Respondents Reply Brief — Hatzlachh Supply Co. v. United States

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No. 78-1175 4 = QCT_-s«18 1979

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Iu the Supreme Court of the United States

OCTOBER TERM, 1979

| HATZLACHH SUPPLY COMPANY, INC., PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF CLAIMS

BRIEF FOR THE UNITED STATES

WADE H. MCCREE, JR.

Solicitor General

ALICE DANIEL

Acting Assistant Attorney General

KENT L. JONES

Assistant to the Solicitor General

ELOISE E. DAVIES

FRANK A. ROSENFELD

Attorneys

Department of Justice

Washington, D.C. 205380

Opinion DObOW .....<:.....:rcssccsasncnsnscscocsossensansesyeneseens

FPO nssiiesiiesisiinscciccevinisnsinnanincababaiandllemmecnnnan

Question prewemted .............ccccecsssncsecesesnssntonavenes

Statutory provisions involved ................-.-----+-+--

ERCOUIOIE weenie cecnesianiensvenecingnssentnnninisnbraandiaaameen

Summary of argument .....................cocssssesssesss

Argument:

The Court of Claims lacks jurisdiction to

award damages on petitioner’s claim be-

cause an implied-in-fact contract of bail-

ment does not arise from the seizure of

goods for forfeiture under 19 U.S.C.

RII essen ncssisrndeibnsceada-caeumedaninaean

A. A claim founded upon an implied

contract with the United States is not

within the jurisdiction of the Court

of Claims unless there was mutual

assent to enter into the contract........

B. Neither the United States nor peti-

tioner manifested its assent to a con-

tract of bailment for the goods seized

for forfeiture under 19 U.S.C. 1592..

1. The seizure of goods for violations

of the customs laws does not cre-

ate an implied-in-fact contract

OR WIIG nicecssccctnniionsexttniniaans

Argument—Continued

2. Neither 28 U.S.C. 2465 nor a

discretionary remission of the for-

feiture under 19 U.S.C. 1618 cre-

ates an implied-in-fact contract of

Sa SISA RRO, 2 CY Sl

3. The exception from governmental

tort liability in 28 U.S.C. 2680

detention of goods by customs

officers supports the conclusion

that an implied-in-fact contract

of bailment does not arise from

the seizure of goods for violations

of the customs laws ......................

i NLS A in TE ee ea

CITATIONS

Cases:

Agnew v. Haymes, 141 F. 631

Algonac Mfg. Co. v. United States, 428

F.2d 1241

IPPE AN I beic stcinbicbosddcasssuotnoies 8, 9, 20,

American Merchandising Co., In re, 136

a MN I iodides

epeenetaden 24,

Page

25, 26

34, 36

Ill

Cases—Continued Page

Bateson-Stolte, Inc. v. United States, 142

Sie Mie. MMI Shi tdasicaunstinbelastetvesibetalsActuagssaside 30

Beck v. Washington, 369 U.S. 541 ............ 31

Bigby v. United States, 188 U.S. 400 ........ 32

Bird & Sons, Inc. v. United States, 420

i ee Ge eehhinktetidg rgd 3

Blackorby v. Friend, Crosby & Co., 134

Bes ‘0, SD TR Wie Fe Sectein i ncieinictninns 17

Burke v. Trevitt, 4 F. Cas. 746 (No. 2,

SOI Ressnseichceseasdteipcemeleansbaibusadindleaiedaicdelas 25

Burns vy. State, 145 Wis. 373, 128 N.W.

PRINS SAMA Med TB DSIRE har Lc TOC RRS Vee Or 23

Burtt v. United States, 176 Ct. Cl. 310...... 32

Canadian Co-op. Wheat Producers, Ltd.

v. Murphy & Hoffman, Inc., 52 F.2d

pee en Te MORMON: ENA ME Us BC cea & 17

C.F. Harms Co. v. Erie R.R., 167 F.2d

IIE - cists stiiedninachoniondiniassleadbaiidebeasonateagaiigeninca 21

Cities Service Gas Co. v. United States,

a I eis ainedthisceindblensenidesadinadtdaees 14

Continental Insurance Co. v. Harrison

County, 168 F.2d 671 .......................2..:. 23

Conqueror, The, 166 U.S. 110 ................ 25, 26, 38

Department of Revenue v. Jennison-

Wright Corp., 393 Ill. 401, 66 N.E. 2d

RAIA. BOSC DOR RANT AO OED 17

Dioguardi v. Durning, 139 F.2d 274 ........ 25

Gulf Transit Co. v. United States, 43 Ct.

Sle” MID chaadhidssloncnintscinpelitecninsatiethteckitonse 21

Haskins v. Dean, 19 Utah 89, 56 P. 953... 17

H.S. Crocker Co. v. McFaddin, 148 Cal.

App. 2d 639, 307 P.2d 429 0.000... 15, 16

Jackson v. United States, 573 F.2d 1189.. 40

Keifer & Keifer v. Reconstruction Finance

COP, BOR GF, GR sic cseecscvvcescetictedantecses 32

Cases—Continued Page

Kendall v. United States, 107 U.S. 1238 .... 13

Malz v. State, 36 Tex. Crim. 447, 37 S.W.

gear Son UNITE AEP CONC Oo ee 17

Maulding v. United States, 257 F.2d 56.... 17

Medbury v. United States, 173 U.S. 492... 21

Merritt v. United States, 267 U.S. 388 .... 22

Mosca v. United States, 417 F.2d 1882... 21

Naamloze Vennootschap Suikerfabriek

“Wono-Alseh” v. Chase National Bank,

cit 2 fe eee ee 18

One Lot Emerald Cut Stones and One

Ring v. United States, 409 U.S. 232... 19

Russell Corp. v. United States, 587 F.2d

474, cert. denied, 429 U.S. 1078 .......... 14, 15

S. Schonfeld Co. v. SS Akra Tenaron, 363

REST ERE aoe 34

Seaboard Sand & Gravel Corp. v. Moran

Towing Corp., 154 F.2d 399 ............ 22, 23

Somali Development. Bank v. United

States, 508 F.2d 817 oon... ececcccccee. 32

Soriano v. United States, 352 U.S. 270... 13

Spencer v. First Carolinas Joint-Stock

Land Bank, 165 S.E. 781 .................. 16, 17, 23

State v. Carr, 118 N.J.L. 233, 192 A. 36.. 22

States Marine Lines, Ine. v. Shultz, 359 F.

Supp. 512, rev’d on other grounds, 498

IR ee habia icc ctatadssrecitidbeccuasiaacy 35

States Marine Lines, Inc. v. Shultz, 498

Bi) Eas 11, 24, 25, 26, 27, 34, 38

Stencel Aero Engineering Corp. v. United

States, 481 U.S. 666 ..000...o.... ec. 39

Tree Farm Development Corp. v. United

States, 585 F.2d 498 ooo... cesses. 15

Trotter v. Union Indemnity Co., 33 F.2d

363, aff’d, 35 F.2d 104 oo. 18

Cases—Continued Page

United States v. Dickinson, 331 U.S. 745..

United States v. Hvoslef, 237 U.S. i .....-..

United States v. Lynah, 188 U.S. 446 ..........

United States v. Minnesota Mutual In-

vestment Co., 271 U.S. 212 ..............000020

United States v. One (1) 1972 Wood, 19

Ft. Custom Boat FL 8448Ay, 501 F.2d

MAMIE - siidlbcapecinshibestscinceiaekeniaaeaadasmeatoabhtdiiia

United States v. Sherwood, 312 U.S. 584..

United States v. Stowell, 133 U.S. 1......19, 21, 25

United States v. Testan, 424 U.S. 392 ...... 13

United States v. Thomas, 82 U.S. (15

PR IF ein siccsnsiishsiassitammienirincknnaciansets 23, 25, 33

United States v. United Marketing Ass’n,

BI i WI CEI eerpctiecnidennsccncncensinnlnnonanns 18

Wilson v. Citizens Central Bank, 56 Ohio

pce: ie 8 Sh Sen eeem 23

Statutes and rules:

Customs Procedural Reform and Simplifi-

eation Act of 1978, Pub. L. No. 95-

410, Section 110(a), 92 Stat. 888 .......... 3

92 Stat. 893-896 (19 U.S.C. 1592(c)

DP) stiiisicernsalscadasansoonsnensoonvaveresbebeneaten 3

Federal Tort Claims Act:

Be Wi BUI) | hoccnriniececcocnvesseraie 32, 33, 34

Be TIED veceenececkecscedonncecencsene 34

I TE a clic sseenee 38

I I ie ils cclicle cw ucnbnmens 33

ee I or 2, 36

28 U.S.C. 2680(a)-(m) ..000000. ee. 35

BD WR BED vncvvncesceveecccccsasconsmees 36

28 U.S.C. 2680(c) ................ 9, 10, 12, 26, 33,

35, 36, 37, 38

Statutes and rules—Continued Page

Tucker Act, 28 U.S.C. 1491 ........ 2

39 U.S.C. 1608 ................ 3, 5, 6, 7, 8, 9, 14, 16, 18,

19, 25, 39

I 23

oe OU ce 4, 5, 19, 28, 29

a 13, 21

| 4) eee 32

28 U.S.C. 2006 ................ 11, 26, 27, 30, 33, 38, 39

ih. 53 |: SSE nena 25

Oe I ce 26, 33

eM UNO i 30

. i 5 | ae 31

Sup. Ct. BR, 28(1)(e) .:................. 31

Miscellaneous:

8 Am. Jur. 2d Bailment 2) eee 23

8 C.J.S. Bail (1962) 23

8 C.J.S. Bailments (1962) 16

H.R. Rep. No. 1287, 79th Cong., 1st Sess.

