Statutes to prevent frauds upon the revenue, although they
impose penalties or forfeitures, are not to be construed, like
penal laws generally, strictly in favor of the defendant, but they
are to be fairly and reasonably construed so as to carry out the
intention of the legislature.
The forfeiture imposed by the Act of February 8, 1875, c. 36, §
16, for carrying on the business of a distiller without having
given bond, or with intent to defraud the United States of the tax
on the spirits distilled, includes all personal property owned by
other persons, knowingly and voluntarily permitted by them to
remain on any part of the premises and actually used, either in the
unlawful business or in any other business openly carried on there;
but in the lot of land on which the distillery is situated, only
the right, title, and interest of the distiller, and of persons who
have consented to the carrying on of the business of a distiller
thereon, is forfeited. And there is a like forfeiture of personal
property under Rev.Stat. § 3258 for setting up an unregistered
still, and of personal property and interests in real estate under
§ 3305, for omitting to keep books as required by law.
The forfeiture imposed by the Act of February 8, 1875, c. 36, §
16, and by Rev.Stat. §§ 3258, 3305, takes effect from the time of
the commission of the offense, both as to the right, title and
interest in the land and as to personal property then upon the
land.
When the owner of land upon which an illicit distillery has been
set up and carried on with his consent has previously made a
mortgage thereof to
Page 133 U. S. 2
one who does not permit or connive at the illicit distilling,
and the mortgagor, upon a subsequent breach of condition of the
mortgage, makes a quitclaim deed to the mortgagee, the forfeiture
of the land, as well as of trade fixtures annexed to it for a
lawful purpose before the setting up of the still, is of the equity
of redemption only.
This was an information filed November 18, 1884, under §§ 3258
and 3305 of the Revised Statutes, and § 16 of the Act of February
8, 1875, c. 36, the material parts of which are printed in the
margin,
* for the forfeiture
of property particularly described in the information, and seized
by the collector of internal revenue on November 14, 1884, and
including: 1st. All the right, title and interest of Thomas Dixon,
Eli B. Bellows,
Page 133 U. S. 3
and William Stone in a lot of land in the City of Lawrence, with
the buildings thereon. 2d. A copper still, a boiler and engine, a
pump, vats and tanks, and other machinery and fixtures. 3d. A
number of butts, a quantity of malt and hops, two horses and wagons
and harnesses, and other personal property.
Joseph Stowell filed a claim for the real estate, the machinery
and fixtures (except the still), the butts, and the malt and hops,
and Thomas Bevington filed a claim for the horses, wagons and
harnesses.
A decree was entered against the property not claimed, and upon
a trial in the district court between the United States and the
claimants, the only evidence introduced was an agreement in
writing, signed by the counsel of all the parties, that certain
facts were true, which was, in substance, as follows:
For some time before and until the seizure, Dixon carried on the
business of a brewer on the premises, which consisted of a
three-story frame building and adjoining sheds with doors between,
and a yard connected therewith. The requirements of the internal
revenue laws concerning breweries were complied with. In the latter
part of September, 1884, Stone and Bellows, with Dixon's knowledge
and consent, set up in the third story of the principal building
(which story was not used in the brewing business, except as the
large tanks used in brewing reached up into it) a copper still,
which remained in position and in proper condition for use until
November 9, 1884, and with which, during that time, two hogsheads
and one barrel of rum were made from molasses. The still was not
registered as required by law; no bond therefor was given; no
government book was kept; the still was run with intent to defraud
the United States of the tax on the spirits distilled, and the
United States were defrauded of that tax. It did not appear that
the sheds were in any way used in connection with the distillery.
Dixon continued to carry on his business as a brewer while the
still was being used, and on November 10 and 11 took down and
removed the still.
There were on the premises a large boiler set in brick, a
Page 133 U. S. 4
small engine, a small pump, and large vats and tanks, which the
claimants alleged to be real estate, but which the United States
asserted to be fixtures. It was admitted that a part or all of them
would be trade fixtures as between landlord and tenant, that part
or all of them were apparatus used in the brewery, and such as
might properly be in the brewery, and that part or all of them were
used as apparatus for the illicit distilling, and were fit to be
used in connection with the still.
At the times of the illicit distilling and of the seizure, all
these fixtures and the still, as well as all the personal property
seined, were in Dixon's possession and custody and under his
control, and they were found in the brewery, sheds and yard.
