1. Where, pursuant to the tenth section of the Act of July 20,
1868, 15 Stat. 129, a survey of a distillery and an estimate of its
producing capacity is made and a copy thereof furnished the
distiller, such survey and estimate conclusively determine the
producing capacity of the distillery, fix the minimum tax due from
him, and can only be abrogated by a new survey and estimate,
ordered by the Commissioner of Internal Revenue, a copy of which is
furnished to the distiller.
2. An abortive attempt to make a new estimate to take the place
of the former cannot have the effect to annul it.
This is an action on a distiller's bond given to the United
States under the seventh section of the Act of July 20, 1868, 15
Stat. 127. The tenth section of that is as follows:
"Immediately after the passage of this act, every assessor shall
proceed, at the expense of the United States, with the aid of some
competent and skillful person, to be designated by the Commissioner
of Internal Revenue, to make survey of each distillery registered,
or intended to be registered, for the production of spirits in his
district, to estimate and determine its true producing capacity,
and in like manner shall estimate and determine the capacity of any
such distillery as may hereafter be so registered in said district,
a written report of which shall be made in triplicate, signed by
the assessor and the person aiding in making the same, one copy of
which shall be furnished to the distiller, one retained by the
assessor, and the other immediately transmitted to the Commissioner
of Internal Revenue. If the Commissioner of Internal Revenue
Page 93 U. S. 626
shall at any time be satisfied that such report of the capacity
of a distillery is in any respect incorrect or needs revision, he
shall direct the assessor to make in like manner another survey of
said distillery; the report of said survey shall be executed in
triplicate and deposited as hereinbefore provided."
In the fall of 1870, Ferrary, the principal in the bond,
proposed to commence distilling whiskey at Louisville, Tenn.,
within the Second Collection District of that state. Nov. 10, 1870,
an assistant assessor of that district, with a person to aid him,
designated by the Commissioner of Internal Revenue, made the survey
agreeably to the requirements of the foregoing section, measured
the tubs, and estimated the true producing capacity of the
distillery. Triplicates of the report of this survey, made under
the assessor's direction, were signed by him and the person aiding
him; one copy was retained by him, another sent to the Commissioner
of Internal Revenue, and the third furnished to Ferrary. By this
survey and report the producing capacity of the distillery was
estimated upon the basis of three gallons of whiskey for each
bushel of corn.
The bond now in suit was entered into Nov. 8, 1870. It is
conditioned "in all respects faithfully to comply with all the
provisions of law in relation to the business and duties of
distillers, and pay all penalties incurred," &c., and recites
Ferrary's intention to be engaged in distilling from Nov. 15. The
exceptions state that he manufactured whiskey from Dec. 16, 1870
(the date of the approval of the bond), to March 10, 1871. Nov. 18,
1870, the Commissioner of Internal Revenue officially informed the
assessor that the report of survey, dated Nov. 10, 1870, was
"regarded as erroneous in respect to the dry inches and the yield
of spirit to the bushel. According to the ruling of this office,
three dry inches for rye and seven for corn are the true allowances
for tubs sixty inches or under in depth," adding, that if the
distillation was "by direct steam, the yield should be three and a
half gallons to the bushel." The assessor was accordingly ordered
to make another survey, as provided in sec. 10, before referred to,
and the letter concluded, "as no new measurements are required," no
expense was to be allowed. The second report thus demanded was made
Nov. 22, 1870, with the desired amendments, fixing the
producing
Page 93 U. S. 627
capacity at three and a half gallons per bushel. In making this
new estimate and determination of the producing capacity, the
officers did not again visit the distillery, nor make any new
measurements of any part thereof, but gave all the old measurements
of the former report. Triplicate copies of this last report were
made, one retained by the assessor and one sent to the
commissioner. The assessor's clerk swore to having either mailed or
delivered the third copy to Ferrary, and other evidence was
introduced tending to show that it reached him; but he denied
receiving or having any knowledge of it till about the time he
closed his distillery, in March, 1871. His mail clerk and other
employees testified in a manner tending to negative its delivery at
the distillery.
Assessments were made for December, 1870, January, February, and
March, 1871, based upon the estimates of the second report of
survey; but the evidence showed that if they had been based upon
the first, there would still have been a deficiency, for which
Ferrary would be liable to be assessed. After instructions not
excepted to, the presiding judge told the jury that if the second
report of survey was not actually made by the assessor, or
assistant assessor, and his designated assistant, in like manner
with the survey which was the foundation of the first report, then
said second report of survey was invalid, and any assessments based
thereon would also be invalid, and the plaintiff could not recover
thereon in this action. The plaintiff excepted to this instruction,
as well as to an instruction that
"if the jury should be satisfied from the evidence that a second
survey had not been made, or that a second copy of the same was not
furnished Ferrary, then their verdict must be for the
defendants."
The plaintiff asked the judge to instruct the jury:
1st, that the first report of survey was valid and binding until
the same was abrogated by authority of law, and that was only when
defendant was furnished with a copy of resurvey or second
survey.
2d, that, if the copy of the second survey ordered was furnished
to the defendant, he would be bound by it; but if he never received
it, and continued to operate his distillery under the first one,
then he would be bound by the first survey, of which he admitted
having received a copy. These instructions were refused upon the
ground
Page 93 U. S. 628
that no assessment was based on the first survey. An exception
was taken to such refusal.
The jury found a verdict for the defendants, and, judgment
having been rendered thereon, the United States sued out this writ
of error.
MR. JUSTICE STRONG delivered the opinion of the Court.
