Court Opinion

ID: 9635156
Source: CourtListenerOpinion
Date Created: 2023-08-22 13:39:30.973284+00
Date Added: 2024-06-11T09:59:41.345814
License: Public Domain

WHITAKER, Judge
(dissenting).
The Walsh-Healey Act provides no penalty against an ineligible contractor who enters into a contract with defendant. It is true plaintiffs failed to reveal, even concealed, their identity as ineligible contractors, and contracted with full knowledge of their ineligibility. In so doing, they perpetrated a fraud against the United States, in that they, by deceit and trickery, circumvented the purpose of the Act. But, no statute provides for recovery by the Government of a contractor’s profit, as a penalty therefor. How can we allow recovery where there is no statutory or contractual authority therefor?
Under the common law, fraud vitiated the contract and allowed, in the absence of any equitable considerations at least, recovery of actual damages sustained as a result of the fraud; but it is not shown that the defendant suffered any monetary damage, except $896, the cost of furnishing plaintiffs with material and remov*839ing it from plaintiffs’ premises after termination.
The common law did not permit recovery of money paid on a contract induced by fraud, unless actual' monetary damage was sustained as a result of the fraud. On the other hand, to annul a transaction fraudulently induced, the party seeking relief therefrom was obliged to return the consideration received thereunder. See Causey v. United States, 240 U.S. 399, 36 S.Ct. 365, 60 L.Ed. 711, and many other cases.
So much for the two contracts fully performed, and paid for.
However, I think that under the forfeiture statute (28 U.S.C. § 2514), plaintiffs’ claim for the amount unpaid on the terminated contract may be forfeited, because plaintiffs’ claim is tainted with the fraud they perpetrated in securing the contract. Except for the fraud there would have been no contract and no claim.
It is not necessary that the Government should have suffered monetary damage. The criminal statutes provide (18 U.S.C. § 88) that where there has been a conspiracy to violate an Act of Congress, the conspirators may not escape liability because the United States has not suffered any pecuniary loss. The fact that the lawful function of the Government has been impaired or defeated, or that the United States has been defrauded in any manner, whether pecuniary loss has been suffered or not, is sufficient for conviction. Hyde v. Shine, 199 U.S. 62, 25 S.Ct. 760, 50 L.Ed. 90; Dimond v. Shine, 199 U.S. 88, 25 S.Ct. 766, 50 L.Ed. 99; Haas v. Henkel, 216 U.S. 462, 30 S.Ct. 249, 54 L.Ed. 569; Glasser v. United States, 315 U.S. 60, 62 S.Ct. 457, 86 L.Ed. 680.
Plaintiffs, Harry Paisner and Samuel Paisner, were undoubtedly guilty of a conspiracy to defraud the Government, using the word “fraud” in this sense, when, by concealing their identity they induced the Government to award them this contract in violation of the Walsh-Healey Act. Hence, I think it is our duty to declare forfeited the amount due them under the terminated contract.
The Commissioner in his opinion has cited a number of cases where the plaintiffs have been denied recovery where the contract has been entered into illegally or the indebtedness has been incurred illegally. They are: United States v. Trinidad Coal & Coking Co., 137 U.S. 160, 11 S.Ct. 57, 34 L.Ed. 640; Causey v. United States, supra; Sutton v. United States, 256 U.S. 575, 41 S.Ct. 563, 65 L.Ed. 1099; Pan American Petroleum & Transport Co. v. United States, 273 U.S. 456, 47 S.Ct. 416, 71 L.Ed. 734; Atlantic Contracting Co. v. United States, 57 Ct.Cl. 185; Rankin v. United States, 98 Ct.Cl. 357.
I do not think the plaintiffs can recover the amount unpaid on the terminated contract, notwithstanding the fact that a Government agent ordered plaintiffs to complete the sleeping bags the materials for which had already been cut. The facts were similar in Sutton v. United States, supra, where recovery was denied; but I do not think the Government may recover amounts already paid on a contract fully performed. 28 U.S. C. § 2514 does not authorize affirmative action by the United States to recover amounts already paid under a contract entered into in violation of the law.
I would deny plaintiffs recovery and allow defendant to recover $896, the cost of furnishing and removing material from plaintiffs’ premises.