United States v. Guy W. Capps, Inc.

• Decision Date: 15 April 1953
• Docket Number: No. 6541.,6541.
• Citation: 204 F.2d 655
• Parties: UNITED STATES v. GUY W. CAPPS, Inc.
• Court: U.S. Court of Appeals — Fourth Circuit

204 F.2d 655 (1953)

UNITED STATES v. GUY W. CAPPS, Inc.

No. 6541.

United States Court of Appeals Fourth Circuit.

Argued March 18, 1953.

Decided April 15, 1953.

Joseph Kovner, Attorney, Department of Justice, Washington, D. C. (Warren E. Burger, Asst. Atty. Gen., A. Carter, Whitehead, U. S. Atty. and Austin E. Owen, Special Asst. to the U. S. Atty., Richmond, Va., and Edward H. Hickey, Attorney, Department of Justice, Washington D. C., on brief) for appellant.

W. R. Ashburn, Norfolk, Va., (H. M. Jarvis and Ashburn, Agelasto & Sellers, Norfolk, Va., on brief) for appellee.

Before PARKER, Chief Judge, and SOPER and DOBIE, Circuit Judges.

PARKER, Chief Judge:

This is an appeal by the United States from a judgment entered on a verdict directed for the defendant, Guy W. Capps, in an action instituted to recover damages alleged to have been sustained by the United States as the result of alleged breach by defendant of a contract with respect to the importation of seed potatoes from Canada. The District Court denied a motion to dismiss the action. United States v. Guy W. Capps, Inc., 100 F. Supp. 30. Upon the subsequent trial, however, the court directed a verdict and entered judgment for defendant on the ground that there was no sufficient showing of breach of contract or damage to the United States.

The contract sued on has relation to the potato price support program of 1948 and the executive agreement entered into between Canada and the United States through the Canadian Ambassador and the Acting Secretary of State of the United States. Pursuant to the Agricultural Act of 1948, Public Law 897, 80th Cong. 2d Sess., 62 Stat. 1247, the United States committed itself to purchase from eligible potato growers, directly or through dealers, all table stock and seed potatoes that could not be sold commercially at a parity price. The purchase and disposal of potatoes under this program was carried out by the Commodity Credit Corporation. In a manifest attempt to protect the American Potato Market in which this price support program was operating from an influx of Canadian grown potatoes, the Acting Secretary of State of the United States, on November 23, 1948, entered into an executive agreement with the Canadian Ambassador, who was acting for the Canadian Government, to the effect that the Canadian Government would place potatoes in the list of commodities for which export permits were required and that export permits would be granted therefor only to Canadian exporters who could give evidence that they had firm orders from legitimate United States users of Canadian seed potatoes and that "Canadian exporters would also be required to have included in any contract into which they might enter with a United States seed potato importer a clause in which the importer would give an assurance that the potatoes would not be diverted or reconsigned for table stock purposes". In consideration of this agreement on the part of the Canadian Government, the United States Government undertook that it would not impose "any quantitative limitations or fees on Canadian potatoes of the 1948 crop exported to the United States" under the system of regulating the movement of potatoes to the United States outlined in the Canadian proposal and would not consider the Canadian Government's guarantee of a floor price with respect to certain potatoes to be the payment of a bounty or grant and would not levy any countervailing duty on such potatoes under the provisions of section 303 of the Tariff Act of 1930. On November 26, 1948, the Canadian Privy Council added potatoes to the list of products under export permit control and exporters of seed potatoes to the United States could not secure an export permit without complying with the conditions required by the executive agreement.

Defendant, a corporation engaged in business in Norfolk, Virginia, entered into a contract in December 1948 with H. B. Willis, Inc., a Canadian exporter, to purchase 48,544 sacks of Canadian seed potatoes, containing 100 lbs. each, to be shipped on the S. S. Empire Gangway docking in Jacksonville, Florida, in January 1949. Defendant's officers admittedly knew of the agreement with Canada and stated in a telegram to an official of the United States Department of Agriculture that the potatoes were being brought in for seed purposes. Defendant sent a telegram to the exporter in Canada on the same day that the potatoes were billed stating that they were for planting in Florida and Georgia. Defendant sold the potatoes while in shipment to the Atlantic Commission Company, a wholly owned agency of Great Atlantic & Pacific Tea Company, a retail grocery organization. No attempt was made to restrict their sale so that they would be used for seed and not for food, and there is evidence from which the jury could properly have drawn the conclusion that they were sold on the market as food displacing potatoes grown in this country and causing damage to the United States by requiring greater purchases of American grown potatoes in aid of the price support program than would have been necessary in the absence of their importation.

On these facts we think that judgment was properly entered for the defendant, but for reasons other than those given by the District Court. We have little difficulty in seeing in the evidence breach of contract on the part of defendant and damage resulting to the United States from the breach. We think, however, that the executive agreement was void because it was not authorized by Congress and contravened provisions of a statute dealing with the very matter to which it related and that the contract relied on, which was based on the executive agreement, was unenforceable in the courts of the United States for like reason. We think, also, that no action can be maintained by the government to recover damages on account of what is essentially a breach of a trade regulation, in the absence of express authorization by Congress. The power to regulate foreign commerce is vested in Congress, not in the executive or the courts; and the executive may not exercise the power by entering into executive agreements and suing in the courts for damages resulting from breaches of contracts made on the basis of such agreements.

In the Agricultural Act of 1948, Congress had legislated specifically with respect to the limitations which might be imposed on imports if it was thought that they would render ineffective or materially interfere with any program or operation undertaken pursuant to that act. Section 3 of the act, which amended prior statutes, provided in the portion here pertinent, 62 Stat. 1248-1250, 7 U.S.C.A. § 624:

"(a) Whenever the President has reason to believe that any article or articles are being or are practically certain to be imported into the United States under such conditions and in such quantities as to render or tend to render ineffective, or materially interfere with, any program or operation undertaken under this title * * * he shall cause an immediate investigation to be made by the United States Tariff Commission, which shall give precedence to investigations under this section to determine such facts. Such investigation shall be made after due notice and opportunity for hearing to interested parties, and shall be conducted subject to such regulations as the President shall specify.

"(b) If, on the basis of such investigation and report to him of findings and recommendations made in connection therewith, the President finds the existence of such facts, he shall by proclamation impose such * * * quantitative limitations on any article or articles which may be entered * * * for consumption as

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