Source: https://caselaw.findlaw.com/us-supreme-court/307/219.html
Timestamp: 2019-04-26 06:56:06+00:00

Document:
[307 U.S. 219, 220] Messrs. Frank Murphy, Atty. Gen., and Gordon Dean, of Washington, D.C ., for the United States.
In each of these causes the District Court, proceeding under the 'Liquor Law Repeal and Enforcement Act' [307 U.S. 219, 221] of August 27, 1935, c. 740, 49 Stat. 872, 878, 27 U.S.C.A. 40a, mitigated the forfeiture of an automobile seized for unlawful transportation of distilled spirits upon which the federal tax had not been paid. (One was seized December 3, 1936; the other, March 15, 1937.) The forfeiture was decreed in a proceeding based upon section 3450 R.S., 26 U.S.C.A. 1441. The Circuit Courts of Appeals rightly approved and their judgments must be affirmed.
'Sec. 204 ( 40a). (a) Whenever, in any proceeding in court for the forfeiture, under the internal-revenue laws, of any vehicle or aircraft seized for a violation of the internal-revenue laws relating to liquors, such forfeiture is decreed, the court shall have exclusive jurisdiction to remit or mitigate the forfeiture.
It was admitted that Guy Walker had a previous record and reputation for violating both state and federal laws relating to liquor. Paul Walker was convicted of violating the National Prohibition Act, 41 Stat. 305, in 1929, and was duly [307 U.S. 219, 223] sentenced therefor, but his record and reputation since serving the sentence were good.
The claimant purchased the conditional sales contract in good faith believing that Paul Walker was the pur- [307 U.S. 219, 224] chaser and owner of the automobile. It had no knowledge, information or suspicion of the true facts until after the automobile had been seized by federal officers.
Petitioner challenges the judgment below because of claimant's failure to establish compliance with the conditions imposed by subsection ( b) section 204. Especially because claimant failed to show that it had no reason to believe the automobile was being used or would be used to violate the liquor laws; also because it made no adequate inquiry concerning the record and reputation of the real purchaser-Guy Walker.
Manifestly, section 204 is a remedial measure. It empowers the courts, exercising sound discretion, to afford relief to innocent parties having interests in condemned property where the claim is reasonable and just. Its primary purpose is not to protect the revenues; but this is proper matter for consideration whenever remission is sought. The section must be liberally construed to carry out the objective. The point to be sought is the intent of the law-making powers. Forfeitures are not favored; they should be enforced only when within both letter and spirit of the law. Farmers' & M. National Bank v. Dearing, 91 U.S. 29 , 33-35. If any claimant has been negligent or in good conscience ought not be relieved, the court should deny his application.
Where the value exceeds $500 or bond is given, forfeiture must be sought in court through a libel in rem. [307 U.S. 219, 229] United States v. Two Bay Mules, D.C., 36 F. 84; United States v. Mincey, 5 Cir., 254 F. 287, 5 A.L.R. 211; Logan v. United ates, 5 Cir., 260 F. 746; United States v. One Bay Horse, D.C., 270 F. 590.
The court shall not allow the (request)-claim-of any claimant for remission or mitigation, if it appears that [307 U.S. 219, 235] the interest asserted by (him)-the claimant-arises out of or is in any way subject to any contract or agreement under which any person having a record or reputation for violating laws of the United States or of any State relating to liquor has a right with respect to such vehicle or aircraft, unless and until he (the claimant) proves that before (he)-such claimant-acquired his interest, or such other person acquired his right under such contract or agreement, whichever occurred later, (he)-the claimant-his officer or agent, was informed in answer to his inquiry, at ( certain headquarters specified in the alternative) as to the character or financial standing of such other person, that such other person had no such record or reputation.
The forfeiture acts are exceedingly drastic. They were intended for protection of the revenues, not to punish without fault. It would require unclouded language to compel the conclusion that Congress abandoned the equitable policy, observed for a very long time, of relieving those who act in good faith and without negligence, and adopted an oppressive amendment not demanded by [307 U.S. 219, 237] the tax officials or pointed out in the reports of its committees.
Subsection [b] [307 U.S. 219, 3] was intended to prevent remission to a claimant who had failed to inquire when he should have done so, to one chargeable with willful negligence or purpose of fraud. It would be excessively harsh, unreasonable indeed, to say that one dealing in entire good faith must, at his peril, first discover and then make inquiry concerning somebody of whose existence he has no knowledge or suspicion. We cannot think Congress intended thus to burden dealing in all vehicles capable of transporting liquor.
