Petitioners Reply Brief — Hart v. Federal Reserve Bank

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LS ose BRR ice t= tcp ELTA oiken Scie abet cepae ieaOb ei cle Saas acinar Pa saa ata

- INDEX.

The Purpose of ‘Sicceaitee’ Order No. 9112 ......-\ea-

The Malconstruction of Executive Order Compounded

Why Justice Department Gannot Invoke Doctrine of

Estoppel to Protect, Federal Reserve Bank .,)......

‘Why Defense of Federal Reserve Bank by J ustice De-

_ partment Is Contrary to Public Policy ..... iaaae

Interrogatories. Propounded by the Plaintiffs. to ~

Nicholas deB Katzenbach, Attorney General of

the United States—Filed April 8, 1965 ... uti :

Supplementary Statement of Reasons hie’ Writ

EE Slice ncedhawessiceewonacdeuen

"Appendix A—Excerpt From Testimony of Hon. Rob-

‘ ert P. Patterson, Under Secretary of War, Before

’ Committee on Banking and Currency, Uni es

Senate, 77th Cong. 2d Sess, on S. 2250, a-Bill to

Mobilize the Productive Facilities of Small Busi-

ness inf the Interests of Successful Prosecution of the

War, and for Other Purposes, Part 2, March 20,

Be ET GE bh ven saws euceOeastidcivbiounecsé ,

Appendix B—Announcement Concerning War Financ-

ing by Board of Governors of the Federal Reserve

System Published in Federal Reserve ~~

. April, 1942, page 424 ........5..-.cce0e nace

Appendix C—Liaison Officer’s. Certificate to Federal

Reserve Bank of Atlanta ..................: Pree

Appendix D—Letter to Solicitor General ila aaadhae

Appendix . E—Reply of Solicitor General to Appen- ;

dix Do... e see een ee. F Pati SPCR Las Dept he eat i

cae

a a ii

RF 9 ty |

CITATIONS, .

Cases.

Johansen v, ,U. S., 949 U. a 497, 72.8. Ot 849, 96 .

L: ed: BOE Kesueuscitvdeenceueneneeundsenesdnir 2 7

"Lee v. Munroe & Thornton, 11 U. 8. 866, 3 Le ed. 373... 24

Scott Paper Co. v. Marcolus Mfg. Co., 326 U. 8. 249, -

ee ee ee eee 26

Steele, use of Corn Exchange National Bank =

118 U. 8. 128, 5 8. Ct. 396, 28 L. ed. 952 .. pan ence. 30

U.S. v. Hart et al., 312 F. 2d 127, 130 sactuephaan tabas 27

U. S. v. Nice, 241 U. S. 591, 36 8. Ct. 696, 60 L. a.

OP cei a

U. S. v. Prescott, 3 How. 578, 11 L. Ba De civacatee 24

: Wisconsin Central R. Co. v. United States, 164 US

_ 190, 17 8. Ct. 45, 41 L. ed. 399 cacueues eéaenweien 24

> ;

First War Powers Act, 1941, Titel ...... Mocs.

First War Powers Act, 1941, Title II, Sec. 201 erases a a

Military Appropriations Act, ve June 20, 1941,

isaac enivcas 8

: Mobilization of Small Business Act (56 Stat. 351). ae

~ National Housing Act jummnent of 1942 (56 Stat.” |

We, ee ee Snetictestioetet ae

\ + Title 31, U. 8. €. A. 626 a ie Readies iden 8

United States Constitution: sees astee oe gon

~ Art. I, See: 9, Cl. 7 pVeecoeetueccovestedavessptese, “0

| Cong. Ree., Vol. 88, Part 3 pp. 3228, 3576 ......... oe ie

Cong. Ree., Vol. 88, Part 4, pp. 4503-4507 ,.....:...17,19

Federal Reserve Bulletin, April 1942, pages 299, 424..3, 20

i ae : eget Aa _ ee

—

7 Fed. Reg. 10192, Codified at 10 C. F. R. 81.320—.

—_—

First Cumulative NID Sc cueccnncBecveceous

on Banking and ‘Currency, United States Senate,

Seventy-seventh Congress, Second Session on’ ‘A. R.

6927; April 28 and 29, 1942, PP. 4, 8 ........ seen. |

_ Hearings Before the ‘ inteidiites on Banking and Cur-

-rency, United States Senate, on S. 2250, March 20,

BE éckiwiteetbeddcanecasclduincicléwnbacaces

Ai Rep. No. 2030, Gelteonen haat to Accompany

' -H. R. 6868, Sixth Supplemental N. ational Defense

. Appropriation Bill, 1942 ............c..ccccccee ed s-

Hearings Before a Subcommittee of ‘the Committee .

‘House Report No. 2039, Report of the House Commit- ©

tee on Banking and Currency to anneal H. R..

UE SC Abare hausensweegedenedscdnctdbewcdveatiea :

i York Times, March 27, 1942, page1........ = v

Senate Report No. 1219, ‘‘Conversion of Small Busi- -

- ness Enterprises to War Production’’, Senate Com-

mittee on Banking and Currency, March 26, 1942...

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O. No. 738. | |

_ IN THE

SUPREME COURT OF THE UNITED STATES,

OCTOBER TERM, 1967.

JOSEPH W. HART, LUELLA F. HART and J: CARL-RUSSELL

} Petitioners, a

FEDERAL RESERVE BANK OF. ATLANTA,

Respondent. :

————— ——— — es

"On Petition for a Writ of Certiorari to the United States Court. of

Appeals for the Sixth Circuit. -

PETITIONERS’ SUPPLEMENTAL BRIEF AND REPLY

TO THE BRIEF FOR RESPONDENT.

The Justice Department should not have asserted in

the brief on behalf of the federal reserve bank that Ex-

ecutiye Order No. 9112 ““specifically’’ granted authority-

to the War Department to guarantee ‘fany contract found

| by the War Department to be ‘necessary, appropriate or

convenient for the prosecution of the war’’’ (Respond-

- ent’s Brief,. page 7); This general language of the ex-

ecutive order must be read in the light of the central

purpose of the order and the history and surrounding

circumstances of its issuance. Johansen v. U. 8.,- 342

U. 8. 427, 72 8. Ct, 849, 96 L. ed. 1051.° In construing a

statute, this Court in U. 8. v. Nice, 241 U. S. 591, 36 S. Ct.

- 60 L. ed. 1192, stated: |

‘The words, although general, must be hvaid in

the light of the act as a whole, and with due regard

to the situation in which they were to be applied.

That they were to be taken with some implied lim-

i itations and not literally, is obvious.’’ “

‘THE PURPOSE OF EXECUTIVE ORDER NO. 9112.

