HOWARD AND MARETTA SMITHSON, PETITIONERS V. UNITED STATES OF
   AMERICA
   No. 88-326
   In the Supreme Court of the United States
   October Term, 1988
   On Petition for a Writ of Certiorari to the United States Court of
Appeals for the Federal Circuit
   Brief for the United States in Opposition
            TABLE OF CONTENTS
   Questions Presented
   Opinion below
   Jurisdiction
   Statement
   Argument
   Conclusion
                            OPINIONS BELOW
   The opinion of the court of appeals (Pet. App. 3a-10a) is reported
at 847 F.2d 718.  The opinion of the United States Claims Court (Pet.
App. 11a-32a) is reported at 12 Cl. Ct. 345.
                             JURISDICTION
   The judgment of the court of appeals (Pet. App. 1a) was entered on
May 11, 1988.  On July 29, 1988, Chief Justice Rehnquist extended the
time for filing a petition for a writ of certiorari to and including
August 23, 1988, and the petition was filed on that date.  The
jurisdiction of this Court is invoked under 28 U.S.C. 1254(1).
                          QUESTIONS PRESENTED
   1. Whether petitioners have a claim for breach of contract because
the Farmers Home Administration (FmHA) on one occasion took almost 90
days to comply with a contractual provision that states, without any
provision as to time limits or schedules for making loans, that FmHA
will "make future" loans if funds are available and the applicants
meet all regulations.
   2. Whether an FmHA security agreement provision stating that the
agreement "is subject to (the agency's) present regulations * * * and
to its future regulations not inconsistent with (the agreement's
terms)" makes the FmHA's entire body of rules enforceable against the
agency in an action for damages for breach of contract.
   3. Whether there were genuine disputes of material fact that
precluded summary judgment against petitioners.
                               STATEMENT
   1. This case involves an alleged breach of contract by the Farmers
Home Administration (FmHA).  Between 1972 and 1983, FmHA made 15
emergency or farm ownership loans to petitioners (Pet. App. 15a).
Under the Consolidated Farm and Rural Development Act, when a farmer
"is unable to obtain sufficient credit elsewhere to finance his actual
needs at reasonable rates and terms," the Farmers Home Administration
is authorized to make loans for, among other purposes, operating
family farms.  7 U.S.C. 1941-1947;  see Dahl v. United States, 695
F.2d 1373, 1378-1379 (Fed. Cir. 1982).
   To ensure repayment, FmHA required petitioners to execute five
security agreements, which were standard FmHA forms containing the
following clauses (Pet. App. 14a-15a):
         E. This Agreement is subject to the present regulations of
      the Secured Party and to its future regulations not inconsistent
      with the express provisions hereof.
                      * * * * *
         J. Secured Party will make or insure future loan advances to
      Debtor to enable him to raise or harvest farm crops or raise
      livestock or other animals, provided funds are available and the
      Debtor meets all the current requirements imposed by regulations
      of the Secured Party.
   On January 10, 1984, petitioners applied for a sixteenth FmHA loan
(Pet. App. 15a).  Approximately three weeks later, on February 2,
1984, after FmHA's county supervisor had worked with them to develop
an annual financial and operating plan, known as a Farm and Home Plan
(see 7 C.F.R. 1924.57(e) and (f)), the supervisor submitted
petitioners' application and plan to FmHA's state office (Pet. App.
15a).  Petitioners allege that the Farm and Home Plan as submitted was
inaccurate.
   On February 15, 1984, less than two weeks after the county
supervisor made that submission, the state office responded by setting
conditions for petitioners' continued receipt of loans (Pet. App.
15a).  Based on a new Farm and Home Plan, however, the county
committee certified that petitioners had the necessary character and
farming ability to qualify for a loan (see 7 C.F.R. 1941.12(a)(5),
1941.30, 1945.162(g)).  Approximately three weeks later, the county
supervisor forwarded the county committee's certification of
eligibility for petitioners to the state office, along with a revised
Farm and Home Plan (Pet. App. 15a).  Within approximately four weeks
of receipt of that information, on April 6, 1984, the state office
advised the county supervisor that petitioners' loan application had
been approved (ibid.).  Five days earlier, however, petitioners had
surrendered a tract of leased land that they had told FmHA they
intended to farm in 1984, and they therefore declined to accept the
loan (ibid.).
