Chaffee & Co. v. United States, 85 U.S. 516 (1873)
U.S. Supreme Court
Chaffee & Co. v. United States, 85 U.S. 18 Wall. 516 516 (1873)Chaffee & Co. v. United States
85 U.S. (18 Wall.) 516
Syllabus
1. The action of debt lies for a statutory penalty, because the sum demanded is certain, but though in form ex contractu, it is founded in fact upon a tort. The necessity of establishing a joint liability in such cases does not exist; it is sufficient if the liability of any of the defendants be shown. Judgment may be entered against them and in favor of the others, whose complicity in the offense for which the penalty is prescribed is not proved, as though the action were in form as well as in substance ex delicto.
2. The general rule which governs the admissibility of entries in books made by private parties in the ordinary course of their business requires that the entries shall be contemporaneous with the facts to which they relate, and shall be made by parties having personal knowledge of the facts, and be corroborated by their testimony, if living and accessible, or by proof of their handwriting if dead or insane or beyond the reach of the process or commission of the court.
3. The cases of Fennerstein's Champagne and Cliquot's Champagne, reported in the 3d of Wallace, commented upon and explained, and distinguished from the present case.
4. It is error to instruct a jury, in an action for penalties for alleged frauds upon the revenue, that after the government has made out a prima facie case against the defendants, if the jury believe the defendants have it in their power to explain the matters appearing against them and do not do so, all doubt arising upon such prima facie case must be resolved against them. The burden rests upon the government to make out its case beyond a reasonable doubt.
The forty-eighth section of the Act of June 30, 1864, "To provide internal revenue to support the government," &c., [Footnote 1] thus enacts:
"All goods, wares, merchandise, . . . on which duties are imposed by the provisions of law, which shall be found in the possession or custody, or within the control of any person . . . for the purpose of being sold or removed by such person . . . in fraud of the internal revenue laws, or with design to avoid payment of said duties, may be seized by any collector . . . who shall have reason to believe that the same are possessed, had, or held for the purpose or design aforesaid, and the same shall be forfeited to the United States."
"And also all articles of raw materials found in the possession of any person . . . intending to manufacture the same for the purpose of being sold by them in fraud of said laws, or with design to evade the payment of said duties, and also all tools, implements, instruments, and personal property whatsoever, in the place or building, or within any yard or enclosure where such articles on which duties are imposed, as aforesaid, and intended to be used by them in the fraudulent manufacture of such raw materials, shall be found, may also be seized by any collector or deputy collector, as aforesaid, and the same shall be forfeited as aforesaid."
"And any person who shall have in his custody or possession any such goods, wares, merchandise, . . . subject to duty as aforesaid, for the purpose of selling the same with the design of avoiding payment
of the duties imposed thereon, shall be liable to a penalty of $500, or not less than double the amount of duties fraudulently attempted to be evaded, to be recovered in any court of competent jurisdiction."
"And the goods, wares, merchandise, which shall be so seized by any collector may, at the option of the collector, during the pendency of such proceedings, be delivered to the marshal of said district and remain in his care and custody and under his control until final judgment in such proceeding shall be rendered."
This statute being in force, Sidney Chaffee, Highland Chaffee, and Rue Hutchins, trading as Chaffee & Co., were distillers, at Tippecanoe, a small town upon the Miami Canal, a canal which traverses the state of Ohio from Cincinnati on the south line of the state, by a course north and south, to Toledo in the north. The custom of Chaffee & Co. was to ship whiskies in both directions -- that is to say, northward towards Toledo and southward to Cincinnati. Going north, such whiskies had to pass through a place called Piqua, which was the first place on the canal at which toll was payable when the vessel was going from Tippecanoe in the direction named. Going south, towards Cincinnati, the whiskies had to pass through Dayton, the first place at which toll was payable when the vessel was going from Tippecanoe south. There was no other distillery at Tippecanoe. There were, however, in the whole distance between Piqua and Dayton three others.