‘Executive Order No. 9112. was a procurement. order,

designed to increase production of war -materials, sup-

plies and equipment by assisting small manufacturing

concerns to take subcontracts under prime. contractors

with the armed services—especially the Army. It was

never in contemplation—by. either the Président or the

Congress—that the armed services would be empowered

to enter into the-field of private defense housing by add- .

ing another government guaranty on top of F. H. A. 90-

percent-of-value insured housing loans authorized by other

legislation and for which an appropriation was made to»

Federal Housing Administration.

Executive order No. 9112 read as a whole is not rea-

sonably susceptible of*the construction that the president.

. assumed the power to authorize the War Department, the

* Navy Department and the Maritime»Commission to guar-

antee loans. to. anybody they pleased for any purpose they

' pleased so long as they were engaged in any business or

operation deemed by them to be necessary, appropriate

or convenient for the prosecution of the war. In the first

paragraph of the preamble the lacie of the order is

_ Stated in these. words

_ “*. . in order that contracta of the War Depart-

ment, the Navy Department, and the United States

Maritime Commission . . . which are now outstand-

ing or may hereafter be entered into for war produc- _

tion, including the obtaining or. conversion of a

ties, may be promptly and effectively performed... .’

In the second paragraph of the preamble the purposes .

of the order are indicated as being consistent with (and

not outside of) the objeéts for which appropriations had

. been made to the three departments by the Cape This

a a rr

paragraph is as follows:

‘*Whereas the War Department, the — Depart-

ment, and the Maritime Commission have available

to them. amounts appropriated by Congress which

may be used for the purpose of making or guaran-

teeing loans, discounts or advances or commitments

in connection therewith for the purpose of financing

contractors, subcontractors and others engaged in

such production or otherwise to “ae war pro-

duction. si

- In the Federal Reserve Bulletin for April 1942 at page

299, Executive Order No. 9112 was printed together with

a statement by the White House that the order was

aimed at curing a situation which had interfered with the

all-out participation of small business enterprises in war

production. We quote from the Federal Reserve Bulletin

. a8 follows: |

War Finanting Contracts. Ngo

‘The President of the United States on March 96,

1942, issued an Executive Order authorizing the War

and Navy Departments and the Maritime Commission

to eater into financing. eontracts to facilitate the

prosecution of the war. There is published below the

text of this Order together with a statément by the |

White House. ; | ‘

“

The White House, Washington, D. C.

| | March 26, 1942. |

The Executive Order authorizing the diene of

contracts to facilitate the prosecution of the war is

aimed at curing a situation which has interfered

with the all-out participation of many small: business.

enterprises in war production. Senators Murray,

Mead and Capper have been particularly anxious to

bring about this participation. Full production of the

7 nation’s smaller businesses is essential to victory.

The Order was prepared by, the War Production

Board, the War and N avy Departments and the Mari-:

time Commission. It is the opinion of Messrs. Nelson,

_ Patterson, Forrestal and Admiral Land ‘that this

order will greatly speed the war production of small

business and subcontractors generally.

The basic purpose of the Order is to put working,

capital financing on a war basis. Up to now peace-

time restrictions on banks and credit agencies have .

made it difficult for them to finance war‘ production

although the banks have been anxious to use their

resources for prosecution of the war.

Under the ‘Order,. the War Sanaa ‘the Navy

Department, and the Maritime Commission may guar-

antee or make loans when they are needed for war

production.. These guarantees will support the opera-

‘ tions of the banks, the Federal Reserve System, the

Reconstruction Finance Corporation, and other credit

agencies. They will not be made under peacetime

credit rules. They will be made. by production men,

wherever additional financing is essential for addi-

tional production. Peacetime restrictions on credits

cannot hold up production of war supplies *heeded by

od the armed forces. .

=: ae

The text of the order follows: |

(See appendix to petition, page 52. )

On ewe 26, 1942, the same day President Roosevelt

issued Executive Order No. 9112, The Senate Committee .

on Banking and Currency submitted Sen’: Report No.

1219 entitled ‘‘Conversion of Small Business Enterprises

to War Production. ”? In this report, which recommended

the passage of S. 2250, a bill to mobilize the productive .

facilities of small business in the interests of Successful

prosecution of the war, appears a. statement that on.

February 5, 1942, the -bill 8. 2250 was reported unani-

mously by the Committee on Small Business and referred

to the Committee on Banking and Currency. It is stated

that extensive hearings were then held by: a subcom-

mittee at which various persons expressed -their views .

with respect to the problems confronting small business

enterprises and the necessity of mobilizing their activities |

- to the fullest extent in connection with the war effort.

The New. York Times on March 27, 1942, on the first

page, reported the issuance of the mnie order under

the following caption:

“ORDERS WAR LOAN S TO SMALL BUSINESS

—PRESIDENT . MOVES TO GUARANTEE

WORKING .CAPITAL TO OBTAIN CAPAC-

ITY ARMS PRODUCTION.”’.

_In the’ body of the news article it was stated that Sena-

tors -Murray of Montana, Mead of New York and Capper

of Kansas were invited to the White House for the cere-

monies in connection with the signing of the executive .

order by President Roosevelt and that Under Secretaries ~

. Patterson and Forréstal and- Admiral Land were also |

‘present. The same news —— contained the following

statement: :

jw Gan

_ Financing ‘‘On a War Basis’.

The White House said that the basic purpose of

the order was to put working capital financing on a

war basis, and added: mer .

‘‘Peacetime regtrictions on banks and .eredit agen-

_ cies have made it difficult for them to finance war

production, although the banks have ‘been anxious to

use their resources for prosecution of the war.”?

Under-Secretary Patterson explained that a small

business enterprise, which had a normal annual turn-

over of $100,000 in peacetime products, might now

find itself with $5,000,000 worth of war subcontracts

on its books. Unless easy money was provided, he

went on, the concern probably would not: be able to. -

meet its charges for labor and raw materials.

Until today, Mr. Patterson added, the War Depart-

ment had been authorized by law to advance only up

to 30 per cent of the contraet cost to prime contrac-

tors, and to make na loans: whatever to subcontrac-

tors. Under the new policy each of. them may~be

helped up to 100 per cent, if necessary. |

In the hearings befare the Committee on Banking and

Currency United States Senate on S. 2250 on Friday,

March 20, 1942, Hon. Robert Patterson, Under Secretary

of War, testified that a systent for the financing of sub-

contractors and supplies had been given careful study by

the Army, the Navy, the Maritime Commission, and the

War Production Board, as well as the Federal Reserve

System, that the system was then being formulated and

was expected to take effect very shortly under a proposed

. Executive Order which they thought was proper under

the First War Powers Act, ‘‘whereby Army and. Navy

funds already appropriated for supplies can. be used to

take the risk of loss in advances made to subcontractors

_ by the regular banking connections of those subcontrac-

tors ...’? An excerpt from Under Secretary Patterson’s

testimony is printed in the appendix to this brief.

