MASSACHUSETTS TRUST. OF EAST. G. & F. ASSOC. v. United States, 6035.

• Decision Date: 08 January 1963
• Docket Number: No. 6035.,6035.
• Citation: 312 F.2d 214
• Parties: MASSACHUSETTS TRUSTEES OF EASTERN GAS AND FUEL ASSOCIATES, Libelants-Appellants, v. UNITED STATES of America, Respondent-Appellee.
• Court: U.S. Court of Appeals — First Circuit

312 F.2d 214 (1963)

MASSACHUSETTS TRUSTEES OF EASTERN GAS AND FUEL ASSOCIATES, Libelants-Appellants, v. UNITED STATES of America, Respondent-Appellee.

No. 6035.

United States Court of Appeals First Circuit.

January 8, 1963.

COPYRIGHT MATERIAL OMITTED

J. Franklin Fort, Washington, D. C., with whom James S. Eastham, William M. Brady, Boston, Mass., Israel Convisser and Kominers & Fort, Washington, D. C., were on the brief, for appellants.

Lawrence F. Ledebur, Attorney, Department of Justice, with whom Joseph D. Guilfoyle, Acting Asst. Atty. Gen., W. Arthur Garrity, Jr., U. S. Atty., and Morton Hollander and Leavenworth Colby, Attorneys, Department of Justice, were on the brief, for appellee.

Before WOODBURY, Chief Judge, and HARTIGAN and ALDRICH, Circuit Judges.

ALDRICH, Circuit Judge.

This libel and cross-libel in personam were brought to recover rental, or charter hire, alleged by libelants to have been overpaid, and by cross-libelant to have been underpaid, in connection with bare-boat charters of merchant vessels by the former United States Maritime Commission to Massachusetts Trustees of Eastern Gas and Fuel Associates, hereinafter in the singular, Eastern. Basically the case raises the question of whether a profit-sharing lease, with a sliding scale calling for payments surpassing 50 per cent of the net voyage profits in excess of 10 per cent was unlawful. The district court held it was not, dismissed the libel, and rendered a money judgment in favor of the government on its cross-libel. Eastern appeals.

The charters were executed pursuant to the Merchant Ship Sales Act of 1946, hereinafter the 1946 Act, the most pertinent portion of which is section 5(b).

"The charter hire for any vessel chartered under the provisions of this section shall be fixed by the Commission at such rate as the Commission determines to be consistent with the policies of this Act * * *, but, except upon the affirmative vote of not less than four members of the Commission, such rate shall not be less than 15 per centum per annum of the statutory sales price (computed as of the date of charter). * * *" 50 U.S.C.Appendix 1738 (b).

In addition, subsection (c) of this section adopted certain provisions of the Merchant Marine Act of 1936, hereinafter the 1936 Act, the presently most important of which is section 709(a).

"Every charter made by the Commission pursuant to the provisions of this title shall provide that whenever, at the end of any calendar year subsequent to the execution of such charter, the cumulative net voyage profits (after payment of the charter hire reserved in the charter and payment of the charterer\'s fair and reasonable overhead expenses applicable to operation of the chartered vessels) shall exceed 10 per centum per annum on the charterer\'s capital necessarily employed in the business of such chartered vessels, the charterer shall pay over to the Commission, as additional charter hire, one-half of such cumulative net voyage profit in excess of 10 per centum per annum: Provided, That the cumulative net profit so accounted for shall not be included in any calculation of cumulative net profit in subsequent years." 46 U.S.C. § 1199(a).

Further provisions will be referred to later.

The original agreement, under which a number of vessels were chartered, was executed November 7, 1946. It provided for two separate types of rental. One, described as the "Basic Charter Hire" was a flat daily, sometimes called monthly, payment at the rate of 15 per cent per annum of the statutory sales price, which was the minimum amount required by section 5(b). A further paragraph, entitled "Additional Charter Hire," provided for the payment of "Cumulative net voyage profit (in excess of 10% per annum on capital necessarily employed not in excess of $100 per day — 50%" (precisely in accordance with section 709(a)), but provided further that if the net voyage profit as defined exceeded $100 a day, 75 per cent of certain excess, and 90 per cent of any balance, hereinafter called the larger percentages, would be due. Eastern's operations until the termination of this charter on September 1, 1947, resulted in cumulative net voyage profits in excess of $100 per day. It paid the government some, but not all, of the larger percentages, and thereafter instituted this libel for their recovery. The government's cross-libel seeks payments of the balance.

