American Motorists Ins. Co. v. US

• Decision Date: 10 May 1990
• Docket Number: No. 88-03-00237.,88-03-00237.
• Citation: 737 F. Supp. 648,14 CIT 298
• Parties: AMERICAN MOTORISTS INSURANCE CO., Plaintiff, v. The UNITED STATES, Defendant.
• Court: U.S. Court of International Trade

737 F. Supp. 648

14 CIT 298

AMERICAN MOTORISTS INSURANCE CO., Plaintiff, v. The UNITED STATES, Defendant.

No. 88-03-00237.

United States Court of International Trade.

May 10, 1990.

Russotti & Barrison, Harvey Barrison, New York City, for plaintiff.

Stuart M. Gerson, Asst. Atty. Gen., Washington, D.C., Joseph I. Liebman, Atty. in Charge, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, New York City, and Al J. Daniel, Jr., for defendant.

OPINION

MUSGRAVE, Judge.

BACKGROUND

The plaintiff in this case is a surety for a general term import bond placed with the Customs Service ("Customs") by an importer and covering the import into the United States of two entries of merchandise at issue here. After liquidation of the merchandise, Customs sent to the plaintiff on August 11, 1986 a document titled "Formal Demand on Surety" stating that the principal debtor under the bond, the importer, had not paid the import duties due on the merchandise covered by the bond and requesting that the surety pay the amounts due pursuant to its obligation under the bond. Accompanying that document was a computer printout that provided the name and identification number of the importer, and listed for each overdue entry bill the entry number, bill number, bill date, billing location, "document date", amount due, and "age category" of the respective bills.

Under 19 U.S.C. § 1514(c)(2), a decision of a customs officer as to charges or exactions on imported merchandise is deemed conclusive against, inter alios, a surety on an import bond unless the affected surety files a protest of that decision within 90 days from the date of mailing by Customs of a "notice of demand for payment" in accordance with that statutory provision. The defendant asserts that the August 11 communication constituted a "notice of demand for payment" within the meaning of 19 U.S.C. § 1514(c)(2). The plaintiff contends that it did not.

The plaintiff filed a protest denying liability under the bond on July 31, 1987 in which it claimed that the bond had undergone material alterations and that its surety obligations under the bond were therefore discharged; the plaintiff also contested Custom's classification of the imported merchandise. The defendant argues that because that protest was filed well in excess of 90 days after Customs sent the August 11, 1986 communication, the protest was untimely filed and that consequently the determination by Customs of the plaintiff's liability is conclusive under 19 U.S.C. § 1514(c)(2). The plaintiff denies that the August 1986 communication was effective as a notice of demand for payment, alleging that it was instead a later communication from Customs, sent on July 8, 1987, that constituted a demand in accordance with the statute. Because the plaintiff's July 31, 1987 protest was filed within 90 days of this latter date, the plaintiff contends that its protest was timely filed under the statute and that Customs' refusal to consider the protest was improper.

The central issue in this case, then, is whether the August 1986 communication was a legally effective demand, so as to begin the 90-day period within which a protest was required to be filed, or was not effective, in which case the July 1987 demand began the 90-day period. The plaintiff contends that the 1986 communication was ineffective as a formal demand because Customs did not include with the communication "copies of the bond, entry papers and other relevant documents". Plaintiff's Brief at 6. The 1987 communication from Customs was accompanied by "copies of the respective bills, entries and bonds", Plaintiff's Exhibit A, and the plaintiff contends that it was therefore the later communication that constituted effective notice of demand for payment. Asserting that its protest was therefore timely filed, the plaintiff invokes the jurisdiction of this Court under 28 U.S.C. § 1581(a) and (i) to request that the Court find the merchandise to have been improperly classified and order its reliquidation in accordance with the plaintiff's proposed classification, and that the Court adjudge the bond at issue to be null and void due to the alleged alteration and hold the plaintiff to be consequently relieved of liability under the bond.