The intent of -President Roosevelt as to the authority

conferred upon the War Department, Navy..Department.

_ and the Maritime Commission by Executive Order. No.

9112, of course, is that which he had when ‘he signed the

- order. The order itself discloses that he deemed that his

authority to make the order was derived from the Con-

_ stitution of the United States and the various provisions

of the First War Powers Act, 1941, approved December

18, 1941 and by all other acts of Congress. —

The part of the First, War Powers Act, 1941, deemed

to confer authority upon the President to issue Executive

Order No. 9112 obviously was Title Il, which was as

em Laer |

“Title II—Contracts

‘Sec. 201. The President may authorize any de- .

partment or agency of the Governmeiit exercising

functions in connection with the prosecution of the ©

war effort, in accordance with regulations prescribed

_ by the President for the protection of the interests

of the Government, to enter into contracts and into

amendments or modifications of ‘contracts heretofore

or hereafter made and to make advance, progress

_ and other payments thereon, without regard to the

provisions of law relating to the making, perform-

ance, amendment, or modification of contracts when-

ever he deems such action would facilitate the prose-

* -cution of the war; ...? -

Appendix to Petition, page 31.

from the Treasury but in Consequence of Appropriations

made by Law (Art. I, Sec. 9, Cl. 7). And there has been

- The Constitution. forbids that money shall be drawn -

eee

in force for a long time a law providing: “Bxcept as

otherwise provided by law, sums appropriated for the

various branches of expenditure in the public service

shall be applied to the objects for which they. are respec-

tively made, and for no others.” (Title 31, U. 8. @. A.

626, emphasis added.) We find no provision in the First

War Powers Act, 1941 that would make it lawful for the

President to authorize the: War Department, Navy De- -

partment or the Maritime Commissién to apply money

appropriated for specific objects to guarantee any con-

tract foynd by them to be “necessary, appropriate ( or con- -

venient for the prosecution of the war.”

Congress, by the Military Appropriation Act, 1942; .ap-

‘proved June 20, 1941, 55 Stat. 366, had made appropria-

tions for the Military Establishment ‘ander the headings ~*

- “Military Activities—Expediting Production” for the ob- _ —_

ject of enabling the Secretary’'of War, with the approval ~~...’

of the President, “to.expedite the production of -equip-

_ ment and Supplies for the. Army for emergency national

defense purposes, including. all of the objects and pur-

- poses specified under each of the appropriations available

to the War: Department during the fiscal year 1942, for

procurement or production of equipment or supplies for

erection of structures, or for acquisition of land; the fur-

nishings of Government-owned facilities at privately

owned plants; the procurement and training of civilian

personnel i in connection with the production of equipment

and material and the use and operation thereof; and for _

any other purposes which in the discretion of the Secre- °

tary. of War are desirable in expediting production for

military purposes and are approved by the President,

.” By the final proviso to this paragraph of the

uatary ieee Act, 1942, it was provided: + —

. . Provided further,, That no obligation shall

be eivnered for or on account of objects appropriated

edantelianamen te

ae oe

for under this head of the Military Establishment ex-

_ ept in pursuance of specific appropriations.” ~

By Executive Order No. 9070 issued February 24, 1942,

President, by virtue of Title I of the First War Powers

Act, 1941, approved’ December 18, 1941, had directed that

all functions, powers, and duties relating to defense hous-

ing of the War Department and the Navy Department

with respeét-to housing units for persons (with families)

. engaged: in national defense activities (except housing

units located on military or naval reservations, posts, or -

bases) under Title IV of the Naval Appropriation Act for

| the fiscal year 1941; should be administered - under the

direction and supervision of a National Housing Admin-.

istrator (Appendix to Petition, p. 49). |

On March 31, 1942, S. 2250, the bill for conversion. of

small business enterprises to war production, came on for

consideration by the Senate. (Vol. 88, Cong. Rec., Part 3,

p. 3228.) Each of the three senators who were invited” to

the ceremonies. for the signing of Executive Order No.

9112 by President Roosevelt made statements concernin

the purpose of the executive order and showing how. it

‘was related to the bill the Senate was considering. First,

Senator Murray said: a

‘“‘Mr. Murray: . . .,A few days ago, the President

issued an Executive order in which he authorized tlie

‘War Department, the Navy ‘Department, and - the

Maritime Commission to make loans and discounts,

adyances and.commitments, in order to ite and

_ aid in bringing about complete utilization of small

. business. The President invited three members of our

committee to the White House at the time when he

was, signing the Executive order; this ackowledged ©

the efforts of our’ committee to solve the problem. My

understanding is that the Executive order will great-

ly aid in achieving the objects we have sought to

. a | ; | - | Pe. ; | . —19— :

Vee se | ‘accomplish through ‘our efforts in’ connection with the

SNPS —." a ee “bill”: (pp. 3228-3229). :

» Senator Capper stated:

~—S “ay believe tr appieciate fully some of the possibil-

ea ities in the ‘President’s. Executive : order taking off *

SE the’ restraints ‘on lending by Government, by BR. F.C.)

Shee '. by banks, and by ‘other lending agencies, so that

“Us - eau capital may be provided ‘wherever necessary,

oe eo . appropriate, or convenient to the war effort. _Fap-

oe. 2° preciate the fact. that some’ of the Government-uui-

i . ‘ derwritten loans “willbe ‘made to small industries;

os |, but, under that order there is no one, no agency, no ©

_« “yesponsibility for seeing. that the small concerns get _

=” a any ‘of ‘its benefits. |

i eo x The’ Smaller War Plants Corporation propeced in

= - s ‘the pending, bill will be in. ‘position, will have the

a aN aoe _‘Fesponsibility (ander control of the War Production

af OR BE to so that it will not do anything to hamper war

po, ae | _. production) to utilize the. very broad powérs created

rs ie " by.the- President’s Exeeutive order allowing unlimited :

re ee - lending for, war production’? (p. 8235).

ane : ee: 7 Senator - Mead, the other senator, who was invited to

he ‘the ceremonies in the White House ‘for the’ signing of °

; _ Executive. Order. No. 9112, stated:

| “Mr, Mead: Mr. Président, as one who. is very’

“deeply interested in the problems ‘of small business,

* Sas one. Who, as far back as 1936, introduced a bill to

SQ BR a te Set up a system of guaranteed loans for small busi- -

, Ne et: ness, I wish to- make: a few observations concerning

st, (thas, : the measure which is-now before the Senate for con- _

@*~_.“ sideration. The bill, like the President’s order, ‘seeks —

put working capital, financing, on a war basis, and

.. seeks to eliminate peacetime” restrictions | on» ‘banks’

and other: credit ait 80 that we ay cut away

PC ee ee 2 aie

—i1--

the red tape and expedite the war-production pro-

| a gram . . .”” (p. 3237).

ne Senator Taft, in his statement ny the Senate, em-

phasized that the purpose bas the. executive order by the |

. President was .

