Campbell v. W. H. Long & Company/Opinion of the Court

[Argument of Counsel from page 611 intentionally omitted]

Mr. Lewis Landes, of New York City, for respondent W. H. Long & Co.

Messrs. Harry S. Barger, of Washington, D. C., and Michael Serody, of Philadelphia, Pa., for respondent Swanson Chemical Corporation.

Mr. Patrick J. Friel, of Philadelphia, Pa., for respondent Casper.

Mr. John Fletcher Caskey, of New York City, argued the cause for respondents.

Mr. Justice BRANDEIS delivered the opinion of the Court.

These three cases deal with basic permits concerning denatured alcohol. They were argued together with Campbell v. Galeno Chemical Co., 281 U.S. 599, 50 S.C.t. 412, 74 l. Ed. -, decided this day, and involve, in the main, the same questions.

In Nos. 445 and 510, the permits involved authorize the operation of denaturing plants, the purchase and receipt of alcohol thereat, and the removal therefrom of the denatured alcohol. In No. 511, the permit authorizes the use of specially denatured alcohol in the manufacture of toilet preparations. In each of the three cases the permit was issued prior to October 1, 1927, and was in accordance with the regulations in force at the date of issuance. Each permit provides in terms that it shall be in force 'from the date hereof until surrendered by the holder or cancelled by the Commissioner of Internal Revenue for violation of the national prohibition act or regulations made pursuant thereto.'

While the permits of the several plaintiffs were still in force, the Treasury Department, Bureau of Prohibition, promulgated Regulations 3, effective October 1, 1927. Article 95 thereof provides that all basic permits theretofore issued to operate denaturing plants and manufacture denatured alcohol shall expire on December 31, 1928, unless renewed; and that thereafter only annual permits shall be issued. Article 113 makes the same provision for permits to use specially denatured alcohol in the manufacture of toilet and other preparations. The plaintiffs, insisting on the effectiveness of their original permits, filed applications for renewal, which were denied. These suits were then brought to enjoin interference with their permits otherwise than in accordance with the provisions of section 9 of the act (27 USCA § 21), considered in the Galeno Case. In No. 445 an injunction was issued by the trial court; the decree was affirmed by the Circuit Court of Appeals for the Second Circuit (34 F.(2d) 645); and we granted certiorari (280 U.S. 548, 50 S.C.t. 85, 74 L. Ed. -). Injunctions were granted by the trial court also in Nos. 510 and 511 (30 F.(2d) 400 ); appeals were taken to the Circuit Court of Appeals for the Third Circuit; and these cases are here on certificates from that court.

Among the 'articles' enumerated in section 4, title 2, of the National Prohibition Act (Oct. 28, 1919, c. 85, 41 Stat. 305, 309 (27 USCA § 13)), which may be manufactured with the use of liquor, under permits, and which are excepted from operation of the act 'after having been manufactured and prepared for the market,' are: '(a) Denatured alcohol * *  * produced and used as provided by laws and regulations now or hereafter in force. * *  * (d) Toilet *  *  * preparations and solutions that are unfit for use for beverage purposes.' Title 3, headed 'Industrial Alcohol,' provides, in section 10 (27 USCA § 80): 'Upon the filing of application and bond and issuance of permit denaturing plants may be established *  *  * and shall be used exclusively for the denaturation of alcohol by the admixture of such denaturing materials as shall render the alcohol, or any compound in which it is authorized to be used, unfit for use as an intoxicating beverage. Alcohol lawfully denatured may, under regulations, be sold free of tax either for domestic use or for export.' There is no provision in the act specifically requiring permits for the manufacture of toilet preparations with denatured alcohol.

First. The contentions of the government in Nos. 445 and 510 are those already considered in Campbell v. Galeno Chemical Co., supra. The questions certified in No. 510 are:

'1. Is denatured alcohol, during its manufacture and     preparation for the market, 'liquor' within the meaning of      sections 1 and 6, Title II of the national prohibition act,      the latter of which provides that permits to manufacture      'liquor' may be issued for only one year?

'2. Does the provision of section 6, Title II of the national     prohibition act, which directs that every permit 'shall      designate and limit the *  *  * time when' the authorized acts      may be performed, apply to a permit to operate a denaturing      plant, i. e., to use alcohol in the manufacture of denatured      alcohol?