Neither of the claimants knew until after the seizure that a still
had been set up on the premises.
On June 11, 1883, Dixon conveyed the real estate to Stowell by a
mortgage deed, duly recorded, subject to a prior mortgage of
$1,500, to secure a debt of $2,500. On October 13, 1884, upon a
breach of condition of this mortgage, Stowell, instead of
foreclosing it, took from Dixon a quitclaim deed of the premises,
the consideration named in which was $8,000.
On June 5, 1884, Stowell took a bill of sale from Dixon of the
butts, as security for endorsing a note for $350, which went to
protest, and was paid by him on November 10, 1884. At the time of
that bill of sale, the butts were pointed out by Dixon to Stowell
as those which he was to have, but they remained in Dixon's
possession.
On November 8, 1884, Stowell took a bill of sale of part of the
malt and hops as security for endorsing a note for $100 payable in
ten days, and paid that note also after it had been duly protested.
No delivery was ever made of the malt and hops. Neither of those
bills of sale was ever recorded.
On November 11, 1884, a bill of sale of the horses, wagons and
harness was executed and delivered by Dixon to Bevington as
security for a loan of $700, which was never paid. This bill of
sale was recorded in the city clerk's office on November 18, 1884.
The property so conveyed to Bevington was kept on a farm of Dixon's
at North Andover, and was used in the business of the brewery, and
seized at the brewery.
Page 133 U. S. 5
At the time of the sale, Dixon pointed it out to Bevington, and
said that he delivered it, and Bevington appointed Dixon's son as
nominal keeper, but never otherwise took possession of it, and it
remained under the control of Dixon, and was used by him.
Upon these facts, the district court ruled that the information
could not be maintained against the property claimed by Stowell and
Bevington, and adjudged that it be dismissed as to that property.
The United States alleged exceptions, and, upon the affirmance by
the circuit court of the judgment of the district court, sued out
this writ of error.
Page 133 U. S. 11
MR. JUSTICE GRAY, after stating the case as above, delivered the
opinion of the Court.
The property sought to be forfeited consisted of real estate,
and of machinery and fixtures and personal property found thereon.
The real estate was a single lot of land, part of which was covered
by a building and sheds opening by doors into one another, and the
rest of which was a yard connected with the buildings. Dixon owned
the premises and used them for a lawful brewery. Stone and Bellows,
with Dixon's knowledge and consent, set up and used a still in the
principal building, and there carried on the business of
distillers, without the still's having been registered and without
giving bond or keeping books, as required by the internal revenue
laws, and with intent to defraud the United States of the tax on
the spirits which they distilled.
The omission to register the still was a cause of forfeiture,
under § 3258 of the Revised Statutes; the carrying on of the
business of a distiller without having given bond, or with intent
to defraud the United States of the tax on the spirits distilled,
was a cause of forfeiture under § 3281, as reenacted
Page 133 U. S. 12
in § 16 of the Act of February 8, 1875, c. 36, and the omission
to keep books was a cause of forfeiture under § 3305 of the Revised
Statutes. The questions presented are of the extent of the
forfeiture.
By the now settled doctrine of this Court, notwithstanding the
opposing dictum of Mr. Justice McLean in
United
States v. Sugar, 7 Pet. 453,
32 U. S.
462-463, statutes to prevent frauds upon the revenue are
considered as enacted for the public good, and to suppress a public
wrong, and therefore, although they impose penalties or
forfeitures, not to be construed, like penal laws generally,
strictly in favor of the defendant, but they are to be fairly and
reasonably construed so as to carry out the intention of the
legislature.
Taylor v. United
States, 3 How. 197,
44 U. S. 210;
Cliquot's
Champagne, 3 Wall. 114,
70 U. S. 145;
United States v.
Hodson, 10 Wall. 395,
77 U. S. 406;
Smythe v.
Fiske, 23 Wall. 374,
90 U. S.
380.
