The opinion of the court was delivered by: BARD
This action was brought by the Administrator of the Office of Price Administration, pursuant to Section 205(e) of the Emergency Price Control Act of 1942
to restrain defendants from selling certain merchandise until required records are prepared and maintained, to enjoin sales at over ceiling prices, and to recover treble damages for the sale, between July 1943 and April 1944, of men's and boys' shorts at prices allegedly in excess of the maximum prices determined under the Regulations.
In the complaint plaintiff alleges sales in excess of maximum prices determined by the price regulations in a sum in excess of $ 100,000 and asks that judgment be entered in favor of the plaintiff and against the defendants for a sum in excess of $ 300,000. At trial plaintiff proved certain sales of garments at prices which he claims were overcharges in the sum of $ 49,611.39, and for which plaintiff claims treble damages of $ 148,834.17.
Between March 1943 and April 1944 defendants sold quantities of men's and boys' shorts including, inter alia, style numbers 467, 259 and 259(b). Sale of these styles was discontinued in April 1944. Until May 1943 the determination of the maximum price for this merchandise was controlled by General Maximum Price Regulation Sec. 1499.3(b), 7 F.R. 3154.
This section required defendants, after obtaining specific authorization from the Office of Price Administration, to calculate the proper maximum price according to a prescribed formula, and to report the calculated price within ten days subject to adjustment by the Administrator. On May 24, 1943 this section was amended,
eliminating the necessity of prior authorization before calculating the maximum price under this section
In June 1944 plaintiff began an investigation of defendants' records. The complaint was filed July 14, 1944, although the investigation continued for some time thereafter. Until this time defendants had not reported the self-determined maximum prices to the Administrator, despite the provisions of Section 1499.3(b) of the Regulations. On August 1, 1944, two weeks after the filing of the complaint and about three months after sale of the garments had ended, defendants filed their reports, as required by the Regulations, for styles 259 and 467.
On June 1, 1944, by Amendment 61,
subsection (e)(1) was added to Section 1499.3 of the Regulations providing that 'the Price Administrator, * * * , may at any time approve, disapprove or revise maximum prices reported, proposed or established under paragraphs (a), (b)(1), or (c) of this section so as to bring them into line with the level of maximum prices otherwise established by this regulation.' (Italics supplied) Prior to this amendment the 'in-line' price was to be determined by the seller only, except that Section 1499.3(b) made the submitted price subject to adjustment by the Administrator. Under the authorization of Section 1499.3(e)(1), the Administrator promulgated an order on October 20, 1944, three months after the complaint was filed, in which he stated that the determination of maximum prices by defendants, submitted August 1, 1944, was not in line with the level of maximum prices and ordered that defendants' maximum selling prices for styles 467 and 259 'shall be established as follows * * * ' The prices set forth were lower than the prices submitted by defendants and were lower than the prices at which the garments had been sold. On May 8, 1945, ten months after suit was begun, the Administrator amended this order making the adjusted maximum prices effective retroactively to cover the period between the date the garments were first offered for sale and the date when defendants' prices were filed with the Administrator. It is this maximum price established by the retroactive order, promulgated May 8, 1945, ten months after the filing of the complaint, upon which plaintiff bases his contention that defendants sold garments between July 1943 and April 1944 at prices higher than allowed by law.
The Administrator argues that the amendment of June 1, 1944, adding Section 1499.3(e)(1) was merely a clarification of the Administrator's power to adjust prices 'in-line' with other established prices which he previously had under Section 1499.3(b); that this Court has no power to determine the validity of the retroactive order under the provisions of Section 204(d) of the Act, 50 U.S.C.A.Appendix § 924(d), but this issue must be decided by application to the Emergency Court of Appeals; and that the Administrator had a cause of action at the inception of the suit and that the only effect of the retroactive price order was to make the amount of damages, which had existed inchoately, ascertainable.
The dispositive issue on defendants' motion is whether or not plaintiff had a legal cause of action at the time the complaint was filed. If defendants' contentions on this issue are sound, then the question whether the Administrator's retroactive price order is valid need not be determined, for reasons which will be later indicated.
