
    W. O. DILLON, SR., W. O. DILLON, JR., AND VIRGINIA P. DILLON, A PARTNERSHIP DOING BUSINESS AS VINITA HAY COMPANY v. THE UNITED STATES
    [No. 199-55.
    Decided December 4, 1957.
    Plaintiffs’ motion for rebearing overruled March 5,1958]
    
      
      Mr. George H. Jennings for the plaintiffs. Mr. Paul A. Walicer was on the brief.
    
      Mr. Francis P. Borden, Jr., with whom was Mr. Assistant Attorney General George Oóchram, Doub, for the defendant.
   Jones, Chief Judge,

delivered the opinion of the court:

This is an action in which plaintiffs sue for excess costs of hay delivered to defendant in Oklahoma under a supply contract. It is pleaded that such excess costs were due to the severe drought conditions which prevailed in that area during the period of performance.

The plaintiffs, a partnership doing business as Vinita Hay Company, at Vinita, Oklahoma, on April 29, 1952, entered into a contract to furnish to the defendant certain amounts of hay as set out in findings 2 and 3. The hay was to be delivered during the months of July, August and September 1952. The price was $26 per ton. The hay was to be delivered at the Reno Quartermaster Remount Station, Fort Eeno, Oklahoma. The contracting officer was E. H. Eich-ards, Fort Worth Quartermaster Depot, Fort Worth, Texas. The delivery price of the modified contract was $49,915.82.

The area comprising 5 or 6 counties in northeastern Oklahoma within a radius of 50 miles from the city of Vinita is recognized as a principal prairie hay-producing area within the State of Oklahoma. The type of hay to be used in filling this contract matures largely during the month of June and cutting usually begins in late June or early July.

In the year 1952 an unusually severe drought prevailed not only in Oklahoma but in some of the surrounding States during the month of June. On account of the dry, hot and searing weather the yields of prairie hay were very short in the State of Oklahoma. The weather was so severe that the State of Oklahoma was included among the States where the drought was of sufficient severity and magnitude to warrant assistance by the Federal Government. By declaration, the President made available emergency funds to be used “in meeting any unrecoverable portion of the costs of procuring, transporting and distributing certain livestock feed in order to relieve the serious shortage.”

Under the heading “Default” the contract contained, inter alia, the following provision:

(b) The Contractor shall not be liable for any excess costs if any failure to perform the contract arises out of causes beyond the control and without the fault or negligence of the Contractor. Such causes include, but are not restricted to, acts of God or of the public enemy, acts of the Government, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, unusually severe weather, and defaults of subcontractors due to any of such causes unless the Contracting Officer shall determine that the supplies or services to be furnished by the subcontractor were obtainable from other sources in sufficient time to permit the Contractor to meet the required delivery schedule.

The plaintiffs repeatedly endeavored to get released from the contract on the ground that it was impossible to fulfill the contract with hay purchased in Oklahoma as there was not sufficient hay to meet the demand and the farmers were refusing to sell it, and that the price had gone much higher than the rate specified in the contract. That even at that price there was not sufficient hay available to make delivery under the contract.

Just as repeatedly, the contracting officer insisted on the hay being delivered and stated that if the amount of hay were not delivered he would contract with others to make delivery and charge the additional cost against the plaintiffs

Faced with these conditions, the plaintiffs purchased the hay wherever available and at whatever price that might be necessary in the State of Oklahoma, and in order to complete the contract made five purchases, as set out in finding 22, in the State of Nebraska.

It is stipulated by the respective parties to this litigation that the plaintiffs sustained a net loss of $17,298.48 in making delivery of the amount of hay specified in the contract. The plaintiffs sue for this amount, alleging that the contract relieves the contractor of any liability for excess costs if failure to perform arises out of certain' causes not the fault or negligence of the contractor. One of the causes listed in the contract is unusually severe weather.

Anyone who has ever been in the fringe of the so-called “dust bowl” during the rare occasions on which these severe droughts sometimes prevail can realize the havoc that is wrought at such a time. The hot winds come and sweep with blistering trail across the prairies. The heavens become like brass and the earth as iron. The small streams go dry, the leaves wither and the growing grass becomes seared. Within a space of a few days tremendous damage can be done. The undisputed evidence in this case shows that the drought not only in Oklahoma but in some of the surrounding States was very severe during this period. Naturally the price of the limited hay available in that area increased very greatly.

