Commonwealth v. Rosenfield Bros.

Opinion- or the couet by JUDGE BARKER Reversing : The appellees, Rosenfield Bros. & Co., are the owners and proprietors of a distillery bonded warehouse in this State, wherein was stored during the fiscal years from 1898 to 1903, inclusive, distilled spirits; and this is a proceeding on the part of the Commonwealth, by the Auditor’s agent, to collect interest alleged to be due on the taxes assessed for State and county purposes during the bonded period. Without entering into a detailed statement of the pleadings, we can materially abbreviate the opinion by a simple statement of the issues, which are adequately presented in the record. ■No question is raised as to the regularity of the assessment of the distilled spirits, or of the payment by appellees of the principal of the taxes due thereon at the proper time. The questions presented are: First, whether or not the taxes due from appellees to the Commonwealth do or do not bear interest under the statute regulating the taxation of distilled spirits. Second, if so, is, or not, the Commonwealth estopped from now collecting the interest by reason of the fact that the Auditor received the principal sum of the taxes — 380 — from appellees, without interest. And, third, whether-the 'five-years statute of limitation applies to the claim of the 'Commonwealth under this proceeding. The latv regulating the subject in hand is contained in article 5, c. 108, Ky. St., 1903, sections 4105 to 4114, inclusive. The following sections, relating to the payment of the tases, are peculiarly applicable to the subject under discussion: “Section 4109. Any person or corporation having the custody of such spirits on the fifteenth day of September in the year the assessment is made, shall be liable for all taxes due thereon, together with all interest and penalties which may accrue; and any warehouseman or custodian of such spirits, who shall pay the taxes, interest or penalties on such spirits, shall have a lien thereon .for the amount so paid, ■with legal interest from day of payment. “Section ,4110. Taxes on distilled spirits- which may be assessed while in a bonded warehouse, and on which the United States Government tax has not been paid, or will not become due before the first day of March after the assessment, shall be due on the second day of January, May and September next after the said government tax becomes due or be paid, or when the spirits are removed from the warehouse; and the taxes on each year’s assessment shall bear legal interest until paid. “Section 4111. Every owner or proprietor of a bonded Warehouse in which distilled spirits may be stored, as contemplated in the preceding section, shall, on the first day of January, May and September next after said government tax shall have been paid, become due, or be removed from the warehouse, make and transmit to the Auditor of Public Accounts, and the clerk of the county court in which the spirits may have been at the time of assessment, a — 381 — Statement sworn to by tlie person whose duty it is to make the report, showing the quantity of spirits on which the ■government tax has been paid or has become due, and what spirits have been removed from the warehouse during the preceding four months; the years in which such spirits were assessed for taxation, and the county, city, town or taxing district in which the warehouse is situated in which ihe Spirits were .stored at the time of the assessment, and shall, at the same time, pay all taxes and interest on such spirits due the State, county, taxing district, city, or town to the officers entitled to receive the same. “Section 4112. On the failure of any owner or proprietor of any such warehouse to pay the taxes and interest within five days after the same becomes due, he shall be deemed delinquent, and a penalty of eight per cent, on each year’s taxes due on the spirits shall attach, and the officer authorized to collect such taxes shall at once cause such proceeding to be instituted for the collection of such taxes, with such interest and penalties as may be provided by law for the collection of other delinquent taxes,” These sections are substantially the law as enacted in 1S92 (Laws 1892, p. 312, c. 103, section 6), except that the following language, with which section 4110 closes, “ and the taxes on each year’s assessment shall bear legal interest until paid,” was originally as follows, “and the taxes on each year’s assessment shall bear interest as other taxes;” the change having been made in 1902 (Laws 1902, p. 321, c. 128, section 6). The first question for adjudication is whether or not, under the laws as existing from 1892 to 1902, the taxes in question bore interest. It will be observed that in each of the foregoing sections, wherever the payment of taxes is mentioned, it is also provided that the payment of interest — 382 — shall be made; and if it be true, as