Bowles v. Mannie & Co.

• Decision Date: 22 April 1946
• Docket Number: No. 8857.,8857.
• Parties: BOWLES, Price Administrator, v. MANNIE & CO. et al.
• Court: U.S. Court of Appeals — Seventh Circuit

155 F.2d 129 (1946)

BOWLES, Price Administrator, v. MANNIE & CO. et al.

No. 8857.

Circuit Court of Appeals, Seventh Circuit.

March 13, 1946.

Rehearing Denied April 22, 1946.

Stanford Clinton and Nicholas J. Pritzker, both of Chicago, Ill., for defendants-appellants.

David London and Nathan Siegel, both of Washington, D. C., Amos J. Coffman, George E. Leonard, and Katherine H. Johnson, all of Chicago, Ill., George Moncharsh, Deputy Administrator for Enforcement, and Milton Klein, Director, Litigation Division, Office of Price Administration, both of Washington, D. C., and George E. Leonard, Regional Litigation Atty., Office of Price Administration, of Chicago, Ill., for defendants-appellees.

Before EVANS, SPARKS, and KERNER, Circuit Judges.

KERNER, Circuit Judge.

Defendants appeal from a decree granting an injunction on the second count of a complaint filed by plaintiff under the Emergency Price Control Act¹ directing compliance with the record-keeping and invoicing requirements of the regulations involved and enjoining defendants from selling cotton textiles at prices in excess of the applicable maximum prices adopted by the Price Administrator.

The complaint alleged that defendants had engaged in acts and practices in violation of certain regulations promulgated and made effective pursuant to the terms and provisions of the Act. The regulations asserted as applying are Revised Price Schedule 35 issued October 21, 1941, 6 Fed.Reg. 5335; Revised Price Schedule 89 issued May 4, 1942, 7 Fed.Reg. 715; Maximum Price Regulation 118 issued May 4, 1942, 7 Fed.Reg. 3038; Maximum Price Regulation 127 issued May 4, 1942, 7 Fed. Reg. 3119; and the General Maximum Price Regulation,² 7 Fed.Reg. 3153 (hereinafter referred to as RPS35, RPS89, MPR118, MPR127, and GMPR). Defendants concede that GMPR applies to the commodities handled by them where no other specific regulation controls.

Before the effective dates of these regulations inflationary pressures were already so great that official cognizance was taken of them. By executive order No. 8734, issued April 11, 1941, which established the Office of Price Administration and Civilian Supply, the Administrator was authorized to take lawful steps necessary to prevent price spiraling, rising costs of living, profiteering and inflation.

Section 1316.51(b) of RPS35, section 1316.101(b) of RPS89, and section 1400.104 of MPR118 fix the prices at which any person may sell blue denim, bed linens and unbleached duck, respectively, at the mill price, except when such commodities are sold by a person performing "a recognized distributive function," but they are not applicable to sales or delivery of the commodity made to any wholesaler, jobber or retailer "in the performance of a recognized distributive function." Section 1400.82(i)(1) of MPR127 provides for a jobber's markup on finished piece goods sold in the performance of a recognized distributive function to be computed under a certain formula stated therein, and that no sale is made in the performance of a recognized distributive function within the meaning of the regulation unless it advances the goods sold to the next stage of distribution. The phrase "in the performance of a recognized distributive function" is not defined in either RPS35 or RPS89. Both MPR118 and MPR127 provide that "no sale is made in the performance of a recognized distributive function unless it advances the goods to the next stage of distribution, but no explanation or definition is given as to what constitutes the "next stage of distribution." However, MPR118, § 1400.104, declares that "Presumptively sales by one jobber to another, or by one manufacturer to another, engaged in the same type of business, are not sales in the perfomance of a recognized distributive function."

The facts: Both Mercantile Trading Company, a partnership in existence for about ten years prior to 1941 consisting of Meyer Fefferman, Manuel Fefferman and Rose Fefferman, and Mannie & Company, a corporation formed in 1941, were engaged in the purchase and sale of cotton textiles. Etta Fefferman was the principal owner of the capital stock of Mannie & Company, and Manuel Fefferman, her husband, looked after her interests in that corporation. Mercantile had an office and warehouse on Michigan Avenue in Chicago, where its stock was kept and from which shipments were made. It sold its merchandise to the public generally — to "anybody who came in to buy." Mannie had an office on La Salle Street in Chicago, where it employed one person. There samples were carried, and orders by mail, telephone, or in person were received from anyone desiring to buy its merchandise. Mannie purchased ninety-five percent of its merchandise from Mercantile, who filled and shipped the orders received by Mannie. Mannie invoiced its customers on its own letterheads, but as Mannie received payments by checks, it assigned them to Mercantile. Among Mannie's customers was Texcott & Company, a jobber, which sold to public and private institutions.

