Solomon v. United States

• Decision Date: 04 April 1960
• Docket Number: No. 13953.,13953.
• Citation: 276 F.2d 669
• Parties: Charles B. SOLOMON, Avery Tucker, Martin Weston and Joseph B. Mohr, Appellants, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

276 F.2d 669 (1960)

Charles B. SOLOMON, Avery Tucker, Martin Weston and Joseph B. Mohr, Appellants, v. UNITED STATES of America, Appellee.

No. 13953.

United States Court of Appeals Sixth Circuit.

April 4, 1960.

Max E. Klayman and George Stone, Detroit, Mich., for appellants.

Willis Ward, Asst. U. S. Atty., Detroit, Mich. (Fred W. Kaess, U. S. Atty., Detroit, Mich., on the brief), for appellee.

Before SIMONS, Senior Circuit Judge, and MILLER and CECIL, Circuit Judges.

SHACKELFORD MILLER, Jr., Circuit Judge.

The appellee, United States of America, filed this action in the District Court against Max Solomon, his son Charles B. Solomon, Steve J. Marth, Avery Tucker, Martin Weston, Joseph B. Mohr, Charles Terry, and Barry Steel Corporation. The complaint alleged that in 1946 Tucker, Weston, Mohr and Terry, who were war veterans, conspired with Max Solomon and Charles B. Solomon, who were non-veterans, to obtain from the War Assets Administration surplus steel in violation of the Surplus Property Act of 1944. 58 Stat. 765, 50 U.S. Code Appendix, 1944 Edition, Sections 1611 through 1646. It also alleged that Marth, as an employee of the War Assets Administration, had aided and abetted them in accomplishing their purpose, and that Barry Steel Corporation received the benefits and the profits from the sale of the steel involved. While the action was pending Max Solomon died and the Barry Steel Corporation underwent reorganization and the Government's claim against them was dismissed. At the close of the Government's evidence the District Judge directed verdicts in favor of the defendants Terry and Marth. At the conclusion of the trial the jury returned verdicts against the remaining four defendants, upon which verdicts judgments were entered, followed by this appeal.

Section 26(b) of the Surplus Property Act of 1944, Section 1635(b), Title 50, App., U. S. Code, 1944 Edition, provides as follows:

"(b) Every person who shall use or engage in or cause to be used or engaged in any fraudulent trick, scheme, or device, for the purpose of securing or obtaining, or aiding to secure or obtain, for any person any payment, property, or other benefits from the United States or any Government agency in connection with the disposition of property under this Act (such sections); or who enters into an agreement, combination, or conspiracy to do any of the foregoing —

"(1) shall pay to the United States the sum of $2,000 for each such act, and double the amount of any damage which the United States may have sustained by reason thereof, together with the costs of suit; or

"(2) shall, if the United States shall so elect, pay to the United States, as liquidated damages, a sum equal to twice the consideration agreed to be given by such person to the United States or any Government agency; or

"(3) shall, if the United States shall so elect, restore to the United States the property thus secured and obtained and the United States shall retain as liquidated damages any consideration given to the United States or any Government agency for such property."

In the present case the Government elected to claim damages under Section 26(b) (2).

The following brief review of the Government's evidence is sufficient to show the facts upon which the Government relies and to present the issues involved on this appeal. Appellants Tucker, Mohr and Weston were honorably discharged veterans who qualified for a priority status under the Disposal Program. Max Solomon and Charles Solomon, who were non-veterans, were in the business of purchasing steel under the partnership name of Barry Products, which partnership was later incorporated under the name of Barry Steel Products, Inc. They were not entitled to a priority status. Each of these veterans made written application to the War Assets Administration for the purchase of steel under their priority status. The applications were typed in the office of Max and Charles Solomon by the secretary for the Solomons. The information for these applications was furnished by the Solomons. The Solomons paid to each veteran the amount of money which the veteran had agreed to pay for the steel. Each veteran, after receiving this money from the Solomons, paid for the steel by his own check. The Solomons received no note or security for the payment of this money to the veterans. The price paid for the purchase of steel under these applications was,

                  Tucker ............  $13,873.73
                  Weston ............   31,286.34
                  Mohr ..............   25,951.96
                

No one of the veterans was in the steel business, nor did any veteran have any warehouse facilities. The applications contained false statements with respect to the steel business in which each applicant stated he was engaged. At least in the cases of Tucker and Weston, the veterans did not see or inspect the steel so purchased. The veterans had nothing to do with the shipping instructions and the steel so purchased was shipped direct to the Solomons or according to Solomon's instructions. The veterans did not engage in the steel business after making the purchases involved in this action.

