196 F. 76 | D. Maryland | 1912
The warehouses, and the distillery were situate in Washington county, Md., and the warehouses were such as the distiller is required by the internal revenue laws of the United States to maintain for the storage of the distilled spirits of his own manufacture until the tax thereon has been paid. Such a warehouse is under the direction and control of the collector of the district and in charge of an internal revenue storekeeper and is declared by the law “to be a bonded warehouse of the United States to be known as a distillery warehouse.” Section 3271 (U. S. Comp. St. 1901, p. 2122).
Under the act of the Legislature of Maryland, approved February 27, 1906, being chapter 19 of the Acts of 1906, entitled “An act to add a new section to article 14 of the Public General Laws, 1904, title ‘Bills of Lading, Storage and Elevator Receipts’ to come in after section 11 of said article, and be called section 12,” it was enacted as follows:
“See. 12. Bonded warehouses of the United States, known as distillery warehouses, as defined by and existing under the laws of the United States of America and situated in this state, shall be deemed . to be warehouses within the contemplation and meaning of this act, and such distillery warehouses shall be subject to all the provisions of this article not inconsistent with the laws of the United States regulating the conduct and operation of such distillery warehouses, and all warehouse receipts hereafter issued by such a distillery warehouse shall be governed by and subject to all the provisions of this article as fully to all intents and purposes as the warehouse receipts of any other warehouseman, corporation or person conducting a general warehousing business in this state.”
This state statute became effective on June 1, 1906, and was in force as to all warehouse certificates issued after that date, and there are but few involved in this case issued prior to that date.
It is urged by the exceptants that, by reason of the subject not being described in its title as required by the Constitution of Maryland (section 29, art. 3), this act of the Maryland Legislature is void. The constitutional law of Maryland is what its Court of Appeals declares it to be, and the Court of Appeals of Maryland has distinctly held that ordinarily it is a sufficient compliance with the constitutional requirement if the title of the act states its purpose to be to add an additional section to an article, of the Code and mentions the numbers of the
By the Maryland Code all warehouse, elevator, or storage receipts whatsoever for goods deposited are declared to be negotiable instruments, and full andl complete title to the property therein mentioned shall vest in the bona fide holder for value.
But independent of the special enactment of Maryland with regard to distillery warehouses, I am in full accord with the special master in his conclusion that, because of the peculiar situation of the distilled spirits stored in a bonded distillery warehouse, there is by the transfer effected by the warehouse certificate as full a delivery of the goods as is commercially possible under the special circumstances attending distilled spirits stored in the bonded distillery warehouses of the United States.
I will not prolong this opinion by a recital of those circumstances or of the reasons why a constructive delivery should result from the issuing of such warehouse certificates. It will be sufficient to refer to the very able discussion of the question in the opinion of the special master returned to the court in this case, and to the learned and convincing opinion of Circuit Judge Gray in the Circuit Court of Appeals for the Third Circuit in Taney v. Pennsylvania National Bank of Reading, 187 Fed. 689, 109 C. C. A. 437.
It appears that this constructive delivery is commonly made use of by those dealing in whisky, and money is loaned on pledges of the certificates by banks and others in sums of great magnitude. This is so because whisky usually must be kept in the distillery warehouse five years to mature, and in no other way could the necessary money be raised and the whisky, itself be commercially dealt with except by the use of these warehouse certificates representing the whisky.
The rules of commercial law are built up upon the actual dealings which have the sanction of honest and competent merchants and which are necessary to carry out honest transactions in the fairest manner.
The Maryland Court of Appeals in several cases involving the proper taxation of whisky stored in distillery warehouses has recognized the holder of the warehouse certificate as the owner of the whisky. Monticello Distillery Co. v. Baltimore City, 90 Md. 416, 45 Atl. 210; Fowble v. Kemp, 92 Md. 637, 48 Atl. 379; Carstairs v. Cochran, 95 Md. 488, 52 Atl. 601; Carstairs v. Cochran, 193 U. S. 10, 24 Sup. Ct. 318, 48 L. R. A. 596; Hannis Distilling Co. v. Baltimore, 216 U. S. 285, 30 Sup. Ct. 326, 54 L. Ed. 482.
I overrule the exceptions based upon the supposed invalidity of the certificates, andl I confirm the master’s report upholding their validity.
It appears to me that there is also another ground upon which the holders of this class of pledges have good title to their certificates, which is that when Gambrill in 1906 transferred all his whisky to the Distilling Company, Gambrill was bound to pay whatever loans he had individually secured by pledging it, and that in renewing these loans, or in effecting new loans to take up the old ones, the whisky was only pledged to carry subsisting liens on it, and the loans operated as well to benefit the company as to benefit Gambrill.
