UNITED STATES v. NEW YORK, NEW HAVEN & HARTFORD RAILROAD CO.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT.
Argued November 20, 1957.
Decided December 16, 1957.
Pursuant to 322 of the Transportation Act of 1940, the Government paid upon presentation and prior to audit bills presented by respondent railroad for transporting government property in 1944. On post-audit, the Government found that it had been overcharged and, upon refusal of respondent to refund the amount of the overcharge, deducted the amount from a bill for transportation services rendered by respondent in 1950. Respondent then sued the Government under the Tucker Act for the full amount of the 1950 bill. In its answer, the Government admitted the 1950 bill but claimed credit for the 1944 overcharge and its payment of the difference by check. Respondent then admitted receipt of the check, but claimed that the remainder of the 1950 bill was due and unpaid. Held: Respondent has the burden of proving that its 1944 charges were computed at lawful and authorized rates, and it is entitled to recovery only if it satisfies that burden. Pp. 254-264.
Alan S. Rosenthal argued the cause for the United States. With him on the brief were Solicitor General Rankin, Assistant Attorney General Doub and Melvin Richter.
Edmund M. Sweeney argued the cause and filed a brief for respondent.
MR. JUSTICE BRENNAN delivered the opinion of the Court.
The General Accounting Office audited transportation bills of the respondent, rendered and paid in 1944, and determined that the Government was overcharged in the amount of $1,025.26. When the respondent did not refund this amount on demand, the Government exercised the right, reserved in 322 of the Transportation Act of 1940, 1 to deduct the overpayments from a subsequent bill. The Government credited that amount against a bill of the respondent, admittedly owing, of $1,143.03 for 1950 transportation services, and paid the balance of $117.77 by check.
The respondent thereupon brought this action under the Tucker Act 2 in the District Court for Massachusetts. The complaint seeks recovery not of the $1,025.26 deducted, but of the full amount of the 1950 bill of $1,143.03. The Government's answer admits the 1950 [355 U.S. 253, 255] bill but pleads its payment by the check of $117.77 and the credit of $1,025.26 in liquidation of the overcharges determined in the 1944 bills. The respondent filed a pleading in response to the government answer 3 admitting "that it did receive the check in the amount of $117.77, all as recited by the defendant, leaving the balance due and to this date unpaid in the amount of $1025.26."
The question presented in both courts below, and in this Court, is whether in this action the carrier has the burden of proving the correctness of the 1944 bills, or the Government the burden of proving that it was overcharged. The District Court held that the respondent carrier was pleading on a contract against which the Government was attempting to "set off" claims under other contracts, and that "whoever attempts to set off the other contractual claims has the burden of showing there are other claims." In the absence of government evidence proving the claimed overcharges in the 1944 bills, a motion of the respondent for summary judgment was granted. The judgment entered, however, was for $402.84, because the respondent accepted the amount of 1944 overcharges in the difference between that sum and the amount of the bill. The Court of Appeals for the First Circuit affirmed the judgment. 236 F.2d 101. We granted certiorari, 352 U.S. 965 .
Before enactment of 322, the Government protected itself against transportation overcharges by not paying transportation bills until the responsible government officers, and, in doubtful cases, the General Accounting Office, first audited the bills and found that the charges were correct. 4 When charges were questioned the carrier [355 U.S. 253, 256] was required to justify them. If administrative settlement was not reached and the carrier sued the United States to recover the amount of the bill, no one questions that it was the carrier's duty to sustain the burden of proving the correctness of the charges. 5 Southern Pacific Co. v. United States, 272 U.S. 445, 448 .
