Case ID: us-ct-cl_174/html/0209-01.html
Source: Caselaw Access Project
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Date Created: 2024-08-24T03:29:51.129683

(355 F. 2d 606)
    ALBERT W. HIMFAR v. THE UNITED STATES
    [No. 328-60.
    Decided January 21, 1966]
    
      
      Robert S. Grodinsky, attorney of record, for plaintiff. Joseph B. Gildenhorn, of counsel.
    
      John R. Franklin, with whom was Assistant Attorney General John W. Douglas, for defendant.
    Before CowbN, Chief Judge, Laramore, Davis and ColliNS, Judges.
    
   Per Curiam :

Plaintiff in this action seeks to recover alleged damages resulting from the suspension by defendant of a certificate which authorized plaintiff to make shipments of manganese ore to the defendant in connection with the “Domestic Manganese Purchase Program.” The General Services Administration drafted and published in the Federal Register, on July 9,1952, a “Manganese Regulation: Domestic Manganese Purchase Program,” as revised and amended pursuant to the “sense of Congress” evidenced by the Defense Production Act of 19'SO. The regulation described as its purpose: “* * * to establish a Program to encourage expansion of domestic production of manganese by providing a uniform price scale for small domestic producers of metallurgical grade manganese ores and concentrates. * * *”

This regulation, inter alia, as amended and revised prior to September 2,1954, set the expiration date of the program at June 30,1958, and guaranteed minimum prices. It stated that anyone desiring to participate in the program by making sales to the General Services Administration (hereafter referred to as the defendant) of manganese ores that met the specifications detailed in the applicable regulations could make application to the nearest regional office of defendant in the form of a letter, postcard, or telegram, postmarked or dated by the telegraph office.

The plaintiff made such an application by letter dated February 5,1953, in which he stated:

I would like you to send me a certificate authorizing me to make shipments under the Domestic Manganese Purchase Program. [Sec. 704, 64 Stat. 816, as amended, Pub. law 429, 82nd Cong.] My ore is metallurgical grade, Domestic Origin. All mines are located in Eastern Tennessee in the vicinity of Mountain City, Tenn. This program was authorized by D.P.A. on May 9,1952. I have read this regulation and accept its terms and conditions. All ore or concentrate shipment will be over 40% manganese.

On October 12, 1953, F. W. Witt, Coordinator of Sales, Emergency Procurement Services, General Services Administration, Washington, D.C. (hereafter referred to as Witt), wrote to Albert W. Himelfarb enclosing a Certificate of Authorization No. 3-112, entitling the plaintiff to participate in the Domestic Manganese Purchase Program, and a copy of the applicable regulation.

During the period from October 12, 1953, to September 2, 1954, the plaintiff delivered approximately 979 tons of manganese ore to the defendant, for which he was paid the sum of $97,727.33. In early August 1954, the defendant received information from various sources that the ore being deliv-Bred by plaintiff herein might be of foreign origin. Acting on this information Witt directed that the latest shipment from plaintiff be neither unloaded nor paid for, pending an investigation to ascertain whether or not the ore being offered was of domestic origin.

Prompted by defendant’s refusal to pay for his last shipment of ore and by the existing rumors, plaintiff made a trip to Washington. On August 24, 1954, he was assured by the Director of the Compliance Division, GSA, that the investigation was currently being conducted on an expedited basis and that a report should be forthcoming within the “near future.” On August 25,1954, at Witt’s request, plaintiff executed an affidavit wherein he certified that all manganese ore shipped by him and ore to be shipped in the future was mined, or would have been mined, within the United States.

The preliminary reports submitted by agents of the Compliance Division of defendant revealed that some difficulty had been experienced in locating mines in production which were owned or leased by the petitioner, and they referred to the existence of rumors to the effect that plaintiff was mixing a higher grade foreign ore with a lower grade of domestic ore in order to upgrade the ore so that it would meet the minimum specifications required by the regulations. By letter dated September 2, 1954, Witt suspended plaintiff’s certificate, notifying him that, pending an investigation of his manganese operations, the defendant would no longer accept deliveries of manganese from him.

Upon receiving no further word from the GSA as to investigations being made or completed, plaintiff, on February 1, 1955, gave notice of an appeal from the action taken by Witt. After corresponding with plaintiff, the Board of Beview set a date (March 24, 1955) for a hearing.

In considering the appeal of plaintiff, the Board of Be-view concerned itself primarily with two principal questions: (1) Was the appellant a producer of manganese ore under the Domestic Manganese Purchase Program regulation, and (2) Was manganese ore of a foreign origin blended with domestic ore for upgrading purposes. On the basis of these considerations and the evidence presented to it, the Board of Keview concluded, in a decision rendered on May 4,1955, that plaintiff had not violated the applicable regulation, and recommended reinstatement of his certificate, No. 3-112, and his right to resume shipments. This recommendation was approved and plaintiff was notified that his certificate had been reinstated. However, plaintiff was unable or unwilling to resume operations for several reasons which have been referred to in finding 57.

Plaintiff filed suit in this court for damages resulting from loss of anticipated profits for the period from September 2, 1954 (the date of suspension of his certificate), to May 11, 1955 (the date on which he was advised of his reinstatement) ; loss due to deterioration of equipment; and loss of the pro rata use under a 2-year lease for his mining property.

