Lipke v. Lederer
Decision Date | 05 June 1922 |
Docket Number | No. 596,596 |
Citation | 42 S.Ct. 549,66 L.Ed. 1061,259 U.S. 557 |
Parties | LIPKE v. LEDERER, Collector of lnternal Revenue |
Court | U.S. Supreme Court |
Mr. Lincoln L. Eyre, of Philadelphia, Pa., for appellant.
Mrs. Assistant Attorney General Willebrandt, for appellee.
Relying upon Ketterer v. Lederer (D. C.) 269 Fed. 153, the court below dismissed the bill, upon motion, for want of equity (274 Fed. 493), and the cause is here by direct appeal.
The bill alleges:
That complainant, Lipke, paid all internal revenue taxes required by the laws of the United States for the year ending June 30, 1920, and he holds a retail liquor license issued by the court of quarter sessions, county of Philadelphia, for the year ending May 31, 1921. On December 29, 1920, he was arrested for selling liquor contrary to the National Prohibition Act (41 Stat. 305), and gave bail to appear and answer in the United States District Court. This prosecution is still pending.
That on March 18, 1921, complainant received a written communication from the defendant which stated:
The total assessment amounted to $557.29, made up of three items indicated thus:
'R. L. D. Sec. 35 D. T. 45.83; 11 Mos. 21 3244 P. 11.46; S. F. P. A. 1-26-21 S. P. 500.00.'
That on March 31st he received a second written demand for $557.29, which penalty of 5 per cent. for failure to pay within prescribed time. And he was advised:
'If payment of tax and penalty is not received within 10 days, collection of the same, with any accrued interests thereon and costs, shall be made by seizure and sale of property.'
That:
That section 3244, U. S. Revised Statutes1 has no application; section 35 of the Prohibition Act confers no such power as the collector seeks to exercise; and he is undertaking to punish complainant by fine and penalty for an alleged criminal offense without hearing, information, indictment, or trial by jury, contrary to the federal Constitution. If the latter section has the meaning ascribed to it by defendant, it is unconstitutional.
The prayer is for an injunction restraining the defendant from proceeding to collect the sum demanded by warrant of seizure, distress, or sale, or otherwise, and requiring a cancellation of the so-called 'tax bills.'
Appellant maintains that the demand upon him was not for taxes, but for a penalty for an alleged criminal act; that the method adopted for enforcing his penalty is contrary to the federal Constitution; and that, if construed as appellee insists it should be, section 35 is unconstitutional.
Appellee maintains that the cause involves only questions of construction, and therefore the appeal should be dismissed; that section 3224, Revised Statutes (Comp. St. § 5947),2 prohibits the relief prayed; that the bill states no ground for equitable relief; and that full, adequate, and complete remedy may be had at law.
The cause is properly here by direct appeal from the District Court. Appellant claimed that, as construed and sought to be enforced by the collector, section 35 of the Prohibition Act conflicts with the federal Constitution. The point is substantial, and sufficient to support our jurisdiction. Towne v. Eisner, 245 U. S. 418, 425, 38 Sup. Ct. 158, 62 L. Ed. 372, L. R. A. 1918D, 254; Dahnke-Walker Milling Co. v. Bondurant, 257 U. S. 282, 42 Sup. Ct. 106, 66 L. Ed. 239 (December 12, 1921); South Covington, etc., Ry. Co. v. Newport, 259 U. S. 97, 42 Sup. Ct. 418, 66 L. Ed. ——(May 15, 1922).
The National Prohibition Act (41 Stat. 305, c. 85) is entitled:
'An act to prohibit intoxicating beverages, and to regulate the manufacture, production, use, and sale of high proof spirits for other than beverage purposes, and to insure an ample supply of alcohol and promote its use in scientific research and in the development of fuel, dye, and other lawful industries.'
'It is a comprehensive statute intended to prevent the manufacture and sale of intoxicating liquors for beverage purposes.' United States v. Yuginovich, 256 U. S. 450, 41 Sup. Ct. 551, 65 L. Ed. 1043 (June 1, 1921).
'Title II—Prohibition of Intoxicating Beverages,' contains 39 sections:
'Sec. 3. No person shall on or after the date when the Dighteenth Amendment to the Constitution of the United States goes into effect, manufacture, sell, barter, transport, import, export, deliver, furnish or possess any intoxicating liquor except as authorized in this act, and all the provisions of this act shall be liberally construed to the end that the use of intoxicating liquor as a beverage may be prevented.
* * *
* * *
'The Commissioner, with the approval of the Secretary of the Treasury, may compromise any civil cause arising under this title before bringing action in court; and with the approval of the Attorney General he may compromise any such cause after action thereon has been commenced.'
The mere use of the word 'tax' in an act primarily designed to define and suppress crime is not enough to show that within the true intendment of the term a tax was laid. Bailey v. Drexel Furniture Co., 259 U. S. 20, 42 Sup. Ct. 449, 66 L. Ed. ——(May 15, 1922). When by its very nature the imposition is a penalty, it must be so regarded. Helwig v. United States, 188 U. S. 605, 613, 23 Sup. Ct. 427, 47 L. Ed. 614. Evidence of crime (section 29) is essential to assessment under section 35. It lacks all the ordinary characteristics of a tax, whose primary function 'is to provide for the support of the government' and clearly involves the idea of punishment for infraction of the law—the definite function of a penalty. O'Sullivan v. Felix, 233 U. S. 318, 324, 34 Sup. Ct. 596, 58 L. Ed. 980.
The collector demanded payment of a penalty, and section 3224, which prohibits suits to restrain assessment or collection of any tax, is without application. And the same is true as to statutes granting the right to sue for taxes paid under protest. A revenue officer without notice has undertaken to assess a penalty for an alleged criminal act and threatens to enforce payment by seizure and sale of property without opportunity for a hearing of any kind.
Section 35 prescribes no definite mode for enforcing the imposition which it directs, and, if it be interpreted as above stated, we do not understand counsel for the United States claim that relief should be denied to the appellant. Before collection of taxes levied by statutes enacted in plain pursuance of the taxing power can be enforced, the taxpayer must be given fair opportunity for hearing; this is essential to due process of law. Central of Ga. Ry. v. Wright, 207 U. S. 127, 136, 138, 142, 28 Sup. Ct. 47, 52 L. Ed. 134, 12 Ann. Cas. 463. And certainly we cannot conclude, in the absence of language admitting of no other construction, that Congress intended that penalties for crime should be enforced through the secret findings and summary action of executive officers. The guaranties of due process of law and trial by jury are not be forgotten or disregarded. See Fontenot v. Accardo (C. C. A.) 278 Fed. 871. A preliminary injunction should have been granted.
The decree of the court below must be reversed, and the cause remanded for...
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