U.S. v. Reul

• Decision Date: 02 April 1992
• Docket Number: No. 91-1264,91-1264
• Citation: 959 F.2d 1572
• Parties: The UNITED STATES, Plaintiff-Appellee, v. Dr. George REUL, Defendant-Appellee, and St. Paul Fire and Marine Insurance Company, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1572

959 F.2d 1572

13 ITRD 2349

The UNITED STATES, Plaintiff-Appellee, v. Dr. George REUL, Defendant-Appellee and St. Paul Fire and Marine Insurance Company, Defendant-Appellant.

No. 91-1264.

United States Court of Appeals Federal Circuit.

April 2, 1992.

Bruce N. Stratvert, Commercial Litigation Branch, Dept. of Justice, New York City, argued, for plaintiff-appellee. With him on the brief were Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director and Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office.

Leonard L. Rosenberg, Sandler, Travis & Rosenberg, P.A., Miami, Fla., argued, for defendant-appellant. With him on the brief was Barry M. Boren.

Before NEWMAN, CLEVENGER and RADER, Circuit Judges.

CLEVENGER, Circuit Judge.

St. Paul Fire and Marine Insurance Company (St. Paul) appeals the final judgment of the United States Court of International Trade granting summary judgment in favor of the United States on its action to recover the principal amount of two Customs entry bonds, and prejudgment interest thereon, as to which St. Paul is surety for its principal, Dr. George Reul. United States v. Reul, No. 90-92, 1990 WL 133191 (Ct.Int'l Trade Sept. 12, 1990) (granting summary judgment); United States v. Reul, No. 91-6, 1991 WL 16497 (Ct.Int'l Trade Feb. 8, 1991) (denying rehearing).

The appeal raises two issues: whether the statute of limitations has run on the complaint filed by the United States, and if not, whether the Court of International Trade abused its discretion by awarding prejudgment interest against St. Paul from the date St. Paul's principal breached his contract with the United States. St. Paul does not appeal the judgment as to its liability for the principal amount of the bonds. We affirm the decision for the United States on the principal amount of the bonds, and vacate and remand for further proceedings regarding the assessment of prejudgment interest.

I

This case involves the importation of two Ferrari automotive vehicles by Dr. George Reul at the port of Houston, Texas. The first, a 1974 Berlinetta Boxer model (Car One), was imported June 14, 1977. The second, a 1977 model 512 (Car Two), was imported November 7, 1978. Both cars entered under an Immediate Delivery and Consumption Entry Bond (Single Entry), and each was subject to and required to meet existing emission standards promulgated by the Environmental Protection Agency (EPA) and federal motor vehicle safety standards promulgated by the Department of Transportation (DOT). See 19 C.F.R. § 12.73 (1977) and 19 C.F.R. § 12.80 (b) Requirements for entry and release. Each motor vehicle ... offered for importation or imported into the Customs territory of the United States shall be refused entry unless there is filed with the entry, ... a declaration ... which contains:

                (1978).   The regulations for emissions compliance stated in pertinent part
                

* * * * * *

(5) A statement that--

* * * * * *

(ii) Such 1971 or subsequent model year motor vehicle ... is covered by a certificate of conformity with Federal motor vehicle emission standards ..., or

* * * * * *

(x) Such motor vehicle ... is not covered by a certificate of conformity with Federal motor vehicle emission standards but will be brought into conformity with such standards and is being imported under bond in accordance with 40 C.F.R. 85.203....

* * * * * *

(c) Release under bond. If a declaration filed in accordance with paragraph (b) of this section states that the entry is being made under circumstances described in paragraph [ (b)(5)(x) ] of this section, the entry shall be accepted only if the importer or consignee gives a bond ... for the production of a declaration that the vehicle is in conformity with Federal emission standards.... Within 90 days after such entry, or such additional period as the district director of Customs may allow for good cause shown, the importer or consignee shall deliver to the district director the prescribed declaration. If the declaration is not delivered to the district director ... within 90 days of the date of entry or such additional period as may be allowed ... the importer or consignee shall deliver or cause to be delivered to the district director of Customs those motor vehicles ... which were released in accordance with this paragraph. In the event that any such motor vehicle ... is not redelivered within 5 days following the date specified in the preceding sentence, liquidated damages shall be assessed in the full amount of the bond....

