United States v. American Sales Corporation

• Decision Date: 06 July 1928
• Docket Number: No. 997,998.,997
• Citation: 27 F.2d 389
• Parties: UNITED STATES v. AMERICAN SALES CORPORATION. AMERICAN SALES CORPORATION v. UNITED STATES.
• Court: U.S. District Court — Southern District of Texas

27 F.2d 389 (1928)

UNITED STATES v. AMERICAN SALES CORPORATION.

AMERICAN SALES CORPORATION v. UNITED STATES.

Nos. 997, 998.

District Court, S. D. Texas, at Houston.

July 6, 1928.

H. M. Holden, U. S. Atty., of Houston, Tex., Will H. Krause, Sp. Asst. U. S. Atty., of Washington, D. C., and Howell Ward, Asst. U. S. Atty., of Houston, Tex.

McDonald & Wayman, of Galveston, Tex., and T. W. Gregory, of Houston, Tex., for American Sales Corporation.

HUTCHESON, District Judge.

These two suits involve the same transaction, a sale in 1920 of 7,770 escort wagons. The first suit is an action on the part of the United States to recover a balance due on a contract for the sale of the wagons at $55.20 each. The second is a suit by the sales corporation to recover an amount due it on account of its having paid, at the price of $30.25 each, for more wagons than it received.

Plaintiff, the United States, admits the overpayment and concedes that the defendant is entitled to a credit on the account sued for of $12,000 on account of this overpayment. The defendant denies that it owes any amount to the United States, asserting that, while it is true that it did, in November and December, 1920, execute contracts for the purchase of 7,770 wagons, these contracts were, on July 20, 1921, canceled and abrogated by the substitution of new contracts, reducing the price as to the undelivered wagons from $55.25 per wagon, to $30.25.

The United States admits that such change was attempted and new contracts executed as claimed by the defendant, but it asserts that these new agreements were wholly without consideration and executed by persons having no authority. The facts determining the rights of the parties are undisputed. These are briefly, that pursuant to the acts of July 9, 1918 (40 Stat. 845, 850 Comp. St. § 6941aa), and July 11, 1919 (41 Stat. 104 5 USCA § 211), which provide that the Secretary of War "is hereby authorized to sell any surplus supplies * * * now owned by and in the possession of the government for the use of the War Department to * * * any corporation or individual, upon such terms as may be deemed best," agreements to sell were made with the American Sales Corporation 7,770 class A escort wagons, complete, stored at the Hawthorne Warehouse, Chicago, Ill., at $55.25 each.

These agreements were made with the defendant, after similar agreements, made in August, 1920, with Frank A. Winerich, or Frank A. Winerich Motor Company, had been canceled. The contracts with the American Sales Corporation were formal contracts, duly executed and delivered, and in accordance with their terms the defendant paid the required 10 per cent. deposit, amounting to $41,430.90, and paid $55,250 in advance for the first 1,000 wagons, making a total check of $96,680.90.

After the making of the first contract in November, three additional contracts, covering 268 wagons, 4 wagons, and 1 wagon, respectively, and using the same terms, were entered into on December 9, 1920. The defendant Sales Corporation, in its brief, as to the substance of these contracts and the status of the parties, says: "The United States sold and had agreed to deliver, and the company bought and agreed to take in lots of 1,000 or more by June 30, 1921, 7,770 wagons at $55.25 each. The United States was to furnish free storage and assume the fire hazard. The United States held $98,227.10 as a deposit and as a payment for 1,000 wagons."

Thereafter the defendant, finding it difficult, if not impossible, to move the wagons on account of various conditions, among them a claimed depression, appealed to Maj. Castleman, the officer who had signed the original contracts, for an extension of time and a reduction of price, which appeal was refused; the officer telegraphing the company on March 19, 1921: "Be advised by War Department that Director of Sales has ruled your company will be held to terms of original contract."

Thereafter Morris, for the defendant company, for the third time urged a modification, and after considerable correspondence succeeded in obtaining new contracts, reducing the price from $55.25 to $30.25. Defendant paid for all the wagons called for by the contracts, 571 already delivered before the making of the new contract at the original price, $55.25 each, and the remainder at $30.25, the price agreed upon in the new contract, but the United States failed to deliver 400 of the wagons so paid for.

Upon these facts the United States contends that the contract claimed to have resulted from the new agreement was a mere nudum pactum, because without consideration, and further was void because those who acted for the United States were without authority in the premises.

Defendant, as to the first contention, correctly says in its brief: "When the new contract was made in July, 1921, there had been no breach of the old contract. The company had done everything that it was bound to do. It had paid all that was required, the money was held by the United States, and it had until November 1 in which to receive, and pay for the undelivered wagons. The United States could have stood on the contract and made no modifications. On two occasions they did refuse to change the terms, but, after listening to Dr. Morris' presentation of the extraordinary conditions, they did agree to new terms. There is no suggestion but that all parties acted in the utmost good faith."

To which the United States replies, waiving for the moment the question of authority, and conceding for the argument that the officers had the power to make settlement and compromise of disputes, that the very statement of the case made by defendant defeats its position, for, in order for there to be a binding settlement of a dispute, there must be a dispute to settle, whereas here nothing was in dispute. The matter was presented and determined upon the view that to insist upon the contract would work a hardship upon the defendant, which consideration, however meritorious between individuals dealing equally and for themselves certainly has no place in guiding the actions of officers of the United States in dealing with its property. They say, therefore, that that line of cases represented by United States v. Corliss Engine Co., 91 U. S. 321, 23 L. Ed. 397, has no application, and they say further that, because of the fact that there...