Opinion
33947, 33958.
DECIDED APRIL 19, 1952. REHEARING DENIED JUNE 4, 1952.
Complaint; from Richmond Superior Court — Judge G. C. Anderson. December 4, 1951.
Curry Curry, for plaintiff in error.
Cumming, Nixon Eve, Arnall, Golden Gregory, contra.
Where the petition, in an action to recover amounts paid for whisky in excess of maximum prices fixed by the Office of Price Administration, failed to show that the whisky was purchased by the plaintiff for use or consumption other than in the course of his trade or business, and so failed to show that the right to recover such amounts was in the plaintiff according to the Federal statutes making such excess payments unlawful, and where the alleged contract under which such amounts were paid was not in contravention of any law of this State and, by its terms, did not bind the defendants to return such amounts deposited with them, the petition failed to set out a cause of action, and it was error to overrule the general demurrers thereto.
DECIDED APRIL 19, 1952 — REHEARING DENIED JUNE 4, 1952.
This suit was originally brought by W. B. Gaddy against Augusta Distributing Company, a corporation. While the suit was pending, the corporation surrendered its charter, and its stockholders, Murray H. Silverman, Charles A. Schafer, and B. E. Pittman, reorganized the business as a partnership under the same name. These three partners were made defendants by a consent order. The plaintiff made substantially the following allegations in his petition as amended: On June 19, 1946, he deposited with the defendants $2000, and on June 21, 1946, deposited an additional $2000, both deposits being in the nature of a loan. On June 24, 1946, in consideration of said deposits, the plaintiff entered into a written agreement with the defendants, whereby he would have the right to receive from the defendants each month eight cases of fifths and thirty-two cases of pints of Seagram's Seven Crown Whisky, as long as the money was kept on deposit. It was further agreed that the deposit was to be refunded upon termination of the agreement by notice given on the first day of any month. Between June 30, 1946, and July 12, 1946, the parties agreed that, instead of the defendants keeping the plaintiff's $4000 deposit on hand at all times, the defendants should have the right to use said deposit to purchase a lot of bulk whisky that the defendants represented to be available to them. The defendants had made arrangements with Seagram-Distillers Corporation to bottle and case all bulk whisky purchased by them as Seagram's Seven Crown Whisky. The purchase of said bulk whisky by the defendants and the bottling of it by Seagram-Distillers Corporation would enable the defendants to make available for delivery to the plaintiff, over a period of eighteen months, 1000 cases of Seagram's Seven Crown Whisky over and above the amount theretofore allocated to the plaintiff by the defendants under the system of allocation then in effect, and the plaintiff was to pay the defendants $4 per case for fifths or $5 per case for pints, over and above the regular price of Seagram's Seven Crown Whisky. On July 12, 1946, the plaintiff deposited with the defendants an additional $5000, and on July 23, 1946, and additional $1000, and, with respect to these two deposits, the parties made the same agreement, except that the allocation to the plaintiff over an eighteen-month period was to be further increased by 1500 cases of Seagram's Seven Crown Whisky. While the modification of the original contract and the making of the new contract occurred between June 30, 1946, and July 25, 1946, at a time when the Emergency Price Control Act of 1942 had expired, no deliveries thereunder were to be made between said dates, and before delivery was made under the new contract, the Emergency Price Control Act had been extended so as to revive all regulations and requirements under the 1942 act which were in effect on June 30, 1946. As the new contract provided for a $4 and $5 payment per case above the price fixed under the Emergency Price Control Act of 1946, the agreement to pay these sums was void; and as the plaintiff's conduct in entering into the contract was not accompanied by fraud, he is entitled to recover the amount of his deposits, $10,000. After the modification of the original contract, the plaintiff ordered and received from the defendants a number of deliveries of whisky and paid the defendants, at the time of each delivery, the full price at which said whisky was billed to him, but no invoice for any of said deliveries ever reflected any charge over and above the regular price for such whisky. The arrangement fixed by the defendants, whereby the plaintiff would be required to pay the defendants $4 and $5 a case over and above the regular price for said whisky is null and void and is in violation of the Emergency Price Control Act of 1942, as amended and extended, because the ceiling price for Seagram's Seven Crown Whisky was as follows: $45.21 per case for fifths, $56.77 per case for pints, and $57.63 per case for half-pints, and the provision in the new contract to pay an additional $4 and $5 per case was in violation of said act and also in violation of the State Revenue Law, which provides that "No retailer, wholesaler, distiller, manufacturer, or other person engaged in any business operation connected with the manufacture, transportation or sale of alcoholic beverages, whiskies, or liquors shall sell, transfer or assign any such alcoholic beverages, whiskies or liquors at a price or for a total consideration which, in its fair appraisal value, shall amount to more than the legal ceiling sale price of such alcoholic beverages, whiskies, or liquors, as established by the Office of Price Administration of the Federal Government," which State Revenue Law was promulgated by authority of section 8 (h) of the Revenue Tax Act, approved February 3, 1938. The plaintiff demanded of the defendants the return of his deposit of $10,000, but the demand was refused, and the plaintiff sought judgment for the amount of the deposit.