It will be convenient, in the first place, to ascertain the
construction and effect of the provisions of § 16 of the act of
1875, by which, if any person carries on the business of a
distiller, without having given bond, or with intent to defraud the
United States of the tax on the spirits distilled by him, he shall
be punished by fine and imprisonment, and there shall be forfeited
to the United States: 1st. "all distilled spirits or wines, and all
stills or other apparatus fit or intended to be used for the
distillation or rectification of spirits, . . . owned by such
person, wherever found;" 2d. "all distilled spirits or wines, and
personal property, found in the distillery, or . . . in any
building, room, yard, or enclosure connected therewith, and used
with or constituting a part of the premises;" 3d. "all the right,
title, and interest of such person in the lot or tract of land on
which such distillery is situated;" 4th. "all right, title, and
interest therein of every person who knowingly has suffered or
permitted the business of a distiller to be there carried on, or
has connived at the same." 18 Stat. 310. By the first of these
provisions, all distilled spirits or wines, and all stills or other
apparatus fit or intended to be used for the distillation of
spirits owned by the illicit distiller and found on the premises or
elsewhere are forfeited, without
Page 133 U. S. 13
regard to the question whether the apparatus, by reason of the
manner in which and the purpose for which it is placed on or
affixed to the land, is technically personal property or real
estate. But this provision does not extend to property owned by any
other person than the distiller. The second provision forfeits
"all distilled spirit or wines and personal property found in
the distillery, . . . or in any building, room, yard, or enclosure
connected therewith, and used with or constituting part of the
premises."
The last words, "and used with or constituting part of the
premises," like the words next preceding, "connected therewith,"
aptly designate real estate, and naturally and grammatically relate
to and qualify "any building, room, yard, or enclosure," and not
"all distilled spirits or wines and personal property." The
provision is clearly not limited to personal property owned by the
illicit distiller. To hold it to be so limited would give no effect
to that part of this provision which forfeits distilled spirits or
wines, for all distilled spirits or wines owned by the distiller,
wherever found, have been already forfeited by the first provision.
The first provision is restricted in point of ownership, and not in
point of place. The second provision is restricted in point of
place, and not in point of ownership. Nor can the second provision
be restricted to property fit or intended to be used for the
distillation of spirits, for while the first provision contains
such a restriction as regards apparatus, the second provision omits
all requirement of fitness or intention for the unlawful use. Each
of the two provisions clearly defines its own restrictions, and the
restrictions inserted in the one cannot be imported into the other.
The second provision must therefore extend to some property not
owned by the distiller and to some property not fit or intended to
be used in distilling spirits. In order to give it such effect as
will show any reason for its insertion in the statute, it must be
construed to intend at least that all personal property which is
knowingly and voluntarily permitted by its owner to remain on any
part of the premises, and which is actually used, either in the
unlawful business or in any other business openly carried on upon
the premises, shall be forfeited, even if he has no participation
in or knowledge
Page 133 U. S. 14
of the unlawful acts or intentions of the person carrying on
business there, and that persons who entrust their personal
property to the custody and control of another at his place of
business shall take the risk of its being subject to forfeiture, if
he conducts, or consents to the conducting of, any business there
in violation of the revenue laws, without regard to the question
whether the owner of any particular article of such property is
proved to have participated in or connived at any violation of
those laws. The present case does not require us to go beyond this
or to consider whether the sweeping words "all personal property"
must be restricted by implication in any other respect -- for
instance, as to personal effects having no connection with any
business, or as to property stolen or otherwise brought upon the
premises without the consent of its owner.
The significance of the omission of all restrictions in point of
ownership, and in point of fitness or intention for the unlawful
use, in the second provision concerning personal property, is
clearly brought out by contrasting that provision with the
provisions immediately following it, concerning real estate.
The third provision forfeits only "all the right, title, or
interest of" the distiller "in the lot or tract of land on which
the distillery is situated." And the fourth provision forfeits only
"all right, title, and interest therein of every person who
knowingly has suffered or permitted the business of a distiller to
be there carried on, or has connived at the same."
Congress has thus clearly manifested its intention that the
forfeiture of land and buildings shall not reach beyond the right,
title, and interest of the distiller, or of such other persons as
have consented to the carrying on of the business of a distiller
upon the premises.
In the case, on which the attorney for the United States much
relied, of
Dobbins' Distillery v. United States,
96 U. S. 395, the
jury, under the instructions given them at the trial, had found
that the owner of the distillery, whose title was held to be
included in the forfeiture for unlawful acts of his lessee, had
leased the property for the purpose of a distillery, which brought
the case within the provision of the act under
Page 133 U. S. 15
which the condemnation was sought, corresponding to the fourth
provision now under consideration. Act of July 20, 1868, c. 186, §
44; 15 Stat. 143.
