#### CALIFORNIA PACKING CORPORATION v. THE UNITED STATES

[No. C-1137.

Decided December 7, 1925]

*On the Proofs*

*Purchase order; provisional price.'*— -Where the price named in a Navy order is stated as for an advance payment and subject to later determination of what is just and reasonable, the plaintiff is assured therein that it will receive a reasonable profit, and does not accept the tentative price so named, but makes the required deliveries, it is entitled to compensation based upon the fair market value at the time and place of delivery. See *Pocahontas Fuel Go. case, ante,*p. 231.

*The Reporter’s*statement of the case:

*Mr. Spencer Gordon*for the plaintiff. *Mr. J. Harry Cov-ington*and Covington, *Burling & Rublee*were on the briefs.

*Mr. John G.*Dudley, with whom was *Mr. Assistant Attorney General Herman J. Galloway,*for the defendant. *Mr. Howard W. Ameli*was on the brief.

The court made special findings of fact, as follows:

I. The plaintiff is, and was, during the period involved, a corporation incorporated under the laws of New York, having its principal place of business in San Francisco, and owning and operating several canneries in the State of California.

II. Together with other canned products, plaintiff manufactured catsup known and widely advertised under the name and style of “ Del Monte Brand.” This brand was of the quality known to the trade as “ extra,” as distinguished from “ standard,” the distinguishing feature being that the former is made, either directly or indirectly, from selected and trimmed ripe tomatoes, while the latter is made, either directly or indirectly, from unripe or overripe tomatoes or from trimmings.

For the purpose of iulfilling contracts not contemplated at the time of the manufacture of the catsup as a finished article, it was customary to manufacture what was *273known as *“*puree.” This puree was, simply stated, a stock of stewed and strained tomatoes which could be used as a basis for the later manufacture of catsup as the occasion demanded. It appears that there was no appreciable difference in quality between catsup manufactured directly from the tomato or indirectly through the medium of the so-called puree.

III. Shortly after the entrance of the United States into war, there was formed what was known as the California preserved food committee, composed of representative individuals of the preserving industries located in that State. The plaintiff was represented on this committee through one of its officers. The committee had no official power or obligations in connection with the United States but functioned in a quasi-official character as broker between the packers of preserved foods and the Government, collecting and disseminating information for both.

IV. On November 5, 1917, this committee sent a bulletin to the plaintiff advising that the Government had called for tomato catsup, and requesting plaintiff to advise whether or not it had packed tomato catsup that year; and if so, in what quantity; and further requesting plaintiff’s ideas as to price.

V. On November 6, 1917, the plaintiff replied giving the condition of its catsup supply and offering to furnish 5,000 cases No. 5 tins of catsup at $5.50 per dozen tins, and 10,600 cases No. 10 tins at $9 per dozen tins, the net contents of No. 5’s being 56 per cent of No. 10’s. This price was to include strapping of cases, which is a binding by wire or metal strips of cases for overseas shipment. Plaintiff also stated in the letter that it could not furnish any more unless it converted puree which it then had in containers.

VI. The committee on November 10 wired the, United States Food Administration the plaintiff’s offer on the No. 5’s and under date of November 17 received a letter from the Food Administration advising of their understanding that the Navy had that day issued orders for 5,500 cases of No. 5 at the $5.50 price offered by the plaintiff. On No*274vember 17 and 20 the Paymaster General of the Navy wired plaintiff that Navy Order 1231 had been awarded plaintiff.

VII. Thereupon, at a time between November 21,1917, and December 4,1917, plaintiff received Navy Order No. N-1231, which it accepted in writing thereon. The date of acceptance does not appear, but it does appear that it was returned accepted on December 4, 1917. On the face of the order above the signatures appears the pencil notation, “No charge for strapping,” but the evidence does not disclose the name of the writer.

