Federal Housing Administration v. Darlington/Dissent Frankfurter
Mr. JUSTICE FRANKFURTER, dissenting.
Here we have not the application of some broad, generalized legal conception, either of a statutory nature, like "restraint of trade" in the Sherman Law, or a constitutional provision, like "due process of law" or "the equal protection of laws." Such conceptions do not carry contemporaneous fixity. By their very nature they imply a process of unfolding content.
Our immediate problem is quite different. The pre-1954 Housing Act does not leave us at large for judicial application of a generalized legislative policy in light of developing circumstances. The pre-1954 statute deals with a particularized problem in a particularized way. It presents the usual question of statutory construction where language is not clear enough to preclude human ingenuity from creating ambiguity. It is outside the judicial function to add to the scope of legislation. The task is imaginatively to extrapolate the contemporaneous answer that the Legislature would have given to an unconsidered question; here, whether rentals to transients were totally prohibited. It was not until 1954 that the Congress did deal with the question of the right of apartment-house owners to rent even a small number of apartments to transients without even remotely seeking to evade or to disadvantage the interests of veterans in whose behalf the Government, through the Federal Housing Administration, insured the mortgages of private owners. The opinions of the District Court and my brother HARLAN seem to me compelling on the construction of the pre-1954 legislation.
This brings me to the validity of the 1954 enactment which presents for me a much more difficult question than that of the problem of statutory construction just considered. This is so because of the very weighty presumption of constitutionality that I deem it essential to attribute to any Act of Congress. This case falls between such cases sustaining the retroactive validity of legislation adversely affecting an existing interest as Paramino Co. v. Marshall, 309 U.S. 370, 60 S.Ct. 600, 84 L.Ed. 814, and Fleming v. Rhodes, 331 U.S. 100, 67 S.Ct. 1140, 91 L.Ed. 1368, on the one hand, and Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434, on the other. While, to be sure, differentiation between 'remedy' and 'right' takes us into treacherous territory, the difference is not meaningless. The two earlier cases cited may fairly be deemed to sustain retroactive remedial modifications even though they affect existing 'rights,' while the Lynch case is a clear instance of the complete wiping out of what Mr. Justice Brandeis, in his opinion for the Court, called 'vested rights.' 292 U.S. at page 577, 54 S.Ct. at page 842. Insofar as the 1954 Act applied to the earlier Darlington mortgage, it did not completely wipe out 'vested rights.' But on the proper construction of § 608, in the circumstances found by the District Court and not here challenged, the unavoidable application of the 1954 Act to the Darlington mortgage did substantially impair the 'vested rights' of respondent. I would be less than respecting the full import of the Lynch case did I not apply it to the present situation.
Accordingly, I join Mr. Justice HARLAN'S opinion.
Mr. Justice HARLAN, whom Mr. Justice FRANKFURTER and Mr. Justice WHITTAKER join, dissenting.
The question in this case is whether appellee Darlington is entitled to rent to transients (that is, so far as this case is concerned, for periods of less than 30 days) a small number of apartments in its building, which is covered by a mortgage insured by the FHA. Darlington's FHA mortgage was consummated and insured in December 1949. At that time neither the controlling statute, § 608 of the National Housing Act, 56 Stat. 303, as amended, 12 U.S.C. § 1743, 12 U.S.C.A. § 1743, nor the regulations issued thereunder, 24 CFR § 280 et seq., contained any provision prohibiting rentals to transients. Such provisions are found for the first time in § 513 of the Housing Act of 1954, 68 Stat. 610, 12 U.S.C. (Supp. V) § 1731b, 12 U.S.C.A. § 1731b, passed some five years after this mortgage was made.
A three-judge District Court, largely adopting the findings and conclusions of the single district judge before whom this case was originally heard, held that as the law stood in 1949, when the mortgage here involved was issued, Darlington was not forbidden to make occasional transient rentals, and that the Federal Housing Administrator may not now prohibit such rentals since that would involve an unconstitutional retroactive application of the relevant provisions of the Housing Act of 1954.  This Court now holds that under the statute and regulations as they stood in 1949 Darlington was never entitled to make any transient rentals, and that in any event the prohibitory provisions of the 1954 Act may be applied to prevent such rentals. From these holdings I must dissent.
In construing the earlier statute the Court, in my opinion, has proceeded on an erroneous premise. The Court holds that 'no right or privilege to rent to transients is expressly included in the (pre-1954) Act nor fairly implied.' In my view, however, the true issue is not whether the statute under which Darlington's mortgage was insured gave the right to an FHA-insured mortgagor to make such rentals, but rather whether it prohibited such a mortgagor from making them. Given this as the issue, it seems to me that the record is compelling against the Court's conclusion as to § 608, that the provisions of the 1954 Act cannot be applied to one in Darlington's position, and that the decision below was clearly right.
1. As already noted, § 608 and the regulations implementing it were barren of any provision excluding rentals to transients at the time Darlington's mortgage was insured by the FHA.
2. The District Court found that (1) Darlington's rentals to transients even at the height of Charleston's transient season constituted no more than ten percent of the building's total available occupancy; (2) 'no person entitled to priority has ever been rejected, and no one desiring so-called 'permanent' occupancy of an apartment has been required to wait any time to obtain same'; and (3) Darlington 'does not advertise as a hotel, has no license as such, and no signs appear indicating its willingness to accept transients.' 142 F.Supp. at page 349. According the utmost effect to the conceded purpose of § 608 to provide housing for World War II veterans and their families, and to the recitals in the regulations to the effect that property subject to FHA mortgages shall be 'designed principally for residential use' (italics supplied), I am unable to understand why Darlington's practices, as found by the lower court, should be regarded as violative of either the letter or spirit of these statutory or regulatory provisions. Not until the passage of the 1954 Act do we find any suggestion that the words 'designed principally for residential use' were, in the language of the Court, 'evidently used so as not to preclude some commercial (as distinguished from transient) rentals.'
