and again between January 7 and February 1, 1927, delivered to Burns some seventy or more bills of lading purporting to show the loading of freight cars with drums of oil, tallow, paint, etc., at Bell Road siding. In most of these bills of lading the legendary Di Ganna Oil Company appeared as the shipper, and in all of the others the shippers were fictitious. The four bills of lading for the original loading of the four seized cars were among them.
The contents of the cars as appearing in these fake bills of lading corresponded in each case as to bulk and packages almost exactly with the drums of alcohol which Becherer's reports showed to have been moved on the same day from the Quaker Corporation's warehouse to its denaturing plant. In a more general way, they corresponded with the amount of alcohol shipped from the Publicker Company and apparently received at the Quaker warehouse.
An interesting coincidence was that the period of inactivity between December 22 and January 7 corresponded with the time when Becherer was on a vacation. Thus all of Preas' active and diversified commerce in oil, lumber, tallow, and paint, etc., from Bell Road siding was carried on while Becherer was at the Quaker plant in charge of the reports to the government of the receipt and disposition of alcohol, and it was temporarily suspended when he was not there.
In view of all this, it would seem to be useless to raise the question that the government has not proved the alcohol was diverted by the Quaker Corporation. The evidence that it did, though circumstantial, was overwhelming, and nothing need be added to the above recital of it.
As to the quantity of alcohol proved to have been diverted: Assuming a minimum of 50 gallons of alcohol to a drum at the taxable rate of $6.40 per proof gallon, it was only necessary to show the diversion of 141 drums of alcohol in order to sustain a verdict in the amount rendered, namely, $85,400. There were eighty drums of alcohol in the cars seized in Cleveland, and it was admitted by the defendant that the contents of these drums was alcohol. As to the Rechester car, the testimony was that there were "eighty steel drums of alcohol" in the car, and "that we handled each drum and found that it was filled." The testimony does not show that more than one drum was tested, but, in the absence of circumstances showing the fact to be otherwise, the assumption always is that a witness is testifying as to facts which he knows. If not, the other party can show it by cross-examination. So, where a witness says that he seized eighty drums of alcohol, it will be assumed that he means drums filled with alcohol, and that he knows that it is alcohol. The contrary is for the defendant to show. The eighty drums of supposed glucose in the Detroit car smelled of alcohol when unloaded. And it appears in evidence that agent Cranford "examined the contents and found them to be alcohol." The evidence is ample to sustain the verdict in more than the amount found.
The defendant bonding company argues with great earnestness that it was discharged as surety by reason of a material alteration in the contract which it guaranteed. The facts upon which this argument is based are as follows:
The bond in suit was executed December 8, 1925. It recites the issuance of a permit (No. 106) to Quaker Industrial Alcohol Corporation, and the conditions, in the usual form, are that the permittee "shall not violate the terms of such permit," and further that the principal "shall pay * * * all taxes * * * on all alcohol * * * not so transported, denatured or removed under lawful permit."
At the time the bond was executed, the Quaker Corporation held a basic permit No. 106, issued October 4, 1924, which authorized it to operate a denaturing plant. In November, 1925, in pursuance of a treasury decision, an attempt was made to compel the surrender of all these basic permits at the end of the current year so that thereafter annual applications would have to be made. On December 11, 1925, as a result of this nuling, the Quaker Corporation applied for a new permit for the year 1926, asserting, however, in the letter that, in their view, the existing permit did not expire, that the filing of renewed applications was unnecessary, and that the application was filed with the understanding that such act should not under any circumstances be considered a waiver of any and all rights which it then had under the existing laws and regulations.
This application appears never to have been acted upon, but on December 29, 1925, pending action upon it, a temporary permit, authorizing the operation of the plant for one month, was issued. This temporary permit differed in no way from the original basic permit except as to the term for which it was issued. Thereafter, by letters from the Prohibition Administrator, this temporary permit was renewed from month to month, and such letters covering the period when the diversions took place.
Even if the Quaker Corporation had unqualifiedly accepted the temporary permit and surrendered its existing permit, I would have no hesitation in holding that the surety was not discharged. It is well established by decisions of the Circuit Court of Appeals of this circuit that even a material change in the terms of the contract guaranteed will not operate to discharge a compensated surety unless the surety is materially injured or prejudiced by the change. U.S. v. U.S.F. & G. Company (C.C.) 178 F. 721; American Bonding Company v. United States (C.C.A.) 233 F. 364. This is also the general rule. Pickens County v. National Surety Company (C.C.A.) 13 F.2d 758. In this case, I cannot see how the surety could have been prejudiced in any way by a reduction of the term of the contract for which they had assumed liability, from perpetuity to a period of one month.
But there never was any change in the original contract. The government had no right to alter it without consent of the permittee, and the permittee never consented. As was stated by Judge Woolley in Pittsburgh-Buffalo Company v. American Fidelity Company (C.C.A.) 219 F. 818, 824: "If by alteration an old contract is transformed into a new or different one, thereby discharging a surety, a concurrence of the parties in making the alteration and in the meeting of their minds informing the new undertaking must have been present. A new contract, means a new agreement, and a new agreement between parties to an old one contemplates the action of both parties in making it." Obviously, there was no agreement of meeting of minds here. The Prohibition Administrator announced that he proposed (illegally) to terminate the rights of the permittee. The mere fact that the permittee acquiesced in this illegal action only to the extent of accepting a new permit does not indicate any meeting of minds as to the surrender of the old one. The application for the issuance of the new permit was not in any way inconsistent with the permittee's assertion that the old one was in force. If, instead of issuing a temporary permit which authorized the permittee to carry on its business exactly as usual, the Administrator had withheld alcohol until the old one was surrendered, a situation might have arisen where the permittee would have been compelled either to stand on its rights under the old permit or surrender them. But the fact that the permittee allowed an additional permit to issue, still claiming that the old one was in force and that the abrogation of it was illegal, cannot be said to be the formation of a new contract relationship.
Rule for a new trial is discharged, and judgment may be entered for the plaintiff upon the verdict.
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