Court Opinion

ID: 6921371
Source: CourtListenerOpinion
Date Created: 2022-07-23 23:02:58.339438+00
Date Added: 2024-06-11T16:06:48.574286
License: Public Domain

FRIENDLY, Circuit Judge, with whom LEONARD P. MOORE, Circuit Judge, joins
(dissenting).
It would have been a happy circumstance if the changes in the membership of the Court since these cases were last before us had led to concord or at least to a closer approach to it. Instead they have resulted in replacing the former 3-2 vote for reversal with a 3-2 vote which, broadly speaking, is for affirmance, — plus a fine opinion by our brother Smith which we applaud for its exposition of the issues, even though we are unable to pay it the ultimate tribute of agreement. Because of his fresh and somewhat different analysis, something more needs be said in the way of an expression of dissent than merely echoing Judge Hincks’ opinion for Judges Medina, Moore and himself on the previous in banc, 265 F.2d 136, with which we agree.
Understanding of Clause 13 of Shipsalesdemise 303 necessitates a statement of the controversy whence it stemmed, which, if not different from Judge Smith’s in the ultimate, places the emphasis where required. The Act of March 8, 1946, 60 Stat. 41, 50 U.S.C.A. Appendix, §§ 1735-1746, had provided both for the sale, § 1737, and, in certain cases, § 1738, for the charter of war surplus vessels. Section 5(b), 50 U.S. C.A.Appendix § 1738(b), provided that the charter hire “shall be fixed by the Commission at such rate as the Commission determines to be consistent with the policies of this Act * * * but, except upon the affirmative vote of not less than four members of the Commission, such rate shall not be less than 15 per centum per annum of the statutory sales price (computed as the date of the charter).” With a certain exception not here material, “rates of charter hire fixed by the Commission on any war-built vessel which differ from the rate specified in this subsection shall not be less than the prevailing world market charter rates for similar vessels for similar use as determined by the Commission.” Section 5(c) made applicable “to charters made under this section” various sections of the Merchant Marine Act, 1936; one of these, § 709(a), 46 U.S.C.A. § 1199(a), had required “Every charter made by the Commission” to include a clause requiring the charterer to pay over to the Commission as additional charter hire “one-half of such cumulative net voyage profit in excess of 10 per centum per annum” on the charterer’s capital employed in operating the chartered vessels. Charters previously made by the War Shipping Administration contained such a 50% clause, 11 F.R. 4669, 4671 (1946).
Announcement by the Commission in August, 1946, that it intended to cancel the War Shipping Administration Warshipdemiseout 203 charters and substitute a new form of charter Shipsalesdemise 303, with a sliding scale reaching as high as 90% of net profits, naturally led to protest from the operators on both business and legal grounds. The protest clearly was not lacking in legal substance, as shown by the recent decision of the Court of Claims, Madden, J., dissenting, American Export Lines, Inc. v. United States, 1961, 290 F.2d 925, that the new sliding scale went beyond the Commission’s legal powers. The meager record available on the exceptions and exceptive allegations to the libels tells us only that “on September 4, 1946, the Maritime Commission rejected the protest of the ship operators * * * but adopted the recommendation of its General Counsel that the clause of the proposed charter party containing the disputed item, i. e., Clause 13, be modified” in a way we shall now describe.
What the operators’ protest achieved, as well as what it did not, can best be understood by setting down in parallel columns the relevant provisions of Clause 13 of the previous Form 203 and of Form 303 as issued;
*614Form 203.
“Clause 13. Additional Charter Hire. After redelivery of all Vessels under this Agreement, if the cumulative net voyage profits computed for the period of the agreement (after the payment of the basic charter hire provided herein and payment of the Charterer’s fair and reasonable overhead expenses applicable to operation of the Vessels) shall be in excess of a rate of ten (10) per centum per annum on the Charterer’s capital necessarily employed in the business of the Vessels during the period of the agreement (all as hereinafter defined in Clause 23) the Charterer shall pay to the owner at Washington, D. C. within sixty (60) days thereafter, an amount equal to one-half of such cumulative net voyage profit in excess of an amount computed for the period of the agreement at the rate of ten (10) per centum per annum on such capital as hire in addition to the hire payable under Clause 12; Provided, however, That such payment of additional charter hire shall be deemed to be preliminary and subject to adjustment upon the completion of final audit by the Owner, at which time such payments will be made by or to the Owner as such final audit may show to be due.”
Form 303.
“Clause 13. Additional charter hire. If at the end of the calendar year 1946, or any subsequent calendar year or at the termination of this Agreement, the cumulative net voyage profit (after the payment of the basic charter hire hereinabove specified and payment of the Charterer’s fair and reasonable overhead expenses applicable to operation of the Vessels) shall exceed 10 per centum per annum on the Charterer’s capital necessarily employed in the business of the Vessels (all as hereinafter defined), the Charterer shall pay over to the Owner at Washington, D. C., within 30 days after the end of such year or other period, as additional charter hire for such year or other period, an amount equal to the percentages of such cumulative net voyage profit in excess of 10 per centum per annum on such capital computed in accordance with the following table (but such cumulative net profit so accounted for shall not be included in any calculation of cumulative net profit in any subsequent year or period):
“Cumulative net voyage profit (in excess of 10% per annum on capital necessarily employed) not in excess of $100. per day, 50%.
“Cumulative net voyage profit (in excess of 10% per annum on capital necessarily employed) in excess of $100. per day but not in excess of $300. per day, 75% on such excess over $100. per day.
“Cumulative net voyage profit (in excess of 10% per annum on capital necessarily employed) in excess of $300. per day, 90% on such excess over $300. per day.
