
    JOHN T. HICKEY v. THE UNITED STATES
    [No. H-8.
    Decided May 28 1928]
    
      On the Proofs
    
    
      Contract of sale; liquidated, damages; penalty. — .(1) While the courts at one time were inclined to the view that liquidated damages provided for by contract were in the nature of a penalty, which they would not enforce, they now regard damages as a proper subject for agreement.
    (2) Where a contract of sale provides that if the balance of the purchase money is not paid within the time specified, “ the Government reserves the right to forfeit the deposit as liquidated damages, and the bidder shall lose all right or interest in the property,” failure to comply with the condition gives the Government the right to rescind the contract and appropriate the deposit.
    
      The Reporter’s statement of the case:
    
      Mr. Don F. Reed for the plaintiff. Hatch <& Reed were on the brief.
    
      Mr. William W. Scott, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. The plaintiff, John T. Hickey, is a resident of Atlantic City, New Jersey; he has at all times borne true allegiance to the Government of the United States and has never given aid or encouragement to the enemies of the United States in rebellion; he is the sole owner of the claim presented in the petition, no part thereof or interest therein having been transferred or assigned to any person, firm, or corporation.
    II. On February 9, 1922, the Quartermaster’s Department of the United States Army held a public auction sale of surplus property, pursuant to previous notice in the form of a catalogue, at the quartermaster intermediate depot in the city of Philadelphia, Pa. The surplus property to be sold was classified and listed in the said catalogue by the officers in charge of the depot.
    Under lots Nos. 8 and 142 of the catalogue of auction sale of quartermaster surplus property held at the quartermaster intermediate depot, Philadelphia, Pa., on February 9, 1922, the following goods were offered for sale, stored at the Philadelphia quartermaster intermediate depot:
    
      
    
    III. Among other terms and conditions of this sale particularly pertinent to this claim are the following, appearing on pages 4, 5, 6, and 7 of the auction-sale catalogue:
    Page 4: “ Twenty per cent of the bid must be paid in cash or certified check at the time and place of sale; balance within ten days from date of sale in cash, certified check, or letter of credit, otherwise the Government reserves the right to forfeit the deposit as liquidated damages, and the bidder shall lose all right or interest in the property. * * * The letter of credit must be in the form approved * *
    Page 4: “All property listed for sale * * * will be open for inspection for a period of one week prior to the sale * *
    Page 4: “All property listed in this catalogue * * * will be sold as is ’ and ‘ where is,’ without warranty or guaranty as to quality, character, condition, size, weight, or kind * * * and no claims for any allowances upon any of the grounds aforesaid will be considered after the property is knocked down to a bidder by the auctioneer.”
    Page 5: “ Provided goods are paid for in full * * * the Government will permit the goods to remain in Government storage for thirty days from date of sale free of charge. * * * After this thirty days the Government will charge storage at local commercial rates * *
    
