292 F. 24 | 8th Cir. | 1923
This is an action against the principal and surety on a bond which the former was required to give by the National Prohibition Act, tit. 2, '§§ 4 and 6 (41 Stat. 305, 309, 310), and the regulations of the Commissioner of Internal Revenue prescribing its form and amount. It appears from the complaint that Wandmaker, the principal, applied for and was granted permits pursuant to those sections and regulations, to purchase and use alcohol, in the manufacture of Wandmaker’s Dandruff Remedy, Wandmaker’s Quinine Tonic, Bay Rum and other compounds of alcoholic content. The complaint set up the bond in hsec verba.
“Know all men by these presents, that John Wandmaker, of Fargo, North Dakota, as principal, and United States Fidelity and Guaranty Company, a corporation of Maryland, having its principal office in the city of Baltimore, Maryland, as surety, are held and firmly bound unto the United States of America in the sum of Two Thousand and No/100 Dollars, lawful money of the United States, for the payment whereof to the United States we bind ourselves, our heirs, executors, administrators, successors or assigns, jointly and severally, firmly by these presents.
“Whereas the above bounden principal has made application for a permit to use and sell distilled spirits and wines for other than beverage purposes at No. 51 Broadway, Fargo, North Dakota, in the Oollection District of North Dakota.
“Now therefore, the condition of this obligation is such that if the said principal shall fully and faithfully comply with all the requirements of the laws of the United States now or hereafter enacted and regulations issued pursuant thereto, respecting the sale or use of distilled spirits and wines for other than beverage purposes, then this obligation to be void; otherwise to remain in full force and virtue.”
Sections 4 and 6 require two permits, one to purchase the alcohol and - the other to use it, thus:
Sec. 4. “A person who manufactures any of the articles mentioned in this section may purchase and possess liquor for that purpose, but he shall secure permits to manufacture such articles and to purchase such liquor, give the bonds, keep the records, and make the reports specified in this act and as directed by the Commissioner. No such manufacturer shall sell, use, or dispose of any liquor otherwise than as an ingredient of the articles authorized to be manufactured therefrom. No more alcohol shall be used in the manufacture of any extract, sirup, or the articles named in paragraphs b, e, and ■d of this section, which may be used for beverage purposes than the quantity necessary for extraction or solution of the elements contained therein and for the preservation of the article.”
*26 Sec. 6. “Permits to purchase liquor shall specify the quantity and kind to be purchased and the purpose for which it is to be used. * * * Every permit shall-be in writing, dated when issued, and signed by the Commissioner or his authorized agent. It shall give the name and address of the person to whom it is issued and shall designate and limit the acts that are permitted and the time when and place where such acts may be performed. No permit shall be issued until a verified, written application shall have been made therefor,, setting forth the qualification of the applicant and the purpose for whch the liquor is to be used. The Commissioner may prescribe the form of all permits and applications and the facts to be set forth therein. Before any permit is granted the Commissioner may require a bond in such form and amount as he may prescribe to insure compliance with the terms of the permit and the provisions of this title.”
“And the said principal expressly agrees that the said bonds so deposited may be sold at public or private sale, with or without notice of said sale and without notice of any character to the principal, and the proceeds applied to the payment of internal revenue taxes, interest, and penalties which may be due, and in satisfaction of any of the liabilities incurred hereunder and the expense of such sale, if any, and the residue, if any, paid to the said principal.”
While the Act declares that the purpose of the bond is “to insure compliance with the terms of the permit and the provisions of this title,” it also authorizes the Commissioner to fix its form and amount. The power vested in him to fix the form of bond, clearly gave him the right to determine the obligations of it and to name the condition that would constitute a breach. The regulations which he adopted prescribe a rule by which the amount named in the bond is to be ascertained, in this way:
“Tbe basis of tbe penal sum of sucb bond shall be as follows: $4.20 per proof gallon on distilled spirits received during any quarterly period of tbe calendar year, plus tbe quantity on band at tbe end of tbe preceding quarterly period. In no case shall tbe penal sum of any bond be less than $1,000.00 nor more than $100,000.00,”
and provide that the bond should secure payment of taxes, interest and penalties assessed under the internal revenue laws. See Sec. 35, Prohibition Act. We take the expression, “in satisfaction of any liabilities incurred hereunder,” to be a broad inclusion of such liabilities to which the permittee might subject himself under the Prohibition Act, which authorized the issuance of the two permits. It is certainly broad enough to include them, and we see no other purpose in its use. By association it has reference to liabilities to be incurred for other penalties. We think it clear that the whole purpose of this form of bond was to secure payment of all liabilities on the part of the permittee to which he might be subjected in virtue of having received the permits.
“That subsequent to the execution and delivery of said bond and undertaking, and subsequent to the issuance of said, permit, the said defendant, John Wandmaker, in violation of the conditions of said bond and undertaking, and in violation of and contrary to the terms and conditions of said permit, did. willfully, unlawfully and knowingly, sell for beverage purposes, at divers times during the year 1920, and up to and including the 17th day of March, 1921, to divers persons, alcohol, so obtained by said defendant, pursuant to said permit and undertaking, whereby the conditions of said bond and undertaking, were, by the said defendant, John Wandmaker, breached and violated.”
The Prohibition Act denounces violations of the permit as criminal offenses, subjects the permittee to criminal prosecution therefor, and the imposition of penalties in the way of fines, as liabilities which he must pay. Sec. 29 reads thus:
“Any person who manufactures or sells liquor- in violation of this title shall for a first offense be fined not more than $1,000, or imprisoned not exceeding six months, and for a second or subsequent offense shall be fined not less-then $200 nor more than $2,000 and be imprisoned not less than one month nor more than five years. Any person violating the provisions of any permit, or who makes any false record, report, or affidavit required by this title, or violates any of the provisions of this title, for which offense a.special penalty is not prescribed, shall be fined for a first offense not more than $500; for a second offense not less than $100 nor more than $1,000, or be imprisoned not more than ninety days; for any subsequent offense he shall be fined not less than $500 and be imprisoned not less than three months nor more than two years.”
The two forms of bond, either of which the permittee had the-right to give, are identical in obligation. If the form requiring deposit of Liberty or other U. S. bonds had been given by Wandmaker, there can be no doubt that the ruling on the demurrer was right. The $2,000 named in the bond would not have been an agreed sum to be forfeited on breach but a penal sum to secure damages suffered in taxes, interest, penalties and other liabilities of the permittee unpaid. How, then, can the obligation in the form that was used be said to be different ? We fail to find any reason for so holding. The two forms of bond were for the same purpose. We think the principle announced in the cases relied on has no application here.
Affirmed.