Court Opinion

ID: 8822223
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:36:22.162106+00
Date Added: 2024-06-11T17:04:39.932040
License: Public Domain

On Rehearing.
On reargument on application of I'illippo Pummilli, and the following interveners: Harold S. Gall, Herbert Skcrrii, Henry C. Heinike, George Ahmler, Robert Arnold, Edward Golwitzer, John Leyden, F. L. Heitzman, William Metzger, H. W. Zimmerman, E. W. Lang, Nate Fenton, Daniel Montgomery, Godfrey Prenevau, Max Sellers, and separate suits against George B. Wende, as acting Collector of Internal Revenue, by Max Lubelski, by Charles Fix and Frank F. Fix, by Joseph L. Schneider, by Louis Smith, by Frances Bauer, by Salvatore Agnello, by Peter Varían, by Raymond A. Nunn, by Frank J. Kolb, by Michael A. Zeller, by John A. Dicks, by Frank J. Schulte, by William McDonald, by Willey H. Alrny, and by James Sbarbati, and against Bert P. Gage, Collector of Internal Revenue, by Thomas McCormick.
George P. Keating, of Buffalo, N. Y., for Pummilli, Heitzman, Metzger, Zimmerman, and Lang.
Goldring & Sherman, of Buffalo, N. Y., for Fenton.
William W. Dickinson, of Buffalo, N. Y., for Lubelski and Schneider.
Ernest W. McIntyre, of Buffalo, N. Y., for Heinike, Skerrit, Golwitzer, Arnold, Ahmler, Leyden, Gall, Montgomery, and Prenevau.
Stanley & Gidley, of Buffalo, N. Y., for Charles and Frank F. Fix.
Corcoran & Corcoran, of Buffalo, N. Y., for Smith.
G. H. Wende, of Los Angeles, Cal., for Bauer.
William J. Brock, of Buffalo, N. Y., for Sellers.
Watts, Hunt & Findlay, of Niagara Falls, N. Y., for McCormick, McDonald, and Sbarbati.
Dojde 81 Corcoran, 'of Rochester, N. Y., for Agnello, Varían, Nunn, Kolb, Zeller, Dicks, and Schulte.
Harry H. Servis, of Rochester, N. Y., for Almy.
HAZEL, District Judge.
Since filing the original opinion prepared by this court herein, the Supreme Court, in U. S. v. Yuginovich, 256 U. S. -, 41 S. Ct. 551, 65 L. Ed. -(decided June 1, 1921), con-st rued section 35 of the National Prohibition Act to mean that the intention of Congress was to retain the prior revenue laws in so far as they were not inconsistent with the National Prohibition Act, and that Congress had the right, under its taxing power, to tax intoxicating liquors notwithstanding their illegal manufacture or sale, and prescribe, penalties for violations. Such is the prior holding of this court in this case.
*850The Supreme Court, it is contended, did not, however, directly pass upon the question of how the additional penalty of $500 on retail dealers and $1,000 on manufacturers was to be assessed and collected— whether in a civil action or by distraint and sale under section 3187, R. S. (Comp. St. § 5909). It was my original opinion that the assessment of a double tax, including the additional penalty, was collectible by distraint and sale; but since filing the opinion several decisions rendered in other jurisdictions expressing views to the contrary have been shown me, and I have therefore re-examined the questions involved in these cases. Such adjudications are: Accardo v. Fontenot (D. C.) 269 Fed. 447; Kausch v. Moore (D. C.) 268 Fed. 668; Thome v. Lynch, (D. C.) 269 Fed. 995.
In the Accardo Case Judge Foster ruled that the taxes and penalties under section 35 of the National Prohibition Act were merely additional penalties for violation of a criminal statute, and that a suit to enjoin collection was maintainable, since the correct determination of the question involved depended upon the construction of provisions under which the 'assessment was made.
In the Kausch Case it was held by Judge Faris that it was the duty of the plaintiff in that case, who sought to enjoin the collector, to pay all taxes assessed, and that for failure to pay distraint was warranted, but that, since the additional penalty 'in his opinion was punitive, the collector did not have the right to distrain the plaintiff’s property for its collection, as section 3224, R. S. (Comp. St. § 5947), does not apply to such a penalty.