      Page 5: “No claims will be entertained except shortage in delivery to the authorized representative of the purchaser.”
    Page 6: “ Strict adherence will be required in the matter of payments * * *. No exceptions will be made * *
    Page 1: “ Note. — All articles listed in this catalogue will be sold ‘as is ’ and ‘ where is ’ * * * Samples * * * on display are believed to be representative, and descriptions accurate. * * * No claims will be entertained should the articles vary from the samples or not come up to the expectations of the purchaser as to conditions, quality, color, size, weight,” etc.
    IV. For approximately one week prior to February 9, 1922, the date of said sale, there were open for inspection by prospective bidders, in the defendant’s auction salesroom, six bales of blankets, wool, class 1, and in the defendant’s warehouse there were open for such inspection approximately fifty bales of blankets (a'total of approximately 332 bales), and the plaintiff visited the said salesroom for the purpose of inspecting, and did inspect, said six bales of blankets prior to the day of sale.
    V. All of the goods listed under the lots 8 and 142 of the catalogue were awarded to the plaintiff, the 6,639 blankets at $1.90 each, amounting to $12,614.10, and the 8,166% yards of duck, at 14% cents per yard, amounting to $1,214.80, the total amount of sale being $13,828.90. The plaintiff then and there made a deposit of $2,500 to apply on the purchase price of said blankets and duck, being approximately 20 per cent thereof, in accordance with the terms and conditions of the sale. And on the same day, to wit, February 9, 1922, the plaintiff sold the said blankets to N. Snellenberg & Company, of Philadelphia, Pa., who upon inspection on February 10, 1922, rejected said blankets for the reason that some of the bales contained cotton-warp blankets, and plaintiff was notified of such rejection and the reason therefor. .
    VI. By letter dated February 13,T922, the defendant from the Philadelphia depot requested plaintiff to pay the balance due on said purchase on or before February 20, 1922, in accordance with the terms of sale, and also to furnish shipping instruction therefor. A letter of credit in the amount due on this sale, $11,328.90, was sent to the defendant at the Philadelphia depot by W. H. Duval & Company, of New York City, agents for plaintiff, with its letter of February 20, 1922. The said letter of credit was returned to the said W. H. Duval & Company by the defendant on February 21, 1922, with the explanation that it did not conform to the required form. On March 2, 1922, the defendant, from the Philadelphia depot, made request on W. H. Duval & Company for letter of credit in the proper form. In answer to said letter the defendant received a letter from said W. H. Duval & Company, under date of March 4, 1922, stating that said letter of credit had been canceled and that all further communications relative to said purchase made by the plaintiff must be addressed to the plaintiff.
    On March 4, 1922, the defendant, from the Philadelphia depot, wrote to the plaintiff requesting immediate settlement on the balance due on said purchase and further requesting that the plaintiff furnish shipping instructions to cover the shipment of the property so purchased, to which letter the defendant received no reply from the plaintiff.
    VII. The Eastern Surplus Property Sales Board, at its meeting held on March 18, 1922, directed that the said sale to plaintiff be rescinded and the $2,500 deposit be forfeited to the Government as liquidated damages, the plaintiff not having paid for said property in accordance with the terms and requirements set out in the catalogue advertising said sale, and that the property in question be. offered for sale at the next auction sale, with no further liability or obligation to be incurred by the plaintiff on account of the sale. On March 29, 1922, the plaintiff was by the defendant, from the Philadelphia depot, advised that rescission of the sale had been made and the $2,500 deposit forfeited as liquidated damages, to which notice the plaintiff made no reply..
    VIII. On June 19, 1922, the entire quantity of duck, originally awarded at the auction sale to the plaintiff under-lot No. 142, was transferred by the defendant without funds to the Department of Agriculture, and said blankets were not sold at public auction but at private sale, as set forth in Finding XII.
    