Section 322, however, required the payment of such bills "upon presentation . . . prior to audit or settlement by the General Accounting Office . . . ." The audit procedures [355 U.S. 253, 257] remained substantially the same as those in effect prior to the statute but the former means of protecting against overcharges - by not paying the bills until their correctness was proved - has, by force of the statute, been replaced by the method of collecting them from subsequent bills, under the right reserved by the section to the Government "to deduct the amount of any overpayment to any such carrier from any amount subsequently found to be due such carrier." We recently said in United States v. Western Pacific R. Co., 352 U.S. 59, 74 :
It is entirely clear that although the railroads sought, in the words of their spokesman, "corrective action . . . that will render impossible such long delays in payment for services rendered," to gain that end the railroads recognized that any remedy suggested on their behalf should be "both practical and legal and [one] which can easily be made operative without the assumption of any risk insofar as the Government is concerned." It was "with this thought in mind" that the railroads proposed the elimination of preaudit procedures and the prompt payment of transportation bills when rendered, with audit "after payment . . . [of] these bills referred to the General Accounting Office or such other governmental auditing [355 U.S. 253, 259] office as might be desired for audit." The plan contemplated that "in the event . . . this audit reveals an over-payment" the same "will be promptly paid by the railway, preserving, however, the right of the carrier to make further effort to recollect in the event that it does not believe the proper charges resulted from the Government's audit." 9
In hearings before the House Committee on Interstate and Foreign Commerce held June 1, 1938, 10 in connection with one of the bills incorporating the proposal which became 322, the then General Counsel of the Association of American Railroads, arguing in support of the [355 U.S. 253, 260] proposal, urged that "[i]f that section could be put in here, it would require the payment of the bills by the Government as they are rendered by the railroads, with the privilege, however, of course, if it should develop that there has been an overpayment, the Government may deduct that amount from subsequent bills."
The conclusion is inescapable from this history that the Congress was desirous of aiding the railroads to secure prompt payment of their charges, 11 but it is also clear that the Congress, and the railroads, contemplated that the Government's protection against overcharges available under the preaudit practice should not be diminished. The burden of the carriers to establish the correctness of their charges was to continue unabridged. The carriers were to be paid immediately upon submission of their bills but the carriers were in return promptly to refund overcharges when such charges were administratively determined. The carrier would then have "to recollect" the sum refunded by justifying its bills to the agency or by proving its claim in the courts. The footing upon which each of the parties stood when controversies over charges developed was not to be changed. The right of the United States to deduct overpayments from subsequent bills was the carriers' own proposal for securing the Government against the burden of having to prove the overpayment in proceedings for reimbursement.
In the light of this history, we are unable to agree with the holdings of the Court of Appeals that "[a]ll that 322 does is to authorize and direct disbursing officers of the United States to pay transportation bills upon presentation, without waiting for audit or settlement by the General [355 U.S. 253, 261] Accounting Office," and that the reservation of the right of offset against subsequent bills is without significance - "We suppose that this provision was inserted out of an abundance of caution, because the availability of a setoff by the United States need not depend upon specific statutory authorization," citing Gratiot v. United States, 15 Pet. 336, 370. 236 F.2d 101, 105.
Nor do we share the view of the Court of Appeals that "the position of the United States as shipper, so far as the present case is concerned, is no different from that of a private shipper." Id., at 104. Even if we assume that "[i]f a private shipper or consignee should pay the carrier before satisfying himself of the correctness of the charges demanded - as he may be required to do pursuant to 3 (2) of the Interstate Commerce Act, 49 U.S.C.A. 3 (2) and regulations of the Commission thereunder - and later sues for a refund of alleged overpayments, or seeks to set off the amount of the overpayments against another claim admittedly due, in either case the shipper or consignee would have the burden of alleging and proving the fact and the amount of such overpayment," 12 the Court of Appeals overlooks the fact that the Government's statutory right of setoff was designed to be the substantial equivalent of its previous right to withhold payment altogether until the carrier established the correctness of its charges. Thus the issue of overcharges, after the enactment of 322, arises in a different way, but the differing procedures by which the issue is presented should not control the placement of the [355 U.S. 253, 262] burden of proof. 13 In effect the situation is that the railroad is suing to recover amounts which the Government initially paid conditionally, and then recaptured, under the 322 procedure. We therefore hold that the burden of the carrier to establish the lawfulness of its charges is the same under 322 as it was under the superseded practice.
