Amicus Curiae Brief — United States v. Yuginovich

Guthe Sugreme Court of the Hnited States,

OcToBER TERM, 1920.

No. 523

THE UNITED STaATEs OF AMERICA, Plaintiff in Error,

Vv.

Boze YUGINOVICH AND CousIN BozE YUGINOVICH.

BRIEF AMICUS CURIAE

On Behalf of Plaintiff in Error.

Agreeable to the permission of the court, this brief is

filed to aid in reaching a correct conclusion on the

principles of law involved herein.

STATEMENT

This brief is submitted to support the following propo-

sitions of law, which are determinative in this case.

Federal and State liquor tax and revenue laws are not

repealed by the National Prohibition Act.

Failure to comply with the revenue laws, Sections 3257,

3279, 3281, 3282 et seq., is an indictable offense.

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2

FEDERAL AND STATE LIQUOR TAX AND

REVENUE LAWS ARE NOT REPEALED BY

THE NATIONAL PROHIBITION ACT.

Section 35 of the Federal Prohibition Code provides as

follows:

“This Act shall not relieve anyone from paying

any taxes or other charges imposed upon the manu-

facturer or traffic of such liquor. No liquor revenue

stamps or tax receipts for any illegal manufacture or

sale shall be issued in advance, but upon evidence of

such illegal manufacture or sale a tax shall be as-

sessed against, and collected from, the person re-

sponsible for such illegal manufacture or sale in

double the amount now provided by law, with an

additional penalty of $500 on retail dealers and

$1,000 on manufacturers. The payment of such

tax penalty shall give no right to engage in the manu-

facture or sale et liquor or relieve anyone from

criminal liability, civil or criminal, heretofore or

hereafter incurred under existing laws.”

In addition, section 35 of the Prohibition Act pro-

vides:

“All provisions of law that are inconsistent with

this Act are repealed only to the extent of such in-

consistency and the regulations herein provided for

the manufacture or traffic in intoxicating liquor shall

be construed as in addition to existing one.

It is further provided in section 9, title 3, of the Nation-

al Prohibition Act, that the manufacturers of Industrial

Alcohol shall be exempt from certain sections of the Inter-

nal Revenue Laws, which apply to the making of distilled

and vinous liquors. It is manifest from this section that

Congress intended that all those who make intoxicating

liquor, except Industrial Alcohol, must comply with the

regulations in section 9, and all other regulations in the

revenue laws. It follows that these laws which must be

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complied with are in full force and effect. The only sec-

tion which could affect this case, even if the defendant was

an Industrial Alcohol manufacturer would be section

3279. The manufacturers of Industrial Alcohol must

comply with the other sections, 3257, 3281 and 3282, R.

S., for which the defendants in this case are indicted for

violating the Internal Revenue Laws.

The above sections of the law make clear that Con-

gress intended to retain all of the Revenue Laws and

Regulations providing for the manufacture and traffic in

intoxicating liquor. Unless Congress did not have

authority to enact such provisions the conclusions reached

by the district judge are clearly erroneous.

The Court below said, with reference to the Prohibi-

tion Act:

“It is intended, as I take it, to cover the entire subject,

and in my judgment supersedes and operates as a repeal

of the previous act governing the operation of distiller-

ies.”

“That it (The National Prohibition Act) is inconsist-

ent with the Revenue Act which provides for the levying

of a tax upon distillers and upon the liquor manufacturer

at such places.”

In other words, the District Judge holds that the Reve-

nue Laws and Regulations are abrogated by the National

Prohibition Act. * * *

It has been contended in practically all of these cases

relating to the validity of section 35 of the National Pro-

hibition Act, that a law imposing a tax upon the out-

lawed liquor traffic is void, because the entire beverage

liquor traffic is prohibited by the Eighteenth Amendment.

-This contention is not sound. The courts have uniform-

ly sustained laws levying a tax upon the liquor traffic, even

though it is conducted in violation of law.

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4

POWER OF STATE AND FEDERAL GOVERN-

MENT ON TAXATION

The sovereignty of a State or Nation is said to extend

to everything which exists by its own authority, or is in-

troduced by its permission and to be limited accordingly,

so that everything over which such sovereign power ex-

tends is an object of taxation. Cyc. Vol. 37, Pg. 716.

The power of taxation rests upon necessity, and is an

essential and inherent attribute of sovereignty. It is as

extensive as the range of subjects over which the power

of that Government extends. As to such subjects, and in

the absence of constitutional restrictions the power of

taxation is practically absolute and unlimited, the only

security against an abuse of the power of being found in

the structure of the Government itself. Cyc. 37, Pg. 716.

The power of Congress to tax is a very extensive power.

It is given in the Constitution, with only one exception

and only two qualifications. | Congress cannot tax ex-

ports, and it must impose direct taxes by the rule of ap-

portionment, and indirect taxes by the rule of uniformity.

Thus limited, and thus only it reaches every subject, and

may be exercised at discretion. License Tax Cases (5

Wall 462.)

TAXES FOR OTHER PURPOSES THAN RAIS-

ING REVENUE ONLY, SUSTAINED

In Veazie Bank v. Fenno, 8 Wall, 533, the court sus-

tained a prohibitive and special tax laid on the notes of

State banks for the purpose (as well known) of driving

them out of circulation. In sustaining its constitutionali-

ty this court said (8 Wall 548) :

“Tt is insisted, however, that the tax in the case

before us is so excessive as to indicate a purpose on

the part of Congress to destroy the franchise of the

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bank, and is therefore beyond the constitutional

power of Congress.”’

“The first answer to this is that the judicial can

not prescribe to the legislative departments of the

Government limitations upon the exercise of its ack-

nowledged powers. The power of tax may be exer-

cised oppressively upon persons, but the responsi-

bility of the legislature is not to the courts, but to the

people by whom its members are elected. So if a

particular tax bears heavily upon a corporation or a

class of corporations, it cannot, for that reason only,

be pronounced contrary to the Constitution.”

