United States v. Eastport Steamship Corporation

Decision Date06 May 1958
Docket NumberDocket 24448.,No. 6,6
Citation255 F.2d 795
PartiesUNITED STATES of America, Libelant-Appellant, v. EASTPORT STEAMSHIP CORPORATION, Respondent-Appellee.
CourtU.S. Court of Appeals — Second Circuit

COPYRIGHT MATERIAL OMITTED

George Cochran Doub, Asst. Atty. Gen., Paul W. Williams, U. S. Atty., Paul A. Sweeney, Benjamin H. Berman, Herman Marcuse, Attys., Dept. of Justice, Washington, D. C. (Leavenworth Colby, Chief, Admiralty & Shipping Section, Dept. of Justice, Washington, D. C., of counsel), for libelant-appellant.

Zock, Petrie, Sheneman & Reid, New York City, Kominers & Fort, Washington, D. C. (J. Franklin Fort, John Cunningham, Israel Convisser, Washington, D. C., Francis J. O'Brien, New York City, of counsel), for respondent-appellee.

Before SWAN, MEDINA and WATERMAN, Circuit Judges.

WATERMAN, Circuit Judge.

The Government commenced this suit in the Southern District of New York to recover charter hire allegedly owed by the Eastport Steamship Corporation under a charter party entered into in 1947. Exceptive allegations to the libel were filed by Eastport, alleging that the Government's claim was barred by res judicata, and that the sums sought to be recovered had been voluntarily paid by the Government. The District Court sustained the exceptive allegations and dismissed the libel. 142 F.Supp. 375.

The basis for the Government's claim is a charter party under which several vessels owned by the Government were chartered to Eastport. By the terms of the agreement the charterer agreed to pay additional charter hire upon the occurrence of certain contingencies. Eastport determined that the Government was entitled to additional charter hire in the amount of $78,024.01 and paid that sum. According to the Government's computations, however, additional charter hire was due to the extent of $109,126.72 so that Eastport's payment left an indebtedness under the charter party of $31,102.71. Approximately one year after the parties entered into the charter party, Eastport, in an unrelated transaction, purchased the S.S. Opie Read from the Government under a contract of sale1 which provided that the purchase price then paid was to be reduced by an amount equal to the cost of repairs necessary to enable Eastport to obtain certificates of classification and registration for the vessel. Upon refusal by the Government to pay a claimed reduction, Eastport brought suit in the Court of Claims and was awarded a judgment for $54,097.16.2 128 Ct.Cl. 778. This judgment was duly presented to the Comptroller General for payment, but in view of the Government's claim against Eastport under the charter party, the Comptroller General paid only $22,899.45. The balance, the alleged indebtedness of $31,102.71 plus $100 estimated cost of litigation necessary to obtain a judgment on the government's claim, was withheld pursuant to 31 U.S.C.A. § 227.3 That statute provides that when a judgment creditor of the United States is indebted to the Government the Comptroller General shall withhold payment of such portion of the judgment as is equal to the indebtedness (plus the estimated cost of litigation necessary to prosecute the Government's claim) and, unless the creditor agrees to a pro tanto discharge of the mutual claims, that the Comptroller General shall promptly institute legal proceedings to reduce the Government's claim to judgment. Provision is also made for the recovery of interest by the judgment creditor if the Government is unsuccessful in its action. Eastport refused to consent to the withholding, whereupon the Government commenced the present suit.

Subsequent to the withholding but prior to the commencement of this suit, Eastport brought an action on its judgment in the Court of Claims alleging the Government's failure to pay the balance of the judgment which that Court had awarded and demanding recovery thereof with interest. The Government moved to dismiss. It alleged that the Court of Claims had no jurisdiction on the grounds that 31 U.S.C.A. § 227 provided the exclusive procedure by which the propriety of the withholding could be determined; and because the withholding was based upon a claim asserted under a maritime contract, and the district courts, as courts of admiralty, had exclusive jurisdiction over such contracts. The Court of Claims rejected each of these challenges to its jurisdiction and, in addition, determined that it had jurisdiction over a claim founded upon a judgment previously rendered by it. 130 F. Supp. 333, 131 Ct.Cl. 210. Thereupon, in an effort to avoid adjudication of its claim for additional charter hire in the Court of Claims, the Government paid the remainder of the judgment that Eastport had recovered previously and filed an answer setting up the defense of payment. Eastport moved to strike the answer as unresponsive because it failed to admit or deny Eastport's right to interest. The motion was sustained. The Court of Claims entered an order allowing the Government thirty days to amend its answer, in default of which the Government's liability for interest would be treated as admitted. 140 F.Supp. 773, 135 Ct.Cl. 175. Some time later the Government entered a confession of judgment for the interest Eastport demanded.

