Case: VITRO ELECTRONICS v. THE UNITED STATES
Abbreviation: Vitro Electronics v. United States
Decision Date: 1969-03-14
Docket Number: No. 5-66
Citation: 187 Ct. Cl. 428
Volume: 187
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: VITRO ELECTRONICS v. THE UNITED STATES
Judges: Before Cowejt, Chief Judge, Laramore, Dureee, Davis, ColliNS, SeeltoN and Nichols, Judges.
Pages: 428–442

Head Matter:
408 F. 2d 1038
VITRO ELECTRONICS v. THE UNITED STATES
[No. 5-66.
Decided March 14, 1969.
Plaintiff’s motion for rehearing to alter or amend a judgment or a new trial denied May 16,1969]
J. D. Olark, attorney of record, for plaintiff. John Douglas Clark, Jr., of counsel.
Steven L. Oohen, with whom was Assistant A ttorney General William D. Ruclcelshaus, for defendant. Katherine H. Johnson, of counsel.
Before Cowejt, Chief Judge, Laramore, Dureee, Davis, ColliNS, SeeltoN and Nichols, Judges.

Opinion:
Per Curiam ; This case was referred to Trial Commissioner Bichard Arens with directions to make findings of fact and recommendation for conclusions of law under the order of reference and Rule 57(a). Tbe commissioner bas done so in an opinion and report filed on June 7, 1968. Exceptions to tbe commissioner's findings of fact, opinion and recommended conclusions of law were filed 'by plaintiff and tbe case has been submitted to tbe court on oral argument of counsel and the briefs of tbe parties. Since tbe court is in agreement with the commissioner's opinion, findings and recommended conclusion of law, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Therefore, plaintiff is not entitled to recover and the petition is dismissed.
OPINION OP COMMISSIONER
Arens, Commissioner:
This case involves a radio receiver, one of several which plaintiff delivered from its plant in Silver Spring, Maryland, to the Department of the Air Force at Kelly Air Force Base, San Antonio, Texas, under a negotiated supply contract entered into on April 27, 1962, at a unit price of $3,510. The receiver in question was, upon inspection by defendant, found to be damaged, and was, at plaintiff's suggestion, returned to and replaced by plaintiff under a warranty clause of the contract. Plaintiff claims that it is entitled to recover from defendant the amount of the damage to the receiver on various theories hereinafter considered.
Defendant not only takes issue with plaintiff on the merits o'f its claim, but asserts that plaintiff has no standing in this court because it did not pursue the administrative remedy provided under the disputes article of the contract. Since this assertion, if found to be valid, would be dispositive of the case at the outset, we consider it first. It is clear that under the facts, which are here capsuled but detailed in the accompanying findings, the controversy did not come within the purview of the disputes article and that under the pronouncements of this court in Universal Ecsco Corp. v. United States, 181 Ct. Cl. 10, 385 F. 2d 421 (1967), plaintiff is now entitled to an adjudication in this court.
On September 10, 1962, plaintiff's agent, Roadway Express, Inc. (hereinafter referred to as Koadway), delivered the receiver to the receiving station at Kelly Air Force Base where defendant's agent acknowledged receipt thereof, without exception, on a copy of the freight bill. Shortly thereafter, in accordance with the established procedure upon receipt of technical equipment, defendant's engineering laboratory division was notified so that an inspection by a laboratory technician would be made.
On September 13, 1962, due to a combination of clerical mistakes which occurred at the Base, an intrabase form DD 250 was filled out in which it was erroneously stated that the receiver had been inspected and approved by the engineering laboratory division, that the receiver conformed to the contract and was accepted without exceptions. The form DD 250 was then routed to defendant's finance office for payment which was made on December 14, 1962. It does not appear that the form DD 250 was sent as a matter of established procedure to the consignor of equipment or that it was sent to plaintiff.