Plaintiff contends that the defendant, by its manganese regulation, offered to purchase up to 10,000 long dry tons of manganese, at a minimum price, and that plaintiff, by his letter of February 5, 1953, accepted the offer and consummated the contract. Plaintiff asserts that the regulation was an invitation to deliver ore to defendant which would be accepted and purchased subject to the following conditions: (1) the'ore must meet minimum specifications set out in the regulation; (2) the shippers must be small producers; and (3) the ore must be domestic ore: Satisfactory compliance with these requirements obligated defendant to pay a fixed price under the applicable regulation. Plaintiff further contends that the subsequent suspension was entirely unreasonable and therefore defendant is liable for damages sustained by plaintiff as a result of the suspension.

It is defendant’s claim that the alleged contract, as asserted by the plaintiff, must fail totally for lack of consideration moving to the defendant 'from the plaintiff. The crux of defendant’s claim is that each shipment of ore, by anyone holding a certificate, if it met the three necessary conditions, created a contractual obligation on the part of the defendant to pay the designated price for such individual shipments. But defendant also says that that is the only obligation the Government assumed. This contention is not accepted because it limits too strictly the defendant’s obligation.

One of the purposes of the Defense Production Act of 1950 was to provide a supply of manganese ore without reliance on foreign sources. The Act sought to accomplish this purpose by encouraging the discovery of new ore sources through offers to buy manganese ore from small domestic producers, who placed themselves in the necessary posture to comply with the applicable regulation. As a measure of assuring interest in the program and the investment of capital, the defendant offered a substantial increase in the price prevalent in the world market during the period involved here. Belying on the defendant’s offer to purchase manganese ore at a fixed price, subject to the specifications set out in the regulation, plaintiff expended time and money in obtaining equipment, mineral leases, and manpower necessary for production of the ore. Nonetheless, defendant vigorously maintains that there is a total lack of mutuality and, therefore, no contract could possibly exist between the parties. This premise finds its rationale in the admitted fact that the plaintiff does not have any obligation by which the defendant could require delivery. However, plaintiff did place himself in a position to perform under the accepted terms of defendant’s regulation. At substantial expense, plaintiff searched for and obtained domestic deposits of manganese ore, thereby complying with one of the primary objectives sought by Congress in passing the Defense Production Act of 1950.

The proper approach to a governmental arrangement of this type has been indicated by the decisions of this court in Padbloc Co., Inc. v. United States, 161 Ct. Cl. 369 (1963) and Radium Mines, Inc. v. United States, 139 Ct. Cl. 144, 153 F. Supp. 403 (1957). In the former, the court pointed out “that there are many situations in which the outline of the transaction appears unilateral but a return promise can * * * often be seen in a document, an act, or a course of conduct” (id., at 377-78). It was also noted that the modern trend in the law of contracts “looks toward holding, if justice so requires, one whose promissory words have induced significant action in reliance (even though there be no technical consideration in the narrow sense)” (id., at 379). In Radium Mines the court read an Atomic Energy Commission mining-circular (“Ten Year Guaranteed Minimum Price”)— providing that the Commission would pay certain guaranteed prices for uranium ore (of a specified type) over a ten-year period — as ripening into a contract when it was accepted by the producer’s putting itself in a position to supply the ore described in the circular. See, also, Aycock-Lindsey Corp. v. United States, 171 F. 2d 518, 521 (C.A. 5, 1948).

In this case, as in Radium Mines, the Government’s purpose was to induce persons to find and mine a wanted mineral, and this purpose was to be achieved by the payment of a guaranteed uniform price, higher than the then market price. As in Padbloe, the Government’s language in its manganese regulation reasonably induced significant action by plaintiff in reliance upon the promise to receive and pay for the ore. At least in the case of a producer (like plaintiff) who expended efforts to find and obtain ore in response to the regulation — and who had been granted the required certificate — there arose an obligation on the part of the defendant to receive and pay for minerals falling within the requirements of the regulation. The consideration for this obligation was the plaintiff’s finding of manganese and his efforts to produce it. There was, in a word, an obligation and a promise by the defendant to allow the plaintiff to find, ship, and receive payment for such ore. This seems, also, to have been the view of the Office of Defense Mobilization which was directly concerned with this program (see finding 13(c)).

In these circumstances, it would be unduly harsh and unreasonable to permit the defendant to suspend the plaintiff’s certificate when the suspension, precipitated solely by unconfirmed rumors, was later found to be unwarranted and was vacated. Such action would be a breach of contract. Edgerton v. United States, 127 Ct. Cl. 515, 117 F. Supp. 193 (1954). If defendant bad good reason to believe that a certain certificate bolder was proceeding in violation of tbe requirements specified in the regulation, it could terminate or revote bis certificate, notifying tbe certificate bolder that any error or injustice bad its remedy in a timely appeal to tbe Board of Review. There was no specific provision for suspension of tbe certificate either in the regulations or in tbe correspondence with plaintiff, but we can assume that there was a potential authority to suspend, if the facts warranted it, in tbe Administrator of tbe General Services Administration. But where, as here, tbe suspension-for-mvestigation proves to be unfounded and there was in fact no violation, the defendant cannot rely on some inherent power to investigate any suspicion or rumor of violation as justification for cutting off the producer’s right to ship and receive payments “pending completion of an investigation of your Manganese operations.”

