Landen v. United States

• Decision Date: 07 May 1924
• Docket Number: 3954-3956.
• Citation: 299 F. 75
• Parties: LANDEN v. UNITED STATES. KATZ v. SAME. MILLER v. SAME.
• Court: U.S. Court of Appeals — Sixth Circuit

299 F. 75

LANDEN v. UNITED STATES. KATZ v. SAME. MILLER v. SAME.

Nos. 3954-3956.

United States Court of Appeals, Sixth Circuit.

May 7, 1924

The defendants, wholesale druggists, were convicted of a conspiracy to violate section 6 of title 2 of the National Prohibition Act (Comp. St. Ann. Supp. 1923, Sec. 10138 1/2c) by selling intoxicating liquor for nonbeverage purposes, but without the necessary permit. The indictment is complicated but it was construed by the trial court as dependent upon the theory that the respondents' permit allowed only a limited amount of sales, and that their plan to violate the law and their actual violations involved making sales beyond and above the limitation. It will answer all presently useful purposes to confine our examination to this feature of the case. Respondents were actively connected with the Independent Drug Company, a corporation which had long been regularly conducting a wholesale drug business at Cincinnati. This company had a store in which it carried on such business in the usual way, and where is carried such stock as would be customary for wholesale druggists, including some intoxicating liquor. On March 11, 1921, the company applied on form 1,404, for a permit to sell intoxicating liquors for nonbeverage purposes. Upon this application a 1,405 permit was issued by the federal prohibition commissioner, under date of June 28, 1921. This permit gave general, and prima facie unlimited, permission to sell for other than beverage purposes to others holding proper permits to purchase, and was to be in force until December 31, 1921, 'unless revoked or renewed as provided by law or regulation. ' Such quantitative limitation as there may be in the permit must be imported through the clause, 'This permit is granted subject to any conditions which may be adopted by the Bureau in connection with the distribution of liquor at wholesale,' or the clause, 'This permit is granted under the conditions that the provisions of the National Prohibition Act and regulations issued thereunder, will be strictly observed.'

At the time the permit issued, the whole subject of sales at wholesale was covered by article IX of regulation 60 of the Internal Revenue Department. After the Independent Drug Company had conducted its business under the permit for a time, section 58 in article IX was amended by a pronouncement of the Internal Revenue Department, approved by the Secretary of the Treasury and called 'Treasury Decision 3,208.' This amended article or regulation took effect August 15th. It covers five pages of the printed record. The clause of limitation, found just before (a), and which has become a controlling feature of this case, is as follows: 'No wholesale druggist shall be permitted to procure, or withdraw, or sell potable liquor, not including high-proof alcohol, during any one month in an aggregate amount greater than 10 per cent. (measured in dollars and cents) of his entire average monthly bona fide drug business sales (an exchange of any part of his stock or the exchange of any goods or property is not a sale) during the quarter immediately preceding the first day of the month during which he proposes to withdraw, procure or sell, unless he shows to the satisfaction of the Commissioner that such excess quantity is reasonably required for the legitimate purposes of his business. The average monthly sales during the quarter mentioned shall be arrived at by taking the aggregate sales for the three months and dividing the same by three. The computation of the entire wholesale sales shall not include any sales of potable liquor or high-proof alcohol. In making application for withdrawal of potable liquor the wholesale druggist shall certify to the average sales during the previous quarter to show whether or not his applications cover liquors, measured in dollars and cents, in excess of 10 per cent. of his sales.'

This limitation continued in force until March 7, 1922, on which date it was superseded by Treasury Decision 3,299, reading as follows: 'The paragraph immediately preceding subdivision (a) of section 58 of regulation No. 60, as amended by T.D. 3,208, of August 3, 1921, is hereby amended to read as follows: A wholesale druggist shall be permitted to procure or withdraw potable liquor, not including high-proof alcohol, to an amount equal to 10 per cent. (measured in dollars and cents) of his bona fide drug business sales during his past year. He shall not be permitted to acquire additional amounts of potable liquor during the succeeding 12-months period unless he shall show to the satisfaction of the Commissioner that such excess quantity is required for the legitimate needs of his business.'

The District Judge confined the proof to sales made between August 15, 1921, and March 7, 1922. Within this period the Drug Company continued its business at its Cincinnati store, and no complaint is made in that connection. During the same period, it had to do with liquor sales not at its store and of three different characters:

First. It sold warehouse receipts, and had nothing to do with tax payments or withdrawals by the purchaser. It is conceded that such sales were permitted by section 3 of the act, that no permit was required therefor, and that they were not a violation of any regulation.

