Brown v. Cummins Distilleries Corporation

• Decision Date: 22 January 1944
• Docket Number: No. 584.,584.
• Citation: 53 F. Supp. 659
• Parties: BROWN, Price Administrator, Office of Price Administration, v. CUMMINS DISTILLERIES CORPORATION et al.
• Court: U.S. District Court — Western District of Kentucky

53 F. Supp. 659

BROWN, Price Administrator, Office of Price Administration, v. CUMMINS DISTILLERIES CORPORATION et al.

No. 584.

District Court, W. D. Kentucky, Louisville Division.

January 22, 1944.

George J. Burke, Gen. Counsel, and Thomas I. Emerson, Associate Gen. Counsel, both of Washington, D.C., James C. Greuner, Regional Atty., and Robert H. Trenkamp, Regional Enforcement Atty., both of Cleveland, Ohio, Raymond C. Stephenson, Chief Atty., of Louisville, Ky., Fritz Krueger, Chief Enforcement Atty., of Mt. Vernon, Ky., and Homer B. Parrent, Enforcement Atty., of Louisville, Ky., for plaintiff.

Allen P. Dodd and John Skaggs, Jr., both of Louisville, Ky., for defendants A. J. Cummins and others.

J. V. Norman and Davis R. Castleman, both of Louisville, Ky., for defendant Roy St. Lewis.

Irvin Marcus and Davis, Boehl, Viser & Marcus, all of Louisville, Ky., for defendant Earl J. Mock.

Curtis & Curtis, of Louisville, Ky., for defendant Mrs. Marcellius G. Mature.

J. Verser Conner, of Louisville, Ky., and Frederic P. Lee and Floyd F. Toomey, both of Washington, D.C., for defendant Adolph Hirsch.

MILLER, District Judge.

The plaintiff as Price Administrator, Office of Price Administration, brought this action on behalf of the United States, pursuant to the provisions of Section 205(e) of the Emergency Price Control Act of 1942, 50 U.S.C.A.Appendix § 925(e), against the defendants Cummins Distilleries Corporation and its individual stockholders to recover $6,799,101.57 as treble damages for the sales of 51,694 barrels of Bourbon whiskey at prices in excess of the maximum price established therefor by Maximum Price Regulations. A number of the defendants have filed motions for summary judgment, and by answers have also pleaded that the complaint fails to state a cause of action against them. The motions and such paragraphs of the answers raise similar questions and will accordingly be considered together.

The complaint alleges that the Cummins Distilleries Corporation was a Delaware corporation doing business in Kentucky with its principal office in Louisville, Kentucky, and was engaged in the business of selling whiskey in bulk and whiskey and gin in cases; that on December 31, 1942 it was dissolved; that on or about January 4, 1943 the corporation, or its officers, or its directors, or a stockholders' distribution committee, or the stockholders themselves sold to various purchasers 51,694 barrels of Bourbon whiskey at prices which were in excess of Maximum Price Regulation No. 193 in the amount of $2,266,367.19. Judgment is prayed against each of the defendants for treble this amount, as authorized by Section 205(e) of the Act. Verified answers add the additional undisputed facts that on or about October 1, 1942 the Cummins Distilleries Corporation was required by the United States to discontinue the manufacture of alcoholic beverages and to manufacture in its place alcohol for the United States Government; that continuously from October 1, 1942 up to the date of its dissolution it produced alcohol for the United States Government exclusively; that it had a stock of whiskey on hand that could possibly last 3½ years at the most, and being unable to replenish its stock it was the opinion of its board of directors that it was impossible for the distillery to continue in business at a profit to its stockholders; that accordingly on December 24, 1942 the stockholders voted to dissolve the corporation and proceedings were instituted and carried through in good faith to that end; that the whiskey on hand represented by warehouse receipts therefor was distributed in kind to the stockholders through delivery to an authorized stockholders' committee, which committee thereafter sold the warehouse receipts to the purchasers referred to in the complaint. The answers also plead in defense that the warehouse receipts were negotiable instruments and not "commodities" as that term is used and defined in the Emergency Price Control Act, and were in fact "securities" which were expressly exempt from the application of Maximum Price Schedules; that there was not at the time of the alleged sales any valid maximum price applicable to the sale of negotiable warehouse receipts or of whiskey in bulk; that the alcoholic beverages produced by the distilleries corporation were manufactured exclusively from agricultural products and as such were not covered by Maximum Price Regulation No. 193 relied upon by the plaintiff; that there was no maximum ceiling price for bulk whiskey in bond until February 3, 1943 which was subsequent to the date of the alleged sales; and that said sales were made in good faith and in the belief that they were not violations of any provisions of the Act or of any price schedule.

