
    EPHRAIM A. SCHWARZENBERG v. THE UNITED STATES
    
    [No. C-34.
    Decided June 1, 1925]
    
      On the Proofs
    
    
      Contract; sale of nonexistent war supplies — Where plaintiff enters into a contract with the Government to purchase certain surplus war supplies, and it afterwards develops that the United States does not own such supplies, the Government is not responsible for any loss plaintiff may sustain by reason of said contract.
    
      The Reporter's statement of the case:
    
      Mr. Edward A. Harrimcm for the plaintiff.
    
      Mr. Percy M. Gox, tvith whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The following- are the facts as found by the court:
    I. The plaintiff is, and for many years has been, engaged in the business of a dealer in iron and steel in Cleveland, Ohio.
    II. For the purpose of handling sales of surplus war supplies, materials, and equipment under the authority of the act of July 9, 1918, 40 Stat. 845-850, the Assistant Secretary of War, who was made responsible for the disposal of such property, created a branch of the Purchase, Storage, and Traffic Division, called the sales branch, under the direction of an officer known as the director of sales, and also created in the Ordnance Department a salvage board which had charge of the sales of such property in the Ordnance Department and which conducted such sales after the consent of the director of sales thereto, such consent being commonly known as a “ clearance.”
    III. On date November 29, 1919, the plaintiff entered into a contract in writing with the United States, represented in the execution thereof by Maj. A. C. Hindman of the Ordnance Department, as contracting officer, and approved by Col. D. K. Shurtleff, as chairman of the salvage board, for the purchase of approximately 106,000 gross tons of steel billets of various sizes and shapes, and located at various manufacturing plants throughout the country, as indicated in a schedule included in said contract, a copy of which contract is set out in plaintiff’s petition and is made a part hereof by reference.
    Included in said schedule were three items of 9.5" round billets located at the plants of the Donner Steel Company, Buffalo, N. Y., Wickwire Steel Company, Buffalo, N. Y.> 
      and Curtis & Company, St. Louis, Mo., and aggregating 9,382.48 gross tons.
    IY. In November, 1919, previous to the date of said contract, and pursuant to notice- given, a public sale of the materials embraced in said contract had been held in Washington, at which time bidders, plaintiff included, had been furnished with copies of the schedule contained in said contract. At such sale the plaintiff bid $33 per gross ton, less freight from location to Pittsburgh, which was the highest bid made, and it was then accepted.
    V. On December 4, 1919, the plaintiff entered into a contract with the Fishel & Marks Company to sell to it 200 gross tons of 9.5" round billets of from 4 to 14 feet in length, at $43 per gross ton, f. o. b. Buffalo, N. Y.
    In entering into this contract the plaintiff intended thereby to sell to the Fishel & Marks Company the 89.28 tons shown ■on the contract schedule as at the plant of the Donner Steel Company, Buffalo, N. Y., and the 110.20 tons shown thereon as at the plant of the Wickwire Steel Company in the same city.
    VI. On December 22,1919, the plaintiff wrote the Boches-ter District Salvage Board, which had charge of deliveries in that district, as follows:
    “Befe'rring to my contract of Nov. 29, made with the Government covering the purchase of steel billets, some of which are located in your district. From list furnished me, 1 note there are approximately 200 tons 9y2" round billets .at Buffalo, about 90 tons stored at Donner Steel Company, :and 110 tons stored at Wickwire Steel Company.
    “Will you please arrange to ship these1 immediately on ■order bill of lading consigned to the order of E. A. Schwar-zenberg, Cleveland, O., notify the Fishel & Marks Company, Cleveland, O., N. & S. S. By. delivery at Cleveland.
    “ I trust that you will be able to get this material shipped -very promptly and I await your reply by return mail as to what I may expect in this connection.”
    On December 24, 1919, by a communication received by the plaintiff on December 26, 1919, the defendant, through the said Bochester District Salvage Board, informed the plaintiff that it had no 9.5" round billets at Buffalo, and the defendant did not at any time comply with the plaintiff’s request for delivery thereof.
    
