King Packing Co. v. Reconstruction Finance Corp.

• Decision Date: 07 May 1952
• Docket Number: No. 577.,577.
• Citation: 196 F.2d 514
• Parties: KING PACKING CO. v. RECONSTRUCTION FINANCE CORPORATION.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

196 F.2d 514 (1952)

KING PACKING CO. v. RECONSTRUCTION FINANCE CORPORATION.

No. 577.

United States Emergency Court of Appeals

Heard January 4, 1952.

Decided May 7, 1952.

Robert E. Smylie, Boise, Idaho, with whom Langroise, Clark & Sullivan, Boise, Idaho, were on the brief, for the complainant.

Maurice S. Meyer, Attorney, Department of Justice, Washington, D. C., with whom J. Gregory Bruce, Attorney, Department of Justice, Washington, D. C., was on the brief, for the respondent.

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

Heard at Boise, Idaho, January 4, 1952.

MAGRUDER, Judge.

The challenge here is to the action of Reconstruction Finance Corporation in partly disallowing complainant's claims for livestock slaughter subsidy payments for the months of February, March, April, May, November and December of 1945, and of January, February, March, April, May, June, September and October of 1946. Upon denial by RFC of a formal protest against such order or determination, complainant filed its complaint in this court under § 204(a) of the Emergency Price Control Act of 1942. 56 Stat. 31, 50 U.S.C.A. Appendix, § 924(a). For a resume of the livestock slaughter subsidy program, and also for the basis of our jurisdiction in this class of cases, see Evergreen Meat Co. v. RFC, E.C.A.1951, 188 F.2d 368.

We have many times noted how closely the subsidy program was tied in with the program for controlling meat prices.

Revised Regulation 3 (10 F.R. 4241), effective January 19, 1945, issued by respondent's predecessor Defense Supplies Corporation, embodied a so-called cattle stabilization plan which sought to impose indirect controls upon live cattle prices by depriving the buyer of his subsidy to the extent that his total monthly payments for all grades of cattle purchased exceeded the price ranges established for the various grades. These price ranges were fixed with a view to bringing into proper relationship the prices for live cattle and the prices for meat carcasses and wholesale cuts established in Revised Maximum Price Regulation 169 (7 F.R. 10381).

The foregoing subsidy regulation drew a distinction between what came to be known as "feeder cattle", that is, cattle which were not purchased and delivered to the subsidy applicant within thirty days of slaughter, and "non-feeder cattle", that is, cattle purchased and delivered to the subsidy applicant within thirty days of slaughter and thus not kept for feeding more than thirty days. Section 7003.7 (c) and (d) required the applicant to file separate subsidy claims for cattle slaughtered in these two distinct categories during each accounting period. At the outset, there was no difference in the subsidy rates applicable to the two categories. But it was only as to non-feeder cattle that the subsidy claims were subject to deduction, as provided in § 7003.8, to the extent that the applicant's actual cost of cattle was below the minimum or above the maximum permissible cost as set forth in the cattle stabilization plan. Accordingly, in filing his subsidy claims for slaughter of non-feeder cattle, the applicant was required to report the cost of all such cattle slaughtered by him during the accounting period. He did not have to report his cattle costs in submitting his separate claims on account of the slaughter of feeder cattle, that is, cattle slaughtered by him during the accounting period which were not purchased and delivered to him within thirty days of slaughter. By amendment 2 to Revised Regulation 3, effective April 1, 1945, an extra basic subsidy was provided for slaughter of non-feeder cattle over and above the compensation for slaughter of feeder cattle; and during the remainder of the accounting periods here in question, though the rates varied from time to time, this differential was maintained.

