Court Opinion

ID: 8814443
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:14:01.190157+00
Date Added: 2024-06-11T17:04:24.940369
License: Public Domain

MANTON, Circuit Judge
(dissenting). .The defendants below were charged in the indictment with having conspired to commit an offense against the United States, by applying to their own use jerkin linings, the property of the United States. The prosecution proceeded upon an alleged violation of sections 36, 37, of the Criminal Code of the United States.
The defendant Borman was engaged in business under the name of Borman Sheep Dined Coat Company and had contracts with the government to furnish in all 113,000 leather jerkins. Under the terms of the contracts, the Quartermaster’s Department delivered to Bor-man quantities of linings to be used in the making of jerkins. On the 25th of February, 1918, Borman caused to be shipped to the defendant Phillips 2,664 yards of such linings, which were delivered *32to Borman pursuant to the contracts with the government. Phillips, acting under the instructions of Borman, sold the linings for $6,000, and the check therefor was delivered to Borman, who /indorsed it over to an employé, and this was deposited to the employé’s credit in his bank.
The main inquiry is whether the linings in question were the property of the United States at the time they were sold under Borman’s instructions. The District Judge charged the jury, as a matter of law, that the title to the linings was in the United States at the time of their sale by the defendants, or at the time of the commission of the crime as charged. It is the contention of the defendants that the contracts were of manufacture and sale, and that the possession of the linings'by them was not by mere bailment, with a contract of service. An examination of the language of the contracts will reveal that the transaction is referred to as a .purchase and sale of the jerkins; the purchaser being the government. In order to make a valid sale of the jerkins to the government, it was necessary for the contractor to pass a good title, not only of the materials which he purchased and placed in the jerkins, but each and all of the materials which went to make up the manufactured product; otherwise the sale would amount to a portion of .the jerkins — such of the materials as were purchased by the contractor and placed in the jerkins. The linings were delivered to the contractor in bulk, and the inquiry is whether title thereto .passed and when it passed. The contracts provided in part as follows: *
“Contract for supplies to be delivered in bulk at depots and the purchasing quartermaster for distribution or use in manufacture, etc. To be used for all purchases of supplies, clothing, wagons, harness, etc., which are purchased in bulk or large quantities to be delivered at depots or to purchasing quartermasters.”
“Contract for army clothing (to be used exclusively for the manufacture of army clothing where raw material is furnished by the United States).”
'It would appear that a purchase of jerkins was intended, and not a contract for service upon materials furnished by the government.
Another form of contract used by the government, which is in evidence, but is not the contract under which the lining was sold, reads in part:
“8. Title to Material Furnished. — Unless otherwise expressly provided herein, all materials paid for or furnished by the government under this contract, and all parts and pieces thereof and clippings therefrom, in whatsoever form or process of manufacture, shall be and remain the property of the government, and, while in the contractor’s possession, shall be suitably marked as such by the contractor, in the manner directed by the contracting officer, so as to be identified as the property of the government.”
This, it will be observed, indicates a manufacturing service. The word “purchase” is not used, and the tenor of the provisions is that the contractor is to return to the government, in manufactured form, the materials which it furnished.
Purchase implies a substitution of one owner for another. The word “purchase,” as used in the title of the contracts, must be considered in its usual and ordinary meaning, for the contracts are ex*33clusively concerned with the buying of supplies by the governn ent, and the word “supplies” indicates a contract of purcb se, and not one of service.
Section 3 of the contracts provides:
“8. That the articles herein contracted for shall be examined and inspected, without unnecessary delay in being delivered, by a person or persons appointed by the United States; and upon such inspection the articles found to be in all respects as required by this contract shall be received and become the property of the United States. Any and all articles that may, upon such inspection, be condemned or rejected, shall be removed from the premises by the contractor within ten days after the said contractor or his agent shall have been notified of such objection; otherwise, at the risk and expense of the contractor.”
If the goods on inspection are rejected, they do not become or remain the property of the United States, but remain the property of the contractor, who' is obliged to remove the same at his own expense. N othing in the contracts requires the contractor to part the rejected jerkins and, while keeping for himself the portion supplied by him, return to the government the linings supplied by it. On the contrary, the contractor in such a case would be required to furnish in place of the rejected jerkins, completed ones complying with the terms of the contract, and when he has done so, he would be free to dispose of the rejected jerkins for his own benefit. It will be noted that the other contract referred to (not involved here) provided that all materials throughout the entire process of manufacture, remain the property of the United States; but it is further provided that, in case of rejected goods, “the government shall be paid by the contractor a sum equal to the actual cost or market value at the time of such rejection of all materials furnished hereunder by the government for the making of such articles.”