In McCray v. United States, 195, U. S., 27, the later

act levying a higher tax on oleomargarine was sustained

over a very strong showing that it was intended merely

to suppress the production of and dealing in oleomarga-

rine and was therefore an interference with the reserved

police powers of the states. The reason given by the

court was as follows: (195 U. S. 63, 64.)

“As we have said, it has been conclusively settled

by this court that the tendency of that article to de-

ceive the public into buying it for butter is such that

the state may, in the exertion of their police powers,

without violating the due process clause of the 14th

Amendment, absolutely prohibit the manufacture of

the article. It hence results, that, even although it

be true that the effect of the tax in question is to re-

press the manufacture of artificially colored oleomar-

garine, it cannot be said that such repression de-

stroys rights which no free government could de-

stroy, and, therefore, no ground exists to sustain

the proposition that the judiciary may invoke an

implied prohibition, upon the theory that to do so is

essential to save such rights from destruction. And

the same considerations dispose of the contention

based upon the due process clause of the 5th Amend-

ment. That provision, as we previously said, does

not withdraw or expressly limit the grant of power

to tax conferred upon Congress by the Constitution.

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Irom this it follows, as we have also previously de-

clared, that the judiciary is without authority to

avoid an act of Congress exerting the taxing power,

even in a case where, to the judicial mind, * it seems

that Congress had, in putting such power in motion,

abused its lawful authority by levying tax which was

unwise or oppressive, or the result of the enforce-

ment of which might be to indirectly affect subjects

not within the powers delegated to Congress.”

Finally, in United States v. Jin Fuey Roy, 241 U. S.

394 (same case decided again by Sup. Ct., December 6,

1920. Question of constitutionality “set at rest’ says

the court). This court said of the act under considera-

tion:

“It may be assumed that the statute has a moral

end as well as revenue in view, but we are of the

opinion that the district court, in treating these ends

as to be reached only through a revenue measure

within the limits of a revenue measure, was right.”

See also U.S. v. Doremus (249 U.S., 86.)

In the case of Youngblood y. Sexton, (32 Michigan,

406) a case involving the right of the State to tax the

illegal traffic in liquors, the court used this convincing

language :

“Tt is enough for him that the government has

selected for itself its own subjects for taxation, and

prescribed its own rules. [t is his liability to taxa-

tion at the will of the government that entitles him

to protection, and not the circumstances of his being

actually taxed. And the taxation of a thing may be,

and often is when police purposes are had in view,

a means of expressing disapproval instead of appro-

bation of what is taxed.

“There has undoubtly been felt and expressed a

strong sentimental objection to the doing of any-

thing by the State that even seemed to be a lending

of its countenance to a business which the objectors

7

regarded as an evil in itself; especially to the State

perticipating in the profits of a pernicious trade.

ut the objection never found expression in laws for-

bidding the taxation of liquors or of the business of

dealing in them. Indeed, in this State liquors have

always been taxable as pro erty; and so have been

the implements by means of which forbidden games

of chance have been carried on. Yet when the keep-

er of billiard tables is compelled to pay a tax, it can

be no defense to him, either in law or in morals, that

he is compelled to do so from the profits of an illegal

business. To refuse to receive the tax under such

circumstances would tend to encourage the business,

instead of restraining it; and would not only be un-

wise because it would tend to defeat the State policy

which forbids games of chance and hazard.

“This State has never shown any disinclination to

make things morally and legally wrong contribute to

the public revenue when Justice and good morals

seemed to require it. If it were to act upon the

idea of refusing to derive a revenue from such

sources, it ought to decline to receive fines for crimi-

nal offenses with the same emphasis that it would

refuse to collect a tax from an obnoxious business.

If the tax is laid by way of discouragement or regu-

lation, it has the same general object in view with the

fine; not only as it affects the person taxed and the

community, but also in the use to which the money

is devoted. * * * ”

In the case of Home Ins. Co. v. Augusta, 50 Ga. 530,

the court held:

“The Federal laws give us illustration of the taxa-

tion of illegal traffic. A case in point was the taxa-

tion of the liquor traffic in this State revious to the

ly of the prohibitory law: the Federal law found

a business in existence and it taxed it without under-

taking to give it any protection whatever. Me.

Guire v. Com., 3 Wall 387; Pervear v. Com., § Wall

475. What would have prevented the State from

taxing the same traffic at the same time? Is it any

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more restricted in the selection of subjects of taxation

than the general government is? If one may tax

and at the same time refuse to protect may not the

other do the same? The only reason suggested for

a negative reply to these questions is, that it was the

State itself, not the United States, that made the

business illegal, and it would be inconsistent and ab-

surb to declare it illegal, and at the same time tax it.

But how the inconsistency would appear in one case

rather than the other is not apparent, The illegali-

ty was declared by competent authority, and yet the

Federal Government taxed the trade, at the same

time refusing, or being unable to protect it. If pro-

tection because of the tax was due to the very thing

upon which the tax imposed, there would be an in-

consistency in taxing a prohibited trade; but treating

taxation, however and wherever it may fall, as the

return for the general benefits of government—for

the protection of life, liberty, the social and famil

relations, as well as to business and property—whic

is the only legal and proper idea of taxation,

there is no inconsistency whatever in making a

thing which is not protected by one of the measures

or standards by which to determnie how much the

party owning or supporting it ought to pay the gov-

ernment. IF ONE PUTS THE GOVERN.

MENT TO SPECIAL INCONVENIENCE AND

COST BY KEEPING UP A PROHIBITED

TRAFFIC OR MAINTAINING A NUISANCE,

THE FACT IS A REASON FOR DISCRIMI-

NATING IN TAXATION AGAINST HIM;

AND IF THE TAX IS IMPOSED ON THE

THING WHICH IS PROHIBITED OR

WHICH CONSTITUTES THE NUISANCE

THE TAX LAW, INSTEAD OF BEING IN.-

CONSISTENT WITH THE LAW DECLAR.

ING THE ILLEGALITY, IS IN ENTIRE HAR.