The Miami Canal, on which these whiskies were transported, had been made and for some years was managed by the State of Ohio. And a statute for "the regulation of the navigation thereof and for the collection of tolls," enacted that no boat should be permitted to pass on it unless the master had first obtained a clearance for each voyage from the collector of tolls, which clearance the collector nearest to the place at which the boat began her voyage was required to issue. To enable the collector to issue clearances that should truly represent what cargo was on board, the act made it obligatory on the master to exhibit to the collectors "a just and true account or bill of lading" of "each and every article of property on board," when the boat
should depart on her voyage, or which should be taken on board afterwards; and further, to insure accuracy, every collector receiving a bill of lading might require the master to verify it by his oath. The knowingly delivering any false bill was made an indictable offense, punishable with fine in three times the value of the property omitted or falsely stated in the bill. The bill of lading thus required was to be exhibited to the collector where any portion of the cargo should be unladen. The act proceeded:
"It shall be the duty of every collector to whom bills of lading are required to be presented in order to obtain a clearance for any voyage to make out from such bill or bills of lading, in a book, a certificate containing a pertinent description of the articles composing the cargo of the boat for which clearance is about to be issued, properly classified and designated with reference to the rates and amount of tolls chargeable thereon, which certificate shall be signed by the master, who shall also attest on oath or affirmation to the correctness thereof, if required by the collector, before the clearance shall be issued."
"In every case where a certificate is required to be made out and signed, the collector shall enter upon the clearance a correct list or statement of all articles of lading contained in such certificate, properly classified and designated, with the amount of tolls charged and received thereon, and shall sign his name thereto."
"On the arrival of any boat at the place of destination or at any place in the course of the voyage where there is a collector's office, the master thereof shall immediately present to the collector the bill or bills of lading together with the clearance."
"No boat shall proceed on its voyage until the bill or bills of articles of lading on board thereof, together with the clearance and list of passengers, shall have been presented to the collector, nor until all necessary examinations and comparisons of such bills of lading, clearance, and cargo shall have been made, nor until all tolls payable at such office shall have been paid, and the collector may detain both the bills of lading and clearance until the necessary entries shall be made on such clearance and until all the requisitions of this section shall be complied with."
"No part of the cargo of any boat shall be unladen at the termination of any voyage until the clearance, together with
the bill or bills of lading of the whole cargo, shall have been presented to the proper collector and a permit obtained from such collector for such unlading, which permit such collector is hereby required to grant, after a reasonable time shall have elapsed for the examination of such clearance, bills of lading and cargo, and on the payment of all tolls which shall remain due."
Though, as already said, the canal had been originally managed by the state, it was not so managed at the time when the whiskies of Chaffee & Co. were transported. The state had leased it, the lease containing this provision:
"Such rights, privileges, and franchises now exercised by the state as may be necessary to manage, control, and keep in repair the public works, and collect tolls for the navigation of the same, together with the right to appoint superintendents, collectors &c., who shall have and exercise the same power and authority in the collection of tolls and water rents, and the levy of fines, as can now by law be exercised by similar officers and agents appointed by the state, and said lessee or lessees shall be governed by the rules and regulations for navigating the canals now in force, subject to such alterations and additions as may hereafter be established by law,"
&c.
The purpose of the company, which had now leased the canal, apparently was to follow the rules about clearances that the statute had prescribed. But whether the rules had been followed with statutory rigor was less clear. Captains would come, it appeared, to the collector's office and report for a clearance, the collectors generally, though not always, knowing them. The bills of lading were usually produced, but occasionally a captain would happen to have left his bills behind, and in such case, if he was a person known to the collector and a person whose word the collector thought he could safely take as to what was on board the boat, he would sometimes dispense with the production of the bills and make out the clearance from the captain's verbal report, though this would not be done ordinarily with any master, and never in the case of "new men" whom the collectors did not know. Captains were never interrogated upon their
oaths; nor did the collector ever overhaul and make personal inspection of cargoes or in this way or in any way have actual and personal knowledge whether the representation of the captains or of the bills was strictly accurate. But however made, the captain would always certify the representation on which the clearance was granted to be true. When, however, arriving at its destination, the boat came to be unladen, it was testified
"to be the duty of the collector at such place of unlading to see, when the boat is unloading, that the captain has given in his freight correctly, and if he sees any freight that is not on the clearance, he then brings the captain to an account for it."
The certificates which the captains signed on the books of the collector would be in this form:
"COLLECTOR'S OFFICE"
"DAYTON, December 2, 1865"
"I, H. U. French, master of the boat A. Hopkins, do certify that the following is a full and true statement of all the cargo taken on board said boat for transportation on her present passage, and that I have paid toll thereon as follows, to-wit, to Piqua, for original cargo, on clearance No. 893, viz.:"
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These certificates, as the reader will observe, purport to show the name of the boat and master, what cargo was on the boat, where the cargo came from, and where it was going, the number of miles of the transit, and the amount of toll, but in themselves did not show who owned or who shipped the cargo.