Moreover, it is to be borne in mind as. to all transactions that in point of fact Gambrill was the company. He own^d substantially all the stock, managed all its business and operations, and conducted all its financial transactions. His authority was never called in question, and he continued so to act during years of time, so that his method of conducting the business must be taken as assented to by those who might have controlled him if they saw fit to do so. In some cases his methods were formally authorized.
I agree with the special master that there is no sufficient ground to hold that any of the pledges to secure loans to Gambrill are invalid.
This becomes of great importance because a disgraceful feature of the insolvency of this company is that under Gambrill’s management certificates calling for barrels by their serial numbers were repeatedly issued, when certificates for the same barrels were already outstanding in the hands of bona fide innocent holders who had advanced money on them. There were, at the date of the appointment of the. receivers, receipts' outstanding for 35,479 packages, while there were actually in the warehouses 17,825 barrels and 1,301 half barrels, making 19,126 packages.
The special master has treated the older certificates, or the certificates substituted for the older ones, as having the first lien on the barrels called for, and those holding the subsequent certificates for the same barrels (unless taken in substitution for an older certificate) as coming next in priority.
The receivers paid the county tax on all the whisky which came to their hands, but they contest their liability for tax on whisky which they never had.
The county tax on distilled spirits is imposed by a special statute of Maryland. Act of 1892, c. 704 (Code, art. 81, § 214 et seq.).
It is required that the distiller shall report for taxation the quantity of distilled spirits on hand on the 1st of January in each year, and shall make quarterly reports showing the deliveries, and shall remit and pay with each report the tax on such distilled spirits, and shall not permit the distilled spirits to go from the warehouse without paying the tax, and any warehouseman, custodian, or agent paying such tax shall have a lien on the distilled spirits covered by such tax.
The Maryland Court of Appeals, in Fowble v. Kemp, 92 Md. 630-638, 48 Atl. 379, 382, construing this act taxing distilled spirits on storage, said:
“The liability of the appellees to pay the tax due by. other owners of the distilled, spirits is a liability unlike that which they are under to pay taxes on the spirits which they own. In the one case their liability is that of a collector for the state; in the other, it is that of owner. An owner of property holds it subject to the right of the state to seize it upon summary process for the nonpayment of taxes. As collector for the state the same person is not liable to have his own property seized under the same process for the nonpayment of taxes not actually due by him at all. This inis been expressly ruled in Hull v. Southern Dev. Co., 80 Md. 8 [42 Atl. 943]. * * * So far, then, as the appellant undertook by distraining property owned by the appellees to enforce the payment of the taxes due by other owners of the distilled spirits though the taxes were payable by the appellees under the statutory obligation, the proceeding was unwarranted. The appellant should have brought suit in a court of law upon the statutory obligation,, and when a judgment was recovered execution could be issued, and any property owned by the appellees could lie levied on and sold.”
It would seem clear in this case that the Distilling Company was liable for having allowed the whisky to be taken away without collecting and paying over the tax, but that there was no lien on the whisky belonging to others which remained on storage. It is true there were in this case some barrels which had been overlooked and certificates for which had not been sold or pledged, and the receivers-have paid the county tax on that whisky, but the proceeds of that whisky were absorbed in the expenses of the receivership and cannot be used to pay the taxes on other whisky.
As for the claim of the state of West Virginia for a license tax,. I am also of opinion that cannot be held to be a lien on the property of others held in storage by the Distilling Company.
The stipulation contained in the note is that upon default the holder may sell the collateral at any broker’s board, or at public or private sale, and after the proceeds of any sale have been applied to the payment of the note, and after charging all costs and attorney’s fees, any excess to be paid to the maker of the note.
The language of the stipulation that the holder of the note may sell the collateral and that the proceeds of any sale may be applied to the payment of costs and attorney’s fees I think contemplates a sale by the holder of the note. In this case the collateral was sold by the receivers appointed by the court, and not by or at the expense of the holder of the note. All the holder of the note has to do is to prove his claim and receive payment. I agree with the special master in disallowing attorney’s fees and costs.
I have not considered it necessary in passing on the exceptions to say more, as the able and learned opinion and report of the special master have discussed all the points raised by the exceptants in the most careful and thorough manner, with full citation of authorities, and I am in full accord with the results he has reached.
I therefore overrule the exceptions and will sign a decree to carry the report into effect.