Bishop v. United States, 17374.

• Decision Date: 18 June 1959
• Docket Number: No. 17374.,17374.
• Citation: 266 F.2d 657
• Parties: Bill J. BISHOP and Joseph R. Haynen, Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

266 F.2d 657 (1959)

Bill J. BISHOP and Joseph R. Haynen, Appellants, v. UNITED STATES of America, Appellee.

No. 17374.

United States Court of Appeals Fifth Circuit.

May 13, 1959.

Rehearing Denied June 18, 1959.

Wilford W. Naman, Naman, Howell & Smith, Waco, Tex., Sam H. Amsler, Jr., McGregor, Tex., for appellants.

Maurice S. Meyer, Atty., Dept. of Justice, Washington, D. C., Carl Mason, Asst. U. S. Atty., Land Acquisition Section, Waco, Tex., Russell B. Wine, U. S. Atty., San Antonio, Tex., George Cochran Doub, Asst. Atty. Gen., Alan S. Rosenthal, Atty., Dept. of Justice, Washington, D. C., for appellee.

Before HUTCHESON, Chief Judge, and CAMERON and BROWN, Circuit Judges

JOHN R. BROWN, Circuit Judge.

The disposition we make of this case dispels many of the intricate and somewhat troublesome procedural questions dealt with by the parties. In brief, this is a run-of-the-mill condemnation suit in which the Government in 1954 took — really took back — specified portions of Bluebonnet Ordnance Plant near McGregor, Texas, which it had sold to the claimant, Bill J. Bishop, in 1949.

In any case, that is the way it started. But after final judgment awarding the claimant $185,000 (less certain agreed credits) for the property, indeed after the Government had acquiesced in that judgment by formally dismissing its appeal and depositing the balance of the judgment in the Registry, it sought — and has so far succeeded — in getting out of paying anything, on the ground that the original conveyance in 1949 from the Government to Bishop was infected with fraud. This is so, it contends, because Joseph Haynen, now admittedly a partner of Bishop and interested in the property, was then an employee of the War Assets Administration Regional Office in Dallas and was, in fact, the secret, silent partner of Bishop in breach of Haynen's duty of undivided fealty.

On the very last day of the one-year period permitted under F.R.Civ.P. 60(b) (3), 28 U.S.C.A. the Government filed what it called an "Amended and Supplemental Complaint." In it was set forth the facts to establish this infidelity. The relief provided by F.R.Civ.P. 60(b), of course, is merely to set aside a judgment. But that sought by this paper did not stop there, nor did the Court in the relief finally granted. Over the vigorous protests of the claimants (Haynen had since been made a party defendant) that all that rightfully could be done at that stage was to set aside the judgment, the Government sought, and the Court granted, far-reaching relief. The result was that what had started out as a simple condemnation suit had been turned into a proceeding by which the original deeds to Bishop were effectively rescinded and he was categorically ordered to account for all revenues, income, profits and proceeds from the use, sale or other disposition of the properties from the date of the purchase in 1949.

Obviously what was granted was not within the permissible scope of F.R. Civ.P. 60(b). There was a judgment casting the Government for $185,000. It was final. It had adjudged the record fee ownership in Bishop and had fixed just compensation. Even if we assume that fraud, actual or constructive, in the initial conveyance seven years before could infect the judgment and not merely the underlying transaction itself, setting aside that judgment would not have given all of this other relief. Setting aside the condemnation judgment would have left the Government's complaint, the claimant's intervention and Answer and, perhaps the Commissioner's report together with the Government's exceptions to it. In short, it would have left a condemnation suit open and undisposed of. It would have left ownership of the property as it was on the commencement of the condemnation action. An open and undisposed of condemnation suit is the mechanism by which the Government seeks to acquire property by ascertainment and payment of Fifth Amendment just compensation. It is patently not the mechanism for the assertion that the Government really owns the full beneficial title. Neither United States v. Turner, 5 Cir., 1949, 175 F.2d 644, certiorari denied 1949, 338 U.S. 851, 70 S.Ct. 92, 94 L.Ed. 521, nor any of the other numerous cases¹ urged by the Government would bring this about.