The order is as follows:

Navy Order No. N — 1231

Navt Department,

Bureau of Supplies and Accounts,

’Washington, *D.*<7., *®lst*November, *1917.*California Packing Corporation,

*San*Francisco, *California.*

Sir : 1. Pursuant to the provisions of the acts of Congress, naval appropriation act approved March 4th, 1917, and the urgent deficiency act approved June 15th, 1917, and acting under the direction of the President of the United States (quoted in part on reverse hereof) an order is hereby placed with you under the conditions stated in subparagraph b (sub-paragraph a is eliminated), to furnish and deliver material needed by the Navy as listed below. Compliance with this order is obligatory and no commercial orders shall be allowed by you to interfere with the delivery herein provided for.

*(a)*The price herein stated has been determind as reasonable and just compensation for the material to be delivered; payment will be made accordingly. If the amount is not satisfactory you will be paid 75 per centum of such amount, and further recourse may be had in the manner prescribed in the above-cited acts. Please indicate conditions under which you accept this order by filling in and signing certificate below, returning original copy of order. If you state the price fixed as reasonable is not satisfactory, 75 per cent only of the unit price will be paid. If payment in full is accepted, it will be considered as constituting a formal release of all claims arising under this order.

(5) As it is impracticable to now determine a reasonable and just compensation for the material to be delivered, the fixing of the price will be subject to later determination. You are assured of a reasonable profit under this order; and *275as an advance payment you will be paid tlie unit prices stated hereon, with the understanding that such advance payment will not be considered as having any bearing upon the price to be subsequently fixed. Any difference between the amount of such advance payment and the amount finally determined upon as being just and reasonable will be paid to you or refunded by you, as the case may be. The unit price determined herein will not prejudice any future price determination or be considered as a precedent in determining such increases or decreases as may be later decided upon as proper.

*(g)*The order must be accepted and filled in any event, and if placed in accordance with subparagraph a, you are only required to indicate below whether the price stated and fixed is satisfactory or is not satisfactory. If not satisfactory, a separate letter of comment and qualification must accompany the original order that is to be signed by you and returned. If order is placed under subparagraph b, original is to be signed and returned. The duplicate copy may be retained by you in either case.

2. Deliveries are required to be made, in whole or in part, as soon as possible and before the expiration of the time limit as stated herein. Delivery will be made to navy yard, Philadelphia, Pa., immediately.

3. Dealers’ bills are to be sent to supply officer, navy yard, Philadelphia, Pa., who is authorized to prepare vouchers in payment. Payments will be made only by the Bureau of Supplies and Accounts, Navy Department, Washington, D. C.

*(a)*In forwarding bills the original bill must bear the following certificate: “ Prices are certified to be those as stated in Navy Order No. N-1231; payment not received.”

*4.*If this order is based on deliveries f. o. b. works, your material can not be shipped except upon orders from the naval inspecting officer for your district, and then only under a Government bill of lading to be furnished by that officer, in which case transportation charges must not be prepaid.

5. The conditions appearing on the reverse side hereon are made a part of this order.

Reference: S. and A. Bureau Requisition No. 51, 5,500 cases, 12 No. 5 tins to a case, first quality catsup, $5.50 per dozen tins, f. o. b. San Francisco.

All cases to be strapped with soft iron or soft wire and stenciled on one end with contractor’s name, date, and number of Navy order and net weight of contents. All tins to be labeled with the contractor’s regular commercial label.

*276The supply officer, navy yard, Philadelphia, Pa., will furnish naval bills of lading to cover shipment.

By direction of the Secretary of the Navy:

-, *Contractor.*

McGowan,

*Paymaster General of the Navy.*

O. E. P.

The above order is accepted subject to the conditions in subparagraph b above.

California Packing Corporation, By J. K. Armsby, *President.*

Witness:

H. J. Baldwin.

On the reverse side of the order are extracts from the act of March 4, 1917, (39 Stat. 1193), and the act of June 15, 1917 (40 Stat. 183).