In, the Thome Case Judge Booth also held that the collector of internal revenue, though authorized to collect taxes by distraint, could not collect penalties in general by that method, except the 5 per cent, penalty added under section 3184, which were the penalties that could properly be taxed.
In the Yuginovich Case, supra, the Supreme Court had before it an indictment charging defendant with unlawfully engaging in the business of a distiller and defrauding the United States of the tax on spirits. The question was whether the defendant could be punished under section 3257, R. S. (Comp. St. § 5997) providing for forfeitures and fines, and also whether he was punishable fqr violating section 35 of the Volstead Act. It is substantially stated in the opinion of the court that section 35 must be construed in the light of legal principles governing the interpretation of statutes, and that, though Congress manifested an evident intention to tax liquors illegally, as well as those legally, produced, yet it did not intend to preserve old penalties in addition to the specific punishments provided by the Volstead Act for a violation.
The collection of the assessed double tax and penalty with which we are concerned, as heretofore stated, is specifically included in section 35, and at least by inference it may be adduced that the Supreme Court regarded such penalty as a part of the tax, and that manufacturers or traffickers in intoxicating liquor were subject thereto, and moreover that the assessment was distinguishable from a criminal penalty.
*851In support of my former conclusion the case of Regal Drug Corporation v. Wardell, 273 Fed. 182, recently decided by the Circuit Court of Appeals for the Ninth Circuit, is instructive. There the precise question here considered was determined against the plaintiff, who sought to enjoin the collector from enforcing the tax and additional penalty. It was contended there, as here, that the liability of the offender was for the penalty and not for a tax, and that the penalty could be enforced only by proceedings in court, and not by a summary proceeding of an assessment. But the court in answer quoted section 3220 of the Revised Statutes (Comp. St. § 5944), wherein it is substantially provided that the Commissioner of Internal Revenue liad the power to remit, refund, or pay back all taxes erroneously or illegally assessed or collected, including all penalties collected without authority, and since it did not appear that the plaintiff had sought to have .such erroneous taxes and penalties remitted or refunded to him, as provided by statute, the court was required to give effect to section 3226, R. S. (Comp. St. § 5949), which provides that no suit shall be maintained in any court for the recovery of an internal tax or penalty, etc., and upon the authority of Cheatham v. U. S., 92 U. S. 85, 23 L. Ed. 561, and Dodge v. Osborn, 240 U. S. 118, 36 Sup. Ct. 275, 60 L. Ed. 557, it was decided that the suit in equity could not be maintained, since the remedy for erroneous assessment and collection was in an action to recover back the tax and penalty after payment. Snyder v. Marks, 109 U. S. 189, 3 Sup. Ct. 157, 27 L. Ed. 901. In Appell v. Miles, a suit pending in the Supreme Court of the District of Columbia, the bill asking for temporary injunction to restrain the collection of the double tax and penalty was vacated. Although no written opinion was filed in that case, it may be presumed that the court based its conclusion upon the decision by the Supreme Court in the Yuginovich Case.
[3] The question presented is not, in my opinion, free from difficulty and doubt, but I nevertheless think that those actions to restrain the collector of internal revenue cannot now be maintained, since there is a plain, adequate, and complete remedy at law. Regal Drug Corporation v. Wardell, supra; Dows v. Chicago, 11 Wall. 108, 20 L. Ed. 65; Pacific Express Co. v. Seibert, 142 U. S. 339, 12 Sup. Ct. 250, 35 L. Ed. 1035. Under section 3226, R. S., such a suit for the recovery of an internal tax or penalty improperly collected may not be brought until after the Commissioner, to whom an appeal must be taken, has delayed making a decision for more than six months.
[4] It is also contended by plaintiff Pummilli and several interveners that they have paid the annual retailer’s license fee, amounting to $25 ; that the license did not expire until July 1, 1920, and hence no tax was owing to the government or collectible at the time the assessments were made. But any questions of that character are not determinable here.
The applications for rehearing are denied, and all injunctions are vacated.