Baltimore Mail SS Co. v. United States

• Decision Date: 02 April 1935
• Docket Number: No. 3802.,3802.
• Parties: BALTIMORE MAIL S. S. CO. v. UNITED STATES.
• Court: U.S. Court of Appeals — Fourth Circuit

76 F.2d 582 (1935)

BALTIMORE MAIL S. S. CO. v. UNITED STATES.

No. 3802.

Circuit Court of Appeals, Fourth Circuit.

April 2, 1935.

Stuart S. Janney and Charles Markell, both of Baltimore, Md. (William A. Grimes, of Baltimore, Md., on the brief), for appellant.

Cornelius Mundy, Sp. Asst. to U. S. Atty., of Baltimore, Md., and Oliver P. M. Brown, Sp. Counsel, United States Shipping Board Bureau, of Washington, D. C. (Bernard J. Flynn, U. S. Atty., of Baltimore, Md., George C. Sweeney, Asst. Atty. Gen., and William S. Ward, Atty., Department of Justice, of Washington, D. C., on the brief) for the United States.

Before PARKER and NORTHCOTT, Circuit Judges, and GLENN, District Judge.

GLENN, District Judge.

This is an appeal from a judgment in favor of the United States in a suit brought by the appellant, Baltimore Mail Steamship Company, to recover alleged excessive interest paid to the United States. The alleged excessive interest was paid on a government loan made through the agency of the United States Shipping Board to the appellant company for the reconstruction of a vessel bought from the United States. The sale of the vessel and the enabling loan were in keeping with the policy of the government to aid American steamship companies, especially when the vessels purchased were to be used in foreign trade. The court below, trying the case without jury, ordered judgment for the defendant, United States of America. The court had in the first instance overruled a demurrer to the declaration which demurrer raised the question of jurisdiction. On the merits, however, the court found in favor of the United States and hence the appeal is here raising questions both as to the jurisdiction and as to the merits.

The suit was brought under the Tucker Act (Act of March 3, 1887, as amended, U. S. C., title 28, § 41, subd. 20, 28 USCA § 41 (20), for the recovery of an alleged overpayment of interest on a loan made to appellant by the United States Shipping Board under authority of section 11 of the Merchant Marine Act of June 5, 1920, 41 Stat. 993, 46 U. S. C. § 870, as amended by the Act of May 22, 1928, § 301 (a), 45 Stat. 689, 690, 691 (see 46 USCA § 870), for the reconstruction of appellant's vessel, the Steamship City of Baltimore. The claim of overpayment is predicated on the difference between an amount of interest paid by appellant, calculated at the rate of 3 per cent., the rate specified in the agreement of loan between appellant and the Shipping Board, and an amount calculated at ½ of 1 per cent., which appellant contends is the proper rate under the provisions of the act, notwithstanding the 3 per cent. rate specified in the loan agreement. The case involves the one interest payment made on December 5, 1931, for the period from June 28, 1931, to December 14, 1931, in an amount of $17,333.69. Appellant contends that the amount properly payable was $2,888.62. The amount claimed was reduced to $10,000, the jurisdictional limit of the District Court.

It is important to note that no issue other than the claim for recovery of excess interest is raised by the plaintiff's declaration or by any of the pleadings in the case. The suit is exclusively one for the recovery of excess interest, paid under protest according to the appellant's contention. The plaintiff successfully contended in the District Court that the Tucker Act gave the District Court jurisdiction in this suit. The plaintiff's contentions as to jurisdiction are summed up in the statement that under the Tucker Act the District Court had jurisdiction of the plaintiff's claim which was founded both upon a law of Congress (Merchant Marine Act 1920 amended by Merchant Marine Act 1928) and also upon contracts (the loan agreement, first mortgage, and notes evidencing the relations between the parties).

