Reconstruction Finance Corp. v. Foust Distilling Co.

• Decision Date: 12 February 1952
• Docket Number: No. 3008.,3008.
• Citation: 103 F. Supp. 167
• Parties: RECONSTRUCTION FINANCE CORP. v. FOUST DISTILLING CO.
• Court: U.S. District Court — Middle District of Pennsylvania

103 F. Supp. 167

RECONSTRUCTION FINANCE CORP. v. FOUST DISTILLING CO.

No. 3008.

United States District Court, M. D. Pennsylvania.

February 12, 1952.

COPYRIGHT MATERIAL OMITTED

James G. McDonough, Scranton, Pa., David H. Frantz, Arthur J. Sullivan, Philadelphia, Pa., for plaintiff.

Eugene Nogi (of Nogi, O'Malley & Harris), Scranton, Pa., for defendant.

MURPHY, District Judge.

Plaintiff (RFC) as transferee¹ of Defense Supplies Corporation (DSC) seeks from defendant distiller, a Pennsylvania corporation, simple damages for breach of contract; treble damages for violation of maximum price regulations and refund orders, reasonable attorney's fees, interest and costs, by virtue of a violation of § 205(e) of the Emergency Price Control Act of 1942, as amended, 50 U.S.C.A. Appendix, § 925(e).

Upon denial of its motion to dismiss plaintiff's complaint² defendant filed an answer and counterclaim. Plaintiff moves for summary judgment on the complaint, to dismiss the counterclaim or alternatively for summary judgment thereon.³ The record consists of the complaint and accompanying exhibits, including the contract, defendant's answer and counterclaim, plaintiff's supporting affidavits and defendant's counter affidavit.

Affidavits may be considered on motions for summary judgment to ascertain whether an issue of fact is presented but not as a basis for deciding a fact issue. Frederick Hart & Co., Inc., v. Recordgraph Corp., 3 Cir., 1948, 169 F.2d 580. It is well settled that summary judgment may be entered for either party if the pleadings and affidavits show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Toebelman v. Missouri-Kansas Pipe Line Co., 3 Cir., 1942, 130 F.2d 1016 at page 1018, Love v. United States Rubber Co., D.C.M.D.Pa., 92 F.Supp. 174 at pages 176, 177.

Is there a genuine issue as to any material fact? Is plaintiff entitled to judgment as a matter of law?

The controversy revolves around a dispute between the parties as to (a) the maximum price to be paid by DSC to defendant for alcohol sold and delivered under a written contract; (b) was defendant's refusal to make refunds as directed in OPA price orders wilful or the result of failure to take practicable precautions against occurrence of the violations?

During the recent World War, by written contract⁴ defendant agreed to sell and DSC agreed to buy up to defendant's maximum production of alcohol as allocated to DSC by the War Production Board (WPB), the purchase price to be the maximum price for producer's alcohol as determined in accordance with appropriate regulations by the Office of Price Administration (OPA). The contract provided that, pending determination of such maximum price by OPA, DSC would make pro forma payments⁵ to defendant for alcohol sold and delivered. If however price adjustments were later made which required a refund to DSC by defendant the latter agreed to make such payments promptly.

As to certain quarterly periods,⁶ the OPA thereafter fixed maximum prices for defendant's alcohol at a figure lower than that paid to the defendant, and ordered defendant to refund the excess within fifteen days. In each instance defendant refused to comply.

MPR No. 28⁷ provided that prices were to be based upon defendant's costs, plus a four cent per gallon profit. Although it followed the prescribed formula, the OPA challenged and disallowed certain items of cost as furnished by the defendant. In each price order, when this occurred, defendant was notified as to the items disallowed and of its right to file a protest. The defendant did not file such protest or invoke the methods provided by law to seek revision upward, i. e., pursue the statutory administrative procedure of appeal with the right of judicial review by the Emergency Court of Appeals within the time allotted.

Having failed to avail itself of the proper administrative remedy and judicial review, defendant herein challenges plaintiff's right to enforce the refund orders assigning reasons⁸ the gist and purport of which are attacks upon the validity, effectiveness and enforcibility of price orders and refunds ordered therein; further that such OPA regulations and orders are not applicable to the contract in question notwithstanding the express provisions of the contract to the contrary.

No question can be here raised as to the validity of the relevant regulations and the refund orders on the ground of retroactivity or otherwise. Those are matters exclusively within the jurisdiction of the Emergency Court of Appeals. 50 U. S.C.A.Appendix, §§ 923, 924; Woods v. Stone, 333 U.S. 472 at pages 474 and 482, 68 S.Ct. 624, 92 L.Ed. 815; Lockerty v. Phillips, 319 U.S. 182 at pages 185, 188, 63 S.Ct. 1019, 87 L.Ed. 1339; Woods v. Hills, 334 U.S. 210, 68 S.Ct. 992, 92 L.Ed. 1322; Yakus v. United States, 321 U.S. 414 at pages 431, 434, 435, 64 S.Ct. 660, 88 L.Ed. 834; Bowles v. Willingham, 321 U.S. 503 at page 512, et seq., 64 S.Ct. 641, 88 L.Ed. 692, and see Porter v. Senderowitz, 3 Cir., 158 F.2d 435 at pages 438, 440, certiorari denied 330 U.S. 848, 67 S.Ct. 1091, 91 L.Ed. 603.