3. As the FHA conceded and the District Court found, nothing in Darlington's charter, bylaws, mortgage or mortgage note, all of which were subject to the FHA's advance approval, expressly restricted its right 'to lease apartments in its project for periods of less than thirty (30) days.' The only period of rental limitation appearing in any of these instruments was the following, contained in Darlington's charter: 'Dwelling accommodations of the (appellee) shall not be rented for a period in excess of three years * * *.' 142 F.Supp. at page 346. It is too much to attribute to the word 'dwelling,' as the Court now in effect does, an implied prohibition of less-than-30-days rentals.
4. The FHA had in a number of instances before 1954 actually given specific approval to less-than-30-days rentals by insured mortgagors where veteran demand for housing had fallen off, and when in 1955 Darlington inquired of the FHA the basis of its position that less-than-30-days rentals by such mortgagors were not permissible the agency simply referred appellee to the provisions of the Housing Act of 1954. These events conclusively show that the Housing Administration did not construe the statute or regulations before 1954 to prohibit transient rentals altogether.
5. There is nothing in this record to indicate that Darlington was engaged in any kind of a scheme to subvert the purposes of this federal housing legislation. Its occasional transient rentals seem to have been nothing more than an effort to plug the gap in its revenues left by a falling off of the demand for long-term apartment space, and do not depict a sub rosa hotel operation.
Upon these undisputed facts, which are reinforced by other factors detailed in the two opinions below, I can find no basis for impugning the soundness of the District Court's holding that under the law as it existed at the time Darlington embarked upon this project nothing prohibited it from making the occasional transient rentals shown by this record. The 1954 Act was new, and not merely confirmatory, legislation.
Hence I consider that the FHA's position in this case must stand or fall on whether the less-than-30-days rental provision of the 1954 Act, which in terms applies to mortgagors insured before as well as after the Act's effective date (see 12 U.S.C. (Supp. V) § 1731b(b), 12 U.S.C.A. § 1731b(b)), can be given application to Darlington to increase the obligations assumed by it under its 1949 contract with the United States. I do not think it can. As the District Court correctly put it: 'When the United States enters into contractual relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals.' 142 F.Supp. at page 351. See Lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434; Sinking-Fund Cases, 99 U.S. 700, 718, 25 L.Ed. 496. What was said in the Lynch case as to contracts of war-risk insurance applies here: 'As Congress had the power * * * to issue them, the due process clause prohibits the United States from annulling them, unless, indeed, the action taken falls within the federal police power or some other paramount power.' 292 U.S. at page 579, 54 S.Ct. at page 843. I do not understand the Housing Administration to contend that the United States possesses general regulatory power over appellee outside the contractual relationship, and the Court has pointed to no such 'paramount power' by which the imposition of the 1954 Act's prohibitions might be justified in this case. Under these circumstances I see no reason for disregarding the principles set forth in the cases cited, particularly when the District Court with ample justification found that 'the 1954 Act is designed to afford relief for private interests, as distinguished from public purposes * * *.' 142 F.Supp. at page 353.  Indeed the Court's treatment of this case seems to reinforce my view about the 1954 Act; else why all this straining to bring the matter under the pre-1954 statute?
^1 The opinion of the district judge who first heard this case is reported at 142 F.Supp. 341. Subsequent references to the decision below are to that opinion.
The three-judge District Court's opinion is reported at 154 F.Supp. 411. Its decree imposed on Darlington (plaintiff) the following conditions:
'(a) The plaintiff shall not lease, or make available for ieasing, for terms of less than thirty days more than 15% of the total number of apartments in the project.
'(b) The plaintiff shall not increase its schedule of rents and charges now in effect for rentals of apartments for less than thirty days and for furnishings and other incidentals offered or supplied in connection therewith.
'(c) The plaintiff shall not advertise itself as a 'hotel', nor shall it through the use of any advertising medium, the circulation of letters, the maintenance of signs, or otherwise solicit the business of transients for less than thirty days occupancy, or advise the general public of its willingness to provide accommodations for transients for periods of less than thirty days occupancy.
'(d) The plaintiff shall not provide occupants of its project with food or beverage room service, or maintain regular bell boy service.'
The District Court retained jurisdiction of the cause for the purpose of effectuating its decree.
^2 This fact is demonstrated by the rather unusual provision of the 1954 Act which gives hotel operators and owners the right to seek federal court injunctions against violations of the transient rental prohibition of the statute. 68 Stat. 611, 12 U.S.C.(Supp. V) § 1731b(i), 12 U.S.C.A. § 1731b(i). See also the testimony of Arthur J. Packard and Earl M. Johnson, respectively Chairman of the Board and Treasurer of the American Hotel Association, before the congressional committees considering the bills which became the Housing Act of 1954. Hearings before the Senate Committee on Banking and Currency, 83d Cong., 2d Sess., on S. 2889, S. 2938, S. 2949, pp. 654-661; Hearings before the House Committee on Banking and Currency, 83d Cong., 2nd Sess., on H.R. 7839, pp. 507-515.