There is little doubt that if plaintiffs had deliberately defaulted in their contract they would have been relieved of much of the damages and costs which they incurred by their completing delivery. They could simply have refused to deliver, but of course in that event the contracting officer would have charged them with the additional costs by offset.

■ Thus, in either event plaintiffs were faced with a law suit. The choice which the contracting officer gave them was some-wbat like tbe choice sometimes given, the cattle thief who might be captured by a group of citizens on the frontier in the early days. The story goes that one such rustler was taken in the act. The enraged owners gave him the choice of whether he would be “hung or shot.” After studying the matter over, he replied that he could not develop any enthusiasm for either method.

It is to plaintiffs’ credit, that in the face of the somewhat unreasonable demands of the contracting officer and regardless of the many thousands of dollars of extra costs, they completed delivery of the entire amount of hay specified in the contract. Plaintiffs went to many places in Oklahoma and secured all the hay they could find available, even at the increased prices. They found it necessary to go to Nebraska for a portion of the hay in order to complete the contract.

It seems almost like placing a penalty on energy or integrity to deny the plaintiffs the relief which they seek, but the defendant insists upon the terms of the contract. Since the terms of the contract, especially when read in the light of the disputes clause, provide for relief only for failure to perform, we find that we have not the authority to grant the principal part of the relief which is sought in this action. There is, however, a portion of the claim which we think undoubtedly should be accorded the plaintiffs.

When the wording of the contract as a whole, the point of delivery contemplated by that contract, and the accessibility of the normal supply of hay for that particular section are considered in connection with the correspondence and the evidence by both sides, there is a conclusive showing that the source of supply which both parties contemplated was the area not exceeding a reasonable distance from the point of delivery. This conclusion is made much more plausible when the bulky nature of the commodity is given consideration. The evidence shows that when shipped from any considerable distance the freight costs exceeded the price of the hay. It will be noted from a reading of the citations set out below, the general rule is that difficulty of performance or losses in carrying out a contract will not be treated as a basis for relief by the courts in the absence of a special clause in the contract stipulations providing for such relief, both parties being bound by the terms of the contract. But in extraordinary cases where extreme hardship, unforeseen and not contemplated by either party, would necessarily result, a measure of relief may be granted if the unusual circumstances justify such action. This is the very essence of equity, which is the peculiar product of English and American jurisprudence. See 6 Williston on Contracts (Rev. Ed.) § 1963; also Restatement of the Law of Contracts §§ 454 and 460 for a discussion of the general rule and the exceptions.

In the case of Mitchell Canneries, Inc. v. United States, 111 C. Cls. 228, at page 250, is found this language:

It might be pointed out here that regardless of whether or not a contract provides for findings, there must be some reasonable limit to the area from which a contractor can be expected to acquire raw materials in performance of a contract. • If the doctrine that a contractor may not be excused when materials are available anywhere, at any price, were carried to its logical conclusion, it would follow that there would have to be complete crop failure over the entire surface of the world before a contractor could be relieved from damages. If some small quantity of materials had been available in some distant country, a contractor could not be excused. The blackberry crops in Oregon and Washington from which the government purchased materials in the open market when the contractor could not complete the contract here involved,were so far from the contractor as to be practically out of his reach. The contract was made during time of war to be performed when transportation was difficult and space in refrigerator cars for shipment of perishable goods was painfully inadequate. These facts have bearing on the reasonableness of the contracting officer’s findings. It would be an unconscionable result to hold the contractor liable for damages for failure to complete the contract when the raw material was actually unobtainable.

While this language was used in a case in which there was an actual default, its philosophy and meaning certainly apply to the sis railroad cars of hay purchased by the plaintiffs and shipped from Thompson Company, Newport, Nebraska, which can certainly be termed out of the range of the parties in entering into the contract in question. ■ We hold that it was contemplated and well understood by both parties that in delivering hay under the contract the plaintiffs expected to obtain it, and the defendant expected to receive it, from sources not unreasonably distant from the delivery point contained in the contract, and that Newport, Nebraska, where plaintiffs were compelled to go to purchase the six carloads of hay mentioned, was an unreasonable distance and clearly beyond the area in contemplation of both parties to the contract.

