United States v. U.S. Fidelity & Guaranty Co. of Baltimore, Md.

• Decision Date: 02 February 1915
• Docket Number: 1299.
• Citation: 221 F. 27
• Court: U.S. Court of Appeals — Fourth Circuit
• Parties: UNITED STATES v. UNITED STATES FIDELITY & GUARANTY CO. OF BALTIMORE, MD.

221 F. 27

UNITED STATES v. UNITED STATES FIDELITY & GUARANTY CO. OF BALTIMORE, MD.

No. 1299.

United States Court of Appeals, Fourth Circuit.

February 2, 1915

Clyde R. Hoey, Asst. U.S. Atty., of Shelby, N.C., and A. E. Holton of Winston-Salem, N.C. (W. C. Hammer, U.S. Atty., of Ashboro N.C., on the brief), for the United States.

G. S Bradshaw, of Greensboro, N.C., for defendant in error.

Before KNAPP and WOODS, Circuit Judges, and WADDILL, District Judge.

KNAPP Circuit Judge.

The United States brought this suit on the 21st of September 1911, against the defendant as surety on the bond of Dart C. Foster, who operated grain distillery No. 3, in the Fifth collection district of North Carolina, from the 20th of May, 1905, to the 31st of December of that year. The bond was for $6,000, and conditioned, among other things, that Foster 'shall in all respects faithfully comply with all the provisions of law relating to the duties and business of distillers,' etc. The evidence tends to show that large quantities of spirits were removed from the distillery, during the period mentioned, on which the government tax, amounting to more than the penalty of the bond, has never been paid, and that this was a breach of the bond is not disputed. The defenses set up are based upon allegations which may be summarized as follows:

It appears that after the execution of the bond, and on the 6th of November, 1905, the spirits on hand and all the apparatus belonging to the distillery, together with the land on which it was located, were seized by the government and taken into custody; that on the 8th of December following the property was released and restored to Foster, without the assent or knowledge of the defendant; that in January, 1909, Foster conveyed the distillery to one Williams, and thereupon left the country for Mexico where he has since resided; that with full knowledge of these facts the distillery property was again seized by the government in April, 1910, and shortly thereafter released to Williams, without the assent of the defendant; that such seizure and restoration to Williams terminated the defendant's liability; that the plaintiff neglected to enforce the liens acquired by its seizures and to preserve its lien rights thereunder, and that by reason of such failure and the relinquishment of its liens without the knowledge of defendant the latter was discharged of liability upon the bond; that the plaintiff 'failed, within 15 months from the time of the delivery of the list to the collector, to enter or make the assessment contemplated and required by section 3182 (Comp. St. 1913, Sec. 5904); and that such assessment was not entered or made until nearly five years after the time it should have been made and entered of record, and the said defendant pleads said statute in bar of any recovery in this action. ' It further appears that the spirits in question, on which the tax was not paid, were removed by or with the connivance of certain agents and employes of the government.

At the close of the evidence the court made the following ruling, the correctness of which is challenged by the assignments of error:

'There is no evidence that this information did not come to the commissioner of internal revenue within fifteen months. Both sections 3182 and 3253 (Comp. St. 1913, Secs. 5904, 5988) must be considered in connection with this case. It is admitted that the taxes are claimed for a part of the year 1905, ending with December 31st of that year, and the assessment is made on the September list, 1910, about five years later. Therefore the assessment cannot be sustained under section 3182. The attorney for the United States insists that the provisions of section 3253 validate the assessment, but there is no evidence that the facts upon which the assessment is based did not come to the knowledge of the taxing authorities before the expiration of 15 months from the time the 1905 lists were furnished. The district attorney then insists that the plaintiff is entitled to recover in the action as in debt, but the court construes the complaint as based upon the assessment. The court holds that the plaintiff is not entitled to recover upon the complaint and this testimony, and directs the jury to return a verdict for the defendant.'

The question thus presented is whether, under the averments of the complaint and...