      VII. On, December 26, 1919, the market price of 9.5" round billets such as those described in plaintiff’s contract with the United States was $59.20 per gross ton f. o. b. Buffalo. The freight rate on November 29, 1919, from Pittsburgh to Buffalo, on steel billets was $2.80 per gross ton, exclusive of Federal tax.
    VIII. On December 26, 1919, the plaintiff contracted to sell to the Fishel & Marks Company 1,000 gross tons of 9.5" steel billets, at $35 per gross ton f. o b. St. Louis, intending at that time to sell to said The Fishel & Marks Company 1,000 gross tons of the 9,183 gross tons shown on, this schedule in plaintiff’s contract, as at the plant of the Curtis & Company Manufacturing Company, at St. Louis, Mo.
    On January 14,1920, the defendant, through the St. Louis Salvage Board, notified the plaintiff that “ we have no 9.5" billets in rounds which we can apply on your purchase,”’ followed by information as to numbers and sizes of ingots which were on hand. No 9.5" round billets were ever delivered.
    IX. The notice referred to in the last above finding was received by the plaintiff on January 15, 1920, on which day the market price of 9.5" round billets was $65.66 per gross ton f. o. b. St. Louis.
    On November 9,1919, the freight rate on such billets from Pittsburgh to St. Louis was $5.30 per gross ton, exclusive of' Federal tax.
    X. The plaintiff had no other 9.5" round billets which it could furnish on its said contracts with the Fishel & Marks Company and was unable to perform said contracts, and on May 12, 1920, the Fishel & Marks Company brought suit against the plaintiff in the Court of Common Pleas of Cuya-hoga County, Ohio, claiming damages in the sum of $34,400, with interest, because of the breach of said contracts.
    The plaintiff employed attorneys to defend said action, and, being advised by said attorneys that there was no adequate defense, a compromise was negotiated, and the plaintiff paid said company $12,000 in full settlement of said suit and of the demands of said company.
    
      XI. In June, 1920, the plaintiff presented to the Secretary of'War a claim for $12,000 because of the facts herein recited, which the Secretary of War rejected on the ground that the Government did not have the billets in question when the contract was made, and that there was therefore no valid contract for their sale. No claim for damages was then presented to the Secretary of War other than for said specific sum of $12,000.
    The plaintiff caused a bill to be introduced in Congress providing for the payment to him of said sum of $12,000, but no action was had thereon by Congress, and the bill was withdrawn.
    XII. When the plaintiff was furnished a copy of the schedule set out in the contract and when the contract was ■executed the inventories on file in the office of the Ordnance Salvage Board contained the three items in question, as set out in said schedule, but none of the officers in Washington having to do with said sale had any knowledge beyond said inventories as to the existence, of said recited 9.5" round billets.
    Reports were made from various manufacturing establishments having Government materials on hand to the district salvage boards, where these reports were compiled and in turn forwarded to the Ordnance Salvage Board in Washington; but this board had no knowledge as to the correctness of the inventories unless, as in certain cases, investigations were directed, and mistakes in inventories were not uncommon.
    Aside from the appearance of these items on the inventories, it is not shown that they were in existence either at the time of the sale or when the contract was made, and the reasonable inference from the whole record is that they were not at such times on hand, and it is so found.
    The court decided that plaintiff was not entitled to recover.
    
      
       Writ of certiorari denied.
    
   MEMORANDUM BT THE COURT

One proposition, without consideration of any others, is determinative of this case. The authority of the law was to sell certain classes of materials, and it went no further. If tbe materials contracted to be sold were in fact nonexistent, there could be as to them no contract of sale.- There was no authority to contract the delivery of materials which the Government did not have.

The plaintiff has failed to prove the existence of the materials, except upon paper in the form of items upon inventories, and upon the whole record the court has concluded that they were nonexistent. It is but another case of the infliction of an injury by reason of a mistake, due, no doubt, to the immense volume of such transactions then being handled.

It may be suggested that, charged with knowledge of (lie limitations as to the actual existence of property thus sold and purchased, it would have been prudent on the part of the plaintiff — perhaps his duty — to have made some investigation before entering into contracts for resale.

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