The extra cost of delivering these six: carloads of hay as set out in finding 22 is $1,480.82. Judgment will be rendered for plaintiffs in this amount.

It is so ordered.

Fahy, Circuit Judge, sitting by designation; Madden, Judge; and Littleton, Judge, concur.

Whitaker, Judge, dissents.

FINDINGS OF FACT

The court, having considered the evidence, the report of Commissioner William E. Day, and the briefs and argument of counsel, makes findings of fact as follows:

1. The plaintiffs, W. O. Dillon, Sr., W. O. Dillon, Jr., and Virginia P. Dillon, are and were, at the times involved, co-partners doing business at Vinita, Oklahoma, under the firm name of Vinita Hay Company, and are and were, at the times involved, engaged in the business of buying and selling hay and grain.

2. Plaintiffs, on April 29,1952, entered into a contract with the Government, acting through the Department of the Army, whereby plaintiffs agreed to furnish hay, feeding, upland prairie, U. S. No. 2, and/or, timothy and clover, U. S. No. 2, at $.013 per pound ($26.00 per ton), for delivery to the Eeno Quartermaster Eemount Station, Fort Eeno, Oklahoma, during the months of July, August and September 1952, and in the following amounts:

July_.- 667, 440 pounds
Aug- 989, 520 pounds
Sept-- 989,520 pounds

3.On June 9, 1952, the contracting officer, Major E. H. Eichards, Chief, Purchasing Branch, Fort Worth Quartermaster Depot, Fort Worth, Texas, wrote to the plaintiff company suggesting the need by the defendant for adcli-tional upland prairie hay and requesting information as to whether it would accept an increase in contract quantities at the same unit price. On the next day, apparently on receipt of the letter referred to above, the plaintiff company, through W. O. Dillon, Sr., accepted the increase in deliveries under the contract at the same unit price.

4. The contract was modified in writing by Supplemental Agreement dated June 18, 1952, changing the quantities to read as follows:

July-1,279,892 pounds— $16,638. 60
August-1,279,893 pounds 16,638. 61
September-1,279,893 pounds— 16, 638. 61

The total contract price was changed to read $49,915.82 in lieu of $84,404.24.

5. The contract contains the following provisions, among others:

❖ #
11. Default
(a) The Government may, subject to the provisions of paragraph (5) below, by written Notice of Default to the Contractor terminate the whole or any part of this contract in any one of the following circumstances:
(i) if the Contractor fails to make delivery of the supplies or to perform the services within the time specified herein or any extension thereof; or
(ii) if the Contractor fails to perform any of the other provisions of this contract, or so fails to make progress as to endanger performance of this contract m accordance with its terms, and in either of these two circumstances does not cure such failure within a period of 10 days (or such longer period as the Contracting Officer may authorize in writing) after receipt of notice from the Contracting Officer specifying such failure.
(5). The Contractor shall not be liable for any excess costs if any failure to perform the contract arises out of causes beyond the control and without the fault or negligence of the Contractor. Such causes include, but are not restricted to, acts of God or of the public enemy, acts of the Government, fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, unusually severe weather, and defaults of subcontractors due to any of such causes unless the Contracting Officer shall determine that the supplies or services to be furnished by the subcontractor were obtainable from other sources in sufficient time to permit the Contractor to meet the required delivery schedule.
(c) In the event the Government terminates this contract in whole or in part as provided in paragraph (a) of this clause, the Government may procure, upon such terms and in such manner as the Contracting Officer may deem appropriate, supplies or services similar to those so terminated, and the Contractor shall be liable to the Government for any excess costs for such similar supplies or services, Provided, That the Contractor shall continue the performance of this contract to the extent not terminated under the provisions of this clause.
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12. Disfutes
Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. Within 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise furnishing to the Contracting Officer a written appeal addressed to the Secretary, and the decision of the Secretary or his duly authorized representative for the hearing of such appeals shall be final and conclusive: Provided, That if no such appeal is taken, the decision of the Contracting Officer shall be final and conclusive. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer’s decision.
% # H* ❖ ❖

