the penalties for manufacturing liquor, and

INMAN MFG. CO. v. AMERICAN CEREAL making the business illegal.

CO.

(Supreme Court of Iowa. May 12, 1909.) APPEAL AND ERROR (§ 1178*)-DETERMINATION ON APPEAL-REMAND TO SETTLE COUN

TEROLAIM.

Where, on appeal from a judgment for plaintiff, it is shown on rehearing that it has unsettled claims against defendant arising since the suit which may affect the amount of defendant's recovery on a counterclaim sustained on the appeal, the case will be remanded to determine such matter.

[Ed. Note. For other cases, see Appeal and Error, Dec. Dig. § 1178.*]

Supplemental opinion. ion, see 119 N. W. 722.

[Ed. Note.-For other cases, see Intoxicating Liquors, Cent. Dig. 88 467-473: Dec. Dig. 327. 1

Appeal from District Court, Winneshiek County; L. E. Fellows, Judge.

The plaintiff, Orke, brought this action against the defendant, McManus, for $416, an alleged balance due for fixtures, furniture, and stock in a saloon sold by the plaintiff to the defendant. The Dubuque Star Brewing Company intervened in the action and alleged that it held a prior bill of sale upon the fixtures, furniture, and stock in question, For former opin- executed and delivered to it by the plaintiff Orke, and that it held the same as security for an indebtedness owing to it by the plaintiff. It also pleaded that an arrangement had been entered into between the parties whereby the defendant McManus should retain possession of the property and should pay the balance of the purchase price due from him to the party legally entitled to the property. Both plaintiff and defendant answered the petition of intervention, alleging the intervener's bill of sale was void, in that the consideration therefor consisted wholly of an indebtedness incurred by the plaintiff for intoxicating liquors unlawfully sold to him by the intervener. There was trial to the court and judgment for the intervener. Plaintiff appeals. Reversed.

PER OURIAM. The petition for a rehearing and resistance thereto show that the plaintiff has unsettled claims against the defendant, arising since this suit was brought, which may affect the amount of the defendant's recovery on its counterclaim for money loaned to the plaintiff. In view of this we think the original opinion should be so modified as to remand the case to the district court for a determination of such matter.

It is therefore so ordered, and with such modification the original opinion is adhered to, and the petition for a rehearing is overruled.

ORKE v. MCMANUS (DUBUQUE STAR BREWING CO., Intervener). (Supreme Court of Iowa. May 14, 1909.) 1. INTOXICATING LIQUORS (§ 147*) - SALEPLACE OF SALE "UPON THE PREMISES.'

A brewery company owned lots 3 to 10, inclusive; the brewery proper covering lots 5 to 10. The second story of the building on lots 3 and 4 was occupied by the president of the brewery as a residence, that part of the first story on lot 4 was used as his office, and that part on lot 3 was occupied as a saloon to retail beer from the brewery. There were partitions between the saloon and office and the office and brewery proper, with entrances through them, and the public entrance to the saloon was on the corner of lot 3, through which brewery employés, who were given free beer, entered. Held, that the brewery was selling beer "upon the premises" within Code, 2460, providing that one operating any brewery permitting any drinking, or sale at retail, of its product upon the premises, shall forfeit the exemption thereby granted, so that it was not exempted under section 2456, exempting manufacturers of liquor from the penalties provided by law for manufacturing liquors. [Citing Words and Phrases, vol. 6, p. 5512.]

[Ed. Note.-For other cases, see Intoxicating Líquors, Dec. Dig. § 147.*]

2. INTOXICATING LIQUORS (§ 327*)-LEGALITY -BUSINESS PROHIBITED BY LAW.

For former opinion, see 115 N. W. 580.

E. R. Acres, for appellant. M. A. Harmon, for appellee McManus. E. W. Cutting, for appellee Dubuque Star Brewing Co.

EVANS, C. J. Orke operated a saloon at Ossian, Iowa, and became largely indebted to the intervener, Dubuque Star Brewing Company, for intoxicating liquors purchased. To secure this indebtedness he executed to the intervener a bill of sale of the property in question. Some time later he sold out his business to McManus, and executed to him

also a bill of sale covering the same property. Upon discovering the claim of the intervener, McManus declined to pay the balance of the purchase price, and this suit was brought therefor. The pleadings of the parties were so framed that the only issue tried was whether the sales of intoxicating liquors by the intervener to Orke prior to June 6, 1905, was in violation of law. If so, Orke is entitled to judgment against McManus, as prayed; if not, the intervener is entitled to such judgment.