‘to guarantee thes ein Finance Corpora-

tion or anybody else against loss on contracts: In

other words the Army and the Navy are ‘making the.

loans themselves. - '

Senator Taft further said that the main purpose of the

bill under consideration by the Senate was not the loan,

the financing. Its main purpose, he said, was ‘‘to mobil-

ize small industry to take war contracts. The financing

provision is included only because financing is .in many

cases an ‘essential tool to enable the. other work to be ©

done cao oe 3268). '

, . Senator Ellender stated: :

‘*Mr. Ellender: Permit me to read one of the para-

graphs from the President’s statement, which I failed

to read. I did not think it was necessary; but,- in

view of the question propounded by the Senator, let

me read it: © |

< The Executive order siiliatilig the financing

| ' of contracts to facilitate the prosecution, of the

’

interfered with the all-out participation of many

small-business enterprises in war production.

Senators Murray, Mead, and Capper have been

- particularly anxious to bring about this partici-

_ + pation. Full production of the Nation’s smaller $s

| businesses is essential to victory.

I presume the President had in mind the bill now |

before. us, because it is a product of the Small Busi-

war is aimed at curing a situation which has - |

re . _— _ 2am aye AOA ESE IE RET Tak TY tenet enna Sent ore gens sg OO OL eo REE IF VER Oty

. n . mr waren ee ake, eae! Se ee =

om cme Ger tiene annie «te a te ERED oe eae Sa ES a a cence nated en ae ES na sas ane eens

oo? es | | ~129—

ness 7 which has held hearings on the

_ subject”’ (p. 3270).

_ Question was raised in the Senate as to why the sum.

of $100,000,000 was fixed as the amount of the capital

stock of Smaller War Plants Congenien. Senator Mur-

ray answered this question:

““Mr. - Murray: Of course, I realize, with th ‘Senator,

that $100,000,000 ‘will not go very far; bnt, as‘ the

Senator from Ohio (Mr. Taft): explained a /little while

ago, what we are undertaking in the perding bill is

largely an experiment. We have held hearings, and

. have brought witnesses here from all over the coun-

try, and we realized that we are going to get produc-

tion. We must get it through some such: machinery |

as that which we are seeking to set up under the

bill. -We fixed on the sum of $100, 000,000 because that

-would at least give us an opportunity to try out the

program. Since the agitation has developed as a-

result of studies of the committee, the President—

_ as has just been pointed out in the debate—has issued

an Executive order in which he has authorized the

War Department, the Navy Department, and the

- Maritime Commission to make advances, loans, and

commitments to corporations intending to carry on

war production.

“It will be observed that the Executive order is

not in conflict with our bill, but is supplemental to

it; and the probability is that our loaning activities

will be confined to small plants which find it difficult

to get loans through the regular channels; but they

will be able to secure loans only after having the

War Production Board and the corporation set up

‘under Donald Nelson decide that. they are competent _

‘ and capable. of carrying through’ such contracts and

that they are essential for the production program”

(p. 3270).

—13—

Senator Brown of Michigan moved: to amend the bill .

so as to authorize the War Department and the. Navy

Department to guarantee any.loans or advances made by |

the Smaller War Plants Corporation. He said that.the

amendment he proposed was identical with the provision

in the bill with respect to loans made by the Reconstruc-

‘tion Finance Corporation, and was identical with the

language in the Executive order of the President. As

passed by the Senate a new section was. inserted reading

as follows: ,

‘**Sec. 7. The War Department and the Navy De- | | 4

partment are hereby authorized to participate in or ;

to guarantee any loans made pursuant to this act,

and in connection therewith they may use any funds

heretofore or hereafter made available for purposes

of procuring war materials, etn and equipment’’

(p. 3274).

. At the top of page 8 of the Respondent’s Brief the

Statement is made that on June 11, 1942, Congress passed -

a bill which specifically authorized the War Department. -

to make loan guarantees in accordance with Executive

Order No. 9112. This statement, ‘following as it does, the

garbled statements on page 7 concerning the authority

conferred upon the War Department and the Federal Re-

serve Banks by Executive Order No. 9112 could have been ~

“misleading to. the Court. Why did the Justice Department

. take out of context and quote only those clauses from the

_-. Executive order and H. Rept. 2131 that suited its purpose

of trying to persuade the Court that the War Department

was given authority to guarantee loans for housing and

that Congress had authorized this to be done by the ©

President? Why did they omit to tell’ the whole truth

about the purpose of the Executive order and the Mobil-

ization of Small Business Act?

While Congress had under consideration the bill to

mobilize the productive facilities of small business in the

—14—

interests of successful prosecution of the war, it also had

under consideration a bill to amend the National Housing

Act (H. R. 6927). ‘These amendments known as- National

Housing Act Amendments of 1942 added a new section

to Title VI of the National Housing Act to authorize’ the

insurance of mortgages on a 90-percent-of-value basis

covering larger rental projects designed’ primarily for

war workers.

On April 20, 1942, H. Rept. No. 2039 was committed to

the Committee of the Whole.House on the state of the _

union and ordered to be printed. This was the report

of the House Committee on Banking and Currency to

accompany H. R. 6927. ‘The mapert stated the purpose of

the bill. as follows:

‘*The bill has for its purpose the ovatinuing of the.

housing. program for war workers through the me-

dium of the mortgage insurance provisions of Title

_ VI of the N ational Housing Act. Its | enactment is

essential at this time in. order to enable private capi-

tal to*continue its participation in that program, the

existing mortgage insurance authority of $300,000,000

upder Title VI having been exhausted. —

. sf

te . . . “<s . . ww

“Section 11 of the bill adds a new section to Title

VI of the National.Housing Act so as to authorize the

insurance of mortgages on a 90-percent-of-value basis,

covering larger rental projects designed primarily

for war workers.: This new section, except for the.

__. 90-percent-of-value limit and certain. provisions pro-

viding for greater flexibility in the manner , of* con-

. trolling: rents and leasing any other practices, con-

" tains, as applied to war rental housing, virtually the

Same ‘provisions as are contained in Section 207 of

the present, law which — re of the

emergency.

