
    LIBBY, McNEILL & LIBBY v. THE UNITED STATES
    [No. A-85.
    Decided April 16, 1928]
    
      On the Proofs
    
    
      Purchase of packmg-house products; contract with Quartermaster Corps, V. 8. Army; formality of execution; failure to fix price; allotment by Food Administrator; breach by Government; measure of damages. — See Swift y. United States, 59 O. Ols. 364.
    
      The Reporter’s statement of the case:
    
      Mr. G-. Oarroll Todd for the plaintiff. Mr. Wül/íami Tl. Long and Gregory ds Todd were on the briefs.
    
      Mr. J. Robert Anderson, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant Mr. Charles F. Jones was on the brief.
    The court made special findings of fact, as follows:
    I. The plaintiff, Libby, McNeill & Libby, is, and at and before the time herein involved was, a corporation duly organized under the laws of Maine, with its principal place of business in the city of Chicago, county of Cook, State of Illinois.
    It was founded for the purposes, among others, of purchasing live stock and converting the same into fresh and cured meats for human consumption, and the transaction of all business incident to a general slaughtering and packing establishment, and was so engaged at all times involved herein.
    II. The plaintiff’s plant for the production of canned meats is located at Chicago, Illinois.
    
      III, IY, Y, VI, VII, VIII. [Same as in Swift y. United States, 59 C. Cls. 364.]
    IX. In supplying the needs of the Army for bacon and .other packing-house products, including canned meats, during the early stages of the war, the regular method of advertising for and receiving bids and letting contracts to lowest bidders, if otherwise satisfactory, was adhered to, but later on, in 1917 and during 1918, the needs had so grown and were so rapidly approaching the capacity of the packing plants that this method became impracticable, and the necessity for a constant and ever-increasing flow of supplies of this character made necessary the resort to other purchase and procurement methods.
    The office of the depot quartermaster, afterwards the zone supply officer, at Chicago was informed from time to time by the proper authorities at Washington as to the number of men which would be in the service within stated times, and the duty devolved on the depot quartermaster of procuring supplies of the kind in question sufficient for the indicated number of men without the issuance of specific authorization to him in each instance to purchase or specific instructions as to quantities to be purchased. And because of the time required to cure, smoke, and can Army bacon and prepare other meat supplies it was necessary to anticipate needs therefor.
    The plan was adopted by the depot quartermaster at Chicago of calling into conference with him or his authorized assistant, from time to time, representatives of this plaintiff and the s,ix other large packing houses, at which conferences the packers’ representatives were informed as to the needs of the Government for a stated period, usually three months, sufficiently in the future to give time for manufacture, and asked to indicate what portion of the stated needs each would furnish. Upon receipt of the statements from the packers as to what quantities they would 'furnish, which were submitted in writing and usually within a few days after the conference, the depot quartermaster made an allotment to each packer and notified each as to the quantities it would be expected to furnish during each month of the period involved.
    