In the particular case of Chaffee & Co.'s whiskies, as they passed through Dayton, the collector was one Brown.
Either he or a young man in his employ kept, for the most part, the books, Brown directing the manner, and the purpose, as testified to, being to keep them regularly. The young man, at the time of the suit hereinafter mentioned as brought by the United States against Chaffee & Co., was dead; but the entries not made by Brown himself, were, without denial, in his handwriting; a few excepted, which were in the handwriting of a grandson of Brown, whose entries Brown represented to be "always reliable."
The collectors at Piqua and at other points where toll was payable, when whiskies were sent in the northern direction, followed the same general mode of making out the clearances, that is to say, they were made out in general from the freight bills, though occasionally where the collector knew the captain, and thought he could trust in his word, from the captain's verbal representations; no actual knowledge being had by the collectors here more than at Dayton, of the truth of what the captain certified to.
At Cincinnati, of course, there were no further clearances. What the collector then did, or at least what it was his duty to do, was to check the clearances from other places, and see that they were right. He made memoranda in a book of freights as shown by them, or as found by himself, but these no captain signed.
In one direction or in the other, Chaffee & Co. had sent large quantities of whisky. They had also paid taxes on large quantities, confessedly on as much as 6,045 barrels.
In this state of things, and under the forty-eighth section of the statute of June 30, 1864, already quoted, the United States brought suit in the court below against Highland Chaffee, Sidney Chaffee, Rue Hutchins (all heretofore named), and William Chaffee, "late partners, doing business under the firm name of H. D. Chaffee & Co."
The declaration, which was founded on the italicized portion of the section above quoted, of the Act of June 30, 1864, [Footnote 2] charged that the "defendants," from February 1,
1865, to September 1, 1866, were residents at Tippecanoe &c., they, the defendants, then and there did "carry on and transact the business of distillers of spirits, under said firm name of H. D. Chaffee & Co., for which they were duly licensed," and were thereby bound to pay all the revenue and taxes imposed upon them, and to comply with the act passed June 30, 1864, in reference to the spirits by them manufactured and distilled; nevertheless, that the defendants, with intent to evade the payment of the lawful duties upon 200,000 gallons of distilled spirits, "by them distilled at their distillery," did, between said dates
"unlawfully, knowingly, and fraudulently have in their custody and possession, and under their control 200,000 gallons of distilled spirits (each gallon subject to a tax of $2 imposed by law, which is unpaid), for the purpose of selling the same, with the design of avoiding the payment of the duties imposed by law thereon,"
and
"the defendants did then and there unlawfully and fraudulently sell, dispose of, and remove the same, so that the lien of the plaintiff has been lost, and the taxes remain unpaid, which act of having in their custody and possession, and under their control, said distilled spirits, for the purpose of selling the same, with the design of avoiding the payment of the duties imposed by law thereon, in fraud of the internal revenue laws of the United States, by said defendants, was contrary to the form of the statute in such case made and provided, whereby the defendants forfeited and became liable to pay to the plaintiffs, for the offense aforesaid, the penalty of $800,000, double the amount of the taxes imposed by law upon said distilled spirits."
The declaration concluded with an allegation that "an action hath accrued to the plaintiffs to demand and have of the defendants the sum of $1,010,000," &c.
The defendants demurred generally, the ground of the demurrer being that the penalty prescribed by the act applied only to persons who had at the time of seizure the goods in their possession and then held them for sale with a design to avoid the payment of duty upon them, and not to those who had held them with that design but had parted
with them. The demurrer was overruled. The defendants Sidney Chaffee and Hutchins then pleaded not guilty and nil debet, and the defendant William Chaffee pleaded separately that he was not a member of the firm of H. D. Chaffee & Co., or interested in its business. The district attorney filed the common similiter to the pleas of Sidney Chaffee and Hutchins, and traversed by replication the plea of William Chaffee.
The death of Highland Chaffee was then suggested, and it was ordered that as to him "all proceedings be stayed and abate."
The case being subsequently called for trial, the government abandoned, in form, the suit against William Chaffee, the abandonment being entered of record.
