236 F.2d 944 (9th Cir. 1956), 14692, United States v. National Wholesalers

Docket Nº:14692.
Citation:236 F.2d 944
Party Name:UNITED STATES of America, Appellant, v. NATIONAL WHOLESALERS, a corporation; M-D Parts Manufacturing Company, National Parts Company and Henry Mezori, Appellees.
Case Date:September 18, 1956
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 944

236 F.2d 944 (9th Cir. 1956)

UNITED STATES of America, Appellant,


NATIONAL WHOLESALERS, a corporation; M-D Parts Manufacturing Company, National Parts Company and Henry Mezori, Appellees.

No. 14692.

United States Court of Appeals, Ninth Circuit.

September 18, 1956

Page 945

Warren E. Burger, Asst. Atty. Gen., Alan S. Rosenthal, Melvin Richter, Paul A. Sweeney, George S. Leonard, Attys., Dept. of Justice, Washington, D.C., Laughlin E. Waters, U.S. Atty., Los Angeles, Cal., for appellant.

William H. Neblett, Los Angeles, Cal., for appellee.

Before FEE and CHAMBERS, Circuit Judges, and FOLEY, District Judge.

CHAMBERS, Circuit Judge.

National Wholesalers, a California corporation, was low bidder in the year 1950 to supply the Department of the Army with 6, 600 generator regulators for motor vehicles at $23.50 each. The call for bids had specified catalogue items DR (for Delco-Remy) 1118502, GM (for General Motors) 1118502, or IHC (for International Harvester Corporation) 50301-R1 'or equal.' The bid call also made reference to Army ordnance stock numbers for the item.

By the terms of the bid call which had been previously mailed to 56 prospective

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bidders, it was required that if 'or equal' was offered by the bidder he should so state. Not mentioning 'or equal, ' National Wholesalers said on its bid that it was 'bidding' DR-1118502 regulators. Thereupon, the proper Army contracting officer in behalf of the United States entered into a contract incorporating within it the bid. In our judgment, properly construed, the contract required the bidder to furnish the proprietary Delco-Remy regulator and nothing else.

It seems that in the background of National Wholesalers' plan to obtain the contract was its belief that it could obtain a supply of Delco-Remy regulators perhaps sold by the government as World War II surplus. It would now sell them back to the government. But due to changes in specifications 1 on the Delco-Remy regulators, the old surplus model would not meet current specifications. Caught in this dilemma, National Wholesalers decided that it would manufacture regulators substantially meeting the specifications of the Delco-Remy model. What it made is described in the record as a 'Chinese copy.' The government now has some lingering contentions that the Chinese copies were not as good as the specified Delco-Remy. The trial court found that the substitutions were 'equals.'

The controversy here principally stems from the fact that surreptitiously National Wholesalers caused spurious Delco-Remy labels 2 to be printed which it attached to its product prior to delivery to the Army. For some months the Army, in ignorance, accepted the regulators as delivered in installments by National Wholesalers in performance of its contract. 3 After 4, 086 regulators of the contracted 6, 600 had been inspected and received by the Army, the shoddy operation of the contractor was discovered. A 'stop order' on receipt of deliveries was issued and off for testing to the Detroit Arsenal went one of the bogus regulators supplied by National Wholesalers along with a sample of the genuine Delco-Remy article. The tests were very favorable to the contractor. The substituted article, as to performance, was found to be within established limits of tolerance variations for 'or equal' items.

At this point the Army about faced and its contracting officer advised the contractor by letter that the counterfeit labeled product would be accepted as 'or equal.' So much of the case turns upon the letter that it is set forth in full as follows: 4

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'All Communications Should be Accompanied by Carbon Copy and Addressed to Los Angeles Ordance District U.S. Atty

35 North Raymond Avenue Pasadena 1, California

'To Insure Prompt Attention

In Replying Refer to

LAD No. 160-96/5 Nat'l W.

Attention of Legal Br.

16 October, 1950.

'National Wholesalers, Inc.

4395 East Olympic Boulevard,

Los Angeles, California.


Subject: Contract No. DA-20-018-Ord-3951

'Under date of 15 February, 1950, an Invitation for Bids, WD Form 106, was issued by Detroit Ordnance District inviting the submission of bids for furnishing 6, 600 each Regulator, generator, Assy., Mfr's Part Nos. DR-1118502, GM-1118502, IHC-50301-R1, or equal. ORD-7069022, ORD-7069023. Ordnance Stock No. 2580-1118502. Vehicle Application SNL G541, G671, G506, F501, G508.

'Under date of 6 March, 1950, you offered to furnish 6, 600 each Regulator, generator, Assy., Mfr's Part No. DR-1118502 at a price of $23.50 each; on 1 April, 1950, your bid was accepted by the Government; and under date of 12 April, 1950, the contract thereby created was transferred to the Los Angeles Ordnance District for administration.

'Subsequently Regulators were submitted to the Resident Ordnance Inspector for inspection and a total quantity of 4, 086 Regulators were inspected and accepted by the Government. It then came to the attention of the Contracting Officer that Regulators which had been manufactured locally were being offered for inspection and acceptance, and on 14 September, 1950, the Resident Ordnance Inspector was therefore instructed not to accept such Regulators pending a decision as to whether they were in conformity with the requirements of the contract.

'In this connection your attention is directed to the fact that in your bid you offered to furnish one of the approved items listed in the Invitation, and...

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