Lilienthal's Tobacco v. United States

97 U.S. 237 (____)

LILIENTHAL'S TOBACCO
v.
UNITED STATES.

Supreme Court of United States.

Mr. Richard T. Merrick, for Lilienthal.

Mr. Assistant-Attorney-General Smith, contra.

MR. JUSTICE CLIFFORD delivered the opinion of the court.

Articles or objects on which duties are imposed, found in the possession, custody, or control of any person for the purpose of being sold or removed by such person in fraud of the internal-revenue laws, or with design to avoid the payment of the duties imposed, may be seized by the proper officer, as therein provided, and the provision is that the same shall be forfeited to the United States. 13 Stat. 240.

Provision is also made by the same section for the seizure by the proper officer of all raw materials found in the possession of any such person intending to manufacture the same for the purpose of sale in fraud of said laws, or with the design to evade the payment of the said duties; and also for the seizure of all tools, implements, instruments, and personal property whatsoever in the place or building or within any yard or enclosure where such articles may be found, which were intended to be used by such person in such fraudulent manufacture; and the provision is that all such articles shall also be forfeited to the United States, by a proceeding in rem in the Circuit or District Court in the district where such seizures were made.

Due seizure was made in this case, and it appears that at that date smoking-tobacco of all kinds, if sweetened, stemmed, or butted, was by law subject to a tax of forty cents per pound, and that such tobacco of all kinds, if not sweetened nor stemmed or butted, including that made of stems and imitations thereof, was subject to a tax of fifteen cents per pound. 14 id. 133.

Fourteen prayers for instruction were then presented by the claimant, all of which except the last two were given to the jury. Two prayers for instruction were presented by the prosecutor, both of which the court gave to the jury; and the claimant excepted to the rulings of the court in refusing the last two of his requests and in giving those presented by the prosecutor.

Subsequent to the charge of the court additional prayers for instructions were presented by the claimant, some of which were refused and were made the subject of exception by his counsel. Instructions were given by the presiding justice on his own motion, and six exceptions were taken to specific portions of the charge, as set forth in the record. Sixteen errors are assigned, embracing every exception except one taken at the trial. They have all been examined, and, where it is deemed necessary, they will be separately considered.

1. Numbers 13 and 14 of those presented before the charge was given to the jury may be considered together, as they involve similar considerations.

Argument to prove that those requests were properly refused is not necessary, as the record shows that much evidence had been introduced by the prosecutor tending to support the allegations of the information, that the claimant had not, at the date of the seizure, paid all the taxes legally due on the tobacco manufactured at his factory, and that large quantities of tobacco there manufactured had been sold or removed from the factory in fraud of the internal-revenue laws, and with the design to avoid the payment of the taxes. Testimony of the kind was plainly admissible, and, having been properly introduced, the question, whether it was sufficient to establish the charge, was beyond all doubt a matter for the jury, which is all that need be said upon the subject.

2. Three other errors assigned, to wit, the third, fourth, and fifth, may also be considered together, for the same reason.

Stemmed or butted tobacco was subject to a tax of forty cents per pound, but if not stemmed or butted nor sweetened it was only subject to a tax of fifteen cents per pound. Butted tobacco in large quantities was manufactured by the claimant; but he contended that the manufacture was still subject only to the smaller tax, even though the leaf was stemmed or butted, if the manufacturer during the process added to and intermingled with the leaf an amount of stem equal to that previously withdrawn by the process of stemming or butting: but it is clear that that theory is wholly inadmissible in this case, for the reason that the evidence does not show that an equal amount of stems was added to the leaf during the process of manufacture; nor would it be a sufficient defence in any case, for two reasons: 1. Because the practice is not warranted by the act of Congress; 2. Because it would open the door to fraud, which could seldom or never be exposed; from which it follows that tobacco stemmed or butted, even if manufactured in the manner of that theory, was subject to the higher rate of tax during all the period specified in the fourth assignment of error; nor would it benefit the claimant in this case, even if it appeared in a given case that he put back during the process of manufacture a quantity of stems as great as that which grew in the leaf.