Closely correlated with the subsidy regulation was Maximum Price Regulation 574 issued by the Price Administrator, effective January 29, 1945 (10 F.R. 1270, 1404), § 2 of which provided that no person in the course of trade or business "shall pay for live cattle bought or received during any accounting period an amount higher than the maximum amount fixed by this regulation for such live cattle during such accounting period". The cattle stabilization plan as embodied in Revised Regulation 3 was incorporated into MPR 574, thus adding the sanctions of the Emergency Price Control Act to the sanction of loss or diminution of subsidy, in order to induce slaughterers to keep their purchases of live cattle within the prescribed range prices in the over-all monthly average. Section 9(c) of MPR 574 provided that the calculations for determining the maximum permissible cost of cattle during an accounting period "are the same as the calculations required in an application to Defense Supplies Corporation for subsidy payment on Form No. DS-T-55 Revised pursuant to Livestock Slaughter Payments Regulation No. 3, Revised, of Defense Supplies Corporation." Section 10 of MPR 574 dealt with reports to the Office of Price Administration required of all slaughterers subject to the provisions of MPR 574. Such slaughterers were required to furnish the OPA (1) a copy of Form No. DS-T-55 Revised, on which the slaughterer had filed a claim with Defense Supplies Corporation for cattle slaughter payments on account of non-feeder cattle, which document had to contain the information required to determine the slaughterer's maximum permissible cost and to show the slaughterer's total cost of such cattle for the accounting period, and (2) a copy of Form No. DS-T-55 Revised, submitted to DSC in applying for the subsidy on account of the slaughter, if any, of feeder cattle, that is, "all cattle owned for more than 30 days before slaughter". In addition, MPR 574 established an overriding ceiling price, without regard to grade, for sale or delivery of any live bovine animal or lot of live bovine animals, a regulation applicable both to sellers and buyers.

Now for an understanding of the problem in this case, it is necessary to distinguish between three related businesses, G. K. Livestock Company, a partnership, King Packing Company, a partnership, and King Packing Company, a corporation, the complainant in the case at bar.

For many years G. K. Livestock Company had been engaged in a general farming and livestock business at Nampa, Idaho. It was a partnership in which George King held a 45 per cent interest, his wife Edith King 45 per cent, and his daughter Mildred King Kelsey 10 per cent. This partnership was set up some time in the middle thirties, with a separate set of books and bank account, as a business unit distinct from King Packing Company, a partnership engaged in the cattle slaughtering business in the same town.

The partners in King Packing Company were George King and his wife, each with a 30 per cent interest, their daughter Mildred King Kelsey with 10 per cent, and Allan, Dennis and Catherine Kelsey each with 10 per cent.

King Packing Company, complainant herein, is an Idaho corporation, successor to the partnership of the same name, having on January 1, 1946, acquired the business of the partnership and all of its assets and liabilities. The stock of the corporation is held by George King and his wife, each with a 35 per cent interest, their daughter Mildred King Kelsey with a 5 per cent interest, Allan, Dennis and Catherine Kelsey each with 5 per cent, and the remaining 10 per cent owned by four other individuals.

In the course of business the G. K. Livestock Company bought cattle and fed them, and sold them to cattle buyers throughout Idaho, including King Packing Company, but with the unsettled market conditions during the war period G. K. Livestock Company came to conduct the feeding operation mainly for the purpose of assuring King Packing Company an adequate supply of high quality beef.

There is no suggestion that the two partnerships, G. K. Livestock Company and King Packing Company, were not what they purported to be, two distinct businesses having their respective assets and liabilities, though having certain partners in common. Cf. In re Buckhause, D.C.Mass.1874, 2 Low. 331; In re Haines & Co.'s Estate, 1896, 176 Pa. 354, 35 A. 237; Beacannon v. Liebe, 1884, 11 Or. 443, 5 P. 273; Burrows v. Leech, 1898, 116 Mich. 32, 74 N.W. 296; Pattee v. Paige, 1895, 163 Mass. 352, 40 N. E. 108, 28 L.R.A. 451. And of course, since they were formed long before the war period, it could not be said that they were set up for some evasive or other improper purpose connected with the interrelated price control and subsidy programs under the Emergency Price Control Act. The accounting periods now in question cover months in the years 1945 and 1946; during the former year the slaughtering plant was conducted by the partnership King Packing Company, and during the latter year the plant was conducted by the successor corporation of the same name. In respect to the subsidy claims now before us, it would not seem sensible to draw a distinction between King Packing Company the partnership and the successor corporation.

King Packing Company, first the partnership and later the corporation, purchased some of its cattle from G. K. Livestock Company and some from other sources. In submitting its subsidy claims to Defense Supplies Corporation on Form No. DS-T-55 Revised, King Packing Company reported all of the cattle slaughtered as non-feeder cattle, since all the cattle were slaughtered within the 30-day period after their acquisition by it. No distinction was made between cattle bought from G. K. Livestock Company and cattle bought from other sources, though in large part cattle which had been procured from G. K. Livestock Company had been bought by G. K. Livestock Company more than thirty days before their slaughter by King Packing Company.

On or about May 15, 1946, respondent RFC, which had meanwhile taken over the functions of its wholly owned subsidiary Defense...