Bowles v. Farmers Nat. Bank of Lebanon, Ky.

• Decision Date: 16 February 1945
• Docket Number: No. 9789.,9789.
• Citation: 147 F.2d 425
• Parties: BOWLES, Administrator, OPA, v. FARMERS NAT. BANK OF LEBANON, KY.
• Court: U.S. Court of Appeals — Sixth Circuit

147 F.2d 425 (1945)

BOWLES, Administrator, OPA, v. FARMERS NAT. BANK OF LEBANON, KY.

No. 9789.

Circuit Court of Appeals, Sixth Circuit.

February 16, 1945.

Edward H. Hatton, of Washington, D. C. (Thomas I. Emerson, Fleming James Jr., and David London, all of Washington, D. C., A. D. Ruegsegger, of Cleveland, Ohio and Fritz Krueger, of Louisville, Ky., on the brief), for appellant.

A. C. Van Winkle, of Louisville, Ky., for appellee.

Before HICKS, ALLEN and HAMILTON, Circuit Judges.

ALLEN, Circuit Judge.

The question involved in this appeal is whether an action for treble damages instituted because of violation of a price regulation of the Office of Price Administration survives the death of one charged with the violation. The District Court held that the action did not survive and dismissed the appellee from the suit.

The Administrator sued under § 205(e) of the Emergency Price Control Act of 1942, as amended October 2, 1942, 50 U.S. C.A.Appendix § 925(e), to recover sums aggregating $6,799,101.57 calculated to be due as treble damages for six sales of whiskey in excess of the ceiling price. The complaint alleged that on December 31, 1942, Cummins Distilleries Corporation, a Delaware corporation with its principal place of business at Louisville, Kentucky, engaged in selling whiskey and gin, was purportedly dissolved pursuant to a plan which contemplated the distribution of its net assets to its stockholders; that in accordance with this plan the corporation purported to transfer the whiskey involved in the action to its common stockholders, who organized a committee to carry the plan into effect and authorized it to sell the whiskey and distribute the proceeds; that the itemized sales of whiskey in bulk at prices in excess of those permitted by Maximum Price Regulation No. 193 were made between January 5, 1943, and January 11, 1943, by the corporation, its directors, officers, the committee, or the stockholders, including G. W. Dant, the appellee's testator. A recovery for three times the amount by which the prices of the whiskey sold exceeded the prices permitted by the regulation was asked against the defendants jointly and severally. Appellee's testator died April 25, 1943, and the appellee was appointed executor of his will May 18, 1943. The action was instituted May 27, 1943.

Appellee moved to dismiss the action upon the ground that as to it the complaint does not state a claim upon which relief can be granted, and the District Court sustained the motion.

The Administrator contends that the court erred in dismissing the complaint for the reason that the cause of action vested in the Administrator by § 205(e) of the Emergency Price Control Act is remedial and not penal in nature, and therefore does not abate with the death of the party liable. Section 205 (e), prior to amendment, 56 Stat. 33, in its pertinent portions read as follows: "If any person selling a commodity violates a regulation, order, or price schedule prescribing a maximum price or maximum prices, the person who buys such commodity for use or consumption other than in the course of trade or business may bring an action either for $50 or for treble the amount by which the consideration exceeded the applicable maximum price, whichever is the greater, plus reasonable attorney's fees and costs as determined by the court. * * * If any person selling a commodity violates a regulation, order, or price schedule prescribing a maximum price or maximum prices, and the buyer is not entitled to bring suit or action under this subsection, the Administrator may bring such action under this subsection on behalf of the United States. * * *"

