United States v. Engelberg
| Decision Date | 14 June 1924 |
| Docket Number | No. 2828.,2828. |
| Citation | 2 F.2d 720 |
| Parties | UNITED STATES v. ENGELBERG et al. |
| Court | U.S. District Court — Western District of Pennsylvania |
A. W. Henderson, Sp. Asst. U. S. Atty., of Pittsburgh, Pa.
J. M. Magee and E. W. Arthur, both of Pittsburgh, Pa., for defendants.
The United States has brought this action to recover from Max Engelberg, as principal, and the American Surety Company, as surety, the penal amount of two bonds in the sum of $10,000 and $15,000, respectively, alleging breach of the conditions of said bonds. Engelberg filed an affidavit of defense, raising questions of fact, among others, alleging the cancellation by the government of said bonds. The surety company denies liability, alleging as a legal proposition that, on breach of the conditions of the bonds, the United States cannot recover the entire penal sum, without reference to the damages sustained, but can only recover the amount of the pecuniary loss, and, as no pecuniary loss or damage is alleged to have been suffered by the United States by reason of the breaches of the conditions, plaintiff's action cannot be sustained. This legal question alone is for our determination at this time. The material facts of the case, which must be assumed to be true in passing upon the legal question thus raised, are as follows:
Engelberg was a liquor dealer of Erie, Pa. On or about January 12, 1920, he applied to the federal prohibition commissioner for a federal permit to sell intoxicating liquors for other than beverage purposes, under the provisions of the law. In order to obtain such permit, he executed and delivered to the proper federal officers a bond to the United States in the sum of $10,000, with the American Surety Company as surety. The bond was executed on what is known as form 738. The permit applied for was issued to Engelberg on January 24, 1920, and the bond remained in force until canceled, as to future liability, on March 6, 1920. The condition of this bond was as follows:
"Now, therefore, the condition of this obligation is such that if the said principal shall fully and faithfully comply with all the requirements of the laws of the United States now or hereafter enacted, and regulations issued pursuant thereto, respecting the sale or use of distilled spirits and wines for other than beverage purposes, then this obligation to be void; otherwise, to remain in full force and virtue."
On February 26, 1920, shortly after the issuance of the permit, a larger bond was executed and delivered by the permittee, apparently for the purpose of authorizing increased withdrawals of liquor under the permit. This bond was in the sum of $15,000, and was executed on what is known as form 1408. The American Surety Company was also the surety on this bond. The condition of this bond was as follows:
"Now, therefore, the condition of this obligation is such that, if there be no material false statements in the application for such permit, and the said principal shall not violate the terms of such permit issued to him by the Commissioner of Internal Revenue, or any person authorized by him to issue permits on such application, or shall not violate any of the provisions of the National Prohibition Act and regulations promulgated thereunder as now or hereafter provided, and all other laws of the United States now or hereafter enacted respecting distilled spirits, fermented liquors, wines, or other intoxicating liquors, and will pay all taxes, assessments, fines, and penalties incurred or imposed upon him by law, then this obligation to be void; otherwise, to remain in full force and effect."
It is averred that between the 24th day of January, 1920, and the 17th of August, 1921, the defendant Engelberg wholly failed to comply with the requirements of the laws of the United States and regulations issued pursuant thereto, respecting the sale of distilled spirits for other than beverage purposes, and violated the requirements of the laws and regulations, in that he failed and neglected to keep records of the purchase, receipt, and sale of distilled spirits as required by the laws and regulations, and that he had and possessed whisky on his premises of which no record appears upon the books required to be kept, and that he unlawfully sold whisky for beverage purposes on March 5, 1920, and on March 9, 1920, and unlawfully transported whisky on the last-named date, and did not in good faith conform with and otherwise violated the laws of the United States and the regulations pursuant thereto, respecting the sale of distilled spirits for other than beverage purposes; that on the 17th of August, 1921, because of such violations the said permit which had been granted to the said Engelberg was canceled upon due and proper notice, and that notice of such cancellation was given to the said defendant; that by reason of these facts the defendant made and suffered a breach of the conditions in each of the bonds, and that thereupon the full amounts became forfeited to the United States, to recover the amounts of which the action has been brought.
Assuming the truth of these averments, must the United States aver the specific damage suffered, and is its recovery limited to such loss? Or, on the other hand, is the sum named in the bond a penalty or forfeiture, inflicted by the...
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