#### SAMUEL DOBLIN v. THE UNITED STATES

[No. D-827.

Decided January 9, 1928]

*On the Proofs*

*.Assignment of contract; breach; purchase of claim against United States under sale in bankruptcy.*— Where the plaintiff has acquired his claim against the United States for alleged breach of contract through sale in bankruptcy proceedings of the assets of a corporation to which the Government contractor had attempted to assign the contract, the plaintiff can not recover in the Court of Claims.

*The Reporter's*statement of the case:

*Mr. C henries S. Witwer*for the plaintiff.

*Mr. Ralph O.*Williamson, with whom was *Mr. Assistant Attorney General Herrrum J.*Galloway, for the defendant. *.Mr. Joseph Henry Cohen*was on the brief.

The court made special findings of fact, as follows:

I. In August, 1918, one Harry P. Worth, trading under the name and style of H. P. Worth Co., was engaged in the business of jobbing hardware in New York City and manufacturing garden tools and implements at a small plant located on a farm near East Lyme, Conn.

On August 19, 1918, the said Harry P. Worth, trading as H. P. Worth Co., entered into a formal written contract with the defendant for the manufacture of eighty thousand axe handles. A .copy of this contract is annexed to the petition as Exhibit A and made a part of these findings by reference. As a part of /said contract and attached thereto was a purchase order, the material portion of which is as follows:

“5. Total quantity: Eighty thousand (80,000).

“ 6. Unit price: Sixteen and two-thirds cents each ($.16%), less 2% for cash payment within ten days after Government inspection; not 30 days.

“ *1.*Total price: Approximately thirteen thousand three hundred thirty-three dollars and thirty-three cents ($13,333.33).

“8. F. O. B. delivery point: F. O. B. cars, station, Ea/st Lyme, Conn.

*353“ 9. Deliveries:

6,000 to be delivered by September 15, 1918.

12,000 “ “ “ “ October 15, “

14,000 “ *“*“ “ November 15, “

16,000 “ *“ “ “*December 15, “

16,000 “ “ “ “ January 15, 1919.

16,000 *“ “*“ “ February 15, “

II. Work on this order commenced immediately, and by early September the contractor was engaged in cutting wood in the forest adjacent to the plant, preparatory to the fashioning of the axe handles, and about 100 handles had been fashioned and were ready for the finishing sander, which, with the exception of grading, is the last operation in the process of manufacture.

III. Together with his business a,s H. P. Worth Co. the said Harry P. Worth was the controlling owner of the Chapman, Porter & Woelfling Co., Inc. This latter company was in financial difficulty and its creditors held a meeting for the purpose of ascertaining the action to be taken. At this meeting Worth proposed to these creditors that a new company should be formed to which he would assign all of his interests in the business known as the II. P. Worth Co., and that in return for releasing the debts of the insolvent company these creditors were to be given preferred stock in the new company.

IY. This proposition was accepted by the creditors, and on October 15, 1918, a certificate of incorporation of the H. P. Worth Co., Inc., was filed in the office of the secretary of state of New York, and on the day following a duplicate original thereof was filed in the office of the clerk of the county of New York. On October 28, 1918, the first meeting of the-incorporators and subscribers was held, and it was formally i-esolved that the company proceed to carry on the business for which it was incorporated. At the same meeting there was presented for the consideration of the incorporators and subscribers the following offer by Harry P. Worth:

“ The undersigned, transacting a general hardware business and manufacturing handles, garden tools, and implements, under the name of H. P. Worth Co., at 180 West Street, in the Borough of Manhattan, city of New York, *354and at East Lyme, Conn., hereby offers to sell and deliver all the assets of the said business, including the good will thereof, stock in trade and accounts receivable, contracts, factory at East Lyme, Conn., together with the full equipment thereof and also all machinery now -owned by him at 180 West St., in the Borough of Manhattan, city of New York, and at East Lyme, Conn., together with the land owned by him at East Lyme, Conn., livestock and buildings upon the said land, subject, however, to the indebtedness of the said H. P. Worth Co. and subject, moreover, to a certain mortgage of $2,000 now a first lien on the land at East Lyme, Conn., and subject also to a lease duly made and executed by the undersigned to his wife wherein and whereby the land now owned by him at East Lyme, Conn., has been leased to the wife of the undersigned for a period of 99 years, and in consideration of the issue to him of 250 shares of the common stock of said corporation; provided, however, that your company may execute the said lease if the said lease herein-before mentioned is not already executed.