Based upon consideration of all the evidence, it is found that the defendant acted unreasonably and without proper authority or substantial evidence in. suspending the certificate of plaintiff and that, as a result of such unreasonable and improper action, the plaintiff sustained damages in the manner and amounts set out below.

As previously stated, damages sustained by plaintiff as a result of defendant’s action in suspending the plaintiff’s certificate can be divided into three categories, which are: (1) loss of anticipated profits for the period from September 2, 1954, until May 11, 1955, (2) loss of equipment, and (3) loss of the pro rata use under a 2-year lease (hereafter sometimes referred to as the Jenkins lease). If proved, these are proper elements of damage. Edgerton v. United States, supra, 127 Ct. Cl. at 522, 117 F. Supp. at 196-97. We shall be concerned solely with the amount of damages, if any, allowable under category (1), for there is no dispute between the parties as to the amount of damages under categories (2) and (3). The amounts for those items are as follows: For the second category, $6,136.48, and for the third category, $1,350.

The measure of damages allowable under category (1) presents a problem that is not without minor complications. The evidentiary guides are few, for they consist solely of plaintiff’s operations reflected by the books of the Yirtennco. Corporation and the testimony of defendant’s auditors regarding these books.

Regardless of the problems which may arise in any attempt to prove anticipated profits, it is not necessary that, plaintiff present proof of the amount of damages with an. absolute certainty. As stated by this court in Chain Belt Company v. United States, 127 Ct. Cl. 38, 59, 115 F. Supp. 701, 714 (1954):

* * * The more recent and general view of the courts-, seems to be that if the fact of damage, that is, lost profits,, is certain, uncertainty as to the precise amount lost is not necessarily fatal to recovery. * * *

Plaintiff has used as the measure of damages a computation, which is based on a recovery of. profits for an 8-month period of suspension at the same rate which prevailed du-ring-the 8 months preceding suspension, without an allocation of exploration costs. The defendant’s theory for measuring damages differs, from plaintiff’s in that defendant includes the expenses for the additional period from August 1,1953, to December 31, 1953. It is concluded that the record and better reasoning dictate the use of a monthly profit rate based on a 13-month period (August 1, 1953 to September 2, 1954), with an allocation of exploration costs over a. period of 3 years and the application of the 8-month suspension period to the monthly profit rate in arriving at a, proper measure of damages under category (1).. .

Beginning with August 1, 1953, the date of opening of' the books of the Virtennco Corporation, and ending with September 2, 1954, the date of Witt’s suspension letter, the defendant’s audit revealed that the company incurred expenses of $19,288.32 for the period from August 1, 1953, to. December 31,1953, and $55,340.37 for the period January 1, 1954, to September 2, 1954, for total expenses .of $74,628.69-for the two. periods. During this entire time the income from sales of manganese ore to the defendant was $97,727.33, which income was substantially received during the latter period. The net overall operating profit for the 13 months amounted to $23,098.64, without any allocation of exploration costs ($97,727.33 less $74,628.69).

According to the audit, the expenses incurred during the early period of operation, or during 1953, included an amount of $10,992.35 for exploration costs. This item consists of those costs incurred in exploration and development of the mining venture,, and, as such, would normally be allocated over a period of years, rather than charged in its entirety to current operations. The record does not contain a plethora of information from which a period of time might be derived for such an allocation. However, the record does establish that the petitioner had been in operation since August 1953 and that no mining lease held solely by the petitioner extended beyond 1956. For this reason it is concluded that 3 years is a reasonable period over which to allocate the exploration and development costs. After an allocation of these costs, the net profit for 13 months is recalculated to be $30,121.53, with the monthly profit rate being $2,317.04 which yields a final figure for loss of anticipated profits of $18,536.32.

It is therefore found that plaintiff is entitled to recover a total of $26,022.80, as outlined under the following categories:

Loss of profit (8 months)_ $18,536.32
Loss of equipment_ 6,136.48
Pro rata loss of use on a 2-year lease_ 1,350. 00
Total_ 26,022.80

Findings of Fact

1. Plaintiff, Albert W. Himelfarb, changed his name, by court order, to Albert W. Himfar on October 15, 1954.

2. On September 8,1950, the President signed into law the Defense Production Act of 1950, 64 Stat. 798, 50 U.S.C. App. § 2061, et seq. Section 2 of the Act set forth a “Declaration of Policy,” the first paragraph of which reads as follows:

It is the policy of the United States to oppose acts of aggression, and to promote peace by insuring respect for world law and the peaceful settlement o± differences among nations. To that end this Government is pledged to support collective action through the United Nations and through regional arrangements for mutual defense in conformity with the Charter of the United Nations. The United States is determined to develop and maintain whatever military and economic strength is found to be necessary to carry out this purpose. Under present circumstances, this task requires diversion of certain materials and facilities from civilian use to military and related purposes. It requires expansion of productive facilities beyond the levels needed to meet the civilian demand. In order that this diversion and expansion may proceed at once, and that the national economy may be maintained with the maximum effectiveness and the least hardship, normal civilian production and purchases must be curtailed and redirected.

