Federal Housing Administration v. Darlington/Opinion of the Court

This case involves a construction of § 608 of the National Housing Act, 56 Stat. 303, 12 U.S.C. § 1743, as amended by § 10 of the Veterans' Emergency Housing Act of 1946, 60 Stat. 207, 214, 12 U.S.C.A. § 1743, and the Regulations issued thereunder. The aim of the Act as stated in § 608(b)(2) is to provide housing for veterans of World War II and their immediate families. That end is to be achieved by authorizing the Federal Housing Administration to insure mortgages covering those projects. § 608(a). Mortgagors, eligible for insurance, are to be approved by the agency, which is empowered to require them 'to be regulated or restricted as to rents or sales, charges, capital structure, rate of return, and methods of operation.' § 608(b)(1).

Appellee is a South Carolina corporation formed in 1949 to obtain FHA mortgage insurance for an apartment house to be constructed in Charleston. The insurance issued and the apartment was completed. The Regulations, promulgated under the Act (24 CFR § 280 et seq.), provide that the mortgaged property shall be 'designed principally for residential use, conforming to standards satisfactory to the Commissioner, and consisting of not less than eight (8) rentable dwelling units on one site * *  * .' § 280.34. The Regulations further provide:

'No charge shall be made by the mortgagor for the     accommodations offered by the project in excess of a rental      schedule to be filed with the Commissioner and approved by      him or his duly constituted representative prior to the      opening of the project for rental, which schedule shall be      based upon a maximum average rental fixed prior to the      insurance of the mortgage, and shall not thereafter be      changed except upon application of the mortgagor to, and the written      approval of the change by, the Commissioner.' § 280.30(a).

Veterans and their families are given preference in the rentals; and discrimination against families with children is prohibited. § 280.24.

Appellee submitted to FHA its schedule of monthly rates for its different types of apartments. No schedule of rates for transients was supplied. Indeed there was no representation to FHA that any of the apartments would be furnished. But an affiliate of appellee without FHA knowledge furnished a number of apartments; and some were leased to transients on a daily basis at rentals never submitted to nor approved by FHA, part of the rental going to the affiliate as 'furniture rental.' Though appellee, as required by the Regulations (§ 280.30(f)), made reports to FHA, it made no disclosure to the agency that it had either furnished some apartments or rented them to transients. But it continued to rent furnished apartments to transients both before and after 1954 when § 513 was added to the Act. 68 Stat. 610, 12 U.S.C. (Supp. V) § 1731b, 12 U.S.C.A. § 1731b. The new section contained in subsection (a) the following declaration of congressional purpose:

'The Congress hereby declares that it has been its intent     since the enactment of the National Housing Act that housing      built with the aid of mortgages insured under that Act is to      be used principally for residential use; and that this intent      excludes the use of such housing for transient or hotel      purposes while such insurance on the mortgage remains      outstanding.' And see H.R.Rep. No. 1429, 83d Cong., 2d Sess.,     p. 17; S.Rep. No. 1472, 83d Cong., 2d Sess., p. 31.

Appellee persisted in its rental of space to transients. Appellant FHA persisted in maintaining that the practice was not authorized. In 1955 appellee brought this suit for a declaratory judgment that so long as it operates its property 'principally' for residential use, keeps apartments available for extended tenancies, and complies with the terms of the Act in existence at the time it obtained the insurance, it is entitled to rent to transients. The District Court gave appellee substantially the relief which it demanded. 142 F.Supp. 341. On appeal, we remanded the cause for consideration by a three-judge court pursuant to 28 U.S.C. § 2282, 28 U.S.C.A. § 2282. 352 U.S. 977, 77 S.Ct. 381, 1 L.Ed.2d 363. On the remand a three-judge court adopted the earlier findings and conclusions of the single judge, 154 F.Supp. 411, attaching however certain conditions to the decree unnecessary to discuss here. It held that rental to transients was not barred by § 608 and that § 513(a) as applied to respondent was unconstitutional. The case is here on direct appeal. 28 U.S.C. § 1253, 28 U.S.C.A. § 1253.

We take a different view. We do not think the Act gave mortgagors the right to rent to transients. There is no express provision one way or the other; but the limitation seems fairly implied. We deal with legislation passed to aid veterans and their families, not with a law to promote the hotel to motel business. To be sure, the Regulations speak of property 'designed principally for residential use' (§ 280.34)-words that by themselves would not preclude transient rentals. But those words as the Senate Report on the 1954 Amendment indicates, were evidently used so as not to preclude some commercial rentals. Moreover, the Regulation goes on to describe the property that is insured as 'dwelling units.' Id. The word 'dwelling' in common parlance means a permanent residence. A person can of course take up permanent residence even in a motel or hotel. But those who come for a night or so have not chosen it as a settled abode. Yet the idea of permanency pervades the concept of 'dwelling.' That was the construction given to § 608 by FHA in 1947 when it issued its book Planning Rental Housing Projects. 'Housing' was there interpreted to mean 'dwelling quarters for families-quarters which offer complete facilities for family life.' There again the quality of permanency is implicit. And if the provisions of appellee's charter are deemed relevant, it is not without interest to note the requirement that 'Dwelling accommodations of the corporation shall be rented at a maximum average rental per room per month * *  * .' Again the focus is on permanency.