Sa TITOSDE 1s Se Rane 37

S.. Rep. No. 1400, 79th Cong., 2d Sess.

SEA a ean 37

Story on Bailments (7th ed. 1863) ......11, 22, 23,

24, 38

eee eee 37

Iu the Supreme Court of the United States

OCTOBER TERM, 1979

No. 78-1175

HATZLACHH SUPPLY COMPANY, INC., PETITIONER

Vv.

UNITED STATES OF AMERICA

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF CLAIMS

BRIEF FOR THE UNITED STATES

OPINION BELOW

The opinion of the Court of Claims (A. 25a-32a)

is reported at 579 F.2d 617.

JURISDICTION

The judgment of the Court of Claims was entered

on July 14, 1978, and a timely petition for rehearing

was denied on September 29, 1978 (Pet. App. 9a).

On December 8, 1978, the Chief Justice extended the

(1)

time for filing a petition for a writ of certiorari ‘o

January 27, 1979 (Pet. App. 10a). The petition was

filed on January 26, 1979, and was granted on May

14, 1979. The jurisdiction of this Court is invoked

under 28 U.S.C. 1255(1).

QUESTION PRESENTED

Whether the United States may be held liable for

breach of an implied bailment contract when goods

are lost while held by the United States Customs

Service following their seizure for customs violations.

STATUTORY PROVISIONS INVOLVED

1. The Tucker Act, 28 U.S.C. 1491 provides in

relevant part:

The Court of Claims shall have jurisdiction to

render judgment upon any claim against the

Unitec States founded either upon the Constitu-

tion, or any Act of Congress, or any regulation

of an executive department, or upon any express

or implied contract with the United States, or for

liquidated or unliquidated damages in cases not

sounding in tort.

2. The Federal Tort Claims Act, 28 U.S.C. 2680,

provides in relevant part:

The provisions of this chapter and section 1346

(b) of this title shall not apply to—

* * * * *

sessment or collection of any tax or customs

duty, or the detention of any goods cz merchan-

dise by an officer of customs or excise or any

other law-enforcement officer.

8 Prior to October 3, 1978, 19 U.S.C. (1976 ed. )

1592 provided in relevant part: ’

If any consignor, seller, owner, importer, con-

signee, agent, or other person or persons enters

or introduces, or attempts to enter or introduce,

into the commerce of the United States any im-

ported merchandise by means of any fraudulent

or false invoice, declaration, affidavit, letter,

paper, or by means of any false statement, writ-

ten or verbal, or by means of any false or fraudu-

lent practice or appliance whatsoever, or makes

any false statement in any declaration under the

119 U.S.C. 1592 was amended on October 8, 1978, by Sec-

tion 110(a) of the Customs Procedural Reform and Simplifi-

cation Act of 1978, Pub. L. No. 95-410, 92 Stat. 888, 893-896.

The amended statute provides in part (to be codified at 19

U.S.C. 1592(c) (5)) that:

If the Secretary has reasonable cause to believe that a

person has violated [customs entry requirements as set

forth in] subsection (a) and that such person is insolvent

or beyond the jurisdiction of the United States or that

seizure is otherwise essential to protect the revenue of

the United States or to prevent the introduction of pro-

hibited or restricted merchandise into the customs terri-

tory of the United States, then such merchandise may be

seized and, upon assessment of a monetary penalty, for-

feited unless the monetary penalty is paid within the time

specified by law.

92 Stat. 896. This amendment was enacted eight years after

the declaration of forfeiture in this case and is not directly

relevant to this litigation. All citations to the customs laws

of the United States in this brief are to the laws as they

existed in 1970, at the time of the seizure that occurred in

this case.

provisions of section 1485 of this title (relating

to declaration on entry) without reasonable cause

to believe the truth of such statement, * * *

whether or not the United States shall or may

be deprived of the lawful duties, or any portion

thereof, accruing upon the merchandise, or any

portion thereof, embraced or referred to in such

invoice, declaration, affidavit, letter, paper, or

statement; * * * such merchandise, or the value

thereof, to be recovered from such person or per-

sons, shall be subject to forfeiture, which for-

feiture shall only apply to the whole of the mer-

chandise or the value thereof in the case or pack-

age containing the particular article or articles

of merchandise to which such fraud or false

paper or statement relates.

19 U.S.C. 1618 provides in relevant part:

Whenever any person interested in any vessel,

vehicle, merchandise, or baggage seized under the

provisions of this chapter, or who has incurred,

or is alleged to have incurred, any fine or penalty

thereunder, files with the Secretary of the Treas-

ury under the customs laws or under the naviga-

tion laws, before the sale of such vessel, vehicle,

merchandise, or baggage a petition for the re-

mission or mitigation of such fine, penalty, or

forfeiture, the Secretary of the Treasury, if he

finds that such fine, penalty, or forfeiture was

incurred without willful negligence or without

any intention on the part of the petitioner to

defraud the revenue or to violate the law, or

finds the existence of such mitigating circum-

stances as to justify the remission or mitigation

of such fine, penalty, or forfeiture, may remit or

mitigate the same upon such terms and condi-

tions as he deems reasonable and just, or order

discontinuance of any prosecution relating

thereto. * * *

STATEMENT

Petitioner imported certain camera supplies and

other miscellaneous items from Germany in April

and May of 1970. This merchandise, which had been

transported in shipping containers, was seized by the

United States Customs Service on its arrival at the

port in New Jersey. This action was taken because,

upon opening the containers, customs officials dis-

covered discrepancies between the descriptions of the

merchandise submitted on arrival and the items in

fact landed (A. 26a). The Customs Service gave

petitioner formal, written notice that the seized goods

were declared forfeited to the United States under

19 U.S.C. 1592.

On June 5, 1970, and June 26, 1970, petitioner

applied to the Secretary of Treasury under 19 U.S.C.

1618 for remission of the forfeitures and return of

the seized goods (A. 10a, 18a). In these petitions,

petitioner offered explanations for the violations of

19 U.S.C. 1592, stating that, while the description

of the goods on the customs documents was erro-

neous, petitioner “in no way contributed, either

actively or passively, in the erroneous description,

and that his only instruction to [his broker agent]

was to prepare a proper [entry] application” (A.

lla; see A. 20a-21a).? Petitioner also complained

that the government’s inventories indicated that a

portion of the merchandise had disappeared since the |

goods were landed (A. 15a-16a, 21a-22a).*

On October 13, 1970, the Secretary agreed to remit

the forfeiture in return for payment of a $40,000

penalty (A. 3a). Petitioner paid the penalty, and the

Customs Service thereupon returned the forfeited

materials in its possession (ibid.; see A. 26a).

On March 17, 1976, six years after the first con-

tainer was landed (A. 2a), petitioner filed this suit

in the United States Court of Claims seeking to re-

cover $165,220.50, which it alleged to be the value of

the goods that were “lost or stolen” while in the

custody of the Customs Service (A. 3a).‘ The gov-

ernment moved for summary judgment, alleging that

2 Petitioner maintained that the misstatements of its agents

did not justify forfeiture under 19 U.S.C. 1592 (A. 12a, 20a-

21a).

8In the June 5, 1970, petition for remission of the for-

feiture, petitioner claimed that “the statement of appraise-

ment released to the petitioner’s attorneys indicates that the

quantities which survived the opening of the container in a

public place accessible to strangers on the pier were smaller

than the quantities stated on the invoices” (A. 15a). In the

June 26, 1970, petition, petitioner asserted that “the importer

has sustained an irreparable loss. For the inventory fur-

nished by the Government, even taking several apparent

errors into account, shows that a substantial shortage of

goods took place after the containers were unsealed on the

pier and while in Customs custody” (A. 21a-22a).