Prior to the confession of judgment but subsequent to the striking of the Government's answer in the Court of Claims proceedings, Eastport filed its exceptive allegations to the Government's libel in the District Court. The District Court sustained the allegations and dismissed the libel. It held that the Government could not assert its claim under the charter-party because payment of the withheld portion of the Court of Claims judgment was a "voluntary payment" of the claim for additional charter hire, and also because the failure to plead the claim as a counterclaim in the Court of Claims precluded its later assertion in another court.

Voluntary Payment

The District Court erred in its conclusion that payment of Eastport's original judgment was a "voluntary payment" by the Government of the Government's claim for additional charter hire. Under the doctrine of voluntary payment "One cannot, in the absence of fraud or duress or mistake of fact or reservation agreement, or, perhaps, other special circumstances, pay a claim and later sue to recover the amount paid."4 The doctrine is applicable only when recovery is sought of a sum previously paid. McKnight v. United States, 1878, 98 U. S. 179, 25 L.Ed. 115, affords an excellent illustration. In that case the Government had paid a sum of money to the assignees of a contractor to whom the Government was indebted. Subsequently, relying upon the undisputed invalidity of the assignment, the Government sought to recover the amount paid. Recovery was denied on the ground of voluntary payment.

In the present case the Government claims a balance due upon its charter party with Eastport. The payment which it made to Eastport was upon Eastport's judgment, arising from the purchase of the Opie Read, an entirely unrelated transaction. Under these circumstances the doctrine of voluntary payment has no application. Eastport contends, however, that voluntary payment of a debt without deducting from the amount paid any known and existing offsetting account bars a later recovery of the sum that should have been deducted. The contention is unsound. Although a debtor may have the power to withhold payment of his admitted debt, he is not compelled to do so under penalty of foregoing his unrelated claim. The case of Cleveland & Western Coal Co. v. Main Island Creek Coal Co., 6 Cir., 1924, 297 F. 60, relied upon by Eastport, is inapposite. There the payments were made under a contract without deducting amounts to which the debtor was entitled under the same contract. "The account was a single one; the payment was for the balance due as between the parties; * * *" 297 F. 60, 64. Cf. Nix v. Art Neon Co., 1940, 105 Colo. 562, 100 P.2d 165. Here, there was not a "single account" between the parties, nor did the Government's payment purport to establish a balance between them. The payment was made for the sole purpose of satisfying the first Court of Claims judgment.

The result is not altered by the fact that the Comptroller General has the duty under 31 U.S.C.A. § 227 to withhold payment of a judgment until the Government's claim against the judgment creditor is reduced to judgment.5 By paying Eastport's judgment while the Government had a claim against Eastport the Comptroller General perhaps was guilty of a breach of duty toward the United States. Cf. United States v. Ennis, C.C. D.N.J.1904, 132 F. 133. Eastport suggests, however, that payment of the judgment was consistent only with an admission that the Government's claim against it was unfounded. Assuming, arguendo, that the Comptroller General had authority to make such an admission, payment of the judgment to Eastport does not constitute such an admission. The payment is equally consistent with an interpretation of the statute which is at variance with that contended for by Eastport. See note 5, supra.

Res Judicata and Collateral Estoppel

Eastport urges that the Government's confession of judgment in the Court of Claims bars the present suit under the doctrine of res judicata. It argues that the interest which it demanded might properly be awarded only if the Government's withholding was wrongful;6 and since the withholding would have been wrongful only if the claim for additional charter hire lacked merit, the award of interest by the judgment of the Court of Claims was an adjudication of the invalidity of the Government's claim. Eastport fails to distinguish between, and thereby confuses, the doctrines of res judicata and collateral estoppel. The classic statement of these doctrines and the distinctions between them is found in Cromwell v. County of Sac, 1876, 94 U.S. 351, 352-353, 24 L.Ed. 195.

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