National State Bank of Newark v. United States, 50-65

• Decision Date: 18 March 1966
• Docket Number: No. 50-65,60-65.,50-65
• Citation: 174 Ct. Cl. 872,357 F.2d 704
• Parties: NATIONAL STATE BANK OF NEWARK v. The UNITED STATES. The BOWERY SAVINGS BANK v. The UNITED STATES.
• Court: U.S. Claims Court

174 Ct. Cl. 872, 357 F.2d 704 (1966)

NATIONAL STATE BANK OF NEWARK v. The UNITED STATES.

The BOWERY SAVINGS BANK v. The UNITED STATES.

Nos. 50-65, 60-65.

United States Court of Claims.

March 18, 1966.

James Brent Clarke, Jr., Washington, D. C., attorney of record, for plaintiff in No. 50-65.

Stuart D. Root, New York City, for plaintiff in No. 60-65; George D. Reycraft, Washington, D. C., attorney of record.

Manfred J. Schmidt, Washington, D. C., with whom was Asst. Atty. Gen. John W. Douglas, for defendant. Russell W. Koskinen, Washington, D. C., of counsel.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, and COLLINS, Judges.

LARAMORE, Judge.

These actions come to us after having been consolidated for the sole purpose of resolving the issues raised by defendant's motions to dismiss. Both plaintiffs are banks seeking to recover additional mortgage insurance benefits pursuant to contracts with the Federal Housing Administration (FHA). Defendant has moved to dismiss their claims for failure to state a claim upon which relief can be granted, and on the additional ground in the National State Bank of Newark action, that plaintiff has failed to state a cause of action over which this court has jurisdiction. The substance of each motion is that only the FHA, and not the United States, has consented to be sued in this type of case and that this is shown by the applicable case law and by the fact that the proper remedy is the award of debentures issued by the Housing Insurance Fund, and not money judgment.

In response to defendant's motions, plaintiffs assert that their claims are comprehended by the Tucker Act, 28 U.S.C. § 1491 (1964 Ed.), but concede that this court cannot compel the FHA to issue debentures, and accordingly beg leave to amend their petitions to demand money judgments which defendant can discharge at its option by payment of debentures. We hold that the United States is subject to suit on these claims, and also give plaintiffs leave to amend their pleadings to petition for money judgments.

In dealing with defendant's contentions, we need only set out a skeleton of the facts; the details are best left to a footnote.¹ Both plaintiffs purchased mortgages insured by the FHA under section 207 of the National Housing Act, ch. 847, 48 Stat. 1246, 1252 (1934), as amended, 12 U.S.C. § 1713 (1964 Ed.). That provision contains the basic scheme of mortgage insurance under which the FHA guarantees or insures qualifying mortgages.² To finance this insurance, lenders or mortgagees pay a premium charge to the FHA which deposits it into the Housing Insurance Fund.³ Upon default, the mortgagee can receive the benefits of this insurance by assigning its interest in the mortgage to the FHA. Benefits are payable exclusively in debentures issued by the Housing Insurance Fund. These debentures are interest-bearing and "fully and unconditionally guaranteed as to principal and interest by the United States." 12 U.S.C. § 1713(i) (1964 Ed.). The FHA has already paid each plaintiff a substantial amount of its claimed insurance benefits. It denied the balance of each claim, apparently on the theory that plaintiffs had received equivalent amounts through independent financing arrangements with the borrower-mortgagors.⁴ These balances are the subject of plaintiffs' claims here.

As a court of claims, a necessary antecedent to our jurisdiction is the waiver of sovereign immunity. In chapter 91 of 28 U.S.C. §§ 1491-1506, Congress has waived the immunity of the United States in many classes of actions. The Tucker Act, 28 U.S.C. § 1491, is the waiver provision relied upon here. It is broad — e. g., waiving immunity in suits founded upon acts of Congress, upon regulations of an executive department, or upon express or implied contracts with the United States — and, we believe, sufficiently broad to encompass these plaintiffs' claims. We feel that the facts accepted for purposes of these motions to dismiss show that the FHA was acting within the scope of its authority, as agent, for the United States, as principal, in carrying out the purposes of the National Housing Act. By using the FHA to carry out such purposes, the United States submits itself to suit under the Tucker Act unless there is some specific provision to the contrary.