3. Separate exceptions were taken by the claimant to the ruling of the court in giving the two instructions requested by the prosecutor, and those two rulings are the subjects of the sixth and seventh alleged errors of the court.

Suffice it to remark in this connection that the books of the claimant were introduced, and that the theory of the prosecutor was that the claimant did not make the required entries in the same, and that he kept no account for the period specified of his manufacture; that large quantities of the same during the same period were sold or removed without making any entry of the same in the books kept as those required by law for the purpose, and that no accurate account of the manufactures so removed was kept in any manner in said books; that large quantities of granulated tobacco and other descriptions were during that period sold and removed from the manufactory, and that no account of such sales and removals was kept in said books; that seventeen monthly returns were furnished to the assistant-assessor as true and accurate abstracts of all such sales and removals, and that they were not true nor accurate statements of the manufactured products sold and removed; that the two annual inventories given in evidence were made and delivered to the assistant-assessor as true statements of the matters and things therein contained as required by law; that it appears from the evidence, as compared with the first inventory and the abstracts, that much more chewing-tobacco and fine shorts were there manufactured during that year than is stated in said abstracts; and that a large quantity of smoking-tobacco manufactured at his factory had been sold or removed during the same year which had not been returned for taxation, of which no account was given in the said abstracts or in the said books.

Enough appears to show that the prosecutor gave evidence tending to prove all of those allegations; and the court instructed the jury, pursuant to the first request of the prosecutor, that if they found those several allegations to be true, then the burden of proof is upon the claimant to satisfy the jury that the tobacco so manufactured on said premises and sold or removed without due account, return, and entry made thereof in the said books and abstracts in the manner required by law, was not so sold and removed in fraud of the internal-revenue laws and without intent to evade the payment of the taxes thereon; and if the claimant shall not have so satisfied the jury of his intent respecting the same, the jury may infer that the claimant's intent in respect of the same was fraudulent, and that his possession of the goods in the suit was with the like intent.

Prayers for instruction are properly framed in that way where the evidence to support the charge is complicated, conflicting, or of a circumstantial character, as it belongs to the jury to decide whether the facts and circumstances introduced in evidence are satisfactorily proved, and it is the province of the court to determine whether, if fully proved, they will warrant the jury in finding that the allegations which constitute the charge are established. Pursuant to that view the second request for instruction to the jury was framed in the same way.

Preliminary to the legal proposition which the court was requested to adopt, the prayer presented contains a recital of the substance of the evidence given to support the charge, put hypothetically, for the consideration of the jury, appended to which is the formal part of the prayer to which the exception embodied in the seventh assignment of error is addressed. It is as follows: That if the jury believe from these facts that the claimant made the said change in the process of manufacturing the said long smoking-tobacco and the said change in the manner of returning the same for taxation, during the specified period, for the purpose of selling and removing the same in fraud of the internal-revenue laws and with intent to evade the payment of the taxes thereon, then they would have a right to infer that the claimant had the like intent with respect to the property in suit.

Both of these instructions were given at the request of the prosecutor, and the claimant insists with much confidence that the first is erroneous, inasmuch as it declares that in the event stated the burden of proof is cast upon the claimant to show that the acts proved were not done in fraud of the internal-revenue laws; but the court is of a different opinion, for several reasons. Regulations of the kind in revenue cases have often been prescribed by Congress. Provision was made in the first collection act that in actions, suits, or information to be brought where any seizure shall be made pursuant to that act, if the property be claimed by any person, in every such case the onus probandi, if probable cause is shown, shall be upon such claim ant. 1 Stat. 678; Rev. Stat., sect. 900; Locke v. United States, 7 Cranch, 339.

Rules of similar import have been incorporated into the acts of Congress providing for the collection of internal revenue, as, for example, sect. 45 of the act of the 13th of July, 1866, provided that proceedings in seizures shall be according to existing provisions of law in relation to distraint and in conformity with the regulations of the commissioner, and that the burden of proof shall be upon the claimant of said spirits, to show that the requirements of law in regard to the same have been complied with. 14 Stat. 163.

