Mora v. Superior Court of Puerto Rico

76 P.R. 420

• Court: Supreme Court of Puerto Rico
• Decided: May 14, 1954
• Docket: No. 2045
• Status: Published

Opinions

Mr. Chief Justice Snyder

delivered the opinion of the Court.

On March 12, 1953 the Secretary of Agriculture and Commerce issued Administrative Order No. 228, effective March 16, 1953, fixing the maximum prices for the sale of rice in Puerto Rico under authority vested in him by § 3 of Act No. 228, Laws of Puerto Rico, 1942, as amended by Act No. 234, Laws of Puerto Rico, 1950. The importers of rice in Puerto Rico filed a motion for reconsideration of Order No. 228, pursuant to § 11 of Act No. 228. A hearing was held on the motion for reconsideration at which testimony was taken. Thereafter the Secretary denied the motion for reconsideration.

The importers filed a petition for review of the Order of the Secretary in the Superior Court under § 12 of Act No. 228.¹ The Superior Court entered a judgment affirming Order No. 228. Pursuant to § 12, we granted certiorari to review the judgment of the Superior Court.²

The importers also filed a suit in the United States District Court for Puerto Rico for an injunction to restrain the Secretary from enforcing Administrative Order No. 228. After taking testimony and hearing the parties, that Court denied the motion of the importers for a temporary injunction. Mora v. Torres, 113 F. Supp. 309 (Dist. Ct., Puerto Rico, 1953). The importers appealed from the judgment of the United States District Court, which was affirmed by the Court of Appeals for the First Circuit. Mora v. Mejías, 206 F. 2d 377 (C.A. 1, 1953).

The opinions of the Superior Court, the United States District Court, and the Court of Appeals all contain detailed findings and statements of fact. It is unnecessary to restate the findings of fact of the Superior Court, which we adopt. The issue as the case reaches us is narrow. Due to the fact that the prices paid by the importers for rice in continental United States have decreased, the petitioners now concede that Administrative Order No. 228 has been valid for several months. They argue, however, that the Order was invalid during the months of March, April, May and June, 1953 as to rice purchased by them during that period in continental United States under open price contracts for which they paid prices higher than those fixed in Order No. 228 as the maximum sales prices in Puerto Rico.³

In Mora v. Mejías, supra, the Court of Appeals made a comment which is pertinent to this contention of-the petitioners. It is said at pp. 384-5:

“Plaintiff apparently supposes that Administrative Order No. 228 has been conclusively established to be arbitrary or capricious, and unconstitutional, because, as found as a fact by the court below, plaintiff has on hand a certain quantity of rice which he imported into Puerto Rico at costs per cwt.; greater than the wholesale prices fixed in the order. This is not necessarily so, though of course the administrator cannot expect to subsidize the Puerto Rican people indefinitely at the expense of the rice importers.

“It is not denied that the maximum prices established in Administrative Order 228 were valid as applied to stocks of rice in Puerto Rico which had been bought in continental United States while millers’ prices there were still subject to federal regulation. For aught that the present record discloses, the administrator may have had reason to anticipate that the rise in millers’ prices which occurred just after federal controls were lifted was a temporary flurry, and that import-, ers’ costs, in the normal operations of the market, would soon revert to levels consistent with profitable operation at the wholesale prices established in the order. For all we know, the administrator might also have had reason to anticipate that the wholesale prices fixed in the order would in themselves have some tendency to restrain runaway inflation in miJlers’ prices in continental United States because of the important share of Puerto Rico in the export market. Cf. Great Atlantic & Pacific Tea Co. v. Porter, Em.App. 1946, 156 F. 2d 812.”

Both the Court of Appeals and the Administrator proved to be good prophets. All concerned now agree that the rise in importers’ costs have reverted “to levels consistent with profitable operation at the wholesale prices established in the order.” The petitioners would nevertheless have us hold that Order No. 228 was void during the short period when there was “a temporary flurry” which resulted in a rise in millers’ prices, and that the Order became valid only as of the date the prices in continental United States dropped below the prices fixed in Order No. 228.