4 Petitioner also sought to recover $2,000,000 for loss of

“face and good will” (A. 4a). This claim was denied and is

not in issue here.

the complaint failed to state a claim within the court’s

jurisdiction (A. 26a).° The Court of Claims granted

the motion, holding that petitioner had not stated a

claim for breach of an implied bailment contract and

therefore had failed to state a claim on which the

court could grant relief (A. 32a).

The court first rejected petitioner’s contention that

the seizure of the merchandise by the Customs Service

was “ ‘capricious, arbitrary, unreasonable, unlawful

and not sanctioned nor colored’ by law” (A. 26a).

The court noted that petitioner’s application for re-

mission of the forfeiture “to the Regional Commis-

sion of Customs admitted that the merchandise de-

scription submitted to the [Customs Service] was

‘erroneous’ and that the discrepancy between the

merchandise description and the items actually landed

[was] ‘obvious and apparent’” (A. 26a; emphasis

in original). The court observed that, while the sanc-

tion of forfeiture in this context might appear severe,

the Customs Service had not acted unlawfully, arbi-

trarily or capriciously in declaring the forfeiture and

seizing the merchandise under 19 U.S.C. 1592 (A.

26a). The court also observed that, even if the seizure

of the goods had been unlawful, arbitrary or caprici-

ous, the Court of Claims would have had no juris-

diction over petitioner’s action because it “would

then sound in tort” (A. 26a-27a, citing Algonac

5The government also impleaded Sea-Land Services as

third-party defendant. Sea-Land operated the terminal where

the goods were first landed and where they were detained

before their removal to a government warehouse.

Mfg. Co. v. United States, 428 3'.2d 1241 (Ct. Cl.

1976) ).°

The court then rejected petitioner’s claim that the

government had entered into an implied contract of

bailment to return the merchandise seized for for-

feiture under 19 U.S.C. 1592. The court concluded

that, when the government seizes merchandise for

forfeiture for violations of Section 1592, it does not

assent[] to, or agree[] to be bound by, an im-

plied-in-fact contract to return the merchandise

whole. Lacking such assent by one of the parties

(and here it is doubtful whether either of the

parties actually agreed), we cannot find an im-

plied-in-fact contract. See, e.g., Somali Develop-

ment Bank v. United States, 508 F.2d 817, 205

Ct. Cl. 741 (1974).

(A. 32a; emphasis in original).

The court noted that the Second Circuit had con-

cluded in Alliance Assurance Co. v. United States,

252 F.2d 529 (1958), that an implied-in-fact contract

of bailment was created when the government de-

tained merchandise for inspection to determine com-

pliance with entry requirements. It distinguished

the decision in Alliance, however, on two principal

grounds. First, there is “the obvious factual distinc-

tion” that this case involves seizure for forfeiture

rather than inspection, and the importer in this case

6 For essentially the same reasons, the court rejected peti-

tioner’s claim that the forfeiture of merchandise entered in

violation of 19 U.S.C. 1592 constitutes a “ ‘taking’ * * * with-

out just compensation” (A. 27a). Petitioner has not sought

further review of these rulings of the Court of Claims.

was thus not the “unquestioned, rightful owner” of

the goods as the court had assumed in Alliance (A.

30a).7 Second, where goods are seized for forfeiture

under 19 U.S.C. 1592, any tort claim against the

United States “arising in respect of * * * the deten-

tion” is expressly precluded by 28 U.S.C. 2680(c).

Because Congress has “specifically precluded recovery

in claims arising from customs detention, even where

such claims arose from tortious actions by the Gov-

ernment” (A. 31la-32a; emphasis in original), the

court reasoned that it could not find an implied agree-

ment by the government to pay for the value of the

allegedly missing merchandise (ibid.).* The court

indicated, however, that it would not consider its

decision “as necessarily controlling a case in which

there were additional facts from which an implied

or express agreement could possibly arise, ¢.g., a

7 [In Alliance, the court of appeals had relied on the fact

that the importer was “the lawful owner” of the merchandise

held by the government for customs inspection. 252 F.2d at

582. The court emphasized that the goods there at issue had

passed customs inspection before they were lost. Id. at 531.

The court also remarked that there was an “elaborate set of

ten tickets, at least two of which [were] designed to restore

the goods to the owner,” which supported an inference of a

promise to return the goods following inspection. Jd. at 5382.

8The court noted that the Second Circuit had ruled in

Alliance that merchandise lost while in the possession of the

government for customs inspection is not being “detained”

by the government and that neither tort nor contract liability

is thus precluded by 28 U.S.C. 2680(c) for such claims. The

court suggested that the Alliance court might interpret 28

U.S.C. 2680(c) to preclude recovery on the different facts of

this case (A. 31a).

promise, representation or statement that the goods

would be guarded or carefully handled” (A. 32a).

In the latter circumstances, the court stated that a

claim might lie under the Tucker Act even though

28 U.S.C. 2680(c) barred recovery under the Federal

Tort Claims Act (ibid.).

SUMMARY OF ARGUMENT

The Court of Claims is a court of limited juris-

diction. A claim based upon an implied contract is

within the jurisdiction of the Court of Claims only if

the contract is one implied-in-fact, not implied-in-

law. For petitioner to prevail in this case, it must

establish that the United States and petitioner

mutually assented in fact to a contract of bailment

for merchandise seized by the United States for for-

feiture under the customs laws.

A. The elements of an implied-in-fact contractual

bailment are wholly lacking in this case. In a con-

tractual bailment, the bailor retains unquestioned

title to the property and the right to call for delivery

or reclaim his goods. The United States, however,

seized petitioner’s merchandise by operation of law

under a claim of government ownership due to forfei-

ture for violation of the customs laws, and not by

mutual assent, The United States held the merchan-

dise under its own claim of title and not pursuant

to any contractual agreement with petitioner.

B. The fact that the United States does not enter

into an implied-in-fact contract of bailment when it

seizes goods for forfeiture does not mean that the

government has no responsibility under any circum-

stances to return or safeguard goods seized for vio-

lations of the customs laws. At common law, cus-

toms officials are regarded as “quasi-bailees” (Story

on Bailments § 618, at 597 (7th ed. 1863) ) be-

cause the law imposes on them certain responsi-

bilities that are analogous to those created by a con-

tractual bailment. In particular, customs officers

must exercise reasonable diligence in the care of goods

seized and held by them in the performance of their

official duties. This responsibility is imposed by law,

however, and not by agreement, it is enforcable in a

private tort action and not in a suit for breach of

contract.

The statutes of the United States have long recog-

nized the tort liability of customs officers as a result

of their “quasi-bailee” status. 28 U.S.C. 2006 pro-

vides that, in an action brought against a customs

officer for negligent loss of goods, if it is established

that the seizure was made with probable cause the

judgment may not be executed against the individual

officer but “shall be paid out of the proper appropria-

tion by the Treasury.” Under this statute, the lia-

bility of customs officers remains grounded in tort,

not in contract. The statute merely protects customs

officers in limited circumstances from being held

personally liable for their tortious conduct. States

Marine Lines, Inc. v. Shultz, 498 F.2d 1146, 1149

(4th Cir. 1974).

The Court of Claims plainly lacks jurisdiction over

personal actions against government officers; it also

lacks original jurisdiction over claims grounded in

tort. The implied-in-law or “quasi-bailee” responsi-

bilities of customs officers are thus not the proper

subject of suit in the Court of Claims. While there

is a remedy for goods that are seized but not forfeited

and are lost by the negligence of customs officers,

that remedy is not in the Court of Claims.

C. This conclusion is supported by the fact that

in enacting the Federal Tort Claims Act, Congress

was careful not to shoulder for the United States the

potential tort liability of customs officers. 28 U.S.C.

2680(c) excludes from the general coverage of the

Act any claim arising “in respect of the * * * deten-

tion of any goods or merchandise by any officer of

customs * * *.” Claims for negligent loss of goods

during customs detention must be brought against

the customs officer as an individual; they are ex-

eluded from coverage under the Federal Tort Claims

Act. As the Court of Claims concluded in this case,

the United States cannot be assumed to have assented

in fact to a liability that it has by law disclaimed.

138

ARGUMENT

THE COURT OF CLAIMS LACKS JURISDICTION

TO AWARD DAMAGES ON PETITIONER’S CLAIM

BECAUSE AN IMPLIED-IN-FACT CONTRACT OF

BAILMENT DOES NOT ARISE FROM THE SEIZURE

OF GOODS FOR FORFEITURE UNDER 19 U.S.C. 1592

A. A Claim Founded Upon An Implied Contract With

The United States Is Not Within The Jurisdiction Of

The Court Of Claims Unless There Was Mutual

Assent To Enter Into The Contract

The Court of Claims is a court of limited jurisdic-

tion. Under the Tucker Act, it has jurisdiction to

award damages upon any claim against the United

States that is bs

founded either upon the Constitution, or any Act

of Congress, or any regulation of an executive

department, or upon any express or implied con-

tract with the United States, or for liquidated or

unliquidated damages in cases not sounding in

tort.

