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al is entitled to the priority granted to the their sovereign capacity. Du Pont de NeUnited States by that section, the judgment mours & Co. v. Davis, 264 U. S. 456, 462, 44 below must be reversed. But it is said here, S. Ct. 364, 68 L. Ed. 788. But it was for and was held below, that such priority is in- Congress to determine whether or not claims hibited by the provisions of section 10, Act of arising out of such operation should have March 21, 1918, c. 25, 40 Stat. 451, 456 (Comp. | priority when the debtor made a voluntary St. 1918, Comp. St. Ann. Supp. 1919, 8 assignment. In cases of bankruptcy the stat3115), which provides:

"That carriers while under federal control 'shall be subject to all laws and liabilities as common carriers, whether arising under state or federal laws or at common law, except in so far as may be inconsistent with the provisions of this act or any other act applicable to such federal control or with any order of the President. Actions at law or suits in equity may be brought by and against such carriers and judgments rendered as now provided by law; and in any action at law or suit in equity against the carrier, no defense shall be made thereto upon the ground that the carrier is an instrumentality or agency of the federal government. Nor shall any such carrier be entitled to have transferred to a federal court any action heretofore or hereafter instituted by or against it, which action was not so transferable prior to the federal control of such carrier; and any action which has heretofore been so transferred because of such federal control or of any act of Congress or official order or proclamation relating thereto shall upon motion of either party be retransferred to the court in which it was originally instituted. But no process, mesne or final, shall

be levied against any property under such fed

eral control."

Under Davis v. Pringle, 268 U. S. 315, 45 S. Ct. 549, 69 L. Ed. 974, if the estate of the Rathbone Manufacturing Company were be

*239

ing administered under the Bankruptcy Act, the claims of the Director General would not be entitled to preference. It is also plain, under Bramwell v. United States Fidelity & Guaranty Co., 269 U. S. 483, 46 S. Ct. 176, 70 L. Ed. 368, Price, Receiver, v. United States, 269 U. S. 492, 46 S. Ct. 180, 70 L. Ed. 373, and United States v. Butterworth-Judson Corporation, supra (January 11, 1926), that, in proceedings like the present one, debts due directly to the United States, nothing else appearing, are ordinarily entitled to priority under R. S. § 3466. Decision of this cause, therefore, must turn upon the effect to be given section 10, Act of 1918, supra.

[1] All agree that the rights of the Director General rest upon statutory provisions, and not upon any sovereign prerogative of the United States. In taking over and operating the railroads, the United States acted in

ute then in force prohibited any preference.

In some matters, at least, under section 10, the United States stand exactly as if they were a railroad corporation operating as a common carrier. Director General v. Kastenbaum, 263 U. S. 25, 28, 44 S. Ct. 52, 68 L. Ed. 146. As said in Davis v. Pullen (C. C. A.) 277 F. 650, 655:

"There is a certain obvious injustice in giving the United States when engaged in an industrial and commercial venture, even although under war powers, superior rights over other creditors bearing like relations to insolvents."

And we think that the indicated purpose of Congress will be best carried out by construing the relevant statutes, so far as may be, with the general intent to preserve the substantive rights of all parties concerned as they would have existed but for federal con

trol.

*240

[2] Section 10 subjected the Director General, as an operator of common carriers, to the laws theretofore applicable *to them, except when inconsistent with some provision of the federal control acts or an order of the President, and forbade him to defend, in any suit against him as such operator, upon the ground that he was an instrumentality or agency of the federal government. In the circumstances presented by this record, it is reasonable to say that the statute confined his substantive rights to those which a carrier would have had, and prohibits him, as though he were an actual defendant in a suit, from resisting the demands of others for equal distribution of the insolvent's assets, under the commonly applied rule, upon the ground that he is an instrumentality of the federal government. To permit the claimed preference, we think, would conflict with the spirit and broad purpose of the statute. These become plain enough upon consideration of the just ends which Congress had in view together with the recent policy, revealed by the Bankruptcy Act, in respect of priorities.

