Before MARIS, STALEY and HASTIE, Circuit Judges.
This suit was brought in the United States District Court for the District of New Jersey by the plaintiff, a slaughterer of livestock, to collect from the defendant the sum of $374,667.46 in unpaid meat subsidy claims filed in 1944, 1945 and 1946, the payment of which had been withheld by the defendant. The defendant filed a counterclaim in the suit to recoup from the plaintiff the sum of $233,408.11 in subsidies which it had paid to the plaintiff in the years 1944 and 1945 upon claims which the defendant now asserts were invalid.
The case was referred by the district court to a master who took voluminous testimony.The master found that all of the subsidy claims filed by the plaintiff were substantially accurate and correct and were a true reflection of the plaintiff's operations. He accordingly recommended the dismissal of the defendant's counterclaim and the entry of judgment in favor of the plaintiff for the full amount of its claim less a deduction for arithmetical errors amounting to $4,227.12 and for terminal inventory on October 14, 1946, the day on which the subsidy program ended, amounting to $1,901.70, a total deduction of $6,128.82. The amount of the judgment recommended to be entered in favor of the plaintiff was accordingly $368,548.64 with interest.
Objections to the master's report were filed by the defendant. Upon consideration of these objections the district court sustained the master's findings that the plaintiff's subsidy claims were valid and accurate except as to the claims filed for the period January 20, 1944 to November 3, 1944 which claims the court found had been lawfully invalidated by the defendant upon the basis of a determination by a deputy of the Secretary of Agriculture that the plaintiff had been guilty during that entire period of wilfully violating War Food Order No. 75 by failing to set aside beef for the armed forces in the amounts required. The court accordingly directed the entry of judgment for the plaintiff upon its unpaid claims for the years 1945 and 1946 only and the entry of judgment for the defendant upon its counterclaim for the amount of subsidy which the defendant had paid to the plaintiff for the period from January 20, 1944 to November 3, 1944 and which the defendant had not theretofore recouped from the plaintiff. 92 F.Supp. 376.
Judgment was thereupon entered in favor of the plaintiff in the sum of $330,931.75 with interest at the rate of 4% per annum on allowable claims computed from one month after date of filing of claims totaling $59,253.75, or a total sum of $390,185.50, and in favor of the defendant in the sum of $66,673.45 plus interest on its allowable claims at the rate of 4% per annum computed from the dates on which the respective claims were paid to the plaintiff which totaled $15,997.83, or a total sum of $82,671.28. Deducting the said sum of $82,671.28 from the sum of $390,185.50 a final judgment was entered in favor of the plaintiff and against the defendant for the sum of $307,514.22, which sum the defendant was directed to pay to the plaintiff within 60 days. From the judgment thus entered both the defendant and the plaintiff have appealed to this court.
The subsidy payments and claims in controversy were made under section 2(e) of the Emergency Price Control Act of 1942, as amended, 50 U.S.C.A.Appendix, § 902(e), upon meat produced from the slaughter of cattle, calves, and sheep.The basis of the subsidy program and the manner in which it was authorized and carried out have been fully set forth by the Emergency Court of Appeals in its opinions in Wm. Schluderberg-T.J. Kurdle Co. v. Reconstruction Finance Corp., 1948, 169 F.2d 419, certiorari denied 335 U.S. 846, 69 S. Ct. 68, 93 L. Ed. 396; Earl C. Gibbs, Inc. v. Reconstruction Finance Corp., Em.App., 1948, 169 F.2d 654; Merchants Packing Co. v. Reconstruction Finance Corp., Em.App., 1949, 176 F.2d 908, and other cases, and need not be repeated here. It is sufficient to recall that originally Defense Supplies Corporation was the instrumentality through which the subsidy was paid and that after June 30, 1945 the defendant, Reconstruction Finance Corporation, was the paying agent. Both corporations operated under the directions of the Federal Loan Administrator who in turn was required to carry out the overriding policy directives issued by the Director of Economic Stabilization under the Stabilization Act of 1942, 50 U.S.C.A.Appendix, § 961 et seq.*fn1
Meat subsidy claims were governed during the period from June 7, 1943 through October 14, 1946, the whole period of the subsidy program, successively by Livestock Slaughter Payments Regulation No. 3 of Defense Supplies Corporation*fn2 and Revised Livestock Slaughter Payments Regulation No. 3 of Defense Supplies Corporation and its successor in administering the subsidy program Reconstruction Finance Corporation.*fn3 Regulation No. 3 was applicable to the plaintiff's meat subsidy claims between June 7, 1943 and January 29, 1945. Revised Regulation No. 3 was applicable to its subsidy claims from January 29, 1945 to June 30, 1946 when the original meat subsidy program ended. Regulation No. 10 of Reconstruction Finance Corporation*fn4 specifically made Revised Regulation No. 3 applicable to the reestablished meat subsidy program which was in force between September 1 and October 14, 1946.