The Act of July 20, 1868, which imposes taxes on distilled
spirits and tobacco, directs that there shall be levied and
collected on all distilled spirits on which the tax then prescribed
by law had not been paid a tax of fifty cents on each and every
proof gallon, to be paid by the distiller, owner, or person having
possession thereof, before removal from distillery warehouse. It
also declares that every proprietor or possessor of a still,
distillery, or distilling apparatus, shall be jointly and severally
liable for the taxes imposed by law on the distilled spirits
produced therefrom. To determine the quantity of spirits produced,
three returns in each month are required to be made to the
assessor, stating the quantity and kind of materials used, and the
number of wine gallons and proof gallons made and placed in
warehouse. These returns it is made the duty of the assessor to
examine, and he is required to make assessments for deficiencies.
The twentieth section of the act also enacts that the quantity of
spirits returned, together with the deficiency assessed, shall in
no case be less than eighty percent of the producing capacity of
the distillery, as estimated under the former provisions of the
act. Thus a liability is imposed upon the distiller of a tax of
fifty cents upon eighty percent, at least, of the producing
capacity of the distillery. And such capacity is ascertained and
information of it is given to the distiller before he commences his
manufacture. A survey is made is his distillery, and an estimate is
based on the survey of its true producing capacity, one copy of
which is furnished to the Commissioner of Internal Revenue, one is
retained by the assessor, and one is given to the distiller
himself. These requirements of the law respecting the survey and
the estimate were complied
Page 93 U. S. 629
with in the present case. A survey of Ferrary's distillery,
together with an estimate of the producing capacity, was made on
the 10th of November, 1870, and a copy of it was furnished to him.
He had previously -- to-wit, on the eighth day of the same month --
given the bond upon which this suit was brought (the other
defendants being his sureties), conditioned for faithful compliance
with all the provisions of law in relation to the duties and
business of distillers, and on the sixteenth day of the same month
he commenced distilling. So long as that survey and estimate
remained unchanged, we think they conclusively determined the
producing capacity of the distillery, and fixed the minimum tax due
from the distiller. The bill of the exceptions, however, shows that
on the 18th of November the Commissioner of Internal Revenue
directed the assessor to make another survey, stating in his letter
that no new measurements were necessary, and consequently that no
expense was to be allowed or incurred. The commissioner's object in
giving the direction, as plainly appears from his order, was to
obtain not a new survey, but a new estimate of producing capacity,
founded on the prior survey and measurements. No new survey was
made under it, and no new estimate is proved to have been given to
the distiller. It must therefore be conceded that his liability for
taxes was not affected by it, and that the assessor was not
authorized to make any assessment founded on any other survey or
estimate than the one of Nov. 10, 1870. But what then? That survey
and estimate remained in force. An abortive attempt to make a new
estimate to take the place of the former cannot have the effect to
annul it. If it could, the distiller would escape from any tax
measured by the producing capacity of his distillery, though under
the act of Congress; without an ascertainment of that, he is not an
liberty to distil at all. The first survey and estimate was valid
and binding, as we have said, until it was abrogated by authority
of the law, and it could only be abrogated by a new survey and
estimate ordered by the commissioner, a copy of which was furnished
to the distiller. Thus the circuit court was asked to instruct the
jury, and we think there was error in refusing to give the
instruction asked. There was error, also, in the refusal to affirm
the other proposition of the
Page 93 U. S. 630
plaintiffs, which was,
"that if the copy of the second report ordered was furnished the
defendant, no matter how, so he received it, he would be bound by
it; but if he never received it, and continued to operate his
distillery under the first one, then he would be bound by the first
survey, of which he admits having received a copy."
There was also error in the instructions actually given to the
jury, as well as in the refusal to give that asked by the
plaintiffs.
The learned judge evidently confounded the survey required by
the tenth section of the act of Congress with the estimate and
determination of producing capacity calculated from the survey.
Hence he instructed the jury, that if the second report of survey,
of which there was some evidence, was not actually made by the
assessor or assistant assessor, and his designated assistant, in
like manner with the survey made as the foundation of the report of
survey first made, the second report was invalid, and any
assessment against the distiller based thereon would be invalid,
and the plaintiffs could not recover thereon in this action. To
this he added, that if the jury were satisfied from the evidence
that a second survey had been made, or that a copy of the same had
been furnished to Ferrary, the distiller, their verdict must be in
favor of the defendants. This was misleading. There was no pretense
that a second survey had been made. None was contemplated by the
order of the commissioner. That order expressly stated that no new
measurements were required. All that was done was forming a
corrected estimate, resting on the first measurements. If the
corrected estimate was inoperative because of failure to furnish
the distiller with a copy of it, his liability for the taxes,
determined by the survey that was made, and the estimate based
thereon, remained undisturbed. The suit was not founded on an
inoperative assessment, as the court seems to have assumed. It was
brought on the distiller's bond; and the breach averred was
noncompliance with the provisions of the law in relation to the
duties and business of distillers, one of which was the payment of
taxes legally assessed against him. Ferrary had full information of
the sums due from him. The law fixed the rate at fifty cents for
each gallon of spirits produced, and the survey and estimate which
was furnished him informed him
Page 93 U. S. 631
of the producing capacity of his distillery, and made it his
duty to pay the tax on at least eighty percent of that. Thus the
law fixed both the rate and amount. If the assessor claimed more,
without warrant, his claim did not relieve Ferrary from the duty of
paying what was due, the amount prescribed by the law. So the jury
should have been instructed.
Judgment reversed, and a venire de novo awarded.