The cause is properly here on the writ of certiorari. The appeal was improvidently allowed by the Circuit Judge, and is dismissed. The decree below is affirmed.

(271 U. S. 354)

(46 S. Ct.)

UNITED STATES v. KATZ et al. UNITED STATES v. FEUERSTEIN et al. (Argued March 11, 1926. Decided May 24, 1926.)

Nos. 726, 727.

view a judgment of the District Court (5 Fed. [2d] 527), sustaining demurrers to such indictments and granting motions to quash, the United States brings error. Affirmed.

Mr. William D. Mitchell, Sol. Gen., of Washington, D. C., Mrs. Mabel Walker Willebrandt, Asst. Atty. Gen., and Mr. Mahlon D. Kiefer, of Washington, D. C., for the United

Messrs. Wm. T. Connor, John R. K. Scott, and Benjamin M. Golder, all of Philadelphia, Pa., for defendant in error.

1. Intoxicating liquors 154(1)-One unlaw-
fully selling intoxicating liquor is not punish-States.
able for failure to keep record of sales, such
statutory requirement being applicable only
to permittees (National Prohibition Act Oct.
28, 1919, tit. 2, §§ 3, 10, 34 [Comp. St. Ann.
Supp. 1923, $$ 10138/2aa, 10138/2e,
101382u]; Revenue Law [Comp. St. 1916,
$$ 5981 to 6161]; Food Control Act Aug. 10,
1917 [Comp. St. 1918, Comp. St. Ann. Supp.
1919, $$ 3115e-31158kk, 31158-
3115r]; Const. Amend. 18).

Mr. Justice STONE delivered the opinion of the Court.

[1] The two defendants in error in each of these cases were indicted in the Eastern Dis

National Prohibition Act Oct. 28, 1919, tit.trict of Pennsylvania for a conspiracy to sell intoxicating liquors without making a permanent record of the sale, in violation of sec*355

2, § 10 (Comp. St. Ann. Supp. 1923, § 101381⁄2e), providing "no person shall manufacture," etc., "any liquor without making at tion 10, title 2 *of the National Prohibition the time a permanent record thereof showing in detail," etc., applies only to permittees, and Act of October 28, 1919, c. 85, 41 Stat. 305, failure of one unlawfully selling intoxicating | 312 (Comp. St. Ann. Supp. 1923, § 101381⁄2e). liquor to keep such record is not a crime in itself, in view of title 2, §§ 3, 34, of the National Prohibition Act (Comp. St. Ann. Supp. 1923, §§ 101382aa, 101382u), Revenue Law (Comp. St. 1916, §§ 5981-6161), Food Control Act Aug. 10, 1917 (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3115e-3115kk, 3115%-3115%г), and Const. Amend. 18.

2. Statutes 181 (2)-Laws are to be given sensible construction, and literal application avoided, if it leads to absurd consequences, and if reasonable application is consistent with legislative purpose.

The indictment in No. 726 charged that the defendant Katz conspired with the defendant Senn to sell for the Stewart Distilling Company to Senn a quantity of whisky, without making a record of the sale. A similar offense was charged against the defendants named in the indictment in No. 727.

Demurrers and motions to quash were interposed to both indictments, on the ground that they failed to charge any crime. In support of this contention it was argued that section 10, which requires a permanent rec

Laws are to be given a sensible construc-ord to be made of sales of intoxicating liqtion, and a literal application avoided, when it uors, applies only to persons authorized by will lead to absurd consequences, and when rea- the National Prohibition Act (Comp. St. Ann. sonable application is consistent with legisla-Supp. 1923, § 101384 et seq.) to sell alcoholic tive purpose.