298 U.S.C. 1491. The limitations in this grant of

jurisdiction are strictly observed. Soriano v. United

States, 352 U.S. 270, 273 (1957) ; Kendall v. United

States, 107 U.S. 123, 125 (1882). As this Court

stated in United States v. Testan, 424 U.S. 392, 399

(1976), quoting United States v. Sherwood, 312 US.

584, 587-588 (1941), “Te}xcept as Congress has con-

sented [to a cause of action against the United

States], there is no jurisdiction in the Court of Claims

more than in any other court to entertain suits

against the United States.”

err

In this case, petitioner argues that the United

States entered into, and subsequently breached, an

implied contract of bailment for merchandise seized

by the United States for violations of customs entry

requirements under 19 U.S.C. 1592. But a claim

based upon an implied contract is within the juris-

diction of the Court of Claims only if the contract is

“one implied in fact and not one based merely on

equitable considerations and implied in law.” United

States v. Minnesota Mutual Investmert Co., 271 U.S.

212, 217 (1926). See Cities Service Gas Co. v.

*. United States, 500 F.2d 448 (Ct. Cl. 1974).

A contract “implied in law’ (or quasi-contract)

arises ‘‘where, by fiction of law, a promise is imputed

to perform a legal duty, as to repay money obtained

by fraud or duress * * *.” Baltimore & Ohio R.R. v.

United States, 261 U.S. 592, 597 (1923). The duty

“is imposed by operation of law without regard to the

intent of the parties. Such arrangements are treated

as contracts for the purposes of remedy only.” Rus-

sell Corp. v. United States, 5387 F.2d 474, 482 (Ct.

Cl. 1976), cert. denied, 429 U.S. 1073 (1977). See

Algonac Mfg. Co. v. United States, 428 F.2d 1241

(Ct. Cl. 1970).

By contrast, a contract implied-in-fact is a true

contract, “founded upon a meeting of [the] minds,

which, although not embodied in an express contract,

is inferred, as a fact, from conduct of the parties

showing, in the light of the surrounding circum-

stances, their tacit understanding.” Baltimore & Ohio

R.R. v. United States, supra, 261 U.S. at 597. An

implied-in-fact contract differs from: an express con-

tract only in that the agreement is not expressed in

wurds, either written or spoken, but is instead “indi-

cated by some intelligible conduct, act or sign.” Jd.

at 598. In all other respects, all the elements of an

express contract must be shown:

For there to be an express contract, the parties

must have intended to be bound and must have

expressed their intention in a manner capable of

understanding. * * *

* * * * *

A contract implied in fact requires a showing

of the same mutual intent to contract as that

required for an express contract. The fact that

an instrument was not executed is not essential

to consummation of the agreement. It is essen-

tiai, however, that the acceptance of the offer be

manifested by conduct that indicates assent to

the proposed bargain.

Russell Corp. v. United States, supra, 537 F.2d at

481-482. Accord, Tree Farm Development Corp. v.

United States, 585 F.2d 493 (Ct. Cl. 1978).

For petitioner to prevail on its claim, it must there-

fore establish that the United States and petitioner

mutually assented to a contract of bailment for mer-

chandise seized by the United States for forfeiture

under the customs laws.°

® “The general rule that the assent of both parties is neces-

sary before a contract, either express or implied in fact, can

come into existence, is applicable to the ordinary case of a

contract of bailment.” H. S. Crocker Co. v. McFaddin, 148

Cal. App. 2d 639, 644, 307 P.2d 429, 432-433 (1957). See

also pages 22-23, infra.

B. Neither The United States Nor Petitioner Manifested

Its Assent To A Contract Of Bailment For The Goods

Seized For Forfeiture Under 19 U.S.C. 1592

The Court of Claims correctly concluded (A. 32a)

that the United States and petitioner did not mutually

assent to a contract of bailment for merchandise

seized by the United States under 19 U.S.C. 1952 for

violations of the customs laws.

1. The Seizure Of Goods For Violations Of The Cus-

toms Laws Does Not Create An Implied-In-Fact

Contract Of Bailment

A contractual bailment cannot be implied in fact

“where it appears it was the intention of the parties,

as derived from their relationship to each other and

from the circumstances of the case, that the property

was to be held by the party in possession in some

capacity other than as bailee.” H. S. Crocker Co. v.

McFaddin, 148 Cal. App. 2d 639, 644, 307 P.2d 429,

433 (1957). When the United States seized petition-

er’s goods for forfeiture for violations of the customs

laws, it did not assent to the elements of a contrac-

tual bailment.

A contractual bailment “is premised upon the un-

interrupted retention of title in the * * * bailor.”

In re American Merchandising Co., 136 F. Supp. 952,

954 (D.N.J. 1955); 8 C.J.S. Bailments §1, at 314

(1962). It is created by the delivery of property by

10 Constructive bailments, which are not contractual in

nature but are implied-in-law duties imposed when there is

“lawful possession, however created, and the duty to account

for the thing as the property of another” (Spencer v. First

the owner to another for a specific purpose, with an

“express or implied contract to redeliver the goods

when the purpose has been fulfilled, or to otherwise

deal with the goods according to the bailor’s direc-

tions.” Maulding v. United States, 257 F.2d 56, 60

(9th Cir. 1953). See 9 Williston on Contracts § 1030,

at 876 (3d ed. 1967). In a contractual bailment,

title does not change with delivery of the property,

and the owner retains the right to call for delivery or

reclaim his goods. Department of Revenue v. Jenni-

son-Wright Corp., 393 Ill. 401, 407, 66 N.E.2d 395,

398 (1946); Haskins v. Dern, 19 Utah 89, 98, 56

P. 953, 955 (1899) ; Malz v. State, 36 Tex. Crim. 447,

37 S.W. 748 (1896) ; 9 Williston on Contracts, supra,

§ 1035, at 890-891. While the property remains in

the possession of the bailee, the bailee “may not dis-

pute the title of his bailor.” Canadian Co-op. Wheat

Producers, Ltd. v. Murphy & Hoffman, Inc., 52 F.2d

496, 497 (W.D.N.Y. 1931). Because of the trust

nature of a contractual bailment, the bailee “cannot

set up title in himself unless it has been acquired

* * * from a transfer made by the bailor subsequent

to the bailment.” 9 Williston on Contracts, supra,

§ 1036, at 895. Blackorby v. Friend, Crosby & Co.,

134 Minn. 1, 3, 158 N.W. 708, 709 (1916):

It is a well-settled rule in the law of bailments

that the bailee must return the property or its

proceeds to the possession of the bailor before he

can assert a title thereto adverse to the bailor.

Carolinas Joint-Stock Land Bank, 165 S.E. 731, 732 (S.C.

1932) ), are discussed at pages 22-23, infra.

If the bailee transfers or disclaims the title of the

bailor, the “bailment terminates and the right to im-

mediate possession is restored to the bailor.””’ Naam-

loze Vennootschap Suikerfabriek “Wono-Aseh’ v.

Chase National Bank, 111 F. Supp. 838, 844 (S.D.

N.Y. 1953). See also Trotter v. Union Indemnity

Co., 33 F.2d 363 (W.D. Wash.), aff’d, 35 F.2d 104

(9th Cir. 1929); United States v. United Marketing

Ass’n, 220 F. Supp. 299, 306 (N.D. Iowa 1963).

These attributes of a contractual bailment relation-

ship bear no resemblance to the situation in this case.

When the United States seized petitioner’s goods for

customs violations under 19 U.S.C. 1952, it did not

recognize petitioner as the “unquestioned, rightful

owner” (A. 30a) of the goods and undertake to re-

turn them at petitioner’s direction. The United States

seized the merchandise by operation of law under a

claim of government ownership due to forfeiture,

and not by mutual assent. The United States claimed

(and petitioner has not disputed) that the merchan-

dise was brought into this country under a customs

declaration that contained material false statements

concerning the contents of the shipment (see page

7, supra). Because of these false statements, the

goods were subject to forfeiture and properly seized

by customs officers under 19 U.S.C. 1592. The United

States then held the goods under a claim of owner-

ship, not as bailee. Indeed, in view of petitioner’s

admission “that the merchandise description submit-

ted to [Customs’]} officials was ‘erroneous’ and that

the discrepancy between the merchandise description

and the items actually landed [was] ‘obvious and

apparent’ ” (A. 26a), it would appear that the gov-

ernment’s claim that the goods were forfeited was

correct. See One Lot Emerald Cut Stones and One

Ring v. United States, 409 U.S. 232, 234 (1972).”

By the settled doctrine of this court, whenever

a statute enacts that upon the commission of a

certain act specific property * * * connected with

that act shall be forfeited, the forfeiture takes

effect immediately upon the commission of the

act; the right to the property then vests in the

United States, although their title is not per-

fected until judicial condemnation; the forfeiture

constitutes a statutory transfer of the right to

the United States at the time the offence is

committed * * *.

