2d Session No. 184 PAN AMERICAN PETROLEUM & TRANSPORT COMPANY v. THE UNITED STATES LETTER FROM THE ASSISTANT CLERK OF THE COURT OF CLAIMS OF THE UNITED STATES TRANSMITTING IN RESPONSE TO SENATE RESOLUTION NO. 84 (77TH CONG.) A CERTIFIED COPY OF THE COURT'S FINDINGS OF FACT AND CONCLUSIONS RENDERED BY THIS COURT, FEBRUARY 7, 1944 APRIL 13 (legislative day, APRIL 12), 1944.-Referred to the Committee on Claims, and ordered to be printed COURT OF CLAIMS OF THE UNITED STATES, OFFICE OF THE CLERK, Washington, D. C., April 8, 1944. In re Pan American Petroleum & Transport Company v. The United States (No. Congressional 17765). The Honorable the PRESIDENT OF THE SENATE OF THE UNITED STATES. SIR: In compliance with Senate Resolution 84 and section 151 of the Judicial Code, I transmit herewith certified copy of the court's findings of fact and conclusions rendered by this court on February 7, 1944, in the above-entitled case. Respectfully, JOHN W. TAYLOR, [Court of Claims of the United States. No. Congressional 17765. Pan American Petroleum & Transport Company v. The United States. Decided February 7, 1944] STATEMENT On February 18, 1941, a bill was introduced in the Senate directing the Secretary of the Treasury to pay to the Pan American Petroleum & Transport Company the sum of $9,336,956.58 as compensation for work and services rendered and material furnished by this company in connection with the construction of the naval fuel oil station at Pearl Harbor, Hawaii, and as compensation for the fuel oil and other petroleum products delivered by said company to the United States at said station in conformity with two contracts, one dated April 25, 1922, and the other dated December 11, 1922. This bill was referred to this court "in pursuance of the provisions of an Act entitled, 'An Act to codify, revise, and amend the laws relating to the judiciary,' approved March 3, 1911," known as the Judicial Code. Section 151 of that Code authorizes reference to this court by either House of Congress of a bill pending before it for a report on the facts in the case and the amount justly due. In addition to making a report on the facts, the duty is also imposed on the court of reporting whether or not there has been delay or laches in presenting the claim or whether or not is it barred by the statute of limitations, and to make such conclusions "as shall be sufficient to inform Congress of the nature and character of the demand, either as a claim, legal or equitable, or as a gratuity against the United States, and the amount, if any, legally or equitably due from the United States to the claimant." After the passage of the Resolution referring to this court the bill "for the relief of the Pan American Petroleum and Transport Company," that company filed a petition in this court setting up its claim. A general traverse was filed by the United States and the case was referred to a commissioner of the court to report on the facts. All of the testimony introduced was embodied in a stipulation entered into between the parties, to which was attached numerous exhibits. The stipulation, however, was entered into, subject to the right in both parties to object to any of the facts stipulated "on the grounds of irrelevancy or immateriality, or both," and the only issue between the parties is the question of what facts are relevant and material to the question presented by the bill "for the relief of the Pan American Petroleum and Transport Company." The plaintiff says that the only relevant and material facts are whether or not it constructed the naval fuel oil station at Pearl Harbor, and whether it delivered the fuel oil and other petroleum products as claimed, and whether or not the United States received the benefit of the work done and materials furnished and used them, and, lastly, whether or not the amount claimed for the work done and materials furnished is fair and equitable. This position, however, is clearly untenable in the light of the decision of the Supreme Court in the case of Pan American Petroleum & Transport Co., et al., v. United States, 273 U. S. 456. Briefly stated, that case is as follows: Not long before completion of the construction of the naval fuel oil station at Pearl Harbor, Congress passed a joint resolution on February 8, 1924, reciting that the contracts of April 25, 1922, and of December 11, 1922, and the leases executed in pursuance of the contracts, had been executed under circumstances indicating fraud and corruption and without authority on the part of the officers purporting to act for the United States, and in defiance of the settled policy of the Government to maintain in the ground a great reserve of oil adequate to the needs of the Navy; and the Act authorized and directed the President to cause suit to be prosecuted for the annulment and cancellation of all such leases and contracts. In obedience thereto, a bill was filed in the District Court for the Southern District of California. The District Court entered a decree in accordance with the prayer of the bill and stated an account between the parties. This account, summarily stated, charged the Transport Company and the Petroleum Company, its subsidiary, with all the oil taken from the ieased ground and credited these two companies with the cost of the erection of the storage facilities at Pearl Harbor and the oil delivered thereto, and the cost of drilling wells on the leased ground. On appeal by both parties to the Circuit Court of Appeals this decree was reversed insofar as it gave the two companies