
    EVERLASTIK (INC.) v. THE UNITED STATES
    
      [No. C-1004.
    Decided April 2, 1928]
    
      On the Proofs
    
    
      Jurisdiction.; Vent Act; decision try Secretary of War prerequisite to suit. — See United States Bedding Go. v. United States, 55 C. Cls. 459.
    
      
      The Reporter's statement of the case:
    
      Mr. Raymond M. Hudson for the plaintiff. Mr. James Mercer Davis was on the brief.
    
      Mr. Dwight E. Rorer, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. At the times hereinafter mentioned plaintiff was a corporation duly organized under the laws of the State of Massachusetts and engaged in the manufacture of elastic webbing, made of silk and cotton in combination with rubber thread, and used principally for garters and suspenders. It operated plants at Lowell, Massachusetts; Chelsea, Massachusetts; Brockton, Massachusetts; Bridgeport, Connecticut; Pawtucket, Rhode Island; Bayonne, New Jersey; and Mansfield, Ohio.
    II. During the summer and fall of 1918 Captain Carrol-ton R. Richmond, afterwards Major Richmond, representing the Purchase, Storage, and Traffic Division of the Quartermaster Corps, United States Army, visited plaintiff’s various plants for the purpose of determining the capacity of each plant, with a view to recommending to the contracting officers of the Government that contracts be placed for certain material, including nonelastic webbing. As a result of these visits made by Major Richmond and future conversations had between Major Richmond and the representatives of plaintiff company, several formal written contracts were entered into by and between the Government of the United States and plaintiff company, wherein plaintiff company obligated itself to furnish and deliver to the Government of the United States large quantities of nonelastic webbing, according to specifications prepared and furnished by the Government, and attached to and made a part of said contracts. All of these formal contracts were performed or canceled and said contracts are not the foundation of this action and are not material in the consideration of the questions involved herein, except as hereinafter stated in these findings.
    
      III. Before the war plaintiff company was engaged in the manufacture of elastic webbing only, and the webbing which the Government needed and required under its various contracts was nonelastic and of a different character. Plaintiff company had much difficulty with its contracts with the Government in that the webbing manufactured by it in accordance with the specifications as to yarn did not always equal the required standards of weight and breaking strength, as required under the specifications attached to the contract. The Government specifications for light webbing all required 16/2-ply yarn. In the early part of September, 1918, a representative of the plaintiff company stated to Lieutenant Harold D. Holmes, who was in charge of the inspection of webbing on Ordnance Department contracts, that it had 60,000 lbs. of 20/3-ply yarn, which it was desirous of using in place of the 16/2-ply yarn in the manufacture of the webbing under its contracts. The 20/3-ply yarn was not greatly different from the 16/2-ply yarn and the cost of the 20/3-piy yarn was as much or more than the cost of the 16/2-ply yarn.
    On September 7, 1918, Lieutenant Holmes wrote the following letter to the Boston Depot Quartermaster:
    “ 1. Since the light-weight webbings at the Lowell and Pawtucket branches of the Everlastik, Inc., have recently fallen below specifications in tensile strength, it would seem that the recent propensity of that contractor to offer the Government inferior material was again shown here. The writer has recently had the opportunity to look into this matter, inasmuch as Mr. Chisholm, of the Everlastik, Inc., paid this office a visit a few days ago. This gentleman wishes sanction to be given him for a revision in construction on all light-weight webbings to be manufactured at the five Everlastik plants within the next few months. The following outline of the construction on these materials was given by Chisholm: 20/2-ply yarn is now being used in the edge, face, and back of all Everlastik light-weight webbings. The binder threads and the filler are now comprised of 16/2-ply yarn.
    “2. Beginning within a short time the Everlastik, Inc.? wishes to substitute a 20/3-ply yarn for the 16/2-ply now being used in the binder. This contractor now has 60,000 lbs. of the 20/3-ply to dispose of in this manner, and will use it only for the 16/2-ply binder thread present in material now being processed.
    