VIII. The plaintiff on December 7, 1917, wrote the committee as follows:

“ We confirm our quotation of $9.00 per dozen for #10 tins of Del Monte catsup, net cash f. o. b. San Francisco, price includes cost of strapping, delivery to commence two weeks after placing' order, and final delivery, we believe, can be made within 30 days from the date of receiving order. This catsup is not in stock now and will have to be made from #10 tins of pulp, which we will have to bring in from our different plants to manufacture into catsup here. It is possible that a further quantity can be supplied if wanted. The quality of our Del Monte catsup is well known to the Navy, and we hope that you can obtain a firm order at an early date, so that we can start in to manufacture, otherwise, it is our intention to close down our plants for the season, as our regular pack is about terminated.”

And on December 10, 1917, also wrote the following:

“We confirm sale of 5,000 dz. #10 tins Del Monte catsup at $9.00 per dz. net cash f. o. b. San Francisco, price includes strapping.

“ We will commence manufacturing this as soon as we have finished with the pint glass that we are now manufacturing on Government order, and, in all probability, will be in a position to commence delivery within two weeks’ time. We also confirm our information to you that we can offer additional 6,000 dz. on the same basis,, delivery to commence directly after finishing delivery on the 5,000 dz. re*277ferred to — prices and terms identical with offering of the 5,000.

“ You quite understand that all of this catsup is to be made from the #10 tins of our whole, tomato puree which we havé in stock, and price based accordingly, as per our original offering of Nov. 6th.”

The quantity and price named in the above two letters were communicated to the United States Food Administration by the committee by telegrams dated December 7 and 10, respectively.

IX.Thereafter the plaintiff received five other orders signed by the Paymaster General of the Navy, identical in form with order N-1231, bearing different numbers and dates and calling for different amounts, which were accepted in writing by the plaintiff. It does not appear when these orders were received or accepted by the plaintiff, but it does appear when they were returned accepted. A tabulation of all orders involved herein is as follows:

X. The orders subsequent to the first contained the clause, “ Price per dozen tins, $9 net, f. o. .b. factory,” and also, “An extra charge of 6 cents per case for iron strapping and 4 cents per case for wire strapping to be allowed [N-1408 said *‘*paid ’] by the Government.”

XI. Between the dates of N-1430 and N-1669, or to wit December 31, 1917, the plaintiff had offered through the committee 25,000 cases No. 10’s *“*on the same basis as our last offering,” which offer was on the same date communicated to the Food Administration by the committee.

XII. Pursuant to the orders set out in Finding IX the plaintiff prepared for delivery, partially from that on hand *278and partially from that manufactured from puree, all of the quality called for, in cases strapped with iron, and delivered to the carriers in California the quantities of catsup in the following tabulation set forth with the dates of deliveries and the numbers of the orders upon which the various deliveries were made:

XIII. In accordance with the terms stated in the orders the defendant paid the plaintiff $5.50 per dozen for No. 5’s and $9 per dozen for No. 10’s, totaling $243,141.50, and $2,838.48 for strapping 47,308 cases at 6 cents. The dates of these payments do not appear, but it does appear that no payments were made within 10 days of shipment nor after May 14, 1919.

XIV. Under date of May 14, 1919, the Paymaster General of the Navy wrote the plaintiff by separate letter fixing the prices under each of these orders at $3.25 per dozen for No. 5 tins and $5,175 for No. 10 tins, f. o. b. factory, with an allowance of 6 cents extra for strapping. These letters requested check for refund “ inasmuch as the price now fixed is less than the provisional price.” These prices were unsatisfactory to the plaintiff and it did not execute an acceptance thereof but immediately entered into negotiations with the Navy Department looking to the fixing of a satisfactory price.

XV. While these negotiations were pending, the plaintiff not having sent a check in accordance with the request, the Treasury Department (office of the Auditor for Navy Department) made a settlement of certain other claims of the plaintiff then pending in connection with which he made a charge against the plaintiff and a deduction on account of *279alleged overpayment on tbe orders here involved. His notice of settlement was as follows:

“ Sirs: Your claim has been settled and $25,098.21 found due as follows:

CREDITS

By amount clue on public bill No. 1741, under contract

51515, for apricots_$60, 500. 00

By same, on public bill No. 1761, under contract No.

