Standard Magnesium Corporation v. United States

• Decision Date: 07 February 1957
• Docket Number: No. 5491.,5491.
• Citation: 241 F.2d 677
• Parties: STANDARD MAGNESIUM CORPORATION, a Kansas corporation, Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

241 F.2d 677 (1957)

STANDARD MAGNESIUM CORPORATION, a Kansas corporation, Appellant, v. UNITED STATES of America, Appellee.

No. 5491.

United States Court of Appeals Tenth Circuit.

February 7, 1957.

Harry M. Crowe, Jr., Tulsa, Okl., for appellant.

Charles H. Froeb, Asst. U. S. Atty., Tulsa, Okl. (B. Hayden Crawford, U. S. Atty., Tulsa, Okl., was with him on the brief), for appellee.

Before BRATTON, Chief Judge, and HUXMAN and PICKETT, Circuit Judges.

HUXMAN, Circuit Judge.

Standard Magnesium Corporation, herein called Standard, appeals from that portion of the judgment below against it in the sum of $5,734.95. The controversy arose out of a sale of certain government surplus material "generated" at Brookley Air Force Base at Mobile, Alabama. It was tried to the Court on an agreed statement of facts.

On January 16, 1952, the Government advertised for bids for, inter alia, "Wheels, misc. aircraft (salvage) where is, as is, 30,000 lbs." The defendant below Standard, bid $.204 per pound making the total bid price of $6,120. This was accepted. By the terms of the invitation to bid, Standard agreed to remove "all quantities of wheels, * * * generated during the life of the contract, where is, as is." The invitation expressly stated that the quantities available and listed of the items for sale "represent the estimated and not the actual amounts which will be available for delivery during the period stated. * * *"

Prior to submitting its bid Standard inspected part of the wheels offered for sale and found them to be of miscellaneous sizes and shapes, all of magnesium, with no more than 15% having steel brake drums attached and almost none with aluminum tire rims attached. The invitation to bid provided for such inspection, failure to inspect giving no ground for a claim. The invitation specifically provided that "* * * all property is sold `as is'; the Government makes no guaranty, warranty, or representation, express or implied, as to the kind, size, weight, quality, character, description, or condition of the property, or its fitness for any use or purpose; this is not a sale by sample." The invitation also warned that "Items may be contaminated."

With this understanding Standard picked up 15,470 pounds of wheels on February 28. These conformed substantially to those inspected and Standard paid for them. The Government later notified Standard to pick up 37,000 pounds and, on April 8, 25,730 pounds were loaded and taken to Standard's Tulsa, Oklahoma, plant. There, upon inspection, it was discovered that all the wheels had steel brake drums and aluminum tire rims attached. The drums and rims were readily removable and constituted about 35% of the total weight. Standard protested that the wheels were "contaminated" and that "We do not expect an overage to the extent purchasing steel brake drums with the wheels." Although it recognized that "* * * the purchaser agrees to take all quantities generated", Standard refused to accept same with the drums and rims attached and offered to return the excess over the 30,000 pounds estimated but to accept such up to 30,000 pounds.

The Government refused this offer and notified Standard that the contract was terminated, and that all loss incurred in the disposal of the wheels "generated" during the contract term was to be Standard's responsibility. Due to an unexpected modification program not anticipated when the invitation was published, a total of 148,840 pounds was generated. The Government sold the undelivered poundage, 107,690 pounds, at the best price obtainable. It credited this receipt to the contract price due from Standard, and sued for the balance and also for the purchase price of the 25,730 pounds delivered to Standard but yet unpaid for. This was recovered in the proceeding below and this appeal follows.

It is urged for reversal that the Court erred in failing to find that the Government had breached its contract in not delivering "wheels" as contemplated by the contract. It is Standard's position that "wheels" simply means wheels and not wheels with drums and rims. In the alternative, however, it urged that if the contract is deemed ambiguous in this respect it must be strongly construed against the party drafting it to the effect that the material furnished did not conform to the subject matter as described therein. Standard's further contention is that the 148,840 pounds "generated" by the Government, 118,840 pounds in excess of the estimate, is a breach of contract because the excess constitutes more than a reasonable variance from the amount estimated by the seller. The trial Court was of a contrary view and held that inasmuch as Standard had inspected a portion of the wheels, seeing that the drums and rims were attached, it was on notice that any or all wheels might be in such condition. Also the Court held that the amount contracted for was the amount "generated" and not the estimate and Standard was required to accept that amount or pay damages for its refusal.

It is apparent from the authorities that the usual Government surplus goods contract is not governed by the usual niceties of contract law. They are "where is, as is" sales with warranties and representations expressly negatived. Inspection prior to bidding is urged. The rule of caveat emptor in such sales "was certainly intended to be applied to the furthest limit that contract stipulations could accomplish it."¹ The subject matter is necessarily described generally because...