Peoples Bank & Trust Co. v. United States

• Decision Date: 09 June 1964
• Docket Number: No. 20763.,20763.
• Citation: 332 F.2d 597
• Parties: PEOPLES BANK & TRUST CO., Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

332 F.2d 597 (1964)

PEOPLES BANK & TRUST CO., Appellant, v. UNITED STATES of America, Appellee.

No. 20763.

United States Court of Appeals Fifth Circuit.

June 9, 1964.

Frank W. Riggs, III, Albert W. Copeland, Montgomery, Ala., Godbold, Hobbs & Copeland, Montgomery, Ala., of counsel, for appellant.

Ben Hardeman, U. S. Atty., J. O. Sentell, Asst. U. S. Atty., Montgomery, Ala., for appellee.

Before MAGRUDER,^* JONES and GEWIN, Circuit Judges.

GEWIN, Circuit Judge.

This is an appeal from an order of the District Court for the Middle District of Alabama denying the claimant's (appellant) petition for remission of forfeiture. The forfeiture chattel is a 1962 Chevrolet automobile purchased by Mrs. Syble Russell and financed by the claimant. Mrs. Russell used the car 4½ days a week to drive a distance of 35 miles from her home in the country to her place of employment in Montgomery. She was employed as credit manager of a ladies' shop. The car was purchased from a local dealer in Montgomery, Alabama, on April 5, 1962, and arrangements for the loan were made by Mrs. Russell in a conversation with a Vice President of the claimant by telephone. She made the initial down payment of $683.92 and borrowed the balance of $2,767.00,¹ for which she executed a chattel mortgage on the day of the purchase. The chattel mortgage was executed on a form apparently provided by the claimant. The vehicle was not described in detail but is referred to in the mortgage simply as "1962 Chevrolet, Impala cpe," followed by two numbers evidently representing the serial number and the motor number. The bill of sale or other title papers are not contained in the record and the record fails to disclose that the Vice President who made the loan examined the title papers at the time arrangements for the loan were made. Indeed the record shows, as mentioned above, that commitment to make the loan was made over the telephone.

Although the car was purchased on April 5, 1962, and the mortgage given on that date, the libel of information seeking a forfeiture was not filed until December 13, 1962, over eight months after the purchase date. The car was seized on September 21, 1962, over five months after the date of purchase. It is alleged that the vehicle was seized as forfeited property because it "had been used in Montgomery County, Alabama, on June 5, 1962, in violation of the Internal Revenue laws of the United States, in the conduct of the business of selling distilled spirits," etc. The alleged unlawful use of the vehicle occurred 60 days after purchase.

At the time of the loan, the claimant obtained a credit report on Mrs. Russell which was satisfactory; she had previously borrowed money from the claimant and her repayment record was good; payments on the loan were $77.00 per month and she earned $47.50 per week; her sister was a valued employee of the claimant; and the price of the vehicle was substantially more than the amount of the loan. It was stipulated that at all times pertinent to the litigation the husband had a reputation among law enforcement officers in the community in which he lived of being a liquor law violator.

The trial court correctly stated the rule in cases of forfeiture and petitions for remission, that there must be circumstances which put the lender on notice as to the likelihood that the vehicle may be used in violation of the law before the right of remission is denied.² The court then proceeded to find that the claimant-bank, "as a matter of law, was put on notice by the following facts:" the size of the monthly payments ($77.00) as compared with Mrs. Russell's salary ($47.50 per week); amounts previously deposited in the Russell joint account in the claimant bank were inconsistent with Mrs. Russell's income; and the account on which the initial payment check was drawn was overdrawn at the time the check was given and had been frequently overdrawn on prior occasions. The court further found that the type of automobile was a factor which should have put the claimant on notice even though Mrs. Russell stated that her husband had no connection with the purchase, because the automobile was equipped with a 300 h. p. engine, 4-speed transmission, heavy duty front and rear springs, and heavy duty front shock absorbers; and finally, the credit report furnished to the Bank showed that Mrs. Russell was directly dependent upon her husband. The court stated: "All of the foregoing was sufficient for the Bank to have reasonably suspected that someone — other than Mrs. Syble Russell — had an interest in the purchase of the automobile." It was further concluded that after such notice to the Bank, as found by the court, a duty arose to investigate further and that such an investigation after such notice would have disclosed the interest of Mr. Russell in the purchase, and that the car would likely be used by Mr. Russell in the illicit liquor business.³

In our opinion the facts found by the District Court were not legally sufficient to require an inquiry on the part of the Bank into the record or reputation of the husband as a liquor law violator. The claimant was not in possession of such facts as imposed upon it a duty to investigate and look into the record, reputation, and affairs of the husband.

The controlling statute is 18 U.S.C.A. § 3617(b) which sets forth conditions precedent to remission or mitigation.⁴ That section is long, involved, and contains difficult phrasing which has resulted in conflicting views as to its meaning. United States v. Automobile Financing, (5th Cir. 1938) 99 F.2d 498; United States v. One 1936 Model Ford, (4th Cir. 1938) 93 F.2d 771; Federal Motor Finance v. United States, (8th Cir. 1937) 88 F.2d 90. The meaning and purpose of the statute is best set forth in United States v. One 1936 Model Ford, (1938) 307 U.S. 219, 59 S.Ct. 861, 83 L.Ed. 1249, 1260:

"These facts indicate that Congress intended a reasonable inquiry concerning the bootleg risk should be made in connection with the investigation of financial responsibility. They negative the notion that wholly innocent claimant at his peril must show inquiry concerning something unknown and of which he had no suspicion. Dealers do not investigate what they have no cause to suspect.

"The forfeiture acts ars exceedingly drastic. They were intended for protection of the revenues, not to punish without fault. It would require unclouded language to compel the conclusion that Congress abandoned the equitable policy, observed for a very long time, of relieving those who act in good faith and without negligence, and adopted an oppressive amendment not demanded by the tax officials or pointed out in the reports of its committees.

"Subsection (b) (3) was intended to prevent remission to a claimant who had failed to inquire when he should have done so, to one chargeable with willful negligence or purpose of fraud. It would be excessively harsh, unreasonable indeed,

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