Manifestly then, affirmative action, apart from the highly specialized condemnation proceeding under F.R.Civ.P. 71A was essential. We mention this not to hold that the Court was in substantial harmful error in the manner it went about the hearing on this "Amended and Supplemental Complaint," for we never really reach this. We mention it because it emphasizes sharply the real nature of the Government's new claim.

This was the serious charge, requiring substantial proof resting on clear and convincing evidence and not mere suspicion, that this long-time respected employee of the Government, who had discharged heavy responsibilities in an exemplary fashion had, for the sake of speculative profit in the possible later sale of property which the Government had not been able to dispose of in three years, become the faithless servant. The confusion in the Court's mind, the uncertainty in just what was being, or could be, done or tried under this equivocal proceeding, obscured the basic problem. It accounts, we think, for the failure of the Court to evaluate perceptively the lack of real evidence having qualities of inherent trustworthiness showing that Haynen was a partner, or had or would have, an interest in the property to be bought by Bishop.

The inadequacy of the total evidence to sustain the crucial findings of the Court can best be demonstrated by analyzing the case against the dramatic and extravagant claims of the Government's brief. In this phase of the case the Government's brief starts out with this claim. "* * * The evidence fully establishes: (1) a gross violation by Haynen of his fiduciary obligation to War Assets Administration; (2) that Haynen and Bishop conspired to misrepresent the transaction to War Assets Administration; (3) that they deceived and defrauded War Assets Administration and induced it to approve Bishop's bid and sell the property to him * * * Haynen was the guiding hand in the entire transaction." Again, the brief pulls all stops. "* * * All the evidence impels the conclusion that Haynen and Bishop planned to acquire the property for some time prior to the bidding and that they took every covert step necessary to secretly acquire the property and to methodically conceal Haynen's interest * * *. Haynen, with the advantage of his professional knowledge of the equipment, his experience in disposals, his special knowledge of the specific property, and his ability to assess its marketability in likely industries, was in a uniquely strategic position to know how the bonanza could best be realized. In this posture, he withheld his skill and knowledge from his principal, and furtively diverted it to his own self-interest. * * *." The brief ends with an equal flourish. "The facts * * * establish a clandestine trick, scheme and device whereby the defendants falsely represented that the bid was made by and on behalf of Bishop alone to induce War Assets Administration to approve the bid * * *."

At the outset, it is acknowledged that Bishop had the right to buy the property. He was, to be sure, a former employee of War Assets Administration as Assistant Chief of the Property Maintenance Division in the Dallas Regional Office. But he had left the service in a reduction of personnel on February 18, 1949. Whatever knowledge he had gained during his official employment about these properties, the real or potential values or prospective uses of them, was his to exploit to the fullest. His prior employment or any unique knowledge that may have given him did not restrict in any way his right to submit his bid of May 30, 1949, or his right to buy the property if successful.

Haynen, on the other hand, was a Government employee until September 2, 1949, at which time his employment was terminated on a reduction in force.² He was, and had been for a considerable time, Chief, Property Management Division of the Regional Office, War Assets Administration, and was therefore Bishop's superior. As such, he had responsibility for about a half a billion dollars worth of Government property in this five-state region, and direct supervision of 1,000 employees. Though the Property Management Division was administratively separate from the Industrial Disposal Division, Haynen's position required that he serve on the Regional Review Board to review bids for the purpose of recommending their acceptance by Washington.³ Because of this it is frankly acknowledged, as indeed it must be, that absent full disclosure, Haynen was disqualified as a purchaser or bidder or as one interested financially in a bid or purchase. On long-accepted notions of fidelity he could not have a personal interest in a pending or proposed purchase, and if he did, the property and its fruits must be restored to the principal wholly without regard to actual evil conduct, misrepresentation or concealment on the part of the unfaithful servant, or actual damage and injury on the principal's part.⁴

It bears emphasis here, however, that while the law — out of the demands of morality and equity — rightfully imposes this heavy trust on the property and the faithless agent, the resulting legal incidents do not serve either to establish the unfaithful act or, as charged here, that it was consciously done with furtive, though awkward, clumsy stealth.

The Government asserts "Haynen was the guiding hand in the entire transaction" and "he and Bishop planned to acquire the property for some time prior to the bidding." Then the brief reaches this climax. "* * * Haynen, with the advantage of his professional knowledge of the equipment, his experience in disposals, his special knowledge of the specific property, and his ability to assess its marketability in...