— 15 —

“Section 12 of the bill provides that nothing in the

bill is to be construed to ‘be inconsistent with or to

* *supersede the Executive Order eonsolidating the vari-

_ _' ous war housing ‘agencies.”’ - 7 )

_ .On‘Aprib 22, 1942, the House of Representatives resolved -

itself into the Committee of the Whole House on the state

of the union for the consideration of the bill-(H. R. 6927)

to amend the National Housing Act, and for other pur-

- poses Steagall explained the: purpose of the bill as

being to insure loans for the*construction of defense hous-

ing in defense areas, and to bring about as far as may be

possible the construction of defense housing by private

investment rather than by having such construction done

under direct appropriation for the war program:

_ On April 22, 1942, the bill (H. R. 6927, 77th Cong., 2d

sess.) passed the House. |

On Tuesday, April 28, 1942, a subcommittee of the Com-

mittee on Banking and Currency, United States Senate,

” " commenced hearings on the bill. At the commencement

of the hearings, Hon. John B. Blandford, Jr., Adminis-

trator, National Housing Agency, made a statement before

the subcommittee to provide the committee with a bit of

background. He stated: Lae S.

“We have now in the National Housing Agency all

of the organizations concerned with housing, and’

therefore with war housing. We have been trying

within the last few weeks to appraise the situation—

to find out where we stand in meeting the job of kious-

ing war workers and trying to determine: what lies

. ahead. In -that effort we are working very closely”

with the War Production Board because it is the:

War Production Board that determines, with the

“War and Navy Departments, the industrial pattern,

and*therefore the need for workers, and therefore the

need for housing. : ic

;

—16—

‘*. . . I think you can. feel completely assured

that there is an urgent need for the 200,000 units

- . which we hope private enterprise will provide, and

that the $500,000,000 authorization is a conservative

| ’ estimate of that part of the insurance that will land

in FH. A.; and further, that this is an authoriza-

tion and. that it is under control. and that we are

daily programming this method of utilizing: this au-.

thority.’’

Redetngs before a subcommittee of the Committee |

on Banking and Currency, United States Sen- |

ate, Seventy-seventh Congress, second session -

' on H. R. 6927; April 28 and 29, 1942, pp. 4, 8.

On May 1, 1942, the Senate Committee on Banking and ©

Currency submitted its report on the National ‘Housing ~

Act Amendments of 1942 which was printed as Senate Re-

port No. 1300. This report stated that the amendments

recommended by the*eommittee did not.change materially

the substantive provisions of the bill as it passed the

House. The summary of the provisions of the bill was

taken from House Report No. 2039.

‘On April 18, 1942, H. Rep. No. 2030 was ordered to

be printed. This was the Conference Report to accom-

pany H. R. 6868, the Sixth Supplemental NAtional De- _

ferise Appropriation Bill, 1942. In the statement of the

managers on the part of the House under ‘‘Title I—War

Department’’, it was stated:

‘‘. . .; the House accepts the Senate amendment mod-

ified to make the merged appropriations available

for. carrying out the provisions of Executive Order

9112 of March 26, 1942, for the guaranteeing or mak-

ing of-loans to contractors and thus facilitating the

participation of small business enterprises in the war .

production effort’? (Emphasis added). -

—17—

On April 21, 1942, Representative Clarence Cannon of

Missouri, from the managers on the part of the House,

_ explaining the bill on the floor of the House, said:

“On March 26, 1942, the President issued Executive

Order 9112, which authorizes the War and Navy De-

partments and the Maritime Commission to enter. into

‘ contracts with any Federal Reserve bank, the R. F. C.,

or other financing institutions for the purpose of

financing any contractor or subcontractor or others

. engaged in any business or operation which is deemed

by ‘War or Navy or Maritime Commission to be in

' the interest of the prosecution of the war. This order -

is designed principally to give assistance to small

business in financing its participation in war con-

tracts. Provision has now been made in the bill so

that the appropriations for the War and Navy De- .

partments shall be available to carry out without

‘question the intentions of the Executive order. In

_my jadgment, it was not necessary to include this —

_ Special provision in the bill, but, since the Senate

added the amendments, we see no harm in n including

' them’’ (Emphasis added).

Vol. 88, Cong. Rec., Pt. 3, p. 3576.

On May 13, 1942, H.- Rep. No. 2131, the report of the

Committee on Banking and Currency on S. 2250, Mo-

bilization of Small Business for War and Essential Civil-

ian Production was printed. On May 25, the bill was con-

sidered by the House of Representatives. H. Rept. 2131

is printed in: the Congressional Record (Vol. 88, Pt. 4,

page 4505). _Under the heading ‘‘CHANGES FROM THE

BILL AS PASSED BY. THE SENATE”, the . seach

statement is made: . 0

“Section 7 has been modified so as to give » hegiale-

_ tive’ approval to the exercise of authority under

=) -

—18—

Executive Order No. 9112,). and to limit. the partici

~ pation in or guarantee by the War Department, the

Navy Department, or the Maritime Commission, of

loans made under the act to those loans made with a

view to increasing the production of war materials,

supplies, or equipment.’’ (Emphasis added.)

Mr. Crawford, Representative from Michigan, explained

the bill and stated as follows:

- A third. proposition in this bill is set: forth in

section 7, page 24 of .the bill as submitted by the

committee, wherein this bill puts in statutory form”

_ Executive Order No. 9112, issued by the President,

authorizing the War Department, the Navy Depart-

ment, and the Maritime Commission to guarantee

loans made by commercial banks to business, small,

intermediate, and large, engaged in producing goods

ordered by those three agencies of government, the

-War Department, the Navy | Department, and the.

Maritime Commission. Anyone who is interested in

this production program and in what I would call

high. financing, can well afford to study these hear-

ings.

) Miss ‘Rankin of Sicinin Mr. Chairman, will the

' gentleman. yield?

Mr. Crawford: I yield.

Miss Rankin of Montana: What is there in 1 this |

bill which enables large or small companies, inex-

perienced in war work, to obtain risk capital to en-

able them to carry on the new work?

Mr. Crawford: I would say that section .7 goes

direetiy to that question, along with Executive Order

1 The ‘Justice Department in its brief (top of page 8) quoted

the clause “to give legislative approval to the exercise of au-.

thority under Executive Order No. 9112,” and stopped. It is?

-unfortunate that the remainder of Sec. 7 stating the limitation

‘upon the authority of the War Department, ete., was omitted.

—19—

No. 9112. I might enlarge on that just a little. As

the »war program unfolded itself the President - dis-

covered that there was-a shortage of credit for cer-

tain types of operation, and certain firms. He issued

Executive Order No. 9112, authorizing the Army, the -

' Navy, and the Maritime Commission to use funds

_ appropriated to them by Congress for war production

as a basis for guaranteeing loans made to mannfac-

_ turing companies by commercial banks, the R. F. C.,

_ and the Federal Reserve banks. In other words,

through’Executive Order No. 9112, which is made law

by section 7 of this bill when enacted, it furnishes

the risk capital which the lady from Montana has

referred to . . .’” (Emphasis added).

Vol. 88, Cong. Rec. Pt. 4, pp. 4503-4507.