The complaint, filed on July 14, 1944, alleges that defendants sold garments 'at prices in excess of the maximum prices established therefor pursuant to the provisions of the General Maximum Price Regulations.' During the period when the sales were made and until the filing of the complaint, the only maximum prices which may have been in existence for styles 259, 259(b) and 467 were the prices computed by the defendants in accordance with the procedure found in Section 1499.3(b). Even these computations were not proper maximum price determinations since these prices were not reported to the Administrator as required by the Regulations. Nor was any maximum price fixed by the Administrator up to the date of the filing of the complaint. It was not until three months after the complaint was filed that the Administrator fixed a valid adjusted 'in-line' maximum price in an order operating in futuro. And it was not until ten months after the filing of the complaint that the Administrator issued an order making the prior pricing order retroactive to the period in which the sales were made.
Plaintiff's right to recover in this action must be predicated upon facts in existence at the time the complaint was filed. United States ex rel. Texas Portland Cement Co. v. McCord, 233 U.S. 157, 34 S. Ct. 550, 58 L. Ed. 893; American Bonding & Trust Co. v. Gibson County, 6 Cir., 145 F. 871, 7 Ann.Cas. 522; County Court of Marion County, West Virginia, v. United States, 53 Ct.Cl. 120. Since the rights of the parties must be determined on facts existing at the inception of the suit, American Agricultural Chemical Co. v. Moore, D.C., 17 F.2d 196, the court cannot adjudicate, in this action, rights which accrued, or which are based on facts which occurred subsequent to the commencement of the action. Kontovich v. United States, 6 Cir., 99 F.2d 661. The non-existence of a cause of action when suit is commenced is fatal, and the defect cannot be cured by the happening of events thereafter which create or mature a good cause of action. American Bonding & Trust Co. v. Gibson County, supra; County Court of Marion County, West Virginia, v. United States, supra. Where the action has thus been prematurely brought, the suit should be dismissed. City of Trinidad v. Hokasona, 8 Cir., 178 F. 438.
Although Rule 15(d) of the Federal Rules of Civil Procedure, 28 U.S.C.A.following Section 723c, permits a party to set forth transactions or events which happened after the filing of the complaint, the supplemental pleading is merely a continuation of the complaint justifying other or further relief. City of Texarkana v. Arkansas Louisiana Gas Co., 306 U.S. 188, 59 S. Ct. 448, 83 L. Ed. 598; Howard v. Jennings, 8 Cir., 141 F.2d 193. However, if plaintiff did not have a cause of action at the time the complaint was filed, he could not, by a supplemental pleading, allege a cause of action thereafter accruing because of subsequent happenings or events. Berssenbrugge v. Luce Mfg. Co., D.C.W.D. Mo., 30 F.Supp. 101. The Federal Rules of Civil Procedure, therefore, have not effected any change with regard to the requirement that facts constituting a cause of action must exist at the time suit is commenced. Mellor v. Smither, 5 Cir., 114 F. 116; Kryptok Co. v. Haussmann & Co., D.C.E.D. Pa., 216 F. 267; Eveland v. Detroit Machine Tool Co., D.C.E.D. Mich., 18 F.2d 968.
Plaintiff's own evidence shows that one essential fact necessary to its cause of action did not exist at the commencement of the action. On that date the maximum price for styles 467, 259 and 259(b), upon the basis of which plaintiff claims an overcharge, was not in existence. On that date plaintiff would have been unable to prove a cause of action. Several months thereafter, plaintiff, by his own act, perfected a cause of action by promulgating a retroactive price order. Since the evidence shows that plaintiff could not sustain a good cause of action on the facts as they existed when suit was commenced, his action is defective, and since this fact cannot be cured by a supplemental amendment (assuming such an amendment would be allowed at this time) that portion of the suit which is based on the Administrator's price order fixing maximum prices for styles 467, 259, 259(b)
must be dismissed. Mike Levine, Inc. v. Baer, D.C.S.D.N.Y., 32 F.Supp. 575; Berssenbrugge v. Luce Mfg. Co., supra.
The conclusion must be the same whether or not the Administrator's orders of October 20, 1944 and May 8, 1945 have a valid retroactive effect extending over the period when these sales were made. The orders were not promulgated until after the date the complaint was filed. On that date no price orders had been issued and no maximum prices had been established so that the Administrator could have no valid cause of action on the facts existing when the action was begun. The problem of the retroactive effectiveness of the Administrator's orders would have been determinative only if they had been promulgated before the complaint was filed. If the orders had been promulgated before suit was begun, all the essential elements upon which the cause of action was based would have existed prior to the filing of the complaint. Thus, the only argument which could have been advanced by defendants in support of the motion to dismiss would have been the invalidity or ineffectiveness of the retroactive pricing order. This would be a matter for the Emergency Court of Appeals to determine. ...