United States v. Veneziale, 12820.

• Decision Date: 29 June 1959
• Docket Number: No. 12820.,12820.
• Citation: 268 F.2d 504
• Parties: UNITED STATES, Appellant, v. Albert VENEZIALE.
• Court: U.S. Court of Appeals — Third Circuit

268 F.2d 504 (1959)

UNITED STATES, Appellant, v. Albert VENEZIALE.

No. 12820.

United States Court of Appeals Third Circuit.

Argued April 21, 1959.

Decided June 29, 1959.

Herbert E. Morris, Washington, D. C. (George Cochran Doub, Asst. Atty. Gen., Chester A. Weidenburner, U. S. Atty., Newark, N. J., Morton Hollander, William E. Mullin, Attys., Dept. of Justice, Washington, D. C., on the brief), for appellant.

No attorney for appellee.

Before MARIS, GOODRICH and HASTIE, Circuit Judges.

HASTIE, Circuit Judge.

This is an appeal from a judgment for the defendant in a civil action by the United States for double damages and a statutory forfeiture under the False Claims Act, 31 U.S.C.A. § 231. The government's complaint alleges that the defendant Veneziale caused George and Margaret Boyce to make a fraudulent application for a bank loan wherein it was falsely represented that the loan was wanted for home improvements when it was in fact wanted and the proceeds were used to buy real property from Veneziale. This fraudulent application became one of the essential documents which induced the Federal Housing Administration to guarantee payment of the bank loan. Later, there was a partial default on the loan with the result that the government was required to pay under its guaranty the sum of $944.03. Under the provisions of the False Claims Act,¹ the United States now demands of Veneziale $1,888.06, double the damages actually incurred, plus the statutory penalty of $2,000. A separate count of the complaint asserts that $944.03 is due as damages suffered from actionable fraud, without regard to the False Claims Act. The case was tried to the court below sitting without a jury. There was a recovery on the second count. However, at the conclusion of the trial the court dismissed the statutory claim for double damages and forfeiture under the False Claims Act, ruling that this fraudulent obtaining of a pledge of the government's credit is not within the statute even though the government has had to pay a substantial sum under its guaranty. The United States has appealed.

In United States v. Tieger, 3 Cir., 1956, 234 F.2d 589, a suit for a statutory penalty under the False Claims Act presenting facts indistinguishable from the facts now before us, except that in Tieger there had been no default on the loan and the government was not out of pocket on its guaranty, we held that no violation of the False Claims Act had been established. Accord, United States v. Cochran, 5 Cir., 1956, 235 F.2d 131. Since that time the Supreme Court has considered the problem of the Tieger case and has ruled in accord with our decision. United States v. McNinch, 1958, 356 U.S. 595, 78 S.Ct. 950, 2 L.Ed.2d 1001.

In our Tieger opinion we stressed the fact that the government had been subjected to no liability on its guaranty. In the McNinch opinion the Supreme Court expressly left open the question whether the additional facts of default on the loan and demand upon the government as guarantor would make a case under the False Claims Act. See 356 U.S. at page 599, 78 S.Ct. at page 952. That question is before us now.

The False Claims Act provides statutory remedies for the wrongdoing of "any person * * * who shall * * * cause to be presented, for payment or approval * * * any claim upon or against the * * * United States * * * knowing such claim to be * * * fraudulent * * *." Here it is clear that the fraudulent statement in the loan application as to the purpose of the borrowing was an essential inducement to the Federal Housing Administration guaranty upon which the government has now had to pay. Thus the wrong of the defendant was an important, even an essential factor in...