UNITED STATES v. CITY OF ROSSVILLE, (N.D.Ga. 1966)

SIDNEY O. SMITH, Jr., District Judge.

This is a suit in which plaintiff seeks to recover certain sums advanced by the Federal Works Agency (Later Community Facilities Administration, Housing and Home Finance Agency, now Department of Housing and Urban Development) to the City of Rossville, Georgia, in 1947 for plan preparation pertaining to construction for an outfall sanitary sewer. Basically, the agreement provided for such sums to be repaid upon construction of the proposed facility. The government contends that a proportionate part of the advances are now repayable because of certain improvements made in the City of Rossville by the City of Chattanooga, while the City of Rossville contends that the project was abandoned by it. The case was submitted on the following

It is stipulated by and between the plaintiff and the defendant, through their respective attorneys, that the following facts are true and correct and may be accepted by the Court without introduction of further proof:

(a) The City of Rossville, Georgia, defendant in this action is a corporate body politic organized and existing by virtue of the laws of the State of Georgia.

(b) That prior to the filing of the application for a Federal advance as hereafter described, the Department of Public Health of the State of Georgia sent a letter to the Federal Works Agency, dated April 10, 1947, a true copy of which is attached hereto as Exhibit "A", and made a part hereof.

(c) Defendant filed with the Bureau of Community Facilities, Federal Works Agency (FWA) an agency of the Government of the United States of America (succeeded by the Community Facilities Administration (CFA), Housing and Home Finance Agency (HHFA), (Under Public Law 89-174, 89th Congress, H.R. 6927, approved September 9, 1965 [ 79 Stat. 667], the Housing Home Finance Agency, including the Community Facilities Administration and other constituent units and branches, shall become the "Department of Housing and Urban Development" on November 9, 1965.) an application for an advance, dated April 21, 1947, for plan preparation pertaining to construction for an outfall sanitary sewer by applicant with an estimated construction cost of $163,500.00, including $7,100.00 for plan preparation (subsequently revised to $141,515.00 and $5,790.00, respectively, as evidenced by letters dated May 1, 1947, and May 6, 1947, attached hereto as Exhibits "B" and "C"^fn2, respectively.) A true copy of said application is attached hereto, marked Exhibit "D", and made a part hereof.

(d) Plaintiff and defendant entered into an Agreement designated "Agreement and Public Voucher for Advance," bearing Application No. Ga. 9-P-570, which was signed on behalf of the defendant on June 20, 1947, by Mayor Herman O. Bowman, acting under proper legal authority, and was accepted on behalf of the plaintiff on June 24, 1947. A true copy of said Agreement is attached hereto, marked Exhibit "E", and made a part hereof.

(e) In said Agreement, the defendant requested said FWA to advance $5,800.00 to the defendant for the purpose of plan preparation for construction of the public work described as "Sewer Facilities — New sanitary sewer outfall," (herein referred to as the "Project") located at Rossville, Georgia. Contingent upon receipt of the advance, defendant offered to complete such plan preparation and to repay said advance when required, in accordance with the regulations of the Bureau of Community Facilities, Federal Works Agency.

(f) That pursuant to the aforesaid agreement the United States of America did subsequently advance a total of $5,800.00 to the City of Rossville, Georgia. See Exhibit "F".^fn4

(g) That the said City of Rossville, Georgia did use all of the money so advanced by the United States of America for the purpose of plan preparation of the Project located in and near the City of Rossville, Georgia; and did retain engineers who completed such plans for the Project; and said plans were for an outfall sewer line of the type or nature contemplated by the aforementioned application.

(h) In an effort to carry out the project, the City of Rossville obtained legislative authority of the General Assembly of Georgia (Georgia laws 1952, pages 2283 et seq.), a copy of said Charter Amendment being attached hereto as Exhibit "G", and made a part hereof.

(i) During the year 1953, it was determined by the City of Rossville that it could not finance the construction of the project in a manner sufficient to obtain the desired rates or charges for its sewerage users. At this time the City of Rossville had obtained revised plans on which it made the above-mentioned determinations.