1. The intervener was a manufacturer of beer, located at Dubuque, Iowa, and claimed Under Code, c. 6, § 2423, nullifying all seto be operating in accordance with the provicurities, etc., made on account of intoxicating sions of sections 2456 and 2461 of the Code. liquors sold in violation of this chapter, a bill Section 2460 provides: "Any person, partof sale held by a brewery as security for liquor nership or corporation operating any brewery sold on its premises was void; section 2460 forfeiting the exemption of liquor manufacturpermitting any drinking of such ers who sell their product on the premises from product or selling the same at retail upon For other cases see same topic and section NUMBER in Dec. & Am. Digs. 1907 to date, & Reporter Indexes

the premises of any such manufacturing es- It is claimed that they always entered the tablishment shall forfeit the exemption here- saloon for such purpose through the public by contemplated to be granted." It is the entrance, and such fact may be assumed for contention of appellant that the intervener the purpose of our consideration. No beer did permit drinking of beer upon its premises, was retailed at any other place upon the and that it did sell the same at retail upon premises. such premises. It appears from the undisputed testimony that the intervener was the owner of a certain structure or structures covering eight lots of ground in a certain block numbered from 3 to 10, inclusive. Lot No. 3 was in the northeast corner of the block, and the other lots lay to the south in consecutive order, fronting east. Exhibit 24 is a photograph or engraving of such structure or structures as they appear fronting east:

The question presented to us is whether the brewery company permitted any drinking of its product or sold the same at retail "upon the premises of such manufacturing establishment." We see no escape from the conclusion that this entire property was one property, under one ownership, and under one management. The fact that one room was set apart exclusively for the purpose of drinking and selling at retail the product of the brewery ought not to be deemed as sepaEx. 24

rating it from the "premises." If it could be so deemed, then the provision of the statute has little use. Its evasion would involve no inconvenience. We think therefore that the intervener was selling the product of its brewery "upon the premises." It thereby lost the protection of the statute referred to, and its sales of intoxicating liquors to the plaintiff were unlawful, and its security for the indebtedness created was void under section 2423.

The claim of the intervener was that the brewery proper covered lots 5, 6, 7, 8, 9, and 10. The structure covering lots 3 and 4 consists of two stories. The second story thereof is used as a residence by the president of the brewery company. That part of the lower story which covers lot 4 is occupied by the president as an office. That part of the lower story which covers lot 3 is occupied as a saloon for the retail of beer from the brewery. There are partitions between the saloon and the office and between the office and the brewery proper. There are also entrances between the saloon and the office and between the office and the brewery proper. The brewery company operated the saloon and sold its brewery product therefrom at retail. The public entrance into the saloon was at the northeast corner. By its contract with its employés the brewery company was required to furnish them with beer free of charge.

As to what is meant by the term "premises" in such a case, see: Words and Phrases, vol. 6, p. 5512; Downman v. State, 14 Ala. 242; Daly v. State, 33 Ala. 431; Stockwell v. State, 85 Ind. 522; Shields v. State, 95 Ind. 299; People v. Higgins, 56 Mich. 159, 22 N. W. 309; People v. Miller (Co. Ct.) 79 N. Y. Supp. 1122; Winlock v. State, 121 Ind. 531, 23 N. E. 514; Bandalow v. People, 90 III. 218.

The judgment below must therefore be

LACY V. STATE TREASURER. (Supreme Court of Iowa. May 15, 1909.) 1. JUDGMENT (§ 710*)-CONCLUSIVENESS-PER- of the estate of John Smith, deceased, to deSONS AFFECTED PERSONS NOT PARTIES.

der the contract Smith was to take and use the land during his natural life; he to pay an annuity to persons named of $104 per year until his death. He (Smith) also agreed to keep the property which it is said was owned by him intact so far as possible. George H. Cavanaugh was to have the right to rent the land, and by the concluding paragraph of the contract, Smith agreed with Cavanaugh and others that upon his death they should take the land share and share alike, to be divided equally between them. It was also agreed that Sarah Barton, if alive at the time of the death of John Smith, should also have a share of the land.

