United States v. Four (4) Pinball Machines

• Citation: 429 F. Supp. 1002
• Decision Date: 15 April 1977
• Docket Number: 74-250 to 74-252.,Civ. No. 74-249
• Parties: UNITED STATES of America, Plaintiff, v. FOUR (4) PINBALL MACHINES and One (1) Remote Control Device, Defendants. UNITED STATES of America, Plaintiff, v. THREE (3) BALLY PINBALL MACHINES and $325.00 in U. S. Coin, Defendants. UNITED STATES of America, Plaintiff, v. FOUR (4) BALLY PINBALL MACHINES, Defendants. UNITED STATES of America, Plaintiff, v. FOUR (4) BALLY PINBALL MACHINES, FRAME NUMBERS 38859, 5263, 31686, AND 1610, and U. S. Coin in the Total Amount of $100.85, Defendants.
• Court: U.S. District Court — District of Hawaii

429 F. Supp. 1002

UNITED STATES of America, Plaintiff, v. FOUR (4) PINBALL MACHINES and One (1) Remote Control Device, Defendants.

UNITED STATES of America, Plaintiff, v. THREE (3) BALLY PINBALL MACHINES and $325.00 in U. S. Coin, Defendants.

UNITED STATES of America, Plaintiff, v. FOUR (4) BALLY PINBALL MACHINES, Defendants.

UNITED STATES of America, Plaintiff, v. FOUR (4) BALLY PINBALL MACHINES, FRAME NUMBERS 38859, 5263, 31686, AND 1610, and U. S. Coin in the Total Amount of $100.85, Defendants.

Civ. Nos. 74-249, 74-250 to 74-252.

United States District Court, D. Hawaii.

April 15, 1977.

T. David Woo, Asst. U. S. Atty., Honolulu, Hawaii, for plaintiff.

Ernest Y. Yamane, Honolulu, Hawaii, for defendants.

DECISION AND ORDER

WONG, District Judge.

I. BACKGROUND

These four forfeiture actions under 26 U.S.C. § 7302 were consolidated for trial. The government seized the 15 pinball machines following non-payment of the special tax imposed by 26 U.S.C. § 4461(a). Defendant-claimant National Amusement, Inc. is the owner of the 15 pinball machines.

The matter was submitted for trial on stipulated facts and the parties' memoranda. The stipulation of facts recites the following:

1. The 15 pinball machines are gaming devices within the meaning of 26 U.S.C. § 4462(a)(2).¹

2. A special tax of $250.00 per machine per year was required to be paid pursuant to 26 U.S.C. § 4461(a)(2).²

3. The special tax imposed by 26 U.S.C. § 4461(a)(2) has not been paid for any of the 15 pinball machines.³

4. Defendant-claimant National Amusement, Inc. has been and is engaged in the business of leasing gaming and amusement devices.

5. In the past, National Amusement, Inc. has paid and/or has ensured that lessees of National Amusement, Inc.'s gaming devices have paid the taxes required by 26 U.S.C. § 4461(a)(2).

6. At no time has National Amusement, Inc. attempted to evade payment of the special tax.

7. National Amusement, Inc. is ready, willing, and able to pay the special tax on the 15 pinball machines.⁴

8. The 15 pinball machines were seized on September 15, 1972. National Amusement, Inc. learned of the seizure at that time.

9. Prior to the seizure, National Amusement, Inc. did not know of the government's intent to seize and forfeit the pinball machines for non-payment of the special tax.

10. The 15 pinball machines were seized from premises not maintained, used, or owned by National Amusement, Inc. The premises were maintained, used, or owned by the lessees of the machines.

11. The machines were seized from premises in public places and the machines were in plain view and fully accessible to the public.

II. DISCUSSION

A special tax of $250.00 per machine should have been paid. It was not. Therefore, under 26 U.S.C. § 4901(a), it became illegal to continue to operate the 15 pinball machines. The machines continued to operate. The government seized the machines and seeks to confiscate the machines and the money found within the machines. National Amusement, Inc. seeks to prevent forfeiture of the machines.

National Amusement, Inc. has three arguments. First, the machines are not the instrumentalities or fruits of the crime. Second, National Amusement, Inc. is the "innocent" owner of the machines. Third, forfeiture would be a violation of due process.

A. Instrumentality of the crime

The pinball machines are not illegal per se. As long as the special tax is paid, the machines can be used.⁵ National Amusement, Inc. argues that the machines themselves do not become illegal when the special tax is not paid. What is illegal is the continued operation of the machines. National Amusement, Inc. seeks to distinguish the pinball machines from property which is illegal per se or property such as an automobile used to transport illicit drugs.

The court does not agree. The illegal activity here is engaging in or carrying on business subject to the special tax imposed by 26 U.S.C. § 4461(a)(1) without paying the tax. 26 U.S.C. § 4901(a).⁶ There cannot be any illegal activity unless there is a pinball machine upon which the special tax was not paid. Hence, the pinball machines are an essential element of the illegal activity in these cases.