Similarly, conventional principles of contractual setoff should not govern the determination of the carrier's burden of proof in this action merely because the complaint [355 U.S. 253, 263] frames an action for recovery of the full amount of the 1950 bill rather than the amount deducted therefrom. The respondent's brief concedes that "[w]henever a railroad brings an action against the Government, directly upon the deduction [as, on the facts of the case, to recover the alleged 1944 overpayments], it has the burden of alleging and proving the facts of the case and establishing the validity of its claim in the light of the contract and the applicable tariffs." There is also authority that the plaintiff has the same burden, although suing on the subsequent bill, when the claim for damages is for the amount of the deduction. Suncook Mills v. United States, 44 F. Supp. 744; Eastport S. S. Co. v. United States, 131 Ct. Cl. 210, 130 F. Supp. 333; Buch Express, Inc. v. United States, 132 Ct. Cl. 772, 132 F. Supp. 473. 14 We do not see that a different issue was shaped by the pleadings in this action. Cf. Wisconsin Central R. Co. v. United States, 164 U.S. 190, 212 . Although the ad damnum clause of the complaint prays recovery of $1,143.03, respondent's pleading filed in response to the Government's answer admits the government payment of $117.77, and that the actual controversy concerns the balance of $1,025.26. The true dispute between the parties, arising from the determination and collection of the overpayments as authorized by 322, involves the lawfulness of the 1944 bills. It is the substance, not the form, which should be our concern. Cf. Alcoa S. S. Co. v. United States, 338 U.S. 421 ; Reynolds v. United States, 292 U.S. 443 . We hold that the respondent is entitled to recover only if it satisfies its [355 U.S. 253, 264] burden of proving that its 1944 charges were computed at lawful and authorized rates.
We do not here intimate that the administrative determination of overpayment has binding effect in the judicial proceeding, see Wisconsin Central R. Co. v. United States, supra, at 211; Grand Trunk Western R. Co. v. United States, 252 U.S. 112, 120 -121; and we agree with the Court of Appeals that the extrinsic fact, namely the availability of the freight cars in the sizes ordered, remains to be proved in the suit. Our conclusion is that the burden in that respect is upon the carrier.
The judgment of the Court of Appeals is reversed with direction to remand the case to the District Court for further proceedings not inconsistent with this opinion.
[ Footnote 2 ] 24 Stat. 505, as amended, 28 U.S.C. 1346 (a) (2).
[ Footnote 3 ] The Pleading is captioned "Plaintiff's Answer to Defendant's Counterclaim."
[ Footnote 4 ] Government accounts generally are subject to audit prior to payment. 33 Op. Atty. Gen. 383. Prepayment examination of [355 U.S. 253, 256] claims has statutory support in several statutes. See 55 Stat. 875, 31 U.S.C. 82b; R. S. 3620, 31 U.S.C. 492; R. S. 3622, 31 U.S.C. 496; R. S. 3623, 31 U.S.C. 498; R. S. 3633, 31 U.S.C. 514; R. S. 3648, 31 U.S.C. 529; 37 Stat. 375, as amended, 31 U.S.C. 82; 55 Stat. 875, 31 U.S.C. 82c. The claimant must furnish proof satisfactorily establishing his claim. Charles v. United States, 19 Ct. Cl. 316. Doubtful accounts and claims are transmitted to the General Accounting Office for review. Section 1 of G. A. O. General Regulations No. 50, April 21, 1926, 4 CFR 4.1.