hold the amount so paid as a lien against | enjoyment after the death of the grantor the said land. After this year, and begin- or donor. It seems that the title to part of ning with March 1, 1893, George Cavanaugh the land passed to Smith through the will shall have the right to rent of John Smith of Ellen Cavanaugh, deceased, and that unthe premises above described, giving as rent therefor two-fifths of all grain raised on old ground, and one-half of all grain raised on newly broken ground, all delivered in the crib on the said premises. In consideration that John Smith takes and keeps, during his natural lifetime, all the rents and profits of said land, with full use and control thereof, during said period, he agrees to and with the said George H. Cavanaugh, Sarah Burns and Emma Raymond, that upon his death they may take the same, share and share alike, and the land above described shall be equally divided among them. If their mother, Sarah Barton, should survive this grantor, John Smith, then she is to take an equal share For appellant it is contended that Smith with the rest." This paper was witnessed by was nothing more than a naked legal trustee two witnesses, and was filed for record Jan- of the land, that the contract conveyed a uary 14, 1892. John Smith died intestate present interest to Cavanaugh and others in April 13, 1906, and E. R. Lacey was appoint- the land, and that as they were not and are ed administrator of his estate. This adminis- not heirs of Smith, and do not take by intrator claims that the real estate mentioned heritance, the land is not subject to the colin said contract is not subject to the collateral lateral inheritance tax. Something is claiminheritance tax for the reason that the dis-ed for the decree of the district court, passtrict court of Louisa county, wherein adminis-ed after the death of Smith, finding that tration was granted, found that Cavanaugh, Cavanaugh and others were entitled to a Raymond, and Barnes were entitled to a con- deed of the lands, and ordering the adminisveyance of the land under the contract hith- trator to make such a deed; but, as the erto set out, and directed the administrator State Treasurer was not a party to that to make a conveyance to them of said land, suit, and was in no manner interested therewhich was accordingly done. He also claims in, this decree has no significance, and is in that John Smith, at the time of his death, no manner controlling. The exact point held nothing but the naked legal title to the made by plaintiff's counsel is that the conland for the purpose of securing his life es- tract conveyed a present interest in the land tate, and that the remainder in fee was vest- to Cavanaugh and others, reserving simply ed in Cavanaugh and others in virtue of said a life estate in Smith. On the other hand, contract, that nothing descended to the par- it is insisted that the contract is testamenties from John Smith, and that title passed tary in character, and that in no event could through and under the contract above set the grant, gift, sale, or will take effect in out. Defendant contends that nothing pass-possession or enjoyment until after the death ed from John Smith until his death; that of Smith. We are constrained to hold that the contract conveyed no present interest; that Smith was in the possession and enjoyment of the entire premises until his death; and that the enjoyment of the property by Cavanaugh and others was postponed until the death of Smith. Further, it is contended that the contract was nothing more than a conditional promise on the part of Smith to permit Cavanaugh et al. to inherit the real estate. Smith left no direct descendants, and Cavanaugh and others are brothers and sisters of Ellen Cavanaugh deceased, who, according to the recitations of the contract, devised part of the land involved to John Smith, deceased.

In order to solve the questions presented by this appeal it is necessary to construe the various provisions of the contract, in order to determine whether or not the land therein referred to passed to Cavanaugh and others by will, deed, grant, sale, or gift made

this contract was testamentary in character, or rather that it did not take effect in so far as Cavanaugh and others were concerned, either in enjoyment or possession, until after the death of Smith. Cavanaugh and others are collateral heirs of Ellen Cavanaugh, deceased, and if they take either mediately or immediately through her, the land is subject to the tax. If, on the other hand, they take through Smith under the contract, construing it to be a grant, this grant was not made to take effect, either in enjoyment or possession, until after the death of Smith, and in such event the land was subject to the tax. The record does not disclose the date of Ellen Cavanaugh's death, but the contract was made January 11, 1892, and Smith died April 13, 1906. Appellant contends that as the collateral inheritance law did not go into effect until July, 1896, the land cannot be made subject to the tax.

