
    WILLIAM ROSENBLATT v. THE UNITED STATES
    [No. E-206.
    Decided April 4, 1927]
    
      On the Proofs
    
    
      Sale of supplies; inspection; cancellation of aivard; forfeiture of deposit. — In a proposal and bid for Navy surplus scrap metal it was stated that the material was offered “ as and if is,” that bidders were expected to inspect the material before bidding, and that deposits would be forfeited upon failure to carry out the terms of payment. Plaintiff inspected the lot offered for sale, bid accordingly, was announced as the highest bidder, and made the required deposit. He at one reinspected the lot and found it materially changed. He protested against being required to take the lot so changed, and before a formal award was made it was announced as canceled and return of the deposit was declared forfeited and was retained. Held, that the contract of sale was not completed, and the defendant, . having suffered no loss, may not under the circumstances retain the deposit.
    
      
      The Reporter's statement of the case:
    
      Mr. Lawrence A. Steinhardt for the plaintiff. Guggen-heimer, Unterm/yer &■ Marshall were on the briefs.
    
      Mr. George Dyson, 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 is and at all the times hereinafter mentioned was a native-born citizen of the United States of America, residing at 4 East 88th Street, Borough of Manhattan, city, county, and State of New York, and engaged in the business of a metal broker and in the purchase and. sale of metals at 165 Broadway, Borough of Manhattan, city, county, and State of New York.
    II. The officer in charge of the central sales office, navy yard, Washington, D. C., approximately two or three weeks prior to the day fixed for the sale on June 8, 1923, mailed to prospective bidders Catalogue No. 206-B, entitled “ Sale of Navy Surplus Scrap, Scrap Metal,” inviting the submission of sealed proposals for the purchase of any one or more of the lots of material specified in that catalogue, consisting in all of approximately 1,581,500 pounds of material. The terms of the sale were set out on pages 6 and 7 of the cata-logue. The pertinent parts thereof are as follows: * * *
    “ 3. Material is offered ‘ as and if is ’ without recourse and the description furnished is based on the best available information, but no guaranty is given by the Navy as to the exact quantity, quality, condition, weight, size, or description. In the event that the entire quantity listed and paid for under an individual lot is not available at time of shipment the amount involved in the shortage will be refunded.
    “ 4. Full opportunity for actual inspection of the material listed is offered and bidders are expected to make physical inspection of the material desired before submitting bids. Failure to inspect ivill not constitute grounds for claim for adjustment.
    “ 5. Stock numbers where given in the catalogue are for the information and convenience of the naval authorities only, and are not intended as a part of the description for the information of the bidders.
    6. A deposit of 10 per cent of the total amount bid, in the form of cash, certified check, cashier’s check, or postal money order, made payable to tlie Officer in Charge, Central Sales Office, Navy Yard, Washington, I). C., must accompany the bids. Bids less than $250 must be accompanied by the full amount of bid.
    “7. Deposits of unsuccessful bidders will be returned promptly. Deposits of successful bidders will be held as security for the payment of balance of the purchase price within ten (10) days and removal of material ivithin thirty (30) days from date of award. Where these terms are complied with deposits will be applied on final payment. In case of failure to carry out the terms of payment the 10 per cent deposit will be forfeited to the United States Government as liquidated damages, and the bidder shall lose all right and interest in the property.”
    “ 9. Balance due on awards must be effected within ten (10) days from date of award. Final settlement of balance due on purchases amounting to less than $5,000 must be made in the form of cash, certified check, or cashier’s check. Final settlement of balance due on purchases of $5,000 or more may be made in the form of cash, certified check, cashier’s check, banker’s acceptance, or by an approved, clean, nonrevocable domestic letter of credit on a bank which is a member of the Federal Reserve Banking System. The banker’s acceptance of drafts drawn by virtue of letter of credit issued in final settlement of purchases must be due and payable as follows:
    “ Purchases of from $5,000 to $10,000, 30 days.
    “ Purchases of from $10,000 to $25,000, 30 and 60 days.
    “ Purchases over $25,000, 30, 60, and 90 days from date of award.
    “ 10. Upon payment of the purchase price in full, title to the material passes to the purchaser and all handling thereafter shall be at the risk of the purchaser.”
    “ 14. The right is reserved to reject any or all bids and to award less than the quantity desired by the bidder, to waive defects in bids, to withdraw' vdiole lots or any portion thereof as may be deemed advantageous to the Navy. Only bids actually physically received at the appointed place at the appointed time will be considered. Bids sent by mail must be actually physically received at the appointed place by the appointed time in order to be considered.”
    “ 16. Having carefully examined and considered the foregoing ‘ terms of sale,’ I/w7e hereby offer the price set opposite the lots desired and specifically waive any claim for adjustment on account of not having inspected the material. This bid is accompanied by a deposit of $-.”
    A copy of said catalogue was sent the plaintiff.
    