“(Signed) HaRRt P. Wokth.”

The foregoing offer was duly accepted by the H. P. Worth Co., Inc., by resolution of its directors on October 28, 1918, and on that date the said Harry P. Worth transferred to the newly formed corporation the assets described in the offer, and there were issued to him in payment therefor 250 shares of fully paid common stock of the new company at a par value of $25,000.

Y. The plant at East Lyme, Conn., was equipped with machinery suitable for the making of axe handles. This machinery derived its power from a twenty-five horsepower engine. This engine, however, was not of sufficient power to operate all of the machinery at the same time. It was nec-essaiy, therefore, to put into use a portion of the machinery for a certain period and then to stop work in that department and connect the engine with other portions of the machinery. This method resulted in a great deal of lost time, and it was therefore desired to obtain an engine which would develop horsepower sufficient to- run the entire plant. A fifty-horsepower engine was obtained, but it was not of the design which met the requirements of Connecticut law and could not, therefore, be used. By the time a new en*355gine was obtained notice to cease operations as hereinafter set forth had been given.

The new boiler and engine were invoiced to “ H. P. Worth Company,” October 21, 1918, and the terms stated on the face of the invoice were $500 cash and two notes of $275 each, due one, two, three, and four months, respectively, thereafter. The H. P. Worth Company, Inc., was the maker of the notes and paid some of the early installments the amount of which does not appear.

In addition to the engine and boiler there was also purchased an inserted-tooth saw, with accompanying accessories, which were shipped October 24, 1918, consigned to H. P. Worth Co. The cost of this saw and accessories was invoiced as $439.30. It does not appear that this sum was ever paid the consignor.

VI. On November 14, 1918, the assistant zone supply officer at Boston addressed the H. P. Worth Co., calling attention to the fact that his reports showed no production up to November 8th and asking to be advised as to the cause of delay and when and in what quantities deliveries would be made. To this request answer was given on November 18th that installation of the new steam engine had not been effected and that when completed progress would be greatly assisted.

VII. On November 27, 1918, the following telegram was received:

Govt. Nite. • WASHINGTON, D. C.,

1918, *Nov. %6, a. m. 1¶}.%8.*

H. P. Woeth Co.,

*New Yorh*Oity, *N. Y.:*

Suspend production on contract for handles number H. C. dash three seven eight dash B period send promptly statement present status of contract as outlined in circulars one eleven one twelve one fourteen mailed you to-day.

Bose, *General Supplies.*

Eshleman.

Work upon the contract ivas immediately thereafter discontinued. At time the work ceased about eight hundred axe handles had been made and finished but none had been *356delivered. Five hundred of these were of the grade which •corresponded to the specifications of the contract.

VIII. On November 26, 1918, the “H. P. Worth Company ” sent a sworn statement of claim to the defendant to which, under date of December 31st, the defendant replied asking that a questionnaire be filled out. This questionnaire was sent to H. P. Worth Co. on January 6, 1919; was filled out and returned to the defendant on January 16th. In this questionnaire the H. P. Worth Co. asserted its willingness to terminate the Government contract and advised that raw material was on hand (being felled trees or dressed lumber) to the value of $500; inward handling charges amounted to $351.92; overhead expense, applicable to the production of said raw material, $3,096.38; labor cost, $2,172.84; overhead, applicable to partly finished products, $678.91; and that the total cost of special facilities to the date of receipt of notice of suspension was $7,042.02. It further stated that i'aw materials purchased by it could not be utilized on other contracts except at a loss of $4,998.96, and that it had purchased machinery, which had not been installed at time of cancellation of contract, to the value of $2,139.30; that the total value of all machinery purchased was $9,139.71, and that none of the machinery could be returned. It concluded by representing that the damage caused by suspension had been $11,302.15. This questionnaire was sworn to Harry P. Worth, jr., as “ proprietor ” of the H. P. Worth Co.

IS. Thereafter frequent requests were made to the H. P. Worth Co. by the zone supply officer to attend a conference in Boston for the purpose of reaching a termination settlement.

These requests were not complied with, and on May 20, 1919, the defendant sent the following telegram:

BostoN, Mass.

’ H. P. WORTH AND CO.,

*Ill Beade St., New York:*

If representative of your company not here this week matter will be referred to Department of Justice.

