CUTLER-HAMMER, INCORPORATED v. United States

• Decision Date: 14 May 1971
• Docket Number: No. 531-69.,531-69.
• Citation: 441 F.2d 1179,194 Ct. Cl. 788
• Parties: CUTLER-HAMMER, INCORPORATED et al., v. The UNITED STATES.
• Court: U.S. Claims Court

194 Ct. Cl. 788, 441 F.2d 1179 (1971)

CUTLER-HAMMER, INCORPORATED et al., v. The UNITED STATES.

No. 531-69.

United States Court of Claims.

May 14, 1971.

Albert H. Greene, Washington, D. C., attorney of record for plaintiffs; Richard J. Ney, and Alvord & Alvord, Washington, D. C., of counsel.

James F. Merow, Washington, D. C., with whom was Asst. Atty. Gen. L. Patrick Gray, III, for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.

ON PLAINTIFFS' MOTION AND DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT

NICHOLS, Judge:

This case is before us on plaintiffs' motion and defendant's cross motion for summary judgment. Plaintiffs are seven domestic corporations, all industrial users of silver. The cause of action is based upon an alleged breach by the defendant of an alleged contract to sell silver to the plaintiffs at the price of $1.XXXXXXXXX ($1.29+) per fine troy ounce. Jurisdiction is said to lie under 28 U.S. C. § 1491.

The facts of this case present an interesting bit of monetary history, even though contributing no new problem to the field of contract law. We hold that plaintiffs have no actionable claim because their allegations do not set forth any facts which support the existence of a contract, either express or implied.

Both sides have filed lengthy motions, affidavits, documents, and briefs setting forth the background facts in great detail. We have examined this material carefully, but find it unnecessary to do more than summarize it here, since there is no factual dispute and the only question for resolution is whether the Treasury Department Regulation of May 18, 1967, 32 Fed.Reg. 7496, was contractual in nature, an offer binding the United States to sell silver to anyone who complied with its terms. The Regulation reads in part as follows:

§ 56.1 Conditions upon which silver will be sold.

An application for the purchase of silver may be filed either with the Federal Reserve Bank of New York or the Federal Reserve Bank of San Francisco on forms which are available at both Banks and at the Offices of the Directors of the Mint and of Domestic Gold and Silver Operations. The right is reserved to supply the silver from any mint institution as the interest of the Government requires. Silver may be sold only in amounts required for domestic manufacturing use in the normal conduct of the applicant\'s business. The applicant is required to certify that the amount of silver which he desires to purchase, together with that on hand, will not exceed his normal requirements for a 2-month period, and that the silver is for manufacturing uses. Applications for unusual amounts of silver are required to be referred to the Office of the Director of Domestic Gold and Silver Operations for approval before the sale can be made.

§ 56.2 Sales price.

Silver is sold at a price not less than $1.XXXXXXXXX per fine troy ounce. Transportation charges from the mint institution to the purchaser are paid by the purchaser. Payment shall be made in a form acceptable to the Federal Reserve Bank.

* * * * * *

This regulation was issued pursuant to § 209 of the Coinage Act of 1965, 31 U.S.C. § 405a-1 (Supp. V, 1965-69). The purpose of the Act was "to conserve this Nation's rapidly dwindling supply of silver", H.R.Rep.No.509, 89th Cong., 1st Sess. (1965), U.S.Code Cong. & Admin.News 1965, p. 2299, by eliminating the use of silver in all coins except the silver dollar. It authorized the minting of the now familiar clad or "sandwich" coin consisting of a copper core between layers of cupro-nickel to replace the silver coins of lesser denomination. H.R. Rep.No.509 gives us the background for this legislation:

The tremendous expansion in the demand for silver coupled with the relatively static supply, and the importance of silver in industrial processes, such as photography, where no satisfactory substitute exists, have been responsible for a dramatic increase in the market price of silver over a period of only 4 years. Prior to 1962, the New York price of silver bullion had not reached or exceeded a dollar per fine troy ounce in more than 40 years. It was relatively stable in price from 1951 through most of 1961 in the neighborhood of 91 cents an ounce. Since late 1961 it has risen sharply to the monetary value of silver as used in the standard silver dollar. (Footnote omitted.)

