Merchants Packing Co. v. Reconstruction Finance Corp.

• Decision Date: 29 September 1949
• Docket Number: No. 487.,487.
• Citation: 176 F.2d 908
• Parties: MERCHANTS PACKING CO. v. RECONSTRUCTION FINANCE CORPORATION.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

176 F.2d 908 (1949)

MERCHANTS PACKING CO. v. RECONSTRUCTION FINANCE CORPORATION.

No. 487.

United States Emergency Court of Appeals.

Heard March 28, 1949.

Decided September 29, 1949.

Warren Woods, Atlanta, Ga., for complainant.

George Arthur Fruit, Attorney, Washington, D. C. (Joseph M. Friedman, Special Assistant to the Attorney General, both of the Department of Justice, on the brief), for respondent.

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

Heard at Washington, March 28, 1949.

MAGRUDER, Judge.

This is another case involving claims filed with the Reconstruction Finance Corporation for livestock slaughter subsidy payments provided for in Revised Regulation No. 3, as amended. For extended discussion of the origin, legal basis, purposes and mechanisms of the meat subsidy program, we refer to our opinions in Armour & Co. v. Bowles, Em.App.1945, 148 F.2d 529, certiorari denied 1945, 325 U.S. 871, 65 S.Ct. 1411, 89 L.Ed. 1989; Illinois Packing Co. v. Bowles, Em.App.1945, 147 F.2d 554; Illinois Packing Co. v. Snyder, Em.App.1945, 151 F.2d 337; Earl C. Gibbs, Inc., v. Defense Supplies Corp., Em.App. 1946, 155 F.2d 525, certiorari denied, 1946, 329 U.S. 737, 67 S.Ct. 51, 91 L.Ed. 637; Federated Meat Corp. v. Fleming, Em.App. 1947, 159 F.2d 725, and William Schluderberg-T. J. Kurdle Co. v. R. F. C., Em.App. 1948, 169 F.2d 419, certiorari denied 1948, 335 U.S. 846, 69 S.Ct. 68.

Cattle slaughter subsidy payments were originally established, effective June 7, 1943, by Regulation No. 3 (8 F.R. 10826), issued by Defense Supplies Corporation, a corporation created under § 5d of the Reconstruction Finance Corporation Act, as amended (6 F.R. 2972), and empowered to act as paying or disbursing agent in respect to the subsidies to livestock slaughterers. A so-called cattle stabilization plan, instituted pursuant to directive of the Office of Economic Stabilization issued October 25, 1943 (8 F.R. 14641), was designed to impose an indirect control upon live cattle prices by subjecting the buyer to a loss of subsidy when his total monthly payments for all grades of cattle purchased exceeded the price ranges established for the various grades. The subsidy regulation as it had been amended from time to time was reissued as Revised Regulation No. 3, effective January 19, 1945 (10 F.R. 4241). Defense Supplies Corporation was dissolved on July 1, 1945, and its functions transferred to respondent RFC by the Act of June 30, 1945, 59 Stat. 310, 15 U.S.C.A. § 611 note. Revised Regulation No. 3, as amended, was then taken over and administered directly by RFC (10 F.R. 11155).

The Office of Economic Stabilization, which had been given overriding authority over the entire subsidy and stabilization program by Executive Order 9250 (7 F.R. 7871 — see our discussion in Earl C. Gibbs, Inc., v. Defense Supplies Corp., supra, 155 F.2d 525), issued Amendment 3 (11 F.R. 3102) to its Directive 41 (10 F.R. 4494), by which amendment, effective April 1, 1946, RFC was directed to withhold payment of subsidy claims, in accordance with a prescribed sliding scale of penalty deductions, in cases where a slaughterer's claim, on Form DS-T-55, showed an aggregate cost of cattle, for the monthly accounting period covered by the claim, in excess of the maximum permissible cost under the cattle stabilization plan.¹ Section 7(b)(5) of Directive 41, as added by the aforesaid Amendment 3, provided, however, that a slaughterer might apply to the Price Administrator at Washington, D. C., for a release of the subsidy payments which RFC had thus been directed to withhold. The subsection further provided as follows:

"Upon a finding by the Price Administrator that such overpayment was due to extenuating circumstances and that the release of the subsidy withheld, or a portion thereof, would not be inconsistent with the stabilization program, he may so certify to Reconstruction Finance Corporation, setting forth the amount of the subsidy to be released and thereupon such amount of subsidy shall be payable forthwith."

