United States v. Penn Foundry Mfg Co 8212 10, 1949

• Citation: 337 U.S. 198,69 S.Ct. 1009,93 L.Ed. 1308
• Decision Date: 31 May 1949
• Docket Number: No. 253,253
• Parties: UNITED STATES v. PENN FOUNDRY &MFG. CO., Inc. Argued Jan. 7—10, 1949
• Court: United States Supreme Court

337 U.S. 198

69 S.Ct. 1009

93 L.Ed. 1308

UNITED STATES

v PENN FOUNDRY &MFG. CO., Inc.

No. 253.

Argued Jan. 7—10, 1949.

Decided May 31, 1949.

Mr. Melvin Richter, Washington, D.C., for petitioner.

Mr. David G. Bress, Washington, D.C., for respondent.

Mr. Justice BURTON delivered the opinion of the Court.

This is an action in the Court of Claims by the respondent, Penn Foundry and Manufacturing Company, Inc., against the United States for loss of anticipated profits alleged to have been caused by the latter's cancellation of a contract for gun mounts for the Navy. The cancellation occurred a few days after the contract had been awarded by the United States to the respondent on February 23, 1942. The question presented is whether the findings of fact made by the Court of Claims are sufficient to sustain its judgment requiring the United States to pay for such loss. 75 F.Supp. 319, 110 Ct.Cl. 374. We hold that they are not. We so hold because of (1) the absence of any finding of the readiness and capacity of the respondent to perform certain of its contractual obligations upon which its profits were contingent and (2) the presence of certain affirmative findings which preclude the drawing of any sufficient inference of such readiness and capacity from the other findings.

The record includes only the pleadings and accompanying exhibits filed in the Court of Claims and that court's special findings of fact, conclusion of law, opinion, judgment and refusal to grant a new trial. We do not have before us the report which its Commissioner made to the Court of Claims or the testimony upon which he or that court relied. While additional claims were made by the respondent in its original petition to the Court of Claims and while the United States originally contested the binding force of the contract, the errors specified in the present proceeding question only the right of the respondent to recover $80,000 as damages for its alleged loss of anticipated profits. We granted certiorari because of the possible relation of the result in this case to claims under many war contracts cancelled by the United States. 335 U.S. 857, 69 S.Ct. 130.

T e findings of fact show the following:

In 1911, the respondent bought a manufacturing plant consisting of six buildings in Waynesboro, Virginia. The main buildings, each 57 x 100 feet, had been built in 1890 and were referred to respectively as the machine shop, the foundry and the blacksmith shop. At one time the respondent manufactured circular saws and, at another, did work on brake shoes. Since 1931, the plant had been used only for minor engagements, requiring not more than four or five employees. It had been idle for some years when, late in 1940 or early in 1941, the respondent's officers became desirous of engaging in the National Defense Program. Most of those officers were then in other businesses at or near Pittsburgh, Pennsylvania. One stockholder and director was in the real estate business in Waynesboro. He had been the local manager of the plant when it was in operation and had continued thereafter as such and as the statutory agent of the company.

In January, 1941, the respondent engaged an additional man as assistant to the president and, on February 24, 1942, an engineer as general manager. In April, 1941, it submitted a proposal to the Navy for the manufacture of 500 3-inch 50-caliber gun mounts. In July, a representative of the Gun Mount Section of the Navy Department inspected the plant. Following a conference in September, the respondent was asked by the Government to furnish information as to financial ability, commitments of subcontractors, and a detailed study of the machine tool operations, predicated upon a possible award of 150 3-inch 50-caliber mounts. In October and December, the respondent submitted additional information and slightly modified its proposals. December 22, the respondent's proposal as to prices, quantities, delivery schedule, payments and options for additional mounts was accepted as satisfactory and the respondent agreed to secure a letter from a surety company indicating that a bond of the nature required by the Navy's Bureau of Supplies and Accounts would be furnished.