The specifications provide the kind of materials used for linings. These were what the government was to furnish to the manufacturen, and the'government was necessarily to get its own linings back. If they have always remained its own, it would not insist that the linings be of a certain kind. A buyer of leather jerkins would so insist. The contracts refer to the price paid, and that indicates the sum which the seller will receive in exchange for his completed product. The contracts further provide that, in case of the failure of the contractor to perform any part of the contracts, the government shall have the right to supply the deficiency by procurement in the open market, or otherwise purchase any of the supplies so required, at such places as it may elect. This is to be done at the expense of the contractor. It is the usual provision of the contract expressing the legal right of any buyer in a contract of bargain and sale to buy in the open market an article similar to that to which the seller has agreed to deliver to him, and to charge the seller the excess in price over the price contracted for, where breach of contract results.
If it were a mere contract of service, another rule of damages would apply involving the cost to get the work done by another. The idea of the contract, that only upon acceptance shall the jerkins become the property of the government, was intended to mean that then only *34would the title pass to the government. This imposed upon the manufacturer the entire responsibility for the goods, the process of manufacturing, and the result of such process. Under the terms, the contractor became liable for any loss of or damage to the materials furnished by the government, and the government inspector might inspect the goods and reject any of the articles or materials because of inferior workmanship. In the case of such rejection, the materials necessarily were thrown back upon the contractor, and it became the duty of the contractor to produce, at his cost, other materials to take the place of the rejected, and make satisfactory jerkins. It is clear to me that there was a sale of the linings in question, and not a bailment thereof. Power Co. v. Burkhardt, 97 U. S. 110, 24 L. Ed. 973; Hargraves Mills v. Gordon, 137 App. Div. 695, 122 N. Y. Supp. 245.
Since it appears that the contracting parties by their written contracts intended a contract of manufacture and sale of the jerkins, title to the parts of the constituent parts of said completed product were the subject of a sale. In' Buffum v. Merry, 4 Fed. Cas. No. 2112, Judge Story said:
“It was not a contract whereby the specific yam was to be manufactured into cloth wholly for the plaintiff’s account and at his expense, and nothing but his yam was to be used for the purpose. There the property in the yarn might not be changed; but here the cloth was to be made of other yarn as well as the plaintiff’s, the warp of the plaintiff’s yarn, the filling of the defendant’s. The whole cloth, when made, was not to be delivered to the plaintiff, but so much only as at 15 cents per yard would pay for the plaintiff’s yarn at 65 cents per pound. What is this but the sale of the yam at a specified price, to be paid for in plaids at a specified price.”
In Dixon v. London Small Arms Co., Etd., 1 App. Cases, 632, a somewhat similar case, Ford Chancellor Cairns said:
“Now, * * * in order to answer that question you must turn to the contract itself. * * * Therefore * * * in substance the result of the whole is this: What I may call the raw material for the barrel, the steel tube, is supplied by the government at a certain price; the butt or stock of the rifle is supplied by the government at a certain price; all the other component parts of the arm have to be provided or made (for the contract is consistent with either view) by the contractors. The whole component parts have to. be inspected from time to time by the officers of the government. They have the right from time to time to reject any part of the arm while in the course of manufacture, which is not consistent with the contract and the specification; and when the whole is, to use the technical term, ‘assembled,’ when all the pieces of the arm are put together, then if it complied with the specification, and in that case only, it is to be taken over and accepted by the government, and the property in it is to pass to the government, and, on the other hand, the price is to be paid for the article to the contractors. * * * The question then has to be asked: During this process, what is the position of the person who is called the contractor? He is clearly not a servant of the crown. That was not contended. There is no contract of service whatever between him and the crown. He is not an officer of the crown, engaged in the service of the crown. Is he, then, an agent of the crown? * * ■ * I cannot find any ground whatever for contending that the contractor is an agent of the crown. He is a person who is a tradesman, and not the less a tradesman because he is engaged in works of a very large and extensive character; he is a tradesman manufacturing certain goods, for the purpose of supplying them according to a certain standard, which is laid before him as a condition, on which the goods will be accepted. During the time of the manufacture the property, at all events, in that which concerns the present case, namely, *35the property in the lock, or the breech action of the rifle, is not the property of the crown. The materials are not the materials of the crown. If the respondents make the lock themselves, the materials are provided by the respondents, and the respondent’s work upon those materials, not as the agents of the crown, but as conducting their own work and their own manufacture for the purpose of supplying the complete arm. * * * I can find here no delegation of authority — no mandate from a principal to an agent; I find here simply the ordinary case of a person who has undertaken to supply manufactured goods, who has not got the goods ready manufactured to be supplied, and who has to make and produce the goods in order to execute the order which he has received. I find him engaged in that work on his own account up to the time when the article is completed and handed over to, and accepted by, the person who has given the order. I therefore arrive at the conclusion that there is not here on the part of the respondents that which amounts in any way to the character or the status of an agent, a servant, or an officer of the crown.”
