US v. Ataka America, Inc., Court No. 92-10-00710.

• Decision Date: 21 June 1993
• Docket Number: Court No. 92-10-00710.
• Citation: 17 CIT 598,826 F. Supp. 495
• Parties: The UNITED STATES, Plaintiff, v. ATAKA AMERICA, INC., et al., Defendants.
• Court: U.S. Court of International Trade

826 F. Supp. 495

17 CIT 598

The UNITED STATES, Plaintiff, v. ATAKA AMERICA, INC., et al., Defendants.

Court No. 92-10-00710.

United States Court of International Trade.

June 21, 1993.

Stuart E. Schiffer, Acting Asst. Atty. Gen., Joseph I. Liebman, Atty. in Charge, Intern. Trade Field Office, Commercial Litigation Branch, Civ. Div., U.S. Dept. of Justice, Bruce N. Stratvert, Ted Kundrat, Office of Asst. Chief Counsel, U.S. Customs Service, of counsel, for plaintiff.

Sharretts, Paley, Carter & Blauvelt, P.C., Allan H. Kamnitz, for defendant Itochu Intern. Inc.

Sandler, Travis & Rosenberg, P.A., Ronald W. Gerdes, Edward M. Joffe, Arthur K. Purcell and Beth C. Ring, for defendant St. Paul Fire & Marine Insurance Company.

OPINION

RESTANI, Judge:

This case comes before the court on three motions: (1) the motion of defendant Itochu International Inc. ("Itochu") for judgment on the pleadings against the United States, (2) the motion of defendant St. Paul Fire & Marine Insurance Co. ("St. Paul") for summary judgment against the United States, and (3) the United States' cross-motion for summary judgment against St. Paul. The United States commenced this suit to demand payment of anti-dumping duties, and therefore this court has jurisdiction under 28 U.S.C. § 1582(2) and (3) (1988).¹

Background

Between January 1976 and March 1977, Ataka America, Inc. ("Ataka America") made 42 entries of steel wire rope from Japan. Ataka America, with defendant St. Paul as surety, posted bonds to cover the cost of any duties assessed. The bonds state,

Ataka America, Inc. ... as principal, and St. Paul Fire & Marine Insurance Company ... as surety, are held and firmly bound unto the UNITED STATES OF AMERICA in the sum of Twelve Hundred Eleven & no/100 dollars ($1211.-), for the payment of which we bind ourselves, our heirs, executors, administrators, successors, and assigns.

See, e.g., Plaintiff's Exhibit A-1. The United States Customs Service ("Customs") liquidated the entries of wire rope in the period between September 1979 and June 1980, assessing a total of $189,588.62 in anti-dumping duties against Ataka America. Customs sent a bill to Ataka America on the day of liquidation. The formal demand on St. Paul as surety was made on March 17, 1981.² Ataka America filed timely protests, which Customs finally denied approximately eleven years later on October 25, 1991.

During the eleven-year hiatus, Ataka America and its related companies underwent several changes. At the time of importation, Ataka America was doing business in Illinois. Ataka America sold the imported goods to its subsidiary, Alps Wire Rope ("Alps"). The stock of Alps was subsequently transferred to Ataka USA, Inc. ("Ataka USA"). Ataka America retained certain other assets. On October 4, 1977, Ataka USA merged into C. Itoh & Co. (America), Inc. ("Itoh"), which now has offices in New York. Itoh was later renamed Itochu International Inc., the name under which it appears as a defendant in this action. The pleadings do not indicate when, if ever, Ataka America ceased doing business.

Itochu admits that it is liable for all debts of Ataka USA. For the purpose of this motion, Itochu must also admit, as alleged in the complaint, that Ataka USA at some time in the past used Ataka America's import identification number plus a suffix. Itochu denies, however, that liability for Ataka America's debts falls on its shoulders. Itochu therefore moves for judgment on the pleadings. St. Paul, the surety on Ataka America's customs entry bonds, opposes Itochu's motion. It interposes its own motion for summary judgment on the ground that the statute of limitations has run, or, alternatively, that Customs' over ten-year delay in deciding Ataka America's protests unreasonably postponed the running of the statute of limitations.

Discussion

I. Statute of Limitations vis-à-vis Itochu

Although it did not raise the issue in its motion for judgment on the pleadings, Itochu alleged in its answer that the action against it was untimely.³ The court at oral argument asked specifically whether a statute of limitations is applicable to the claim of the United States to recover customs duties from an importer such as Ataka America and its alleged successors. The parties provided their comments on this issue by letter briefs of May 13 and 17, 1993.

