Source: https://supreme.justia.com/cases/federal/us/281/599/
Timestamp: 2019-04-23 02:12:38+00:00

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Justia › US Law › US Case Law › US Supreme Court › Volume 281 › Campbell v. Galeno Chemical Co.
Campbell v. Galeno Chemical Co.
1. A basic permit granted under § 4, Title II, of the Prohibition Act, to manufacture articles such as toilet, medicinal, and antiseptic preparations, containing intoxicating liquor but unfit for beverage purposes, is not within the provision of § 6 that "permits to manufacture, prescribe, sell or transport liquor . . . shall expire on the 31st day of December next succeeding the issuance thereof." P. 281 U. S. 606.
2. Such a basic permit issued under § 4, to be in force until "revoked, suspended or renewed as provided by law or regulations," sufficiently complies with the provision of § 6 (assuming but not deciding it to be applicable) that every permit shall designate the time when the permitted acts may be performed. P. 281 U. S. 608.
3. Such a basic permit issued under § 4 to remain in force "until revoked, suspended or renewed as provided by law or regulations" is not subject to be revoked by a subsequent regulation fixing a time limit for unexpired permits, but is revocable only for cause as provided in §§ 5 and 9, upon notice and hearing, with a right to judicial review. P. 281 U. S. 609.
4. Regulations issued under a statute may not extend or modify its provisions. P. 281 U. S. 610.
Certiorari, 280 U.S. 548, to review decrees of the circuit court of appeals affirming decrees of injunction in two suits against a Prohibition Administrator, the Commissioner of Prohibition, and the Secretary of the Treasury to restrain the revocation of permits issued to the plaintiffs under § 4 of the Prohibition Act.
any liquor without first obtaining a permit from the commissioner so to do. . . . All permits to manufacture, prescribe, sell, or transport liquor may be issued for one year, and shall expire on the 31st day of December next succeeding the issuance thereof: Provided, . . . That permits to purchase liquor for the purpose of manufacturing or selling as provided in this chapter shall not be in force to exceed ninety days from the day of issuance."
Section 4 of the Act (27 U.S.C.A § 13) provides that the "articles" therein enumerated, including toilet, medicinal and antiseptic preparations, although containing intoxicating liquor, "shall not, after having been manufactured and prepared for the market, be subject to the provisions of" the Act, and that the use of intoxicating liquor in the manufacture of such "articles" is authorized under certain restrictions. Manufacturers are required under this section to procure two permits: one, the basic permit here involved, granting general authority to manufacture such preparations with an alcoholic content; the other, a supplemental permit granting special authority to purchase liquor for that purpose and limited by § 6 to not more than ninety days from the date of issuance. Treasury Dept., Bureau of Internal Revenue, Regulations 60 (1924), §§ 200, 201, 221, 403; Prohibition Bureau, Regulations 2 (1927) §§ 201, 203, 404.
"is not in good faith conforming to the provisions of this chapter, or has violated the laws of any state relating to intoxicating liquor," and subjects the action of the Commissioner to judicial review as provided in § 5. Compare Ma-King Products Co. v. Blair, 271 U. S. 479.
"all permits issued and in force and effect on the effective date of these regulations shall expire on December 31, 1928, unless renewed in the manner hereinafter specified, . . ."
to the basic permits issued under § 4 of the Act to persons engaged in the business of manufacturing medicinal preparations "that are unfit for use for beverage purposes." The plaintiffs, without indicating any intention to waive their rights under existing permits and for the purpose of safeguarding themselves, accordingly filed applications for renewal of their permits.
notified the several plaintiffs accordingly and fixed dates for their hearings. Compare Liscio v. Campbell, 34 F.2d 646.
Laboratories, Inc. v. Campbell, 34 F.2d 642. This Court granted writs of certiorari. Campbell v. Galeno Chemical Co., 280 U.S. 548.
other preparations only "that are unfit for use for beverage purposes," while "liquor" is defined in § 1 as meaning liquids, in addition to those enumerated, "which are fit for use for beverage purposes." The two definitions are mutually exclusive. If the article to be manufactured is fit for use for beverage purposes, and therefore liquor, a permit under § 4 cannot be issued, and vice versa. By express and obvious enactment, therefore, the permits held by the plaintiffs are not permits to manufacture liquor, and are not within the expiration limit prescribed by § 6.
Second. The government contends also that, because plaintiffs' permits, whatever their character, do not provide a calendar date of expiration, they are void or voidable for failure to comply with the further provision of § 6 that every permit "shall designate and limit the acts that are permitted and the time when and place where such acts may be performed," even though they complied with the regulations in force at the time of issuance. This contention rests wholly upon the assertion that the grant of a permit to be in force until "revoked, suspended, or renewed as provided by law or regulation" is not definite.
It has been questioned whether Congress intended to make this provision apply to permits issued under § 4, but we do not express any opinion on that question. Even if applicable, this provision in § 6 does not declare that permits must expire by the calendar. The limitation that the permits shall be in force until revoked, suspended, or renewed in accordance with the law or regulations is a sufficient compliance with the general requirement of the designation of the time when the permitted acts may be performed. When a calendar date is required, § 6 so states specifically. Ninety days for permits to purchase liquor for the purpose of manufacturing and selling; thirty days for permits to purchase for any other purpose; December 31st next succeeding the date of issuance for permits to manufacture, prescribe, sell, or transport liquor.