United States v. Stowell, 1383 U.S. 1, 16-17 (1890).”

11In One Lot Emerald Cut Stones and One Ring, supra, the

Court noted that, in a proceeding to adjudicate goods forfeited

for importation in violation of customs entry requirements,

the government need not prove intent to defraud. 409 U.S.

at 234. See also 19 U.S.C. 1592 (goods may be seized for

forfeiture for “any false statement in any [customs entry]

declaration * * * without reasonable cause to believe the

truth of the statement, whether or not the United States shall

or may be deprived of the lawful duties * * *.’’).

12 The government’s claim of title in this case, though valid,

was not adjudicated in formal court proceedings and thus

remained unperfected. United States v. Stowell, supra, 133

U.S. at 17. Adjudication became unnecessary because the

Secretary exercised his discretion to remit the forfeiture pur-

suant to 19 U.S.C. 1618. (See pages 28, 31, infra.) Dur-

ing the period that the United States held the goods pursuant

to 19 U.S.C. 1592, however, it did so under a claim of rightful

ownership and not by the assent of the parties that the goods

would be returned at petitioner’s direction.

Because the United States seized petitioner’s

merchandise under a claim or rightful ownership, in

derogation of petitioner’s title and without assenting

to return the merchandise at petitioner’s direction,

the elements of an implied-in-fact contract of bail-

ment were wholly lacking.“* The United States held

the merchandise under its own claim of title, not

pursuant to any contractual agreement with peti-

tioner.**

13 The decision of the court of appeals in Alliance Assurance

Co. v. United States, supra, is distinguishable on this basis

(A. 30a; see note 7, supra). In Alliance, the court held

that the government breached an implied contract of bail-

ment when it failed to return goods that had been lost follow-

ing their clearance through customs inspection. The court

relied on the fact that the importer was “the lawful owner”

of the merchandise and noted that the goods had passed cus-

toms inspection before they were lost. 252 F.2d at 531, 532.

The court also noted that there was an “elaborate set of ten

tickets, at least two of which [were] designed to restore the

goods to the owner,” which supported an inference of a

promise to return cleared items following inspection. Jd. at

532.

Here, by contrast, petitioner’s goods did not pass customs

inspection. The United States seized the goods for customs

violations under claim of right and in derogation of petition-

er’s claim of title. Moreover, here, unlike in Alliance, there

were no “additional facts from which an implied or express

agreement could possibly arise, ¢.g., a promise, representation,

or statement” that the goods would be returned at petitioner’s

request (A. 32a). The Court need not decide in this case

whether the decision in Alliance, on its different facts, was

correct in finding an implied-in-fact contract. The Court of

Claims properly refused to decide that hypothetical question

(A. 30a, 32a).

14 Petitioner cites (Br. 14-15) several cases in which courts

have determined that, under the particular facts presented,

the United States did assent to an implied-in-fact contract

2. Neither 28 U.S.C. 2465 Nor A Discretionary Remis-

sion Of The Forfeiture Under 19 U.S.C. 1618 Cre-

ates An Implied-In-Fact Contract Of Bailment

a. The fact that the United States did not enter

into an implied-in-fact contract of bailment does not

of bailment. These cases are inapposite, however, because we

do not contend that the United States cannot assent to an

implied-in-fact contract of bailment—as when it charters a

barge (C. F. Harms Co. Vv. Erie R.R., 167 F.2d 562 (2d Cir.

1948) or allows members of the public to use a Navy dock

(Gulf Transit Co. v. United States, 43 Ct. Cl. 183 (1908) ).

Rather, it is our position that, on the totally different facts

of this case, the United States did not assent to an implied-in-

fact contract of bailment.

Petitioner’s reliance (Br. 16 n.11) on United States v.

Dickinson, 331 U.S. 745 (1947), and United States v. Lynah,

188 U.S. 445 (1903), is similarly misplaced. In those cases,

the Court suggested, without concluding, that a taking of

land for public use may create an implied promise to pay just

compensation. The Court held that such a claim is, in any

event, within the jurisdiction of the Court of Claims over

claims “founded * * * upon the Constitution” (28 U.S.C.

1491) because the claim “traces back to the prohibition of the

Fifth Amendment” * * *,” 331 U.S. at 748. There is plainly

no implied-in-fact promise of compensation when goods are

seized for forfeiture for violations of the customs laws. The

goods are not appropriated for public use; they are forfeited

for unlawful conduct. United States v. Stowell, supra.

Finally, petitioner’s reliance (Br. 15) on cases in which

a statute creates a duty in an officer to pay certain sums to a

claimant is unavailing. Where a statute “leave[s] no ques-

tion” that a sum of money is to be paid, the claim is properly

founded on the statute, not on an implied-in-fact contract to

which the officer has not assented. See, e.g., United States v.

Hvoslef, 237 U.S. 1, 10 (1915) ; Medbury v. United States, 173

U.S. 492, 497 (1899) ; Mosca v. United States, 417 F.2d 1382,

1385 (Ct. Cl. 1969). Petitioner has never claimed that it has

a right in money damages against the United States based on

statute. Moreover, there is no statutory duty to return goods

that are forfeited to the United States.

mean that government officers have no responsibility

under any circumstances to return goods seized for

violations of the customs laws. It has been said that

customs officials are “quasi bailees” (Story on Bail-

ments § 613, at 597 (7th ed. 1863) ) because the law

imposes on them certain responsibilities that are

analogous to those created by a contractual bailment.

But these responsibilities are imposed by law, not by

contractual agreement. There is no jurisdiction in

the Court of Claims to award damages for the breach

of these non-contractual responsibilities. Merritt v.

United States, 267 U.S. 338, 341 (1925).

While many cases “refer to a bailment as a con-

tractual relation, the statement is not entirely ac-

curate. The relation may be created by operation of

law.” Seaboard Sand & Gravel Corp. v. Moran Tow-

ing Corp., 154 F.2d 399, 402 (2d Cir. 1946) (footnote

omitted). Courts have long recognized the distinction

between contractual bailments, which “spring[] from

the mutual assent of the parties” (State v. Carr,

118 N. J. L. 233, 234, 192 A. 36, 87 (19387)), and

quasi-bailments or constructive bailments that arise

by operation of law rather than agreement.

While it is a relationship that ordinarily rests

in contract, express or implied in fact, there is

also a class of bailments, quasi-contractual in

nature, which arises by operation of law “where,

otherwise than by a mutual contract of bailment,

one person has lawfully acquired the possession

of personal property of another and holds it

under circumstances whereby he ought, under

principles of justice, to keep it safely and restore

it or deliver it to the owner * * *; * * * guch

23 .

quasi contracts of bailment include what are

known as constructive and involuntary bail-

ments.”

Ibid. Accord, Seaboard Sand & Gravel Corp. v. Moran

Towing Corp., supra, 154 F.2d at 402; Wilson v. Citi-

zens Central Bank, 56 Ohio App. 478, 480, 11 N.E.2d

118, 119 (1936); Spencer v. First Carolinas Joint-

Stock Land Bank, supra, 165 S.E. at 732; Armstrong

v. Sisti, 242 N.Y. 440, 444, 152 N.E. 254, 256 (1926) ;

8 Am. Jur. 2d Bailment § 52 (1963).”

At common law, collectors of customs were re-

garded as “quasi-bailees” of merchandise seized for

customs violations.’® See Story on Bailments, supra,

§§ 613, 618, at 597, 599. The responsibilities of the

collector were imposed by law, not by agreement. If

15In Continental Insurance Co. v. Harrison County, 153

F.2d 671 (5th Cir. 1946), Judge Walker noted that a construc-

tive or quasi-bailment may be implied by law even when no

mutual assent exists and that it ordinarily results from “ ‘law-

ful possession, however created, and [the] duty to account for

the thing as the property of another.’” Jd. at 676, quoting

Burns V. State, 145 Wis. 373, 380, 128 N.W. 987, 990 (1911).

See also 8 C.J.S. Bail § 15, at 362 (1962) (“* * * an actual

contract or one implied in fact is not always necessary to

create a bailment. There is also a class of bailments which

arise by operation of law.”).

16 Collectors, as agents of the government, are true bailees

for the government of goods seized or held under a claim of

government title. The government, being the owner, has the

right to demand that the collector relinquish possession of the

goods at the government’s direction. United States v. Thomas,

82 U.S. (15 Wall.) 337 (1872), on which petitioner relies (Br.

8), established no more than this. In Thomas the Court held

that the collector, “as custodian of the money [collected,]

* * * ig bailee of the government.” Jd. at 352. See also 19

U.S.C. 1605, which directs the collector to retain forfeited

goods in his possession.

the goods were properly seized by the collector and

forfeited to the government, there was of course no

duty to return the goods to the claimant. If, however,

the goods were determined not to be forfeited, the

customs officers could be “liable in their individual

capacities for tortious conduct committed in the per-

formance of their duties.” States Marine Lines, Ine.

v. Shultz, 498 F.2d 1146, 1149 (4th Cir. 1974).