A special tax was required to be paid by 26 U.S.C. § 4461(a)(1). Failure to pay the tax and continuing to operate the machines gave rise to a violation of 26 U.S.C. § 4901. The pinball machines thus became property which had been used in violating the provisions of the Internal Revenue Code. As such, it became unlawful to have or possess the pinball machines under 26 U.S.C. § 7302,⁷ the forfeiture statute.⁸ Other courts have applied this forfeiture statute to pinball machines. For example, United States v. Various Gambling Devices, 478 F.2d 1194 (5th Cir. 1973); United States v. Ten Coin-Operated Gaming Devices, 388 F.Supp. 801 (N.D.W.Va.1975); United States v. One Bally Sun Valley Pinball Machine, Civil Action No. 16,941 (W.D.La. Jan. 19, 1973); United States v. Five (5) Coin-Operated Gaming Machines, 246 F.Supp. 349 (W.D.Va.1965); United States v. One Bally County Fair Pinball Machine, 238 F.Supp. 362 (W.D.La.1965).

B. Due process

National Amusement, Inc.'s innocent owner and due process arguments overlap. Due process is said to be violated because the owner is "innocent" and not significantly involved in the illegal activity.

National Amusement, Inc. admits the validity of the special tax. But it says that the tax is imposed upon the lessees of the machines in this case. National Amusement, Inc. argues that forfeiture statutes are intended to impose a penalty only upon those significantly involved in the criminal activity. National Amusement, Inc. says that it was not significantly involved in the illegal activity since 26 U.S.C. § 4461(a) does not impose the special tax on it. Further, it argues that it is "innocent" because it is not at fault in failing to pay the tax; it is ready, willing, and able to pay the tax; and it has never attempted to evade payment of the tax.⁹ Therefore, to forfeit the machines would be a deprivation of property without due process of law. National Amusement, Inc. also argues that it was denied due process because it did not have notice of the non-payment of the special tax or the seizure.

1. Innocent owner

In United States v. Bride, 308 F.2d 470 (9th Cir. 1962), an automobile was seized because it was used by Lisner in illegal bookmaking activities. The automobile was registered to Lisner's wife and a bank was the legal owner. The wife and bank objected to the forfeiture. The district court returned the car to the wife, but the Ninth Circuit reversed. The court said that

it is well settled that in a proceeding for forfeiture against a motor vehicle for violation of the internal revenue laws the innocence of the registered owner-claimant is no defense, as the proceeding is in rem against the vehicle. It is held . . that in order to relieve the owner from forfeiture where the vehicle was being used without the knowledge or consent of the owner it must be shown that the person so using it had obtained the vehicle in violation of the criminal laws . . ..

308 F.2d at 473-74 (citations omitted). Accord United States v. One 1967 Cadillac Coupe Eldorado, 415 F.2d 647, 648 (9th Cir. 1969).

In United States v. United States Coin and Currency, 401 U.S. 715, 91 S.Ct. 1041, 28 L.Ed.2d 434 (1971), the Supreme Court said that forfeiture statutes "are intended to impose a penalty only upon those who are significantly involved in a criminal enterprise." 401 U.S. at 722-23, 91 S.Ct. at 1045 (footnote omitted). National Amusement, Inc. argues that since it was not significantly involved in any criminal enterprise, it falls within the protection of Coin and Currency.

In Coin and Currency, however, the Court also said that

if we were writing on a clean slate, the government's claim that § 7302 operates to deprive totally innocent people of their property would hardly be compelling. Although it is true that the statute does not specifically state that the property shall be seized only if its owner significantly participated in the criminal enterprise, we would not readily infer that Congress intended a different meaning. However, as our past decisions have recognized, centuries of history support the Government's claim that forfeiture statutes similar to this one have an extra-ordinary broad scope.

Id. at 719, 91 S.Ct. at 1043-1044 (citations omitted).

There is the conflicting language from Coin and Currency but, more importantly, there is the subsequent case of Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S.Ct. 2080, 40 L.Ed.2d 452, reh. denied, 417 U.S. 977, 94 S.Ct. 3187, 41 L.Ed.2d 1148 (1974). In Calero-Toledo, Puerto Rican authorities seized a yacht and charged one of the lessees of the yacht with a marijuana violation. No challenge to the seizure was filed, so the yacht was forfeited to the Puerto Rican government. The owner of the yacht learned of the seizure and forfeiture when attempting to repossess the yacht because of non-payment of rent. Thus, the owner was "innocent;" it was not involved in the criminal activity and it did not know that the yacht was being used to violate the law.

The owner filed an action for declaratory and injunctive relief. It complained that the applicable Puerto Rican statutes were unconstitutional because there was a denial of due process, to-wit, no hearing, no notice, and a deprivation of property without just compensation.

A three-judge district court held for the owner. The court viewed Coin and Currency "as having effectively overruled . . prior decisions that the property owner's innocence has no constitutional significance for purposes of forfeiture . . .." 416 U.S. at 669, 94 S.Ct. at 2085. The Supreme Court called this reliance "misplaced." Id. at 688, 94 S.Ct. 2080.

Therefore, the owner's innocence is not a defense to a forfeiture proceeding. It does seem unfair that a truly "innocent" owner's...