author: KNOX, District Judge.

text:
    BOWLES, Administrator, O. P. A., v. LEVENTHAL.
    District Court, S. D. New York.
    March 28, 1945.
    Paul L. Ross, Regional Enforcement Executive, and Callman Gottesman, Chief Enforcement Atty., both of New York City (William F. Cauley, Jr., of Yonkers, N. Y., of counsel), for plaintiff.
    Benjamin E. Alter, of New York City (Irving J. Roth, of New York City, of counsel), for defendant.
   KNOX, District Judge.

For several years prior to 1941, defendant was engaged in selling merchandise at retail upon installments of “dollar down and a dollar a week.” In so doing, he charged full list prices and a little extra because of risks involved in that type of business. In November of the latter year, and due to war conditions, he decided to go into the discount business and sell standard articles below competitive prices. His operations consist principally in dispensing jewelry, clothing, toilet articles and personal items, to retail purchaser who, according to defendant, can supply their wants at discounts of from 20 to 25 percent below list prices. This, it is said, is due to the fact that defendant carries on business on the sixth floor of an office building, and is put to little expense for sales service and advertising. His gross sales amount to about $80,000 per annum.

On August 16, 1943, defendant sold and shipped to Randolph J. Seidenberg, at Buffalo, N. Y., 144 Regens mechanical cigar or cigarette lighters and charged therefor the sum of $2.75 each. On September 14, 1943, he sold, 432 of the same type of lighters to Seidenberg at a price of $3. each. Two weeks thereafter, defendant sold 360 Regens lighters, with nickel cases, to Stanley A. Levy, also of Buffalo, at $3 per item. On October 13, 1943, he sold Levy 190 additional lighters at $3.75 each, and a week later sold him 216 more lighters at the same price. The lighters were purchased by Seidenberg and Levy with the intention of retailing them at $4.95 apiece.

The items here involved were manufactured by the Regens Lighter Corporation in Long Island City, and plaintiff called Rudolf Dismas, vice president of that organization, as a witness. According to him, the prices at which his corporation sold lighters after March, 1942, as of which time prices generally were frozen, were $5.40 per dozen to jobbers; $7.20 to retailers, and the latter were supposed to supply the users of the items at $1 apiece. The manufacturer advertised its wares in the October issues of two local trade publications, known as “The Tobacco Jobber” and “The Retail Tobacconist,” respectively, and specifically declared that the retail price of the lighter was unchanged at $1 each. Letters and price sheets to the same effect, and of earlier dates, were widely distributed throughout the trade. The corporation endeavored to sell its product only to merchants who maintained its price list.

Subsequent to March, 1942, the company had but two domestic competitors, and each of them sold its lighters at prices less than those charged by the Regens Company. Dismas, however, stated that he could not, in all instances, quote jobber’s prices for lighters after March, 1942, because of the existence of a black market in the trade.

Section 1499.2 of the General Maximum Price Regulation sets the maximum price of an article offered for sale at “the highest price charged by the seller during March, 1942, for the same commodity” or “for the similar commodity most nearly like it” or at the highest price charged during March, 1942, by the “most closely competitive seller of the same class for the same commodity.”

The testimony of Dismas was offered by plaintiff in order to prove the ceiling prices on Regens lighters that had been established by defendant’s “most closely competitive seller,” which price, in the absence of a price established by defendant in March, 1942, would tend to place a limitation on the amount he might charge for the same item. While there is no direct showing that defendant saw or knew of any of the advertising matter issued by Regens Lighter Corporation, it is reasonable to suppose that defendant, as an experienced trader, when he undertook to deal in Re-gens lighters, would inform himself of what the company charged for the merchandise he was handling. For him to have done so would seem to be a natural course of procedure in the business in which he was engaged. He, the same as every trader, was charged with knowledge of the price regulations of the Administrator, and it became his duty to inform himself of the restrictions applicable to his line of business. For this reason, it is fair to assume that he either knew or should have known that the ceiling prices of Regens Lighter Corporation were also prices by which he might be bound. If I am correct in this, Leventhal must bear the burden of showing that his established ceiling price in March, 1942, if he had had one) differed from that of the manufacturer of the Re-gens lighter.

Leventhal, it appears, purchased the lighters in question from a man named Philip Applebaum, who has a place of business at 598 Seventh Avenue, New York. He is a customer of defendant, and from time to time purchases shirts and socks at Leventhal’s shop. On one of his visits to defendant’s store, Applebaum showed Lev-enthal a Regens lighter, and, on the latter’s inquiry, told him that he could supply the article at $32 per dozen. Thereupon, defendant asked the retail selling price of the article, and was informed that “in the window downstairs, there is a sign displaying them at $4.95. Leventhal then requested Applebaum to leave with him six lighters, and this was done.

Some time later, Leventhal was playing golf with David Schoolman, and, as they walked about the course, the two men discussed business matters in which they had a common interest. Schoolman, who is an accountant, called attention to the fact that Randolph J. Seidenberg was one of his clients, and on being apprised of the wide variety of the lines of goods handled by Leventhal, Schoolman said: “Maybe you can pick up some lighters. This client of mine, Seidenberg, is a big distributor and a retail man in Buffalo wanted some lighters.” Leventhal replied: “Well, there is a fellow left some stuff up in my place. Let him (Seidenberg) come and look at it.” Some days later a man who turned out to be Seidenberg called on Leventhal and said, “Mr. David Schoolman sent me here.” Thereupon, Leventhal showed him á Regens lighter, and was then asked “What price is it?” Leventhal replied, “Well, we had set a price (retail) of $4.95 on it.” His explanation as to the manner by which he and Seidenberg agreed on a price of $2.75 for the first shipment is this: “Well, when he came up and he asked me the price of them and I figured we were selling them for $4.95 or $5. and on a job batch, which occasionally I had, we gave a little added discount as long as I could make a little money, and figured about 20 to 25 off, which was my customary job lot price, would bring it to $48. When I asked him that price, he says, ‘That is out of the question because they want to sell it for $4.95 and the profit wasn’t there,’ and I said, ‘All right, I will make a small turnover and I will ask for $36.’ and he said ‘$3.,’ and I said, ‘All right. Send me something as soon as you can.’ ”

Aside from the six lighters that had been left with him by Applebaum, Leventhal then had no lighters in stock. However, he called Applebaum and asked if he could procure four gross of the lighters. Thereafter, the same were delivered to Leventhal, who gave him a check to Applebaum for $1,440. After describing the circumstances under which he sold Regens lighters to Levy, the following colloquy took place between Leventhal and the Court:

“Q. When you made this sale to this merchant up in Buffalo, did you make any inquiry as to what the retail price was under the O.P.A. regulation? A. My feeling was $4.95.
“Q. Did you make any inquiry? A. Yes. That lighter, about five stores around my neighborhood were selling that lighter for $4.95. One was Herman’s at 420 West 42nd Street. He had a sign in his window.
“Q. Even if that is true, did you make any inquiry as to what the price was in 1942 at which these Buffalo merchants sold? A. Well, Mr. Seidenberg is a cigar man and he has been in business so long.
“Q. You are not answering my question. I am asking you whether you made any inquiry as to the price at which he might legitimately sell those lighters ? A. I don’t get that question.
“Q. Let us say that you knew that all he could get for the lighters was a dollar under the price regulation. Was anything said by you or by him at the time you negotiated this purchase as to what the O.P.A. price was? A. No, nothing at all. In that respect, Mr. Seidenberg said he would like to sell these lighters for $4.95.”

At this point, defendant’s attorney interjected and inquired:

“Q. Mr. Leventhal, did you know that you could only sell this lighter for a dollar? A. No, I did not. I never heard of the lighter before.
“Q. In other words, you based your price of this lighter on what you considered to be similar to what you sold in March, 1942? A. That is right.
“Q. You knew of no lighter that retailed for a dollar ? A. I did not know of any price. I never heard of that lighter before.”

