Case Name: CHARLES W. KELLY, TRADING AS AND DOING BUSINESS AS KELLY DAIRIES v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1950-06-05
Citations: 116 Ct. Cl. 811
Docket Number: No. 48853
Parties: CHARLES W. KELLY, TRADING AS AND DOING BUSINESS AS KELLY DAIRIES v. THE UNITED STATES
Judges: Howell, Judge; and LittletoN, Judge, concur.
Reporter: United States Court of Claims Reports
Volume: 116
Pages: 811–823

Head Matter:
CHARLES W. KELLY, TRADING AS AND DOING BUSINESS AS KELLY DAIRIES v. THE UNITED STATES
[No. 48853.
Decided June 5, 1950]
Mr. Robert F. Rlepinger for tbe plaintiff. Messrs. Grover G. Thompson, Jr., and Grover G. Thompson were on the brief.
Mr. J. J, McGinty, with whom was Mr. Assistant Attorney General 3. G. Morrison, for the defendant.
Plaintiff’s petition for writ of certiorari pending.

Opinion:
Whitaker, Judge,
delivered the opinion of the court:
The plaintiff submitted a sealed competitive bid to supply milk and other dairy requirements to the Government's Veterans' Administration Hospital at Lexington, Kentucky, for the period May 15, 1946, through June 30, 1947. The bids were to be opened on April 30,1946. In the standard government form on which the bids were submitted was paragraph 6, providing for an increase or decrease in the bid price if taxes or charges were increased or decreased by Congress after the bid was submitted.
When the bids were read on April 30, one of the plaintiff's competitor's bids was read first. That bidder had stamped on his bid the following statement:
TKe above prices will be adjusted upward or downward in the same amount of any adjustment in the ceiling prices on the same date.
The reading of that bid brought up a discussion as to whether paragraph 6 of the standard form would apply to an adjustment of prices by the Office of Price Administration. The Chairman of the Board of Awards said that it was his opinion that it would. The plaintiff's bid, containing no qualifying statement, was read next, and then the bid of the third bidder was read which had a qualifying statement similar to the one contained in the bid first read.
The plaintiff was awarded the contract, the Government's Certificate of Award being executed on May 13. The plaintiff was not the low bidder, but was the lowest bidder whose facilities were regarded as satisfactory by the Board of Awards.
On June 7,1946, O. P. A. ceiling prices were increased on some of the commodities covered by the contract. The plaintiff notified the hospital that prices would be increased accordingly. He was requested to itemize the increases and include them in his monthly bills. He did so, and his bills were paid as submitted until June 1,1947. But from the plaintiff's bill for June 1947, all these increases included in former bills were deducted, amounting to $3,292.75. The plaintiff submitted a claim for this amount, which was denied by the Comptroller General of the United States.
The plaintiff contends that paragraph 6 of the contract gave it the right to add the O. P. A. increases in ceiling prices to the amount of its bid. We do not think it did.
In this paragraph the parties undertook to take care of an increase or decrease in taxes. The first sentence reads: "Prices bid herein include any Federal tax heretofore imposed by the Congress which is applicable to the material on this bid." It then proceeds:
If any sales tax, processing tax, adjustment charge, or other taxes or charges are imposed or changed by the Congress after the date set for the opening of this bid, and made applicable directly upon the production, manufacture, or sale of the supplies covered by this bid, and are paid by the contractor on the articles or supplies herein contracted for, then the prices named in this bid will be increased or decreased accordingly, and any amount due the contractor as a result of such change will be charged to the Government and entered on vouchers (or invoices) as separate items.
The Government's contracting officer drew this bid form. By it he directed the bidder to include in his price any Federal tax previously imposed by the Congress on the material included in the bid, but he said to him that if Congress thereafter should change the tax applicable to the material in the bid, the amount bid would be changed accordingly.
There would be no doubt at all in the mind of any one that the whole paragraph related to taxes except for the fact that the expression "adjustment charge" was used. But even though this expression might be somewhat ambiguous to a layman, we think a lawyer would naturally construe it in connection with its context, and its context clearly was taxes.
By the use of this expression we think the Government intended an adjustment charge affecting a tax; for instance, an adjustment in the valuation of property upon which a tax is levied. This would be such an adjustment charge as was in the minds of the parties who drew paragraph 6. The contracting officer in asking for bids according to the requirements of paragraph 6 had in mind an adjustment charge which affected tax liability.
However, it may be admitted that a layman reading this language might not understand that the expression, "adjustment charge," was confined to an adjustment relating to taxes, and the bidders asked the question whether or not an adjustment in ceiling prices by the O. P. A. came within the terms of this paragraph. The Chairman of the Board of Awards said that in his opinion it did come within its provisions.
Had this expression of opinion been made by one who was authorized to enter into a contract on behalf of the Government, we would be inclined to say that the plaintiff was entitled to rely upon it and, hence, that the Government would be bound by it. However, the plaintiff has not shown that the Chairman of the Board of Awards was authorized to express an opinion as to the meaning of this provision.