Yates Inspection Barlow.

*357This was Replied to by telegram as follows:

New York, N. Y., *May 88, 1919, 10.3 p. m.*

*Boston Zone Supply. Officer, War Dept., Boston, Mass.:*E. L. Baelow,

About contract H dash three seven eight dash B Philip Doblin manager will call on you Thursday morning.

H. P. Worth CompaNv.

The above telegram was sent by Philip Doblin, who was secretary and manager of the H. P. Worth Co., Inc., having direct charge only, however, of the New York office. At that time Mr. Worth, the president of the company, was not in New York City, did not see either telegram, nor had he been informed of the contents thereof.

X. In accordance with the aforesaid telegram the said Philip Doblin went to Boston, Mass., and interviewed Captain E. B. Barlow, Quartermaster Corps, officer in charge,, general supplies division. At this conference there was present one Captain Stark, whose identity and whose authority in the premises do not satisfactorily appear. At the request of these officers Doblin executed a document in words and figures as follows:

Information sheet

Zone Supply Officer, General Supplies Division, 108 Mass.

Ave., Boston, Mass.

Make separate report covering each contract. Reports must be typewritten. State quantities approximately.

Product, axe helves; date,-

Contractor, H. P. Worth Co.; Contract No. H-378-B.

Address, New York City.

Contract quantity- 80, 000

Quantity accepted to elate_ None.

Quantity manufactured waiting inspection- None.

Balance unfilled- 80, 000

Quantity in process_ None.

*358

Sheet No. 2.

For the above the H. P. Worth Company will allow for 40 cords of wood @ $16.00-$640.00.

Sheet No. 3.

No. 4. — Use separate sheet for replies if necessary.

1. Do you consider the Government under obligation to you for any special reasons not already covered? If so, make specific statement of same (make your answer complete, arranging your facts in concise, logical manner).

No.

2. What percentage of employees released from Government work do you estimate you can reenpploy on commercial work within thirty days?

Unable to state.

*359I do solemnly swear or affirm that the statements contained in the foregoing report are true to the best of my knowledge and belief.

H. P. WORTH COMPANY, Philip Doblin, *Secretary.*

Sworn to before me and subscribed in my presence this 29th day of May, 1919.

Joseph S. Wakd, *Notary Public.*

Commission expires July, 1924.

XI. On November 11, 1919, the H. P. Worth Co., Inc., was by the United States District Court for the Southern District of New York adjudged a bankrupt. On July 22, 1920, as a result of the trustee sale, Samuel Doblin, the plaintiff, purchased the assets of the bankrupt, the bill of sale describing the same as: «

“Any right, title, and interest that Maurice L. Shaine as trustee in bankruptcy of H. P. Worth Company, Inc., bankrupt, maw have in and to the real property located at East Lyme, Connecticut, described as follows: [Here follows description of property.]

“Also any right, title, and interest that Maurice L. Shaine as trustee, in bankruptcy of H. P. Worth Company, Inc., bankrupt, may have in and all livestock, machinery, tools, fixtures, and other personal property on the premises above described.

“ It being the intent of this instrument that said trustee transfer all his right, title, and interest, if any, in and to the above-mentioned property, and all property, claims, contracts belonging to the said H. P. Worth Company, Inc.”

The court .decided that plaintiff was not entitled to recover.

Moss, Judge,

delivered the opinion of the court:

On August 19,1918, Harry P. Worth, doing business under the name of H. P. Worth Co., entered'into a contract .with the Government for the manufacture and delivery to the War Department of 80,000 axe handles. By the terms of the contract the handles were to be delivered in specified weekly quantities, the whole contract to be completed by February 15, 1919.

During the period involved in the transaction under consideration the said Harry P. Worth was the controlling *360owner of a concern known as the Chapman, Porter & Woel-fling Co., Inc., which was in severe financial difficulties. As the result of a proposal made by Worth and accepted by the creditors of the Chapman, Porter & Woelfiing Co., Inc., a new. corporation was organized on October 15, 1918, and on October 18, 1918, said Harry P. Worth in accordance with the plan and agreement previously made, and in return for certain shares of stock in the new H. P. Worth Co., Inc., transferred to said new company all his assets, and the assets of the business of the H. P. Worth Co., “ including the good will thereof, stock in trade and accounts receivable, contracts, factory at East Lyme, Conn. * *

The new corporation, H. P. Worth Co., Inc., made certain preparations for the performance of the contract with the Government and proceeded with the business of the old concern.