The case was referred to an auditor by the superior court, and the auditor overruled the defendants' renewed general demurrer to the amended petition. To this ruling the defendants filed exceptions pendente lite, and they also excepted to such ruling as shown in the auditor's report. The court overruled the defendants' exceptions to the auditor's report, and error is assigned, in the defendants' cross-bill of exceptions, on this ruling and on the exceptions pendente lite.
The auditor's finding was that the plaintiff was not entitled to recover. The plaintiff's exceptions of law to the auditor's report were dismissed by the court, and the plaintiff assigned error, in his main bill of exceptions, on this ruling.
The petition seeks recovery of money paid to or deposited with the defendants, which the defendants agreed to use to buy bulk whisky to be bottled and made available for sale to the plaintiff. The plaintiff paid only the maximum price allowed for the bottled whisky by the Office of Price Administration when some of the whisky was delivered to him; but it is contended that the money paid for the purchase of the bulk whisky amounted to an overcharge of $4 or $5 per case, since these payments, although made during the period between June 30, 1946, and July 25, 1946, when the Emergency Price Control Act of 1942, as amended, was not in effect, were a part of the same transaction as the subsequent purchase at ceiling prices of the bottled and cased whisky, deliveries of which were made after the enactment of the Price Control Extension Act of 1946.
The statute under which recovery is sought is § 205 (e) of the Emergency Price Control Act of 1942, as amended, then 50 U.S.C.A., Appendix, § 925 (e), 58 Stat. 640, which provides in part: "If any person selling a commodity violates a regulation, order, or price schedule prescribing a maximum price or maximum prices, the person who buys such commodity for use or consumption other than in the course of trade or business may, within a year from the date of the occurrence of the violation, within a year from the date of the occurrence of the violation, except as hereinafter provided, bring an action against the seller on account of the overcharge. . . If any person selling a commodity violates a regulation, order, or price schedule prescribing a maximum price or maximum prices, and the buyer either fails to institute an action under this subsection within thirty days from the date of the occurrence of the violation or is not entitled for any reason to bring the action, the Administrator may institute such action on behalf of the United States within such one year period." (Emphasis added.) The plaintiff did not allege that he purchased the whisky for use or consumption other than in the course of his trade or business, and therefore failed to state a cause of action under the terms of the statute.