On April 28, 1942, the Sixth Supplemental National De-

_ fense Appropriation Act, 1942 passed and was approved

(56 Stat. 226). On May 26, 1942, the day following-the

debate in the House on the Mobilization of Small Business

Act, the National Housing Act Amendment of 1942 passed

and was approved (56 Stat. 301). On June 11, 1942, the

- Mobilization of Small Business Act passed ‘and was ap-

proved (56 Stat. 351). | :

There is nothing whatsoever in this whole train of cir- '

cumstances, proceedings and events to indicate that Presi-

dent Roosevelt or the Congress intended te confer any

authority on°*the War Department, the: Navy Department

. Or the Maritime Commission to guarantee loans for de-

fense housing. No appropriation was made to the War |

Department for that purpose. All of the housing functions

of the government had been consolidated into National -

- . Housing Agency by Executive Order No. 9070. (See Ap- —

pendix to petition at page 49.) There was a limitation

upon the authority of National Housing Agency to 90

“percent of the estimated replacement cost of the com-

pleted property. =? 7

hee

Is it conceivable that the Congress, after plainly limit-

ing the Federal Housing Administrator to 90% loans on

defense housing, empowered the War Department to

nullify the limitation by the simple expedient of.calling °

defense housing a ‘‘war product’’ and binding’ the Gov-

ernment to pay the remaining 10% of the loan? To main-

tain that proposition requires more sublety that the en-

tire Justice Department has been able to conjure up for

its client, the-federal reserve: bank.”

THE MALCONSTRUCTION OF EXECUTIVE ORDER

NO. 9112 COMPOUNDED.

“Te statement in the second paragraph of page 8 of

the Justice Department’s brief that the federal reserve

bank entered into the guarantee agreement in compliance

with the procedures set out in Regulation V of the Board

of Governors of the Federal Reserye System is mislead-

ing. The Board.of Governors of the Federal Reserve Sys-

' tem on April 10, 1942 announced the adoption of Regula-

tion V to carry out the President’s Executive Order No.

9112 of March 26, 1942, for the purpose. of facilitating

and expediting the financing of war production. This an-

nouncement was made by a Statement for the Press which

was published in Federal Reserve Bulletin for April, 1942

at page 424. For the convenience of the Court this State-

ment is printed in the Appendix to this Reply Brief.

_. Had the Justice Department been a little more candid®

with the Court they would have stated that the certificate

2 Petitioners reiterate the statement contained in the footnote

on page 5-of their Petition. All of this had been fully —s |

to the Justice Department before, sabeeation therein ny

unnecessary.

8 There is another iricorrect and a statement in tlie

Justice Department’s Brief. In the footnote on page 8 appears

the statement that the application for a War Department guaran-

teed loan was “by petitioners’ corporation. ” The fact is that the

application was not by petitioners’ corporation but by one of the

financing institutions, The wise National Bank of an.

of convenience onl senniiee: was signed by a.major in

the Army stationed at the Federal Resérve Bank of

Atlanta as a liaison: officer. According ‘to the Statement

for the Press ‘issued by the Board of Governors’of the

Federal Reserve System, the only authority of such a

>. liaison officer was to certify to the reserve bank that an .

applicant for financing was qualified ‘from ‘the technical -

or production standpoint to carry out a contract, subeon-

tract or order for war ‘supplies or equipment.’’

The application showed on its face that Country Club

Village Corporation was not a prime contractor holding

a prime contract with any unit: of the Government. It

a showed also that Country Club Village Corporation was

not a subcontractor having a subcontract or order for

supplying war products. It stated in the printed par. 7

reading: ‘‘7. War, produets to be supplied by applicant for

‘loan’? that the, war products were ‘*“Defense housing. is

The certificate. issued by the liaison officer is printed

in the appendix hereto. How it came about that the fed-

eral reserve bank, with notice from the application itself’

that the guarantee was not for a loan to finance either 9

contractor or subcontractor under a prime contract with

the War Department but for a housing loan, nevertheless

issued the guarantee is unexplained i in this record.

Regulation V contained a statement ( Section 5),: that

_ the War Department, Navy Department, and Maritime

Commission, after consultation with the Board of Gov-_

ernors of the Federal Reserve System, would issue general

instructions with respect to the operations of the Federal

Reserve Banks under the Exetutive Order, including pro-

. visions regarding the relationships of ‘the Federal Reserve

_ Banks with liaison officers or other field representatives

of such agencies. It stated:

“The operations of the Federal Reserve Banks :

under the Executive Order shall be conducted in.

accordance - with such instructions. ie

2 :

The Wat Destine did not ennabne Wuseuiive Order

“No. 9112 as relating to housing, Neither did the Board. of

Goveinors of the Federal Reserve System. By Section 7

of Regulation V it was provided: "

**With respect to financing of production, lia as

may be otherwise. authorized specifically or by. gen-

eral instructions of the: War Department, Navy De-

partment or Maritime Commission, the maturity of

any loan made or guaranteed in whole or in ‘part

by a Federal Reserve Bank on behalf of such agency

’ Shall be consistent with the needs of the borrower for |

the fulfillment of the contracts or orders for which

the financing is provided’’ (Emphasis added).

The War Department i) instructions for the handling: of

- loans made under Regulation V were published in the.

Federal Register (7 Fed. Reg. 10192, codified at 10 C. F. R..

81.320—First. Cumulative Supplement).. The regulations

'. governing Guaranteés, Loans and Commitments, and Ad-

vance Payments are a part of Chapter VIlI—Procurement

‘and Disposal of Equipment and Supplies. ‘See. 81 319 sets

forth War Department policy in connection with prime ae

contractors (b) and in ‘connection with subcontractors (c).

_ Subsection (d) deals with cooperation between céntract-

ing officers, liaison officers and the Federal Reserve Banks

to devise “the most practical method of: financing from —

the standpoint of maximum war production by the con-

tractor.” This subsection provides: “if a guaranteed loan

ora direct loan, it may or may not be policed as to ex-

penditures by the supply service most interested.” And

finally, subsection (d) provides that there should be a

determination of. the method of fimancing at the time of

the award of. the contract to prime contractors.

Sec. 81.320 of the War Department Regulations covers, ‘ Ss

the subject of guarantees, loans and commitments under

Executive Order No. 9112. This section sets out par. (5)

| ¥ Executive Order No. 9112, directing the agencies to ae

make reports of. all contracts entered into by them pur-

_ suarft to the ‘terms of. this executive order, in accordance

with’the provisions of ‘paragraph 1 of the regulations pre-

scribed. in Title II of; Executive Order No. 9001, dated _ -

and purchases—not: to. housing.

