United States District Court, Northern District of Illinois
December 18, 1956
UNITED STATES OF AMERICA, PLAINTIFF,
PAUL L. TEMPLE, SULLIVAN BOX FACTORY, A COPARTNERSHIP, AND REPUBLIC BOX COMPANY, A COPARTNERSHIP, DEFENDANTS.
The opinion of the court was delivered by: Sullivan, District Judge.
This action is one by the Government to recover damages for
several transactions in which it claims it has been defrauded by
defendant Paul Temple. On the basis of its complaint and one
other document which will be discussed later, the Government has
moved for a summary judgment in its favor.
The first affirmative defense asserted by the answer is that
the complaint is barred by the Statute of Limitations.
Consideration of this defense requires an examination of the
various Counts of the complaint. Counts I and II set forth two
occasions on which Temple allegedly obtained money from the
Smaller War Plants Corporation as loans by making false
representations, and ask double damages under the False Claims
Act, Title 31 U.S.C.A. § 231. That section provides:
"Any person * * * who shall make * * * any claim
upon or against the Government of the United States *
* * knowing such claim to be false, fictitious, or
fraudulent * * * 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 by reason of the doing or committing
such act * * * and such forfeiture and damages shall
be sued for in the same suit."
The cause of action there given is limited by Title 31 U.S.C.A.
§ 235, which provides that "Every such suit shall be commenced
within six years from the commission of the act, and not
That limitation would, in view of the times involved, bar the
present action so far as Counts I and II are concerned, unless
the time for filing was extended by the Wartime Suspension of
Limitations Act, Title 18 U.S.C. § 3287:
"When the United States is at war the running of
any statute of limitations applicable to any offense
(1) involving fraud or attempted fraud against the
United States or any agency thereof in any manner * *
* shall be suspended until three years after the
termination of hostilities as proclaimed by the
President * * *"
The question therefore is whether Section 231 designated an
"offense involving fraud or attempted fraud against the United
States". The Supreme Court held in United States v. Grainger,
1953, 346 U.S. 235
, 73 S.Ct. 1069, 97 L.Ed. 1575, that a
violation of the companion criminal section of the False Claims
Act, Title 18 U.S.C. § 287, was such an "offense" and that the
Wartime Suspension of Limitations Act accordingly tolled the
normal three-year Statute of Limitations. Whether this decision
requires a similar conclusion in the present instance depends
upon a comparison of the sections involved. Using exactly the
same language, both are concerned with any person who "makes any
claim against the United States, knowing such claim to be false";
the sole distinction is in the remedy provided.
That a civil and compensatory remedy is made available to the
Government in addition to a criminal sanction does not in any way
change the character of the act performed, or make it any less an
"offense against the United States". United States v. Strange
Bros. Hide Co., D.C.N.D.Iowa 1954, 123 F. Supp. 177. Nor is this
conclusion a mere matter of semantics revolving around the word
"offense". The False Claims Act was concerned with fraud of a
pecuniary nature, committed against the government, Marzani v.
United States, 1948, 83 U.S.App.D.C. 78, 168 F.2d 133, affirmed
without opinion 335 U.S. 895, 69 S.Ct. 299, 93 L.Ed. 431 and
336 U.S. 922, 69 S.Ct. 653, 93 L.Ed. 1084; United States v. Cochran,
5 Cir., 1956, 235 F.2d 131 and United States v. Lurie, 7 Cir.,
1955, 222 F.2d 11, 15. The Wartime Suspension of Limitations Act
was concerned in turn with the ease with which fraud could be
concealed, and sought to grant the government in time of war a
correspondingly longer time to discover it. Bridges v. United
States, 1953, 346 U.S. 209, 73 S.Ct. 1055, 97 L.Ed. 1557. Surely
Congress may be assumed to have been as anxious, or even more
anxious, to preserve to the government its civil remedy as its
This conclusion is supported by similar holdings under the
analagous Surplus Property Act, United States v. Covollo,
D.C.E.D.Pa. 1955, 136 F. Supp. 107; United States v. Witherspoon,
1954, 211 F.2d 858. And lower courts which have considered the
question have unanimously held that the Wartime Suspension Act
tolled the limitations section of the False Claims Act: United
States v. Strange Bros. Hide Co., D.C.N.D. Iowa 1954, 123 F. Supp. 177;
Dugan & McNamara, Inc., v. United States, 1955, 127 F. Supp. 801,
130 Ct.Cl. 603; United States v. Salvatore, D.C.E.D.Pa.
1956, 140 F. Supp. 470. The Seventh Circuit has clearly indicated
that, if squarely faced with the same problem, this would be its
position, United States v. Lurie, 7 Cir., 1955, 222 F.2d 11, 15.
Cf. United States ex rel. Nitkey v. Dawes, 7 Cir., 1945,
151 F.2d 639, certiorari denied 327 U.S. 788, 66 S.Ct. 808, 90 L.Ed. 1015.
Since Sec. 231 provides a remedy for an offense against the
United States involving fraud, the time for its enforcement was
tolled by the Wartime Suspension of Limitations Act, and this
action was timely filed as to Counts I and II.
