Source: http://www.law.cornell.edu/supremecourt/text/307/219
Timestamp: 2014-12-18 12:47:44
Document Index: 432656681

Matched Legal Cases: ['§ 1441', '§ 1624', '§ 1661', '§ 40', '§ 1441', '§ 1620', '§ 1624']

UNITED STATES v. NotFound | LII / Legal Information Institute
307 U.S. 219 (59 S.Ct. 861, 83 L.Ed. 1249)
[HTML] Nos. 10, 627.
The Repeal Enforcement Act provides
The following findings by the District Court, it is agreed, correctly set out 'the facts in this case.'
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.
In Federal Motor Finance v. United States, 88 F.2d 90, 93, the Circuit Courts of Appeals Eighth Circuit said
In the causes now before us (4 Cir., 93 F.2d 771, 773; 5 Cir., 99 F.2d 498, 0), the Circuit Court of Appeals accepted the view that
Sections 3450 and 3453 Revised Statutes, 26 U.S.C.A. §§ 1441, 1620 a), 1621derived from Acts June 30, 1864 and July 13, 1866 provide that whenever any commodity in respect of which a tax is imposed, is removed with intent to defraud the United States, it shall be forfeited and '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 thereof, respectively, shall be forfeited.' 'The proceedings to enforce such forfeiture shall be in the nature of a proceeding in rem in the circuit court or district court of the United States for the district where such seizure is made.'
Sections 3460 and 3461, 26 U.S.C.A. § 1624derived from Acts July 13, 1866 and June 6, 1872provide that when goods, wares, or merchandise seized as subjects of forfeiture, do not exceed $500 in value, they may be restored to the claimant upon the execution of a bond and this shall be delivered to the District Attorney for proper proceedings; if no bond, the articles shall be sold and the proceeds paid into the Treasury. Within a year any claimant may apply to the Secretary for remission which may be granted 'upon satisfactory proof, to be furnished in such manner as he shall prescribe: Provided, That it shall be satisfactorily shown * * * That the said forfeiture was incurred without willful negligence or any intention of fraud on the part of the owner of said property.'
Section 3229 Revised Statutes, Act July 20, 1868, c. 186, sec. 102, 15 Stat. 125, 166, 26 U.S.C.A. § 1661, provides
Wilson Motor Co. v. United States, 9 Cir., 84 F.2d 630, 632, states'The government's brief advises that prior to the Act of August 27, 1935, the procedure of the government to afford relief to these innocent owners was under the provisions of compromise powers given the Attorney General and the Treasury under section 1661, 26 U.S.C.A.'
The National Prohibition Act, October 28, 1919, c. 85, Title II, sec. 26, 41 Stat. 305, 315, Title 27 U.S.C.A. § 40, provided that 'whenever intoxicating liquors transported or possessed illegally shall be seized by an officer he shall take possession of the vehicle and team or automobile, boat, air or water craft, or any other conveyance, and shall arrest any person in charge thereof.' The person arrested shall be proceeded against but the vehicle or conveyance shall be returned upon execution of a bond. Upon his conviction the court shall order the liquor destroyed 'and unless good cause to the contrary is shown by the owner, shall order a sale by public auction of the property seized.'
See Richbourg Motor Co. v. United States, 281 U.S. 528, 50 S.Ct. 385, 74 L.Ed. 1016, 73 A.L.R. 1081. This was repealed by The Repeal and Enforcement Act, supra.
The Act of September 21, 1922, c. 356, sec. 618, 42 Stat. 858, 987 provides
In the situation disclosed by the foregoing summary, Congress came to consider the Act of August 27, 1935. The Judiciary Committees of Senate and House made reports (Senate Report No. 1330, House Report No. 1601, 74th Cong., 1st Session). In each the paragraphs relative to section 204(a) and (b) are the same in substance.
A representative of the Treasury Department made a statement to the Senate Judiciary Committee. An extract from this appears in the margin.