By Title I, par. 2 of Executive Order No. 9001, the.

things contracted for were defined very specifically, as ~

“2. The contracts hereby authorized to be made

_ Include agreements of all kinds (whether in the form .

of letters of intenf, purchase orders, or otherwise)

for all types of things and services necessary, ap-

propriate or convenient for the prosecution of war, -

for the invention, development, or production of,. or

résearch Concerning any such thirgs, including but

not limited to, aircraft, buildings, vessels, arms, arma-

ment equipment, ‘or supplies of any kind, or any

portion thereof, . 5 -” |

_ Subsection (b) of Section 81.320 of the War Department

regulations provides that the administration of the powers °

conferred upon the War Department by Executive Order :

9112 are vésted in the Advance Payment and Loan Branch,

Fiscal Division, Headquarters, Service of Supply. Sub- .

section (eJ provides that financial contracting officers ~

attached to the Fiscal ‘Division, ‘Headquarters, Services

Banks in arranging financing for businesses whose op-

erations are necessary, appropriate or convenient for the

prosecution of the war. By subsection (d) it is provided

that liaison officers are attached to the Advance Payment

and Loan Branch, Fiscal Division, Headquarters, Services

of Supply. Subsection (e) deals with the procedure for

obtaining guaranteed loars by contractors.. By subsection

—24—.

(g) it was provided that loans and guarantees must be

_- submitted to the Advance Payment and Loan Branch |

when the amount exceeded $100,000. ~

Unquestionably, the certification by the liaison officer ;

of the War Department dated October 31,. 1942, prior to

the issuance of the War Department Meidiaiiens on De-

cember 8, 1942, on the basis of which Federal. Reserve -

‘Bank of Atlanta, as Fiscal Agent of the United States

on behalf of the War Department, guaranteed to the two

Alabama banks 90% of the loan to finance» eee rl Club

* Village Corporation

+35 + ae the ocaueuntion of “495 single family

dwelling pnits with other improvements, including

streets, water distribution systems,-and power lines;

said dwelling units to be located on a tract of. land

situate in Mobile County, Alabama, on Old Shell

Road near Springhil va

was without authority of law. This was an illegal trans-

~ action and Federal Reserve Bank of Atlanta was charge-

able with knowledge of this fact. The Supreme Court

has declared that public policy demands that every de-

pository of public money shall be held to strict accounta-

bility. U. 8. v. Prescott, 3 How. 578, 11 L. ed. 734; Lee

v. Munroe & Thornton, 11 U. 8. 366,-3-L.-ed. 373, -_ —- —-

Plaintiffs-A ppellants sought a discovery from the Fed-

eral Resérve Bank concerning the transaction and the

certification on which it relied for the authority to’ pay

-out funds belonging to the United States of America

under the guarantee agreement. The discovery was de-

| nied by the court below. - A ,

In Wisconsin Central B. Co. v. United States, 164 U. 8.

clared:

“As a general rule, and on grounds of public policy, |

_ the government cannot be a by the action of its

officers, who must be held to the performance of their

“duties within the strict limits of their legal authority,

where, by misconstruction of the law under which

they have dssumed to act unauthorized payments are

made. Whiteside v. United States, 93 U. S. 247;

Hawkins v. United States, 96 ¥ S. 689, and. cases be-

fore cited.’?

ss)

The Justice Viepnetment is plainly wrong in stating in,

its Brief thatthe Federal Reserve Bank \ was lawfully i in-

volved in the transaction.

WHY JUSTICE DEPARTMENT CANNOT INVOKE —

DOCTRINE OF ESTOPPEL TO PROTECT

FEDERAL RESERVE BANK. |

In ‘the » footnote at the bottom of page 7 of its Brief, the.

_ Justice Department contends that petitioners -should bé

estopped to challenge the “authority of the Federal Re-

serve Bank and.the War Department to grant the guaran-

tee for. which they themselves: had applied.” Heretofore, ‘ J

_ petitioners have corrected the statement that they applied

for ‘the guarantee. The application for the guarantee was

made by one of: the financing institutions, The First Na- .

tional Bank-of Birmingham. The application contains the

| following statement:

(Country. Club Village Corporation). has-been ad-—

vised that financing institution is applying for this

guarantee in the amount and subject to ths terms

herein. indicated.

In this litigation, satidlaleds are not seeking to. set.

aside the judgment against them which the Government .

has obtained. They are seeking to recover from the fed-

eral reserve bank the loss which both the United - States

and themselves have sustained as the-result‘ of the vio-

“12. The applicant for the loan herein veleered. to

— 26 — v

tatlen of. the laws of. the United States aun the

public money. It ill behooves the Justice Department to

try to protect the malefactors. It would seem that the

Justice Department would try. to. protect. the interests of

the United States. *

In Scott Paper Co. v. Marcolus 5 Mrz, Co., 326 U.S. 249,.

66-8. Ct. 101, 90 L. ed. 47, this Court said:

“Estoppel cannot, any more than private contract,

be the means of successfully avoiding the _Tequire-

_ ments of legislation enacted for the protection of the

‘Public interest.” '

“Tei is indeed a ra spectacle i in this case: ssaliiideicen

, before the Court are seeking to protect the public interest

by upholding the Constitution and laws of the United

States for the proteetion of public funds, while the Jus-

tice Department is trying to defeat them by raising all

manner of _— technicalities. ;

WHY DEFENSE OF FEDERAL RESERVE BANK BY

JUSTICE DEPARTMENT -I8 CONTRARY TO:

| PUBLIC POLICY. ~

The J in Department’ in its Brief for the inieiauea

contends that the Federal Reserve Bank was acting as

- agent for the United States. We have shown that the acts

of the Federal Reserve Bank were without authority of

law and not binding on the ‘Government.

—The Justice L Department says that petitioners a liti-

gated the issues of, fairness of the sale of the corporate

property and the adequacy of the price therefor, and lost.

’ That statement is true. But the reason they have lost is

that the Justice Department has not yet? produced the

"evidence in the files of the War Department and the. Fed-

eral Reserve Bank that will oa why the sale of property

; sideration.

ot een

- was made by: private sale en masse for 80 small a con-—

The Justice: ‘Departrnent says that -

“Petitioners in the past have had ample oppor-

tunity.to prove the ‘fraud’ they seek to demonstrate

in this action; their proof has been found to be ‘en-

tirely unconvincing’ and to refute rather than sub-

| stantiate their contentions. They are not. entitled to

_. try to revive these claims in this suit’? (Respondent's :

Brief, p. 9), oe

The Court of Appeals, i in its opinion affirming the deci-: _

Sion of the district court i in the prior suit, said: —

[2, 3] The government ’s certificate of indebtedness

of the appellants herein which was not questioned was --~~

prima facie evidence of the balance of such’ déBb ow-

ing by the appellant. "We detect no reversible error:

‘» in the District Court’s finding that this evidence was eee

not satisfactorily rebutted through ‘the appellants’ —~

claim of bad faith dealings on the part of the banks

with the government ’s assent, the testiniony of the »n-

pellants’ own witnesses having detracted materiail,

from their claim that the price, at which these prop-

erties were sold was unfair and inequitable. More-

over, the defense of bad faith was an ‘‘avoidance”’

within Rule 8 (c) Federal Rules of Civil Procedure,

Title 28, U. S: C. A., and the defendant did not carry

the burden of substantially proving this-defense.

