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Denning v. Fleming and Four Other Cases .

: March 7, 1947.



Before PHILLIPS, BRATTON and HUXMAN, Circuit Judges.

HUXMAN, Circuit Judge.

The Administrator, Office of Price Administration,*fn1 filed three separate actions in the United States District Court for the District of Kansas charging violations of the maximum price ceiling regulations relating to the sale and purchase of broomcorn. Case No. 2397 below was filed against John L. Denning and Company, Inc.*fn2 The complaint charged that the corporation had sold three carloads of broomcorn for which it demanded and received prices or considerations in excess of the maximum authorized by Regulation No. 468. It also alleged that the corporation had demanded and received advance cash deposits from customers for orders for broomcorn and that such advances constituted an overcharge to such customers.

Case No. 2400 below was filed against Effie N. Denning, John L. Denning, Jr., and Edwana Collins, copartners doing business as Denning Broomcorn Company.*fn3 The complaint in this case charged the sale of eight carloads of broomcorn for a consideration in excess of the maximum ceiling price fixed by the regulation. It was also charged in this case, as in No. 2397, that the defendants had demanded and received advance cash deposits against orders for broomcorn and that this constituted a violation of the regulation.

Case No. 2398 below was filed against the corporation and partnership. The complaint in this case alleged that the corporation and the partnership had violated the regulation with respect to twenty-four carloads of broomcorn. The complaint alleged that these twenty-four cars of broomcorn had been sold jointly to purchasers for a consideration in excess of the maximum price fixed by the regulation.It was alleged that the sales were divided between the corporation and the partnership for the express purpose of evading the regulation and for collecting a higher price than authorized for the broomcorn.

In addition to a judgment for treble damages, the Administrator also asked for injunctive relief. Other claims were advanced in the complaints which it will not be necessary to note, because they are not pressed in these appeals. The three cases were consolidated and tried to the court. The findings of fact by the trial court are not challenged. The exceptions of the respective appellants are to the court's conclusions of law and its judgments based thereon.

The trial court found and determined: (1) That the receipt of advance cash deposits did not violate the regulation. (2) That the split shipments by which the corporation and the partnership both sold broomcorn to the same customers in less than 14,000 pound lots, and shipped them in the same car at the same time, did not violate the regulation. (3) That the practice of the corporation and the partnership of shipping split sales in full carload lots from their warehouse in Wichita and each charging L.C.L. freight rates*fn4 while only paying full carload rates from Wichita, constituted a violation of the regulation. Based thereon, monetary judgments were entered for the actual amount of the overcharge, plus $1. An injunction was entered in Case No. 2398, but was denied in No. 2397, because an injunction had been entered in No. 2398. The respective parties have appealed from the parts of the judgments adverse to their contentions.

The questions presented by the separate appeals are these: (1) Did the trial court err in holding that the defendants could charge L.C.L. freight rates only from the point of origin to the warehouse in Wichita, but were not permitted to charge such rates from there on when the broomcorn was shipped in carload lots? (2) Was the trial court in error in concluding that the receipt of advance cash deposits for orders for broomcorn did not violate the regulation? (3) Could the corporation limit sales to its customers to less than 14,000 pounds and thus in many cases require a number of orders to meet their requirements, in order to charge a higher price, without violating the regulation? (4) Did the practice of splitting orders for broomcorn from a customer between the corporation and the partnership, so that each sale was for less than 14,000 pounds but the aggregate of both was in excess of 14,000 pounds, in order to obtain a higher price, constitute a violation of the regulation?

Subsection 3 of Price Regulation 468 establishes the maximum price for broomcorn sold by producers. Subsection 9 establishes maximum prices for broomcorn sold by persons other than producers. This regulation as far as pertinent, is set out in*fn5

The defendant corporation had a warehouse in Wichita, Kansas, where the broomcorn purchased by both it and the copartnership, in L.C.L. lots, was stored. Sales were made on a delivered basis from this warehouse. In a large number of instances, a quantity of broomcorn invoiced in the name of the corporation and a quantity invoiced in the name of the partnership, making a carload, would be shipped in a single car to the point of destination. In all such instances freight was paid at carload rates from Wichita, while the delivered price to the customer included the maximum ceiling price plus freight from the point of origin to Wichita and from there to the point of ultimate destination computed at L.C.L. rates.*fn6 In this way, each defendant would receive more freight from the customer than was actually paid by it to the transportation company.