3. Section 308 of the Act is, in part, as follows:

* * * [T]he President may make provision (1) for purchases of or commitments to purchase metals, minerals, and other raw materials, * * * for Government use or for resale; and (2) for the encouragement of exploration, development, and mining of critical and strategic minerals and metals * * *.

Section 701 of the Act is, in part, as follows:

(a) It is the sense of the Congress that small-business enterprises be encouraged to make the greatest possible contribution toward achieving the objectives of this Act.
(b) In order-to carry out this policy—
(i) the President shall provide small-business enterprises with full information concerning the provisions of this Act relating to3 or of benefit to, such enterprises and concerning the activities of the various departments and agencies under this Act;
*****
(iii) in administering this Act, such exemptions shall be provided for small-business enterprises as may be feasible without impeding the accomplishment of the objectives of this Act; and
(iv) in administering this Act, special provision shall be made for the expeditious handling of all requests, applications, or appeals from small-business enterprises.

4. On August 7, 1953, the President signed into law the Domestic Minerals Program Extension Act of 1953, which extended the termination dates of programs undertaken in accordance with the provisions of the Defense Production Act of 1950, 67 Stat. 417, 50 App. U.S.C. 2181, et seq. Section 2 of the Act set forth a congressional declaration of policy as follows:

It is recognized that the continued dependence on overseas sources of supply for strategic or critical minerals and metals during periods of threatening world' conflict or of political- instability within those nations-controlling the sources of supply of such materials-gravely endangers the present and future economy and security of the United States. It is therefore declared to> be the policy of the Congress that each department and agency of the Federal Government charged with responsibilities concerning the discovery, development,, production, and acquisition of strategic or critical minerals and metals shall undertake to decrease further and" to eliminate where possible the dependency of the United States on overseas sources of supply of each such material.

5. The General Services Administration drafted and published in the Federal Register on July 9,1952 (17 F.E. 6154) a “Manganese Begulation: Domestic Manganese Purchase-Program.” This regulation was issued pursuant to Section 704, 64 Stat. 816, as amended, Public Law 429, 82d Cong., as. amended.

6. The manganese regulation was revised by GSA on February 19, 1953 (18 F.E. 1112), and amended, from time to time, prior to September 2,1954 (Amendment 1, August 18,. 1958, 18 F.E. 4909; Amendment 2, October 1, 1953, 18 F.B.. 6266; Amendment 3, July 13,1954,19 F.E. 4230). Amendments subsequent to September 2, 1954, are not pertinent,, since they occurred after the time period involved here.

7. The manganese regulation, as revised and amended by-GSA as aforesaid, was distributed generally to the. industry and numerous prospective participants in the Domestic Manganese Purchase Program, as defined in Section 2(e) thereof. The regulation was distributed upon request to all interested parties and freely available to the public. The regulation was distributed to all participants in the program directly from the Emergency Procurement Services of the GSA. The contents of the regulation were well known to the industry- ;and the information contained therein was widely ■disseminated.

8. The regulation described its purpose (in Section 1) as follows:

* * * to establish a Program to encourage expansion of domestic production of manganese by providing a uniform price scale for small domestic producers of metallurgical grade manganese ores and concentrates. * * *

Section 4 provided (in part):

Participation in the Program. Any small domestic producer desiring to participate in the Program shad make application to the nearest General Services Administration regional office in the form of a letter, postcard or telegram postmarked or dated by the telegraph office on or before June 80,1953 stating (a) that applicant has read this regulation and accepts its terms and conditions, and (b) that applicant desires to participate in this Program, and will offer manganese ore or concentrates to the Government pursuant thereto. * * *

In addition, the regulation established a termination date of the program (by revision and various amendments prior to September 2,1954) of June 30,1958, guaranteed minimum prices specified for certain manganese-bearing ores.

9. Plaintiff was first informed of the defendant’s purchase program for manganese ore by Jim Ammons, a chemist, while he and Ammons were mining in New Mexico and in Mexico. It was in this area for a period of some years that plaintiff gained experience in the exploration and mining of manganese ore.

10. The prices paid by the GSA, as provided in the manganese regulation, for the purchase of manganese ore and concentrates were substantially higher than the prices then being paid in the market for manganese ore and concentrates. The open market prices-during the period involved here were at such a low level that it was financially prohibitive for small producers to attempt a large scale expansion of domestic exploration and development in the mining of manganese ore. That statement applies particularly to producers of less than 10,000 long dry tons in any calendar .year, as was envisaged by the Defense Production Act of 1950 and the Domestic Minerals Program Extension Act of 1953.

11. Early in 1953 plaintiff went into tibe Virginia-Tennessee area in search of deposits of manganese ore, with the intention of mining and selling such ore to the defendant.

12. On February 5, 1953, plaintiff wrote to the regional director of the GSA requesting a certificate authorizing him to make shipments under the Domestic Manganese Purchase Program. In this letter plaintiff agreed to accept the terms and conditions of the regulation which established the program.