Leventhal then proceeded to say that in 1942, he paid from $4 or $5 each for a “Ronson” lighter, but that articles comparable with the Regens product were costing about $36 per dozen. The names of such lighters, however, were not given. Leventhal also said that when he first talked with Applebaum about purchasing Regens lighters, he asked one of his employees to get out his March, 1942, price sheets, from which he ascertained that he was then selling a “press” lighter at $5, a lipstick lighter at $0.79 and a “Ball of Flame” at $0.98. These sheets, however, do not disclose the name of the manufacturer of the lighter for which Leventhal had then charged $5. It is, therefore, impossible to say if it was a commodity most nearly like the Regens device.

Notwithstanding that the General Maximum Price Regulation required defendant to prepare on or before July 1, 1942, and thereafter keep for examination, a base period statement showing the highest price that he charged for commodities delivered in March, 1942, together-with his offering prices for delivery of the same during that month, together with an appropriate identification of each such commodity, and' all customary allowances, discounts and other price differentials, he did not do so.

Another regulation required Leventhal to prepare current pricing records showing as precisely as possible the bases on which he determined maximum prices for all articles not identical with those on the base period statement. Here, again, defendant did not voluntarily comply. By an order of this court, dated July 6, 1944, he was directed to prepare a base period statement and a current pricing record as called for by the regulations. This, he purported to do, and the document allegedly showing such data is before the court as plaintiff’s exhibit 20. Item 15 thereof reads:

Highest Price Invoice No. Base Item Item Supplier’s name Description March 1942 79874 15 Lighter Cash job lot - $4.95 _ cig Date of Invoice 3/17/42

So far as this exhibit goes, it does not indicate that in March of 1942 defendant sold any cigar lighters at jobber’s prices, and his current pricing statement omits any mention of sales of Regens lighters. Notwithstanding all this, Leventhal’s jobbing prices to Seidenberg and to Levy, within a period of less than three months, running from August 16, 1943 to October 22, 1943, ranged from $2.75 to $3.75 per lighter.

In order to substantiate his statement to the effect that lighters similar to those of Regens’ manufacture were selling at $3.44 at a time prior to the date of trial, Leventhal produced and offered in evidence a lighter that was manufactured in Canada, and imported into the United States. Such importation was subject to a tariff of 110%, and the same is now being sold under Special Order No. 41 of the Office of Price Administration. Under these circumstances, the Canadian lighter cannot be regarded as being similar to the Regens product, and its current price is immaterial.

When Leventhal was asked directly if in the ordinary course of business he would make inquiry as to the price at which he could purchase lighters for manufacturers, he said: “In the ordinary course of business I would say yes and no, but knowing that I saw that lighter (Regens) sold for $4.95, I know I never bought it any cheaper than 50 off. I saw the lighter for $4.95 in quite a few places.” Granting this to be true, defendant did not inquire at what price these concerns were selling similar lighters in March, 1942, and what he saw in 1943 in other stores cannot serve as a defense for his own wrongful conduct, or his gross negligence.

Similarly, the effort made to justify his conduct by the alleged sale of a lighter similar to that of Regens, in March, 1942, is unconvincing. The duplicate sales slip purporting to show the transaction does not identify the type of lighter that was sold. Certainly, it was not one made by the Re-gens Company, and defendant’s statement that the one sold was similar thereto is far from persuasive. His explanation is that when he changed his method of doing business from an installment to a trade discount basis, he had 20 to 30 lighters on hand, and the sale in question consisted in disposing of one of these. What became of the others is not disclosed. Furthermore, defendant could not name the lighter, and the description of it was so vague that no reliance can be placed upon his statement that it was similar to the Regens device.

Cigar lighters vary in price as a result of the metal of which they are made, the fineness of the workmanship that is in them, the nature of their construction and method of operation, together with their sparking mechanism. Notwithstanding, the only similarity between the lighter that defendant sold in March, 1942, and the Re-gens lighter that he could point out, was that both had a similar sparking mechanism. He even admitted that the lighter he sold might possibly have been gold plated since it had a yellowish finish.

From all that has been said, I am satisfied that during the base period of March, 1942, he did not sell a lighter similar to the Regens product, and had, therefore, no established ceiling that would justify the prices at which he sold lighters to Seidenberg and Levy.

Some time after defendant sold Regens lighters to Levy, the latter discovered that under O.P.A. regulations he could not lawfully sell them at a price of more than $1 each. Thereupon, Levy returned to Leven-thal 19 or 20 lighters that remained unsold out of the first shipment, together with the entire shipment of 216 lighters, and received from defendant the sum that had been paid therefor. By reason of this, defendant contends that under Section 205(e) of the Emergency Price Control Act of 1942, as amended by Section 108(b) of the Stabilization Extension Act of 1944, 50 TJ.S.C.A.Appendix, § 925, he can not be held liable for treble damages with respect to the sales so rescinded. In other words, the argument is that the rescission wiped out any “overcharge” that may have been exacted when the sale was made.

With this contention, I can not agree. Neither Seidenberg nor Levy, who purchased lighters from Leventhal, was qualified under the provisions of Section 205(e) of Price Control Act, as originally written, or as amended June 30, 1944, to bring an action against the defendant. This is so for the reason that their purchases of lighters were in the course of trade or business. Under such circumstances, the Administrator, and he alone, is authorized to make recovery of such overcharges (together with penalties), as were paid defendant. And where the overcharges were wilfully made, or are the result of failure to take practicable precautions against the occurrence of the violation (and Leventhal’s violations were of that character), the Administrator is entitled to recover •such sums as might be assessed against defendant by a buyer who was qualified to bring suit against the seller. In such cases, the plaintiff’s measure of recovery consists ■of a reasonable attorney’s fee and costs, .as determined by the court, “plus whichever of the following sums is the greater, (1) Such amount not more than three times the amount of the overcharge, or the ^overcharges, upon which the action is based, as the court in its discretion may determine, ■or (2) an amount not less than $25., nor more than $50., as the court in its discretion may determine: Prpvided, however,— That such amount shall be the amount of .the overcharge or overcharges or $25., whichever is greater, if the defendant proves that the violation of the regulation, ■order, or price schedule in question was neither willful nor the result of failure to take practicable precautions against the occurrence of the violation.”

If defendant’s argument to the effect that plaintiff cannot recover with respect to overcharges on the sales to Levy that he and Leventhal rescinded, be sound, it ■would place the rights of the Administrator at the mercy of black market sellers and buyers, and they would be enabled, in some cases, utterly to frustrate the remedial purposes of the statute. For example, let it be supposed that in a period of scarcity of alcoholic beverages, a dealer should sell 1,000 cases of whiskey to a purchaser at a price of $50 per case above the ceiling price of that commodity, and that only the Administrator was vested with authority to sue the seller for the overcharges and penalties. Potentially, he would be entitled to recover the sum of $150,000. Let it then be further supposed that, subsequent to the time at which the Administrator learned of the transaction, but before he instituted suit against the seller, both he and the purchaser, having become aware that their illegal acts had been discovered, it would indeed be anomalous if the seller could escape liability for his wrong, by arranging with his purchaser to undo their unlawful acts. A thief who steals his employer’s funds, and who returns them to the till, upon discovery of his theft, cannot thus wipe out his crime. Neither can this defendant and one of his black market purchasers, through a rescission of their unlawful contract, put at naught the rights of the Administrator.

The further contention of the defendant that the Administrator cannot sue for treble damages where the .purchase was in the course of trade or business, and not to a consumer, is clearly untenable in view of the wording of the statute. Bowles v. Chew, D.C., 53 F.Supp. 787, 790.