In its brief Eastern asserts that the "`basic charter hire' was fixed by Maritime under section 5(b) of the 1946 act * * * and the `additional charter hire' was a profit-sharing arrangement fixed under section 709(a) of the Merchant Marine Act of 1936. * * *" (ital.suppl.) The charter makes no such specification. Eastern's assertion would seem to us, at first blush, merely an employment of the device of giving a dog a bad name and then hanging him for it. If in fact the only authorization for the profit-sharing arrangement was section 709(a), it would seem only too clear that the government's case must fall. Eastern's assertion that the Commission was in that position would seem merely an attempt to assume the point in issue. However, since other courts have taken precisely this approach, we must consider it.

In American Export Lines, Inc. v. United States, Ct.Cls., 1961, 290 F.2d 925, a case involving an apparently identical lease, the court said, at p. 927, "Section 5(b) of the Merchant Ship Sales Act of 1946 * * * provided for a basic charter hire¹ to be fixed at such rate as the Commission determined to be consistent with the policies of the Act, but at not less than 15 percent of the statutory sales price * * *." 290 F.2d at 927. The court thereafter stated as one of the issues in the case, "Was the Commission authorized under section 709(a) of the Merchant Marine Act of 1936, to charge additional charter hire on a sliding scale of 50, 75 and 90 percent of the cumulative net voyage profits * * *?" It proceeded, "As a subsidiary question, was the additional charter hire in excess of 50 per cent of the cumulative net voyage profits a part of the basic charter hire under section 5(b) of the Merchant Ship Sales Act of 1946?" 290 F.2d at 928.

The court concluded without difficulty, citing Dichman, Wright & Pugh, Inc. v. United States, D.C.S.D.N.Y., 1956, 144 F.Supp. 922, and United States v. East Harbor Trading Corp., D.C.S.D.N.Y., 1960, 190 F.Supp. 245, that section 709 (a) did not authorize the charging of more than 50 per cent of the net voyage profits. With this we quite agree, as did the court below. Then, with respect to the so-called subsidiary question, whether these larger amounts were inserted in the charter pursuant to the Commission's authority under section 5(b), the court said, "It may be the charter could have provided this * * * but the fact is that it did not so provide." Having thus decided that all that was done under section 5(b) was fixing 15 per cent as the "basic charter hire," the court concluded that the Commission had no further authority except what was conferred upon it by section 709(a), which section, as it had already decided, was insufficient to warrant the imposition of the larger amounts.

In Dichman, Wright & Pugh, Inc. v. United States, supra, cited by the court in American Export Lines, the court went further, in a dictum, conceding rather than stating as a "may be," that the larger amounts could legally have been imposed under section 5(b) had the Commission in fact done so. However, like American Export, the court then examined the agreement and concluded it had not done so. Finally,^1½ in United States v. East Harbor Trading Corp., supra, on a motion for summary judgment, the court adopted this dictum of the Dichman case, but held that it was a question for further proceedings to determine which section of the statute the government had in fact proceeded under.²

In the present case the district court, after reviewing these earlier decisions, dismissed their approach as a "recondite technicality." We must agree. The charter in no way stated that one of its paragraphs was the product of, or was inserted by virtue of, one section of the statute and the other of the other. The charter was an integrated agreement that made no reference to the statute in any particular. The Commission had a single, overall obligation to fix a charter hire.³ It was but natural to place the formula for computing fixed, and the formula for computing contingent, rental in two separate paragraphs. Simply because the charter described the fixed charge as the "basic charter hire" and the Court of Claims⁴ interpreted section 5(b) as "basic charter hire," and because the second paragraph was entitled "Additional Charter Hire" (in this case words used in section 709(a), but equally descriptive and applicable to the charter provision whether within section 709(a) or not) the court concluded that the Commission had acted outside of its authority, although conceding it might have provided exactly this, so far as substance was concerned, had it used some other form of expression.

To say that the Commission stultified itself by its choice of format is to elevate semantics above substance. Appellate courts frequently affirm district courts for being right, but for the wrong reason, and we may assume that district courts prefer this to not being affirmed at all. But the courts in the first two of these cases have reversed the Commission outright, and the third has questioned it, not for reaching an impermissable result, nor because it gave a wrong reason, but merely because they chose to think that it had one. We cannot accept this approach. If a commission or other body is doing something it would be authorized to do, the presumption should be that it was acting within its authority. With all due respect, we think these courts have lost sight of this principle in a forest of pedagogy.

Eastern contends that it appears of record that the Commission in fact relied upon section...