United States v. CALIFORNIA EASTERN LINE

• Decision Date: 16 February 1956
• Docket Number: No. 11448.,11448.
• Citation: 231 F.2d 754
• Parties: The UNITED STATES of America and The Secretary of Commerce, as Successor to the Chairman of the United States Maritime Commission, Petitioners, v. CALIFORNIA EASTERN LINE, Inc., Respondent.
• Court: U.S. Court of Appeals — District of Columbia Circuit

231 F.2d 754 (1956)

The UNITED STATES of America and The Secretary of Commerce, as Successor to the Chairman of the United States Maritime Commission, Petitioners, v. CALIFORNIA EASTERN LINE, Inc., Respondent.

No. 11448.

United States Court of Appeals District of Columbia Circuit.

Argued on Remand from Supreme Court, May 18, 1955.

Decided February 16, 1956.

Mr. Frederick N. Curley, Atty., Dept. of Justice, with whom Mr. Edward H. Hickey, Atty., Dept. of Justice, was on the brief, for petitioners.

Mr. Samuel D. Slade, Atty., Dept. of Justice, also entered an appearance for petitioners.

Mr. Robert E. Kline, Jr., Washington, D. C., for respondent.

Before PRETTYMAN, WASHINGTON and DANAHER, Circuit Judges.

DANAHER, Circuit Judge.

The controversy here presented arose under the Renegotiation Act, as amended.¹ The Tax Court by its decision and order of February 26, 1952, ruled that there was presented no renegotiable contract within § 403(c) (1). See 1952, 17 T.C. 1325. When the Government filed its petition for review, we were first confronted with a jurisdictional question because of lack of the proper parties. See 1953, 92 U.S.App.D.C. 207, 204 F.2d 398. When next before us, we dismissed the petition for review for lack of jurisdiction, for reasons stated in 1954, 93 U.S.App.D.C. 289, 211 F.2d 635. Rehearing en banc by this court having been denied, certiorari was granted, 1954, 348 U.S. 810, 75 S.Ct. 59, 99 L.Ed. 639, and the Court thereafter held that "the Tax Court's decision in this case is * * * subject to the normal type of review authorized by § 1141." United States v. California Eastern Line, 1955, 348 U.S. 351, 355, 75 S.Ct. 419, 422, 99 L.Ed. 383. It thereupon became our duty to review the Tax Court's determination, and in doing so we have proceeded "in the same manner and to the same extent as with decisions of the district courts in civil actions tried without a jury".²

Since, from the various opinions cited the facts appear in sufficient detail, we present only such background as is required to highlight the basic problem. In 1941 the Maritime Commission assembled some 2,000,000 tons of merchant shipping, including an intercoastal ship VERMONT owned by California Eastern Line, Inc. The Commission negotiated the terms of a charter between the owner and the British Ministry of War pursuant to which the VERMONT sailed for a Red Sea port with supplies for use in the African campaign. After the VERMONT'S departure, May 29, 1941, the charter was formally signed by the owner and by a representative of the British Ministry of War and expressly ran between the signatories. The Government claims that the British acted on behalf of and as agent for the Maritime Commission, but the Tax Court specifically found to the contrary and upheld the owner's contention in this respect. The Commission, from Lend-lease funds appropriated by the Congress for the purpose, paid the owner about $351,000 as charter hire, of which the amount of $164,000 was later determined by the Maritime Commission to be "excessive profits," said to be subject to renegotiation. The shipowner thereupon petitioned the Tax Court for relief, asserting that the charter was not subject to renegotiation, because (a) it was not made with the Maritime Commission, but with Great Britain³; (b) "final" payment under the charter was made June 23, 1941, hence the Act of April 28, 1942, could not apply;⁴ and (c) the renegotiation was commenced more than one year after the close of the contractor's fiscal year within which the contract had been completed.⁵

Judge Raum's able opinion concluded:

