
    PENN CHEMICAL CO. v. THE UNITED STATES
    [No. A—337.
    Decided February 14, 1927]
    
      On the Proofs
    
    
      Contract; order under section 120, act of June 3, 1916; acceptance of price named. — Where a contractor has complied with an order placed with him under section 120 of the act of June 3, 1916, by delivery of the material ordered, and has accepted the price named in the order, he is bound as to the price named.
    
      Same; objection to price named; proof of just compensation — Where under the circumstances recited the contractor reserved the price, dissenting to the price named, he must, in order to recover, furnish proof as to a fair and just compensation.
    
      The Reporter’s statement of the case:
    
      Mr. John, H. Jaeleson for the plaintiff. Messrs. Joseph R. Swan and Charles T. Clayton, and Moore, Hall, Swam, da Cunninghcum, were on the briefs.
    
      
      Mr. George Dyson, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. The plaintiff is a corporation organized under the laws of the State of Pennsylvania and in 1917 was engaged in the business of manufacturing wood alcohol and acetate of lime at a plant owned by it located at Hutchins, Pa.
    II. On December 24, 1917, there was served on the plaintiff a paper in words and figures as follows:
    WAR DEPARTMENT,
    
      Washington.
    
    To Penn Chemical Co., Bidgway, Pa.
    
    Gentlemen : By virtue of the authority vested in him by the Constitution and Laws of the United States, the President of the United States, Commander in Chief of the Army and Navy, does hereby requisition for public use connected with the common defense the following necessary supplies, namely: All your existing stock of acetate of lime, wood alcohol, acetone, and ketone. Delivery of said supplies will be made as directed by the War Industries Board, and just compensation will be paid you therefor.
    Pursuant to the authority of section 120 of the act of Congress, approved June 3, 1916, 39 Stat. 213, entitled “An act for making further and more effectual provisions for the national defense, and for other purposes,” you are hereby directed to manufacture for the needs of the Government in the present emergency, for a just and fair compensation to be determined by the Secretary of War, the full output which your plant is capable of producing during the remainder of the fiscal year ending June 30, 1918, of acetate of lime, wood alcohol, acetone, and ketone. Delivery of said supplies will be made as directed by the War Industries Board. This order will take precedence over all other orders and contracts heretofore placed with you by any person whatsoever other than orders by the War Department, the Navy Department, or the Shipping Board. You are further notified that by the said Act of June 3, 1916, any refusal on your part to give to the United States such preference in the matter of the execution of this order or any refusal on your part to manufacture the above articles at a reasonable price, as determined by the Secretary of War, is made a felony and punishable by imprisonment for not more than three years and by a fine not exceeding $50,000; and in addition the Secretary of War is authorized to take immediate possession of your plant and through the Ordnance Department of the United States Army to manufacture the said articles.
    By direction of the President:
    (Signed) NewtoN D. Bakee,
    
      Secretary of War.
    
    Dated December 24, 1917.
    Within a few days thereafter, the War Industries Board, Paw Materials Division, Wood Chemicals Section, mailed to the plaintiff an undated mimeographed letter entitled “ Letter to producers of acetate of lime and crude wood alcohol in further explanation of the order of December 24, 1917,” which was received by the plaintiff on or about January 1, 1918. Said letter contained, among other things, the following: '
    
