The Government sued respondents to recover civil damages under §
26(b)(1) of the Surplus Property Act of 1944 for obtaining surplus
government property by fraud. Later it moved to file an amended
complaint seeking instead to recover damages under § 26(b)(2). That
motion was withdrawn, and the Government filed a second amended
complaint again seeking damages under § 26(b)(1). After trial, the
District Court awarded the Government damages under § 26(b)(1).
Both sides appealed, and the Court of Appeals affirmed. While the
appeal was pending, the Government accepted from respondents
promissory notes totalling the amount of the judgment, and it
released only its judgment liens in two counties.
1. By accepting payment of an amount equal to the judgment
appealed from as inadequate and releasing only its judgment liens
in two counties in the circumstances of this case, the Government
did not lose its right to press its claim for the full amount of
the damages it believed to be due. Pp. 364 U. S.
2. Recoveries under § 26(b) are not penalties, and the claims
asserted by the Government were not barred by the statute of
limitations. P. 364 U. S.
3. In the circumstances of this case, in which the issue was
preserved in a pretrial order pursuant to Rule 16 of the Federal
Rules of Civil Procedure, the Government did not waive its
contention that it was entitled to change its election of remedies
and to recover under § 26(b)(2), instead of § 26(b)(1). Pp.
364 U. S.
4. The Government's original complaint seeking damages under §
26(b)(1) did not constitute an irrevocable election of remedies,
and, in the circumstances of this case, the Government had a right
to amend its pleadings so as to seek damages under § 26(b)(2). Pp.
364 U. S.
5. Section 26(b) did not empower the District Court to determine
according to the evidence which of the three subsections would
Page 364 U. S. 311
be the most appropriate and to require the Government to accept
judgment under that subsection. P. 364 U. S.
6. In the circumstances of this case, respondents are not
entitled to a new trial. Pp. 364 U. S.
270 F.2d 290, reversed.
MR. JUSTICE BLACK delivered the opinion of the Court.
Section 16 of the Surplus Property Act of 1944 gave priority
preferences to veterans in the purchase of surplus war materials.
58 Stat. 765. Section 26 authorized the United States to recover
damages against any person who obtains such property from the
Government by "fraudulent trick, scheme, or device. . . ." The
complaint in this case charged that respondent Hougham, a
nonveteran, combined with the other respondents, who are veterans,
and obtained for his own business purposes hundreds of items of
surplus property, including trucks, trailers and other equipment,
by fraudulent use of the veteran respondents' priority
certificates. After hearings, the District Court found respondents
guilty of fraud as charged and awarded damages in the amount of
$8,000. Both sides appealed. The Court of Appeals affirmed,
rejecting both the Government's contention that the damages awarded
were inadequate and the respondents' contentions that the finding
of fraud was clearly erroneous and that the claims were barred by
the statute of limitations. 270 F.2d 290. Because the case raises
important questions concerning the interpretation and application
Page 364 U. S. 312
the Surplus Property Act, we granted the Government's petition
for certiorari. 361 U.S. 958.
The respondents first contend that the entire controversy here
has been settled, is therefore moot, and that the Government is
estopped from further pressing claims against them. This contention
rests upon the fact -- set out in respondents' brief and not
disputed by the Government -- that, after the trial court judgment
was entered and before it was affirmed by the Court of Appeals, the
Government accepted from respondents promissory notes totalling
$8,000, the amount of the trial court judgment. The contention is
that this fact alone renders the case moot, or at least creates
some sort of estoppel against the Government. We disagree. It is a
generally accepted rule of law that, where a judgment is appealed
on the ground that the damages awarded are inadequate, acceptance
of payment of the amount of the unsatisfactory judgment does not,
standing alone, amount to an accord and satisfaction of the entire
claim. See, for example, Embry v. Palmer, 107 U. S.
; Erwin v.
7 How. 172, 48 U. S.
-184. This case provides a perfect example of the
good sense underlying that rule. For here, it was the respondents
themselves who proposed payment of the $8,000, asserting expressly
as their purpose in so doing the obtaining of a "Full Release of
Judgment Liens" filed in the Counties of Los Angeles and Kern. The
Government did nothing more in the entire transaction than accept
the notes and execute the requested release. Since that release was
expressly denominated only as a "Full Release of Judgment Liens"
for the Counties of Los Angeles and Kern, it simply is not and
cannot properly be interpreted to constitute a full release of all
the Government's claims against respondents. Moreover, since the
transfer of the notes occurred prior to the decision of the Court
of Appeals, it is clear that neither of the parties regarded that
transfer as an accord and satisfaction of the
Page 364 U. S. 313
entire controversy for both pursued their appeals in that court.