      Only representatives of the large packers were called into these conferences, because upon them chief dependence for adequate supplies must be placed, but the smaller packers were also called upon, and as needs increased were urged to furnish as much as they could of their products.
    X. Since there were many elements entering into cost of production as to which there were frequent fluctuations, it was not practicable to undertake to determine prices so far in advance, and, accordingly, instead of fixing prices at the time the proposals were submitted, or notices of allotments issued, it was agreed that prices would be determined at or near the first of each month for the product to be furnished during that month. This was at a time when of necessity the preparation of the product was well under way, approaching completion as to a large part thereof, and when the cost of the green bellies, the basic element of final cost of bacon, and other fluctuating elements of cost of all .products were ascertainable.
    At about this time the usual form of circular proposals were sent to the packers, not for use in submitting bids as under the peace-time competitive system, but as a convenient method for formal submission by the packers of their proposals as to price for the product which they had theretofore been directed to furnish during the month in question and which already, by direction of the depot quartermaster, was in process of preparation.
    Upon submission of these proposals as to price, if the same were satisfactory to the depot quartermaster or, otherwise, upon adjustment to a satisfactory basis, purchase orders were issued which furnished the basis of payment, although the purchase orders frequently were not issued until a part and sometimes all of the product covered thereby had been delivered.
    XI. The needs for bacon and other meat products, including canned roast beef, canned corned beef, and canned corned-beef hash, rapidly grew as the number of men to be provided for increased, and early in 1918 it became apparent that capacity production on the part of the plaintiff and the other large packers would be required. They were accordingly informed at one of the conferences held that they would be, expected to produce to capacity, a statement which was frequently repeated, and it was understood that the Army would need and would take capacity production until further notice. A survey was made of the packing plants to determine their capacity in order that it might be known whether they were producing to capacity.
    XII. On the 10th day of August, 1917, after the passage of the food control act, approved that day, 40 Stat. 276, the President by Executive order created the United States Food Administration and conferred upon it the powers and authority given him by said act, and authorized it to carry into effect the provisions thereof and directed all departments and established agencies of the Government to cooperate with it in the performance of its duties. By proclamation of October 8, 1917, he required all packers whose annual sales exceeded $100,000 to obtain a license of the Food Administration as a condition of carrying-on business after November 1, and such a license was issued to the plaintiff.
    Effective November 1, 1917, the Food Administration issued regulations applicable to all licensed packers, of which the plaintiff was informed, directing, among other things, that their books should be kept as theretofore unless otherwise ordered, that they should be subject to examination by the Food Administration, that they should so conduct their business that their profits should not exceed 9 per cent of their investment, or 2y2 per cent of their gross sales, and that they should make periodic reports of their business in whatever detail the Food Administration might direct. The plaintiff complied with these regulations; it continued to keep its books as theretofore; no instructions were received to adopt any other system; they were periodically examined, as often at 12 times in one year, by representatives of the Food Administration, and it was determined that plaintiff’s profits during the period of control by the Food Administration did not exceed the prescribed limit.
    XIII, XIY. [Same as in Swift v. United States, supra-]
    
    XY. At a meeting of the Food Purchase Board held on July 16, 1918, it was concluded that on account of the shortage which had developed in canned meats and bacon these products should be placed on an allotment basis. On August 12, 1918, the depot quartermaster at Chicago was notified from the office of the Quartermaster General by the officer in charge of the subsistence division that it was understood that tinned meats, including tinned bacon and smoked bacon, would be allocated by the Food Administration, and he was requested to cancel orders which had been placed with the packers and ask allotments of the same from the Food Administration.
    XYI. On November 9, 1918, a conference was held on the call of General Kniskern, at which he and Major Skiles, for the Government, were present, and- representatives of the seven large packers, including Libby, McNeill & Libby, for the purpose of providing allotments of bacon and other meat products for the months of January, February, and March, 1919. The quantity of bacon asked for for the three months stated was 60,000,000 pounds, 30,000,000 each of serials 8 and 10. The quantities of other canned meats asked for for the same three months were: Of canned roast beef, 39,000,000 1-lb.-cans and 11,000,000 2-lb. cans; of canned corned beef, 39,000,000 1-lb. cans and 11,000,000 No. 2 cans (No. 2 cans contain 1 y2 lbs.) ; of canned corned-beef hash, 17,000,000 1-lb. cans and 3,000,000 2-lb. cans.
    On November 23, 1918, Libby, McNeill & Libby sent to the Depot Quartermaster at Chicago the following communication :
    NOVEMBER 23rd, 1918.
    O. F. Skiles,
    Major, Q- M. R. C., Depot Quartermaster,
    1819 West 39th St., Chicago.
    C. C. Beef — Roast Beef — C. B. Hash
    Dear Sir: We herewith wish to confirm our offer to you on the following canned meats for delivery as follows:
    
      
    
    
      The 12 oz. C. C. beef delivery will be of our regular 12 oz. commercial pack goods.
    Yours truly,
    By Libby, McNeill & Libby,
    By E. D. BaldwiN.
    Beef Department.
    SDB: AMW.
    On December 11,1918, the Food Administration, by Major Boy, with the approval of the chief of the meat division, whose assistant he was, issued the following:
    DECEMBER 11, 1918.
    D. C. P. 2193.
    
      Corrected allotment
    
    To replace allotment dated 12/3/18
    From: U. S. Food Administration, Meat Division.
    To: Libby, McNeill & Libby, U. S. Yards, Chicago, Ill.
    Subject:
    1.On requisition of the packing house products branch, subsistence division, office of Quartermaster General, 1819 W. 39th St., Chicago, Ill., you have been allotted for delivery during the month of—
    
      
    
    2. The above to be in accordance with Q. M. C. Form 120 and amendments thereto.
    3. For any further information regarding this allotment, apply to the packing house products branch, subsistence division, office of the Quartermaster General, 1819 W. 39th St., Chicago, Ill.
    UNITED States Food Administration,
    
      Meat Division.
    
