United States v. Bernstein
| Decision Date | 18 March 1957 |
| Docket Number | Civ. A. 3088. |
| Citation | 149 F. Supp. 568 |
| Parties | The UNITED STATES of America, Plaintiff, v. Abe BERNSTEIN, Morey Bernstein, Sam Bernstein, Bernstein Bros. Pipe and Machinery Company, a Corporation, Maurice Levy, Rose Levy, Albert Bensik, and Modern Specialty Distributors, a partnership, Defendants. |
| Court | U.S. District Court — District of Colorado |
Donald E. Kelley, U. S. Atty. for the Dist. of Colorado, Herbert M. Boyle, Asst. U. S. Atty. Denver, Colo., E. Leo Backus, and Frederick L. Smith, of counsel, Dept. of Justice, Washington, D. C., for the United States.
Grant, Shafroth & Toll, Morrison Shafroth, and Frank H. Shafroth, Denver, Colo., for defendants.
The plaintiff instituted this action by filing a complaint charging the defendants with having engaged, in violation of the Surplus Property Act of 1944, 50 U.S.C.A. Appendix § 1611 et seq., in a fraudulent trick, scheme, or device for the purpose of obtaining, or aiding in obtaining surplus property from the War Assets Administration.
The case was tried to the Court and thereafter briefs were submitted by the parties.
On plaintiff's motion, at the conclusion of its case the action was dismissed as against the defendant Abe Bernstein.
As to the defendant Rose Levy, the Court is of the opinion that the Government has failed to produce sufficient evidence to establish any participation by her in the alleged fraudulent trick, scheme or device, or any connection therewith, and accordingly the action will be dismissed as to the defendant Rose Levy.
The Court is satisfied from the evidence adduced at the trial that the remaining defendants in the manner and form alleged in the complaint, used, or engaged in, or caused to be used and engaged in a fraudulent trick, scheme, or device for the purpose of receiving or obtaining, or aiding to receive or obtain surplus from the United States, and entered into an agreement, combination, or conspiracy to do the same and as a result of such action were successful in obtaining priority surplus property from the United States to which they were not entitled, all in violation of the Surplus Property Act of 1944 and the regulations promulgated thereunder, as a consequence of which the issue of liability must be resolved in favor of plaintiff.
In the Court's view no helpful purpose would be served by a recital of the evidence, of considerable volume, which impels the foregoing conclusion of liability on the part of the remaining defendants. However, a determination of the amount of the recovery to which the Government is entitled necessitates some analysis of the pleadings and record as well as the pertinent law.
By its original complaint, filed February 28, 1950, the Government alleged the defendants:
"are liable at the election of the United States (and which election the United States hereby makes and asserts) to pay to the United States as liquidated damages, a sum equivalent to twice the consideration agreed to be given to the War Assets Administration for the property obtained."
Computed on this basis the maximum recovery allowable would be $39,912.00.
The defendants, on October 24, 1950, filed their Answer to the Complaint.
On July 3, 1951, the plaintiff filed a Motion for Leave to File Amended Complaint, alleging in part therein:
"that it has, and since the filing of the original complaint, apparently come to the attention of said Department of Justice that the defendants Bernsteins have made a very large profit from the sale of the heaters alleged to have been fraudulently acquired by them; that if the charges in the complaint be established, said Bernsteins will be liable to the plaintiff for said profits, greatly enhancing the amount to be recovered. * * *"
Thereafter, on January 2, 1952, an Amended Complaint was filed by which the Government sought relief by praying for the restoration of the merchandise or for damages for the cash returns or proceeds of the sale. Damages were also sought in the amount of twice the consideration paid the plaintiff for the merchandise. Answer was made to this Complaint March 10, 1953.
Thereafter, on April 16, 1954, the plaintiff filed a Motion to Amend the Complaint again. The motion was granted, and by its Second Amended Complaint the plaintiff sought, in effect, three forms of relief, viz.:
1. Restoration of the property or the cash returns or proceeds of the sale of the property;
2. Twice the consideration paid the plaintiff for the merchandise;
3. $2,000 plus twice the amount of damages which the plaintiff might have sustained in the sale.