MONY WITH ITS GENERAL PURPOSE AND

MAY SOMETIMES BE EVEN MORE EF.

FECTUAL. CERTAINLY WHATEVER DIS.

CRIMINATIONS ARE MADE IN TAXATION

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OURS.)

This is Judge Cooley speaking in the opinion in the

Youngblood case and it will be observed that the hypo-

thetical case given by Judge Cooley is identical in the in-

stant case. The U. S. has prohibited the traffic through-

out the nation and under Judge Cooley's reasoning has

the right to tax the traffic under the Revenue laws.

Following this last expression of Judge Cooley one

can come to no other conclusion than that the law instead

of being inconsistent with the Prohibition Amendment is

in entire harmony with it and, it tends to effect the same

purpose, namely, the prevention of the sale of liquor.

This view is also in accord with that of Judge Minshall

on p. 561 in Alder v. Whitbeck, 44 O. St. Supra, where

he sj eaks of the tax as being an impediment to or disap-

proval of the traffic in liquors.

The last syllabus in Youngblood v. Sexton, 32 Mich.

406 supra, on this point is as follows:

“A business is not necessarily licensed or protect-

ed because of its being taxed, nor does taxing a busi-

ness imply an approval of it.”

See also pp. 420, 421, 422 and 423.

Judge Cooley also says on this phase of the question in

his work on taxation, 3d ed. p. 14, as follows:

“They privilege taxes—may be intended to dis-

courage trades and occupations which may be use-

ful and important when carried on by a few persons

under stringent regulations, but exceedingly mis-

chievous when thrown open to the general public

and engaged in by many persons. An example is a

10

heavy tax imposed in some states, and in some locali-

ties in other states on those engaged in the manu-

facture and sale of intoxicating liquors.”

On page 242 of the same work Judge Cooley further

says:

“On the other hand, one purpose of taxation

sometimes is to discourage a business and perhaps

put it out of existence. Then it is taxation without

any idea of protection attending the burden. This

has been avowedly the purpose in the case of some

federal taxes, while in others the burden has been

laid on subjects which by state legislation were put

out of the protection of the law. The taxes have

nevertheless been sustained.” (Italics ours.)

In the license tax cases, 5 Wal. 462, cited in Conwell

v. Sears, 65 O. St., supra, and Foster v. Speed, 120 Tenn.

470 supra, on p. 472, the Chief Justice rendering the opin-

ion says as follows:

“Nor are we able to see the force. of the other ob-

jection made in argument, that the dealings for

which licenses are required being prohibited by the

laws of the state cannot be taxed by the national

government. There would be a great force in it if

a license were regarded as giving authority, for then

there would be direct conflict between national and

state legislation on a subject which the Constitution

places under the exclusive control of the states.

“But, as we have already said, these licenses give

no authority. They are mere receipts for taxes.

* * * * There is nothing hostile or contradictory,

therefore, in the acts of Congress to the legislation

of the states. What the latter prohibits, the for-

mer, if the business is found existing notwithstand-

ing the Prohibition discourages by taxation. The

two lines of legislation proceed in the same direction

and tend to the same result. It would be judicial

anomaly as singular as indefensible if we should hold

violation of the laws of the Union.”

11

In the case of Lyle v. Sears (61 N. E. 155), the court

in part held:

The assessment upon the traffic in Stoiceting

liquors required by gection 43 64-9 of the Revise

Statutes is legally and properly made upon that traf-

fic, though it be carried on in violation of a munici-

pal ordinance.

This case has been repeatedly affirmed by the Supreme

Court of Ohio. Several attempts have been made since

the passage of Prohibition Laws relating to municipalities,

counties, and then to the entire State to reopen this ques-

tion. The court has always been impressed with the

reasoning of Judge Shauck, that wherever the traffic ex-

ists, the Government has the right to tax it. The fact

that it exists in violation of law furnishes no reason why

it should be immune from the burden of taxation. It is

more costly and more troublesome than any other busi-

ness, and, if it exists in violation of law and the taxing

power can be used to carry out the purpose of the Gov-

ernment, it is not only consistent, but it furnishes an add-

ed reason why the Government should make this crime-

producing traffic pay for some of the expenses that it

causes,

Judge Shauck well said in the Ohio case:

“We should not assume that the Legislature in-

tended to offer a reward for the violation of local

inhibitions in those numerous portions of the State

where sentiment against the traffic is strong enough

to secure their adoption, but conviction is not strong

enough to secure their enforcement.”

If a business could be exempt from taxation because it

was operating in violation of the law, many trades might

be willing in some sections of the country to take their

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chances and operate in this manner in order to secure re-

lief from tax laws.

The Congress well knew from its investigation of the

beverage liquor traffic under Senate Resolution 307, (See

copy of findings of Committee Sept. 5, 1919, Congres-

sional Record. The investigation was made in 1918 and

reported to the Senate) that in some places the law

would not be rigidly enforced, because of the lawless

character of the traffic. In order to make this outlawed

trade bear some of the expense it makes, and in order to

discourage the trade in such places, the liquor tax laws

were retained, and those who were engaged in the trade

in violation of the law were made subject to a special or

prohibitive tax.

Over $22,000,000 in liquor taxes have been assessed

this last year under authority of this Section 35. It has

been a revenue and a law enforcement measure combined. }

As the Supreme Court of Tennessee well said, this tax

has been more effective in preventing the traffic in some

of these places than the criminal provisions of the law.

This has been the policy of the Government for years.

A U. S. revenue tax has been collected on the illegal sale

of liquor, and the collection of the tax gave the liquor

dealer no right to sell. Section 1001-12 of the Revised ft

Statutes enacted in 1919 provided a $1,000 tax on those

who manufactured liquor in violation of State or Local

Laws.

In the case of Foster v. Speed, 111 S. W. 925, the |

court held: a prohibited traffic may be taxed. The rea-

soning in this case is convincing:

“The question in this case is whether the statute

imposing a tax upon those engaged in that business

applies to territory in which the sale of liquor is pro-

hibited by what is commonly known as the “four-

mile law.”

