Muschany v. United States Andrews v. Same

Citation65 S.Ct. 442,89 L.Ed. 744,324 U.S. 49
Decision Date05 February 1945
Docket Number32,Nos. 31,s. 31
PartiesMUSCHANY et al. v. UNITED STATES. ANDREWS et al. v. SAME
CourtUnited States Supreme Court

Mr. William R. Gentry, of St. Louis, Mo., for petitioners Muschany.

Mr. Samuel M. Watson, of St. Louis, Mo., for petitioners Andrews.

Mr. Paul A. Freund, of Washington, D.C., for respondent.

Mr. Justice REED delivered the opinion of the Court.

Writs of certiorari were allowed to petitioners by this Court in these two cases to review the action of the Cir- cuit Court of Appeals for the Eighth Circuit.1 That appellate court reversed the action of the District Court of the Eastern District of Missouri which had upheld the validity of contracts between petitioners and the United States for the purchase of land for the Weldon Springs, Missouri, ordnance plant.2 The contracts were pleaded by petitioners as defendants in eminent domain suits to establish the proper condemnation award.

The petitions for certiorari were granted, 321 U.S. 760, 64 S.Ct. 846, because of asserted conflict with United States v. Grace Evangelical Church, 7 Cir., 132 F.2d 460. Jurisdiction of this Court rests on Section 240 of the Judicial Code, 28 U.S.C.A. § 347.

Under the authority of the Second Supplemental National Defense Appropriation Act of 1941, 54 Stat. 872, the President approved the Weldon Springs project on October 17, 1940. Pursuant to this approval, the War Department claims that it proceeded to acquire the necessary land under the act of July 2, 1917, 40 Stat. 241, 50 U.S.C.A. § 171, as restricted by the National Defense Act of July 2, 1940, 54 Stat. 712. The statutory authority of the War Department to proceed as it did is not questioned except on the issue of whether the purchase contracts entered into in acquiring the needed land violate the first section of the act of July 2, 1940, which provides:

'Provided further, 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 the cost-plus-fixed-fee form of contract when such use is deemed necessary by the Secretary of War.' 54 Stat. 713, 50 U.S.C.A.Appendix § 1171.

The duty to act for the War Department in obtaining the land lay in the office of the Quartermaster General and specifically in the Real Estate Branch of that office. In an effort to expedite the acquisition of the needed land the head of that branch, Colonel R. D. Valliant, contracted with R. Newton McDowell to act as the agent for the Government in securing options, on forms approved by the United States and attached to the employment contract, from the owners for submission to and acceptance by the United States. Mr. McDowell's compensation for acting as agent was a 'five per cent (5%) commission * * * to be paid by the vendor.'3

The employment of McDowell as agent to secure options for the United States was confirmed by the War Department to the Citizens Committee, an informal organization of those who owned property which was needed for the proposed project. McDowell went to work to carry out his contract. He held meetings at which he explained to the landowners the plan to secure options and the option form itself. From his explanation the landowners must have understood that their sale price would have deducted from it McDowell's commission and other expenses. This was also the understanding of the Government, as is shown not only by the documents themselves which were approved by the Government but also specifically by the testimony of Colonel Valliant. While McDowell was employed and his commission set by the Government, it was arranged that McDowell should collect his money from the vendor so that a single voucher would cover the purchase price and the expenses.

The approved form of option, which was a part of McDowell's contract with the Government, was used by McDowell in the particular transactions which are under examination in these proceedings. The option accords with the requirements of the McDowell contract and in addition provides for an agreed valuation at the option price in case of condemnation.4 The offer was accepted by the Government.

There were a large number of landowners in the required area. Options were obtained from 270, including the petitioners, and with one exception the options were accepted by the Government at the optioned price. Almost half of the contracts were closed by acceptance of deeds and payment of the price. Criticism of the prices and manner of purchase developed and the War Department repudiated the remaining contracts and turned to condemnation. The repudiation followed upon the conclusion among other things that the contracts violated the statutory provision against the cost-plus-a-percentage-of-cost system of contracting, page 444 of 65 S.Ct., supra, and were contrary to public policy because of the contingent interest of McDowell, which was antagonistic to the Government.

Petitioners' options were among those accepted only to be repudiated later, the Government then instituting condemnation proceedings to obtain petitioners' lands. In the two condemnation proceedings instituted against petitioners judgments were entered upon a declaration of taking which vested titles in the United States. 46 Stat. 1421, 40 U.S.C.A. § 258a et seq. Thereafter the petitioners here filed their answers in which they consented to the condemnation and demanded that the price which was fixed in the option, accepted by the Government, be adopted by the trial court as just compensation. In reply the Government set up its repudiation of the contracts on numerous grounds including fraud, such unfairness to the Government because of gross overvaluation that the contract should not be enforced in equity and good conscience as well as the disregard of the statutory proscription and public policy, which was referred to in the preceding paragraph as the ground for repudiation.

