Pabst v. Campbell

• Decision Date: 03 April 1957
• Docket Number: No. IP 56-C-226.,IP 56-C-226.
• Citation: 150 F. Supp. 71
• Parties: Frank C. PABST, Helen R. Pabst v. Gary CAMPBELL, United States District Director of Internal Revenue for the Indiana Internal Revenue District; Commercial Distillers Corporation.
• Court: U.S. District Court — Southern District of Indiana

150 F. Supp. 71

Frank C. PABST, Helen R. Pabst v. Gary CAMPBELL, United States District Director of Internal Revenue for the Indiana Internal Revenue District; Commercial Distillers Corporation.

No. IP 56-C-226.

United States District Court S. D. Indiana, Indianapolis Division.

April 3, 1957.

Rosenfeld, Wolfe & Allen, Terre Haute, Ind., Dewey, Ballantine, Bushby, Palmer & Wood, New York City, for plaintiff.

Jack C. Brown, U. S. Atty., Indianapolis, Ind., for Int. Rev. Service.

Wickes, Riddell, Bloomer, Jacobi & McGuire, New York City, Gambill, Dudley, Cox, Phillips & Gambill, Terre Haute, Ind., for Commercial Distillers.

Before SWAIM, Circuit Judge, STECKLER, Chief Judge, and HOLDER, District Judge.

PER CURIAM.

On August 21, 1956, plaintiffs herein filed their complaint praying a permanent injunction, an interlocutory injunction, and a temporary restraining order, all of which were requested to restrain each defendant from certain conduct under certain provisions of the Internal Revenue Code of 1954, which, for convenience, may be referred to as the "force-out" provisions. Provisions relevant to the force-out operation may be found at 26 U.S.C.A. §§ 5001, 5004, 5005, 5006, 5011, 5061, 5194(f), 5232, 5247 and 5625. Relevant regulations are found in the Warehousing of Distilled Spirits Regulation, Title 26 C.F.R. (1954) Part 225, §§ 225.424, 225.426, 225.430, 225.431, 225.510, 225.511, 225.512, 225.513. See also Revenue Ruling 55-379 I.R.B. 1955-51, 23 and Alcohol and Tobacco Division of Internal Revenue Service Industry Circular 56-17. The restraint was sought to protect a large quantity of whiskey stored in defendant Commercial's warehouses but belonging to plaintiffs by virtue of a number of warehouse receipts which plaintiffs owned. The theory supporting the claim for injunctive relief was that the force-out provisions were unconstitutional, because of this assertion a three-judge court became necessary, and this court was convened on August 30, 1956.

Prior to the convention of this court, a temporary restraining order was, on August 21, 1956, issued as prayed by the single judge to whom the cause had been assigned. On August 23, 1956, service was had on each defendant, and on August 27 defendant Commercial filed, among other things, its motion to dismiss. Defendant Campbell, United States District Director of Internal Revenue for the Indiana Internal Revenue District, filed a similar motion on September 5, and Commercial filed a memorandum supporting its motion to dismiss the same day. The single judge, on the same day, entered an order extending the temporary restraining order, increasing plaintiffs' bond from $10,000 to $25,000, but withholding ruling on the two motions to dismiss.

On October 5 this court, pursuant to plaintiffs' request and after a hearing, entered an interlocutory injunction as prayed; at the hearing Commercial orally renewed its motion to dismiss. On October 29 Commercial moved for a hearing on its motion, and the following day this court by an order disposing of certain motions reserved ruling on each defendant's motion to dismiss until the trial on the merits. The District Director, on November 1, moved for a hearing on his motion and, subsequently, filed his brief in support of his motion to dismiss on November 15.

A trial was commenced on November 19, 1956, and concluded the following day. At the conclusion of all the evidence each defendant orally renewed and requested the refiling of its respective motion to dismiss; these motions were taken under consideration. Each defendant at that time also moved to dissolve the interlocutory injunction, and defendant Commercial moved that the bond be increased. The court after considering the motions ordered that the bond be increased from $25,000 to $500,000 within ten days or, if it was not, that the interlocutory injunction would be dissolved. On the 3d of December, at the request of Commercial, the court found that the order had not been complied with and that the interlocutory injunction was therefore dissolved. On December 5 plaintiffs belatedly filed the additional bond and applied for a temporary restraining order, which was denied, and moved for reinstatement of the interlocutory injunction. The Director on December 18 filed objections to the plaintiffs' motion for reinstatement of the interlocutory injunction.

On the 7th of January, 1957, plaintiffs filed a motion for "rescission of post-trial briefing schedule," to which Commercial filed an answer brief on February 1. On January 14, 1957 the court orally advised counsel for the parties that the consideration by the court of the plaintiffs' motion for rescission of the post-trial briefing schedule would be held in abeyance for a reasonable time in order to permit the parties to have an opportunity by conference to agree upon an appropriate procedure by which the cause could be disposed of. Subsequently, plaintiffs filed their own motion to dismiss without prejudice for mootness; they have also requested permission to withdraw their motion for reinstatement of the interlocutory injunction and their motion for "rescission of post-trial briefing schedule," and they have moved for the return of the additional bond of $475,000 which was previously filed. Commercial filed briefs in answer to these motions and moved that the action be dismissed as to it with prejudice and that damages be assessed for wrongful injunction. Plaintiffs filed a brief in answer to Commercial's motion and supporting their own.

Thus it appears that the parties are agreed that the action should be dismissed, and the immediate question which remains between plaintiffs and defendant Commercial is whether it should be dismissed with or without prejudice.

Plaintiffs urge that the claim for injunctive relief is moot because the whiskey which is the subject of the action has, since the interlocutory injunction was dissolved, been either sold (and tax-paid) or redistilled; redistillation is, under the force-out provisions, tantamount to destruction of the original whiskey. The whiskey, it is urged, which the prayer of the complaint sought to protect is gone and with it this court's power to act.

Commercial on the other hand asks this court to consider its earlier motions to dismiss on the merits first and, that failing,...