3. Statutes 184, 211, 217.

liquor, and that the indictment failed to allege that either of the defendants charged with making the sales, or the Stewart Distillpre-ing Company, held a permit, or was otherwise

In ascertaining legislative purpose, courts may examine title of act, the source in vious legislation of the provision in question, and legislative plan.

4. Statutes 241(1)—General terms, descriptive of class made subject to a criminal statute, should be limited, where literal application leads to absurd results, and is not necessary to accomplishment of legislative purpose. General terms, descriptive of class of persons made subject to criminal statute, should be limited, where literal application would lead to absurd results, and where legislative purpose, gathered from whole act, would be satisfied by limited interpretation.

Mr. Justice Brandeis, dissenting.

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authorized to sell. The indictments were quashed by the District Court. 5 F.(2d) 527. The cases come here on writ of error to the District Court, under the provisions of the Criminal Appeals Act of March 2, 1907, c. 2564, 34 Stat. 1246 (Comp. St. § 1704).

The overt act charged in each indictment was the sale of whisky by one defendant to the other. This is an offense under the National Prohibition Act; but as the defendants in each case were only one buyer and one seller, and as the agreement of the parties was an essential element in the sale, an indictment of the buyer and seller for a conspiracy to make the sale would have been of doubtful validity. Compare United States v. N. Y. C. & H. R. R. (C. C.) 146 F. 298; United States v. Dietrich (C. C.) 126 F. 664; Vannata v. United States (C. C. A.) 289 F. 424, 427. This embarrassment could be avoided in an indictment for a criminal conspiracy only if the buyer and seller were

charged with conspiring to commit a sub-, furnished on demand, presumably by the stantive offense having an ingredient in ad- criminal keeping the record.

*356

dition to the sale, not requiring *the agreement of two persons for its completion. See Chadwick v. United States, 141 F. 225, 72 C. C. A. 343.

We are not now concerned with any question of legislative power to establish such a system but only with the question whether it was the intention of Congress to do so.

See

Hence the government takes the position construction; and a literal application of a [2, 3] All laws are to be given a sensible that the seller of intoxicating liquor is re- statute, which would lead to absurd consequired by the statute to keep a permanent quences, should be avoided whenever a rearecord of his sales, whether lawful or unlaw-sonable application can be given to it, conful, and that failure to do so is itself a crime, sistent with the legislative purpose. from which it would follow that a conspiracy Hawaii v. Mankichi, 190 U. S. 197, 212, 23 S. to effect a sale without such a record is an in- Ct. 787, 47 L. Ed. 1016, and cases there cited. dictable offense. No question is made but In ascertaining that purpose, we may examthat persons authorized to deal in alcoholic ine the title of the act (United States v. Fishliquors under the Prohibition Act are requir-er, 2 Cranch, 358, 386, 2 L. Ed. 304; United ed to make permanent records of their trans-States v. Palmer, 3 Wheat. 610, 631, 4 L. Ed. actions. But the government, to support a 471; Holy Trinity Church v. United States, charge of conspiracy applicable to buyer and 143 U. S. 457, 462, 12 S. Ct. 511, 36 L. Ed. seller, relies on the literal application of title 226), the source in previous legislation of the 2, § 10: particular provision in question (United "No person shall manufacture, purchase for States v. Saunders, 22 Wall. 492, 22 L. Ed. sale, sell, or transport any liquor without mak- 736; Viterbo v. Friedlander, 120 U. S. 707, ing at the time a permanent record thereof 7 S. Ct. 962, 30 L. Ed. 776; United States v. showing in detail the amount and kind of liquor Morrow, 266 U. S. 531, 535, 45 S. Ct. 173, 69 manufactured, purchased, sold, or transported. L. Ed. 425), and the legislative scheme or plan together with the names and addresses of the persons to whom sold, in case of sale, and the by which the general purpose of the act is to consignor and consignee in case of transporta- be carried out. See Platt v. Union Pacific tion, and the time and place of such manufac- R. R., 99 U. S. 48, 63-64, 25 L. Ed. 424; Bernture, sale, or transportation. The Commission-ier v. Bernier, 147 U. S. 242, 246, 13 S. Ct. 244, er may prescribe the form of such record, which 37 L. Ed. 152. shall at all times be open to inspection as in this act provided."

