Opinion — United States v. La Franca

SUPREME COURT OF THE UNITED STATES.

No. 74.—OcrToBer TERM, 1930.

The United States of America, ne On Writ of Certiorari to

tioner, the United States Cir-

vs. euit Court of Appeals

Anthony La Franea. j for the Fifth Circuit.

[February 24, 1931.]

Mr. Justice SUTHERLAND delivered the opinion of the Court.

Respondent was sued in a federal district court for nonpay-

ment of taxes and penalties. The petition alleged that he had

sold intoxicating liquor at various times in his restaurant, and

by reason thereof had become a retail liquor dealer and incurred

liabilities as follows: In the sum of $37.50, retail liquor dealer’s

tax under R. S. § 3244 for a period of nine months, doubled under

§ 35, Title 2, of the National Prohibition Act; $4.68, penalty im-

posed by R. 8S. § 3176, as amended, for failure to make and file a

return as a retail liquor dealer; $1,500, special tax under § 701

of the Revenue Act of 1924 for engaging in the business of retail

liquor dealer in Louisiana contrary to the law of that state, being

for a period of nine months and doubled under § 35; $500, penalty,

in addition to the retail liquor dealer’s tax imposed by § 35.

Prior to the commencement of the action respondent had been

convicted and fined upon an information filed by the United

States under the National Prohibition Act, charging him with the

same unlawful sales of intoxicating liquor set forth in the peti-

tion as the basis for the imposition of the taxes and penalties

sought to be recovered. There is no dispute about the facts. They

are alleged in the petition and, in detail, made the subject of a

stipulation of the parties in the district court. Pleas of former

Jeopardy and of res judicata were overruled by the district court,

a jury was waived, and judgment for the United States entered

for the full amount sued for. The court of appeals reversed the

judgment on the ground that the action was barred by § 5 of the

Willis-Campbell Act. 37 F. (2d) 269.

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United States vs. La Franca.

The point is made that respondent failed to enter an exception

to the order of the district court overruling the pleas, but, since the

facts were agreed to by stipulation entered of record, the failure

to note an exception to the order will not preclude their con-

sideration. Certainly it does not appear that an exception was

necessary to direct the mind of the trial court to the precise point

to afford opportunity for reconsideration, which is one of the

functions of an exception. United States v. U. 8S. Fidelity Co.,

236 U.S. 512, 529; Fillippon v. Albion Vein Slate Co., 250 U. S.

76, 52. And an exception is not necessary to open for our con-

sideration a question of law apparent on the record, as it is here,

where there is nothing in the record to indicate waiver of the re-

spondent’s rights. Denver v. Home Savings Bank, 236 U. 8. 101,

103-104.

By § 35, Title 2, of the National Prohibition Act, e. 85, 41 Stat.

305, 317 (U.S. C., Title 27, § 52), it is provided that the act

‘*shall not relieve anyone from paying any taxes or other charges

imposed upon the manufacture or traffic in [intoxicating] liquor.

No liquor revenue stamps or tax receipts for any illegal manu-

facture or sale shall be issued in advance, but upon evidence of

such illegal manufacture or sale a tax shall be assessed against,

and collected from, the person responsible for sueh illegal manu-

facture or sale in double the amount now provided by law, with

an additional penalty of $500 on retail dealers and $1,000 on

manufacturers. ”’

Section 5 of the Willis-Campbell Act, c. 1384, 42 Stat. 222, 223

(U.S. C., Title 27, § 3), so far as pertinent here provides:

‘*That all laws in regard to the manufacture and taxation of and

traffic in intoxicating liquor, and all penalties for violations of

such laws that were in force when the National Prohibition Act

was enacted, shall be and continue in force, as to both beverage and

non-beverage liquor, except sueh provisions of such laws as are

directly in conflict with any provision of the National Prohibition

Act or of this Act; but if any act is a violation of any of such laws

and also of the National Prohibition Act or of this Act, a convie-

tion for such act or offense under one shall be a bar to prosecu-

tion therefor under the other.”’

By § 701, par. 9, of the Revenue Act of 1924, e. 234, 43 Stat.

253, 327 (U.S. C., Title 26, § 206), it is provided that every person

carrying on the business of retail liquor dealer, ete.. in any state,

ete., contrary to the laws of such state, ete., or in any place where

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United States vs. La Franca. 3

the carrying on of such business is prohibited by local or munici-

pal law, shall pay in addition to all other taxes, $1,000. This

section was passed in lieu of a similar provision in the Revenue

Act of 1918, repeated in the Revenue Act of 1921. The govern-

ment, accordingly, treats the item sought to be recovered under

$701 as having been imposed by an act in force prior to the Na-

tional Prohibition Act. With that view we agree.