* * *

13

“The imposition of a tax upon an outlawed busi-

ness is often more efficient in suppressing it than

statutes making it a criminal offense, because of the

greater certainty of the collection of the tax and

the difficulties attending to prosecution of the mis-

demeanor, and the fact that the enforcement of the

two remedies is generally intrusted to different offi-

cers, as in this case, where the tax is collected by the

clerk of the county court and the prosecution of the

misdemeanor committed in making the sale made the

duty of the sheriff and the district attorney.”

In Carpenter v. State, 120 Tenn. 586 also we find this

sound conclusion.

“The business of retailing liquors in any part of this

state whether it be where they can be lawfully sold or

where the sale is prohibited * * is made a privilege and

taxed, and anyone engaging in this business although in

violation of the latter law is liable for the tax.”

In the case of Comm. vy. Nickerson 128 N. E. 273, the

Supreme Court of Massachusetts upheld the restrictive

and prohibitory features of a license law after the 18th

Amen@ment was adopted.

The court said:

“But aside from that (referring to certain license

provisions) other provisions of c. 100 aimed at the

suppression of sales of liquor containing more than

one per cent of alcohol have a ——- to enforce

prohibition of the use of such liquor for beverage

purposes. They will be enforced by judicial tribu-

nals of a different sovereignty. They tend toward

the same result by harmonious mieans.”

It follows with even greater force that a tax or revenue

law is valid, and in perfect harmony with the prohibition

Act. The tax does not in any way give any legality to

the trade and cannot be considered a protection to it. It

is a burden on the traffic and ften used as a means to dis-

courage or prevent it.

7a

FAILURE TO COMPLY WITH THE REVENUE

LAWS IS AN INDICTABLE OFFENSE

The United States Liquor Tax or Revenue Laws have

not been repealed by the enactment of the Volstead Act,

as we have heretofore shown. It is contended, however,

that, inasmuch as the Eighteenth Amendment and the

Volstead Act prevent a liquor dealer from purchasing

revenue stamps, or tax receipts, in advance for any illegal

manufacture or sale of liquor, the Government has no

legal right to prosecute the defendant for failing to do

what the law prevents him from doing. ‘The provision

of the Volstead Act preventing the issuance of the stamps

in advance has little if anything, to do with this question.

This section 35 refers to the illegal manufacture or

sale. Every person who makes liquor, or sells intoxicat-

ing liquor, must comply with certain provisions of the

Revenue Laws, even though he makes such intoxicating

liquor legally for non-beverage purposes. The failure of

any individual to comply with these laws subjects the

maker or seller to certain criminal penalties. As long as

the law requires certain conditions precedent to be ful-

filled before you can make or sell intoxicating liquor, the

failure to comply with these conditions may be made an

offense, such as is found in Sections 3257, 3279, 3281,

3282, R. S. et seq. If the defendant engages in either

the legal or illegal liquor traffic, he is liable for the tax,

and must obey certain revenue regulations. If he is to

engage in a business not prohibited by the constitution,

there is no reason why he should not comply with the

Revenue Laws for the control of such business not pro-

hibited.

It is somewhat similiar to the situation in the States

which have license laws for, liquors not prohibited by the

Federal Law. These States require every liquor dealer

15

who engages in the making and selling of any kind of malt

and vinous liquors to secure a license. The Federal Act

prohibits the sale and making of intoxicating liquor, con-

taining ¥% of 1 per cent alcohol for beverage purposes,

but some of these State Laws require a dealer to take out

a license for doing that which the Federal Act and the

Eighteenth Amendment does not prohibit.

The Court of Appeals of Maryland, in passing upon

this kind of a law, recently held in the case of Ulman v.

Maryland (decided Jan. 13, 1921):

‘We have here to deal with the Federal Constitu-

tion and an Act of Congress which permit the sale

of intoxicating liquor for non-beverage perpeten, and

a state law which prohibits the sale of such liquors

without a license for any purpose. Certainly there

is no conflict so far as the State law applies to sales

for non-beverage purposes. Because it permitted

the license of sales for beverage purposes also when

such sales were not prohibited by the Federal Consti-

tution, and because such licenses can no longer be

issued, it does not follow that the whole law has been

abrogated. On the contrary it is not unreasonable

to suppose the Legislature would have enacted laws

regulating the liquor business and providing for a

revenue from such sales as would have been permis-

sible if the 18th Amendment had then been in force.

One of the ways of exercising control over the busi-

ness by the State and preventing clandestine and

illegal sales, would be to enforce the prohibition fea-

ture of the existing license laws, the effect of which

would be to punish everyone selling without a license

whether for beverage or non-beverage purposes.

The inhibition being against any sale without a

license; all sales are covered, both those permitted

and those prohibited by the 18th Amendment. But

even if it were probable that the Legislature of

Maryland would not have enacted, the existing

license laws or any part of them if it could have fore-

seen the adoption of the 18th Amendment that could

16

not be taken into consideration in determining the

question now before us. Doubtless many statutes

would not be enacted if happenings of the future

could be foreseen. .

“The Legislative intent which is important in re-

ference to the dependence of the validity of one part

of a statute upon the validity of another part, re-

lates to conditions as they exist at the time of the

pecenge of the statute and not to those brought about

y subsequent events. If a statute is valid in all its

parts at the time of enactment, then if conditions

subsequently arise which make enforcement of part

of the statute impossible, the question becomes, not

what the men who made the law would have done if

they could have looked into the future, but whether

the remaining part of the statute can be enforced

without doing violence to the purpose of the whole

act; in other words any part of the purpose of the

act can be subserved by the enforcement of such part

of the statute as has not been nullified.”

Section 3247 et seq. of the Revised Statutes relates to

the tax on distilled liquors. By section 600, Act of Feb.