   Two weeks after declining to accept the FmHA loan, petitioners
requested that they be furnished loan-servicing relief for their
existing loans (Pet. App. 15a-16a).  /1/ FmHA denied that request
within four weeks of its receipt (id. at 16a).
   2. Petitioners brought a breach-of-contract suit in the United
States Claims Court seeking more than two million dollars for loss of
their farming operation and damage to their reputation based on FmHA's
"delay" in granting their loan application and "failure" to consider
them for loan-servicing relief (Pet. App. 16a, 27a).  They asserted
that FmHA's county supervisor used "false and misleading numbers" in
completing their Farm and Home Plan "for the sole purpose of
wrongfully denying (their) application," thereby delaying FmHA's
approval (id. at 15a;  Pet. 4, 7).  Petitioners further claimed that
the supervisor later neglected to consider them for loan-servicing
relief (Pet. 7).
   The Claims Court granted the government's motion for summary
judgment (Pet. App. 32a).  The court held that, to recover money
damages against the United States, a litigant must point either to a
provision of law that fairly mandates the payment of money sought or
to a breach of a contractual obligation.  Petitioners had pointed to
neither (id. at 17a-18a).  The court explained that they had made "no
claim that any of the statutes relied upon is money-mandating" and had
cited no contractual provision requiring that FmHA "timely" process
their loan application or consider them for loan-servicing relief (id.
at 21a, 26a, 28a).
   The court further observed that petitioners misplaced their
reliance on clauses E and J of their security agreements as the source
of contractual duties.  The court stated that, since clause J
contained no express requirement or guarantee that FmHA would approve
a loan within a specified period, FmHA fully adhered to that clause
when it approved a loan for petitioners (Pet. App. 28a).  The court
added that, although clause E provided that the parties' security
agreement would be subject to present and consistent future FmHA
regulations, it was unreasonable for petitioners to infer from the
language of this clause that "FmHA meant to obligate itself in
wholesale fashion to comply with each FmHA regulation or risk breach
of contract damages" under its standard form security agreement (id.
at 26a).
   3. In an opinion by Judge Davis, the court of appeals affirmed
(Pet. App. 1a-9a).  As a threshold matter, the court observed that the
Claims Court had "initial jurisdiction" over the case "because
(petitioners) sued for breach of their contracts with FmHA," but that
jurisdiction over petitioners' specific contentions must be "judged
separately" (id. at 6a).  The court further observed that, in
examining those contentions, it could not, in the absence of record
support, assume, as did petitioners, that FmHA officials had acted
arbitrarily or in bad faith (ibid.; id. at 9a n.4).  The court then
addressed petitioners' claim that FmHA had breached its contract,
either by violating its regulations, which petitioners contended were
incorporated by clause E of their security agreement, or by unduly
delaying the tender of requested loan funds and other services that
petitioners asserted were required by clause J (id. at 7a-9a).  The
court concluded that no breach of contract had occurred (ibid.).
   The court held that clause E of the security agreement, which
provided that the agreement would be "subject to" present and
consistent future FmHA regulations, did not incorporate wholesale into
the parties' contracts the mass of FmHA regulations (Pet. App. 7a).
The court reasoned that, if the parties had wished to incorporate
fully into their contracts all FmHA regulations, "they would have
explicitly so provided" and that a "wholly new ground of obligation"
should not be created on the part of the government by implication
from clause E, which appears to say no more than that a "contract
provision * * * contrary to a regulation would be invalid" (ibid.).
The court noted that "the more natural reading of appellants'
complaint is that its incorporation argument states, not a true
contractual claim, but a tort claim * * * for misfeasance and
misconduct" (id. at 7a-8a).
   The court also reasoned that clause J, which provided for "future
loans and advances" to a borrower under specified conditions, "did not
set any time limits or schedules" for such loans;  nor did it cover
servicing relief (Pet. App. 9a).  Therefore, any undue FmHA delay in
making the loan or failure to provide alternative relief was
"vindicable, if at all, only in a tort action of which the Claims
Court would have no jurisdiction" (ibid.).  Finally, the court noted
that, based on the record, it did not consider the less than 90 days
FmHA took to approve petitioners' application to be an undue delay or
an abuse of discretion (ibid.).