      III. Among the lot numbers offered for sale in said cata-logue there appeared the following: Lot No. 28 — Dross metal and skimming, red brass, class NF 21, quantity 201,000 pounds (more or less) located at Navy Yard, Washington, D. C.
    IY. The plaintiff personally inspected said lot No. 28 three or four days prior to the day of sale and took four or five samples from various parts of said lot. Prior to the date of sale he submitted the said samples to the Pittsburgh Testing Laboratory and received from said laboratory a certificate showing said samples to contain red brass with copper content of 88.58%. In accordance with the terms of said proposed sale the plaintiff in due course regularly submitted a bid of $.0813 per pound for said lot No. 28; and in accordance with the terms of said sale he deposited with the central sales office of the Navy Department 10% of the amount of his bid, to wit, the sum of $1,634.13.
    V. The plaintiff’s bid of $.0813 per pound was submitted by him in reliance upon the catalogue received by him from said central sales office and his personal inspection of said lot No. 28 as it existed three or four days prior to the sale.
    YI. Captain Edmund W. Bonnaffon was the officer in charge of the sale on June 8, 1923. The plaintiff’s bid was received on June 8,1923, in the morning, and on that day the bids were opened and the plaintiff was announced as the highest bidder on lot- No. 28. The sales book in the office of the central sales office shows this fact, and around the price submitted by the plaintiff was drawn a circle in lead pencil, and in the record book of sales below the proffered price of plaintiff, viz, $.0813, there appears a notation made June 8, 1923, the day of sale, as follows: “Forfeit 10% dep.” Immediately following the announcement that plaintiff was the highest bidder, plaintiff visited the dump of material he had previously examined and again inspected it. Plaintiff- found on this inspection that the lot exhibited a changed condition and, upon close inspection, observed a quantity of dirt, slag, zinc, bronze, aluminum, and yellow brass, as well as some red brass. Tlxe plaintiff at once reported his discovery to the officer in charge, and he in turn delegated Mr. McKinney to accompany the plaintiff and make a further inspection of the lot. This inspection was made and Mr. McKinney admitted that the lot contained dirt, aluminum, bronze, and zinc in the mass, but that it was representative of the offal of the furnace process in the manufacture of red brass. Mr. McKinney further said that the lot would not run to exceed 45 or 50%.
    VII. Mr. McKinney made the original inspection of lof No. 28 from 40 to 60 days prior to the date of sale for classi fying the lot, and classified it as appears in the catalogue Mr. McKinney accounted for the presence of zinc, aluminum, etc., as accidental or incidental, and admitted that his second inspection convinced him that the lot was not uniform and that the plaintiff bid much more than the lot was worth. On June 22,1923, Captain Bonnaffon wrqte plaintiff a letter in which, among other words, this language appears: “ Mr. McKinney, metallurgist of the gun factory, while he admitted, and his statement was accepted by this office as authoritative, that this was a mixed lot, yet there was red brass in this material, and therefore is not open to the objection raised by your attorney.” The “mixed lot ” referred to is lot No. 28, involved in this suit. A mixed lot is not a lot of “ dross metal skimmings, red brass.” On the contrary, as the inspection disclosed, it was, as the words import, a mixed lot of offal from various sources.
    VIII. After this the plaintiff protested against being required to take lot No. 28. Captain Bonnaffon was of the opinion that inasmuch as lot No. 28 contained some red brass, the lot met the classification given in the catalogue, and was not disposed for that reason to grant plaintiff’s protest without a forfeiture of plaintiff’s deposit. He treated plaintiff’s attitude as a refusal to carry out the contract of sale, and immediately on the day of sale did what he regarded as his duty and forfeited the plaintiff’s deposit of $1,634.13, at the time in effect setting aside the bid, but doing so only upon .the condition of retaining the plaintiff’s said deposit. On .June 12, 1923, two days after the expiration of the period within which plaintiff was to have made payment of the balance of the purchase price for lot No. 28, Captain Bon-naffon advised the plaintiff, in writing, “Award of lot #28 has been canceled.” No written notice was ever served upon the plaintiff awarding the contract of sale to him. No demand for payment of the purchase price was ever made upon the plaintiff, no steps ever taken to work a forfeiture of plaintiff’s deposit after the lapse of 10 days from date of sale, and no complaint made with respect to plaintiff’s position except his claim for a refund of his deposit. It was the practice of the central sales office to send to successful bidders written notices of awards of contracts.
    IX. Neither Captain Bonnaffon nor Mr. McKinney knew of their own knowledge whether there had been any additions to or removals from lot No. 28 between the date of classification and the date of the plaintiff’s first inspection— three or four days prior to the sale.
    There was a gross divergence between the description of lot No. 28 in the catalogue and the contents of the lot on the date of the sale.
    The court decided that plaintiff was entitled to recover.
   Booth, Judge,

delivered the opinion of the court:

The Navy Department, in the public sale of certain surplus war materials, catalogued the material to be sold, and upon this bids were solicited. Among other lots was lot No. 28, specified as “ dross metal and skimmings, red brass, class NF 21, quantity 201,000 pounds (more or less), located at navy yard, Washington, D. C.” It is conceded that “dross metal and skimmings, red brass,” means the skimmings which follow the smelting of red brass in a smelting furnace. The value of the red brass refuse is in the ability to reclaim from it the metal it contains. The catalogue contained the usual governmental terms of sale; the material was to be sold “ as and if is,” opportunity for inspection was to be afforded, and no warranty obtained. The plaintiff made an inspection of the mound of material, and from it obtained samples which were in t'urn submitted by him to the Pittsburgh Testing Laboratory. The test disclosed a copper content of 88.58%. The plaintiff on the day of sale bid on the material, offering therefor $0,813 per pound, and accompanied his bid with a deposit of 10% of the same, i. e., $1,634.13. The sales officer announced on the day of sale that plaintiff’s bid was the highest received. Immediately after this announcement plaintiff again inspected, the material and discovered a radical change in conditions from those of his first inspection. He observed a large quantity of dirt, slag, zinc, bronze, aluminum, and yellow brass, as well as some red brass mixed in the make-up of the mound. Obviously this condition of affairs did not correspond to plaintiff’s conception of what he intended to purchase, and he thereupon reported the fact to the officer in charge of the sales and requested a concellation of his contract, protesting against existing conditions. The officer in charge granted the request but declined to return to plaintiff the $1,634.13 he had deposited at the time he submitted his bid. It is for this amount the plaintiff sues.

The defendant treats the case as one of consummated contract, with the right of forfeiture under the agreement. The antithesis of the advanced proposition impresses the court. Section 14 of the terms of sale reserved to the defendant the right to reject any or all bids and the privilege of withdrawing whole lots from the sale, as well as waiving defects in bids offered. Careful stipulations abound throughout the entire recital of terms of sale advantageous to the Government, indicating a clear intent to reserve the question of a binding contract of sale until the award is made. “Award ” is the term employed, clearly indicating that something more than the mere offer and announcement of the highest bidder were necessary to make the contract a binding obligation. If the defendant accepted the offer and the minds of the parties met, the contract would have been complete, but in this instance the defendant had not accepted and did not unqualifiedly accept the offer; on the contrary, between the announcement of the plaintiff’s bid and the closing of the transaction the defendant, confronted by an allegation of changed conditions, acknowledged the same and sought to accept not an unqualified contract of sale but undertook to impose upon the plaintiff a condition for according him an alleged release from the existing difficulties of the situation. We say this advisedly because the record discloses that no effort was made to collect payment for the material alleged to have been sold, no notice was given to plaintiff to pay or remove the material from the premises, no word that the plaintiff was in default under his contract, nothing-done except to hold fast to the material and the plaintiff’s deposit. The Government’s officer had notified the plaintiff in writing of awards as to two other distinct lots of material purchased by the plaintiff, but omitted any reference to lot No. 28. What the officer did was to say to the plaintiff, “ We do not intend to hold you for the full purchase price of the material sold, and in consideration for this concession will forfeit your deposit.” The officer’s motives are not t!o be questioned; he was acting as he thought the law required him to act, not as he personally would have preferred to act.

The forfeiture provisions of the terms of sale are found in paragraphs 6 and 1 of the published catalogue. A deposit of 10% of the amount of the bid must accompany the same. Unsuccessful bidders were to receive a return of their deposits; but the deposit of the successful bidder was to be retained as security for his performance of the contract, and if he did not pay the balance of the purchase price within 10 days and remove the material within 30 days from date of sale the deposit was to be forfeited to the United States as liquidated damages and the bidder would lose all right and interest in the property. Forfeitures are not favored in the law. There is no evidence of any pecuniary loss to the United States, and obviously, from the record in this case the conditions of the terms of sale which were to work a forfeiture were not observed by the Government. On the contrary, the record book shows that on June 8, 1923, the officer in charge of the sale, on the very day of sale, without waiting longer, made this notation, “Forfeit 10% dep.,” and then on June 12, 1923, advised the plaintiff by letter “that in accordance with your verbal request, the award of lot No. 28 (totaling $16,341.30) has been canceled.” Note the language “ has been eaneeledP It would be most unusual to sustain a forfeiture under a contract which prior to the time of the performance of the conditions which work the same had been “ canceled.”

It is impossible to read the record in this case and arrive at a conclusion that the contract of sale was completed. To attain such a conclusion entails the necessity of disregarding the customary and usual practice of the Government' in sales conducted as this one was conducted. To at once assume the right of forfeiting his advance deposit without waiting for a default upon the part of a purchaser, despite what may have been said, is indicative of an intent to treat as breached a contract which the officer later admits was canceled days before it was possible to make default. The sales officer was clothed with authority t'o accept or reject the plaintiff’s bid. If accepted, the transaction from this angle of approach was closed; if rejected, a similar condition obtained. That he did not regard the plaintiff as obligated under the bid is manifest from his negotiations with the plaintiff respecting the sale after the bids were opened, and what he did is not unusual in Government sales of surplus material.

No proof, as previously observed, is in the record that the Government suffered any loss because of plaintiff’s position; whether the material was subsequently sold for more or less than plaintiff’s bid does not appear, and we believe the plaintiff is entitled to a judgment. Judgment will be awarded the plaintiff for $1,634.13. It is so ordered.

Moss, Judge; Geaham, Judge; Hat, Judge; and Campbell, Chief Justice, concur.  