      IX. On September 21, 1922, tbe defendant at tbe Philadelphia depot received a letter from Backrack Brothers, Inc., New York City, inclosing a letter from the pla,intilf dated September 20, 1922, directing that shipment of said blankets and duck be made to Backrack Brothers and inclosing their certified check for $11,328.90, drawn by Back-rack Brothers, Inc., in payment for the two lots of goods. The defendant from the Philadelphia depot replied to both of said letters under date of October 2, 1922, returning said check to Backrack Brothers, with the statement that it could not be accepted, and advising the plaintiff to that effect.
    X. On October 6, 1922, approximately eight months after the sale, a meeting of the Eastern Surplus Property Sales Board was held, which was attended by the plaintiff in accordance with his request made on October 3, 1922. At said meeting the plaintiff stated that he was somewhat at fault in completing the purchase of said goods; that the letter of credit was returned to W. H. Duval & Company when he was out of town; that his mail was not forwarded to him, and that he neglected to give the matter of said sale his attention, and in the meantime a Mr. Workman, of W. H. Duval & Company, went to Philadelphia to examine the blankets, and upon finding that some of them were cotton warp and not blankets, class No. 1, new as listed in said catalogue, the matter was dropped, as it was not to their interest to remove the blankets. The plaintiff also stated at said hearing that part of the fault was due to the action of the defendant in not properly fisting the goods; that he inspected the blankets, which were normal wool blankets made up of wool warp and wool filling, and that the matter finally came to his attention when he was called upon to deliver 2,000 blankets against a sale which was effected as' a resale on such purchase, when he decided to accept the goods in order to save his deposit.
    XI. No part of the said $2,500 aforesaid has ever been returned to plaintiff.
    XII. The blankets in question were resold by the defendant as blankets, wool, class 1, to five hospitals during September, October, and November, 1922, at a fixed pr,ice of $11,684.64, or $1.76 per blanket, being 14 cents less per blanket than the plaintiff’s bid made on February 9, 1922, making a net cash loss to the defendant (as compared to the original sale) of $929.46, exclusive of cost of resale, storage charges, and interest.
    XIÍI. The plaintiff, John T. Hickey, purchased certain property from the defendant under sales No. E-12485, April 13, 1923, and as such purchaser was entitled to have said property stored in the defendant’s warehouse at the quartermaster depot, War Department, Schenectady, New York, without cost to him, until May 9, 1923, and plaintiff was to pay for storing said property at local commercial rates if he permitted the same to remain in said warehouse after May 9, 1923; said property was left by plaintiff in defendant’s warehouse from May 10, 1923, to September 6, 1923, occupying 2,650 square feet of storage space of the value of $127.50 per month, or $510 for four months’ storage.
    The plaintiff has refused and still refuses to pay the defendant the above-mentioned $510 charges for storing said property or any part thereof.
    The court decided that- plaintiff was not entitled to recover. Counterclaim allowed.
   Giiaham, Judge,

delivered the opinion of the court:

This suit grows out of a sale by the War Department of certain surplus materials, consisting of blankets and duck. The terms and conditions of the sale are set out in Finding III, which contains, among other things, the following:

“ Twenty per cent of the bid must be paid in cash or certified check at the time and place of sale; balance within ten days from date of sale in cash, certified check, or letter of credit, otherwise the Government reserves the right to forfeit the deposit as liquidated damages, and the bidder shall lose all right or interest in the property. * * * The letter of credit must be in the form approved * *

The plaintiff bid at the sale, his bid was accepted, and he thereupon paid to the defendant $2,500, approximating the 20 per cent provided for in the terms of sale. The balance was to be paid within ten days, and if paid by letter of credit it was to be “ in the form approved.”

On February 20, 1922, a letter of credit in the amount due on the sale, $11,328.90, was sent to the defendant at its Philadelphia depot by W. H. Duval & Company, of New York City, agents for plaintiff. The letter of credit was returned to W. H. Duval & Company on February 21, 1922, with an explanation that it did not meet the required form, and inclosing a blank approved form for a new letter of credit. Under the terms of the sale the defendant was within its rights in declining to receive the letter of credit in a form not approved.

Thereafter, not receiving a reply or payment, the defendant wrote again to the W. H. Duval & Co., requesting a letter of credit in proper form. On March 4, 1922, the company replied that the letter of credit had been canceled, and that all further communications relative to the purchase should be addressed to the plaintiff. Thereupon, on March 4, the defendant again wrote to plaintiff, requesting a settlement of the balance due, to which request it received no reply. After waiting two weeks the defendant, through the Eastern Surplus Property Sales Board, at its meeting held on March 18, 1922, rescinded the sale and the plaintiff’s right and interest in the property, declared the $2,500 deposit forfeited to the Government as liquidated damages upon the ground that the plaintiff had not paid for the property in accordance with the terms of the contract of sale, and directed that the property be resold as the property of the Government. On the 29th of March, 1922, the plaintiff was notified of the rescission of the sal'e and the appropriation of the $2,500 deposited as liquidated damages, to which plaintiff made no reply. Nothing was done by plaintiff in the matter until September 21, 1922, as hereinafter stated.

The defendant on June 19, 1922, sold the blankets at a private sale, and transferred to the Department of Agriculture the duck which was the subject of the previous sale.