Lord O’Hagan said:
“The contract was not of service, but of sale, for the contractors’ own benefit, of certain commodities, fulfilling certain conditions and to be paid for on certain terms; and if those conditions were fulfilled, whether by their own workmanship or articles provided at their instance, I apprehend the crown could not have rejected the commodities; as, on the other hand, its rights of rejection on nonfulfillment until the moment of delivery remained intact, a state of things difficult to be reconciled with the theory of agency or service.”
In effect, the delivery of the linings in question was in part payment of the cost or price of the finished product. The parties evidently intended this. The price paid to the contractor was reduced to the extent of the value of the linings. The question of title must necessarily turn upon the intention of the contract and the intent of the parties as therein made plain.
But it is said that because of the provision, “All rags and clippings from the lining shall remain the property of the United States and be delivered with the finished jerkins,” a clear indication is given by the parties that title to the linings vested in the government at all times. But, to me, the requirement for such a provision indicates that the parties intended just the reverse. If the lining material did not vest in the contractor on the delivery to him by reason of the nature and effect of the contract itself, the clause would be entirely unnecessary and without meaning, because, in such case, they would be reserved to the government by the very force of its title, without the necessity of such a clause or reservation. On the other hand, if the title to the lining material did become the property of the contractor on delivery to him, then such a reservation has both meaning and effect, and constitutes an exception to the general grant of the linings. When the government indicated a wish to accept such linings in the contract offered in evidence (Defendants’ Exhibit D, Contract 108— not involved here) it said:
“All unused material furnished by the government shall remain the property of the United States, be properly prepared for shipment and held for such disposition as may be necessary by the government. All rags and clippings from material furnished by the government shall remain the property of the United States.”
From the foregoing, it is apparent that the government, when intending to reserve ownership in property which it furnishes to the *36contractor, can and does plainly express its intent therefor. The language of the contract, since it is drawn by the government, must be presumed to be that of the government. It is the general rule that exceptions and restrictions are to be construed- strictly against the writer of the contract, and not to be extended beyond a fair import of the language expressed, except by necessary implication. Duryea v. Mayor, 62 N. Y. 592. It was well said in Mallory v. Willis, 4 N. Y. 76:
“Whatever tire motive was, the express provision requiring Willis to return the offals and a specific quantity and quality of flour for a given quantity of good merchantable wheat, taken in connection with the other provisions of the contract, implies the exclusion of any claim or right of the plaintiffs to any greater quantity of flour, whatever the quantity produced was, and I think it is fairly implied that the surplus, if any, was to belong to Willis.”
In Clarkson v. Stevens, 106 U. S. 505, 1 Sup. Cf. 200, 27 L. Ed. 139, Stevens had been under a contract to build a ship for the United States. Materials for tire ship were delivered at Stevens’ dock and under contract, were there received by the United States official, and stamped “U. S.,” and “became the property of the United States.” It was claimed that the contract provision made the ship built from these materials also the property of the United States as it was built. It was held that title to the unfinished vessel remained in Stevens, and that no property therein vested in the United States. The court said:
“For the inference is obvious, from the particularity of such a provision, that the larger interest would not be left to mere intendment.”
I am of the opinion that title to the linings passed when delivered to the contractor and that the transaction as to the linings was a sale thereof and not a mere bailment. It was therefore error for the court to charge, as a matter of law, that the title remained in the government. Exception was taken to this charge, and, in my opinion, presents error which requires reversal from -this judgment.