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United States v. Eastport Steamship Corp.

decided.: May 6, 1958.


Author: Waterman

Before SWAN, MEDINA and WATERMAN, Circuit Judges.

WATERMAN, Circuit Judge.

The Government commenced this suit in the Southern District of New York to recover charter hire allegedly owed by the Eastport Steamship Corporation under a charter party entered into in 1947. Exceptive allegations to the libel were filed by Eastport, alleging that the Government's claim was barred by res judicata, and that the sums sought to be recovered had been voluntarily paid by the Government. The District Court sustained the exceptive allegations and dismissed the libel. 142 F.Supp. 375.

The basis for the Government's claim is a charter party under which several vessels owned by the Government were chartered to Eastport. By the terms of the agreement the charterer agreed to pay additional charter hire upon the occurrence of certain contingencies. Eastport determined that the Government was entitled to additional charter hire in the amount of $78,024.01 and paid that sum. Accordingly to the Government's computations, however, additional charter hire was due to the extent of $109,126.72 so that Eastport's payment left an indebtedness under the charter party of $31,102.71. Approximately one year after the parties entered into the charter party, Eastport, in an unrelated transaction, purchased the S.S. Opie Read from the Government under a contract of sale*fn1 which provided that the purchase price then paid was to be reduced by an amount equal to the cost of repairs necessary to enable Eastport to obtain certificates of classification and registration for the vessel. Upon refusal by the Government to pay a claimed reduction, Eastport brought suit in the Court of Claims and was awarded a judgment for $54,097.16.*fn2 128 Ct.Cl. 778. This judgment was duly presented to the Comptroller General for payment, but in view of the Government's claim against Eastport under the charter party, the Comptroller General paid only $22,899.45. The balance, the alleged indebtedness of $31,102.71 plus $100 estimated cost of litigation necessary to obtain a judgment on the government's claim, was withheld pursuant to 31 U.S.C.A. § 227.*fn3 That statute provides that when a judgment creditor of the United States is indebted to the Government the Comptroller General shall withhold payment of such portion of the judgment as is equal to the indebtedness (plus the estimated cost of litigation necessary to prosecute the Government's claim) and, unless the creditor agrees to a pro tanto discharge of the mutual claims, that the Comptroller General shall promptly institute legal proceedings to reduce the Government's claim to judgment. Provision is also made for the recovery of interest by the judgment creditor if the Government is unsuccessful in its action. Eastport refused to consent to the withholding, whereupon the Government commenced the present suit.

Subsequent to the withholding but prior to the commencement of this suit, Eastport brought an action on its judgment in the Court of Claims alleging the Government's failure to pay the balance of the judgment which that Court had awarded and demanding recovery thereof with interest. The Government moved to dismiss. It alleged that the Court of Claims had no jurisdiction on the grounds that 31 U.S.C.A. § 227 provided the exclusive procedure by which the propriety of the withholding could be determined; and because the withholding was based upon a claim asserted under a maritime contract, and the district courts, as courts of admiralty, had exclusive jurisdiction over such contracts. The Court of Claims rejected each of these challenges to its jurisdiction and, in addition, determined that it had jurisdiction over a claim founded upon a judgment previously rendered by it. 130 F.Supp. 333, 131 Ct.Cl. 210. Thereupon, in an effort to avoid adjudication of its claim for additional charter hire in the Court of Claims, the Government paid the remainder of the judgment that Eastport had recovered previously and filed an answer setting up the defense of payment. Eastport moved to strike the answer as unresponsive because it failed to admit or deny Eastport's right to interest. The motion was sustained. The Court of Claims entered an order allowing the Government thirty days to amend its answer, in default of which the Government's liability for interest would be treated as admitted. 140 F.Supp. 773, 135 Ct.Cl. 175. Some time later the Government entered a confession of judgment for the interest Eastport demanded.

Prior to the confession of judgment but subsequent to the striking of the Government's answer in the Court of Claims proceedings, Eastport filed its exceptive allegations to the Government's libel in the District Court. The District Court sustained the allegations and dismissed the libel. It held that the Government could not assert its claim under the charter-party because payment of the withheld portion of the Court of Claims judgment was a "voluntary payment" of the claim for additional charter hire, and also because the failure to plead the claim as a counterclaim in the Court of Claims precluded its later assertion in another court.

Voluntary Payment

The District Court erred in its conclusion that payment of Eastport's original judgment was a "voluntary payment" by the Government of the Government's claim for additional charter hire. Under the doctrine of voluntary payment "One cannot, in the absence of fraud or duress or mistake of fact or reservation agreement, or, perhaps, other special circumstances, pay a claim and later sue to recover the amount paid."*fn4 The doctrine is applicable only when recovery is sought of a sum previously paid. McKnight v. United States, 1878, 98 U.S. 179, 25 L. Ed. 115, affords an excellent illustration. In that case the Government had paid a sum of money to the assignees of a contractor to whom the Government was indebted. Subsequently, relying upon the undisputed invalidity of the assignment, the Government sought to recover the amount paid. Recovery was denied on the ground of voluntary payment.