credit for the expenditures they had made. The Supreme Court granted certiorari, and affirmed the decision of the Circuit Court of Appeals. The Supreme Court first held that the contracts and leases had been entered into as the result of fraud and corruption and without authority of law and contrary to the declared purpose of Congress. It then proceeded to consider whether or not the companies were entitled to credit for the expenditures that they had made in constructing the naval oil depot at Hawaii and in drilling wells, etc. The Supreme Court held that they were not entitled to this credit because, it said, "the contracts and leases and all that was done under them are so interwoven that they constitute a single transaction not authorized by law and consummated by conspiracy, corruption, and fraud" (p. 509). The court recognized the rule that he who seeks equity must do equity requires a person defrauded to return, or offer to return, whatever of value he may have received as a result of the transaction, as a condition precedent to his right to relief from the fraudulent transaction; but it held that this rule did not apply to the United States in such a case as was before it. The court said: "The United States does not stand on the same footing as an individual in a suit to annul a deed or lease obtained from him by fraud. Its position is not that of a mere seller or lessor of land. The financial element in the transaction is not the sole or principal thing involved. This suit was brought to vindicate the policy of the Government, to preserve the integrity of the petroleum reserves and to devote them to the purposes for which they were created. The petitioners stand as wrongdoers, and no equity arises in their favor to prevent granting the relief sought by the United States. They may not insist on payment of the cost to them or the value to the Government of the improvements made or fuel oil furnished as all were done without authority and as means to circumvent the law and wrongfully to obtain the leases in question * * *" (p. 509). The court then proceeded to say that it was "not for the courts to decide whether any of these things are needed or should be retained or used by the United States.' "Such questions," it said, "are for the determination of Congress. It would be unjust to require the United States to account for them until Congress acts; and petitioners must abide its judgment in respect of the compensation, if any, to be made." It is apparent from the above quotations from the opinion of the Supreme Court that Congress should have before it all the facts relevant to the entire transaction, as a result of which the work was done and the materials were furnished, in order that it may arrive at an intelligent judgment as to whether or not the facts and circumstances transcend the ordinary considerations of equity and entitle plantiff to relief notwithstanding its wrongdoing. With this guide in mind, the court makes the following FINDINGS OF FACT (For the convenience of the Congress, we incorporate in the following findings certain things not ordinarily incorporated in judicial findings of fact, such as Acts of Congress and court decisions.) 1. On February 18, 1941, the following bill was introduced in the Senate of the United States: "A BILL For the relief of the Pan American Petroleum and Transport Company "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Secretary of the Treasury be, and he is hereby, authorized and directed to pay, out of any money in the Treasury not otherwise appropriated, to the Pan American Petroleum and Transport Company the sum of $9,336,956.58, as compensation for work and services rendered and material furnished by the Pan American Petroleum and Transport Company for and in connection with the construction of the naval fuel oil station at Pearl Harbor, Territory of Hawaii, and compensation for the fuel oil and other petroleum products delivered by the Pan American Petroleum and Transport Company, to the United States of America at such station, in conformity with a contract dated April 25, 1922, supplemented by a contract dated December 11, 1922." 2. This bill was referred to this court under a Resolution introduced in the Senate on March 10, 1941, reading as follows: "Resolved, That the bill (S. 905) entitled 'A bill for the relief of the Pan American Petroleum and Transport Company,' now pending in the Senate, together with all the accompanying papers, be, and the same is hereby, referred to the Court of Claims, in pursuance of the provisions of an Act entitled 'An Act to codify, revise, and amend the laws relating to the judiciary,' approved March 3, 1911; and the said court shall proceed with the same in accordance with the provisions of such Act and report to the Senate in accordance therewith." 