UNITED
STATES v. GUY W. CAPPS, Inc.
204 F.2d 655, 1953 U.S. App. LEXIS
4020 (4th Cir.1953)
JUDGES: Before PARKER, Chief Judge,
and SOPER and DOBIE, Circuit Judges.
OPINION BY: PARKER
[*657]
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 [*658]
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 he finds and declares
shown by such investigation to be necessary in order that the entry of such
article or articles will not render to tend to render ineffective, or
materially interfere with, any program or operation referred to in subsection
(a), of this section * * * Provided, That no proclamation under this section
shall impose any limitation on the total quantity of any article or articles
which may be entered * * * for consumption which reduces such permissible total
quantity to proportionately less than 50 per centum of the total quantity of
such article or articles which was entered * * * for consumption during a
representative period as determined by the President: * * *.'
There was no pretense of complying with the requirements of this statute. The President did not cause an investigation to be made by the Tariff Commission, the Commission did not conduct an investigation or make findings or recommendations, and the President made no findings of fact and issued no proclamation imposing guantitative limitations and determined [*659] no representative period for the application of the 50% limitation contained in the proviso. All that occurred in the making of this executive agreement, the effect of which was to exclude entirely a food product of a foreign country from importation into the United States, was an exchange of correspondence between the Acting Secretary of State and the Canadian Ambassador. Since the purpose of the agreement as well as its effect was to bar imports which would interfere with the Agricultural Adjustment program, it was necessary that the provisions of this statute be complied with and an executive agreement excluding such imports which failed to comply with it was void. Morgan v. United States, 304 U.S. 1, 58 S.Ct. 773, 999, 82 L.Ed. 1129; Panama Refining Co. v. Ryan, 293 U.S. 388, 55 S.Ct. 241, 253, 79 L.Ed.
446. As was said by Chief Justice Hughes in the case last cited: 'We are not
dealing with action which, appropriately belonging
to the executive province, is not the subject of judicial review or with the
presumptions attaching to executive action. * * * we are concerned with the
question of the delegation of legislative power. * * *'
It
is argued, however, that the validity of the executive agreement was not
dependent upon the Act of Congress but was made pursuant to the inherent powers
of the President under the Constitution. The answer is that while the President has certain inherent
powers under the Constitution such as the power pertaining to his position as
Commander in Chief of Army and Navy and the power necessary to see that the
laws are faithfully executed, the power to regulate interstate and foreign
commerce is not among the powers incident to the Presidential office, but is
expressly vested by the Constitution in the Congress. It cannot be upheld as an
exercise of the power to see that the laws are faithfully executed, for, as
said by Mr. Justice Holmes in his dissenting opinion in Myers v. United States, 272 U.S. 52, 177, 47 S.Ct. 21, 85,
71 L.Ed. 160, 'The duty of the President to see that the laws
be executed is a duty that does not go beyond the laws or require him to
achieve more than Congress
sees fit to leave within his power'. In the recent case of Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 72
S.Ct. 863, 867, 96 L.Ed. 1153, the Supreme Court dealt with
the question in the following pertinent language:
'Nor
can the seizure order be sustained because of the several constitutional
provisions that grant executive power to the President. In the framework of our
Constitution, the President's power to see that the laws are faithfully
executed refutes the idea that he is to be a lawmaker. The Constitution limits his functions in the lawmaking process
to the recommending of laws he thinks wise and the vetoing of laws he thinks
bad. And the Constitution is neither silent nor equivocal about who shall make
laws which the President is to execute. The
first section of the first article says that 'All legislative Powers herein
granted shall be vested in a Congress of the United States * * *.' After granting
many powers to the Congress, Article I goes on to provide that Congress may
'make all Laws which shall be necessary and proper for carrying into Execution
the foregoing Powers and all other Powers vested by this Constitution in the
Government of the United
States, or in any Department or Officer thereof."
We
think that whatever the power of the
executive with respect to making [*660]
executive trade agreements regulating foreign commerce in the absence of action
by Congress, it is clear that the executive may not through entering into such
an agreement avoid complying with a regulation prescribed by Congress. Imports from a foreign county are foreign
commerce subject to regulation, so far as this county is concerned, by Congress
alone. The executive may not
by-pass congressional limitations regulating such commerce by entering into an
agreement with the foreign county that the regulation be exercised by that
county through its control over exports. Even though the regulation prescribed
by the executive agreement be more desirable than that
prescribed by Congressional action, it is the latter which must be accepted as
the expression of national policy.
It
is argued that irrespective of the validity of the executive agreement, the
contract sued on was a valid contract between defendant and the Canadian
exporter and that since the contract was made for the benefit of the United
States, this country may maintain action upon it. The answer is that the
contract was but the carrying out of the executive agreement entered into in
contravention of the policy declared by Congress; and the courts of the United
States will not lend their aid to enforcing it against the public policy of the
country so declared. As stated, the regulation of imports from foreign
countries is a matter for Congress and, when Congress has acted, the executive
may not enforce different regulations by suing on contracts made with reference
thereto. As said by the
Supreme Court in Oscanyan v. Arms. Co., 103 U.S. 261, 277, 26 L.Ed. 539,
'Contracts permissible by other
countries are not enforceable in our courts, if they contravene our laws, our
morality or our policy.'
For
the reasons stated, we
do not think that the United States can maintain the action for damages. The
judgment for defendant will accordingly be affirmed.