The intention of Congress that no interest in land and buildings
shall be forfeited which does not belong to someone who has
participated in or consented to the carrying on of the business of
distilling therein is further manifested in the provision of § 3262
of the Revised Statutes, which directs that
"No bond of a distiller shall be approved unless he is the owner
in fee, unencumbered by any mortgage, judgment, or other lien, of
the lot or tract of land on which the distillery is situated, or
unless he files with the collector, in connection with his notice,
the written consent of the owner of the fee, and of any mortgagee,
judgment creditor, or other person having a lien thereon, duly
acknowledged, that the premises may be used for the purpose of
distilling spirits, subject to the provisions of law, and expressly
stipulating that the lien of the United States for taxes and
penalties shall have priority of such mortgage, judgment, or other
encumbrance, and that in case of the forfeiture of the distillery
premises, or of any part thereof, the title of the same shall vest
in the United States, discharged from such mortgage, judgment, or
other encumbrance."
That section clearly indicates that the interest of an innocent
mortgagee or other person having a lien on the lot or tract of land
on which the distillery is situated would not otherwise be included
in a forfeiture for acts of the owner only.
The provisions of the other sections of the Revised Statutes,
relied on to support this information, may be more briefly
treated.
Section 3258 does not forfeit any land or buildings, but it does
forfeit every still or distilling apparatus not registered by the
person having it in his possession or custody or under his control,
as well as
"all personal property in the possession or custody or under the
control of such person, and found in the building, or in any yard
or enclosure connected with the building in which the same may be
set up."
Personal property,
Page 133 U. S. 16
by whomsoever owned, is thus included in the forfeiture,
provided that it is in the possession, custody, or control of the
distiller as well as found upon the premises. There is no reason
for giving a narrower construction to this enactment than to the
second provision of § 16 of the act of 1875, above considered.
Section 3305 provides that in case of omission to keep the books
required by law,
"the distillery, distilling apparatus, and the lot or tract of
land on which it stands, and all personal property on said premises
used in the business there carried on,"
shall be forfeited. This description, taken by itself and
literally construed, would include not only the distillery and
distilling apparatus, but "the lot or tract of land on which it
stands," by whomsoever owned, as well as all personal property on
the premises and used in the business there carried on. But it is
hard to believe that Congress intended that a forfeiture of real
estate, under this section, for not keeping books, should be more
comprehensive than the like forfeiture, under the leading section
already considered, for the graver offense of carrying on the
business of a distiller without having given bond, or with intent
to defraud the United States of the tax upon the spirits distilled.
The more reasonable construction is that the brief summary of §
3305 was intended to conform substantially, in scope and effect, to
the fuller definitions in § 3281 (reenacted in § 16 of the act of
1875), and to forfeit without regard to the question of ownership
the distillery and distilling apparatus and all personal property
found on the premises and used in the business there carried on;
but, as to the real estate, to forfeit only the right, title, and
interest of the distiller, and of any persons who participate in or
consent to the carrying on of the distillery.
The next question to be determined is from what time the
forfeiture takes effect. By the settled doctrine of this Court,
whenever a statute enacts that upon the commission of a certain
act, specific property used in or connected with that act shall be
forfeited, the forfeiture takes effect immediately upon the
commission of the act; the right to the property then vests in the
United States,
Page 133 U. S. 17
although their title is not perfected until judicial
condemnation; the forfeiture constitutes a statutory transfer of
the right to the United States at the time the offense is
committed, and the condemnation, when obtained, relates back to
that time and avoids all intermediate sales and alienations, even
to purchasers in good faith.
The rule was early applied under statutes enacting that whenever
goods, the importation of which was prohibited, should be imported,
they should be forfeited, and that if any ship should leave port
without clearance or giving bond, as required by law, the ship and
the cargo should be forfeited.
United States v.
Coffee, 8 Cranch 398;
The Mars, 8 Cranch
417. It has been recognized and acted on in cases of goods imported
in fraud of the customs laws.
Gelston v.
