Opinion
July 8, 1926. On Rehearing, July 18, 1926.
Falk Orleans, of New York City (Samuel Falk, of New York City, of counsel), for complainant.
Emory R. Buckner, U.S. Atty., of New York City (U.S. Grant, Asst. U.S. Atty., of New York City, of counsel), for defendants.
In Equity. Suit for injunction by the Olivett Distributing Company, Inc., against Frank K. Bowers, Collector of Internal Revenue, and another. Writ denied.
This is a motion to enjoin the collector of internal revenue from refusing to issue a permit for the withdrawal of alcohol, as provided in section 6 of title 2 of the National Prohibition Act (Comp. St. § 10138½c).
A basic permit authorizing plaintiff to operate a denaturing plant, and for obtaining quantities of alcohol, 125,000 gallons each month, was issued by the prohibition commissioner on November 26, 1923. Several withdrawal permits were subsequently issued, but on June 9, 1926, the collector refused to issue a new withdrawal permit, or permit to purchase alcohol, and at the time of filing the bill herein no steps to revoke the basic permit had been taken; but later a citation was issued, pursuant to title 2, § 9 (Comp. St. § 10138½dd), requiring plaintiff to show cause why its existing permit should not be revoked and canceled, on the ground that it had not in good faith complied with the provisions of the National Prohibition Act, and specifically that at various times plaintiff had falsely certified that it was without alcohol at its plant or in transit; that alcohol had been collusively diverted, and accurate records of alcohol were not kept, as required by the statute; that more alcohol was sold than had been permitted during the named period. The verified answer embodies these grounds for refusal as a defense.
The hearing upon the citation has not as yet been had. Plaintiff contends that the prohibition administrator cannot legally refuse to issue a new permit to buy alcohol while the basic permit is in force, and a decision by Judge Augustus N. Hand in Wilson v. Bowers, 14 F.2d 976, in support thereof, is drawn to my attention. In that case, however, the court was concerned with a specially denatured alcohol, and as to such article it was decided that prohibition officers could not refuse permits during the pendency of a proceeding to revoke. In this case we are dealing with pure alcohol, a liquor or beverage. Section 6 of title 2 is directed to the manufacture, sale, purchase, or transportation of liquor as that term is defined, without obtaining a permit so to do, and it is stated "that permits to purchase liquor for the purpose of manufacturing or selling * * * shall not be in force to exceed 90 days from the date of issuance," while permits to buy liquor for any other purpose are not in force beyond 30 days. Upon expiration of permits of the latter class, application for new permits must be made. The applications, however, may be refused, when there is evidence that the permittee was guilty of violating the act, or has not in good faith conformed to the regulations.
Such a construction of the material provisions relating to permits is logical, for section 6 affords to permittees, on refusal of their applications, the right of review, as provided in section 5. It is also to be noted that, since Judge Hand rendered his decision in the above-cited case, regulation 61 has been amended, and by article 119 it is substantially provided that in the discretion of the administrator he may, after issuance of the citation, refuse withdrawal permits, and reinstate withdrawals upon a showing of good cause. The various rights accorded withdrawal permits for alcohol or liquor and permits for denatured alcohol are apparently in a different class, for section 6 of title 2 refers to "any liquor" — obviously beverages — and, though the word "alcohol" is included in the provision, the wording, nevertheless, as Judge Learned Hand remarked in Higgins v. Foster, 12 F.2d 646, recently decided by the Circuit Court of Appeals, "precludes denatured alcohol, which is not potable."
Upon carefully reading sections 4, 5, 6, and 9 of title 2 (Comp. St. §§ 10138½b-10138½c, and 10138½dd), I have become satisfied that it was not intended that this court should, by injunction, enforce the issuance of withdrawal permits, when the prohibition administrator, for cause, refuses a renewal. The plaintiff is not prohibited from conducting its business under the basic permit, during the pendency of the revocation proceeding, save in so far as its business is interrupted by the refusal to permit the additional purchase of alcohol. If the hearing is adverse to plaintiff, it has the right to have the action of the administrator reviewed, and in such case this court may affirm, modify, or reverse, if the evidence warrants. It is clear that the administrator has the discretionary right to deny plaintiff's application, regardless of the fact that the basic permit has not expired, or has not been canceled; but this court has not the power to temporarily enjoin the exercise of the power and duties of the administrator.
In the case of Ma-King Products Co. v. Blair, 46 S. Ct. 544, 70 L. Ed. ___, decided by the Supreme Court June 1, 1926, it was said: "It is clear that the act does not impose on the Commissioner the mere ministerial duty of issuing a permit to any one making an application on the prescribed form, but, on the contrary, places upon him, as the administrative officer directly charged with the enforcement of the law, a responsibility in the matter of granting the privilege of dealing in liquor for nonbeverage purposes, which requires him to refuse a permit to one who is not a suitable person to be intrusted, in a relation of such confidence, with the possession of liquor susceptible of diversion to beverage uses."
In view of the foregoing, I hold that this court is without power to require issuance of the writ, and accordingly the motion is denied.
On Rehearing.
In the Ma-King Case the Supreme Court evidently has before it a basic permit, as plaintiff's counsel contends, but, since the statute (section 6 of title 2) gives the Commissioner the right to refuse a permit (a purchase permit is implied), when the permittee has violated the terms of the permit or any law of the United States, the language of the Supreme Court is fairly applicable to both classes of permits, namely, that the Commissioner has the discretionary right to suspend purchase permits, or refuse their renewal, for flagrant violation of the statute, or if he has grounds for believing that the public interest would suffer if further withdrawals were permitted. Section 1903, Regulations. It is inconceivable that Congress intended that the prohibition officials must give purchase permits, if in their judgment the permittee has not in good faith complied with the law and regulations to enforce it. The refusal or suspension of the purchase permit in this case, as the affidavits in opposition to grant a temporary injunction show, was on the ground of flagrant violations, for which a citation has been issued to show cause why the basic permit should not be revoked, and in the circumstances this court ought not, at this time, interfere with the discharge of the duties placed by law upon the prohibition officers.
Rehearing denied. So ordered.