We have found as a fact in finding 2 that "there is no evidence that the Chaii'man [of the Board of Awards] had any authority, or represented that he had any, to alter the language of paragraph 6." In finding 3 we said that the contracting officer "made no statements, had no conversations and gave no assurances to the plaintiff or his agents, relative to the contract, before it was entered into." The contracting officer is the person clothed with authority by the Government to enter into a contract on its behalf. He drew the form of bid which plaintiff was required to execute. This bid contained paragraph 6. He did not express any opinion as to the meaning of paragraph 6, and it is not shown that he delegated any authority to do so to the Chairman of the Board of Awards. So far as the record shows, this board had authority merely to receive bids and to award the contract, and it was authorized to award the contract only to such person as had bid according to the requirements laid down by the contracting officer.
Before a plaintiff is entitled to rely upon any statement made by a Government agent he must show that this agent had the authority to make the statement.
As long ago as Hawkins v. United States, 96 U. S. 689, 691, the Supreme Court said that persons dealing with the Government must take notice of the extent of the authority it had given its agents, and that the Government is not bound by their declarations unless it appears that they had the authority to make them. In that case the court said:
Individuals as well as courts must take notice of the extent of the authority conferred by law upon a person acting in an official capacity; and the rule applies, in such a case, that ignorance of the law furnishes no excuse for any mistake or wrongful act. State, ex rel. etc. v. Hayes, 52 Mo. 578; Delafield v. The State of Illinois, 26 Wend. (N. Y.) 91; The People v. The Phoenix Bank, 24 id. 430; The Mayor and City Council of Baltimore v. Reynolds, 20 Md. 1; Whiteside v. United States. 93 U. S. 247.
Different rules prevail in respect to the acts and declarations of public agents from, those which ordinarily govern in the case of mere private agents. Principals in the latter category are in many cases bound by the acts and declarations of their agents, even where the act or declaration was done or made without any authority, if it appear that the act was done, or the declaration was made, by the agent in the course of his regular employment; but the government or public authority is not bound in such a case, unless it manifestly appears that the agent was acting within the scope of his authority, or that he had been held out as having authority to do the act, or make the declaration, for or on behalf of the public authorities. Story, Agency, 307 a; Lee v. Munroe, 7 Cranch, 366. [Italics ours.]
Plaintiff has not shown that the Chairman of the Board of Awards was acting within the scope of his authority in interpreting paragraph 6 nor is it shown that he was held out as having authority to do so.
Much later, in Federal Crop Insurance Corporation v. Merrill, 332 U. S. 380, 384, the Supreme Court reiterated the declaration of the Hawkins case, supra, when it said:
Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. The scope of this authority may be explicitly defined by Congress or be limited by delegated legislation, properly exercised through the rule-making power. And this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority. See e. g. Utah Power & Light Co. v. United States, 243 U. S. 389, 409; United States v. Stewart, 311 U. S. 60, 70, and see generally The Floyd Acceptances, 7 Wall. 666.
In the case last cited there were the same appealing considerations as in the case at bar. There a wheat farmer applied for insurance to the Bonneville County Agricultural Conservation Committee, which was acting as the agent for the Federal Crop Insurance Corporation. He advised this committee he was planting 460 acres of spring wheat and that on 400 of them he was reseeding on winter-wheat acreage. The committee advised the applicant that the entire crop was insurable, and it forwarded the application for insurance to the Denver office of the corporation, and that office accepted the application.
Notwithstanding this statement of the committee that the entire crop was insurable, and notwithstanding the acceptance of the application by the corporation, the court held that the plaintiff was not entitled to recover because the committee was not authorized to make the statement that the entire crop was insurable, the regulations being to the contrary.
The court recognized that it was a hard case, but it nevertheless denied recovery.
In Munro v. United States, 803 U. S. 36, 41, a veteran of the First World War undertook to bring suit on an insurance policy. He was advised by the United States Attorney that he might file his summons within the statutory period and later follow it with his petition. Acting upon this advice he filed his summons within the statutory period, but did not file his petition until after the statute had run. The Supreme Court held that the statute required the filing of the petition within the statutory period and that the veteran was not entitled to rely upon the statement of the United States Attorney that the filing of the summons was sufficient and that his suit was accordingly barred. See also Utah Power *& Light Co. v. United States, 243 U. S. 389, 408-409; Sutton, v. United States, 256 U. S. 575, 578-579; Wilbur National Bank v. United States, 294 U. S. 120, 123-124.
We are of the opinion that paragraph 6 of the bid was not intended to relate to an adjustment in ceiling prices by the Office of Price Administration, and that plaintiff was not entitled to rely upon the expression of opinion of the Chairman of the Board of Awards that it did cover such an adjustment and, therefore, he is only entitled to the price stated in his bid.
This may seem to be a harsh conclusion, but it is one required not only by law but by logic when we recollect that the Government has hundreds of thousands of employees and that it would be disastrous to hold it liable for their expressions of opinion unless it is shown the Government had held them out as being authorized to give opinions.
The deduction made from plaintiff's bill for June 1947 was proper, and he is not entitled to recover. His petition will be dismissed.
Howell, Judge; and LittletoN, Judge, concur.
"6. Prices bid herein include any Federal tax heretofore imposed by the Congress which is applicable to the material on this bid. If any sales tax, processing tax, adjustment charge, or other taxes or charges are imposed or changed by the Congress after the date set for the opening of this bid, and made applicable directly upon the production, manufacture, or sale of the supplies covered by this bid, and are paid by the contractor on the articles or supplies herein contracted for, then the prices named in this bid will be increased or decreased accordingly, and any amount due the contractor as a result of such change will be charged to the Government and entered on vouchers (or invoices) as separate items."