In February, 1944, the Office of Price Administration examined defendants' records to determine whether defendants were selling their merchandise at prices in excess of the applicable maximum prices adopted by the Price Administrator. The investigation disclosed that in September, 1943, Mercantile had purchased 5,602 yards of blue denim at 21½ cents per yard, which it sold to Mannie at 23½ cents per yard, and that Mannie in turn sold it to Texcott at 25½ cents per yard; that Mercantile sold to Mannie 1,070 yards of unbleached duck at 39½ cents a yard, which Mannie sold to Texcott at 42 cents a yard; that in November, 1943, Mercantile sold to Mannie 1,025 yards of bleached duck at 44.8 cents a yard, which Mannie sold to Texcott at 46 cents a yard; and that in December, 1943, Mercantile had purchased 5,050 yards of 42-inch bleached sheeting at 25 cents a yard, which it sold to Mannie at 32½ cents a yard, and that Mannie sold some of this sheeting to Texcott at 34½ cents a yard.

The testimony of experts tended to show that before a sale of cotton textiles can be said to be made in the performance of a recognized distributive function, the goods must be advanced to the next stage of distribution, and that the recognized stages of distribution are producer, wholesaler or jobber, retailer or commercial user and consumer, and that sales from one individual in a given stage or level to another in the same stage or level do not advance the goods to the next stage of distribution.

Thus, upon substantial evidence the court found that the maximum prices for sales by Mercantile to Mannie and by Mannie to Texcott of cotton goods, bed linens and cotton products, respectively, are fixed and determined by RPS35, RPS89 and MPR 118, respectively; that the maximum prices for sales by Mercantile to Mannie and by Mannie to Texcott of finished piece goods are fixed and determined by MPR127; that the maximum prices for sales of cotton goods, bed linens and cotton products by Mercantile to Mannie and by Mannie to Texcott, when made in the performance of a recognized distributive function, are fixed and established by the provisions of GMPR; that defendants and Texcott were engaged in business as jobbers or wholesalers of cotton textiles; and that the sales by Mercantile to Mannie and by Mannie to Texcott of cotton goods, bed linens, cotton products and finished piece goods were not sales in the performance of a recognized distributive function.

Upon these findings of fact the court concluded that Mercantile, in its sales of cotton textiles to Mannie, and Mannie, in its sales to Texcott, have each violated the record-keeping and invoicing requirements of RPS35, RPS89 and MPR118; that Mercantile and Mannie on their sales of finished piece goods have violated the invoicing and record-keeping requirements of MPR127; that Mercantile and Mannie have each violated the provisions of §§ 1499.11 and 1499.12 of GMPR in that neither has adequate and correct base period statements as required by § 1499.11, and neither has kept records showing as precisely as possible the manner in which it computed its maximum prices as required by § 1499.12 of GMPR; that Mercantile, in its sales to Mannie, and Mannie, in its sales to Texcott, have each violated the provisions of RPS35, RPS89, MPR118, and MPR127 by selling and delivering cotton goods, bed linens, cotton products and finished piece goods, respectively, at prices higher than the maximum prices fixed and determined therefor by RPS35, RPS89, MPR118, and MPR127; and that Mercantile and Mannie have each violated the provisions of GMPR by selling and delivering cotton goods, bed linens and cotton products at prices in excess of the maximum prices fixed and determined therefor by the GMPR.

In their briefs and upon oral argument defendants stated that the errors relied on are concerned with the application of the Act and with the construction and applicability of the regulations involved.

A plain reading of § 1(a) of the Act, 50 U.S.C.A.Appendix § 901(a), clearly discloses that one of the purposes of the Act was to prevent, in the interest of the national defense and security, unwarranted increases in prices. In reporting on the bill, the Senate Committee said: "In order to achieve effective price control it may often be necessary to regulate or prohibit practices which are * * * likely to result in * * * increases inconsistent with the purposes of the bill. * * * Examples of such practices in connection with a commodity include * * * the unnecessary multiplication of middlemen, * * * or manipulative selling * * * practices." Sen.Rept.No. 931, 77th Cong. 2d Sess. p. 17. In Bowles v. Wheeler, 9 Cir., 152 F.2d 34, 37, the court said: "With respect to the regulations issued pursuant to the broad powers granted the Price Administrator to issue `such regulations and orders as he may deem necessary or proper in order to carry out the purposes and...