Second. It sold to other wholesale druggists who were authorized to purchase liquors, selling upon a wine gallon tax-paid basis, and carried out such sales by appropriating thereto warehouse receipts which it owned, and upon which it proceeded to pay the taxes and make withdrawals, in the name of its customer, and through the instrumentality of these warehouse receipts. In some cases it sent the receipts to the customer, who indorsed and returned them; in other cases it had one of its clerks write the name of the customer upon the back of the receipt. The customer furnished to the distillery the regular 1,410 permit, with the name of the distillery as consignor, but made payment to the Independent Drug Company.

Third. In still other cases, the Independent Drug Company, owning warehouse receipts, tax-paid the whisky and put it in the distillery free warehouse. It then made sales thereof to other wholesale druggists, who forwarded their 1,410 permits to the distillery, with the distillery appearing as consignor, and the shipments were made accordingly; but the purchase price was paid to the Drug Company. In this third class there was no appearance of transfer of the warehouse receipt to the purchaser.

It is conceded that the sales in the second and third class, or even in the third class alone, made during the period in question, far exceeded the 10 per cent. limitation sought to be imposed by Treasury Decision 3,208.

Jos. S. Graydon, of Cincinnati, Ohio, Levi Cooke, of Washington, D.C., and James B. O'Donnell, of Cincinnati, Ohio, for plaintiffs in error.

Thomas H. Morrow and R. T. Dickerson, Sp. Asst. Attys. Gen. (Benson W. Hough, U.S. Atty., of Columbus, Ohio, on the brief), for the United States.

Before DENISON and DONAHUE, Circuit Judges, and SIMONS, District Judge.

DENISON Circuit Judge (after stating the facts as above).

It is urged that merely to violate a regulation made by the Commissioner of Internal Revenue under the purported authority of section 7 of the National Prohibition Act (Comp. St. Ann. Supp. 1923, Sec. 10138 1/2cc) does not constitute such a crime or offense against the United States as to support a prosecution for conspiracy under section 37 of the Criminal Code (Comp. St. Sec. 10201). U.S. v. Eaton, 144 U.S. 677, 12 Sup.Ct. 764, 36 L.Ed. 591. It is also urged that, in so far as Treasury Decision 3,208, undertook to prevent wholesale druggists, otherwise authorized, from selling more than a limited quantity of intoxicating liquor made before the Prohibition Act was passed, it was invalid, and reliance is had upon the opinion of the Attorney General, dated March 3, 1921, holding that the act did not indicate any intention to permit executive officers to limit the amount of existing liquors which could legally be sold for medicinal purposes, as well as upon the known limitations of the departmental right to make regulations, as stated in Williamson v. U.S., 207 U.S. 425, at page 462, 28 Sup.Ct. 163, 52 L.Ed. 278, and other similar cases. Indeed, it is said that the repeal of so much of Treasury Decision 3,208 as limited the amount of sales, which repeal was effected by Treasury Decision 3,299, was made because this opinion of the Attorney General was then so interpreted.

Each of these two contentions, as well as some others presented, we pass by without consideration, ^[1] and come to (1) the effect of the repeal; and (2) the defense resting on a good-faith belief by the respondents that their adopted plan of business was not contrary to this regulation.

1. It was a familiar common-law rule that, after a statute creating an offense was repealed without a saving clause, there could be no further criminal prosecution for its violation, and even prosecutions pending at the date of the repeal were abated. In the federal courts this rule was extended to the case of that repeal by implication which comes from passing an inconsistent statute (U.S. v. Tynen, 11 Wall. 88, 20 L.Ed. 153); but, even if there were effective analogy between such a statutory repeal and the present change of regulations, we observe that this common-law rule is no longer in force. The Act of February 25, 1871 (R.S. Sec. 13 (Comp. St. Sec. 14)), is a complete saving clause as to all later statutes which do not reject it (Gt. Northern R.R. v. U.S., 208 U.S. 452, 28 Sup.Ct. 313, 52 L.Ed. 567), and covers all offenses (U.S. v. Reisinger, 128 U.S. 398, 9 Sup.Ct. 99, 32 L.Ed. 480).

2. It is settled that...