[ Footnote 5 ] The correctness of the 1944 bills turned on the determination of fact whether freight cars of the shorter lengths ordered by the United States were available when the initial carrier supplied cars of larger sizes. A wartime measure permitted the charging of the tariffs applicable to the cars furnished if the carrier could not supply cars of the sizes ordered. 236 F.2d 101, 103. The General Accounting Office determined the overpayment on a finding that the documents showed that longer cars were furnished than were ordered. On the question of whether cars of the sizes ordered were available, the Government stated its position in answer to interrogations: "Such information is peculiarly within the knowledge of plaintiff [respondent] and/or the initial carrier . . . ." The ordinary rule, based on considerations of fairness, does not place the burden upon a litigant of establishing facts peculiarly within the knowledge of his adversary. Cf. Selma, R. & D. R. Co. v. United States, 139 U.S. 560, 566 ; United States v. Denver & R. G. R. Co., 191 U.S. 84, 91 -92. The position of the respondent herein is that the Government had all the information known to the carriers as to the availability of cars of the sizes ordered.
[ Footnote 6 ] S. 3876, 75th Cong., 3d Sess., introduced April 20, 1938 (83 Cong. Rec. 5569). H. R. 10620, 75th Cong., 3d Sess., introduced May 12, 1938 (83 Cong. Rec. 6842).
[ Footnote 7 ] See, e. g., S. 1915, 76th Cong., 1st Sess., introduced March 23, 1939 (84 Cong. Rec. 3143); S. 1990, 76th Cong., 1st Sess., introduced March 30, 1939 (84 Cong. Rec. 3509). Section 1 of both of these bills dealt with the elimination of land-grant rates; 2 with the payment of transportation bills upon presentation.
H. R. 2531, 76th Cong., 1st Sess., introduced January 13, 1939 (84 Cong. Rec. 345); H. R. 4862, 76th Cong., 1st Sess., introduced March 8, 1939 (84 Cong. Rec. 2512). Section 501 of Title V of H. R. 2531 and 201 and 202 of Title II of H. R. 4862 concerned government traffic. Their provisions were substantially the same as the provisions in S. 1915 and 1990.
[ Footnote 8 ] H. R. Rep. No. 2016, 76th Cong., 3d Sess.; H. R. Rep. No. 2832, 76th Cong., 3d Sess.
[ Footnote 9 ] The postpayment audit of transportation bills by the General Accounting Office has been a large-scale operation since enactment of 322. For example, the Annual Report of the Comptroller General for the fiscal year ending June 30, 1951, pages 31-32, reports that:
[ Footnote 10 ] Hearings before the Committee on Interstate and Foreign Commerce of the House of Representatives on H. R. 10620, 75th Cong., 3d Sess., June 1, 1938, pp. 34-35.
[ Footnote 11 ] The statute was broadened before final passage to apply to any common carrier subject to the Interstate Commerce Act, as amended, or the Civil Aeronautics Act of 1938. See Hearings before the Committee on Interstate and Foreign Commerce of the House of Representatives on H. R. 2531, 76th Cong., 1st Sess., p. 472.
[ Footnote 12 ] The private shipper must pay freight charges promptly and has no expressed right of offset of any overpayment against charges for other transportation services. 24 Stat. 380, as amended, 49 U.S.C. 3 (2). A limited exception allows carriers to extend credit for a period of 96 hours to private shippers under prescribed conditions and limitations. Ex parte No. 73, 57 I. C. C. 591.
[ Footnote 13 ] Compare the practice followed in the Court of Claims, which has concurrent jurisdiction with the District Court of actions under the Tucker Act. A "Memorandum Order as to Procedure in Common Carrier Cases," issued March 11, 1953, by the Court of Claims (now, with some amendments, included as Appendix B in the Rules of the Court of Claims, revised December 2, 1957), expressly defines the "dispute" in cases of the instant kind, among others, brought in that court:
[ Footnote 14 ] But see Atlantic Coast Line R. Co. v. United States, 136 Ct. Cl. 1, 140 F. Supp. 569, 572. The Court of Claims there indicated that the burden would be on the United States while holding that the railroad had the duty to provide all the information it had on the issue of availability of cars. [355 U.S. 253, 269]