Furthermore, defendant’s objection to the amendment of the complaint at the time of trial, so as to include the sale of lighters, that was made to Seidenberg on August 16, 1943, is without merit. Defendant interposed no special defense to the allegations that such sale took place at prices above the ceiling, with the exception that action thereon is said to be barred by the statute of limitations; that is to say, that more than one year elapsed between the date of sale and the amendment of the complaint. The complaint itself was filed on June 6, 1944, which date, of course, was less than one year subsequent to the sale. This matter, it seems to me, is fully covered by subdivision (b) and (c) of Rule 15 of the Supreme Court Rules of Civil Procedure, 28 U.S.C.A. following section 723c. Subdivision (b) reads, in part: “If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The •court may grant a continuance to enable the objecting party to meet such evidence.” (no request for a continuance was here made)

Subdivision (c) of Civil Rule 15 is in these words: “Whenever the claim or defense asserted in the amended pleading •arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back to the date of the original pleading.”

Paragraph 9 of the complaint, so far as here material reads: “Since about August 1, 1943 to the date of this complaint, (June 2, 1944), defendant has sold and delivered cigarette lighters to R. J. Seidenberg Company, S. L. Levy Inc., Buffalo, New York * * * at prices in excess of the maximum prices established by the General Maximum Price Regulation. * * * ”

It is thus clearly seen that plaintiff’s amendment of his complaint at the time of trial was altogether permissible by the express terms of Rule 15, subdivision (c).

According to my calculations, the overcharges that defendant made on his sales of lighters to Seidenberg and to Levy amounted, in the aggregate, to $3,381.30. Three times that sum is $10,467.90, and plaintiff may have judgment in that amount.


source: Caselaw Access Project

author: LEDERLE, District Judge.

license: Public Domain

text:
    BOWLES, Administrator, Office of Price Administration, v. GULF REFINING CO.
    No. 21749.
    District Court, N. D. Ohio, E. D.
    June 14, 1945.

      William B. Pecsok, of Cleveland, Ohio, for plaintiff.
    Howell, Roberts & Duncan, of Cleveland, Ohio, for defendant.
   LEDERLE, District Judge.

1. This is an action brought in accordance with the Emergency Price Control Act of 1942, 50 U.S.C.A. Appendix § 901 et seq., in which the plaintiff, Chester Bowles, Administrator of the Office of Price Administration, seeks an injunction and treble damages according to the provisions of that Act. It is conceded that the defendant, The Gulf Refining Company, hereinafter referred to as “Gulf”, is a Delaware corporation, with its principal offices located at Pittsburgh, Pennsylvania, and that it has throughout the country various selling units in accordance with the definition promulgated by the Administrator of the Office of Price Administration. Defendant has an establishment within this District where it transacts business. The case was tried to the court and at the close of plaintiff’s case, the defendant moved for a dismissal. In accordance with Bach v. Friden Calculating Machine Co., 6 Cir., 1945, 148 F.2d 407, these findings and conclusions are being made.

2. For a number of years prior to 1942 the defendant had furnished a particular type of commodity called Ink Oil No. 4 to the Howard Flint Ink Company, a Michigan corporation, hereinafter referred to as “Flint,” whose principal place of business was located in Detroit, Michigan. Flint used the oil in manufacturing printer’s ink.

3. In December, 1941, a written contract was entered into between Gulf and Flint providing for Gulf to sell and Flint to purchase Ink Oil No. 4 for the year 1942. This contract became effective January 1, 1942, and expired by its terms on December 31, 1942. The contract provided for the delivery of approximately 1,900,000 gallons of this product at certain unit prices per gallori. The unit prices varied from 10.4 cents for oil going to Denver to 6.7 cents for oil going to New Orleans. The contract also indicated the shipping terminals from which shipments to the various points were to be made. The shipments to Detroit were to be shipped from Girard Point, Pennsylvania. The contract specifically provided: “The above prices are F.O.B. shipping terminals indicated with freight allowed to the respective destinations, as follows” — and then are enumerated the various shipping points for the various units. The unit price fixed for Detroit shipments was 9.4 cents. The contract also provided for the place or office of Gulf to which notice for shipment was to be sent. The reason for the variation of specified prices of the same material of the same quality shipped to different points was a variation in the freight to the different points.

4. On or about April, 1942, Gulf was no longer able to ship the product to Girard Point, Pennsylvania, for the reason that tankers formerly used for that purpose were taken over by the Government in-connection with the prosecution of the war. Thereupon Gulf notified Flint that if Flint desired to purchase any more of this product for Detroit, it would have to be purchased from the Port Arthur, Texas, selling unit as the supply at the Girard Point unit was exhausted.

5. During the months of July to December, 1942, inclusive, Gulf shipped to the plaintiff a number of carloads of this product and adjusted the price computations therefor to take care of the increase in freight.

6. Gulf shipped all oil freight collect to Flint. The freight was at all times paid by Flint directly to the railroad. In this trade it had become the custom, followed by Gulf and Flint, to include the freight charges in the invoice and then, in turn, credit Flint with the freight charges, and the only payment made to Gulf was a payment by Flint of the sale price for the product at the point of sale, called “net-back.”

7. None of the impugned sales involved in this case originated at Girard Point, Pennsylvania. They were all sales made at Port Arthur, Texas, from July to December, 1942, inclusive. Except for plaintiff’s Exhibit 1, the contract heretofore referred' to between Flint and Gulf, no evidence was offered as to the highest price for which this product was sold at. the Port Arthur unit during March, 1942, which is the base-period. That contract indicates an agreement to sell oil going to Denver at the rate of 10.4 cents per gallon. It is conceded that the sales involved in this case would figure at 10.4 if the theory is adopted that sale price was price of oil plus cost of freight.

8. Some of the Gulf bookkeeping and billing for the Flint dealings was handled at defendant’s Toledo, Ohio, office, and plaintiff contended that this transformed the sales in question into sales from Toledo, Ohio. If the plaintiff’s contention is correct, that the sales took place at Toledo, Ohio, then that was the selling unit of Gulf. There is no evidence as to the highest sale price at that Toledo selling unit during th'e base period.

9. It is obvious from the contract, Exhibit 1, and such other evidence as was received in this case, that both Gulf and Flint understood that the invoice price was sales price with the cost of delivery from the shipping terminal to the point of delivery indicated as paid by Flint direct to the railroad. It is apparent that the matter was fully understood between Flint and Gulf, and the freight was in all instances paid by Flint and it, in turn, remitted only the selling price for the product of the shipping terminal, which was referred to in the record as the “net back”.

10. Plaintiff has failed to sustain the burden of proof that the sales made by the defendant involved in this proceeding were above the ceiling price for the selling unit at which the sales were made. The Emergency Price Control Act specifically provides that it shall not be so administered as to change the usual method of transacting business in any line of commerce.

Conclusions of Law.

1. Where, as here, a corporate defendant regularly transacts business in this District, this court has jurisdiction of this suit, involving a claim for treble damages and injunctive relief as a result of defendant’s sale of oil at an allegedly excessive price to a purchaser who bought for use or consumption in the course of its trade or business, instituted by the Administrator of the Office of Price Administration, an officer of the United States authorized by law to sue. 28 U.S.C.A. § 41(1); 50 U.S. C.A. Appendix § 925(a) (c) and (e).

2. This action having been instituted within one year of each of the impugned sales, the action is timely. 50 U.S.C.A. Appendix § 925(e).

3. Where, as here, the Administrator of the Office of Price Administration fails to prove the highest price at which a seller has sold its product during March, 1942, the Administrator has failed to establish the maximum price or ceiling at which a seller can' sell his product under General Maximum Price Regulation issued April 28, 1942, 6 F.R. 3153.

4. The burden of proof is upon the Administrator of the Office of Price Administration, in challenging a sale as being above the seller’s ceiling, to prove what the ceiling is, and where, as here, this was not done, there is no basis for a finding that the seller has violated the General Maximum Price Regulation issued April 28, 1942, 6 F.R. 3153.