U. 8. v. Hart, et al., 312 F. 2d 127, 130, , poheraeeis

The J ustice Department should be abashed to act upon

the failure of the defendants to carry the burden of prov-.

_ ing their defense of bad faith dealings with the collateral

in the _prior suit. Defendants (petitioners before this’

Court) ‘failed because the Justice Department answered

’ the defendants’ Interrogatory No. 9 in the — suit that ;

ee,

‘¢Plaintiff (United States of Anibrics) had no knowl-

edge’’ of the matters inquired about in the interrogatory

‘Federal Reserve Bank of Atlanta had knowledge about

the matter. They had to have some reason for making the —

sale of the subdivision at, the time it was made, for the

consideration they agreed to accept and for reledsing the

lien to enable the sale to be made. If their decision. was

-an honest: ‘and good faith decision and they’ thought that

‘they were acting for the best interests of the United

. States; they would surely be willing to open their files.

and show there was no fraud in the sale.

In this . ‘present action, petitioners propounded inter- -

rogatories to the acting attorney general of the United

States as follows: |

| Interrogatories, Propounded by the Plaintiffs to Nicholas

deB Katzenbach, Attorney General of the

United States—Filed April 8, 1965.

- The plaintiffs, Joseph W. Hart, Luella F. Hart and J.

Carl Russell, in pursuance to Rule’ 33 of the Federal

_ Rules of Civil Procedure, propound the following inter-

; rogafories. to be answered by Nicholas deB Katzenbach,

Attorney General ‘of the United States, personally: ‘

Interrogatory No. 1—Has an: investigation ever been. am

made by the Department of Justice, the’ Federal Bureau’

of Investigation, or any other officer, agency. or depart-

ment of the United States of | America of. the sale of

Country Club Village housing project in Mobile, Alabama,

made in: October, 1945, by Federal Reserve Bank of At-

lanta, purporting to act as fiscal agent of the United |

States of America, The First National Bank of Birming- |

ham, Birmingham, Alabama, and The Merchants Natiofial

‘Bank of Mobile, Mobile, Alabama, to R. B. Ellinor or

Spring Hill Homes, Inc., for $37,170.00 to be paid by

(See Petition page 18). But, the War Department. and

‘a post-dated check. to determine whéther this was a ied

faith sale, for a fair and adequate consideration and for

the best interests of the United States. of America?

‘Answer:

Interrogatory No. 2.—If such investigation has. been

‘made,’ will you file a-copy of the report or reports of

such investigation as exhibits to your. answer to these: |

- interrogatories? |= ~ - %

Answer: Acie 7

Interrogatory No. 3.—If such iideaiiaaiien has not -

been ‘made, will you cause to. be madé a full and thorough

investigation of ‘the sale, examining particularly the files

of the War Department and Federal Reserve Bank of

Atlanta, and state your conclusion whether or not said —

ni ir consideration and in the best interests of the United

States of America, giving reasons for’ your conclusion.

Answer:

| Intetrogatory No. 4.— After welstiine all pertinent facts

surrounding said sale, does it appear’ that the interests

of the United States of America will be best served: by

the United States continuing to. attettipt to collect the

judgment rendered . in its favor against the plaintiffs,

Joseph W. Hart and J. Carl Russell, and’ defending this

action for Federal Reserve Bank of Atlanta on’ the

grounds that it is protected by governmental’ immunity

- or does it appear in this case, in the language of the

_ United States Supreme Court in Land v. Dollar, 330 U..&

731, 738, that the ‘‘dominant interést of the sovereign is

| . on the side of the vietim .. .’—in this case the

Answer: |

? si >Fyke Farmer,

: F sensed for Plaintiffs.

Se ee ee ee eee eee

- °

os —80e

— 4 oe

interrogatories? (Petition , for Certiorari, p. 19).

- After: the. Petition was filed and before the Brief: of .

_. Respondent was ‘filed, petitioners’ attorney wrote a letter

- to the Solicitor Géneral. This letter, together with the

reply of the Solicitor General i is par. in oe Appenttx

at pages 4 43-47. |

_ SUPPLEMENTARY STATEMENT OF REASONS

‘WHY WRIT .SHOULD . BE GRANTED. ,

This Court has previously held that a private sale of

the property of the United States by a-naval.contractor, -

without survey, inspéction or appraisement, for $2,000.00 —

which the buyer resold 4or $8,975.56, was ‘Megat because

.. without authority of law, ‘saying:

The fact: that.the account of the appeilant was dite.

tled: by the officers of ‘the Navy Department by charg- .

ing him with the value of the old material at $2,000

is no bar to the recovery of its real value by the gov-

ernment, The whole transaction was illegal, and ap-

‘ pellant is chargeable with knowledge of. the fact. It

was, in effect, a private sale of. the property of the

United States without: survey, inspection or appraise-—

ment, at a grossly inadequate price. The fact that the —

account had been settled by the officers of the- Navy

Department did not cure the unauthorized acts. Both

the disposition of the property and the settlement of

‘the account.were without authority of law and not

binding-on the -Government. :

Steele, use of Corn Exchange National Bank Vv.

We ~ S. 128, 5 8. Ct. 396, 28 L. Ed.

- 952.

made" no reply to that section ‘of the argument in the

)

eed

wither; ibe

Petition: urider the heading, ‘Want of Authority in Fed.’

eral: ie Sale Se of Atlanta to Release Lien to Allow _

Private Salé\of Subdivision to be Made’? (p. 25).

Petitioners submit that public policy forbids that the ”

«Judicial Department of the Government -condone fraud

on the United States and overrides the public policy: be-

hind the doctrine of res judicata or collateral estoppel by

judgment, insofar as it may, have application to this case.

Instead of opposing petitioners’ efforts to enforce the

liability of the federal reserve bank, the-Justice Depart-

ment should be on their side. (See Motion of tlie Defend-

ants filed August 24, 1965 in the action in which the United. _

and Russell, Appendix to Petition, page 34.)

This case, from the standpoint of the amount involved,

is little. The principle and public policy involved is very:

big: honesty. in Government, faithful stewardship of the

_ publie funds, protection of the public irterests under law.

LA Respectfully submitted,

‘' » FYKE FARMER,

511 American Trust Building,

‘Nashville, Tennessee 37201, ou

a Attorney for Petitioners.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.