Court Opinion

ID: 6885928
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:28:22.938426+00
Date Added: 2024-06-11T08:51:00.731288
License: Public Domain

EVANS, Circuit Judge
(dissenting).
Convinced that the agency contract between Herman and Col. Valliant, of the Quartermaster Corps of the United States Army, was against public policy, I believe the District Court correctly denied appellant’s right to recover more than the fair market value of the property.
It would seem elementary that if an employment contract was against public policy, the agent named therein was without authority to bind his principal, the United States Government. Equally clear is the proposition that land purchase contracts which are against public policy, may not be enforced against the United States, regardless of any attempted ratification by any public official. Wisconsin Central R. Co. v. United States, 164 U.S. 210, 212, 17 S.Ct. 45, 41 L.Ed. 399. Good faith by the ratifying official is inconsequential.
Liability in this case must finally turn on the authority of Herman to bind the United States by the contract which he and the landowner entered into. This contract, like hundreds of others with this agent, provided that “the vendor agrees to pay * * * Herman, of Chicago, Illinois, a commission of 5% of the gross sales price.” In other words, Herman was acting for the United States Government, but was paid by the vendor. His compensation was a percentage of the purchase price, which was fixed by him and the vendor.
Reduced to its last analysis, the validity of the sales contract depends on the ethics (the anti-public policy standard) of an *463agency contract which empowered the agent to buy land for the U. S. Government at prices fixed by him and the landowner and out of which the landowner, not the Government, pays him five per cent, of the selling price.
Sound reason and common sense, alike, condemn this contract as violative of sound public policy. Instead of protecting the public (the Government and the taxpayers), it'furnished incentive for raids upon the Treasury.
Herman was financially benefited by higher, not lower, purchase prices. Under the circumstances, the vendor was, of course, willing to pay a commission to the buyer’s representative for both were interested in boosting the price. But who was there to protect the U. S. Government ?
This is not like an agency contract between seller and a real estate agent where parties knew the agent was to receive a commission from the purchaser. Here, the agent had no limitation as to price. There was no one to check his price negotiations. There could be no ratification, in fact, no knowledge, of his loading the selling price to the financial advantage of himself and of the seller,
“Public Policy" is a somewhat relative term, perhaps a term of varying meaning. It would seem that a stricter, a higher test, is applied, and should be applied, when one of the contracting parties is the Government. It has been said that an agreement, or the contract itself, is against public policy if it has a tendency to be injurious to the public or is against the public good. State v. Gateway Mortuaries, 87 Mont. 225, 287 P. 156, 68 A.L.R. 1512; 12 Am.Juris. 663-666.
The United States Government can only act through its officers and agents. Of necessity, therefore, their authority is limited. That authority must be scrutinized carefully by all who deal with them.
It is true, the Government should be the last one to repudiate its lawful agreements of every kind. Union Pac. R. Co. v. U.S., 99 U.S. 700, 25 L.Ed. 496, 504. But action by agents of the Government which shocks the conscience, may well be condemned, on general principles, as contrary to public policy. Judicial precedent in a case on all fours with the instant action is lacking. But unaided by such decision it would seem fair to say that any act or any contract which has a tendency or is likely, to give a citizen an advantage over his Government should be voided. Marfield v. Cincinnati, D. & T. Traction Co., 111 Ohio St. 139, 144 N.E. 689, 40 A.L.R. 357.
Moreover, Congress, by Act of July 2, 1940, provided
“That the cost-plus-a-percentage-of cost system of contracting shall not be used under this section; but this proviso shall not be construed to prohibit the use of a cost-plus-a-fixed fee form of contract when such use is deemed necessary by the Secretary of War.” 41 U.S.C.A. preceding § 1 note.
While this statute did not purport to define what acts or contracts were against public policy, it constituted instruction to the Government not to make contracts which from their very nature were against public interest and therefore against public policy. It was somewhat declarative of the law and furnished an explicit guide for action by the Secretary of War.
If it be contended that the Act provided a new standard of public policy and changed the law as it previously stood, then sufficient answer may be found in the fact that the passage of the Act antedated the contract in question.
It follows from what has been said that I favor the affirmance of the judgment.