(j) On January 10, 1956, the City of Rossville, Georgia, entered into a contract with the City of Chattanooga, Tennessee, a copy of which is attached hereto and marked Exhibit "H". The City of Chattanooga agreed to finance and construct a project, said project being similar to that so planned by Rossville when the application for the advance was made to the Government. The City of Rossville agreed to furnish plans and specifications for the sewer system, to pay the engineering expense for the preparation of the plans and specifications, to be approved by Havens and Emerson, Chattanooga's Consulting Engineers; acquire easements for the sewer system, at its own costs for the extension of an intercepting sewer from the Tennessee-Georgia State Line into Rossville; general obligation bonds in the amount of $14,000 being issued by Rossville in payment thereof; restore and repave its streets, in which such sewer may be constructed and maintain the surface of the easement after the sewer has been constructed; enter into a contract with the City Water Company of Chattanooga, a private utility corporation, to bill and collect sewer service charges and to fix sewer service charges which will be collected by the City Water Company of Chattanooga, said charges to be paid to the City of Chattanooga, Tennessee.

(k) That on May 29, 1958, the City of Chattanooga entered into a construction contract with Brown Brothers, Contractors, for the construction of the Rossville outfall sewer system as provided for in the contract between the City of Rossville and the City of Chattanooga, shown on Exhibit "I" heretofore referred to, for $123,804.25. That Brown Brothers, contractors for the City of Chattanooga, proceeded to construct said facility and subsequently completed the same. That said facility so constructed is located in, along, or near many of the same streets or route as the facility planned with the Federal advance.

(l) That written demands dated September 15, 1960, November 15, 1960, and July 28, 1961, for repayment of said advance to the Government were duly made by CFA and received by the defendant, but defendant has not repaid said advance in whole or in part.

(m) That pursuant to Section 602(b) of the Housing Act of 1964 (P.L. 88-560, 78 Stat. 799; 40 U.S.C. § 462[b]) and regulations issued relative thereto ( 30 F.R. 5511-5512, April 17, 1965; 44 CFR) HHFA has determined that the amount of said advance presently repayable, on the basis of information available to it as to the proportionate part of the facility actually constructed, is $4,176.00, plus accrued interest; and that there is a continuing potential liability for the balance of $1,624.00, with interest.

(n) Attached hereto, and marked Exhibit "J" are Regulations of the Housing and Home Finance Agency, Advance Plan Regulations dated January 1, 1946.

This case presents a unique question and a close one. It arises from another problem created by federal legislation at the close of World War II seeking to assist municipalities and other public agencies in meeting the needs of the general public, which had necessarily been disregarded during the war years. The scheme of the act, was to provide funds in the form of "advances" for planning purposes for highway, recreational, hospital, and health projects. If the project was completed, normally through bond issues or other public financing, the "advances" were to be repaid to the government. On the other hand, if the project was not undertaken, the money was not to be repaid. In the meanwhile, the funds involved were neither an outright grant or an obligation due the United States, but in limbo dependent upon the project.

The act itself simply provided:

"(c) Advances under this section to any public agency shall be repaid by such agency if and when the construction of the public works so planned is undertaken. Any sums so repaid shall be covered into the Treasury as miscellaneous receipts." War Mobilization Reconversion Act of 1944, § 501, 58 Stat., ch. 480, pub. law 458; U.S. Code Cong.Ser. (78th Cong.2d Sess.) at 788.

The regulations adopted pursuant to the act provided:

"(a) The Act authorizes assistance in the form of loans or advances of Federal funds, but in order to simplify the administration of the Act these regulations limit assistance to advances.

(d) An advance shall not be required to be repaid until the construction of the public work for which the advance is made is undertaken or started as provided in section 12 hereof. Until such construction is undertaken or started the advance shall not be deemed by the United States to be a debt or obligation within the meaning of any constitutional or statutory limitation.

(e) No interest charge shall be made for any advance."

The application and public voucher add no further enlightenment on the subject.

As might have been expected, various problems arose regarding the liability for repayment. In the main, these were two:

(1) Whether there was liability when the plans made with the advance were abandoned, but the project was eventually completed in some form or another?

(2) Whether there was liability when the project was completed by some agency other than the applicant?

There are apparently only five reported cases on the subject. Four of these deal with the abandonment of plans: United States v. Board of Education of City of Bismarck, D.C., 126 F. Supp. 338 (1954); United States v. City of Wendell, 237 F.2d 51 (9th Cir. 1956), cert. den. 352 U.S. 1005, 77 S.Ct. 565, 1 L.Ed.2d 549; United States v. City of Willis, D.C., 164 F. Supp. 324 (1958); aff'd 5 Cir., 264 F.2d 672; City of Greeley v. United States, 335 F.2d 896 (10th Cir. 1964). Two deal with the substitute agency: United States v. City of Charleston, D.C., 149 F. Supp. 866 (1957) (only collaterally); City of Wendell, supra. The government has presented two unreported cases dealing with the latter question, one of which ended in settlement by the City of Charleston (S.C.), the applicant, when the project was constructed by a parks authority and the other in judgment against the City of Pleasureville (Ky.), though the constructing agency Henry County Water District was found not liable.

