Woodbury v. United States

Citation313 F.2d 291
Decision Date28 January 1963
Docket NumberNo. 17585.,17585.
PartiesRay B. WOODBURY, Appellant, v. UNITED STATES of America, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)

King, Miller, Anderson, Nash & Yerke, Norman J. Wiener and Jean P. Lowman, Portland, Or., for appellant.

Joseph D. Guilfoyle, Acting Asst. Atty. Gen., Sidney I. Lezak, Acting U. S. Atty., Alan S. Rosenthal, John W. Boult and John G. Laughlin, Attys., Dept. of Justice, Washington, D. C., for appellee.

Before MERRILL, BROWNING and DUNIWAY, Circuit Judges.

DUNIWAY, Circuit Judge.

Woodbury's appeal comes before us upon a judgment of dismissal for lack of jurisdiction, made final pursuant to Rule 54(b) F.R.Civ.P. There is a counterclaim pending. Both parties accept the trial court's findings as to the facts, embodied in a written opinion, and we take our statement from that opinion.

Woodbury claims the right to recover $853,676.82 from the United States under the Federal Tort Claims Act (28 U.S.C. §§ 1346(b) and 2671-2680). He was interested in constructing prefabricated housing for naval and civilian personnel stationed at the Kodiak Naval Base in Alaska.1 He organized Aluetian Homes, Inc., which became the sponsor of the project and acquired the necessary land from the Alaska Housing Authority. The project was to be financed under Title II, Section 203, of the National Housing Act.2 Under this program, a private mortgage agency takes out individual long-term mortgages on each house in the project. In order to obtain buyers for the mortgages, it was necessary to have a commitment from FHA to insure them. FHA appraised the value of a 344 unit project at $5,904,250 and in April, 1952, issued for a stated period its conditional commitment to insure long-range individual mortgages on each home in a total amount of $4,706,400, which amount was based on 80 percent of the FHA appraised value. FNMA3 provides a secondary market for the purchase and discounting of mortgages. In 1952, FNMA issued its commitment to purchase at par the individual long-range mortgages as they were obtained by the private mortgage agency and insured by FHA.

It proved impossible to obtain construction financing from private sources, and assistance was then sought from HHFA. A final application was made by Aleutian Homes, Inc., late in 1952 and approved in January, 1953. This interim construction loan by HHFA was in the sum of $4,230,900, which constituted 90 per cent of the amount of the FHA and FNMA commitments with respect to the permanent long-range financing, the application indicating that the difference between the projected costs and the loan amount applied for would be provided for by the sponsor, Aleutian Homes, Inc. The loan was authorized by a Loan Authorization signed by the Administrator, and carried into effect by documents required by a Building Loan Agreement, including a guaranty of the Loan Agreement and the guaranty of the construction contract by Woodbury, and a promissory note and deed of trust. Procedures for disbursement under the loan were provided for in a Loan and Disbursement Agreement executed by Woodbury as President, Aleutian Homes, Inc., April 27, 1953.

Contractual arrangements for the construction of the project under the interim loan from HHFA were signed in Seattle, Washington on April 27, 1953. In general they provided as follows: Aleutian Homes, Inc., as the owner entered into a "general contract" with Kodiak Construction Co.4 for the construction of the housing project for the payment of the sum of $4,230,900 (the total maximum amount of the HHFA loan). Kodiak Construction Co., as general contractor, in turn, contracted with three subcontractors, plus a freight company. The total payment under these subcontracts, plus freight, equaled the sum of $4,230,900 (the maximum total amount of the HHFA loan).

In October and November, 1953, financial difficulties arose in connection with the construction of the project, and, on November 6, 1953, Pacific Alaska Contractors, Inc., which was the "site construction" subcontractor, filed a claim of lien against the project for the sum of $150,504.43. Thereupon, construction came to a standstill with the project approximately 75% completed. In November, 1953, demand was made on Woodbury under his guarantee. He failed to comply with the demand. Thereafter, a "completion agreement" was negotiated. In general, it provided for the completion of the construction of the project and the payment order of claimants, creditors and completion costs in four stages. To carry out this program, Aleutian Homes, Inc., Kodiak Construction Co. and Leo S. Wynans Co., Inc.,5 agreed to vest in a Project Manager exclusive authority to take any and all action in connection with the project that they would be authorized to take, subject to the rights of HHFA defined therein. HHFA was not a signatory to the completion agreement, but approved it in writing. The court found, and we assume that the finding is correct, that HHFA was a party to the agreement.

