268 F. 668 | E.D. Mo. | 1920
Plaintiff filed his bill in equity to enjoin the defendant, as collector of internal revenue of the First district of Missouri, from seizing and selling the property of plaintiff under distraint for the taxes and penalty, alleged to have been incurred by the plaintiff, pursuant to the provisions of section 35 of the Volstead Act (41 Stat. 305). Defendant moved to dismiss plaintiff’s bill as being without equity.
All facts well pleaded in the bill are in consequence admitted for the purpose of determining this motion. These facts substantially are that defendant is threatening to seize and sell the property of the plaintiff to pay certain double taxes and the penalty which section 35 of the Volstead Act, supra, provides may be assessed and collected from those who engage, in the sale of intoxicating- liquors at retail, in violation of said act. In order that the precise situation may be appreciated I quote from plaintiff’s bill:
“Plaintiff further states that on or about the 29th day of April, 1020, the Commissioner of Internal Revenue for the United States of America, basing his acts on reports of investigators acting for the United States, and statements contained in said reports, submitted to him, that plaintiff had violated some of the provisions of the National Prohibition Act, title 2, assessed on the March list, 1920, under section 35, title 2, of said act, the plaintiff a sum in double the amount heretofore required to be paid by a retail liquor dealer, to wit, $20.48, with an additional penalty of $500 on retail dealers, as provided by said section, and further sum as a penalty to wit, $2.60.
“Plaintiff further states that the Commissioner of Internal Revenue, as aforesaid, has transmitted to the said George H. Moore, collector as a L'oresaid, the aforesaid assessment against plaintiff in a sum in double the amount heretofore required to be paid by retail liquor dealers, to wit, $20.48, with an additional penalty of $500 on retail liquor dealers, as provided by said section, and the further sum as penalty of $2.60 for collection from plaintiff by a warrant of distraint or otherwise.
“Your plaintiff further states that he is a person of small means and father of a large family, and that he is maintaining a small mercantile business in the city of St. Louis, Missouri, on which he owes a large sum of money secured by mortgage, and in addition thereto largo sums of money to his creditors for mercantile supplies.
“Plaintiff further states that defendant, George H. Moore, collector as aforesaid, upon the request and order of the Commissioner of Internal Revenue, and of his own volition, is threatening and it is his purpose to levy a warrant of distraint, and seize upon the business, goods and chattels, property, and effects of plaintiff for the purpose of collecting the aforesaid assessment and penalties amounting to $-, for the purpose aforesaid.
“Plaintiff states that he has no adequate remedy at law, and that if defendant levies a warrant of distraint and seizes upon plaintiff’s business, goods, and chattels, property, and effects, it will deprive plaintiff of his means of earning a livelihood, will ruin his business, and causo his wife and children to be in want and distress; that he has no ready money with which to pay said assessment and has been unable to procure the same.”
The specific provisions of the Volstead Act invoked, as warranting the distraint threatened, read thus:
“No liquor revenue stamps or tax receipts for any illegal manufacture or sale shall be issued in advance, but upon evidence of such illegal manufacture or sale a tax shall be assessed against, and collected from, the person re*670 sponsible for such illegal manufacture or sale in double tbe amount now provided by law, with an additional penalty of $500 on retail dealers and $1,000 on manufacturers. Tbe payment of sucb tax or penalty shall give no right to engage in tbe manufacture or sale of sucb liquor, or relieve anyone from criminal liability, nor shall this Act relieve any person from any liability, civil or criminal, heretofore or hereafter incurred under existing laws.
“The Commissioner, with the approval of the Secretary of the Treasury, may compromise any civil cause arising under this title before bringing action in court; and with the approval of the Attorney General he may compromise any such cause after action thereon has been commenced.”
But it would seem to be fairly clear tirat a statute which merely forbids injunction as against a tax ought not to be so extended as to include injunction against the enforcement of a penalty. Certainly, this ought not to be done in a case wherein the manner of the collection, as here, is not warranted by law. In reaching this conclusion, I start with the assumption that the imposition of the penalty is clearly within the power of Congress under the provisions of the Eighteenth Amendment to the-Constitution. So much being conceded, the question arises whether the Commissioner of Internal Revenue has the authority, merely upon reports of investigators- to the effect that plaintiff has unlawfully sold liquor at retail, to assess such penalty, and without notice to the plaintiff, and without an opportunity anywhere given him to be heard, to empower the defendant collector to distrain plaintiff’s property to pay the penalty so assessed ?
