U.S. v. City of Palm Beach Gardens

• Decision Date: 26 January 1981
• Docket Number: No. 79-1691,79-1691
• Citation: 635 F.2d 337
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. The CITY OF PALM BEACH GARDENS et al., Defendants-Appellees. . Unit B
• Court: U.S. Court of Appeals — Fifth Circuit

Page 337

635 F.2d 337

60 A.L.R.Fed. 678

UNITED STATES of America, Plaintiff-Appellant, v. The CITY OF PALM BEACH GARDENS et al., Defendants-Appellees.

No. 79-1691.

United States Court of Appeals, Fifth Circuit.

Unit B

Jan. 26, 1981.

Leonard Schaitman, Marleigh Dover Lang, Michael Kimmel, Appellate Staff, Civil Div., Dept. of Justice Washington, D. C., for plaintiff-appellant.

David R. Lowell, St. Petersburg, Fla., for Nelson.

Wood, Lucksinger & Epstein, Bill R. Bludworth, Houston, Tex., Robert E. Venney, Miami, Fla., for Palm Beach Gardens Community Hospital et al.

Brant & Baldwin, Lake Park, Fla., Bernard Duco, Jr., Houston, Tex., for City of Palm Beach Gardens.

Appeal from the United States District Court for the Southern District of Florida.

Before VANCE, HATCHETT and ANDERSON, Circuit Judges.

HATCHETT, Circuit Judge:

In this case the parties disagree as to the time within which the United States must bring suit under the Hill-Burton Act, 42 U.S.C. § 291i, for the recovery of federal funds used in the construction of a non-profit hospital sold to a profit-making organization. We reverse the decision of the trial court holding the United States time-barred from seeking such recovery following the transfer of a federally-supported hospital from public to private ownership.

Appellee, the City of Palm Beach Gardens, Florida, received a federal grant in 1964 under the Hill-Burton program to assist in the construction of a publicly-owned hospital. In 1968, the City sold its fully-constructed hospital to a private, profit-making corporation. The Hill-Burton Act provides that upon the transfer of any hospital constructed under this program to a profit-making organization, the federal government may sue either the transferor or the transferee for a share of the value of the hospital. 42 U.S.C. § 291i. ¹ Appellant, the United States, brought this action in 1976 against the City for recovery of a share of the sale price of the Palm Beach Gardens hospital. The district court held that the United States was time-barred by the six-year statute of limitations applicable to suits for recovery of money diverted from a federal grant program. 28 U.S.C § 2415(b). ² The court entered summary judgment for the City of Palm Beach Gardens. The United States appeals.

We must determine what limitations period applies to actions brought by the United States under the Hill-Burton Act, for the recovery of federal funds used in the construction of a non-profit hospital sold to a profit-making organization.

The City argues that the trial court properly looked to 28 U.S.C. § 2415(b) which governs any suit by the United States to recover money diverted from a grant program. The City contends that the court correctly viewed the 1968 hospital sale as a diversion of federal funds to a private, profit-making group. Under this view, the six-year limitations period prescribed by § 2415(b) would have expired prior to the institution of this action in 1976.

The City argues in the alternative that the six-year period set forth in 28 U.S.C. § 2415(a) ³ bars this action. This statute of limitations applies to any suit by the United States founded on an express or implied contract. The City points to the express contract between itself and HEW concerning the grant money which the United States seeks to recover. The City also claims the existence of an implied contract under which the City received federal funds upon the condition that it maintain its hospital as a non-profit facility. The City views this suit as an action for breach of this implied contract and for prevention of unjust enrichment following its receipt of the sale price of the hospital.

The United States argues that neither § 2415(a) nor § 2415(b) apply because this suit stems from neither the diversion of federal funds nor the breach of any contract. The United States claims that this suit derives solely from the cause of action granted by the Hill-Burton Act. This Act contains no limitations period. The United States contends that Congress included no time limitation because it wanted to allow the tax-paying citizens of our country to recover grant funds through suit by the federal government at any time after the sale of a Hill-Burton hospital to a private organization. We agree.