In the meantime, on September 18, 1962, Mr. Joe Bean, a a technician of defendant's engineering laboratory division, broke the original seals and opened the three separate containers in which the receiver was packaged. He noticed that one of the meters was out of place and that there was only one dial where there should have been two. On removing the receiver from the packaging and removing the top of the receiver, he noticed that a meter was loose and that a tuning unit was out of place. Since he concluded that the defects which he noticed were sufficient to warrant rejection of the receiver, Mr. Bean did not look for other defects in it, but thereupon rejected the receiver. Two days later, on September 20', 1962, he signed a Government form DD 6 (report of damaged or improper shipment) in which it was noted that there was a deficiency in the preservation or packaging of the receiver and that a meter and inductor had been shifted out of position. The form DD 6 contained spaces for an indication of whether the carrier (Roadway) had been notified or had inspected the damage, but these spaces were not marked. A copy of this form DD 6 as filled out showed plaintiff as addressee and was sent to and received by plaintiff.
On December 19,1962, Staff Sergeant Albert Jobnson, who was in charge of the receiving station at Kelly Air Force Base, telephoned plaintiff's superintendent of manufacturing, engineering and production control, Mr. Robert Ellen-berger, regarding the receiver and stated that it had been paid for by defendant inadvertently. Mr. Ellenberger acknowledged that plaintiff had received a copy of the form DD 6 regarding the receiver and stated that since the receiver was still under warranty, defendant should return it to plaintiff for repair or replacement.
On December 21,1962, defendant shipped the receiver back to plaintiff via another carrier, Railway Express Agency, on a Government bill of lading. After its receipt at plaintiff's plant on January 2, 1963, the receiver was, on January 25, 1963, unpacked in the presence of a Roadway (the original carrier) inspector and plaintiff's agents who took photographs of it. Thereafter, on February 18, 1963, plaintiff's service section recommended that the receiver not be repaired because the only part of worth was a certain section which was valued at $250.
Thereafter, plaintiff shipped to defendant a replacement for the receiver and filed a claim for $2,140 against Roadway which declined payment on the ground that :
We tendered a shipment to your customer at San Antonio, Texas, with shipping container apparently in good condition and no visible signs of damage or negligence and a clear receipt was given to us, September 1962.
This shipment then was in the possession of your customer for several months after which time it was returned by railway express another carrier, and it was not until January 25, 1963 that our company was asked to make an inspection.
At the trial the testimony produced by both plaintiff and defendant was to the effect that there was no additional damage to the receiver while it was being returned to plaintiff. (See findings 7 (a) and (b).)
We come then to a consideration of the various theories which from time to time have been advanced by plaintiff as a basis for recovery:
(1) By accepting the receiver from the delivering carrier, defendant foreclosed an action by plaintiff against the carrier. Plaintiff has cited no authority to support this theory; nor has plaintiff established that defendant owed a duty to advise Roadway, the delivering carrier, of the damage which the evidence clearly establishes was not evident except upon the subsequent opening of the packaging.
(2) Defendant did. not give plaintiff timely notice of the damage to the receiver. Plaintiff cites Cudahy Packing Co. v. United States, 109 Ct. Cl. 833, 75 F. Supp. 239 (1948), in which this court ruled that a delay of over two months by the War Department in notifying the plaintiff therein of the rejection of eggs which had been delivered to and inspected by defendant was unreasonable and that the plaintiff was entitled to recover the purchase price of the eggs. The court observed that the eggs "were a perishable commodity, obviously intended for current consumption by the troops In the instant case, plaintiff premises its theory on the assumption that it had no notice of the damage to the receiver until December 19,1962, when Staff Sergeant Johnson telephoned plaintiff's Mr. Ellenberger. The evidence establishes, however, that the form DD 6 which noted the defects in the receiver had been filled out by defendant's Mr. Bean on September 20,1962, and sent to plaintiff, and that Mr. Ellenberger acknowledged that plaintiff had received it. There is no evidence that the form DD 6 was not processed to plaintiff promptly. Although paragraph 5(c) of the General Provision of the contract provides that acceptance or rejection shall be made as promptly as practicable after delivery, the clause next following reads:
•but failure to inspect and accept or reject supplies shall neither relieve the Contractor from responsibility for such supplies as are not in accordance with the contract requirements nor impose liability on the Government therefor.
