Bernstein v. Peters

The court erred in striking, on demurrer, paragraph 6(b) of the plea and answer of the defendant.

DECIDED JUNE 10, 1943. STATEMENT OF FACTS BY SUTTON, J. J. A. Peters and J. A. Goethe, doing business as Savannah Distributing Company, brought suit against Harry M. Bernstein, to recover for certain intoxicating liquors sold and delivered to the defendant in Savannah, Chatham County, Georgia. On the trial the court overruled a motion to dismiss the action on the ground that it did not appear from the petition that the plaintiffs, at the time the liquors were sold, were duly licensed by law to conduct a wholesale business in intoxicating liquors. This court reversed that judgment. Bernstein v. Peters, 68 Ga. App. 218

(22 S.E.2d, 614). Before the remittitur of this court was made the judgment of the trial court an amendment which cured the defect was allowed. The defendant's answer as a plea of non-liability and as a cross-action alleged substantially as follows: (6) (a) On or about June 26, 1940, the defendant was approached by Henry V. Jenkins, the city salesman and employee of the plaintiffs, and was solicited to purchase from the plaintiffs a large quantity of liquors greatly in excess of the periodical purchases made by the defendant from the plaintiffs during a course of extended dealings between them. Jenkins stated to the defendant, as a reason for his desire to sell the defendant so large a quantity of liquors, that after July 1, 1940, the price of the said merchandise would go up at least two or more dollars per case; and when the defendant stated to him that he could not pay for that quantity of liquor upon the usual terms, Jenkins stated that he could pay for the same in convenient installments, about in the same manner as though he were purchasing current weekly or monthly supplies. The defendant then informed Jenkins that he did not have sufficient storage space in his package shop to accommodate so large a purchase, and that this fact was known to Jenkins; whereupon Jenkins advised him to store the liquors at his place of residence at 48 West Broad Street in Savannah. The place of business of the defendant was at 116 West Broad Street, a distance of about 300 feet south of the residence and on the east side of the street. At the same time he informed the defendant that he would not have to pay the Federal floor tax, which had been enacted by Congress, upon any of the liquor stored at his residence, Jenkins then well knowing that his advice upon that subject was false in fact and was made by him for the purpose of inducing the defendant to then purchase the large quantities of liquor. The defendant not only did not have any knowledge at that time of the provisions of the floor-tax law; but, through the long course of dealings between him and Jenkins as the agent of the plaintiffs, he relied upon the superior knowledge and experience which he supposed, as he had a right to do, was possessed by Jenkins, and not having any reason to suspect that Jenkins, by misrepresenting the facts in respect of such tax, would take advantage of him through his ignorance thereof. By reason of the extended experience of the defendant in purchasing liquors through Jenkins as the representative of the plaintiffs, over a long period of time, there had grown up a relation of trust and confidence between Jenkins and the defendant; and the defendant, being impressed by Jenkins with the idea that he knew whereof he spoke, and of which he had knowledge and experience superior to that of the defendant, was induced to rely and act upon such superior knowledge and experience of Jenkins, resulting in the purchase by the defendant from the plaintiffs, through Jenkins, their agent, of the liquors the purchase-price of which the plaintiffs sought to recover.

(b) Under the law of Georgia entitled "revenue tax act to legalize and control alcoholic beverages and liquors," enacted by the General Assembly, which was in force on June 26, 1940, and under the rules and regulations of the Department of Revenue of Georgia, adopted pursuant to that act of the legislature, it was unlawful for a wholesale dealer in alcoholic liquors to deliver to a retailer any alcoholic liquors at any place other than his licensed liquor store or package shop operated by the purchaser. Notwithstanding this law the plaintiffs, in violation thereof, delivered the liquors so purchased by the defendant on June 26, 1940, not at his licensed liquor store or package shop located at 116 West Broad Street, but at his place of residence not licensed to sell liquors, located at 48 West Broad Street in Savannah, contrary to the said law, by reason whereof the plaintiffs became, were and are particeps criminis to the violation of said law; and therefore they are legally not entitled to recover in this action for the purchase-price of the liquors.

(c) Section 3321 (a) of the United States Internal Revenue Code, title 26, enacts that every person who removes, deposits, or conceals, or is concerned in removing, depositing, or concealing any goods or commodities for and in respect whereof any tax is or shall be imposed, with intent to defraud the United States of such tax, or any part thereof, shall be liable to a fine or imprisonment, or both. Paragraph (B)-(1) of said section enacts that whenever any goods or commodities for and in respect whereof any tax is or shall be imposed are removed or deposited or concealed in any place with intent to defraud the United States of such tax, or any part thereof, all such goods and commodities shall be forfeited. By reason of the facts stated in subparagraph (a) of paragraph 6 hereinbefore, in respect to the plaintiffs being particeps criminis to the illegal transaction, they are not entitled to recover any part of the purchase-price of said merchandise.

