A-3946, SEPTEMBER 10, 1924, 4 COMP. GEN. 286

A-3946: Sep 10, 1924

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WHERE SUCH SUPPLIES WERE SOLD BY THE WAR DEPARTMENT "AS IS" THE AGENTS OF THE GOVERNMENT WERE WITHOUT AUTHORITY TO BIND THE GOVERNMENT BY ANY SPECIAL WARRANTIES EITHER AS TO KIND. IN WHICH WAS DISALLOWED ITS CLAIM FOR $750 ON ACCOUNT OF ALLEGED LOSS IN CONNECTION WITH THE PURCHASE BY IT OF SURPLUS MATERIAL (DRILLS) SOLD BY THE GOVERNMENT AT AUCTION IN MAY. THE CLAIMANT URGENTLY CONTENDS THAT LISTING THE DRILLS IN THE SALE CATALOGUE AS "UNUSED" CREATED AN EXPRESS WARRANTY AS TO KIND AND QUALITY AND THEREFORE ARGUES THAT THE GOVERNMENT SHOULD NOW RESPOND IN DAMAGES TO COVER CLAIMANT'S ALLEGED LOSS ON A RESALE OF THE MERCHANDISE BECAUSE SOME OF THE ARTICLES IN THE LOT APPEAR TO HAVE BEEN USED.

A-3946, SEPTEMBER 10, 1924, 4 COMP. GEN. 286

SALES OF SURPLUS WAR SUPPLIES - WARRANTIES IN THE SALE OF SURPLUS WAR SUPPLIES THE COMMON-LAW RULE OF CAVEAT EMPTOR APPLIES, AND WHERE SUCH SUPPLIES WERE SOLD BY THE WAR DEPARTMENT "AS IS" THE AGENTS OF THE GOVERNMENT WERE WITHOUT AUTHORITY TO BIND THE GOVERNMENT BY ANY SPECIAL WARRANTIES EITHER AS TO KIND, QUALITY, OR CONDITION.

DECISION BY COMPTROLLER GENERAL MCCARL, SEPTEMBER 10, 1924:

THE STANDARD MERCANTILE CO., IN ITS LETTER OF AUGUST 5, 1924, REQUESTS RECONSIDERATION OF DECISION OF JULY 18, 1924, SUSTAINING SETTLEMENT NO. 013975 OF MARCH 21, 1924, IN WHICH WAS DISALLOWED ITS CLAIM FOR $750 ON ACCOUNT OF ALLEGED LOSS IN CONNECTION WITH THE PURCHASE BY IT OF SURPLUS MATERIAL (DRILLS) SOLD BY THE GOVERNMENT AT AUCTION IN MAY, 1923.

THE CLAIMANT URGENTLY CONTENDS THAT LISTING THE DRILLS IN THE SALE CATALOGUE AS "UNUSED" CREATED AN EXPRESS WARRANTY AS TO KIND AND QUALITY AND THEREFORE ARGUES THAT THE GOVERNMENT SHOULD NOW RESPOND IN DAMAGES TO COVER CLAIMANT'S ALLEGED LOSS ON A RESALE OF THE MERCHANDISE BECAUSE SOME OF THE ARTICLES IN THE LOT APPEAR TO HAVE BEEN USED. IN VIEW OF CLAIMANT'S INSISTENCE, IT IS DEEMED PROPER TO REEXAMINE THE FACTS AND BASIS OF CLAIMANT'S DEMAND.

IT IS ASSUMED THAT THE AUTHORITY UNDER WHICH THE WAR DEPARTMENT PROCEEDED IN MAKING THE SALE UNDER CONSIDERATION WAS THE ACT OF JULY 9, 1918, 40 STAT. 850. THIS STATUTE AUTHORIZED THE PRESIDENT, THROUGH THE HEAD OF ANY EXECUTIVE DEPARTMENT,"TO SELL, UPON SUCH TERMS AS THE HEAD OF SUCH DEPARTMENT SHALL DEEM EXPEDIENT.' THE METHOD OF SALE ADOPTED BY THE WAR DEPARTMENT IN THIS CASE IS THE ONE USUALLY ADOPTED IN SIMILAR CASES. THE SUPPLIES SOLD WERE CATALOGUED BY NUMBER AND LOT AND THE EXPLICIT TERMS, CONDITION, AND PLACE OF SALE WERE SET OUT AND THE PROSPECTIVE PURCHASER WAS AFFORDED THE OPPORTUNITY TO EXAMINE AND INSPECT ALL THE MERCHANDISE OFFERED BEFORE SALE.

THE EVIDENCE SHOWS THAT THE CLAIMANT'S BID WAS ACCEPTED ON MAY 24, 1923, AND GOODS INVOICED AND DELIVERED TO CLAIMANT ON JUNE 6, 1923, AND PURCHASE PRICE THEREOF PAID ON SAID DATE.