    By E. L. Boy.
    F Accepted.
    
      
      Additional allotment
    
    Deo. 11, 1918.
    D. C. P. 2215.
    From: U. S. Food Administration, Meat Division.
    To: Libby, McNeill & Libby, U. S. Yards, Chicago, Ill.
    Subject:
    1.On requisition of the packing house products branch, subsistence division, office of Quartermaster General, 1819 W. 39th St., Chicago, Ill., you have been allotted for delivery during the month of—
    
      
    
    2. The above to be in accordance with Q. M. C. Form 120 and amendments thereto.
    3. For any further information regarding this allotment, apply to the packing house products branch, subsistence division, office of the Quartermaster General, 1819 W. 39th St., Chicago, Ill.
    UNITED States Food Administeation,
    
      Meat Division.
    
    By E. L. Hoy.
    F Accepted.
    Major E. L. Boy, Quartermaster Corps, National Army, then a captain, was by orders of the Chief of Staff, dated July 22, 1918, directed to proceed to Chicago and report to the Depot Quartermaster for assignment to temporary duty with the Food Administration. He became assistant to the Chief of the Meat Division of the Food Administration in charge of the Chicago office of that division and remained with the Food Administration in that capacity until his resignation on December 10, 1918, following his discharge from the Army.
    Two copies of each of these notices were sent to Libby, McNeill & Libby. On one copy of each notice was stamped the word “Accepted,” followed by this instruction: “ To be signed and returned to the Meat Division, 11 West Washington Street, Chicago.”
    
      Libby, McNeill & Libby indicated its acceptance by writing below the word “Accepted ” the following: “ Libby, Mc-Neill & Libby, H. W. Souther, 12/13/18,” and returned this copy to the Food Ad ministration.
    On December 9, 1918, the packing house products branch of the subsistence division, office of Director of Purchase and Storage at Chicago, sent the following communication to Libby, McNeill & Libby:
    Dec. 9,1918.
    From: Officer in Charge Packing House Products Br., Subsistence Div., Office Director of Purchase and Storage.
    To: Libby, McNeill & Libby, Union Stock Yards, Chicago, Ill.
    Subject: Canned Meat Allotments, January, February, and March.
    1. In connection with the allotments made by the U. S. Food Administration for beef corned, beef roast, and hash corned beef scheduled for delivery during the months of January, February, and March, please be informed that it is the desire of this office that quantities of the various products be packed in accordance with the schedule indicated below:
    Beef corned January, .. 3,400,000 lbs.
    to be packed_ - 2,700,000 12 oz. cans.
    100,000 1 lb. cans.
    850,000 No. 2 cans.
    Beef corned Feb. & Mar. .. 4,150,000 lbs. monthly.
    to be packed_ .. 2,700,000 12 oz. cans monthly.
    ' 850,000 1 lb. cans monthly.
    850,000 No. 2 cans monthly.
    Beef roast January_ .. 1,200,000 lbs.
    to be packed_ .. 600,000 2 lb. cans.
    Beef roast Feb. & Mar. - 2,400,000 lbs. monthly.
    to be packed_ .. 1,200,000 2 lb. cans monthly.
    Hash corned beef_ _ 2,000,000 lbs. monthly.
    to be packed-'_ .. 1,000,000 2 lb. cans monthly.
    2. You are urgently requested to advise this office by return mail at what points you anticipate putting up these allotments so the various zone supply officers, inspectors, etc., may be properly informed and in position to handle this production intelligently.
    By authority of the Director of Purchase and Storage:
    A. D. KNiskerN,
    
      Brigadier General, Q. M. Gorps. Officer in Qharqe.
    
    By O. W. MeNge,
    
      Und Lieut., Q. M. Gorps.
    
    OWM.MJP.
    
