581 Diamonds v. United States

119 F. 556, 60 L.R.A. 595, 1903 U.S. App. LEXIS 4793

Opinion

DAY, Circuit Judge,

after making the foregoing statement, delivered the opinion of the court.

As between the government and Bush there can be no question that the right to forfeit the goods seized has been fully and clearly made out. Bush was caught with the diamonds concealed in his shoes. He denied all knowledge of how he came to be thus possessed of the gems when entering the port of Detroit. On his way to the prison he practically confessed his offense in saying to the officer: “Now, if you have got all that you are looking for, let me go.” The only question of importance in the case is as to the sufficiency of the amended answer of Van Antwerpen & Van Den Bosch to require the diamonds to be returned to them, instead of forfeited to the government. If the diamonds were imported in violation of the statute, it is established law that the forfeiture dates from the time of the, commission of the wrongful act and binds the goods from that date. Henderson’s Distilled Spirits, 14 Wall. 44, 20 E. Ed. 815. For the purposes of this inquiry we may regard the amended answer of the claimants as true. Thus treated, it makes allegations sufficient to establish the fraudulent character of the purchase of the diamonds by Hurvich. It is distinctly averred that not only did Hurvich make false statements to induce the sale as to his financial responsibility, but it is alleged that the goods were purchased in furtherance of a fraudulent scheme not to pay for them. In such case there can be no doubt of the right of the vendor to rescind the sale and recover the goods in the hands of the vendee,, or from others than innocent purchasers for value. The rule is thus, tersely stated by Mr. Justice Davis, in Donaldson v. Farwell, 93 U. S. 631, 23 L. Ed. 993:

“The doctrine is now established by a preponderance of authority that a. party not intending to pay, who, as in this instance, induces the owner to sell him goods on credit by fraudulently concealing his insolvency and his intent not to pay for them, is guilty of a fraud which entitles the vendor, if no innocent third party has acquired an interest in them, to disaffirm the contract and recover the goods. Byrd v. Hall, *41 N. Y. 647; Johnson v. Monell, Id. 655; Noble v. Adams, 7 Taunt. 59; Kilby v. Wilson, Ryan & M. 178; Bristol v. Wilsmore, 1 Barn. & C. 514; Stewart v. Emerson, 52 N. H. 301; Benj. Sales, § 440, note of the American editor, and cases there cited.”

In Morrow Shoe Mfg. Co. v. New England Shoe Co., 6 C. C. A. 515, 57 Fed. 693, 24 L. R. A. 417, it is said:

“The seller, on discovering the fraud, may affirm the sale and sue for the price, or he may disaffirm it and reclaim the goods, or he may proceed criminally.”

Notwithstanding the fraud, if there is an intention to part with the title, as well as the possession, the title passes subject to the right of the vendor to rescind the sale and reclaim the property. Benj. Sales, § 517. It is the intent of the law, so far as the forfeiture feature is concerned, to work that result only in cases where the owner, or some of those named in the statute, in his interest, are guilty of the attempt to defraud the revenue. Origet v. U. S., 125 U. S. 240, 8 Sup. Ct. 846, 31 L. Ed. 743; U. S. v. 11503½ Pounds of Celluloid, 27 C. C. A. 231, 82 Fed. 627. The contention in this case is that neither Hurvich nor Bush were the owners of the goods, and that the real ownership as against the government’s claim was in the claimants. When the goods were delivered to Hurvich under the circumstances detailed in the amended answer, he became the owner of them. He had the unqualified right to the possession thereof. He might lawfully remove them. That he intended to import them into the United States was well known to the vendors; not, it is true, with authority of the sellers to-smuggle them into the country, but the control and possession of the property was delivered up, leaving the vendors to the right to rescind if they chose and recover the property. But there was always the chance that before the vendor became acquainted with the facts, or after knowledge and before action was determined upon, the one who had the ownership and control of the property might change its status so as to render ineffectual the right to rescind. The authorities agree that this would be the result of a sale to an innocent purchaser. It might be incumbered in favor of one who dealt in good faith on the strength of the apparent ownership and title.

The question made is: Can the vendor assert this right against the right of the United States to forfeit the goods, when the one thus clothed with title and possession has attempted to smuggle them into the country in violation of its revenue laws ? The statute under which forfeiture is claimed by the government is as follows:

“That if any owner, importer, consignee, agent or other person shall make or attempt to make any entry of imported merchandise by means of any fraudulent or false invoice, affidavit, letter, paper, or by means of any false statement, written or verbal, or by means of any false or fraudulent practice or appliance whatsoever, or shall be guilty of any willful act or omission by means whereof the United States shall be deprived of the lawful duties, or any portion thereof, accruing upon the merchandise, or any portion thereof, embraced or referred to in such invoice, affidavit, letter, paper or statement, or affected by such act or omission, such merchandise, or the value thereof, to be recovered from the person making the entry, shall be forfeited, which forfeiture shall apply only to the whole of the merchandise, or the value thereof, in the case or package containing the particular article or articles Of merchandise to which such fraud or false paper or statement relates. Anu such person shall, upon conviction, be fined for each offense a sum not exceeding five thousand dollars, or be imprisoned for a time not exceeding two years, or both, in the discretion of the court.” Act June 10, 1890, § 9, 1 Supp. Eev. St. p. 749 [U. S. Comp. St. 1901, p. 1895].

