#### ABRAHAM BAUMAN v. THE UNITED STATES

[No. D-1132.

Decided January 9, 1928]

*On the Proofs*

*Contract for services; failure of Government to furnish material; fall in price of machinery; damages.*— The Government is under no obligation to recompense a contractor for machinery used in part fulfillment of a Government contract, purchased and used by the contractor prior to entering into the contract, and which he could have sold at a more advantageous price if it had not been held in readiness to complete work on material the Government failed to furnish.

*The Reporter’s*statement of the case:

*Mr. Herbert D. Cohen*for the plaintiff. *Mr. Morris D. Kopple*was on the briefs.

*Mr. Dwight E. Borer,*with whom was *Mr. Assistant Attorney General Herman J.*Galloway, for the defendant.

The court made special findings of fact, as follows:

I. The plaintiff is and was at the times herein mentioned a citizen of the United States, residing in the city and county of New York, State of New York.

II. On June 6, 1918, the plaintiff entered into a contract with the defendant by its officer in charge of the provisions and clothing depot, Second Avenue at 43rd Street, Brooklyn, New York, acting under the direction of the Secretary of the Navy, known as contract No. 1080, series 1918, navy yard, New York, a copy of which is attached to the petition as “ Exhibit A *”*and made a part hereof by reference.

III. The contract provided that the plaintiff was to “ furnish and deliver, at his own risk, and expense,” subject to conditions specified, “ the following services and at the price set opposite each item, respectively:

*414“ Necessary labor to make and finish complete the following garments, all garments to be cut and all material used in them to be furnished by the Government.

“ Item:

“(2) 250,000 (c) (more or less) blue flannels or serge overshirts, complete, contractor to make, tape, and star the collars (stars to be made by machine), machine crow tacks at pocket, at $0.64 each.

“(3) 100,000 (more or less) blue serge or flannel undress jumpers, with machine-made crow tacks at pockets, at $0.42 each.

“(4) 200,000 (more or less) white working jumpers, at $0.22 each.

“(9) 100,000 (more or' less) chief petty officers’ uniforms, white drill, double-breasted coat and trousers, at $2.75 each.

“(10) 10,000 (more or less) chief petty officers’ overcoats, 30-ounce cloth, at $3.00 each.”

The conditions of plaintiff’s proposal for the work, made a part of the contract, contained, among other things, the following:

“ Number of garments covered by this proposal to be given out to neAV contractors will depend upon material available that is in excess of that required to keep regular established facilities of this depot for manufacture of clothing running to capacity.”

The contract further provided that upon presentation of bills and within ten days of proof of the services required the contractor was to be paid $551,000, with the option on the part of the United States to make payments before all the services required had been performed. The plaintiff executed and delivered to the defendant a bond in the sum of $475,100 for faithful performance of the contract.

IV. In his aforesaid proposal the plaintiff stated that he would deliver to the defendant finished garments weekly, as follows:

Item 2. All cut garments received by plaintiff up to 20,000.

Item 3. All cut garments received by plaintiff up to 20,000.

Item 4. All cut garments received by plaintiff up to 20,000.

Item 9. All cut suits received by plaintiff up to 3,000 to 4,000.

*415Item 10. All cut coats received by plaintiff up to 500 to 800.

And that he had in his shop the equipment necessary to manufacture these amounts.

Y. The defendant thereafter delivered to the plaintiff material so described in the contract, and plaintiff and the Bauman Clothing Corporation (hereinafter referred to) performed the Required work thereon in the following amounts:

Item 2. Blue flannels or serge overshirts, 226,768.

Item 3. Blue serge or flannel undress jumpers, 100,000.

Item 4. White working jumpers, 100,135.

Item 9. Chief petty officers’ uniforms, 1,688.

Item 10. Chief petty officers’ overcoats, 2,974.

VI. In the early part of January, 1919, a more specific date does not appear, the plaintiff sold the assets and liabilities, including merchandise, machinery, and accounts receivable, of his business as a manufacturer of clothing and dealer in woolen goods, theretofore conducted by him, to the Bauman Clothing Corporation, a newly formed corporation, of which he was president and chief stockholder, and in return therefor received certain shares of stock in the new company. Thereafter the labor required by the contract in suit was furnished by the Bauman Clothing Corporation. The amount of the labor so furnished by the corporation does not appear.

There is no evidence that defendant’s officers at any time knew of the said sale by plaintiff to the Bauman Clothing Corporation.