'3. Does a provision in a permit that it shall be in force     until 'surrendered by the holder or canceled by the      Commission of Internal Revenue for violation of the national      prohibition act or regulations made pursuant thereto,' comply      with the above-mentioned requirement of section 6 of Title II      of the national prohibition act, that every permit 'shall designate and limit the *  *  * time when'      the authorized acts may be performed?

'4. May a permit to operate a denaturing plant, which permit     provides that it shall be in force 'until surrendered by the      holder or canceled by the Commissioner of Internal Revenue      for violation of the national prohibition act or regulations      made pursuant thereto,' be terminated by a general regulation      providing that all such permits shall expire on a date      named?'

We interpret the first question as inquiring whether a permit to manufacture denatured alcohol is a permit to manufacture liquor within the cited provision of title 2, § 6 (27 USCA § 16). As thus construed, we answer it in the negative. For, whether issued under section 4, title 2 (27 USCA § 13), or under section 10, title 3 (27 USCA § 80), the permits held by plaintiffs authorize them to convert something which is undoubtedly liquor into a product which is required to be unfit for use as a beverage; that is, to convert liquor into something which is not liquor. Campbell v. Galeno Chemical Co., supra. For the reasons stated in that case, our answer to the third question is in the affirmative; and to the fourth question in the negative. In view of the answer to the third question, the second question need not be answered.

Second. In No. 511, the Circuit Court of Appeals certified the following questions:

'1. Does the provision of section 6, Title II, of the     national prohibition act, which directs that every permit      'shall designate and limit the *  *  * time when' the      authorized acts may be performed, apply to a permit to use      specially denatured alcohol?

'2. (Same as question 3 in No. 510).

'3. May a permit to use specially denatured alcohol in the     manufacture of toilet preparations, which permit provides      that it shall 'be in effect until surrendered by the holder      or cancelled by the Commissioner of Internal Revenue for      violation of the provisions of Title III of the national      prohibition act or the regulations made pursuant thereto,' be      terminated by a general regulation providing that all such      permits shall expire on a date named?'

In this court, the government concedes that the permit here involved is not one to manufacture liquor within the meaning of either the special or the general time provisions of title 2, § 6. It contends, however, that since toilet preparations and denatured alcohol used in their manufacture are both excluded by title 2, § 4 from the operation of the act, the plaintiff's business is not one for which a permit is required by the statute; that if the plaintiff used so-called completely denatured alcohol, no permit would be required at all (Regulations 61 (1920), art. 108; Regulations 3 (1927), art. 106); that permits for the use of specially denatured alcohol are required only by the regulations of the Bureau pursuant to its general authority, conferred, among other sections, by section 13, title 3 (27 USCA § 83), to make regulations to guard against the diversion of alcohol for unlawful purposes and to protect the public revenue; that the power to issue regulations includes the power to repeal and amend them; that section 9, title 2 (27 USCA § 21) applies only to the permits required by statute and does not abridge the regulatory power with respect to permits required only by administrative regulation. The conclusion is, in our opinion, unsound.

Since no question has been raised as to the propriety of plaintiff's permit, we do not inquire whether the permit is required by the act or whether its requirement by regulations is authorized thereby. But, if the requirement of the permit is proper, it is so only because it is authorized by the act, either explicitly or otherwise. There is no suggestion that the regulations were made under any other authority. If, then, the permit was issued under authority of the Prohibition Act, the plaintiff comes within the description in title 2, § 9 (27 USCA § 21), of 'any person who has a permit'; and that section provides the exclusive procedure for the revocation of the permit. The attempt to revoke it by regulations without complying with that section exceeds the authority, and violates rights, conferred by the Act.

We answer the third question in the negative. For reasons stated in connection with questions 2 and 3 in No. 510, we answer the second question in the affirmative; and do not answer the first.

No. 445-Affirmed.

No. 510-Question 1 answered No.

Question 2 not answered.

Question 3 answered Yes.

Question 4 answered No.

No. 511-Question 1 not answered.

Question 2 answered Yes.

Question 3 answered No.