“The Charterer agrees to make preliminary payments to the Owner on account of such additional charter hire and on account of any additional charter hire accrued under any War Shipping Administration Form 203 (Warshipdemiseout) charter (prior to the times of payment provided for *615above or in such Warshipdemiseout charters) at such times and in such manner and amounts as may be required by the Owner: Provided, however, That such payment of additional charter hire shall be deemed to be preliminary and subject to adjustment either at the time of the rendition of preliminary statements or upon the completion of each final audit by the Owner, at which times such payments will be made to the Owner as such preliminary statements or final audit may show to be due, or such over-payments refunded to the Charterer as may be required.”
For the purpose here material Form 303 differed from Form 203 in two important respects. First, it permitted the Commission to call for payments of additional charter hire or the charterers for refunds “at the time of the rendition of preliminary statements,” as well as on final audit.1 Second, instead of providing that “payments will be made by or to the Owner as such final audit may show to be due,” it provided that payments will be made to the Owner as the statements or audit show to be due,— note only “to” and not “by” — “or such overpayments refunded to the Charterer as may be required.” The latter is the vital phrase. It shows the charterers were not satisfied that the Owner agree to make such payments to them as the statements or audit “may show to be due,” as had been provided in form 203; they demanded that the Owner agree to refund “such overpayments * * * to the Charterer as may be required.” Why the change? Quite obviously, it would seem, because the charterers insisted that the Owner agree to refund something which the statements and audits would not “show to be due” — namely, the over-payments resulting from what the charterers considered an invalid provision in the contract itself. This is the concession which the Charterers got from their protest — and of which the majority would now deprive them.
Perhaps “quite obviously” goes too far, since our brothers do not read the clause as we do. We have used the phrase because that interpretation accords with business sense and with the apparent understanding of the parties (see the Maritime Administration’s notice of May 14, 1951, mentioned below and its letters fn. 3), and no one has suggested any other reason for the change. At the very least, however, libelants made a sufficient case that the contract obligated the Owner to refund charter hire illegally collected, “either at the time of the rendition of preliminary statements or upon the completion of each final audit,” that they ought be permitted to offer extrinsic evidence in support of their construction, 3 Corbin, Contracts (1960 ed.), § 579, with the important aid of discovery of the Commission’s files, rather than be foreclosed by a decision on the pleadings and on affidavits *616which prick the mind rather than satisfy it — a method for determining such an issue which another Court of Appeals sitting in admiralty has soundly condemned, Richfield Oil Corp. v. United States, 9 Cir., 1957, 248 F.2d 217, 225, as have this and other courts in a not unrelated procedural area, see 6 Moore, Federal Practice (1953 ed.), j[ 56.15 and U 56.16.
Indeed, the majority seem to recognize the force of these considerations when they say that exploration of what the parties actually intended would be fruitless since if Clause 13 postpones the accrual of a claim as libelants say, this would go beyond the Commission’s contracting powers. Without debating whether the “jurisdictional” character commonly attributed to what would seem an ordinary statute of limitations in the Suits in Admiralty Act, 46 U.S.C.A. § 745, is not an anachronistic carry-over from doctrines of sovereign immunity now generally abandoned, we find neither reason in nor authority for the position that this statute constitutes an implied but universal limitation on the power of government contracting agencies to draw their contracts as they deem best. Section 207 of the Merchant Marine Act, 1936, 46 U.S.C.A. § 1117, which was expressly made applicable to activities under the Act of March 8, 1946, § 12(d), 50 U.S.C.A.Appendix, § 1745(d), authorized the Commission to “enter into such contracts, upon behalf of the United States, * * * as may, in its * * * discretion, be necessary to carry on the activities authorized by this chapter * * in the same manner that a private corporation may contract within the scope of the authority conferred by its charter.” The Commission may have had excellent reasons for agreeing to purchase peace by a modification of Clause 13 which, by assuring the charterers ample time to protect their alleged rights, would get the charters signed and keep the ships at sea. Perhaps the Commission was just as well satisfied on its own account to avoid immediate test of its powers. The whole issue might become academic — no one could know in 1946 whether the cumulative net profits would, in fact, exceed 10% on capital. Moreover, the Commission may have had in mind the possibility of obtaining validating or, on its view, clarifying legislation from a future Congress; it might well have thought pending litigation would be an obstacle to this in view of Congressional reluctance to intervene in matters already pending in the courts. In any event, all this was for the Commission to decide; it is of no moment that, in the light of hindsight, we may think its decision to modify Clause 13 to have been unwise. As was said of another officer of government, “we do not find in the statutes defining the powers and duties” of the Commission “any such limitation on the exercise of his discretion as this contention involves. His authority to make determinations includes the power to make erroneous decisions as well as correct ones.” Swift & Co. v. United States, 1928, 276 U.S. 311, 331-332, 48 S.Ct. 311, 317, 72 L.Ed. 587. We are thus quite unable to join with the majority in attributing to the Suits in Admiralty Act, enacted in 1920, so restrictive a force on the contracting powers of agencies created long afterward and endowed by Congress with the same power of molding their contracts as private corporations enjoy.
If we are right in thinking that Clause 13 gave the charterers a contractual right to recover any overpayment, even for illegality, “at the time of the rendition of preliminary statements or upon the completion of each final audit,” or that the charterers are at least entitled to offer parol evidence that it did, we need not tarry over either of the first two dates when our brother Smith thinks the cause of action for the allegedly illegal payments may have arisen, immediately on signature, since, as he holds, an action for a declaratory judgment, 28 U.S.C.A. §§ 2201, 2202, could then have been brought, or upon the first payment exceeding 10%, — although we must express our doubts as to how the date when a “cause of action arises” under the *617Suits in Admiralty Act of March 9, 1920, 46 U.S.C.A. § 745, can have been accelerated by a new procedural device, enacted fourteen years later, Act of June 14, 1934, c. 512, 48 Stat. 955, whose framers surely had no such thing in mind, and our fears as to the traps for the unwary that would be set if courts were to adopt a general doctrine that causes of action arise as soon as declaratory relief becomes obtainable.2 An obligee who has been assured that money erroneously exacted from him will be refunded at a later date is not required to sue before then, even though he may. His causes of action for declaratory relief or for money unjustly demanded may be time-barred if he does not sue within the statutory period after these accrue, but his cause of action for breach of contract does not arise until the obligor’s performance is due; and he is free to rely on that cause of action and abandon the others.
