dissenting.
I respectfully dissent.
In this case of neglect of duty by government agents in administering a statute enacted for the purpose of protecting importers and the United States against the notorious potential for abuse by customhouse brokers, the trial court had sound basis for invoking the doctrine of equitable estoppel. The majority’s opinion pays scant deference to the facts as found by the Court of International Trade, none of which the majority finds to be clearly erroneous.
Appellate review of an equitable judgment requires not only attention to the specific abuses that led the court to impose an equitable remedy; but more, it requires appropriate deference to the discretionary authority with which trial judges are invested. Trial courts “in the framing of equitable decrees, are clothed ‘with large discretion to model their judgments to fit the exigencies of the particular case.’ ” United States v. E.I. du Pont de Nemours & Co., 353 U.S. 586, 607-08, 77 S.Ct. 872, 885, 1 L.Ed.2d 1057 (1956) (quoting International Salt Co. v. United States, 332 U.S. 392, 400-01, 68 S.Ct. 12, 17, 92 L.Ed. 20 (1947)). See also Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 10, 100 S.Ct. 1460, 1466, 64 L.Ed.2d 1 (1980) (“the discretionary judgment of the district court should be given substantial deference”). The basis for our review of the decision of the Court of International Trade is whether the court abused its discretion in imposing equitable estoppel, on the uncontested facts of this case. See Albemarle Paper Co. v. Moody, 422 U.S. 405, 424, 95 S.Ct. 2362, 2375, 45 L.Ed.2d 280 (1975) in which, in directing the Fourth Circuit as to the standard to apply to the district court’s determination of whether respondents were entitled to the equitable remedy of back-pay, the Supreme Court stated:
[T]he standard of review will be a familiar one of whether the District Court was “clearly erroneous” in its factual findings and whether it “abused” its traditional discretion to locate “a just result” in light of the circumstances peculiar to the case....
See also Los Angeles Department of Water & Power v. Manhart, 435 U.S. 702, 729, 98 S.Ct. 1370, 1386, 55 L.Ed.2d 657 (1978) (Marshall, J., concurring in part and dissenting in part).
A trial court’s exercise of equitable discretion based on specific circumstances is the acme of the judicial obligation to do justice under law. It is not defeasible by generalities as to the absolute right of the sovereign to extract monies from citizens — a right that is not absolute, as this nation declared in 1776. The government is subject to minimal standards of responsibility in dealing with the public, whether the matter at issue is customs duties or any other impost on the public.
In holding the United States estopped, the trial court, expert in customs law, invoked the policy behind the law that the *1021government had failed to administer. The trial court declined to excuse the government from the consequences of this failure. Viewed another way, the trial court refused to penalize the innocent importer by requiring the importer to pay the duty of $230,334:12 twice, when governmental lapse was a significant factor in the event.
The trial court recognized, as had Congress when the current law controlling customs brokers was enacted, the unusual role of customhouse brokers in the customs business:
[I]n view of the fact that these customhouse brokers are quasi-officers of the Treasury and that by licensing them the Treasury holds out to importers that it has investigated their character and represents to such importers that they are capable and honest in their conduct of their customs business....
Cong.Rec. 13,356-57 (1935) (statement of Senator Walsh). See also S.Rep. No. 1170, 74th Cong., 1st Sess. 3 (1935).
As the trial court remarked, Loudon’s history of bad checks and negative net worth was well known to the Customs Service. The legislative history shows that the regulation of customs brokers was designed to protect “both importers and the revenue of the United States”. Cong.Rec. 13,387 (1935). Congressman Crowther reiterated that customs brokers are
pseudo Federal officers in the sense that they handle the customs revenue as between the Government and the importer
Cong.Rec. 14,577 (1935), and that in light of their “peculiar relation” to the federal government, the Treasury Department
ought to have complete authority for a thorough examination of their transactions in order to end this racketeering and depleting of the revenue of the Government of the United States.