Prior to the amendment of the contract which increased the quantities of hay to be delivered referred to in finding 4, the contract specifications provided, among other things, as follows

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5. DeliveRt Schedule: a. Deliveries shall be made as called for by consignee (Commanding Officer, Reno QH Remount Station, El Reno, Oklahoma.
b. The term F. O. B. Barn, Reno QM Remount Station, Fort Reno, Oklahoma is clarified to mean: Unload at the BARN, Reno QM Remount Station, Fort Reno, Oklahoma.
c. For planning purposes only the following tentative schedule is included and shall be conformed with as closely as is practicable by the consignee:
July 1952_ 667,440 pounds
August 1952 - 989,520 pounds
September 1952_ 989,520 pounds

6. By June 30, 1952, W. O. Dillon, Sr., who had become concerned because of the onset of drought conditions in the hay-growing country, telephoned the contracting officer requesting cancellation of the contract. He said that due to the severe heat they were having, the hay was “burning up” and that his firm could not make delivery. Cancellation was asked under paragraph 11 (b) which he felt was an “act of God” clause which should terminate the contract. The contracting officer stated that he would have to check with his legal officers before he could reply to the request.

The plaintiff company, by W. O. Dillon, Sr., on the same day wrote and sent the following letter to the commanding officer of the Fort Worth Quartermaster Depot:

We called your office this morning and talked with Capt. Risinger relative to the above contract.
We advised Capt Risinger that it would be impossible for us to fulfill this contract, as this country is experiencing the worst drouth that we have had for the past fifteen to twenty years with no relief in sight. The extreme weather conditions have already cut our hay crop very, very short, as well as pastures and other growing crops. Temperatures have ranged from 95 to 105 the past three to four weeks and you know no crop will stand under such dry, hot weather.
Our farmers are refusing to sell on account of the shortage of their crops. They claim there will not be enough to supply their own needs, which we think is true.
We regret very much that this drouth has enveloped our entire trade territory, but is, of course, beyond our control. We cannot, therefore, fill this contract under prevailing conditions and we referred Capt. Risinger to paragraph (b) page 3 of General Provisions which is self-explanatory.
Capt. Risinger advised that he would go over this matter with you thoroughly and call us as we asked for the cancellation of this contract.

7. On July 1, 1952, Mr. W. O. Dillon, Sr., was told in a telephone conference with a Miss Richardson, a procurement officer subordinate to the contracting officer, that the contract could not be canceled. He was also told that 105° weather was not unusual for that time of the year and was given information as to where Miss Richardson thought he might procure the hay called for by the contract.

8. On July 2, 1952, W. O. Dillon, Sr., sent the following letter to the commanding officer of the Fort Worth Quartermaster Depot:

This will confirm our telephone conversation with your office yesterday and to-day relative to the delivery of hay on the above named contract.
We are sorry that you did not see fit to cancel this contract as we requested. There has been such extreme changes in our production in this territory, and certainly when the crops of all kinds, grain and hay alike, are so affected toy the extreme weather there is very little one can do.
It is our understanding that we are to proceed, with this contract as rapidly as possible for the July delivery. We advised Miss Richardson, with whom we talked, that we would have to go out of this State for a great share of this hay. And we stated that this would naturally add a great expense and freight to our cost. We were advised by your office that it would be agreeable for us to continue the movement of this hay, and invoicing at regular contract price, after which we are to file claims for losses sustained which are due directly to the extreme weather conditions.
It is also understood that under section 11, paragraph b, we are given protection by our Government in just such extreme cases as we are faced with at this time. We feel we could not be expected to stand such a loss which is caused by no fault of ours.
We have billed one car to Ft. Reno to-day and will start two trucks to-morrow. The car should arrive there within three days; the trucks by Friday morning. This hay will show close to $10.00 per ton loss on account of weather conditions.