24, 1919, it is $2.20 per gallon on non-beverage spirits

and $6.40 on beverage spirits. Every person who is a

wholesale dealer in intoxicating liquor, manufacturers

and wholesale dealers in fermented liquors, (Section

3244, R. S.) must pay a $100 tax.

(Section 18, Act of February 8, 1875 (18 Stat., 309),

as amended by Sec. 4, of March 1, 1879 (20 Stat., 327),

provides that retail dealers in liquors shall pay twenty-

five dollars.

A manufacturer must give a bond in accordance with

Title III of the Federal Prohibition Act, and sign an

agreement under Regulation 1408 to be liable for all of

the taxes. Any person who thus makes, or sells, or trans-

ports, intoxicating liquor in violation of the Revenue

Laws, is as liable for the penalties provided in the crimi-

17

nal sections referred to as he was before the adoption of

National Prohibition. Liability for failure to comply

with the Revenue Laws relating to the legal manufacture

of intoxicating liquors is the same today as it was before

the adoption of National Prohibition.

In the case of United States v. One Essex Touring

Automobile, 266 Fed. 138, the Court said:

“This section (35) expressly continued the reve-

nue laws in force and is not contrary to the Eigh-

teenth Amendment. That amendment does not

prohibit the manufacture, transportation, and sale

of intoxicating liquors, for any purpose whatever,

but only for beverage purposes. Such liquors ma

still be made, decried about, and sold for medicinal,

sacramental, scientific, and some commercial pur-

poses. The restraints applicable to liquors for such

uses do not arise from the amendment, but are justi-

fied as reasonable safeguards to prevent the abuse

of liberty as to them, and to attain enforcement of

the prohibition for beverage purposes. Evidently

there is much field left by the amendment for the

operation of the revenue lame, which are preserved

by section 35. Since that section expressly provides

that taxation of illegal acts shall not be had in ad-

vance, and that the exaction of the tax afterwards

shall not legalize them, there is no contravention,

even in spirit, of the prohibitory amendment. The

tax operates only as an additional penalty, and tends

rather to the enforcement than the defeat of the pro-

hibition scheme.

“It follows, then, that distilled liquors whether

produced under permit for lawful purposes or in

violation of law, are still “a commodity in respect

whereof a tax is imposed,” in the language of Rev.

St. §3450, and its provisions are applicable to a case

within them, unless defeated by inconsistent provis-

ions of the Prohibition Act. The suggestion that re-

peal was intended because the whole subject of intox-

icating liquors was covered is answered by the ex-

—

18

press language to the contrary in section 35. Sec-

tion 26 is not only reconcilable with Rev. St. §3450,

but applies to a substantially different subject-mat-

ter.”

In the case of United States v. Turner, (265) Feder-

al Rep. (249) the court discussed the effect of the Fed-

eral Amendment on various Revenue Laws and regula-

tions in reference to section 3296. The Court said:

“By far the commonest difficulty encountered by

the government in prosecutions for removals of

liquor under section 3296 is that of proving beyond

reasonable doubt that the liquor was untaxed. A

a of this difficulty and an intent to aid and

supp ement the old statute by the transporting clause

of the Volstead Act seems to me to comport with the

chief purpose of the framers of the Volstead Act

much better than does an intent to repeal the re-

moval clause of section 3296. Both statutes are

useful in preventing the use of intoxicating liquor as

a beverage. Neither fully covers the ground; but

the two together seem to reach every method of

evading the fundamental intent of the Volstead Act,

in so far as the movement of liquor is concerned, and

the use of intoxicating liquor as a beverage to any

considerable extent necessitates movement of liq-

uor.

In the case of United States v. Sohm, 265 F. 910, the

Court held that the Internal Revenue laws were not re-

pealed by the Prohibition Act. The Court said:

“Before the Eighteenth Amendment, prohibiting

manufacture of and traffic in “intoxicating liquors

* © © for iy » purposes,” * * * is an elabo-

rate “code” of federal law governing manufacture

of and traffic in distilled spirits and other intoxicating

liquors for beverage and other purposes, in the main

to provide public revenue. In so far as provisions

of this Code apply to and sanction spirits and liquors

for beverage purposes only, they are rendered obso-

19

lete or repealed by the Amendment. Subsequent to

the amendment is the National Prohibition Act, to

effectuate the amendment and also to govern manu-

facture and traffic in such spirits and liquors for non-

beverage purposes: this latter not only as incidental

to prohibition, but also to prones public revenue.

(1) In title 2, § 35, the act expressly provides

that “all provisions of law that are inconsistent with

this act are repealed only to the extent of such in-

consistency, and the regulations herein provided for

the manufacture or traffic in intoxicating liquors

shall be construed as in addition to existing laws,”

and in section 9, title 3, the act recognizes the con-

tinued existence of many enumerated sections of the

Codes, including sections 3258, 3260, and provides

these sections shall not apply to industrial alcohol

plants only, though the commissioner may so apply

them by regulations made by him.

This express repeal in the act renders all rules of

implied repeal inapplicable, demonstrates no implied

repeal is intended. ‘“Expressio unius,” etc. See

cases cited in 36 Cyc. 1081, and annual annotations.

(2) It follows that save for clear and unavoid.

able inconsistencies, both said Code and the act,

wherein their terms are applicable to spirits and

liquors for non-beverage purposes, are present law,

the latter cumulative to the former, however cumber-

some and confused the result may be.

It may be observed that, if the act more lightly

penaliaes an offense identical as in the Code, the

atter is repealed by inconsistency.

(3) In the act is nothing forbidding, as does sec-

tion 3282 of the Code, making a mash fit for the

production of spirits on premises other than duly

authorized distillery. Hence there is no inconsist-

ency. Section 3282 is not repealed, and the first

count of the indictment, based thereon, states a pub-

lic offense.

It hardly needs to be pointed out that, subject to

the act, distilleries will continue to exist and mashes

to be made, and now, as before, it is essential the

20

latter be made only at the former duly authorized.

The object of the act requires this as much as did

the object of the Code.”