Thus, respondents' contention here is totally inconsistent with
their position in the Court of Appeals, where they sought to avoid
all liability to the Government, including liability for the $8,000
they had already paid. For that position must necessarily have been
predicated upon the view that the payment was without prejudice to
the rights of either party as those rights might come to be
established by subsequent judicial decree. Under such
circumstances, the contention that the Government has lost its
right to press its claim for the full amount of damages it believes
due is wholly untenable.
We find it unnecessary to discuss at length respondents' second
contention -- that the claims asserted by the Government are barred
by the statute of limitations. It is sufficient to say that the
courts below were entirely correct in rejecting that contention,
for, resting as it does upon the assumption that recoveries under §
26(b) are penalties, it is inconsistent with our holding in Rex
Trailer Co. v. United States, 350 U.
We therefore proceed to the principal controversy -- the
question of the adequacy of the damages awarded to the Government.
Section 26(b) provides in relevant part that those who obtain
property by the kind of fraud established here:
"(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"
"(2) shall, if the United States shall so elect, pay to the
United States, as liquidated damages, a sum equal to twice the
consideration agreed to be given by such person to the United
States or any Government agency; or "
Page 364 U. S. 314
"(3) shall, if the United States shall so elect, restore to the
United States the property thus secured and obtained and the United
States shall retain as liquidated damages any consideration given
to the United States or any Government agency for such
In its complaint as originally filed, the Government claimed
recovery as authorized by § 26(b)(1) -- $2,000 for each fraudulent
act plus double the amount of any actual damages. Subsequently, the
Government attempted to file a First Amended Complaint claiming
liquidated damages under § 26(b)(2). Upon indication of the trial
judge that the claim in the original complaint under § 26(b)(1)
amounted to an irrevocable election of remedies, but without any
formal ruling to that effect, the Government withdrew the First
Amended Complaint and filed a Second Amended Complaint in which it
reverted to its original claim under 26(b)(1). Still later,
however, following pretrial proceedings under Rule 16 of the
Federal Rules of Civil Procedure, the district judge, with the
approval of counsel for both parties, entered a pretrial conference
order which provided,
"[T]his order shall supplement the pleadings and govern the
course of the trial of this cause, unless modified to prevent
And the order expressly enumerated the "issues of law" that
remained "to be litigated upon the trial." One of the issues so
reserved was the legal correctness of the Government's argument
that it was entitled to recover "double the amount of the sales
price of the vehicles described in the Second Amended Complaint,"
that it was "entitled to make its election (as between § 26(b)(1)
and § 26(b)(2)) at any time prior to judgment," and that it did
"in the event of judgment in its favor, to receive as liquidated
damages a sum equal to twice the consideration agreed to be given
to the United
Page 364 U. S. 315
The District Court ultimately decided this legal issue against
the Government, holding that the original complaint constituted an
irrevocable election, and proceeded to award damages of $8,000
under § 26(b)(1). The Court of Appeals affirmed this judgment on a
different ground. It held that the refusal of the District Court to
permit recovery under § 26(b)(2) was within its power to determine
the appropriate remedy under § 26(b), asserting that no issue as to
election of remedies was even involved in the case. 270 F.2d at
The Government contends that denial of recovery under § 26(b)(2)
cannot be justified on either of the theories adopted below.
Respondents contend that the Government waived its right to urge
this contention by voluntarily proceeding to judgment on the Second
Amended Complaint. This contention is predicated upon the failure
of the Government to get a formal ruling on its First Amended
Complaint before withdrawing it and filing the Second Amended
Complaint. But, as shown above, the pretrial order and the
conclusions of law of the District Court both show that the
Government urged its right to change its election up to the time
judgment was rendered. That pretrial order, as authorized by Rule
16, conclusively established the issues of fact and law in the case
and declared that the issues so established should "supplement the
pleadings and govern the course of the trial. . . ." One of these
supplementary issues was the Government's contention that it was
entitled to recover under § 26(b)(2), rather than under § 26(b)(1),
as claimed in the Second Amended Complaint. Thus, the pretrial
order changed the claim in that complaint from § 26(b)(1) to §
26(b)(2) insofar as the Government had the power to change its
election, and posed an issue which required adjudication by the
District Court. That such was the effect of the order is clear from
the language of Rule 16, which provides that the
Page 364 U. S. 316
court, after pretrial conference,
"shall make an order which recites . . . the amendments allowed
to the pleadings . . . , and such order when entered controls the
subsequent course of the action, unless modified at the trial to
prevent manifest injustice."
