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U.S. Supreme Court

Massachusetts Trustees v. United States, 377 U.S. 235 (1964)

Massachusetts Trustees of Eastern Gas & Fuel Associates

v. United States,

No. 137

Argued February 24, 1964

Decided May 25, 1964

377 U.S. 235


Petitioners chartered ships from the Maritime Commission under a contract providing for payment which included a share of excess profits under a sliding scale of 50 to 90 percent. Section 5 (b) of the Merchant Ship Sales Act of 1946 directed the Commission to fix charter hire at rates which "shall not be less than 15 percentum per annum of the statutory sales price," and shall be consistent with the Act's policy to sell, rather than charter, ships to private owners. The provisions of § 709(a) of the Merchant Marine Act, 1936, which were made applicable to charters under the 1946 Act by § 5(c) of the latter statute, stipulated that every charter shall provide that,

"whenever, at the end of any calendar year . . . the cumulative net voyage profits . . . shall exceed 10 percentum per annum on the charterer's capital necessarily employed in the business of such chartered vessels, the charterer shall pay over to the Commission, as additional charter hire, one-half of such cumulative net voyage profit in excess of 10 percentum per annum. . . ."

Pursuant to a charter clause permitting termination of the contract, the Commission notified petitioners of its intention to cancel the charter, but advised that the vessels could continue to be used under new terms, to which petitioners agreed, providing that excess profits would be computed for each voyage separately after September 1, 1947. Petitioners' contentions that the Commission was limited under § 709(a) to 50 percent of the excess profits, and that it exceeded its authority by dividing the calendar year 1947 into separate periods through the threat of cancellation, were rejected by the lower courts.


1. The Commission had authority under § 5(b) of the Merchant Ship Sales Act of 1946 to utilize a sliding scale of excess profits. Pp. 377 U. S. 241-250.

(a) The 50 percent provisions in § 709(a) of the Merchant Marine Act, 1936, established, in the context of the 1946 Act, a minimum, but not a maximum, rate. Pp. 377 U. S. 243-245. chanroblesvirtualawlibrary

Page 377 U. S. 236

(b) The use of a sliding scale was authorized by § 5(b) and the failure of the Commission to indicate the specific source of its authority had no legal significance. Pp. 377 U. S. 245-248.

2. There was no limitation of the Commission's power to terminate the existing charter. Pp. 377 U. S. 250-251.

(a) The provisions in § 709(a) calling for computation of additional charter hire "at the end of any calendar year" did not impose such a restriction. Pp. 377 U. S. 250-251.

(b) Notification of termination was not a mere threat for an improper purpose; the Commission could terminate all existing charters and then recharter the vessels to accomplish its goals. P. 377 U. S. 251.

312 F.2d 214, affirmed.

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