(4.5) Section 3, title 2, of the act provides that

intoxicating liquor for non-beverage purposes ma

be manufactured, etc., “only as herein provided.”

But ‘“‘only as herein provided,” by virtue of section

35, includes the provisions of all consistent existing

law, to which the act is but an addition.

So, while said section 3 provides for permits from

the commissioner and in form by him prescribed, and

for bonds in his discretion and in form by him pre-

scribed, section 3258 of the Code, requiring registra-

tion in statutory form with the collector of stills set

up and possessed (upon which section is based the

second count of the indictment), and section 3260

of the Code, requiring a bond in statutory form

(upon which section is based the third count of the

iaeats. are not inconsistent with the act, are

not repealed, and the said counts state public offen-

ses.”

In the Windham case, (264 Fed. 376) cited with ap-

proval by the court below, and in certain other cases, it

was held substantially that, inasmuch as the Volstead Act

prohibits the manufacture of distilled spirits for beverage

purposes, and, by Title III thereof, provides a new sys-

tem for the production of industrial alcohol, Section 3258

R. S., and other sections, must be regarded as having

nothing left to operate upon, as being, therefore, incon-

sistent with the Volstead Act and consequently impliedly

repealed.

This reasoning would have some weight if Title III

covered the production of all non-beverage spirits. The

fact is, however, that it covers only alcohol. It does not

cover the productions of the potable liquors—brandy,

gin, rum, etc. for non-beverage purposes, which is still

left to be covered by the old internal revenue system. If

21

the production of potable liquors for non-beverage pur-

poses was intended to be covered by the old internal reve-

nue system, of course, Sections 3257, 3279, 3281, 3282,

R. S., which are a part of that system, must remain in

effect.

This disposes of the objection to all cases where the

defendant failed to comply with the Revenue Laws relat-

ing to the manufacture and sale and transportation of

liquor for legal non-beverage use. We submit that such

prosecutions lie also for the manufacture and sale of liq-

uors for illegal purposes. It is a well settled policy in the

States that a person who makes or sells liquor may be

punished for these acts if he does so even illegally. The

same person may be punished for making or selling liquor

without first having obtained a license. There has never

been any question but what the State had the power to

lay a liquor tax upon the making and selling of liquor,

whether it was done legally, or illegally. If the State

may penalize a person who makes or sells liquor without

first securing a license, by the same logic the same penalty

may be placed upon a person who makes or sells liquor

without paying the tax. The argument is even stronger,

because the payment of the tax never has in any State, or

in the Federal Government given the person who pays

the tax any right to sell liquor in violation of any law—

Local, State, or Federal.

Section 3243, R. S., provides that the payment of any

tax imposed by the internal revenue laws for carrying on

any trade or business shall not exempt any person from

any penalty or punishment provided by the laws of any

State for carrying on the same within such State, or in

any manner to authorize the commencement or continu-

ance of such trade or business contrary to the laws of such

State or in places prohibited by municipal law; nor shall

22

the payment of any such tax be held to prohibit any State

from placing a duty or tax on the same trade or business,

for State or other purposes.

McGuire v. Commonwealth, 3 Wall, 387; License Tax

cases, 5 Id., 462; 6 Int. Rev. Rec., 36; affirmed in Pervear

v. Commonwealth, 5 Wall. 475.

A special-tax stamp from the Federal Government,

under the internal revenue act of Congress, is no bar to

an indictment under a State law prohibiting the sale of

intoxicating liquors. (Pervear v. Commonwealth, 5

Wall., 475.)

The court in the Windham case and in the court below

entirely overlooked the fact that all of the revenue laws

remain in full force and effect for the manufacture of dis-

tilled liquors for non-beverage purposes, and all of these

revenue laws and regulations remain in full force and

effect to control the manufacture ef industrial alcohol

except the sections heretofore mentioned in this brief.

It would be an anomalous situation if the regulations con-

trolling the manufacture and distribution of non-bever-

age liquors were repealed. It would put the illicit manu-

facture of these liquors at a premium, or, as the Supreme

Court said in the Ohio case, it would act as a reward for

the violation of Prohibition Laws in those communities

where local public sentiment was not strong enough to

secure the honest enforcement of the criminal laws. The

fundamental error in these cases is that the court assumes

that the revenue laws are inconsistent with the Prohibi-

tion Act. In order to reach this conclusion, the court

must have assumed that these revenue tax laws are

license laws, and that they attempt to legalize the sale

and manufacture of liquor. This court many years ago

made clear the fallacy of this position in the license cases

cited supra.

23

REVENUE LAWS NOT REPEALED BY

IMPLIC;: <iON

No principle of statutory construction is better settled

than the principle that repeals by implication are not fa-

vored. The presumption is against them. To work a

repeal by implication there must be something more than

inconsistency in principle. The inconsistency must be

such as to make it impossible for the statutes to exist to-

gether. “If both can exist, the repeal by implication will

not be adjudged. Johnson y. Browne, 205 U. S. 309,

321; Osborne v. Nicholson, 13 Wallace 654, 662; Wood

v. U.S. 16 Peters 342, 363; U.S. v. Gear, 3 Howard 120,

131 U.S. v. Tynon, 11 Wall. 88; Dist. of Col. v. Hutton,

143 U.S. 18; U.S. v. Claffin, 97 U.S. 546; There is no

difficulty whatever about Sections 3257-3279, R. S. et.

seq., and the Volstead Act existing together. They do

not clash in any particular. The offenses which are made

punishable by Section 3257, and these other sections in

the Revenue Laws are not punishable at all under the

Volstead Act. As already shown, the Volstead Act does

not cover the entire field of non-beverage spirits produc-

tion. That which it does not cover is covered by the

Internal Revenue laws, including Section 3257 R. S. et.

seq. If this section of the revenue laws and the Volstead

Act cover different fields of non-beverage spirits produc-

tion, they are not even inconsistent in principle. Of

course, then, these sections are not repealed by the Vol-

stead Act.