(d) On or about July 1, 1940, the defendant, in reliance upon the said statement of the agent of the plaintiffs, made tax returns only of the liquors in his package shop, and did not include the liquors purchased from the plaintiffs and stored at his residence, delivery being made by the plaintiffs, the defendant paying the tax to the United States assessed upon only the liquors shown in said return. In making said return the defendant acted upon the statements of the plaintiffs through their agent Jenkins, relying upon the supposed superior knowledge and experience of Jenkins, and this defendant being ignorant of the subject, which fact was known to Jenkins, between whom and the defendant a relation of trust and confidence had grown up through a long course of dealings. Jenkins, as agent of the plaintiffs, acting for and in their behalf, took advantage of the defendant's ignorance of the revenue law in question, of which ignorance Jenkins knew, and took advantage of the trust and confidence which defendant reposed in him in respect of his superior knowledge and experience in the liquor tax laws of the United States and the State of Georgia, and thus foisted upon the defendant the purchase by him of said large quantities of liquors in excess of his then requirements, which conduct induced the defendant to act and rely thereon to his injury and damage as hereinafter set out. The participation of the plaintiffs through their agent, in the violations of law as hereinbefore and hereinafter set out, renders the contract of purchase of said liquors illegal and unenforceable; and therefore the plaintiffs can not recover in this action.

(e) This subparagraph recites the history of the things which happened to the defendant subsequently to the return made by him and payment of the floor tax, averring that the liquors were forfeited to the United States government by appropriate proceedings in the United States district court at Savannah, and that the defendant was indicted and convicted of the offense charged, a wilful making of a false floor-tax return; that in addition to the loss of the liquors he was put to great expense in the employment of counsel was subjected to great humiliation and endured severe mental strain, and is now required to make monthly reports to a probation officer, etc.; that in addition to said tax he was required to pay a penalty of $610.42; that by reason of the foregoing the plaintiffs have injured and damaged him in that sum for which, and for $400 as attorney's fees, he prays judgment, contending that for the illegal and unconscionable conduct of the plaintiffs through their agent Jenkins the defendant would not have suffered the financial loss and mental worry as stated above.

(7) The plaintiffs, acting through their agent Jenkins, perpetrated a fraud upon the defendant in the sale to him of the liquors in question, in that to induce him to purchase the liquors they offered to and did deliver them at his residence, and did state to him that the liquors thus stored would not be subject to the Federal floor tax and would not be included in his return, which would cover only the liquors at his package store. This agent, acting within the scope of his employment in so informing the defendant in respect of the floor tax, acted knowingly and wilfully with the intent to deceive the defendant and did actually deceive him; and but for said fraud and deceit he would not have purchased the liquors. As a result thereof, he did not include the liquors in his floor-tax return, and by reason thereof they were forfeited and became wholly lost to him. He has had to pay the floor tax thereon, and in addition a penalty of $610.42. The contract sued on is illegal, void, and unenforceable, and the plaintiffs have injured and damaged him in the sum of $610.42. By reason of the facts recited he has been injured and damaged in the total sum of $5000, for which he prays judgment.

Error is assigned on the striking, on demurrer, of the plea and cross-action of the defendant, and on the final judgment by the court for the plaintiffs; the defendant conceding that the plaintiffs were duly licensed at the time of the alleged illegal sale, and that the amount of the judgment was correct except for the alleged illegality. The plaintiff in error contends that the trial court erred in sustaining the demurrer to his plea, which, it is urged, set up a legal defense to the action, because as therein shown the contract was illegal and unenforceable, in that it violated the act of 1938 for legalizing and control of alcoholic beverages and liquors (Ga. L. Ex. Sess. 1937-38, p. 103; Code Ann. § 58-1001 et seq.); violated the rules and regulations promulgated by the State revenue commissioner in pursuance of the authority granted by such act, in that the plaintiffs agreed to deliver and did deliver the intoxicating liquors at a place other than the defendant's retail place of business; and violated stated provisions of the United States Internal Revenue Code as set out in the statement of facts above, and that the plaintiffs were thereby particeps criminis; that the plaintiffs committed a fraud upon the defendant through their agent Jenkins whose acts they ratified, in that between the parties a relation of trust and confidence had existed for a number of years, and through Jenkins the plaintiffs falsely and fraudulently deceived the defendant into believing that if he purchased and stored the liquors at his residence they would not be subject to the then existing Federal floor tax, which representation was known by the agent, but not by the defendant, to be wholly false, and it constituted a statement of a fact, and not, as contended by the plaintiffs, a mere opinion as to the law, and upon which statement the defendant had a right to rely because of the agent's supposed superior knowledge and experience. Because of the defendant's belief in and reliance upon such fraudulent representations in the purchase of the liquors and his acceptance of them at his place of residence, which he did not include in his return for the purpose of a Federal tax, he was thereby subjected to prosecution by the Federal government, was required to pay the floor tax on the liquors which were forfeited, together with a penalty of $610.42, and he has been tried and convicted and is under probation; by reason of which facts he has been injured and damaged by the plaintiffs $5000 for which sum he seeks judgment by cross-action.

