Massachusetts Trustees of Eastern Gas and Fuel Associates v. United States

• Decision Date: 25 May 1964
• Docket Number: No. 137,137
• Citation: 377 U.S. 235,12 L.Ed.2d 268,84 S.Ct. 1236
• Parties: MASSACHUSETTS TRUSTEES OF EASTERN GAS AND FUEL ASSOCIATES, Petitioners, v. UNITED STATES
• Court: U.S. Supreme Court

377 U.S. 235

84 S.Ct. 1236

12 L.Ed.2d 268

MASSACHUSETTS TRUSTEES OF EASTERN GAS AND FUEL ASSOCIATES, Petitioners,

v UNITED STATES.

No. 137.

Argued Feb. 24, 1964.

Decided May 25, 1964.

J. Franklin Fort, Washington, D.C., for petitioner.

Wayne G. Barnett, Washington, D.C., for respondent.

Mr. Justice HARLAN delivered the opinion of the Court.

This case presents the claim that the Maritime Commission exceeded its statutory authority under § 5 of the Merchant Ship Sales Act of 1946, 60 Stat. 43, as amended, 50 U.S.C.App. § 1738, by

(1) including in its contract with petitioners¹ for the bareboat charter of ships a sliding scale that required payment to the Government of more than 50% of certain excess profits and

(2) using the threat of termination of the character arrangement to compel agreement to divide the calendar year 1947 into separate periods for the purpose of computing such profits.

Because a considerable number of suits are pending in the lower courts which will turn on resolution of these issues, and because of a conflict among the circuits as to the first issue,² we brought the case here. 375 U.S. 809, 84 S.Ct. 46, 11 L.Ed.2d 47. For reasons to follow, we affirm the judgment below upholding the power of the Commission to act as it did.

I.

The Merchant Marine Act, 1936, 49 Stat. 1985, as amended, 46 U.S.C. §§ 1101—1294, provided for the charter of government vessels by the Maritime Commission to private enterprise. Section 709(a) of that Act, 49 Stat. 2010, incorporated by reference in the 1946 Act, § 5(c), 60 Stat. 43, provided:

'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.'

During World War II, operations of the private merchant marine were disrupted and its fleets reduced by losses and requisition. Meanwhile many vessels were constructed for government operations. Congress by means of the Merchant Ship Sales Act of 1946, supra, sought to ensure post war rehabilitation of the private merchant marine by having the Maritime Commission sell or charter surplus war-built government vessels. The Commission was instructed 'so far as practicable and consistent with the policies of this Act (to), give preference to * * * applicants to purchase' over applicants to charter.³ Section 5(b), 60 Stat. 43, of the Act set out standards for the Commission to follow in chartering vessels:

'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). * * * (R)ates of charter hire fixed by the Commission on any war-built vessel which differ from the rate specified in this subsection shall not be less than the prevailing world market charter rates for similar vessels for similar use as determined by the Commission.'

As already indicated, § 5(c) made the provisions of § 709(a) of the Merchant Marine Act applicable to charters under the 1946 Act.

Prior to the Commission's exercising of its authority under the 1946 Act, the War Shipping Administration chartered ships to private interests on an interim basis; it followed the lines of the 1946 Act, specifying a 'basic charter hire' which equaled 15% per annum of the statutory sales price and an 'additional charter hire' of one-half of any net profits in excess of a 10% annual return on the charterer's capital employed in the operation of the chartered vessels. During this period a Special Charter Committee considered the best way to implement the provisions of the 1946 Act. Existing rentals were believed to be too low and higher rentals were thought necessary to promote the statutory policy of encouraging sales rather than charters. A majority of the Committee preferred a higher profit-sharing rate than that provided in § 709(a) to any additional firm rental, since the former would permit both the Commission and charterers to adapt to a fluctuating world market, without imposing a greater risk of loss on the charterers. The Maritime Commission adopted this basic suggestion and decided to charge, in addition to the firm rental of 15% of the sales price, 50% of the average net voyage profits in excess of 10% of the charterer's capital necessarily employed up to the first $100 of profits per day, 75% of the next $200 per day, and 90% of such profits above $300 per day.

