Fox Packing Co. v. Fleming

• Decision Date: 02 May 1947
• Docket Number: No. 375.,375.
• Citation: 161 F.2d 209
• Parties: FOX PACKING CO. v. FLEMING.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

161 F.2d 209 (1947)

FOX PACKING CO. v. FLEMING.

No. 375.

United States Emergency Court of Appeals.

Heard January 31, 1947.

Decided May 2, 1947.

D. Heyward Hamilton, Jr., of Baltimore, Md. (Cummings & Stanley, of Washington, D. C., and Hershey, Donaldson, Williams & Stanley, of Baltimore, Md., on the brief), for complainant.

Irving J. Helman, Atty., and William R. Ming, Jr., Asst. Gen. Counsel, both of Washington, D. C. (Carl A. Auerbach, Gen. Counsel, and Prentice A. Hilburn, Atty., both of Washington, D. C., on the brief), for respondent.

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

Heard at Baltimore January 31, 1947.

MAGRUDER, Judge.

The Fox Packing Company seeks relief in this proceeding under § 2 of the Act of June 23, 1945, Pub.L.No. 88, 79th Cong., 1st Sess., 59 Stat. 260, 15 U.S.C.A. § 606b note, relating to the special subsidy to non-processing slaughterers of cattle.

This special subsidy had been provided pursuant to a Directive of the Economic Stabilization Director issued October 25, 1943 (8 F.R. 14641), reading in part as follows:

"5. Slaughterers who during the year 1942, or a representive portion thereof, sold and who currently sell 98% or more of the total dressed carcass weight of cattle slaughtered by them in the form of carcasses, wholesale cuts, frozen boneless beef (Army specifications) (carcass equivalent) or ground beef, shall be paid in addition to the payments authorized by Regulation No. 3 of Defense Supplies Corporation (Live-stock Slaughter Payments), the amount of $0.80 per cwt. of cattle slaughtered during the month for which such payments are made.

"6. Defense Supplies Corporation is directed to amend Regulation No. 3 (Livestock Slaughter Payments) in accordance with this Directive."

In compliance with the foregoing, Defense Supplies Corporation, on October 30, 1943, issued Amendment No. 2 to its subsidy regulation, reading in part as follows:

"Pursuant to a directive issued by the Office of Economic Stabilization on October 25, 1943 (8 F.R. 14641), Regulation No. 3 of Defense Supplies Corporation is hereby amended by adding a new § 7003-14, as follows:

"§ 7003.14 Extra compensation for non-processing slaughterers of beef — (a) Definitions. (1) `Non-processing slaughterer of beef' means an unaffiliated slaughterer as hereinafter defined who during six consecutive months of 1942, sold, and who currently sells, 98% or more, measured in dressed carcass weight, of the total beef produced from cattle slaughtered by him in all his establishments, in the form of carcasses, wholesale cuts, boneless beef or ground beef.

"(2) `Unaffiliated slaughterer' means a slaughterer who does not own or control a processor or purveyor of meat, and who is not owned or controlled by a processor or purveyor of meat. `Unaffiliated slaughterer' shall not include any institution, representative or agency of Federal, State or local governments.

"(3) `Processor or purveyor of meat' means a person who processes fresh beef or sells or dispenses fresh or processed meat or products containing meat, at wholesale or at retail, or in a hotel, restaurant or other eating establishment.

"(4) `Own or control' means to own or control directly or indirectly a partnership equity or in excess of ten percent of any class of outstanding stock or to have made loans or advances in excess of five percent of the other person's monthly sales.

* * * * * *

"(c) Filing claims. (1) Claims for extra compensation shall be filed in the same manner as, for the same period as, and with, the applications for payment provided for in §§ 7003.1 through 7003.5 of this regulation.

* * * * * *

"(d) Payment of claims. Defense Supplies Corporation will make payment on approved claims for extra compensation at the rate of .8 cents a pound on the same amount of live weight of cattle slaughtered on or after November 1, 1943, on which payments are made to the applicant under §§ 7003.1 through 7003.5 of this regulation. * * *"

Amendment No. 2, though it was issued on October 30, 1943, was not published in the Federal Register until February 16, 1944 (9 F.R. 1820). In the early months, there was some confusion and misunderstanding as to the conditions of eligibility for the special subsidy. Also, the affiliation provisions in Amendment No. 2 were not in the Directive pursuant to which the special subsidy was established, and there was doubt whether the Defense Supplies Corporation was authorized to add further conditions on eligibility not contained in the Directive. This question, which was not without some difficulty, was finally answered in the affirmative by our decision in Earl C. Gibbs, Inc., v. Defense Supplies Corporation et al., 1946, Em.App., 155 F.2d 525, certiorari denied 67 S.Ct. 51.

