Summary
In Tracey v. Corse, 58 N.Y. 143, the plaintiff claimed title to a barge, as purchaser at a sale at public auction made by the collector of internal revenue, by whom the barge had been seized for an alleged forfeiture incurred under the internal revenue law of the United States, in that the barge at the time of seizure was fitted up and used in the business of the illicit manufacture of spirits.
Summary of this case from Serota v. Transportation Ins. Co.Opinion
Argued April 30, 1874
Decided September 22, 1874
A.H. Dana for the appellant. Dennis McMahon for the respondent.
The plaintiff claims title to the barge "Franklin," as purchaser at a sale at public auction, made in the city of New York, August 2, 1868, by one Alexander Spaulding, a collector of internal revenue, by whom the barge, in June previous, had been seized for an alleged forfeiture incurred under the internal revenue law of the United States, in that she was, at the time of the seizure, fitted up and used in the business of the illicit manufacture of spirits. The collector assumed to act, in making the sale, under the authority conferred by the forty-eighth section of the act of Congress relating to internal revenue, passed June 30, 1864, as amended by the ninth section of the act of July 13, 1866. That section declares that the collector or deputy collector of internal revenue may seize any goods, articles or objects on which taxes are imposed by law, found in the possession or within the control of any person in fraud of the internal revenue laws, or with the design to avoid the payment of taxes; and that the same shall be forfeited to the United States; and also all raw materials found in the possession of any person under the circumstances specified in the statute; "and all tools, implements, instruments and personal property whatsoever in the place or building, or within any yard or inclosure where such articles or such raw materials shall be found." The section also provides that proceedings to enforce the forfeiture shall be in the nature of a proceeding in rem, in the Circuit or District Court of the United States, where the seizure is made, or in any other court of competent jurisdiction. The articles seized, the section declares, may, at the option of the collector, be delivered to the marshal of the district, and shall remain in his care and custody until he shall obtain possession by process of law; but a proviso is made that when the property so seized may be liable to perish, or become greatly reduced in value by keeping, or when it cannot be kept without great expense, a sale may be had on the application of the collector to the assessor, and upon the proceedings being taken as provided in the section; and the proceeds of the sale, after deducting costs of the seizure and sale, are to be paid into court, to abide its final order, decree, or judgment.
It is quite obvious, I think, that the sale of the barge was not authorized by this section of the statute. It was not liable to seizure under it. It was not an object or thing upon which a tax was imposed, nor was it a tool, implement or instrument, within the meaning of the statute. The sale provided for in the forty-eighth section is a sale of property liable to seizure under that section. The barge was liable, perhaps, to seizure under the fourteenth section of the act of 1866, as a vessel used for the deposit or concealment of taxable articles in fraud of the statute, but this does not appear to have been the ground of seizure; and if it had been, the collector is only authorized to make a summary sale of property seized under the provisions of the forty-eighth section. The sale was therefore void.
The power of sale conferred upon a collector is ministerial and not judicial; and a sale made by a collector, in a case not within the statute, neither divests nor confers any title. It is to be assumed, in view of the proof offered on the trial and rejected, that the barge was liable to forfeiture when the seizure was made, and that the seizure was lawful. But the title of the owner of property as to which an act of forfeiture has been committed under the internal revenue laws, is not divested eo instanti, upon the commission of the offence, or by the seizure, but by the judgment or decree of a court having jurisdiction in the premises, ascertaining and declaring the forfeiture. It is true, that the statute declares that property, under certain circumstances, shall be forfeited, but it also provides that proceedings to enforce the forfeiture shall be taken in the courts of the United States. Whatever may be the true view as to the time when the forfeiture takes place, it is by the judgment alone that it can be ascertained and determined. If the government may be deemed to have an inchoate title from the time the offence is committed, it is not consummated until after a judicial condemnation. And, if after a seizure the possession is abandoned by the government, and a decree of forfeiture is not obtained, the title and the right of possession is in the original owner. This is, I think, a fair deduction from the authorities. ( Slocum v. Mayberry, 2 Wheat., 1; Gelston v. Hoyt, 3 id., 246; U.S. v. Grundy, 3 Cranch, 350; Same v. 1,960 Bags of Coffee, 8 id., 398; Caldwell v. U.S., 8 How., 366-381.)