Three months later, on September 21, 1922, plaintiff tendered to defendant a certified check of Backrack Brothers, Inc., to whom it had apparently sold the blankets and duck. This offer was refused by defendant, as it had already disposed of the property. Thereafter plaintiff appeared at a meeting of the Eastern Surplus Property Sales Board and stated in effect that the goods were not of the quality that had been sold to him, and that for this reason the matter had been dropped, as it was not to his interest to remove the blankets. This complaint, it will be seen, was not made until nearly four months after the goods had ben resold and after notice that the sale had been rescinded, to which notice no reply was ever made, and it must be assumed that plaintiff acquiesced in the action of the Government.

As to the complaint about the quality of the material, there is nothing in the case but this statement of the plaintiff. Even accepting it as a fact, it would not relieve the plaintiff from his obligation under the terms and conditions of the sale. The terms of sale were that the material was sold “ as is and where is, without warranty or guaranty as to quality, character, condition, size, weight or kind, * * * and no claims for any allowances upon any of the grounds aforesaid will be considered after the property was knocked down.” This form of contract has been heretofore passed upon by this court. See the Triad case, 63 C. Cls. 151.

The original tender by plaintiff of a certified check was rejected because it was not in proper form, and this was the right of the defendant, as the contract provided that the letter of credit “ must be in the form approved.” But a tender to be good must be maintained, and in this case the tender was withdrawn, and the defendant notified that the letter of credit had been canceled. The time fixed for the payment of the balance of the purchase money was ten days from February 9,1922. Failing to hear from plaintiff, after requesting payment of the balance, after the tender had been withdrawn, the defendant exercised its right to rescind the contract and terminate the right and interest of the plaintiff in the property, and appropriate the 20 per cent deposit.

It is contended that the defendant had no right to appropriate, or, as the plaintiff puts it, to forfeit the $2,500 as liquidated damages; that it was enforcing it as a penalty, which the courts are not inclined to favor. The parties have a right to contract upon the basis of the sum deposited being liquidated damages, and if .it appears to have been the intention of the parties that it should be so treated, that intention will be carried out.

The courts at one time were disinclined to enforce contracts providing for liquidated damages, and leaned to the construction of such provisions as penalties. Subsequently this view was greatly modified, until now the courts have become strongly inclined to allow the parties to make their own contracts, and to carry out their intentions. The question now is always, What was the intention of the parties. See opinion of Justice, afterwards Chief Justice, White in Sun, Printing & Publishing Co. v. Moore, 183 U. S. 642, where the authorities on this point are fully reviewed; also United States v. Bethlehem Steel Co., 205 U. S. 105, 119; and Tayloe v. Sandiford, 7 Wheat. 13, 5 L. Ed. 384. See Lamport Manufacturing Co., C-1209, this day decided (ante, p. 579).

It would be difficult in a contract to declare the intention of the parties more clearly than in this contract. It provides that if the balance of the purchase money is not paid within the time specified, the Government shall have the right to forfeit the deposit as liquidated damages,” and showing that this meant the rescission and termination of the contract and plaintiff’s interest therein, it provides that the “ bidder shall lose all right on interest in the property.”

We hold that under this contract the deposit of $2,500 was made with the intention that it was to be treated as liquidated damages upon the failure of the plaintiff to comply with the terms of the contract.

It is to be observed in conclusion that the defendant dealt fairly with plaintiff in this whole matter. It did not insist upon the forfeiture of the deposit upon the failure of plaintiff to pay the balance in ten days as it had a right to do, but made three attempts to have the plaintiff comply with its contract, and only asserted its right to Rescind the contract and appropriate the deposit after more than a month had passed, two weeks after its third request for settlement. It notified the plaintiff of the rescission promptly and received no reply, and two months later resold the goods as its own. See Lamport Manufacturing Supply Co. v. United States, C-1209, this day decided.

The defendant has interposed a counterclaim for $510, which under the facts should be allowed. Let the petition be dismissed and judgment be entered in favor of defendant in the sum of $510, with interest from September 10, 1923, to date of judgment.

GREEN, Judge; Moss, Judge; and Booth, Chief Justice, concur.  