US v. Peerless Ins. Co.

Decision Date29 December 1988
Docket NumberCourt No. 87-10-01045.
Citation12 CIT 1182,703 F. Supp. 955
PartiesUNITED STATES, Plaintiff, v. The PEERLESS INSURANCE COMPANY, Defendant.
CourtU.S. Court of International Trade

John R. Bolton, Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch, U.S. Dept. of Justice, and Barbara M. Epstein, New York City, for plaintiff.

Doherty and Melahn, William E. Melahn, Boston, Mass., for defendant.

MEMORANDUM OPINION AND ORDER

DiCARLO, Judge:

The Peerless Insurance Company (Peerless) of New Hampshire moves under Rule 12(b)(5) of the Rules of this Court to dismiss an action for failure to state a claim upon which relief can be granted because the action brought on behalf of the United States Customs Service (Customs) to recover liquidated damages for alleged violations of an entry bond is beyond the six-year statute of limitations under 28 U.S.C. § 2415(a) (Supp. IV 1986). In turn, the United States moves pursuant to Rule 56(a) of the Rules of this Court for summary judgment in the amount of $26,431 plus interest from the date of Customs' demand for payment.

The Court has jurisdiction under 28 U.S.C. § 1582(2) (1982). The Court finds that the government's action under paragraph (4) of the consumption entry bond is not barred by the statute of limitations and denies Peerless' motion to dismiss. The Court also finds the facts alleged in Peerless' supplemental petition and the anticipated defenses and justifications for discovery presented at oral argument provide a sufficient basis to conclude that disputes of material fact are unresolved. The government's motion for summary judgment is therefore denied.

BACKGROUND

Ferrari of San Francisco (Ferrari), as principal, and Peerless, as surety, executed an immediate delivery and consumption entry bond (Customs Form 7553) in the amount of $75,000 to cover entries for the one year period from May 11, 1977 to May 10, 1978. Under the bond, Ferrari and Peerless are jointly and severally liable for all duties, taxes, and liquidated damages resulting from the entry of merchandise into the United States. Ferrari and Peerless are also jointly and severally liable for liquidated damages if merchandise imported under the bond is not timely redelivered to the custody of Customs following a proper demand on Ferrari.

Ferrari imported a used de Tomaso Pantera passenger automobile on August 10, 1977 and a new Ferrari passenger automobile on October 11, 1977. As conditions of importation, Ferrari executed forms stating that within ninety days the two vehicles would be brought into conformity with Environmental Protection Agency automobile emission standards and United States Department of Transportation motor vehicle safety standards.

Ferrari submitted Environmental Protection Agency Forms 3520-1, which declared that each "vehicle or engine is not in conformity with applicable emission standards, but will be brought into conformity with such standards and is being imported under bond." Complaint, exhibits B and M (emphasis in original). Ferrari also submitted a Department of Transportation Form HS-7 that stated:

The merchandise does not conform with applicable Federal Motor Vehicle Safety Standards, but I will bring it into conformity with such standards and will not sell or offer it for sale until the bond required by 19 C.F.R. § 12.80(c) has been released.
WARNING: Entry under this provision requires posting of a bond equal to the value of the merchandise, for the delivery of a conformity statement no later than 90 days after entry to the District Director of Customs.... Vehicle must be redelivered to port of entry upon failure to provide satisfactory statement.

Complaint, exhibits C and N (emphasis in original).

Ferrari did not bring the vehicles into compliance, and on October 19, 1981, Customs mailed a notice to redeliver the vehicles to the port of entry. See 19 C.F.R. § 141.113(f) (1981). Ferrari did not redeliver the vehicles. On April 16, 1982, Customs demanded Ferrari pay liquidated damages of $6,180 for the used vehicle and $20,251 for the new vehicle. Customs sent copies of the demands for payment to Peerless.

Peerless then petitioned for mitigation relief from liquidated damages pursuant to 19 C.F.R. § 172.11. Customs denied this petition on September 17, 1982 and demanded full payment. Peerless then petitioned for supplemental relief under 19 C.F.R. § 172.33, asking Customs to cancel entirely all claims against Peerless because Customs' requests for redelivery and the notice of liquidated damages may not have been delivered to the "now defunct Ferrari" and that Customs did not act promptly in requesting redelivery. Complaint, exhibit I, at 1-3. Customs denied this petition and sent additional collection demands for payment of liquidated damages on October 1, 1984 and August 29, 1985. The government commenced this action on October 22, 1987.

DISCUSSION

Peerless moves to dismiss the action as barred by a six-year statute of limitations. The government contends the action is timely and moves for summary judgment in its favor.

A. Surety's Motion to Dismiss

The parties agree that this action is governed by the six year statute of limitations in 28 U.S.C. § 2415(a) (Supp. IV 1986), which provides that an action brought by the United States for money damages founded upon a contract "shall be barred unless the complaint is filed within six years after the right of action accrues...." The parties disagree as to what event commenced the running of the statute.

