United States v. One hundred barrels of Spirits.

Law, 125; Nichols v. Squire, Peck, 168; State v. Whitworth, 8 Port. (Ala.) 434.

Being of opinion that the act of 1868 is not a repeal of that part of section 25 of the act of 1867, which denounces penalties against distillers for failing to make the entries and reports required of them, it is necessary now to consider another position taken by the claimant's counsel, viz: Admitting that section 25 of the act of 1867 is yet in force, and is the one applicable to this case, still, the spirits in controversy are not, under the agreed facts, forfeited by virtue of its provisions, because they were not found on the premises of the distiller, but in the possession of an innocent purchaser. The argument is, that the words "found on the premises" relate to, and qualify the whole list of forfeited articles, including distilled spirits.

Upon an examination of the language of this section in the light of its legislative history adverted to in the statement of the case, and in the light of other provisions of the statutes relating to forfeitures denounced against distillers, it is our opinion that his position is substantially correct; in other words, that it was not the intention of Congress to denounce an absolute and instantaneous forfeiture on the commission of the of fense, of all spirits, but only those either found on the premises at the time of seizure or information given, or, if found elsewhere, still owned by the party guilty of the wrongful act or omission.

This conclusion, reached, it must be confessed, after some hesitation, and adopted with some lingering distrust of its soundness, rests full more upon the general spirit and purpose of the legislation of Congress respecting the rights of third persons, than upon the particular words of section 25 of the act of 1867, if these stood alone with nothing beyond to aid in their interpretation. This conclusion is fortified by supposing Congress in its legislation to have been regardful of the or

United States v. One hundred barrels of Spirits.

dinary sense of justice, and not to have designed to make the innocent suffer for the acts of the guilty, and to visit the laches of officers of the revenue upon those guilty of no wrong and no neglect. And it is still further strengthened if we have regard alone to considerations of mere policy. Revenue is the sole purpose of all the complicated official machinery pertaining to the manufacture of spirits. The duty levied is high, the temptation to fraud correspondingly great. Congress will be presumed to have seen, unless the contrary clearly appears, that revenue would be promoted by making it safe to buy manufactured spirits, and would be injured by legislation of a contrary character, by which a "secret taint of forfeiture is indissolubly attached to the property, so that at any time, and under any circumstances, within the limitations of law, the United States might enforce their rights against innocent purchasers." Per STORY, J., United States v. Nineteen hundred and sixty bags of Coffee, 8 Cranch, 398, 406.

The policy of Congress to confine the forfeiture to the property of the guilty, at least not to extend it to innocent persons, may be seen by section 130 of the act of 1864, 13 Stat. at L. 306, which protects bona fide purchasers from forfeitures by frauds. The fraudulent vendor forfeits value, but the article bought bona fide and paid for cannot be pursued in the hands of the purchaser. So in the act of July 13, 1866, 14 Id. 153, if the distiller fails to pay the tax for carrying on his business (§ 23), or fails to give bond, or gives a false or fraudulent notice (§ 24), he forfeits only such liquors as are owned by him, or found upon the premises; which evidently means owned by him at the time of seizure or date of information given. So in section 5 of the act of March 31, 1868, 15 Stat. at L. 58, so often mentioned, it is provided that the distiller who defrauds or attempts to defraud the United States of the

United States v. One hundred barrels of Spirits.

tax on the spirits distilled by him, shall forfeit, among other things, "all distilled spirits and all raw materials for the production of distilled spirits found in the distillery and on the distillery premises."

This section, as above observed, does not repeal all prior laws inflicting penalties and forfeitures upon distillers, but repeals them only so far as they relate to the same offense. But being in pari materia with section 25 of the act of March 2, 1867, relied on by the district-attorney, and which governs this case, it may be properly resorted to when endeavoring to discover the meaning of that section. Under the act of 1868, spirits, which had passed into the hands of a bona fide purchaser, and not found in the distillery building or premises, would not be liable to be condemned as forfeited. So by the act of July 20, 1868, 15 Stat. at L. § 44, passed soon after the spirits in controversy were made and before they were seized, but which saves forfeitures already incurred (Id. 166, § 195), all obscurity as to extent of forfeiture is removed, and the forfeiture is in terms limited to "distilled spirits owned by such person (the offending distiller), wherever found, and all distilled spirits and personal property found in the distillery," &c. 15 Stat. at L. 142, § 41; and see sections 5, 7, and 19 of same act. This legislation shows quite satisfactorily a uniform policy on the part of Congress from the beginning not to extend the forfeiture to innocent third persons.

In the light of these considerations, and of this legislative policy, we may now recur to section 25 of the act of March 2, 1867, which is the one relied on by the government, and we repeat it as our opinion that, under it, a neglect or refusal by a distiller to make entries and reports as required by law, does not forfeit spirits not "found" on the premises, and not, at the time when "found," the property of the offending distiller. It would, indeed, be strange if such a neglect or refusal,

United States v. One hundred barrels of Spirits.

which is not necessarily fraudulent in fact, as we have before stated, should have the effect to forfeit spirits in the hands of bona fide purchasers, when by other provisions of the statutes, as, for example, that of March 31, 1868, an actual fraud, accompanied with a fraudulent intent, would not have that effect.

The judgment of the court is, that under section 25 of the act of March 2, 1867, a forfeiture eo instanti is not worked for omissions of the distiller to make the entries and reports required of him.

This view, if correct, results in affirming the judgment of the district court, and renders it unnecessary to consider the other proposition of the claimant's counsel, which is, that if forfeiture attached to these spirits, eo instanti with the commission by Johnson, the distiller, of the offenses charged, the United States waived any right of property acquired of such forfeiture, when they accepted from Henderson, the claimant, the amount of the taxes due on these spirits, and surrendered them into his possession, he being innocent of fraud. We content ourselves with remarking, that the proposition, as stated, is of questionable correctness, for waiver would imply a power in the revenue officers which they do not possess, and perhaps, also, a knowledge of the forfeiture, which it is not shown they had, when the taxes were received from the claimant and the spirits were surrendered to him. If any proposition could be maintained, it would be the one, that in view of the peculiar provisions of the law for detecting frauds, the ample facilities it supplies its officers, its system of bonded warehouses, the government, by accepting and retaining the taxes paid to it by the claimant is estopped to say the property all the time belonged to it by reason of a previous forfeiture of title by the vendor of the claimant. Whether the view is correct, or whether the case could be successfully distinguished from those in which the supreme court has

Minot v. Philadelphia, Wilmington, & Baltimore R. R. Co.

held, under the customs revenue acts, that the forfeiture might be enforced against the property in the absence of innocent and subsequent purchasers, we pass without deciding, resting our determination of this case upon the grounds before stated.

The judgment of the district court must be affirmed.

KREKEL, J., concurred.

Judgment affirmed.

MINOT v. PHILADELPHIA, WILMINGTON, AND BALTIMORE RAILROAD COMPANY.

Circuit Court, Third Circuit; District of Delaware, 1870.

CORPORATIONS.-TAXATION.-CONSTITUTIONAL LAW.

A circuit court has jurisdiction of a suit by a citizen of another State against a corporation created by the State in which the court is held; notwithstanding the corporation also holds charters from other States.

A State, acting through its legislature, may denude itself, by a contract, of power to impose taxes upon a corporation. But such exemption must be conferred expressly, or must appear by clear and necessary implication from the legislative act; it cannot be favored by presumption or intendment.

The payment by a corporation, to the government of the State, of a bonus for granting a charter of incorporation, does not protect the grantee of the franchise from all taxation, except such as the State has reserved a right to impose in the charter itself.