That Congress did not intend these revenue laws to be

repealed is indicated by the direction in Section 35 of

Title II of the Volstead Act; ‘All provisions of law that

are inconsistent with this Act are repealed only to the ex-

tent of such inconsistency and the regulations herein pro-

vided for the manufacture or traffic in intoxicating liquor

24

shall be construed as in addition to existing laws,”’ and

by the further direction in Section 3 that “all the provi-

sions of this Act shall be liberally construed to the end

that the use of intoxicating liquor as a beverage may be

prevented.” The intent of Congress is rendered still

clearer by the fact that the industrial alcohol plants and

bonded warehouses established under the provisions of

Title III of the Volstead Act are exempt from the provi-

sions of Section 3279 R. S. Under the rule that the

mention of one excludes the other, it must logically fol-

low that Congress, having expressly exempted industrial

alcohol from Section 3279 as to the matters coming with-

in Title III, it did not intend to repeal the sections named

as to matters not within the scope of this Title. In the

face of all this, the inconsistency should be very clear be-

fore Section 3279 R. S. should be held repealed by im-

plication. It is in fact very clear that there is no incon-

sistency between them.

There is no constitutional provision interfering with

the continued existence of Section 3279 R. S., or the other

section in issue in this case. It is unconstitutional, of

course, to punish a person twice for the same offense, but

even in the face of this inhibition, it has been held that:

“A single act may be an offense against two stat-

utes; and if each statute requires proof of an addi-

tional fact which the other + not, an acquittal or

conviction under either statute does not exempt de-

fendant from prosecution and punishment under the

other.”

Morey v. Commonwealth, 108 Mass. 433; Carter v.

McClaughry, 183 U.S. 365, 395, 22 Sup. Ct. 181, 46 L.

Ed. 236; Gravieres v. U. S., 230 U. S. 338, 31 Sup Ct.

421, 45 L. Ed. 489; Ebeling v. Morgan, 237 U. S. 625,

630, 631, 35 Sup. Ct. 710, 59 L. Ed. 1151; U.S. v. Tur-

ner, 266 Fed. 248. But the act, or rather failure to act,

25

which is an offense under Section 3257 R. S., is not pun-

ishable at all under the Volstead Act. No offense which

the Volstead Act creates is like that created by Sections

3257, 3281 or 3282 R.S. To hold that one repeals the

other is like holding a statute dealing with the crime of

burglary repeals one dealing with the crime of murder.

Persons who engage in the sale of alcoholic liquor,

even though such business is a violation of the law of

their State, are nevertheless required to pay special tax

under the internal revenue laws of the United States,

The stamp, however, issued to them is not a license, and

does not protect them from Prosecution, conviction and

sentence under the State Law. (T. D. 21851; see also

T. D. 1484 and T. D. 1826.)

It is true that the revenue stamps cannot be issued in

advance for the illegal sale, but this does not relieve the

liquor dealer from Paying the tax, which he owes to the

Government, when he makes or sells the liquor. The

only part of the procedure which js changed by Section

35 of the Volstead Act js that the stamps cannot be is-

sued in advance. This was Provided in order to deny

liquor dealers the imaginary protection which the reve-

nue stamp gives when it is placed upon a liquor container.

If a liquor dealer went to the Revenue Office and tender-

ed the amount of the tax upon certain liquors which he

had made or sold and the Government refused to re-

ceive the tax, there would be some basis for the conten-

tion that he had complied with the law as far as he was

able todo so. The situation is similar to that which the

liquor dealers faced before National Prohibition. Un.

der Section 3240 of the Revised Statutes of the United

States made the fact that a dealer paid the Revenue tax

Prima facie evidence of sale, and a provision was made

for securing a certified copy to be used in the criminal

26

court to convict the holder for violating the Criminal

Laws. The denial of the right to receive the revenue

stamp in advance does not relieve the illegal liquor dealer

of his responsibility to pay the tax upon liquors when he

does make or sell such liquors subject to tax. It is not

sound reasoning, therefore, to say that, because a liquor

dealer is prohibited from making or selling liquor, he

cannot be prosecuted under a law which makes it an of-

fense for him to engage in this business without having

paid the tax imposed upon him by the Revenue Laws.

The Prohibition Act and the revenue laws supplement

each other and work to a common end. What the crimi-

nal sections fail to completely prohibit, the tax sections

discourage by a heavy tax. The payment of the tax gives

no legal right to sell, but on the other hand is used as

evidence to convict the offender for violating the sections

making the act a crime.

The tax is collected just as the liquor taxes always have

been collected. The penal sections and abatement pro-

ceedings are enforced as provided in the act.

The National Prohibition Act for good and valid rea-

sons includes the criminal, equity and taxing power of

the Government to carry out its expressed purpose ‘“‘to

prevent the use of intoxicating liquor as a beverage.”

That Congress had the power to do this is no longer

called into question. Inasmuch as the Congress has

specifically retained all the revenue laws, we respectfully

submit that the law should be construed as to carry out

the purpose of the act, and therefore the decisions of the

lower court should be reversed.

Respectfully submitted,

Wayne B. WHEELER,

Amicus Curiae.

IN THE

SUPREME COURT OF THE UNITED STATES,

OCTOBER TERM, 1920,

No. 523.

THE UNITED STATES OF AMERICA, PuarintTiIFF 1N

Error,

v8,

BOZE YUGINOVICH anp COUSIN BOZE YUGINO-

VICH, Derenpants ny Error.

REPLY BRIEF FOR DEFENDANTS IN ERROR.

The brief submitted by the Government and the brief sub-

mitted by the “amicus curi#” entirely miss the point in-

volved in this appeal.

The defendants are charged in the indictment with fail-

ure to pay the tax imposed by the internal revenue laws on

the manufacture of intoxicating liquor; but whether this

liquor was to be used for beverage or non-beverage purposes,

the indictment does not state.

i eee eee

2

Both the Government and the “amicus curia’’ strenuously

(and, we concede, rightly) contend that under certain sec-

tions of the National Prohibition Act intoxicating liquor

may be lawfully manufactured for non-beverage purposes;

and that such manufacture is a proper object for taxation

(which we also concede) ; and that the amount of that tax,

the method of its collection and the penalties for not paying

it, all are prescribed in the internal revenue laws (which

is the fact).

