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Porter, Price Administrator v. Montgomery.


decided.: July 11, 1947.


Author: Biggs


BIGGS, Circuit Judge.

On February 2, 1945, the Administrator filed suit, pursuant to the provisions of the Emergency Price Control Act of 1942 as amended by the Stabilization Extension Act of 1944, 50 U.S.C.A.Appendix, § 901 et seq., against the defendants. He prayed that they be enjoined*fn1 from continuing certain practices which resulted in higher-than-ceiling prices for lumber sold by them and sought to recover treble the amounts of overcharges on sales.*fn2 Before answer and on April 28, 1945 the defendant Charles H. Montgomery died. The Administrator asked the court to substitute as parties defendant the administrators of Montgomery's estate,*fn3 asserting that the right to a money judgment*fn4 under Section 205(e)*fn5 of the Act against Montgomery was not extinguished by his death. The Administrator asserts that his suit is a civil action for damages. Montgomery's administrators contend that the action is one for a penalty and that therefore the Act of June 16, 1933, c. 103, 28 U.S.C.A. § 780a,*fn6 is not available to save the cause of action for the Administrator. The court below took a view unfavorable to the Administrator. See 66 F.Supp. 889. He has appealed.

The legislative history of Section 780a is not very helpful. It consists chiefly of a letter written by the Acting Attorney General under date of May 20, 1933, to the Chairman of the Judiciary Committee of the Senate. The letter is set out in the footnote.*fn7 It appears from discussion on the floor of the House of Representatives that the individual to whom the Acting Attorney General referred in his letter was Edward L. Doheny*fn8 who had been sued in the District Court of the United States for the Southern District of California, Central Division, at No. 6350-J, by William C. McDuffie, as receiver of Pan American Petroleum Company. The cause of action grew out of the circumstances surrounding the drainage of oil from "Tea Pot Dome". McDuffie sought collection of damages from Doheny because of a conspiracy alleged to exist between him and Albert B. Fall and to collect from Doheny for Pan American the sums decreed to be paid by Pan American to the United States. It is not presently clear in precisely what fashion the United States was interested in McDuffie's suit against Doheny but we think we may assume that a question of collection of a judgment was presented. In any event it is clear that McDuffie's suit against Doheny was a civil action for damages and not a suit for a penalty.

We turn now to the legislative history of Section 205. An action by the Administrator under subsection (e) has been referred to as "a suit for damages on behalf of the United States." Senate Report No. 992, 78th Cong., 2d Sess., p. 5; House Report No. 1593, 78th Cong., 2d Sess., p. 8. The report last referred to states that Section 205 "* * * includes a criminal proceeding, an injunction proceeding, an action for damages * * *," and that subsection (e) is "the so-called treble damage provision". A conference report states that the subsection "permits a civil action * * * for treble the amount of any unlawful overcharge * * *." House Report No. 1658, 77th Cong., 2d Sess., p. 26. It is notable that no reference is made in subsection (e) to a "penalty" or to "penalties." Indeed the only reference in the section to "penalties" occurs in subsection (d) wherein it is stated, "No person shall be held liable for damages or penalties in in any Federal, State, or Territorial court, on any grounds for or in respect of anything done or omitted to be done in good faith pursuant to any provision of this Act * * *". In referring to penalties in subsection (d) Congress may have had in mind the criminal sanctions of the Act to be imposed by the District Courts of the United States.