It is obvious that defendant's notice to plaintiif of the damage to the receiver was timely. It would appear, moreover, that by voluntarily sending the replacement receiver under the contract warranty provisions, plaintiff waived the question of timely notice. Copco Steel & Engr. Co. v. United States, 169 Ct. Cl. 601, 341 F. 2d 590 (1965).
(3) Defendant concealed acceptance of the receiver and thereafter misrepresented that the receiver had been rejected. This theory is, in the light of the facts as heretofore discussed, manifestly unsupported.
(4) The receiver was damaged by defendant. The weight of the evidence does not support this theory.
(5) Defendant was grossly negligent in releasing plaintiff's property (the receiver) to Railway Express Agency, the retummg earner, for a $50 vaJ/we, with the result that plaintiff could not recover from Rail/way Express Agency for damage caused during the return of the receiver. In view of the fact that the testimony produced by both plaintiff and defendant was to the effect that there was no additional damage to the receiver while it was being returned to plaintiff, and that there was no probative evidence to the contrary, this theory is unsubstantiated.
(6) If there was damage to the receiver on its return to plaintiff's plant {in addition to that previously reported by defendant) then defendant, having paid for the receiver, toas liable for such additional damage because the receiver was then the property of defendant. On the basis of the factual conclusion reached on theory (5), supra, this theory is likewise unsubstantiated.
FINDINGS on Fact
1. (a) Plaintiff, a corporation organized and existing under the laws of the State of Delaware, is a manufacturer of electronic equipment in Silver Spring, Maryland.
(b) On April 27, 1962, plaintiff entered into a negotiated supply contract with the Department of the Air Force for, inter aim, 16 special purpose radio receivers to be delivered to the Transportation Officer, Kelly Air Force Base, San Antonio, Texas, and marked for the Air Force Security Service, at a price of $3,510 each, FOB destination.
2. The contract provided that inspection and acceptance would be made by Headquarters United States Air Force Security Service personnel at the destination. The contract also had a disputes article usually contained in Government supply contracts. Other pertinent provisions of the contract were as follows:
5. Inspection
(a) All supplies shall be subject to inspection and test by the Government, to the extent practicable at all times and places including the period of manufacture, and in any event prior to acceptance.
(b) In case any supplies or lots of supplies are defective in material or workmanship or otherwise not in conformity with the requirements of this contract, the Government shall have the right either to reject them (with or without instructions as to their disposition) or to require their correction. If the Contractor fails promptly to remove such supplies or lots of supplies which are required to be removed, or promptly to replace or correct such supplies or lots of supplies, the Government either (i) may by contract or otherwise replace or correct such supplies and charge to the Contractor the cost occasioned the Government thereby, or (ii) may terminate this contract for default as provided in the clause of this contract entitled "Default." Unless the Contractor corrects or replaces such supplies within the delivery schedule, the Contracting Officer may require the delivery of such supplies at a reduction in price which is equitable under the circumstances. Failure to agree to such reduction of price shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes."
(e) Acceptance or rejection of the supplies shall be made as promptly as practicable after delivery, except as otherwise provided in this contract; but failure to inspect and accept or reject supplies shall neither relieve the Contractor from responsibility for such sup plies as are not in accordance with, tire contract requirements nor impose liability on tire Government therefor.
(d) The inspection and test by the Government of any supplies or lote thereof does not relieve the Contractor from any responsibility regarding defects or other failures to meet the contract requirements which may be discovered prior to acceptance. Except as otherwise provided in this contract, acceptance shall be conclusive except as regards latent defects, fraud, or such gross mistakes as amount to fraud.
$ ‡ H* ‡ ‡
6. Responsibility foe Supplies Except as otherwise provided in this contract, (i) the Contractor shall be responsible for the supplies covered by this contract until they are delivered at the designated delivery point, regardless of the point of inspection; (ii) after delivery to the Government at the designated point and prior to acceptance by the Government or rejection and giving notice thereof 'by the Government, the Government shall be responsible for the loss or destruction of or damage to the supplies only if such loss, destruction, or damage results from the negligence of officers, agents, or employees of the Government acting within the scope of their employment; and (iii) the Contractor shall bear all risks as to rejected supplies after notice of rejection except that the Government shall be responsible for the loss, or destruction of, or damage to the supplies only if such loss, destruction or damage results from the gross negligence of officers, agents, or employees of the Government acting within the scope of their employment.