      “ The Secretary of War has fixed the reasonable price for acetate of lime produced after December 31st, 1917, at 4$ per pound, f. o. b. shipping point. This price is on the basis of 80% acetate of lime by distillation test, the percentage of acetate of lime in excess of 80% or less than 80%, as the case may be, to be paid for or to be subtracted from the reasonable price, pro rata, provided that if said test falls below 77% the product shall be deemed unmerchantable.
    “ Payment for acetate of lime is to be made in cash, subject to examination of goods at destination. Bags are to be returned as per shipping instructions within sixty (60) days, in good condition or to be paid for by the consignees.
    “ Until further notice manufacturers of acetate of lime will ship or dispose of their entire output of acetate of lime through the same channels as heretofore.
    ❖ * ❖ Hi' * m $
    “ The Secretary of War has fixed the reasonable price for crude wood alcohol, as shown by said inventories as of December 31st, 1917, at 90$ per gallon of 82° Tralles, delivered to refineries.
    “ The Secretary of War has fixed the reasonable price for crude wood alcohol miscible with two parts of water, produced after December 31st, 1917, at 50$ per gallon of 82° Tralles, naked, f. o. b. shipping point.
    “Until further notice, the United States waives delivery cf crude wood alcohol on condition that manufacturers of crude wood alcohol ship or dispose of their entire output of crude wood alcohol to the refiners who have been receiving the same, and on the further condition that all claims for compensation against the United States for such output and (or) delivery are waived by said manufacturers.
    “All claims for shortage, poor quality, and damage in transit on any crude or refined products shall be a matter of adjustment between the consignor and consignee.”
    III. Between January 1st and June 30th, 1918, the plaintiff operated its plant under and in accordance with said order and made delivery of all wood alcohol and acetate of lime produced at said plant in said] period as it was directed by said War Industries Board and received therefor 500 per gallon for said wood alcohol and 40 per pound for said acetate of lime, those being the prices fixed under said order by said Secretary of War.
    IY. On June 25,1918, the Wood Chemicals Section, of the War Industries Board, forwarded to the plaintiff a certified copy of Order No. 326 B/C from the Director of Purchases, Storage, and Traffic dated June 14, 1918, which said order was in words and figures as follows:
    WAR DEPARTMENT,
    Director op Purchases, Storage,
    and Traffic.
    Director of Purchases, Storage, and Traffic, No. 326 B/C, War Industries Board, Chemicals Division No. 101.
    To: Penn Chemical Co., Bidgway, Pa.
    Pursuant to the authority of section 120 of the act of Congress approved June 3, 1916 (39 Stat. 213), entitled “An act for making further and more effectual provisions for the national defense, and for other purposes,” and acting under the direction of the President of the United States, Commander in Chief of the Army and Navy, an order is hereby placed with you, for purposes connected with the national security and defense, for the entire output of acetate of lime, wood alcohol, acetone, and/or ketone, which your plant or plants are capable of producing from July first, nineteen hundred eighteen, until December thirty-first, nineteen hundred eighteen (both dates inclusive), the said products or material being of the nature and kind usually produced or capable of being produced by you.
    The War Industries Board, through its representative herein designated, C. H. Conner, Wood Chemical Section, or any other representative which it may in future designate, is hereby authorized and empowered to accept delivery of said products or material; to take possession or to direct delivery thereof for the purposes mentioned above, by waiver or otherwise and upon such terms and conditions as it may deem necessary; and to make returns to the Director of Purchase, Storage, and Traffic, Washington, D. C., of all things done and proceedings had in connection therewith!
    Approved by Chemicals Division, War Industries Board.
    By Chakles H. MacDowell.
    Approved by the Office of the Judge Advocate General.
    By L. W. Call,
    
      U. Gol., J. A. N. A.
    
    Approved by Priorities Committee, War Industries Board.
    By EdwiN B. Parker.
    6/12 McK.
    This order will take precedence over all other orders and contracts heretofore placed with you by any person whatsoever other than prior orders by the War Department, the Navy Department, or the Shipping Board. You are further notified that by the said act of June 3,1916, any refusal •on your part to give to the United States such preference in the matter of execution of this order, or any refusal on your part to furnish the above products or materials at a reasonable price, as determined by the Secretary of War, is made a felony and punishable by imprisonment for not more than three years and by a fine not exceeding $50,000.
    W-550 A. S.
    Done at the city of Washington this fourteenth day of June, 1918.
    By direction of the Secretary of War.
    Hugh S. JohNsoh,
    
      Brigadier General, N. A.,
    
    
      For Director of Purchases, Storage, cmd Traffic.
    
