Brown v. United States

Decision Date09 January 1976
Docket NumberNo. 251-72.,251-72.
Citation524 F.2d 693
PartiesHorton J. BROWN, Individually, as Assignee of Ray Browder, and d/b/a Western Electrical & Mechanical Systems, B & B Construction Co., and Puget Sound Builders v. The UNITED STATES.
CourtU.S. Claims Court

COPYRIGHT MATERIAL OMITTED

Arnold B. Robbins, Seattle, Wash., attorney of record for plaintiffs.

Howard G. Slavit and Carolyn B. Lamm, Washington, D. C., with whom was Acting Asst. Atty. Gen. Irving Jaffe, for defendant.

Before COWEN, Chief Judge, MARKEY,* Chief Judge, and LARAMORE, Senior Judge.

ON DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

COWEN, Chief Judge.

This case, which arises out of plaintiff's involvement in a housing rehabilitation program conducted by the Department of Housing and Urban Development (HUD), comes before the court on defendant's motion for partial summary judgment as to plaintiff's petition and for summary judgment as to its own counterclaim.1

The facts in this case are not complicated. The Government, through HUD, owned during the relevant time period various properties which it had acquired through foreclosures and sales. As one would readily expect, these properties were often in dire need of repairs. To facilitate the quick disposition of the properties to private buyers, HUD entered into "Area Management Broker" (AMB) contracts with local real estate brokers, who then became agents of HUD in the repair and subsequent sale of the properties. For the repair and sale of certain of the properties in the Seattle, Washington, area, HUD entered into an AMB contract with Emil C. Gislason, d/b/a Berg Realty Company. Working for Mr. Gislason in this enterprise were Roy H. Christopherson and George J. Manus, both of whom play feature roles in the activities which form the basis of this litigation.

The AMB contract and the procedures used in carrying it out were governed by various HUD regulations and policies. The applicable regulations required Berg Realty Company to solicit at least three competitive bids for various jobs which were necessary for the renovation of the properties in question.2 These tasks were classified separately according to the different craft skills that were required to complete them. No matter how many bids were received by the AMB, the applicable HUD policies prohibited any contractor from receiving more than one craft job on each FHA property. Pursuant to the language of the AMB contract, Berg Realty Company was authorized to "procure * * * such supplies, materials, equipment, and services * * * as may be necessary for the maintenance, repair, and operation of the project where the cost of a single item or total cost of a series of related items * * * does not exceed $2,500.00."3 It was also the responsibility of the AMB, in this case Berg Realty Company, to accept and compile the various bids, complete certain portions of each purchase order, and then to forward the material to HUD's local office for further processing. After this processing was completed, several copies of the purchase orders were returned to the AMB in part so that its employees could certify the completion of the work by the private contractor.

During this time, plaintiff, Horton J. Brown, was a general contractor doing business in the State of Washington. Between the latter part of 1970 and the spring of 1972, he worked on various properties in the Seattle area covered by HUD's AMB contract with Berg Realty Company. According to defendant, Mr. Brown entered into a conspiracy with various individuals to circumvent the regulations and policies discussed above. To ensure that he received every bid on the various properties involved in this renovation program, Mr. Brown allegedly made arrangements to receive all the invitations to bid for each item open for bid. In this manner, he could rig the bidding in such a way that he would always emerge the winner of the contract in question. In order to lend some semblance of propriety to this activity, Mr. Brown allegedly created the following "companies" solely for bidding purposes: B & B Construction Company, Horton Brown, Western Company, Horton J. Brown & Associates, Ray Browder, and Western Electrical & Mechanical System. According to defendant, Mr. Brown engaged in this activity with full knowledge that his actions would prevent the requisite competition from other legitimate contractors.

An essential part of the factual background of this case concerns the events which occurred when plaintiff's alleged "system" was uncovered during a lengthy investigation by the Federal Bureau of Investigation. Subsequent to the completion of this investigation, an indictment was filed by a grand jury formed in the Western District of Washington against plaintiff, Messrs. Browder, Gislason, Christopherson, and Manus. Plaintiff was named in 17 counts of the indictment, dated August 15, 1972, alleging various violations of Title 18, Section 1001 of the United States Code.4 He was also named along with the other principals in the case in a conspiracy count based on Title 18, Section 371 of the United States Code.5 The indictment covered some, but clearly not all, of the contracts between plaintiff and HUD. By the time the indictment was filed, HUD had approved many purchase orders in the names of plaintiff's various companies, and several of plaintiff's claims for payment had been paid by defendant in the normal course of business. However, when the local office of HUD learned of the FBI investigation and the indictment, it directed that no further payments be transferred to plaintiff pending the final outcome of the criminal proceedings.