The section, as amended in 1944, 50 U.S. C.A.Appendix § 925(e), and made applicable to all pending cases brought by the Administrator, reads as follows: "(e) If any person selling a commodity violates a regulation, order, or price schedule prescribing a maximum price or maximum prices, the person who buys such commodity for use or consumption other than in the course of trade or business may, within one year from the date of the occurrence of the violation, except as hereinafter provided, bring an action against the seller on account of the overcharge. In such action, the seller shall be liable for reasonable attorney's fees and costs as determined by the court, plus whichever of the following sums is the greater: (1) Such amount not more than three times the amount of the overcharge, or the overcharges, upon which the action is based as the court in its discretion may determine, or (2) an amount not less than $25 nor more than $50, as the court in its discretion may determine: Provided, however, That such amount shall be the amount of the overcharge or overcharges or $25, whichever is greater, if the defendant proves that the violation of the regulation, order, or price schedule in question was neither wilfull nor the result of failure to take practicable precautions against the occurrence of the violation. * * * If any person selling a commodity violates a regulation, order, or price schedule prescribing a maximum price or maximum prices, and the buyer either fails to institute an action under this subsection within thirty days from the date of the occurrence of the violation or is not entitled for any reason to bring the action, the Administrator may institute such action on behalf of the United States within such one-year period. If such action is instituted by the Administrator, the buyer shall thereafter be barred from bringing an action for the same violation or violations. * * *" We think that the original enactment of this section clearly provided for a penalty. The basic test whether a law is penal in the strict and primary sense is whether the wrong sought to be redressed is a wrong to the public or a wrong to the individual. Huntington v. Attrill, 146 U.S. 657, 668, 13 S.Ct. 224, 36 L.Ed. 1123. The purpose of the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix § 901, is stated as follows: "It is hereby declared to be in the interest of the national defense and security and necessary to the effective prosecution of the present war, and the purposes of this Act are, to stabilize prices and to prevent speculative, unwarranted, and abnormal increases in prices and rents; to eliminate and prevent profiteering, hoarding, manipulation, speculation, and other disruptive practices resulting from abnormal market conditions or scarcities caused by or contributing to the national emergency * * *."

This describes a threatened injury to the public. While private rights and interests are necessarily affected, the controlling purpose of the statute is to protect the public during the war emergency.

Section 205 is headed "Enforcement." Under it the Administrator can, at his option, pursue any one of a number of remedies in order to restrain inflation, maintain price levels, and effectuate the purposes of the Act. He may either apply for injunction, § 205(a), cause criminal proceedings to be instituted, § 205(b) and (c), issue licenses in order to regulate dealing in commodities, § 205(f), or file suit for recovery of treble damages § 205 (e). The suit for recovery is plainly intended by Congress to be used as a method of "enforcement" equally with the other methods prescribed.¹ Hence we conclude that the manifest purpose of § 205 (e) was to prevent the inflationary tendencies sought to be curbed by the Act as a whole, through punishment of violators of the statute by payment of penalties either to the Administrator or to the person injured.

The amount of such payments, if made to the injured person, supplies a direct and powerful incentive for the enforcement of the Act by the individual. Cf. Gilbert v. Thierry, 1944, D.C.Mass., 58 F.Supp. 235. As well stated in that case, the treble damages provision is intended to be sufficiently attractive to stimulate an aggrieved person to recover his losses and to enforce the law; and it is also intended to be sufficiently burdensome to deter potential violators and to punish actual violators.

Moreover, if a sum of money is to be recovered by a third person for violation of a statute instead of the person injured Huntington v. Attrill, supra, 146 U.S. 657, 668, 13 S.Ct. 224, 36 L.Ed. 1123; State of Wisconsin v. Pelican Ins. Co., 127 U. S. 265, 299, 8 S.Ct. 1370, 32 L.Ed. 239, or if the sum exacted is greatly disproportionate to the actual loss, Helwig v. United States, 188 U.S. 605, 611, 23 S.Ct. 427, 47 L.Ed. 614, it constitutes a penalty rather than damages. The fact that the sum is to be recovered in a civil action does not determine the nature of the exaction. Hepner v. United States, 213 U.S. 103, 29 S.Ct. 474, 53 L.Ed. 720, 27 L.R.A.,N.S., 739, 16 Ann.Cas. 960; United States v. Zucker, 161 U.S. 475, 16 S.Ct. 641, 40 L.Ed. 777; Lees v. United States, 150 U.S. 476, 14 S. Ct. 163, 37 L.Ed. 1150; Jacob v. United States, Fed.Cas. No. 7,157.

In the light of such considerations, the exaction established by this statute clearly falls within the classification of penalty. In the present case recovery is to be paid not to the person injured, but to the Government. In fact in the majority of instances both original § 205(e) and the...