The tort liability of the officers as constructive or

quasi-bailees only “bears some analogy” (Story on

Bailments, supra, § 613, at 597 )"* to the responsibili-

ties that would be imposed if a contractual bailment

had been created. If the seizure was “tortious, and

without any reasonable cause” (ibid.), the customs

officer could be sued in tort for conversion or trespass

and would be strictly liable for goods lost while in his

possession. Jd. at 599. If, on the other hand, the

seizure was justifiable (although eventually proven

to be in error), the officer was liable only on a theory

of negligence for breach of his “official obligation, as

imposed by law” to exercise “reasonable diligence”

in the performance of the duties of his office. United

States v. Thomas, 82 U.S. (15 Wall.) 337, 342-343

(1872). The officer would then be liable in tort “only

for losses and damages occasioned by the want of

ordinary diligence.” Story on Bailments, supra,

§ 613, at 597. See Agnew v. Haymes, 141 F. 631,

641 (4th Cir. 1905).

17 See also 9 Williston on Contracts, supra, § 1088A, at 905:

“While not directly presenting a question of contracts, there

is a close analogy.”

The legal duty imposed on the collector under the

common law is plainly not created by agreement or

mutual assent; the duty attaches even if the collector

attempts to disclaim it at seizure. Failure to act with

due diligence establishes a personal liability in tort;

the duty is not assumed by contract or mutual assent.

See States Marine Lines, Inc. v. Shultz, supra, 498

F.2d at 1149." ae

The quasi-bailee status of the collector, which is

implied by law “to supply the place of a special agree-

ment where there is none” (United States v. Thomas,

supra, 82 U.S. (15 Wall.) at 349)), has long been

recognized in the statutes of the United States. Goods

seized by customs officers for violations of entry

requirements under 19 U.S.C. 1592 may be made the

subject of forfeiture proceedings in the United States

district courts. See 28 U.S.C. 2461. If the goods are

adjudicated to be forfeited to the United States, the

government’s title is “perfected” (United States V.

Stowell, supra, 183 U.S. at 17) and the claimant

obviously has no further right or claim in the goods.

If, however, judgment is entered for the claimant in

18 The cases on which petitioner relies (Br. 8-10) wine g

only that the collector may be held personally liable 7 et re

negligence in the conduct of his office. See, a ety hs

Smith, 84 U.S. (17 Wall.) 82 (1872); Burke v. ar ‘ i

Cas. (No. 2,168) 746 (C.C. Mass. 1816) ; Agnew V. on

141 F. 631 (4th Cir. 1905). See also The Conqueror, jot * 4

110 (1897); Dioguardi v. Durning, 139 F.2d 274 (2

1944). By referring to the law of bailments as a —

a standard of due care, these decisions do not hold t _ -

collector has in fact agreed or assented to a contractual bail-

ment.

the forfeiture proceeding, 28 U.S.C. 2465 provides

that the goods held subject to forfeiture “shall be

returned forthwith to the claimant or his agent

* * *” The customs officer must then return the

goods, and if he fails to do so, the claimant may

bring suit against the collector for personal liability

in tort to recover his loss. States Marine Lines, Ine.

v. Shultz, supra, 498 F.2d at 1148-1151.” In the

action against the collector, if it is determined that

the seizure was made without probable cause, the

officer will be strictly liable for the loss of goods in

his possession, and the United States will not in-

demnify the officer. Agnew v. Haymes, supra, 141

F. at 637-641.” If, however, there was probable

cause for the seizure, the officer will be liable only in

The United States has not consented to suits for money

damages for the loss of goods that are not returned by the

collector following an adjudication of non-forfeiture. The

duty to return the goods resides in the collector, who may be

sued individually and may be indemnified, in some circum-

stances, by the United States (see 28 U.S.C. 2006). The Con-

queror, 166 U.S. 110 (1897); States Marine Lines, Inc. Vv.

Shultz, supra, 498 F.2d at 1148-1151; Agnew v. Haymes,

supra, 141 F. at 636-641. Congress has preserved the com-

mon law defenses that are available to the collector in the

individual tort action. Indeed, as we discuss at pages 33-40,

below, it was the adequacy of the common-law remedy

against the collector that led Congress to enact 28 U.S.C.

2680(c) to exclude claims based on customs detentions from

the general waiver of sovereign immunity for tort claims

under the Federal Tort Claims Act.

*0 Indeed, if the seizure was without probable cause, the

collector may be personally liable for consequential damages

that otherwise are forbidden by 28 U.S.C. 2465. See Agnew

v. Haymes, supra, 141 F. at 641.

negligence for the value of goods lost or damaged

while in his possession; moreover, the judgment

entered against the collector in such a case may not

be executed against the collector, but “shall be —

out of the proper appropriation by the Treasury.

28 U.S.C. 2006.2 See States Marine Lines, Inc. v.

Shultz, supra, 498 F.2d at 1149-1150.

Under these statutes, the liability of the officer

remains grounded in tort, not in contract. The stat-

utes merely “protect[] * * * such officers” in some

circumstances from their tort liability. States Marine

Lines, Inc. v. Shultz, supra, 498 F.2d at 1149. The

tort liability of the officer must be established, and

the claim reduced to judgment, before the United

States will act as surety for the collector’s negligence.

28 U.S.C. 2006. And even then the United States

has not consented to pay the judgment if the seizure

was made without probable cause. Ibid. The Court

of Claims plainly lacks jurisdiction over personal

actions against government officers and individuals;

21 28 U.S.C. 2006 provides:

Execution shall not issue against a collector or other

revenue officer on a final judgment in any Semen

against him for any of his acts, or for the recovery :

any money exacted by or paid to him and subsequen y

paid into the Treasury, in performing his official duties,

if the court certifies that:

ble cause existed; or

i -ogpe acted under the directions of the Secre-

tary of the Treasury or other proper Government —

When such certificate has been issued, the amount °

the judgment shall be paid out of the proper appropria-

tion by the Treasury.

it also lacks original jurisdiction over claims

grounded in tort. The implied-in-law or “quasi-

bailee” responsibilities of the collector are thus not

the proper subject of suit in the Court of Claims.

Petitioner, in any event, has not sought to invoke

the traditional tort remedy against the collector for

negligent loss of goods. Whether such a remedy

would have been available to petitioner had it been

sought in the circumstances of this case is far from

clear.” But, whatever the tort liability of the collec-

tor might have been as “quasi-bailee” of the goods

seized for forfeiture, the defect with petitioner’s ac-

tion in the Court of Claims is that it seeks recovery

against the United States on a bailment that is im-

plied in law, not in fact.

b. Petitioner argues (Br. 12) that, when the

Secretary of the Treasury exercised his discretion

under 19 U.S.C. 1618 to remit the forfeiture upon

petitioner’s payment of a $40,000 penalty, the gov-

ernment thereby assented to an implied-in-fact con-

tract of bailment for the merchandise that had been

seized. But the discretionary action taken by the

Secretary to remit the forfeiture was taken approxi-

2 If, as we believe (see pages 18-19, supra), the goods were

seized under a valid claim of forfeiture, petitioner would not

be entitled to return of the goods in a proceeding to adjudi-

cate the forfeiture. The Secretary of the Treasury could,

however, remit the forfeiture “upon such terms and condi-

tions as he deems reasonable and just.” 19 U.S.C. 1618.

Petitioner’s right to the goods would then be no greater than

that granted by the Secretary in remission of the forfeiture.

See pages 28-31, infra.

—

mately six months after the goods had been seized for

customs violations.”* During the preceeding six month

period, the merchandise had been held by the United

States under a claim of right and not as an implied-

in-fact bailee. The Secretary’s action in remitting the

forfeiture did not disclaim the government’s prior

declaration that the goods were forfeited. To the con-

trary, by remitting the forfeiture “upon such terms

and conditions as he deems reasonable and just” (19

U.S.C. 1618), the Secretary reaffirmed that the goods

were forfeited but concluded that a lesser sanction was

appropriate due to the absence of “willful negligence,”

an intent “to defraud the revenue,” or the presence of

other “mitigating circumstances” (ibid.). This action

did not retroactively create a contractual bailment at

the time the goods were seized. See pages 16-18 supra.

Petitioner further contends that “the Customs Serv-

ice explicitly agreed to return the goods upon pay-

ment of a $40,000 penalty” (Br. 12). But what the

Secretary necessarily undertook was to return the

goods then in his possession, not the additional mer-

chandise that petitioner long previously had claimed

was missing.** It is obvious that the Secretary could

28 The forfeiture was remitted in October 1970. The goods

were seized in April and May 1970. See pages 5-6, supra.