It has been held that an action by a consumer brought under Section 205(e) is remedial.Everly v. Zepp, D.C.E.D.Pa., 57 F.Supp. 303. The reason advanced for the decision is that recovery is to recompense the consumer for the injury suffered by him. Thierry v. Gilbert, 1 Cir., 147 F.2d 603, affirming D.C., 58 F.Supp. 235. A number of decisions have ruled that actions brought by the United States, that is to say by the Administrator, are penal in nature. Brown v. Glick Bros. Lumber Co. D.C.S.D.Cal., 52 F.Supp. 913, reversed on other grounds 9 Cir., 146 F.2d 566; Bowles v. Beatrice Creamery Co., D.C.D.Wyo., 56 F.Supp. 805; Bowles v. Silverman, D.C.D.S.Dak., 57 F.Supp. 990, appeal dismissed, 8 Cir., 145 F.2d 1022. The reasoning of these cases is that the United States imposes a fine to punish the wrongdoer which aids in the enforcement of a law passed by Congress to aid the general welfare. Other cases hold that the nature of the action under Section 205(e) is the same whether the suit be brought by the United States or by the consumer. Bowles v. Farmers Nat. Bank of Lebanon, Ky., 6 Cir., 147 F.2d 425; Bowles v. Trowbridge, D.C.N.D.Cal., 60 F.Supp. 48.*fn9

The decision of the Supreme Court in Huntington v. Attrill, 146 U.S. 657, 13 S. Ct. 224, 36 L. Ed. 1123, does not solve the questions sub judice. It is notable that almost every decision, both state and federal, has cited this authority and has attempted to apply the tests set forth in it with widely divergent results. Cf. Carter v. Carter Coal Company, 298 U.S. 238, 56 S. Ct. 371, 80 L. Ed. 1160. It should be observed, however, that in the decision in Porter v. Warner Holding Co., 328 U.S. 395, at pages 401, 402, 66 S. Ct. 1086, 1091, 90 L. Ed. 1332, there were words employed which may indicate that subsection (e) provides both damages and penalties.*fn10 See also the dissenting opinion of Mr. Justice Rutledge, Id., 328 U.S. at page 407, 66 S. Ct. 1086, 90 L. Ed. 1332. In Testa v. Katt, 67 S. Ct. 810, Mr. Justice Black expressly assumed that § 205(e) is a penal statute. The question under consideration in the instant case was not before the Supreme Court in either of the decisions referred to. Cf. Crary v. Porter, 10 Cir., 157 F.2d 410, 413-415, and Bowles v. Farmers Nat. Bank of Lebanon, Ky., supra.

The fact that judgment in the instant case may amount to "three times the amount of the overcharge"*fn11 is not the touchstone to a correct decision; nor does the solution to the problem lie in calling a suit by a consumer a civil action for damages while designating one brought by the Administrator as calling for a penalty. See Huntington v. Attrill, 146 U.S. at page 668, 13 S. Ct. at page 228, 36 L. Ed. 1123. We may not conclude that a suit is remedial in nature when it provides a private remedy and is not remedial where it seeks to redress public damage. The objection to such reasoning is all the more apparent when we consider that in time of war the public economy is necessarily subjected to public control and a burden is imposed by taxation to aid in maintaining commodity prices at fair levels.

In this welter of law it seems that the case at bar can be decided only on commonsense principles. A civil action is for damages if it is brought for the compensation of the injured individual. It is for a penalty if it seeks to obtain a sum of money for the state, and entity which has not suffered direct injury by reason of any prohibited action. In order to obtain damages the loss must flow out of the wrong and be its natural and proximate consequence. Smith v. Bolles, 132 U.S. 125, 130, 10 S. Ct. 39, 33 L. Ed. 279. A penalty need have no causal connection with the wrong inflicted. In a penal statute the penalty is inflicted by a law for its violation. In the case at bar the sum sought to be recovered by the Administrator clearly is not intended for compensation whereby Montgomery should reimburse or compensate any person whom he injured by sales above ceiling price. The sum sought to be recovered is in the nature of an exaction, to be levied upon Montgomery or his heirs as a penalty to aid in the prevention of a repetition of an offense prohibited by the Act. See Bowles v. Farmers Nat. Bank of Lebanon, Ky., supra. We conclude therefore that Section 780a, Title 28 U.S.C.A., which provides that no civil action for damages brought by the United States or in its behalf shall abate by reason of the death of a defendant will not serve to preserve the Administrator's suit against Montgomery and that the court below committed no error in refusing to substitute his administrators as party-defendants.

The order appealed from will be affirmed.

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