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United States v. Tieger.

decided.: June 14, 1956.


Author: Hastie

Before BIGGS, Chief Judge, and KALODNER and HASTIE, Circuit Judges.

HASTIE, Circuit Judge.

On motion, the district court dismissed for failure to state a cause of action*fn1 certain counts of a complaint wherein the United States sued defendant Tieger for a statutory civil penalty under the False Claims Act. R.S. §§ 3490, 5438, 31 U.S.C. § 231. This appeal*fn2 requires decision whether that which Tieger is alleged to have done is a violation of the False Claims Act.

Tieger is a realtor who, to enable his clients to borrow money needed for down payments on the purchase of property, is alleged to have misrepresented the proposed transactions as improvement loans on structures already owned by the borrowers. Each count is based upon a loan obtained by one of Tieger's clients from a private lending institution and insured routinely by the United States as a property improvement loan, insurable under Title I of the Federal Housing Act.*fn3

The essence of the complaint is that the United States was induced to guarantee repayment of the loan, thus changing legal position detrimentally, by willfully false representations concerning the circumstances of the borrower and the intended use of the money, submitted by Tieger as part of the loan application with the intention that the United States, as well as the lender, should rely upon them. However, in each case, the loan was repaid in full by the borrower so that no claim was made upon the United States as guarantor.

In these circumstances the government contends that Tieger is liable under the following provision of the False Claims Act:

"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, or who, for the purpose of obtaining * * * the payment or approval of such claim, makes, uses, or causes to be made or used, any false bill, receipt, voucher, roll, account, claim, certificate, affidavit, or deposition, knowing the same to contain any fraudulent or ficitious statement or entry, * * * shall forfeit and pay to the United States the sum of $2,000, and, in addition, double the amount of damages which the United States may have sustained * * *." 31 U.S.C. § 231.

Only the statutory penalty is claimed, it being admitted that the United States has suffered no loss.*fn4

It will be observed that this section covers both the presentation of a fraudulent "claim" against the United States for "payment or approval" and the use of false supporting documents to obtain "the payment or approval of such claim." The latter alternative seems more nearly applicable to the present facts. Accordingly, we will treat this as a case on which the defendant is charged with using a "false * * * certificate" in order "to obtain the payment or approval" of a "claim upon or against the * * * United States."

But whatever combination of words may seem most favorable to the government, the statute can apply to this case only if the government's contractual undertaking to repay a private bank loan if the borrower should default, itself constituted the "payment or approval" of a "claim against the * * * United States." We think this is a fair and accurate statement of the government's legal problem. At the same time it reveals the inherent difficulty and weakness of the position the government has to take. For the conception of a claim against the government normally connotes a demand for money or for some transfer of public property. Believing that connotation applies here, we shall affirm the judgment below simply on the ground that when Congress legislated against fraud in connection with the "payment or approval" of "any claim upon or against the * * * United States" it did not cover fraud in inducing the United States to make a guarantor's promise, performance of which was conditioned upon an event which never occurred. True, the contract Tieger induced might have led to what would undoubtedly be considered a claim against the United States, but it never did.*fn5 And certainly, there is no indication that Tieger intended or even anticipated any default by the borrower and consequent claim on the guarantor.

Actually, the alleged claim against the United States here is no more than the privilege of the lending bank, in such a case as the loan application falsely represented this to be, to negotiate a unilateral contract under which the bank pays a modest consideration and receives in return the promise of the United States to make good if a borrower shall default. It is possible to view this commercially advantageous privilege of exchanging a little money for such an aleatory promise as a claim. But this privilege of contracting certainly is not a claim in normal business or legal usage and terminology. For familiar example, a policy of life insurance often accords the owner of converting the policy into a new and different contract. It seems as strange to describe the exercise of this privilege of contracting as a claim, as it is normal so to denominate and application for the sum payable upon the death of the insured.

Both the legislative history*fn6 and certain language*fn7 of the False Claims Act point to the soundness of the construction which thus restricts "claim * * * against the * * * United States" to this conventional meaning of demand for money or property. But resort to these is unnecessary because the Supreme Court has so clearly stated its view of the matter.

United States v. Cohn, 1926, 270 U.S. 339, 46 S. Ct. 251, 70 L. Ed. 616, was a criminal prosecution in which one of the charges was the violation of the very provision now in suit, which then was effectuated and enforcible by a criminal as well as a civil sanction.*fn8 Referring to this provision the court explicitly considered whether the conduct of the defendant amounted to "obtaining the approval of a 'claim upon or against' the Government, within the meaning of the statute [False Claims Act]." It then construed the decisive language of the statute, saying: "While the word 'claim' may sometimes be used in the broad juridical sense of 'a demand of some matter as of right, made by one person upon another, to do or to forbear to do some act or thing as a matter of duty,' Prigg v. Commonwealth of Pennsylvania, 16 Pet. 539, 615 (10 L. Ed. 1060), it is clear in the light of the entire context, that in the present statute, the provision relating to the payment or approval of a 'claim upon or against' the Government relates solely to the payment or approval of a claim for money or property to which a right is asserted against the Government, based upon the Government's own liability to the claimant." 270 U.S. at 345-346, 46 S. Ct. at page 252.

Seeking to minimize the force of this construction the government calls it "dictum," meaning, apparently, that this construction was more restrictive than the exigencies of the case required. But, to an inferior federal court, such a plain statement of a statute's meaning, adopted by the Supreme Court as the basis of its decision is much more than "dictum", however apparent it ...

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