
    JACOB LEVY, SAMUEL LEVY, AND VICTOR LEVY, PARTNERS, AS JACOB LEVY & BROTHERS, v. THE UNITED STATES
    [No. D-284.
    Decided February 14, 1927]
    
      On the Proofs
    
    
      Sale of surplus supplies; authority of Secretary of War to cancel sale; return of purchase price. — Tbe Secretary of War, selling supplies under tbe acts of July 9, 1918, and July 11, 1919, bad power to authorize local boards of sales control to cancel a sale “on account of discrepancy in identity of goods.” Where a cancellation so made was approved by him and he notified the purchasers that upon return of the articles delivered they would be reimbursed the original purchase price, and the purchasers returned a portion of them, and the portion returned was accepted by the War Department, the purchaser is entitled to reimbursement of the original purchase price on the portion returned.
    
      The Reporter’s statement of the case :
    
      Mr. Elwood H. Seal for the plaintiffs. Mr. Lewis Landes was on the brief.
    
      Mr. Joseph Henry Cohen, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. The plaintiffs are partners trading under the firm name and style of Jacob Levy & Brothers, with their principal place of business in Louisville, Kentucky, and are engaged in the purchase and sale of metals and junk.
    II. By the act of July 9,1918 (40 Stat. 850), the President was authorized “ through the head of any executive department, to sell, upon such terms as the head of such department shall deem expedient, to any person, partnership, association, corporation, * * * any war supplies, material, and equipment, and any by-products thereof.” By the act of July 11,1919 (41 Stat. 104, chap. 8), it was further provided that “ the Secretary of War be, and he is hereby, authorized to sell any surplus supplies * * * upon such terms as may be deemed best.”
    
      III. Pursuant to the act of July 9, 1918, and by direction of the Secretary of War there was created the Office of Director of Sales, whose function was to supervise sales and to coordinate transfers to other departments of all surplus war materials. Beginning with March 15, 1921, the Director of Sales operated directly under the Assistant Secretary of War. There was further created, pursuant to this act and by direction of the Secretary of War, a sales organization known as the Surplus Property Division, which, during all the time hereinafter mentioned, operated as a branch of the Quartermaster Corps, effecting sales subject to the approval and direction of the Director of Sales.
    IY. Prior to November 22, 1921, there was published, issued, and distributed to the plaintiffs among others a cata-logue entitled, “ Public Auction Sale at Army Supply Depot, Jeffersonville, Ind., of Quartermaster Surplus Property, Tuesday, November 22,1921,10 o’clock A. M. Central Standard Time.” The conditions and terms of sale, as recited in said catalogue, are fully and correctly set out in the petition at pages 6 to 9, inclusive, with certain corrections. The conditions and terms of sales as set forth in the petition at pages 6 to 9, inclusive, with corrections are made a part of this finding by reference.
    Y. Lot No. 40 is listed and described in the sales catalogue as follows:
    CLOTHING AND EQUIP AGE
    Lot No. Article S. P. D. No. Quantity
    40 Rope, wire, copper clad 0-1764 275,000 ea. 7/16” Class “A”
    YI. On November 22, 1921, at the public auction held at J effersonville, the plaintiffs submitted a bid of 2^c per foot for 270,000 feet of the wire rope listed for sale in the cata-logue as Lot No. 40. This offer was accepted by the officer of the surplus property division in charge of the sale.
    YII. Before submitting their bid the plaintiffs inspected a sample but failed to measure same. This sample consisted of a complete roll of the wire rope which was in the room at the time and place of the sale.
    YIII. On December 14, 1921, the defendant delivered to the plaintiffs 270,000 feet of the wire rope listed in the sales catalogue as Lot No. 40. The plaintiffs received the same and paid to the defendant the full contract price of $6,075, which sum was covered into the Treasury in December, 1921, as miscellaneous receipts.
    IX. Upon delivery of the aforesaid wire rope, it was found to measure in thickness between %" and 13/32".
    X. On December 30, 1921, the plaintiffs wrote to Major Castleman, Central Surplus Property Control Officer, at Chicago, Illinois, that the size of the wire rope was %" and not and requested a reasonable allowance.
    XI. On February 21, 1922, the plaintiffs’ claim for an allowance was considered by the Chicago Local Board of Sales Control; and recommendation was made that the claim be disallowed, “in view of the condition of sale, price at which rope was sold, and the small difference of -¿¶" in the size of the rope purchased and the rope delivered.”
    XII. On October 27, 1922, the plaintiffs’ claim was reconsidered by the Washington Local Board of Sales Control. On October 31, 1922, the Quartermaster General, by “A. B. Warfield, Assistant,” wrote to Mr. Landes, attorney for the plaintiffs, the letter annexed to the petition as Exhibit B. On December 4, 1922, the Quartermaster General, by “ G. A. Zautner, for A. B. Warfield, Assistant,” wrote to Mr. Landes the letter annexed to the petition as Exhibit C. These letters are made a part of this finding by reference.
    XIII. Paragraph 312 of Circular No. 1, issued by the Office of the Quartermaster General of the Army under date of January 3,1922, provided as follows:
    “312. Local boards of sales control. — (a) There will be originated by each quartermaster supply officer in charge of a surplus property area a surplus property local board of sales control. Each surplus property local board of sales control will consist of not less than three commissioned officers, designated by the quartermaster supply officer, one of whom shall be the surplus property officer. The surplus property local board of sales control will act as a board of review, approval, and direction with respect to all sales conducted under the direction of the quartermaster supply officer of the control depot within the following limits:
    “ It will pass upon the acceptance of bids and may reject any or all bids or permit bids to be withdrawn where consideration of policies and fair dealings may require.
    