3. Section 151 of the Judicial Code (Title 28 U. S. C., section 257), reads as follows: "Whenever any bill, except for a pension, is pending in either House of Congress providing for the payment of a claim against the United States, legal or equitable, or for a grant, gift, or bounty to any person, the House in which such bill is pending may, for the investigation and determination of facts, refer the same to the Court of Claims, which shall proceed with the same in accordance with such rules as it may adopt and report to such Horse the facts in the case and the amount, where the same can be liquidated, including any facts bearing upon the question whether there has been delay or laches in presenting such claim or applying for such grant, gift, or bounty, and any facts bearing upon the question whether the bar of any statute of limitation should be removed or which shall be claimed to excuse the claimant for not having resorted to any established legal remedy, together with such conclusions as shall be sufficient to inform Congress of the nature and character of the demand, either as a claim, legal or equitable, or as a gratuity against the United States, and the amount, if any, legally or equitably due from the United States to the claimant: Provided, however, That if it shall appear to the satisfaction of the court upon the facts established, that under existing laws or the provisions of this chapter, the subject matter of the bill is such that it has jurisdiction to render judgment or decree thereon, it shall proceed to do so, giving to either party such further opportunity for hearing as in its judgment justice shall require, and it shall report its proceedings therein to the House of Congress by which the same was referred to said court" (March 3, 1911, c. 231, § 151, 36 Stat. 1138). 4. All the testimony introduced in this court is incorporated in a stipulation of facts entered into between the parties and filed on October 20, 1942. To this stipulation are attached exhibits A to R, both inclusive, and it incorporates by reference exhibits to plaintiff's petition, Nos. 1 to 4, both inclusive. Paragraph 10 of the stipulation reads as follows: "A true copy of the opinion of the Supreme Court of the United States in the matter of United States v. Pan American Petroleum & Transport Company and Pan American Petroleum Company (273 U. S. 456) is attached hereto, marked 'Exhibit I,' and made a part hereof. Each and all of the facts set out in said Exhibit I hereto are, as provided above in this stipulation, made a part of the record in this case; and each and all statements of fact and determinations of questions of law contained in said Exhibit I hereto, insofar as the same may here be applicable, are hereby conceded to be res judicata in this case." In view of this stipulation the following findings will be taken from the opinion of the Supreme Court insofar as possible, and where so taken they will be in quotations, with the reference to the page in the Supreme Court's opinion where they are found. 5. The plaintiff, at all times mentioned in its petition, was a corporation duly organized and existing under and by virtue of the laws of the State of Delaware, with its principal office for the transaction of business in the City of New York and State of New York. It will hereafter be called the "Transport Company." It owned all the stock in the Pan American Petroleum Company, hereinafter called the "Petroleum Company." During the entire period of the negotiations and execution of the contracts and leases hereinafter referred to, Edward L. Doheny controlled both companies. Until July 24, 1922, he was President of the Petroleum Company, but on that date became Chairman of its Board of Directors. Until December 7, 1923, he was President of the Transport Company, but on that date became Chairman of its Board of Directors. 6. On April 25, 1922, the plaintiff entered into a contract with the United States, signed by the Acting Secretary of the Interior and by the Secretary of the Navy providing for the construction of the storage facilities at Pearl Harbor and for the delivery to such storage facilities of 1,500,000 barrels of fuel oil. Later, a supplementary contract was entered into on December 11, 1922, signed for the United States by the Secretary of the Interior and the Secretary of the Navy, providing for the construction of additional storage facilities at Pearl Harbor and for the furnishing of additional fuel oil. It was under the first of these two contracts that the storage facilities were constructed and the oil was delivered, for which payment is now being requested. The contract of April 25, 1922, called for payment for the work to be done and the oil to be furnished out of royalty oil to be obtained by the United States under leases to be given on lands located in Naval Petroleum Reserve No. 1, hereinafter mentioned. However, the contract did not obligate the United States to give such leases to the plaintiff; nevertheless, plaintiff's proposal to construct the facilities and to furnish the oil was conditioned upon a preferential right to all oil leases which might thereafter be made by the Government in Naval Petroleum Reserve No. 1, and it insisted on such assurances. But instead of incorporating such a provision in the contract of April 25, 1922 it was agreed that a letter should be written by the Assistant Secretary of the Interior and the Secretary of the Navy to the plaintiff stating that the Department of the Interior had agreed to grant to the plaintiff within one year from the date of the delivery of the contract leases on two strips of land requested by plaintiff totalling 300 acres. Such a letter was written and such a lease was executed on June 5, 1922. Later, and coincident with the signing of the contract of December 11, 1922, another lease was given the plaintiff covering the balance of the unleased lands in Naval Petroleum Reserve No. 1. 7. By the terms of the contract dated April 25, 1922, as stated by the Supreme Court in the above-mentioned decision, on pages 488-489, "the Transport Company agreed to furnish at the Naval Station at Pearl Harbor, Hawaii, 1,500,000 barrels of fuel oil and deliver it into storage facilities there to be constructed by the |