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UNITED STATES v. KALLAS

December 12, 1958

UNITED STATES of America, Plaintiff,
v.
Arthur KALLAS and Anna Kallas, Defendants



The opinion of the court was delivered by: ABRUZZO

This suit was commenced by the United States of America on August 5, 1954. It was instituted pursuant to Title 38 U.S.C.A. § 694c-1. It is necessary to set forth in detail the facts as testified to by the witnesses, coupled with the exhibits introduced into evidence, in order to understand the claim of the plaintiff and the defense of the defendants.

On December 9, 1950, Arion C. and Madalyn Mancuso, his wife, entered into a contract to purchase from the defendants a dwelling to be erected on the west side of Kallas Court, being plot No. 69 as shown on Survey No. A-7425, Map of Kallas Manor (proposed located in Elmont, Nassau County, N.Y. dated October 21, 1950.) The purchase price of this house was set at $ 12,500.

 On February 7, 1951, a new agreement of purchase was entered into between the parties for a dwelling to be erected on the west side of Kallas Court with no designation as to the plot number, but the terms were similar to the agreement of December 9, 1950, and the purchase price was set at $ 12,500. This agreement provided for delivery of the deed on or before March 1, 1951. (Deft's Exhibit A.)

 On November 20, 1951, the day before Thanksgiving, Mancuso, hereinafter referred to as the veteran, moved into what was known as the model house. The closing of title took place on December 20, 1951. On the same date and after the title was closed the veteran signed a note for $ 1,250, he having been given credit concededly for an advance to the builder of $ 250. About a week later the veteran paid this note so that concededly the original purchase price of $ 12,500 was augmented by $ 1,500.

 The claim of the Government before this Court now is that the $ 1,500 was a 'side payment' from a veteran after the Veterans Administration had appraised the home for a specified amount, to wit, $ 12,500.

 The defendants contend that the $ 1,500 was payment for 'extras' which were put into this house by the builder at the request of the veteran. In view of the fact that the defendants claim this round amount of $ 1,500 was not part of the original price agreed upon but was for extras, they contend that the plaintiff is not entitled to any recovery. There are five items which the defendants claim makes the total amount of $ 1,500 over and above the agreed purchase price of the house: Brick veneer $ 500 Extra plumbing 400 Extra cabinets 150 Additional costs of construction 400 Extra electric 50 $ 1,500

 A pre-trial conference was held which culminated in the following stipulation:

 'The Court: Counsel for the respective parties have agreed that the issue of fact and the only issue of fact before the Court is whether or not the fifteen hundred dollars of changes were made after the contract was entered into, that they were outside of the purview of the contract, and if the defendant can prove by credible proof that this fifteen hundred dollars was charged for improvements and changes ordered by the plaintiff outside of the contract, the defendant is entitled to a verdict, and the Government is only entitled to a verdict, or a judgment, if they can prove that the fifteen hundred dollars that counsel has portrayed was spent for improvements and changes within the purview of the contract.'

 Section 694c-1 of Title 38 U.S.C.A., reads as follows:

 § 694c-1. Recovery of damages; jurisdiction; Attorney General as plaintiff in certain cases

 Whoever knowingly makes, effects, or participates in a sale of any property to a veteran for a consideration in excess of the reasonable value of such property as determined by proper appraisal made by an appraiser designated by the Administrator, shall, if the veterans pays for such property in whole or in part with the proceeds of a loan guaranteed by the Veterans' Administration under section 694a, 694b, or 694c of this title, be liable for three times the amount of such excess consideration irrespective of whether such person has received any part thereof. * * *

 This is the statute invoked by the plaintiff pursuant to which plaintiff claims to be entitled to judgment.

 In accordance with the provisions of the agreement of February 7, 1951, the veteran made application for a first mortgage in the sum of $ 10,300 pursuant to the provisions of the Servicemen's Readjustment Act of 1944, as amended, and the Franklin National Bank agreed to issue a mortgage for $ 10,300. After a required Veterans Administration appraisal was made for $ 12,500 a certificate of reasonable value was issued on October 8, 1951, and the mortgage was approved by the Veterans Administration.

 By virtue of the above the purchase price of this house could not in any way be augmented. The questions, therefore, remain (1) whether any of these items constituting the sum of $ 1,500 were in fact 'extras,' and (2) whether or not any increase in the purchase price of this house of whatever nature, whether for additional cost of construction or for ...


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