One purpose of the National Prohibition Act was to suppress the entire traffic in in

*358

Title 2, 8 34 (Comp. St. Ann. Supp. 1923, toxicating liquor as a beverage. Grogan v. § 101381⁄2u), provides:

"All records and reports kept or filed under the provisions of this act shall be subject to inspection at any reasonable hour by the Commissioner or any of his agents or by any public prosecutor or by any person designated by him, or by any peace officer in the state where the record is kept, and copies of such records and reports duly certified by the person with whom kept or filed may be introduced in evidence with like effect as the originals thereof, and verified copies of such records shall be furnished to the Commissioner when called for."

*357

To uphold the contention of the government, therefore, the language of section 10 must be taken to apply not *only to those who hold government permits authorizing them to deal in intoxicating liquors under a familiar system of regulation, to whom it admittedly is applicable, but to every criminal violator of the National Prohibition Act, even though making only a single, isolated sale. It must be taken also to extend the provisions of section 34, clearly applicable to such permittees, in such a way as to present the incongruity of a system of records to be kept by criminal violators of the act who are not permittees, in a form which the Commissioner may prescribe, which may be introduced in evidence on the certification of the person "with whom kept," and verified copies of which are to be

Walker & Sons, 259 U. S. 80, 89, 42 S. Ct. 423, 66 L. Ed. 836, 22 A. R. L. 1116. But the Eighteenth Amendment did not prohibit the use of intoxicating liquor for other than beverage purposes, and an important purpose of the act, as its title1 and contents show, was to regulate the manufacture, transportation, and use of intoxicating liquor for other than beverage purposes.

1923, § 101381⁄2aa) which prohibits the manuSection 3, title 2 (Comp. St. Ann. Supp. facture, sale, and possession of intoxicating liquor, expressly provides that:

"Liquor for nonbeverage purposes and wine for sacramental purposes may be manufactured, purchased, sold bartered, transported, imported, exported, delivered, furnished and possessed, but only as herein provided, and the commissioner may, upon application, issue permits

therefor. * *

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(46 S. Ct.)

gress had before it the provisions of the Rev- is also persuasive that the provisions of title enue Law (Comp. Stat. 1916, §§ 5981 to 6161) 2, § 34, already quoted, relating to "all recgoverning distillers, rectifiers, and brewers, ords and reports kept or filed under the prorequiring detailed records of all transactions, visions of this act," refer to records and reand laying down other regulations designed ports required of permittees.3 Nowhere in to promote the effective collection of liquor the reports of the committees does it appear taxes; it also had before it the regulatory that any such novel legislation was being system devised by the Internal Revenue proposed as is here contended for by the govBureau for carrying into effect the prohibi- ernment. On the contrary, it is stated in the tory legislation contained in the Food Control report of the House Judiciary Committee, Act of August 10, 1917, c. 53, 40 Stat. 276 page 7, that: (Comp. St. 1918, Comp. St. Ann. Supp. 1919, § 3115e-3115% kk, 3115%-3115%г), and subsequent war legislation. See 21 T. D. 7, No. 2788.

The business affected by this legislation was lawful business, subject to governmental reg*359

"Title 2 for the enforcement of the Eighteenth Amendment has in it no new or experimental features. Every provision in it has precedents in state or federal legislation."