As neither title 19 nor title 28 of the United States Code provides a specific statute of limitations for such claims, the issue is whether 28 U.S.C. § 2415(a) (1988) (six-year contract statute of limitations) should be read to bar suit by the United States.⁴ The general rule is that the United States is exempt from statutes of limitations unless Congress has expressly provided otherwise. United States v. City of Palm Beach Gardens, 635 F.2d 337, 339 (5th Cir.), cert. denied, 454 U.S. 1081, 102 S.Ct. 635, 70 L.Ed.2d 615 (1981) (citing Guaranty Trust Co. v. United States, 304 U.S. 126, 132-33, 58 S.Ct. 785, 788-89, 82 L.Ed. 1224 (1938)). Congress did not expressly limit the sovereign's right to sue in this area to its contractual rights. See 28 U.S.C. § 1582(2), (3) (distinguishing between suit to recover on a bond from suit to collect customs duties); 19 U.S.C. § 1505(b) (1988) (providing for collection of customs duties from importer without specifying a time limit).

Courts have refused to apply the contract statute of limitations to the government where the obligation, although expressed in a contract, is essentially statutory. Palm Beach Gardens, 635 F.2d at 340; see also United States v. St. John's Gen. Hosp., 875 F.2d 1064, 1068 (3d Cir.1989). It is a long-standing principle that customs duties are a personal debt upon the importer that derives from a statutory rather than a contractual obligation. United States v. Cobb, 11 F. 76, 79 (C.C.D.Mass.1882). Thus, suit by the United States against Itochu for recovery of duties is not barred by the contractual statute of limitations found in 28 U.S.C. § 2415(a).

II. Itochu's Motion for Judgment on the Pleadings

A party who moves for judgment on the pleadings is deemed to admit all of the facts of the adversary's pleadings while denying their sufficiency as a matter of law. Superscope, Inc. v. United States, 12 CIT 283, 285, 1988 WL 30645 (1988). Any factual inferences must be drawn in favor of the non-moving party. C.J. Tower & Sons, Inc. v. United States, 68 Cust.Ct. 377, 383, 343 F.Supp. 1387, 1393 (1972). A motion for judgment on the pleadings will not be granted unless there is no issue of material fact and the movant is clearly entitled to judgment as a matter of law. Superscope, 12 CIT at 285.

In its motion, Itochu argues that as a corporate successor to the subsidiary of the importer of record, it has no liability for the original importer's debts. The majority rule on successor liability is clear — a corporate successor is responsible for its predecessor's debts only if (1) there is an express or implied agreement to assume past debts, (2) the change in corporate form constitutes a de facto merger, (3) the successor is a mere continuation of its predecessor, or (4) the change in corporate form was motivated by the intent to defraud creditors. See, e.g., Bud Antle, Inc. v. Eastern Foods, Inc., 758 F.2d 1451, 1456 (11th Cir.1985) (citing the law of several federal district and circuit courts).⁵ The occurrence of a de facto merger or a mere continuation of a corporate entity are the only two exceptions directly implicated in this case.⁶ United States v. Union Metallic Cartridge Co., 265 F. 349 (D.Conn.1920), does not contradict the well-established rules of corporate law on de facto merger and continuation. In Union Metallic, the district court considered a complaint alleging that a corporation had assumed the obligation to pay customs duties owed by another corporation whose assets it had previously acquired. Id. at 350. The court reasoned, "where assets of A. have been taken over by B., a promise by B. to pay A.'s debts should be enforceable in actions at law by A.'s creditors." Id. at 353. In applying that rule of law, the court declared,

it cannot be said that the United States ... was a stranger to a contract by which B. Company obligated itself to pay the debts of A. Company when it took over all the assets of the latter. Indeed, it is fair to assume that B. Company actually intended to be responsible for all such debts.

Id. Union Metallic stands merely for the unsurprising proposition that an acquiring corporation's promise to pay an acquired corporation's debts encompasses debts to Customs as well.

Plaintiff's emphasis on Ataka USA's use of Ataka America's import identification number appears misplaced. Customs is indeed entitled to rely on what an importer asserts to be its identification number in notifying that importer of the liquidation of its goods, for example. Washington Int'l Ins. Co. v. United States, 13 CIT 112, 116-17, 707 F.Supp. 561, 565-66 (1989). In contrast, Customs could not have relied on Ataka USA's subsequent and unrelated use of Ataka America's import identification number at the time Customs accepted Ataka America's entry bonds.

A further flaw in plaintiff's argument is the premise that Ataka America, by transferring its subsidiary, Alps, conferred on Ataka USA an obligation to pay Ataka America's customs duties. One cannot assume that a subsidiary is liable for the debts of its parent corporation. See FMC Fin. Corp. v. Murphree, 632 F.2d 413, 422-23 (5th Cir. 1980) (applying Illinois law). In the context of parent-subsidiary relationships, a court will "pierce the corporate veil" and find the parent liable for its subsidiary's debts if two circumstances are present. First, the subsidiary must be a mere instrumentality, under the complete domination of its parent. Second, the parent must manipulate the subsidiary in such a way as to cause an unjust loss to the plaintiff. American Protein Corp. v. AB Volvo, 844 F.2d 56, 60 (2d Cir.) (applying New York...