The only possible answer to these suggestions is that, as the contract was made before the passage of the collateral inheritance tax law, that law cannot be held to apply, for the reason that it impairs the obligations of a contract, and deprives the Cavanaughs and others of their property without due process of law. This proposition, while suggested in appellant's opening brief, was not argued with much force until the reply was filed, and in consequence the Attorney Gen

unless Cavanaugh and others took an estate | joyment during the grantor's lifetime. This in enjoyment or possession in 1892 as claim- is the conclusion of all the courts which ed, the collateral inheritance tax statute have been called upon to construe similar does apply, for the reason that, whether statutes. See Reish v. Commonwealth, 106 they took through Smith or remotely from Pa. 521; In re Johnson's Estate (Sur.) 19 Ellen Cavanaugh, they did not have either N. Y. Supp. 963; Genet v. Hunt, 113 N. Y. the possession or enjoyment until the death of 158, 21 N. E 91; Wright's Appeal, 38 Pa. Smith. Indeed, we doubt if they acquired 507; Seibert's Appeal, 110 Pa. 329, 1 Atl. any title until after Smith's death; but this 346; Du Bois' Estate, 121 Pa. 368, 15 Atl. point need not, as we view it, be determined 641; In re Brandreth, 169 N. Y. 437, 62 N. E. at this time. The statute is very clear, and 563, 58 L. R. A. 148; In re Greene, 153 N. Y. applies to all cases where wills, grants, 223, 47 N. E. 292; Townshend v. Frommer, deeds, sales, or gifts are made, or intended, 125 N. Y. 446, 26 N. E. 805. to take effect in possession or enjoyment after the death of the grantor or donor. If, then, the title passed either mediately or immediately from Ellen Cavanaugh, it did not take effect, either in possession or enjoyment, until after the death of Smith. Her estate was subject to the control of the district court, in virtue of the contract, for a long time after the collateral inheritance law went into effect, and by reason of that fact the land was subject to the tax. Ferry v. Campbell, 110 Iowa, 290, 81 N. W. 604; Gels-eral did not give much attention to the matthorpe v. Furnell, 20 Mont. 299, 51 Pac. 267, 39 L. R. A. 170. In other words, by making of the contract with Smith, they surrendered their right to take an immediate possession and enjoyment of the property under the will of Cavanaugh; and, if they now have title through Ellen Cavanaugh, and are insisting upon rights derived through her, they, by their own acts, delayed the determination of their rights until after the collateral inheritance tax law went into effect. That being true, there is no merit in the claim that the law does not apply because the estate had fully vested before it went into effect.

ter in his argument. It must be remembered that the contract was made in settlement of some litigation over the will of Ellen Cavanaugh, deceased. The title came from her, and the contract simply undertook to fix the rights of the parties in consummation of a settlement of the will contest. The title really comes by inheritance, or through the will of Ellen Cavanaugh, deceased, and the contract was entered into to fix the rights of the parties in and to the land. Smith was a devisee under the will, and Cavanaugh and others were collateral heirs of the deceased, Ellen Cavanaugh. The contract was not with reference to lands The case is not ruled by Gilbertson v. Bal- which either then owned, but to deterlard, 125 Iowa, 420, 101 N. W. 108, upon mine their respective rights in the property which appellant relies. We doubt if the which passed from and through Ellen Cavacontract under consideration passed a pres- naugh. Until the court finally fixed these ent interest to Cavanaugh and others. It rights the estate of Ellen Cavanaugh was expressly states that they are to take the still unsettled, and until settled the Legisproperty upon his death share and share lature had the right to pass an inheritance alike. This negatives the thought that they tax law which should be made applicable to took from Ellen Cavanaugh directly, and all unsettled estates. Part only of the land clearly indicates that there was no thought involved passed directly by will to Smith. of passing title presently. The grantees, un- Some of it passed by descent, and not by der the contract so called, were not to take will, and the parties undertook by contract until the death of Smith. But, whatever to control, not only the title devised by will, view may be taken of this question, it is but also that which passed by descent. So very clear that the property did not pass by long as the matter remained open and unwill, deed, grant, sale, or gift made to take settled, the property was subject to the tax, effect in possession or enjoyment immediate- although the law was passed after the dely. Possession and enjoyment were clearly mise of Ellen Cavanaugh, and after the makpostponed until the death of Smith. That ing of the contract. Smith was placed in being true, the case falls within the express control of the property by agreement, and language of the statute. Smith was to distribution was not made or attempted until have the possession, income, profits, and en- after the collateral inheritance tax statute joyment of the land until his death, and was passed. It is clear that by the making after his death these, upon certain condi- of the contract the full settlement of the tions, were to go to Cavanaugh and others. Ellen Cavanaugh estate was postponed until The payment of the tax can only be defeat- the death of Smith, which event occurred ed by such a bona fide conveyance as parts long after the inheritance tax law went into