5. Plaintiff having failed to prove that defendant sold a product at a price higher than the applicable maximum, it follows that defendant’s motion must be granted. Accordingly, judgment is being entered simultaneously herewith, dismissing the complaint.


author: GIBSON, District Judge.

text:
    In re STINEMAN.
    No. 12786.
    District Court, W. D. Pennsylvania.
    June 20, 1945.

      C. Randolph Myers, of Ebensburg, Pa., referee.
    Milbank, Tweed & Hope and Thomas P. Farley, all of New York City, for Chase Nat. Bank of City of New York, N. Y.
    Harry Doerr and Roman C. Widmann, both of Johnstown, Pa., for United States Nat. Bank.
    Ray Patton Smith, of Washington, D. C., for First Nat. Bank of South Fork, respondent.
   GIBSON, District Judge.

On August 3, 1944, this court sustained exceptions of the Chase National Bank of the City of New York to orders of the referee in above entitled cause. 56 F.Supp. 190. By those orders the referee had held that the United States National Bank of Johnstown and the First National Bank of South Fork were entitled to maintain their positions as lien creditors of the bankrupt and at the same time participate in the distribution of the general fund. The orders had been made pursuant to the prior consent of all general creditors, it was claimed. In fact it was asserted that the arrangement had been instituted at the suggestion of counsel for the Chase National Bank on behalf of all general creditors. The court, feeling that participation in the two funds was contrary to all accepted bankruptcy practice, and that the record then before it did not establish the active consent of counsel for the Chase National Bank to such participation, vacated the referee’s orders.

In its memorandum explaining its action, however, the court said: “If it were definitely established that the Chase National Bank had full knowledge of the agreement claimed and had benefited as a result of it, and had induced it in fact, this court, despite some qualms induced by the Bankruptcy Act, might well hold that it could not in good faith now attack it. The record, however, is largely in the Referee’s Office, but such of it as is before the court does not make it plain that the Chase National Bank or its counsel had the definite-understanding claimed.”

After the order sustaining exceptions to-the referee’s orders was made, counsel for the United States National Bank of Johns-town and the First National Bank of South-Fork sought a rehearing upon the matter which was granted, and the entire record was produced. From it the court is definitely satisfied that counsel for the Chase National Bank had recommended and had full knowledge of the agreement of the general creditors that the lien holders, in> return for their ceasing to attempt to> realize upon their liens, should participate-in both the judgment creditor and general funds. This agreement was of great benefit to the general creditors. Had the secured creditors realized upon their liens, a-sufficient amount would have been obtained' to satisfy them, but the effect of it would! have been almost the total wreck of the-general claims. When this fact is joined! to the influence of counsel for the Chase-National Bank in promoting the participation agreement, and the further fact that that Bank, without any demur whatsoever,, had knowledge of some seven distributions, prior to its exceptions to the referee’s orders, wherein the lien holders had received, all the amounts distributed from the realty fund and had participated in the general fund, it would seem plain that the Chase-National Bank is equitably estopped from, relying upon a contention which has become entirely technical, strong as its position might have been under other circumstances.

The orders of this court of August 3, 1944, by which the exceptions of the Chase-National Bank were sustained and the referee’s order of June 7, 1943, was vacated! and set aside, will be vacated and the referee’s order re-established.


author: WELSH, District Judge.

text:
    GENERAL ACCIDENT FIRE & LIFE ASSUR. CORPORATION, Limited, v. DICKINSON et al. DICKINSON et al. v. GENERAL ACCIDENT FIRE & LIFE ASSUR. CORPORATION, LIMITED, OF PERTH, SCOTLAND.
    Civil Action No. 4287.
    District Court, N. D. California, N. D.
    June 4, 1945.
    Van Dyke & Harris, of Sacramento, Cal., for plaintiff.
    J. Oscar Goldstein, of Chico, Cal., Erling S. Norby, of Marysville, Cal., and Geis & Hogle, of Willows, Cal., for defendants.
   WELSH, District Judge.

Declaratory relief was sought by plaintiff with reference to its rights and legal relations with respect to a policy of automobile insurance wherein defendant, L. K. Fereva, doing business as Fereva Chevrolet Company, was named insured. Defendants, Charles Gromer Dickinson, Doris May Dickinson and William Kemp, were named as such by reason of injuries received in an automobile accident involving the automobile tow truck covered by said policy.

A jury rendered verdicts in favor of the defendants. Counsel for all parties conducted the cause upon the theory that, on account of the equitable origin of estoppel, which was raised in connection with waiver, the jury’s verdicts were advisory. The Court, in view thereof, determined not to follow such advisory verdicts and made findings and entered judgment in favor of plaintiff.

An appeal was taken wherein the Circuit Court of Appeals decided that the action was purely at law, that the verdicts were binding on the Court, and that judgment thereupon should be entered. 9 Cir., 147 F.2d 396. Such judgment was entered accordingly.

Plaintiff thereafter made a motion for a new trial, which was exhaustively argued and briefed. This Court is now placed in the position of determining whether or not the verdicts were supported by the evidence and whether plaintiff is entitled to a new trial upon any of the grounds set forth in its notice of motion pursuant to Section 657 of the California Code of Civil Procedure.

Plaintiff’s arguments are based mainly upon insufficiency of the evidence and errors in law occurring at the trial.

Findings herein were filed on the 24th day of September, 1942. Finding 14 reads in part: “in said policy of insurance here-inabove referred to as Exhibit ‘A’, it was provided in condition number 7 thereof as follows: ‘Noticeof Accident — Claim or Suit. Upon the occurrence of an accident written notice shall be given by or on behalf of the insured to the corporation or any of its authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and addresses of the injured and of available witnesses.’ ”

With respect to this requirement of written notice, said Finding 14 also specified: “that upon the occurrence of the accident referred to herein, namely on February 25, 1940, written notice was not given by said L. K. Fereva, the assured under said policy of insurance, or on behalf of said insured, to the plaintiff or any of its authorized agents as soon as practicable; that no notice whatever was given to plaintiff prior to April 26, 1940.”

So far as notice of any kind to plaintiff, as insurer, was concerned, said Finding 14 shows: “that pr-ior to said April 26, 1940, no notice was given by said L. K. Fereva to plaintiff in writing or otherwise containing particulars sufficient to identify the insured, or reasonably obtainable information respecting the time, place and circumstances of the said accident, the names and addresses of the injured and of available witnesses, or any of the said items.”

On the question of waiver and estoppel, said Finding 14 read: “the court further finds that there was no waiver or change made or effected in any part of the said policy of insurance and that the plaintiff is not estopped from asserting its rights herein under the terms of said policy, and that no terms of the said policy are or have been waived or changed by any course of conduct pursued by the plaintiff herein.”

This Court, having so found at the conclusion of the trial, when the evidence was freshly in mind, is constrained to decide now that plaintiff is entitled to a new trial.

After hearing the evidence, observing the witnesses on the stand, and being fully advised in the premises, this Court not only determined not to render a judgment pursuant to the verdicts of the jury, but, subsequently, on further consideration, denied the motion of defendants for a new trial. It thereby held that the verdicts were not supported by the evidence. It still is persuaded that the evidence preponderated in favor of plaintiff.

The learned Judge Curtis D. Wilbur in his concurring opinion in Dickinson v. General Accident F. & L. Assur. Corp., 9 Cir., 147 F.2d 396, 398, recognized “it was admitted that no timely written notice was given.” It was, therefore, not a compliance with the terms of the insurance contract. The evidence by which defendants sought to establish a waiver of the requirement of notice was neither impressive nor satisfactory.

Certain testimony was admitted over objection during the trial. Inasmuch as the Court concluded not to accept the verdicts of the jury, it has not heretofore been necessary to comment on such rulings.

