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FEDERAL HOUSING ADMINISTRATION v. DARLINGTON

decided: November 24, 1958.

FEDERAL HOUSING ADMINISTRATION
v.
THE DARLINGTON, INC.



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF SOUTH CAROLINA.

Warren, Black, Frankfurter, Douglas, Clark, Harlan, Brennan, Whittaker; Stewart took no part in the consideration or decision of this case

Author: Douglas

[ 358 U.S. Page 85]

 MR. JUSTICE DOUGLAS delivered the 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, 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

[ 358 U.S. Page 86]

     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. 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.*fn1

[ 358 U.S. Page 87]

     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. 352 U.S. 977. 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.

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,*fn2 not with a law to promote the hotel or 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,

[ 358 U.S. Page 88]

     as the Senate Report on the 1954 Amendment indicates,*fn3 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.*fn4 And if the

[ 358 U.S. Page 89]

     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 ...


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