The provisions of section 35 of the Volstead Act, supra, are regrettably meager as to the quantum of evidence required, and as to the details of the procedure to be followed. On this point the act merely says:
“Upon evidence of such illegal manufacture or sale a tax shall be assessed against, and collected from, the person responsible for such illegal manufacture or sale in double the amount now provided by law, with an additional penalty of $500 on, retail dealers.
Pursuant to other provisions of the Volstead Act, the plaintiff here may, upon conviction on the criminal side of the court, “be fined not more than $1,000, or imprisoned not more than six months.” Section 29 of Act of October 28, 1919. The imposition of the double tax and of the penalty provided by section 35, supra, are therefore in the nature of additional punishments for the same offense. In .short, there exist under this act a fine, a double tax, and a penalty, as punishments for one and the same offense. These considerations regarded, the word “penally,” as used in the act, would seem to have been used by Congress in the usual and ordinary legal meaning of this word, which meaning is fairly well-settled law. A penalty is a sum of money, which the law exacts by way of punishment, for the doing of some act, which the law forbids, or for the failure to do some act, which the law requires to be done. It is true, as the definition foreshadows, that sometimes the word “penalty” is undoubtedly used as a synonym oE the word “fine”; but as used in the Volstead Act it cannot fairly be so construed, because by another provision of the act a fine as such is clearly provided for. Moreover, no authority can be conferred by Congress upon the Commissioner of Internal Revenue to impose a fine in the .strict sense of that word (Wong Wing v. United States, 163 U. S. loc. cit. 237, 16 Sup. Ct. 977, 41 L. Ed. 140); a fortiori, without a trial, or any sort of hearing theretofore had, as here.
Ordinarily the well-settled procedure is that penalties are recoverable in only one o f two ways; that is, either by a criminal prosecution, or by a civil action. Neither one of these methods has been or is being followed here, and so far as the Commissioner of Internal Revenue is concerned, he has no authority to follow the former. I think the law, the status of the case, and the circumstances, as well as the argument, eliminate recovery by the Commissioner of Internal Revenue or by his agent, the defendant here, by way of a criminal prosecution. If the plaintiff is to enjoy that due process of law which the Constitution guarantees to him, the inference seems obvious. It ought to follow that recovery of this penalty cannot be had by distraint under
It is also contended that the case of Oceanic Navigation Co. v. Stranahan, 214 U. S. 321, 29 Sup. Ct. 671, 53 L. Ed. 1013, is decisive of the question presented here. Section 9 of the act (32 Stat. p. 1213) held in judgment in the Stranahan Case, supra, conferred power on a merely administrative officer to assess a fine — synonymous with “penalty” as used in the act — of $100 against any steamship company which might bring immigrants to the United States, when such immigrants were afflicted with certain diseases. The'power was also conferred to refuse clearance papers to ships so offending till the penalty assessed should be paid. The latter power, of course, forced payment under the strongest duress. The power of an administrative officer to as- . sess the penalty was there, as here, strenuously assailed. The action being at law to recover the money paid under duress exercised in the manner stated, the court denied the recovery. In the Stranahan Case, a hearing of a sort was provided for; here there is no hearing of any sort anywhere provided for before the assessment of the Commissioner of Internal Revenue is made. Nor thereafter is there any possible hearing open to plaintiff, till subsequent to payment, and then only by way of an action at law to recover back the sum exacted from him.
I am not able to construe the Stranahan Case as being so far-reaching in principle as to apply here. If the penalty here in question could
Summing up, therefore, I think he must, as a condition precedent to injunctive relief, either have paid or tendered to the defendant all taxes assessed against him. He may, of course, as forecast, pay under protest, and later sue to recover back such payment. But he need not, in my view, either tender or pay the penalty specifically provided in the statute in question under that name. Against the collection of this penalty, at this time and under the circumstances existing and by the mode threatened, injunction will lie on a sufficient bill. For the reason given, however, the motion to dismiss ought to be sustained to the bill as filed.
Let it be so orderéd.