This brings us to what we regard as the most serious issue in the case — did libelants’ contractual claims for refund arise seriatim “at the time of the rendition of preliminary statements” or could libelants await final audit? The majority simply assume the former, insofar as they deal with the issue at all.
We do not deny that libelants could have begun suits for refunds of what they considered additional charter hire illegally exacted, when they rendered preliminary statements. However, it does not necessarily follow they were required so to bring them, under pain of time-bar. The application of the statute of limitations to contracts where a promisee is entitled to periodic performance is a troublesome question, discussed in 6 Williston, Contracts (Rev. ed.), §§ 2024-2028, and in 3A and 4 Corbin, Contracts (1960 ed.), §§ 687, 698, 948-51. The cases fall into two lines. One is illustrated by decisions that the statute runs separately against each instalment of a debt, as, for example, against each right to collect interest on bond coupons, Amy v. City of Dubuque, 1879, 98 U.S. 470, 25 L.Ed. 228, or against each instalment of salary under a contract of employment, Gensman v. West Coast Power Co., 1940, 3 Wash.2d 404, 101 P.2d 316. See cases cited in Annotation, 82 A.L.R. 316. On the other hand, if the contract calls for the payment of an entire sum for a specified overall performance, with the right to collect advance payments, as in the case of progress payments to a contractor, City of Albany v. Leftwich, 5 Cir., 1928, 24 F.2d 297, certiorari denied 1928, 277 U.S. 599, 48 S.Ct. 561, 72 L.Ed. 1008; Rich v. Arancio, 1931, 277 Mass. 310, 178 N.E. 743, or payments to an attorney retained in connection with a single litigation, Walker v. Goodrich, 1855, 16 Ill. 341, the obligee may safely wait until the entire sum is due and sue for that without fear of the statutory bar on the earlier instalments. A decision somewhat analogous to the instant case is Board of County Commissioners of Wilson County v. Hudson, 1936, 143 Kan. 454, 54 P.2d 994. This involved a two year printing contract, with the printer submitting to the county an itemized monthly bill; the court held the county’s suit to recover overcharges, brought within the statutory period after the termination of the contract, was timely as to all months although the period had elapsed as to many individual payments.
The instant case falls within the second line of decisions. The very language of the contract “preliminary and subject to adjustment” seems to negative an intention to require litigation before the final audit. Consistently with this, the Maritime Administration sent all char*618terers, on May 14, 1951, a notice requesting that checks submitted with preliminary accountings should bear no restrictive legends but rather should be accompanied by a letter of transmittal stating “that the remittance is on account of additional charter hire due the Maritime Administration and is subject to adjustment upon the completion of final accounting between the Charterer and the Maritime Administration and that neither the tender of such payment by the Charterer, nor its acceptance by the Maritime Administration shall be construed as an approval of the correctness of the amount thereof, nor as a waiver of the rights or remedies of either party under the terms of the agreements involved or otherwise.” The amount of additional charter hire due for any period could be substantially changed by subsequent accounting adjustments; it might even be eliminated if libelants are right in their belief that subsequent deficiencies in rate of return may be applied to reduce excesses previously reported. If the Owner under these charters were a person not enjoying the Government’s immunity from statutes of limitations, could a charterer successfully assert the Owner was barred from recovering amounts due on preliminary statements as to which the period had run, although suit was timely begun after final audit? We think not — and also that the rule works both ways.
Moreover, even if it were to be held that a sounder view of the law of limitations would require claims based on the illegality of the exactions to be asserted within two years of the respective preliminary statements rather than of final audit, the libels ought not be dismissed as to claims of that nature as to which suit was brought within two years of such statements; since libelants are suing on an express contract which validly postponed accrual of their causes of action at least that long, there is no need to show that such payments were “involuntary.”3 And on no view can we see any legitimate basis for holding that any of the claims which relate only to the amount of additional charter hire, assuming the contracts to be valid, are barred. Judge Smith does not doubt the power of the Maritime Commission to postpone determination of such claims, as he does with respect to the claims of illegality; hence the only question is how long determination was postponed. No one has suggested what purpose would have been served for anyone by a construction that would require a charterer to rush into the courts for the determination of the multitude of such claims, which Judge Smith recognizes to be bound to arise, on the submission of each preliminary statement, under pain of otherwise becoming time-barred. Happily, persons engaged in the performance of complex contracts have learned other ways of working out their differences than constant resort to the courts; they wait until all the disputed items are before them and then generally come to a conclusion no less satisfactory for not being altogether scientific. The law of limitations should encourage this sensible process of adjustment — not require immediate entry into the judicial arena under threat of the expiry of a short statutory bar.
We would therefore reverse the orders dismissing the libels 4 with instructions *619to permit the parties to offer relevant evidence as to the meaning of Clause 18 and to take further proceedings consistent with this opinion.5