24 Petitioner informed the Secretary in June 1970—two

months after the seizure and four months before the Secre-

tary remitted the forfeiture—that merchandise allegedly in

the shipment was not reflected in the Customs Service inven-

tory. See page 6, note 3, supra.

not implicitly have undertaken to return goods that

had long been alleged to be missing and were not then

in his possession. And petitioner has not alleged that

the Secretary entered into an express contract to

make petitioner whole for the claimed losses of over

$165,000 (A. 24a) in return for petitioner’s payment

of the $40,000 penalty.” Obviously, the Secretary

undertook to deliver something to petitioner in re-

mitting the forfeiture. But, in the absence of any

express agreement to the contrary, it cannot be im-

plied that he undertook to perform a physical impos-

sibility by returning goods petitioner repeatedly had

asserted to be missing from the government’s inven-

tory (A. 15a-16a, 21a-22a).

Moreover, petitioner has never contended that the

Secretary breached a contract to return the mer-

25 Indeed, it is questionable whether the Secretary would

have authority to enter into such a contract. 28 U.S.C. 2006

contemplates that the Unived States will not be liable for

goods lost or damaged by customs collectors unless (i) the

seizure was with probable cause but the goods are adjudicated

not forfeited and (ii) the goods were lost through the tortious

misconduct of the collector. See p: ves 25-27, supra. The

Secretary’s authority to remit a foriciture upon such terms

as he finds just and reasonable (19 U.S.C. 1618) would seem

subjected to the express limitations on governmental liability

for the collector’s actions in 28 U.S.C. 2006.

But this issue is not presented here in any event. Respond-

ent did not plead the existence of an express agreement to

that effect or attach a copy of any such agreement to its

petition in the Court of Claims. This is fatal to its present

claim (Br. 12) that an express contract existed and imposed

a duty on the Secretary to return goods that were not in his

possession. See Rule 35(d) of the Rules of the Court of

Claims; Batcson-Stolte, Inc. v. United States, 142 Ct. Cl. 304

(1958).

chandise the government held at the time that the

forfeiture was remitted.** Instead, in the Court of

Claims and in his statement of the question presented

in this Court, petitioner has asserted that the United

States breached “an implied-in-fact-contract of bail-

ment” (Pet. Br. 12) that arose at the time that the

goods were seized for customs violations. In any event,

any claim raised here that the Secretary breached a

contract to return goods in his possession at the time

that the forfeiture was remitted would not be within

the scope of the question on which certiorari was

granted and should not be considered by this Court.

Rule 23(1)(c) of the Rules of this Court; Beck v.

Washington, 369 U.S. 541, 554 (1962). See also note

ae question faced by this Court, whether peti-

tioner’s claims are based on an implied-in-fact contract

or in tort, is a problem not often confronted in mod-

ern litigation. With the abandonment of the strict

rules of common law pleading, such distinctions have

lost most of their importance. See Fed. R. Civ. P. 2.

When a suit is brought against the United States in

the Court of Claims, however, these distinctions re-

main critical: the Court of Claims has jurisdiction

over contract claims against the United States only

if the “contract” arises from the mutual assent of

26 Thus, petitioner has not contended that goods seit on

the customs inventory were not returned when the forfei ure

was remitted. See notes 3, 25, supra. Instead, omgaaaed

argued in the Court of Claims (A. 34a) and logge oe

(Br. 12) that the remittance retroactively implied a bai ~—

from the time of seizure. This contention is in error for the

reasons previously discussed (pages 28-30, supra).

the parties, and it does not have jurisdiction over

tort claims against either the United States or gov-

ernment officers.” While there is a remedy available

for owners of goods that are seized but not forfeited

and are lost while in the custody of customs officials,

that remedy is not in the Court of Claims.

3. The Exception From Governmental Tort Liability

in 28 U.S.C. 2680(c) For Claims Arising From The

Detention Of Goods By Customs Officers Supports

The Conclusion That An Implied-In-Fact Contract

Of Bailment Does Not Arise From The Seizure Of

Goods For Violations Of The Customs Laws

a. As we have shown, the common law has long

recognized a tort action against the collectur for the

*7In Keifer & Keifer v. Reconstruction Finance Corp., 306

U.S. 381, 395 (1939), the Court reiterated that a tort claim

may not be the subject of relief in the Court of Claims. See

also Bigby v. United States, 188 U.S. 400 (1903). There must

be a contractual undertaking, either express (as in Keifer &

Keifer and Burtt v. United States, 176 Ct. Cl. 310 (1966) ) or

implied-in-fact (as in Somali Development Bank v. United

States, 508 F.2d 817 (1974) ) to sustain the action in the Court

of Claims.

28 U.S.C. 1504 gives the Court of Claims appellate jurisdic-

tion over final judgments in the district courts in civil actions

based on tort claims against the United States under 28 U.S.C.

1346 (b), but only with the consent of all parties. See Bird

& Sons, Inc. v. United States, 420 F.2d 1051, 1053 & n.8 (Ct.

Cl. 1970). Petitioner sought to invoke the original jurisdic-

tion of the Court of Claims, so Section 1504 is inapplicable

here.

*8 Petitioner is plainly mistaken in contending that a con-

tract should be implied else “there would be little or no in-

centive for government officials to maintain seized goods in

proper storage facilities” (Br. 36). The collector’s common

law tort responsibility ensures that he acts under a duty of

due diligence.

negligent loss of goods held in his possession.” In

enacting the Federal Tort Claims Act to authorize

claims against the United States for injury caused

by “the negligent or wrongful act or omission of any

employee of the Government while acting within the

scope of his office or employment, under circumstances

where the United States, if a private person, would

be liable to the claimant” (28 U.S.C. 1346(b); see

28 U.S.C. 2674), Congress did not choose to shift to

the United States the potential tort liability of the

collector. Instead, Congress determined to continue

the arrangement developed at common law and under

28 U.S.C. 2006 and 2465, by which the United States

will pay the judgment entered against the collector in

a private tort action for negligence only when the

seizure was supported by probable cause. See pages

25-27, supra. Because of the adequacy of the rem-

edy afforded by the private tort action and 28 U.S.C.

2006, and because of Congress’ unwillingness to as-

sume any broader liability, 28 U.S.C. 2680(c) ex-

cludes from the general coverage of the Federal Tort

Claims Act

[a]ny claim arising in respect of the assessment

or collection of any tax or customs duty, or the

detention of any goods or merchandise by any

officer of customs or excise or any other law

enforcement officer.

2° The action may be brought by the claimant if the goods

are determined to be his property. The action may be brought

by the United States if the goods are forfeited to the United

States. See United States v. Thomas, supra; note 15, supra.

Petitioner’s claim of negligent loss of goods is one

“arising in respect of the assessment or collection of

any * * * customs duty, or the detention of * * *

goods or merchandise by [an] officer of customs.” It

is therefore not within the limited waiver of sovereign

immunity for tort claims against the United States

in the Tort Claims Act. Assuming, for purposes of

argument, that a tort claim may exist in the factual

context of this case, it must be filed against the col-

lector individually, not against the United States.

States Marine Lines, Inc. v. Shultz, supra, 498 F.2d

at 1148-1151.

b. Petitioner argues, however, that the exception

from direct government tort liability in 28 U.S.C.

2680(c) applies only to claims based on the fact of

detention itself and that the statute does not exclude

tort claims for the negligent loss of goods “after they

have been detained” (Br. 18). The language of

80 Of course, even if we were wrong in this submission,

petitioner could not prevail in this case. The Tort Claims

Act confers no original jurisdiction on the Court of Claims. 28

U.S.C. 1846(b). Moreover, even if this case had arisen in a

federal district court, petitioner could not succeed in any action

under the Federal Tort Claims Act because the two-year stat-

ute of limitations on tort claims against the United States (28

U.S.C. 2401(b)) expired long before petitioner initiated this

litigation. See page 6, supra.

81 Petitioner’s assertion is supported by A-Mark, Ince. Vv.

United States Secret Service, 593 F.2d 849 (9th Cir. 1978),

and Alliance Assurance Co. v. United States, supra. It has

been rejected by several courts, including the Court of Claims

in this case (A. 3la). See, e.g., United States v. One (1) 1972

Wood, 19 Ft. Custom Boat FL 8443AY, 501 F.2d 1327 (5th

Cir. 1974) ; S. Schonfeld Co. v. SS Akra Tenaron, 363 F. Supp.

the statute does not support such a distinction: it

excludes “[a]ny claim arising in respect of * * * the

detention of any goods or merchandise by any officer

of customs * * *.” 28 U.S.C. 2680(c). A claim al-

leging that goods were lost while being detained is

literally a claim that “‘aris[es] in respect * * * of the

detention.” Jbid. Petitioner cannot maintain, on the

one hand, that goods were lost while being detained

by the Customs Service, and argue, on the other hand,

that the goods were lost ‘“‘after” the detention so as

to be beyond the scope of 28 U.S.C. 2680(c).