   Chief Judge Markey concurred.  He would have dismissed the appeal
on the ground that petitioners' claims sound in tort and therefore are
beyond the jurisdiction of the Claims Court and the Federal Circuit.
Pet. App. 10a.
                               ARGUMENT
   Since petitioners' application for a loan was approved by FmHA,
they advance no claim that they were denied a loan.  Instead, they
make several arguments in support of the contention that they should
be allowed to pursue an action in the Claims Court against the United
States for FmHA's alleged failure to process their loan in a timely
fashion.  The court of appeals correctly rejected that argument, and
its decision does not conflict with any decision of this Court or any
court of appeals.  Thus, no further review is warranted.
   1. Petitioners contend (Pet. 9-17) that the courts below erred in
holding that petitioners have no valid breach-of-contract claim (but
at most only a tort claim that is beyond the jurisdiction of the
Claims Court) for FmHA's allegedly "undue" delay in processing their
loan application.  Petitioners contend that that holding is in
conflict with the decisions of other courts of appeals.  There is,
however, no conflict.
   In Petersburg Borough v. United States, 839 F.2d 161 (3d Cir.
1988), the court did suggest that an action for undue delay in
furnishing a loan could be pursued as a breach-of-contract claim in
the Claims Court.  The basis for that holding, however, was that "the
Borough's claim is for breach of a promise by (FmHA) to close timely"
(839 F.2d at 163 (emphasis added)).  There is no such promise in this
case, for FmHA agreed only "to make or insure loan advances to
(petitioners)" on certain conditions, without specifying any schedule
for the making of such loans.  Moreover, the Petersburg court was
careful not to "imply that the Borough is or is not entitled to
recover in (the Claims Court)" (ibid.).
   United States v. Huff, 165 F.2d 720 (5th Cir. 1948), likewise does
not conflict with the decision below.  The case did not involve a
promise to make loans at all, but rather a promise (in connection with
the operation of an Army training camp on land farmed by the
plaintiffs) that, "following the crossing of (specified) fences by the
troops, the Government will restaple the said wire to the posts, and
leave the fence in as good condition and repair as it was at the time
of entry upon the leased premises by the Government" (165 F.2d at
723).
   The court, quite understandably in light of the nature of the
contract, construed the phrase "following the crossing of the fences
by the troops" to "inject()" a "time element" (165 F.2d at 724) "even
though no such word as 'immediately' precedes the phrase" (id. at
725).  The government was held to have breached the contract because
"the Government did virtually no repairing of the fences at any of the
times in question" (ibid. (emphasis added)).  The Fifth Circuit's
holding that the government breached that particular contract hardly
implies that petitioners have a tenable claim for breach of the very
different kind of contract involved in this case, which contains only
a generalized promise to make loans if petitioners prove to be
eligible, and neither specifies any time at which loans will be made
nor by its nature suggests that the government intended to bind itself
to make each and every such loan at a time that would fit petitioners'
needs.
   Petitioners' contention that the court below departed from
principles recognized by this Court in Hatzlachh Supply Co. v. United
States, 444 U.S. 460 (1980), and Keifer & Keifer v. Reconstruction
Finance Co., 306 U.S. 381 (1939), is also incorrect.  Those cases
stand only for the unexceptional proposition that a valid contract
claim is not outside the jurisdiction of the Claims Court merely
because it has elements of tort as well as contract.  The decision
below does not suggest that petitioners' claim fails because it might
be tortious in nature;  rather, the decision below merely suggests
(without deciding) that petitioners, who have no valid contract claim,
might nevertheless be able to state a valid tort claim.  /2/
   The gist of the decision below is not, as petitioners seem to
believe, that all claims of undue delay in contract performance are
tort claims that can never be pursued as contract claims in the Claims
Court.  Rather, it is that the contract at issue in this case simply
was not breached by the modest delay that petitioners encountered in
obtaining the loan that they sought in early 1984 (see Pet. App. 9a),
at least in the absence of any record support for petitioners' claim
that the agency acted in bad faith or engaged in misconduct (id. at 9a
n.4).  That holding is supported by the record and presents no issue
of widespread importance warranting this Court's review.