ON THE FOOT OF THE INVOICE APPEARS THE FOLLOWING STATEMENTS:IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF SALE CONTINUED IN AUCTION SALE CATALOG ISSUED BY THE WAR DEPARTMENT COVERING SALE AT THE ARMY SUPPLY BASE, BROOKLYN, NEW YORK, MAY 24, 1923.

IT IS UNDERSTOOD AND AGREED THAT THE ABOVE MATERIAL IS SOLD "AS IS, WHERE IS," DELIVERY TO BE ACCEPTED BY YOU AT THE ARMY SUPPLY BASE AND MATERIAL TO BE REMOVED THEREFROM ON OR BEFORE JUNE 25, 1923.

CASH OR CERTIFIED CHECK PAYABLE TO THE ORDER OF THE FINANCE OFFICER, U.S. ARMY, NEW YORK GENERAL INTERMEDIATE DEPOT, IN PAYMENT FOR THE ABOVE MATERIAL SHALL BE DELIVERED TO THE FINANCE OFFICER, U.S. ARMY, NEW YORK GENERAL INTERMEDIATE DEPOT, 1ST AVENUE AND 58TH STREET, BROOKLYN, NEW YORK, ON OR BEFORE JUNE 6, 1923.

THE PROCEEDS OF THE GUARANTY DEPOSIT SUBMITTED BY YOU AT THE TIME OF SALE WILL BE APPLIED IN FINAL PAYMENT FOR THE MATERIAL SOLD.

IN A LETTER DATED JULY 18, 1923, CLAIMANT AFTER RECITING THE FACT OF ATTENDING THE SALE AND MAKING THE PURCHASES AND RECEIVING THE GOODS STATES:

UNDER THE CIRCUMSTANCES THE GOODS ARE ABSOLUTELY WORTHLESS TO US AND IT WILL BE NECESSARY FOR US TO ENTER OUR CLAIM FOR THE AMOUNT PAID THEREFOR, TO-WIT, $1,400.00, AND SHALL ASK YOU ALSO FOR INSTRUCTIONS FOR THE RETURN OF THE MERCHANDISE AT YOUR EARLY CONVENIENCE.

A REPLY WAS MADE TO THIS LETTER UNDER DATE OF JULY 20, 1923, WHICH QUOTED THE FOLLOWING CLAUSES FROM THE SALES CATALOGUE:

ALL PROPERTY WILL BE SOLD "AS IS" AT STORAGE POINT, WITHOUT WARRANTY OR GUARANTY AS TO QUALITY, CHARACTER, CONDITION, SIZE, COLOR, WEIGHT, OR FOR WHICH IT WAS ORIGINALLY INTENDED OR MAY BE INTENDED, OR DESIRED TO BE USED BY THE PURCHASER, EXCEPT THAT SUBSISTENCE STORES WILL BE SOLD SUBJECT TO THE PURE FOOD LAW AND GUARANTEED TO BE FIT FOR HUMAN CONSUMPTION AT THE TIME OF SALE.

CERTAIN ARTICLES ARE DESCRIBED AS "UNUSED," MEANING THEREBY THAT THEY HAVE NOT BEEN USED; SUCH ARTICLES MAY BE SHOPWORN OR OTHERWISE NOT IN FIRST-CLASS CONDITION.

ALL PROPERTY LISTED HEREIN WILL BE AVAILABLE FOR INSPECTION FOR A PERIOD OF ONE WEEK IMMEDIATELY PRECEDING THE DATE OF SALE, AND EACH BIDDER OR PROSPECTIVE PURCHASER IS INVITED AND ENJOINED TO INSPECT THE PROPERTY LISTED FOR SALE AT ITS POINT OF STORAGE PRIOR TO THE SALES DATE. THE FAILURE OF ANY PURCHASER TO INSPECT THE PROPERTY HEREIN LISTED AND SOLD, OR TO ACQUAINT HIMSELF WITH ITS TRUE CONDITION OR QUALITY, WILL NOT BE CONSIDERED AS SUFFICIENT GROUNDS FOR A CLAIM BY ANY PURCHASER FOR AN ADJUSTMENT OF THE PRICE OR RESCISSION OF THE SALE.

IT IS FURTHER INDICATED IN THIS LETTER OF JULY 20 THAT THE MERCHANDISE IN QUESTION HAD NEVER BEEN USED UP TO THE TIME OF SALE. IT ALSO APPEARS THAT NO EXAMINATION WAS MADE TO ASCERTAIN THE CONDITION OF THE DRILLS, WHICH NUMBERED ABOUT 10,000, UNTIL AFTER THE SALE AND DELIVERY THEREOF BY THE STANDARD MERCANTILE CO. TO THE DEWITT TOOL CO., LOCATED AT 244 LAFAYETTE STREET, NEW YORK.