9. On the morning of July 9,1952, W. O. Dillon, Sr., received a telephone call from Miss Richardson during which he was informed that the plaintiffs were then delinquent under the contract by 177,748 pounds of hay and that her office had received word from Fort Eeno that it had only one day’s supply of feed for 2437 horses. Mr. Dillon advised her that certain railroad cars containing hay were en route to Fort Eeno, to which Miss Eichardson said that unless the cars were at Fort Eeno by 4 p. m. that day, the defendant would have to buy the hay, that it would have to be delivered that night and that that course may be expensive (to the plaintiffs by implication). Mr. Dillon asked to speak to the commanding officer of the depot and was told that he was out of the office for an hour.

10. Shortly before noon on July 9,1952, W. O. Dillon, Sr., had a long distance telephone conversation with Colonel Edwin D. McCoy, Commanding Officer of the Fort Worth Quartermaster Depot, in which he told the colonel of the difficulties he was encountering in securing hay. He also told the colonel of various railroad cars of hay which wer8 en route to Fort Eeno. Colonel McCoy said that the plaintiffs were behind schedule and that it was necessary to have feed for the animals at the fort and that the defendant would have to buy against the plaintiffs’ account if the plaintiffs could not produce. Mr. Dillon insisted that it was an act of God which rendered it impossible for him to deliver as required by the contract. He did, however, say that he could get hay by going north if the Government would pay the difference in price. Colonel McCoy said that he could not agree to do that, and there was some discussion as to the manner in which a claim might be submitted by the plaintiffs.

11. Two days later, on July 11,1952, another conversation by telephone took place between Colonel McCoy and W. O. Dillon, Sr. The colonel indicated his concern regarding the hay requirements at Fort Eeno which were scheduled for July delivery by the plaintiffs, and also inquired concerning the plaintiffs’ compliance with the contract for the August and September deliveries. Mr. Dillon told Colonel McCoy that because of the drought, the price of hay had increased $15 to $20 per ton. He said that hay was available in the north at the higher prices but not “in, this country.” Later in the conversation Mr. Dillon said that the hay was available outside the State but not in Oklahoma.

12. Another conversation by telephone took place on July 14, 1952, between Mr. Dillon and Colonel McCoy during which Mr. Dillon advised that he would proceed to deliver the August and September requirements, and that he would put in a claim for the increased costs to the plaintiffs.

13. On July 28,1952, in response to a request by the plaintiffs, the contracting officer authorized the plaintiffs, by telephone, to deliver the hay scheduled for delivery during August as soon as the plaintiffs could effect delivery but he stated that, due to insufficient storage space at Fort Reno, the defendant could not accept the September requirements until September. This was confirmed by letter on the same date.

14. Plaintiffs completed delivery of the hay at the times and in the amounts as described in the contracts, and at the price set in said contracts. Thereafter, on November 10,1952, plaintiffs filed a claim with the Fort Worth Quartermaster Depot for $17,304.56. The contracting officer forwarded the claim to the Office of the Comptroller General for disposition. The claim was disallowed in the settlement of October 20,1953, as set out below:

Your claim for $17,304.56, representing excess costs incurred in connection with the furnishing of supplies to the Department of the Army, Reno Quartermaster Remount Station, Fort Reno, Oklahoma, under Contract No. DA-41-187-QM-290, dated April 28, 1952, has been carefully examined and it is found that no part thereof may be allowed for the reasons hereinafter stated.
Under the terms of the cited contract you agreed to furnish a quantity of hay at a stipulated price and in strict accordance with the requirements thereof, to be delivered during the months of July, August and September, 1952, without reference to any provision for payment to the contractor of an amount in addition to the contract price, in the event the contractor subsequently was required to pay increased costs, or because of factors arising' which were not anticipated or contemplated at the time of acceptance.
It is alleged that a shortage of hay, caused directly from the effects of a severe drought in the producing area, necessitated the purchase of hay at the prevailing drought prices, in order to fulfill the contract requirements, and that the price paid therefor, being over and above that specified in the contract, resulted in a loss of $17,804.56. Furthermore, to substantiate the claim, reference is made to that portion of Article 11, page 2 and 8, paragraph (b) of the General Provisions of the contract which states that the contractor shall not be liable for any excess costs if any failure to perform the contract arises out of causes beyond the control, and without the fault or negligence of the contractor, and that such causes include “unusually severe weather.”
In this connection you are advised that although a drought may under certain circumstances, be considered “unusually severe weather” as defined in Article 11 of the General Provisions of the contract, relief thereunder may only be given in those cases where default occurs, and even in such cases paragraph (b) of Article 11, further provides that the contractor shall not be liable for any excess costs, unless the contracting officer determines that the supplies or services to be furnished by the subcontractor were obtainable from other sources in sufficient time to permit the contractor to meet the required delivery schedule.
In the instant case there was no default, as the hay was actually furnished in accordance with the requirements of the contract, and in sufficient time to meet the required delivery schedule, and further the compensation stipulated in the contract measures the amount of recovery for strict performance, irrespective of whether cost of performance is in excess thereof.
The established rule is that valid contracts are to be enforced and performed as written, and the fact that supervening or unforseen events render performance more burdensome, or less profitable, or even occasion a loss, is not sufficient to excuse performance, or to entitle a contractor to additional compensation.
I therefore certify that no balance is found due you from the United States.