   2. Petitioners also contend (Pet. 17-24) that the court below erred
in holding that the contract at issue in this case did not make every
violation of an FmHA regulation into a contractual promise whose
breach would give rise to an action for damages.  That holding,
however, is plainly correct.  /3/
   As the Claims Court (Pet. App. 22a) and Federal Circuit (id. at 7a)
both readily acknowledged, contracts can be written in such a way that
they incorporate agency regulations and make them binding on the
government as a matter of contract.  The question here is whether the
contract between petitioners and FmHA was written so as to have that
effect.  Both courts below correctly held that it was not.  The
contract says nothing about incorporation of agency regulations as
contractual obligations;  all it says is that "(t)his agreement is
subject to the present regulations of (FmHA) and to its future
provisions not inconsistent with the express provisions hereof." The
purpose of such a clause is to put contracting parties on notice that
the terms contained in the contract are necessarily subordinate to
legal obligations imposed by present and future regulations, /4/ not
to make the agency answerable in damages for each and every breach of
one of its regulations (see id. at 26a).
   There is no conflict between the Federal Circuit's decision and the
decision in Bodek v. Department of Treasury, Bureau of Public Debt,
532 F.2d 277 (2d Cir.), cert. denied, 429 U.S. 849 (1976).  In Bodek,
the plaintiff sought to force the Treasury Department to issue him
duplicate savings bonds when his parents refused to relinquish custody
of bonds issued to him for his thirteenth birthday (532 F.2d at 278,
280).  The issue was not, as here, whether a plaintiff could collect
breach-of-contract damages for violation of a regulation allegedly
incorporated into an agreement.  Rather, the issue was whether,
without regard to any contract, a statutory provision and implementing
regulations for replacement of lost or stolen bonds (31 U.S.C. (1976
ed.) 738a;  31 C.F.R. 315.25) provided for replacement in such
circumstances (532 F.2d at 280).  In resolving the statutory issue,
the court determined only that the son was not entitled to replacement
because his claim did "not fall within the category of 'loss * * *'
covered under the * * * replacement provision" (ibid.).  Thus, the
court's footnote reference to Treasury regulations as "an implied part
of the contract between the United States and a purchaser of its
bonds" (id. at 279 n.7) was dictum and in any event referred to a kind
of "contract" -- the one arguably implied by law to exist between the
government and every purchaser of its securities -- different from the
one at issue here.
   Nor is the decision below inconsistent with Neal v. Bergland, 646
F.2d 1178 (6th Cir. 1981), aff'd on other grounds sub nom. Block v.
Neal, 460 U.S. 289 (1983).  The court in that case rejected the
plaintiff's "contract" claim on the ground that FmHA had no duty to
provide technical assistance or to inspect and supervise construction
when it made a rural housing loan to the plaintiff (646 F.2d at 1181).
 The court's observation (ibid.) that neither statute nor regulation
imposed any such duty on the agency can hardly be taken to mean that,
if such duties had existed, they would automatically have been
enforceable in an action for damages for breach of contract.  /5/
   Petitioners can point to no decision of a court of appeals other
than the court below in which, in the absence of a contract clause
that incorporates agency regulations much more specifically than does
petitioners' clause E, an agency has been held liable in damages for
breaching regulations that concededly (see note 5, supra) do not by
themselves support an action for damages.  In the absence of such a
conflict, review by this Court is not warranted.  /6/
   3. Finally, petitioners contend (Pet. 25-30) that there were
genuine disputes of material fact with respect to FmHA's good faith.
All of the factual allegations that petitioners discuss, however, were
explicitly assumed by the Claims Court to be true (Pet. App. 15a-16a),
with two trivial exceptions.  /7/ Moreover, in observing that the time
taken to approve the loan did not constitute undue delay (id. at 9a),
the court of appeals merely relied on a fact that petitioners never
disputed -- that it took less than 90 days for approval of their 1984
loan application.  There were no genuinely disputed issues of material
fact that precluded the court from affirming the dismissal of
petitioners' complaint.
                              CONCLUSION
   The petition for a writ of certiorari should be denied.
   Respectfully submitted.