Of the four items involved, two unmistakably are penalties, and

are so denominated. The other two, notwithstanding they are

ealled taxes, are in their nature also penalties. Putting aside for

later consideration the item of $4.68, we consider, for the pres-

ent, only the other three items.

By § 35, supra, it is provided that upon evidence of an illegal

sale under the National Prohibition Act, a tax shall be assessed

and collected in double the amount now provided by law. This,

in reality, is but to say that a person who makes an illegal sale

shall be liable to pay a ‘‘tax’’ in double the amount of the tax

imposed by preexisting law for making a legal sale, which existing

law renders it impossible to make. A tax is an enforced con-

tribution to provide for the support of government; a penalty, as

the word is here used, is an exaction imposed by statute as punish-

ment for an unlawful act. The two words are not interchangeable,

one for the other. No mere exercise of the art of lexicography can

alter the essential nature of an act or a thing; and if an exaction

be clearly a penalty it cannot be converted into a tax by the simple

expedient of calling it such. That the exaction here in question is

not a true tax, but a penalty involving the idea of punishment for

infraction of the law is settled by Lipke v. Lederer, 259 U. S. 557,

561-562. See also Regal Drug Co. v. Wardell, 260 U.S. 386. There

is nothing in United States v. One Ford Coupe, 272 U. S. 321, or

Murphy v. United States, 272 U. S. 630, to the contrary. The first

of these cases was a proceeding to forfeit an automobile because

used in violation of law; the other was a suit in equity to enjoin

the occupation and use of premises for a year because used in the

commission of offenses under the National Prohibition Act, and to

abate the maintenance as a nuisance. The distinction made by

these four cases is that in the first two, the purpose of the pro-

ceedings was punishment; while, as to the other two, the purpose

in the first case was to enforce a simple tax, not one which had been,

4 United States vs. La Franca.

as here, converted, by a change of its nature, into a penalty, and in

the second case the purpose was prevention. Murphy v. United

States, supra, p. 632. Respondent already had been convicted and

punished in a criminal prosecution for the identical transactions

set forth as a basis for reeoVery in the present action. He could not

again, of course, have been prosecuted criminally for the same

acts. Does the fact that the second ease is a civil action, under the

circumstances here disclosed, alter the rule?

In United States v. Chouteau, 102 U. 8S. 603, a distiller and his

sureties were sued upon a bond, one of the breaches of which was

that the distiller had removed spirits from his distillery without

first paying the tax thereon. To this it was pleaded that before

the suit was brought two indictments had been found avainst the

distiller for the same removals, and that upon the recommendation

of the Attorney General the government had accepted a specified

sum in compromise and satisfaction of the indictments, which were

thereupon dismissed and abandoned. The court held that the com-

promise was the same in principle as a conviction in the criminal

proceedings, and that the action was barred; and at page 611 said:

‘* Admitting that the penalty may be recovered in a civil action,

as well as by a criminal prosecution, it is still as a punishment for

the infraction of the law. The term ‘penalty’ involves the idea of

punishment, and its character is not changed by the mode in which

it is inflicted, whether by a civil action or a criminal prosecution.

The compromise pleaded must operate for the protection of the

distiller against subsequent proceedings as fully as a former con-

viction or acquittal. He has been punished in the amount paid

upon the settlement for the offence with which he was charged, and

that should end the present action, according to the principle on

which a former acquittal or conviction may be invoked to protect

against a second punishment for the same offence. To hold other-

wise would be to sacrifice a great principle to the mere form of

procedure, and to render settlements with the government delu-

sive and useless.”’

In United States v. McKee, 4 Dill. 128, where the defendant was

indicted, convicted and punished for conspiring with others to de-

fraud the United States by unlawfully removing distilled spirits

from their distilleries without the payment of taxes, it was held by

Mr. Justice Miller and Judge Dillon, sitting together, that this

constituted a bar to a civil suit to recover the penalty of double

the amount of the taxes of which the government had been de-

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United States vs. La Franca. 4)

frauded by means of the conspiracy, the transactions in both cases

peing the same. To the same effect, see United States v. Gates, 25

Fed. Cas. 1263, Case No. 15,191.