      XVII. Soon after the armistice the Food Administration began to “ taper off ” its activities in various directions, adopting a program of discontinuance of its activities as early as possible. It made no further allotments of meat products and fixed no price for bacon or for canned roast beef, canned corned beef, or canned corned-beef hash after that for December delivery.
    On December 16, 1918, General Kniskern was instructed by telegraph as follows:
    Brig. Gen. A. D. Kniskern, Chicago, III.:
    
    Effective with January requirements, the Army will purchase packing-house products independently of Food Administration.
    This office is notifying Food Administration accordingly. You are authorized to proceed on this basis. Please wire acknowledgement.
    Wood, Subsistence, BakeR.
    Thereafter prices for January and February deliveries were determined as they had been during the earlier months of 1918 before that function came to be exercised by the Food Administration.
    XVIII. On January 24, 1919, the following communication was sent to Libby, McNeill & Libby:
    January 24, 1919.
    From: Zone Supply Officer, Zone Seven, Packing House
    Products Branch, Subsistence Division, Office Director
    Purchase and Storage.
    To: Libby, McNeill & Libby, Union Stock Yards, Chicago, Ill.
    Subject: Packing-house products.
    1. Due to the large quantities of bacon, corned beef, roast beef, and corned-beef hash now on hand, and in view of the fact that the Army is rapidly being demobilized and the demand constantly decreasing, you are informed that this office will not be in the market for any of the above-mentioned products for delivery during the month of March, 1919, except as hereinafter stated.
    2. Such quantity of bacon as is now in process of cure, over and above the quantity necessary to take care of February awards, and which has been passed by inspectors of this •office, will be accepted.
    
      3. This information is furnished you for the purpose of giving as much advance notice as possible of the intentions of this office, in order that you may take such steps as you may deem necessary toward the reconstruction of your commercial trade.
    4. There is at present no likelihood of any further purchases of the products mentioned for several months.
    5. Please accept the sincere thanks of this office for the hearty and loyal cooperation your firm has so generously given in the past, without which the difficulties of securing sufficient meat foods for the Army would have been well nigh unsurmountable.
    By authority of the Director of Purchase and Storage:
    A. D. IÍNiSKERN,
    
      Brigadier General, Q. M. Corps, Zone Supply Officer.
    
    O. F. Skills,
    Major, Quartermaster Corps.
    
    OFS-JW
    XIX. On March 7, 1919, another notice was sent by General Kniskern to Libby, McNeill & Libby reading as follows:
    MaRoh 7, 1919.
    From: Zone Supply Officer, Zone 7, Packing House Products Branch, Subsistence Division, Office Director Purchase & Storage.
    To: Libby, McNeill & Libby, Union Stock Yards, Chicago, Illinois.
    Subject: Extension of delivery date on packing-house products.
    1. You are informed that the date of delivery of corned beef, roast beef, corned-beef hash and issue bacon which your contracts required you to have completed by February 28, 1919, has been extended to permit delivery on or before March 31, 1919.
    2. You are further advised that none of the above-mentioned commodities over and above the quantities noted on February contracts will be required by this office. It will therefore be necessary for you to discontinue production immediately on such commodities which are not intended to apply against the February contract. Should, however, you have any issue bacon which is now in smoke and which is in excess of the amount required for February delivery, same will be accepted. Under no condition will any more bacon be placed in smoke for this office.
    3. It is the intention of this office to enter into negotiations with your firm with a view of making settlement for such material as you now actually have on hand, which can not be utilized after completion of the February contract.
    4. It will not be necessary to communicate with this office •either in.person or by correspondence with a view to making any arrangements other than those outlined herein.
    5. As soon as possible this office will call upon you for certain information, upon receipt of which negotiation will begin. In the meantime you are instructed to use every effort to dispose of such material, as you now have on hand, in order that adjustment may be quickly made. This office will proceed with this work as rapidly as is consistent with other business connected herewith.
    By authority of the Director of Purchase and Storage:
    A. D. KNiSKERN,
    
      Brigadier General, Quartermaster Corps,
    
      Zone Supply Officer.
    
    O. F. Selles,
    
      Major, Quartermaster Corns.
    