   CHARLES FRIED
      Solicitor General
   JOHN R. BOLTON
      Assistant Attorney General
   DAVID M. COHEN
   ROBERT S. GREENSPAN
   ROBERT D. KAMENSHINE
   TERRENCE S. HARTMAN
      Attorneys
   NOVEMBER 1988
   /1/ When a farmer receives a loan from FmHA, he is expected to
repay that loan according to a planned repayment schedule.  When
appropriate, however, an FmHA county supervisor may rewrite rates or
terms for loans (reschedule loans), combine and rewrite the rates and
terms of two or more loans (consolidate loans), or postpone payment of
part of a loan installment (defer loans).  7 C.F.R. 1951.33 (1987).
   /2/ It is principally for that reason that there is no merit to
petitioners' repeated claims (Pet. 12 n.3, 13 n.4, 17, 20 n.9, 22
n.11) of a conflict between the decision below and other decisions of
the Federal Circuit or its predecessor the Court of Claims.  Moreover,
decisions of the Court of Claims are binding on the Federal Circuit
(see South Corp. v. United States, 690 F.2d 1368, 1370-1371 (Fed. Cir.
1982) (en banc)), and any conflict of the sort petitioners allege
would be a matter for the Federal Circuit, not this Court, to resolve.
 See Wisniewski v. United States, 353 U.S. 901, 902 (1957).  We note,
in this regard, that petitioners did not seek either rehearing or
rehearing en banc in the Federal Circuit.  In any event, the decisions
that petitioners cite are not remotely in conflict with the decision
below, and it is particularly ironic that petitioners apparently claim
a conflict between the decision below, written by Judge Davis, and
such decisions as L'Enfant Plaza Properties v. United States, 645 F.2d
886, 892 (Ct. Cl. 1981) (Davis, J.), and Commerce Int'l Co. v. United
States, 338 F.2d 81, 85 (Ct. Cl. 1964) (Davis, J.).
   /3/ It is, any event, unclear what duty imposed by regulation FmHA
could possibly be said to have violated.
   /4/ Cf. Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380,
384-386 (1947) (participants in government programs must abide by
statutes and regulations even if not made an express part of their
contract).
   /5/ Indeed, a fair reading of the brief passage in Neal rejecting
the "contract claim" suggests that the court was using that phrase as
shorthand for all claims cognizable under the Tucker Act, 28 U.S.C.
1346(a)(2), 1491, and not just for claims that, strictly speaking,
arise under a contract.  See 646 F.2d at 1181 & n.4.  In the present
case, it is undisputed that petitioners have no valid Tucker Act claim
for damages directly under the governing statute or regulations but
must instead depend on their theory that those regulations were
incorporated wholesale into the contract (Pet. App. 6a n.1, 21a).
Neal does not support that theory.
   /6/ Since petitioners cannot point to any express contractual
commitments by FmHA, they seek to create a "wholly new ground of
obligation" by mere implication.  But, as this Court has observed,
liability cannot be imposed on the government "without clear words."
Pine Hill Co. v. United States, 259 U.S. 191, 196 (1922).  The Federal
Circuit applied that principle here by refusing to infer governmental
guarantees to petitioners that were not expressly stated (Pet. App.
7a).  See Somalia Development Bank v. United States, 508 F.2d 817, 822
(Ct. Cl. 1974);  Eastport Steamship Corp. v. United States, 372 F.2d
1002, 1010 (Ct. Cl. 1967) (Davis, J.);  Farm Security Administration
v. Herren, 165 F.2d 554, 562 (8th Cir.), cert. denied, 333 U.S. 875
(1948).
   /7/ Petitioners contend (or at least imply) that the county
supervisor did not meet with the county committee on March 1, 1984
(Pet. 26), and that the county supervisor on or about that date told
them to take their complaints to their Congressman (Pet. 26-27).
Given the undisputed facts that the county committee's favorable
certificate of petitioners' loan eligibility and a correct Farm and
Home Plan were forwarded to the state office just one week later (on
March 8, 1984) and led to the approval of a $265,000 loan within 30
days after that (on April 6, 1984), petitioners' assertions could not
possibly "affect the outcome of the suit under the governing law."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).  The delay
of which petitioners complain in this case was that allegedly caused
by the submission of an inaccurate Farm and Home Plan in early
February 1984, and petitioners have come forward with nothing (other
than bare allegations unsupported by record evidence) to suggest that
anything more than an honest mistake could have caused that delay.