Brabham v. Cooper

• Decision Date: 25 February 1935
• Citation: 9 F. Supp. 904
• Court: U.S. District Court — District of South Carolina
• Parties: BRABHAM et al. v. COOPER et al.

9 F. Supp. 904

BRABHAM et al. v. COOPER et al.

District Court, E. D. South Carolina.

February 25, 1935.

J. D. E. Meyer, of Charleston, S. C., and Edgar A. Brown, of Barnwell, S. C., for petitioners.

Claud N. Sapp, U. S. Atty., of Columbia, S. C., for defendants.

MYERS, District Judge.

On the petition herein, a temporary restraining order was issued enjoining the defendant R. M. Cooper, as United States collector of internal revenue of the state of South Carolina, Nollie Robinson, as acting investigator in charge of the alcohol tax unit, having the authority to enforce and collect taxes in this district, and J. C. Dial, as deputy collector of internal revenue within the Eastern District of South Carolina, from collecting or attempting to collect from the petitioners, and other liquor dealers in this district included within its terms and provisions who should intervene as parties plaintiff, the "special excise tax" of $1,000 imposed on brewers, distillers, liquor dealers, dealers in malt liquors, and manufacturers of stills in any state, territory, or district of the United States in which the carrying on of such business is prohibited by local or municipal law.

Petitioners allege that they have paid the permit tax imposed upon liquor dealers under section 205, subd. (b), tit. 26 USCA of the Revenue Laws, and have the receipt of the proper official therefor in the nature of a permit to conduct such business free from further tax exactions.

It is not denied that, having issued such tax receipts or permits, the authorities charged with that duty in South Carolina are threatening to levy and collect as an additional tax, in the usual manner of direct levy pursued in enforcement of tax payments, the "special excise tax" imposed under section 206, tit. 26 USCA, reading as follows: "On and after July 1, 1926, there shall be levied, collected, and paid annually, a special excise tax of $1,000, in the case of every person carrying on the business of a brewer, distiller, wholesale liquor dealer, retail liquor dealer, wholesale dealer in malt liquor, retail dealer in malt liquor, or manufacturer of stills, as defined in sections 202 to 205, inclusive, and section 241 of this title, in any State, Territory, or District of the United States contrary to the laws of such State, Territory, or District, or in any place therein in which carrying on such business is prohibited by local or municipal law. The payment of the tax imposed by this section shall not be held to exempt any person from any penalty or punishment provided for by the laws of any State, Territory, or District for carrying on such business in such State, Territory, or District, or in any manner to authorize the commencement or continuance of such business contrary to the laws of such State, Territory, or District, or in places prohibited by local or municipal law."

It is not necessary to inquire into the allegation that petitioners were informed by the collector when paying the privilege tax under section 205, tit. 26 USCA, that they were not required to pay further taxes. Respondent collector denies having made such representation. The collector had no such authority. Utah v. U. S., 284 U. S. 534, 535, 52 S. Ct. 232, 76 L. Ed. 469; Utah Power & Light Co. v. U. S., 243 U. S. 389, 402, 37 S. Ct. 387, 61 L. Ed. 791.

Nor should the contention of petitioners that the act would not apply to South Carolina be considered as a serious proposition. The right of a citizen to bring into the state one quart of liquor each month by obtaining a permit from the proper authority cannot be construed as in any sense permitting the sale of liquors within the borders of the state, and in fact such sale is prohibited, and the section applies either as a tax or a penalty.

The attack upon the constitutionality of section 206, tit. 26 USCA, fails on all grounds. Its uniformity is unlimited in its application to territory where sales were prohibited at the time of its passage or at any time thereafter before repeal. U. S. v. Doremus, 249 U. S. 86, 39 S. Ct. 214, 63 L. Ed. 493; Edye v. Robertson, 112 U. S. 580, 5 S. Ct. 247, 28 L. Ed. 798; U. S. v. Singer, 15 Wall. (82 U. S.) 111, 121, 21 L. Ed. 49; Phillips v. Commissioner, 283 U. S. 589, 591, 51 S. Ct. 608, 75 L. Ed. 1289, and cases there cited.

The repeal of national prohibition and subsequent legislation by the Congress did not repeal the act under consideration. It was enacted as a Revenue Statute in 1918 (section 1001, 40 Stat. 1128), prior to the passage of the Eighteenth Amendment, and re-enacted as section 701, par. 1, of the Revenue Act of 1926 (26 USCA § 206). It cannot be held to be a part of the legislation adopted to make the Eighteenth Amendment effective, or to have any relation thereto. United States v. La Franca, 282 U. S. 568, 572, 51 S. Ct. 278, 75 L. Ed. 551.