VII. On February 5, 1919, the defendant notified plain-

tiff in writing as follows: “ * * * the amount of material that enters into the manufacture of these garments is limited, and * * * the plentiful supply of the manufactured article on hand does not justify the purchase of any more material. Thus no promises can be made as to the number of cut garments that will be issued to you, and for these reasons it is suggested that you cancel the unfinished portion of your contract without liability to the Navy * *

VIII. The plaintiff refused to comply with the said suggestion that he “ cancel the unfinished portion ” of his con*416tract “ without liability to the Navy.” The Bauman Clothing Corporation maintained its plant and the necessary labor intact to complete the contract, and .plaintiff demanded of the defendant from time to time the necessary materials and cut garments to complete the maximum requirements of the contract. The defendant furnished the plaintiff small amounts of material from February 5, 1919, until April 8, 1919, and thereafter supplied no more material.

IX. During the period of the war the Navy Department maintained a depot at Second Avenue and 43rd Street, Brooklyn, New York, for the cutting of garments for the Navy personnel. The material so cut and the other material used in the garments were then given out to various pieceworkers and contractors to be made into finished garments. Among these contractors was the plaintiff, and before and at the time he was working under the contract in suit he was working on other and similar contracts for the Army and the Navy, and on certain commercial business, the amount whereof does not appear.

Soon after the anmistice the cutting of garments in the said depot greatly diminished, there being no more need for the quantities theretofore cut. It does not appear at what time operations ceased.

X. On July 2, 1920, the plaintiff executed the following instrument:

“ I, Abraham Bauman, hereby assign to Frances H. Bau-man the agreement with U. S. A. dated June 6th, 1918, Contract No. 1080, together with all rights and claims which I have or can have upon or under said contract.”

Thereafter, on July 6th, 1922, the said Frances H. Bau-man, who was plaintiff’s wife, executed the following instrument:

“ I, Frances IT. Baiunan, hereby assign to Abraham Bau-man the agreement with U. S. A. dated June 6th, 1918, contract No. 1080, together with all right and claim which I have or can have upon or under said contract.”

XI. On or about March 9, 1923, the plaintiff, through his attorney, presented a claim to the Navy Department for alleged damages in connection with the contract here sued

*417upon, amounting to $131,618.46, consisting of rent, pay for labor, and one-fifth of pay for supervisors and superintendents.

This claim was computed by the plaintiff as follows:

*Item*g

Rent for 26 weeks (6% months) at the rate of $812.50

per month_ $5, 281. 25

Pay roll for labor, etc., for 26 weeks at $1,990 per week— 51, 740. 00 One-fifth of pay roll for supervisors, superintendents, etc., for 26 weeks at $1,080 per week_ 5, 616.00

Total_' 62,637.25

*Item, If*

Rent for 29 weeks (7% months) at the rate of $416.67

per month_ $3, 020.86

Pay roll for labor, etc., for 29 weeks at $599 per week- 17, 371.00

One-fifth of pay roll for supervisors, superintendents, etc.,for 29 weeks at $1,080 per week_ 6, 264.00

Total_ 26, 655.86

*Items 9 and 10*

Rent for 34% weeks at the rate of $416.67 per month_ $3,593. 85

Pay roll for labor for 34% weeks at $1,035 per week_ 35, 707.50

One-fifth of pay roll for supervisors, superintendents, etc., for 14 weeks at $1,080 per week_ 3, 024. 00

Total_ 42, 325.35

*Svntmyary*

On the item of blue-flannel overshirts_$62, 637.25

On the item of 200,000 white working jumpers_ 26,.655. 86

On the items of 10,000 chief petty officers’ overcoats and 100,000 uniforms_ 42, 325.35

Total_131,618.46

The claim so stated was rejected by the Acting Paymaster General of the Navy, June 6, 1923.

XII. The plaintiff has received from the defendant the sum of $222,725.22 for all the work done under the contract. The work was conducted largely on a piecework system, but in addition an organization was maintained to carry on the business, and this was conducted in four different factories. *418The plaintiff’s gross receipts from his business for the year 1918 were $3,692,269.12, in connection with which his overhead expense was $581,972.52. The plaintiff computes his claim in this suit as follows:

*Loss of profits*

Contract price on undelivered garments_$328, 274.78

Piecework cost of making up undelivered

garments_A_$179,742.61

Overhead on same- 51, 703. 74

- 231,446.35

Profits lost_ 96, 828. 43

*Keeping factories open*

Item 2. Made up at factory, 54 West 21st Street:

The pay roll for the 22 weeks’ delay, was_$9, 746. 00

Kent_i_ 4,125.00

Light and power_ 656. 80'

General administration expenses_ 7, 920. 00

Total_ $22, 447. 80

Item 4. Made up at factory, 30 West 15th Street:

The pay roll for the 25 weeks’ delay was_$3, 550. 00

Kent_ 2,403.75

Light and power_,_ 454.11

General administration expenses_ 9,000.00

Total_ 15,407. 86

Items 9 and 10. Made up at 134 Spring Street and West 20th Street:

The pay roll for the 10 weeks’ delay was_$5, 560.00

Kent- 931.50

Light and power_ 463. 20

General administration expenses_ 3, 600. 00

'Total- 10,584.70

Expense of keeping factories open_ 48, 440. 36

*Loss of machinery*

Cost of machinery in 1917 and 1918_ $62,327.00

Depreciation in 1917 and 1918 (10% each year)_ 12,464.00

Value in latter part of 1918_ 49, 863. 00

Price received in 1919 on machinery used on contract in

suit'- 15,000. 00

Loss of machinery_ 34,863.00

*419Of the loss so computed plaintiff claims $20,771.35 only, representing a proportional allocation of 60 per cent as an unfinished percentage of the contract.

*Summary*

Loss of profits_$96, 828.43

Keeping factories open- 48, 440. 36

Loss of machinery_ 20, 771. 35

Total_ 166,040.14

It is not possible from the evidence to determine plaintiff’s expense attributable to his nonreceipt of the amount of material necessary to complete the maximum number of garments specified in the contract. Prospective profits on the material not received are not satisfactorily proved.

The court decided that plaintiff was not entitled to recover.

Moss, *Judge,*

delivered the opinion of the court:

On June 6, 1918, plaintiff, Abraham Bauman, entered into a contract with the Government to furnish the necessary labor to manufacture certain garments for use in the Navy, in accordance with certain specifications, the material for which, already cut and ready for manufacture, to be furnished by the Government. Plaintiff was to receive compensation for his services, based on a schedule of prices set forth in the contract, amounting to the total sum of $551,000. The contract provided for four distinct classes of garments, and plaintiff was to complete all garments received by him, up to a specified weekly quantity. Plaintiff proceeded very soon after the date of ,the contract with the performance of the work and continued to manufacture and deliver finished garments to the Government, as the material was furnished him, between the date of the contract, June 6,1918, and April 8, 1919. Prior to February 5, 1919, the deliveries to plaintiff of cut garments had materially decreased, and on that date the defendant wrote a letter to plaintiff in which it was stated: “ * * * the amount of material that enters into the manufacture of these garments is limited, and that the plentiful supply of manufactured articles on hand does not justify the purchase of any more material. Thus no promises can be made as ,to the number of cut garments that will be *420issued to you, and for these reasons it is suggested that you cancel the unfinished portion of your contract without liability to the Navy.” Thereafter no supplies were furnished by the Government and no deliveries were made by plaintiff, except that on April 8, 1919, a negligible quantity was furnished, which was made up and delivered by plaintiff. Plaintiff has instituted this action for the recovery of damages occasioned by the action of the Government in the cancellation of the contract, in the sum of $166,040.14, made up of an alleged loss of profits amounting to $96,828.43, expense of “ keeping factories open ” $48,440.36, and loss on machinery $20,771.35.

Considering these items in reverse order, it is shown by the record that all the machinery used in the work under this contract had been acquired prior to the date of the contract and had been in use in plaintiff’s factories since 1917. Plaintiff asserts that if he had been permitted to complete the contract without any delay he could have sold certain portions of this machinery at an advantageous price, and that having been compelled to keep such machinery on hand for the completion of his contract he sold same at a substantial loss, and claims the right of recovery against the Government for such alleged loss. The Government is under no obligation whatever to recompense plaintiff for this loss.