On November 24, 1972, after a trial in which plaintiff testified, a jury found Mr. Brown guilty as charged on all 18 counts in which he was named in the indictment. Plaintiff was fined $5,000, sentenced to six months in jail, and placed on probation for two-and-a-half years. His conviction was affirmed by the Ninth Circuit Court of Appeals on August 17, 1973.

On June 16, 1972, plaintiff, in his own right and as the alleged assignee of Ray Browder, filed his petition in this court, making numerous breach of contract claims and requesting damages totalling $64,794. On February 26, 1973, the Government commenced a civil action in the United States District Court for the Western District of Washington under the False Claims Act, 31 U.S.C. § 231-35, against plaintiff, Ray Browder, and the officials of the Berg Realty Company involved in the criminal proceedings. Defendant, on February 28, 1973, filed a motion in this court to stay the proceedings here pending the outcome of the District Court litigation. However, before a decision from this court could be made, the District Court, on motion from Mr. Brown, ordered that all proceedings in that forum as to Mr. Brown be stayed pending further order of that court. On May 15, 1973, a trial judge of our trial division denied defendant's motion to stay proceedings. His ruling was based in part on the fact that plaintiff had filed his suit here prior to the time defendant filed its complaint in the District Court.

I Assignment of Claims

Our first task in this case is to determine precisely which claims found in plaintiff's petition are properly before the court. Paragraph three of plaintiff's petition states that "all rights of Ray Browder to payment or awards under any of the contracts or bids hereinbelow described have been assigned to plaintiff."6 In determining whether these alleged assignments are valid, we look first to the Assignment of Claims Act, 31 U.S.C. § 203, 41 U.S.C. § 15, which sets forth in detail all the procedures which are required. The Act states in part that:

All * * * assignments * * * of any claim upon the United States * * * shall be absolutely null and void, unless they are freely made and executed in the presence of at least two attesting witnesses, after the allowance of such a claim, the ascertainment of the amount due, and the issuing of a warrant for the payment thereof. 31 U.S.C. § 203
No contract or order, or any interest therein, shall be transferred by the party to whom such contract or order is given to any other party, and any such transfer shall cause the annulment of the contract or order transferred, so far as the United States are concerned. 41 U.S.C. § 15

The Act, which is clearly applicable to the situation presently before the court, does contain exceptions to the general provisions cited above, to authorize assignments to "a bank trust company, or other financing institution, including any Federal lending agency." 31 U.S.C. § 203, 41 U.S.C. § 15.

At no place in his submissions to this court does plaintiff allege that he has complied with the Assignment of Claims Act. Indeed, plaintiff freely admits that at least a portion of the Act was not followed. See Plaintiff's Brief in Opposition to Defendant's Motion for Summary Judgment, at 3. This concession would seem to preclude the validity of the alleged assignments by Ray Browder to plaintiff. See Uniroyal, Inc. v. United States, 454 F.2d 1394, 1396, 197 Ct.Cl. 258, 260-61 (1972); Beaconwear Clothing Co. v. United States, 355 F.2d 583, 589-90, 174 Ct.Cl. 40, 49-51 (1966); Royal Indemnity Co. v. United States, 93 F.Supp. 891, 894, 117 Ct.Cl. 736, 746 (1950). In any event, since plaintiff clearly does not fall within the "financing institution" exception cited above and has not demonstrated compliance with the procedures mandated by this Act, the purported assignments are invalid, and we hold that plaintiff may not recover on any of the Browder claims assigned to plaintiff.

II Plaintiff's Claims 1 and 2

Plaintiff's first substantive claim, labeled as "Express Contract," seeks recovery on 20 purchase orders which plaintiff allegedly submitted to defendant for payment and which were never paid. His second claim alleges that, although certain work was substantially completed, several purchase orders...

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