The Emergency Price Control Act of 1942 was approved January 30, 1942, 50 U. S.C.A.Appendix §§ 901 through 946. It in itself established no ceiling prices but vested in the Price Administrator broad discretionary authority to fix ceiling prices on such "commodities," as he might select.

Section 302 dealing with definitions provides "The term `commodity' means commodities, articles, products, and materials (except materials furnished for publication by any press association or feature service, books, magazines, motion pictures, periodicals and newspapers, other than as waste or scrap), and it also includes services rendered otherwise than as an employee in connection with the processing, distribution, storage, installation, repair, or negotiation of purchases or sales of a commodity, or in connection with the operation of any service establishment for the servicing of a commodity: * * *." By Section 3(c) of the Act it is provided that "no maximum price shall be established or maintained for any commodity processed or manufactured in whole or substantial part for any agricultural commodity below a price which will reflect to producers of such agricultural commodity a price for such agricultural commodity equal to the highest price therefor specified in subsection (a)." Subsection (a) of Section 3 provides that no maximum price shall be established for any agricultural commodity below a certain level determined in several ways, including 110 percentum of the parity price for such commodity, the market price prevailing for such commodity on certain dates, and the average price for such commodity during a designated period of 10 years. The Act also created by Section 204 thereof the Emergency Court of Appeals with exclusive jurisdiction to determine the validity of any regulation or order or price schedule issued under the Act, with appeal from its judgments to the Supreme Court of the United States.

On April 28, 1942 the Price Administrator issued "General Maximum Price Regulation —Bulletin No. 1." In Section 2 of this Regulation he established maximum prices "for any commodity or service" at the highest price charged by the seller during the month of March 1942. Section 9 of this Regulation excepted certain commodities from its operation, including in Subsection 15 thereof "Securities." By Section 20, dealing with definitions and explanations it was provided in Subsection (q) that "`Securities' includes any note, stock, bond, and interest or instrument commonly known as a `security'".

On August 1, 1942 the Administrator issued Maximum Price Regulation No. 193, effective August 5, 1942, which by its title dealt with "domestic distilled spirits," and which in its opening paragraph stated that in the judgment of the Price Administrator it was necessary to establish maximum prices for the sale of domestic distilled spirits because (a) the allocation of all neutral spirits to war industries had forced blenders of liquors to use higher priced high wines and (b) it was proposed to increase the Federal excise tax on distilled spirits. This Regulation provided "On or after August 5, 1942, regardless of any contract, agreement, lease or other obligation, no person shall sell or deliver domestic distilled spirits and no person in the course of trade or business shall buy or receive domestic distilled spirits at prices higher than the maximum prices set forth in Appendix (a) hereof * * *; and no person shall agree, offer, solicit, or attempt to do any of the foregoing." Appendix (a) provided that "the seller's maximum price for domestic distilled spirits shall be the seller's maximum price established under Section 1499.2(a) of the General Maximum Price Regulation, plus the following additions: * * *." The additions allowed manufacturers, and also sellers other than manufacturers, to add certain costs and taxes, and Appendix (a) then further provided that "If the seller's maximum price for the domestic distilled spirits to be priced can not be determined" in that way it should be established by taking the maximum price for the most closely competitive seller of the same class for such domestic distilled spirits or for the similar commodity most nearly like it, or if this was not possible it should be determined in accordance with Section 1499.3 of the General Maximum Price Regulation. On November 2, 1942 the Administrator issued Maximum Price Regulation 193 Amendment 1 and Maximum Price Regulation 193 Amendment 2; on December 1, 1942 the Administrator issued Maximum Price Regulation 193 Amendment 3; and on February 3, 1943 the Administrator issued Maximum Price Regulation 193 Amendment 4. All of these carried the title of "Domestic Distilled Spirits." Amendments 1, 2 and 3 dealt with matters not important to this litigation. Amendment 4 dealt specifically with Domestic Bulk Whiskey," and "Warehouse Receipt." A new paragraph, designated Paragraph (e), was added which provided in part as follows: "The seller's maximum prices for sales of domestic bulk whiskey in bond by transfer of warehouse receipt or other evidence of title, or otherwise, shall be the maximum prices set forth in Paragraph (g) in accordance with the age of such whiskey...