Hoyt, 3 Wheat. 246,
16 U. S. 311;
Wood v. United
States, 16 Pet. 342,
41 U. S. 362;
Caldwell v. United
States, 8 How. 366. And it has been steadfastly
upheld under the internal revenue laws -- in one case under an
enactment punishing by fine and imprisonment any person removing
distilled spirits from the distillery contrary to law with intent
to evade the payment of the tax thereon, and providing that spirits
so removed should be forfeited, and in another case under an
enactment that any person fraudulently executing an instrument
required by the internal revenue laws should be punished by fine
and imprisonment, and the property to which the instrument related
should be forfeited.
Henderson's Distilled
Spirits, 14 Wall. 44;
Thacher's Distilled
Spirits, 103 U. S. 679.
The rule is equally applicable to the statutes now in question.
In the Act of February 8, 1875, c. 36, § 16, the four provisions
before quoted relating to forfeiture follow immediately after the
clause prescribing the punishment by fine and imprisonment of the
offender, and contain nothing to imply that the forfeiture of all
the kinds of property mentioned is not to take effect at one and
the same time. The forfeiture, under the first of those provisions,
of spirits and wines, stills, and apparatus owned by the offender
is evidently intended to take effect immediately upon the
commission of the offense, so as to prevent any subsequent
alienation by him before seizure
Page 133 U. S. 18
and condemnation, and the words "wherever found" merely preclude
all limit of place, and have no tendency to postpone the time when
the forfeiture shall take effect. In the second provision, the
restriction to personal property "found in the distillery" or upon
the premises of which it is part is a limit of place only, and does
not postpone the forfeiture of such property which is on the
premises when the offense is committed, and from what date a
forfeiture of personal property not on the premises at the time of
the commission of the offense, but brought there afterwards, should
take effect, this case does not require us to consider. That the
forfeiture of real estate under the third and fourth provisions
must take effect as soon as the offense is committed is yet
clearer, for those provisions contain nothing which by any possible
construction could be supposed to postpone the forfeiture, and by
the common law of England, even in the case of the forfeiture of
all the real and personal estate of an offender, while the
forfeiture of his goods and chattels was only upon conviction and
had no relation backward, the forfeiture of his lands had relation
to the time of the offense committed, so as to avoid all subsequent
sales and encumbrances. 4 Bl.Com. 387. The forfeitures under §§
3258 and 3305 of the Revised Statutes are governed by the same
considerations.
It remains to apply the provisions of the statutes to the
admitted facts of this case.
Stowell claims the real estate, and certain machinery and
fixtures, as well as a number of butts and a quantity of malt and
hops.
The butts were personal property used in the business of the
brewery. Assuming them to have been sold and delivered by Dixon to
Stowell before any offense was committed by which a forfeiture was
incurred, yet they were suffered by Stowell to remain in Dixon's
possession, custody, and control, and were upon the premises at the
time of the commission of the offense, and found there at the time
of the seizure. They were therefore forfeited under each of the
sections relied on. As to the malt and hops, the case is even
clearer in favor of the United States, for not only were they
intended to be
Page 133 U. S. 19
used in the brewery, and were in the possession, custody, and
control of Dixon and upon the premises both at the time of the
commission of the criminal acts and of the seizure, but Stowell
acquired no right whatever in them until after such acts had been
committed.
Of the real estate, Stowell, more than a year before the
unlawful acts began to be committed by which a forfeiture was
incurred, took a mortgage from Dixon, subject to a prior mortgage
for $1,500, and to secure a debt of $2,500. This mortgage conveyed
a distinct interest in the real estate to the mortgagee, and by the
law of Massachusetts, as between the mortgagor and the mortgagee,
vested the fee in the latter, but subject to the mortgage, and as
regarded third persons, left the legal title in the mortgagor.
Conard v. Atlantic Ins.
Co., 1 Pet. 386,
26 U. S. 441;
Ewer v. Hobbs, 5 Met. 1, 3;
Howard v. Robinson, 5
Cush. 119, 123. As soon as a still was set up on the land, with the
mortgagor's knowledge and consent, in violation of the internal
revenue laws, the forfeiture under those laws took effect, and
(though needing judicial condemnation to perfect it) operated from
that time as a statutory conveyance to the United States of all the
right, title, and interest then remaining in the mortgagor, and was
as valid and effectual against all the world as a recorded deed.