Since the pretrial order here reserved the legal question as to
the Government's right to change its election, and since the court
expressly decided that question against the Government,
most certainly was not waived, and must here be determined.
Thus, we come to the question whether the courts below were
correct in holding that the Government was not entitled to damages
under § 26(b)(2). With respect to the theory adopted by the
District Court that the Government's original complaint constituted
an irrevocable election of remedies, we can find nothing either in
the language of § 26(b) or in its legislative history which lends
the slightest support to such a construction. This fact leads
naturally to the conclusion that the ordinary liberal rules
governing the amendment of pleadings are applicable. The applicable
rule is Rule 15 of the Federal Rules of Civil Procedure, which was
designed to facilitate the amendment of pleadings except where
prejudice to the opposing party would result. Despite respondents'
argument to the contrary, we see this case as one where
Page 364 U. S. 317
there plainly was no such prejudice. In such a situation,
acceptance of respondents' contention on this point would subvert
the basic purpose of the Rule.
"The Federal Rules reject the approach that pleading is a game
of skill in which one misstep by counsel may be decisive to the
outcome and accept the principle that the purpose of pleading is to
facilitate a proper decision on the merits."
Conley v. Gibson, 355 U. S. 41
355 U. S. 48
therefore conclude that under the circumstances of this case the
Government had a right to amend its pleadings and that the District
Court erred in refusing to permit such amendment.
The alternative theory of the Court of Appeals appears, upon
examination, to be equally untenable. The Court of Appeals
interpreted § 26(b) as placing power in the District Court to
determine, according to the evidence presented in any particular
case, which of the three subsections would be most appropriate, and
to require the Government to accept judgment under that subsection.
That interpretation collides with the express language of § 26(b),
which provides for recovery under any one of the three subsections
"if the United States
shall so elect." (Emphasis
supplied.) Since the language of the section is conclusive on this
point, the theory adopted by the Court of Appeals must also be
The respondents' final contention is that, in any event, they
are entitled to a new trial. Obviously, there need be no new trial
on the fraud issue. But respondents also urge that there is no
support in the record for a judgment fixing the Government's
recovery under § 26(b)(2) and "twice the consideration agreed to be
given" for the vehicles. There was no consideration "agreed to be
given," the argument proceeds, because all the transactions
involved cash sales at a price fixed by the Government. This
argument, while ingenious, is not sound. Cash sales, like others,
must follow an agreement of the parties with regard to
consideration "to be given."
Page 364 U. S. 318
Respondents' contention to the contrary would, if accepted,
allow any purchaser from the Government to effectively avoid
liability under § 26(b)(2) simply by being careful to make all of
its fraudulent dealings in cash. Plainly, however, the Government
suffers just as much from a fraudulent cash sale as from a
fraudulent credit sale. An interpretation of § 26(b)(2) which
allows recovery for the one but not for the other cannot be
accepted. The respondents' contention for a new trial must be
The judgment is therefore reversed, and the cause remanded to
the District Court with directions to enter judgment for the United
States under § 26(b)(2).
It is so ordered.
* The language of the trial judge on this point was
"This Court rules that the plaintiff United States can only
receive liquidated damages under the provisions of Section 26(b)(2)
if it elects to receive only such damages originally in the action;
that, since the United States sought damages under the provisions
of Section 26(b)(1) in the original complaint, that such is an
irrevocable election; that the plaintiff United States cannot
thereafter amend its complaint to seek liquidated damages under the
provisions of Section 26(b)(2), or otherwise elect to receive
liquidated damages under the provisions of Section 26(b)(2), but
that the United States is thereafter limited as the measure of its
recovery for liquidated damages to those liquidated damages set
forth in Section 26(b)(1)."
MR. JUSTICE WHITTAKER, with whom MR. JUSTICE DOUGLAS joins,
With all deference, I cannot agree, and must dissent for two
One may not appeal from a money judgment that he
has collected and satisfied. Here, as the Court recognizes, after
the judgment was entered, the Government accepted promissory notes
from respondents in payment of the judgment. I think, with, I
respectfully submit, the support of all the relevant cases -- which
are legion -- that the Government, having recovered a judgment for
$8,000, over the serious protests of respondents that they owed it
nothing, and having, with knowledge of all the facts, accepted the
benefits of the judgment by collecting and satisfying it, cannot
thereafter prosecute an appeal to reverse it.
The Court relies on Embry v. Palmer, 107 U. S.
, and Erwin v.