It is admitted by the Government that the veterans were legally entitled to a priority status in the purchase of the steel in question and after purchasing it had a right to resell it instead of using it. It is contended, however, that the purchases in the present case were not purchases by the veterans, but actually were purchases by the Solomons through fraudulent use of the priority rights of the veterans.

Evidence was introduced on behalf of the appellants that the purchases by them were bona fide transactions, that the steel so purchased was resold by them to the Solomons before they paid for it, and that the money transferred to them by the Solomons before they paid for their purchases were advance payments by the Solomons to the veterans on account of the resale of the steel and not payments by the Solomons to the Government.

The question presented by the evidence was whether the veteran involved in each transaction under consideration conspired with the Solomons to engage in a fraudulent scheme or device for the purpose of enabling the Solomons to obtain surplus steel from the Government on a priority basis, when as a matter of law under the Surplus Property Act they, being non-veterans, were not entitled to such a priority basis.

Appellants' first contention is that the evidence was not sufficient to take the case to the jury on this issue and that the Court erred in not sustaining the motions for directed verdicts in favor of each of the defendants, instead of in favor of only Terry and Marth.

Although the Government's evidence was contradicted in some respects, it is well settled that upon a motion of a defendant for a directed verdict, the trial judge should overrule the motion unless, viewing the evidence in the light most favorable to the plaintiff, there would be no substantial evidence to support a jury verdict if returned for him. Hinton v. Dixie Ohio Exp. Co., 6 Cir., 188 F.2d 121, 124; Scott v. United States, 6 Cir., 161 F.2d 1009, 1012.

Applying the rule to the evidence in the present case, we are of the opinion the District Judge properly overruled appellants' motions for directed verdicts.

Various other questions have also been raised by the appellants, which will be considered in turn.

The complaint, which was filed May 7, 1954, alleges that the appellants committed the acts complained of in March and April, 1946. Appellants contend that the action was barred by Section 2462, Title 28 U.S.C., which provides that an action "for the enforcement of any civil fine, penalty, or forfeiture, pecuniary or otherwise, shall not be entertained unless commenced within five years from the date when the claim first accrued." The action was not brought until more than eight years after the alleged cause of action accrued. In United States v. Witherspoon, 6 Cir., 211 F.2d 858, this Court held that an action under Section 26(b) (1) of the Surplus Property Act of 1944 was an action for penalties to which Section 2462, Title 28 U.S.C., was applicable. However, the Supreme Court in Rex Trailer Co. v. United States, 350 U.S. 148, 76 S.Ct. 219, 100 L.Ed. 149, later ruled that such an action was a civil remedy in the nature of liquidated damages and was not a criminal penalty. Based upon this ruling, the Court of Appeals for the Third Circuit and the Supreme Court held in United States v. Doman, 3 Cir., 255 F.2d 865, affirmed sub nom. Koller v. United States, 359 U.S. 309, 79 S.Ct. 755, 3 L.Ed.2d 828, that a suit for damages under Section 26(b) (1) of the Surplus Property Act of 1944, was not a suit to enforce a fine or penalty and therefore was not subject to the five-year limitation of Section 2462, Title 28 U.S.C. See also: United States v. Weaver, 5 Cir., 207 F.2d 796, 798.

Appellants attempt to avoid the effect of this ruling by pointing out that the ruling involved an action brought under Section 26(b) (1) of the Act and is not applicable to the present action which was brought under Section 26(b) (2) of the Act. They contend that the reasoning of this Court's opinion in United States v. Witherspoon, supra, 6 Cir., 211 F.2d 858, is very much in point when this Court is now called upon to construe Section 26(b) (2) of the Act, which is materially different from Section 26(b) (1) and which has not yet been construed by any reported federal case. We find no merit in the claimed distinction between the two sections. In Rex Trailer Co. v. United States, supra, 350 U.S. 148, at pages 151-152, 76 S.Ct. at page 221, the Supreme Court said with respect to the three alternative remedies provided by Section 26(b), subsections 1, 2 and 3, "All three were recognized as civil remedies by Congress before the bill was passed, and the conclusion is inescapable that each was of the same nature and designed to serve the same purpose."

The Surplus Property Act of 1944 was for the...