Appeal from the District Court of the United States for the Southern District of New York.
Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.
AUGUSTUS N. HAND, Circuit Judge
The errors which appellant insists were made by the court below were:
(1) In holding that the possession of intoxicating liquors originally acquired under a permit does not ipso facto become unlawful when the permit is revoked.
(2) In ordering the return of the wine to Hebrew Sacramental Wine Company, Inc., when the search warrant under which it had been seized was vacated.
It has been held by the Court of Appeals for the Third Circuit in Hazelwood Brewing Co. v. United States, 3 F.2d 721, and by the Court of Appeals for the Ninth Circuit in Orient Ins. Co. v. Ariasi, 28 F.2d 579, that the mere retention of intoxicating liquors after a permit has terminated is not a violation of the Prohibition Act. Our independent consideration of the portions of the act applicable to the situation here impels us to reach the same conclusion in the present case.
Section 25 of title 2 of the Prohibition Act (41 Stat. 315 [27 USCA § 39]) makes it unlawful "to have or possess any liquor * * * intended for use in violating" the act "or which has been so used." In both the Hazelwood and the Orient decisions, supra, and likewise in the present case, the government sought to show that the possessor had violated and intended to violate the law in other ways than by merely retaining possession after the termination of the permit. But because of failure to prove any independent violations here, the appellant is forced to resort solely to the claim that the retention of the wine, after the permit terminated, was unlawful. To support this contention, it quotes section 3 of title 2 of the act (41 Stat. 308 [27 USCA § 12]), providing that "no person shall on or after the date when the eighteenth amendment to the Constitution of the United States goes into effect, * * * possess any intoxicating liquor except as authorized in this act, * * *" and section 33 (41 Stat. 317 [27 USCA § 50]), providing that "after February 1, 1920, the possession of liquors by any person not legally permitted under this title to possess liquor shall be prima facie evidence that such liquor is kept for the purpose of being * * * disposed of in violation of the provisions of this title."
Section 522 of Regulations 2 of the Treasury Department is also relied on, which reads as follows:
"When any permit is revoked all liquors on hand in possession of the permittee by virtue of such permit may continue to be lawfully possessed by him for a period of 30 days after such revocation, but only for the purpose of making lawful disposition thereof on proper permit therefor, which permittee shall do within said period. After the expiration of said period of 30 days the possession by permittee of such liquors will be unlawful and same may be seized and forfeited as provided by law for the seizure of other liquors not possessed under lawful permit, unless special permit, authorizing such possession has been obtained."
Section 3 of title 2 provides that "wine for sacramental purposes may be manufactured, purchased, sold, bartered, transported, imported, exported, delivered, furnished and possessed, but only as herein provided, and the commissioner may, upon application, issue permits therefor. * * *"
There was a rehearing of the revocation of the permit pursuant to regulations, and, on June 19, 1928, the revocation was sustained as of March 17. The permittee was notified of this action on July 12, 1928, and at the same time was furnished with application blanks for a special permit to dispose of the wines remaining on hand. After considerable negotiations with the Department and as late as December 10, 1928, the appellee made its application for a special permit to enable it to dispose of its remaining stock. This application was never acted upon, though such a permit might perhaps be granted under section 522 of the above Regulations, for it contains no express requirement that a special permit must be applied for within the 30 days after revocation to which the original permit is automatically extended for the purpose of disposing of surplus stock.
So we have a situation where wines were lawfully acquired under a valid permit, where no sufficient proof was adduced of use in violation of law, and where the original permittee was negotiating with the Department and seeking a special permit to enable it to dispose of its stock after the original permit ceased, and the Department took no action upon the application.
The question presented is whether, in the foregoing circumstances, there was probable cause for ...