Argued December 4, 1901. Decided October 20, 1902.
Sections 6 and 7 of the War Revenue Act of 1898, 30 Stat. 448, c. 448, provided for certain stamp taxes on bonds, and other instruments enumerated in Schedule A of the act, but section 17 of the same act exempted "all bonds, debentures, or certificates of indebtedness issued by the officers of the United States Government, or by the officers of any State, county, town, municipal corporation, or other corporation exercising the taxing power." The "dramshop act" of Illinois and the Revised Code of Chicago provided for the giving of bonds by all applicants to whom licenses were granted to sell liquor in the city of Chicago. Ambrosini gave two such bonds as required by the state statute but failed to affix thereto United States revenue stamps, and was indicted for an offence under the War Revenue Act, tried, found guilty and sentenced to pay a fine after a motion to quash the indictment had been overruled. Held error and that the indictment should have been quashed. The General Assembly of Illinois in enacting the dramshop act legislated "against the evils arising from the sale of intoxicating liquors" not by prohibiting, but by regulating, the traffic, and such legislation was in exercise of the police power which is reserved to the States free from any Federal restriction material in this action. Such legislation (and ordinances of the city of Chicago) required bonds to be given by applicants as prerequisites to the issue of licenses permitting sales, and the granting of the license was a strictly governmental function and the giving of the bonds was a part of the same transaction, and to tax either would be to impair the efficiency of state and municipal action; this case, therefore, falls within the general principle that as the means and instrumentalities employed by the General Government to carry into operation the powers granted to it are exempt from taxation by the States, so are those of the States exempt from taxation by the General Government, and viewed in the light of this principle the bonds in question were exempted by section 17 of the War Revenue Act.
By article five, chapter 24, of the statutes of Illinois concerning cities, it was provided: "§ 1. The city council in cities, and president and the board of trustees in villages, shall have the following powers . . . " Fourth. To fix the amount, terms and manner of issuing and revoking licenses. . . ." Forty-sixth. To license, regulate and prohibit the selling or giving away of any intoxicating, malt, vinous, mixed or fermented liquor, the license not to extend beyond the municipal year in which it shall be granted, and to determine the amount to be paid for such license: . . . Provided, further, That in granting licenses, such corporate authorities shall comply with whatever general law of the State may be in force relative to the granting of licenses."". . . Ninety-sixth. To pass all ordinances, rules, and make all regulations proper or necessary to carry into effect the powers granted to cities or villages, with such fines or penalties as the city council or board of trustees shall deem proper: . . ." 1 Starr Curtis (2d ed.), 689, c. 24.The Revised Code of Chicago of 1897, provided: "The mayor of the city of Chicago shall, from time to time, grant licenses for the keeping of dram shops within the city of Chicago to persons who shall apply to him in writing therefor, and shall furnish evidence satisfying him of their good character. Each applicant shall execute to the city of Chicago a bond, with at least two sureties, to be approved by the city clerk or city collector, in the sum of five hundred dollars, conditioned that the applicant shall faithfully observe and keep all ordinances in force at the time of the application or thereafter to be passed during the period of the license applied for, and will keep closed, on Sundays, all doors opening out upon any street from the bar or room where such dram shop is to be kept; and that all windows opening upon any street from such bar or room shall, on Sundays, be provided with blinds, shutters or curtains, so as to obstruct the view from such street into such room. No application for a license shall be considered until such bond shall have been filed." 1 Rev. Code, 1897, p. 253, c. XXXIX, art. I.
The ordinance contained many other specific regulations of the traffic, and provided that licenses might be revoked by the mayor for violation of "any provision of any ordinance of the city council relating to intoxicating liquors, or any condition of the bond aforesaid." The conditions of the bond in the sum of $3000 to the People of the State of Illinois were substantially in the words of the statute. The conditions of the bond in the sum of $500 to the city of Chicago were somewhat more stringent than the language of the municipal code.
Mr. T.A. Moran and Mr. Levy Mayer for plaintiff.
Mr. Assistant Attorney General Beck for defendants in error.
By the dramshop act the general assembly of Illinois legislated, as was stated in the title of the act, "against the evils arising from the sale of intoxicating liquors," not by prohibiting the traffic altogether, but by regulating it in protection of the public. The act concerning cities authorized municipal action subject to the general law.
The legislation was enacted in the exercise of the police power for the safety, welfare and health of the community, and it is conceded that that power is a power reserved by the States, free from Federal restriction in any particular material here.
The act and the ordinance required these bonds to be given as prerequisites to the issue of licenses permitting the sale. The licenses could not be issued without compliance with this condition precedent. The statute expressly provided that no license should be granted unless the applicant "shall first give bond in the penal sum of $3000," and the ordinance, that "no application for a license shall be considered until such bond shall have been filed."
The bonds were obviously intended to secure the proper enforcement of the laws in respect of the sale of intoxicating liquors; the prompt payment of fines and penalties; a remedy for injuries in person, property or means of support; and the protection of the public in divers other enumerated particulars. The granting of the licenses was the exercise of a strictly governmental function, and the giving of the bonds was part of the same transaction. To tax the license would be to impair the efficiency of state and municipal action on the subject and assume the power to suppress such action. And considering license and bond together, taxation of the bond involves the same consequences. In themselves the bonds were not mere incidents of the regulation of the traffic, but essential safeguards against its evils, and governmental instrumentalities of State and of city, as authorized by the State, to insure the public welfare in the conduct of the business, although the business itself was not governmental. They were not mere individual undertakings to secure a personal privilege as suggested by the court below, but means for the preservation of the peace, the health and the safety of the community in compelling strict observance of the law, and remedying injurious results.
The general principle is that as the means and instrumentalities employed by the General Government to carry into operation the powers granted to it are exempt from taxation by the States, so are those of the States exempt from taxation by the General Government. It rests on the law of self-preservation, for any government, whose means employed in conducting its strictly governmental operations are subject to the control of another and distinct government, exists only at the mercy of the latter. Nelson, J., Collector v. Day, 11 Wall. 113.
Viewed in the light of that general principle, we think it clear that Congress, lest the broad language of Schedule A, "and all other bonds of any description," might literally cover bonds such as those in question, and in avoidance of controversy in that regard, exempted them by section 17, wherein it was declared that it was intended "to exempt from stamp taxes imposed by this act, such State, county, town, or other municipal corporations in the exercise only of functions strictly belonging to them in their ordinary governmental, taxing or municipal capacity." True, this language was used in a proviso, and the enacting clause exempted bonds "issued by the officers of any State, county, town, municipal corporation or other corporation exercising the taxing power;" but as the bonds were required by the State and the city and were issued for the benefit of the public and not for the benefit of the individuals who executed them, it appears to us that they came fairly within the meaning of the clause, assuming that they were covered by Schedule A. The question is whether the bonds were taken in the exercise of a function strictly belonging to the State and city in their ordinary governmental capacity, and we are of opinion that they were, and that they were exempted as no more taxable than the licenses. Either they were exempt, apart from the proviso, because, in the sense of the statute, issued by the State and city, or the proviso so far qualified the language of the enacting clause as to exempt them in exempting the State and city in respect of the exercise of strictly governmental functions.
We conclude, therefore, that they were not taxable within the statute. United States v. Owens, 100 F. 70; Stirneman v. Smith, 100 F. 600; Warwick v. Bettman, 102 F. 127; S.C., 108 F. 46; People v. City, 31 C.L.N. 247.
Judgment reversed and cause remanded with a direction to quash the indictment.
MR. JUSTICE HARLAN did not hear the argument and took no part in the decision.