contended for by appellant, that the taxes under consideration do not bear interest during the bonded period, then it must be confessed that the Legislature has taken great pains to insert into every section relating, to the subject-matter words which mean nothing. In section 4109 it is provided that the “person or corporation having the custody of such spirits on the fifteenth, day of September in the year the assessment is made, shall be liable for all taxes due thereon, together with all interest and penalties which may accrue,” and “when payment shall be made by the warehouseman of the taxes, interest or penalties, he shall have a lien for the amount so paid, with intei'est from the date of payment.” Section 4110 (prior to 1902) : “And the taxes on each year’s assessment shall bear interest as other taxes.” Section 4111 provides how and when the State taxes shall be paid, and that the proprietor of the warehouse “shall, at the same time, pay all taxes and interest on such spirits due the State, county, taxing district, city, or town to the officer entitled to reveive the same.” Section 4112: “On the failure of any owner or proprietor of any such warehouse to pay the taxes and interest within five days after the same becomes due, he shall be deemed delinquent,” etc. We do not know how ihe Legislature could have made it plainer that State taxes on whisky m bond should bear interest than by the language used in the sections aforesaid. It is contended, however*, that inasmuch as the language of section 4110 is, “and the taxes on each year’s assessment shall bear interest as other taxes,” and because other taxes do not bear interest, therefore all of the language used by the Legislature in providing for interest on deferred payment of taxes assessed against whisky in bond is nullified. To this, we can not agree. If there is anything plain — 383 — in tbe statute in band', it is that tbe taxes shall bear interest, and. it can not be consonant with any known or sound principle of statutory construction that tbe three words, “as other taxes,” because they are incorrectly used, shall nullify all of the other parts! of the statute, which make it perfectly clear that the Legislature intended that the taxes should bear interest. It may be conceded, as urged by counsel for appellees, that taxes do not bear interest without a special requirement therefor. We think that the sections quoted plainly show that the Legislature intended to require the deferred payments of taxes on whisky in bond should bear interest. Let us see, now, what the statutory requirement on the subject of interest on other taxes is. Section 4091 provides, in regard to taxation on the franchises of corporations, that if they (the corporations) fail to pay the taxes due, after receiving thirty days’ notice, they shall be deemed delinquent, and a penalty of ten per cent, on the amount of the tax shall attach, and thereafter said tax shall bear interest at the rate of ten per cent, per annum. Section 4103 contains a similar provision as to interest with reference to railroad taxes as that contained in section 4091, and section 4148 provides as follows: “Any person or persons failing to pay their taxes by the first day of December in the year following the assessment for such taxes, shall pay six per centum additional on the tax so due and unpaid.” Now, while it may be admitted that technically this is a penalty, and not interest, we think it clear that it is the provision specifically alluded to in section 411Ó, and what was meant by the use of the words “as other taxes” was merely to fix the time at which the interest theretofore provided for commenced to run, and the rate thereof; that is, the interest on taxes on spirits in bond should commence to run on the first day of — 384 — December in the year following the assessment, and should be at the rate of sis per cent. This conclusion is fortified by the fact that the penalty of six per centum inflicted for the nonpayment of other taxes under section 4143 coincides in amount with legal interest, as defined in section 2218 of the statutes. So we find that “other taxes,” after a specified time, either bear interest at a fixed rate, or a penalty coinciding in amount with the legal rate of interest — six per cent. The cardinal rule or statutory construction is that the intention of the Legislature shall be effectuated, even at the expense of the letter of the law; and, to accomplish this, the meaning of words may be modified, the structure of sentences changed, or some words rejected altogether, and others interpolated. Endlich, in his work on the Interpretation of the Statutes, section 295, thus states the ruler “Where the language of a statute, in its ordinary meaning and grammatical construction leads to manifest contra^diction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence. This is done sometimes by giving an unusual meaning