13. (a) Under the Domestic Manganese Purchase Program, the defendant was obligated to purchase all manganese which met the requirements of the regulation at prices provided therein.

(b) During 1954 domestic ore containing up to 48 percent manganese was being purchased by the defendant at $2.30 a long dry ton.

(c) Arthur S. Flemming, Director of the Office of Defense Mobilization, in testimony given before the Subcommittee on Mines and Mining of the Committee on Interior and Insular Affairs, House of Representatives, on June 25, 1956, stated: “* * * I cannot conceive of anyone taking such action [revocation of the order extending the manganese program] because he would open the Government up to the charge of bad faith immediately.” He further indicated that the relationship between the Government and the mining industry established by the program came “as close to a formal contractual arrangement between the Government and industry as you possibly could get.”

(d) These circumstances, when considered in conjunction with the complete record, support the existence of an obligation, sounding in contract, on the part of the defendant, once plaintiff had placed himself in a posture of performance in conformity with the regulation by exploration for and acquisition of mining locations.

14. (a) Immediately upon entering the Virginia-Tennessee region in 1953, plaintiff began exploration of the area for the purpose of locating manganese ore.

(b) In conjunction with Herman I. Weiner, plaintiff’s brother-in-law, plaintiff entered into several lease agreements, some in his own name and others solely in Weiner’s name.

(c) A log washer and mill were built at Laurel Bloomery, Tennessee, near the location of five mines.

(d) Plaintiff did extensive earth-moving in an effort to discover ore, build settling ponds and roads.

15. From August 1, to December 31, 1953, plaintiff expended $10,922.35 for exploration and development. Exploration was carried out at Laurel Bloomery and Savage Prospect on Iron Mountain, otherwise known as Bed Hill. Mines were eventually operated in a number of other locations.

16. On October 12, 1953, plaintiff received a Certificate of Authorization (No. 3-112), entitling him to participate in the Domestic Manganese Purchase Program. The certificate was issued by F. W. Witt, Coordinator of Sales, GSA, Washington, D.C. (hereafter referred to as Witt). It authorized plaintiff to deliver to the defendant, in accordance with the terms of the program, manganese ore meeting the minimum specifications outlined therein.

17. Previously plaintiff had been furnished a copy of the original regulation, dated July 9,1952, a copy of one correction, which was published in the Federal Register on July 24, 1952, and the regulation as first revised February 19, 1953.

18. Late in the summer of 1953, Herman I. Weiner (hereinafter referred to as Weiner), plaintiff’s brother-in-law, came to the Yirginia-Tennessee area to observe plaintiff’s operations. Initially, Weiner lent money to plaintiff to enable him further to explore and develop the mining operations. Eventually the two men, plaintiff and Weiner, worked together in the Yirginia-Tennessee area, entering into various formal and informal arrangements for the acquisition and mining of properties, including but not limited to areas known as York and Shady Yalley properties.

19. In late 1953, Virtennco Corporation (hereinafter referred to as Yirtennco) was incorporated in Smyth County, Yirginia. The certificate of incorporation named Albert W. Himelfarb (see finding 1) as president of the corporation and Herman I. Weiner as secretary-treasurer of the corporation.

20. In March of 1954, Weiner, as secretary-treasurer of Yirtennco, applied by undated letter, addressed to Region 3 of tbe GSA, for a certificate of authorization to ship manganese under the Domestic Manganese Purchase Program. In response thereto, on March 17,1954, Certificate No. 3-118 was issued to Virtennco.

21. Manganese ore was not shipped under the Virtennco certificate because the corporation was never active, independent of plaintiff, who was in control of it. The quality of manganese ore shipped to defendant was measured on the basis of a 10-car average. Since plaintiff had maintained a high 10-car assay average, he preferred to continue shipments under his own certificate (No. 3-112). (See Board of Review action with respect to certificate No. 3-118 in finding S4.)

22. Defendant was informed by plaintiff of his connection with Virtennco.

23. From October 12,1953, to September 2,1954, plaintiff delivered approximately 980 tons of manganese ore under the authority of certificate No. 3-112, for which he was paid the sum of $97,727.33. This sum of money was reported to the Internal Revenue Service as income received by Virtennco.

24. During the course of mining operations, plaintiff purchased, and thereafter blended, high grade manganese ore, assaying approximately 60 percent manganese content, which had been mined on a property known as Blake Hill, in Bates-ville, Arkansas, with ore that he had mined in Tennessee and Virginia. In addition, the plaintiff purchased low grade manganese ore from properties in the Virginia-Tennessee area, and blended it with ore that he mined in Virginia and Tennessee.

25. “Blending” of manganese ore consists of mixing ore that is marginal in value with high-grade ore, in order to arrive at an average percentage of manganese which complies with the requirements or specifications. Blending was not prohibited by the regulation. It was a common practice at the time, well known by the authorities who administered the Domestic Manganese Purchase Program.

26. The minimum manganese content of ore acceptable to ■defendant under the Domestic Manganese Purchase Program was 40 percent. Plaintiff blended ore of different grades to meet the grade required by the regulation.