      “ 3. Within three months Mr. Chisholm purposes to bring about still another change in the construction of the lightweight fabrics, namely, that of employing a 16/2-ply yarn in all portions of the warp and a 20/2-ply yarn in the filling.
    “ 4. To all these projected changes this office gave its consent, inserting the proviso that the webbing should be kept up to weight, width, thickness, and breaking strength. It is believed that the inspectors at the various Everlastik plants will be able to hold this contractor to the strict letter of his contract obligations. The composition of the following lightweight webbing will undergo the changes noted above: 1", iy2", 2", 5%".
    - “ 5. It is requested that samples of these materials from the three Everlastik plants under the jurisdiction of the Boston depot be forwarded to this office with regularity in order that it may keep in close touch with the standard of quality maintained through the several alterations in these fabrics.”
    A copy of this letter with the exception of the first paragraph was sent to the plaintiff company, and it proceeded to use 60,000 lbs. of 20/3-ply yarn in the performance of contract No. 6584-B dated September 24, 1918, which contract called for approximately 200,000 yards of webbing at a total price of $11,500. This contract was settled by virtue of a cancellation agreement, numbered 964, whereby plaintiff received in settlement thereunder the sum of $3,123.94 by check No. 127574, dated June 19, 1919, which plaintiff accepted in full adjustment, payment, and discharge of the said contract.
    Plaintiff manufactured in all 402,194 yards of webbing, which webbing was rejected by the Government because it was not in accordance with contract specifications. A part of this webbing was rejected material under contract 6584r-B. Another part of this webbing was rejected material under a written contract No. 5525-EQ between plaintiff and defendant dated June 17, 1918, which contract was settled by an award dated August 19, 1919, whereby plaintiff received in settlement the sum of $2,418.65.
    At said time plaintiff company had two other contracts with the Government, namely, contract No. 6585-B and contract No. 7856-B. No deliveries were made under either of these contracts.
    Plaintiff company filed a claim under the Dent Act for the 402,194 yards of webbing, which claim was disallowed by the board that heard the same, and no appeal therefrom was taken to the Secretary of War. '
    IY. On June 19,1918, plaintiff entered into a formal written contract with the United States, No. P 10171-5558 EQ, calling for the manufacture of 2,140,000 yards of %" 1-oz. O. D. webbing at a price of $0,075 per yard, deliveries to commence in September, 1918, with 90,000 yards, and to be completed in December, 1918. The specifications called for %" webbing to weigh 1 ounce per linear yard, to be made of 10s/5 yarn in the web and 5-ply in the filling and to have a breaking strength of 400 pounds.
    Plaintiff placed orders with yarn mills for a sufficient quantity of 10s/5 yarn to cover the amount required for the performance of the contract, but there was a delay in the delivery of the same, and on account of plaintiff’s inability to secure enough 10s/5 yarn to enable it to perform the contract on schedule time, it asked the Government officers for permission to use 8s/4 yarn in place of 10s/5. The difference between the two yarns was that the 10s/5 had five strands-of thread and the 8s/4 had four strands. Major Richmond, of the Procurement Division of the Ordnance Department, ap-thorized the plaintiff company to make the substitution and plaintiff substituted 8s/4 yarn for 10s/5 yarn in three of its mills in which it was manufacturing the %" webbing.
    The product of the mills at Pawtucket, Rhode Island, and Chelsea, Massachusetts, in which the 8s/4 yarn was used, passed inspection and was accepted by the Government and was paid for as manufactured under contract No. 5553 EQ.
    The %" webbing manufactured at the other mills of the plaintiff out of 8s/4 yarn did not pass inspection and was rejected because 8s/4 yarn was used in place of 10s/5 yarn.
    A total of 969,957 yards of webbing made out of the 8s/4 yam at all the plaintiff’s mills was rejected by the Government and negotiations were entered into by and between plaintiff company and Government officials for . another contract to be entered into whereby the plaintiff was to deliver 376,000 yards of this webbing, the same being a part of that which had accumulated as the production of the webbing made out of the 8s/4 yarn, at a price slightly less than the contract price for webbing made out of 10s/5 yarn, but this contract was never entered into.
    