The government does not suggest that there *361 is in fact any precedent in *legislation, state or national, for the interpretation which it urges here.

ulation; records of *transactions were required to be kept, as a condition of receiving governmental permission to operate, and such records were a convenient and necessary Of the 39 sections in title 2 of the act, means for protecting the interests of the gov- which deals with national prohibition, more ernment with respect to its revenues. than half, including the 7 sections which preWhen Congress came to enact the National cede section 10, contain provisions authorizProhibition Act, a similar method of permit ing or regulating the manufacture, sale, or license and a similar system of records transportation, or use of intoxicating liquor afforded a convenient means for the regula- for nonbeverage purposes. These provisions, tion and control of those dealing with alcoholic liquors for the nonbeverage purposes as authorized by the statute.

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2 Report No. 151 of the Senate Judiciary Committee, Aug. 18, 1919, to accompany H. R. 6810, which became the National Prohibition Act, contains the following statement on page 20:

"The provisions requiring those who sell or manufacture liquor for nonbeverage purposes to secure a permit is a continuation of the system now enforced by the federal authorities. It is the most effective means to insure obedience to the law and prevents the diversion of liquor for illegal purposes. It is a slight burden on the law-abiding citizens who are dealing in liquor for legal purposes."

Report No. 91, part 1, of the House Judiciary Committee, June 30, 1919, to accompany H. R. 6810, contains the following statement on page 2:

"Title 2, to enforce prohibition under the Eighteenth Amendment to the Constitution, contains substantially the same features at title 1 and in addition a system of permits such as is now in force under regulations of the Revenue Department, Treasury Decision 2788, and in the various prohibition codes. These permits are designed to prevent diversion of liquor from legal to illegitimate uses. This system greatly lessens prosecution by making it difficult for persons to obtain liquor except for legitimate purposes. In addition to the permit system, which is also provided for in title 3 (the industrial alcohol section) the act carries a number of the more essential penal provisions of the ordinary prohibition codes, such as those against advertising liquor."

The Senate Report, pages 7, 8, contains the following statement with reference to the provisions of the present section 34 of the National Prohibition Act:

"The requirement of section 35 [now 34]-that the Commissioner file all the reports, statements, and information required by title II as a part of the files of his office, in a permanent record, alphabetically arranged, with an indorsement showing the date when filed, etc., and to furnish certified copies of such reports, statements, and information to any person requesting the same-is deemed by the committee an unnecessary requirement, and one which will result in cumbering the office of the commissioner with reports, information, and data which would serve no useful purpose; that for all practical purposes it will be sufficient if all records and reports kept on file under the provisions of

the act shall be subject to inspection by the Commissioner or any of his agents, or by any public prosecutor or any person designated by him, and that copies of such records and reports, duly certified, may be introduced in evidence with like effect as the originals thereof. The committee has amended section 35 [now 34] accordingly. Section 10, it will be observed, authorizes the Commissioner to prescribe the form of the permanent record to be made by the manufacturer, purchaser, seller, or transporter of any liquor, and requires that such permanent record be at all times open to inspection by the Commissioner or his agents."

The following examples may be noted: Section 4 exempts from the operation of the act denatured alcohol, medicinal and toilet preparations, etc. It authorizes the manufacture of these articles and the purchase and possession of alcoholic liquors for that purpose under government permit, and requires the manufacturer to "keep the records, and make the reports specified in this act and as directed by the Commissioner."

Section 5 provides for the revocation of permits, if the product manufactured does not comply with the requirements of section 4.

Section 6 prohibits the sale, purchase, transportation, or prescription of liquor without a permit from the Commissioner, issued as prescribed in the section, except the purchase and use for medicinal purposes and for the treatment of alcoholism. This section also exempts sacramental wines from the provisions of the act, except as to the requirements

*362

read together, clearly indicate a statutory | United States, supra; United States v. Kirby, 7 Wall. 482, 19 L. Ed. 278; United States v. Palmer, supra.

not citizens of the United States, were indict

ed for a robbery committed on a foreign vessel on the high seas, under a statute which provided that, "if any person or persons shall

plan or scheme to regulate the disposition *of alcoholic liquor not prohibited by the Eight- In United States v. Palmer, the defendants, eenth Amendment, in such manner as to minimize the danger of its diversion from authorized or permitted uses to beverage purposes. These provisions plainly relate to those persons who are authorized to sell, transport, use or possess intoxicating liquors under the Eighteenth Amendment and the provision of section 3 of the act, already quoted.