Equally stringent provision in respect to distilled spirits is contained in the subsequent act, which was in force at the date of the transactions involved in the prosecution. 15 id. 140. By that enactment it is provided that the burden of proof in the described cases shall be upon the claimant of said spirits, to show that no fraud has been committed and that all the requirements of the law in relation to the payment of the tax have been complied with, which is substantially the same as the provision in the prior act.

In criminal cases the true rule is that the burden of proof never shifts; that in all cases, before a conviction can be had, the jury must be satisfied from the evidence, beyond a reasonable doubt, of the affirmative of the issue presented in the accusation that the defendant is guilty in the manner and form as charged in the indictment. Commonwealth v. McKie, 1 Gray (Mass.), 64; Same v. York, 9 Metc. (Mass.) 125; Same v. Webster, 5 Cush. (Mass.) 305; Same v. Eddy, 7 Gray (Mass.), 584; Bennett & Heard, Lead. Cr. Cas. 299.

Text-writers of the highest authority state that there is a distinction between civil and criminal cases in respect to the degree or quantum of evidence necessary to justify the jury in finding their verdict. In civil cases their duty is to weigh the evidence carefully, and to find for the party in whose favor it preponderates; but in criminal trials the party accused is entitled to the legal presumption in favor of innocence, which, in doubtful cases, is always sufficient to turn the scale in his favor. 3 Greenl. Evid. (8th ed.), sect. 29; 1 Taylor, Evid. (6th ed.) 372.

Beyond question, the general rule is that the burden of proof in civil cases lies on the party who substantially asserts the affirmative of the issue, but the burden may shift during the progress of the trial. Possession of a negotiable instrument payable to bearer or indorsed in blank is prima facie evidence that the holder is the proper owner and lawful possessor of the same; but if the defendant prove that the instrument was fraudulent in its inception, or that it had been lost or stolen before he became the holder, the burden of proof is changed, and the onus is cast upon the plaintiff to prove that he gave value for it when he became the holder. Collins v. Gilbert, 94 U.S. 753.

Examples of like character almost without number might be given; but it is unnecessary, as every one knows that the plaintiff in every case may safely rest when he has introduced proof to make out a prima facie case. Authorities to show that the case before the court is a civil case are scarcely necessary, but if any be needed they are at hand. 1 Bishop, Cr.Law (6th ed.), sect. 835; United States v. Three Tons of Coal, 6 Biss. 371; Schmidt v. Insurance Company, 1 Gray (Mass.), 533; Knowles v. Scribner, 57 Me. 497.

Speaking of a proceeding in rem to forfeit spirituous liquors, the Supreme Court of New Hampshire say that it is only when some crime or misdemeanor is charged upon an individual that all reasonable doubt of the guilt of the accused must be removed; but here no one is accused of any crime, as it is not a proceeding against any person. Such being the character of the proceeding and of the character of the trial, the claimant may appear by attorney, may make and sign his claim by attorney, may file his plea in writing and sign it by attorney; issues may be joined, claims and pleas amended, verdict rendered on the issues, judgment rendered on the verdict, costs allowed the prevailing party, and execution for cost issued. State v. Spirituous Liquors, 47 N.H. 375; Cooper v. Slade, 6 H. of L. Cas. 772.

Innocence is presumed in a criminal case until the contrary is proved; or, in other words, reasonable doubt of guilt is in some cases of the kind ground of acquittal, where, if the probative force of the presumption of innocence were excluded, there might be a conviction; but the presumption of innocence as probative evidence is not applicable in civil cases nor in revenue seizures, as, for example, when a railroad company is sued in damages for negligence, the issue depends upon the evidence, without any presumption of innocence or guilt, but the company is not put to defence until a prima facie case of negligence is made out by the plaintiff; but when such a case is made out, courts do not instruct juries that if there is reasonable doubt as to negligence they must find for the defendant, as such an instruction would be a plain error. Issues of the kind, however, must be proved at least prima facie; and if the defendant fails to overcome the prima facie case, the jury, if they deem it reasonable, may find for the plaintiff. 2 Whart. Evid., sect. 1245; Gordon v. Parmelee, 15 Gray (Mass.), 415.