Under the above-quoted provision of the statute, the plaintiff must allege and prove that he purchased the commodity "for use or consumption other than in the course of trade or business." The statute contained an exception as the basis of a cause of action; and as the plaintiff failed to negative such exception, he did not state a cause of action under the statute. Crowley v. Hughes, 74 Ga. App. 531 ( 40 S.E.2d 570); Moody v. Foster, 74 Ga. App. 829 (2c) ( 41 S.E.2d 560). See also Lightbody v. Russell, 293 N.Y. 492 ( 58 N.E.2d, 508); Armour Co. v. Blindman, 73 F. Supp. 609; Robinson v. White System Inc., 70 F. Supp. 147; Allen v. Walton, 163 Kan. 642 ( 185 P.2d, 154); Foley v. Day Bros. Inc., 320 Mass. 344 ( 69 N.E.2d, 451); Bayne v. Kingery, 30 Wn. 2d, 922 ( 195 P.2d 98); Bowles v. Rogers, 149 Fed. 2d, 1010; Speten v. Bowles, 146 Fed. 2d, 602; Bowles v. Seminole Rock c. Co., 145 Fed. 2d, 482.
It is contended that the petition sets out a cause of action for the recovery of money paid on an illegal contract without fraud, where the contract has not been fully executed; and it is alleged that the contract, to sell whisky for a consideration exceeding the O. P. A. ceiling price, also contravened the "State Revenue Law," as promulgated by authority of section 8 (h) of the Revenue Tax Act of 1938 (Ga. L. Ex. Sess. 1937-38, p. 108; Code, Ann. Supp., § 58-1022). The act of 1938 provides that the State Revenue Commissioner shall have the power to promulgate such rules and regulations as he may deem necessary to control the sale, etc., of distilled spirits and alcohol in accordance with the provisions of that act; and it appears that what is alleged to be the "State Revenue Law" is a regulation promulgated by the Revenue Commissioner. The violation of such an administrative rule of the Revenue Commissioner may result in suspension or cancellation of the license of the offending party or parties, but such rules do not make illegal an act or contract not also prohibited by statute. Glustrom v. State, 206 Ga. 734 ( 58 S.E.2d, 534); Columbus Wine Co. v. Sheffield, 83 Ga. App. 593 ( 64 S.E.2d 356); State of Ga. v. Schafer, 82 Ga. App. 753 ( 62 S.E.2d 446). It is not shown that the transactions in question were made illegal by any law of this State.
The character of the alleged $4000 deposit as a loan under the first agreement of the parties was changed by the subsequent agreement, under which the defendants were given the right to use the money to purchase bulk whisky, and in return the plaintiff was given the right to buy an increased amount of whisky which the defendants were to make available for delivery to the plaintiff over an eighteen-month period. It does not appear that the plaintiff was bound to buy the whisky to be made available to him by the defendants, nor is it alleged that, under the agreements of July, 1946, the defendants were bound to refund any part of the amounts paid or deposited which might not have been used in the contemplated purchase of bulk whisky. Conceding, for the sake of the argument, that the alleged transaction between the parties was a valid one, the plaintiff obtained no more than what amounted to an option to purchase 2500 cases of whisky over an eighteen-month period, and the price paid for such an option cannot be recovered so long as the defendants are not in default in making the sales and deliveries as called for by such an option contract.
The petition does not show that the right to recover amounts paid in excess of the maximum prices of whisky, as fixed by the Office of Price Administration, is in the plaintiff, according to the Federal statutes which make such excess payments unlawful; and as the alleged contract was not in contravention of any law of this State and, by its terms, did not bind the defendants to return the money deposited with them to buy bulk whisky, the petition failed to set out a cause of action. The court erred in overruling the defendants' exception of law to the auditor's overruling of the general demurrers to the petition. The further proceedings in the case were nugatory, and therefore no ruling need be made as to the sufficiency of the plaintiff's exceptions to the auditor's report, as complained of in the main bill of exceptions.
Judgment reversed on the cross-bill of exceptions (number 33958); and the main bill (number 33947) is dismissed. Felton and Worrill, JJ., concur.
ON MOTION FOR REHEARING.