    On July 23, 1918, the War Industries Board, Raw Materials Division, Wood Chemicals Section, sent a letter to the plaintiff in further explanation of Order No. 326 B/C, stating, among other things, as follows:
    “ (A) AS TO ACETATE OF LIME
    *******
    “ (2) Prices. — We inclose a true copy of a notice to you by the War Department Board of Appraisers with regard to prices, which you should read carefully. You will note that the price of acetate of lime is on the basis of eighty per cent acetate of lime by distillation test. The percentage of .acetate of lime in excess of eighty per cent or less than eighty per cent, as the case may be, is to be added to or deducted from the reasonable price, pro rata, provided that if said test falls below seventy-seven per cent the product shall be deemed unmerchantable.
    “(8) Terms and conditions. — Payment for acetate of lime is to be made in cash, subject to examination of goods at destination.
    “ Bags are to be returned within sixty days as per shipping instructions in good condition, or if not so returned to be paid for by the consignee.
    “ General trade conditions and terms will remain the same as at the present time.
    “ Claims for shortage, poor quality, and damage in transit on any crude or refined products will be matters for adjustment between the consignor and consignee.
    “ In order to facilitate the securing of waivers covering the distribution of acetate of lime covered by said compulsory order, the War Industries Board will permit such distribution through William S. Gray & Co., New York, without securing individual waivers from the producer on condition that William S. Gray & Co., for the purposes of such transactions, shall be deemed the agent of the producer, with the same obligations in regard to delivery of acetate of lime so distributed as devolve upon the producer by reason of said compulsory order and with authority to make requests for shipment and to waive in the name of William S. Gray & Co. any and all claims of the producer against the United States of America and/or its representatives by reason of the placing of a compulsory order for the product involved.
    “(B) AS TO CRUDE ALCOHOL
    $ $ ‡ $
    “(2) Prices and specifications. — We enclose a true copy of a notice to you by the War Department Board of Appraisers with regard to prices, which you should read carefully. You will note that the price of crude wood alcohol is on the basis of 82 degrees Tralles. This should be miscible with two parts of water.
    “(3) Terms and conditions. — All claims for shortage, poor quality, and damage in transit on any crude wood alcohol produced under the aforesaid order will be matters of adjustment between the consignor and the consignee.
    “Until further notice, the United States waives delivery of crude wood alcohol, on condition that the respective producers of said crude wood alcohol ship or dispose of their entire output of crude wood alcohol at the reasonable price fixed by said Board of Appraisers and on the conditions stated above to a refiner whose product is subject to Compulsory Order No. 326 B/C, ana on the further condition that all claims for compensation from the United States and/or its representatives for said crude wood alcohol by reason of the aforesaid Compulsory Order No. 326 B/C of the Director of Purchases, Storage, and Traffic, dated June 14, 1918, are waived by said producers, and such shipments of dispositions shall constitute such waiver.”
    Accompanying the above-mentioned letter of July 23, 1918, was a letter from the War Department Board of Appraisers advising plaintiff that by direction of the Secretary of War the board had considered and determined that the price of four cents per pound for acetate of lime (on the basis of eighty per cent acetate by distillation test) and fifty cents per gallon for crude wood alcohol, eighty-two degrees Tralles, to be paid by the United States for the property required by the foregoing order, was a reasonable price, and that it had made a preliminary award upon such basis as just compensation for the required property when called for and accepted by the United States. The last paragraph of said letter contained the following words:
    “ Notice is hereby given that unless dissent to this price, if unreasonable, is filed with this board within 15 days from the date of mailing this notice by the person, firm, or corporation addressed herein it shall be conclusively presumed that hearing thereon is waived and this board will make a final award upon the terms herein stated unless, upon due notice, it is otherwise ordered. If notice of dissent to the price herein stated as reasonable is filed, as above provided, the performance of the order is not thereby suspended, but a hearing upon the reasonableness of the price will be afforded upon due notice to you of time and place, and the award of this board made thereafter will be final.”
    Within the prescribed time of 15 days a representative of the plaintiff filed therefor with the Board of Appraisers its dissent to the price fixed, and in interviews on or about August 6, 1918, with authorized representatives of the War Industries Board and the Board of Appraisers exhibited to them the company’s financial statement and stated that plaintiff was losing money and must have relief.
    On or about August 1Y, 1918, plaintiff’s representative was advised by letter from the Board of Appraisers that the matter of price to be paid would be investigated by the price-fixing committee of the War Industries Board.
    Thereafter, and before October 80,1918, the Federal Trade Commission made an investigation of plaintiff’s affairs for the War Industries Board and reported thereon to the said board. No further action appears to have been taken in the matter by the War Industries Board before plaintiff filed with the Secretary of War its claim hereinafter referred to.
    Y. Between July 1 and December 14, 1918, the plaintiff delivered to consumers, as directed by the Government, its output of wood alcohol and acetate of lime produced between those dates and received therefor fifty cents per gallon for the. wood alcohol and four cents per pound for acetate of lime, which were the prices fixed by the Secretary of War.
    On December 14, 1918, there was delivered to the plaintiff a telegram from General George W. Goethals, Director of Purchase, Storage, and Traffic, General Staff, in the following words and figures:
    WASHINGTON, D. C., December If, 1918.
    