The legislative history of the Federal Tort Claims

Act refutes petitioner’s effort “to fracture the clear

language of [the] statute.” Andrus v. Sierra Club,

No. 78-625 (June 11, 1979), slip op. 8. Since its

initial enactment, the Federal Tort Claims Act has in-

cluded a series of exceptions from tort liability for

various federal activities. The exception for claims

arising in respect of the detention of goods by customs

officers is one of the 13 exceptions now contained in 28

U.S.C. 2680(a)-(m). When these exceptions were first

considered by Congress in 1940, Judge Alexander

Holtzoff, who was then an officer of the Justice Depart-

ment, testified before a congressional subcommittee

that the exception for claims “arising in respect of

the assessment or collection of any tax or customs

1220 (D. S.C. 1973); States Marine Lines, Inc. v. United

States, 359 F. Supp. 512 (D. S.C. 1973), rev’d on other

grounds, 498 F.2d 1146 (4th Cir. 1974). The conflict is not,

however, presented in this case for, as we have noted above

(note 30, supra), the Court of Claims has no original juris-

diction over claims arising under the Federal Tort Claims Act.

duty or the detention of any goods or merchandise by

any officer of customs” should be enacted because

various statutory remedies already existed and

“Tt]here was no purpose in interfering with that

machinery.” Tort Claims Against the United States:

Hearings on S. 2690 Before a Subcomm. on the Ju-

diciary of the Senate Judiciary Committee, 76th Cong.,

3d Sess. 38 (1940). Two years later, the bill was again

submitted to Congress, and the list of exceptions con-

tained in 28 U.S.C. 2680 was supported by the Justice

Department generally—without reference to particu-

lar exceptions—on the grounds that the exceptions

either were necessary to protect certain government

activities from the threat of suit or because other

adequate remedies already were in existence.” Tort

32 Petitioner, relying on Alliance Assurance Co. v. United

States, supra, 252 F.2d at 534, argues (Br. 27) that the ex-

clusion in 28 U.S.C. 2680(c) for Customs Service activities

is narrower than the exception for Postal Service activities,

which applies to claims of “loss, miscarriage, or negligent

transmission” of mail. 28 U.S.C. 2680(b). To the contrary,

the Postal Service exception in 28 U.S.C. 2680(b) applies to

only a small subset of the broader activities excepted from

tort liability for customs officers in 28 U.S.C. 2680(c). While

the Postal Service exception applies only to claims arising

from the loss or negligent transmission of mail, the Customs

Service exception applies broadly to “[a]ny claim” whatso-

ever “arising in respect” to the detention of goods by customs

officers. While the specific language of the Postal Service

exception supports an inference that claims not based on loss

or negligent transmission of mail are not excluded from Tort

Claims Act coverage, the specificity of 28 U.S.C. 2680(b)

provides no basis for limiting the broader exemption con-

tained in 28 U.S.C. 2680(c).

Petitioner also cites (Br. 24-26) numerous law review

articles that discuss the legislative history of the Federal Tort

Claims: Hearings on H.R. 5373 and H.R. 6463 Be-

fore the Comm. on the Judiciary of the House Comm.,

77th Cong., 2d Sess. 28, 44 (1942). When the Federal

Tort Claims Act was eventually enacted in 1946, Con-

gress adopted the exceptions the Justice Department

had proposed, explaining that the exceptions exclude

from the coverage of the Act “claims which relate to

certain governmental activities which should be free

from the threat of damage suit, or for which adequate

remedies are already available.” S. Rep. No. 1400,

79th Cong., 2d Sess. 33 (1946). See H.R. Rep. No.

1287, 79th Cong., lst Sess. 6 (1945).

Petitioner argues that this legislative history indi-

cates that claims based on negligent loss of goods

during customs detention were not contained within

the exception in 28 U.S.C. 2680(c) because no “‘ade-

quate remedies [were] already available” for such

claims. But petitioner is simply mistaken in its

premise that there were no pre-existing “statutory

procedures for the-xecovery of damages for loss or

damage to goods while in the custody of Customs

officers” (Pet. Br. 23). As we have explained in

detail (pages 25-27, supra), the claimant’s tradi-

tional remedy—long recognized by the statutes of the

United States—is to sue the collector individually in

tort for the loss or damage and then to execute on

the judgment by obtaining payment from the Treas-

Claims Act. These articles support our position that the ex-

ception contained in 28 U.S.C. 2680(c) was enacted because

other adequate remedies existed for the loss of goods during

customs detention.

ury. 28 U.S.C. 2006. See States Marine Lines, Inc.

v. Shultz, supra, 498 F.2d at 1149. To be sure, the

United States will not shoulder a judgment against

the collector if the seizure was without probable

cause; and, if the seizure was with probable cause,

the collector (and, thereafter, the government) will

be liable only for negligent loss of the goods and not

for consequential damages.* 28 U.S.C. 2006. It was,

no doubt, as Judge Holtzoff testified, the need to avoid

interference with the traditional strictures of this

adequate pre-existing remedy that led Congress to ex-

clude from general governmental tort liability all

claims arising from the detention of goods by the col-

lector.“ By enacting 28 U.S.C. 2680(c), Congress

was careful not to assume a liability greater than that

the United States had assumed under pre-existing

legislation.

The legislative history of the Federal Tort Claims

Act thus supports the conclusion that 28 U.S.C.

2680(c) is as broad as the words Congress employed.

Claims for negligent loss of goods during customs de-

33 See 28 U.S.C. 2465; The Conqueror, supra, 166 U.S. at

121-125; Story on Bailments, supra, at 598-599.

** If 28 U.S.C. 2680(c) means only what petitioner urges,

the traditional limitations on the liability assumed by the

United States under 28 U.S.C. 2006 would be rendered mean-

ingless. As the court concluded in States Marine Lines, Inc.

v. Shultz, supra, 498 F.2d at 1149, the exception from Federal

Tort Claims Act liability in 28 U.S.C. 2680(c) “merely recog-

nized the established procedure and the long-standing protec-

tions afforded by 28 U.S.C. §§ 2006 and 2465.” 28 U.S.C.

2680(c) should not be read to “drain 28 U.S.C. §§ 2006 and

2465 of any purpose.” 498 F.2d at 1150.

tention must be brought against the collector as an

individual. They are excluded from coverage under

the Federal Tort Claims Act.

c. Congress’ careful efforts to preserve the tradi-

tional restrictions on the common law tort remedy

against the Collector in enacting the Federal Tort

Claims Act supports our submission that an implied-

in-fact contract of bailment does not arise when goods

are seized for forfeiture under 19 U.S.C. 1592. The

exclusion in the Federal Tort Claims Act for claims

arising in respect of customs detention is not an acci-

dental result of drafting. Rather, it reflects a consid-

ered judgment by Congress that the sovereign immun-

ity of the United States with respect to such claims

should not be waived beyond the limited, adequate

remedy available under the common law and 28

U.S.C. 2006. As the Court of Claims stated, allowing

recovery against the United States on an implied-

in-fact contract theory for breach of the “quasi-

bailee” tort responsibility of the collector would

“ ‘admit at the back door that which has been legis-

latively turned away at the front door” (A. 31a,

quoting Stencel Aero Engineering Corp. v. United

States, 431 U.S. 666, 673 (1977) ).* The United States

cannot be assumed to have assented in fact to a lia-

35 Petitioner mischaracterizes Stencel by arguing that it

involved an attempt to “bypass the procedures” for relief

provided by statute. In Stencel, the Court refused to infer a

contractual undertaking by the government to indemnify a

party for losses that the government had, by statute, other-

wise limited or disclaimed. See 431 U.S. at 672-674. The

Court’s reasoning in Stencel applies here as well.

bility that it has in fact disclaimed by statute. See

Jackson v. United States, 573 F.2d 1189 (Ct. Cl.

1978). The “quasi-bailee” status of the collector is

a responsibility imposed by law, not a contract

implied-in-fact. The Court of Claims therefore lacked

jurisdiction in this case.

CONCLUSION

The judgment of the Court of Claims should be

affirmed.

Respectfully submitted.

WADE H. MCCREE, JR.

Solicitor General

ALICE DANIEL

Acting Assistant Attorney General

KENT L. JONES

Assistant to the Solicitor General

ELOISE E. DAVIES

FRANK A. ROSENFELD

Attorneys

OCTOBER 1979

WX ou. 8. GOVERNMENT PRINTING orrics; 1979 302917 103

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