    OFS-JW
    XX. Libby, McNeill & Libby had left on hand 2,694,786 pounds of raw or green canning beef, purchased prior to receipt of the notice to stop production, and necessary for the production of the canned corned beef, canned roast beef, and canned corned-beef liash offered by its before-mentioned letter of November 23, 1918, for delivery in March, 1919, and which the Food Administration by its before-mentioned letters of December 11, 1918, allotted to it for delivery in that month, and which the depot quartermaster by his before-mentioned letter of December 9, 1918, requested it to deliver. This raw canning beef yielded, after cooking, 1,562,976 pounds of corned beef, into which it was converted by Libby, McNeill & Libby and packed in commercial size or 12-oz. cans, making 2,083,968 such cans as the best way in its judgment of disposing of it with the least loss after the War Department gave notice that it would not take the March installment of canned meats. The cost of manufacture thereof to Libby, McNeill & Libby was $721,443.05. It was sold for $616,153.42, after deducting expenses, making the net loss of Libby, McNeill & Libby, on account of this material, $105,289.63.
    XXI. A reasonable manufacturing profit on the 1,562,976 pounds of canned corned beef, within the limits provided by the regulations of the Food Administration then in force and applicable, to the plaintiff as a licensee, was $18,036.07, being. 2y2 per cent of the cost of manufacture.
    XXII. Libby, McNeill & Libby also had left on hand, over and above the tin plate used in packing the 1,562,976 pounds of canned corned beef, 14,423.84 base boxes of tin plate purchased prior to receipt of the notice to stop production and necessary for the canning of the corned beef, roast beef, and corned-beef hash ordered for delivery in March, 1919, ■ as aforesaid, on which it sustained a loss of $10,817.88.
    XXIII. Eecapitulated, the loss sustained by Libby, Mc-Neill & Libby was as follows:
    Cost of 1,562,976 pounds of canned corned beef (2,083,968 12-oz. cans) into wbicb the raw canning beef left on band and wbicb was required to fill tbe March delivery of canned meats was converted in order to dispose of it (Finding No. XX)— $721,443.05
    Profit thereon at 2% per cent (Finding No. .
    XXI)_ 18,036.07
    - $739,479.12 -
    Less net proceeds of resale of said 1,562,976 pounds of canned corned beef (Finding No. XX)- 616,153.42
    123, 325. 70
    Loss sustained on 14,423.84 base boxes of tin plate on hand for production of tbe March delivery of canned meats_ — _^_ 10, 817.88
    Total loss_ 134,143. 58
    The court decided that plaintiff was entitled to recover.
   Moss, Judge,

delivered the opinion of the court:

This case is controlled by the decision of the United States Supreme Court in the case of Swift & Company v. United States, 270 U. S. 124. The contract which is the basis of this action was entered into at the same time, and for the same purpose, through the same Government official as in the Swift case; and the reason for the failure of the Government to fully execute the contract is also precisely the same as in that case. When the Government notified plaintiff to cease production under the contract plaintiff had on hand 2,694,786 pounds of raw canning beef purchased prior to receipt of said notice for manufacture under the contract. The instruction from the Government contained in a communication from General Kniskem, officer in charge, was “ to use every effort to dispose of such material as you may now have on hand in order that adjustment may be quickly made,” and that “it will not be necessary to communicate with this office, either in person or by correspondence, with a view to making any arrangements other than those outlined herein.” There were only two methods open to plaintiff— to try to dispose of the material in its raw condition or convert it into a marketable finished product. Plaintiff proceeded at once with the manufacture of this raw material into the canned product by the usual process and disposed of same at a loss of $134,143.58. Defendant does not deny its liability, but contends that by adopting a different method of disposing of the material on hand plaintiff could have realized a larger sum, thereby reducing the damages. Specifically, defendant’s contention is that said material should have been sold promptly in the market in its raw state, and alleged that it had a market value of 23 cents a pound. The record, however, shows not only that it did not have such a market value, but that at that particular time there was no market for it in any considerable quantity. In adopting the method employed for the disposition of this material plaintiff acted in good faith and in accordance with its best judgment, and this course meets the spirit of the rule announced in the Swift case.

In view of the patriotic and praiseworthy cooperation of plaintiff and others in its class in meeting the demands of the Government during the stress of war-time needs, as reflected in the judicial history of the country, it is, to say the least, unfortunate that plaintiff has so long been denied the remedy provided by law, which in this case is the recovery of actual out-of-pocket losses, without interest; and especially does this observation refer to the period which has elapsed since the final decision in the Swift case. Plaintiff is entitled to recover the amount sued for, and it is SO' ordered and adjudged.

Graham, Judge; Booth, Judge; and Campbell, Chief Justice, concur.

GkeeN, Judge, took no part in the decision of this case.  