Whether this constituted a violation of the regulation presents no serious difficulty when the purpose of permitting the addition of freight to the maximum price which could be charged for broomcorn is considered. The pertinent part of the regulation fixed the maximum price which the owner could charge for broomcorn. It was intended that he should have the full benefit of this price. When he sold the broom-corn f.o.b., he could charge no more than the maximum price because no additional charge was incurred, but where the sale was on a delivered basis he was compelled to pay the additional freight. Unless he could add this item to the price, he would not get the benefit of the maximum lawful price. It was for this reason that the regulation provided that the amount of freight actually paid could be added to the maximum price f.o.b. A number of super-refined, hypothetical cases are posed to show that inequity might result from such a construction. Thus the phrase in Sec. 9(a), "The term 'Point of origin' means in case shipment to the purchaser is made by rail, the point at which the broomcorn is loaded on the railroad car * * *". is singled out and it is argued that under this phrase Wichita might be considered the point of origin and no freight could be added from the place where the broomcorn was purchased to Wichita. One cannot determine the true meaning of a phrase, sentence, or even a paragraph, by lifting it out of its natural setting. Its true meaning can be ascertained only by considering the whole subject matter of which it is a part. It is sufficient to say that no such claim as is posed by this hypothetical case is advanced by anyone. Considered in its entirety, it is perfectly obvious that the intent of the regulation was to permit the recovery of freight actually paid, and no more.

The defendant appellants, however, contend that this question was not an issue in the case; that it was not raised by the pleadings; that it was first injected into the case by the court itself at the conclusion of the trial, and that it was reversible error for the court to render judgment on a matter not within the issues as framed by the pleadings. It is not necessary to determine the soundness of the defendant appellants' position on this issue, because even if correct they could not prevail. At the conclusion of the evidence, the court discussed this question with the attorneys for the respective parties. The court expressed the view that the inclusion in the price of broomcorn of more freight than was actually paid constituted a violation of the regulation. The causes were recessed to enable the parties to compute the excess freight charged. At a later hearing evidence was introduced as to the amount of such overcharge. No objection was made by the defendants at any time. By joining the plaintiffs in computing the amount of such freight overcharges and failing to object, they consented to a trial upon this issue and may not now for the first time on appeal be heard to object thereto.*fn7

There was a shortage of broomcorn during the times in question. The defendants solicited orders for broomcorn and required a cash deposit with each order. These deposits amounted to a considerable sum and were in possession of the defendants for a number of months before the orders were filled and the broomcorn was delivered. The Administrator contends that the possession of this money amounted to the receipt of an additional consideration, and that interest thereon should be charged against the defendants. The trial court found that these deposits were taken as a guarantee that the customer would receive broomcorn and were not otherwise used by the defendants. This finding is not challenged. Under these circumstances it is difficult to see how the mere possession of this fund constituted any additional consideration. This case is clearly distinguishable upon the facts from the cases relied upon by the Administrator to sustain this point. In all of them there was an additional benefit or consideration which was sufficent to cause the court to conclude that an additional consideration was received. We are of the opinion that the mere possession of these funds in escrow, as it were, without any use being made of them by the defendants, was insufficient to establish an additional consideration which would constitute a violation of the regulation.

The Administrator contends that the corporation's practice of limiting its sale of broomcorn to a single customer to less than 14,000 pounds when he desired to purchase a greater quantity, and thus compelling him to place additional orders, each of less than 14,000 pounds, until his requirements were filled, constituted evasion. It is argued that this practice was an obvious pretext and that these separate orders in fact were but a single order with shipments split up in order to obtain a higher price.While the defendants do not concede that these separate shipments to a single customer by either the corporation or the partnership alone constituted split shipments, they will be so treated for the purpose of this assignment. It is too well settled to need any discussion or citation of authorities that there is a difference between avoiding and evading the effects of a law or regulation. The regulation in question fixed a maximum price for sales of broomcorn in quantities greater than 14,000 pounds and a higher price for sales of less than 14,000 pounds. In the absence of a provision in the regulation prohibiting split sales of less than 14,000 pounds to a customer whose requirements were greater, we know of no principle of law which would prohibit a vendor from selling only less than 14,000 pounds to a customer, even though that compelled the customer to place additional orders, and when the only motive for such ...

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