CONGRESS CONSTRUCTION CORPORATION v. United States

• Decision Date: 06 March 1963
• Docket Number: No. 535-59.,535-59.
• Parties: CONGRESS CONSTRUCTION CORPORATION v. The UNITED STATES.
• Court: U.S. Claims Court

314 F.2d 527 (1963)

CONGRESS CONSTRUCTION CORPORATION v. The UNITED STATES.

No. 535-59.

United States Court of Claims.

March 6, 1963.

John T. Koehler, Washington, D. C., for plaintiff. John Paulding Brown, John Geyer Tausig, and Butler, Koehler & Tausig, Washington, D. C., were on the briefs.

Herbert Pittle, Washington, D. C., with whom was Asst. Atty. Gen. Ramsey Clark, for defendant.

Before JONES, Chief Judge, and WHITAKER, LARAMORE, DURFEE and DAVIS, Judges.

DAVIS, Judge.

Plaintiff was the potential sponsor of a "Wherry Housing Project" which never came to fruition because the Armed Services Committees of the Congress did not approve the acquisition by the Government of the land needed for the project. As such sponsor, plaintiff expended about $220,500 in preparation, and now seeks to recover that sum on the ground that the defendant failed to use its best efforts to obtain the required Congressional approval.

As the court has already pointed out (Henry Barracks Housing Corp. v. United States, Ct.Cl., 281 F.2d 196, 197-198), the Wherry Military Housing Act — Title VIII of the National Housing Act, as added by 63 Stat. 570 (see also 64 Stat. 97, 65 Stat. 365), 12 U.S.C. (1952 ed.) § 1701 et seq. — was enacted to encourage private investors to engage in the construction of rental housing for military and civilian personnel on duty at military installations. The legislation sought to remove the unattractive features of private investment in military housing through (i) a special form of mortgage insurance up to 90 percent of replacement cost; (ii) acquisition by the Government of the building sites, followed by a long-term irrevocable lease to the builder; and (iii) assurance that utilities would be provided the project on a long-term basis by the nearby military post. The sticking point in this case, as we shall see, was the acquisition by the Government of the project land for, under a general provision which Congress has long kept in effect, the military departments must "come into agreement" with the Armed Services Committees of the Congress before making fee-title acquisition of real property costing over a stated sum.¹

This abortive Wherry Housing Project had its origin in 1950, when the Navy requested various builders to submit proposals for the housing of naval personnel in the Alameda-Oakland area of California. In the spring of 1952, the Navy determined that a tract owned by plaintiff² offered the best possibilities, and by the end of July 1952 authorization was given the local naval official to negotiate with plaintiff for a 500-unit Wherry housing project on this land (which the Government would purchase). During the latter part of 1952, as part of these negotiations, plaintiff submitted to the Navy and the Federal Housing Administration (which had to approve the project if mortgage insurance were to be given) plot plans and building layouts. These were tentatively approved, and plaintiff's formal proposal was made to the Navy on December 10, 1952. After some modifications, the Navy informed plaintiff at the end of February 1953 that the proposal was "generally acceptable." At the end of May 1953, the Navy gave plaintiff the required "Certification of Need" which was a prerequisite to financing through F.H.A.; this certification was made contingent on Navy ownership of the site (which was to be acquired from plaintiff) and it was pointed out that Congressional clearance would be needed for the acquisition; the plaintiff was told that if it chose to go ahead with F.H.A. financing "you must assume the risk of the Navy obtaining favorable action by Congressional Committees for acquisition of the site." By the end of June 1953, the F.H.A. agreed to insure the mortgage on the project if it should ultimately be undertaken.

Both plaintiff and the Navy understood all the while that an indispensable precondition to the consummation of the project was the approval by the Senate and House Armed Services Committees of the purchase of the land from the plaintiff. The Navy came into agreement on terms with plaintiff and prepared the data necessary to obtain the Congressional consent, but it was always clear to both parties that the purchase and the project each hinged on Congressional approval of the land acquisition. The Navy told plaintiff that it "cannot officially accept your offer relating to the land nor commit the Navy in any way to such acceptance until the land is approved for acquisition by Congressional Commitees"; on the Navy's insistence, plaintiff revised its offer relating to the land so that it was explicitly made subject to the Committees' agreement.

