San Antonio Packing Co. v. Reconstruction Fin. Corp.

• Decision Date: 09 June 1950
• Docket Number: No. 529.,529.
• Citation: 182 F.2d 614
• Parties: SAN ANTONIO PACKING CO. v. RECONSTRUCTION FINANCE CORPORATION.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

182 F.2d 614 (1950)

SAN ANTONIO PACKING CO. v. RECONSTRUCTION FINANCE CORPORATION.

No. 529.

United States Emergency Court of Appeals.

Heard April 3, 1950.

Decided June 9, 1950.

Herman A. Greenberg, Washington, D. C., for the complainant.

Anthony L. Mondello, Attorney, Department of Justice, Washington, D. C., with whom Joseph M. Friedman, Special Assistant to the Attorney General, was on the brief, for the respondent.

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

Heard at Washington, D. C., April 3, 1950.

MARIS, Chief Judge.

The complainant partnership during the year 1945 was in the business in San Antonio of purchasing and slaughtering live cattle and hogs and selling carcasses and wholesale cuts.¹ It, therefore, was entitled to livestock slaughter subsidy payments in accordance with the regulations in effect in 1945. For the months from May through December of that year, it filed subsidy claims in the aggregate amount of $25,027.47. Based on a certification by the Office of Temporary Controls (the successor to the Office of Price Administration²) that a judgment in a civil action had been obtained against the complainant for violation of Maximum Price Regulation No. 169 the respondent invalidated these subsidy claims under the authority of Section 7003.10(a) of Revised Livestock Slaughter Payments Regulation No. 3, as amended. The claims have previously been paid, the amount involved was recouped in part by the respondent from subsidy claims payable for subsequent accounting periods. The balance of $10,902.90 has not yet been repaid by the complainant. The complainant protested respondent's action, its protest was denied by the board of directors of the respondent, and the present complaint was filed.

It appears that the civil action to which the Office of Temporary Controls referred in its certificate was brought by the Price Administrator against the predecessor of the complainant partnership in the United States District Court for the Western District of Texas, that it was based upon alleged charges for the sale of boned beef in excess of ceiling prices for the year 1945 amounting to $560.35, and that judgment was entered therein by agreement of the parties for damages equal to one and one-half times that amount.

The complainant does not dispute the fact that Section 7003.10(a) of Revised Livestock Slaughter Payments Regulation No 3, as amended, in terms authorized the respondent to invalidate the claims of an applicant for subsidy who had been certified to have been determined in a civil proceeding to have violated a subsidy provision of a price regulation applicable to the sale of meat. The complainant asserts, however, that the regulation in authorizing the invalidation of subsidy claims amounting to $25,027.41 because of price ceiling overcharges amounting to only $560.35 was invalid because the amount authorized to be invalidated is so grossly disproportionate to the amount of the violation as to result in a penalty not authorized by the Emergency Price Control Act, 50 U.S.C.A.Appendix § 901 et seq. It also contends that so far as concerns the invalidation of its subsidy claims for the months of May, July, August and September, 1945, there was no basis in the regulation for the respondent's action. The consideration of these contentions requires a review of the legal bases for the invalidation of subsidy claims by the respondent.

At the outset we must remember that the respondent is a mere subsidy paying agent³ as was its predecessor in the subsidy program, Defense Supplies Corporation.⁴ It has no discretionary power to invalidate subsidy claims which meet the requirements of Revised Livestock Slaughter Payments Regulation No. 3, as amended, except to the extent that such power is conferred by that regulation. When we turn to the regulation we find that the sole provisions authorizing invalidation of subsidy claims for violation of price regulations are contained in Section 7003.10(a). As amended by Amendment No. 3⁵ Section 7003.10(a) provided as follows: "§ 7003.10 Invalid claims — (a) Compliance with other regulations. Defense Supplies Corporation⁶ `shall declare invalid, in whole or in part, any claim filed by an applicant who, in the judgment of the War Food Administrator or the Price Administrator, has wilfully violated any regulation or order of their respective agencies applicable to the purchase or sale of livestock or to livestock slaughter or to the sale or distribution of meat, and any claim of any applicant who the Price Administrator certifies to Defense Supplies Corporation has been determined in a civil proceeding to have violated a substantive provision of any regulation or order of the Office of Price Administration applicable to the purchase or sale of livestock or to livestock slaughter or to the sale or distribution of meat."