At the time the present action was filed, there were pending before this Court two other cases that involved the same or substantially the same issue presented here: American Motorists Insurance Co. v. Villanueva, 12 CIT ___, 706 F.Supp. 923 (1989) and Peerless Insurance Co. v. United States, 12 CIT ___, 703 F.Supp. 104 (1988). This Court therefore delayed rendering a decision in the instant action pending consideration by the Court of Appeals for the Federal Circuit of appeals from those related decisions. The Court of Appeals subsequently affirmed those decisions, upholding the liability of the surety in each case. American Motorists Insurance Co. v. Villanueva, 880 F.2d 409 (1989); Peerless Insurance Co. v. United States, 891 F.2d 298 (1989). Those decisions dictate the same result in the present case.

The Court finds that the August 1986 communication constituted effective notice of demand on the plaintiff for payment under the bond and that the plaintiff's July 1987 protest was therefore not timely filed with Customs. Consequently, the determination by Customs of the plaintiff's liability is conclusive under 19 U.S.C. § 1514(c)(2).

DISCUSSION

1581(a)

This Court has jurisdiction under 28 U.S.C. § 1581(a) over denials by Customs of protests filed under 19 U.S.C. § 1515. The subjects of and procedures for filing § 1515 protests are prescribed in 19 U.S.C. § 1514. Among the protest categories covered by the latter section is the type of protest filed by the plaintiff, and denied by Customs, in this case: protests of "(3) all charges or exactions of whatever character within the jurisdiction of the Secretary of the Treasury". Subsection (c)(2) of section 1514 establishes the 90-day time period, noted above, within which a protest provided for by that section must be filed. The standard for determining whether a purported notification of delinquency and demand for payment constitutes a formal "notice of demand for payment against a surety's bond" within the meaning of section 1514(c)(2) was stated by this Court in Old Republic Insurance Co. v. United States, 10 CIT 1, 625 F.Supp. 983 (1986). To qualify under that standard, a demand for payment must "provide a surety sufficient means of ascertaining the bond on which demand for payment is being made". Id. at 4-5, 625 F.Supp. at 986. The communication sent by Customs to the surety in Old Republic was similar to the one Customs mailed to the plaintiff in the present case. It included a computer printout listing numerous bonds on which payment from the surety was requested. An accompanying letter stated that the amounts due on the listed bonds had not been paid by the principals thereon after demands on the principals and that the addressee surety was an original promisor on the bonds; the letter then stated, "This is a formal demand upon you for immediate payment of the amounts noted on the enclosures hereto". Id. at 2, 625 F.Supp. at 984. The enclosed computer printout listed for each bond or bill the bill number, the billing date, the port of entry, and the amount due. The printout did not provide the names and addresses of the delinquent principals or the entry numbers for the bills and corresponding merchandise, nor did the communication include a copy of the relevant bonds. A subsequent communication from Customs to the surety identified the principals and entry numbers and included copies of the bonds.

The Court in Old Republic found, contrary to the government's contention there, that the earlier communication was not a sufficient notice of demand for payment against the bond at issue, because of the absence from that communication of the information noted above. Consequently, the Court held that the 90-day period within which the surety's protest had to be filed was not begun until the later communication which did include that information, and the Court therefore denied the government's motion to dismiss the surety's challenge of liability as untimely filed relative to the earlier communication.

The plaintiff surety in the instant action argues for the same result here based on similar reasoning. An examination of the Old Republic and subsequent opinions and of the particular facts at issue in this case, however, shows that a different result is required here.

In American Motorists, 706 F.Supp. 923, the plaintiff American Motorists was a surety for bonds on which 113 outstanding claims against principals had accrued. Customs sent to the surety several notices of delinquency and demands for payment of the outstanding amounts, to which the surety either did not respond at all or submitted a rambling, obfuscatory response. Thereafter, Customs, concluding that the response filed did not constitute an adequate defense to the claims, formally designated the company as delinquent and temporarily refused to accept new bonds from it.

The notices sent to the surety contained, inter alia, the relevant claim numbers; port name and code; broker number; name, address, and identification number of the principal; date of entry; entry number; description of merchandise; and payment amount. A copy of the bond and entry documents were included in some, but not all, of the notices. In seeking a preliminary injunction to prevent Customs from refusing to accept new bonds from it, the surety essentially argued that it had not received sufficient notice under 19 C.F.R. § 113.38(c)(4) (requiring that a surety be provided notice of delinquency and opportunity to respond before Customs may refuse to accept new bonds from the surety), because each and every notice sent by Customs did not contain, in addition to the above information, a copy of the relevant bonds. The Court dismissed...