The opinion of the court was delivered by: BYERS
This is an action at law in which the complaint was filed on June 4, 1934, wherein recovery is sought against the defendants in the sum of $647.58, with interest from June 30, 1930.
The individual defendant was a retail druggist in Brooklyn and in April, 1921, filed an application for a permit to use and sell intoxicating liquor for non-beverage purposes, at his store. The application was accompanied by a bond dated April 5, 1921, on Form 1408, in the sum of $1,000.00, furnished by the corporate defendant, as surety.
The permit was issued April 8, 1921. The original bond was superseded by another in like amount on Form 1538, in the sum of $1,000.00, as of April 1, 1923.
The permit was renewed annually and, with the last-mentioned bond, remained in effect until revocation took place on November 29, 1929.
This action therefore was instituted within five years from that date.
It is alleged that prior to June 30, 1930, the individual defendant failed to comply with the terms of his permit and with the provisions of title 2 of the National Prohibition Act (27 USCA § 4 et seq.) and of the Internal Revenue laws respecting the use and sale of distilled spirits, and violated the same by illegal disposition of, and failure to account for, certain of the intoxicating liquor that he was permitted to use and sell, thereby incurring liability to pay to the United States taxes, assessments and penalties under the prohibition law and "other Internal Revenue laws" as follows:
"Tax as Retail Liquor Dealer, under
Section 3244, R.S., for 10 months ended
June 30, 1930, doubled under Section 35,
Title II, of the National Prohibition
Plus 25% penalty, under Section
3176 R.S. 5.21
"Penalty as Retail Liquor Dealer,
under Section 35, Title II, National
Prohibition Act 500.00
"Tax on 19 gallons of spirits, at $5.30
per gallon, under Section 600 (a) Reve-
nue Act of 1918, as amended 100.70
It is alleged that on or about April 15, 1930, due notice of the breach of the conditions of the bond and of the said indebtedness was given to both of the defendants, and demand was made for payment of the said sum.
The corporate defendant has answered, raising issues as to all of the foregoing allegations save that it admits that it did execute a bond as surety for the individual defendant. As separate defenses, it pleads, first, the statute of limitations and, second, that the repeal of the Eighteenth Amendment bars recovery of said taxes or penalties. The matter is before the Court on a motion for judgment on the pleadings in favor of the corporate defendant, dismissing the complaint.
So far as the first separate defense is concerned, it must be apparent that it is insufficient because it does not appear that the penalties sought to be recovered ceased to be payable prior to the period of limitation. If it appeared from the complaint that the "payability" of the penalties was extinguished more than five years prior to June 4, 1934, the motion would have to be granted. United States v. Springer & Lotz (C.C.A.) 69 F.2d 819.
So much of the motion therefore must be denied.
As stated, the second defense is that, by reason of the repeal of the Eighteenth Amendment and the National Prohibition Act (27 USCA § 1 et seq.), no action will lie against the surety for the collection of any taxes or penalties as provided therein.
Attention must be given to the various items upon which the Government relies to sustain its cause.
The first is for the tax as retail liquor dealer doubled under section 35, title 2, of the National Prohibition Act (27 USCA § 52), amounting to $41.67. This item of double tax was a penalty exacted by the terms of the National Prohibition Act. United States v. Springer & Lotz, supra, and cases cited. With the repeal of the prohibition law effective December 5, 1933, the right to inflict punishment under that law came to an end. United States v. Chambers, 291 U.S. 217, 54 S. Ct. 434, 78 L. Ed. 763, 89 A.L.R. 1510. The payment of a penalty is in the nature of a punishment; i.e., it is punitive. United States v. La Franca, 282 U.S. 568, 51 S. Ct. 278, 75 L. Ed. 551. As to this item therefore the defense is thought to be sufficient.
The second item is the 25% penalty under section 3176, Revised Statutes, as amended (26 U.S.C. § 98 [26 USCA § ...