In view of the fact that the Circuit Court of Appeals ordered this Court to enter judgment pursuant to the verdicts, this Court has re-examined the transcript and given consideration to the points urged by-plaintiff in connection with the admission of said testimony, which has to do mainly with alleged conversations of Mr. and Mrs. FereVa purporting to relate to reporting the happening of the accident to plaintiff. No authorized representative of plaintiff insurance company was present at such conversations.

The Court is not satisfied that the claimed notification of the accident to Mr. Urquhart was sufficient even if written notice had been waived. The alleged conversation was at best indefinite and inadequate so far as conveying to the plaintiff company any information on which it could base an investigation. None of the particulars of the accident were purported to have been given. No mention was made of time, place, circumstances or parties involved in the accident, or witnesses thereto.

The policy required that particulars of the accident be given. Nothing less than the giving thereof would satisfy the terms of the policy. Standard Life & Accident Ins. Co. v. Strong, 13 Ind.App. 315, 41 N.E. 604; Stephenson v. Bankers’ Life Ass’n, 108 Iowa 637, 79 N.W. 459.

Mr. Fereva’s own statement as to what he said to Mr. Urquhart was (Vol. Ill, Reporter’s Transe., p. 159, line 19, to p. 160, line 3) :

“A. Why, when I went out to meet Mr. Urquhart, why, we passed the time of day; then I said, ‘Bob, I want to report a littl'e crackup I had down the highway the other morning with my tow car.’ I said, ‘I was called out in the morning to go out to pull a car out of the ditch, and while I was towing the car out of the ditch another car ran into the car we were towing out. There were several people injured; they were scratched and bruised, but nothing serious.’ I think that is about the extent of our conversation.
“Q. Then what happened as you were talking to him? A. Why, as it happened, that day my service manager was off — in other words, my men alternated; each man had a day off — and I worked on Sunday, and I was very busy taking my service man’s place, and customers came in, and I left Mr. Urquhart standing in front of the building to wait on the customers.”

Mr. Fereva, on cross-examination, testified substantially to the same effect (Reporter’s Transe., Vol. Ill, p. 166, line 23, to p. 168, line 28):

He admitted that he did not tell Mr. Urquhart to whom the accident happened (p. 167, line 30) ; where the accident happened (p. 168, lines 3 and 4) ; not even on what highway (p. 168, line 11).

He also admitted that Mr. Urquhart made no reply to him, and that he had known for some fourteen years that Mr. Urquhart was a very deaf man (p. 168, lines 25 to 28).

It was, therefore, entirely possible that Mr. Urquhart did not even hear this conversation which Mr. Fereva claims to have had with him.

That Mr. Urquhart was hard of hearing was evident to this Court when that witness was on the stand. The record itself shows that when counsel for defendants Dickinson and Kemp began questioning him the following transpired (Reporter’s Transe., Vol. Ill, p. 132, lines 4 to 6):

“Mr. Goldstein: Q. I guess I will have to come close to you, Mr. Urquhart. I have never spoken to you before. Can you hear me now? A. Well, slightly; you better come closer.”

It is well known that Mr. Goldstein has an exceptionally forceful and clear manner of speaking in courtrooms.

Furthermore, Mr. Urquhart directly denied that he was so notified by Mr. Fereva of the happening of this accident (Reporter’s Transcript, Vol. Ill, p. 151, line 29 to p. 152, line 6).

This Court was therefore not satisfied that notice as required by the policy was proven to have been communicated to the plaintiff company.

Error was also committed in permitting the witness Bessie K Fereva to testify as follows:

“Q. What did you do, Mrs. Fereva, following that accident on February 25, 1940, in connection with making any phone call to Mr. Urquhart, or report to him? A. I couldn’t say the exact time; within a week or thereabouts I asked Mr. Fereva if I should phone. When I asked him if I should phone to Mr. Urquhart, or we should phone to Mr. Urquhart and report the accident, I will use his own words: He said, ‘Bob was in the other day’ — ‘Bob’ meaning Mr. Urquhart — ‘and I reported it to him when he was here’.”

Said testimony should have been stricken out on plaintiff’s motion.

Similar error was committed in permitting the witness Charles Gromer Dickinson to testify, and not striking out his testimony, as follows:

“Q. When you went down to get the car, as you told the jury, in the period of between five and twelve days after the 25th day of February, 1940, did you have a conversation with Mr. Fereva? A. Yes, sir.
“Q. Will you please state what the conversation was? A. Well, I went down to see Mr. Fereva. I told him my wife was very seriously injured, and asked him what he was going to do about it. He told me that the insurance company had my car tied up there, and was taking care of it, and everything was going to be taken care of.” (Tr. 188, 189.)

“A motion for new trial on the ground that the verdict is not sustained by the evidence is addressed to the sound discretion of the trial court.” Aetna Casualty & Surety Co. v. Reliable Auto Tire Co., 8 Cir., 58 F.2d 100, 104; and in respect to sufficiency of the evidence on disputed matters of fact “is addressed to him as the thirteenth juror.” McBride v. Neal, 7 Cir., 214 F. 966, 968.

As this court is of opinion that the verdicts were against the clear weight of the evidence, it is deemed duty bound to set aside said verdicts by granting a new trial. Ætna Casualty & Surety Co. v. Yeatts, 4 Cir., 122 F.2d 350, 352.

As was said by Mr. Justice Shaw of the California Supreme Court in his classic opinion in Green v. Soule, 145 Cal. 96, 102, 78 P. 337, 340: “We frequently have cause to believe that the judges of the superior court are too reluctant to exercise their power of granting a new trial for insufficiency of the evidence, and too much inclined to acquiesce in a verdict of the jury which does not meet with their own approval. There is a clear and obvious distinction between the duty of a trial court and the duty of an appellate court with respect to the decision of such questions, and it is well established by the decisions of this court. The trial court cannot rest upon a conflict in the evidence, but must weigh and consider the evidence for both parties, and determine for itself the just conclusion to be drawn from it. ‘Where the decision is against the weight of the evidence, it is the duty of that court to grant a new trial.’ ”

This view has been repeatedly reiterated by the Supreme Court and the District Courts of Appeal of the State of California. The Supreme Court recently stated in Re Green’s Estate, 154 P.2d 692, that a trial court does not abuse its discretion in granting a new trial for insufficiency of evidence where there is a conflict in the evidence or where there is any evidence which would support a judgment in favor of the moving party.

The District Court of Appeal stated in Johnson v. McRee, 152 P.2d 526, 529: “The trial judge exercises a broad discretion upon motion for new trial to set aside a verdict which he believes to be against the weight of the evidence.”

Said court summarized the situation as recently as November, 1944, in Grover v. Sharp, 153 P.2d 83, 84: “It is thoroughly settled in California that a trial judge in passing on a motion for a new trial is not bound by conflicts in the evidence; that in fact he sits as a thirteenth juror with the duty resting on him of reviewing the evidence and passing on its sufficiency; that if he is dissatisfied with the verdict and concludes that it has resulted in a miscarriage of justice it becomes his duty to grant the motion.” This Court, so sitting as a thirteenth juror, has reviewed the evidence, is dissatisfied with the verdicts and concluded that they have resulted in a miscarriage of justice.

It is therefore hereby ordered that the motion and application of plaintiff herein for a new trial be granted, and that the verdicts of the jury be vacated and a new trial had on all issues, for the following causes materially affecting the substantial rights of plaintiff, to-wit: Insufficiency of the evidence to justify the verdicts, and that said verdicts are, and each of them is, against law; and errors in law occurring at the trial and excepted to by plaintiff.


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    BUELL v. SIMON NEWMAN CO.
    Civ. No. 5023.
    District Court, N. D. California, N. D.
    June 20, 1945.
    J. Everett Barr, of Yreka, Cal., for plaintiff.
    Treadwell & Laughlin, of San Francisco, Cal., for defendant.
   WELSH, District Judge.