The defendant derives title from the person who owned the barge when the seizure was made. The plaintiff, as has been shown, acquired no title under the collector's sale. He cannot therefore recover possession of the barge from the defendant, unless he can show that the assumed title under that sale has in some way been confirmed and made conclusive upon the defendant.
The plaintiff, to establish this, produced in evidence the record of a decree of the District Court of the United States for the southern district of New York, made January 29, 1869, in proceedings by information, commenced in that court December 22, 1868, against $618, alleged to be the proceeds of the barge "Franklin," etc. The information recited the seizure by the collector of the barge and also of a quantity of distilled spirits, as forfeited to the United States, and the special grounds upon which it was made, and it also alleged that the proceeds were in the custody of the collector, and prayed process of attachment to bring the property within the custody of the court and of monition to the parties interested, that due proceedings being had the barge and property might be condemned by decree of forfeiture and the proceeds distributed, etc.
The marshal in his return of the monition, January 12, 1869, certifies that he had attached the proceeds therein described, and had given due notice to all persons claiming the same, that the court on a day named would proceed to the trial and condemnation thereof, should no claim be interposed to the same. The decree recites the return of the monition, and that the default of all persons had been entered, and adjudges that the "six hundred and eighteen dollars, proceeds of the barge Franklin, etc," be condemned as forfeited. The decree then recites the seizure by the collector, and the sale to the plaintiff, and concludes by declaring and adjudging that the seizure and the sale and all proceedings therein, be in all things confirmed. This decree, it is insisted, conclusively establishes against all the world the forfeiture of the "Franklin," and the validity of the collector's sale. Without entering to any considerable extent into the difficult and perplexing learning upon the subject of the estoppel of judgments, and the distinction between those in rem and in personam, there are, I think, two reasons against giving to this decree the effect claimed for it against the defendant: First, the court pronouncing it did not have the custody of the barge, nor was it subject to its process, and the decree does not adjudicate directly that it was forfeited; and, second, the only persons summoned, or notified by the marshal to appear were those claiming an interest in the proceeds of the collector's sale. The collector on the sale delivered the barge to the plaintiff, and it was never afterward in the possession of the government, nor was it at any time within the custody of the court.
The general principle is well established that a court proceeding in rem must have the custody of the res in order to pronounce a valid judgment. The purpose of a proceeding in rem is to fix the status of the property or thing which is the subject of the inquiry irrevocably, as to all the world, and to ascertain the right of all possible claimants, and possession of the thing by the court which pronounces upon it is in general indispensable. ( The Josefa Segunda, 10 Wheat., 312; Taylor v. Carryl, 20 How., 599; Jennings v. Carson, 4 Cranch, 2; The Mary, 9 id., 144.)
The defendant did not claim the proceeds of the sale of the barge. Such a claim was adverse to the title which he asserted. He had neither actual nor constructive notice that the court claimed any jurisdiction over or would proceed to pronounce the forfeiture of the vessel, and indeed it did not do so. The judgment of the District Court was conclusive on the question before it, viz., the ownership of the proceeds, and however essential it may have been in the determination of that question to pass upon the status of the barge and its liability to forfeiture, the barge itself was not the res, and the title to it was not affected by the decree.
That the proceeding is in rem, does not dispense with the rule of universal justice, that a party shall not be condemned without an opportunity to be heard. It is true that he is not entitled to personal notice before a court can adjudge the forfeiture of his property, but he must have notice, either actual or constructive, of the proceeding or it will be void. The custody of the res may be constructive notice that the court having possession will proceed to adjudicate upon it, and notice may be given in this way or by publication, according to the usual practice of the court, and then he is bound to defend or assert his rights if he has any. Notice in this way may never in fact reach him; in many cases the giving of personal notice is impracticable, nor is it required, but the rule requiring notice, either actual or constructive is fundamental and ought never to be departed from.
The question as to who was entitled to the proceeds of the barge, was one with which the defendant had no concern, if in fact, as he claimed, the sale from which the proceeds came was void. He was not called upon to defend his title to the barge under a proceeding to determine the right to the proceeds. ( Bradstreet v. Neptune Ins. Co., 3 Sum., 607; Lessee of Boswell v. Dickerson, 4 McLean, 267; Woodruff v. Taylor, 20 Vt., 65.)
The judgment should be affirmed.
All concur.
Judgment affirmed.