Massachusetts Trustees of Eastern Gas & Fuel Associates v. United States

PETITIONER: Massachusetts Trustees of Eastern Gas & Fuel Associates
RESPONDENT: United States
LOCATION: Hooper's Restaurant

DOCKET NO.: 137
DECIDED BY: Warren Court (1962-1965)
LOWER COURT: United States Court of Appeals for the First Circuit

CITATION: 377 US 235 (1964)
ARGUED: Feb 24, 1964
DECIDED: May 25, 1964

Facts of the case

Question

Media for Massachusetts Trustees of Eastern Gas & Fuel Associates v. United States

Audio Transcription for Oral Argument - February 24, 1964 in Massachusetts Trustees of Eastern Gas & Fuel Associates v. United States

Earl Warren:

Number 137, Massachusetts Trustees of Eastern Gas and Fuel Associates, Petitioner, versus United States.

Mr. Fort.

J. Franklin Fort:

Mr. Chief Justice and may it please the Court.

This case involves two questions arising under the Merchant Ship Sales Act of 1946.

The petitioner here chartered 10 ships during the years 1946 and 1947 under that Act, and the argument revolves around whether a statutory provision fixing the charter hire is paramount over a contractual provision which we claim differs from the statute.

The statutes that are involved, Your Honors, are set forth in a foldout sheet to our brief, the petitioner's brief.

We have set forth there that the relevant statutes, the provisions of the applicable regulations, the first form of charter that the Maritime Commission used, and in the last column, the form of charter which is in issue here.

In substance, the Merchant Ship Sales Act was designed to dispose either by sale or charter of the large fleet of war-built merchant vessels resulting from World War II.

The statute provided for the fixing of a basic monthly or annual charter hire and for a -- the sharing of profits with the government arising out of the operation of the chartered vessels.

The first section in concern is Section 5 (b), which you will see up at the left-hand corner of the foldout sheet, which says, in substance that the charter hire, the fixed charter hire shall be in an amount not less than 15% of the statutory sales price of the vessels as fixed for sale under the 1946 Act.

The second section, Section 5 (c) states that the provisions of certain sections of the Merchant Marine Act 1936, including Section 709, shall be applicable to charters made under this section and 709, which is the principal statutory provision in question here is quoted at the bottom of that column.

That says that every charter made by the Commission pursuant to the provisions of this Title shall provide whenever at the end of any calendar year, subsequent to the execution of such charter, the accumulative net voyage profit shall exceed 10%, and I'm giving you the substance now on the ca -- charter's capital necessarily employed, that the charter shall pay over to the Commission as additional charter hire, one-half of such cumulative net voyage profit.

In the next column, you will find the regulations, the regulation relating to the fixed 15% hire, reiterates and summarizes the statute, the regulation relating to the profit-sharing hire, the 50-50 division of profits describes this as a mandatory provision in the charters and provides for one-half.

The third column is the original charter which the Maritime Commission used with the industry which provides for a one-half division of profits with the government.

And in the last column, you will find the provision of the charter, Clause 13, at the bottom, of which we complain.

In substance, what happened was that the Maritime Commission took Section 709 (a) and rewrote it to include a sliding scale of additional charter hire up as high as 90%.

And the first controversy here is whether they had the legal authority to charge the excess amounts.

Now, the Ship Sales Act form of charter was adopted in September 1946.

The Maritime Commission fixed the basic annual hire, and I'm using liberty vessels now for purposes of illustration because they were the type of this company charter, fixed a basic hire of $96,000 a year for those ships payable, irrespective of profits and losses.

That was about $14,000 more than the minimum that they could have fixed per annum under that section.

They then proposed this sliding scale of additional charter hire for the charterers and the industry associations objected to it and after these objections were raised, the provisions of the charter were amended.

A further provision was added to Clause 13 which is not on the foldout sheet but which is at page 7 of our brief in a footnote stating that any payments of additional charter hire based on profits which were made under that clause would be tentative and preliminary until the final audit of the charterer's accountings for profits and losses and that the -- at the time of the final audit, an adjustment would be made and amounts refunded to the charterers as may be required.

Now, that clause has been the subject of some litigation.

We've cited the cases in our brief.

It's been admitted that it was put in there to protect our position with respect to our dispute as to whether the charter provision calling for this sliding scale of additional charter hire conflicted with the statutory provision.

Arthur J. Goldberg:

(Inaudible)

J. Franklin Fort:

Yes, it is, Your Honor.

And I won't go into the details of -- of that.

I think the record is clear.

The District judge in this case found that we have reserved our rights and that we have relied on -- on those rights in -- in holding -- holding back and raising the issue at a later time.