27. The manganese ore shipped by plaintiff for the period from January 19, 1954, to June 21, 1954, was checked by the Pittsburgh Testing Laboratory under contract with defendant to see that it met the minimum requirements of the regulation. Pittsburgh Testing Laboratory had the contract for assaying in the area known as Eegion 3 under the Domestic Manganese Purchase Program. The laboratory assayed 13 carload lots offered for shipment by plaintiff. The manganese content of these carload lots ranged from a high of 57.02 percent to a low of 41.43 percent. Copies of the assay reports were sent to Witt. Witt believed the process of analysis utilized by the Pittsburgh Testing Laboratory was satisfactory.

28. In June 1954, the Pittsburgh Testing Laboratory was replaced by Andrew 'S. McCreath & Son (hereinafter referred to as McCreath), when the former’s contract expired. McCreath’s contract ran for a year, or until June 30, 1955.

.29. McCreath employed Messrs. Hunter and Adams as samplers of ore delivered in Eegion 3 to the GSA. Prior to May 1954, Hunter and Adams had never sampled in the Virginia-Tennessee area and had never compared ore from that area with imported ore, though they had had a great deal of experience with imported ore.

30. On August 10,1954, Hunter sampled and screen-tested manganese ore supplied by plaintiff from two railroad cars at Chilhowie, Virginia, which was located in Eegion 3, and examined a portion of the sample with Adams. These men had not previously sampled plaintiff’s ore. A portion of the sample was assayed by McCreath and showed a manganese content of 60.3 pecent. Adams then expressed the opinion that the ore examined was of Indian origin. On or about August 12, 1954, these two carload lots were shipped via Norfolk & Western Eadlroad.

31. On August 5,1954, 5 days-prior to the McCreath sampling, Witt wrote a letter for the signature of Commissioner A. J. Walsh addressed to Mr. Harry E. Harman, Jr., regional director, Eegion 4, GSA, requesting that Harman have the Compliance Division check on the source of plaintiff’s manganese ore. • . •

32. Pursuant to Harman’s request, and after obtaining approval of the investigation from Baron I. Shacklette, Director of the Compliance Division in Washington, Kobert J. Benson, special agent, Atlanta Field Office, Compliance Division, conducted an investigation and filed a report, dated August 25,1954. (This report is referred to hereinafter as the Benson report.)

33. The Benson report was first sent to James A. McMain, a special agent in the Compliance Division, Washington, who received it August 26, 1954. On August 30, 1954, McMain referred the report to John F. Colbert, another special agent, Compliance Division, Washington, for necessary action in that office. Colbert had been assigned to the case by Mr. Shacklette.

34. On September 2, 1954, the same day he received the Benson report, Witt wrote a letter advising plaintiff that he could no longer ship manganese ore under the Domestic Manganese Purchase Program, pending completion of an investigation of plaintiff’s manganese operations. Witt’s letter suspending plaintiff’s operations was based primarily on information contained in the Benson report. Plaintiff received no other report concerning investigation of his operation.

35. On September 8,1954, Colbert initiated a further investigation concerning information contained in the Benson report, and, after closing his investigations on December 21, 1954, prepared a report, dated January 27, 1955. (See finding 49 for details of this report.)

36. Colbert’s report was sent to McMain, who, at the time of the trial, could not remember reading it. The trial record does not reflect what specific action was taken as a result of this investigation, but the suspension was subsequently vacated.

37. Prior to the suspension of plaintiff’s operations on September 2,1954, and after the shipment of two carload lots of manganese ore on August 10 and 11, 1954, for which prompt payment was not received, plaintiff began to hear reports from persons in the Virginia-Tennessee area that he was being investigated by the defendant.

38. Sometime in August of 1954 plaintiff went to Washington to get paid for the two carload lots of manganese ore shipped by him and to inquire about the stories he had heard of the investigation concerning his operations in the Virginia-Tennessee area.

39. On August 25, 1954, at Witt’s request, plaintiff signed an affidavit in which he stated that all the ore shipped by him to date was of domestic origin and that all future ore to be shipped by him would be mined in the United States. Plaintiff asked Witt about the rumors circulating in the Virginia-Tennessee area about an investigation of him by the Government, and Witt advised him that the Compliance Division might be able to give him some information concerning the matter.

40. Plaintiff went to the Compliance Division but was unable to obtain any further information about the investigations. A short time after the suspension of plaintiff’s certificate, plaintiff went again to Washington and inquired of Witt, as well as other individuals in the Compliance Division, concerning the reasons for his suspension. He was told nothing of any substance by anyone with whom he spoke at the Compliance Division or elsewhere.

41. Plaintiff was not informed as to why Witt and/or the Compliance Division, believed he was including foreign ore in his shipments until February 17,1955, on which date plaintiff was advised by Witt that the “investigation did not disclose that you either owned or leased and operated a manganese mine.” Later, by letter dated March 21, 1955, plaintiff was advised by Witt that sample ore delivered by the plaintiff indicated that the manganese ore was not common to the local area in which he had mined ore.

42. Plaintiff was asked previously, in September 1954, to produce documents showing the location of his mines. He produced leases, some of which were procured in the name of Herman I. Weiner, and other records, and submitted some of them to Colbert on October 20,1954.