It is well established that Congress may create a right of action without restricting the time within which the right must be exercised. Occidental Life Insurance Co. v. EEOC, 432 U.S. 355, 97 S.Ct. 2447, 53 L.Ed.2d 402 (1977); United States v. Sellers, 487 F.2d 1268 (5th Cir. 1973). Moreover, courts have long held that the United States is not bound by any limitations period unless Congress explicitly directs otherwise. Guaranty Trust Co. v. United States, 304 U.S. 126, 58 S.Ct. 785, 82 L.Ed. 1224 (1938); United States v. 93 Court Corp., 350 F.2d 386 (2d Cir. 1965), cert. denied, 382 U.S. 984, 86 S.Ct. 560, 15 L.Ed.2d 473 (1966); United States v. Borin, 209 F.2d 145 (5th Cir.), cert. denied, 348 U.S. 821, 75 S.Ct. 33, 99 L.Ed. 647 (1954). The doctrine that the mere passage of time cannot foreclose the rights of the United States derives from the common law principle that immunity from limitations periods is an essential prerogative of sovereignty. Blackstone, Commentaries 247 (1783). This doctrine remains viable today because it furthers the public policy objective of protecting rights vested in the government for the benefit of all from the inadvertence of the agents upon which the government must necessarily rely. As explained by the Supreme Court, the justification for this doctrine

"is to be found in the great public policy of preserving the public rights, revenues, and property from injury and loss, by the negligence of public officers." ... (T)he rule is supportable now because its benefits and advantage extend to every citizen, including the defendant ....

Guaranty Trust Co. v. United States, 304 U.S. 126, 132, 58 S.Ct. 785, 788, 82 L.Ed. 1224 (1938) (quoting United States v. Hoar, 26 F.Cas. 329 (C.C.D.Mass.) (1821) (Story, J.)).

These principles apply to the case before us. The Hill-Burton Act grants the federal government a cause of action, but contains no limitations period. We must therefore conclude that Congress intended to allow the United States to bring an action under the Act at any time unless the City can demonstrate that Congress intended one of its independent, general statutes of limitations to apply to suits under the Act.

The trial court accepted the argument of the City that 28 U.S.C. § 2415(b) should apply. This statute provides a six-year limitations period for actions by the United States "to recover for diversion of money paid under a grant program." 28 U.S.C. § 2415(b). Because we find that this case does not involve the diversion of construction funds provided under the Hill-Burton program, we reject application of § 2415(b). The City of Palm Beach Gardens properly used the money paid under the program for the construction of its hospital. Later, ownership of the hospital was transferred to a profit-making organization. The Hill-Burton program permits such transfers of ownership, though it also allows the federal government to seek reimbursement. Thus, the United States here alleges a change in the ownership of a properly-financed, fully-constructed hospital; the United States does not allege an improper diversion of the construction funds provided under the program. We, therefore, hold 28 U.S.C. § 2415(b) inapplicable.

The City argues in the alternative that the six-year limitations period set forth in 28 U.S.C. § 2415(a) should apply in this case. That statute of limitations governs suits by the federal government which are "founded upon any contract express or implied in law or fact." We reject application of this statute because we do not view this action as resting upon any form of contract.

Without question, the terms of the hospital grant to the City of Palm Beach Gardens are expressed in a contract between the City and HEW. The claim of the United States, though, is not contractual, but statutory. An action derives from contract only when a contract "contains an undertaking 'to do the thing for the nonperformance of which the action is brought.' " Mack Trucks, Inc. v. Bendix-Westinghouse Automotive Air Brake Co., 372 F.2d 18, 21 (3d Cir. 1966), cert. denied, 387 U.S. 930, 87 S.Ct. 2053, 18 L.Ed.2d 992 (1967) (quoting Gulf Life Insurance Co. v. Hillsborough County, 176 So. 72, 75, 129 Fla. 98, 104 (1937)). The grant contract between the City and HEW neither obligates the City to maintain the hospital as a non-profit facility, nor provides for federal recovery in the event of its transfer to a profit-making organization. It is the Hill-Burton Act which grants the federal government the right to seek reimbursement. We therefore conclude that this action is not founded upon an express contract so as to fall within the purview of 28 U.S.C. § 2415(a).

Nor do we believe that the six-year limitations period of 28 U.S.C. § 2415(a) should apply because of a "contract ... implied in law or fact" between the City and the federal government. Admittedly, such quasi-contractual obligations may arise even in conjunction with a statutory...