Peerless argues that the statute of limitations "begins to run when the cause of action or breach of bond first accrues." Defendant's Memorandum in Support of 12(b)(5) Motion, at 5 (citing United States v. Continental Seafoods, Inc., 11 CIT ___, 672 F.Supp. 1481, 1484 (1987), remanded with instructions to dismiss with prejudice, No. 88-1398 (Fed.Cir. Oct. 28, 1988); United States v. Atkinson, 6 CIT 257, 575 F.Supp. 791 (1983); and United States v. Bavarian Motors, 4 CIT 83 (1982)). Peerless maintains that "a claim under the bond accrues when the potential plaintiff is first able to maintain the cause of action in question, even though there may be other breaches subsequent to the first breach." Defendant's Memorandum in Support of 12(b)(5) Motion, at 5 (citing Sven Salen AB v. Jacq. Pierot, Jr. & Sons, Inc., 559 F.Supp. 503, 505 (S.D.N.Y.1983), aff'd, 738 F.2d 419 (2d Cir.1984)).

Peerless contends the government was first able to maintain its cause of action upon the first default under paragraph 8 of the bond, which occurred on November 17, 1977, ninety-five days after the first vehicle was imported, and on January 17, 1978, ninety-five days after the second vehicle was imported. Peerless argues that Ferrari's failure to deliver within ninety days documents stating the vehicles had been brought into compliance with the pollution controls and safety standards constituted an automatic breach of paragraph 8. Peerless asserts that 19 C.F.R. § 12.73(b)(5)(x) and 19 C.F.R. § 12.80(b)(iii) are incorporated into the bond, see Old Republic Ins. Co. v. United States, 10 CIT 589, 645 F.Supp. 943 (1986), and that these regulations require that liquidated damages will issue if the documents are not timely submitted and the vehicles not timely redelivered. According to Peerless, this automatically triggers the statute of limitations as to paragraph 8. Peerless argues that this action is time-barred under the six year statute of limitations because it was not commenced until October 22, 1987.

Paragraph 8 of the bond provides for the delivery of certain papers:

(8) And if in any case the above-bounden principal shall deliver to the district director of customs such invoices, declarations of owners or consignees, certificates of origin, certificates of exportation, and other documents as may be required by law or regulations in connection with the entry of said articles, and in the form and within the time required by law or regulations, or any lawful extension thereof, or in the event of failure to comply with any or all of the conditions of this section (8) shall pay to said district director such amounts as liquidated damages as may be demanded by him in accordance with the law and regulations, not exceeding the amount of this obligation, for breach or breaches thereof;

The government argues that determining whether paragraph 8 of the bond was breached is irrelevant, because the cause of action is based on the breach of paragraph 4 of the immediate consumption entry bond. Paragraph 4 provides for damages for failure to redeliver the non-conforming vehicles:

(4) And if in any case the above-bounden principal shall redeliver or cause to be redelivered to the order of the district director of customs, on demand by him, in accordance with the law and regulations in effect on the date of the release of said articles, any and all of the merchandise found not to comply with the law and regulations governing its admission into the commerce of the United States, ... or, in default of redelivery after a proper demand on him, the above-bounden principal shall pay to the said district director such amounts as liquidated damages as may be demanded by him in accordance with the law and regulations, not exceeding the amount of this obligation, for any breach or breaches thereof;

(Emphasis added).

Paragraph 4 required Ferrari to redeliver the vehicles "after a proper demand" for redelivery. Customs made this demand for redelivery on October 19, 1981 under 19 C.F.R. § 141.113. Peerless argues that the government "incorrectly brought this action as a breach of paragraph 4 of the bond." Peerless characterizes this demand for redelivery as a mere formality which does not affect the start of the statute of limitations for an action under paragraph 8.

The government states its cause of action under paragraph 4 is proper and accrued when Ferrari failed to...

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2 cases
  • US v. Commodities Export Co.
    • United States
    • U.S. Court of International Trade
    • January 9, 1991
    ...court have applied the six year statute of limitations in 28 U.S.C. § 2415 to liquidated damages cases. United States v. Peerless Ins. Co., 12 CIT ___, ___, 703 F.Supp. 955, 957 (1988); United States v. Angelakos, 12 CIT ___, ___, 688 F.Supp. 636, 637 (1988). The Court here follows those de......
  • US v. Cocoa Berkau, Inc., Court No. 91-08-00607.
    • United States
    • U.S. Court of International Trade
    • April 9, 1992
    ...1990 WL 133191 (1990), reh'g den., 15 C.I.T. ___, 1991 WL 16497 (1991), aff'd 959 F.2d 1572 (Fed.Cir. 1992); U.S. v. Peerless Ins. Co., 12 C.I.T. 1182, 703 F.Supp. 955 (1988); U.S. v. Angelakos, 12 C.I.T. 515, 688 F.Supp. 636 (1988); U.S. v. Continental Seafoods, 11 C.I.T. 768, 672 F.Supp. ......

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