United States v. Automobile Financing, 8753.
| Decision Date | 31 October 1938 |
| Docket Number | No. 8753.,8753. |
| Citation | 99 F.2d 498 |
| Parties | UNITED STATES v. AUTOMOBILE FINANCING, Inc. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Lawrence S. Camp, U. S. Atty., and A. Sidney Camp, Asst. U. S. Atty., both of Atlanta, Ga.
Clint W. Hager and J. D. Tindall, both of Atlanta, Ga., for appellee.
Before SIBLEY, HUTCHESON, and HOLMES, Circuit Judges.
Proceeding under Sec. 40a Title 27 U. S.C.A. the Financing Company sought the remission from forfeiture of a Ford automobile, seized while removing and concealing nontax paid liquor, in violation of Sec. 3450, Rev.St., 26 U.S.C.A. § 1441. Its claim was, as the innocent owner and holder in good faith of purchase money notes and lien on the car, given by one William Robert Jenkins, a person without record or reputation of violating either State or Federal liquor laws.
The United States opposed the remission on the ground that Jenkins was not the real, but only the pretended purchaser of the automobile; that the real purchaser and owner was Robert L. McFarland, whose record and reputation as a liquor law violator was bad; and that under subdivision (b)(3) of Sec. 40a, 27 U.S.C.A., "the interest asserted by claimant arises out of", or at least, "is subject to, a contract or agreement under which a person having a record or reputation as a liquor violator has a right with respect to the automobile."
The District Judge made findings fully supported by the record; that McFarland was the real purchaser and owner; that because of his own bad reputation as a liquor violator, he had procured Jenkins to appear as ostensible purchaser; that the Finance Company was, however, wholly unaware of this fact and prosecuted inquiries and purchased the notes and lien in the good faith and reasonable belief that Jenkins was the purchaser; that Jenkins had a good reputation for character and for paying his debts, and that the Finance Company had a right to and did rely upon this record and reputation. He concluded that there was no duty or obligation upon the Company to investigate the record and reputation of McFarland, the real but secret purchaser of the car, and in the exercise of the discretion he thought the statute conferred on him, he ordered the forfeiture remitted.
The United States is here insisting that, under the findings, the spirit and the purpose of the statute, as well as its literal terms, authorized, indeed required, the District Court to deny the remission of forfeiture. A large part of its brief is devoted to maintaining that remission is not a matter of right, and that even though all statutory "conditions precedent to remission or mitigation" are complied with, whether there shall be a remission or mitigation is still within the sound discretion of the court.
We understand this to be the law.1 We do not understand appellee to contend otherwise. Certainly the District Judge so understood the law. In his opinion he said; "I think this is a clear case where the Court should exercise its discretion to remit the forfeiture."
The real controversy between appellant and appellee is over appellant's contention; that in the case of sales of this kind, where the real purchaser with a record, procures another to appear as purchaser, the ostensible purchaser must be disregarded and the remission granted or denied upon the record and reputation of the real purchaser; and that where, as here, no inquiry was made regarding him, the statutory conditions precedent have not been complied with, and remission must be denied.
The involved language of (b)(3)2 is, we think, capable of such a possible construction. Several District Courts, and one Circuit Court of Appeals, the Eighth,3 have so construed it. We agree, however, with the view of the Fourth Circuit Court of Appeals4 that "Congress did not intend to impose upon the lienor the obligation to ascertain at his peril" the existence of secret or covered interests, "unless from the documents themselves or other surrounding circumstances the lienor possesses information which would lead a reasonably prudent and law-abiding person to make further investigation."
The long legislative and judicial history of the struggles of those engaged in a large and legitimate industry, automobile financing, to protect themselves and their...
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