Plaintiff sued defendant for rentals which he claimed exceeded $3,500, and became due under a lease by Montague Water Conservation District (hereinafter referred to as the “District”). The said plaintiff is the trustee in the matter of the Montague Water Conservation District, Bankruptcy No. 10,503 in this court. Said lease was made and entered into by and between said District and defendant-on the 1st day of January, 1944. A copy thereof is attached to plaintiff’s complaint as Exhibit “A”.

Defendant denied in its answer that any rent was due and alleged that at the time said lease went into effect the crop of grain on the lands so leased was about six inches high; that on the 27th day of May, 1944, said District sold and conveyed all of the leased property to defendant in consideration of the payment of $32,420.85, at which time said lease was merged in the title of said land; and that said plaintiff executed and delivered to plaintiff a release of any claims, a copy of which was attached as Exhibit “A” to said answer.

Plaintiff moved to strike said affirmative defenses and said exhibit from defendant’s answer.

The parties stipulated as to certain facts, the material portions of which stipulation are as follows:

“II. On the 1st day of January, 1944, defendant and' Montague Water Conservation District entered into the written lease, Exhibit ‘A’ attached to the complaint.
“HI. At the time of the execution of said lease and at the time that said lease went into effect on the 1st day of January, 1944, there was a crop of grain planted on said property. On the 27th day of May, 1944, the District sold and conveyed the leased land to defendant in consideration of the sum of $32,420.85. Up to that time the crop of grain was about six inches high and no crops of any kind had been taken off said land. At a later date the crop was matured and harvested by defendant, and one-quarter of said crop as matured and harvested was of the value of $3,327.00.
“IV. The Court may take judicial notice of the proceedings in Montague Water Conservation District, bankrupt, No. 10503, and the agreement of composition therein, and it is stipulated that in Paragraph VIII of said agreement it was provided that ‘All income from rents and royalties accruing after December 31, 1943 upon lands now owned by the District shall belong to the bondholders’.
“V. On the 18th day of November, 1944, W. E. Buell, in consideration of the payment to him of said sum of $32,420.85, made, executed and delivered the certificate marked Exhibit ‘A’ attached to the answer herein.”

Both the lease and the release above mentioned refer to the agreement of composition, dated the 6th day of December, 1943, between plaintiff herein and the District.

The lease recited that it was “executed by the lessor and accepted by the lessee in full understanding of, and subject to all the rights, privileges, restrictions, duties and obligations of the lease under the terms and conditions of a certain plan of Municipal Debt Readjustment and petition for confirmation now on file in the United States District Court for the Northern District of California, Northern Division, and numbered 10503 therein.” It thereby put both of its executing parties on notice as to the terms and provisions of said plan and the court proceedings with respect thereto. Said plan contemplated the full release of all lands whereon payments of the amounts specified in said agreement were made.

Said release also referred to the same plan. It recited: “In consideration of the above payment, and pursuant to the provisions of that certain contract dated Dec. 6th, 1943, and entered into by and between W. E. Buell and the Montague Water Conservation District * * * (Buell) does by these presents forever release the hereinafter described real property, located in the boundaries of the Montague Water Conservation District from any liability for the payment of the present outstanding bonds and interest thereon of the Montague Water Conservation District.”

This, again, emphasizes that all transactions between the parties to this litigation and the District, subsequent to December 6, 1943, were conditioned upon and made pursuant to the said agreement between plaintiff and said District on said December 6, 1943.

The primary purpose of all the dealings of plaintiff, defendant and said District was to carry out the intentions of the contracting parties to the first agreement of December 6, 1943. Included among such intentions appears that of inducing former owners of the lands in said District to buy back such lands from the District so that revenue could again be derived therefrom.

Evidently this purpose was accomplished as to the lands herein involved, for defendant raised sufficient funds to consummate a deal. The amount of the price, to-wit, $32,420.85, was satisfactory to both plaintiff and defendant. That this was entirely satisfactory is shown by the fact that neither party has sought to avoid responsibility under either the sale or the release. It does not seem reasonable for this suit to be maintained as an aftermath.

Said plaintiff and defendant, when so contracting on November 18, 1944, must have had in contemplation that the price agreed upon was the full amount which defendant was to pay and plaintiff was to receive. As reference was directly made to the agreement of December 6, 1943, between plaintiff and the District, said plaintiff must have realized that his delivery of the deed to defendant would end the payment of money to him by defendant by reason of any and all transactions then, and theretofore, had between them.

The original document referred to by the parties as the agreement of composition was filed in this court on the 10th day of December, 1943. It was therein recited that said parties submitted a plan of adjustment in accordance with the provisions of Sections 81 to 84 of the United States Bankruptcy Act, 11 U.S.C.A. §§ 401-404; that said Buell, as trustee for all bondholders, would accept from any individual landowner in the District in full settlement of the liability of such landowner for the payment of all his outstanding bonds and coupons of the District, whether due or to become due, the amount set forth in Exhibit “B”, attached thereto, opposite the description of such land.

Certain land described in said Exhibit “B” was designated “Tract No. 62 District — formerly Simon Newman Company ... .135.1 acres.”

It was further recited that if the specified “cash price” were paid in cash on or before ninety days after the final confirmation of this plan by the United States District Court as provided in paragraph 3 of said agreement, said Buell would give full releases therefor.

It was also provided, in paragraph 8, “all income from rents and royalties accruing after December 31, 1943, upon lands now owned by the District shall belong to the bondholders.”

Plaintiff’s contention in his complaint herein is that said bondholders thereby became entitled to the sum of $3500, by reason of the lease (Exhibit “A” to said complaint), which provided that the lessee will deliver to the lessor, or its order, one-fourth of all of the proceeds and crops produced on said premises of every kind and description.

It was further provided, in paragraph 9, of said agreement that whenever land had been released from obligation pursuant to said agreement, the said trustee would make, execute and deliver to the owner of such land a release substantially in the form of Exhibit “C” thereto attached. Exhibit “A” annexed to defendant’s answer is substantially in the form of said Exhibit “C” attached to said agreement of composition.

The Court is inclined to agree with defendant that the execution of said release, taken in conjunction with all the other documents stipulated to have been executed, indicated that not only the land, but defendant, as the purchaser thereof, was released from any further liability for payments to the District or to plaintiff as trustee.

One of the cardinal rules in the interpretation of contracts is that courts should endeavor to ascertain the intention of the parties.

The District and the defendant when entering into the crop lease used the expression “proceeds and crops produced on said premises” with reference to the percentage of one-fourth which the lessee (defendant) was to deliver to the lessor (District). This indicates that they intended that the crops should be matured and harvested before the percentage would become due to the District. Otherwise, there would be no “proceeds” to pro rate. Neither would there be any crops to divide. That such was the intention is further indicated by the reference to hay and grain, thus — “any and all hay produced to be divided on said premises in stack; all grain to be divided and lessor’s share to be delivered to Montague Water Conservation District at Montague, California, either in cars or to the warehouse in Montague, California, of the said lessor in seasonable time after such crop shall have been gathered and harvested.”

Obviously the hay could not be delivered until it had been cut and stacked. The grain could not be divided or delivered as provided until after it had been “gathered and harvested.”

The stipulation as to facts sets forth that on the 27th day of May, 1944, when the District sold and conveyed the leased land to defendant, “the crop of grain was about six inches high and no crops of any kind had been taken off said land.” There was, at said time, therefore, no crop to divide, and there were no proceeds to pro rate.

There was, accordingly, not sufficient evidence to sustain plaintiff’s allegation that there was due from defendant rentals in the amount of $3,500, or thereabouts.

Defendant set up in- its answer that the lease was merged in the title of said land when it made the purchase from the plaintiff; that upon the vesting of the title in defendant, no part of said property or the crop thereon, as rent or otherwise, belonged to the District or to plaintiff.