The section of the Merchant Marine Act which deals with the question of interest is as follows: "(d) All such loans shall bear interest at rates as follows, payable not less frequently than annually: During any period in which the vessel is operated exclusively in coastwise trade, or is inactive, the rate of interest shall be as fixed by the board, but not less than 5¼ per centum per annum. During any period in which the vessel is operated in foreign trade the rate shall be the lowest rate of yield (to the nearest one-eighth of 1 per centum) of any Government obligation bearing a date of issue subsequent to April 6, 1917 (except postalsavings bonds), and outstanding at the time the loan is made by the board, as certified by the Secretary of the Treasury to the board upon its request. The board may prescribe rules for determining the amount of interest payable under the provisions of this paragraph." Act May 22, 1928, c. 675, § 301 (a), 45 Stat. 690.

In the loan agreement covering the sale of the particular vessel involved in this suit, the Steadfast (now the City of Baltimore), the Shipping Board over the plaintiff's protest inserted the following paragraph: "Sec. 19. The permanent notes shall be of equal amounts and shall bear interest payable semi-annually as follows: During any period in which the vessel is operated exclusively in coastwise trade or is inactive, the rate of interest shall be 5¼%; during any period in which the vessel is operated in foreign trade, the rate shall be the minimum rate of three (3) per centum per annum or such higher rate as shall be fixed by the Board at the time of the completion of the work on the vessel and redelivery thereof by the Builder to the Owner under the provisions of the Merchant Marine Act, 1928. The Board may prescribe rules for determining the amount of interest payable under the provisions of this paragraph." (Italics supplied.) (R. 27.)

The 3 per centum per annum rate as contained in this section 19, the loan agreement, was then inserted in the notes executed by the appellant. The permanent notes and the preferred mortgage were dated June 15, 1931, and contained provisions fixing the rate of interest at 3 per centum. The contention was made by the appellant during all the preliminary negotiations that the rate of interest on the loan for the time that the vessel was engaged in foreign trade should be fixed according to the formula of lowest rate of yield as understood by the Treasury Department, i. e. the lowest rate of yield received by a purchaser of government obligations on his investment, irrespective of how short a time such obligations may have to run at the time of their purchase.

The contest on trial centered chiefly around the construction of the section of the statute fixing the rate of interest to be charged on the long term loan. For many reasons, the enumeration and discussion of which would carry us over many pages, we think that the learned District Judge came to the correct conclusions as to the construction of the controlling section of the statute. His findings of fact, conclusions of law, and opinion present fully his views in this regard. His stated views thereabout find strong support in reason and authority. Cogent reasoning and well-accepted principles of statutory construction abundantly sustain the correctness of his decision. In addition to this, the question would arise, if we were at liberty to consider the case upon the merits, whether the plaintiff is not estopped by the terms of its contract from questioning the correctness of the interest paid by it. While the statute prescribes the rate at which loans shall be made by the Shipping Board, the fact remains that the plaintiff, as a condition of obtaining the loan, agreed to pay the rate of interest specified in its contract; and the question arises whether it can accept the loan and repudiate the conditions upon which it was made.

We cannot pass upon any of these questions affecting the merits, however, for the reason that in our opinion there was no jurisdiction in the court below to entertain the suit under the Tucker Act or any other statute. It is not a suit to enforce a liability created by statute, nor is it a suit upon a contract either express or implied in fact. It is a suit to recover interest paid the United States on the theory that such interest was unlawfully exacted of plaintiff; and proceeds solely upon the theory that there is a duty imposed by law to repay the monies thus wrongfully collected. In other words, recovery is sought upon the theory of quasi contract, or contract implied in law. The Merchant Marine Act does not say a word anywhere about the duty of the government to repay any interest collected at an excess rate. Neither statute nor term of the express contracts gives basis or support to the plaintiff's right to recover this interest. The legal fiction of a contract implied in law is absolutely essential to and constitutes the only basis of plaintiff's claim to recover in this suit.

This question of jurisdiction must always be viewed in light of the well-accepted premise that a suit will not lie against the United States unless clearly authorized by statute. It is well understood that the Tucker Act has been called a great remedial statute and that it should not be looked upon with an evil eye. The late Justice Holmes has pointed out that courts should give a broad interpretation to this "great remedial statute" and that it is not to be "read with an adverse eye." But, at the same time, when we strip the present suit at law of all background and get down to the real essence of the cause of action stated, we think that it is a suit against the United States...