      Contract No. 5553-EQ was canceled and a settlement was made under date of July 22, 1919, whereby plaintiff was awarded and paid $63,697.22. Plaintiff filed a claim with the War Department under the Dent Act for compensation for the said 969,957 yards of webbing-, but said claim was) disallowed and no appeal therefrom was ever taken to the Secretary of War.
    Y. In September, 1918, plaintiff company had manufactured at its mill at Chelsea, Massachusetts, 344,001 yards of webbing which did not come up to the Government specifications under either of the contracts that plaintiff company had with the Government. Negotiations were entered into for the purchase- by the United States of the rejected webbing, and samples were sent to Washington for examination and test. As a result of the negotiations a purchase order was issued by S. W. Shaffer, captain, Quartermaster Corps, dated September 20, 1918, No. 5387-B for approximately 344,001 yards of webbing at 10$ per yard, to include the cost of commercial packing, or at a total cost of approximately $34,400.10. A copy of said purchase order is filed with plaintiff’s petition, marked “ Exhibit A,” and is made a part hereof by reference. S. W. Shaffer was never designated as a contracting officer and no formal contract for the 344,001 yards of webbing was entered into.
    This 344,001 yards was inspected by the Government and rejected because it did not comply with the specifications that were made a part of purchase order dated September 20, 1918. Plaintiff filed a claim with the Secretary of War under the Dent Act for the price of the 344,001 yards of webbing and on June 11, 1920, plaintiff was allowed 2$ per yard on 228,500 yards, representing the difference in contract price and price at which retained by contractor and 1$ per yard on 115,501 yards, representing loss to contractor in sale of yardage, and an award was made in the'sum of $5,725.01. The award was paid by voucher No. 1662 and check No. 152716, dated August 28, 1920.
    YI. During the time that plaintiff company was performing its-formal contracts heretofore mentioned, it manufactured 135,597 yards of %" webbing, which did not equal the Government specifications as to weight. Negotiations were entered into for the purpose of having the United States accept the rejected webbing and samples were sent to Washington, which were examined and tested. As a result of the negotiations a purchase order was issued, dated October 4, 1918, order No. 4913-B, for approximately 135,597 yards of %" webbing at $0,065 per yard, to include the cost of commercial packing, or at a total cost of approximately $8,813.81. The specifications provided that the %" sulphur-dyed olive-drab webbing was to weigh 0.83 oz. per lineal (sic) yard, and to stand a breaking strain of 400 lbs. A copy of said purchase order is filed with plaintiff’s petition, made part thereof, and marked “ Exhibit B,” and is made a part hereof by reference.
    The purchase order was executed and signed by S. W. Shaffer, captain, Quartermaster Corps, purchasing quartermaster. S. W. Shaffer was not designated as a contracting officer. At the time the purchase order was executed and delivered to plaintiff company it was understood between officials of plaintiff company and S. W. Shaffer that if the rejected webbing did not comply with the specifications the Government Avould take the same at a price and under specifications that were to be determined later, but no written agreement of this kind was entered into by plaintiff company and the Government officials.
    All of the 135,597 yards of webbing was rejected by the Government for the reason that it did not comply with the specifications attached to and made a part of the purchase order. Plaintiff company filed a claim with the Secretary of War under the Dent Act, wherein it asked for compensation for the 135,597 yards of webbing, which claim was heard by the War Department Claims Board, and an allowance of 2‡ per yard was made on 135,000 yards, the balance of 597 yards having been disposed of by plaintiff, and plaintiff was awarded the sum of $2,700, which amount was paid plaintiff by check No. 151224, dated August 10, 1920.
    VII. During the year 1918 the Government was in urgent need of heavy webbing, and the capacity of the mills of the United States was not great enough to manufacture all of the heavy webbing that the Government required. Plaintiff company had no machinery in the mills operated by it that could make the heavy webbing. In September, 1918, the representatives of the plaintiff company conversed with Major C. It. Richmond, representing the Purchase, Storage, and Traffic Division of the Quartermaster Corps, and Major Richmond told them that the Government was in urgent need of heavy webbing and that if they would install looms large enough to manufacture said heavy webbing the Government would give them enough orders to keep the looms running. As a result of this conversation plaintiff company purchased 52 looms from Crampton & Knowles Loom Works, Worcester, Massachusetts, at a cost of $134,230.81, and erected a building in which to place the looms at a cost of $176,970.51.
    No formal contract was ever entered into by and between plaintiff company and the Government of the United States with reference to the purchase of said looms or to the erection of said building, but before the building was erected it was necessary for plaintiff to obtain the permission of the War Industries Board for its erection. Major C. R. Richmond assisted the plaintiff in obtaining such permission, which was granted on September 17, 1918, in a letter signed by S. P. Bush, director, facilities division, which letter was as follows:
    SEPTEMBER 17, 1918.
    EVERLASTIK, INC.,
    Chelsea, Mass.
    