    Compulsory order number three hundred twenty-six, dated June fourteenth, nineteen eighteen, for acetate of lime, wood alcohol, acetone, and/or ketone, is hereby terminated to take effect seven p. m., December fourteenth, nineteen eighteen, and further performance of this order shall cease at that date and hour. Done at the city of Washington, D. C., this fourteenth day of December, nineteen eighteen. By direction of the Secretary of War.
    Geo. W. Goethals,
    
      Director of Purchase, Storage, and Traffic, General Staff.
    
    YI. Between January 1, 1918, and June 30, 1918, the plaintiff produced and delivered, as required by the terms of the order of December 24, 1911, acetate of lime and crude wood alcohol, and received and accepted in payment therefor the prices fixed by the Secretary of War without objection.
    On July 1, 1918, plaintiff began to manufacture under the order of June 14, 1918, and continued until the termination of the order on December 14, 1918, to manufacture, produce, and deliver, according to its terms and conditions, acetate of lime and crude wood alcohol, and received and accepted in payment, without protest, tbe prices fixed by the Secretary of War.
    VII. The total amounts of wood alcohol and of acetate of lime produced and delivered by the plaintiff under and in accordance with both said compulsory orders between January 1 and December 14, 1918, was of wood alcohol TT,596 gallons and of acetate of lime 524,493 pounds, and the plaintiff received for said wood alcohol at the price fixed therefor under said orders $9,304.22, and for said acetate of lime at the price fixed therefor under said orders $21,350.96, and the total amount so received by the plaintiff was $30,655.18.
    VIII. On January 9, 1919, the plaintiff received from the War Department Board of Appraisers a telegram worded as follows:
    “ If you have any claim arising under wood chemical compulsory order three two six dated June fourteen one nine one eight administered by C. H. Conner, War Industries Board, prepare same in details at once and forward to War Department Board of Appraisers, Munitions Building, Washington.”
    In February, 1919, the president of the plaintiff company exhibited to a member of the appraisal section of the War Department Claims Board, one Colonel Knowlton, a statement showing the operating losses of the company during the period between January 1, 1918, and December 14, 1918, which it had sustained on deliveries of acetate of lime and crude wood alcohol for the use of the Government, and stated that he desired a hearing before the Board of Contract Adjustment. Colonel Knowlton replied that he would take upon himself the responsibility for the hearing.
    Some time before June 30, 1919, the exact date does not appear, the plaintiff filed a claim with the Secretary of War in the sum of $430.05 for 10,345 pounds of acetate of lime and 65 empty bags which it had on hand when the order of June 14,1918, was terminated on December 14, 1918, and which had been purchased by the Government at the price named by the order.
    On August 22, 1919, the War Department Board of Appraisers decided “ that the Penn Chemical .Company be given a hearing as to the propriety of increasing the price for acetate of lime delivered under requisition and compulsory order.” The plaintiff thereupon presented to the said board a statement of its operating losses in the production of acetate of lime and crude alcohol during the period from January 1, 1918, to December 14, 1918, amounting to $68,654.71.
    While this claim was being considered by said Board of Appraisers the Air Service Claims Board of the War Department on December 11, 1919, recommended that the Secretary of War award to the plaintiff on the “ agreement ” of June 14, 1918, the sum of $426.80 as “in full adjustment, payment, and discharge of said agreement,” with the provision that “the payment by the United States of this award shall operate to vest in the United States title to the property described in Schedule A, attached hereto.” The award as recommended was accepted by the plaintiff December 20, 1919, by indorsement thereon according to its said terms, and on February 19, 1920, the War Department. Claims Board, acting by authority of the Secretary of War, made the award as thus recommended and accepted. It was paid to the plaintiff, at what time does not appear, and payment was received by it without protest. There is no proof of any mutual mistake as to this award being in final and full adjustment of plaintiff’s claims against the Government, including the claims here asserted.
    On August 12, 1920, the appraisal section of the War Department Claims Board denied the plaintiff’s application for increase in price, that is to say, its claim for $68,654.71, on the ground that “by producing the commodity requisitioned, making deliveries thereof, and accepting the price so fixed, the company can not be heard as to the inadequacy of these prices.”
    Plaintiff thereupon applied for a rehearing, which was held October 1 and 2, 1920, and by letter dated October 29, 1920, the appraisal section of the War Department Claims Board informed plaintiff that said section had on October 21,1920, decided that plaintiff’s claim of $68,654.71 for operating losses should be denied for the reason that payment had been received on the award of the Air Service Claims Board and “ acceptance of release ” had been signed by the plaintiff, and that the War Department Claims Board was without authority to assume jurisdiction and issue further award.
    On November 10, 1920, the plaintiff petitioned the Secretary of War for reformation of the award made by the Air Service Claims Board December 11, 1919.
    On February 2, 1921, the appraisal section of the War Department Claims Board denied further relief on the ground that, although the claim for manufacturing losses had not been taken into consideration by the Air Service Claims Board in the award of $426.80, it had thereafter been disallowed on its merits. This decision was approved by the Secretary of War February 8, 1921.
    IX. The wood alcohol the plaintiff had on hand at the termination of the order on December 14, 1918, was sold to the Government and paid for at the price named in the order.
    X. The plaintiff sues to recover the difference between the cost of manufacturing the said acetate of lime and wood alcohol under the aforesaid orders, and the compensation named and paid therefor, and alleges that the said difference is the reasonable value to it of said products.
    The evidence shows that plaintiff’s plant, during the period from January 1, 1918, to December 14, 1918, was shut down for repairs at intervals totaling three months.
    An audit of the plaintiff company’s books show that there was expended by the plaintiff in the manufacture of the acetate of lime and wood alcohol under the aforesaid orders, over and above the price received, $35,585.08. There is no proof by which this sum may be apportioned between the periods covered by the said two orders or between the articles produced, nor is there satisfactory proof that this apparent loss in the manufacture of the material was due to inadequacy of price named in the order and paid.
    There is no satisfactory proof of the cost of manufacture either of said acetate of lime or of the wood alcohol or both.
    There is no proof of the market value of the materials manufactured and delivered by the plaintiff in this case.
    
