U.S. v. Cocoa Berkau, Inc., 92-1390

• Decision Date: 30 March 1993
• Docket Number: No. 92-1390,92-1390
• Citation: 990 F.2d 610
• Parties: The UNITED STATES of America, Plaintiff-Appellant, v. The COCOA BERKAU, INCORPORATED, and Washington International Insurance Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

Page 610

990 F.2d 610

15 ITRD 1009

The UNITED STATES of America, Plaintiff-Appellant, v. The COCOA BERKAU, INCORPORATED, and Washington International

Insurance Company, Defendants-Appellees.

No. 92-1390.

United States Court of Appeals, Federal Circuit.

March 30, 1993.

Susan Burnett Mansfield, Sr. Trial Counsel, Dept. of Justice, New York City, argued, for plaintiff-appellant. With her 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.

Ronald W. Gerdes, Sandler, Travis & Rosenberg, P.A., Washington, DC, argued, for defendants-appellees. Gilbert Lee Sandler, Sandler, Travis & Rosenberg, P.A., Miami, FL, was on the brief, for defendants-appellees.

Wayne Jarvis and Michael G. Hodes, Hodes & Pilon, Chicago, IL, were on the brief, for amicus curiae Old Republic Ins. Co.

Before ARCHER, LOURIE and SCHALL, Circuit Judges.

LOURIE, Circuit Judge.

The United States appeals from the judgment of the United States Court of International Trade granting the motion of Washington International Insurance Company to dismiss the government's action to recover liquidated damages as time-barred under 28 U.S.C. § 2415(a) (1988). United States v. The Cocoa Berkau, Inc., 789 F.Supp. 1160 (Ct. Int'l Trade 1992). Because the government filed its complaint more than six years after its right of action accrued and the statute of limitations was not tolled by any administrative proceeding required by contract or by law, we affirm.

BACKGROUND

On March 6, 1984, The Cocoa Berkau, Inc., as principal, and Washington, as surety, executed and delivered to the U.S. Customs Service a single entry bond in the amount of $111,500 to secure the immediate delivery of sweet chocolate to be imported from Brazil. Paragraph 4 of the entry bond required Cocoa Berkau to redeliver, upon proper demand by Customs, any and all merchandise found not to comply with the law and regulations governing importation of the merchandise into the United States. It further provided that upon default of redelivery, Cocoa Berkau (and Washington, as its surety) would be liable for liquidated damages as may be demanded by Customs, not to exceed the face amount of the bond.

On March 26, 1984, Cocoa Berkau entered 500 metric tons of sweet chocolate under item 156.20, Tariff Schedules of the United States (TSUS). An entry summary for consumption was submitted to Customs and it was eventually accepted. At the time of entry, a sample of the imported merchandise was taken by Customs for laboratory testing. Customs' analysis of the sample revealed that the imported merchandise contained milk solids, properly classified under item 156.30, TSUS. Merchandise so classified was subject to an import quota under item 950.16, TSUS.

Consequently, on January 31, 1985, Customs issued a notice ordering Cocoa Berkau to redeliver the imported merchandise to Customs within 30 days from the date of the notice. The notice was mailed to Cocoa Berkau at its address of record. A second notice to redeliver, dated February 11, 1985, was mailed to Cocoa Berkau at a new address. Cocoa Berkau subsequently advised Customs that the imported merchandise could not be redelivered to Customs because it had already been sold. The imported merchandise was never redelivered to Customs.

Customs determined that Cocoa Berkau's failure to redeliver the imported merchandise upon demand constituted a breach of the bond. On June 26, 1985, Customs demanded payment from Cocoa Berkau of liquidated damages in the amount of $1,114,812 to be paid within 60 days. Cocoa Berkau did not pay these damages. ¹

On March 18, 1988, Customs liquidated the imported merchandise under item 156.20, TSUS, under which the merchandise was originally entered. On November 30, 1990, formal demand for $111,500 in liquidated damages was made on Washington for Cocoa Berkau's breach of the entry bond, to be paid within 30 days. That amount represented the face amount of the bond which Washington executed as bond surety. On December 28, 1990, Washington petitioned for mitigation relief and that petition was denied by Customs on July 19, 1991.

On August 22, 1991, the government filed suit against Cocoa Berkau and Washington in the U.S. Court of International Trade to recover the $111,500, plus pre-judgment and post-judgment interest and costs. Washington moved for dismissal on the ground that the government failed to timely file its complaint within the six-year limitations period of 28 U.S.C. § 2415(a). Washington argued that the government's right of action accrued no later than March 13, 1985, when the bond was breached by the principal. The government claimed that its right of action accrued on December 30, 1990, when the surety defaulted on its obligation under the bond.