It was said in Jameson v. Hayward, 106 Cal. 682, 683, 39 P. 1078, 1080, 46 Am.St.Rep. 268: “* * * equity will prevent or permit a merger as will best subserve the purposes of justice and the actual and just intent of the parties.” What has been said hereinbefore indicates the view of this Court with reference to the intention of the District and plaintiff in entering into the lease. It is our further view that plaintiff, by the terms of the agreement of December 6, 1943, and of the release of November 18, 1944, intended that all liability of defendant with respect to the District, the bondholders and plaintiff acting in his representative capacity, would be discharged by the payment of the sum of $32,420.85 when he delivered to it the deed.

It is likewise our view that the purposes of justice will be best subserved by holding that no rent was due from defendant to plaintiff at the time of the commencement of the above-entitled action. It would be unconscionable, under the circumstances of this case, to require defendant to pay plaintiff rental on a crop which was but six inches high at the time defendant became the owner of the land whereon said crop was growing.

The doctrine of merger is well explained in annotation in 143 A.L.R. 93-132. It is therein stated that “whenever an estate for years and a greater estate vest in the same person without any intermediate estate, the estate for years is merged in the greater estate.” (p. 96, of 143 A.L.R.)

Otis v. McMillan & Sons, 70 Ala. 46, is cited on the point: “There can be no greater absurdity, than to place Otis in the relation of being his own landlord and his own tenant at one and the same time.” (p. 97 of 143 A.L.R.)

Chancellor Kent is quoted: “There would be an absolute incompatibility in a person filling at one and the same time the character of tenant and reversioner in one and the same estate; and hence the reasonableness, and even necessity, of the doctrine of merger.” (p. 97 of 143 A.L.R.)

The Annotator states on page 124 of 143 A.L.R.: “Where a leasehold estate for years is absorbed by the operation of the doctrine of merger, the lessee’s obligation to pay rent is terminated.”

Erving v. James H. Goodman & Co. Bank, 171 Cal. 559, 153 P. 945, and other California cases, together with several other jurisdictions are cited in support thereof. In the Erving case it was said (page 563 of 171 Cal., page 946 of 153 P.): "“That when the fee vested in the bank’s predecessor, the covenant to pay rent for the realty became of no effect.”

We believe that a reasonable construction of all the agreements referred to in the pleadings and the stipulation as to facts, and the proceedings in the bankruptcy matter, of which this Court is to take judicial notice pursuant to. said stipulation, leads to the conclusion that the bondholders, on whose behalf plaintiff is acting, are not entitled to receive the allotted payment of $32,420.85 made by defendant as a purchaser of the lands, and rentals in addition.

It is therefore ordered that plaintiff’s motion to strike be, and the same is, hereby denied, and that defendant have judgment, with costs.

Counsel.for defendant will prepare findings.


text:
    BOWLES, Adm’r, Office of Price Administration, v. HARRISON et al.
    Civil Action No. 3711.
    District Court, W. D. Pennsylvania.
    June 19, 1945.
    John A. Metz, Jr., Dist. Enforcement Atty., and Thomas F. Garrahan, Chief, Fuel and Consumer Goods Unit, Office of Price Administration, both of Pittsburgh, Pa., for plaintiff.
    Rose and Eichenauer and John Corcor-an, all of Pittsburgh, Pa., for defendants.
   GIBSON, District Judge.

The court, after due hearing upon complainant’s prayer for a preliminary injunction, makes the following Findings of Fact and Conclusions of Law:

Findings of Fact

1. Since May 18, 1942, F. W. Harrison and E. W. Quinette, trading as the Harrison and Quinette Coal Company, a partnership, have been and are now engaged in the mining and merchandising of bituminous coal in the Western District of Pennsylvania, upon sale of which by them maximum prices are and have been continuously established by the Maximum Price Regulation 120.

2. Prior to October 27, 1942, the defendants gave notice to the Office of Price Administration that they proposed to sell crushed coal at run of mine prices under the appropriate section of Maximum Price Regulation 120, and proceeded forthwith to do so. Run of mine coal, crushed to desired size, under Regulation 120 could be sold for the price of run of mine coal.

3. From the first notice to the Office of Price Administration to July, 1943, defendants filed the monthly reports required by Section 1340.210 (a) (8) (iv) of Regulation 120. From July 1943 to the months of May and June, 1944, the defendants failed to file such monthly reports. In the months of May and June, 1944, the defendants filed the reports required, but did not file them for the succeeding months prior to September, 1944, since which time they have regularly filed such reports.

4. From the time of the notice to the Office of Price Administration, as set forth in Paragraph 2 supra, until July, 1943, the office of Solid Fuels Administration had furnished forms to defendants upon which to make said monthly reports. After the date last mentioned such forms were not available and defendants, after requesting such forms, and evidently acting under the misapprehension that such forms were required, failed to file the reports until the months of May and June, 1944, when forms were secured for those two months. Having no forms thereafter no reports were filed until September, 1944. During the periods when forms were unavailable defendants continued their applications therefor to the Office of Price Administration, through the Solid Fuels Administration or the Fuel and Consumer Goods Unit.

5. On September 11, 1944, defendants wrote the Office of Price Administration, Solid Fuels Price Branch, stating that they had not received forms for crushed coal reports for several months and requested a supply of them if still in use. To their request the Office of Price Administration replied by letter of September 15, 1944, by J. H. Reppert, Price Executive, Solid Fuels Price Branch, wherein, in substance, it was stated that no such forms were available, and that revision of them (forms) was contemplated. In addition to this information the letter said:

“We regret that we are unable to authorize any deviation from the application of the provisions of Section 1340.210 (a) (8)(iv) of the Regulation. Your application which has been assigned No. 13. will again be considered in full force, if reports are filed currently in conformity with the provisions of Maximum Price Regulation No. 120.”

6. From September, 1944, defendants have filed monthly reports as required by said Regulation, and have also filed all reports which had not theretofore been filed.

7. The proof adduced herein does not establish any lack of good faith, or intent to defraud, on the part of defendants in failing to file the monthly reports required by Maximum Price Regulation No. 120, their failure in that respect being due to misapprehension of the scope and requirements of the statute.

Conclusions of Law

I. Defendants, under Section 1340.210 (a) (8) (iv) of Maximum Price Regulation No. 120, were required to file reports of run of mine coal crushed under the Regulation on or before the 20th day of each month, and in event of failure to file such reports were not lawfully permitted to market coal crushed under Section 1340.210 (a) (8) (iv) at run of mine prices when such prices were less for such coal than the applicable maximum f.o.b. mine price.

II. The failure of the defendants to meet the requirements of the Regulation No. 120 not having been wilful, and the reports required by the Regulation having been later filed with the consent of the Office of Price Administration, a preliminary injunction is not required herein.

III. The Office of Price Administration is not estopped from the subsequent enforcement of Maximum Price Regulation No. 120 by any failure of the Administration, or of any officer of the said Office of Price Administration, to enforce it.

Discussion

In his complaint the Administrator has prayed for a preliminary injunction. He has asked, first, for an order upon defendants to file monthly reports for the period between August, 1943, to April, 1944, as required by Section 1340.210 (a) (8) (iv) of Regulation 120. The defendants voluntarily complied with this request before hearing.

The next prayer is for a mandatory injunction, directing defendants to file an application for a higher maximum price for crushed coal, as required by Section 1340.210 (a)(8)(iv). We doubt the power to make such an order. However, such an application is necessary if the defendants are to be allowed to sell crushed coal at the run of mine rate, and the requirement for it has been substantially met by defendants with the approval of the Administrator’s Office. See Finding of Fact No. 5. One entitled to speak for the Administrator, J. H. Reppert, Price Executive, answering defendants’ letter to the Administrator, accepted the application as though formally made. While possibly his action might be criticized as not in strict compliance with the Regulation, to hold it to be invalid would be to allow technicality to triumph over common sense. A useless request is not required by statute or O.P.A. Regulation.