      “ It will make adjustments of all claims arising between tbe purchaser and its particular control depot in matters of discrepancies in quantity, condition, or quality of goods delivered, or such other conditions involving consideration or fair dealing.
    “ The board will make adjustment of claims and authorize the payment of refunds in so far as the law permits, where funds have not been covered into the Treasury.
    “(b) To the local board of sales control in the surplus-property division, this office, is reserved the right to determine fixed price on commodities for sale on the market or to a designated purchaser, in accordance with the principles and policies set forth in Article XVIII, compilation of Supply Circulars and Supply Bulletins, Purchase, Storage, and Traffic Division, General Staff, 1919.”
    This paragraph was amended by Changes No. 104, issued by the Office of the Quartermaster General of the Army under date of August 23, 1922, reading as follows:
    (C. O. Q. M. G. Cir. 1.)
    CHANGES-O. Q. M. G. ClECUXiAES
    Changes') No. 104.1
    TVae Depaetment,
    Oeeice oe Quaeteemastee Genekal,
    
      Washington, August 23,1922.
    
    Subparagraph (a), paragraph 312, of Circular No. 1, O. Q. M. G., January 3, 1922, is changed to read as follows:
    312. (a) There will be originated by each quartermaster supply officer in charge of a surplus property area a surplus property local board of sales control. Each surplus local board of sales control will consist of not less than three commissioned officers, designated by the quartermaster supply officer, one of whom shall be the surplus property officer. The surplus property local board of sales control will act as a board of review, approval, and direction with respect to all sales conducted under the direction of the quartermaster supply officer of the control depot within the following limits, but will not authorize a cancellation of a sale except as hereinafter provided.
    It will pass upon the acceptance of bids, and may reject any or all bids or permit bids to be withdrawn where it is to the manifest interest of the Government to do so.
    It may make final adjustment of all claims arising between the purchaser and its particular control depot in matters of discrepancies in tbe identity or quantity of goods delivered, or other conditions involving an improper delivery of the specified goods purchased; but it will not make adjustment in the unit prices or otherwise alter the essential terms of the sale except as to quantity sold.
    The board will receive all claims and complaints in writing, signed by the claimant, and as soon thereafter as possible make an examination of and inquire into all of the facts and circumstances connected with the matter complained of; take and receive all testimony or other evidence bearing upon the claim or complaint; and in cases beyond its authority to make final adjustment, it will transmit the same, together with its recommendation, through the Office of the Quartermaster General to the Office of the Assistant Secretary of War for final action.
    (O. O. Q. M. G. Oirs. No. 104, August 23, 1922.)
    (400.703 A-A, Surplus Property Control Depots.)
    W. H. Hart,
    
      Acting Quartermaster General.
    
