169 F.2d 413 (Fed. Cir. 1948), 445, Belle City Packing Co. v. R.F.C.

Docket Nº:445.
Citation:169 F.2d 413
Case Date:August 02, 1948
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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169 F.2d 413 (Fed. Cir. 1948)




No. 445.

United States Emergency Court of Appeals.

August 2, 1948

         Heard at Washington April 24, 1948.

         Warren Woods, of Washington, D.C. (Roberts & McInnis, of Washington, D.C., on the brief), for complainant.

         George Arthur Fruit, Atty., Department of Justice, of Washington, D.C. (Joseph M. Friedman, Sp. Asst. to Atty. Gen., and Jack W. Loeb, Atty., and John C. Erickson, Counsel, both of the Reconstruction Finance Corporation, both of Washington, D.C., on the brief), for respondent.

         Before MARIS, Chief Judge, and MAGRUDER and LINDLEY, Judges.

         MAGRUDER, Judge.

         Complainant, Belle City Packing Company, here challenges the validity of a ruling or determination by the Reconstruction Finance Corporation that complainant was ineligible, during certain monthly accounting periods, to receive the special subsidy payable to nonprocessing slaughterers of cattle under the provisions of Amendment No. 2 (9 F.R. 1820) to Regulation No. 3 (8 F.R. 10826) issued by Defense Supplies Corporation. 1

         Since the subsidy regulation had been issued pursuant to Sec. 2(e) of the Emergency Price Control Act of 1942, 56 Stat. 26, 50 U.S.C.A.Appendix, 902(3), the foregoing

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ruling or determination by the RFC thereunder was in effect a 'regulation or order under section 2,' subject to protest under Sec. 203(a) of the Act, 50 U.S.C.A.Appendix, 923(a), and to review in the Emergency Court of Appeals under Sec. 204(a), 50 U.S.C.A.Appendix, 924(a). Illinois Packing Co. v. Bowles, Em. App. 1945, 147 F.2d 554; Illinois Packing Co. v. Snyder, Em. App. 1945, 151 F.2d 337; Greenhouse Bros. & Finkelstein, Inc. v. RFC, Em. App. 1947, 159 F.2d 712, certiorari denied 1947, 331 U.S. 812, 67 S.Ct. 1200, 91 L.Ed. 1832; Armour & Co. v. RFC, Em. App. 1947, 162 F.2d 918, 923. Though the Price Control Act terminated on June 30, 1947, 60 Stat. 664, the jurisdiction of this court in the case at bar is preserved by Sec. 1(b) of the Act, 50 U.S.C.A.Appendix, 901(b), since the protest and complaint are founded upon an asserted 'right' in complainant, with a corresponding 'liability' of respondent, incurred under the subsidy regulation prior to such termination date. Our jurisdiction has not been challenged.

         Amendment No. 2 to the subsidy regulation aforesaid established a special subsidy to non-processing slaughterers pursuant to a directive of the Economic Stabilization Director issued October 25, 1943 (8 F.R. 14641) and attached certain conditions to the payment of such subsidy. To be eligible for the special subsidy, a non-processing slaughterer, as defined, had to be an 'unaffiliated slaughterer,' that is, it could not 'own or control' or be 'owned or controlled by,' a 'processor or purveyor of meat.' The phrase 'own or control' was defined as meaning: 'to own or control directly or indirectly a partnership equity or in excess of ten percent of any class of outstanding stock or to have made loans or advances in excess of five percent of the other person's monthly sales * * * .'

         The validity of these affiliation provisions of the subsidy regulation has already been upheld by us in Earl C. Gibbs, Inc., v. DSC, Em. App. 1946, 155 F.2d 525, certiorari denied 1946, 329 U.S. 737, 67 S.Ct. 51, 91 L.Ed. 637; Atlantic Meat Co., Inc. v. RFC, Em. App. 1946, 155 F.2d 533, certiorari denied 1946, 329 U.S. 737, 67 S.Ct. 52. 91 L.Ed. 637; Illinois Packing Co. v. Henderson, Em. App. 1946, 146 F.2d 1000, certiorari denied 1946, 329 U.S. 783, 67 S.Ct. 202, 91 L.Ed. 671. We refer to our opinions in those cases for discussion of the legal basis of this subsidy program, the purpose of the differential subsidy to non-processing slaughterers, and the rationale of the aforesaid affiliation provisions. Complainant does not now press any argument as to the validity of any provisions of the subsidy regulation, but insists that the adverse ruling of respondent as to complainant's eligibility is contrary to law as being based upon an erroneous interpretation of the regulation as written.

         Belle City Packing Company was incorporated under the laws of the State of Wisconsin on April 20, 1944, with an authorized capital stock of 250 shares of no par value, of which 148 shares were held by David Fagel, 100 shares by James Gottlieb, and one share each by the wife of David Fagel and by Paul Hillips. David Fagel was president, treasurer and a director. The other two directors were Mrs. Fagel and Phillips. Shortly after its incorporation, the company opened up business in Racine, Wisconsin, as a non-processing slaughterer of livestock.

         Prior to April 15, 1944, David Fagel had been a partner with his brother Max Fagel in Fagel Brothers Wholesale Meat Company, of Chicago, Illinois, a partnership business engaged in the purveying of meat to hotels, restaurants and retail outlets in Chicago, and admittedly a 'processor or purveyor of meat' within the meaning of the subsidy regulation. Upon advice of counsel, David Fagel, on April 15, 1944, disposed of his interest in the partnership by selling the same to his brother for the agreed price of $15,000. Max Fagel paid for the purchase by $1,000 in cash and by the execution and delivery of a promissory note to David Fagel in the amount of $14,000. The bill of sale was duly recorded on April 19, 1944, in Cook County, Illinois, and the bona fides of this transfer is unquestioned. Thereafter, David Fagel was completely dissociated from the management and business of Fagel Brothers Wholesale Meat Company conducted by his brother as sole proprietor; and Belle

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City Packing Company never made any sales of meat products to, nor had any other business relations with, said Fagel Brothers Wholesale Meat Company.

         If David Fagel had not disposed of his interest in the partnership, it is clear that the newly created corporation, Belle City Packing Company, could not have qualified for the special subsidy as an 'unaffiliated slaughterer,' for David Fagel, as a partner in Fagel Brothers Wholesale Meat Company, would have been, in that event, a 'processor or purveyor of meat' owning or controlling in excess of 10 per cent of the outstanding capital stock of Belle City Packing Company. Somerville Dressed Meat Co. v. RFC, Em. App. 1947, 159 F.2d 716.

         Complainant filed its claims for the special subsidy for the accounting periods May 18-June 3, 1944, June 5-July 1, 1944, and July 3-29, 1944. In August, 1944, David Fagel...

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