      There is no proof of what would be a fair and just compensation for the materials supplied.
    The court decided that plaintiff was not entitled to recover.
   Geaham, Judge,

delivered the opinion of the court:

This action grows out of two orders, dated respectively December 24, 1917, and June 14, 1918, directing the plaintiff to manufacture for the Government the full production of its plant of acetate of lime and wood alcohol. The first order covered the period from the date of the order to June 30, 1918, and the second from July 1 to December 3L 1918. As to each of the orders the price was named for the articles to be manufactured. These orders were issued pursuant to the authority granted by section 120 of the act of June 8, 1916, 39 Stat. 213, known as the national defense act, which authorizes the President—

“ * * * through the head of any department of the Government, in addition to the present authorized methods of purchase or procurement, to place an order with any individual, firm, corporation * * * for such product or material as may be required and which is of the nature and kind capable of being produced by such individual,” etc.
“ The compensation to be paid any individual for its products or material * * shall be fair and just.”

The Secretary of War is also authorized in connection with the order to state in the order what he may determine to be a reasonable price.

The material covered by the first order was manufactured and delivered without protest or objection to the price named, and that price was accepted and paid. Compliance with the order by delivery of the material, and acceptance of the price constituted a contract which was binding upon the plaintiff as to the consideration to be paid for the articles furnished. American Smelting and Refining Co. v. United States, 259 U. S. 75; Federal Sugar Refining Co. v. United States, 60 C. Cls. 184; Consolidation Coal Co. v. United States, 60 C. Cls. 608, 625; Pocahontas Fuel Co. v. United States, 61 C. Cls. 231; Liggett & Myers Tobacco Co. v. United States, 61 C. Cls. 693; Alcock & Co. v. United States, 61 C. Cls. 312; and Daniel W. Herrman v. United States, 57 C. Cls. 96, 103.