Whereupon the Government argues that the manufacture

of all kinds of*intoxicating liquor—whether for beverage or

non-beverage purposes—is a violation of the internal revenue

laws and may be punished under their provisions; entirely

disregarding the fact that the manufacturing of intoxicating

liquor for beverage purposes is prohibited by a constitutional

provision and cannot possibly be a lawful and taxable oceu-

pation.

If these defendants were engaged in manufacturing in-

toxicating liquors for non-beverage purposes without paying

the tax and complying with the other provisions of the Rev-

enve Laws, they are guilty of the crime of not paying the

tax imposed on that industry as well as failure to observe

the other laws regulating that industry. But that crime

is not charged in the indictment; for no mention is made

therein as to whether the alleged distilling or the place

where these acts are alleged to have been accomplished

were any or either or all of them used or committed for the

purpose of or in the act of distilling intoxicating liquor for

non-beverage purposes. (Transcript of Record, pp. 3

and 4.)

If on the other hand they distilled this intoxicating liquor

3

r beverage purposes, and failed to pay the tax on it (even

meeding the Government’s contention that such a tax

ay be levied in spite of the Constitutional prohibition), a

ferent crime was committed; a new and distinet criminal

ement aside from the non-payment of the tax was an in-

gral part of the act and the indictment is bad in that

either that criminal element nor that criminal act is

iarged.,

“With rare exceptions offences consist of more than

one ingredient and in some cases of many, and the

rule is universal that every ingredient of which the

offense is composed must be accurately and clearly

alleged in the indictment or the indictment will be

bad and may be quashed on motion.” U. 8. v,

Cook, 17 Wall., at p. 174.

The Government cannot deny that there ere now two

stinet elements of criminality present in the unlawful

anufacture of intoxicating liquor:

The one, the crime committed by the failure to pay the

x imposed upon the manufacture of intoxicating liquor

w non-beverage purposes ;

The other, the crime of manufacturing liquor for bever-

se purposes in contravention of the express constitutional

id statutory prohibitions, whether the tax is paid or not.

“Tt is a crime to steal goods and chattels; but an

indictment would be bad that did not specify with

some degree of certainty the articles stolen. This

because the accused must be advised of the essential

particulars of the charge against him and the court

must be able to decide whether the property taken

was such as was the subject of larceny.” U.S. v,

4

Cruikshank, 92 U. S., pp. 557, 558; 22 Cyc., p. 295,

par, 2, and cases there cited.

These defendants are charged in the indictment with fail-

ing to pay the tax imposed upon the business of distilling

intoxicating liquor and with the failure to observe certain

provisions of law applicable to that industry,

A complete answer to the indictment is that it does not

charge a crime:

Ist. Because it is not stated in the indictment whether

the liquor alleged to have been distilled or manufactured

was so distilled or manufactured for non-beverage or bever-

age purposes; and these defendants have the right to know

for what specific crime they are being prosecuted,

2nd, Assuming, as the Government does assume, that they

are being prosecuted for not paying a tax on the occupation

of distilling intoxicating liquor for beverage purposes, it is

respectfully submitted that the Congress cannot tax an oe-

cupation or industry the very existence of which is forbid-

den by the terms of the Constitution from which Congress

derives the power to tax at all,

As well say that Congress could authorize by law the

taking of private property without due process of law and

then impose a tax upon this privilege of such an amount as

to make it impossible for citizens to engage in the industry,

because they could not pay the tax and make a profit on the

business.

Or permit a State to quarter State troops on inhabitants

in the District of Columbia or the Philippine Islands in times

of peace and then impose @ prohibitory tax on the privilege.

The Government and the “amicus curiw#” apply the rules

5

of law applicable to statutory construction in their argument

io sustain the contention that the National Prohibition Act

and the Internal Revenue laws are not inconsistent and that,

therefore, the punitive provisions of the Internal Revenue

laws muy be invoked to punish a person who violates the

provisions of the National Prohibition Act.

The logic is unsound and the cases relied upon to sustain

it are clearly distinguishable and do not apply to this situa-

tion,

Youngblood v, Sexton, 32 Mich., 406, cited at page 8 of

the Government's brief, and page 6 of the brief submitted

by the “amicus curiae’ was a case wherein the act, subject to

the tax, was forbidden by statute—that is, it was an act

“malum prohibitum” and not “malum in se.”

The situation is exactly the same in the cases of Foster v.

Speed, 120 Term., 470 (cited Govt, Brief, p, 17); Conwell v.

Sears, 65 Ohio State, 49 (cited Govt, Brief, p. 8), and in

every other case cited,

They are “local option’ cases—the question of constitu-

tional prohibition does not enter into the situations therein

considered at all,

The language of section 35 of the National Prohibition

Act is not conclusive on the question of the repeal or implied

repeal of the Internal Revenue laws.

That question is purely judicial and not legislative; and

the legislative branch of the Government cannot interfere

with nor restrict by the language of the statute in question

the judicial branch in interpreting and declaring what the

law is or has been,

Ogden v, Blackledge, 2 Cranch, 272, p. 277.

Kosh Konong v. Burton, 104 U. 8., 668, p, 678.

6

There is a fundamental difference between a constitutional

limitation upon the power of a legislature and a constitu-

tional inhibition upon that power.

We earnestly contend that the 18th Amendment to the

Constitution of the United States takes away from Congress

the power to tax the distillation of intoxicating liquors for

beverage purposes.

Such being the case the Congress cannot enact nor the

Executive continue to enforce laws which will punish a de-

fendant for not paying a tax the Congress has no right to

levy and we respectfully submit that the judgment of the

lower court should be affirmed.

All of which is respectfully submitted

RANSOM HOOKER GILLETT,

Of Counsel.

(3368)