Id. This authority was enacted by statute:
Regulations by Secretary
The Secretary of the Treasury shall prescribe such rules and regulations as he may deem necessary to protect importers and the revenue of the United States, and to carry out the provisions of this section, including rules and regulations requiring the keeping of books, accounts, and records by customhouse brokers, and the inspection thereof.... [Emphasis added]
19 U.S.C. § 1641(d).
Pursuant to this authority the Treasury examined Loudon’s finances. A government audit in October 1977 revealed that Loudon’s liabilities exceeded his assets by over $164,000, and that he was responsible for more than $190,000 in overdrafts. This in itself violated the standards for licensed brokers. In late 1979 and early 1980 six of Loudon’s uncertified checks, some covering Cometals’ entries, were dishonored and returned to the Customs Service on the basis of insufficient funds. The Customs Service never advised the importer of these events. Although Loudon eventually covered these checks, the government’s blind eye to Lou-don’s style was inimical to its statutory responsibility.
Despite its knowledge of Loudon’s negative net worth and its experiences with Loudon’s bad checks, the Customs Service conducted no audit after 1977 of Loudon’s financial condition, took no action in connection with Loudon’s license, required no bond from Loudon, and did not tell the importer when its broker’s checks were dishonored. Nothing whatsoever was done to protect either the importer or the United States, as required by statute. The trial court held that the government was equitably estopped, by these actions, from recourse against Cometals in this case.
Despite long-standing congressional and judicial recognition of the pragmatic role of customhouse brokers as “quasi-officers of the Treasury”, the majority erases this history by its fiat that Loudon was a “mere agent” of the importer. The past is not so easily changed. Indeed, the term “broker” itself connotes other than a simple agency relationship.
The trial court discussed its reasons for holding that customs brokers are not sim*1022ply agents of the importer. But even on agency principles, the Customs Service failed in its obligations to the “principal” it now seeks to hold liable. The Customs Service never notified Cometals of its purported agent’s bounced checks, neither in this case nor in prior importations where Loudon’s checks for Cometals’ duties were not honored.
Third party disclosure to an agent is not imputed to the principal when the agent is acting adversely to the principal’s interest and the third party has notice of this.
Arlinghaus v. Ritenour, 622 F.2d 629, 686 (2nd Cir.), cert. denied, 449 U.S. 1013, 101 S.Ct. 570, 66 L.Ed.2d 471 (1980). See also Restatement (Second) of Agency § 271 (1958). The detrimental reliance element of estoppel, e.g., Heckler v. Community Health Services, Inc., 467 U.S. 51, 59, 104 S.Ct. 2218, 2224, 81 L.Ed.2d 42 (1984), was exacerbated by this silence. Further, any agency relationship between Loudon and Cometals vanished when Loudon comingled funds and diverted payments:
[T]he authority of an agent terminates if, without knowledge of the principal, he acquires adverse interests or is otherwise guilty of a serious breach of loyalty to the principal.
Restatement, supra, § 112. The government knew of these adverse interests, and has not denied its knowledge of Loudon’s financial practices. By the government’s admissions, any agency authority was terminated by its and Loudon’s actions adverse to Cometals’ interest.
Cometals argued before the trial court that the Customs Service, in its tolerance of Loudon’s misfeasances and in its failure to notify Cometals when the checks for Cometals’ duties were dishonored, acted in a way that protected Loudon while prejudicing the importer. The government concedes in its brief that “there is no evidence on the record that the importer or surety were even aware that uncertified checks were being accepted”. Loudon’s bankruptcy ended a pattern of what Cometals describes as “kiting”, facilitated by governmental violation of its own regulations.
The trial court was entitled to consider these circumstances in reaching its equitable decision. They can not be glossed over. The government argues that it was entitled to continue to process Loudon’s succession of bad checks without advising the importer, even as it now seeks to hold the importer responsible for this clearly preventable occurrence.
The government argues that it accepted Loudon’s uncertified check in this case because of Cometals’ surety bond, but this is a different issue. I do not see how the presence of Cometals’ bond is a sufficient excuse for the government’s laxness, if not acquiescence, in Loudon’s financial footwork when the Treasury regulations require the government to license only financially sound customs brokers. In view of the government’s failure to meet its minimal regulatory obligations, it can not now argue that the statute
19 U.S.C. § 1648 ... [I]f a check so received is not paid the person by whom such check has been tendered shall remain liable for the payment of the duties
means not only the maker who tenders the check but the importer as well. The plain language of the statute excludes so expansive a reading. The statute itself accommodates the ever-present customs broker, and his complex relationship in such transactions.