7 How. 172, 48 U. S. 184
for its conclusion that the Government may prosecute this appeal
from the judgment notwithstanding it has satisfied it. But, with
deference, I must say those cases do not support the
Page 364 U. S. 319
Court's conclusion. The issue in the Embry
whether Embry was entitled to $9,185.18, as he claimed, or to only
$2,296.29, as the respondents contended and admitted to be due. The
court awarded recovery of only the latter sum, which Embry
accepted. He afterwards appealed from the judgment, and it was held
that he might do so for, as the court pointed out: "The amount
awarded, paid, and accepted constitutes no part of what is in
at 107 U. S. 8
different from the situation here! That case was like the later one
of Reynes v. Dumont, 130 U. S. 354
where the appellants received so many of certain bonds as were not
taken to satisfy the judgment from which they appealed. It was
contended that their action in doing this so completely accepted
the judgment that they could not appeal. In rejecting that
contention, this Court said:
"The acceptance by appellants of what was confessedly theirs
cannot be construed into an admission that the decree they seek to
reverse was not erroneous, nor does it take from appellees
anything, on the reversal of the decree, to which they would
otherwise be entitled. Embry v. Palmer, 107 U. S. 3
107 U. S. 8
130 U.S. at 130 U. S.
Those cases fall within a well recognized but very narrow
exception to the general rule that is applicable here. Similarly,
case did not involve the collection and
satisfaction of a judgment. Rather, it involved only the
performance by Erwin of a minor collateral "condition imposed upon
him before he [could] have the fruits of the decree" in equity.
7 How. at 48 U. S. 184
that case does not at all rule the question
The case in this Court that most nearly rules our question is
Gilfillan v. McKee, 159 U. S. 303
There, appellant claimed an interest in a special fund of $7,070
and also claimed to be entitled jointly to participate in a
Page 364 U. S. 320
fund of $147,057.63. A portion of the special fund was awarded
to him in one division of the judgment, but another division of the
judgment denied to him any right to participate in the general
fund. He appealed, and was met with the claim that, by accepting
the award of a part of the special fund, he had taken under the
judgment, and therefore could not appeal from it. Recognizing that
one cannot appeal from a judgment that he has collected and
satisfied, the Court said:
". . . the acceptance of the whole or a part of a particular
amount awarded to a defendant might, perhaps, operate to estop him
from insisting upon an appeal."
But the court found that
"there were practically two decrees in this case, one applicable
to the special fund, which, in the bill, the subsequent pleadings,
and in the decree had been kept as a distinct and separate matter,
a portion of which fund was awarded to McPherson; and the other
applicable to the general fund in which McPherson had been denied
any participation whatever."
And the court held that
"his acceptance of a share in the special fund did not operate
as a waiver of his appeal from the other part of the decree
disposing of the general fund."
at 159 U. S.
The Fourth Circuit has flatly ruled this question in
Finefrock v. Kenova Mine Car Co.,
37 F.2d 310, among other
cases. There, the appellant accepted payment of a judgment for an
amount substantially less than he claimed and afterwards appealed.
In holding that he could not appeal from a judgment that he had
collected and satisfied, the court said at 314:
"We do not find it necessary to enter into a discussion of these
questions in view of the acceptance by the appellant of the amount
allowed him in full satisfaction and discharge of the judgment. He
contends that there is no inconsistency in his acceptance of the
money and the prosecution of the appeal, relying on such decisions
Page 364 U. S. 321
3, 107 U. S. 8
; McFarland v.
(C.C.A.) 286 F. 365; Carson Lumber Co. v. St.
Louis, etc., Railroad Co.
(C.C.A.) 209 F. 191, 193; Snow
(C.C.A.) 179 F. 182. But it is obvious that he
falls within the general rule, and not within the exceptions
thereto as set out in Carson Lumber Co. v. St. Louis, etc.,
Railroad Co., supra.
