Equitable Trust Co. v. Bowles

• Decision Date: 13 July 1944
• Docket Number: No. 69.,69.
• Citation: 143 F.2d 735
• Parties: EQUITABLE TRUST CO. et al. v. BOWLES, Price Administrator.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

143 F.2d 735 (1944)

EQUITABLE TRUST CO. et al. v. BOWLES, Price Administrator.

No. 69.

United States Emergency Court of Appeals.

Heard March 2, 1944.

Decided July 13, 1944.

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John W. Langs, James I. McClintock, and Frank W. Donovan, all of Detroit, Mich., for complainants.

Sol M. Linowitz, Chief, Court Review Rent Branch, of Washington, D. C. (Richard H. Field, Acting Gen. Counsel, Nathaniel L. Nathanson, Associate Gen. Counsel, and Harry H. Schneider, and Betty L. Brown, Attys., all of the Office of Price Administration, all of Washington, D. C., on the brief), for respondent.

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

Heard at Washington March 2, 1944.

LAWS, Judge.

The complaint in this case, filed on behalf of owners of more than 200 housing accommodations of various types, is an attack on Maximum Rent Regulation No. 11, issued May 27, 1942, to become effective June 1, 1942, in the Detroit Defense-Rental Area.¹ It is claimed that the Regulation is invalid because it establishes April 1, 1941, as the maximum rent date and because it fails to make adequate provision for upward adjustments of rents which on the maximum rent date were substantially lower than those generally prevailing in the Area.

In their challenge against the choice of April 1, 1941, as the maximum rent date, complainants make many different objections which may be considered under three general headings: first, that the Administrator, by acting contrary to purposes declared in the Emergency Price Control Act of 1942,² exceeded the authority delegated to him by Congress to establish a maximum rent date; second, that the Administrator made erroneous findings and drew improper conclusions of fact with respect to the effect of defense activities on rent increases in the Detroit Area; and third, that the Administrator discriminated against the Detroit Area by not applying the same standards in the selection of the maximum rent date as he applied in other comparable areas. It is claimed that as the result of the Administrator's action the maximum rent date in Detroit was fixed at a time approximately one year earlier than should have been chosen and that the rents were fixed at least 10% below the level which should have been permitted.

In support of their claim that the Administrator improperly exceeded his authority, complainants point to what they assert to be policies or standards prescribed by the Emergency Price Control Act of 1942 for the establishment of rent ceilings. They maintain that one of the policies is to permit normal increases of rents such as attend a stimulated war time economy and that so long as the increases are not excessive and do not hinder the war effort, they should be allowed. We do not agree with this as a general statement of a policy of the Act. It is now well settled by our decisions that even small increases in rents after defense activities begin may well be inflationary and therefore inconsistent with the primary purpose of the Act.³ Except where special circumstances are shown to exist, which make the continuance of such increases necessary for the fair and equitable treatment of landlords generally throughout the area concerned, or otherwise necessary for the effectuation of the purposes of the Act, there is no policy to permit them.

But complainants' contention goes beyond this general claim. They argue that they should have been allowed to retain increases in this case because as of the time the maximum rent date was established other costs of living had increased out of proportion to rent increases. They refer to statistics introduced in the record which, they maintain, show that prices and wages increased excessively in Detroit, while rents were closely regulated. These statistics, using 1935-1939 averages as 100, show that rents increased from 107.8 in 1939 to approximately 114.4 in 1943. During the same period the cost of all items increased from 100.2 to 126, food costs rose from 96.2 to 138.8, clothing from 100.1 to 129.7, and house furnishings from 101.3 to 123. Between November 1939, and December 1942, according to evidence submitted by complainants, average weekly earnings of Detroit factory workers increased from $35 to $56. Complainants take the position that while the law does not require uniform percentage increases in the costs of all items, nevertheless the Administrator is required to preserve some reasonable balance between the different segments of the economy. They suggest that the minimum increase of rents to which landlords are entitled should be relatively the same as that permitted other items. In the same connection complainants maintain that the Administrator has disregarded a declared purpose of the Act to protect investors (including landlords) from undue impairment of their standard of living.