These provisions of Revised Livestock Slaughter Payments Regulation No. 3 were promulgated by Defense Supplies Corporation under the authority of the Federal Loan Administrator⁷ pursuant to Directive 41⁸ issued by the Economic Stabilization Director who had overriding supervision of the stabilization program.⁹ Section 7003.10(a) must accordingly be construed in the light of the applicable provisions of the directive. Those provisions are contained in Section 7(b) thereof and are as follows:

"(b) (1) Defense Supplies Corporation¹⁰ is directed to continue its present procedure of declaring invalid, in whole or in part, any claim for subsidy payment filed by an applicant who, in the judgment of the Price Administrator, has wilfully violated any meat or livestock regulation or order issued by the Price Administrator. Such a judgment shall be made only in the event the alleged violation is referred to the United States Attorney for prosecution.

"(2) Upon a nisi prius determination in a civil action or proceeding (including a proceeding before a hearing commissioner) against a subsidy applicant, that such applicant has violated any substantive provision of an Office of Price Administration meat or livestock regulation or order, the Office of Price Administration shall certify the determination to Defense Supplies Corporation, including the period of time during which the violation is found to have occurred. Defense Supplies Corporation shall thereupon withhold payment on all subsidy claims of the applicant for the accounting period in which the violation is found to have occurred. At the same time that the certification is made to Defense Supplies Corporation, the Office of Price Administration shall in writing notify the subsidy applicant that the certification is being made and request the applicant to submit to the Office of Price Administration a signed statement indicating whether he operates more than one selling establishment and, if so, giving for the accounting period or periods during which the determination of violation was made, the gross dollar sales of meat and related products made through the establishment determined to be in violation and the gross dollar sales of meat and related products of all establishments. Upon receipt of such signed statement giving the gross dollar sales as specified, in the event the applicant has more than one selling establishment, the Office of Price Administration shall determine what percentage of the applicant's gross dollar sales of all establishments is represented by the gross dollar sales of the establishment determined to be in violation. The Office of Price Administration shall thereupon notify the Defense Supplies Corporation to change its withholding of subsidy payment to an amount equal to the specified percentage of the subsidy withheld following the certification. In the event that the determination of violation shall be reversed and such reversal become final, the amount of subsidy withheld pursuant to this paragraph shall be payable forthwith.

"For the purposes of this section, every provision of a regulation or order shall be deemed substantive in nature unless the Office of Price Administration determines otherwise."

It will be seen that Section 7003.10(a) of the regulation contains two clauses each providing for a distinct method for invalidating subsidy claims for violation of price regulations and corresponding respectively to the foregoing paragraphs (1) and (2) of Section 7(b) of the directive.

The first clause, which had been in the regulation from the beginning, directs the respondent to declare invalid in whole or in part, any subsidy claim filed by an applicant who in the judgment of the War Food Administrator or the Price Administrator has wilfully violated orders or regulations of their respective agencies. It will be observed that this clause applies only to wilful violations and, as limited by Section 7(b) (1) of Directive 41, only in case the violation has been referred to the United States Attorney for prosecution. The validity of this clause was upheld by this court in Armour & Co. v. Reconstruction Finance Corporation, Em.App.1947, 162 F.2d 918. While the provisions of the clause are not involved in the case before us it is pertinent to recall that we held in that case that the respondent in determining whether to invalidate such a subsidy claim "in whole or in part" is required to follow a standard having a reasonable relation to the facts of the particular case and the purpose of the regulation. The respondent had asserted that in exercising the discretion confided in it by the clause it had followed the practice of restricting the invalidation of such subsidy claims to those only for the accounting periods and particular establishments involved in the violations. With respect to this we said, 162 F.2d at pages 923, 924: "The criterion which is thus said to have been applied in administering the discretionary power conferred by the regulation is certainly logical, fair and reasonable."

The second clause of Section 7003.10(a) of Revised Livestock...