51582, for asparagus_ 40, 911. 38

By same, on public bill No. 1927, under contract No.

51552, for peaches_ 61, 612. 56

163,023.94

DEBITS

To amount overpaid, difference between provisional price ($243,141.50) and 75 per cent of final price (i. e., 75 per cent of $140,287.70 equals $105,215.77), for a lot of catsup, under Navy Orders Nos. N-1669, 2443, 1776,

1430, 1231, and 1408, claimant not agreeing to final price awarded, $243,141.50 — $105,215.77 (26 Comp. Dec.

421)_ $137,925.73

Net amount due_ 25, 098.21

“ Warrant from the TJ. S. Treasurer for the above amount should reach you herewith.

“ Respectfully,

“ Edward Ltjckow, *Auditor.*

“ A. T. H.”

The credit given plaintiff of $163,023.94 was incorrect, there having been paid plaintiff on December 13, 1920, under contract No. 51552, the sum of $14,940. This correction results in an actual deduction of $122,985.73, instead of the $137,925.73 set forth in the statement. There is and was no controversy over the claims allowed under “ Credits.”

XVI. An appeal was taken by the plaintiff, which appeal was denied by the Comptroller of the Treasury May 3, 1921. The plaintiff cashed the Treasurer’s warrant inclosed in the letter.

XVII. Negotiations between the parties were continued, and on May 23, 1922, the Paymaster General of the Navy, by six letters of that date, corresponding to the six orders, canceled the final price amendment of May 14, 1919, and modified the Navy orders in question to provide for a price of $5.25 per dozen for No. 5’s and $7.95 for No. 10’s, to*280gether with a price of 6 cents per case for strapping all cases delivered, and interest on the sums withheld. These letters were signed and returned by the plaintiff and above its signature m each letter appeared the following:

“ Navy Order No. --- is hereby accepted as satisfactory and at the final price fixed above.”

XVIII. On June *7,*1922, the Paymaster General transmitted these modified Navy orders thus accepted by plaintiff to the Comptroller General for audit and certification to Congress, and the Comptroller General held, under date of June 22, that such request was in effect a reopening and reconsideration of the decision of the Comptroller of the Treasury of May 3, 1921. Because no reason for such reopening was alleged or shown, the Comptroller General held that he was precluded from acting thereon.

This ruling was reconsidered without change August 29, 1922, and again October 14, 1922, and then appeal made to the Secretary of the Navy.

The Acting Secretary of the Navy, on February 10, 1923, held that he had no jurisdiction in that the final determination of May 23, 1922, of the prices for catsup which had been made by the Paymaster General and accepted as satisfactory by the plaintiff was a nullity because all authority granted the President of the United States and by him delegated under the provisions of the urgent deficiency act approved June 15, 1911, ceased May 13, 1922, six months after November 14, 1921, when the final treaty of peace was proclaimed between the United States and the German Empire.

XIX. Because of the large demands made by both the Army and Navy the market for catsup was abnormal. There was, however, a market. Purchases and sales between the packers and private individuals were not uncommon during the period here involved, although the volume of such private transactions fell much below that of prior seasons.

The demand of private buyers far exceeded the supply and the plaintiff could have found a ready market for its product in any part of the country. In the open market *281its sales would have been subject to 2 per cent for brokers’ fees and 1 *y2*per cent discount for payment within 10 days.

XX. The fair market value of the catsup furnished as indicated in Finding XII was $9 per dozen for No. 10 tins and $5.50 per dozen for No. 5 tins, a total of $243,141.50, with $2,838.48 in addition thereto for strapping cases, a total of $245,919.98, of which it has received and retained $120,155.77 and $2,838.48, a total of $122,994.25, a difference of $122,985.73.

The court decided that plaintiff was entitled to recover.

