United States v. WATERMAN STEAMSHIP CORPORATION, 71-3424.

• Decision Date: 04 January 1973
• Docket Number: No. 71-3424.,71-3424.
• Citation: 471 F.2d 186
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. WATERMAN STEAMSHIP CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

471 F.2d 186 (1973)

UNITED STATES of America, Plaintiff-Appellant, v. WATERMAN STEAMSHIP CORPORATION, Defendant-Appellee.

No. 71-3424.

United States Court of Appeals, Fifth Circuit.

January 4, 1973.

C. S. White-Spunner, Jr., U. S. Atty., Mobile, Ala., David V. Hutchinson, Adm. & Shipping Sec., U. S. Dept. of Justice, Walter H. Fleischer, Harry R. Sachse, Attys., Dept. of Justice, Washington, D. C., for plaintiff-appellant.

William W. Stoudenmire, George F. Wood, Mobile, Ala., for defendant-appellee.

Before COLEMAN, GOLDBERG and GODBOLD, Circuit Judges.

GODBOLD, Circuit Judge.

The United States brought this suit to recover excess freight charges paid by it to Waterman Steamship Company as reimbursement for the cost of shipping goods abroad for the Cooperative for American Relief Everywhere, Inc. (CARE), a private, nonprofit voluntary relief organization. The suit was grounded on Waterman's written certification to the United States that the freight charges were at prevailing rates. Waterman pleaded as an affirmative defense that suit was time-barred by the one-year limitation period prescribed by the bill of lading under which the goods were shipped, and moved to dismiss the complaint. The District Court recognized that the suit was grounded on the certification, which unlike the bill of lading did not limit time for suit, but nevertheless held that the time limitation of the bill of lading was binding on the government and granted Waterman's motion to dismiss. We are unable to agree that the time limitation in the bill of lading governs suits for breach of the certification, and accordingly we reverse and remand.

The Agency for International Development (AID), an unincorporated agency within the Department of State, is authorized to implement programs specified in the Foreign Assistance Act of 1961, 22 U.S.C. §§ 2151-2406. As part of its authorized functions, AID reimburses qualifying volunteer relief organizations for the cost of shipping goods to "less developed" foreign countries. The procedures for reimbursement of ocean shipment costs are set out in 22 C.F.R. §§ 202.1-202.8. Under these procedures, reimbursement — which is defined as payment to an agency by AID or a cooperating bank acting on behalf of AID — cannot exceed the prevailing rate for similar shipments by similarly situated customers. Issuance of a procurement authorization to the qualifying relief agency is a prerequisite to reimbursement. A procurement authorization, according to evidentiary materials before this court, obligates AID to make reimbursement for ocean shipments upon certification by the carrier that the freight charges do not exceed prevailing rates.

Pursuant to the regulations, AID issued procurement authorizations by which AID became obligated to reimburse approved banking institutions that paid shippers of CARE goods. On October 12, 1965, Waterman shipped for CARE a cargo of wheat to Trabzon, Turkey. Waterman applied in due course to AID, through a cooperating bank, for shipping costs reimbursement, presenting with its application the following required certification:

(i) the carrier is entitled under the contract of carriage to the sum charged to the shipper-voluntary relief agency and (ii) the sum charged to the shipper-voluntary relief agency does not exceed the prevailing rate, if any, for similar services . . . .

(2) The undersigned agrees that upon request of the Administrator of AID he will promptly make refund to AID . . . in the event of nonperformance of any of the terms of the contract of carriage or for breach of any of the terms of this certificate.

In December 1965 AID paid the shipping costs to Waterman through a cooperating bank. AID later determined that the shipping costs exceeded prevailing rates and filed this suit for refund in 1971, just under six years from the dates of shipment and reimbursement.

Thus, the suit was filed within the six-year limitation period for government suits on contracts prescribed by 28 U.S.C. § 2415, but outside the one-year limitation on suits for overcharges prescribed by the bill of lading executed by Waterman and CARE. This one-year limitation is stated in the bill of lading as follows:

The carrier and the ship shall be discharged from all liability in respect of claim for overcharge and/or over-payment of freight unless suit is brought to recover the same within one year from the date the goods are delivered. . . .¹

The narrow issue on appeal is whether the limitation period contained in the contract of carriage executed by Waterman and CARE time-bars a suit by the government for breach of the carrier's covenant in the certification form that freight charges do not exceed prevailing rates.

We find that the government is not bound by the limitation period in the bill of lading for three fundamental reasons. First, the government was neither party nor privy to the bill of lading, and therefore, under traditional principles of contract law, is not bound by its provisions, absent consent to be bound. There was privity between Waterman and the government with respect to the certification contract, pursuant to which Waterman warranted that charges were at prevailing rates. However, the limitation with which Waterman seeks to encumber the government is contained in the bill of lading, not the certification contract. Secondly, the government has not consented to be bound by the short limitation period of the bill of lading. To the contrary, the certification contract, to which the government and Waterman were parties, does not set time limitations on suits for breach of the certification contract. Necessarily, then, the only limitation period on certification-contract suits to which the government has "consented" is the six-year limitation period of 28 U.S.C. § 2415, which is generally applicable to government suits on contracts. Thirdly, the government did not sue for breach of the bill of lading. The certification contract gives the government a cause of action for overcharges independent of causes of action arising under the bill of lading, and it is for breach of the certification contract that the government now sues. That the government and Waterman recognized an independent cause of action for overcharges is made clear by Waterman's promise, in the certification form, to "make refund to AID 1 in the event of nonperformance of any of the terms of the contract of carriage or 2 for breach of any of the terms of this certificate."

Waterman seeks to avoid the above reasoning by arguing that the government owed an unconditional obligation to reimburse for shipping costs incurred by CARE. Thus Waterman invokes the following rule:

When a party merely does what he has already obligated himself to do, he cannot demand an additional compensation therefor, and, although by taking advantage of the necessities of his adversary, he obtains a promise for more, the law will regard it as nudum pactum, and will not lend its process to aid the wrong.²

As the rule suggests, the certification contract would be unsupported by fresh consideration if indeed the government owed Waterman a pre-existing, unconditional obligation to pay CARE's shipping expenses. The rule's requirements are not met in this case, however, for two reasons. First, Waterman has offered no theory by which it can claim the benefits of AID's obligation. For example, Waterman arguably could claim the benefits as a third-party beneficiary to the contract between CARE and AID, but third-party beneficiary questions invariably require contract interpretation, 4 Corbin, Law of Contracts § 775 (1951), and should be presented to the factfinding court in the first instance. Secondly, the record on appeal indicates that the...