#### ROCK RUN MILLS v. THE UNITED STATES

[No. D-395.

Decided February 15, 1926]

*On the Proofs*

*Contract for finished goods; purchase of material therefor; promise of following contract covering excess of sa/id material.*— Where the plaintiff, in order to fill a Government contract awarded it for knit goods, is assisted in securing from a third party, by an officer of defendant without authority to contract, a promise of yarn which is in excess of that required, is told by said officer the excess would be absorbed because there would be a following contract, and thereafter enters into the contract so awarded, it can not recover a loss sustained by it in selling said excess under the purchase price, no following con- - tract having been awarded.

*661
      *.The Reporter's*statement of the case:

*Mr. J cuines 0. Peacock*for the plaintiff. *Messrs. Nathan .B. Williams*and *John W. Townsend*were on the briefs.

*Mr. John E.*Hoover, with whom was *Mr. Assistant Attorney General Herman J.*Galloway, for the defendant. *.Mr. Thaddeus G. Benton*was on the brief.

The court made special findings of fact, as follows:

I. The plaintiff is and at all times hereinafter mentioned was a corporation organized under -the laws of the State •of Indiana, having its office and principal place of business ..at Goshen in said State, and being engaged in the manufacture of underwear.

II. On June 20, 1918, the plaintiff was advised by the United States through the knit-goods branch, clothing and •equipage division, Quartermaster Corps, War Department, ■that there had been awarded to it a contract for 60,000 pairs •of drawers, 40 per cent worsted, Specification No. 4.

III. At that time the United States, being at war, had, through its duly authorized wool administration officers, .taken control of the entire wool supply of the country. The .plaintiff, upon being notified that the contract had been awarded, endeavored to secure proper worsted yarn for the .manufacture of the underwear, but was unsuccessful in its ■ efforts. Its representative, W. L. Stephenson, thereupon ■came to the office of the chief of the said knit-goods branch, -one Lincoln Cromwell, asked for assistance in procuring the yarn needed to fill the contract, and stated that the plaintiff • could take the contract only if such assistance were given. He informed Cromwell that it would take three months to fill the said order for 60,000 pairs of drawers and made the . statement that 10,000 pounds of worsted yarn a month would be required while his company was knitting. The plaintiff . had never before manufactured underwear under the particular specifications attached to this contract and neither of the parties thereto knew at the time exactly how much yarn would be needed.

IY. With the information thus given him by the said Stephenson, Cromwell telephoned an order to the Jules "Desurmont Worsted Co. for 30,000 pounds of worsted yarn. *662Stephenson returned the next day and was informed by Cromwell that 30,000 pounds of worsted yarn had been ordered for plaintiff from the Jules Desurmont Worsted Co. Stephenson protested that 30,000 pounds was too much and that 25,000 pounds would fill his company’s requirements. After some discussion, Cromwell said to Stephenson, “ Here, we got you the yarn; you take it ”; and also told him that it would upset things completely if they had to start all over again; that he did not think plaintiff would have any need to regret it, because there would be a following contract.

*V.*Under these conditions the plaintiff accepted and paid for the 30,000-pound order of worsted yarn, and on June 24, 1918, executed the following agreement on the Government’s printed wool, top, and yarn Form No. 4:

(CONTRACTOR’S AGREEMENT)

June 24, 1918.

To the Acting Quartermaster General,

*Clothing and Equipage Division,*

*Wool Top and Yarn Branch,*

*109 East 16th St., New York, N. Y.*

Whereas we, Rock Run Mills of Goshen, Ind., have entered into a contract with Jules Desurmont Co., of Woon-socket, R. I., the spinner named in the annexed spinner’s agreement, whereby the latter agrees to furnish us with 30,000 lbs. of 1/30 half blood or finer yarn suitable for our Government contract provided the wool is allotted to their topmaker by the Government, we agree to use this yarn exclusively in fulfilling our said Government Contract Number 4012-C for 60,000 worsted #4 drawers.

(Signed) Rock Run Mills,

W. L. Stephenson, *Treas.*

VI. It was common practice at the time for Government contractors to endeavor to obtain the allotment of as much wool as possible in connection with their contracts as wool was hard to get and the market was rising, and plaintiff’s objection to 30,000 pounds was very unusual because most of the contractors were trying to get more than they needed. The plaintiff could not use in its regular commercial business the grade of worsted yarn so purchased, its products being of a cheaper grade than the drawers required by the knit-goods branch.

*663VII. The aforesaid Cromwell was, during the times mentioned in these findings, the chief of the knit-goods branch, clothing and equipage division, Quartermaster General’s Office, War Department. He was a procurement officer and had no authority to contract for the Government or u> promise plaintiff a future contract. The contracting officer in this case was H. M. Schofield, major, Quartermaster Reserve'Corps, United States Army.

VIII. The contract awarded to plaintiff, referred to m Finding II, was reduced to writing as War Department contract for Army supplies No. 4036-C, duly signed by the parties thereto as of July 2, 1918, and was in due course performed according to its terms. A copy thereof is appended to these findings.

The specifications attached to and made a part of the contract provided that the underwear in question should test on chemical analysis not less than 40 per cent wool and about 60 per cent cotton. The plaintiff purchased from private sources 45,000 pounds of cotton yarn for use on this contract, making the proportion of wool to cotton 2 to 8.

After performance of the contract the plaintiff had left on its hands 5,109 pounds of worsted and 8,644 pounds of cotton yarn.