On the trial, the defendants having proved that during the time embraced in the controversy, they had paid taxes on full 6,045 barrels of whisky made by them during that time, the government, in order to show that the defendants had in their custody or possession, dutiable whisky, "for the purpose of selling the same with the design of avoiding payment of the duties imposed thereon," offered in evidence the books of the collectors at Piqua and Dayton, which the collectors produced, to show by different certificates in them, on which clearances had been granted at Dayton or Piqua, the collection offices nearest to Tippecanoe, at which place, as already said, Chaffee & Co. were the only distillers, that 200,000 gallons more whisky had been moved from the said place than duties were paid on. Certificates from the books at Cincinnati checking the clearances, and showing what whiskies had arrived there, were also offered.
The collectors at Piqua, Dayton, and Cincinnati were examined. As would be inferable from what has been already stated, they had little personal knowledge of any facts bearing on the controversy.
The handwriting of Kaufman, the young man who made some entries at Dayton, and who was dead, was proved, and the grandson of Brown, who made some others, was produced and sworn. But the government examined none of
the captains whose names were signed to the several certificates in the books at Dayton and Piqua, as to the genuineness of their signatures, nor was proof given of the handwriting or death of any of them. The collector at Cincinnati did not testify from any knowledge of his own that his books contained true records of what whiskies had arrived. Some, but not all, of the captains were examined as witnesses and testified to the carriage of whisky from Chaffee's distillery on their boats, at dates corresponding, and of quantities corresponding to their several certificates respectively. The government also offered evidence tending to prove that the distillery of Chaffee & Co., at Tippecanoe, was of a capacity equal to a production of fifty barrels of whisky per day when run to its fullest capacity, a larger number of barrels than it was admitted that duties had been paid on.
The defendants objected to the reception of the books on the ground that it was hearsay and res inter alios acta. But the evidence was admitted
"not as evidence that whisky came from or belonged to the defendants, but only as competent to show that a given quantity passed a certain point on a given day, and if the government did not connect this whisky with the defendants, the testimony would be stricken out."
The defendants excepted. The evidence was never afterwards stricken out.
For the purpose of showing the quantity of whisky on hand on the 26th of October, 1865, the defendants offered the evidence of twenty-three witnesses. This testimony tended to prove that on the 1st day of July, 1864, when the distillery stopped, there was a large quantity of whisky on hand (perhaps 2,000 barrels), which was stored in the cellar, grain rooms, and other places in or about the distillery; that this whisky, or the greater part of it, remained on the premises until the 26th of October, 1865, the several witnesses testifying to seeing it at different times from the 1st of July, 1864, until the 26th of October, 1865.
The government, in rebuttal, offered the evidence of eleven witnesses. This testimony tended to prove that from
the 1st of July, 1864, to the summer of 1865, there was very much less whisky -- certain witnesses said not much more than fifty barrels -- at the distillery than was asserted by the defendants and testified to by their witnesses, and that in the autumn of 1865, up to the 26th day of October, there was little if any whisky there.
Sidney Chaffee lived in Tippecanoe, and was about the distillery most of the time, and attended to making purchases and to other business of the firm of H. D. Chaffee & Co., and Hutchins, during the time he was a partner, was employed about the distillery. He testified that the firm of H. D. Chaffee & Co. kept ordinary books of accounts. He was present in court during the entire trial, and Hutchins was in court at the close of defendant's testimony. Before the commencement of the trial, to-wit, on the 3d of March, 1870, the government had caused this notice to be served on the defendants:
"TIPPECANOE, March 3, 1870"
"The United States v. H. D. Chaffee & Co."
"The defendants will take notice that the plaintiffs have filed a motion and have thereby moved the court, that the defendants are required to produce, on the 8th of March, 1870, the day set for trial of this case, the following books, papers, and documents, now in their possession and under their control, which contain evidence pertinent to the issue herein, to-wit, wall books, papers, and statements required by law to be kept or made by defendants, as distillers, at Tippecanoe, Ohio, from July 1, 1864, to October 1, 1866, and all other books, papers, statements, and memoranda kept by them pertaining to their business during the same period at Tippecanoe."
"W. M. BATEMAN"
"District Attorney of the United States"
At the close of the defendants' testimony, the books and papers not having been produced, the counsel for the government called for their production. The counsel for the defendants stated that they were at Buffalo. The counsel for the government refused to receive the statement as an excuse for the nonproduction of the books, and demanded
their production; and that S. L. Chaffee should be called as a witness for the defense to explain why they were not produced, and to testify generally in the case. The defendants did not produce the books and papers, and did not call either S. L. Chaffee or Hutchins as a witness in the case.