The notion that the United States should be subject to suits relating to acts of its agents is suggested by the reasoning of National Cored Forgings Co. v. United States, 115 F.Supp. 469, 126 Ct. Cl. 250 (1953) (On Plaintiffs' Motion to Strike and Defendant's Motion for Judgment on the Pleadings), modified, 132 F. Supp. 454, 132 Ct.Cl. 11 (1955) (On the Proofs). There, the plaintiff⁵ sought damages for the breach of an alleged contract with the Reconstruction Finance Corporation (RFC) which plaintiff claimed guaranteed it a market for the sale of houses. Simultaneously with the filing of the petition in this court, plaintiff complained in a District Court against the RFC in its corporate capacity. In 1953, we denied defendant's motion for judgment on the pleadings principally on the ground that the United States could be sued in the Court of Claims as principal on a contract to which a government corporation, acting in its corporate capacity, was a party. 115 F.Supp. 469, 474-475, 126 Ct.Cl. 250, 258-260. The defendant had asked us, among other things, to dismiss the case under 28 U.S.C. § 1500 (1964 Ed.). At that time, we concluded that the RFC in the District Court, and the United States as principal in the Court of Claims, were different parties. We reversed ourselves on this point in 132 F.Supp. 454, 132 Ct.Cl. 11, holding that the pendency of the suit in the District Court necessitated dismissal under 28 U.S.C. § 1500. In so holding, we overruled First National Steamship Co. v. United States, 90 Ct.Cl. 632 (1940). Our analysis of section 1500 emphasized the part which states that the Court of Claims shall be deprived of jurisdiction where the identical claim is pending in any other court "against * * * any person who, at the time when the cause of action alleged in such suit or process arose, was, in respect thereto, acting or professing to act, directly or indirectly under the authority of the United States." In applying this language to the facts, we said:

The RFC and the other Government corporations are agents of the United States and clearly, when their acts are within their statutory authority, they are acting under the authority of the United States. Cases omitted.

When a Government corporation acting within the scope of its statutory authority makes a contract as the agent of the United States, the United States may be sued in this court as principal on the contract. * * *

* * * * * *

We are of the opinion that when the RFC acts within its statutory authority it contracts both in its corporate capacity and as an agent of the United States and that an aggrieved contractor with the RFC may bring his cause of action in either the District Court against the corporation or in this court against the United States. But it cannot bring a suit on the same cause of action or claim in both courts because of the prohibitions of section 1500, supra. 132 F.Supp. 454, 458-459, 132 Ct.Cl. 11, 18-19.

National Cored Forgings was the logical extension of two prior cases which laid a foundation for the theory that the United States was responsible in the Court of Claims for the contract breaches of a "corporation * * * created solely to perform governmental objectives." Crooks Terminal Warehouses, Inc., Chicago, Ill. v. United States, 92 Ct.Cl. 401, 414 (1941); John Morrell & Co. v. United States, 89 Ct.Cl. 167 (1939). In both, plaintiffs' claims were based on the contracting acts of Federal Surplus Relief Corporations. These were corporations chartered under state law, but created by the President for the purpose of "encouraging national industrial recovery" under the authority of the National Industrial Recovery Act, ch. 90, 48 Stat. 195 (1933).

A still stronger case favoring the result in National Cored Forgings was Ex Parte Skinner & Eddy Corp., 265 U.S. 86, 44 S.Ct. 446, 68 L.Ed. 912 (1924). The plaintiff there, a shipbuilder, originally petitioned in this court for anticipated profits "lost" because the United States Shipping Board Emergency Fleet Corporation cancelled a contract. The jurisdictional dispute came about because the plaintiff, with a view to initiating its action in a state court, moved to dismiss its suit in this court without prejudice. That motion was granted, and plaintiff immediately filed a petition in a state court. The government, suddenly awakened by the fact that it had a counterclaim which would be tried by a jury in the state court if plaintiff's transfer were allowed to stand, asked leave to file its counterclaim and objected to the grant of plaintiff's motion. The earlier order was vacated. In issuing a writ of mandamus ordering this court to reinstate the order to dismiss, the Supreme Court observed that the Emergency Fleet Corporation, a creature of World War I shipbuilding needs, "was certainly acting or professing to act, mediately or immediately, under the authority of the United States" for purposes of the predecessor to 28 U.S.C. § 1500. 265 U.S. 86, 95, 44 S.Ct. 446, 448. To the same effect, but relating to different subject matter, is language in other cases. See Inland Waterways Corp. v. Young, 309 U.S. 517, 524, 60 S.Ct. 646, 84 L.Ed. 901 (1940) (involving the Inland Waterways Corporation and the United States Shipping Board Merchant Fleet Corporation); Graves v. People of State of New York, ex rel. O'Keefe, 306 U.S. 466, 476-477, 59 S.Ct. 595, 83 L.Ed. 927 (1939) (involving the Home Owners' Loan Corporation); Keifer & Keifer v. Reconstruction Finance Corporation, 306 U.S. 381, 389-392, 59 S.Ct. 516, 83 L.Ed. 784 (1939) (involving the Reconstruction Finance Corporation).

The present case is the logical extension of National Cored Forgings, and...