United States v. Idlewild Pharmacy, Inc.

• Citation: 308 F. Supp. 19
• Decision Date: 14 October 1969
• Docket Number: Civ. A. No. 4740-A.
• Parties: UNITED STATES of America, Plaintiff, v. IDLEWILD PHARMACY, INC., Defendant.
• Court: United States District Courts. 4th Circuit. United States District Court (Eastern District of Virginia)

308 F. Supp. 19

UNITED STATES of America, Plaintiff, v. IDLEWILD PHARMACY, INC., Defendant.

Civ. A. No. 4740-A.

United States District Court E. D. Virginia, Alexandria Division.

October 14, 1969.

Jonathan U. Burdick, Atty., Dept. of Justice, Washington, D. C., Brian P. Geddings, U. S. Atty., Alexandria, Va., for plaintiff.

Stephen D. Potts, Washington, D. C., Roy B. Zimmerman, Alexandria, Va., for defendant.

MEMORANDUM OPINION

KELLAM, District Judge.

On September 24, 1962, defendant, Idlewild Pharmacy, entered into a contract with the United States acting through the Federal Aviation Administration to operate a news, drug and novelty concession at Dulles International Airport for a period of five years ending December 31, 1967. The contract obligated defendant to pay as rental for the use of the premises a percentage of the gross receipts from sales of the various articles with a minimum guaranteed annual rental. The sums of money are not in dispute.

The contract in question was the result of a bid submitted by defendant. The invitation to bidders Plaintiff's Exhibit D contained the following language:

Forecasts anticipate that passengers using Dulles International Airport will approach 1,200,000 in its first full year of operation, 1,800,000 during its second year and 2,100,000 in its third year. It is anticipated, with respect to aircraft movements, that approximately 40,000 aircraft operations will be realized during the first year and that this number will increase to 100,000 by the year 1965.

Dulles International Airport is expected to be a prime tourist attraction. It is predicted, in this respect, that more than one million people will visit the Airport during its first full year of operation. Employment upon the Airport during its initial years of operation is estimated at 1,250 persons, and is expected to climb to an excess of 3,000 by 1965.

The foregoing is furnished for informational purposes only. Such data shall in no way operate to relieve the proponent from the responsibility of determining for itself the business potential.

The estimate of the number of passengers proved to be high. For 1963, the number of passengers at Dulles was only 64 percent of the estimate, and each year thereafter the percentage was even smaller.

Defendant also asserts that at the time of the making of the contract, jet planes were not permitted to land at Washington National Airport; that in 1966, the Federal Aviation Administration decided to permit two and three engine jets to land at Washington National, and such action further reduced the potential at Dulles.

Defendant did not pay the minimum required rental. During the early years of the lease, defendant made request of the lessor to change and/or amend the terms of the lease. Extensive negotiations were carried on between the parties. Amendments were made in the terms of the leases with some of the concessionaires at Dulles, and lessor offered to make the same amendment in the lease with defendant. Defendant refused.

Defendant says it relied on the estimate of the number of passengers expected at Dulles as set out in the invitation to bidders; that estimates by the Federal Aviation Administration of passengers expected at other airports has been rather conservative; that Federal Aviation has special knowledge in this area; and that a bidder is entitled to rely on such estimates. Hence, they say that the statements in the invitation to bidders are in fact representations; that they had a right to rely on them; that they were inaccurate; and that defendant did rely on them to its detriment.

In "determining the meaning and effect of contracts to which the United States is a party, the governing rules of law must be finally declared by this United States Supreme Court Court." S. R. A., Inc. v. Minnesota, 327 U.S. 558, 564, 66 S.Ct. 749, 754, 90 L.Ed. 851; United States v. Allegheny County, 322 U.S. 174, 64 S.Ct. 908, 88 L.Ed. 1209; Thompson v. United States, 268 F.2d 426 (4th Cir. 1959).

The line between what constitutes a representation and information is, at times, difficult to draw. The issue is not a new one. The following cases have held somewhat similar statements in invitations to bidders to be representations upon which bidders had a right to rely. United States v. Atlantic Dredging Co., 253 U.S. 1, 40 S.Ct. 423, 64 L.Ed. 735; Centex Construction Co. v. James, 374 F.2d 921 (8th Cir. 1967); Morrison-Knudsen Company, Inc. v. United States, 397 F.2d 826, 184 Ct.Cl. 661 (1968); Womack v. United States, 389 F.2d 793, 182 Ct.Cl. 399 (1968); Fehlhaber Corporation v. United States, 151 F.Supp. 817, 138 Ct.Cl. 571 (1957); Arcole Midwest Corporation v. United States, 113 F.Supp. 278, 125 Ct.Cl. 818 (1953); Binghamton Construction Company, Inc. v. United States, 107 F.Supp. 712, 123 Ct.Cl. 804 (1952).

In Bell v. Lamborn, 2 F.2d 205, 206 (4th Cir. 1924), the Court said that one may be adjudged guilty of "fraud when he falsely expresses his opinion knowing that the facts are not what the opinion implies they are" if the other party is known to rely on the opinion. No such charge is made here, and if it were made, there is no evidence to support it. There are cases where matters of opinion are binding 37 Am.Jur.2d ¶ 46, 49 and 51, subject Contracts, but the evidence does not bring this case within those holdings.