Before charging, the court informed the counsel that it would allow evidence to be introduced at any stage of the case to supply any omission or by way of explanation.
It then proceeded to charge. Commenting on the books of the different collectors which had been received by it and relying on the case of Fennerstein's Champagne, reported along with the case of Cliquot's Champagne in 3 Wallace, [Footnote 3] it said:
"So far as the nature of this testimony is concerned, there has been in modern times a very great change of opinion, and I do not know that if I should search all the books I ever read or call to mind all my experience at the bar, I could select a more fitting instance to illustrate my own opinion of the respective values of these two classes of testimony than the contrast between the persuasive effect of memoranda, made in the ordinary course of business by those who have no motive to falsify -- whose duty it was to record them at the time the transactions took place -- on the one hand, and on the other the grossly conflicting verbal testimony given in this cause as to the amount of whisky on hand in October, 1865. Compare the two and see upon which, in its own nature, as men of common sense, you can repose your credence with most confidence. The one is plain, simple, and direct, without a motive of falsification. The other presents a spectacle like this: a phalanx of twenty men swearing on their oaths to some two thousand barrels of whisky, at a given time, in a given place, and two-thirds as many, equally intelligent and equally respectable, with equal opportunities of knowledge, swearing there is not fifty barrels there. It is a hapless conflict, leaving the mind in uncertainty, with nothing whatever to rest upon."
"It is, however, before you, and you will look carefully over its details, and give due weight to the ingenious and able criticisms
which have been made by the distinguished counsel for the defendants."
Passing to the proofs generally, and to the effect to be given to the nonproduction of the books of the firm, and relying on Clifton v. United States, [Footnote 4] in 4 Howard, it instructed the jury among other things, as follows:
"The proof in the outset may be defective. It may not be sufficient to enable you without any doubt or hesitation to find against the defendants, and still it may be your duty, nevertheless, so to find; for although I instruct you that the case must be made out beyond all reasonable doubt in this as well as in criminal cases, yet the course of the defendants may have supplied, in the presumptions of law, all which this stringent rule demands. In determining, therefore, in the outset whether a case is established by the government, you will dismiss from your minds the perplexing question whether it is so made out beyond all doubt. It needs not, in the exigencies of this case, be so proved in order to throw the burden of explanation upon the defendant if from the facts you believe he has within his reach that power. In the end all reasonable doubt must be removed, but here, at this stage, you need say only 'is the case so far established as to call for explanation?'"
"If, then, you conclude that, unexplained and uncontroverted by any testimony, the opening proof would enable you to find against the defendants for the claim of the government or any material part of it, you will then take up their testimony in view of the principle announced. Although the counsel for the defense, when this principle was announced, with spirit and energy begged leave to differ with the court in reference to the effect of not producing the books and not swearing the defendants, still the presumption of law is that client and counsel have deliberately, and with full knowledge of the law and all its presumptions, elected to withhold this proof, and you will not in the smallest degree abate the full application of the principle on any notion that it may have been misapprehended. The rule is one which I am confident will commend itself to your common reason. It is this:"
" Without exception, where a party has proof in his power, which, if produced, would render certain
material facts, the law presumes against a party who omits it, and authorizes a jury to resolve all doubts adversely to his defense. The same rule is applicable in a case where a party once had proof in his power which had been voluntarily destroyed or placed beyond his reach."
"If you believe the books were kept which contained the facts necessary to show the real amount of whisky in the hands of the defendants in October, 1865, and the amount which they had sold during the next ten months, or that the defendants, or that either of them, could, by their own oath, resolve all doubts on this point; if you believe this, then the circumstances of this case seem to come fully within this most necessary and beneficent rule."
To the instructions thus given the defendants excepted.
The jury found that "the defendants owe to the plaintiffs the sum of $235,680, in manner and form as the plaintiffs have complained against them."
Motions by the defendants for a new trial and in arrest of judgment were overruled, and the court entered judgment on the verdict.
The defendants now brought the case here, alleging that the court had erred among other ways:
1. In overruling the defendant's demurrer.
2. In overruling the motion in arrest of judgment.
3. In admitting the entries contained in the certificate book of the collectors at Dayton, Piqua, and Cincinnati.
4. In instructing the jury as it had done.