After the order of December 24, 1917, had been filed and the material paid for, the plaintiff did complain in connection with the price named in the second order, which is the same as that in the first, upon the ground that it had •suffered a loss on the first order which as stated, had been completed without protest or complaint or reservation of price. Compare Louisville Bedding Co. v. United States, 269 U. S. 533, 59 C. Cls. 226; Nelson & Co. v. United States, 261 U. S. 17, 23; New York, New Haven & Hartford R. R. Co. v. United States, 251 U. S. 123, 127; Willard, Sutherland & Company v. United States, 262 U. S. 489, 494; Atwater & Co. v. United States, id. 495, 498; and Early & Daniel v. United States, 271 U. S. 140, 59 C. Cls. 932, 940.

As to the order of December 24, 1917, the plaintiff was paid the price agreed upon in its contract, and it can not recover additional compensation.

The second order was dated June 14, 1918, and covered the period from July 1, 1918, to December 31, 1918. The price was named therein, and plaintiff was notified that unless dissent to the price was filed with the Board of Appraisers, War Department, within 15 days from the date of the mailing of the notice, it would be presumed that a hearing thereon had been waived and a final award would be made upon the terms stated; that, upon due notice of dissent to the price, without suspending the order a hearing upon the reasonableness of the price would be afforded, and that the award thereafter made would be final.

The plaintiff within the 15 days presented objection to the price named in the second order, and alleged a loss on the first order. The Board of Appraisers submitted the claim to the price-fixing committee of the War Industries Board for investigation, but the record does not show what that committee did in the matter. It appears, however, that the Federal Trade Commission made an investigation of plaintiff’s books, but its report is not in the record.

The plaintiff continued to deliver the material and received and accepted the price named until the contract was canceled on December 14, 1918. It does not appear that it reserved the price or that it did more than complain. Assuming, however, that it reserved the price, it would be entitled to recovery on the basis of the fair and just compensation for material supplied. The court has found that there is no proof of market value or of what would be a fair and just compensation for materials supplied. So that, in any aspect of this second order, the plaintiff can not recover more than the price named, for the reason that if it accepted that price it is bound by its contract, and if it supplied the goods and reserved the price it has furnished no proof of a fair and just compensation.

After the contract was canceled plaintiff sold to the defendant at the price fixed therein 10,345 pounds of acetate of lime and also some bags, for which plaintiff claimed $430, and was afterwards awarded $426.80, which was accepted and paid. On January 9, 1919, plaintiff was notified by the Board of Appraisers to file any claim it might have against the Government growing out of the order of June 14, 1918. Thereupon the president of plaintiff company exhibited to the board a statement claiming an operating loss of $68,654.71 on the two orders.

On August 22, 1919, the War Department Board of Appraisers took under consideration the plaintiff’s claim for an increase of price for acetate of lime delivered, and plaintiff thereupon presented to the board a statement of operating losses in the production of lime and crude alcohol for the period covered by the two orders, amounting to $68,654.71. On August 12, 1920, the board denied the application for increase in price. Thereupon plaintiff applied for a rehearing, which was granted. On October 21, 1920, the board notified plaintiff of the rejection of its claim upon the ground that payment had been received on the award of the Air Service Claims Board and “ acceptance of release ” had been signed by the plaintiff, and that the War Department Claims Board had no authority to assume jurisdiction and make a further award. On November 10, 1920, plaintiff applied to the Secretary of War for reformation of the award of the Air Service Claims Board of December 11, 1919, and on February 2, 1921, the War Department Claims Board denied plaintiff’s claim for manufacturing losses upon the ground that the claim had been theretofore disallowed on its merits. This decision was approved by the Secretary of War on February 8, 1921.

In view of the conclusion reached it is unnecessary to discuss or pass upon the question whether plaintiff was precluded from recovering additional compensation under the second order by reason of its acceptance of the award of December 11, 1919 (Finding VIII), in which it is stated that the amount awarded was “ in full adjustment, payment, and discharge of said agreement” (of June 14, 1918).

The petition should be dismissed and it is so ordered.

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