Pan American Petroleum & Transp. Co. v. United States,
273 U.S. 456 (1927)

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U.S. Supreme Court

Pan American Petroleum & Transp. Co. v. United States, 273 U.S. 456 (1927)

Pan American Petroleum & Transport Company v. United States

No. 305

Argued October 4, 5, 1926

Decided February 28, 1927

273 U.S. 456


1. The evidence sustains findings that the making of the leases and contracts involved herein was dominated by the Secretary of the Interior, acting collusively with the representative of the two defendant oil companies; that the Secretary of the Navy took no active part in the negotiations, and that the leases and contracts were procured by corruption and fraud. P. 273 U. S. 498.

2. The finding that the Secretary of the Navy signed the documents under misapprehension and without full knowledge of their contents is not sustained. An opposite finding is required by the record. P. 273 U. S. 498.

3. In a suit by the United States to annul contracts made through its officials with private corporations the bona fides of which had been investigated by a committee of the Senate, statements made to the committee by the companies' representative, who voluntarily appeared in defense of their interests, showing that he gave money to one of the officials who dominated the procurement, and participated in the execution of the contracts, were admissible against the defendant corporations in proof of fraud. P. 273 U. S. 498.

So held where he who made the statements was the representative of both companies in procuring the contracts; was at that time president of one company and chairman of the board of directors of the other, having been its president also; controlled both companies through stock ownership, and was chairman of both boards of directors when he testified.

Page 273 U. S. 457

4. A lease of the land of a naval reserve and related contracts, which were procured by private corporations as the result of collusion and corrupt conspiracy between their representative and a high government official who, under an executive order, dominated the administration of the reserve, may be avoided by the United States without regard to whether money paid the official by the representative constituted bribery as defined in the Criminal Code, or whether the official was financially interested in the transaction, or the United States suffered or was liable to suffer any financial loss or disadvantage as a result of the contracts and leases. It is enough if the official's interest and dominating influence were corruptly obtained. It was shown that he so favored the lease and contracts that he could not loyally serve the interests of the United States. P. 273 U. S. 500.

5. The Secretary of the Navy was not empowered by the Appropriation Act of June 4, 1920, to enter into contracts involving the leasing of all the unleased land of a naval petroleum reserve, and providing for the use of the crude oil, to be derived by the United States as royalties under such leases, for the acquisition of extensive storage facilities filled with fuel oil for the Navy. Pp. 273 U. S. 501-502, 273 U. S. 508.

6. Under the proviso of the Naval Appropriation Act of June 4, 1920, the authority of the Secretary of the Navy to provide facilities in which to "store" naval reserve petroleum or its products did not extend beyond those that might be provided by use of the money made available by that act. P. 273 U. S. 509.

7. While the general principles of equity are applicable in a suit by the United States to secure the cancellation of a conveyance or the rescission of a contract, they will not be applied to frustrate the purpose of its laws or to thwart public policy. P. 273 U. S. 505.

8. In this suit brought by the United States to set aside illegal and fraudulent leases and contracts which were made for the purpose of circumventing its laws and defeating its policy for the conservation of its naval petroleum reserves, the United States does not stand on the footing of an individual suing to annul a deed for fraud; its position is not that of a mere seller or lessor of land; the purpose is to vindicate the policy mentioned, the financial element being secondary; the defendants are wrongdoers, and have no equity to reimbursement for their expenditures as a condition to the granting of the relief sought by the government. Pp. 273 U. S. 503, 273 U. S. 508.

Page 273 U. S. 458

9. In a suit by the United States to set aide for illegality and fraud leases made, in contravention of the policy of conserving naval petroleum reserves, and contracts made, as part of the same transaction, for erection of oil storage facilities for the Navy, not authorized by Congress, on land of the United States and for storing them with fuel oil, equity does not exact as a condition to the relief prayed that the defendants be compensated for the cost to them, or the value to the government, of the construction work performed or fuel oil furnished under the contracts, or for the amount they expended in drilling or operating oil wells or in other improvements on the leased premises, but their compensation, if any, must depend on Congress. Pp. 273 U. S. 503, 273 U. S. 508.

9 F.2d 761 affirmed.

Certiorari (27 U.S. 640) to a decree of the circuit court of appeals which affirmed in part and in part reversed a decree of the district court (6 F.2d 43) in a suit by the United States to cancel two leases of land in a naval petroleum reserve and two contracts for erecting storage facilities and supplying fuel oil for the Navy. The bill also prayed an account. The decree of the district court cancelled the leases and contracts for fraud and illegality, but, in the accounting, allowed credits to the two corporations for their expenditures under the leases and contracts, with interest. The circuit court of appeals denied such credits, but in other respects affirmed the decree.

Page 273 U. S. 485

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