43. After the investigation of plaintiff’s mining operations commenced, plaintiff was assured by McMain that the investigation was being conducted on an expedited basis; and it was expected that a report would be received from the investigating agent within, a short time. Earlier, in August 1954, Witt and others had similarly advised plaintiff.

44. Colbert was advised by Witt on December 20,1954, that plaintiff had been suspended because Witt suspected plaintiff was shipping foreign ore. Colbert, during his investigation of plaintiff, saw plaintiff at least a half dozen times. Colbert never questioned plaintiff about the suspicions that plaintiff was shipping foreign ore.

45. The Benson report, which was before Witt when he sent his letter to plaintiff dated September 2,1954, contained the following data about plaintiffs operations:

(a) Jim Ammons, Valley Mining Company, Ltd., told Benson that plaintiff had operated a mine outside of Mountain City, Tennessee, another outside of Laurel Bloomery, Tennessee, another at Chilhowie, Virginia, and that he was presently operating a mine in Shady Valley, Tennessee, and preparing to open a mine near Mill Creek, outside of Butler, Tennessee.

(b) A rumor that Jim Ammons had been offered foreign ore by plaintiff was denied by Ammons.

(c) A truck bearing Indiana license plates, delivering manganese ore to plaintiff, broke down in Chilhowie, Virginia.

(d) The sampler employed by McCreath stated that some of plaintiff’s ore appeared to be of Indian origin.

(e) Plaintiff was blending manganese ore.

(f) The title of the report was changed to Virtennco Corporation, to include the firm name and the names of the officers.

46. Witt testified that he suspended plaintiff’s mining activities on the basis of the Benson report,, .which indicated that neither planitiff nor his mines could be found. He also stated that he was fearful that plaintiff was shipping foreign manganese ore and that he desired to have the matter investigated.

47. On March 24, 1955, Colbert advised the Board of Review, GSA, on the basis of the Benson report, that an informant had stated that plaintiff had offered the informant foreign ore for the purpose of blending.

48. The report prepared by Colbert, subsequently sent to McMain, did not find its way into the files of Witt or anyone else who was responsible for taking action in the plaintiff’s case.

49. The Colbert report included the following items:

(a) A list of ten firms which import Indian manganese ore.

(b) A quote from Witt, who stated that it is impossible to distinguish between foreign and domestic ore.

(c) A quote from plaintiff stating that he could not understand the reason for his suspension.

(d) The location by Colbert of plaintiff’s affidavit that all ore mined by plaintiff was of domestic origin.

(e) The physical location of leases and deeds executed by plaintiff, Weiner, and Virtennco in the Virginia-Tennessee area, cancelled checks, employees quarterly tax returns, and a geological survey, among other items, in the records of the defendant.

(f) A statement that no further investigation is required.

50. Although apparently suspicious and desirous of an investigation of the Indiana license plates on a truck bringing ore to plaintiff, Witt neither investigated the matter nor directed the Compliance Division to investigate the matter. He did not ask plaintiff about it, although he talked with plaintiff on several occasions.

51. Plaintiff first heard of the alleged Indiana license plates at a hearing before the GSA Board of Beview, and he there stated that the truck came from Batesville, Arkansas. Subsequently he produced an affidavit from the sheriff of Chil-howie, Virginia, to this effect, and gave it to the members of the Board of Beview.

52. Colbert did not contact the business organizations which he listed in his report as firms which were importing manganese ore. The record does not establish that anyone else contacted those firms. The best grade Indian manganesa ore assays about 52 percent manganese, and it is not classified as high grade. Mexican-manganese ore contains high silica percentages in excess of the silica content permitted by GSA regulation, and is generally low in manganese content. According to proof adduced at the trial, foreign ore, which would analyze as high as 60 percent manganese content, in any appreciable quantities, is not obtainable from any source.

53. In February of 1955, by which date no person had expressly informed plaintiff of the reasons for the suspension, he decided to retain counsel. Counsel for plaintiff requested a hearing, and on March 24,1955, a hearing was held before the GSA Board of Review in Washington, D.C., with the following members present: H. M. Kurth, Acting Chairman; James T. Gobbel; and Archie Cohen.

54. On May 4,1955, approximately 8 months after the suspension letter from Witt, dated September 2, 1954, was sent to plaintiff, the Board of Review unanimously concluded as follows:

On the basis of the evidence presented to the Board of Review, the Board can only conclude that the appellant produced or obtained domestic ore for shipment to the Government, and by so doing, was not in violation of the regulation. Therefore, the appellant was a producer of manganese ore within the meaning of such term as defined in Section 2(e) of the Manganese Regulations under the Domestic Manganese Program.

On the same day the Board made recommendations concerning certificates Nos. 3-112 and 3-118 as follows:

1. That the decision of the Coordinator of Sales, Emergency Procurement Service, suspending the appellant’s right to ship domestic manganese ore under the Domestic Manganese Ore Purchase Program, be vacated Sbxici. sst aside
2. That the Certificate No. 3-118 issued to the Vir-tennco Corporation, of March 17, 1954, be cancelled forthwith.
3. That the appeal of Albert W. Himelfarb be granted and his right to ship manganese ore under the Domestic Manganese Purchase Program, pursuant to Certificate of Authorization No. 3-112, issued October 12, 1953, should be continued.

