United States v. Tieger

• Decision Date: 14 June 1956
• Docket Number: No. 11591.,11591.
• Citation: 234 F.2d 589
• Parties: UNITED STATES of America, Appellant, v. Martin TIEGER.
• Court: U.S. Court of Appeals — Third Circuit

234 F.2d 589 (1956)

UNITED STATES of America, Appellant, v. Martin TIEGER.

No. 11591.

United States Court of Appeals Third Circuit.

Argued November 14, 1955.

Decided June 14, 1956.

Anthony L. Mondello, Washington, D. C. (Geo. S. Leonard, Acting Asst. Atty. Gen., Raymond Del Tufo, Jr., U. S. Atty., Newark, N. J., Melvin Richter, Attorney, Department of Justice, Washington, D. C., on the brief), for appellant.

Samuel Voltaggio, Newark, N. J., for appellee.

Before BIGGS, Chief Judge, and KALODNER and HASTIE, Circuit Judges.

HASTIE, Circuit Judge.

On motion, the district court dismissed for failure to state a cause of action¹ certain counts of a complaint wherein the United States sued defendant Tieger for a statutory civil penalty under the False Claims Act. R.S. §§ 3490, 5438, 31 U.S. C. § 231. This appeal² requires decision whether that which Tieger is alleged to have done is a violation of the False Claims Act.

Tieger is a realtor who, to enable his clients to borrow money needed for down payments on the purchase of property, is alleged to have misrepresented the proposed transactions as improvement loans on structures already owned by the borrowers. Each count is based upon a loan obtained by one of Tieger's clients from a private lending institution and insured routinely by the United States as a property improvement loan, insurable under Title I of the Federal Housing Act.³

The essence of the complaint is that the United States was induced to guarantee repayment of the loan, thus changing its legal position detrimentally, by willfully false representations concerning the circumstances of the borrower and the intended use of the money, submitted by Tieger as part of the loan application with the intention that the United States, as well as the lender, should rely upon them. However, in each case, the loan was repaid in full by the borrower so that no claim was made upon the United States as guarantor.

In these circumstances the government contends that Tieger is liable under the following provision of the False Claims Act:

"Any person * * * who shall * * * cause to be presented, for payment or approval * * * any claim upon or against the * * * United States * * *, knowing such claim to be * * * fraudulent, or who, for the purpose of obtaining * * * the payment or approval of such claim, makes, uses, or causes to be made or used, any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or fictitious statement or entry, * * * shall forfeit and pay to the United States the sum of $2,000, and, in addition, double the amount of damages which the United States may have sustained * * *." 31 U.S.C. § 231.

Only the statutory penalty is claimed, it being admitted that the United States has suffered no loss.⁴

It will be observed that this section covers both the presentation of a fraudulent "claim" against the United States for "payment or approval" and the use of false supporting documents to obtain "the payment or approval of such claim." The latter alternative seems more nearly applicable to the present facts. Accordingly, we will treat this as a case in which the defendant is charged with using a "false * * * certificate" in order "to obtain the payment or approval" of a "claim upon or against the * * * United States."

But whatever combination of words may seem most favorable to the government, the statute can apply to this case only if the government's contractual undertaking to repay a private bank loan if the borrower should default, itself constituted the "payment or approval" of a "claim against the * * * United States." We think this is a fair and accurate statement of the government's legal problem. At the same time it reveals the inherent difficulty and weakness of the position the government has to take. For the conception of a claim against the government normally connotes a demand for money or for some transfer of public property. Believing that connotation applies here, we shall affirm the judgment below simply on the ground that when Congress legislated against fraud in connection with the "payment or approval" of "any claim upon or against the * * * United States" it did not cover fraud in inducing the United States to make a guarantor's promise, performance of which was conditioned upon an event which never occurred. True, the contract Tieger induced might have led to what would undoubtedly be considered a claim against the United States, but it never did.⁵ And certainly, there is no indication that Tieger intended or even anticipated any default by the borrower and consequent claim on the guarantor.

