#### HENRY MERRITT v. THE UNITED STATES.1

[No. C-56.

Decided May 7, 1923.]

*On Defendant's Demurrer.*

*Contract; prime and subcontractors; privity; settlement.-*— -Where in a settlement between a prime and subcontractor the prime contractor conceals from the subcontractor knowledge of the receipt by it of a sum of money from the Government, due by it to the said subcontractor, there is no privity between the United States and said subcontractor and the Government is not liable to him for the money so withheld.

*The Reporter's*statement of the case:

*Mr. W. F.*Norris, with whom was *Mr. Assistant Attorney General Robert E.*Lovett, for the demurrer.

*Mr. L. A. Widmayer*opposed. *Mr. L. B. Perkms*was on the brief.

The following are the material allegations of the petition, to which the defendant demurs:

On July 23, 1918, plaintiff entered into a contract with the Panama Knitting Mills Co. to furnish it with 15,000 yards of khaki cloth at $3.20 a yard, which cloth was to be used in the manufacture of puttees for the United States Army under a contract the said Panama Knitting Co. had with the War Department, and thereafter the War Department suspended said contract with the Panama Knitting Mills Co.

Thereafter the Secretary of War proceeded to determine and settle the liability of the United States to plaintiff and the Panama Knitting Mills Co., according to the provisions of section 1 of the Dent Act, and ordered plaintiff to deliver for the use of the United States at the contract price of $3.20 per yard to the Panama Knitting Mills Co., and plaintiff did deliver 7,442|- yards of said khaki cloth for which the War Department paid to the Panama Knitting-Mills Co. for the account of plaintiff $3.20 a yard, or $23,817.20, plus $597.19 carrying charges for the five months *372said cloth had been held by plaintiff for delivery awaiting adjustment.

Notwithstanding the receipt for account of plaintiff as aforesaid of the contract price of said cloth, or $3.20 per yard, and which was unknown to plaintiff, at that time, the Panama Knitting Mills Co. informed plaintiff that the Secretary of War had only allowed $2.50 per yard for said cloth, and that he was compelling all contractors to take some loss in their settlements, and upon such fraudulent representation procured release from plaintiff for the said cloth, at the rate of $2.50 per yard, plus the carrying charge of $597.19.

When the aforesaid acts of the Panama Knitting Mills Co. became known, the War Department enforced and exacted from the said Panama Knitting Mills Co. a return of the difference in the settlement between it and the settlement the Panama Knitting Mills Co. had with plaintiff, to wit, the sum of $5,210.02, which money though demanded by plaintiff the War Department refused and refuses to pay to plaintiff.

And plaintiff prays judgment in the sum of $5,210.02 against the United States.

The defendant’s demurrer was sustained and the petition dismissed, with the following:

1

 Appealed.

MEMORANDUM

BY THE COURT.

1. The facts averred do not show a contract, express or implied, between plaintiff and the United States.

2. It appears that the Government paid the prime contractor the price for the goods delivered, and if the prime contractor imposed upon plaintiff, that fact does not give a cause of action against the defendant.