to particular words, sometimes by altering their collocation, or by rejecting them altogether, or by interpolating other words — under the influence, no doubt, of an irresistible conviction that the Legislature could not possibly have intended’ what its words signify, and that the modifications thus made are mere corrections of careless language, and really give the true intention. Tire ascertainment of the latter is the cardinal rule, or rather the end and object of all construction; and where the real design of the Legislature in ordaining a statute, although it be not precisely expressed, is yet plainly perceivable or ascertained — 385 — with reasonable certainty, the language of the statute must be given such a construction as will carry that design into effect, even though in so doing the exact letter of the law be sacrificed, or though the construction be, indeed, contrary to the letter. And this- rule holds good even in the construction of criminal statutes. Of course, if the meaning of the Legislature is clear, every technical rule of construction must yield, and, though the words used to express that meaning be not apt for the purpose, they will be so construed as to serve the same. And a fortiori} if there is an express declaration of the intent and meaning of a statute by a provision in the* same to carry out that intent, all other parts of the act are controlled in construction of it. A clause doubtful upon its grammatical construction will be controlled by the general intent of the Legislature, rather than by the literal meaning of the language.” This' principle is upheld in the case of Commonwealth v. Grinstead & Tinsley, 108 Ky., 59, 55 S. W., 720, 21 Ky. Law Rep., 1444. In the case of Sams v. Sams, 85 Ky., 400, 9 R., 24, 3 S. W., 594, it is said: “It is a well settled rule of construction that the letter of a statute will not be followed when it leads to an absurd conclusion; but, on the contrary, the reason for the enactment must enter into its interpretation, so as to determine what was intended to be accomplished by it.” In the case of Bailey v. Commonwealth, 11 Bush, 689, Judge Cofer, speaking for the court, said:' “Words in a statute were always to be understood according to the approved use of language. But there are other rules of construction of equal dignity and importance, which must not be overlooked, and which, although not incorporated in our statute, are as binding upon the courts as if embodied in it. One of these rules is that 'every statute ought to be expounded, not according to the letter, but according to the meaning’; — 386 — and another, that '‘every interpretation that leads to an absurdity ought to be rejected’; and still another that a law ‘ought to be interpreted in such manner as that it may have effect, and not be found vain and illusive.’ ” To the same effect is Feemster v. Anderson, 6 T. B. Mon., 537. We find no difficulty in reaching the conclusion that the ■Legislature manifestly intended that distilled spirits in bond should be assessed each year as other taxes, and, although not required to be paid until the bonded period is at an end, or the United States Government taxes paid, yet for this privilege of retaining the State’s money the warehouseman should pay interest thereon. This conclusion is reached without reference to the language “as other taxes.” What, then, is lacking on the subject in hand before we reach a consideration of these three words? Not that the distiller should pay interest on the deferred taxes, for that is plainly provided for without reference to these words. All that is lacking in the language used by the Legislature up to the time that we are forced to apply to the words “as other taxes,” to make it intelligible, is the time when the interest shall commence to run, and the rate at which it shall run. It is manifest, therefore, that the use of these words was intended to supply the meaning or purpose which was unsupplied by the- other language already used. Turning, then to section 4143, to ascertain the meaning of the words “as other taxes,” we find that other taxes bear, not interest, but a penalty of six per cent., if not paid on the first day of December in the year following the assessment; and we are thus provided with the two lacking constituents necessary to make the meaning of the Legislature on the whole subject of interest on whisky in bond intelligible. Applying the principle enunciated by Mr. Endlich in the section above quoted, and sustained by the utterances of our own court — 387 — in the cases cited, we ignore the fact that the Legislature, in using the words “as other taxes” with reference to interest, was technically incorrect, and borrow from the expression all that is essential — the time when the interest commenced to run, and the rate at which it runs — thus making the statute both practicable and intelligible, and saving it from the criticism