These regulations required the plaintiff to file its claims for subsidy for each monthly accounting period upon the cattle slaughtered in that period upon the basis of the "chilled carcass weight" of the beef produced from slaughter in that month by "grades as graded by an official grader of the United States Department of Agriculture", and showing the live weight and the cost of all of the cattle slaughtered in the plant in that period, but excluding from the live weight, although not from the cost, all condemned cattle and beef. The subsidy rates varied and were computed according to the reported grades of beef, and the amounts of subsidy varied as all these different factors varied.
The regulations provided that claims should be paid upon a purely preliminary basis but that Defense Supplies Corporation (after June 30, 1945 its successor, Reconstruction Finance Corporation) should have the right to require restitution of any payment or part of a payment upon a finding that the claim was invalid or defective. The regulations also always provided that Defense Supplies Corporation (after June 30, 1945 its successor, Reconstruction Finance Corporation) should have "the right to declare invalid, in whole or in part, any claim which does not meet the requirements of this regulation."
The regulations also contained provisions requiring the preservation of books and records by subsidy claimants and giving Defense Supplies Corporation (after June 30, 1945 its successor, Reconstruction Finance Corporation) the right to declare invalid any claim of an applicant who failed to comply with these requirements. Finally it should be noted that the regulations from their inception contained a provision that Defense Supplies Corporation (after June 30, 1945 its successor, Reconstruction Finance Corporation) should have the right to declare invalid, in whole or in part any claim filed by an applicant who in the judgment of the War Food Administrator (after June 30, 1945 his successor, the Secretary of Agriculture) or the Price Administrator has wilfully violated any regulation of their respective agencies applicable to livestock slaughter or the sale or distribution of meat.
The plaintiff is a New Jersey corporation which during most of the subsidy period slaughtered cattle, calves and sheep in its plant in Paterson, New Jersey. Its subsidy claims for the period from January 1, 1944 to November 4, 1944, amounting to $111,963.75, were paid by Defense Supplies Corporation although the portion of this amount paid for the period from April 3, 1944 to July 1, 1944, totaling $37,616.89, was subsequently recouped by Defense Supplies Corporation from later payments made to the plaintiff. The plaintiff's subsidy claims for the period from November 6, 1944 to June 2, 1945, amounting to $159,061.25, were also paid. Its claims for the periods from June 4, 1945 to December 29, 1945, amounting to $201,706.96, for the period from April 1, 1946 to June 30, 1946, amounting to $85,886.36, and for the period from September 3, 1946 to October 14, 1946, amounting to $49,467.25, have not been paid by the defendant, which contends that these claims as well as the earlier claims which have been paid are all invalid because of the failure of the plaintiff to keep accurate records, because its available records fail to substantiate its claims as filed and because the claims were found not to be an accurate reflection of the plaintiff's operations.
The defendant contends that it has declared invalid all of the plaintiff's subsidy claims filed for the years 1944 and 1945 for these reasons, that in addition it has declared the plaintiff's subsidy claims for the period from January 20, 1944 to November 3, 1944 invalid by reason of the plaintiff's wilful violation of War Food Order No. 75 as determined by the Secretary of Agriculture, and that these orders of invalidation by it must be accepted and applied in this case by the district court and by this court on appeal without inquiry into their validity. On this premise the defendant argues that the judgment entered for the plaintiff, at least so far as it relates to the plaintiff's subsidy claims for the years 1944 and 1945, should be reversed and that the judgment entered by the district court on the defendant's counterclaim should be modified by including therein all of the subsidy payments which it made to the plaintiff for the years 1944 and 1945 and which have not heretofore been recouped.
The plaintiff on the other hand contends that the district court was empowered to determine the validity of its subsidy claims on their merits without regard to the actions of the defendant in invalidating them and in refusing to pay those accruing after June 2, 1945. It urges that the master was right in finding that the plaintiff's subsidy claims were accurate and correct and entitled the plaintiff to receive the full amount of its claims and that the district court erred in concluding that the defendant lawfully invalidated the claims filed for the period from January 20, 1944 to November 3, 1944 and was, therefore, entitled on its counterclaim ...