3. (a) On or about August 31, 1962, plaintiff set aside its special purpose receiver, model 1306A, serial number 113 (hereinafter referred to as receiver 113), to be shipped to defendant via Roadway Express, Inc. (hereinafter referred to as Roadway), pursuant to the above-mentioned supply contract.
(b) Plaintiff warranted the receiver as follows:
Yitro Electronics warrants each new equipment to be free of defects in material and workmanship for a period of one year after original shipment. Any instrument which is found within the one year period not to meet the foregoing standards after examination by our factory will be repaired or, at the option of Yitro, replaced without charge except for tubes, fuses, transistors, and diodes.
(c) On September 4, 1962, Roadway picked up receiver 113 and issued its freight bill No. 152 7286.
(d) On September 10, 1962, Roadway delivered receiver 113 to the receiving station for the Air Force Security Service of Kelly Air Force Base where the receipt thereof was on that date acknowledged, without exception, on a copy of the freight bill by a handwritten notation of defendant's agent.
4. (a) At all pertinent times, there was located adjacent to the receiving station of the Air Force Security Service an inspection section in which were inspected certain items which were received by the receiving station. The established procedure upon receipt of technical equipment, such as the instant radio receivers, however, was for the receiving station to verify quantities and then to notify the engineering laboratory division which sent one of its technicians to make the inspection. Thereafter, a material inspection and receiving report, form DD 250 was filled out in accordance with the directions of the engineering laboratory technician who then signed the form. There is no indication on the form DD 250 or in the evidence that it was sent as a matter of established procedure (or in the instant case) to the consignor of the equipment. When a damaged or improper shipment was received, a form DD 6 was filled out with a description of the nature of the deficiency, and sent to the consignor.
(b) Shortly after receiver 113 was delivered to the receiving station, in accordance with the above-described established procedure, the engineering laboratory division was notified.
(c) On September 13, 1962, a technical sergeant who had been assigned to the inspection section for only a short time and who was not "familiar with the situation," filled out and signed for his sergeant supervisor a form DD 250 in which it was stated that receiver 113 had been inspected and approved for acceptance by the engineering laboratory division, and that the receiver conformed to the contract and was accepted without exceptions. On the same date a staff sergeant who was an inchecker also signed the form DD 250 for the chief of the materiel management division, indicating acceptance of receiver 113. No one in the engineering laboratory division signed the form DD 250 or authorized the statements contained in it, and under the established procedures the form should not have been signed by those who did sign it. It is clear that the form DD 250 was filled out and signed mistakenly, and that as of the date of the signing of the form, the engineering laboratory division had not inspected receiver 113.
(d) After form DD 250 was filled out and signed, as above described, it was routed to the finance office for payment.
(e) On September 18,1962, Mr. Joe Bean, a technician of the engineering laboratory division, broke the original seals and opened the three separate containers (cardboard "wraparound," inner cardboard container and outer cardboard container) in which receiver 113 was packaged. He noticed that one of the meters was out of place or missing and that there was only one dial where there should have been two. On removing the receiver from the packaging and removing the top of the receiver he noticed that a meter was loose and that a tuning unit was out of place. Since he concluded that the defects which he noticed were sufficient to warrant rejection of the receiver, he did not look for other defects in it, but thereupon "rejected the receiver as far as the lab was concerned," and notified the receiving station to reject it. He did not inspect the packaging or notice any damage to it.
(f) On September 20,1962, Mr. Bean, signed a form DD 6 (report of damaged or improper shipment) in which it was noted that there was a deficiency in the preservation or packaging of receiver 113 and that a meter and inductuner had been shifted out of position. The form DD 6 contained spaces for an indication of whether the carrier had been notified or had inspected the damage, 'but these spaces were not marked. A copy of this form DD 6 as filled out showed plaintiff as addressee, and was sent to and received by plaintiff.
