E.C. McAfee A/C Bristol Metal Industries of Canada Ltd. v. U.S.

• Decision Date: 23 October 1987
• Docket Number: No. 87-1209,87-1209
• Citation: 832 F.2d 152
• Parties: , 6 Fed. Cir. (T) 16 E.C. McAFEE A/C BRISTOL METAL INDUSTRIES OF CANADA LTD., Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 152

832 F.2d 152

9 ITRD 1455, 6 Fed. Cir. (T) 16

E.C. McAFEE A/C BRISTOL METAL INDUSTRIES OF CANADA LTD., Plaintiff-Appellee, v. The UNITED STATES, Defendant-Appellant.

Appeal No. 87-1209.

United States Court of Appeals, Federal Circuit.

Oct. 23, 1987.

Michael P. Maxwell, Commercial Litigation Branch, Dept. of Justice, New York City, argued for defendant-appellant. With him on brief were Richard K. Willard, Asst. Atty. General, David M. Cohen, Director and Joseph I. Liebman, Atty. in Charge, International Trade Field Office.

James Caffentzis, Fitch, King & Caffentzis, New York City, argued for plaintiff-appellee.

Before NIES, Circuit Judge, COWEN, Senior Circuit Judge, and BISSELL, Circuit Judge.

NIES, Circuit Judge.

The United States appeals from a final order of the United States Court of International Trade in McAfee v. United States, 650 F.Supp. 1026 (CIT 1986), which ordered the government to refund custom duties to "E.C. McAfee a/c Bristol Metal Industries of Canada, Ltd." in the amount of $43,438.56 plus appropriate interest. The government challenges the trial court's jurisdiction to issue the order and its refusal to allow the government to offset the amount of the refunds against duties owed by the customhouse broker, E.C. McAfee, which were not for the account of Bristol Metal. We affirm.

I

This action arises from importations of aluminum grindings. Entry documents submitted to Customs for such merchandise identified the "importer of record" as "E.C. McAfee for the account of Bristol Metals Ltd." McAfee was the customhouse broker for the aluminum imports of the importer, Bristol Metal Industries of Canada, Ltd. Customs classified the merchandise as "articles" of aluminum under item 657.40, Tariff Schedules of the United States (TSUS), and assessed duties, which were paid, in the amount of $43,438.56. Bristol Metal retained counsel to protest the classification on the ground that Customs should have classified the aluminum as duty-free "scrap" under item 870.60, TSUS. Customs denied the protest, and an action was filed in the Court of International Trade, styled "E.C. McAfee (A/C Bristol Metal Industries of Canada Ltd.)," hereinafter "McAfee A/C Bristol."

Before trial, the parties settled, with the government accepting plaintiff's position. The trial court then entered a judgment in favor of "McAfee A/C Bristol," and ordered Customs to reliquidate the entries under the duty-free provision. In compliance with that order, Customs reliquidated the entries. Customs did not, however, pay over the amount of the refunds which resulted from reliquidations. Rather, it claimed a right under customs regulations to offset that amount against outstanding bills issued to McAfee on entries made by McAfee on behalf of persons other than Bristol. The attorneys of record in the suit demanded payment unless the outstanding debt was that of "McAfee A/C Bristol." Upon the government's refusal to pay, counsel filed a motion in the trial court in the name of the importer, Bristol Metal, for an order requiring the government to pay over the refunds plus interest.

The trial court held that it had jurisdiction to rule on the motion, stating the issue to be "whether [the] refund is available for set-off by Customs for monies owed to it by McAfee, the customhouse broker, on transactions other than Bristol's." 650 F.Supp. at 1028. Applying the general principle that one may not set off an agent's own obligation against a debt one owed to the principal (F. Mechem, A Treatise on the Law of Agency Secs. 2491-92 (2d ed. 1914)), the court granted Bristol's motion and ordered the government to refund the amount of the judgment to the plaintiff, "E.C. McAfee A/C Bristol Metal Industries of Canada, Ltd."

II

A. Jurisdiction

The government asserts that the trial court lacked jurisdiction over Bristol's motion on two theories. One theory is that Bristol lacked standing to file the motion because it is not a party to the action. The government urged that the motion is one to amend the judgment, in effect, to make Bristol the plaintiff. As such a motion, it was filed too late. Court of International Trade Rule 59(e) (thirty days to file motion to amend or alter judgment). We reject this argument.

The relief granted by the trial court was to the precise entity named as plaintiff throughout the proceedings, "McAfee A/C Bristol." Whether the motion was brought in the name of "Bristol" or "McAfee A/C Bristol" is of no substantive consequence here inasmuch as the relief was given to the named plaintiff. If there is a question that Bristol could not itself file the motion, it is purely technical. At most, the name on the motion needed to be changed, not the party which was afforded relief in the original judgment. Thus, the motion was not one to amend the judgment and was not untimely.

As a second theory contesting jurisdiction, the government asserts that because Bristol personally filed the motion, the motion must be considered a contractual claim for breach of the settlement agreement, and that the trial court lacks jurisdiction over such a claim. The preceding analysis also negates that theory. The motion was not a claim for breach of contract by Bristol, but one to enforce the court's original judgment in favor of "McAfee A/C Bristol." Thus, the government's jurisdictional theories fail.

B. Merits

With respect to the merits of Bristol's motion, the government argues that the trial court ignored the following regulation under which it was required to set off the refund against duties owed by McAfee:

Sec. 24.72 Claims; set-off.

When an importer of record or other party has a judgment or other claim allowed by legal authority against the United States, and he is indebted to the United States, either as principal or surety, for an amount which is legally fixed and undisputed, the district director shall set off so much of the judgment or other claim as will equal the amount of the debt due the Government.

19 C.F.R. Sec. 24.72 (1987). Thus, the government asserts that we are faced with the legal issue of interpretation of the regulation. In contrast, appellee argues that we may not overturn the trial court's decision not to allow the setoff unless the trial court "abused its discretion." The latter argument is easy to dispose of and we address it first.

It is correct that in some instances a court may disallow a setoff as a matter of discretion. However, a necessary predicate to any setoff is that cross-obligations exist between the parties. See, e.g., Fuller v. Fasig-Tipton Co., 587 F.2d 103, 106 (2d Cir.1978). Only then might the court determine, as a matter of discretion, not to allow the setoff. Cf. Melamed v. Lake County Nat'l Bank, 727 F.2d 1399, 1404 (6th Cir.1984) (allowance of setoff in bankruptcy proceeding within trial court's discretion); see also In re Diplomat Elec., Inc., 499...