of being either “absurd” or “vain" and illusive.” And this conclusion we reach in construing the statute as an original proposition. But we are not left without direct authority on the subject in hand. This very question arose in the case of Commonwealth v. Taylor, 101 Ky., 327, 19 R., 552, 41 S. W., 11. The court had originally reached the conclusion that the act relating to the taxation of distilled spirits in bond was unconstitutional, as being special legislation and contrary to the requirements of uniformity in the matter of taxation, as is shown by the first opinion delivered by Judge White, 88 S. W., 10. Upon a petition for rehearing by the warehouseman, the original opinion was withdrawn, and that contained in-volume 101 was delivered by Judge Burnam. In the second opinion of ihe court, a most elaborate exposition of the unique position which distilled spirits in bond occupies in our fiscal system is given. It is there shown that, owing to the fact that the United States government takes actual possession and control of distilled spirits at the time of its manufacture, and holds it in bond for a period of eight years, it is impossible for the State to enforce its lien for-taxes until after the lien of the general government is extinguished, although the property is. assessed each year by the State, This results in a great benefit to the warehouseman, by enabling him to find purchasers- for his goods before he is required to pay cash for taxes, and for this benefit, and in order to preserve uniformity in taxation, the statute — 388 — requires him to pay interest. On this subject, the court said: “The assessment and taxes upon the property within the territorial limits of the authority levying them are uniform, and are imposed as fairly, according to value by an assessment made in the mode prescribed by the act under discussion, as they could be by assessment made by a county assessor, and, having been so assessed, are collected under the same general laws regulating the revenues as the taxes imposed on other property, except as to the time of payment, and this delay is necessarily made to depend upon the payment of the taxes due to the United States government upon the same property; but, to preserve uniformity, distillers are required to pay interest on the deferred taxes.” This language is not the dictum of the writer of the opinion. It was essential to the upholding of the constitutionality of the act, as to uniformity of taxation, that the conclusion enunciated should have been reached. This opinion was delivered on May 27, 1897, and since that time there has been no room for two opinions on the subject in hand. We freely admit the great force of the doctrine of contemporaneous construction, where the meaning of the statute is vague or uncertain; but, when the court of last resort construes a statute, the further utility of the doctrine ceases. But it is urgently insisted that the State is now estopped from collecting the interest involved herein, because the Auditor received the principal sum of the taxes due without interest, and the warehouseman, who was only the custodian, and not the owner, of the whisky, permitted it to be carried away by the owner, and thus lost his lien through the wrongful act of the State’s fiscal officer, and that, if the distiller is now required to pay the interest, he will have no recourse against the owner for the amount of the interest adjudged — 389 — against him. It may be true that this will tvork a hardship upon the distiller, but it was his duty, under the law, to pay the taxes and the accrued interest, and we can not, in his behalf, waive the time honored and conclusive presumption that he knew the law; and especially is this true since 1897, when the case of Commonwealth v. Taylor was decided, thus establishing beyond all question that taxes on whisky in bond bore interest on the assessments made during the bonded period. Waiving this, however, it is elementary that the State is not estopped by the laches of its officers. • Bigelow, in his work on estoppel, p. 341, says: “Clearly, the State can not be estopped by the unauthorized act of its officers.” The same rule is laid down in Am. & Eng. Ency. of Law (2d Ed.) p. 397, in this language: “But such estoppels can not arise from the unauthorized act of the agent or officer of the State.” See, also, Commonwealth v. Carter, 55 S. W., 701, 21 Ky. Law Rep., 1509; Elmondorff v. Carmichael, etc., 3 Litt., 481, 14 Am. Dec., 86; Pulaski v. State, 42 Ark., 118; Attorney General v. Marr, 55 Mich., 445, 21 N. W., 883; and State v. Brewer, 64 Ala., 287. Since the case of Commonwealth v. Knute, 115 Ky., 239, 24 Ky. Law Rep., 2138, the rule has been established in this State that actions such as these are barred by the expiration of five years after the cause of action arose. Wherefore the judgment is reversed for proceedings consistent with this opinion.