Kirmeyer v. Kansas, 236 U.S. 568 (1915)

In the opinion of the trial court the transactions disclosed constituted a part of interstate commerce within the protection of the Constitution of the United States; and judgment was rendered for Kirmeyer. Upon appeal the Supreme Court of the State declared, “The broad question here is whether the defendant was really engaged in commerce between the States of Missouri and Kansas, or was he only seeking by tricks and devices to evade the laws of his State—doing by indirection that which could not lawfully be done by ordinary and direct methods.” Referring to numerous opinions of this court it further said they “do not preclude a fair inquiry into methods and practices in order to determine whether transactions p. 570under investigation constitute legitimate interstate commerce or are colorable merely and intended to evade and defeat the just operation of the constitution and law of the State.” And the conclusion was— “It is true that a citizen of Kansas who finds that his business is prohibited by our laws may in good faith engage in the same business in another State where the legal obstacle does not exist. But he may not under the guise of moving across the state line, and other shifts or devices to evade the statutes of the State, continue in the prohibited business here and be immune from the penalties of our law. From the facts found by the court and from the testimony of the defendant, it appears that his business was not legitimate interstate commerce but was carried on in violation of the statutes of this State and is subject to abatement and injunction.” Accordingly the action of the district court was reversed with instructions to grant the relief prayed for (88 Kansas, 589, 600, 603). Thereupon this writ of error was sued out.

(a) Rigorous statutes have long prohibited the sale of intoxicating liquors within the State of Kansas. The city of Leavenworth lies on the Missouri River; on the opposite bank in Missouri is Stillings, a village with one store, roundhouse, a few residences, eight or ten beer warehouses, and a freight depot without a regular agent, but no post office. For a long time plaintiff in error has resided in Leavenworth and prior to 1907 he carried on there an illicit beer trade; for use in the same he there maintained a business place and warehouse and kept wagons and teams. In that year, alarmed by the activities of officials, he discontinued this office and warehouse and immediately opened others in Stillings and connected them with the Leavenworth telephone exchange. He did not change his residence nor remove his wagons and teams p. 571from Leavenworth but kept them in quarters connected by telephone with the local exchange and continued to use them for hauling to and from the new warehouse and making deliveries. Thereafter he received at Stillings barrels, cases and casks of beer in carload lots from Kansas City and other points; sometimes he received like merchandise at the railroad depot in Leavenworth which was then hauled across the river. At the Stillings office he received and accepted orders for beer to be delivered in Leavenworth and other points in Kansas. Eighty-five per cent, came by telephone; the remainder through the Leavenworth post office, but these were carried to his place of business before being opened.

The instant cause arose before passage of the Act of p. 572Congress, approved March 1, 1913, c. 90, 37 Stat. 699, known as the Webb-Kenyon Bill; consequently neither its construction nor application is now involved; and what is said herein of course has reference to conditions existing prior to that enactment.

The Supreme Court of the State gave much weight to the dealer’s past conduct and animating purpose and p. 573relied upon language quoted from Austin v. Tennessee, 179 U. S. 343, and Cook v. Marshall County, 196 U. S. 261.

Reversed. p. 574LINN & LANE TIMBER COMPANY v. UNITED STATES.

These are suits in equity brought by the United States against the appellants to annul patents issued under the Timber and Stone Act of June 3, 1878, c. 151, 20 Stat. 89, on the ground that the entries were fraudulent. Both of the courts below have found that the entries were fraudulent, that the defendant Smith was either a party to the fraud or chargeable with notice of it, and that the Linn & Lane Timber Company stood in no better position than Smith. The Circuit Court of Appeals made decrees for the United States in respect of all the lands concerned. 181 Fed. Rep. 545. 196 Fed. Rep. 593; 116 C. C. A. 267. 203 Fed. Rep. 394; 121 C. C. A. 498. The main question here concerns the statute of limitations: u suits to vacate p. 576and annul patents hereafter issued shall only be brought within six years after the date of the issuance of such patents.” Act of March 3, 1891, c. 561, § 8; 26 Stat. 1095, 1099. See Act of March 3, 1891, c. 559; 26 Stat. 1093. In No. 46 the twenty-eight patents in controversy were issued on August 12,1902. In No. 159, nine of the patents were issued on August 12, 1902, and eight on July 9, 1902. The bills were filed and subpoenas were taken out and delivered to the Marshal on May 25, 1908. On July 20 the Marshal returned non est inventus as to Smith. An order of notice was applied for on the same day, suggesting that he was residing in Minneapolis, and was granted on July 27. Smith was served with process on August 11, 1908, and the corporation was made a party on November 16, and was served on November 18, 1908; so that it will be seen that the corporation was not brought into the suit until more than six years had run after the issue of all the patents and that Smith was served more than six years after the issue of eight of the patents involved in No. 159. On the other hand the bills were filed within six years.

Upon the facts as found by the two courts below we must take it that the corporation was the mere tool of Smith, that his knowledge was its knowledge, McCaskill Co. v. United States, 216 U. S. 504, and that it was party to an effort to keep the title concealed until it was too late for the United States to complain. It even is open to some doubt whether the deeds ever were delivered until they were recorded, and it seems open to none that, as was said by the Circuit Court of Appeals, recording the deeds was the first business the corporation did. This being so, the difference in legal personality between Smith and the corporation gives the corporation no greater rights than Smith. It cannot be privy to a fraud and on the ground of its success set up a title of which, if that be material, Smith is to have substantially the whole advantage, and thus defeat the adjudication against Smith that otherwise would undo the fraud. There is no question of creditors’ rights and the only ground for hesitation is that before the bill was filed some of the shares had been pledged by Smith, and fifteen shares had been transferred to one Johnson and also pledged for Smith’s debt. But we are of opinion with the findings that the position was not changed as between the United States, Smith and the corporation in such a way as to give the last a better standing in this case. Those who took the stock as security did not deal with the corporation as outsiders, but became a part of it while it still was under the manifest domination of Smith and charged with participation in Smith’s fraud. The corporation cannot derive any new right from them. Wilson Coal Co. v. United vol . ccxxxvi—37 p. 578States, 110 C. C. A. 343; 188 Fed. Rep. 545. Whether they have a remedy is not a question here.

There was an attempt made in argument to reopen the questions of fact upon which the two courts below agreed, but we see no reason to depart from the common rule and therefore we do not advert to any of those matters. It also was argued that the decision of the Secretary of the Interior that the patents should be issued is conclusive. p. 579236 U. S. Syllabus.