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Civil Resource Manual

208. Counterclaim In Suits On Notes And Mortgages

Frequently, counterclaims are filed in suits on notes and mortgages, arguing that the United States or one of its agencies through its appraisal of the property or the business prospects of a venture has in effect guaranteed success. The function of a government appraisal in such circumstances is to protect the government and its funds. See United States v. Longo, supra. The government does not guarantee the economic feasibility of a project, or that it will not shift personnel from an area or make loans to competing concerns. See Deseret Apartments v. United States, supra; Henry Barracks Housing Corp. v. United States, 281 F.2d 196 (Ct. Cl. 1960); Gross v. United States, 357 F.2d 368, 372 (Ct. Cl. 1966); Marcus Garvey Square, Inc. v. Winston Burnett Construction Co. of Cal., Inc., supra. Counterclaimants' allegations of government misrepresentation of the feasibility of a project falls within the express exception to the Federal Tort Claims Act, so that the court lacks jurisdiction to review the merits of such allegations. See Redmond v. United States, 518 F.2d 811, 814-16 (7th Cir. 1975); United States v. Thompson, 293 F. Supp. 1307, 1312 (E.D. Ark. 1967), aff'd, 408 F.2d 1075 (8th Cir. 1969); Lloyd v. Cessna Aircraft Co., 429 F. Supp. 181, 186 (E.D. Tenn. 1977); United States v. Sheehan Properties, 285 F. Supp. 608 (D. Minn. 1968).

Under loan insurance programs, the government only guarantees the repayment of loans insured by it and not the condition of the property. See United States v. Neustadt, 366 U.S. 696 (1961).