UNITED STATES v. GUY W. CAPPS, INC. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT. No. 14. Argued November 15, 1954.-Decided February 7, 1955. In order to prevent interference with its potato price-support program under the Agricultural Act of 1948, the United States exchanged diplomatic correspondence with Canada under which the latter agreed to permit the export of no potatoes to the United States except seed potatoes and to obtain assurances that they "would not be diverted or reconsigned for table stock purposes. In importing seed potatoes from Canada, respondent gave such assurance to the exporter. Claiming that such assurance constituted a contract made for its benefit and that respondent had violated it by selling such potatoes for table stock purposes, the United States sued respondent for damages alleged to have resulted from the United States being forced to purchase an equivalent amount of domestic potatoes. Held: On the record, there was no clear error in the District Court's directing a verdict for respondent on the ground that the evidence was not sufficient to prove the alleged breach of contract, and the judgment is affirmed on that ground alone. Pp. 296-305. 204 F.2d 655, affirmed on other grounds. Solicitor General Sobeloff argued the cause for the United States. With him on the brief were Assistant Attorney General Rankin, Assistant Attorney General Burger, Oscar H. Davis, Paul A. Sweeney and Herman Marcuse. W. R. Ashburn argued the cause and filed a brief for respondent. MR. JUSTICE BURTON delivered the opinion of the Court. In this case the United States District Court directed a verdict for respondent because petitioner failed to present evidence of either a breach of contract or resulting damages sufficient to sustain a verdict for petitioner. The Court of Appeals, however, affirmed the judgment on the ground that the alleged contract was unenforceable. For the reasons hereafter stated, we agree with the District Court that the evidence was not sufficient to sustain the alleged breach of contract. Accordingly, we do not reach or pass upon the other grounds discussed by the Court of Appeals. In 1948, the crops of Irish potatoes in the United States and Canada were among the largest on record. As a result, the United States, in § 1 (b) of the Agricultural Act of 1948, 62 Stat. 1247, 1248, obligated itself to support the sale of such potatoes at 90% of their parity price. This program was carried out through agreements of the Commodity Credit Corporation to purchase, from eligible growers or dealers in the United States, all Irish potatoes harvested before January 1, 1949, provided such potatoes could not be sold commercially at 90% of parity. As the unsupported Canadian prices were lower than the supported prices in the United States, it became profitable to import Canadian potatoes despite the tariff and freight charges. Recognizing that fact, Congress authorized investigations by the Tariff Commission, under the President's direction, which might lead to imposing quantitative limitations on imports or to increasing import fees. 62 Stat. 1248-1250, 7 U. S. C. § 624. However, without resorting to that procedure, the United States acted through diplomatic channels. Its Acting Secretary of State and the Canadian Ambassador exchanged notes on November 23, 1948, purporting to consummate an executive agreement effective at once. For their text see Appendix, infra, at 305-309. Of special significance to this litigation are the undertakings made by Canada, in its note, to place its Irish potatoes under export control, to withhold export permits for the movement of table stock potatoes to the United States, and to issue export permits for the shipment of Canadian certified 318107 O-55-25 Opinion of the Court. 348 U.S. seed potatoes to the United States only under specified circumstances. Those circumstances were that the shipments be limited to specified States where there was a legitimate demand for certified seed potatoes and to a short period before the normal seeding time. Permits were to be granted only to exporters having firm orders from legitimate United States users of Canadian seed potatoes, and those exporters were "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 reconsigned for table stock purposes." Appendix, infra, at 306. The agreement terminated June 20, 1949. In December 1948, Guy W. Capps, Inc., a Virginia corporation, respondent herein, bought 48,544 one-hundredpound bags of Canadian certified Irish seed potatoes from H. B. Willis, Inc., of Charlottetown, Prince Edward Island, a Canadian exporter. Before the exporter's shipment of them on the S. S. Empire Gangway to respondent at Jacksonville, Florida, respondent wired the exporter