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UNITED STATES v. GUY W. CAPPS, Inc.
JUDGES: Before PARKER, Chief Judge, and
SOPER and DOBIE, Circuit Judges. 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
re-consigned 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. ยง 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 quantitative 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." The rule was well
stated by Mr. Justice Jackson in his concurring opinion in the case last
cited as follows: 'When the President takes measures incompatible
with the expressed or implied will of Congress, his power is at its lowest
ebb, for then he can rely only upon his own constitutional powers minus any
constitutional powers of Congress over the matter. Courts can sustain
exclusive Presidential control in such a case only by disabling the Congress
from acting upon the subject. Presidential claim to a power at once so
conclusive and preclusive must be scrutinized with caution, for what is at
stake is the equilibrium established by our constitutional system.' 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. . . . |
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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.
Affirmed.