Statutes to prevent frauds upon the revenue are considered to be enacted for the public good, and therefore, although they impose penalties or forfeitures, are not to be construed like penal laws generally, but are to be fairly and reasonably construed, so as to carry out the legislative intent. U. S. v. Stowell, 133 U. S. 1, 10 Sup. Ct. 244, 33 L. Ed. 555. It will be observed that the wrongful act, in order to work the forfeiture, must be done by “the owner, importer, consignee, agent, or other person.” It is the attempt of this class of persons to evade the revenue laws of the United States; that is, to deprive the owner of his property as a punishment for such unlawful practice. In U. S. v. 1,150½ Pounds of Celluloid, 27 C. C. A. 231, 240, 82 Fed. 627, this court held that the descriptive words following the term “owner,” to wit, “importer, consignee, agent,” all describe some person having a relation to the owner, and for whose conduct in respect to his goods he may be responsible. It was further held that “other person,” as here designated, meant some one of the same general class as those described in the associated terms used in the statute. It is, then, primarily the “owner” who is to be reached and punished by the forfeiture. When these goods were attempted to be smuggled in by Bush, it is directly averred that he was acting in collusion with Hurvich. If the averments of the amended answer are true, the latter, the legal owner of the goods, was deep in this scheme to defraud the revenue.

The statute is plain and clear in visiting the penalty of forfeiture upon the owner and his importer, consignee, or agent. Are we at liberty to so modify the statute as to qualify this right by reading into it an exemption of property, which, though fraudulently imported by the owner, is in such situation as to title that, because of the fraud of the owner, another might have claimed the property and devested the title? We cannot perceive on what principle we may do this. When an act comes within the terms of the statute, working a forfeiture which may entail a hardship, it is nevertheless to be enforced, not repealed or modified, by the courts. The right of congress to pass suitable revenue laws is conceded. It is the business of the courts to enforce such as are constitutionally passed. “Congress possesses the power to levy taxes, duties, imports, and excises, and it is as clear that congress may enact penalties and forfeitures for the violation of such laws as it is that congress may levy the taxes or duties or pass laws for their collection, safe-keeping, and disbursement.” Henderson’s Distilled Spirits, 14 Wall. 44-59, 20 E. Ed. 815.

So frequent are attempted frauds upon revenue laws that the wisdom of congress cannot be doubted in making strict regulations, which shall preserve the revenue of the government and prevent undue privileges to those who seek to enter the markets against the honest importer with the unlawful advantage of free goods gained by fraudulent acts and practices. When the owner has forfeited the goods by the unlawful acts shown in this case and admitted in the answer, the operation of the statute seems clear, and the only judicial function is to enforce the law. To permit secret claims of ownership to be asserted after forfeiture would be in plain violation of the written law.

We have been unable to find any reported case which goes the length asked by the plaintiffs in error here." Two of those relied upon were reviewed by this court in U. S. v. 1,150½ Pounds of Celluloid, supra. Of them Judge Lurton said:

“In U. S. v. 208 Bags of Kainit (D. C.) 37 Fed. 326, there was no doubt of the intent with which the trespasser had made the unlawful removal of the merchandise involved in that case. The forfeiture was defeated because the owner had not done or authorized these acts, and^ould, therefore, have had no guilty intent; and the case was decided against the government because it was necessary to show an actual intent on the part of the owner, or some person acting under his authority, or under whom he derived title. So, in the case of The Cargo ex Lady Essex (D. O.) 39 Fed. 765, there was no doubt of the intent of the master of the Lady Essex. But the owner of the merchandise had not attempted to smuggle the goods into the United States, nor authorized the acts of those who had made such an attempt, and therefore could have no intent to defraud; and the language of sections 12 and 16 of the act of June 22, 1874, was construed by Judge Brown to ‘apply to the owner of the goods, or his authorized agent, and not to a mere trespasser.’ ”

In the' Celluloid Case the claim was made that the act of June 10, 1890 [U. S. Comp. St. 1901, p. 1886], was broad enough to require the forfeiture of the goods, although the owner was wholly guiltless of any participation in the attempted fraud. In that case the celluloid was stored in Windsor. It was attempted to be smuggled into Detroit by an employé, who was acting without authority and for his own unlawful gain. It was held that this did not forfeit the goods as against the innocent owner. In all the cases cited the goods were not given over by the owner, but were taken wholly without authority and by acts which practically amount to theft or trespass. In holding against the claim of forfeiture the courts have construed the statute as not intending to take the property of the owner for the wrongful or criminal acts of others wholly unauthorized in the premises. In the present case, while there may have been the right to rescind this sale for fraud, it was the act of the owner in attempting to defraud the revenue which brings the case within the terms of the statute.

We find no error in the proceedings in the district court, and its judgment will be affirmed.