"Respondent\'s contention, that the British Ministry acted as the Commission\'s agent and that the Commission was the charterer of the Vermont, is based on the facts that the Commission negotiated the terms and form of the charter, exercised supervision over performance under the charter, and, in behalf of the United States Government, furnished the funds and controlled payment under the charter. We think it does not necessarily follow, under the Renegotiation Act, that these circumstances stamped the charter as being a contract with the Commission. The question of fact remained whether on the entire evidence the charter was such a contract. As the repository of these very important powers, the Commission might have chosen in some circumstances to charter the Vermont itself, making all other arrangements substantially the same as it did here, and to undertake transportation of the British cargo to the destinations at which it was required. Whatever the reasons may have been, whether because of lack of authority or because of restrictions on its action which exigencies of the international situation then imposed on the United States as a non-belligerent, the fact is that the Commission avoided selection of this course. It chose rather that in which the British Ministry was the charterer and in which the contract was with the British Ministry; to itself the Commission relegated the function of making the arrangement and tending to other matters in a way which would make it possible for the British Ministry to charter the Vermont. The contract in fact was, and was intended to be, with the British Ministry and not with the Commission. Cf. Waterman S. S. Corporation v. Land, 80 U.S.App.D.C. 167 151 F.2d 292, 293-296, reversed on other grounds, sub. nom. Macauley v. Waterman S. S. Corp., 327 U.S. 540 66 S.Ct. 712, 90 L.Ed. 839 * * *." 1952, 17 T.C. 1325, 1341-1342.

The Government in its brief says:

"In this Court, the questions presented are: (1) Whether the Tax Court erred in excluding certain evidence offered by petitioners in support of their defense, and (2) whether the holding by the Tax Court that the contract in question was not a contract with the Commission within the meaning of Section 403(c) (1) of the Renegotiation Act was warranted by and consistent with the subsidiary findings of fact made by that court. No question is raised as to the validity of any of the subsidiary findings of fact, most of which were based on stipulated facts."

Because of the earnest insistence by the Government that the Tax Court's findings must fall, we have carefully examined the entire record and the scores of exhibits included. Not only do we conclude that there has been demonstrated no error affecting substantial rights, but on the same record, we would in all probability have arrived at the same result as did the Tax Court. The Government seems really to have been persuaded by its firm conviction that the profits were in fact excessive and should have been recaptured, at least to the extent of $164,000. Such a view is understandable, yet, from the very outset the Commission must have known exactly what its cost problem was. Its May 23, 1941, minutes disclose its plan

"* * * for the execution of a space charter between the vessel owners and the British Ministry of War Transport. A copy of the proposed form of charter is attached. It provides that the owner of the vessel will receive 75¢ per cubic foot on the total bale cargo capacity of his vessel and, if any cargo is carried on deck, 60¢ per cubic foot on actual measurement of such cargo. * * * For example, on a vessel with 400,000 cubic feet of bale cargo space and no cargo carried on deck, the vessel owner will be paid $300,000 for the voyage to Suez * * *."

The space charter of the very craft here involved called for a payment of the full sum of $336,577, which was made June 23, 1941, as the Tax Court found.

No one then was asking Congress to authorize the rewriting of charter-hire or, in the alternative, the requisitioning of the vessels whose owners might refuse to risk their loss in Red Sea wartime voyages or to accept disruption of their own service to their own loss. Replacements for ships lost were hard to find and costs were high. The movement of vast quantities of explosives was involved. The extent of the hazard was unknown. Shipping was at a premium, indeed commercial rates at the time amounted to $1. or more per cubic foot. Every vessel could profitably be employed in neutral waters without the possibility of need for repairs at some distant port unequipped to deal with emergency conditions. What, if any, return cargoes could be picked up was uncertain. Above all, the urgent need in 1941 for expedited delivery of war supplies commanded arrangements which in different and later stages of the war were otherwise to be scrutinized and better controlled. But in May 1941, the plain and well realized fact was that the Commission had no effective legal control over space charter rates. Congress conferred no power over charter rates generally until long after the vessel had sailed and delivered her cargo.

Even when the Renegotiation Act was first considered as § 403 of the Sixth Supplemental National Defense Appropriation Act, 1942, Congress did not seek retroactively to reach excessive profits paid for supplies sold or transportation service rendered to the nations with which we later were allied. Nor did the Commission, possessed of the facts, seek such authority, indeed its minutes for November 19, 1942, disclose the Chairman had called a conference with the owners of various "Red Sea" vessels to seek a voluntary rebate plan.

"From our investigation," he said "we now are convinced that the rates were too high, and exceedingly so, and it is my feeling that the various steamship owners should voluntarily make a refund, thereby remedying the situation. If that is not done, no doubt the Comptroller General will report the results to the Congress, and you may be assured that we will be confronted with an investigation by some committee, with results which, in my opinion, will be injurious to the American merchant marine."

In this case, not until November 27, 1943, was an effort made to set in motion the renegotiation procedures. Not until 1949 was a "determination" made.

By letter of March 22, 1943, the...