Driscoll v. Jones
| Decision Date | 29 June 1937 |
| Docket Number | No. 1210.,1210. |
| Citation | 19 F. Supp. 792 |
| Parties | DRISCOLL et ux. v. JONES, Collector of Internal Revenue, et al. |
| Court | U.S. District Court — Northern District of Oklahoma |
C. S. Fenwick, of Tulsa, Okl., for plaintiffs.
C. E. Bailey, U. S. Atty., and Chester A. Brewer, Asst. U. S. Atty., both of Tulsa, Okl., for defendants.
This is a suit in equity for an injunction to prevent the sale of 40 acres of land, the homestead of the plaintiffs herein, under a warrant of distraint. A motion to dismiss plaintiffs' bill has been filed, but upon the hearing evidence was presented establishing the following facts:
James C. Driscoll and his wife reside upon the 40 acres of land involved herein, and occupy the same as their home. The plaintiffs went to a still owned and operated by one Tom Pasley, and purchased three gallons of whisky, which had been illicitly and illegally manufactured by Tom Pasley. The three gallons of whisky had been placed in the automobile of plaintiffs, for transportation, when it was seized by federal officers. The agents also seized the still, as well as other whisky, and mash. James C. Driscoll was informed against, and subsequently indicted, upon charges involving ownership and operation of the still, as well as manufacture and possession of the whisky and mash. As stated above, the still was being illegally operated and no tax had been paid upon the whisky manufactured. At the trial of the case in this court, it was established that the plaintiff had no interest or ownership in the still, and was not connected with the manufacture of the whisky, but had only purchased three gallons; his automobile was confiscated, under appropriate proceedings therefor, because of its use in transporting the whisky, and he pleaded guilty to possession of the three gallons of whisky and was sentenced upon his plea. It was established that Tom Pasley was the owner and operator of the still. A tax warrant has been issued covering an assessment for the ownership of the entire whisky seized at the still, as well as the mash, in the approximate sum of $1,000, and distraint has been made against plaintiffs. Their 40-acre homestead has been advertised for sale to satisfy the warrant. The purpose of this action is to enjoin the Collector of Internal Revenue from proceeding with the sale of the land to satisfy the tax warrant.
It was further proved that plaintiff is the head of a family and is engaged in farming; that he is not possessed of any personal property of value, and is without any funds with which to pay the assessment. It is further established that the amount of tax due upon three gallons of whisky is $6, and under the double penalty statute the amount due and owing is $12, which sum plaintiffs have tendered in satisfaction of taxes due upon the whisky purchased.
It is insisted by the defendants that this suit is not maintainable because of section 3224 of the Revised Statutes of the United States (26 U.S.C.A. § 1543), which prohibits the maintaining in any court of a suit for the purpose of restraining the assessment or collection of a federal tax.
The whisky involved was subject to taxation (Federal Liquor Taxing Act of 1934, 48 Stat. 313, 26 U.S.C.A. § 1150 et seq.). The rate of tax prescribed is $2 on each proof gallon. Title 1, section 4, of the Liquor Law Repeal and Enforcement Act of 1935 (27 U.S.C.A. § 153), provides that any person who shall produce, withdraw, sell, transport, or use denatured alcohol, denatured rum, or articles in violation of laws, shall be subject to the provisions of the law pertaining to alcohol, including those requiring the payment of tax thereon.
The whisky transported by plaintiff was subject to taxation, and plaintiffs have tendered the amount due in payment of the tax. They are unable to pay the $1,000 assessed against the still, and the whisky and the mash, and sue for its return. They should not be compelled to do so, because in this case the taxing authorities, the governmental agents, have litigated the question of ownership, as well as plaintiff's participation in the operation of the still and the manufacture of whisky thereat, in this court, and the Government was unsuccessful in establishing and having adjudicated that plaintiff was interested in the ownership or operation of the still, or in the ownership or possession of the whisky and mash, other than the three gallons purchased by him. The assessment of $1,000 against plaintiff is therefore arbitrary, and is in the nature of a penalty. If a case were presented involving an erroneous assessment, this court would not entertain a suit for injunction, but we are here considering a case in which the tax sought to be collected is illegal and improper, because it has been adjudicated that the plaintiff was not liable for the tax assessment covering the still, whisky, and mash. The assessment, as a matter of law, is limited to the ownership of three gallons of whisky, which as stated above, is a total of $6.
The Second Circuit Court of Appeals, in Jacoby v. Hoey, 86 F.(2d) 108, 109, in referring to the right of courts to enjoin the Commissioner of Internal Revenue from collecting taxes imposed by him, held that the Commissioner may not be restrained by a suit to enjoin the collection of the tax so assessed, "provided that he does not act arbitrarily or capriciously." To assess a tax against plaintiff for property not owned by him, with full knowledge of the facts, constitutes an arbitrary assessment. The injunctive power of this court, as well as other courts of equity, may be employed to prevent arbitrary tax assessments.
As the assessment has been made with full knowledge of the facts concerning the want of ownership or interest of plaintiff in the still, whisky, and mash, other than the three gallons purchased by him, it clearly appears that the assessment of $1,000, if not arbitrarily and capriciously made, has been imposed as a penalty. It is well established that the provisions of the United States statute referred to above, that no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court, does not apply in the case of a penalty imposed in the guise of a tax. Regal Drug Corporation v. Wardell, 260 U.S. 386, 43 S.Ct. 152, 67 L.Ed. 318; Lipke v. Lederer, 259 U.S. 557, 42 S.Ct. 549, 66 L.Ed. 1061.
If the assessment had neither been...
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Peele v. Glotzbach
...7 Cir., 211 F.2d 669; Local 167 etc. v. United States, 291 U.S. 293, 54 S.Ct. 396, 78 L.Ed. 804. Plaintiff relies upon Driscoll v. Jones, D.C., 19 F.Supp. 792, and Long v. Kelly, D.C., 100 F.Supp. 235. In these cases injunctions were granted but plaintiffs had been acquitted of the criminal......
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...Burke v. Mingori, 10 Cir. 128 F.2d 986. This case held that there were no extraordinary circumstances and relief was denied. Driscoll v. Jones, D.C. 19 F.Supp. 792, Leonardi v. Goldburg, D.C., 76 F.Supp. 747, and Strang v. Maloney D.C.N.J. Jan. 15, 1943, 32 AFTR 1737, are almost identical t......
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...the merits of the tax question following a petition for injunction. Appellant urges that this court follow the cases of Driscoll v. Jones, D.C.Okl., 19 F.Supp. 792, and Long v. Kelly, D.C. Ala., 100 F.Supp. 235. In each case an injunction was obtained restraining the collection of a tax on ......