Downey, Judge,

delivered the opinion of the court:

The transactions out of which this action grows were the furnishing by the plaintiff to the defendant of large quantities of tomato catsup on six several Navy orders, the numbers and dates of which and the deliveries thereunder are set out in the findings and need not be repeated here. The orders were in the same general form as those considered by the court in *Federal Sugar Refining*Co., No. B-147, decided January 19, 1925, 60 C. Cls. 184; *Consolidation Coal*Co., No. A-262, decided January 26, 1925, and on motion for new trial, April 20, 1925, 60 C. ds. 608; and *Pocahontas Fuel Co.,*No. C-739, decided this day, ante, p. 231.

Tentative prices were fixed which were in accordance with prices quoted by plaintiff, and the orders were under sub-paragraph (b) reading as follows:

“(5) As it is impracticable to now determine a reasonable and just compensation for the material to be delivered, the fixing of the price will be subject to later determination. You are assured of a reasonable profit under this order; and as an advance payment you will be paid the unit prices stated hereon, with the understanding that such advance payment will not be considered as having any bearing upon the price to be subsequently fixed. Any difference between the amount of such advance payment and the amount finally determined upon as being just and reasonable will be paid to you or refunded by you, as the case may be. The unit price determined herein will not prejudice any future price determination or be considered as a precedent in determin*282ing such increases or decreases as may be later decided upon as proper.”

These orders were all formally accepted in writing by the plaintiff.

The prices first tentatively fixed were paid to the plaintiff subsequent to May 24, 1918, when the final delivery was made, but on May 14, 1919, the Paymaster General of the Navy modified and reduced the prices and called on the plaintiff for a refund. The plaintiff declined to accept these modified prices and did not make refund, but entered into negotiations with reference to the matter, pending which the Comptroller of the Treasury settled other accounts of the plaintiff, as to which there was no controversy, and from the amounts due the plaintiff thereon deducted the alleged overpayment, being the difference between the amount paid in accordance with the first tentative prices and the price as modified May 14, 1919.

Subsequently, in May, 1922, after investigations by the Navy Department as to .the conditions attendant upon the filling of these orders, the Paymaster General proposed other prices, higher than those fixed on May 14,1919, which the plaintiff agreed to accept upon certain conditions with reference to interest on money withheld. These negotiations resulted in modified orders dated May 23, 1922, on this new basis, which were accepted by the plaintiff, and the accepted orders were sent for settlement to the Comptroller General, who declined to reopen the case. Being then referred to the Secretary of the Navy, the Assistant Secretary held that there was no authority to then adjust the matter because of the limitations under the acts of March 4 and June 15, 1917. This suit was then brought.

The detailed consideration of these orders and their effect seems unnecessary in view of the fact that practically the same order has had the attention of the court in the cases cited. These orders and their acceptance clearly established contractual relations between the parties, and the basis of payment is the question for determination.

The prices stated were tentative, subject to increase or decrease. The only suggestion in subparagraph (b) as to the final price is that “you are assured of a reasonable *283profit.” There are some reports in the files as to investigations made of costs and profits, but these matters have not been made the subject of any direct proof. The prices were in abeyance and the correct measure of plaintiff’s compensation is the fair market value of its product at the time and place of delivery. This value has been determined and stated in the findings. It coincides with prices proposed by plaintiff and incorporated in the defendant’s original orders.

Plaintiff’s acceptance of the prices stated on May 23, 1922, was evidently by way of compromise of the controversy and involved, in addition to those prices, certain allowances as interest on moneys withheld. This settlement was never consummated, but was held to be a nullity, and plaintiff is not bound thereby.

We are asked to award interest “ as a part of the just compensation provided by the contract.” The argument is ingenious and might have force were it not for the statute which upon a claim of this sort founded upon contract precludes the inclusion of interest. (Sec. *111*Judicial Code. Amended, 42 Stat. 316.)

The amount to which the plaintiff was entitled was the amount first paid, and the judgment is, therefore, for the amount deducted from other bills of the plaintiff as an alleged overpayment. We have directed judgment accordingly.

Graham, *Judge;*Hay, *Judge;*Booth, *Judge;*and Campbell, *Chief*Justice, concur.