*363

out

com*mit, upon the high seas, of the jurisdiction of any particular state, murder or robbery, * such offender should be guilty of piracy and punishable No section of the act requiring records to with death. Chief Justice Marshall pointed be made of dealings in alcoholic liquors re- out that Congress, under its constitutional lates to any but dealings authorized or per- | power to define and punish piracy, had aumitted under the statute, unless it be section thority to make a statute applicable to the 10. The question is thus presented, whether defendants; but, applying the principle of the requirement of section 10 that "no per- statutory construction to which we have re* * sell * son shall * * liquor with-ferred, he held that the words "any person out making at the time a permanent rec- or persons," although broad enough to comord thereof" is a regulatory measure appli- prehend every human being, could not, in cable to persons authorized to deal in nonbev-view of the exceptional consequences of a literage liquors, or whether it was intended to add to the crime of manufacturing, selling, or transporting, a second offense, whenever the person committing the crime should fail to make a record of his own wrongdoing. When the statute is read as a whole, and the implications of the latter, interpretation are taken into account, we think that it is not a reasonable or a fairly admissible interpretation.

eral application, and the intent of the Legislature, as derived from the title of the act and a reading of the whole statute, be construed to apply to persons, not citizens, who committed offenses on foreign vessels on the high seas.

In United States v. Jin Fuey Moy, supra, the defendant was indicted for a conspiracy "to have in * * * possession" of another person, not registered, a quantity of opium, [4] General terms descriptive of a class of in violation of the Opium Registration Act persons made subject to a criminal statute of 1914 (Comp. St. §§ 6287g-6287q), which demay and should be limited, where the literal clared it unlawful for "any person," who had application of the statute would lead to ex-not registered and paid the prescribed tax, to treme or absurd results, and where the legislative purpose gathered from the whole act would be satisfied by a more limited interpretation. United States v. Jin Fuey Moy, 241 U. S. 394, 36 S. Ct. 658, 60 L. Ed. 1061, Ann. Cas. 1917D, 854; Holy Trinity Church V.

of section 6 for permits (save for purchase) and to the requirements of section 10 for the keeping of records.

Section 7 authorizes physicians to prescribe liquor under government permit and requires a record of

such prescriptions.

Section 9 authorizes proceedings for the revocation of permits for the violation of the act, and section 27 provides that seized liquor may, under order of the court, be ordered sold to persons holding permits to purchase.

Section 11 requires manufacturers and wholesale or retail druggists, to keep, as part of the records required of them, a copy of all permits to purchase on which sales are made, and prohibits them from selling except to persons having permits to purchase.

Section 12 requires manufacturers of liquor for sale to attach to every package a label describing

its contents.

Section 13 makes it the duty of every carrier to make a record at the place of shipment of the receipt of any liquor transported, and section 14 requires the packages carried to be labeled in a specified way.

have in his possession or control any of the drug in question. This court held that the words "any person not registered" could not be taken to apply to any person in the United States, but must be read, in harmony with the purpose of the act, to refer to persons required by law to register.

We think the reasoning of these cases applicable here, and that the words "no person" in section 10 refer to persons authorized under other provisions of the act to carry on traffic in alcoholic liquors. It is not without significance that the Commissioner has never made any regulation with respect to records of bootlegging transactions, and that the published regulations contain no suggestion that section 10 has any application, except to persons who hold permits, or are otherwise

364

authorized by law to traffic in intoxicating
liquor. See National Lead Co. v. United
States, 252 U. S. 140, 145, 40 S. Ct. 237, 64 L
Ed. 496.
Affirmed.

Mr. Justice BRANDEIS dissents

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