McCormick & Co. v. Brown

• Citation: 52 F.2d 934
• Decision Date: 12 October 1931
• Docket Number: No. 3141.,3141.
• Parties: McCORMICK & CO., Inc., et al. v. BROWN, State Com'r of Prohibition, et al.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

52 F.2d 934 (1931)

McCORMICK & CO., Inc., et al. v. BROWN, State Com'r of Prohibition, et al.

No. 3141.

Circuit Court of Appeals, Fourth Circuit.

October 12, 1931.

Philip C. Friese, of Baltimore, Md., and H. D. Rummel, of Charleston, W. Va. (Rummel, Blagg & Stone, of Charleston, W. Va., on the brief), for appellants.

W. G. Brown, of Summersville, W. Va., and R. Dennis Steed, of Charleston, W. Va. (H. B. Lee, Atty. Gen., on the brief), for appellees.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

SOPER, Circuit Judge.

A bill in equity was filed in the District Court by McCormick & Co., Inc., a Maryland corporation, engaged in the city of Baltimore in the manufacture of various products used for toilet and culinary purposes, and Durham Bros. Company, a Virginia corporation, engaged as a wholesale dealer in groceries and food products in the city of Roanoke, Va., as complainants, against W. G. Brown, state commissioner of prohibition of the state of West Virginia, and Howard B. Lee, Attorney General of that state. The suit was instituted by the complainants on their own behalf and for the benefit of numerous other nonresident manufacturers or wholesale dealers in commercial products containing ethyl alcohol as a necessary solvent or preservative, to secure an injunction to restrain the state officials from requiring them to procure permits at the cost of $50 per annum for the sale and transportation of their goods, and from prosecuting any proceeding for their refusal to procure such permits.

The complainants alleged that these products are used and usable exclusively for medicinal, mechanical, toilet, or culinary purposes, and are manufactured and sold under permits issued by the United States Bureau of Industrial Alcohol, and approved by the United States Bureau of Prohibition; and that none of them contains intoxicating liquors or is fit for beverage purposes within the meaning of the laws of the United States. The state commissioner had declared that all products purchased from nonresident dealers, not clothed with permits, would be subject to seizure, confiscation, and destruction, and the persons selling or keeping for sale the products in West Virginia would be prosecuted under the criminal laws of the state. These requirements of the commissioner, it was charged, were without authority in law and constituted unwarranted attempts on his part to hinder and obstruct complainants' lawful interstate commerce. They asserted that the jurisdiction of the court was established because the matter in controversy exceeded in value the sum of $3,000, and the complainants and defendants were respectively citizens of different states; and also because the complainants sought in the suit to redress the deprivation, under color of unlawful regulation by the commissioner of prohibition, of rights, privileges, and immunities secured to the complainants by the Constitution of the United States, to wit, the right to ship and transport the products manufactured or sold by them in interstate commerce free from unlawful restrictions or regulation by the commissioner of prohibition.

The state officials, by answer, denied the jurisdictional allegations of the bill of complaint and asserted that all of their actions performed or threatened were authorized by certain state enactments and regulations, of which the following is a résumé: A constitutional amendment, effective on and after July 1, 1914 (Constitution of West Virginia, art. 6, § 46), prohibited the manufacture or sale of intoxicating liquor within the state, except liquors for medicinal, pharmaceutical, mechanical, sacramental, and scientific purposes, and except the sale of denatured alcohol for industrial purposes under regulations to be prescribed by the Legislature. That body was enjoined to enact laws to carry the amendment into effect and laws were passed which are now codified in chapter 60 of the Official Code of West Virginia of 1931. The word "liquors" was given a wide significance so as to include not only all kinds of intoxicating beverages, but also all liquors, mixtures, or preparations, whether patented or not, which will produce intoxication. Section 1, article 1. The manufacture and sale of liquors was placed under the supervision of a commissioner of prohibition and under such rules and regulations as he might from time to time prescribe. Section 3, article 2. No one is allowed to sell, purchase, or transport any liquor without first obtaining a permit from the commissioner of prohibition so to do. Permits expire annually on December 31. The fee for a manufacturer's or wholesale dealer's permit is $50. Section 5, article 1. In case of sale, in which a shipment or delivery of liquor is made by a carrier, the sale is deemed to be made in the county where the delivery is made to the consignee. Section 4, article 1. Common carriers are forbidden to carry liquors into the state, and persons in the state are forbidden to receive liquors from a carrier except in case of pure grain alcohol and wine and such preparations as may be sold by druggists. Sections 9 and 13 of article 1. It is unlawful for any nonresident vendor to sell or furnish liquors to any person within the state when such liquors are intended by any person interested therein to be received, possessed, sold, or in any manner used in violation of the state laws; and in case the delivery of the liquors is made by a carrier, the sale or furnishing is deemed to be made in the county wherein the delivery is made. Section 11, article 1.