We cannot agree with this contention of the petitioners. “The statutory standard, as expressed in the local statute, adopting the language of the Emergency Price Control Act of 1942 and of the Defense Production Act of 1950, is that the price regulation must be ‘generally fair and equitable,’ and one that in the judgment of the administrator will effectuate the purposes of the act.” Mora v. Mejías, supra, p. 384. Vindication of his judgment under the statutory standard makes the order of the Administrator under the circumstances of this case valid rather than void ab initio. The Court of Appeals made this clear in its opinion in the Mora case at pp. 385-6:

“It is recognized, as stated in Ben H. Rosenthal & Co., Inc., v. Porter, Em.App. 1946, 158 F. 2d 171, 173, ‘that the maximum prices in a regulation initially valid may become invalid due to a significant shift of economic factors; and vice versa.’ But a price regulation does not oscillate between validity and invalidity dependent upon day-to-day variations in market factors. It is the long-run trends that are significant in this connection. Price regulations are issued not only on the basis of past experience, but also on the basis of reasonable forecasts or anticipations of future market trends. If a price regulation •is initially valid on this dual basis, the administrator is entitled to observe the actual results of its operation for a reasonable period of time, before a court could conclude that he was arbitrary or capricious in not revising the established maximum prices. See Ben H. Rosenthal & Co., Inc., v. Porter, supra, 158 F. 2d at page 174; Superior Packing Co. v. Clark, Em.App. 1947, 164 F. 2d 343, 352. This is especially true with regard to a commodity historically subject to seasonal fluctuations in prices. See Counselman v. Fleming, Em.App. 1947, 161 F. 2d , certiorari denied 1947, 331 U.S. 861, 67 S.Ct. 1756, 91 L.Ed. 1867. See also Gillespie-Rogers-Pyatt Co., Inc., v. Bowles, Em.App. 1944, 144 F. 2d 361.” (Italics ours.)

In Ben H. Rosenthal & Co. v. Porter, 158 F. 2d 171 (Em. App. 1946) the Court indicates that the test is whether the Administrator acted reasonably as of the date of the order. The Court said at p. 173:

“ . . . It is possible, of course, that the maximum prices in a regulation initially valid may become invalid due to a significant shift of economic factors; and vice versa. In making a retrospective declaration as to the validity of a regulation as of some past date, this court should not view the case from the vantage point of hindsight. If, for example, a seller is charged with a criminal violation by an overceiling sale on December 15, 1943, and the question is whether the regulation was valid on that date, we have to project our thinking back to the economic situation as it existed on December 15, 1943, and to decide whether the Administrator then had, consistently with the statutory standards, a rational basis for maintaining the regulation in force in the light of information then available and of the reasonable forecast, as of that date, of the probable impact of the regulation in actual operation.”⁴

“In a particular case it may be very difficult for us to determine the precise date on which a regulation, valid in its inception, became invalid due to subsequent developments.” Superior Packing Co. v. Clark, 164 F. 2d 343, 353 (Em. App., 1947). In the same way it may also be difficult under other circumstances to determine the exact date an order to sell below cost becomes valid by confirmation of the Administrator’s reasoned belief that costs to the vendor will decrease. But here we find nothing in the record which enables us to say that the fixing of a selling price below cost for such a short period was arbitrary and capricious even at its inception. On the contrary, events seem to have shown that by standing firm for a short period the Administrator played an important role in preventing “runaway inflation in millers’ prices in continental United States because [among other things] of the important share of Puerto Rico in the export market.” Mora v. Mejías, supra, p. 385. The Administrator’s action was reinforced by the following: (1) the prices he fixed were substantially the same as those which had been fixed under Federal controls which had been terminated shortly before Order No. 228 went into effect; (2) the Order was issued at a time when the 1952-53 crop had already been harvested, all expenses involved therein had been incurred, and this crop had been selling at the same price under Federal controls; (3) the open contracts which obligated the importers to pay increases in continental market prices were a new practice under which such risks were deliberately undertaken in the face of prospective local controls, and even under these circumstances the importers in many instances were given the opportunity to cancel these contracts. In view of the foregoing, we cannot say as a matter of hindsight from the record before us that Order No. 228 was void from its effective date of March 16, 1953 until July, 1953. In the light of all the circumstances surrounding this particular order, we hold that Administrative Order No. 228 was valid as of March 16, 1953.

What we have said disposes of the first two assignments of error; namely, (1) that Order No. 228 is arbitrary, capricious and contrary to Act No. 228; and (2) that the Order violates the due process clauses of the Constitutions of the Commonwealth of Puerto Rico and of the United States. The third assignment is that the trial court erred in not granting the motion of the petitioners to reopen the case after judgment in order to permit them to present new evidence as to the economic effect of Administrative Order No. 228. The order of the trial court refusing to open the case for that purpose reads in part as follows:

‘•‘The additional evidence offered is summarized under oath in the petition of August 18, to the effect that a large part of the rice received by the plaintiffs during June and July at the price of $12.25 per cwt. could not be sold at the price of $12.90 authorized by the Administrator due to the fact that the previous stocks of rice paid for at $13.25 have not yet all been sold; that all the probabilities are that the rice will have to be sold at a price much less than $12 per cwt. because the rice of the new crop to be received shortly is being purchased for less than $10 CIF San Juan; that as long as the price of the rice keeps falling in the supplying market, the plaintiffs have less opportunity to sell the rice involved herein and affected by Order No. 228 at its cost or a higher price due to competition and the effects of supply and demand; and that because of the continuous falling of the price of rice, the plaintiffs would lose forever the opportunity to recoup the initial loss which they allege they suffered because of Administrative Order 228.

