United States v. Best

• Decision Date: 19 May 1954
• Docket Number: No. 4822.,4822.
• Citation: 212 F.2d 743
• Parties: UNITED STATES v. BEST et al.
• Court: U.S. Court of Appeals — First Circuit

212 F.2d 743 (1954)

UNITED STATES v. BEST et al.

No. 4822.

United States Court of Appeals First Circuit.

May 19, 1954.

John J. Cound, Atty., Department of Justice, Washington, D. C. (Warren E. Burger, Asst. Atty. Gen., Jacob S. Temkin, U. S. Atty., Providence, R. I., and Melvin Richter, Atty., Department of Justice, Washington, D. C., with him on the brief), for appellant.

Edward C. Park, Boston, Mass., for appellees.

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

MAGRUDER, Chief Judge.

On December 31, 1952, the United States filed in the district court a complaint against the members of a partnership under § 403(c) of the Renegotiation Act of April 28, 1942, as amended, 56 Stat. 245, 983, 57 Stat. 565, 58 Stat. 82, 50 U.S.C.A.Appendix, § 1191(c). Recovery of judgment was sought in the amounts of the net principal sums constituting "excessive profits" made by the defendants in the years 1943 and 1944, plus interest at 6 per cent from the respective dates fixed in the formal demands for payment issued by the War Contracts Price Adjustment Board. It is now conceded that the partnership, as a subcontractor under government contracts, was subject to renegotiation pursuant to the Act.

The answer of the defendants admitted liability for the net principal sums claimed, $7,129.20 for 1943, and $6,944.06 for 1944, or a total of $14,073.26; and consented to judgment for the plaintiff in said amount of $14,073.26 "together with such interest from such dates and to such dates as the Court may deem reasonable under the circumstances". After hearing, the district court on June 10, 1953, entered judgment for the plaintiff against the defendants jointly and severally, in the aggregate principal amount of $14,073.26 "plus interest at the rate of 3 percent per annum on the amount of $7,129.20 from August 11, 1950 to June 9, 1953, plus interest at the rate of 3 percent per annum on the amount of $6,944.06 from April 16, 1946 to June 9, 1953, plus Court costs." Plaintiff appealed from this judgment of June 10, 1953, on the ground that the district court erred in not allowing interest at 6 percent on the sum of $7,129.20 beginning to run from October 18, 1945 (the date fixed in the demand for payment issued by the Board in the matter of excessive profits for the year 1943), and in not allowing interest at 6 percent on the sum of $6,944.06.¹

Therefore the point to be decided on the present appeal is a narrow one, involving only the question of interest. Appellant's principal contention is that the district court erred in not applying the mandatory provision of a regulation issued by the War Contracts Price Adjustment Board. The issue has little, if any, practical public importance for the future, for in the Renegotiation Act of 1951 Congress has directly fixed the rate of interest and the time from which interest accrues. 65 Stat. 13-14, 50 U.S.C. A.Appendix, § 1215(b) (2).

The original Renegotiation Act made no statutory provision for the allowance of interest, nor did it contain any authorization for the issuance of administrative regulations. 56 Stat. 245. The amendment of February 25, 1944, 58 Stat. 78, which created the War Contracts Price Adjustment Board as the administrative agency, granted to the Board specific authority to issue regulations on certain limited subjects, not including interest. It conferred no general authority to issue such regulations as the Board might deem appropriate to effectuate the purposes of the Act. Nevertheless, the Board, on October 23, 1944, issued a regulation as follows, 9 F.R. 12847:

"Interest at the rate of 6% per annum accrues upon the amount determined as excessive profits to be eliminated less the tax credit, if any, from and after the date fixed in the demand for payment."

It seems clear that this regulation as to interest was not authorized by the Act. Nor may the courts give weight to it as being in effect an interpretation of the Act by the agency charged with its administration, for the regulation could not by any stretch be viewed as interpreting any ambiguous statutory language.