We find no requirement in any part of the Act that the Administrator must maintain any ratio or balance between the controlled levels of rents and those of wages and commodity prices.⁴ On the contrary, it is required only that maximum rents shall be generally fair and equitable and shall effectuate the purposes of the Act. It seems hardly necessary to refer to the inevitable inflation that would result if increases in all costs were required when rises occurred in the costs of one or a few items. Such a requirement would be contrary to the fundamental purpose of the Act. We do not decide that the Administrator in establishing rent control in an area is under no obligation to consider the existing state of other items of the economy. Such consideration is relevant to a determination whether a given ceiling on rents is generally unfair and inequitable to landlords within the Area. In the case before us while the figures submitted by complainants admittedly show that rents have not risen in proportion to wages and commodity prices, the showing is not of such character as to indicate unfair treatment to landlords. Having a tendency to indicate the contrary is a showing in the record that landlords' over-all profits under rent control have been considerably above pre-war levels in spite of the ceilings imposed.⁵ The record thus fails to establish any harmful reduction in the profit position enjoyed by Detroit landlords. Under these circumstances, we feel we would not be justified in concluding that Detroit landlords under rent control as imposed by the Administrator are being treated generally unfairly and inequitably either by impairment of their standards of living or otherwise.

Complainants claim that the inflationary effect of the rent increases which occurred between April 1, 1941, and June 1, 1942, the effective date of the Regulation, had to a large extent already been spent by the time the Regulation was issued and that the Administrator has failed to show any pending demands for higher wages based upon these rent increases. From this, they conclude that the rollback of rents to the level of April 1, 1941, has not been shown to have been a step in the suppression of inflation, the underlying purpose of the Act. We find this contention to be without merit. It seems apparent that if not suppressed the rent increases which occurred subsequent to April 1, 1941, during a period of war emergency, would constitute a continuing inflationary pressure in the economy. Where the Administrator, as in this case, establishes a rollback of rents after a study of the economy and the rental increases in an area, his action will be presumed to have been correct and in accordance with the provisions of the Act. The burden then falls upon complainants clearly to establish that the rent increases disallowed were not inflationary. There is no evidence before us by which to trace the precise movement through the economy of the increases in Detroit rents. We cannot accept the suggestions and arguments of complainants as being sufficient to overcome the presumption in favor of the Administrator's action.

Complainants next contend that the Administrator misconstrued the facts supporting his selection of April 1, 1941, as the maximum rent date for the Detroit Area. They take the position that the record does not reasonably support a finding, made in the preamble to the Regulation, that "* * * defense activities had not resulted in increases in rents * * * inconsistent with the purposes of the Emergency Price Control Act of 1942 prior to April 1, 1941, but did result in such increases on or about that date."

By exhibits in the record it appears that between September 15, 1939, and April 15, 1941, 26% of all white tenants in Detroit had rent increases averaging 8.9% and 37% of all nonwhite tenants had increases averaging 13.8%. Between April 15, 1941, and May 1, 1942, 63% of the white tenants had increases averaging 10.2% and 34% of all nonwhite tenants had increases averaging 15.8%. Complainants contend these increases resulted from peacetime prosperity, not defense activities. They point out that although Detroit reached a peacetime employment peak in May and June 1941, it early appeared that the demands of national defense would curtail and perhaps completely arrest the output of automobiles for private use. This incentive and the added circumstance that defense spending throughout the country had made increased cash available to consumers resulted in large orders for automobiles of this type and wherever possible factories were put upon capacity production. Complainants state that this period of prosperity and extensive employment was followed by a recession or a falling off of employment caused by the conversion of mass production factories to war work. The recession is said to have begun in July 1941, and to have lasted until the Spring of 1942. The rise in rents during this period is accounted for by what complainants describe as a principle underlying voluminous exhibits in the record. This principle, they state, is that rises in employment and...