United States v. New York, New Haven Hartford Railroad Company

Decision Date16 December 1957
Docket NumberNo. 45,45
Citation355 U.S. 253,78 S.Ct. 212,2 L.Ed.2d 247
PartiesUNITED STATES of America, Petitioner, v. The NEW YORK, NEW HAVEN & HARTFORD RAILROAD COMPANY
CourtU.S. Supreme Court

Mr. Alan S. Rosenthal, Washington, D.C., for the petitioner.

Mr. Edmund M. Sweeney, Boston, Mass., for the respondent.

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.

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 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, 77 L.Ed. 359, 1 L.Ed.2d 320.

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 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, 47 S.Ct. 123, 124, 71 L.Ed. 343.

Section 322, however, required the payment of such bills 'upon presentation * * * prior to audit or settlement by the General Accounting Office * * *.' The audit pro- cedures 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, 77 S.Ct. 161, 170, 1 L.Ed.2d 126:

'* * * 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 of 352 U.S., at page 171 of 77 S.Ct.:

'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 preaudit 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 this opinion, 355 U.S. 264, 78 S.Ct. 219.) 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 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 preaudit 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 audit- ing office as might be desired for audit.' The plan contemplated that 'in the event * * * this audit reveals an over-payment' the same 'will be promptly paid by the railway, preserving, however, the right of the carrier to make further effort to re-collect in the event that it does not believe the proper charges resulted from the Government's audit.'9

In hearings before the House Committee on Interstate and Foreign Commerce held June 1, 1938,10 in connection with one of the bills incorporating the proposal which became § 322, the then General Counsel of the Association of American Railroads, arguing in support of the proposal, urged that '(i)f that section could be put in here, it would require the payment of the bills by the Government as they are rendered by the railroads, with the privilege, however, of course, if it should develop that there has been an overpayment, the Government may deduct that amount from subsequent bills.'

The conclusion is inescapable from this history that the Congress was desirous of aiding the railroads to secure prompt payment of their charges,11 but it is also clear that the Congress, and the railroads, contemplated that the Government's protection against overcharges available under the preaudit practice should not be diminished. The burden of the carriers to establish the correctness of their charges was to continue unabridged. The carriers were to be paid immediately upon submission of their bills but the carriers were in return promptly to refund overcharges when such charges were administratively determined. The carrier would then have 'to re-collect' the sum refunded by justifying its bills to the agency or by proving its claim in the courts. The footing upon which each of the parties stood when controversies over charges developed was not to be changed. The right of the United States to deduct overpayments from subsequent bills was the carriers' own proposal for securing the Government against the burden of having to prove the overpayment in proceedings for reimbursement.

In the light of this history, we are unable to agree with the holdings of the Court of Appeals that '(a)ll that § 322 does is to authorize and direct disbursing officers of the United States to pay transportation bills upon presentation, without waiting for audit or settlement by the Gen- eral Accounting Office,' and that the reservation of the right of offset against subsequent bills is without significance—'We suppose that this provision was inserted out of an abundance of caution, because the availability of a setoff by the United States need not depend upon specific statutory authorization,' citing Gratiot v. United States, 15 Pet. 336, 370, 10 L.Ed. 759. 1 Cir., 236 F.2d 101, 105.

Nor do we share the view of the Court of Appeals that 'the position of the United States as shipper, so far as the present case is concerned, is no different from that of a private shipper.' Id., 236 F.2d at page 104. Even if we assume that '(i)f a private shipper or consignee should pay the carrier before satisfying himself of the correctness of the charges demanded—as he may be required to do pursuant to § 3(2) of the Interstate Commerce Act, 49 U.S.C.A. § 3(2) and regulations of the Commission thereunder—and later sues for a refund of alleged overpayments, or seeks to set off the amount of the overpayments against another claim admittedly due, in either case the shipper or consignee would have the burden of alleging and proving the fact and the amount of such overpayment,'12 the Court of Appeals overlooks the fact that the Government's statutory right of...

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