The complainant further has requested a preliminary injunction by which defendants will be enjoined from selling coal in excess of the maximum prices established therefor by Maximum Price Regulation 120, or other regulation establishing maximum prices. It may well be claimed that defendants have not complied with Maximum Price Regulation 120. Even so, we have found that their failure to do so was not wilful. In fact their mistake, in view of the myriad forms necessarily used by the Government today, was quite natural. Their lack of concealment while the reports were not filed, and their prompt obedience to the regulation when informed that forms were not required, and since, has convinced us that a similar situation exists in the instant case as was before the Supreme Court in Hecht Co. v. Bowles, 321 U.S. 321, 64 S.Ct. 587, 88 L.Ed. 754, in which that court held that the Emergency Price Control Act does not mandatorially require the issuance of an injunction even though violations of the Regulations have been proven, but where those violating the Regulations have acted in good faith.

The motion for a preliminary injunction will be denied.


text:
    BOWLES, Adm’r, Office of Price Administration, v. CUNNINGHAM et al.
    Civil Action No. 3710.
    District Court, W. D. Pennsylvania.
    June 19, 1945.
    John A. Metz, Jr., Dist. Enforcement Atty., and Thomas F. Garrahan, Chief Fuel and Consumer Goods Unit, Office of Price Administration, both of Pittsburgh, Pa., for plaintiff.
    Bernard Goodman, of Pittsburgh, Pa., for defendants.
   GIBSON, District Judge.

The court, after due hearing upon complainant’s prayer for a preliminary injunction, makes the following Findings of Fact and Conclusions of Law:

Findings of Fact

1. Since July 17, 1944, Clyde E. Speer, J. H. Cunningham and L. H. Funcke, trading as The Clyde E. Speer Coal Company, a partnership, have been and are now engaged in the selling of bituminous coal in the Western District of Pennsylvania, the sales of which are and have been continuously regulated by Maximum Price Regulation 120. Clyde E. Speer is not named as a defendant herein.

2. Prior to July 17, 1944, at the times complained of by plaintiff, the business was carried on by a corporation, known as The Clyde E. Speer Coal Company, Incorporated, which is not a defendant herein.

3. From July 17, 1944, until December 2, 1944, defendants sold bituminous coal to the Veterans’ Administration, United States Government, for a price of $3.40 per ton, f. o. b. Veterans’ Administration, Aspinwall, Pennsylvania. The delivery price was determined in this manner: Ceiling price f. o. b. mine was $2.70 per ton and the delivery charges to Aspinwall were $0.70 per ton. Total to consumer was $3.40 per ton.

While defendants billed the Veterans’ Administration $3.40 per ton, defendants paid their suppliers, F. W. Harrison and E. W. Quinette, trading as Harrison and Quinette Coal Company, only $3.28 per ton, f. o. b. Veterans’ Administration, Aspinwall, Pennsylvania, thus realizing a commission of twelve cents per ton.

4. From July 17, 1944, to November 25, 1944, defendants sold bituminous coal to the Allegheny County Workhouse for a price of $3.96 per ton, f. o. b. Workhouse. The delivered price was determined in this manner: Ceiling pricej f. o. b. mine, $3.06, delivery charges to Workhouse, $0.90, total to consumer $3.96.

In this case, defendants billed the Allegheny County Workhouse $3.96 per ton, and paid their suppliers, Harrison and Quinette Coal Company, only $3.81 per ton, f. o. b. Workhouse, thus realizing a commission of fifteen cents per ton.

5. From July 17, 1944, to December, 1944, defendants sold crushed bituminous coal to the City of Pittsburgh, Pa., for a price of $4 per ton, f. o. b. Ross Pumping Station. The delivered price was determined in this manner: Ceiling price, f. o . b. mine, $3.25, delivery charges to Pumping Station $0.75, total to consumer, $4.00.

Here, too, the defendants realized a commission of fifteen cents per ton by billing the City of Pittsburgh at $4 per ton delivered, and paying their suppliers, Harrison and Quinette Coal Company, only $3.85 per ton f. o. b. Ross Pumping Station.

6. The defendants did not employ the haulers of the coal nor set the delivery charges per ton. Defendants merely charged the consumers the ceiling price per ton of the coal, f. o. b. mine, plus the amount per ton set by Harrison and Quin-ette as the delivery charges.

7. Plaintiff has not shown conclusively that the delivery charges in the above three instances exceed the delivery charges allowed by Maximum Price Regulation 120.

8. Plaintiff has not conclusively shown that the price per ton charged by the defendants in the above three instances exceed the ceiling prices set by Maximum Price Regulation 120.

Conclusions of Law

I. Defendants are subject to Maximum Price Regulation 120, and the prices of coal sold by them must not exceed the ceiling prices set by said Regulation.

II. Plaintiff not having conclusively shown that defendants knowingly violated Maximum Price Regulation 120, a preliminary injunction is not required.

Discussion

This action was tried immediately following that of Bowles, Administrator, v. Harrison and Quinette, D.C., 61 F.Supp. 160. The cases are related, in that the sales alleged to have been made at over-the-ceiling prices were made by defendants to the City of Pittsburgh, Allegheny County Workhouse and the Veterans’ Administration from coal supplied from the mines of Harrison and Quinette.

In the Harrison and Quinette case the overcharges claimed resulted only from the inadvertent failure of the defendants to file monthly reports while they were selling crushed coal at run of mine prices (greater than the ordinary price of screened coal). One of the overcharges alleged against the defendants in the instant action is based upon the invalidity of sales of such coal made without due report by Harrison and Quinette, that sale being made to the Ross Pumping Station of the City of Pittsburgh. However, no knowledge of the failure of Harrison and Quinette to file reports was charged to defendants herein.

The instant action did not arise from complaints as to overcharge made by the vendees of the coal, but was instituted by the agents of the enforcement branch of the Administrator’s Office in what they doubtless conceived to be their duty. As a matter of fact, the vendees were obviously not in sympathy with the instant action, as each of them had a great deal of trouble in obtaining sufficient coal for its needs, and had been supplied by defendants only by the exercise of considerable effort on the part of defendants.

The principal controversy concerns the amount of delivery charges defendants are permitted to add to the ceiling price per ton of coal, f. o. b. mine. The defendants were sales agents of the Harrison and Quinette Coal Company, and their ceiling prices, in theory, were dependent upon the ceiling prices allowable to Harrison and Quinette. See Regulation No. 1340.201. The main difficulty in the disposition of this action is not with the regulation, but with the proof. The only proof as to the actual cost of the transportation of the coal from the mine to the vendees was the testimony of the government witness as to admissions alleged to have been made to him by one of the Harrison and Quinette partners, and not otherwise established. By that admission the transportation cost of the coal sold to the Veterans’ Administration was $0.60 per ton; that sold to the Allegheny County Workhouse was $0.75 per ton, and that sold to the City of Pittsburgh Pumping Station was $0.65 per ton. But the defendants had been billed by Harrison and Quinette for a transportation charge of $0.70 per ton on the Veterans’ Administration shipment, $0.90 per ton on the Allegheny County Workhouse shipment, and $0.75 per ton on the shipment to the Pumping Station. If the defendants had no knowledge of the transportation costs other than disclosed by the billing, and no evidence exists to the contrary, then they cannot be properly charged with any intent to exceed the proper ceiling charge. This is true if it is assumed also that they were without knowledge of any invalidity of Harrison and Quinette’s charges for crushed run of mine coal due to failure to make proper monthly returns as required by regulations.

Feeling that no intent to violate the regulation has been shown on the part of the defendants, it is the opinion of the court that no necessity exists for the issue of a preliminary injunction.