In computing the loss alleged to have been sustained in keeping his factories open and in operation for the performance of the work under the contract plaintiff has endeavored to estimate the number of weeks which would have been required 'for the completion of the contract if the cut material had been furnished by the Government. This estimated time is deducted from the total period of about 35 weeks, from June 6, 1918, the date of the contract, to February 5, 1919, the date- of the letter of cancellation; and plaintiff has charged against the Government rent of factories, pay roll, light and power, and “ general administration expenses ” for the period estimated as above explained, amounting in the aggregate to $48,440.36. Plaintiff also adopted this further method of estimating the proportion of overhead expenses properly chargeable to the contract under consideration : It is claimed that plaintiff’s entire business for the year *4211918 amounted to $3,692,269.12, and that his entire overhead for the same period was $581,972.52, an average of 15.75 per cent of the whole volume of business for overhead expense. That percentage of overhead is then applied to the contract price for the portion of the garments which plaintiff was not permitted to complete, producing the sum of $51,460.15 as the proportion of the overhead applicable to the production of the remainder of the garment^ under the contract. It is not believed that either method used by plaintiff can be relied upon as reflecting the proper percentage of overhead expense to be charged against the Government in this case. But if either should be correct in principle plaintiff has completely destroyed the value of his own analysis by his inconsistent and contradictory course with reference to his claim. In March, 1923, which was *three ané one-half years*after the cancellation of the contract, plaintiff presented a claim to the Navy Department for alleged damage^ in connection with the contract and the cancellation thereof, consisting of rent, pay for labor, and *one-fifth*of pay for supervisors and superintendents. In connection with “ item 2 ” plaintiff claimed *26*weeks’ delay. In the record in this action he claimed *22 weeks.*In “ item 4 ” he claimed before the Navy board *29 weeks'*delay and in the record *25 weeks.*In “ items 9 and 10 ” the claim presented to the board showed *3JP/% weeks,*and in the record in this case only *10 weeks*is claimed. The term “ item ” a,s used above refers to the classification of garments which were manufactured in different factories. The total for rent as presented to the board was $11,895.96, while the total claimed in the record is $7,490.25. In his claim before the board there was charged against the Government for pay roll the sum of $104,818.50, exclusive of the sum of $14,904 for one-fifth of the cost of supervisors and superintendents. In this suit he claims for labor $18,856 and for “ general administration expenses ” $20,520.00, a total of $39,376.00. Plaintiff claims in this action the sum of $1,574.11 for “ light and power.” The claim presented to the board contained no such item. He is also suing for loss of profits in the sum of $96,828.43 and for loss of machinery $48,440.36. Neither of the^e items is referred to in the claim presented to the Navy board. The total of plaintiff’s claim *422as presented to the board is $131,618.46, and the amount of recovery sought in this action is $193,000, reduced in plaintiff's brief to a claim for $166,040.41.

The ent.ire claim was rejected by the Navy board by a letter dated June 6, 1923, and on December 31, 1924, one and one-half years later, plaintiff filed this suit.

The glaring discrepancies between plaintiff’s claim before the Navy board and as presented to the court in this action are sufficient to discredit the whole claim. The evidence, however, in other respects, as affecting the clajm for loss of profits, as well as the claim for expense in keeping open the factories and the claim for loss on machinery, is unsatisfactory and obviously unreliable. Plaintiff contends, for example, that during the entire period from the date of the contract, June 6, 1918, until its cancellation ,in February, 1919, his factories were not used for any purpose except for the work under this contract. It is inconceivable that plaintiff maintained three factories and paid salaries and other expenses, as shown above, keeping the plants and operatives in idleness for the per.iod claimed. It is also significant that while plaintiff’s business for the year 1918 amounted to $3,692,269.12, composed largely of Government contracts, six months of that period were devoted exclusively to the contract in question.

It might be of interest to note that' in the early part of 1919, neither month nor day disclosed, plaintiff organized a corporation called “ The Bauman Clothing Corporation,” of which plaintiff was president. This corporation took over certain of the assets of A. Bauman, the precise nature and description of which do not clearly appear. Certain books kept by A. Bauman and by the Bauman Clothing Corporation were not produced and were reported to be lost. It is believed that such books would have been helpful in the solution of the controversy involved here.in. The Bauman Clothing Corporation later became financially involved and its assets were disposed of in bankruptcy proceedings. Thereafter plaintiff organized another corporation by the name of the Wear Pledge Corporation, of Avhich plaintiff is president.

*423There .is another transaction which should also be mentioned: While it is declared in the sworn petition that “ claimant is the sole owner of the claim set forth in this petition and has made no assignment or transfer thereof, or of any part thereof or interest therein; * * it appears

in the record that on July 2, 1920, five months after the contract was canceled, plaintiff assigned to his wife, Frances H. Bauman, the claim sued on herein; said assignment is in the following language:

> “ I, Abraham Bauman, hereby assign to Frances H. Bau-man the claim with U. S. A. dated June 6,1918, contract No. 1080, together with all rights and claims which I have or can have upon or under said contract.

> (Signed) Abbaham BaumaN.”

> On Ju,ly 6,1922, Frances H. Bauman reassigned said claim to plaintiff. This document reads as follows:

> “ I, Frances H. Bauman, hereby assign to Abraham Bau-man the agreement with Ú. S. A. dated June 6, 1918, contract No. 1080, together with all right and claim which I have or can have-upon or under said contract.

> (Signed) FbaNces H. BaumaN.”

It is claimed by plaintiff that the consideration for the assignment to his wife was the sum of $50,000, furnished plaintiff by Mrs. Bauman. There was no consideration for the reassignment and there has been no repayment of any part of the sum alleged to have been furnished plaintiff by his wife.

On the essential features of the case the plaintiff is the only witness presented. Under the evidence it is not possible for the court to determine with any degree of certainty the damages, ,if any, sustained by plaintiff by reason of the cancellation of the contract. It is therefore adjudged that plaintiff’s petition be, and the same is hereby, dismissed.

Geaham, *Judge;*Booth, *Judge;*and Campbell, *Chief*Justice, concur.