(g) On December 14,1962, plaintiff was paid by defendant the contract price of $3,510 for receiver 113.
(h) On December 19,1962, Staff Sergeant Albert Johnson, who was in charge of the receiving station of the Air Force Security Service at Kelly Air Force Base, telephoned plain tiff's superintendent of manufacturing, engineering and production control, Mr. Robert Ellenberger, and stated that receiver 113 bad been received by defendant in a damaged condition, with a defective meter and a loose tuning unit. Mr. Ellenberger acknowledged that plaintiff had received a copy of form DD 6 (finding 4(f), supra) and stated that since the receiver was still under warranty, defendant should return it to plaintiff for either repair or replacement. Sergeant Johnson advised Mr. Ellenberger that defendant had inadvertently paid plaintiff for the receiver. Mr. Ellenberger did not give Sergeant Johnson any instructions as to how receiver 113 should be packed for reshipment, or on the value to be declared on it, or on the carrier to be employed.
(i) On December 21, 1962, defendant shipped to plaintiff via Railway Express Agency, receiver 113 which was repacked in the original cardboard "wrap-around," the original inner carton, and a wooden box (instead of the original outer cardboard container). With the shipment defendant sent a form DD 1148 which noted:
Item received damaged. Returned per telephone conversation with Mr. Ellesberger [sic] and SSgt Johnson, 19 Dec 62. To be repaired or replaced with a new one because of warranty clause of contract AF 41(621) 425 [sic] and returned to AFK 7030 as soon as possible. DD Form 6 is inclosed [sic] in packing list.
The Government bill of lading provided that the charges for the shipment were to be billed to defendant and that the shipment was to be "at the maximum value applicable to the lowest published rate."
5. (a) On January 2, 1963, receiver 113 was received by plaintiff in Silver Spring, Maryland, from Railway Express Agency. Enclosed with the receiver was the Government bill of lading, the form 1148 and the form DD 6.
(b) On January 22,1963, plaintiff requested Roadway, the carrier which, transported receiver 113 to Kelly Air Force Base, to inspect the receiver which had not yet been unpacked by plaintiff.
(c) On January 25, 1963, receiver 113 was unpacked at plaintiff's plant in the presence of a Roadway inspector, plaintiff's superintendent of manufacturing, engineering and production control, Mr. Robert Ellenberger, and plaintiff's supervisor of the receiving and shipping department, Mr. Robert Newman. A joint inspection report, signed by the Roadway inspector and by Mr. Ellenberger, stated that the receiver was refused by defendant and returned to plaintiff for inspection; that the packing was "extra good"; that the top right corner of the receiver front plate was bent back; that there was a small hole in the carton which appeared to have been dropped or hit at that spot; that one knob was broken and others were loose, due to a jolt; that internal damage could only be known by taking the receiver apart; and that upon removal of the top and bottom of the receiver everything in the side appeared to be out of line. Plaintiff took photographs of the receiver shortly after it was unpacked.
(d) On the same day, January 25, 1963, Mr. Ellenberger prepared a returned goods memo in which he requested plaintiff's service section to estimate the repairs needed to restore receiver 113 in first-class mechanical and electrical condition, or if repair was not recommended, to furnish an estimate of its salvage value.
(e) On February 18, 1963, plaintiff's service section estimated that it would cost $2,140.35, including labor, materials and general and administrative expense, to repair receiver 113, and that with an added figure of $204.65 as profit, the total would be $2,345. The estimator recommended that the receiver not be repaired. He noted that the only part of worth was a certain section which he valued at $250.
(f) During the latter part of February 1963, Mr. Ellen-berger talked by telephone with defendant's contracting officer, Mr. Harris, who stated that he wanted to know when plaintiff was going to repair receiver 113 or to replace it with another receiver, and further stated that receiver 113 had not been accepted by defendant. Mr. Ellenberger stated that it was apparent that the damage to the receiver had been caused by handling, and asked why defendant had not notified Roadway, if the receiver had been received by defendant in that condition. Mr. Harris responded that some serviceman had made a mistake. Mr. Ellenberger then stated that he would send defendant a replacement receiver.
