L.A. Warehouse Co. v. Am. Distilling Co.

This is an action by a bailee to recover from the bailor-owner moneys expended by the former in payment of an excise tax on the latter’s property. The judgment in favor of the plaintiff-bailee must be sustained.

The property involved was 2092.5 gallons of gin; exclusive of the tax it was worth 28 cents per gallon. The tax was the United States Internal Revenue excise on distilled *404 spirits; it was imposed at the rate of $2.25 a gallon. Under the law (Int. Rev. Code, § 2800(a) (1) and (e), U.S.C.A., Title 26) such tax attached to the gin “as soon as this substance [came into] . . . existence as such.” Obviously, therefore, the gin, as soon as it came into “existence as such,” represented an invested value of $2.53 a gallon. (The possibility of abatement of the tax upon destruction of the gin under some circumstances need not be considered, as such contingency did not arise here.) Any owner of the gin necessarily had to consider its value as including the $2.25 a gallon tax inasmuch as such tax had to be paid.

Notwithstanding the fact that the tax attached to the gin simultaneously with its coming into existence, the actual payment of the tax could be deferred so long as the…

I concur in the result reached in the majority opinion but do not agree that the federal excise tax *408 on distilled spirits is a property tax, that the tax follows the property “as a necessarily included part of the value thereof,” or that it “becomes an obligation of the owner, as an incident of ownership.” To employ property law concepts in the solution of problems like the present one can lead only to confusion.

The issue turns not upon who had title to the liquor that was destroyed, but upon whose tax liability was discharged by plaintiff when it paid the tax after the destruction of the liquor. Defendant contends that plaintiff paid its own debt, on the ground that the liquor was being transported under the plaintiff’s bond at the time it was lost. Plaintiff contends that it paid defendant’s debt, and that the provisions requiring it to post a bond guaranteeing the payment of the tax in the event the liquor was withdrawn from bond are designed, not to impose a new or substituted tax, but merely to insure collection of a tax already imposed. The determination of this issue rests upon the proper interpretation of the federal statutes and regulations with respect to the…