
    HERMAN H. PANAMA v. THE UNITED STATES
    [No. C-11.
    Decided April 4, 1927]
    
      On the Proofs
    
    
      Contract; sale of Government supplies; warranty; inspection before bidding; damaged condition. — A circular advertising tlie sale of Government supplies contains the statement that they would be sold “as is,” without warranty as to condition, that no allowance on account of its condition would be made after the property was awarded, invites inspection of the goods and says that failure “ to inspect any property will not be considered as grounds for any claim or adjustment or rescission of any sale.” Before submitting his bid the successful bidder examines a porton of the goods, discovers no damage,- and does not insist on a further examination. Held, that the purchaser can not recover damages because some of the goods delivered to him were in a damaged condition and of less value than he had anticipated.
    
      Same; waiver of breach. — Where a purchaser, upon discovering that the goods bought are damaged, does not demand a rescission of the sale or oiler to return them but asks for an allowance to cover their diminished value, which is refused, and thereafter resells the goods, he has by his conduct waived a breach and is estopped from claiming a rescission.
    
      The Reporter’s statement of the case:
    
      Mr. 'William D. Hcrnis for the plaintiff. Messrs. Frank Danis, jr., and Robert T. Scott were on the briefs.
    
      Mr. Joseph Henry Cohen, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant. Mr. Fred K. Dyan was on the briefs.
    The court made special findings of fact, as follows:
    I. Plaintiff, Herman H. Panama, is a citizen of the United States and has always borne true allegiance thereto. He is the sole owner of the claim embraced in this suit, and has made no assignment or transfer of said claim or any part thereof or interest therein.
    . II. On February-2,1922, the United States, by the Surplus Property Division of the Quartermaster General’s Office, issued, published, and distributed its Circular Proposal No. 60, advertising the sale of certain surplus stores of clothing, equipage, and textiles then stored in warehouses at Atlanta, Georgia, and inviting sealed bids to be made thereon. A copy of said Circular Proposal No. 60 marked “ Exhibit A,” is attached to the petition, and is made a part hereof by reference.
    Item #26, in said circular, reads as follows:
    “ Towels, huckaback, cotton, 2,601,985 each.
    “ Condition: New.
    “ Approximate weight, 2 lb. to dozen.
    “ Packed 720 to the bale.
    “Sizes: 17X31".
    17X34".
    17X36".'
    18X36".”
    Said circular contained the statement that all goods would be sold:
    
      a t. * * ‘As is5 and ‘where is,’ without warranty or guaranty as to the quality, character, condition, size, weight, or kind, or that the same is in condition or fit to be used for the purpose for which it was originally intended, and no claim for any allowances upon any of the grounds aforesaid will be considered after the property is awarded.”
    The circular proposal provided also:
    _ • “ Inspection of supplies or material, at point of storage, is invited. Failure on the part of any purchaser to inspect any property will not be considered as grounds for any claim or adjustment or rescission of any sale.”
    III. A few days prior to March 4, 1922, the day upon which the sealed bids were to be opened, the plaintiff, who had had previous experience in surplus property sales of the Government, went to Atlanta to inspect certain of the goods advertised for sale in the said Circular Proposal No. 60. Upon his arrival at Atlanta, he went to the ofiice of Roy W. Hern, captain, Quartermaster Corps, surplus property control officer, under the command of Colonel Gray Zalinski, where he found samples of the goods advertised for sale arranged on tables. He was there shown samples by Edward D. Leonard, a textile inspector of the Quartermaster Corps, of the huckaback towels offered for sale as item #26. The towels which were displayed as samples, and several of which the plaintiff at that time purchased, were new, clean, and unspotted. The plaintiff then inquired whether a further inspection of the towels would be permitted, and he was given a pass to the warehouse where the towels were stored. This was a Candler warehouse, originally intended for cotton. It was a one-story building divided into sections. The bales of towels were piled in it, one on top of the other to the ceiling, and back to each wall from the center, the only open space remaining being a narrow passageway through the center. Arriving at the warehouse, he was shown by Mr. Dennis, the warehouseman employed by the United States, and who was' subject to the orders of Colonel Zalinski and Capt. Hern, sis or eight bales of towels set side by side with the tops cut open .so that a view of the interior of the bales could be had, but the towels at the edges could not be seen nor could the condition of the towels in the outside of the bales be seen without removing the towels from the bales. The said towels, before baling, had been arranged in folds of seventy-two towels each and packed so that the edges were on the outside. There were approximately seven hundred and twenty towels in a bale and twenty-five per cent were on the inside, forming a core, and were not contiguous to the wrapping-paper, burlap, and hoops. These towels on the inside were clean and new and merchantable in every particular, while those on the outside were damaged by contact with the tar paper and by hoop stains. The method of packing employed by the Government was unusual. The plaintiff was not informed that the towels were wrapped in tar paper, surrounded by burlap, and pressed together with hoops, but he could see in his inspection' and examination of the opened bales that the towels were so wrapped and bound. When the plaintiff asked the warehouseman for permission to select several unopened bales at random for inspection, he was told that inspection would be limited to the bales already opened, unless the plaintiff could obtain an order from one of the commanding officers authorizing an inspection of unopened bales. It does not appear that the plaintiff before bidding, or at any time, obtained such an order or endeavored to obtain it.
    