The plaintiff in error concedes that the act relied upon does not in express terms prohibit the delivery to a retailer, at a place other than his retail store, liquor which has been stored in and withdrawn from a State warehouse, but avers that by reason of various provisions for control of the business of intoxicating liquors the implication is in the statute that such a delivery would be in contravention thereof. While the act provides that certain violations of its provisions would subject the offender to punishment as for a misdemeanor, we find nothing therein which by express provision or reasonable implication would prohibit delivery by a wholesaler to a retailer under the circumstances of this case. Section 8 of the act cited above (Code Ann. 1933, § 58-1022) delegates to the revenue commissioner certain powers in the enforcement of the act, among which is the power to "adopt and promulgate, repeal and amend such rules, regulations, standards, requirements, and orders, not inconsistent with this act or any law of this State or of the United States, as he may deem necessary to control the manufacture, sale, distribution, storage, or transportation of distilled spirits and alcohol, in accordance with the provisions of this act, and the conditions under which same may be withdrawn from said warehouses and distributed." It is thus seen that the conditions under which liquor may be withdrawn from a State warehouse and distributed to a retailer and be stored by him, whether in his own particular place of sale or elsewhere, are left for the direction of the revenue commissioner, where not inconsistent with the act or any law of this State or of the United States. While it is provided in the act as codified (Code Ann. § 58-1069) that "Whoever violates any of the provisions of this chapter for which no specific penalty is provided, or any of the rules and regulations issued under authority of this chapter, and in accord with the provisions of this chapter, shall be guilty of a misdemeanor, and upon conviction shall be punished as for a misdemeanor," in determining whether there has been a violation of the act, when viewed as to its penal provisions, it should be strictly construed. So construed, we find nothing in it which expressly or by reasonable implication makes unlawful the delivery, by a wholesaler to a retailer at his residence for storage, liquor which has been withdrawn from a State warehouse, or subjects one making such a delivery to indictment as for a misdemeanor.

However, it is alleged in paragraph 6(b) of the plea that the delivery was in violation of the rules and regulations of the Department of Revenue, adopted pursuant to the authority granted in the act relied on, which rules and regulations it was alleged made it unlawful for a wholesaler in alcoholic liquors to deliver any such liquors to a retailer at any place other than his licensed package shop. The special demurrer directed at this allegation, the ground of which was that a copy of the regulations was not set forth, was not passed on. As the allegation with reference to what the regulations provide, it is an allegation of fact, good as against a general demurrer. Similar allegations are often made as to municipal ordinances, without copying the ordinances verbatim. Inasmuch as the regulations are not set forth so that this court can construe them, and since this court can not take judicial notice of them, the allegation as it stands must be taken as true on demurrer. If the allegation can be supported by proof, the delivery, an integral part of the sale, was unlawful, and punishable as for a misdemeanor, and the seller could not recover in the action for the purchase-price.

