
    JACOB REED’S SONS, INC., v. THE UNITED STATES
    
    [No. B-42.
    Decided January 5, 1925]
    
      On the Proofs
    
    
      Dent Aot; implied contract. — The promise of tlie Depot Quartermaster at Philadelphia to supply plaintiff with future contracts sufficient to compensate it for the expenditure of money for additional equipment and rent, was not such a promise as was contemplated by the Dent Act.
    
      Same; authority of officer.- — Plaintiff was hound to know and take notice of the limited authority of the officer with whom it was dealing, and the court will not imply that such officer was acting under proper authority. B. & O. R. R. Co. v. United States, 261 TJ. S. 592.
    
      The Reporter's statement of the case:
    
      Mr. Frank Davis, jr., for the plaintiff. Palmer, Davis <& Scott were on the brief.
    
      
      Mr. Ralph G. Williamson, with whom was Mr. Assistant Attorney General Robert E. Lovett, for the defendant.
    Motion for new trial overruled March 16, 1925.
    •The following are the facts as found by the court:
    I. Plaintiif is and was during the period hereinafter mentioned a corporation organized and doing business under the laws of the State of Pennsylvania, with its principal office and place of business in Philadelphia in that State. Its principal business, in which it had been engaged since 1824, was the buying, manufacturing, and selling of clothing and officers’ and cadets’ uniforms.
    II. In April, 1917, plaintiff took a trial contract for manufacturing uniforms for the United States Army. It demonstrated its ability to manufacture such uniforms to the satisfaction'of the Government and was given further contracts from time to time. Until shortly prior to July 15, 1918, plaintiff in manufacturing such Army uniforms for the Government was using the fifth floor of its building at 1424-1426 Chestnut Street, Philadelphia, for the cutting work on uniforms and for other work necessary in such manufacture, three floors in a building at Broad and Spring Garden Streets in Philadelphia, one floor in a building at Eighth and Arch Streets in said city, one floor at Broad and South Streets in said city, and a factory at Hampton, N. J., all of which space was used by it exclusively in the manufacture of Government uniforms. The manufacture of such uniforms was entirely different from the regular business of plaintiff. . »
    There was no provision in any of the said contracts with the Government relative to the size or kind of facilities in the way of factories or storerooms that would be required of plaintiff.
    Prior to July 15, 1918, plaintiff had demonstrated its ability to carry out its contract for the manufacture of uniforms to the fullest satisfaction of the Government, and was regarded as one of the best contractors with which the Government was dealing.
    III. Early in the summer of 1918 the situation with regard to clothing and uniforms for the soldiers of the Army of the United States was critical. It was necessary to arrange immediately to provide uniforms for 4,000,000 men by the 1st of July, 1919.
    In the city of Philadelphia the situation as to the manufacture of such imiforms at that time was very unsatisfactory to the Government. The production was not up to the minimum requirements. Contracts were scattered among numerous contractors, and there was much dishonesty, waste, and inefficiency.
    In April, 1918, George W. Goethals, Major General, Assistant Chief of Staff, Division of Purchase, Storage, and Traffic of the United States Army, having charge of the procurement of all standard supplies for the War Department, assigned Benedict M. Holden, a civilian, as depot quartermaster at Philadelphia to increase production and to eliminate dishonest and unsatisfactory contractors.
    As such depot quartermaster it was his duty and he had authority to do everything possible to expedite production of uniforms to meet the program which had been laid out for the United States Army.
    Mr. Holden urged plaintiff in every way to increase its production, as the same was so satisfactory to the Government. He also ordered all contractors to install storerooms at the places where the cutting was done in order that material belonging to the Government could be kept under lock and key. He also required that the factory of the plaintiff at Eighth and Arch Streets be discontinued on account of the fire risk.
