355 U.S. 253 (1957), 45, United States v. New York, New Haven & Hartford Railroad Co.

Docket Nº:No. 45
Citation:355 U.S. 253, 78 S.Ct. 212, 2 L.Ed.2d 247
Party Name:United States v. New York, New Haven & Hartford Railroad Co.
Case Date:December 16, 1957
Court:United States Supreme Court

Page 253

355 U.S. 253 (1957)

78 S.Ct. 212, 2 L.Ed.2d 247

United States


New York, New Haven & Hartford Railroad Co.

No. 45

United States Supreme Court

Dec. 16, 1957

Argued November 20, 1957




Pursuant to § 322 of the Transportation Act of 1940, the Government paid, upon presentation and prior to audit bills presented by respondent railroad, for transporting government property in 1944. On post-audit, the Government found that it had been overcharged, and, upon refusal of respondent to refund the amount of the overcharge, deducted the amount from a bill for transportation services rendered by respondent in 1950. Respondent then sued the Government under the Tucker Act for the full amount of the 1950 bill. In its answer, the Government admitted the 1950, bill but claimed credit for the 1944 overcharge and its payment of the difference by check. Respondent then admitted receipt of the check, but claimed that the remainder of the 1950 bill was due and unpaid.

Held: respondent has the burden of proving that its 1944 charges were computed at lawful and authorized rates, and it is entitled to recovery only if it satisfies that burden. Pp. 254-264.

(a) It is clear from the legislative history of § 322 that both Congress and the railroads contemplated that the Government's protection against overcharges available under the pre-audit practice should not be diminished, and that the burden of the carriers to establish the correctness of their charges was to continue unabridged. Pp. 255-260.

(b) The burden of the carrier to establish the lawfulness of its charges is the same under § 322 as it was under the superseded practice, under which payment was withheld until the carrier established the correctness of its charges. Pp. 260-262.

(c) Conventional principles of contractual setoff should not govern the determination of the carrier's burden of proof in this action merely because the complaint frames an action for recovery of the full amount of the 1950 bill, rather than the amount deducted therefrom. Pp. 262-263.

236 F.2d 101, reversed and remanded.

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BRENNAN, J., lead opinion

MR. JUSTICE BRENNAN delivered the opinion of the Court.

The General Accounting Office audited transportation bills of the respondent, rendered and paid in 1944, and determined that the Government was overcharged in the amount of $1,025.26. When the respondent did not refund this amount on demand, the Government exercised the right, reserved in § 322 of the Transportation Act of 1940,1 to deduct the overpayments from a subsequent bill. The Government credited that amount against a bill of the respondent, admittedly owing, of $1,143.03 for 1950 transportation services, and paid the balance of $117.77 by check.

[78 S.Ct. 214] The respondent thereupon brought this action under the Tucker Act2 in the District Court for Massachusetts. The complaint seeks recovery not of the $1,025.26 deducted, but of the full amount of the 1950 bill of $1,143.03. The Government's answer admits the 1950

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bill but pleads its payment by the check of $117.77 and the credit of $1,025.26 in liquidation of the overcharges determined in the 1944 bills. The respondent filed a pleading in response to the government answer3 admitting

that it did receive the check in the amount of $117.77, all as recited by the defendant, leaving the balance due and to this date unpaid in the amount of $1025.26.

The question presented in both courts below, and in this Court, is whether, in this action, the carrier has the burden of proving the correctness of the 1944 bills, or the Government the burden of proving that it was overcharged. The District Court held that the respondent carrier was pleading on a contract against which the Government was attempting to "set off" claims under other contracts, and that "whoever attempts to set off the other contractual claims has the burden of showing there are other claims." In the absence of government evidence proving the claimed overcharges in the 1944 bills, a motion of the respondent for summary judgment was granted. The judgment entered, however, was for $402.84, because the respondent accepted the amount of 1944 overcharges in the difference between that sum and the amount of the bill. The Court of Appeals for the First Circuit affirmed the judgment. 236 F.2d 101. We granted certiorari, 352 U.S. 965.

Before enactment of § 322, the Government protected itself against transportation overcharges by not paying transportation bills until the responsible government officers, and, in doubtful cases, the General Accounting Office, first audited the bills and found that the charges were correct.4 When charges were questioned the carrier

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was required to justify them. If administrative settlement was not reached and the carrier sued the United States to recover the amount of the bill, no one questions that it was the carrier's duty to sustain the burden of proving the correctness of the charges.5 Southern Pacific Co. v. United States, 272 U.S. 445, 448.

Section 322, however, required the payment of such bills "upon presentation . . . prior to audit or settlement by the General Accounting Office. . . ." The audit procedures

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remained substantially the same as those in effect prior to the statute, but the former means of protecting against overcharges -- by not paying the bills until their correctness was proved -- has, by force of the statute, been replaced by the method of collecting them from subsequent bills, under the right reserved by the section to the Government "to deduct the amount of any overpayment to any such carrier from any amount subsequently found to be due such carrier." We recently said, in United States v. Western Pacific R. Co., 352 U.S. 59, 74:

. . . This right [to deduct overpayment from subsequent bills of the carrier] was thought to be a necessary measure to protect the Government, since carriers' bills must be paid on presentation, and before audit.

Again, at page 75:

The fact that the Government paid the carrier's bills as rendered is without significance in light of § 322 of the Transportation Act, supra, requiring payment "upon presentation" of such bills, and postponing final settlement until audit.

This interpretation of § 322 finds full support in the legislative history of the section. The section was included in the omnibus transportation bill, which became the Transportation Act of 1940, in direct response to a demand of the railroads for legislation relieving them of the inordinate delays in payment of their bills attributable to the pre-audit procedure, which tied up substantial amounts of accounts receivable and contributed to the financial difficulties which confronted the railroads during the depression years. The then President of the Association of American Railroads raised the issue in a letter to the Procurement Division of the Department of the Treasury dated October 5, 1937. (See Appendix to

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this opinion, p. 264.) Proposed legislation in almost the identical language which became § 322 was thereupon introduced in 1938.6 It failed of passage in the Seventy-fifth Congress, and a number of similar proposals were therefore introduced in the Seventy-sixth Congress.7 None of these passed, but, in the following year, the provision was included as § 322 of the Transportation Act of 1940.8

It is entirely clear that, although the railroads sought, in the words of their spokesman, "corrective action . . . that will render impossible such long delays in payment for services rendered," to gain [78 S.Ct. 216] that end, the railroads recognized that any remedy suggested on their behalf should be

both practical and legal, and [one] which can easily be made operative without the assumption of any risk insofar as the Government is concerned.

It was "with this thought in mind" that the railroads proposed the elimination of pre-audit procedures and the prompt payment of transportation bills when rendered, with audit

after payment . . . [of] these bills referred to the General Accounting Office or such other governmental auditing

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office as might be desired for audit.

The plan contemplated that...

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