The contention that the act of the plaintiffs in delivering liquors to the place of residence of the defendant made them particeps criminis to a concealment by the defendant, as forbidden by the pleaded sections of the United States Internal Revenue Code, and that they are not entitled to recover, is without merit. It has been held that mere knowledge by a lender of money that a borrower intends to use it for an illegal or immoral purpose, but where the lender does not participate in the illegal transaction or do anything in furtherance of the consummation of the unlawful design, will not prevent recovery.Hines v. Union Savings Bank, 120 Ga. 711 (48 S.E. 120). See Anderson v. Holbrook, 128 Ga. 233, 239 (57 S.E. 500);Mechanics Realty c. Co. v. Leva, 16 Ga. App. 7 (84 S.E. 222). This ruling controls in principle the issue here. It is not alleged that the plaintiffs or Jenkins, after delivery of the liquor, did anything in aid of Bernstein in the report to the United States Government of the quantity of liquors which he had on hand, or in concealing the fact that he had liquors stored at his residence. A mere lawful delivery of liquors which he had on hand, or in concealing the fact that he had liquors stored at his residence. A mere lawful delivery of liquor would not make the plaintiffs particeps criminis to an illegal transaction by Bernstein in thereafter concealing from the United States Government the fact that it was stored at his residence, and in not reporting it for the purposes of taxation. Singleton v.Bank of Monticello, 113 Ga. 527 (38 S.E. 947), relied on by the plaintiff in error as denying any right in the plaintiffs to recover, is distinguishable on its facts but recognizes the principle here ruled.

Nor did the court err in striking on demurrer that portion of the defendant's amendment in which he sought by cross-action to recover from the plaintiffs damages because of alleged fraud and deceit. The gist of the complaint is (1) that a confidential relationship existed between the agent Jenkins and Bernstein, (2) that Bernstein relied on the supposed superior knowledge and experience of Jenkins, and (3) that the representation made by Jenkins as to the liquors not being subject to a Federal floor tax if stored at Bernstein's residence was a representation of a fact, upon which he had a right to rely, and not a mere expression of opinion as to the law. In respect to confidential relations it is declared in the Code, § 37-707: "Any relations shall be deemed confidential, arising from nature or created by law, or resulting from contracts, where one party is so situated as to exercise a controlling influence over the will, conduct, and interest of another; or where, from similar relation of mutual confidence, the law requires the utmost good faith; such as partners, principal and agent, etc." In Boykin v. FranklinLife Insurance Co., 14 Ga. App. 666 (4) (82 S.E. 60), it was ruled: "The mere facts that one party to a contract had associated with the other party for eight or ten years, that their relations were friendly during that time, that one party was an organizer of the Farmers Union, of which the other was a member, and that the one therefore relied absolutely and implicitly upon the statements of the other, would not justify the party so relying in abandoning proper business caution and negligently signing a plain and unambiguous contract differing from what he intended to sign, and from what the other party represented it to be." In Dover v. Burns, 186 Ga. 19, 26 (196 S.E. 785), it was said: "The fact that it is alleged that the plaintiff reposed trust and confidence in the defendant Burns does not create a confidential relationship. In the majority of business dealings, opposite parties have trust and confidence in each other's integrity, but there is no confidential relationship by this alone. This state of facts does not bring the plaintiff within the protection of the Code, § 37-707, with reference to confidential relationships." See Stoddard Mfg. Co. v. Adams,122 Ga. 802 (50 S.E. 915). Under the facts and the principles of law ruled in the cases cited, no confidential relationship is shown to have existed between the parties, as contemplated by the statute. Furthermore, it does not appear that Bernstein did not in fact have equal opportunity to ascertain, before buying and storing the liquors, the truth as to whether or not they would be exempt from floor tax if stored at his residence. See Martin v. Harwell,115 Ga. 156 (3) (41 S.E. 686).

Was the representation made by Jenkins as to the liquors being exempt from floor tax if stored at Bernstein's residence a representation of a fact? We think not. Jenkins did not represent that the liquor was of a kind which was not taxable, even if it could be said that such a representation would be as to a fact. He merely stated that such liquors would not be subject to the Federal floor tax if stored at Bernstein's residence. Both parties knew that the liquor was intoxicating and generally taxable under the United States government floor tax. The representation in question was clearly an expression of opinion as to the law, upon which Bernstein had no right to rely; and it did not constitute actionable fraud and deceit. See, as to expressions of opinion as to the law, Claxton Bank v. Smith,34 Ga. App. 265 (129 S.E. 142); Beckman v. AtlanticRefining Co., 53 Ga. App. 671 (2) (187 S.E. 158); Salter v.Brown, 56 Ga. App. 792 (193 S.E. 903); National Life c.Insurance Co. v. Parker, 67 Ga. App. 1, 8 (19 S.E.2d 409).

It follows from what is said above that the defendant's plea and answer did not set up any defense, except as set up in paragraph 6(b) of the answer, with reference to the rules and regulations of the commissioner. The court erred in striking on general demurrer the defense set forth in that paragraph.

Judgment reversed. Stephens, P. J., and Felton, J., concur.