Answer was made to this Complaint October 6, 1954. On the same date the defendants filed their Motion to Compel Election in Accordance with Original Complaint. This Motion was denied by Order of March 1, 1955, which also ordered the Government to elect upon one mode of relief. On April 29, 1955, the Government elected the following:
"That judgment be entered in its favor against defendants for restoration to the United States of the aforementioned property; and with respect to any articles which have been resold under circumstances making return impossible, judgment for the proceeds of such sales, less the amount paid the plaintiff, together with interest and costs."
The Amended Answer to Second Amended Complaint, filed February 27, 1956, set forth as a defense the election by the plaintiff made in its original complaint.
By 40 U.S.C.A. § 489, those committing such violations as are the subject of this action:
The plaintiff, apparently made its election under 40 U.S.C.A. § 489(d) which provides:
"The civil remedies provided in this section shall be in addition to all other criminal penalties and civil remedies provided by law,"
for it is stated on page 3 of the Government's brief:
"* * * plaintiff * * * elected to proceed under the common law (and) or equitable count. * * *"
The theory of the Government seems to be that 40 U.S.C.A. § 489(d) provides remedies known to the common law and/or equity and, thus it proceeds on the proposition that there arose a constructive trust upon the fraudulent vendee and that, therefore, the plaintiff vendor is entitled to the doctrine of "pursuit of trust funds." Whatever difficulty there may be in the first instance in interpreting the phrase "provided by law" as it appears in 40 U.S. C.A. § 489(d), or in the second instance the ability of the plaintiff to sufficiently identify the trust funds, is made immaterial by the fact that it must be held that the plaintiff elected its remedy in its original complaint by seeking "a sum equivalent to twice the consideration agreed to be given to the War Assets Administration for the property obtained. * * *"
It is said in 18 Am.Jur., Election of Remedies, § 3, pg. 129, that:
It is clear that the doctrine applies to the Government, albeit, in some instances, with caution. United States v. Oregon Lumber Co., 1922, 260 U.S. 290, 43 S.Ct. 100, 67 L.Ed. 261; Vestal v. Commissioner of Internal Revenue, 1945, 80 U.S.App.D.C. 264, 152 F.2d 132; Goldstein v. United States, 8 Cir., 1955, 227 F.2d 1.
One of the most frequent applications of the doctrine is where a litigant seeks to affirm or disaffirm a contract or transaction and later seeks to disaffirm or affirm the same contract or transaction. Cf. Minneapolis National Bank of Minneapolis, Kan. v. Liberty National Bank, 10 Cir., 1934, 72 F.2d 434; Sylvania Industrial Corporation v. Lilienfeld's Estate, 4 Cir., 1943, 132 F.2d 887, 145 A.L.R. 612; Walker v. L. Maxcy Inc., 5 Cir., 1939, 103 F.2d 24, certiorari denied 308 U.S. 564, 60 S.Ct. 76, 84 L.Ed. 474; Plymouth Village Fire District v. New Amsterdam Cas. Co., D.C.N.H., 1955, 130 F.Supp. 798; Sanders v. Meyerstein D.C.N.C.1954, 124 F.Supp. 77; Tisdel v. Central Savings Bank & Trust Co., 1931, 90 Colo. 114, 6 P.2d 912; Holscher v. Ferry, 1955, 131 Colo. 190, 280 P.2d 655, 28 C.J.S., Election of Remedies, § 6, p. 1070.
In this instance the Government, by its original complaint sought to affirm the transaction by seeking liquidated damages as provided by the statute. By its subsequent election, it sought to disaffirm the transaction by seeking restoration of the property or the proceeds of its sale where return was impossible.
It must, however, be recognized as a general rule that an original complaint will not constitute an election precluding a...
To continue reading
Request your trial