Bowles v. Warner Holding Co.

• Decision Date: 26 October 1944
• Docket Number: Civ. No. 884.
• Citation: 60 F. Supp. 513
• Parties: BOWLES, Administrator, Office of Price Administration, v. WARNER HOLDING CO.
• Court: U.S. District Court — District of Minnesota

60 F. Supp. 513

BOWLES, Administrator, Office of Price Administration, v. WARNER HOLDING CO.

Civ. No. 884.

District Court, D. Minnesota, Fourth Division.

October 26, 1944.

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Arnold A. Karlins, Chief Atty., Minneapolis-St. Paul Defense Rental Area Office, of Minneapolis, Minn., Alex Elson, Regional Atty., of Chicago, Ill., and Ralph M. McCareins, District Enforcement Atty., Twin Cities District Office, Office of Price Administration, of St. Paul, Minn., for plaintiff.

R. H. Fryberger and M. R. Keith, both of Minneapolis, Minn., for defendant.

JOYCE, District Judge.

This is a suit under the Emergency Price Control Act of 1942, § 205(a), 50 U.S.C.A.Appendix § 925(a), hereinafter called the Act, by the Administrator of the Office of Price Administration, against Warner Holding Company, to enforce compliance with the Act and the applicable price regulations. A preliminary injunction has been granted. See Brown v. Warner Holding Co., D.C., 50 F.supp. 593. Plaintiff also seeks an order compelling restitution to certain tenants of rents collected by defendant in excess of "ceilings". These questions present different considerations and will be discussed separately.

I. Injunction of Violations of the Act and Regulations.

The pertinent provisions of section 205 (a) of the Act are: "Whenever in the judgment of the Administrator any person has engaged or is about to engage in any acts or practices which constitute or will constitute a violation of any provision of section 4 of this Act see footnote¹ he may make application to the appropriate court for an order enjoining such acts or practices, or for an order enforcing compliance with such provision, and upon a showing by the Administrator that such person has engaged or is about to engage in any such acts or practices a permanent or temporary injunction, restraining order, or other order shall be granted without bond."

The power of this court under this section has been carefully resolved in Hecht Co. v. Bowles, 321 U.S. 321, 64 S. Ct. 587, 88 L.Ed. 754. The Supreme Court there held that although "the cessation of violations, whether before or after the institution of a suit by the Administrator, is no bar to the issuance of an injunction under § 205(a)", 321 U.S. 327, 64 S.Ct. 591, 88 L.Ed. 754, the statute is not mandatory and the type of order and whether one should issue is within the discretion of the court in the exercise of its historic equity powers. This discretion must be exercised "* * * in light of the large objectives of the Act. For the standards of the public interest not the requirements of private litigation measure the propriety and need for injunctive relief in these cases. That discretion should reflect an acute awareness of the Congressional admonition that `of all the consequences of war, except human slaughter, inflation is the most destructive' (S.Rep. No. 931, supra, p. 2) and that delay or indifference may be fatal." 321 U.S. 331, 64 S.Ct. 592, 88 L.Ed. 754.

With these principles in mind the facts of the case must determine whether plaintiff should be granted the relief asked. The following grounds are specified in the complaint: (a) demanding or receiving or attempting to demand or receive rents in excess of the maximum as prescribed by the regulations; (b) attempting to evict tenants in violation of the regulations; (c) failure to properly register rental units with the rent control office.

(a) Defendant is a corporation owning eight apartment buildings in the city of Minneapolis that are involved in these proceedings. The buildings contain approximately 280 rental units. The local rent control office made a "spot check" of defendant's books and records and prepared tabulations covering twenty rental units, some in each apartment building. The tabulations disclose collection of rents in excess of the ceiling in 155 instances. The amount of each overcharge varies from $1.50 to $16.50 per month and totals $807.75. It is conceded that these computations are correct.