19 C.F.R. § 12.73 (1977).

With respect to motor vehicle safety, 19 C.F.R. § 12.80 required a similar declaration, bond, and redelivery process in order for imported vehicles to demonstrate conformance with federal motor vehicle safety standards. It thus was possible for persons such as Dr. Reul to import nonconforming automobiles by promising before entry to bring the vehicles into conformity within 90 days or such longer time as Customs might allow. Absent the requisite declarations of conformity, the importer agreed to forfeit either the vehicle or the principal of the bond.

Both of Dr. Reul's Ferrari vehicles were known not to conform with emission and safety standards when offered for entry. Dr. Reul consequently executed declarations that he would bring the vehicles into conformance. In addition to making the declaration, Dr. Reul posted bonds equal to the entry value of each vehicle, plus the estimated amount of duty and taxes, pursuant to 19 C.F.R. §§ 12.73(c), 12.80(c) and 113.14(g) (1978). St. Paul was surety on each bond. The bonds, as required by the above-cited regulations, specified that if a vehicle was not brought into conformance within the specified time period, the importer would redeliver it to Customs; failing timely redelivery, Customs would assess liquidated damages in the amount of the entire bond. When Dr. Reul made the required declarations and posted the appropriate bonds, Customs accepted the vehicles for entry under its informal entry procedures. 19 C.F.R. § 159.10(a)(1) (1978).

II

Following importation on June 14, 1977, Dr. Reul delivered Car One to Monza Automobili (Monza) in Houston, which acted as agent and consignee for Dr. Reul. Its task was to perform the necessary modifications to bring the vehicle into compliance.

The history of Car One's compliance ordeal is written on the informal worksheet used by Customs as a control monitor. On the day after entry, Customs notified EPA and DOT of the entry and established an internal suspense date of October 6, 1977 for Car One. That suspense date constituted an extension of approximately three weeks beyond the 90-day period specified for compliance by the regulations. The record before us does not state a reason for the extension. Neither Reul nor St. Paul contends, however, that the extension was not for good cause shown.

The initial suspense date was the first of many extensions of time provided to enable Dr. Reul's agent to bring Car One into conformity with the applicable emissions and safety standards. Three days before the expiration of the initial suspension date, Monza sought an open-ended extension of time to achieve compliance. On October 25, 1977, Customs granted Monza a 90-day extension to January 6, 1978. Ninety days later, Monza had not performed the modifications necessary to obtain the declarations of conformity. EPA thereupon requested Customs to issue a Notice of Redelivery on Car One. Customs responded by issuing Form 4647, the Notice of Redelivery, on April 17, 1978, calling for redelivery of Car One on May 17, 1978.

Monza called Customs two days later to say that compliance forms had been submitted to DOT on April 11 and were in the process of transmission to EPA. Monza, also on April 19, 1978, sent Customs a letter which Monza stated it wrote on March 2, over a month before the Notice of Redelivery issued. In that letter, Monza requested another open-ended extension of the January 6, 1978 suspension date for Car One. Correspondence from Monza reflects additional requests for extensions of time made on April 24, July 31, and October 5, 1978. As a result of those communications from Monza, Customs extended the suspense date for Car One to June 26, 1978, and again to March 12, 1979. The last extension date resulted from EPA's intervention, which resulted from further pleas for extensions by Monza. EPA notified Monza in writing that, absent the appropriate declaration of conformity, Customs would issue a Notice of Redelivery for Car One on March 12, 1979.

When the declaration of emissions conformity was not produced, Customs issued a Form 4647 to Dr. Reul on March 20, requiring redelivery by April 20. Car One was not redelivered. Customs issued notice of liquidated damages to Dr. Reul on May 2, 1979.

The history of Car Two is less prolonged. The Customs worksheet indicates an initial internal suspense date of March 5, 1979, which constituted a 30-day extension of the 90-day period within which to produce declarations of conformity. Car Two was also delivered to Monza for work to bring it into conformance. A February 9, 1979 worksheet entry reflects that EPA sent Monza the same message for Car Two as had been sent on Car One: Customs would issue a Notice of Redelivery if it had not received a conformity statement by March 12, 1979. Customs received no such statement, and on March 19, 1979, a Form 4647 was issued to Dr. Reul for Car Two, requiring redelivery by April 19, 1979. The car was not redelivered, and Customs issued a notice of liquidated damages to Dr. Reul on May 2, 1979.

On August 17, 1984, Customs sent letters to Dr. Reul and St. Paul demanding payment of the liquidated damages, on the grounds that failure to redeliver the two vehicles constituted a breach of paragraph 4 of the bonds upon which St. Paul was surety. St. Paul filed mitigation petitions, which were denied by Customs on December 19, 1984. The government filed the present action April 17,...