A rearrangement of the words of subsection (b)(3) will enlighten its meaning
The court shall not allow the (request)claimof any claimant for remission or mitigation, if it appears that 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.
If the words of section 204(b)(3) be taken literally, without regard to history or purpose of the enactment, they inhibit remission by the court unless one who claims an interest made actual inquiry concerning every person with record or reputation for violating the liquor laws who in fact (although wholly unsuspected) had acquired some right to the vehicle. There would be absolute forfeiture although the claimant acquired his interest in the utmost good faith and without suspicion of any undisclosed interest; although indeed, he had diligently but unsuccessfully sought information concerning all the facts from every person connected with the transaction. Thus construed the provision would require absolute forfeiture notwithstanding the claimant could not by the utmost diligence ascertain the true situation. No greater reason exists for saying a claimant should be relieved if he made unsuccessful inquiry of the seller concerning undisclosed matters than there is for relief when he had no cause to suspect the existence of an undisclosed interestno cause to question appearances. A measure requiring absolute forfeiture under such circumstances probably would be expressed in language sufficiently plain to admit no reasonable doubt.
During many years innocent claimants had a clear remedy either by appeal to the discretion of the Secretary of the Treasury or by application for compromise addressed to the Attorney General and Treasury officials (Wilson Motor Co. v. United States, supra); or under the Prohibition Act, to the court (Richbourg Motor Co. v. United States, supra). This situation was called to the attention of the Senate Committee by the representative of the Treasury. also pointed out that before restoring a car the Secretary required that the claimant 'must prove that he made an investigation as to whether or not the purchaser had a bootlegger record and found that he had none.' The Secretary 'considers that the bootleg hazard is an element involved in the credit risk, and is just as much a part of the investigation by the finance company of a person as a credit risk as is his financial standing in the community.' The Committee reported in respect of 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.'
Subsection b3 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, 65 L.Ed. 376; United States v. Two Bay Mules, supra; United States v. One Bay Horse, supra.
Subsection b3 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 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.
To be sure the phrasing of Sec. 204(b)(3) is difficult. But it means to us that a claimant must prove, in order to satisfy that condition, that he made a reasonable investigation to ascertain if the purchaser was a mere straw man acting for another or was a legitimate purchaser in his own right. The words 'if it appears' carry that connotation. A contrary construction defeats the purpose of the Congress by placing an enormous premium on lack of diligence. That construction opens wide the doors to defraud the revenue, for finance companies need lift no finger nor make any effort to ascertain the existence of a straw man purchaser. Ignorance now is surely bliss. By failure to make inquiry they can effectively insulate themselves even from the knowledge which their business intimatesthe dealershave. Unless informed by disclosures, in the written contract or otherwise, they can contentedly assume that the purchaser is not a straw man for a bootlegger. That they will thus be voluntarily informed by the parties or by others seems unlikely. Since the function of the straw man is to conceal the bootlegger, neither the straw man nor the bootlegger can be expected to step forward with the information. And the automobile salesman is not likely to volunteer the information for his desire is to sell automobiles not to defeat sales. On the other hand, the interpretation which we urge would give the statute real meaning and significance in terms of this specific bootleg hazard which concerned the Congress on its enactment.
R.S. section 3450, Act July 13, 1866, c. 184, sec. 14, 14 Stat. 98, 151, 26 U.S.C.A. § 1441
Revised Statutes, section 3453, Act June 30, 1864, c. 173, sec. 48, 13 Stat. 223, 240; Act July 13, 1866, c. 184, sec. 9, 14 Stat. 98, 111, 26 U.S.C.A. §§ 1620 a), 1621
Revised Statutes sections 3460 and 3461, Act July 13, 1866, c. 184, sec. 63, 14 Stat. 98, 169; Act June 6, 1872, c. 315, sec. 40, 17 Stat. 230, 257, 26 U.S.C.A. § 1624
House Reports, Vol. 4, 74th Congress, 1st Session, 1935, Report No. 1601, p. 6
Senate Committee Hearings, 1935, Vol. 495, No. 4, p. 13