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United States v. Silliman.

decided: March 25, 1948.


Author: Goodrich

Before GOODRICH, McLAUGHLIN and KALODNER, Circuit Judges.

GOODRICH, Circuit Judge.

The United States brought an action against the defendant, Reuben D. Silliman, an attorney, to recover against him for his alleged participation in a plan to deceive officers of the United States so that they would return to another alleged participant in the plan, one Hackfeld, property which had been taken over from Hackfeld by the Alien Property Custodian in World War I. Hackfeld, a native German, had lived in Hawaii and made a fortune there. He was in Germany at the time the European war broke out in 1914 and upon the entrance of the United States into the war his American property was taken over by the Alien Property Custodian.*fn1 It was subsequently returned to him as a result, it is alleged, of the deceit practiced by lawyer and client upon officers of the United States as to Hackfeld's citizenship, residence, domicil, expatriation and other matters relevant to the return of alien enemy property.*fn2 Hackfeld has long since died and that part of his estate which was subject to administration in the United States was turned over to the Government at the conclusion of the ancillary administration in the State of New York. The present action is to recover from the defendant the amount equal to the difference in value, plus interest, of the property which was turned over to Hackfeld, less the amount received from the representative of the estate in New York Surrogate proceedings. The case was tried in the District Court for the District of New Jersey before a jury. A verdict was returned to the plaintiff for the full amount claimed*fn3 and a judgment was entered thereon. From this judgment the defendant appeals. The appeal presents a number of difficult questions which will be discussed separately and the skeleton statement of facts given will be enlarged where necessary to bring the legal point into focus.*fn4 I. May the United States Sue for this Tort?

The argument for the defense on this question is phrased in terms of jurisdiction of the United States courts. We do not think this method of approach is convincing nor does it make the point which the defendant really has in mind. If the United States has a cause of action the general statute*fn5 giving jurisdiction to District Courts of the United States is amply clear to show that the forum chosen is an appropriate one. The real argument the defendant makes is that whatever claim the United States might have is one under the False Claims Act of 1864.*fn6 If this is true the action cannot be maintained because the six year statute of limitations*fn7 has run since, under the defendant's theory, the tort, if any, was completed sometime in 1924.

We do not agree with the defendant's argument upon this point. The United States can sue those who commit tortious acts which result in pecuniary loss to the United States. Thus action may be brought for a trespass on Government owned land*fn8 or an injury to chattels owned by the United States.*fn9 We think this line of authorities clearly demonstrates the standing of the United States as plaintiff to recover pecuniary loss sustained through a tort recognized at the common law.*fn10 An action for harm resulting from false representations of material facts which influence one to do things resulting in his pecuniary loss has been recognized in the common law ever since the decision in Pasley v. Freeman.*fn11 It is well established, moreover, that in a suit in which the United States is sued for additional money allegedly due a claimant it can counterclaim and recover money already paid out if such payments were induced by fraudulent statements. Isenberg v. Biddle, 1941, 75 U.S.App.D.C. 100, 125 F.2d 741; cf. United States v. Rodiek, 2 Cir., 1941, 117 F.2d 588, aff'd by an equally divided court 1942, 315 U.S. 783, 62 S. Ct. 793, 86 L. Ed. 1190; Cummings v. Societe Suisse Pour Valeurs de Metaux, 1936, 66 App.D.C. 121, 85 F.2d 287. Implicit in these cases is the holding that such fraud gives rise to a cause of action for, unless it did, there would be no foundation on which to base a counterclaim. We think, therefore, the Government's standing as a plaintiff to recover a loss it sustains by conduct which amounts to the tort of deceit is pretty clear. Pooler v. United States, 1 Cir., 1904, 127 F. 519.

Nor do we think that the fact that The Congress passed a statute applicable to those who make false claims is to be interpreted as depriving the United States as plaintiff of remedies which it has for violation of a common law right. The False Claims Statute created a special measure of damages; it provided for recovery by an informer and supplied what was intended to be help to Government officers in getting redress from those who defrauded the United States. The defendant offers us no reason, and we see none, for concluding that because a statute cnlarged the liability of the defendant it abrogated the right which the sovereign otherwise has to pursue common law remedies against tort-feasors in its own courts.*fn12 Since this suit is not based upon the False Claims Statute there is no other time limitation. It is well settled that the Government is not barred by any statute of limitations which is not made expressly applicable to it. United States v. Summerlin, 1940, 310 U.S. 414, 60 S. Ct. 1019, 84 L. Ed. 1283; see Guaranty Trust Co. v. United States, 1938, 304 U.S. 126, 132, 133, 58 S. Ct. 785, 82 L. Ed. 1224; Steele v. United States, 1885, 113 U.S. 128, 5 S. Ct. 396, 28 L. Ed. 952. The time limitation objection, therefore, we do not find to be well taken.

II. Finality of an Executive or Administrative Decision.

Defendant points out that the Hackfeld property was returned to its former owner through an order signed by the President of the United States upon recommendation of the Attorney General of the United States. He states that under the law the President's decision was final and not subject to court review.*fn13 Therefore, the contention is, this action will not lie because it is an attempt to do the very thing which was not provided for in the law; that is, to get judicial review of the exercise of the discretion of the executive.

This argument will not stand up. In the first place, the effect of the return of the property has already been abrogated by court action. This action was the lawsuit in the Second Circuit against Hackfeld. While charges of fraud were there made, the case did not go off on any question of fraud, but was decided in the Government's favor on the ground that the seized property had been returned to him under a mistake of law.*fn14 The judgment obtained was a claim against the Hackfeld estate when, after its owner's death, there was administration in the courts of New York.

Furthermore, we think the argument itself is not sound. This action is not brought to review the exercise of Presidential discretion. It is, instead, one brought against those who are alleged to have deceived the officers of the Government by misstating facts to them on which the discretion was exercised. We see analogous situations in other places in the law. Thus, one who uses legal proceedings for an improper motive may find himself liable even though the result obtained in those proceedings is not in dispute.*fn15 Again, equity, under some circumstances, will enjoin one who has used fraud to obtain a judgment even though the time for appellate proceedings with regard to the judgment is long past.*fn16 This Court, furthermore, has held that words importing an intent that certain action is non-reviewable does not prevent judicial action when the assertion is that the action complained of was induced by fraud. In re Bowen, 3 Cir., 1943, 138 F.2d 22, 23, certiorari denied 1944, 320 U.S. 799, 64 S. Ct. 430, 88 L. Ed. 482. We there said:

"We may concede that by the section Congress clearly intended to provide that no court should review either the Commissioner's determination of the value of the whole or any part of property subject to a lien for taxes, or his determination of the amount which must be paid to the collector for a discharge of such a lien, but we cannot believe that by it Congress intended to go further and provide that the Government should be powerless to protect itself even in the event that its collector had been induced by fraud to discharge a valid tax lien. It seems to us that if Congress had intended to provide that the Government should be remediless against the perpetrator of a fraud upon it and thereby create an exception to the thoroughly well established rule that fraud renders transactions which it induces voidable, it would have said so in clear and unmistakable terms. In the absence of such terms we are of the view that Congress in the above section did not intend to tie the Government's hands under the circumstances here disclosed."

We think the point need not be labored further. In no sense can this action brought to recover for a tort be construed into judicial review of a Presidential action which by law was made non-reviewable.

III. Is Plaintiff's Claim Settled ...

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