The Third Circuit has likewise flatly ruled the question in the
same way, Smith v. Morris,
69 F.2d 3; so has the Fifth
Circuit, Kaiser v. Standard Oil Co.,
89 F.2d 58; White
& Yarborough v. Dailey,
228 F.2d 836, and the Eighth
Circuit, Carson Lumber Co. v. St. Louis & S.F. R. Co.,
209 F. 191. Literally dozens of cases by the courts of last resort
in almost all the States in the Union have so held. [Footnote 2
Page 364 U. S. 322
I therefore respectfully submit that the settled law requires
the conclusion that the Government, having collected and satisfied
this judgment with knowledge of all the facts, cannot prosecute
this appeal to reverse it. This appeal should, therefore, be
At all events, the Government is not entitled
to a reversal of the judgment, because it went to trial, and
proceeded all the way to judgment, upon a complaint that asked
damages only under subdivision (1) of § 26(b), not under
subdivision (2) of that section. The procedural chronology was as
follows. In its original complaint, the Government sought damages
"of $2,000 for each such act," under subdivision (1). It thereafter
filed a motion for leave to file a First Amended Complaint asking
damages in "a sum equal to twice the consideration agreed to be
given," under subdivision (2). But it did not press that motion to
decision. On the contrary, the record shows that the Government
formally withdrew that motion, and instead filed a Second Amended
Complaint, again, as in its original complaint, asking damages in
"the sum of $2,000 for each such act," under subdivision (1). It
was upon that complaint that it went to trial and all the way to
Of course, under the express terms of § 26(b), the Government
had the right to elect which of the three allowable measures of
recovery it would seek, but surely it is possible for the
Government at some stage irrevocably to make that election. I agree
it did not irrevocably do so by the filing of the original
complaint, but I insist that it did do so by filing the Second
Amended Complaint and going to trial and all the way to judgment on
it. If that conduct did not effect the election, I would ask, what
It is true that a pretrial conference was held and a pretrial
order was entered, under Rule 16 of Fed.Rules Civ.Proc. One of the
objects authorized by that Rule
Page 364 U. S. 323
is "[t]he simplification of the issues," and another is to
consider "The necessity or desirability of amendments to the
pleadings." The order recited that one of the issues of fact to be
tried was whether the
"defendants became and are liable to pay to the United States
the sum of $2,000 for each act committed by them that [may be]
determined by the court to be in violation of said statute;"
and, under "issues of law . . . to be litigated upon the trial,"
the following appears:
"It is the contention of plaintiff that it is entitled to double
the amount of the sales price of the vehicles described in the
Second Amended Complaint. . . . Previously, the Court has indicated
that an irrevocable election has been made by the United States by
virtue of the successive complaints on file.
It is the
contention of plaintiff that it is entitled to make its election at
any time prior to judgment. Plaintiff elects, in the event of
judgment in its favor,
to receive as liquidated damages a sum
equal to twice the consideration agreed to be given to the United
States or federal agency involved. Plaintiff respectfully calls
this to the attention of the Court so that the point may be
preserved for purposes of appeal."
Of course, in simplifying the issues, the Court may, by the
pretrial order, define the issues to be tried, but those issues
must be within the pleadings.
And amendments to the pleadings
should be freely allowed, as Rule 15 provides. But here, the
Government did not seek leave at the pretrial conference, or at any
time after having voluntarily filed its Second Amended Complaint,
to amend its pleading. It did not even unconditionally elect at the
pretrial conference to proceed under subdivision (2), but only "in
the event of judgment in its favor." Instead, it went all the way
to trial, and to judgment, on the
Page 364 U. S. 324
complaint that sought damages in "the sum of $2,000 for each
such act," and it obtained a judgment on that basis. Surely that
conduct constituted an irrevocable election by the Government to
recover damages in the measure claimed in its final complaint, and
I think the Government is bound by it.
For the first of these reasons, I would dismiss the appeal, but,
inasmuch as the Court does not agree, I would, at the minimum,
affirm the judgment on the ground that the Government irrevocably
elected to recover the measure of damages that it recovered, and
hence is bound by that election.
In Carson Lumber Co. v. St. Louis & S.F. R. Co.,
209 F. 191 at 193-194 the Court said:
"It is undoubtedly the general rule that a party who obtains the
benefit of an order or judgment, and accepts the benefit or
receives the advantage, shall be afterwards precluded from asking
that the order or judgment be reviewed. Nevertheless, this rule is
not absolute where the judgment or decree is not so indivisible
that it must be sustained or reversed as a whole. It has no
application to cases where the appellant is shown to be so
absolutely entitled to the sum collected upon the judgment that the
reversal of it will not affect his right to the amount accepted
(Reynes v. Dumont,
130 U.S. 130 U. S.
-394), especially where there is not present conduct
which is inconsistent with the claim of a right to reverse the
judgment or decree, which it is sought to bring into review
(Embry v. Palmer,
107 U.S. 107 U. S.
-8; Merriam v. Haas,
687; United States v. Dashiel,
Those interested will find many of those cases collected in the
notes to 2 Am.Jur., Appeal and Error, § 214, where the authors have
regarded the rule as so certain and universal as to permit them
flatly to say:
"The general rule . . . is that a litigant who has, voluntarily
and with knowledge of all the material facts, accepted the benefits
of an order, decree, or judgment of a court, cannot afterwards take
or prosecute an appeal or error proceeding to reverse it."