The government's suggestion that United States v. One Ford Coupe Automobile, 272 U. S. 321, 47 S. Ct. 154, 71 L. Ed. 279, 47 A. L. R. 1025, has any application to this proceeding cannot be supported. The effort here is to prevent a distress against an individual; not limited to process of seizure of illegal stock or fixtures.

In approaching consideration of the remaining questions, the court is confronted with the rather amazing proposition that petitioners are not entitled to relief in a court of equity, in that they base their petition on the assertion that they are entitled to equitable relief on a showing and confession that they are violating the laws of the state of South Carolina. This court realizes fully that respondents are here in their official capacity, acting under rulings and orders of their superiors. Yet it cannot refrain from commenting (however reluctantly, in that its comments may be construed into criticism of and reflection upon departmental methods and practices) upon the picture of those representatives of government, familiar with the laws and with rulings governing the basic occupation involved in this controversy, receiving from citizens of this state, in which liquor sales are prohibited — a fact presumed to be within their knowledge — the amount of the tax assessed against those engaging in the business of liquor dealers under section 205, 26 USCA, without informing such persons of the additional tax they will be subject to under section 206, if they make use of the privilege for which they have thus paid, under an apparent promise of immunity from further governmental exactions. It may well be asked whether the government is not estopped in all good conscience. And it may well be said that at least in effect the authorities by this method recognize the "special excise tax" provision of section 206 as a penalty. Should representatives of the revenue bureau encourage or permit, at a revenue price, unlawful business for the purpose of gaining further revenue? Is it not in effect fostering offenses against the state law for the purpose of enforcing, not a further tax, but a penalty? This notwithstanding the knowledg imputed to such taxpayers of the special "tax" provision of section 206.

I can find no authority for so holding, but is it not a logical conclusion that having provided in section 205 a specified tax to be paid by all liquor dealers, if its purpose was to aid in enforcement of state prohibition laws, Congress would have added a provision in section 205 fixing a tax of a prohibitive amount in such states? Section 205 applying here was enacted in 1875 (Act Feb. 8, 1875, § 18, 18 Stat. 311); section 206 in 1924 (Revenue Act 1924, § 701, par. (9) — a re-enactment of similar provisions in section 1001 of the Revenue Act of 1918.

This brings us to consideration of whether section 206 is a penalty statute or a tax revenue measure.

Interpretations of the law by those charged with its enforcement are generally of great weight, sometimes have the force of law, and should not be set aside unless clearly erroneous. Gratiot v. U. S., 4 How. (45 U. S.) 80, 11 L. Ed. 884; United States v. Philbrick, 120 U. S. 52, 7 S. Ct. 413, 30 L. Ed. 559.

In United States v. La Franca, 282 U. S. 568, 51 S. Ct. 278, 280, 75 L. Ed. 551, the Supreme Court, passing upon taxes and penalties under the laws conforming to and affecting national prohibition, said: "By Section 35, supra 27 USCA § 52 it is provided that upon evidence of an illegal sale under the National Prohibition Act, a tax shall be assessed and collected in double the amount now provided by law. This, in reality, is but to say that a person who makes an illegal sale shall be liable to pay a `tax' in double the amount of the tax imposed by preexisting law for making a legal sale, which existing law renders it impossible to make. A `tax' is an enforced contribution to provide for the support of government; a `penalty,' as the word is here used, is an exaction imposed by statute as punishment for an unlawful act. The two words are not interchangeable, one for the other. No mere exercise of the art of lexicography can alter the essential nature of an act or thing; and if an exaction be clearly a penalty it cannot be converted into a tax by the simple expedient of calling it such. That the exaction here in question is not a true tax, but a penalty involving the idea of punishment for infraction of the law is settled by Lipke v. Lederer, 259 U. S. 557, 561, 562, 42 S. Ct. 549, 66 L. Ed. 1061. See also Regal Drug Corp. v. Wardell, 260 U. S. 386, 43 S. Ct. 152, 67 L. Ed. 318. There is nothing in United States v. One Ford Coupe, 272 U. S. 321, 47 S. Ct. 154, 71 L. Ed. 279, 47 A. L. R. 1025, or Murphy v. United States, 272 U. S. 630, 47 S. Ct. 218, 71 L. Ed. 446, to the contrary. The first of these cases was a proceeding to forfeit an automobile because used in violation of law; the other was a suit in equity to enjoin the occupation and use of premises for a year because used in the commission of offences under the National Prohibition Act, and to abate the maintenance as a...