Doran v. Bay State Distributing Corporation, 2395.
| Decision Date | 23 December 1929 |
| Docket Number | No. 2395.,2395. |
| Citation | 36 F.2d 657 |
| Parties | DORAN, Commissioner of Prohibition, et al. v. BAY STATE DISTRIBUTING CORPORATION. |
| Court | U.S. Court of Appeals — First Circuit |
Elihu D. Stone, Asst. U. S. Atty., of Boston, Mass. (Frederick H. Tarr, U. S. Atty., of Boston, Mass., on the brief), for appellants.
George H. McDermott, of Boston, Mass., for appellee.
Before BINGHAM, ANDERSON, and WILSON, Circuit Judges.
Sometime prior to 1925 the appellee was given a basic permit by the Prohibition Commissioner under sections 4 and 6 of title 2 of the National Prohibition Act (27 USCA §§ 13, 16) to operate a denaturing plant. It was contended by counsel in argument that it was limited, as to time, only by its voluntary surrender, or revocation under section 9 of title 2 of the act (27 USCA § 21). The record contains no evidence of this.
However, on December 30, 1925, a new permit was issued to the appellee, and while the record does not show when it expired the inference is, since Treasury Decision No. 3773 was then in force, requiring all permits to expire on December 31st of the year in which issued, or not longer than December 31st of the following year, that it was at least limited in its duration to December 31, 1926.
In March, 1926, a change was made in the management and stock ownership of the appellee corporation, and in conformity with the provisions of paragraph 6 of article 12 of Treasury Regulations No. 3, a new permit, in form, at least, was issued with a limitation as to duration to December 31st of that year, and was evidently accepted by the appellee in lieu of its previous permit, as on its own application it was amended in May and June, 1926, to cover additional matters.
On September 1, 1926, the Treasury Department issued order No. 3925 modifying order No. 3773, and extending all basic permits for denaturing plants already issued until surrendered by permittee, or there was a failure of required bond, or revocation on citation and hearing.
On August 23, 1927, Regulations No. 3 were issued by the Treasury Department effective October 1st of that year. Article 95 of Regulations No. 3 provided that all permits for denaturing plants in force on the above date should expire on December 31, 1928.
In July, 1928, the Prohibition Administrator for the First Prohibition District issued an order to the appellee under section 9 of title 2 to show cause why its permit No. 111 bearing date of March 9, 1926, should not be revoked for the following reasons set forth in the order: (1) That on or about March 9, 1926, being a corporation it failed upon request of the Prohibition Commissioner to furnish him with a true list of its stockholders; (2) that on obtaining the approval of the Commissioner to the permit issued in March, 1926, which it describes as a continuance of original permit No. 111, and to the several amendments thereto in May and June, 1926, the treasurer of the appellee corporation falsely represented that he controlled the corporation, although the controlling shares were only held by him as trustee for some unknown person; and therefore it was alleged that the appellee had not in good faith conformed to the provisions of the National Prohibition Act.
The order to show cause was not based on a complaint under oath, but set forth that the Prohibition Commissioner had reason to believe that the permittee had not in good faith conformed to the provisions of the National Prohibition Act. It was signed by the Prohibition Administrator. A motion was made by the appellee to dismiss the order on the ground that under section 9 of title 2 no one but the Commissioner of Prohibition was authorized to sign such an order.
We think there was no merit in this motion, and it was properly overruled. The federal statutes and Treasury Regulations and orders of the Commissioner clearly show authority in the Prohibition Administrator to issue such an order at that time. See Treasury Decision No. 3737; Public Laws, 69th Congress, No. 751, c. 348, approved March 3, 1927 (5 USCA § 281 et seq.); Treasury Decision No. 2, approved April 1, 1927; section 505 of Treasury Regulations No. 2.
The hearing officer, after hearing, recommended the revocation of the permit, not on the first ground set forth, but on the second ground, viz., that the statement made by the treasurer of the corporation at the time of the issuing of the permit in March, 1926, that he controlled the corporation, and did not disclose that the controlling shares were merely held by him as trustee for some person unknown to him, was sufficient evidence that the appellee had not in good faith conformed to the provisions of the National Prohibition Act.
Upon his recommendation the appellee's permit was revoked by the acting Administrator on September 10, 1928; and on a request for reconsideration the Administrator on November 6, 1928, refused to reconsider the order of September 10, 1928, revoking said permit.
On February 29, 1929, the appellee under sections 9 and 5 of title 2 of the act (27 USCA §§ 21 and 14) filed in the District Court its bill in equity for a review of the order of the Prohibition Administrator, and, after hearing, the District Court set aside the order of the Administrator revoking the permit and ordered it restored. The case is here on appeal from the decree of the District Court.
The appellee's motion to dismiss the appeal for failure to comply with Rule 75 of this court is denied. It does not appear that the violation of Rule 75 complained of was the result of bad faith, or that any part of the record below favorable to appellee's contention was omitted from the record as first printed, or the technical failure to comply with the rule was in any way prejudicial to the appellee. The motion of the government to supplement the record by adding a copy of the permit issued on March 9, 1926, which was a part of the record below, and also a copy of the findings of the hearing officer, is granted.
The proceedings in the District Court were in review of the findings of the Commissioner, and only as to questions of law. A finding by the Commissioner, however, unless based on some substantial evidence, raises an issue of law. Ma-King Products Co. v. Blair, 271 U. S. 479, 46 S. Ct. 544, 70 L. Ed. 1046.
As stated above, the hearing officer made no finding on the first ground alleged in the show cause order, viz., that the treasurer of the corporation failed to file a list of its stockholders on request of the Commissioner; and such a finding would have had no substantial evidence on which to rest. The Commissioner was uncertain whether any such request was ever made, and as against the affirmative evidence of the treasurer of the corporation that no such request was made, and that no list of stockholders was filed during the two years before the proceedings to revoke the testimony of the Commissioner, without action by the Commissioner, did not constitute substantial evidence on which to base such a finding, since it is inconceivable that such a request could have been made and that a failure to comply would have been overlooked for two years without action being taken by the Commissioner.
Upon the other ground, that the treasurer withheld the information that the controlling shares were held by him as trustee and represented that he controlled the corporation, assuming that the information was intentionally withheld, does not warrant the inference that the corporation had not in good faith conformed to the National Prohibition Act. No evidence was adduced that it had otherwise, in any manner, violated any provision of the act or any state law. No provision of the act, nor any regulation of the Department, required such information to be furnished, except where the Commissioner requested a list of stockholders to be filed with him. If that officer did not request it, and the record does not warrant a finding that he ever did, the treasurer had a right to assume that no such detailed information was required. An intent to deceive is not to be presumed. Nor is there any evidence in the case that as trustee he did not have the full voting power and, therefore, the control of the corporation. Without some evidence of the terms of the trust, the hearing officer had no substantial evidence on which to base a finding that the treasurer did not control the...
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