In conformity with the terms of the above Directive, Revised Regulation No. 3 was amended by Amendment 15 issued March 21, 1946, effective April 1, 1946. By this amendment, the subsidy regulation was revised so as to add to § 7003.6(b) thereof a new paragraph (3) incorporating the sliding scale penalty deductions above referred to; and the amended regulation further provided that such deductions, or any part thereof, should be repaid to the applicant by RFC in accordance with any certifications by the Price Administrator to the effect above stated.

As the subsidy regulation was thus set up, RFC as paying agent was required to make deductions from livestock subsidy payments when the claims disclosed that the applicant had exceeded, for the accounting period in question, the maximum permissible cost for live cattle bought by him; and the amount of the deductions was determined by the sliding scale formula incorporated in the regulation. RFC had no discretion in the matter; the deductions were automatic. In that connection RFC was obliged to accept as conclusive the grading certificates issued by the official graders of the U. S. Department of Agriculture; as paying agent, RFC was given no function or authority to review and revise such grading certificates. Furthermore, RFC was not authorized to release any of the subsidy payments thus withheld, except upon receipt of a certification from the Price Administrator.

The function of the Price Administrator to make such certifications was, by Executive Order 9809 (11 F.R. 14281) issued December 12, 1946, 50 U.S.C.A.Appendix, § 601 note, transferred to the Office of Temporary Controls. Later, by Executive Order 9841 (12 F.R. 2645), issued April 23, 1947, 50 U.S.C.A.Appendix, § 601 note, this function was finally transferred to RFC itself. Thus, there were eventually coalesced in RFC (1) the function of paying agent charged with the automatic duty to withhold certain subsidy payments by way of penalty deductions, and (2) the function, upon application by a slaughterer who had been subjected to such penalty deductions, of finding and certifying the existence of "extenuating circumstances", etc., and making the discretionary determination as to the amount of the withheld subsidy payments to be released to the applicant. In the interest of clarity these two functions, and their separate derivations, should be kept distinct.

With the foregoing preliminary statement, it is now in order to summarize the facts of this particular case.

Merchants Packing Company, the complainant, in the winter of 1945-46 built a slaughtering plant in Chicago, Illinois, for the purpose of opening a custom slaughtering business. The plant was opened for business on March 14, 1946. It had a slaughtering capacity of 240 carcasses per day. Its projected storage or holding cooler capacity was 240 carcasses — described by complainant's president as "very limited for an operation of this size." On or about April 1, 1946, the Meat Inspection Division of the Department of Agriculture, though it is alleged to have originally approved the plans in the blueprint stage, ordered the slaughterer, for sanitary reasons, to discontinue the use of the south rail in the storage cooler and to curtail the use of the north rail approximately 50 per cent.² This resulted in a reduction of the capacity of the holding cooler from 240 to 140 carcasses.

Due to restrictions on the custom slaughtering business imposed by Amendment 69 to Revised Maximum Price Regulation No. 169 (11 F.R. 3299), effective April 1, 1946, complainant had to abandon its custom slaughtering operations. Thereafter it continued operations as a straight slaughtering business on its own account, concentrating on the top grades of beef demanded in the hotel and restaurant supply field.

Complainant filed with the RFC its claims for livestock subsidy payments for the months of April, May, and June, 1946. The claims disclosed, in each instance, that complainant had exceeded the maximum permissible cost under the cattle stabilization plan embodied in the subsidy regulation and also in MPR 574 (10 F.R. 1270). Accordingly, RFC made deductions from complainant's subsidy claims for the three months in question in the sums of $36,030.62, $64,384.72, and $65,255.87, respectively. The RFC was required to do so by the express terms of the regulation, and the amounts of the penalty deductions are not in dispute.

Thereafter, on December 30, 1946, complainant made application to the Office of Temporary Controls for a certification authorizing RFC to release the withheld subsidies on the ground that complainant's overpayments for cattle in excess of the maximum permissible cost were due to "extenuating circumstances". At this time, the function of making such certifications was lodged with the Office of Temporary Controls, as we have stated above. The application was denied by the Temporary Controls Administrator. After the function of passing on such applications was transferred by Executive Order 9841 from the Office of Temporary Controls to RFC, complainant renewed its application before RFC. By letter dated July 16, 1947, RFC denied the application, and after request for reconsideration this denial was reaffirmed by letter dated January 21, 1948.

Under date of September 14, 1948, complainant filed with RFC its protest against the action of RFC in denying the application for release of the withheld subsidy payments. By letter dated October 20, 1948, RFC denied the protest. Claiming to be aggrieved by such denial, Merchants Packing Company filed the present complaint in this court on November 19, 1948.

Only brief reference need be made to a suggestion by respondent that the Emergency Court of Appeals lacks...