(g) On March 15, 1963, plaintiff filed a claim for $2,140 against Roadway for damage to received 113. This amount included labor, burden, material, and general and administrative expense.
(h) On March 21, 1963, plaintiff shipped to defendant receiver 133 as a replacement for receiver 113, and forwarded its invoice for the contract price of $3,510 for receiver 133.
(i) On April 5, 1963, defendant returned to plaintiff the invoice for receiver 133 and stated in an accompanying letter that receiver 133 was a replacement for receiver 113 for which defendant had already made payment.
(j) On May 28,1963, plaintiff issued a credit memo which stated that receiver 113, damaged in transit, had been paid for by defendant, that receiver 133 had been sent as a replacement, that the charge therefore was cancelled, and that a claim against the carrier in the amount of $2,345 was to be set up.
(k) On June 3, 1963, Roadway wrote plaintiff that it would be impossible to establish carrier liability for damage to receiver 113, based upon the evidence submitted, and therefore payment of plaintiff's claim was declined at that time.
(l) On September 28,1963, Roadway again declined payment of plaintiff's claim for damage to receiver 113, on the ground that:
We tendered a shipment to your customer at San Antonio, Texas with shipping container apparently in good condition and no visible signs of damage or negligence and a clear receipt was given to us, September 1962.
This shipment then was in the possession of your customer for several months after which time it was returned by railway express another carrier, and it was not until January 25, 1963 that our company was asked to make an inspection.
6. Over the course of the next several months, plaintiff and defendant corresponded respecting liability for damage to receiver 118. Defendant consistently denied liability.
7. (a) At the trial, Mr. Eobert Newman, supervisor of plaintiff's receiving and shipping department, who was present when receiver 113 was unpacked at plaintiff's plant (finding 5(b), supra) expressed the opinion that the damage to receiver 113 did not occur while the receiver was in the shipping containers because neither the cardboard "wraparound" nor the wooden outer box was damaged. He concluded "that it must have been dropped on the corner before it was put back into a paper carton, which was then enclosed by the Air Force in a wooden crate."
(b) Mr. Joe Bean, the technician of defendant's engineering laboratory division at Kelly Air Force Base, who broke the original seals and opened the three separate containers in which receiver 113 was packaged (finding 4(e), supra), examined at the trial the photographs which plaintiff took of the receiver shortly after it was unpacked at plaintiff's plant. He testified that the appearance of the receiver when he inspected it at Kelly Air Force Base and its appearance as depicted in the photographs were "comparatively the same," that the photographs represented a situation that could easily have existed at the time he made his inspection. Mr. Bean emphasized that at the time of his inspection, when he noticed that a meter was loose and that a tuning unit was out of place, he concluded that there "was enough to warrant my rejecting this receiver." He continued: "There could have been others. I didn't look for others. This was sufficient. This was what I rejected it on."
CONCLUSION OF Law
Upon the foregoing findings of fact and opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that plaintiff is not entitled to recover and the petition is dismissed.
In 13 C.J.S. Carriers § 232, the following appears :
Acceptance of the goods hy the consignee, without objection and with knowledge of their defective condition, may preclude recovery for damages thereto, or for loss or destruction subsequent to delivery due to such defective condition. The consignee is entitled, however, to a reasonable opportunity for examination, and acceptance for that purpose will not be a waiver; nor will acceptance waive objection for damage not apparent. Indeed, the receipt of the goods valone, with no stipulation that they are accepted in full performance of the contract, does not, it seems, constitute a waiver of claim for damages for which the carrier may be liable. A receipt acknowledging a delivery of the goods in good condition is only prima facie evidence of the fact.
At the trial Sergeant Johnson was "positive" that Mr. Ellenberger acknowledged in the telephone conversation that plaintiff had received the form DD 6. He testified that when, in the conversation, he (Sergeant Johnson) mentioned that the form DD 6 had been sent to plaintiff, Mr. Ellenberger stated that he would try to find it In plaintiff's file, and that Mr. Ellenberger then stated that he had just found the form in the file. Mr. Ellenberger testified that he did not recall, but would not deny, such acknowledgement.