While the Act denies a defendant in an enforcement proceeding the right to challenge the validity of the regulation, it does not deny him the right to attack the Act itself on constitutional grounds. Yakus v. United States, 321 U.S. 414, 430, 64 S.Ct. 660, 88 L.Ed. 834. This right may not however be utilized as a means of indirectly attacking the regulations themselves instead of the statute. Case v. Bowles, 327 U.S. 92 at page 98, 66 S.Ct. 438, 90 L.Ed. 552. As to the constitutionality of the Act itself, see cases cited in the previous paragraph and see Bowles v. American Brewery, Inc., 4 Cir., 146 F.2d 842 at page 844; cf. Taylor v. United States, 9 Cir., 142 F.2d 808 at page 817, certiorari denied 323 U.S. 723, 65 S.Ct. 56, 89 L.Ed. 581; Taylor v. Porter, Em.App., 156 F.2d 805 at page 809, certiorari denied 329 U.S. 792, 67 S.Ct. 203, 91 L.Ed. 671; Speten v. Bowles, 8 Cir., 146 F.2d 602, certiorari denied 324 U.S. 877, 65 S.Ct. 1023, 89 L.Ed. 1429; Shyman v. Fleming, 9 Cir., 163 F.2d 461 at page 463.

Refusal to make a refund directed by the OPA constitutes a violation of the contract and of the Act itself. Under § 205(e) defendant is liable for treble damages unless it proves that the violation was "neither wilfull nor the result of failure to take practicable precautions against the occurrence of the violation." In this regard wilful means intentional, knowing, voluntary or deliberate, as distinguished from accidental, involuntary or unintentional. Haber v. Garthly, D.C., 67 F.Supp. 774 at page 776, affirmed 3 Cir., 165 F.2d 211; Connor v. Wheeler, D.C.W.D.Pa., 77 F.Supp. 875 at page 879.

We find nowhere in defendant's pleadings any attempt to assert a defense which would negative the claim for treble damages under § 205(e). Such a defense must be pleaded and proved by the defendant. See Bowles v. Krodel, 7 Cir., 149 F.2d 398 at pages 399, 400; Bowles v. Glick Bros. Lumber Co., 9 Cir., 146 F.2d 566 at pages 571, 572. We assume that defendant has asserted its strongest position which is its reliance upon its asserted right that the costs stated by it were justified notwithstanding their disallowance by the OPA.

In its price notice sent to DSC January 3, 1944, in connection with the contract in question defendant advised that prices were subject to upward and downward adjustment in accordance with OPA MPR No. 28, § 1412.263(h). See Yakus v. United States, supra, 321 U.S. at page 435, 64 S.Ct. 660.

Defendant's reliance upon an unsupportable proposition of law does not under the circumstances make its refusal to refund other than wilful. Defendant in failing to take advantage of the right to protest and appeal did not take practicable precautions against occurrence of the violations.

The RFC has whatever rights to proceed as were inherent in DSC. See footnote 2, supra. Defendant asserts that if a right of action arose it was vested only in the administrator of the OPA and not in DSC. We disagree. See Reconstruction Finance Corp. v. Foust Distilling Co., supra, 87 F.Supp. at pages 634, 635.

We have before us the RFC Act, § 5, as amended (see 1934 Ed., 15 U.S.C.Supp., § 606(b), 1948 Ed., § 606(b), historical note) 54 Stat. 573, 574, which provides inter alia: "In order to aid the Government * * * in its national-defense program, the Corporation is authorized * * * (2) * * * (a) to produce, acquire, and carry strategic and critical materials * * *." The DSC charter provides inter alia, "Third, that the objects and purposes of the corporation shall be to buy, sell, carry, acquire, store, transport, produce, process, manufacture, market and otherwise dispose of strategic or critical material and supplies of all kinds which may be necessary or appropriate in connection with the national defense program of the Government * * *."⁹

Whether or not RFC is the proper party plaintiff is a question of law or at most one of legal inferences and conclusions to be drawn from the undisputed facts. See Schreffler v. Bowles, 10 Cir., 153 F.2d 1 at pages 3, 4.

From the uncontradicted evidence it appears that all of defendant's product purchased by the DSC was for the purpose of furthering the war effort, a governmental function, and was not for use by it in any trade or business. In this connection, cf. Cherry Cotton Mills, Inc., v. United States, 59 F.Supp. 122, 103 Ct.Cl. 243, affirmed 327 U.S. 536 at page 539, 66 S.Ct. 729, 730, 90 L.Ed. 835, speaking of the RFC, "That the Congress chose to call it a corporation does not alter its characteristics so as to make it something other than what it actually is, an agency selected by Government to accomplish purely Governmental purposes." And see Todd v. Maryland Cas. Co., 7 Cir., 155 F.2d 29 at page 38.

As we pointed out in our previous opinion, R.F.C. v. Foust Distilling Co., supra, 87 F.Supp. at...