COMMERCIAL CREDIT CORPORATION
v.
UNITED STATES.
No. 297.
Circuit Court of Appeals, Second Circuit.
April 4, 1927.*928 Duane R. Dills and Frank H. Towsley, both of New York City, for appellant.
Emory R. Buckner, U. S. Atty., and C. D. Williams, Asst. U. S. Atty., both of New York City.
Before HOUGH, MANTON, and SWAN, Circuit Judges.
SWAN, Circuit Judge (after stating the facts as above).
The libel was brought under section 3450 of the Revised Statutes (Comp. St. § 6352), which provides:
"Whenever any goods * * * in respect whereof any tax is or shall be imposed, * * * are removed, or are deposited or concealed in any place, with intent to defraud the United States of such tax, * * * every * * * conveyance * * * used in the removal or for the deposit or concealment thereof, respectively, shall be forfeited."
We must take it as established that the alcohol found in the automobile, whether legally or illegally made, was subject to the basic production tax. United States v. One Ford Coupé Automobile, 272 U.S. 321, 47 S. Ct. 154, 71 L. Ed. ___, decided Nov. 22, 1926. The illegal possession of liquor in 5-gallon packages, bearing no stamp or mark indicating payment of the required tax, is presumptive evidence that the tax was unpaid. See Hester v. United States, 284 F. 487 (C. C. A. 4); United States v. Sykes (D. C.) 58 F. *929 1000, 1004; Seiden v. United States, 16 F. (2d) 197 (C. C. A. 2); sections 3289, 3333 Rev. Stat. (Comp. St. §§ 6030, 6130).
The alcohol was being concealed and removed in the vehicle, and there was evidence from which an intent to defraud the United States of the tax thereon could properly be found by the District Court. Concealment and removal of the tax-unpaid goods by illegal transportation in the automobile were presumptive evidence of an intent to defraud the United States of the tax thereon, despite the statements of the persons in charge of the vehicle that they were ignorant of the law imposing such tax. The fact that their primary interest may have been to violate the prohibition law need not prevent the court from inferring an intent also to evade the tax law, as such evasion would necessarily result from their concealment and removal of the alcohol. United States v. One Cadillac Automobile, etc. (D. C.) 292 F. 773; United States v. One White One-Ton Truck (D. C.) 4 F. (2d) 413; The Ella (D. C.) 9 F.(2d) 411. The decree must be sustained, therefore, unless the agreed facts render section 3450 inapplicable. Indeed, the correctness of the decree, if this section be applicable, was not disputed.
The sole question presented and argued was whether the pendency of a prosecution of the persons in charge of the vehicle for violation of the National Prohibition Act (Comp. St. § 10138¼ et seq.) precluded the United States from seeking a forfeiture of the vehicle under section 3450. This question was expressly left open by the Supreme Court in its opinion in Port Gardner Investment Co. v. United States, 272 U.S. 564, 47 S. Ct. 165, 71 L. Ed. ___, decided November 23, 1926, which held that, after conviction of the automobile driver, the disposition of the vehicle prescribed in section 26, tit. 2, National Prohibition Act (Comp. St. § 10138½mm), became mandatory, and, being inconsistent with the disposition under section 3450, precluded resort to proceedings under the latter section.
Said section 26 provides:
"When the commissioner, his assistants, inspectors, or any officer of the law shall discover any person in the act of transporting in violation of the law, intoxicating liquors in any * * * vehicle, it shall be his duty to seize any and all intoxicating liquors found therein being transported contrary to law. Whenever intoxicating liquors transported or possessed illegally shall be seized by an officer he shall take possession of the vehicle * * * and shall arrest any person in charge thereof. Such officer shall at once proceed against the person arrested under the provisions of this title; * * * but the said vehicle * * * shall be returned to the owner upon execution by him of a good and valid bond. * * * The court upon conviction of the person so arrested * * * unless good cause to the contrary is shown by the owner, shall order a sale by public auction of the property seized, and the officer making the sale, * * * shall pay all liens, according to their priorities."
The Willis-Campbell Act (Act of November 23, 1921, c. 134, § 5, 42 Stat. 222) has continued in force or re-enacted all laws in regard to taxation of intoxicating liquor not directly in conflict with the prohibitory legislation. In the Ford Coupé Case, supra, it was held that there was no direct conflict between section 26 of the Prohibition Act and section 3450 of the Rev. Stat., as applied to the facts then before the court.
Mr. Justice Brandeis said (page 158) that it is clearly possible to apply to a particular state of facts either one or the other remedy, and to give the government the choice. But, in reply to the argument that the commencement of proceedings under section 26 barred the government from electing to proceed under section 3450, he said further that no election of remedies was involved because section 26 is applicable only if a person is discovered in the act of transporting liquor illegally, and there was no allegation of transportation in the libel before him. His opinion closed with the statement:
"There is no allegation that Killian, who had possession of the automobile, has ever been prosecuted. It appears that a complaint was made, but not that a warrant issued, or that he was arrested, or even that he was found. The motion to quash must be determined on the showing in the libel."
In the case at bar are present all the facts alluded to by Justice Brandeis as missing in the case under consideration by him. Lamonica and Calabresse were discovered in the act of transporting liquor in violation of law. Forthwith, under section 26, it became the duty of the officer to seize the liquor, to take possession of the vehicle, to arrest the persons in charge thereof, to proceed at once against them "under the provisions of this title," and to hold the vehicle (unless the owner should give bond) to abide the result of the trial of the persons arrested. All of these duties were *930 fully performed except the last mentioned. That duty has been violated if it be assumed that the Prohibition Administrator ceased, on December 9, 1926, to hold the vehicle to await the outcome of the prosecution and thereafter held it under the provisions of section 3450. In these circumstances, we believe there is a direct conflict between the two sections in question, and that section 26 must control the disposition of the vehicle. This view was very clearly stated by Mr. Justice Stone in his concurring opinion in the Ford Coupé Case. The same view is expressed by Mr. Justice Butler in his concurring opinion in Port Gardner Investment Co. Case, supra.
Counsel for the United States appears to concede the correctness of this position, saying that it is extremely difficult to escape the conclusion that section 26 commands, when the given state of facts exists, a proceeding under its own terms. He then argues that section 26 is applicable only when the discovery of the act of illegal transportation is made by a federal officer, not when made by a city policeman.
We should hesitate to adopt a construction of the statutes which would leave the determination of which section is applicable to the mere accident of whether the discovery of the violation of law were made by a federal officer or by a state officer. If the phrase, "any officer of the law," as used in section 26, should, as argued, be construed not to include a city policeman, nevertheless his discovery may be adopted by the United States as well as may his seizure. See Dodge v. United States, 272 U.S. 530, 47 S. Ct. 191, 71 L. Ed. ___, decided November 23, 1926.
When persons in charge of a vehicle used for the illegal transportation of liquor have been arrested and prosecuted by the government for violation of the Prohibition Act, section 26 plainly directs that the proceedings shall be carried through to a forfeiture of the vehicle under the terms of that section, which saves the rights of innocent owners and lienors. It is settled that, after the conviction of such persons, forfeiture under section 3450 is forbidden. To say it is permitted during the pendency of the prosecution and up to the moment of conviction would be most inequitable to innocent owners and lienors, and would put a premium upon dilatory prosecution in order that forfeiture of the vehicle might be secured before conviction of the offending persons. We do not find in the Supreme Court decisions anything which compels us to take this view.
The decree is reversed and the libel dismissed, with costs to the appellant.
HOUGH, Circuit Judge, concurred in the result, but, owing to absence, has not seen this opinion.