Meanwhile, many non-processing slaughterers had collected the special subsidy over a considerable period in entire good faith. Demands for repayment were made by Defense Supplies Corporation in cases in which the slaughterer was deemed to be affiliated with a processor or purveyor of meat, within the meaning of Amendment No. 2. In some cases the slaughterers, upon pain of having the basic subsidy withheld from them in the future, were constrained to make arrangements with Defense Supplies Corporation for repayment by installments. The necessity for refunding special subsidies already collected often worked extreme hardship, where the slaughterer, had he realized his technical ineligibility, could have promptly taken steps to remove the disqualifying affiliation. Officials of the Reconstruction Finance Corporation¹ called the matter to the attention of Congress and suggested remedial legislation. As a result Congress passed the Act of June 23, 1945, 59 Stat. 260, 15 U.S.C.A. § 606b note, referred to at the beginning of this opinion and hereinafter called Public Law 88. Section 2 of the Act reads as follows: "Any slaughterer who heretofore or hereafter shall have received extra compensation payments under Livestock Slaughter Payments Regulation Numbered 3 of Defense Supplies Corporation (adopted pursuant to directives of the Director of Economic Stabilization) when such slaughterer was not in a class eligible for such extra compensation payments, shall be relieved, in whole or in part, of obligation to repay the amount thereof and shall be entitled to receive, in whole or in part, the amount of such extra compensation payments repaid by such slaughterer to, or withheld by Defense Supplies Corporation on account of such extra compensation payments, to the extent that it is determined by the Director of Economic Stabilization, or any agency of the Government authorized by him, that it would be inequitable for Defense Supplies Corporation to require repayment by such slaughterer or to retain the amounts so repaid or withheld, provided such Director or agency also determines that such slaughterer believed reasonably and in good faith that he was eligible to receive such extra compensation payments: Provided, That any determination by such Director or agency under this section shall be reviewable by the Emergency Court of Appeals under such rules as such court may prescribe."

By Directive issued July 2, 1945, the Economic Stabilization Director delegated his powers under § 2 of the Act to the Price Administrator (10 F.R. 8242). On August 10, 1945, the Price Administrator issued Procedural Regulation 15, prescribing the procedure for applying for relief under the Act (10 F.R. 9957). The Fox Packing Company made such an application, and was turned down by the Price Administrator, after which the company filed the present complaint in this court.

Complainant, a Maryland corporation, is a non-processing slaughterer of cattle with a plant at Baltimore. It has an authorized capital stock of 1,000 shares. At the time the special subsidy was established, 400 shares were owned by American Stores Company, which operates a chain of retail grocery stores and is a "purveyor of meat" within the meaning of the subsidy regulation as amended. The other 600 shares were owned by three brothers, Morton Fox, Edwin B. Fox, and Nelson Fox, as joint tenants.

In the middle of November, when Morton Fox, president of complainant, first learned that the extra subsidy to non-processing slaughterers had been authorized, he procured and filled out DSC Form 84 entitled "Statement Establishing Eligibility for Extra Compensation Under Amendment No. 2 to Regulation No. 3 of Defense Supplies Corporation." It was thereby disclosed to Defense Supplies Corporation that American Stores Company, a purveyor of meat at retail, owned 40 per cent of the outstanding capital stock of complainant. We note at this point, for it has a bearing on the reasonableness of complainant's subsequent conduct, that though DSC Form 84 required a disclosure of "all persons who now own 10% or more of any class of outstanding stock of the applicant", it did not call for any disclosure of outstanding loans.

By letter dated November 29, 1943, Defense Supplies Corporation advised complainant of its ineligibility for the special subsidy because of the ownership of more than 10 per cent of its stock by American Stores Company. Morton Fox asked his attorney for advice, but at that time they were unable to obtain copies of the subsidy regulation and of Amendment 2 at the local office of Defense Supplies Corporation. On December 1, 1943, complainant, by Morton Fox, president, replied to Defense Supplies Corporation that, as of December 1, 1943, "we have notified the American Stores Company of our intention to purchase this stock on which up to the present time we have paid eight thousand dollars." This might perhaps have implied that the corporation itself was buying in the outstanding stock, but actually the transaction took the form of an individual purchase by the three Fox brothers of the 400 shares of stock from American Stores Company for the price of $32,000, of which $3,000 was paid...