The commissioner of prohibition appointed under the authority of the statutes has promulgated certain regulations, wherein a nonresident manufacturer, doing business in the state, is classed and treated as a wholesale dealer of whom an annual license fee of $50 is required. A wholesale dealer is declared to be one whose business is that of selling at wholesale, ethyl alcohol in any form, whether pure, medicated, or denatured, and wine as permitted and supervised by the federal government, or selling as aforesaid any liquid mixture or preparation, whether patented or not, which will produce intoxication or come within the definition of liquors in section 1, article 1, of the state law. The regulations of the commissioner also classify alcoholic preparations, defining those the sale of which is prohibited in the state, those which may be sold by the drug trade only under permit, those which may be sold by all dealers under permit, and those which may be sold by all dealers without permit. Goods of the sort manufactured and sold by the complainants are placed in the category of those which may be sold by dealers only under permit.

Thus it appears that the state statutes cover the activities of nonresident vendors, when the liquors sold or furnished by them are intended to be used in violation of the local law, and the term "liquors" has been given a significance sufficiently broad to include the products of the complainants; and the commissioner's regulations have classified nonresident manufacturers of liquor doing business in the state as wholesale dealers required to take out an annual permit before sending merchandise into the state, and have classified the goods of the kind made or sold by complainants as those which may be sold only under permit.

Upon their allegations, the complainants prayed an injunction against the commissioner and the Attorney General to restrain them from requiring complainants by legal proceedings to take out permits and pay the license fees, and from causing the complainants to be arrested for refusal to procure permits, and from interfering in any manner with complainants' business. An order upon the defendants to show cause why a preliminary injunction should not be granted, and also a temporary restraining order pending the hearing on the preliminary injunction, were prayed. Thereupon the District Judge issued a temporary restraining order which seems to have been kept alive by consent until the hearing and determination of the motion for preliminary injunction. The final decree recites that this motion was submitted to the court on the pleadings, exhibits, and affidavits of the parties, whereupon the court decreed that the preliminary injunction be granted until its further order. By consent of all the parties, the application for a permanent injunction was then submitted upon the same pleadings, exhibits, and affidavits which were considered upon the motion for preliminary injunction; and the court, being of the opinion that the complainants had not shown themselves entitled to the relief prayed, adjudged in the same decree that the application for permanent injunction should be denied and the preliminary injunction theretofore granted should be dissolved. The complainants appealed.

The complainants concede the constitutional validity of the statutes of West Virginia, but complain that the state officials have wrongfully interpreted them to authorize the regulations of the prohibition commissioner and the actions injurious to the complainants which he threatens to take. The right of the state to exercise a measure of control over the interstate commerce in intoxicating liquor within its borders is conceded by complainants, by reason of the provisions of the Wilson Act of August 8, 1890 (27 USCA § 121), the Webb-Kenyon Act of March 1, 1913 (27 USCA § 122), and the Reed Amendment of March 3, 1917 (27 USCA § 123); but it is contended that the term "intoxicating liquors" was used in the same significance in these statutes as in the National Prohibition A...