    It was impossible for plaintiff to install a storeroom on the floor where the cutting was then being done by it, 1424 Chestnut Street, without decreasing its production, which the Government was demanding it to increase. To discontinue its factory at Eighth and Arch Streets on account of fire risk or for any other reason would also seriously cut down its production of uniforms instead of increasing the same, as demanded by the Government. The only way it could meet the Government’s demand as to increased production, providing a storeroom and discontinuing the factory at Eighth and Arch Streets, would be by securing sufficient, space in some other building to concentrate its manufacturing on Government work in such space. Plaintiff being desirous of complying with the demands of the Government as to increased production, as well as its orders as to the stock room and discontinuance of its factory at Eighth and Arch Streets, made every effort to find suitable space in Philadelphia for continuing its work. Plaintiff ascertained that it could lease the entire eighth floor of a building at 45-50 North Sixth Street, which would be admirable for the manufacture of uniforms, in that it would afford space for the ■entire manufacture, provide the storeroom which the Government required, and enable it to entirely discontinue its Eighth and Arch Streets factory, at the same time materially increasing its production of uniforms. This space could only be secured by executing a lease for three years. It was necessary also, if this space was to be utilized so as to increase the production as required by the Government, to install the necessary and proper machinery.
    IV. On or about July 15, 1918, the plaintiff reported the above facts to Benedict M. Holden, depot quartermaster at Philadelphia, and stated to him that the taking over and equipment of the portion of the building at North Sixth Street would involve the expenditure of a considerable sum of money, and that it did not feel justified in going ahead without some definite assurances on the part of the depot quartermaster that it would receive a sufficient number of contracts to at least compensate it for the outlay and obligations which it would have to incur. The depot quartermaster wanted to know what it would cost to rent the portion of the building and to equip it. The plaintiff told him that such a plant would cost from $75,000 to $100,000. The depot quartermaster urged the plaintiff to increase its capacity and stated that he was satisfied that the plaintiff would receive contracts from the United States Government sufficient to compensate it for making the investment. The plaintiff suggested that the war might end. The depot quartermaster then said, “ If the war stops, we will be obliged to keep an army of occupation in Europe for some time to ■come, and this army of occupation will need uniforms.” He .further stated that contracts would be placed with the plaintiff which would fully reimburse it for its proposed expenditure.
    , Thereupon plaintiff executed the lease for said space and proceeded as rapidly as possible to adequately equip the same. Said factory was completed and ready for operation about the middle of September, 1918. It was. inspected and approved by officers connected with the Philadelphia depot both during construction and .after completion. As soon as it was completed the Government immediately awarded contracts to the plaintiff, and said factory was used in the manufacture of uniforms from its completion, about the middle of September, up until the date of the armistice, when plaintiff was ordered to stop all manufacturing. Thereafter, although plaintiff was ready, willing, and able to devote the capacity of said factory to the manufacture of uniforms for the Government and requested that additional contracts be, given to it, no further contracts were given to plaintiff.
    After the armistice plaintiff endeavored .to have the Government take said factory off its hands and pay for its losses. The Government failing and refusing to do so, plaintiff proceeded to dispose of the lease and of the equipment at the best price it could obtairi for the same. The-total cost of the factory, including the lease, was $86,128.53; the amount realized by the plaintiff from the sale of said lease and equipment was $42,372.29; the loss to the plaintiff was $43,756.24.
    Y. On or about the 10th day of June, 1919, plaintiff filed' claim for $44,686.28 with the Secretary of War, pursuant to the terms of the act of March 2, 1919, commonly known as the Dent Act. The War Department Claims Board, established pursuant to said act, found that plaintiff was entitled to relief under said act, but on appeal to the Secretary of War relief was denied plaintiff. Thereafter plaintiff brought this action in this court on said claim.
    VI. All matters connected with the origination, making, and performance of all contracts of the plaintiff for the manufacture of uniforms were taken up with the depot quartermaster at Philadelphia, and plaintiff had no dealings with regard to any of said contracts with any other official. All such contracts were executed on behalf of the Government by the officer designated in the contract as contracting officer and designated by the depot quartermaster at Philadelphia.
    On or about May 8,1918, the folloiving letter was received by the plaintiff from the depot quartermaster’s office:
    WAR DEPARTMENT,
    Office of ti-ie Depot Quartermaster,
    