The plaintiff, in his motion for a rehearing, points out that the agreement between the parties was to do an act which was, after the agreement was made, declared by an act of Congress to be illegal, and that the performance of such a contract would have subjected the plaintiff to criminal prosecution. It appears that transactions occurring during the period from June 30, 1946, to July 25, 1946, were excepted from the operation of the price-control laws by the following proviso in section 18 of the Price Control Extension Act of July 25, 1946 (60 Stat. 678, then 50 U.S.C.A., Appendix, § 901-a): "Provided, further, that no act or transaction, or omission or failure to act, occurring subsequent to June 30, 1946, and prior to the date of enactment of this Act, shall be deemed to be a violation of the Emergency Price Control Act of 1942, as amended, or the Stabilization Act of 1942, as amended, or of any regulation, order, price schedule, or requirement under either of such Acts." If the transactions in the present case may be considered to have been completed during this gap in the continuity of the price-control laws, or if the purchase of bulk whisky during such period were not connected with the subsequent purchase of bottled whisky by the plaintiff from the defendants, then the transaction was not illegal. See U.S. v. Henry Drew Co., 177 Fed. 2d, 555.
But if, as contended by the plaintiff, the performance of the contract, in which the defendants were to make available increased allotments of bottled and cased whisky for purchase by the plaintiff after July 25, 1946, was made unlawful by the terms of the Price Control Extension Act of 1946 — which provided that "all regulations, orders, price schedules and requirements under the Emergency Price Control Act of 1942, as amended," should be effective as of June 30, 1946 — nevertheless, the petition shows that the plaintiff participated in such illegal performance of the contract by ordering and receiving from the defendants "a number of deliveries of whisky" after the Emergency Price Control Act had been extended. In short, the contract was partly executed by the parties thereto after the price-control laws were extended; and, according to the plaintiff's contentions, such part performance on his part subjected him as well as the defendants to possible criminal prosecution for violation of the price-control laws. The parties were in pari delicto.
"When a contract which is illegal, or opposed to public policy has been executed, in whole or in part, and the parties are in pari delicto, neither a court of law nor of equity will interpose to give relief to either party, but will leave the parties where they find them." Adams v. Barrett, 5 Ga. 404. "Where money has been paid or goods have been delivered under a bargain containing illegal provisions, the money or the value of the goods can be recovered so long as the illegal part of the bargain is wholly unexecuted, unless entering into the bargain involves serious moral turpitude on the part of the plaintiff." 2 American Law Institute, Restatement of the Law of Contracts, § 605. (Emphasis supplied in above quotations.) Also see 12 Am. Jur. 732, Contracts, § 216; 17 C.J.S. 662, Contracts, § 275. The plaintiff, alleging that he performed the contract in part, and now contending that such performance was in violation of the laws prohibiting sales of goods at prices above the maximum prices fixed by law, cannot recover the amounts he has paid under the contract to the other parties thereto.
Furthermore, as it is contended that the transactions were prohibited by the provisions of the Federal statutes, and since the same Federal statutes denied a right of recovery to one who makes purchases at over-ceiling prices in the course of his trade or business but, instead, gave the right of recovery in such a case to the Price Administrator, then the Federal statutes in effect imposed the same rule in regard to parties who are in pari delicto as does the law of this State, although the Federal statutes made an exception to the rule in the case of persons who made such illegal purchases for use or consumption other than in the course of their trade or business.
Nor do we think that the plaintiff can reasonably and consistently claim that he has been placed in a position where he could not carry out his part of the contract without violating the law, and that for this reason he should recover his money, for after he has violated the law by partly consummating the illegal purpose of the contract, his petition for restitution of the money paid is as consistent with an attempt to avoid the terms of what turned out to be a hard or improvident bargain as it is with an offer to repent and comply with the law. For the plaintiff to be able to rescind the partly performed illegal contract whenever it might become disadvantageous to him, would promote rather than discourage the making of such contracts, and we think the rule that the court should leave the parties where it finds them in such a case, and should afford a locus poenitentiae only where the illegal purpose has not been achieved at all, is salutary and applicable to the facts of this case.
The case of Hunt v. Burk, 22 Ga. 129, cited and relied on by the plaintiff, does not authorize or require a different ruling from that which has been made in this case.
Rehearing denied.