55. The recommendations were approved on May 5, 1955, by Edward F. Mansure, Administrator, GSA, and the notice of the recommendations of the Board and approval by Man-sure was sent by letter to plaintiff. Thereafter, on May 11, 1955, 8 months and 9 days after the suspension, Witt advised plaintiff that his certificate (No. 3-112) to ship under the Domestic Manganese Purchase Program had been reinstated.

58. As of September 2, 1954, plaintiff’s mining operations in the Virginia-Tennessee area were being successfully and profitably performed. Plaintiff closed his mining operations in the Virginia-Tennessee area shortly after receipt of Witt’s letter of September 2,1954.

57. Plaintiff was unable to profitably resume the mining of manganese in the Virginia-Tennessee area subsequent to May 11,1955, because (1) his equipment had been, to a great extent, cannibalized, (2) settling basins had broken down, (3) roads were damaged or destroyed, (4) manganese mines had caved in, primarily because of neglect and the weather, (5) his personnel had been hired by other operating companies, (6) leases on some properties were expiring, (7) his operations were of limited size and he was unable to resume without investment of new capital, and (8) he was looked upon with suspicion by many inhabitants of the area because of the defendant’s action in suspending his certificate to engage in manganese production.

58. The defendant’s audit revealed that plaintiff’s mining operation, as discernible through the books and records of Virtennco, incurred expenses of $19,288.32 for the period from August 1, 1953, to December 31, 1953, and $55,340.37 for the period from January 1,1954, to September 2,1954, for total expenses of $74,628.69 for the two periods. During this entire time, i.e., from August 1, 1953, to September 2, 1954, the income from sales of manganese ore to the defendant was $97,727.33, which income was substantially all received during the latter period. The net overall operating profit for the 13 months amounted to $23,098.64.

59. According to the audit, the expenses incurred during the early period operation, or during 1953, include an amount of $10,992.35 for exploration costs. This expense item consists of those costs incurred in exploration and development of the mining venture, and, as such, are normally allocated over a period of years, rather than charged in their entirety to current operations. Since the record establishes that the plaintiff had been in operation since August 1953, and that no mining lease lield in bis name, nor any lease to tbe rights of which he has definitely proved a claim, extends beyond 1956, it is concluded that 3 years is a reasonable period over which to allocate the exploration and development costs. It is concluded that a monthly profit rate based on a period of 13 months of plaintiff’s operations is reasonable.

60. After applying the expenses and the exploration costs, set out in findings 59 and 60, respectively, to the gross income, the net profit for the entire 13-month period, i.e., from August 1,1953, to September 2,1954, yields a figure of $30,121.53, with a monthly average of $2,317.04. Therefore, the loss of profits for a period of 8 months is the sum of $18,536.32.

6L Plaintiff sustained a loss of equipment in his mining operations, cognizable through the books of Yirtennco, of $6,136.48.

62. One of the properties mined by plaintiff was located at Shady Yalley, Johnson County, Tennessee. The property was owned by George D. Jenkins and his wife, Mary Ellen Jenkins, from whom it was leased on April 29, 1954, for $2,700 for a period of 2 years, in the name of Herman I. Weiner. It is found that plaintiff sustained a loss of $1,350, cognizable through the books of Yirtennco, the amount being one-half of the original price of the lease for the Jenkins land for a period of 2 years.

G3. The total loss sustained by plaintiff as the result of the suspension of his certificate (No. 3-112) from September 2, 1954, until May 11, 1955, includes a loss of profits in the amount of $18,536.32, a loss of equipment valued at $6,136.48, and a loss under the Jenkins lease of $1,350, for a total of $26,022.80.

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover in the amount of twenty-six thousand, twenty-two dollars and eighty cents ($26,022.80) and judgment is entered to that effect. 
      
      This opinion is based, with some additional discussion, on tbe opinion prepared, at tbe direction of tbe court under Rule 57(a), by Trial Commissioner Paul H. McMurray.
     
      
       See findings 2 to 8, inclusive, for specific provisions of the Defense Production Act of 1950 and the regulation issued pursuant to the Act.
     
      
       The regulation defined a “small domestic producer” as one whose total anticipated or actual production of manganese ore or concentrates mined and milled In the continental United States annually Is less than 10,000 long dry tons.
     
      
       Plaintiff Albert W. Himelfarb, changed his name by court order, to Albert W. Himfar on October 15, 1954.
     
      
      
         Shortly thereafter, plaintiff was paid for all previous shipments.
     
      
       Assuming liability is established, there is no dispute as. to .the amount of the damages under the last two items.
     
      
      Defendant does not deny, in fact its witnesses admit, that it would be required to accept shipments of ore which met the specifications set out in the regulation.
     
      
       Since plaintiff kept records of Ms operations through the corporate entity of Virtennco, it is not unreasonable to assume that the books of Virtennco. Corporation realistically reveal his income and.expenses for the periods from August 1, 1953, to December 31, 1953, and from January 1, 1954, until September 2, 1954.
     
      
       For detailed computation ot these amounts see findings 58 to 63, inclusive.
     
      
       Special agent Colbert stated that he received the report from special agent Jane H. Payne, rather than McMain.