By April 12, 1955, 341 out of the 343 houses constructed had passed FHA final inspection. The remaining two at that time were unacceptable for reasons relating to their foundations. Under the completion agreement, all claims listed in Stages 1 and 2 were paid, while only some of the claims in Stages 3 and 4 were paid. The permanent individual mortgages were not taken out on any of the 341 houses and during June, 1955, the FHA commitments to insure such mortgages and the FNMA commitments to purchase such mortgages at par expired.

HHFA made advances to or for the benefit of Aleutian Homes, Inc., for project construction costs in the total amount of $4,192,717.10, of which $862,654.42 was paid out subsequent to the making of the completion agreement. Further advances were made in March, 1955. As of June 30, 1957, accrued interest was claimed to be due to HHFA in the sum of $211,105.65.

HHFA on or about June 11, 1957, in the United States District Court for the District of Alaska, Third Judicial Division, Anchorage, commenced foreclosure proceedings in the name of the United States of America against Aleutian Homes, Inc., among others. On June 14, 1957, upon the motion of HHFA, the court appointed a receiver of the mortgaged property until further order of the court. On or about June 20, 1958, the court authorized the payment by the receiver to HHFA of $200,000 out of proceeds from operation of the project, and that sum was paid to HHFA. On or about September 12, 1958, HHFA amended its complaint by adding additional defendants. On or about April 10, 1959, pursuant to request of the receiver, the court authorized the payment by the receiver to HHFA of $150,000 out of proceeds from operation of the project and that sum was paid to HHFA.

Both in the court below and here, Woodbury contends that HHFA became a fiduciary, not only for Aleutian Homes, Inc. and the other corporations and the creditors involved, but also for Woodbury, and that HHFA breached its fiduciary duties. The claim is stated by the trial court thus:

"That HHFA, its agents and employees, carelessly and negligently or deliberately and wilfully breached said fiduciary relationship by refusing to adopt a permanent long-range program of amortizing the Kodiak project in a manner which considered the claims of all the parties interested in the completion agreement and instead by proceeding to satisfy and prefer its own interests as a creditor from the assets of the project to the exclusion of the interests of said other persons." 192 F.Supp. 933

The court concluded that an implied obligation of HHFA was to arrange for or provide long-term financing, and that it did not do so. However, it also held, assuming that there was a breach by HHFA of its fiduciary duties, that such a breach was not the "ordinary common-law type of tort" contemplated by the Federal Tort Claims Act, and that therefore it lacked jurisdiction under that Act.

Appellant argues persuasively and at length that breach of fiduciary duty is a tort, even though the duty may be created by contract, and that nowhere in the Federal Tort Claims Act is such a tort expressly excepted from its coverage. (See 28 U.S.C. § 2680, where the exceptions are stated) We assume, for the purposes of this decision, but do not decide, that these arguments are sound as far as they go. A number of cases are cited in support of the proposition that the coverage of the Federal Tort Claims Act is not limited to the "ordinary common-law type of tort."6 We have no quarrel with them, but we are still of the view that appellant does not have a case under the Act.

Under the federal statutes, jurisdiction of the courts over contract claims against the government is different from jurisdiction over tort claims. Contract claims are covered by the Tucker Act, adopted in 1887 (ch. 359, 24 Stat. 505) and now appearing, as amended, in 28 U.S.C. § 1491, which confers upon the Court of Claims jurisdiction over "any claim against the United States * * * founded * * * upon any express or implied contract with the United States * * * in cases not sounding in tort." The district courts have concurrent jurisdiction of such cases under 28 U.S.C. § 1346(a) (2), but only when the claim does not exceed $10,000. Jurisdiction over tort claims against the government is made "exclusive" to the district courts by 28 U.S.C. § 1346(b).

The law applied under the two statutes also differs. It has long been established that the law to be applied in construing or applying provisions of government contracts is federal, not state law. (Ivanhoe Irrigation Dist. v. McCracken, 1958, 357 U.S. 275, 289, 78 S.Ct. 1174, 2 L.Ed.2d 1313; Priebe & Sons, Inc. v. United States, 1947, 332 U.S. 407, 411 and dissent at 414, 68 S.Ct. 123, 92 L.Ed. 32; S. R. A., Inc. v. Minnesota, 1946, 327 U.S. 558, 564, 66 S.Ct. 749, 90 L.Ed. 851; United States v. County of Allegheny, 1944, 322 U.S. 174, 183, 64 S.Ct. 908, 88 L.Ed. 1209; ...

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