The right so vested in the United States could not be defeated or
impaired by any subsequent dealings of the mortgagee with the
mortgagor.
Upton v. South Reading National Bank, 120 Mass.
153, 156. The mortgagor's subsequent conveyance of the land by
quitclaim deed to the mortgagee therefore passed no title as
against the intervening right of the United States. But this deed
did not have the effect of merging or uniting the mortgage and the
equity of redemption in one estate, because, by reason of that
intervening right, it was for the interest of the mortgagee that
the mortgage should be kept on foot. The quitclaim deed, being void
or voidable, left the mortgaged estate exactly where it found it.
Factors' & Traders' Ins. Co. v. Murphy, 111 U.
S. 738,
111 U. S. 744;
Dexter v. Harris, 2 Mason 531, 539;
New England
Jewelry Co. v. Merriam, 2 Allen 390;
Stantons v.
Thompson, 49 N.H. 272.
Page 133 U. S. 20
It being admitted that the business of a distiller was not
carried on with the mortgagee's permission or connivance, and that
he did not even know until after the seizure that a still had been
set up on the premises, it follows, for the reasons already stated
in discussing the construction and effect of the statutes in
question, that the mortgage is valid as against the United States,
and that, so far as concerns the real estate, the judgment of
condemnation must be against the equity of redemption only.
As to the boiler, engine, pump, vats, and tanks, the forfeiture
must be equally limited. As we understand the somewhat ambiguous
statement of the facts regarding them, they were upon the premises
before the still was set up, and were owned by Dixon, and not by
the distillers, and it is not shown that any of then was used or
fit to be used in connection with the distillery which was not
already in lawful use in the brewery. In that view, even if they,
or some of them, would be trade fixtures as between landlord and
tenant, yet while annexed to the land, they were real estate, and
covered by the mortgage.
Kutter v.
Smith, 2 Wall. 491;
Freeman v. Dawson,
110 U. S. 264,
110 U. S. 270;
Winslow v. Merchants' Ins. Co., 4 Met. 306;
Bliss v.
Whitney, 9 Allen 114.
The horses, wagons, and harnesses claimed by Bevington were
personal property, used in the business of the brewery, and were
sold and a formal delivery of them made to Bevington by Dixon after
the acts had been committed by which a forfeiture was incurred.
They were afterwards suffered by Bevington to remain under Dixon's
control and in his use, and they were found upon the premises at
the time of the seizure. They were therefore forfeited under each
of the sections relied on by the United States.
Judgment reversed, and case remanded for further proceedings
in conformity with this opinion.
* By Rev.Stat. § 3258,
"Every person having in his possession or custody, or under his
control, any still or distilling apparatus set up, shall register
the same with the collector of the district in which it is. . . .
Stills and distilling apparatus shall be registered immediately
upon their being set up. Every still or distilling apparatus not so
registered, together with all personal property in the possession
or custody or under the control of such person and found in the
building or in any yard or enclosure connected with the building in
which the same may be set up shall be forfeited,"
and he shall be punished by fine and imprisonment.
By the Act of February 8, 1875, c. 36, § 16, substantially
reenacting Rev.Stat. § 3281, any person
"who shall carry on the business of a distiller without having
given bond as required by law or who shall engage in or carry on
the business of a distiller with intent to defraud the United
States of the tax on the spirits distilled by him, or any part
thereof"
shall be fined and imprisoned.
"And all distilled spirits or wines, and all stills or other
apparatus, fit or intended to be used for the distillation or
rectification of spirits, or for the compounding of liquors, owned
by such person, wherever found, and all distilled spirits or wines
and personal property, found in the distillery or rectifying
establishment, or in any building, room, yard or enclosure
connected therewith, and used with or constituting a part of the
premises, and all the right, title, and interest of such person in
the lot or tract of land on which such distillery is situated, and
all right, title, and interest therein of every person who
knowingly has suffered or permitted the business of a distiller to
be there carried on, or has connived at the same"
shall be forfeited to the United States. 18 Stat. 310.
By Rev.Stat. § 3305, every distiller who omits to keep books in
the form prescribed by the Commissioner of Internal Revenue shall
be punished by fine and imprisonment, and
"the distillery, distilling apparatus, and the lot or tract of
land on which it stands, and all personal property on said premises
used in the business there carried on, shall be forfeited to the
United States."