      2680 Grays Ferny Road, Philadelphia, Pa., May 8,1918.
    
    Please send reply in duplicate, quoting No. 421.2-17NS. &
    E. D. — M. B. and date of the letter.
    From: Depot Quartermaster, Philadelphia, Pa.
    To: Jacob Heed’s Sons, 1424 Chestnut Street, Philadelphia. Subject: Contracts.
    1. In accordance with letter received from the office of the Quartermaster General, manufacturing branch, dated May 6, you are informed that all correspondence and all matters pertaining to your contracts, or any business you may have with the Quartermaster Corps in reference to contracts, should be taken up with this office, and at no time will it be necessary for you to correspond with the Quartermaster General’s office unless upon our advice.
    2. The orders from Washington in this matter are explicit, and it is therefore requested that you take immediate note of same and comply accordingly.
    By authority of the depot quartermaster.
    (Signed) S. P. Weinberg,
    A.
    S. P. Weinberg,
    
      Captain, Q. M. R. 0., Asst, to D. Q. M.
    
    VII. Benedict M. Holden, depot quartermaster at Philadelphia, while acting as such, was an agent of the Secretary 'of War.
    The court decided that plaintiff ivas not entitled to recover.
    
      
       Appealed.
    
   Hat, Judge,

delivered the opinion of the court:

The plaintiff relies upon the provision of the Dent Act (40 Stat. 1272). Section 1 of that act provides as follows:

“That the Secretary of War be, and he is hereby, authorized to adjust, pay, or discharge any agreement, express or implied, upon a fair and equitable basis that has been entered into, in good faith during the present emergency and prior to November 12, 1918, by any officer or agent acting under his authority, direction, or instruction, or that of the President, with any person, firm, or corporation for the acquisition of lands, or the use thereof, or for damages resulting from notice by the Government of its intention to acquire or use said lands, or for the production, manufacture, sale, acquisition or control of equipment, materials or supplies, or for services, or for facilities, or other purposes connected with the prosecution of the war, when such agreement has been performed in whole or in part, or expenditures have been made or obligations incurred upon the faith of the same by any such person, firm, or corporation, prior to November 12, 1918, and such agreement has not been executed in the manner prescribed by law: Provided, That in no case shall any award either by the Secretary of War or the Court of Claims include prospective or possible profits on any part of the contract beyond the goods and supplies delivered to and accepted by the United States and a reasonable remuneration for expenditures and obligations or liabilities necessarily incurred in performing or preparing to perform said contract or order * * ■

The plaintiff claims under what it alleges was an express contract between it and Benedict M. Holden, depot quartermaster at Philadelphia, that this contract was made in July, 1918, and that said Holden was “ an officer or agent acting under the authority, direction, or instruction of the Secretary of War.” The terms of this contract are alleged to have been that the plaintiff on its part was to rent and equip a floor of a building in Philadelphia for the production of Army uniforms, and that the depot quartermaster would see to it that the plaintiff would receive contracts from the United States in sufficient quantity to compensate it for any loss which it might incur by reason of such rental and equipment.

