St. Paul Mercury-Indemnity Co. v. United States

Appellee, hereinafter referred to as the Government, instituted this suit seeking, [1] recovery from appellant Livermore Winery hereinafter referred to as taxpayer, of distilled spirits taxes 1 on brandy lost in December 1936; and [2] recovery of the same amount from taxpayer and appellant St. Paul Mercury-Indemnity Company, on a fruit distiller’s bond. The bond, executed by taxpayer as principal, and the Indemnity Company as surety, was conditioned to secure, among other things, the payment of all taxes on brandy produced by taxpayer.

On December 26, 1936, taxpayer, a California corporation, was engaged in the manufacture of wines at Livermore, California. Sometime during the night of December 26-27, 1936, one Renteria, who was then employed by taxpayer as a night distiller, attached a water hose to the distilling material line in the distillery building, and turned the water into the still to wash it. He left the water on all night but neglected to open the stop line valve with the result that the water backed up into a receiving tank, which was also in the distillery, and which was partially filled with brandy.

The following morning the receiving tank was found overflowing…