as follows: "Certified seed potatoes loaded on S. S. Gangway are for planting in Florida and Georgia." The shipment arrived at Jacksonville January 9, 1949.1 On 1 January 10, 1949, the Acting Chief of the Potato Division, Fruit and Vegetable Branch of the United States Department of Agriculture, wired respondent: "Have been informed ACCO [Atlantic Commission Company] representative, Jacksonville, Florida, claiming you have special permission from Department to sell Canadian seed for edible use, if no demand for seed. Please advise basis for claim. Account such disposition is contrary to the intent of U. S. Canadian agreement and to Canadian requirement regarding diversion or reconsignment." January 11, 1949, respondent wired in reply: "Have not made such statement. Only put seed [potatoes] Jacksonville for seed purposes" and, later, on the same day: "I realize fully the agreement with Canada, its intent and want 296 Opinion of the Court. January 11, the potatoes were all invoiced by respondent to the Atlantic Commission Company at Jacksonville as "48,544 Sax Canada No. 1 Seed Potatoes @ $3.35 f. o. b." 2 In January 1951, the United States filed the instant action against respondent in the United States District Court for the Eastern District of Virginia, claiming that the above circumstances constituted a contract between the exporter and respondent for the benefit of the United States. The complaint alleged further, upon information and belief, that, in January 1949, respondent, in violation of such contract, "sold the 48,544 sacks of seed potatoes for table stock purposes" to the damage of the United States in the amount of approximately $150,486, "in that for each quantity of potatoes so imported from Canada and sold for table stock in the United States, a substantially equivalent quantity of potatoes produced in the United States was offered fo. sale to the Department of Agriculture, and had to be an was purchased by the Department under the Agricultural Act of 1948.” Respondent's motion to dismiss the complaint for failure to state a claim upon which relief could be granted was denied. 100 F. Supp. 30. However, at the close of petitioner's case and after argument of counsel, the court directed a verdict for respondent. Judgment was entered accordingly. The court's findings of fact and con to and expect to cooperate with the program. I am only bringing ineed for seed purposes. Canadian dealers are now quoting seed same territory I am selling. Have had quotations as low as 365 hundredweight delivered Norfolk, past week." 2 "Less 10,000 Sax Canada No. 1 Seed Potatoes @ $3.65 f. o. b." These 10,000 sacks were immediately resold by the Atlantic Commission Company to respondent. Of them, 8,730 were invoiced by respondent on the same day as "Canada No. 1 Seed Potatoes" in seven lots to four separate dealers in Florida and Georgia, at prices between $3.75 and $4 per cwt. There was no evidence as to the disposition of the remaining 1,270 sacks. Opinion of the Court. 348 U.S. clusions of law were contained in its oral opinion. That opinion, which has not been published, included the following highly significant statements: "The action here is for breach of contract made between a Canadian exporter and Capps, the American importer, and specifically of a stipulation placed in that contract which the Court has held was for the benefit of the United States. "The expression constituting that stipulation is that certified seed potatoes loaded on the S. S. Gangway are for planting in Florida and Georgia. Now, assuming that the Court is correct in holding that that stipulation is an agreement within the meaning of the Executive Treaty or an assurance, as it is called in the Executive Treaty, to the effect that the potatoes would not be diverted or reconsigned for table stock purposes-I say assuming that the Court is correct in holding that this provision is an assurance, there is no proof here sufficient to go to the jury that there has been such a diversion or reconsignment, or that there has been a lack of diligence or care on the part of this defendant to see to it that its assurance was carried out. "In the first place, the only diversion or reconsignment was from the defendant to the Atlantic Commission Company. Now that was not a diversion or reconsignment for table stock purposes. Nor does it evidence any want of care on the part of the defendant to see that the assurance was kept, because the evidence shows that this defendant had from year to year sold to Atlantic, potatoes exclusively for seed purposes. The evidence does not justify or would not justify the jury in drawing a conclusion that it was a reckless abandonment by the defendant of its obligation to see to the use of |