The facts are that the plaintiff, upon being urged by the depot quartermaster to increase its facilities for the production of Army uniforms, advised the depot quartermaster that it could only do so by renting a floor of a building in Philadelphia; that three years was the shortest term for which it could rent the building; and that the rent and the cost of equipment would be from $75,000 to $100,000, and that the plaintiff would not incur this cost unless it could be assured that it would receive a sufficient number of contracts to compensate it for the outlay and obligations so incurred. The depot quartermaster urged the plaintiff to increase its capacity, and stated that he was satisfied that the plaintiff would receive contracts from the United States Government sufficient to compensate it for making the investment. It Avas suggested by the plaintiff that the war might end. The depot quartermaster answered that if it did the United States would be obliged to keep an army of occupation in Europe for some time to come, and this army would need uniforms. As a result of this conversation with the depot quartermaster the plaintiff proceeded to rent the building and to equip it for the manufacture of uniforms for the United States Army. The building was ready for work about the middle of September, 1918, and the plaintiff was given contracts for the manufacture of uniforms. Before these contracts were completed the armistice was entered into on November 11, 1918, and a few days thereafter the contracts which had been awarded to the plaintiff were canceled. As a result the plaintiff discontinued its work in the building so rented and proceeded to dispose of the lease and of the equipment at the best price it could obtain for the same.

The total cost of,the factory, including the lease, was $86,128.53; the amount realized by the plaintiff from the sale of said lease and equipment was the sum of $42,372.29; and the loss to the plaintiff, upon the transaction was the sum of $43,756.24. And this sum, the plaintiff alleges, the United States must pay by reason of the promises made to it by the depot quartermaster at Philadelphia.

' It does not seem to us that there has been any contract proved between the parties, either express or implied. The promise of the officer to supply the plaintiff with future contracts sufficient to compensate it for the expenditure of money for equipment and rent is not such a promise as the Dent Act contemplates. The circumstances surrounding this transaction are such as to lead to the conclusion that the plaintiff was relying on the promise made to it for obtaining future contracts in the event of the continuance of the war, or if the war did not continue then on the event’ of the United States maintaining an army of occupation in Europe. In either case the plaintiff proceeded upon promises made to it by one who had no authority to obligate the United States to a continuance of work for which the Government might have no use. The plaintiff, in making the expenditure, relying upon the opinion of the depot quartermaster, took the chance that the war would continue, or that if it did not there would still be the chance of using the building which it rented and equipped. There was no duress, no order directing the plaintiff to rent and equip the building, and, so far as the record discloses, there was no authority lodged in the depot quartermaster which authorized him to enter into a contract with the plaintiff or anyone else to rent and equip that or any other building.

The plaintiff was bound to know and to take notice of the limited authority of the officer with whom it was dealing. Baltimore & Ohio R. R. Co. v. United States, 51 C. Cls. 140, 150. There are no circumstances here which can be held to relieve the plaintiff from its responsibility. It is said by the Supreme Court in the case of Baltimore & Ohio R. R. Co. v. United States, 261 U. S. 592, 596: “The act was intended to remedy irregularities and infomalities in the mode of entering into such agreements; not to enlarge the authority of the agents by whom they were made. To entitle the claimant to compensation under such an agreement it is essential that the officer or agent with whom it was entered into should not merely have been holding under the Secretary of War or the President but that he should have been acting within the scope of his authority.” And the court goes on to say in the same opinion: “It was not intended * * * that an agreement into which he entered, although beyond his authority, should become binding upon the Government because it was made in the form of an express agreement not executed within the legal manner or of an implied agreement merely — that is, that his authority should be enlarged by the irregularity or informality with which it Avas exercised.”

It does not appear that the depot quartermaster had any authority to enter into this agreement. He had authority to expedite the production of uniforms and clothing which were being manufactured by contractors in Philadelphia. But from that could not be implied an authority to rent and equip buildings. And in this case it appears that the officer entered into no contract as to the amount of the rent and the cost of the equipment, but without knowing what the rent and costs were gave assurance to the plaintiff that future contracts would be given it to compensate it for its outlay, whatever that might be. We do not feel that we can imply that the officer had any such authority. To do so would be giving an interpretation to the Dent Act which is directly in the face of the decision of the Supreme Court of the United States above quoted.

The petition of the plaintiff must be dismissed. It is so ordered.

Graham, Judge; Downey, Judge; Booth, Judge; and Campbell, Ghief Justice, concur.  