High authority supports the proposition that when a presumption of fact exists against a party in a case of seizure in rem, the court may instruct the jury that the burden is on such party to remove the presumption, and that if he does not, the case must, in an issue in a civil case, go against him on such point. 1 Whart. Evid., sect. 371.

Whenever evidence is offered to the jury which is in its nature prima facie or presumptive proof, its character as such ought not to be disregarded; and no court has a right to direct a jury to disregard it, or to view it under any different aspect from that in which it is actually presented. Crane v. Morris et al., 6 Pet. 598.

Prima facie evidence of a fact, says Mr. Justice Story, is such evidence as in judgment of law is sufficient to establish the fact, and, if not rebutted, remains sufficient for the purpose. 6 id. 632; United States v. Wiggins, 14 id. 334.

Suffice it to say, that the observations already made are sufficient to dispose of the exception to the ruling of the court in giving the second request presented by the prosecutor, without further examination.

4. The next error assigned is the eighth, which is that the court erred in charging the jury that the Orinoco tobacco, so called, would have been liable to a tax of thirty-five cents per pound; but the court here is of a different opinion.

Goods might be manufactured without being subject to tax, even if they were intended for sale, unless they were sold, consumed, or removed from the manufactory. 13 Stat. 264, sect. 94.

Articles, goods, &c., except where otherwise provided, which shall be produced and sold, or be manufactured or made and sold, or be consumed or used by the manufacturer or producer, or be removed for consumption or for delivery to others than agents within the United States, are declared by that section to be subject to such taxation.

Manufactured tobacco under that act, if made of the leaf with the stem taken out, or if sweetened, was subject to a duty of thirty-five cents. Smoking-tobacco manufactured of leaf not stemmed, butted, or stripped was subject to a tax of twenty-five cents per pound.

Before the transaction referred to took place, the amendatory act of the 13th of July, 1866, was passed, which increased the rate of taxation on tobacco of the first-named class to forty cents per pound. Desiring to avoid the payment of the increased tax, the claimant executed the plan of a fictitious sale of a large quantity of tobacco which he had on hand, as a means of effecting that purpose. His own testimony explains the matter in substance and effect as follows: That the goods were never delivered to the purchasers, so called, and were never intended to be delivered, nor were they removed from his factory; that it was understood between him and those merchants that the goods were sold and bought back, and that he believed, though he was not positive about it, that he exchanged checks with them for the amount of the bill; that the proceeding was for the purpose of returning the tobacco as sold in his current monthly return for taxation, in order to avoid payment of the increased rate of duty to which the same would be liable when the new revenue act took effect.

Sales of personal property merely colorable, made with the intention that the title should not be transferred in reality but only in appearance, convey no title whatever to the apparent purchaser. Hyam's Case, 1 De G., F. & J. 79; Bowes v. Foster, 2 H. & N. 783; Cox v. Jackson, 6 Allen (Mass.), 109.

Throughout, the title was undeniably in the claimant; and if the tobacco was goods in his possession, it is clear that it was subject to taxation under the new revenue act, as the new act, if the duty imposed by either of the two preceding acts had not been paid, provides that all manufactures and productions on which a duty was imposed by either of the preceding acts, repealed by that act, in the possession of the manufacturer or producer, or of his agent or agents, on the day when that act takes effect, shall be held and deemed to have been manufactured or produced after that date. 14 Stat. 173, sect. 70.

Viewed in the light of these suggestions, it is plain that the instruction given is correct, and that the assignment of error must be overruled.