Most of the courts of appeals which have had occasion to rule on the point have held that this regulation of the Board as to interest is invalid. United States v. Bonnell, 9 Cir., 1950, 180 F.2d 145, 148; United States v. Abrams, 6 Cir., 197 F.2d 803, certiorari denied 1952, 344 U.S. 855, 73 S.Ct. 93, 97 L.Ed. 664; United States v. Wissahickon Tool Works, Inc., 2 Cir., 1952, 200 F.2d 936, 942; United States v. Edward Valves, Inc., 7 Cir., 1953, 207 F.2d 329, 333; Ring Construction Corp. v. United States, 8 Cir., 1954, 209 F.2d 668, 673-674. See also Sampson Motors, Inc., v. United States, 9 Cir., 1948, 168 F.2d 878, 879; United States v. United Drill & Tool Corp., 1950, 87 U.S.App.D.C. 236, 183 F.2d 998; United States v. Star Construction Co., Inc., 10 Cir., 1951, 186 F.2d 666, 669. Apparently the only circuit which has expressed a view to the contrary is the Third Circuit, in United States v. Philmac Mfg. Co., 1951, 192 F. 2d 517. That decision laid stress upon the fact that, at the hearing in 1945 on a bill to extend the termination date of the Renegotiation Act, various persons called the attention of the committee to the existence of the aforesaid regulation establishing interest at the rate of 6 percent; yet Congress enacted the extension on June 30, 1945, 59 Stat. 294, 50 U.S.C.A.Appendix, § 1191(h), without doing anything about it. Thus, it is argued, the Congress gave tacit approval to the asserted exercise of power by the Board in prescribing the interest rate. This is a type of argument which, we think, is often overworked to an unrealistic degree. It is quite speculative what attention, if any, the members of the committee gave to the item of information brought out at the hearing with reference to the existence of the particular regulation. No comment on the matter was contained in the committee report to the full membership of the House. After all, the purpose of the brief bill was not to make a thoroughgoing revision of the Renegotiation Act but merely to amend one subsection so as to extend the termination date for one year. Considering the limited scope of the bill and the legislative history, we are not prepared to infer that the Congress intended, in passing the Act of June 30, 1945, to give its blessing to this interest regulation which had been issued by the Board. Further, it is significant to note that the Congress did not specifically deal with the subject of interest until it enacted the Renegotiation Act of 1951, 65 Stat. 7, 50 U.S.C.A.Appendix, §§ 1191, 1211 et seq. That Act for the first time granted to the Board a general power to "make such rules, regulations, and orders as it deems necessary or appropriate to carry out the provisions of this title." § 109. But it did not thereby give the Board power to fix the interest rate by regulation; for in § 105(b) (2) the Congress wrote in a flat statutory provision for interest at the rate of 4 percent per annum. The 1951 Act has no retroactive application to the case at bar.

When the Sixth Circuit decided the later case of United States v. Abrams, 1952, 197 F.2d 803, it expressly declined to follow United States v. Philmac Mfg. Co., supra. The United States applied for a writ of certiorari in the Abrams case, claiming a conflict with this decision of the Third Circuit; nevertheless the Supreme Court declined to review the case, 1952, 344 U.S. 855, 73 S.Ct. 93, 97 L.Ed. 664. We think we should follow the great weight of authority in this matter, in accordance with the reasoning persuasively set forth in the opinion by Judge Allen in United States v. Abrams.

In the absence of any statutory provision or valid regulation prescribing the rate of interest to be allowed to the government in suing to recover "excessive profits", it has been generally agreed that interest may be allowed by the court as a discretionary matter. See the cases cited above. This conclusion is in accordance with Billings v. United States, 1914, 232 U.S. 261, 34 S.Ct. 421, 58 L.Ed. 596; Royal Indemnity Co. v. United States, 1941, 313 U.S. 289, 61 S.Ct. 995, 85 L.Ed. 1361. In Board of Commissioners of Jackson County v. United States, 1939, 308 U.S. 343, 352, 60 S.Ct. 285, 289, 84 L.Ed. 313, the Court said: "The cases teach that interest is not recovered according to a rigid theory of compensation for money withheld, but is given in response to considerations of fairness. It is denied when its exaction would be inequitable." Whether the district court in the present case would have been justified in denying all interest we do not have before us, since the defendants did not take an appeal. But we are clear, and we hold, that under the circumstances presented in this record the district court committed no abuse of discretion in failing to make a larger allowance of interest than it did.

The statutory liability of contractors and subcontractors to pay over to the United States their "excessive profits", as defined in the Renegotiation Act, may perhaps be described as an indebtedness due the United States. But it is certainly not an ordinary debt, and it is not at the outset a debt liquidated in amount. The Act laid down the procedure for determining the amount due. Subsection (c) provided that, if the Board did not make an agreement with the contractor or subcontractor with respect to the elimination of excessive profits received, it should "issue and enter an order determining the amount, if any, of such excessive profits, and forthwith give notice thereof by registered mail to the contractor or subcontractor." 58 Stat. 82. Subsection (e) provided that any contractor or subcontractor aggrieved by such order of the Board might within 90 days file a petition with The Tax Court of the United States for a redetermination thereof. "Upon such filing such cou...