      IY. It does not appear that the towels in the unopened bales were materially different in character from those in the several bales which had been opened for inspection. An examination of the towels in the opened bales would have quickly disclosed the soiled and spotted condition of some of the towels which is complained of by the plaintiff, and there is nothing in the record to show that the plaintiff 'was in any manner precluded from making any inspection which he might have wanted to make of the towels in the already opened bales. Plaintiff prepared a sealed bid for the sale of the towels to him and filed the said bid.
    Y. Before the samples aforesaid, which had been exhibited to the plaintiff, had been selected the warehouse had overflowed and a number of lower bales of towels had been damaged by water by reason of the fact that no dunnage had been placed under them. The unsatisfactory condition of alternate dampness and heat in the warehouse caused many of the towels to become mildewed, and others to become spotted from tar and from rust from the wire hoops which held the bales together and others to be soiled from the dust which seeped through the burlap. This condition would not be apparent without an examination of the towels in the bales, and it was not called to the attention of the plaintiff before this bid was submitted, although the warehouseman, who selected the samples and who conducted the plaintiff through the warehouse when he went there for the purpose of making an inspection of the towels before submitting his bid, knew of the condition although he apparently did not know how extensive the damage was. It appears that at the time he made the requisition for the sample towels Captain Plern called for fair samples of the entire lot, but when the warehouseman, Mr. Dennis, made the selection, only clean, merchantable new towels were sent to the sample room, and the unclean, spotted, rust-stained, and mildewed towels were thrown aside and not sent over, and they were not at any time exhibited or shown to bidders.
    It does not appear that the officer in charge of the sale knew of the damaged condition of the towels or of the action of Mr. Dennis in making the selection.
    
      VI. Plaintiff’s bid of $0.06751 on 1,000,000 towels and of $0.07151 on the second million towels was accepted by the Government, and he was duly notified of the award. A copy of said letter of acceptance is attached to the petition marked “ Exhibit B ” and is made a part hereof by reference. The plaintiff left Atlanta to make arrangements to pay for the goods and to sell the same without having actually seen any of the towels except the samples above referred to, together with the towels he had inspected in the bales. Actual possession and inspection of the towels were not given him until he had paid for the same in full. (
    VII. After the plaintiff was notified that his bid had been accepted he immediately proceeded to Chicago, where he sold a lot of 100,000 towels to a department store at a price of eight cents per towel, f. o. b. Atlanta, and the remainder he contracted to sell to the Gallant Mercantile Corporation. He then returned to Atlanta, paid for the towels, and arranged to store them in another Government warehouse, giving a receipt at the time of payment for “ Class A, new towels; huckaback.” Class A meant, according to surplus propex’ty regulations, material that had never been used and was in good condition. After giving said' receipt and accepting delivery, plaintiff began to remove said towels in the presence of Mr. Gallant and Mr. Dennis, the warehouseman employed by the United States, and inspection was made of about fifty bales. It was found that in all the bales examined the towels which were next to the wrapping paper were quite uniformly damaged by tar stains, hoop stains, dust, and rust. A number of them were rotted and mildewed, owing to their having been subjected to the overflow of water in the warehouse. As a result Mr. .Gallant, for the Gallant Mercantile Corporation, canceled his contract with the plaintiff. The plaintiff immediately protested the condition of said towels and put in a claim for a refund of part of the purchase price, which was denied, but he did not demand a rescission of the sale or offer to return the towels, but proceeded to sell them. Upon delivery of the towels in Chicago the department store found them to be damaged and deducted two hundred and sixty-five dollars from the agreed purchase price. The plaintiff made a second claim for refund of part of the purchase price, but the local board denied said claim, and the claim was finally rejected by the Secretary of War. The plaintiff subsequently sold 1,372,000 of the towels for $0.07 and 500,000 for $0.0725.
    VIII. Plaintiff has conceded that twenty-five per cent of all the towels were in perfect condition, and it has been estimated, although seemingly no attempt for an actual count was made, that the remainder, or seventy-five per cent, of the towels was damaged either by water, resulting in rot and mildew, or stained by contact with paper impregnated with tar or some similar substance, or were soiled with rust stains from the hoops, or from dust.
    It appears from the testimony that on March 4, 1922, the day on which the plaintiff bought the towels, the wholesale mill price of new towels, similar to those which the plaintiff had been shown by Captain Hem, was from ninety-five cents to one dollar per dozen, if bought in small quantities, and approximately ten per cent less than that if purchased in larger quantities, and that on account of the condition which they were in, the towels which were delivered to the plaintiff were worth from but thirty-five cents to forty cents per dozen. Plaintiff, however, sold the towels at a small profit.
    The court decided that plaintiff was not entitled to recover.
   Graham, Judge,