However, no deliveries whatever were made under the contract, and on November 21,1918, the contractor was notified to suspend operations. At the time of the cancellation of the contract the contractor had on hand 500 handles which corresponded to the specifications of the contract.

It is alleged in the petition that on account of the action of the Government in canceling said contract the H. P. Worth Co., Inc., was compelled to cease business, and in December, 1919, was forced into involuntary bankruptcy and thereby sustained a loss in money expended for work, labor, machinery, and raw materials, together with loss in profits, earned and prospective, in the total sum of $19,302.15,. for wh,ich judgment is asked.

The plaintiff, Samuel Doblin, acquired the claim, which is the subject of this action, by purchase under a sale by the bankruptcy court of the property, claims, causes of action, and equities belonging to or due and owing said H. P-. Worth Co., Inc.

The notice to suspend operations under the contract was in the form of a telegram which reads as follows: “ Suspend production on contract for handles number H C dash three seven eight dash B period send promptly statement present status of contract as outlined in circulars one eleven one twelve one fourteen mailed you to-day.”

*361Under- this instruction the operations were immediately closed, and on November 26, 1918, the “H. P. Worth Company ” sent a sworn statement of claim to the defendant, to which défendant replied, requesting that a certain formal questionnaire theretofore furnished the contractor be filled out. Sa.id questionnaire was accordingly filled out and returned by the contractor on January 16, 1919. It purported to set forth the items of loss, representing the damage caused by the cancellation of the contract, to be $11,302.15. This statement was sworn to by Harry P. Worth,, jr., as “ proprietor ” of the H. P. Worth Co.

Frequent requests by the defendant were thereafter made to' have the contractor attend a conference in Boston for the purpose of considering and determining the contractor’s claim, to which apparently no attention was given; and on May 20, 1919, four months later, the defendant -telegraphed the contractor as follows: “ If representative of your company not here this week matter will be referred to the Department of Justice.” In response to this telegram Philip Doblin, secretary and manager of the H. P. Worth Co., Inc., went to Boston and had a conference with Captain Barlow and Captain Stark, representatives of the Government, at the conclusion of which he signed and swore to a statement which in substance and effect amounted to a disclaimer of the correctness of the several items contained in t]je original statement of cla.ims. The contention of Philip Doblin that this sworn statement was procured by duress is not sustained by the evidence. It is further contended by Doblin that he had no authority to execute the instrument in question, or to negotiate relative thereto. His actions, however, in that respect as an officer of the company, are important as reflecting his own convictions as to the mer.it of the claim.

The claim itself is almost wholly without merit. The contract was made on the 19th day of August, 1918. Deliveries, were to be made in specified weekly quantities, and the contract was to be completed on'February 15,1919. On November 14, 1918, after the expiration of half the entire contract period, not a single axe handle had been delivered, and in response to an inquiry of that date as to the cause of delay the contractor informed the Government, in substance, that *362the installation of the new steam engine had not been effected, and that when completed progress would be greatly-assisted. At this time 32,000 of the 80,000 handles should already have been manufactured and delivered.

It is not satisfactorily shown that plaintiff company would have earned any profits if it had been permitted to complete the contract. On the contrary, the record tends to show that there would have been a loss instead of profits.

The defendant -is under no obligation, by reason of the cancellation of the contract, to reimburse the contractor for loss on account of the purchase of special facilities as claimed herein.

Aside, however, from the question of the validity or the -■ justice of the claim for damages herein, the assignment of the contract by H. P. Worth doing business as H. P. Worth Company, to the H. P. Worth Co., Inc., was in violation of the provisions of'the Eevised Statutes, section 3737, and the subsequent sale and transfer of same to the plaintiff, Samuel Doblin, conveyed no valid claim against the Government growing out of the cancellation of the contract, and there can be no recovery in th,is court. It should be mentioned that the contract itself expressly provided that there should be no assignment of same, either in whole or in part. Plaintiff’s contention that the defendant acquiesced in said assignment <js not sustained by the evidence. It is the judgment of the court that the plaintiff’s petition should be dismissed. And it is so ordered.

GRAham, *Judge;*Booth, *Judge;*and Campbell, *Gliie; Justice,*concur.