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United States v. Rex Trailer Co.

January 18, 1955


Author: Duffy

Before DUFFY, Chief Judge, and MAJOR and FINNEGAN, Circuit Judges.

DUFFY, Chief Judge.

This action was brought by the United States government pursuant to § 26(b) of the Surplus Property Act.*fn1 The complaint contained five counts. Count 1 was as follows:

"That the defendant during the week of June 17, 1947, a more exact date being at this time unknown, at Tinker Field, near Oklahoma City, in the Western District of the state of Oklahoma, did cause Lester Daniels to make a false statement of a material fact in writing to the War Assets Administration, an agency of the United States Government, for the purpose of obtaining 1 Ross Carrier Company Straddle Truck, model 90-7056, serial 1940 USA 563821."

Counts 2 to 5 inclusive are identical with Count 1 except as to the name of the person making the false statement and the description of the motor vehicle involved. Judgment was asked in the sum of $2,000 on each count. Both plaintiff and defendant moved for summary judgment and plaintiff's motion was granted. The District Court entered judgment in favor of plaintiff for the sum of $10,000.

Sec. 26(b) of the Surplus Property Act of 1944 grants to the United States civil remedies against "Every person who shall use or engage in * * * any fraudulent trick, scheme, or device, for the purpose of securing or obtaining * * * for any person any payment, property, or other benefits from the United States or any Government agency in connection with the disposition of property under this Act * * * (1) shall pay to the United States the sum of $2,000 for each such act, and double the amount of any damage which the United States may have sustained by reason thereof, together with the costs of suit; or * * *."

As a defense the defendant alleged that it had pleaded nolo contendere in a criminal action based upon the same events; that in said criminal action the indictment contained five counts that corresponded exactly with the five counts in the instant action; that on June 23, 1949, as a result of its plea, a fine was imposed and defendant has paid an aggregate sum of $25,000; that plaintiff was not damaged and did not suffer any loss as it received the full offering price for the vehicles; that although the complaint was denominated "complaint for civil damages" this action is in fact, one to recover penalties, and, therefore, is barred by the prohibition against double jeopardy contained in the Fifth Amendment to the United States Constitution.

Defendant was a dealer engaged in buying, selling and repairing farm machinery and mining machinery.Under the advertisement and offer of sale, it had a non-priority right to purchase the motor vehicles thus offered for sale if any such remained after those having priority had been given an opportunity to purchase. The "false statements" charged were the statements qualifying the persons named in each of the counts for a priority right to purchase. At the sales in question all vehicles advertised were sold to those having or claiming priorities.

The Fifth Amendment guarantees that no person shall "* * * be subject for the same offense to be twice put in jeopardy of life or limb". However, "Congress may impose both a criminal and a civil sanction in respect to the same act or omission; for the double jeopardy clause prohibits merely punishing twice, or attempting a second time to punish criminally, for the same offense." Helvering v. Mitchell, 303 U.S. 391, 399, 58 S. Ct. 630, 633, 82 L. Ed. 917.

As stated in United States ex rel. Marcus v. Hess, 317 U.S. 537, 548, 63 S. Ct. 379, 386, 87 L. Ed. 443, "The application of the double jeopardy clause to particular cases has not been an easy task for the courts." In the same case, the court, 317 U.S. at page 549, 63 S. Ct. at page 386, quotes from Helvering v. Mitchell, supra, as follows: "The question for decision is thus whether (the statute in question) imposes a criminal sanction. That question is one of statutory construction.'" In other words, we must here endeavor to ascertain the legislative intent.

The section in question was enacted shortly after the decision of the Supreme Court in United States ex rel. Marcus v. Hess, supra. We may assume that the framers of § 26(b) were aware of that decision when they formulated § 26(b). It should be noted that the statute specifically describes subsection (b) as providing "civil remedies". The section contains subsections (1, 2 and 3). The latter two provide only for multiple damages and are, without question, compensatory in nature. It is very doubtful that Congress intended to have the first of the three subsections a penal section. In fact, the pertinent committee report, S.Rep.No. 1057, 78th Cong., 2d Sess. p. 14, states that the United States has "* * * the option of selecting among three different measures of damages, * * *" It is a reasonable construction that Congress intended all three subparagraphs of § 26(b) to be in pari materia. It is also of significance that § 26(d) expressly provides that the "civil remedies provided in ( § 26) shall be in addition to all other criminal penalties and civil remedies provided by law."

If § 26(b)(1) is of a penal nature the imposition of such penalty in addition to the sanctions provided by the criminal code, contravenes the prohibition against double jeopardy. Of course, statutes are to be construed, if possible, to avoid constitutional issues. United States v. Congress of Industrial Organizations, 335 U.S. 106, 120-121, 68 S. Ct. 1349, 92 L. Ed. 1849; Guessefeldt v. McGrath, 342 U.S. 308, 319, 72 S. Ct. 338, 96 L. Ed. 342.

Both sides discuss and the Government strongly relies upon United States ex rel. Marcus v. Hess, supra. There the defendant had pleaded nolo to an indictment to defraud the United States, and had paid the fine which was imposed. Thereafter, an action was brought under the False Claims Act, 31 U.S.C.A. 231 which contains language quite similar to § 26(b). It provides that a person who commits certain frauds upon the United States "* * * 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 * * * together with the costs of suit; * * *." And, as here, the defendant sought to defend the civil action on the ground that the statute prescribed a penalty and that the double jeopardy provision of the Fifth Amendment barred the proceeding under the False Claims Act.

The court held that the provision that the Government was to recover $2,000, and double damages for each fraud in violation of the statutes was remedial and not penal. The court, 317 U.S. 549, 63 S. Ct. 387, said: "It is enough for present purposes if we conclude that the instant proceedings are remedial and impose a civil sanction. * * * We cannot say that the remedy now before us requiring payment of a lump sum (of ...

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