In the present case the Government claims a balance due upon its charter party with Eastport. The payment which it made to Eastport was upon Eastport's judgment, arising from the purchase of the Opie Read, an entirely unrelated transaction. Under these circumstances the doctrine of voluntary payment has no application. Eastport contends, however, that voluntary payment of a debt without deducting from the amount paid any known and existing offsetting account bars a later recovery of the sum that should have been deducted. The contention is unsound. Although a debtor may have the power to withhold payment of his admitted debt, he is not compelled to do so under penalty of foregoing his unrelated claim. The case of Cleveland & Western Coal Co. v. Main Island Creek Coal Co., 6 Cir., 1924, 297 F. 60, relied upon by Eastport, is inapposite. There the payments were made under a contract without deducting amounts to which the debtor was entitled under the same contract. "The account was a single one; the payment was for the balance due as between the parties; * * *" 297 F. 60, 64. Cf. Nix v. Art. Neon Co., 1940, 105 Colo. 562, 100 P.2d 165. Here, there was not a "single account" between the parties, nor did the Government's payment purport to establish a balance between them. The payment was made for the sole purpose of satisfying the first Court of Claims judgment.

The result is not altered by the fact that the Comptroller General has the duty under 31 U.S.C.A. § 227 to withhold payment of a judgment until the Government's claim against the judgment creditor is reduced to judgment.*fn5 By paying Eastport's judgment while the Government had a claim against Eastport the Comptroller General perhaps was guilty of a breach of duty toward the United States. Cf. United States v. Ennis, C.C.D.N.J.1904, 132 F. 133. Eastport suggests, however, that payment of the judgment was consistent only with an admission that the Government's claim against it was unfounded. Assuming, arguendo, that the Comptroller General had authority to make such an admission, payment of the judgment to Eastport does not constitute such an admission. The payment is equally consistent with an interpretation of the statute which is at variance with that contended for by Eastport. See note 5, supra.

Res Judicata and Collateral Estoppel

Eastport urges that the Government's confession of judgment in the Court of Claims bars the present suit under the doctrine of res judicata. It argues that the interest which it demanded might properly be awarded only if the Government's withholding was wrongful;*fn6 and since the withholding would have been wrongful only if the claim for additional charter hire lacked merit, the award of interest by the judgment of the Court of Claims was an adjudication of the invalidity of the Government's claim. Eastport fails to distinguish between, and thereby confuses, the doctrines of res judicata and collateral estoppel. The classic statement of these doctrines and the distinctions between them is found in Cromwell v. County of Sac, 1876, 94 U.S. 351, 352-353, 24 L. Ed. 195.

"In considering the operation of this judgment, it should be borne in mind, as stated by counsel, that there is a difference between the effect of a judgment as a bar or estoppel against the prosecution of a second action upon the same claim or demand, and its effect as an estoppel in another action between the same parties upon a different claim or cause of action. In the former case, the judgment, if rendered upon the merits, constitutes an absolute bar to a subsequent action. It is a finality as to the claim or demand in controversy, concluding parties and those in privity with them, not only as to every matter which was offered and received to sustain or defeat the claim or demand, but as to any other admissible matter which might have been offered for that purpose. * * *

"But where the second action between the same parties is upon a different claim or demand, and judgment in the prior action operates as an estoppel only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered. In all cases, therefore, where it is sought to apply the estoppel of a judgment rendered upon one cause of action to matters arising in a suit upon a different cause of action, the inquiry must always be as to the point or question actually litigated and determined in the original action, not what might have been thus litigated and determined. Only upon such matters is the judgment conclusive in another action."*fn7

It is readily apparent that the doctrine of res judicata - a doctrine applicable only when the second suit is upon the same cause of action as that upon which the first suit was based - does not preclude the Government from maintaining the present suit. The cause of action which it asserts arises from an alleged breach of the charter-party between Eastport and itself. On the other hand, Eastport's second action in the Court of Claims was based upon a judgment in its favor; and since interest was sought and awarded, perhaps also on the action of the Comptroller General in withholding payment of a portion of that judgment. In either event, the cause of action asserted by the Government in the District Court is not the same as that asserted by Eastport in the Court of Claims.

The doctrine of collateral estoppel is likewise inapplicable to the facts of the present case. The merits of the Government's claim for additional charter hire were never litigated in the Court of Claims. In the absence of such litigation and a consequent determination of the merits by that court, the judgment rendered has no collateral effect in this subsequent action commenced upon a different cause of action. See cases cited at note 7. Eastport's reliance upon Caprito v. United States, 5 Cir., 1954, 217 F.2d 783; Reynolds v. International Harvester Co., D.C.N.D.Ohio 1955, 141 F.Supp. 371; and Brigido Urbino v. Porto Rico Ry. Light & Power Co., D.C. Puerto Rico 1946, 68 F.Supp. 841, is misplaced. In each of those cases an action was held barred by res judicata because it was based upon the same cause of action which had previously merged into a judgment. In this case Eastport attempts to plead the prior judgment in a suit based upon a different cause of action. Eastport also contends that the Court of Claims by awarding interest on the judgment necessarily determined that the Government had no claim for additional charter hire. This contention is also wide of the mark. In United States v. International Bldg. Co., 1953, 345 U.S. 502, 73 S. Ct. 807, 97 L. Ed. 1182, the Supreme Court held that a judgment by confession could not be used as the basis for collateral estoppel even as to matters which were "necessarily determined" by a prior judgment. Cf. Fruehauf Trailer Co. v. Gilmore, 10 Cir., 1948, 167 F.2d 324. The court relied upon the principle enunciated in Cromwell v. County of Sac that unless an issue is actually litigated, it cannot provide the basis for an estoppel in a subsequent case based upon another cause of action. The policy underlying this limitation upon the effect of a judgment is aptly stated in County of Sac:

"Various considerations, other than the actual merits, may govern a party in bringing forward grounds of recovery or defence in one action, which may not exist in another action upon a different demand, such as the smallness of the amount or the value of the property in controversy, the difficulty of obtaining the necessary evidence, the expense of the litigation, and his own situation at the time. A party acting upon considerations like these ought not to be precluded from contesting in a ...

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