Cometals’ surety company bonded Come-táis, not Loudon. The majority interprets Cometals’ bond as Cometals’ surety’s acceptance of liability to the government for Loudon’s diversion of the monies. The majority holds that because of the bond the government had no obligation to enforce its own regulations, or even to exercise minimal due care in its dealings with Loudon and particularly in its dealings with importers. The Court of International Trade held that the Customs Service was chargeable with “affirmative misconduct” in not requiring a bond of Loudon and in failing to audit and determine his financial responsi*1023bility, as the law and Treasury regulations require. On this record, the imposition of equitable estoppel is supported by precedent.
Equitable estoppel against the government is imposed only in egregious circumstances, wherein to hold otherwise is offensive to one’s sense of justice. The Supreme Court in Heckler v. Community Health Services, Inc., 467 U.S. 51, 60-61, 104 S.Ct. 2218, 2224, 81 L.Ed.2d 42 (1984), concluded that it would not
say that there are no cases in which the public interest in ensuring that the Government can enforce the law free from estoppel might be outweighed by the countervailing interest of citizens in some minimum standard of decency, honor and reliability in their dealings with their Government. [Emphasis in original and added]
The Court in Community Health Services discussed various examples of governmental misconduct in which equitable estoppel was denied or granted depending on the facts, including Immigration and Naturalization Service v. Miranda, 459 U.S. 14, 17, 19, 103 S.Ct. 281, 282, 283, 74 L.Ed.2d 12 (1982) (“The Court of Appeals thus correctly considered whether as an initial matter, there was a showing of affirmative misconduct.”); Schweiker v. Hansen, 450 U.S. 785, 788, 101 S.Ct. 1468, 1471, 67 L.Ed.2d 685 (1981) (‘“It is the duty of all courts to observe the conditions defined by Congress for charging the public treasury.’ ”) (quoting Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 385, 68 S.Ct. 1, 3, 92 L.Ed. 10 (1947)). 467 U.S. at 60 n. 12, 104 S.Ct. at 2224 n. 12.
The Court in Community Health Services stated that “at least two of our cases seem to rest on the premise that when the Government acts in misleading ways, it may not enforce the law if to do so would harm a private party as a result of government deception.” Id. (citing United States v. Pennsylvania Industrial Chemical Corp., 411 U.S. 655, 675, 93 S.Ct. 1804, 1817, 36 L.Ed.2d 567 (1973) (evidence of misleading information by government is pertinent to defense of whether it was reasonable to rely thereon); and Moser v. United States, 341 U.S. 41, 47, 71 S.Ct. 553, 556, 95 L.Ed. 729 (1951) (finding “misleading circumstances” the Court held that “elementary fairness” required estoppel)).
There are varied circumstances in which equitable estoppel has been imposed by the courts against the government. Among the circuits, see, e.g., Meister Brothers, Inc. v. Macy, 674 F.2d 1174, 1177 (7th Cir.1982) (“the ‘public has an interest in seeing its government deal carefully, honestly and fairly with its citizens’ ”) (quoting United States v. Wharton, 514 F.2d 406, 412-13 (9th Cir.1975); Corniel-Rodriguez v. Immigration and Naturalization Service, 532 F.2d 301, 307 (2d Cir.1976) (refusing “to sanction a manifest injustice occasioned by the Government’s own failures”); United States v. Lazy FC Ranch, 481 F.2d 985, 989 (9th Cir.1973) (“estoppel is available as a defense against the government if the government’s wrongful conduct threatens to work a serious injustice and if the public’s interest would not be unduly damaged by the imposition of estoppel”); Brandt v. Hickel, 427 F.2d 53, 56 (9th Cir.1970) (“some forms of erroneous advice are so closely connected to the basic fairness of the administrative decision making process that the government may be estopped”); United States v. Georgia-Pacific Co., 421 F.2d 92, 103 (9th Cir.1970) (“the dictates of both morals and justice indicate that the Government is not entitled to immunity from equitable estop-pel in this case”). The Court of Claims has held similarly, see Emeco Industries, Inc. v. United States, 485 F.2d 652, 657, 202 Ct.Cl. 1006 (1973) (government not immune from estoppel where its denial would be “ ‘contrary to equity and good conscience’ ”) (quoting Stevens Manufacturing Co. v. United States, 8 F.Supp. 720, 724, 80 Ct.Cl. 183, 192-93 (1934)).