Count III alleges the presentation to the Government of a
fraudulent claim and seeks recovery under Title 41 U.S.C.A. §
119, which allows recovery by the United States for presenting to
the government a false document for the purpose of obtaining
money. This section is subject to no specific statutory
limitation, and a recent Supreme Court decision, Rex Trailer Co.
v. United States, 1956, 350 U.S. 148, 76 S.Ct. 219, indicates
that Title 28 U.S.C. § 2462 limiting the time for recovery of
"penalties" would not apply, cf. United States v. Weaver, 5 Cir.,
1953, 207 F.2d 796; United States v. Witherspoon, 6 Cir., 1954,
211 F.2d 858; and Erie Basin Metal Products, Inc., v. United
States, Ct.Cl., 145 F. Supp. 922. Counts IV and V (described
below) are common law counts as to which there is no statute of
limitations against the government. The defense of the statute of
limitations as to these Counts must accordingly also be
The second affirmative defense is that the plaintiff's claim
has been previously adjudicated and is barred by a judgment
recovered by the Reconstruction Finance Corporation against Paul
Temple on August 5, 1949 in the United States District Court for
the Southern District of Illinois, Southern Division. The
Government's somewhat unusual response to this pleading was to
rely on the same judgment as entitling it to a summary judgment
here, and it attaches to its motion a certified copy of the prior
complaint and judgment.
That suit was brought against Paul Temple and Gordon Knoblich,
doing business as the Sullivan Box Factory, a partnership, and
Sullivan Industries, Inc., a corporation. The complaint alleges
that Temple and Knoblich, doing business as the Sullivan Box
Factory, executed and delivered to the Smaller War Plants
Corporation (predecessor to the R.F.C.) three notes dated April
28, 1945, October 26, 1945, and March 22, 1946, which are in part
unpaid, and asks judgment on the notes. A default judgment was
entered for $38,430.65.
In the present complaint, the first two Counts allege that in
1945 and 1946 the Smaller War Plants Corporation made loans of
$26,000 and $75,000 (in round figures) to the Sullivan Box
Factory, a partnership in which Temple was a partner, which loans
were made on the basis of false representations; double damages
are asked under the False Claims Act. Count III under Title
41 U.S.C.A. § 119 alleges that a false claim was presented by
Temple, or the Republic Box Co. of which he was a partner, to the
War Department, and paid by it. Count IV re-alleges the above
transactions and apparently seeks to recover in contract; Count V
also re-alleges and seeks to recover in a common law action for
fraud and deceit.
The parties in their briefs agree that the loans set forth in
the first complaint are the same transactions as those on which
the present complaint is based. Since this is the case, the prior
judgment quite apparently bars recovery on Count IV here.
Although that Count is somewhat unclear, it must be read as one
to recover on the basis of a promise to repay
the loans specified in Counts I and II, and it accordingly
duplicates the earlier complaint.
Count V, however, is in a better position. Since it is an
action in tort, Chanin v. Chevrolet Motor Co., 7 Cir., 1937,
89 F.2d 889, 111 A.L.R. 1235, it may be pursued in spite of a prior
judgment in a contract action, since the two remedies are not
inconsistent but are both based on an affirmation of the
contract. Johnston v. Shockey, 1929, 335 Ill. 363, 167 N.E. 54;
28 C.J.S., Election of Remedies, § 1 et seq., p. 1057 et seq. The
same reasoning applies to the statutory remedies asserted by
Counts I, II and III. Since fraud is the essential ingredient
under the statutes, and since recovery is sought for damages
resulting from it, the remedies parallel the common law action
for deceit rather than one in contract on the debt. The question
of whether or not the Government will be required to elect
between its statutory and common law remedies for fraud is not at
this time before the court, since the Government is entitled to
plead alternatively and inconsistently, Fed.Rules Civ.Proc. rules
8(a)(3) and 8(e)(2), 28 U.S.C.
Although these Counts are accordingly not barred by the
doctrine of res judicata, the Government is mistaken in assuming
that the prior decree requires or warrants a summary judgment
here. The former action was solely to recover for unpaid loans;
fraud was not alleged or mentioned. Here fraud is the gist of
Counts I, II, III and V; since that issue was not adjudicated in
the prior suit, it remains untouched and undetermined. See
discussion in United States v. Silliman, 3 Cir., 1948,
167 F.2d 607, certiorari denied 1948, 335 U.S. 825, 69 S.Ct. 48, 93 L.Ed.
379. As for Count III, not only is it based on fraud, but it
could not possibly have been included in the previous action,
since it alleges the payment to Temple of money by the government
on a claim rather than a loan. Further, the Republic Box Co., the
chief actor in that transaction, was not a defendant in the
Summary judgment will be entered for the defendant on Count IV
of the complaint on the grounds that it is barred as having been
The plaintiff's motion for a summary judgment is denied.
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