Source: http://www.law.cornell.edu/supremecourt/text/273/456/
Timestamp: 2014-07-22 15:59:04
Document Index: 165465310

Matched Legal Cases: ['§ 1552', '§ 3732', '§ 6884', '§ 6763', '§ 3617', '§ 6606']

PAN-AMERICAN PETROLEUM & TRANSPORT CO. et al. v. UNITED STATES. | LII / Legal Information Institute
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273 U.S. 456 (47 S.Ct. 416, 71 L.Ed. 734)
PAN-AMERICAN PETROLEUM & TRANSPORT CO. et al. v. UNITED STATES.
Argued: Oct. 4, 5, 1926.
Decided: Feb. 28, 1927.
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A joint resolution adopted by the Senate and House of Representatives and approved by the President February 8, 1924 (
43 Stat. 5), stated that it appeared from evidence taken by the committee on public lands and survey of the Senate that the contract of April 25, 1922, and the lease of December 11, 1922, were executed under circumstances indicating fraud and corruption, without authority on the part of the officers purporting to act for the United States and in defiance of the settled policy of the government to maintain in the ground a great reserve supply of oil adequate to the needs of the Navy. It declared the contracts and leases to be against public interest and that the lands should be recovered and held for the purposes to which they were dedicated. And it authorized and directed the President to cause suit to be prosecuted for the annulment and cancellation of the lease and all contracts incidental and supplementary thereto, and to prosecute such other action or proceedings, civil and criminal, as might be warranted.
The facts and circumstances disclosed by the record show clearly that the interest and influence of Fall as well as his official action were corruptly secured by Doheny for the making of the contracts and leases; that, after the executive order of May 31, 1921, Fall dominated the administration of the naval reserves, and that the consummation of the transaction was brought about by means of collusion and corrupt conspiracy between him and Doheny. Their purpose was to get for petitioners oil and gas leases covering all the unleased lands in the reserve. The making of the contracs was a means to that end. The whole transaction was tainted with corruption. It was not necessary to show that the money transaction between Doheny and Fall constituted bribery as defined in the Criminal Code or that Fall was financially interested in the transaction or that the United States suffered or was liable to suffer any financial loss or disadvantage as a result of the contracts and leases. It is enough that these companies sought and corruptly obtained Fall's dominating influence in furtherance of the venture. It is clear that, at the instance of Doheny, Fall so favored the making of these contracts and leases that it was impossible for him loyally or faithfully to serve the interests of the United States. The lower courts for that reason rightly held the United States entitled to have them adjudged illegal and void. Crocker v. United States, 240 U. S. 74, 80, 81, 36 S. Ct. 245, 60 L. Ed. 533; Garman v. United States, 34 Ct. Cl. 237, 242; Herman v. City of Oconto, 100 Wis. 391, 399, 76 N. W. 364; Harrington v. Victoria Graving Dock Co., L. R. 3 Q. B. D. 549; Tool Co. v. Norris, 2 Wall. 45, 54, 56, 17 L. Ed. 868; Trist v. Child, 21 Wall. 441, 448, 452, 22 L. Ed. 623; Meguire v. Corwine, 101 U. S. 108, 111, 25 L. Ed. 899; Oscanyan v. Arms Co., 103 U. S. 261, 275, 26 L. Ed. 539; Washington Irr. Co. v. Krutz (C. C. A.) 119 F. 279, 286. The transaction evidenced by the contracts and leases was not authorized by the Act of June 4, 1920. The grant of authority to the Secretary of the Navy did not indicate a change of policy as to conservation of the reserves. The Act of June 25, 1910, the Act of February 25, 1920, the executive orders, and the Joint Resolution of February 8, 1924, show that it has been and is the policy of the United States to maintain a great naval petroleum reserve in the ground. While the possibility of loss by drainage might be a reason for legislation enabling the Secretary to take any appropriate action that at any time might become necessary to save the petroleum, it is certain that the contracts and leases have no such purpose. The work to be paid for in crude products contemplated the construction of fuel depots. The one covered by the first contract was a complete unit sufficient for 1,500,000 barrels including pumping stations, fire protection and its own wharf and channel. It is not necessary to consider the possible extent of the construction that might be required under the later contract. Indeed it could not then be known how much work and products in storage it would take to exhaust the reserve. The record shows that the Navy Department estimated the cost of proposed storage plants and contents at approximately $103,000,000. Congress has not authorized any such program. The department tried and failed to secure additional appropriations for the Pearl Harbor storage facilities. The Act of August 31, 1842, 5 Stat. 577 (R. S. § 1552), gave the Secretary authority to construct fuel depots. But it was taken away be the Act of March 4, 1913, 37 Stat. 898. Since that time Congress has made separate appropriations for fuel stations at places specifically named.
And it has long been its policy to prohibit the making of contracts of purchase or for construction work in the absence of express authority and adequate appropriations therefor. R. S. §§ 3732, 3733 (Comp. St. §§ 6884, 6886); Act of June 12, 1906, 34 Stat. 255; Act of June 30, 1906, 34 Stat. 764 (Comp. St. § 6763). The Secretary was not authorized to use money received from the sale of gas products. All such sums are required to be paid into the Treasury. R. S. §§ 3617 and 3618, as amended, 19 Stat. 249 (Comp. St. §§ 6606, 6609).
The substance of the account, as stated in the decree of the District Court, is printed in the margin.
The findings show that the storage facilities at Pearl Harbor covered by the contracts were economically completed on the lands of the United States under the direction of the companies and the supervision of officers of the Navy; that they are of benefit to the United States and are now available for use and should be retained by it; that the Transport Company delivered into the storage constructed a specified quantity of fuel oil of value to the United States equal to what it cost the company; that under the supervision of government officials the Petroleum Company economically expended money for development of the leased lands to produce oil, gas and gasoline and to make thereon permanent improvements that resulted in benefit to the United States equal to the amount expended.