Victor v. Porter

• Decision Date: 16 October 1946
• Docket Number: No. 308.,308.
• Citation: 157 F.2d 769
• Parties: VICTOR et al. v. PORTER, Price Administrator.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

157 F.2d 769 (1946)

VICTOR et al. v. PORTER, Price Administrator.

No. 308.

United States Emergency Court of Appeals.

Heard June 10, 1946.

Decided October 16, 1946.

Writ of Certiorari Denied January 6, 1947.

Henry N. Rapaport, of New York City (Rapaport Brothers, of New York City, on the brief), for complainants.

Harry H. Schneider, Chief, Court Review Rent Branch, of Washington, D. C. (Richard H. Field, Gen. Counsel, of Washington, D. C., Jacob D. Hyman, Associate Gen. Counsel, of Buffalo, N. Y., and Eli A. Glasser, Atty., of Washington, D. C., on the brief), for respondent.

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

Heard at New York June 10, 1946.

Writ of Certiorari Denied January 6, 1947. See 67 S.Ct. 491.

MARIS, Chief Judge.

The Rent Regulation for Housing in the New York City Defense-Rental Area¹ establishes March 1, 1943, as the maximum rent date for housing accommodations rented on that date. For housing accommodations changed on or after November 1, 1943 so as to result in an increase in the number of dwelling units in such housing accommodations Section 4(e) (2) of the regulation established as the maximum rents the first rents charged after November 1, 1943. If the first rents are higher than the rents generally prevailing in the area for comparable housing accommodations on the maximum rent date Section 5(c) (1) of the regulation authorizes the Price Administrator on his own initiative or on application of the tenant to decrease the maximum rent otherwise allowable. In making the adjustment, however, Section 5 of the regulation places the administrator under the duty in cases involving construction to give "due consideration * * * to increased costs of construction, if any, since March 1, 1943."

The housing accommodations here involved fall within the purview of Section 4(e) (2) since they were changed after November 1, 1943, so as to result in an increase in the number of dwelling units and were first rented after that date. The complainants remodelled a five story structure located at 345 West 87th Street, New York City, from a private dwelling to an apartment house having ten rental dwelling units. The work was completed in the period from August through October 1944, and the apartments were first rented on November 1, 1944.

In their registration statements the complainants reported their first rents as their maximum rents. Thereafter the area rent director gave preliminary notice of his intention to reduce the "first rents" and by his orders dated March 24, 1945, the rents of the ten apartments were substantially reduced. The complainants' protest, as amended, was denied by the Administrator on January 29, 1946. The complainants then filed the present complaint in which they allege that the regulation is invalid; that they were denied procedural due process and that the reduction orders are not sustained by the evidence.

The complainants attack the regulation on the ground that Section 5, which provides for allowances for increased costs of construction, limits the allowances to such increases as took place after the maximum rent date for the area, March 1, 1943. They also attack the formula used by the Administrator to implement the regulation in this respect. We shall first consider the attack upon the regulation.

The complainants assert that in the New York City Defense-Rental Area practically no building took place after 1941 and they argue that to limit the allowance provided by Section 5 of the regulation to such building cost increases only as took place after March 1, 1943, is unlawful when applied to that defense-rental area since it does not effectuate the purpose of Congress as expressed in Section 2(b) of the Emergency Price Control Act.² They assert that the Congressional purpose, as thus expressed, was to encourage the creation of additional housing units and new housing construction.

We find the premise of this argument, namely, that in enacting Section 2(b) of the Emergency Price Control Act Congress had for its purpose the encouragement of the construction of new housing, to be without basis. It is well to remember that in early 1942 when Congress enacted the Emergency Price Control Act its primary intent was to utilize all the national resources towards the successful prosecution of the war in which the nation was then engaged. It was not until a later period that the possibility arose of encouraging the general building of housing accommodations without interfering with the war effort. Many of the arguments advanced by the complainants as to the acute housing shortage presently existing and the lack of encouragement to builders to engage in new construction are arguments which might well be advanced to Congress but which do not help us in deciding the issue whether the Administrator has in the regulation under attack acted contrary to the purposes of the Emergency Price Control Act, 50 U.S.C.A.Appendix, § 901 et seq.

The primary mandate given to the Administrator by Section 2(b) of the act was to keep rents down to a fair level so as to prevent inflation. We think the statutory direction to take increased costs into account in fixing the general level of rents was not for the purpose of encouraging new construction but rather in order to make certain that maximum rents would be generally fair and equitable. The most that can be said is that Congress directed the Administrator to give this factor weight in fixing maximum rents even though to a certain extent it might prove to be inflationary. The allowance was thus not intended as a departure from the freeze date method of rent control but merely a modification designed to keep freeze date rents generally fair and equitable.

The complainants urge that by Amendment 21 to the regulation³ issued and effective November 23, 1945, the Administrator made a public admission that the use of the freeze date from which to calculate allocable increases in costs of construction was improper and that the proper date was 1939. It must be remembered that at the time the amendment was issued conditions had wholly changed from those existing when Section 5 of the regulation was first promulgated. Hostilities had ceased. The ban on non-priority building had been lifted. In the light of those circumstances and pursuant to Section 1(a) of the act, which gives as one of its purposes "to assist in securing adequate production of commodities and facilities" the Administrator as an incentive for the building of housing accommodations gave the additional allowance provided by the amendment. Such allowance was consequently limited to those cases in which construction work was begun on or after November 23, 1945, a differentiation which the Administrator was authorized to make by Section 2(c) of the act.

We conclude that Section 5 of the regulation is not invalid upon the grounds asserted by the complainants. We accordingly pass to the consideration of the complainants' attack upon the formula employed by the Administrator to compute the allowance for increased costs of construction made to the landlords under the regulation.

Counsel for the Administrator in his brief describes the formula as follows:

"(1) determine the percentage increase in general construction costs in the Area during the period from the maximum rent date to the date of completion of the work in the particular case; (2) use this percentage to arrive at the portion of the total dollar expenditures occasioned by the rise in general construction costs; (3) allocate this dollar amount to each unit; (4) return this dollar amount to the landlord by spreading it over the estimated probable life of the improvement as a whole."

The complainants attack this formula upon two grounds. The first is that the period for computing increased construction costs should begin much earlier than the maximum rent date. This is the same point raised in the attack on the regulation which we have already discussed and determined to be without merit. It, therefore, requires no further discussion here. The second ground of attack...