BY THE AFFIDAVIT OF SAMUEL A. DEWITT, DATED DECEMBER 11, 1923, IT IS STATED THAT "ON OR ABOUT THE TWENTY-FIRST DAY OF AUGUST, 1923, THERE WERE DELIVERED TO US * * * CERTAIN DRILLS WHICH I HAD THERETOFORE * * * PURCHASED.' THE DATE OF PURCHASE DOES NOT APPEAR IN THIS AFFIDAVIT. DRILLS AND THAT THEY PAID $650 FOR THE ENTIRE LOT.

BY THE AFFIDAVIT OF JACK WATELSKY SECRETARY OF THE STANDARD MERCANTILE CO., DATED DECEMBER 11, 1923, IT APPEARS THAT ON OR ABOUT THE 1ST DAY OF AUGUST, 1923, IT SOLD TO THE DEWITT TOOL CO.'A LOT OF DRILLS" FOR WHICH IT CHARGED THE TOOL COMPANY $650; THAT THESE DRILLS WERE PURCHASED NEW YORK GENERAL INTERMEDIATE DEPOT, FIRST AVENUE AND FIFTY-EIGHTH STREET, BROOKLYN, N.Y.; THAT THE REASON THESE DRILLS WERE SOLD AT THE PRICE OF $650 WAS BECAUSE OF THE LARGE PROPORTION OF ABOUT 30 PERCENT USED DRILLS FROM THE PANAMA CANAL DEPARTMENT AT AUCTION SALE HELD MAY 24, 1923, AT THE BEING IN THE LOT, OF WHICH A LARGE MAJORITY WERE ALSO USED AND IN A DEFECTIVE CONDITION. THE STORE OF THE DEWITT TOOL CO. AND IN PART REPORTED AS FOLLOWS: INSPECTION OF THESE GOODS, COUNTED THOSE THAT HAD BEEN SET ASIDE AS "USED" AND FIND THAT A TOTAL OF 2,009 PIECES SHOW SIGNS OF PRIOR USE, AS FOLLOWS:

1805 DRILLS SHOW SET SCREW BITES AND DISTORTION OF THE METAL OF THE SHANKS WHERE DRILLS HAD BEEN DRIFTED INTO CHUCKS, ACCOMPANIED BY REDUCTION IN LENGTH DUE TO REGRINDING. SHANKS BENT AND TWISTED, SHOWING SIGNS OF IMPROPER HANDLING DURING USE AS WELL AS CHUCK JAW BITES.

IN THE LOT OF DRILLS SET ASIDE AS "USED" I FIND ABOUT 1,000 PIECES RANGING IN SIZES FROM 3/4 INCHES TO 2 1/4 INCHES, WHICH, IF UNUSED, WOULD HAVE A FAIR MARKET.

BASED ON THIS INSPECTOR'S REPORT THE PERCENTAGE OF USED DRILLS WAS 18.77 INSTEAD OF ABOUT 30 PERCENT AS STATED BY CLAIMANT; AND THE REFUND, IF CLAIMANT WERE LAWFULLY ENTITLED TO ANY AT ALL, WOULD AMOUNT APPROXIMATELY TO $259 INSTEAD OF $750 AS CLAIMED.

UPON THE FACTS PRESENTED, WAS THE LANGUAGE USED IN THE SALE CATALOGUE ISSUED BY THE WAR DEPARTMENT SUCH A REPRESENTATION AS FAIRLY CONSTRUED WOULD AMOUNT IN LAW TO A WARRANTY WHICH WOULD ENTITLE CLAIMANT TO RECOVER AS FOR A BREACH THEREOF, OR AUTHORIZE A RESCISSION OF THE SALE AND A RETURN TO CLAIMANT OF THE PURCHASE PRICE PAID? IN THIS CONNECTION THE QUESTION ALSO ARISES, WERE, OR ARE, THE SECRETARY OF WAR AND THE AGENTS OF THE GOVERNMENT IN MAKING SALES OF SURPLUS WAR MATERIAL EMPOWERED OR AUTHORIZED TO BIND THE GOVERNMENT BY ENTERING INTO AGREEMENTS OF SALE OF WAR MATERIAL CARRYING A SPECIAL WARRANTY OF ANY SORT, OTHER THAN A WARRANTY OF TITLE, WHICH THE LAW IMPLIES OR IMPORTS IN EVERY SALE OF A CHATTEL IF THE VENDOR IS IN THE ACTUAL POSSESSION THEREOF? SEE DEATZ AND STERLING V. THE UNITED STATES, 38 CT.CLS. 355; CHARLES JOHN HOUSER V. THE UNITED STATES, 39 CT.CLS. 508. SURPLUS WAR MATERIAL, HAS BEEN NOTED HEREIN, AND BY NO FAIR OR REASONABLE AND UNDETERMINED LIABILITIES AGAINST THE GOVERNMENT FOR DAMAGES AND BREACH OF CONTRACT OF SALE BY INCLUDING, OR WRITING THEREIN, SPECIAL ATTACHES TO PUBLIC SALES. SEE BARNARD V. KELLOGG, 10 WALL. 388.