    XIV. On November 25, 1922, the plaintiffs, acting on the aforesaid letter of October 21, 1922, returned to the Surplus Property Division at Jeffersonville, Indiana, at their own expense, 255,835 feet of the said wire rope.
    XY. On February 13, 1923, the Surplus Property Division at Jeffersonville, after due advertisement, sold the said 255,835 feet of wire at public auction for $2,878.14, the best obtainable price. The expenses of the resale, consisting of auctioneer’s fees and storage charges, amounted to $73.70. The proceeeds of said resale were placed and are now on deposit with the War Department.
    XYI. On December 26, 1923, the defendant, through the Chief of Finance, War Department, forwarded to the plaintiffs for signature a public voucher covering the resale of the said wire rope in the amount of $2,878.14, which voucher the plaintiffs refused to sign.
    XVII. The plaintiffs have demanded from the defendant the payment of $5,756.29, which was the original invoice price of the 255,835 feet of wire rope returned. The defendant has refused to do this.
    The court decided that plaintiffs were entitled to recover.
   Gkaham, Judge,

delivered the opinion of the court:

The facts are fully stated in the findings. It is not necessary to go into the details further than to state that prior to November 22,1921, the Secretary of War advertised for sale through a catalogue certain surplus property in the possession of the War Department. On November 22, 1921, the plaintiffs purchased, paid for and received 270,000 feet of wire rope listed for sale in said catalogue as Lot No. 40 and therein described as follows:

CLOTHINe AND EQUIPASE
Lot No. Article S. P. I). No. Quantity
40 Rope, wire, copper, clad C — 1764 275,000 ea. 7/16” Class “A”

The wire rope delivered to the plaintiff was not size as advertised but was The conditions of the sale were such that had the plaintiffs sought to recover the purchase price upon the ground of this description, they could not have recovered. See Triad Corporation v. United States, post, p. 151, this day decided, and authorities cited. However, plaintiffs stated the facts to the proper War Department official, who upon consideration of all the circumstances decided to cancel the sale and so informed the plaintiffs, stating in a written notice that if they would return the rope at their own expense the Government would reimburse them in the amount of the original purchase price. Thereupon plaintiffs promptly returned 255,835 feet of the wire rope and it was accepted by the Government. The Government has never reimbursed plaintiffs.

After receiving back the rope the Government, without notice to plaintiffs, readvertised and sold it at a price less than that paid by plaintiffs. The amount realized from this sale was tendered to plaintiffs, who refused to receive it.

The act of Congress of July 9, 1918, 40 Stat. 850, authorized the President “through the head of any executive department, to sell, upon such terms as the head of such department shall deem expedient, any war supplies, * * The act of July 11, 1919, chap. 8, 41 Stat. 104, authorized the Secretary of War “ to sell any surplus supplies * * * upon such terms as may be deemed best.”

On October 31, 1922, the Assistant Secretary of War informed the plaintiffs as stated that the contract of sale had been canceled and that upon the return of the material they would be reimbursed in the amount of the original purchase price. Plaintiffs returned 94% of the material and it was received and accepted by the representative of the Government.

The question is whether plaintiffs are entitled to recover the purchase price of the material returned.

The above-cited statutes give the Secretary of War full power to dispose of this war material “ upon such terms ” as he shall “ deem expedient ” or “ may be deemed best.” This necessarily conferred upon him full and ample discretion in the matter of handling and disposing of this surplus material. He could prescribe regulations controlling the sales, name the terms and conditions, and could provide for adjustments of claims arising out of sales when he thought the circumstances warranted it, and he did actually so provide in departmental order of August 23 (Finding XIII). In this order authority was given to local boards theretofore created, under whose direction the property was placed and the sale made, to review the action of the officer making the sale and to authorize the cancellation thereof “ on account of discrepancy in identity of goods,” and if they deemed a case beyond their authority for final adjustment, to transmit it to the Assistant Secretary of War “ for final action.” The local board did cancel the sale involved herein, and its action was approved by the Assistant Secretary of War, who, in notifying the plaintiffs of his decision, stated that “upon receipt of the rope ” the plaintiffs “ would be reimbursed in the original purchase price.” The plaintiffs returned 255,835 feet of the wire rope to the defendant, the value of which at the purchase price is $5,756.29, and for this amount the plaintiffs are entitled to judgment, and it is so ordered.

Moss, Judge; Hat, Judge; Booth, Judge; and Campbell, (Jhiej Justice, concur.  