The respondent received a 'letter of intent,' dated December 29, 1941, signed by the Paymaster General of the Navy as contracting officer and approved by the Under Secretary of the Navy. It stated that it was anticipated that the Navy Department would place an order with the respondent for the manufacture of 150 gun mounts. It specified the delivery of two complete mounts in May, 1942, three in June, five in July, and thereafter at a minimum rate of ten mounts per month. The letter also authorized the respondent to purchase materials and spare parts, subject to confirmation by the Government's purchasing officer, and to proceed with the production of the mounts in anticipation of the placing of the order for their production. However, under date of January 7, 1942, the Government held up this authorization of expenditures until such time as the respondent furnished the Government with the firm commitment of an approved surety company to act as surety on a performance bond. January 10, the respondent accepted the letter of intent. January 29, the Navy Department stated that the necessary letter from a surety company had not been received and that failure promptly to submit such a letter might result in the termination of the letter of intent. February 3, the respondent's representatives submitted a letter from a surety company indicating that that company thought that a bond in connection with a contract of this size would have to be reinsured and that, unless some change were made in the financial setup, reinsurance would be declined. It added, however, that, if either of two suggested plans relative to refinancing were accomplished and if the respondent furnished certain information as to new key personnel to be engaged by the respondent, then the reinsurance could be obtained and the surety company could execute a bond. The findings of fact disclose a difference in the testimony as to the reaction of the Government's represent tive to this letter. There is no finding that the Government's requirement in this regard ever was met.

Much in the following findings of fact Nos. 5—8 is vital to the issue before us:

'5. On January 16 and 17, 1942, plaintiff's plant was visited by inspectors of the Philadelphia Inspection District of the Navy Department to instruct plaintiff's personnel as to the Navy inspection requirements. At the time there was no one at the plant except the watchman and the local manager. No work at all was being performed at the time. On February 19, 1942, a production specialist from the War Production Board visited the plant. His duties were to assist production in factories in the production of naval ordnance. At that time only the watchman was at the plant. The production specialist inspected the plant with the local manager, who was called from his real estate office, and also talked with Mr. Johnson (the new assistant to the president), who was called to Waynesboro for that purpose. Reports of these visits were given to the Navy Department. At that time the company was not prepared to undertake work of the character proposed by the contract, and would not for an indefinite time be prepared successfully to complete a contract for 150 gun mounts. Plaintiff's foundry was incapable of production of the cast steel forgings required for the gun mounts. It was plaintiff's plan, as shown by its proposal to the Government, to subcontract for these castings, as well as for other parts of the work. Plaintiff had contacted certain producers, who were willing to furnish castings and other parts, but no contracts for the castings or any other parts had been made by plaintiff. There was no reason to suppose that the plaintiff could not have obtained these parts from subcontractors. Plaintiff planned to use around 150 mechanics, skilled, semi-skilled, and unskilled, in the machining and assembling of the gun mounts. Plaintiff had expected to secure former railroad shop mechanics residing near Waynesboro as the bulk of its employees. The construction of gun mounts is difficult and exacting work. Manufacturers experienced in somewhat similar work with large organizations and trained mechanics required from seven months to one year from the time of receiving notice to proceed until the first gun mounts were produced. general manager was at this time a and no force of trained personnel to train unskilled employees. Plaintiff's proposed general manager was at this time a regular employee of another company in Ohio. He had been assisting plaintiff in its plans under the expectation that he would sever his connection with the other company and become plaintiff's general manager. A contract between plaintiff and the engineer under the terms of which the engineer was engaged as general manager was executed on February 24, 1942.

'6. Under date of February 23, 1942, the Navy Department mailed to plaintiff a notice of award of contract, No. LL96553, for gun mounts, in the amount of $2,087,555, which notice of award was received by the plaintiff on February 24, 1942. On February 24, 1942, after it had received the notice of award, plaintiff received a telegram as follows:

'NOTICE OF AWARD CONTRACT NOS 96553 FORWARDED IN ERROR RETURN FOR CANCELLATION NO AWARD TO YOU ACKNOWLEDGE REFERRING SYMBOL SPF—

'RAY SPEAR PAYMASTER GENERAL NAVY

'On March 5, 1942, the Navy Department prepared and mailed to plaintiff a letter as follows:

'As it is apparent that you cannot secure a bond to insure faithful performance of the contract, no contract will be issued to you, and the Letter of Intent LL—NOs—96553 (SPC), dated 29 December 1941, is hereby cancelled.

'Since no authority has been given you to incur any expenses under the Letter of Intent, there can be no liability on the...