IT IS CLEAR THAT THE ONLY POWER REPOSED IN THE HEAD OF THE EXECUTIVE DEPARTMENT RELATIVE TO THE SALE MUST BE FOUND IN THE STATUTE. IN A RECENT CASE, ERIE COAL AND COKE CORP. V. UNITED STATES, 58 CT.CLS. 261, 269, WHEN THIS STATUTE AND THE POWERS OF THE SECRETARY OF WAR WERE BEING CONSIDERED, THE COURT SAID:

* * * EVERYONE MUST TAKE NOTICE OF THE EXTENT OF AUTHORITY CONFERRED PREVAIL IN RESPECT TO THE ACTS AND DECLARATIONS OF PUBLIC AGENTS FROM THOSE WHICH ORDINARILY GOVERN IN THE CASE OF MERE PRIVATE AGENTS. * * *

IT IS CLEAR THAT THE AGENTS OF THE GOVERNMENT WERE AND ARE WITHOUT AUTHORITY TO BIND THE GOVERNMENT IN THE SALE OF SURPLUS PROPERTY BY SPECIAL CONTRACT OF WARRANTY, WITH REFERENCE TO THE KIND, CHARACTER, WEIGHT, OR CONDITION OF THE PROPERTY TO BE SOLD, AND THAT IN ALL SUCH CASES THE RULE OF CAVEAT EMPTOR MUST APPLY. VAN PELT CASE, 6 CT.CLS. 103; ERIE COAL AND COKE CORP. V. UNITED STATES, 58 CT.CLS. 261; BARNARD V. KELLOGG, 10 WALL. 1. C. 388; SALISBURY V. STAINER, 19 WENDELL 158; WOHLERS V. PETERSON, 192 N.W. 837; UNITED STATES V. SYMONDS, 120 U.S. 46; 21 CT.CLS. 148. DISCUSSED ABOVE, IS NOT NOW IN A POSITION TO DEMAND A REFUND OF A PART OF THE PURCHASE PRICE OF THE ARTICLES SOLD. AS STATED IN THE DECISION OF JULY 18, 1924:

* * * AND WHEN A BID HAS BEEN ACCEPTED, THE MATERIAL DELIVERED, AND THE PURCHASE PRICE PAID, THE TRANSACTION IS CLOSED * * *.

THIS IS THE GENERAL RULE, AND IT IS APPLICABLE TO THE INSTANT CASE, BUT CLAIMANT THAT ABOUT AUGUST 1, 1923, IT SOLD AND DELIVERED THE DRILLS IN QUESTION TO THE DEWITT TOOL CO. AT THE AGREED PRICE OF $650. THIS VOLUNTARY ACT OF CLAIMANT EFFECTUALLY CLOSED THE DOOR ON THE QUESTION OF RESCINDING THE SALE, OR RECOVERING BACK THE PURCHASE PRICE PAID OR ANY PART THEREOF, AND WAS, IN FACT, AN ACCEPTANCE OF OR RATIFICATION OF THE SALE. FINCH V. UNITED STATES, 12 CT.CLS. 405.

WHEN THE VARIOUS PARAGRAPHS OF THE TERMS AND CONDITIONS OF SALE SET OUT IN THE CATALOGUE ARE READ AND CONSIDERED IN ACCORDANCE WITH THEIR PLAIN AND UNEQUIVOCAL MEANING, IT IS EVIDENT THAT THE WAR DEPARTMENT NEITHER INTENDED TO, NOR DID, CONVEY TO THE PROSPECTIVE PURCHASER ANY IDEA THAT A SPECIAL WARRANTY OF ANY KIND WENT WITH THE SALE OF THE GOODS. THERE WAS NO MISREPRESENTATION, NO FRAUD, AND NO CONCEALMENT, AND PURCHASERS WERE FULLY ADVISED IN THE PLAINEST TERMS THAT THIS WAS A SALE OF GOVERNMENT SURPLUS WAR SUPPLIES, AND THAT THEY MUST BUY "AS IS" AND "WHERE IS; " HENCE THERE IS NO GROUND UPON WHICH CLAIM FOR REFUND OF WALL. 388; WHITESIDE CASE, 93 U.S. 247.