From these authorities, two principles have emerged:

(1) Liability exists whether the planning financed ends up in the project or not, if the "project in mind" is constructed at a later date.

(2) Liability exists regardless of details in the manner of financing or a change in the constructing agency.

The present case presents one further complication because the "project in mind," was essentially carried out not by City of Rossville, the applicant, or any subsidiary authority, but by a separate public agency and independent municipal corporation, the City of Chattanooga, Tennessee. Under the facts in this case, this difference is not deemed sufficient to escape the established principles.

It is clear to the court (and in fact is not seriously contested) that the "project in mind" when the application was made in 1947 and the enabling legislation was passed in 1952 and which was theoretically abandoned because of financing difficulties in 1953 was the same project carried out under the agreement with Chattanooga in 1956 and 1958. From its beginning, the sewerage plan was irretrievably connected with the sewerage plans and problems of Chattanooga. The preliminary correspondence, the application itself, and the charter amendment all anticipated an arrangement for joint disposal of sewerage with Chattanooga. Under the contract with Chattanooga (Exhibit "H"), Rossville was to furnish all plans for construction and the court is convinced that the substance of the plans eventually used were those created with the government advance. Certainly there is substantial "overlapping" of the project planned by Rossville and the project constructed by Chattanooga. See United States v. City of Wendell, 237 F.2d 51 at 53.

Likewise, it was anticipated by Rossville that the project would be financed by revenue anticipation certificates permitted under Georgia law (Code 87-801 ff.), whereby the capital costs are amortized by service charges over a period of time. Though Rossville used bond money to purchase land and easements, the balance of the construction costs were borne by Chattanooga under an arrangement whereby service charges amortized Chattanooga's capital costs. This is nothing more than a "detail in financing" as the citizens-users of Rossville eventually pay the costs under either plan. The essence of this finding is that Rossville obtained the project it applied for and under the act is, therefore, liable for the advance even though it was carried out by a separate public agency through contract. If Rossville had furnished its plans to a separate private corporation and contracted with that corporation to handle its sewerage business we would have no hesitancy in reaching this result. The fact that the contracting party was a separate public municipal corporation does not change the reasoning. Whatever obligation Rossville had with the government could not be defeated by contracting it away or by failure to provide for its repayment in the overall financial arrangement with Chattanooga. See United States v. City of Charleston, 149 F. Supp. 866 (8).

The question of time as it relates to liability for advances is of concern. If a project is begun in 1970, is it really the one in mind when an application was made in 1948? Most municipal problems of this type don't dissolve with the passage of time in a growing community. The absence of some statute of limitations seems unreasonable. To have created any in the original act might have put a premium on delay and thereby thwarted the purposes of the legislation; but sufficient time has now passed (over 20 years since the funds were originally appropriated) to permit some retrospective limitation on recovery without penalizing the diligent. This problem, however, directs itself to the Congress. Nor is the prospect of the resulting financial burden of any judgment on a small community a happy one. It is likely other public problems have replaced those involved here and it is hoped that this obligation may be satisfied by installments mutually agreed upon.

On the question of interest, we are constrained to deny any recovery. The regulations provided that no interest is to be charged. True, interest runs on a liquidated sum from time of maturity or demand. In this instance, however, the government only seeks recovery of $4,176.00 out of $5,800.00 advanced as "the proportionate part of the facility actually constructed." Such determination was not made until this trial and in that sense the amount of the present obligation was unliquidated until now. The amount is not liquidated as of the time liability is determined, but when both time and amount are determined. Browne v. Makin, 177 F.2d 753 (5th Cir. 1949). As seen the court is unsympathetic with the delay in seeking this recovery and this appears to be a proper case for denying interest on equitable principles, particularly since the defendant has apparently proceeded in good faith. 28 U.S.C.A. § 1961; Swift Co. v. United States, 257 F.2d 787 (4th Cir. 1958), cert. den. 358 U.S. 837, 79 S.Ct. 60, 3 L.Ed.2d 73.

Accordingly, let judgment issue in the sum of Four Thousand, One Hundred Seventy-six Dollars ($4,176.00) principal only.

It is so ordered.