Actually, the alleged claim against the United States here is no more than the privilege of the lending bank, in such a case as the loan application falsely represented this to be, to negotiate a unilateral contract under which the bank pays a modest consideration and receives in return the promise of the United States to make good if a borrower shall default. It is possible to view this commercially advantageous privilege of exchanging a little money for such an aleatory promise as a claim. But this privilege of contracting certainly is not a claim in normal business or legal usage and terminology. For familiar example, a policy of life insurance often accords the owner during the life of the insured a privilege of converting the policy into a new and different contract. It seems as strange to describe the exercise of this privilege of contracting as a claim, as it is normal so to denominate an application for the sum payable upon the death of the insured.

Both the legislative history⁶ and certain language⁷ of the False Claims Act point to the soundness of the construction which thus restricts "claim * * * against the * * * United States" to this conventional meaning of demand for money or property. But resort to these is unnecessary because the Supreme Court has so clearly stated its view of the matter.

United States v. Cohn, 1926, 270 U.S. 339, 46 S.Ct. 251, 70 L.Ed. 616, was a criminal prosecution in which one of the charges was the violation of the very provision now in suit, which then was effectuated and enforcible by a criminal as well as a civil sanction.⁸ Referring to this provision the court explicitly considered whether the conduct of the defendant amounted to "obtaining the approval of a `claim upon or against' the Government, within the meaning of the statute False Claims Act." It then construed the decisive language of the statute, saying: "While the word `claim' may sometimes be used in the broad juridical sense of `a demand of some matter as of right, made by one person upon another, to do or to forbear to do some act or thing as a matter of duty,' Prigg v. Commonwealth of Pennsylvania, 16 Pet. 539, 615 (10 L.Ed. 1060), it is clear in the light of the entire context, that in the present statute, the provision relating to the payment or approval of a `claim upon or against' the Government relates solely to the payment or approval of a claim for money or property to which a right is asserted against the Government, based upon the Government's own liability to the claimant." 270 U.S. at 345-346, 46 S.Ct. at page 252.

Seeking to minimize the force of this construction the government calls it "dictum", meaning, apparently, that this construction was more restrictive than the exigencies of the case required. But, to an inferior federal court, such a plain statement of a statute's meaning, adopted by the Supreme Court as the basis of its decision is much more than "dictum", however apparent it may seem to analysts that the court could have gone on a narrower ground, had it chosen to do so.

The district court correctly concluded that the statute deals only with false claims upon the government for money or property and that no such claim is revealed in the counts which have been dismissed.

The judgment will be affirmed.

BIGGS, Chief Judge (dissenting).

The defendant, Tieger, a real estate dealer, on seven occasions between October 27, 1947 and January 29, 1948, caused loan credit applications to be presented to the General Union Mortgage Company of Newark, New Jersey. Each application was made on a government form designated as "FHA Title I Credit Application (Property Improvement Loan)." Alleging that Tieger caused credit to be obtained by these applications and that pertinent statements contained in them were false, the United States brought a civil action against him in the court below, basing its complaint upon the provisions of R.S. §§ 3490 and 5438, 31 U.S.C.A. § 231, the False Claims Act. The complaint contains seven counts. Tieger moved to dismiss on the ground that the complaint failed to state a cause of action. The court below granted the motion as to Counts 1 to 5 inclusive but denied it as to Counts 6 and 7, entering final judgment on the first five counts.¹ Rule 12(b) (6), F.R.C.P., 28 U.S.C. The United States has appealed. We are concerned here only with the question as to whether the first five counts state a cause of action on which the United States may recover.

For the purposes of the appeal, the allegations contained in these counts must be taken to be true. The first count is typical. It alleges that General Union Mortgage Company was a New Jersey corporation with offices in Newark, New Jersey, a financial institution qualified and eligible for credit insurance against losses sustained by it as a result of loans and advances of credit and purchases of obligations representing loans and advances of credit for the purpose of financing alterations, repairs, and improvements of existing structures, and was so authorized and empowered by the Federal Housing Administrator; that on or about December 22, 1947, in Newark, Tieger, for the purpose of obtaining from the Mortgage Company a loan and advances of credit in the sum of $1500 for one Witalis and his wife, caused to be...