The Commission adopted a standard Ship Sales Act charter ('SHIPSALESDEMISE 303') incorporating these provisions, and Eastern chartered 10 vessels under such a contract dated October 1, 1946. Market conditions allowed high profits to be earned in the first eight months of 1947. The Commission decided to terminate existing charters, as it was privileged to do under the contract on 15 days' notice, but agreed not to terminate if a charterer accepted an Adden um to its contract providing, among other things, for a separate calculation of profit-sharing rentals for the period commencing September 1, 1947. Eastern signed such an Addendum and was not able, as a result, to offset losses incurred in the latter part of 1947 against the excess profits earned before September 1.

Eastern did not attempt to litigate its rights under the 1946 Act until it had completed all the payments required by the charter agreement. In 1955 it filed this in personam libel for recovery of money paid pursuant to the profits-sharing provisions and the 1947 'Foreign Trade Addendum.' It asserted that § 709(a) sets a maximum as well as a minimum rate of profit sharing and precluded the Commission from altering that rate under § 5(b). It claimed further that, even if such power existed, the Commission's apparent reliance on § 709(a) rather than § 5(b) renders these charter provisions nugatory. Finally, it argued that the 1947 Addendum conflicted with the statutory mandate of § 709(a) for calendar year accounting of statutory profits, and that the Commission abused its termination privilege by threatening to terminate the charter agreements of those refusing to accept the split-year profit-sharing arrangement. All of these contentions were rejected by the owner court, the Court of Appeals affirming the District Court, 202 F.Supp. 297; 210 F.Supp. 822, in a thorough opinion, 312 F.2d 214.

Preliminarily we observe that in the view we take of that case we find it unnecessary to consider the Government's alternative ground for affirmance: that the doctrine of waiver precludes Eastern from challenging the terms of its charter agreement because once having signed the agreement and benefited from the charter, Eastern cannot seek to overturn provisions of the contract that it regards as unfavorable.⁴

II.

The basic statutory question is whether the Commission, in light of § 709(a), had authority under § 5(b) to impose the sliding scale of additional hire, and if, so, whether its failure to articulate the particular statutory basis for its action vitiates the validity of the profit-sharing terms of the rate set. We approach this problem with three general interpretative guides, all of which point in the Government's favor. Some weight is due to the consistent interpretation of the Maritime Commission, the agency entrusted with administration of the statute. See, e.g., United States v. Zucca, 351 U.S. 91, 96, 76 S.Ct. 671, 100 L.Ed. 964; Kern River Co. v. United States, 257 U.S. 147, 153—154, 42 S.Ct. 60, 66 L.Ed. 175. The successive extensions by Congress of the Commission's authority to charter vessels,⁵ in the face of the Commission's sliding-scale practice, are certainly not controlling, particularly since it does not appear that Congress ever advertently addressed itself to the claim of invalidity of the sliding scale; they do, however, strengthen to some extent the Commission's conclusions regarding its chartering powers. In 1947, following subcommittee hearings,⁶ the House Committee on Merchant Marine and Fisheries, H.R.Rep. No. 725, 80th Cong., 1st Sess. (1947), recommended an extension, subsequently enacted, 61 Stat. 190, 191, of the Commission's chartering authority 'with the understanding that the basic rates for the charter of dry-cargo vessels and recapture rates will be immediately increased, thus encouraging the purchase rather than charter of these ships.' P. 2. Congressional reports prior to another extension, H.R.Rep. No. 60, 81st Cong., 1st Sess., 2 (1949); S.Rep. No. 55, 81st Cong., 1st Sess., 2 (1949), stated: 'It is contemplat d that the Maritime Commission will continue to sell, charter, and operate ships in accordance with existing procedures and without (according to the House Report) any change in its present policy.' (The Senate Report reads 'any changes in policies now effective.')

Further, in light of the congressional policy to encourage the sale of ships, contained in § 7(a) of the 1946 Act, supra, there is an initial presumption that Congress intended that the Commission should have power to establish chartering terms commensurate with making more attractive purchase, instead of charter,...