delivered the opinion of the court:

This is a suit in which the plaintiff seeks to recover losses sustained in the purchase of material from the defendant upon the ground of a breach of an alleged warranty of the material.

The defendant in a circular dated February 2, 1922, advertised for sale certain materials, among which were “ Towels, huckaback, cotton, 2,601,985 each; condition new.” The conditions of sale contained in the circular are the same as those in the case of Triad Corporation v. United States, decided by this court February 14, 1927, ante, p. 151. The proposal stated that the material was sold “as is” and “where is,” without “ warranty or guaranty as to the quality, character, condition, size, weight, or kind,” or that the material “ is in condition to be used for the purposes for which it was originally intended, and no claim for any allowances upon any of the grounds aforesaid will be considered after the property is awarded.” It also contained a provision to the effect that “Failure on the part of any purchaser to inspect any property ivill not be considered as grounds for any claim or adjustment or rescission of any sale.”

As was stated by the court in the Triad case, supra, it is difficult to see how the Government could have given prospective bidders fuller notice than it gave — that it was only selling what it had in the condition in which it was. Opportunity for inspection was afforded plaintiff, and it is clear that if he bid without inspection or after inspection he was bound by his bid.

It was known that the Government was not in the business of manufacturing and selling material, and the letter of acceptance stated that “ Sales are made under this agreement in good faith and from reported verifications of surplus stock.”

The towels which the plaintiff purchased were stored in bales in the warehouse. A number of bales were opened for inspection, and the plaintiff was given an opportunity to examine them as thoroughly as he desired, and he did examine them. It is true that he demanded the privilege of examining other bales so that he might have what he called a “hundred per cent inspection,” which wras refused by the warehouseman, with the statement that he would have to get an order from the officer in charge before this could be done. It does not appear that plaintiff asked for such an order, but afterwards put in his bid for the material. He paid the amount of his bid and the goods were transferred to his possession and to another warehouse. After delivery it transpired that a portion of the goods was damaged, partly by reason of heat operating on the tar paper in which the goods were wrapped and partly by dampness of the floor of the Government warehouse. The goods had been in the possession of the Government almost four years.

There is some evidence that the warehouseman and the subordinate officer who made the selection of samples knew of the damaged condition of the towels. This was not a sale by sample under the terms of the proposal; it was a sale of a quantity of towels without guaranty or warranty as to their quality, character, condition, or kind, or that they were fit to be used for the purposes for which they were originally intended, and it was stated that no claim for allowances upon any of the grounds aforesaid would be considered after the property was awarded.

It does not appear that the authorized official having charge of the sale knew of the damaged condition of the towels. In any event, under the terms of the proposal the officer making the sale had no authority to enter into any warranty as to the condition of the material or vary the terms of the proposal. The case of Triad Corporation, supra, and authorities cited therein are controlling against plaintiff’s right to recover.

But there is another phase of the case. The plaintiff, after discovering that the goods were damaged, did not demand a rescission of the sale or offer to return the towels, but asked for an allowance on account of diminished value due to their damaged condition. After this was refused he sold the goods. He thus waived the alleged breach. By disposing of the material and putting himself in a position wdiere he was not able to return it he is estopped from claiming, assuming he had a right to claim, a rescission of the contract. Veazie v. Williams, 8 How. 134, 158; Andrews v. Hensler, 6 Wall. 254, 258; and Neblett v. MacFarland, 92 U. S. 101, 103.

The petition should be dismissed, and it is so ordered.

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