It is true that permits for short periods terminating upon definite dates would leave the Bureau much freer in the exercise of its discretion than it could be under indeterminate permits revocable only for cause, established pursuant to §§ 5 or 9. Every permittee applying for a renewal has the burden of establishing his fitness, whereas, if permits are terminable only by revocation pursuant to the provisions in §§ 5 and 9, the burden to justify closing the business because of some violation of the Act or of the regulations is put upon the government. But § 6, as well as the rest of the Act, draws an obvious distinction between the manufacture, etc., of intoxicating liquor and that of industrial alcohol and the preparations enumerated in § 4. The former is forbidden except for certain specified purposes for which liquor is deemed necessary. The latter is ordinarily lawful, and it is the express purpose of the Act to encourage it. United States v. Katz, 271 U. S. 354, 271 U. S. 359. Regulations are imposed only for the purpose of guarding against the diversion of this lawful business into the unlawful business of supplying intoxicating liquor. [Footnote 7] It is entirely consistent with the avowed purposes of the Act that the restrictions on the one business should be more severe than those on the other.
October 1, 1927, is a valid exercise of that power. This contention also is unsound.
The limits of the power to issue regulations are well settled. International Ry. Co. v. Davidson, 257 U. S. 506, 257 U. S. 514. They may not extend a statute or modify its provisions. The regulation of October 1, 1927, purports to revoke unexpired permits as of December 31, 1928, without resort to the proceedings prescribed by §§ 5 and 9. It thus attempts to deprive permittees of rights secured to them by these sections of the Act. As was said in Higgins v. Foster, 12 F.2d 646, 648: "We cannot see that the Commissioner, under the guise of legislation, may do in gross what he had no power to do in detail." Whether or not the power to make regulations, or the provision in § 6, authorizes the Bureau to fix expiration dates for permits when issued, it does not authorize the revocation of existing permits in violation of the express provisions of the Act.
"If this permit requires a supporting bond, the failure to keep such bond in force will ipso facto suspend this permit, and this permit may be revoked, suspended, modified, amended, supplemented, extended, or renewed in the manner and for the causes set forth in regulations 60, or specifically set forth herein, or agreed to by the permittee, or otherwise provided by law."
"so long as the supporting bond required by these regulations remains in full force and effect, or until cancelled, suspended, revoked, or voluntarily surrendered by the permittee."
Internal Revenue Treasury Decision 3773, made on November 14, 1925, announced that all permits theretofore granted would expire on December 21, 1925, and that thereafter only annual permits would be issued. See also T.D. 3774. The decision was declared void on June 1, 1926, by the United States Circuit Court of Appeals for the Second Circuit in Higgins v. Foster, 12 F.2d 646. Thereupon, the Bureau, by T.D. 3925, approved on September 1, 1926, declared that "H" permits would be deemed valid until surrendered or revoked. But, on November 9, 1926, the United States Circuit Court of Appeals for the Seventh Circuit held in Chicago Grain Products Co. v. Mellon, 14 F.2d 362, that a permit to manufacture denatured alcohol was subject to the one-year limitation prescribed by § 6 of the Act. Thereafter, § 218, here in question, was incorporated in Regulations 2, revising Regulations 60.
The injunctions granted were interlocutory only. As to two of the original plaintiffs, Lion Laboratories, Inc., and Max Daub, an order of dismissal was granted because their permits had expired by the express terms contained therein. These two plaintiffs appealed to the circuit court of appeals, where the dismissal was affirmed. But they are not parties in this Court. The Commissioner of Internal Revenue had been joined as defendant, but the circuit court of appeals held he was not a proper party, and the bills were dismissed as against him. The plaintiffs acquiesced in this holding.
"If the bill rested upon § 9, National Prohibition Act, certainly it was not; if it depended upon the general equity powers of the court, we do not decide whether the policy manifested in § 9 applies, when there has been no hearing before the commissioner, and when, as here, the revocation was by regulation (§ 218, Regulation 2, Oct. 1, 1927)."
34 F.2d 642, 643. In this Court, too, the decrees were treated as final decrees on the merits of the bills.
The decision of the circuit court of appeals on the merits is in accord with its prior decision in Higgins v. Foster, supra, note 2 and with Casper v. Doran, 30 F.2d 400, but is in direct conflict with the Chicago Grain Products case, supra, note 2 and also with Cywan v. Blair, 16 F.2d 279, which expressly refused to follow the Higgins case.
The argument is that pure alcohol is not immediately fit for beverage use, but that it may be mediately fitted for that purpose by adding water. Alcohol is unquestionably liquor. It is therefore urged that the same is true of any liquid which, like alcohol, is immediately or mediately fit for use as a beverage and otherwise answers the definition of "liquor." Aside from the argument developed in the text, there are two short answers to this contention. First, alcohol is expressly included in the definition of "liquor" in § 1. No argument can therefore be based on the fact that pure alcohol is not immediately fit for use as a beverage. Second, there is no evidence whatever in the record that the plaintiffs' preparations can mediately be fitted for that purpose by the simple process of adding water, or by any other process.
It is unnecessary for us to consider in these cases whether future applicants for basic permits under § 4 may insist on the grant of permits containing no calendar date of expiration, or whether future permits may properly restrict the use of whiskey only to cases where whiskey is an absolutely necessary ingredient and no other spirits or alcohol will properly serve for the extraction and solution of ingredients contained in the preparations and for the proper preservation thereof.
Compare "Industrial Alcohol," a monograph issued by the Treasury Department, Bureau of Prohibition (Gov't Ptg. Office 1930).

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