Jasper v. Hellmich
| Decision Date | 24 March 1925 |
| Docket Number | No. 6783.,6783. |
| Citation | 4 F.2d 852 |
| Parties | JASPER v. HELLMICH, Collector of Internal Revenue, et al. |
| Court | U.S. District Court — Eastern District of Missouri |
Conway Elder, of St. Louis, Mo., for plaintiff.
Allen Curry, U. S. Dist. Atty. and Claude Crooks, Asst. Dist. Atty., both of St. Louis, Mo., for defendant.
This is a suit for a permanent injunction to prevent defendants from collecting by distraint certain so-called taxes and tax penalties from plaintiff under the provisions of section 35 of the National Prohibition Act (Comp. St. Ann. Supp. 1923, § 10138½v).
Pursuant to certain regulations of the Treasury Department, made and promulgated for the making of collections of taxes and penalties under said section 35, supra, notice was given by defendants to plaintiff that there had been assessed against him taxes and penalties under said section 35 in the total sum of $1,866.66, for that he was alleged to have engaged in business as a retail liquor dealer, and advising plaintiff that he might, within 10 days thereafter, file his protest against such assessment and have an opportunity to show cause why such assessment should not be made final against him, and collection thereof be enforced by distraint.
Thereupon plaintiff filed his protest, duly verified, setting up therein, as also now in his bill of complaint, a denial that he had engaged in the business of a retail liquor dealer, and averring that he was not liable to pay such taxes and penalties. He further averred that the assessments proposed to be made are not taxes, but penalties; that he had never been convicted or adjudged guilty of any violation of the Volstead Act (Comp. St. Ann. Supp. 1923, § 10138¼ et seq.); that neither the defendants nor their deputies or agents were by law empowered or authorized to make this assessment; and that such assessment and collection of these so-called taxes in the manner and form proposed was and is in violation of sections 1 and 2 of article 3 of the federal Constitution. I go out of the record to say that, since this case has been pending, plaintiff has been prosecuted for unlawful possession of liquor only, and has pleaded guilty and been punished by a fine. Of course, this does not alter the legal situation.
The matter now before the court is on a motion for a temporary injunction, submitted on the bill of complaint and the answer of defendants thereto, as also a motion for judgment on the pleadings. This answer admits all of the material allegations of the bill of complaint and contains also a motion to dismiss the bill for lack of equity. The provisions of section 35 of the Volstead Act, here involved and pertinent, are:
It is settled that the above section, standing alone, furnishes no authority to distrain property of the alleged taxpayer without hearing, notice, or evidence, and that the so-called taxes provided for in section 35, supra, are in fact penalties, and not taxes, and that injunction will lie to restrain collection or threatened collection thereof by distraint. Lipke v. Lederer, 259 U. S. loc. cit. 561, 42 S. Ct. 549, 551, 66 L. Ed. 1078. In the above case, at the page cited, it was said:
The above excerpt also makes clear, by broad inference, that the evidence to be relied on as the basis of assessment, or as "essential to assessment," is a conviction under the provisions of section 29 of the Volstead Act. Whether such assessment shall be had pursuant to a judgment in a civil case before a court, wherein the judgment of conviction shall constitute prima facie evidence of liability to pay these penalties, is left doubtful by the language of section 35, supra. Although the fact that power is given to the commissioner, by the last sentence of section 35, supra, to compromise civil actions arising under title 2, either before or after suit, lends some color to the notion that collections of these penalties were originally intended to be enforced by civil actions.
The Lipke Case, then, and many others which preceded it and followed it, settled the law, as it stood before the passage of the so-called Willis-Campbell Act. Act Nov. 23, 1921, 42 Stat. 223 (Comp. St. Ann. Supp. 1923, § 10138 4/5 et seq.). The Lipke Case and others (Regal Drug Corporation v. Wardell, 260 U. S. 386, 43 S. Ct. 152, 67 L. Ed. 318), settled the right (a) to proceed by injunction against distraint, as here sought to be done; (b) that the impositions provided by section 35 are not taxes, but penalties; (c) and that they cannot be collected by distraint, as here sought, without evidence of the fact of violation of the criminal statutes. What sort of evidence is required, and when and where and how it should be presented, were still left in doubt, except in so far as is hinted in the above excerpt.
So much being conceded, the question arises as to how far the situation has been changed by the passage of the later act, called the Willis-Campbell Act. This act, so far as pertinent, provides:
"All taxes and tax penalties provided for in section 35 of title II of the National Prohibition Act shall be assessed and collected in the same manner and by the same procedure as other taxes on the manufacture of or traffic in liquor." Section 5, Act Nov. 23, 1921, 42 Stat. 223.
The enactment of the above provision brings about a situation which is peculiar, if not anomalous. It is strenuously contended by defendants that by the above language of the Willis-Campbell Act the Congress intended (perhaps only among other ways, I suggest) to provide for the collection of the "taxes and tax penalties" set out in section 35 of the National Prohibition Act, in the same manner and by the same procedure as such collections are provided for under the provisions of section 3187, R. S. (Comp. St. § 5909); that is, by distraint, as here threatened and proposed to be done by defendants.
If the impositions are in truth and in fact taxes, then there is no doubt Congress has the power so to provide. United States v. Yuginovich, 256 U. S. 462, 41 S. Ct. 551, 65 L. Ed. 1043. But time and again, I repeat, not only by the Supreme Court of the United States, but by inferior courts, the so-called "taxes and tax penalties" of section 35, supra, have been held to be penalties pure and simple, and not taxes. Lipke v. Lederer, supra; Regal Drug Co. v. Wardell, supra; Thome v. Lynch (D. C.) 269 F. 995; Fontenot v. Accardo (C. C. A.) 278 F. 871; Ledbetter v. Bailey (D. C.) 274 F. 375; Middleton v. Mee (D. C.) 277 F. 492. If and when the Congress shall see fit, by a clear and unambiguous statute, to squarely and candidly denominate the impositions of section 35 of the National Prohibition Act as taxes pure and simple, then the situation may be simplified. That it has the power so to do the case of United States v. Yuginovich, supra, makes clear, beyond cavil or doubt; for it says, at page 462 (41 S. Ct. 553): "That Congress may under the broad authority of the taxing power tax intoxicating liquors notwithstanding their production is prohibited and punished, we have no question."
As the case stands, the Congress has in effect said that the "taxes and tax penalties" set out in section 35 of the National Prohibition Act may be collected by "the same procedure as other taxes on the manufacture of or traffic in liquor." The Supreme Court, I repeat, has said that Congress may tax that which is forbidden (United States v. Yuginovich, supra); but has the Congress yet done so?
If the impositions provided for by section 35, supra, were penalties before the passage of the Willis-Campbell Act, and upon this point there is left by the ruled cases neither doubt nor question, what is there in the latter act to change their meaning or color? The latter act does nothing as to this; its sole office is to change, or attempt to change, the manner of their collection. They are called in this act simply "taxes and penalties provided for in section 35 * * * of the National...
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