But assuming for the sake of argument that the statements in question constitute misrepresentations of material facts, or were falsely or carelessly or recklessly made with intent to mislead — neither of which is supported by the evidence in this case — what remedies are available to defendant? Durham v. New Amsterdam Cas. Co., 208 F.2d 342, 344 (4th Cir. 1953), sets forth the choices open to one who complains of fraud and deceit:

The law is well settled that one who complains of fraud and deceit has the right either to rescind what was done as a result of the fraud and deceit, or to affirm what had been done and sue for damages caused by such fraud. He can choose either course, but he cannot choose both. The two are inconsistent. Robb v. Voss, 155 U.S. 13, 15 S.Ct. 4, 39 L.Ed. 52; United States v. Oregon Lumber Co., 260 U.S. 290, 43 S.Ct. 100, 67 L.Ed. 261; Sylvania Industrial Corporation v. Lilienfeld's Estate, 4 Cir., 132 F.2d 887 145 A.L. R. 612; Intertype Corporation v. Pulver, D.C., 2 F.Supp. 4, affirmed, 5 Cir., 65 F.2d 419, certiorari denied, 290 U.S. 660, 54 S.Ct. 75, 78 L.Ed. 571.

A contract induced by fraud is not void, but voidable at the option of the party injured by the fraud. Upon its discovery, the innocent party has the option to rescind the contract, if he can restore what he has received in the same state or condition in which he received it, and sue for and recover back the consideration he has paid or given; or if he has not paid or given anything, he may repudiate the contract, and rely, when sued, on the fraud as a complete defense; or he may elect to retain what he has received under the contract, and bring an action to recover damages for the injuries he has sustained from the deceit. Durham v. New Amsterdam Cas. Co., supra; Brown v. Alkire, 295 F.2d 411 (10th Cir. 1961); General Finance Corp. v. Keystone Credit Corporation, 50 F.2d 872 (4th Cir. 1931), cert. den., Adams v. Keystone Credit Corp., 284 U.S. 684, 52 S.Ct. 201, 76 L.Ed. 578; Malone v. Gimpel, 151 F.Supp. 549 (N.D.N.Y. 1956), aff'd. 244 F.2d 954; Wilson v. Hundley, 96 Va. 96, 30 S.E. 492, 70 Am. St.Rep. 837; Jordan & Davis v. Annex Corp., 109 Va. 625, 64 S.E. 1050, 17 Ann. Cas. 267; Pretlow v. Pretlow, 177 Va. 524, 14 S.E.2d 381; 37 Am.Jur.2d page 432, ¶ 327, subject Fraud & Deceit; 8 Michie's Jur. page 724, ¶ 34, subject Fraud & Deceit; 17 C.J.S. Contracts, § 167, page 939. Ordinarily, one who after discovering the untruth of representations, conducts himself with reference to the transaction as though it were still subsisting and binding, thereby waives all benefits of and relief from the misrepresentations. R. A. Poff & Co. v. Ottaway, 191 Va. 779, 62 S.E.2d 865, 869; West End Real Estate Co. v. Claiborne, 97 Va. 734, 34 S.E. 900, 906; City of Reading v. Rae, 106 F.2d 458 (3d Cir. 1939), cert. denied 308 U.S. 607, 60 S.Ct. 145, 84 L.Ed. 508; Gallon v. Lloyd-Thomas Co., 264 F.2d 821, 825, 77 A.L.R.2d 417 (8th Cir. 1959); Bowie v. Sorrell, et al., 113 F.Supp. 373, 382 (W.D.Va.1963), reversed on other grounds 209 F.2d 49, 43 A.L.R.2d 781 (4th Cir.); Northern Pacific Ry. Co. v. United States, 70 F.Supp. 836, 865 (D.C.Minn.1946), aff'd. 188 F.2d 277 (8th Cir. 1951); Lewis v. Mearns, 168 F.Supp. 134, 138 (N.D.W.Va.1958), aff'd. 268 F.2d 427; Lewis v. Kerns, 175 F.Supp. 115, 118 (S.D.Ind.1959).

In Grymes v. Sanders et al., 93 U.S. 55, at page 62, 23 L.Ed. 798, it is said:

Where a party desires to rescind upon the ground of mistake of fraud, he must, upon the discovery of the facts, at once announce his purpose, and adhere to it. If he be silent, and continue to treat the property as his own, he will be held to have waived the objection, and will be conclusively bound by the contract, as if the mistake or fraud had not occurred. He is not permitted to play fast and loose. Delay and vacillation are fatal to the right which had before subsisted. These remarks are peculiarly applicable to speculative property like that here in question, which is liable to large and constant fluctuations in value. Thomas v. Bartow, 48 N.Y. 193 200; Flint v. Wood, 9 Hare, 622; Jennings v. Broughton, 5 DeG.,M.&G. 139; Lloyd v. Brewster, 4 Paige, 537; Saratoga & S. R. R. Co. v. Rowe Row, 24 Wend. 74; Minturn v. Main, 3 Seld. 220; 7 Rob.Prac., c. 25, sect. 2, p. 432; Campbell v. Fleming, 1 Ad. & El. 41; Sugd. Vend. (14th ed.) 335; Diman v. Providence, W. & B. R. R. Co., 5 R.I. 130.

In Security Underground Storage, Inc. v. Anderson, 347 F.2d 964 (10th Cir. 1965), at page 968, the Court said:

The contracts being indivisible, Billue and the corporation must affirm or disaffirm it in

...