It should be observed that the following things are possible subjects of seizure and forfeiture because of liquor law violations: 'Every vessel, boat, cart, carriage, or other conveyance whatsoever, and all horses or other animals, and all things used in the removal or for the deposit or concealment, etc.' 'Vehicle' is thus defined-'That in or on which a person or thing is or may be carried from one place to another.' A wheelbarrow, a covered wagon, a 'Rolls-Royce', the patient mule, a 'Man of War', and possibly a Pullman car or Ocean Liner is a vehicle. Goldsmith, Jr.-Grant Co. v. United States, 254 U.S. 505 , 41 S.Ct. 189; United States v. Two Bay Mules, supra; United States v. One Bay Horse, supra.
Subsection [b] [307 U.S. 219, 3] applies not only to transactions by financial concerns like respondent but to those of individuals and corporations great or small. It contemplates an investigation and this presupposes some reason at least to suspect the existence of the subject of investigation. Congress took away from executive officers the power to mitigate forfeitures where the property exceeds $500 in value, and gave this to the court familiar with the circumstances; but it left with the Secretary of the Treasury discretion to remit when the value was below $500 The intent was to require the courts to exact [307 U.S. 219, 238] proof of inquiries like those demanded by the Treasury Department practice, and disclosed by its representative before the Senate Committee. The petitioner's view, if adopted, would sanction one standard of remission for a vehicle worth $500, another when appraised at a dollar more.
Furthermore, the requirement for reasonable investigation cannot possibly place such a burden on finance companies as to force us to resolve an ambiguity in statutory language against forfeiture. In the cases before us a single question put the dealer or the purchaser might alone have disclosed the existence of a straw man. But no such simple inquiry was made. An investigation in each case was made to ascertain whether the named purchaser had a reputation or record for liquor violations. But the existence of a straw man was never probed. Certainly on such a matter investigational techniques are not novel, involved or unique. The responsibility for a [307 U.S. 219, 241] reasonable investigation would add but imperceptibly if at all to the cost of doing business. In this field such investigation entails a burden which any legitimate enterprise should be prepared to carry. We need not conjure up hypothetical cases of extended inquiry which disclosed no straw man, for they would meet the test of reasonable investigation here proposed.
Section 204(a) of section 204 provides that in any court proceeding for the forfeiture under the internal-revenue laws of any vehicle or aircraft seized for a violation of the internal-revenue laws relating to liquor, the court shall, upon decree of forfeiture, have exclusive jurisdiction to remit or mitigate the forfeiture. At the present time, the court has authority only to decree the forfeiture, and remission or mitigation is dependent upon administrative action. Section 204 extends to the court which determines whether the vehicle or aircraft shall be forfeited by reason of having been used in the violation of internal- revenue laws relating to liquor, the power to determine whether the claim of any person having an interest in the vehicle or aircraft should be allowed after forfeiture. Thus, in all cases where the value of the seized property exceeds $500, and in all cases where the value is $500 or less, but a bond is posted in order to bring the forfeiture proceeding into court, the court will have exclusive jurisdiction to remit or mitigate the forfeiture. In the event that a bond is not filed in cases where the property is of the value of $500 or less, the power to remit or mitigate will remain in the Secretary of the Treasury.
'Section 204 ... relates to proceedings in court for the forfeiture of vehicles or aircraft seized for violations of internal-revenue laws. At the present time, claimants of interests in vehicles or aircraft that have been seized and forfeited for violation of internal-revenue laws, petition the Secretary of the Treasury for the remission or mitigation of the forfeiture, and the Secretary, under the law, requires the person claiming to have an innocent interest to show that he had no knowledge of the unlawful use of the vehicle or aircraft. What this section will do, in the case of any court proceeding for the forfeiture of vehicles or aircraft, is to give the court jurisdiction to determine whether or not the person claiming to have an innocent interest actually had such an interest. Under the present practice the Secretary of the Treasury requires such a showing . ... This section is of particular importance in connection with the discounting by a finance company of an automobile dealer's paper.
[ Footnote 1 ] Precisely the investigation here urged seems to have been intended, for the Report of the Senate Committee on the Judiciary said as respects Sec. 204(b) (3): 'This last requirement is predicated upon the recognition of the 'bootleg hazard' as an element to be considered in investigating a person as a credit risk. As a matter of sound business practice, automobile dealers, finance companies, and prospective lienholders on automobiles examine records, and make inquiry of references and credit rating agencies as to the owner's or prospective purchaser's reputation for paying his debts and his ability to do so. This subsection merely requires that in the making of such inquiry, the 'bootleg hazard' also be examined as one aspect of the credit risk.' Sen.Rep.No. 1330, 74th Cong., 1st Sess., p. 6. To investigate the 'bootleg hazard' as 'one aspect of the credit risk' when inquiry is made of the 'prospective purchaser's reputation for paying his debts' seems clearly to entail inquiry as to whether or not the prospective purchaser is a straw man for a bootlegger.

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