The trial court granted Washington's motion to dismiss. The trial court determined that in an action for breach of an entry bond, the six-year limitations period of 28 U.S.C. § 2415(a) begins to run on the importer's breach of its bond, which in the instant case occurred no later than March 13, 1985, when Cocoa Berkau failed to redeliver the imported merchandise within 30 days of Customs' demand for redelivery. Because the government's complaint was filed on August 22, 1991, more than six years after the government's right of action accrued, the trial court concluded that the action was time-barred under section 2415(a).

The trial court also rejected the government's alternative argument that the mitigation proceeding initiated by Washington tolled the limitations period until July 19, 1991, when Customs rendered a final decision denying Washington's request for relief. The trial court determined that the limitations period under section 2415(a) is tolled only by mandatory administrative proceedings. It concluded that the mitigation proceeding at issue was not required by law or by the entry bond, but was "merely a permissive administrative proceeding instigated by [Washington]" which did not operate to toll the limitations period.

DISCUSSION

Whether the trial court properly granted the motion to dismiss is a question of law that we review de novo. See Rocovich v. United States, 933 F.2d 991, 993 (Fed.Cir.1991). In the instant case, that inquiry turns on the proper interpretation of the governing statute, which is also a legal question that we review de novo. See Guess? Inc. v. United States, 944 F.2d 855, 857 (Fed.Cir.1991). In reviewing the propriety of the dismissal, we must consider the facts alleged in the complaint to be correct. The Catawba Indian Tribe of S.C. v. United States, 982 F.2d 1564, 1568-69 (Fed.Cir.1993).

I. Accrual of Right of Action

The applicable statute of limitations, 28 U.S.C. § 2415(a), provides that an action brought by the government for money damages on a contract must be filed "within six years after the right of action accrues or within one year after final decisions The law is well settled that, as a general rule, a claim does not accrue until all events necessary to fix the liability of a defendant have occurred. ² The Catawba Indian Tribe, 982 F.2d at 1570; United States v. Commodities Export Co., 972 F.2d 1266, 1270 (Fed.Cir.1992) (" '[A] cause of action accrues when all events necessary to state a claim have occurred.' ") (quoting Chevron U.S.A., Inc. v. United States, 923 F.2d 830, 834 (Fed.Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 167, 116 L.Ed.2d 131 (1991)), cert. denied, --- U.S. ----, 113 S.Ct. 1256, 122 L.Ed.2d 654 (1993). With respect to a claim arising from a bond, it is equally well settled that the date of accrual occurs at the time of the breach of the bond. See United States v. Reul, 959 F.2d 1572, 1576 (Fed.Cir.1992). The parties do not quarrel with these established legal principles. The critical issue on appeal is which event, the default of redelivery by the bond principal or the default of payment of liquidated damages by the bond surety, constituted the breach of the bond which fixed liability for purposes of triggering the statute of limitations.

                have been rendered in applicable administrative proceedings required by contract or by law, whichever is later."   In the instant case, the issue whether section 2415(a) applies to bar the government's suit to recover liquidated damages for breach of the entry bond turns on the date on which the government's right of action accrued
                

The government argues that the trial court erred in determining that the government's right of action accrued when the bond principal failed to redeliver the imported merchandise to Customs upon demand. The government characterizes its suit as one against the bond surety to recover liquidated damages. Thus, it claims that its right of action did not accrue until Washington breached the bond by failing to pay liquidated damages within 30 days of the November 30, 1990 notice demanding payment. Because the action was commenced on August 22, 1991, within six years of that date, the government maintains that its complaint was timely filed. We disagree.

In order to determine when the entry bond was breached, we look to the language of the bond stipulating the relevant obligations of the bond principal and its surety. The government's action for liquidated damages arose from an alleged breach of paragraph 4 of the entry bond. That provision required, inter alia, that the

principal shall redeliver or cause to be redelivered to [Customs], on demand ... any and all merchandise found not to comply with law and regulations governing its admission into the commerce of the United States ... or in default of redelivery after a proper demand ... the principal [or surety] shall pay to [Customs] such amounts as liquidated damages as may be demanded by [Customs.]

Thus, the entry bond placed an obligation on the bond principal to redeliver the imported merchandise upon a proper demand by Customs. The bond was breached, and thus the government's right of...