. We find it unnecessary to discuss the point, much argued in the opinions when the case was last before us, whether “final audit” means what it says or any annual audit, since Judge Smith very properly assumes the former. Form 303 used the phrase “each, final audit” because there would be one for the Warshipdemiseout charter and another for the Shipsalesdemise charter. The practice under the charters shows clearly that the parties did not regard annual audits as the “final” audit; these were simply “preliminary statements.”

. The opinion cites no authority for this. It seems opposed to the majority rule in at least one analogous situation — namely, that title by prescription does not run against a remainderman until he can bring a possessory action even though a statute permitted him to bring an earlier action to quiet title. Maxwell v. Hamel, 1940, 138 Neb. 49, 292 N.W. 38; contra,. Murray v. Quigley, 1902, 119 Iowa 6, 92 N.W. 869; see Developments—Declaratory Judgments, 62 Harv.L.Rev. 787, 831, fn. 331 (1949).

. On our reading of Clause 13 there is no reason to speculate why the companies continued to pay the allegedly illegal charter hire after the ships were returned. However, it ill becomes the Government to urge this in view of its repeated demands that the charterers make the payments and rely on their right to refund on final audit. See letter of December 30, 1954 to Blidberg Rothchild Co.; letter of July 15, 1955 to James Griffiths & Sons, Inc.; letter of March 8, 1955 to North Atlantic and Gulf SS. Co., Inc. Moreover, the threat of “the placing of a government-wide set-off payment order,” would seem a sufficient explanation, letter of December 30, 1954 to Blidberg Rothchild Co.

. This is subject to an exception for the Blidberg claim for “latent defects” as to which we join with our brothers in adopting Judge I-Iincks’ disposition on the previous rehearing in banc, 265 F.2d at page 148.

. Naturally this means that we join in so much of Judge Smith’s opinion as reverses the dismissal of certain claims.