In 1946 FHA made provisions in its application forms for estimates of annual operating expenses of the project. None of the expenses incident to transient accommodations-such as linen supply and cleaning expenses-were listed. Once more we may infer that the insurance program was not designed in aid of transients.

In a letter to field offices in 1951 explaining the criteria to be considered in passing on rent schedules and methods of operation, the FHA instructed them to: ' * *  * bear in mind that the objective of this Administration is the production of housing designed for occupancy of a relatively permanent nature and that transient occupancy is contrary to policy. No approval will be granted with respect to a proposal anticipating transient occupancy.' That interpretation of the Act is clear and unambiguous, and, taken with the Regulations, indicates that the authority charged with administration of the statute construed it to bar rental to transients.

Moreover, as already mentioned, prior approval by FHA of all rental schedules was always required by § 280.30 of the Regulations and appellee never obtained nor sought approval of a schedule of rents for transients.

It is true that FHA felt it had the authority to approve rental schedules for transients. It gave such approval in a dozen or more instances where it felt the public interest required it. We need not stop to inquire whether FHA had that authority. We have said enough to indicate that no right or privilege to rent to transients is expressly included in the Act nor fairly implied. The contemporaneous construction of the Act by the agency entrusted with its administration is squarely to the contrary. In circumstances no more ambiguous than the present we have allowed contemporaneous administrative construction to carry the day against doubts that might exist from a reading of the bare words of a statute. See United States v. American Trucking Ass'ns, 310 U.S. 534, 549, 60 S.Ct. 1059, 1067, 84 L.Ed. 1345; Norwegian Nitrogen Products Co. v. United States, 288 U.S. 294, 315, 53 S.Ct. 350, 77 L.Ed. 796. When Congress passed the 1954 Amendment, it accepted the construction of the prior Act which bars rentals to transients. Subsequent legislation which declares the intent of an earlier law is not, of course, conclusive in determining what the previous Congress meant. But the later law is entitled to weight when it comes to the problem of construction. See United States v. Stafoff, 260 U.S. 477, 480, 43 S.Ct. 197, 67 L.Ed. 358; Sioux Tribe v. United States, 316 U.S. 317, 329-330, 62 S.Ct. 1095, 1100-1101, 86 L.Ed. 1501. The purpose of the Act, its administrative construction, and the meaning which a later Congress ascribed to it all point to the conclusion that the housing business to be benefited by FHA insurance did not include rental to transients.

If the question be less clear and free from doubt than we think, it is still one that lies in the periphery where vested rights do not attach. If we take as our starting point what the Court said in the Sinking-Fund Cases, 99 U.S. 700, 718, 25 L.Ed. 496-'Every possible presumption is in favor of the validity of a statute, and this continues until the contrary is shown beyond a rational doubt'-we do not see how it can be said that the 1954 Act is unconstitutional as applied. Appellee is not penalized for anything it did in the past. The new Act applies prospectively only. So there is no possible due process issue on that score. As stated in Fleming v. Rhodes, 331 U.S. 100, 107, 67 S.Ct. 1140, 1144, 91 L.Ed. 1368, 'Federal regulation of future action based upon rights previously acquired by the person regulated is not prohibited by the Constitution. So long as the Constitution authorizes the subsequently enacted legislation, the fact that its provisions limit or interfere with previously acquired rights does not condemn it. Immunity from federal regulation is not gained through forehanded contracts.'

Moreover, one has to look long and hard to find even a semblance of a contractual right rising to the dignity of the one involved in lynch v. United States, 292 U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434. The Constitution is concerned with practical, substantial rights, not with those that are unclear and gain hold by subtle and involved reasoning. Congress by the 1954 Act was doing no more than protecting the regulatory system which it had designed. Those who do business in the regulated field cannot object if the legislative scheme is buttressed by subsequent amendments to achieve the legislative end. Cf. Viex v. Sixth Ward Ass'n, 310 U.S. 32, 60 S.Ct. 792, 84 L.Ed. 1061; Keefe v. Clark, 322 U.S. 393, 64 S.Ct. 1072, 88 L.Ed. 1346. Invocation of the Due Process Clause to protect the rights asserted here would make the ghost of Lochner v. New York, 198 U.S. 45, 25 S.Ct. 539, 49 L.Ed. 937, walk again.

Reversed.

Mr. Justice STEWART took no part in the consideration or decision of this case.

Mr. JUSTICE FRANKFURTER, dissenting.