15. The area comprising 5 or 6 counties in northeastern Oklahoma, located within a radius of 50 miles from the city of Vinita, is recognized as a principal prairie hay producing area within the State of Oklahoma.

•18. In normal years prairie hay continues to grow until the 10th or 15th of August.

17. In normal years the main harvest of prairie hay begins after July 1, and continues throughout the months of July and August, although some producers begin to cut and bale their prairie hay during the last ten days of June.

18. During the 10-year period ending with the year 1951, the rainfall in Oklahoma was substantially more than the rainfall during the preceding 10-year period.

19. The crop of prairie hay which was raised in northeastern Oklahoma in the year 1951 was normal, or near normal, and the prevailing price of No. 2 prairie hay delivered to the railroads for shipment during the harvest season of that year ranged from $12 to $16 per ton.

20. Because of lack of precipitation and sustained periods of dry, hot weather, the yields of prairie hay in 1952 were very poor in Oklahoma. Similar conditions existed in surrounding states. With demand for hay heavy and supply short, prices of hay increased sharply. There was unusually severe weather during the hay season of 1952 in Oklahoma and surrounding states. In October of that year, the President of the United States determined, pursuant to authority given him by Act of September 30, 1950, 64 Stat. 1109, that the State of Oklahoma should be included among the states which had previously been found to be drought areas of sufficient severity and magnitude to warrant assistance by the Federal Government. By such declaration, the President made available emergency funds to be used “in meeting any unrecoverable portion of the costs of procuring, transporting and distributing certain livestock feed in order to relieve the serious shortage.”

21. After audit of the plaintiffs’ records, the parties have agreed that the plaintiffs sustained a net loss of $17,298.48 in the performance of the contract in suit.

22. It is reasonable to presume that, since hay is a bulky commodity, it was contemplated by both parties that in delivering hay under the contract the plaintiffs expected to obtain it, and the defendant expected to receive it, from sources not unreasonably distant from the delivery point contained in the contract. The claim submitted to the contracting officer by the plaintiffs, which is in evidence as plaintiffs’ exhibit 2T, shows certain deliveries made from Newport, Nebraska. It is found that such deliveries were made from such distant point only because of the unusually severe weather of the 1952 growing season. The six railroad cars of hay purchased by the plaintiffs and shipped from Thompson Company, Newport, Nebraska, caused a loss to the plaintiffs of $1,480.32, derived as follows:

Cost Freight unloading Paid By Defendant
8298.40 $290.19 $29. 84 $372.71
295.90 288.33 29.59 364. 65
315. 70 306. 63 31.57 406. 64
313.60 301.10 31.36 397. 54
293.00 286.15 29.30 369.46
312.00 303.05 31.20 395. 59
$1,828.60 $1,775.45 $182.86 $2,306.59

Adding the total of the first 3 columns results in a figure of $3,786.91. Subtracting the amount paid by the defendant of $2,306.59, results in a loss of $1,480.32.

CONCLUSION OF LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiffs are entitled to recover, and it is therefore adjudged and ordered that it recover of and from the United States one thousand four hundred eighty dollars and thirty-two cents ($1,480.32).  