On July 29, 1953, the Navy submitted this land acquisition proposal to the Assistant Secretary of Defense for approval; two days later, on July 31st, the Navy forwarded it to both the Senate and the House Committees. Until early 1953, it had been the Navy's practice to submit its real estate transactions directly to the Congressional Committees, without clearing through the Department of Defense. Late in 1952 or early in 1953, however, a Director of Installations and Logistics (later the Assistant Secretary of Defense for Properties and Installations) was established in the Office of the Secretary of Defense to review all construction projects and property acquisitions (see footnote 6, infra). In February 1953 the Senate Committee informed the Defense Department that it desired that all future requests for committee approval should indicate the concurrence of the Secretary of Defense. Thereafter, the Navy submitted all pending and all new projects to the Secretary. It was pursuant to this changed practice that the Navy forwarded to the Defense Department (in July 1953) the acquisition in which plaintiff was interested. Early in September 1953, the Assistant Secretary of Defense formally required the Navy to submit to him for prior clearance all real estate transactions which had to go to the Congressional Committees.

The gist of the subsequent history is that, despite a full-scale effort by the Navy to convince him,³ the Assistant Secretary of Defense would not approve the acquisition from plaintiff of the site necessary for the housing project. This led to a checkmate since the Congressional Committees would not proceed to final consideration of the purchase in the absence of further stimulation by the Navy, and the Navy felt itself precluded from urging acceptance upon the Committees until it had obtained clearance from the Defense Department. Ultimately, when it became clear that this higher-echelon approval would not be forthcoming, the Navy formally requested the Committees to permit withdrawal of the proposal (in April 1954). The result was that the entire Wherry Housing Project, of which the land acquisition was an inseparable part, failed to come to life.

Recognizing that the purchase of the land was always contingent upon approval by the Congressional Committees, plaintiff does not assert that the mere failure of the Committees to approve the transaction gave rise to any liability on the Government's part. The primary claim is, rather, that the Navy obligated itself to plaintiff to use its best efforts to obtain such approval, and broke that promise by not going forward before the Committees even though the Defense Department withheld its consent.

At the outset, there is a substantial question, which we leave undecided, whether the Navy obligated itself to do anything toward bringing the negotiations to completion. It is clear that there was a coming-together of the Navy and plaintiff on the terms and scope of the proposal, but though it was expected that the Navy would present the matter to the Committees no such express undertaking was given. Perhaps a subsidiary agreement to press further in good faith can be implied, but on the other hand it may be that no legal rights at all — no binding agreement of any kind — would arise until final acceptance by the Committees (see Kilmer Village Corp. v. United States, 153 F.Supp. 393, 396, 397, 139 Ct.Cl. 231, 234-235, 236 (1957)).⁴ We pass over this issue, assuming arguendo that the Navy was legally bound to plaintiff to make a good faith attempt to persuade the Committees, once plaintiff and the Navy had come to terms.

Was this obligation breached because the Navy, bowing to the will of the Defense Department, did not urge approval by the Committees? The plaintiff says that the Defense Department encroached onto an area which, by statute and practice, was solely the Navy's and therefore that the Navy had no legal excuse to submit. It is true that the negotiations were carried on by (or on behalf of) the Secretary of the Navy and that the statute forbidding Navy land acquisition without Congressional consent (see footnote 1, supra) speaks of the Navy's Secretary coming into agreement with the Committees, without mentioning the Secretary of Defense. But when purely executive functions of a discretionary nature are imposed on a subordinate official of the Government it is an implied condition that his actions (before they have become final) are subject to the review and supervision of his superiors — if the superior is authorized to intervene in that particular field and does so in time. Cf. Darragh v. United States, 33 Ct.Cl. 377, 392 (1898). So far as the Presidency is concerned, this is a necessary corollary of Myers v. United States, 272 U.S. 52, 163-164, 47 S.Ct. 21, 71 L. Ed. 160 (1926), holding that Article II of the Constitution "grants to the President the executive power of the Government, i. e., the general administrative control of those executing the laws, including the power of appointment and removal of executive officers * * *" (emphasis added). Cf. Humphrey's Executor v. United States, 295 U.S. 602, 627-628, 55 S.Ct. 869, 79 L.Ed. 1611 (1935); Wiener v. United States, 357 U.S. 349, 351, 78 S.Ct. 1275, 2...