IX. The plaintiff did not apply for a further contract and it was awarded none. On January 31, 1919, it asked the War Department for instructions regarding the disposition of the excess yarn. The Quartermaster Corps suggested that plaintiff sell in the open market the yarn which it could not use in its commercial business. The plaintiff sold to a private purchaser the surplus worsted yarn of 5,109 pounds for an amount of $4,472.09, and the surplus cotton yarn of 8,644 pounds for an amount of $1,807.73 less than the price it had paid thérefor, a total difference of $6,279.82. The evidence is not satisfactory as to the market value of the surplus at the time of sale, or that the plaintiff made an offer to sell the surplus to any but the actual purchaser. There is no proof of any promise by the defendant to indemnify the plaintiff by taking over the surplus.

X. Plaintiff’s claim for compensation or for an adjustment of the loss suffered was filed with the War Department *664on January 31', 1919, and was subsequently referred to the Board of Contract Adjustment as being a claim under the provisions of the act of March 2, 1919, 40 Stat. 1272, commonly called the Dent Act. A decision was rendered by that board denying any adjustment, payment, or compensation, .and on appeal such decision was affirmed by the Secretary of War October 14, 1920. On March 16, 1921, the Secretary •of War declined to reopen the case. See Decisions of the War Department, Board of Contract Adjustment, volume 5, page 143.

The court decided that plaintiff was not entitled to recover.

GRAham, Judge,

delivered the opinion of the court:

The plaintiff was awarded a contract on June 20, 1918, for the manufacture of 60,000 pairs of drawers, 40 per cent worsted and 60 per cent cotton. Prior to executing said contract, being unable to make arrangements for the purchase of the wool needed for the manufacture of the underwear, it applied to the chief of the knit-goods branch of the War Department for assistance in procuring the needed worsted yarn and stated that it would take three months to .fill the order and 10,000 pounds a month would be needed while it was knitting. Thereupon the representative of the knit-goods branch communicated with a third party by telephone and arranged for the furnishing of the 30,000 pounds of yarn to plaintiff, to be paid for by the latter.

The next day a representative of the plaintiff returned .and stated that he would only need 25,000 pounds of the yarn. He was told that the order would not be counter.manded and that he would have to take the 30,000 pounds. It was the understanding of the Government’s representative at the time the order for the yarn was given that plaintiff needed that amount of yarn. When he was protesting that he did not need the 30,000 pounds, he was told that that much had been ordered and that it would upset the arrangements of the office to go over it again and that it was thought it would have no need to regret the order because there would be a following contract.

*665Thereafter, on July 2, plaintiff entered into a written contract for the manufacture of said drawers, purchased the 30,000 pounds of wool as arranged, manufactured and delivered the drawers, and was paid for them at the contract price. It received no further contracts, nor does it appear that it applied for any. At the termination of the work it had a surplus of 5,109 pounds of worsted yarn on hand. This it tried to induce the department’s representative to take off its hands, but did not succeed. It then disposed of the surplus yarn at a private sale for $9,925.41, which represented a net loss of $4,412.09 as compared with the purchase price. It does not appear what the the market price was at the time of this sale, nor is there satisfactory proof that offers were made by anyone but the purchaser. The price was the adjustment price at which plaintiff believed the Quartermaster’s Department was settling some contracts' at the time.

The material for the manufacture of these garments was three-fifths cotton and two-fifths wool, and on the basis of the 30,000 pounds of wool yarn purchased by plaintiff it purchased 45,000 pounds of cotton, and at the termination of the contract had 8,644 pounds of cotton yarn unused,, which it sold in the same way as it sold the surplus woolen yarn, at a loss of $1,807.33 as against the purchase price.. The plaintiff is suing to recover $6,279.82, being the aggregate of the claimed losses on the sale of the surplus woolen and cotton yarn.

Plaintiff’s contention seems to be that it purchased the surplus yarn because it was told by the Government’s representative to do it, which creates no liability upon the-part of the Government. It could have refused to purchase the yarn or enter into the subsequent contract. *American Smelting Co.*v. *United*States, 259 U. S. 75, 78. Its other contention is that it bought the yarn under a promise that it would be given an opportunity to use the surplus in filling-contracts that would follow.

It is enough to say that a procurement officer who it is-claimed made this promise had no authority to do so *(Donner Steel Co.*v. *United*States, *ante,*p. 209; *Austern*v. *United States,*60 C. Cls. 315; *Burney Axe*v. *United*States, *666
      *id.*493; *Jacob Reed’s Sons*v. *United States, id.*97; *Wright*v. *United States, id.*519), and the court has found the fact. The Government ordered for the plaintiff, at its request and for its assistance, the amount of goods which it understood the plaintiff to state it needed. The yarn was supplied by a third party and was to be paid for by the plaintiff. It purchased the goods- knowing that it would have a surplus on its hands, taking the chance of getting contracts on which it could use the surplus. It did not get additional contracts and did not seek or apply for them. It is apparent that it suffered a loss which it could have avoided and for which the Government is not responsible.

The subsequent written contract in the performance of which the yarn was to be and was used contains no statement or provision with regard to indemnification in case there was a surplus, no agreement to take the surplus material off its hands, and no suggestion that another contract would be awarded. If the plaintiff desired to protect itself in the matter of this surplus, the necessary provision for this purpose should have been inserted in the contract. There is no suggestion that it was ever the intention of the parties that it should be covered into the contract or that it was omitted therefrom for any reason which would justify the court in making it part thereof.

The petition should be dismissed, and it is so ordered.

Hat, *Judge;*DowNet, *Judge;*Booth, *Judge;*and Campbell, *Chief Justice,*concur.