The price of silver has been held at $1.29 because the Treasury Department stands ready to redeem outstanding silver certificates at the monetary value of silver. The effect is that the Treasury Department has become the residual supplier to the market of the silver needed to make up the difference between consumption and production. U.S.Code Cong. & Admin.News 1965, p. 2302.

The value of the silver content in a silver dollar as money has, since 1792, been $1.29+ per fine troy ounce, i. e., when the market price of silver reached $1.29+, the silver in the silver dollars became worth 100 cents. If the market price of silver exceeded that figure, it would become profitable to melt down coins for their silver content. The fear was that rising silver prices would promote hoarding or melting of silver coins before enough of the new clad coins could be minted to meet the needs of our economy. In order to remove this threat to the existing coinage, the Secretary of the Treasury was authorized by § 209 of the Act "to sell on such terms and conditions as he may deem appropriate, at a price not less than the monetary value of $1.XXXXXXXXX per fine troy ounce, any silver of the United States in excess of that required to be held as reserves against outstanding silver certificates". Initially this "free" silver was sold at that price to all comers and it achieved the desired effect of holding down the price. The drain on the Treasury's supply of free silver was tremendous, however, and it became necessary to issue the Regulation of May 18, 1967, supra, limiting sales to domestic industrial users and only in the quantities expressed therein. Treasury Department Release of May 18, 1967, (plaintiffs' exhibit E) explained:

These actions have become necessary because of a rapid increase in the amounts of purchases of silver held by the Treasury. These purchases have been rising at an unprecedented rate during the past week and, if unchecked, could lead to exhaustion of the silver supplies which the Treasury is authorized to sell. This, in turn could result in excessive hoarding of silver coins needed in our national economy at present, as well as in disorderly, speculative dealings in silver affecting the United States economy.

Applications of industrial users were required to be submitted on Form TS-400, which was labeled: APPLICATION AND END-USE CERTIFICATE FOR SILVER BULLION TO BE USED IN DOMESTIC MANUFACTURING OPERATIONS. The form listed the name of the purchaser, the amount of silver requested and made the certifications required by the Regulation, supra. Due to the large amount of silver sold under this procedure during the first three weeks, the Department required that all applications received thereafter be referred to the Office of Domestic Gold and Silver Operations for prior approval. Mr. Thomas W. Wolfe, who is the Director, has furnished the defendant an affidavit showing the scope of this business, (defendant's exhibit 7A):

* * * the decision to refer such applications to the Office of Domestic Gold and Silver Operations was based on the fact that after about three weeks, approximately 19 million ounces of silver had been sold under the End-Use Certificate procedure. This was considered unusual when compared with normal U. S. consumption over the period which, based on a yearly figure of 150 million ounces, the Treasury estimated at not more than 12,500,000 ounces.

When one of the Federal Reserve Banks received an application, it made acknowledgement in the following manner:

This will acknowledge the receipt of your Application and End-Use Certificate dated for approximately ounces of silver bullion which we have forwarded to the United States Assay Office in New York. When we have been informed of the decision of the United States Assay Office in regard to such application we will inform you accordingly.

Pursuant to this procedure, plaintiffs filed applications for and were allowed to purchase varying quantities of silver at the price of $1.29+.

On July 14, 1967, pursuant to a recommendation of the Joint Commission on the Coinage, the Treasury halted the sale of silver at the $1.29+ price and announced that future sales would be conducted by the General Services Administration under a competitive bid procedure. This was because it had minted sufficient clad coins to meet the needs of the economy and it was no longer considered necessary to hold down the price of silver by means of these sales. The only orders filled thereafter were those where the applicant had been advised of approval and the amount had been set aside for him.

Between June 30 and July 13, 1967 plaintiffs had filed a total of twenty applications for silver totalling 7,734,000 ounces, and had received acknowledgements in the form referred to above. But in no case had any of the plaintiffs received any notification that the applications had been approved. It is the failure of the Treasury to fill the orders contained in these applications which plaintiffs contend constitutes a breach of contract. They seek damages in the total amount of $3,798,870. The argument is that the Regulation of May 18, 1967, was an offer which plaintiffs accepted by filing Forms TS-400. As an alternative argument plai...