In the light of these decisions it is clear that if the Willis-

Campbell Act be so construed as to justify a recovery in this case,

a grave question as to the constitutionality of the act will be pre-

sented. The decisions of this court are uniformly to the effect

that *‘A statute must be construed, if fairly possible, so as to

avoid not only the conclusion that it is unconstitutional but also

grave doubts upon that score.’’ United States v. Jin Fuey Moy,

241 U. S. 394, 401; United States v. Standard Brewery, 251 U. S.

210, 220; Baender v. Barnett, 255 U. S. 224, 226. Doubts as to

the meaning of the Willis-Campbell Aet, in respect of the ques-

tions here for consideration, therefore, must be resolved in ac-

cordance with this rule.

Section 5 of the act continues in force all laws in regard to

taxation of, and traffic in, intoxicating liquor and penalties for vio-

lations of such laws as were in foree when the National Prohibition

Act was enacted: but with the proviso.that a conviction for an

act or offense under one shall be a bar to prosecution under the

other. The question whether this proviso applies to the present

ease turns mainly upon the scope and meaning of the word ‘‘pro-

secution’’, since there is no doubt that respondent had been con-

victed under the National Prohibition Act of the offense of making

the same illegal sales as those alleged as a basis for the imposition

of the ‘‘taxes’’ and penalties sought to be recovered in the civil

action. The government contends that the word implies a criminal

proceeding and cannot be extended to include a civil action. But an

action to recover a penalty for an act declared to be a crime is, in its

nature, a punitive proceeding, although it take the form of a civil

action; and the word ‘‘prosecution’’ is not inapt to describe such

an action. In the McKee case, supra, Mr. Justice Miller evidently

held that opinion, since he used both the words ‘‘offense’’ and **pro-

Ssecution’’ in characterizing the civil action there under consid-

eration. In any event, we should feel bound to resolve a greater

doubt than we now entertain in favor of that interpretation of the

word so as to avoid the grave constitutional question which other-

wise would arise.

6 United States vs. La Franca.

We find no merit in the contention of the government that, as

additional amounts resulted from doubling the taxes imposed by

R. S. § 3244 and § 701 of the Revenue Act of 1924 and adding pen-

alties, the civil action, in so far as the additional amounts are con-

cerned, arose solely under the National Prohibition Act, and not,

as the Willis-Campbell Act contemplates, under preexisting acts,

Except for these prior statutes, there would be no basis for seeking

to impose a liability on respondent for the amounts sued for in the

civil action. Section 35 of the act, in effect, amended the preced-

ing statutes in the particulars stated; and, as thus amended, these

statutes now are to be read, as to all subsequent occurrences, as

if they had originally been in the amended form. Blair v. Chicago,

201 U. S. 400, 475; Pennsylvania Co. v. United States, 236 U. 8.

351, 362; Kelleher v. French, 22 F. (2d) 341, 347; Cumberland

Telephone & Tel. Co. v. City of Memphis, 200 Fed. 657, 660-661;

Farrell v: State, 54 N. J. L. 421, 423-424; Russell v. State, 161 Ind.

481, 482. To hold that the acts of respondent in question were not

violations of these preceding laws as amended, as well as of the

National Prohibition Act, would be to give a narrow and strained

application to this provision of the Willis-Campbell Act, and to

raise the very doubts in respect of its constitutionality which we

are bound to avoid if reasonably it can be done.

The government seeks to draw a distinction between the item

of $4.68 and the other items, on the ground that the former con-

stitutes a penalty for failure to make and file a return, and re-

spondent was never charged with, or convicted of, an offense in-

volving that omission. Neither the court of appeals nor the dis-

trict court dealt with the question. The decisions in both courts

proceeded upon the theory that all of the items were subject to

the same rule; and the record plainly indicates that this was and

had been the theory of the government throughout until it came

to the preparation of its final brief in this court. The distinction

now made was not referred to in the government’s petition for

certiorari, or in the brief filed in support of it. The point suggests

questions which the court of appeals. should have been given an

opportunity to decide, that is to say, whether a second jeopardy

results from the fact, if it be such, that the recovery of the penalty

depends upon proof of the same criminal offense of which respon-

dent had theretofore been convicted; and whether requiring under

a aise

. United States vs. La Franca. 7

penalty a return as a retail liquor dealer, amounting, as it plainly

does, to an admission of criminal liability, violates the rule against

compulsory self incrimination. In this situation we do not now feel

called upon to consider or decide the point. If the government, in

view of the foregoing and of our decision upon the questions in

respect of which the writ of certiorari was granted, shall still desire

to press its contention, it will be given an opportunity to do so by

first presenting it to the trial court.

The judgment of the court of appeals will be affirmed and the

cause remanded to the district court for further proceedings in

conformity with this opinion, without prejudice to the further con-

sideration and determination by the district court of the question

of liability in respect of the item of $4.68.

It is so ordered.

A true copy.

Test :

Clerk, Supreme Court, U. 8.