In Air-Sea Brokers, Inc. v. United States, 596 F.2d 1008, 66 CCPA 64 (1979), the Court of Customs and Patent Appeals stated that equitable estoppel could not be applied against the government in cases *1024involving import duties, based on its view of the distinction between governmental action in a sovereign capacity as opposed to a proprietary capacity, id. at 1011, a distinction inapt in the case at bar, as illustrated in the CCPA’s reference to Automobile Club v. Commissioner, 353 U.S. 180, 183, 77 S.Ct. 707, 709, 1 L.Ed.2d 746 (1957), a tax case which held that the Commissioner was not estopped from correcting an error of law and thereby requiring payment of past taxes, id. at 1101 n. 8. In neither Air-Sea Brokers nor Automobile Club did the trial court find that there was affirmative misconduct; nor did the trial court in either case, in its equitable discretion, determine that the facts of the case warranted the application of the doctrine of equitable estoppel. Appropriately in view of the limited standard of review with respect to such issues, see discussion ante, each appellate court and in Automobile Club the Supreme Court affirmed. Therefore, unlike the situation now before us, in Air-Sea Brokers and Automobile Club, imposts were required to be paid rather than waived in their entirety. The case of United States v. Reliable Chemical Co., 605 F.2d 1179, 66 CCPA 123 (1979), relied on by the majority, does not relate to the collection of duties, but to the jurisdictional issue of the filing of a protest before instead of after liquidation.
The Court of International Trade thus declined to apply the CCPA’s sweeping dictum, stating correctly that its holding does not “sanction all possible government misconduct in the area of duty collection, particularly when it displays a blatant disregard for the public interest in a matter of utmost importance.” 605 F.Supp. at 304 (emphasis in original).
As is made clear in the extensive precedent in which courts have considered governmental conduct, whether the government can be estopped depends on the nature of both the governmental action and the governmental misconduct. The trial court referred to the general rule that “ ‘laches or neglect of duty on the part of officers of the Government is no defense to a suit by it to enforce a public right or protect a public interest’ ”, 605 F.Supp. at 303-04 (quoting Utah Power & Light Co. v. United States, 243 U.S. 389, 409, 37 S.Ct. 387, 391, 61 L.Ed. 791 (1917)), a rule tempered by judicial determination of whether the government met a “minimum standard of decency, honor, and reliability”, in the words of Community Health Services. In balancing these factors, the courts are obliged to administer laws fairly, even when the government is a party. Neither the government nor its citizens is relieved from the omnipresent obligation to “turn square corners” with the other. St. Regis Paper Co. v. United States, 368 U.S. 208, 229, 82 S.Ct. 289, 301, 7 L.Ed.2d 240 (1961) (Black, J., dissenting), quoted in Community Health Services, 467 U.S. at 51 n. 13, 104 S.Ct. at 2224 n. 13; Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 387-88, 68 S.Ct. 1, 4-5, 92 L.Ed. 10 (1947) (Jackson, J., dissenting).
Equitable estoppel is not legal estoppel: it is the fruit of the search for justice in an often complex balance of interests, rights, and authorities. The laws requiring federal regulation of customhouse brokers were designed to protect both importers and the treasury, as is clear from the legislative history. Balancing the equities as between these two entities with respect to the circumstances at bar, the Court of International Trade brought its wisdom and experience in customs law and practice. None of the decisions cited by the government or relied on by the majority is contravened by the trial court’s conclusion in this case. The decision of the Court of International Trade is supported by law and precedent and is in the interest of justice.
The Treasury changed its regulations in 1982, by requiring customs brokers to advise importers in writing that importers may pay customs duties directly to the United States rather than to the broker, and that payment to the broker does not relieve the importer of liability. 19 C.F.R. § 111.29(b)(1). This change reinforces the view that the prior regulations and practices were notably imperfect. The trial court’s decision is not contrary to law nor *1025an abuse of its equitable discretion, and should not be disturbed.