Defendant's principal contention is that "in practically every instance" the apartment was rented under a lease for a definite term with a designated sum as rent for that term, and although this sum was payable monthly in advance, there can be no violation until defendant collects an amount in excess of the total specified in the lease on the base date. (The "base" or "maximum rent" date was March 1, 1942, for accommodations rented on that date, with other provisions for accommodations subsequently rented). Therefore, defendant contends that this action is premature. Defendant argues that as it had the established practice on the maximum rent date of renting on a contractual basis for a fixed term and amount, "maximum rent" as used in the regulations must be defined as the term total prescribed in the lease and not the monthly instalment actually paid by the tenant. I cannot agree with this contention. There is no evidence in this case that any tenant paid his "rent" more than one month in advance. Although a tenant might have the right to pay for a full year in advance under his lease, I do not see what effect that would have on the rent ceiling unless on the maximum rent date some tenant had actually done so. The leases provided for monthly payments in specific amounts. These amounts were paid by the tenants and accepted by the landlord on a monthly basis and are controlling in determining the maximum rents. Although defendant marked its receipts "on account" of rent, it is apparent that monthly payments were considered as the "rent". The following rider is attached to one of the leases and will suffice: "It Is Understood And Agreed that retroactive to November 1, 1942 to the expiration of the office of Price Administration rent control act, your rent is hereby reduced $2.50 per month." (Italics supplied).

Section 2(h) of the Act as amended June 30, 1944, 50 U.S.C.A.Appendix § 902(h), now reads: "(h) The powers granted in this section shall not be used or made to operate to compel changes in the business practices, cost practices or methods, or means or aids to distribution, established in any industry, or changes in established rental practices, except where such action is affirmatively found by the Administrator to be necessary to prevent circumvention or evasion of any regulation, order, price schedule, or requirement under this Act."

Defendant contends that under the above-quoted provision, before it can be found in violation, there must be an affirmative finding by the Administrator that the monthly instalments under the term lease are the ceilings. This argument is predicated on the assumption that defendant is compelled to change its business practice of renting by leases for a fixed term with monthly instalment payments. This is not the case. Nothing in the statute or regulations compels defendant to abandon this practice so long as it does not increase the amount of the term total or the monthly instalments due above the provisions in the lease in effect on the maximum rent date. As there is no compulsion to change rental practices, there is no need for an affirmative finding by the Administrator in this case.

Even if defendant's contention were valid it has little factual basis here. On only four apartments was there a lease during both the base and violation periods. The later leases all showed increases both in the term total and the monthly payments. Whatever definition might be given to "maximum rent" in these cases, the execution of the leases and the collection of the monthly instalments under them were violations of rent control. On ten apartments there were no leases on the maximum rent date although there were during the violation period, all calling for higher monthly payments than the maximum. On at least two apartments there were no leases either on the maximum rent date or during all or part of the violation period. To these situations defendant's argument is not applicable.

Defendant introduced testimony for several days including some 184 exhibits, consisting of correspondence, leases, petitions for adjustments in rent, registration forms, evidence of defendant's rental practices such as charging more for additional occupants including infants, evidence of improvements, redecorating, and of continued jousting with the rent control office. This mass of evidence was marshalled with commendable thoroughness and ably presents defendant's position that in many instances an increase in rental was justified because of increased services and improvements. Whatever views this court might have on these problems, the maximum rent on any particular dwelling unit is determined by the Administrator of the Office of Price Administration and the regulations issued pursuant to the Emergency Price Control Act. Judicial review of these determinations is exclusively vested in the Emergency Court of Appeals and the Supreme Court of the United States by section 204 of the Act, 50 U.S.C.A.Appendix § 924. This court has no jurisdiction to pass upon the validity or effectiveness of regulations or orders promulgated pursuant to this Act. Henderson v. Kimmel, D.C.Kan., 47 F.Supp. 635; Henderson v. C. Thomas Stores, D.C.Minn., 48 F.Supp. 295. The record discloses that in comparatively few instances did defendant avail itself of the procedure prescribed in section 203 of the Act, 50 U.S.C.A.Appendix § 923, for appeal from adverse determinations by the local area rent director, and in no instance did defendant seek judicial review by the Emergency Court of Appeals. In the few cases where an appeal was taken defendant was not entirely without success. Defendant's president explained the failure to protest other adverse determinations by testifying that he felt it would be useless and that he felt "frustrated". In any event the determination by the regulations and the Administrator of the ceilings for the rental units involved must be accepted...