5. Though slightly different, the ninth, tenth, and eleventh errors assigned will be re-examined together.

Speaking of the fictitious sale, and the intent it was expected to accomplish, the judge remarked to the jury that it was his duty to say to them that the transaction was utterly illegal; in which the court here fully concurs. Coupled with the averred motive of the actor, it is clear that it was illegal to return the tobacco for taxation, for the reason that it had not been sold nor removed for consumption, nor indeed for any purpose, as it remained in the manufactory. Where the evidence is without conflict, and the facts are conceded or fully proved, it is a question of law whether they show a perfected sale. Cutler v. Bean, 34 N.H. 299; Burrows v. Stebbins, 26 Vt. 663; Kaine v. Weigley, 22 Pa. St. 183.

Persons engaged in the manufacture of such products are required to keep books, and to keep an account of goods manufactured and sold or removed; and the evidence showed in this case that the claimant did not in certain instances comply with those requirements, — which is a sufficient answer to the tenth assignment of error. Nor is it necessary to add any thing to show that the eleventh assignment of error is without merit, beyond what was remarked in response to the complaint set forth in the eighth assignment. Nor is it necessary to enter into any discussion of the twelfth assignment of error, as the remarks made respecting the ninth and tenth assignments apply with equal force to that ground of complaint.

6. Thirteen and fourteen of the errors assigned may also be classed together without inconvenience.

In the first of the two the complaint is that the judge remarked to the jury that, unless a record be kept of the manufactured goods, it is impossible for the manufacturer to comply with the requirements of law in respect to his returns. Such manufacturers are required by law to keep books; and if they fail to do that, and keep no record of their daily transactions, the expression of the judge is scarcely too strong, and was not one calculated to mislead the jury.

Quantities of granulated tobacco entered in the order-books were not in the tax-books, so called, and large quantities entered in the tax-books could not be identified in the order-books, which a witness, when asked to explain the transaction, said it was part of a large mass taken downstairs into the retail department: and the complaint is that the judge remarked that it was an illegal mode of doing business, but such a remark can hardly be regarded as the subject of error when considered in connection with the full charge given to the jury; nor was the remark without justification, as the tobacco had not been returned for tax, as is admitted in the assignment of error.

7. Nothing need be remarked in response to the fifteenth and sixteenth assignment of errors, as the only complaint they contain is that the judgment is for the wrong party.

Suggestion was made during the argument at the bar that the court erred in not instructing the jury that they could not find that the property was forfeited unless the matters charged were proved beyond a reasonable doubt; but no such exception was taken at the trial, nor is any such complaint set forth in the assignment of errors; nor is there any thing in the case of Chaffee v. United States (18 Wall. 516) which conflicts in the least with the views here expressed, as is obvious from the fact that the two cases are radically different, the present being an information against the property, and the former an action against the person to recover a statutory penalty. Informations in rem against property differ widely from an action against the person to recover a penalty imposed to punish the offender. But they differ even more widely in the course of the trial than in the intrinsic nature of the remedy to be enforced.

Instructions of an entirely different character were given in that case, as, for example, the jury were told in effect that suspicious circumstances requiring explanation, if not explained, would supply by presumption what would be sufficient to warrant a verdict of guilty; that silence supplied, in the presumption of law, that full proof which should dispel all reasonable doubt, — making the inference to be drawn from silence one of law instead of fact. Palpable as those errors were, it is clear the decision of this court is correct.

Nor is there any thing in the case of United States v. The Brig Burdett (9 Pet. 682) that is in conflict with these several propositions. Charges of the kind contained in an information ought to be satisfactorily proved; and it is correct to say that if the scale of evidence hangs in doubt, the verdict should be in favor of the claimant, which is all that was there decided. Jurors in such a case ought to be clearly satisfied that the allegations of the information are true; and when they are so satisfied of the truth of the charge, they may render a verdict for the government, even though the proof falls short of what is required in a criminal case prosecuted by indictment. Insurance Company v. Johnson, 11 Bush (Ky.), 593.

Judgment affirmed.