“The problem raised by the plaintiffs, in connection with which they have asked leave to introduce additional evidence, may be stated briefly as follows: Due to the inundation of the market with rice purchased at a much lower price, without their having disposed of the stocks of rice they purchased at $13.25 and $12.45, above the maximum price fixed by Administrative Order 228, due to the economic rule of supply and demand and to competition, they will have to sell rice without even making use of the maximum price fixed by the Administrator and below said maximum price, unless, as they stated at the hearing on their petition, they combined and agreed to sell the rice at the maximum authorized price.

“As may be seen the economic problem confronting the plaintiffs because of the subsequent decrease in the price of rice is one that would not be solved for them either by setting aside Order 228 or annulling it. Order 228 fixes maximum prices, not minimum prices. Plaintiffs themselves state that the market situation is such that they could not even sell the rice at the authorized maximum limit. This situation has neither been created by Order 228 nor is it a consequence thereof.”

We are in substantial agreement with these views of the trial court. The problem of how low or how high a price he will charge under the circumstances in order to make a profit on his stocks of rice on an over-all basis is for each importer to determine himself. All the importers are apparently in substantially the same position: they have some stock on hand purchased at figures higher than the prices fixed in Order No. 228; they also are receiving stock purchased at considerably lower figures. We fail to see how the trial court could tie the hands of the Administrator on this matter by giving decisive weight to testimony by importers purporting to represent all of them that they were all now inexorably required by competition to sell all their stocks at figures so far below the prices fixed in the Order that they would never recoup all or part of their losses on that part of their stock which was purchased at prices higher than those fixed in Order No. 228. It is difficult to believe that the importers propose to engage in such mass conduct so unfavorable to their interests. But even if this testimony be credible, the situation would be of their own making and not due to the Order of the Administrator which leaves them free to sell at a higher price. We cannot say that the trial court abused its discretion in refusing to reopen the case after judgment for the purpose of admitting such testimony.

The petitioners argue in their fourth assignment of error that Order No. 228 infringes the commerce clause of the Federal Constitution. This point has already been decided against the petitioners by the Court of Appeals in Mora v. Mejías, supra. It said at p. 387, footnote 6: “It is interesting to note that appellant in this case made a separate constitutional argument that Administrative Order No. 228 constituted an undue and unconstitutional burden upon interstate commerce. In order to avoid decisions like Buscaglia v. Ballester, 1 Cir., 1947, 162 F. 2d 805, holding that the implication of the commerce clause of the Federal Constitution did not operate as a limitation on the territorial legislature of Puerto Rico, as constituted under the Organic Act of 1917, appellant argued that the 'novel status’ of the present Commonwealth of Puerto Rico falls within the concept of a State within the meaning of decisions holding that a State cannot unduly burden interstate commerce. We did not deal in the body of our opinion with this separate constitutional argument as to the. commerce clause since local price regulation by a State, if otherwise valid, is not rendered invalid because of any incidental effect it may have upon the volume of interstate commerce.”

The fifth error assigned is that Order No. 228 impairs the obligation of contracts of the petitioners, in violation of the Federal and Puerto Rican Constitutions. To agree with the petitioners on this point would be to destroy all possibility of effective price control. Vendors could simply make contracts providing for open prices or for successive increases. Apart from the fact that many of them had the opportunity, which they rejected, to cancel their contracts,. these contracts were signed subject to the possibility of future price control. Mercado v. Brannan, 173 F. 2d 554 (C.A. 1, 1949); Philadelphia Coke Co. v. Bowles, 139 F. 2d 349, 357 (Em. App., 1943); Taylor v. Brown, 137 F. 2d 654, 659 (Em. App., 1943); Méndez v. Jiménez, Commissioner, 72 P.R.R. 315, 320; Sierra, Commissioner v. San Miguel, 70 P.R.R. 573. The fifth assignment of error is without merit.

The writ of certiorari will be discharged.

Mr. Justice Ortiz did not participate herein.

1 Under § 13 (a) 1 of Act No. 11, Laws of Puerto Rico, Special Session, 1952, judicial review of such orders is by the Superior Court rather than by the former Supplies Appeal Court.

2 During the course of the proceedings, the Economic Stabilization Administration of Puerto Rico and the Administrator of the latter were substituted as defendants.

3 Under these open price contracts the importers were required to pay the market price prevailing in continental United States at the time-of each shipment, plus any increase in freight or insurance, C.I.F. San Juan.

4 See Hyman and Nathanson, Judicial Review of Price Control: The Rattle of the Meat Regulations, 42 Ill.L.Rev. 584.