    Gentlemen : We grant permission to construct plant extension to house fifty new looms for the Quartermaster Department. Permission is given with the understanding that the extension in question is to be built of brick and timber, no steel required, and the materials available locally, as well as labor and power, the total cost to be one hundred thousand dollars, to be financed by yourselves. If any preliminary certificate is required it should be applied for in the regular way.
    Yours truly,
    S. P. Bush,
    
      Director Facilities Division.
    
    The building in which to house the looms was about 50% completed on November 11, 1918, and at that time the 52 looms had been bought, but had not been installed in said building. No contract of any kind was ever given the plaintiif company by the Government for the manufacture of heavy webbing. The 52 looms were of special make and were not suitable for the making of webbing for commercial trade.
    Plaintiif filed a claim with the War Department under the Dent Act for compensation for the said 52 looms and the building in which they were housed, but said claim was disallowed and denied by the Board of Contract Adjustment, and no appeal was taken to the Secretary of War.
    VIII. During the time that plaintiif was performing its several contracts hereinbefore mentioned, the Government officials were continuously urging it to keep the looms busy and to speed up production, and advised them that if they had difficulty in purchasing yarn suitable to make webbing that would comply with the Government specifications, under- its several contracts, they should continue to make webbing, and if it fell below Government specifications in some respects but was usable by the Government, spot orders would be issued and said webbing would be taken by the Government at a price to be determined later. As a result of these suggestions made by Major C. It. Kichmond, representing the Purchase, Storage, and Traffic Division of the Quartermaster Corps of the United States Army and Lieutenant Harold D. Holmes, a chief in the inspection division, neither of whom was designated as a contracting officer, plaintiif company continued to make webbing that did not come up to the specifications, and the total yardage manufactured by the plaintiif exceeded the total yardage called for by all of the formal contracts that plaintiif had with the Government.
    It was suggested to plaintiff’s officers that if this surplus webbing was usable by the Government, even though it failed to comply with Government specifications in some respects, spot orders would be issued and said webbing would be taken by the Government at a price to be determined later. One or two spot orders were issued and a small part of this surplus webbing was accepted by the Government and paid for at a price less than the price specified in any of the formal contracts, but when the armistice intervened no further spot orders were issued by the Government for the webbing and at the time of the termination of plaintiff’s contracts it had on hand approximately 1,851,749 yards of webbing, which included the webbing that was rejected under its formal contracts and the surplus webbing, which was never delivered to the Government. If this webbing had complied with the Government specifications it would have been worth approximately per yard. It was not the kind of webbing that was suitable for the commercial trade. Plaintiff company sold about 50% of the webbing that it had on hand after the termination of its contract for 1 ‡ a yard. It does not appear from the evidence what disposition was made of the balance.
    The court decided that plaintiff was not entitled to recover.
   Campbell, Chief Justice,

delivered the opinion of the court:

In this suit the plaintiff claims approximately $524,000, composed of several items alleged to constitute sums recoverable under the Dent Act. An elaborate report of facts has been made by a commissioner of the court and exceptions to this report were filed by the plaintiff. These have been considered and nothing substantial appearing that requires a change, the commissioner’s report is confirmed. Several items of the claim have been presented to the Board of Contract Adjustment created under the Dent Act, whose rulings have been adverse to plaintiff’s contentions. The case has been instituted in this court without any action having been taken by the Secretary of War upon the claims.

There were a number of duly executed contracts in writing entered into between the plaintiff and the Government, but these are not made the basis of complaint.

1. One claim is based upon the allegation that plaintiff contracted to manufacture 402,194 yards of webbing, that it complied with its contract and was entitled to receive about $23,000, but that the Government refused to accept the same. The fact is that this webbing was material offered under two contracts and rejected because it did not comply with specifications. Both of these contracts were subsequently settled between the .parties and allowances made by the Government that were paid to .and accepted by the plaintiff in full settlement and discharge of the contracts. After-wards, this same item was presented, as already stated, under the Dent Act, to the Board of Contract Adjustment and any allowance thereon was refused by that board May 26, 1920. No appeal was taken to the Secretary of War and no action by him is shown. If there was any merit in the claim as a Dent Act claim the. failure to have the same passed upon by the Secretary of War would preclude the maintenance of the suit in this court. See United States Bedding Co. case, 55 C. Cls. 459.

2. Another claim is for the value of some 969,000 yards of olive-drab webbing. This was rejected because it could not pass inspection, having been made of smaller and lighter yarn than was required by the specifications. The contract under which it was made called for more than two million yards, and after large quantities had been supplied the contract was canceled and a full and final settlement made in July, 1919, whereby the plaintiff was paid and accepted in settlement of the contract liability a large sum. Upon the theory that this rejected webbing was contracted for in an informal contract, there is claimed about $10,000 for its breach. But no such contract, oral or written, was ever made. This, as the former claim, was also presented to the Board of Contract Adjustment as a Dent Act claim and disallowed April 3, 1920. No further action was taken by plaintiff and no action .whatever was taken by the Secretary of War. It is only from his action that an appeal is allowed. United States Bedding Co. case, supra.

3. Another claim is on account of 344,000 yards of webbing that was rejected, but was afterwards made the subject of negotiations looking to its use by the Government. It was, however, again rejected. 'Claim for it was presented to the Board of Contract Adjustment under the Dent Act and, holding that there was an informal contract, that board made an allowance in settlement, which was paid to and accepted by plaintiff.

4. Still another claim is on account of about 135,000 yards of webbing that was rejected by the Government. But this claim, as was the one last above mentioned, was presented to said board, who having heard the same made an allowance in settlement which was paid to and accepted by plaintiff.

5. The further claim, much the largest of all, is to the effect that the plaintiff entered into an agreement with authorized agents of the Secretary of War to purchase a large number of looms of special kinds adapted to the Government’s work and that these officers or agents urged their purchase and the erection of a building in which to house, and operate them, and agreed to give the plaintiff contracts for heavy webbing to an extent necessary to pay for same. No such contract was ever made. The plaintiff did begin the construction of a building but before doing so sought the necessary permit, which was authorized in September, 1918, with the distinct statement that it was to be financed by the plaintiff. This claim was also presented to the Board of Contract Adjustment, which disallowed the same because there was no agreement, oral or otherwise, to reimburse the plaintiff for the looms or building. The purchase of the one and the construction of the other were the plaintiff’s own venture. No appeal from the board’s ruling was taken to the Secretary of War and no action by him in the premises is shown.

The petition should be dismissed. And it is so ordered.

Moss, Judge; Geaham, Judge; and Booth, Judge, concur.  