The two cases were decided in favor of the validity of the contracts and the compensation was fixed at the price stated in the contract without revaluation. Consequently there was no occasion for the trial courts to determine whether valuation measured by just compensation would have varied from the agreed price. The Government makes no objection to this manner of determining compensation if the accepted options (contracts) are valid. Compare Danforth v. United States, 308 U.S. 271, 282, 60 S.Ct. 231, 235, 84 L.Ed. 240. In one case the findings of fact and a comment appear as a memorandum opinion in United States v. Certain Land, etc., D.C., 46 F.Supp. 921. In the other case, the decree was entered without separate findings of fact or opinion after adoption of the memorandum in the first case. We perceive nothing in the record to distinguish the cases here and shall dispose of them in a single opinion.5

The following determination appears in the opinion of the trial court for these cases, 46 F.Supp. at page 928:

'There is an absence of any showing that facts were concealed, that misrepresentations were made, or that duress was used. The price stated in the option contract is not unconscionable. There is no fraud, actual or constructive, in this case.'6

As a result of this conclusion, the issues of corrupt action in these two instances are decided contrary to the Gov- ernment's contention at the trial. No such contention was made by the Government here. The findings also stated, 46 F.Supp. at page 925:

'There is no evidence that the option price of forty-five hundred dollars included the amount the defendants asked for the land plus McDowell's fee of 5% of sale price, the Kansas City Title Insurance Company's fee of 1 1/2% for examining title, the stamp tax or the recording fee.'

We treat the finding and determination as applicable to both cases.

On appeal the Circuit Court of Appeals found, contrary to the trial court's finding quoted above, that the commission and expenses were added to the vendors' net price. We agree with the appellate court. While no direct evidence appears as to the addition of the expenses to the vendors' net price, it seems clear from the agreement between the Government and McDowell, the option contract, the statements of McDowell at public meetings, the advice given by the citizens' committee and Colonel Valliant's testimony that it was generally understood that the option price was to be calculated in this way. Although Messrs. Muschany and Andrews were not asked specifically as to how they figured their gross prices stated in the options, both were present at a meeting at which McDowell explained his contract. Since the vendors agreed by the contract to pay all commissions and expenses, they must have added these expenses to what they expected to receive net for their land. Whether the addition was by precise arithmetical computation or by intuitive action is immaterial. The mere fact that no separate statement of the items appears in the evidence in these cases would not overturn the force of this general and definite understanding.

The Court of Appeals was of the opinion that the contracts with the landowners were cost-plus-a-percentage- of-cost and therefore invalid. Any further examination by it of the Government's contention that the contract was contrary to public policy was unnecessary. Petitioners here attack the first conclusion. The Government defends the action of the appellate court on this ground and also because independently of the cost-plus prohibition, the contracts between the landowners and the Government were contrary to public policy.

Prior to consideration of the two principal issues raised by the petitioners and respondent in their arguments before this Court, it seems necessary to refer to the allegations of fraud, unconscionable dealing, bad faith and misrepresentation on which respondent relied in the trial court as invalidating petitioners' contracts. As is indicated, 323 U.S. 54—56, 65...

To continue reading

Request your trial
316 cases
  • National City Bank of New York v. Republic of China
    • United States
    • U.S. Supreme Court
    • March 7, 1955
    ...L.Ed. 1088. 10. Vidal v. Mayor, Alderman and Citizens of Philadelphia, 2 How. 127, 197—198, 11 L.Ed. 205; Muschany v. United States, 324 U.S. 49, 66, 65 S.Ct. 442, 451, 89 L.Ed. 744. 11. Dissents in Great Northern Life Ins. Co. v. Read, 322 U.S. 47, 57, 64 S.Ct. 873, 878, 88 L.Ed. 1121, and......
  • 83 Hawai'i 378, State of Hawai'i Organization of Police Officers (SHOPO) v. Society of Professional Journalists-University of Hawai'i Chapter
    • United States
    • Hawaii Supreme Court
    • November 15, 1996
    ...and legal precedents and not from general considerations of supposed public interests.' " Id. (quoting Muschany v. United States, 324 U.S. 49, 66, 65 S.Ct. 442, 450, 89 L.Ed. 744 (1945)). [83 Hawai'i 405] by private contractual agreement reached by collective bargaining. As this court recen......
  • Brooklyn Sav Bank v. Neil Dize v. Maddrix Arsenal Bldg Corporation v. Greenberg 8212 1945
    • United States
    • U.S. Supreme Court
    • April 9, 1945
    ...235 U.S. 99, 105, 35 S.Ct. 94, 95, 59 L.Ed. 147; Smith v. McCullough, 270 U.S. 456, 465, 46 S.Ct. 338, 70 L.Ed. 682; Muschany v. United States, 324 U.S. 49, 65 S.Ct. 442. 25 H. Rep. No. 2182, 75th Cong., 3d Sess., pp. 6-7, states: 'There are to be no differentials either between sections of......
  • United States v. 15.3 ACRES OF LAND, ETC.
    • United States
    • U.S. District Court — Middle District of Pennsylvania
    • August 15, 1957
    ...laws and legal precedents and not from general considerations of supposed public interests. * * *" Muschany v. United States, 1945, 324 U.S. 49, at page 66, 65 S.Ct. 442, 451, 89 L.Ed. 744. "The United States, when they contract with their citizens, are controlled by the same laws that gove......
  • Request a trial to view additional results
1 books & journal articles

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT