MARCH 8, 1922, 1 COMP. GEN. 484

MARCH 8, 1922, 1 COMP. GEN. 484

SALE OF SURPLUS SUPPLIES - USE OF PROCEEDS DAMAGES TO A PURCHASER OF SURPLUS SUPPLIES RESULTING FROM CONDITIONS ARISING OR ACTION TAKEN BY THE GOVERNMENT AFTER COMPLETE CONSUMMATION OF A SALE ARE NOT REIMBURSABLE AS FOR A BREACH OF WARRANTY BY THE GOVERNMENT FROM FUNDS KEPT IN SPECIAL DEPOSIT ACCOUNTS, NOR WOULD SUCH A CLAIM BE WITHIN THE AUTHORITY OF AN ADMINISTRATIVE OFFICER OF THE WAR DEPARTMENT TO ADJUDICATE.

ACTING COMPTROLLER GENERAL GINN TO MAJ. M. T. LEGG, UNITED STATES ARMY, MARCH 8, 1922:

BY INDORSEMENT DATED FEBRUARY 6, 1922, YOU TRANSMITTED TO THIS OFFICE WITH REQUEST FOR DECISION WHETHER YOU ARE AUTHORIZED TO MAKE PAYMENT THEREON A VOUCHER IN FAVOR OF L. LEHMAN'S FOOD MARKETS FOR $7,778.26, BEING THE BALANCE ALLEGED TO BE DUE AS REIMBURSEMENT FOR FREIGHT CHARGES PAID ON PRUNES SOLD TO SAID CONCERN JUNE 10, 1919, AND RETURNED TO THE GOVERNMENT ON VARIOUS DATES SUBSEQUENT TO NOVEMBER 21, 1919.

THE MATERIAL FACTS, BRIEFLY STATED, APPEAR TO BE AS FOLLOWS:

IN MAY, 1919, THE SURPLUS PROPERTY DIVISION BY AUTHORITY OF THE DIRECTOR OF STORAGE, WAR DEPARTMENT, INVITED BIDS FOR THE PURCHASE OF 3,000,000 POUNDS OF PRUNES AT THAT TIME HELD AS SURPLUS ARMY SUPPLIES AT PORTLAND, OREG. THE BID OF L. LEHMAN'S FOOD MARKETS WAS ACCEPTED JUNE 10, 1919, FOR 2,950,000 POUNDS AT 22-1/8 CENTS PER POUND F.O.B. CARS AT PORTLAND, OREG., TO BE DELIVERED AS ORDERED BY THE BUYER. DELIVERIES AGGREGATING 2,004,150 POUNDS WERE MADE BETWEEN JUNE 10, 1919, AND OCTOBER 11, 1919. THE SUM OF $443,418.24, THE PURCHASE PRICE OF THE PRUNES DELIVERED, WAS PAID BY THE BUYER IN ADDITION TO THE SUM OF $66,000, WHICH ACCOMPANIED THE BID. LETTER DATED OCTOBER 15, 1919, THE BUYER REPRESENTED THAT IT HAD UNDERSTOOD THAT THE 3,000,000 POUNDS OF PRUNES OFFERED FOR SALE BY THE GOVERNMENT IN MAY, 1919, WOULD BE THE ONLY PRUNES SOLD BY THE GOVERNMENT, WHEREAS THE GOVERNMENT HAD SINCE THE SALE OF JUNE 10, 1919, OFFERED OTHER LOTS OF SURPLUS PRUNES FOR SALE, AND WAS ACTUALLY SELLING PRUNES DIRECTLY TO THE CONSUMER AT A PRICE OF 11 CENTS PER POUND AND THAT IT BELIEVED THAT IT SHOULD BE RELIEVED OF THE PRUNES WHICH IT STILL HELD OR BE REBATED A SUFFICIENT AMOUNT TO ENABLE IT TO COMPETE WITH THE OTHER SALES BEING MADE BY THE GOVERNMENT. THE EVIDENCE ADDUCED IS NOT SUFFICIENT TO ESTABLISH THAT THE GOVERNMENT, IF OFFERING THE 3,000,000 POUNDS OF PRUNES FOR SALE, GAVE THE BUYER ANY ASSURANCE THAT NO MORE SALES OF PRUNES WOULD BE MADE, NEITHER DOES IT APPEAR THAT THERE WAS ANY BREACH BY THE GOVERNMENT OF ANY EXPRESS OR IMPLIED CONDITION OR WARRANTY IN THE CONTRACT OF SALE. NOTWITHSTANDING THIS FACT A LETTER WAS ADDRESSED TO THE BUYER UNDER DATE OF NOVEMBER 21, 1919, AS FOLLOWS:

1. IN REPLY TO YOUR LETTER OF OCTOBER 15TH YOU ARE ADVISED THAT THE GOVERNING SALES BOARD ON SURPLUS PROPERTY, IN CONSIDERATION OF THE STATEMENT CONTAINED IN YOUR LETTER AND THE FACTS SURROUNDING THE SALE OF PRUNES TO YOU AND THE SUBSEQUENT SALE OF PRUNES BY THE GOVERNMENT AT A FIXED PRICE OF 11 CENTS PER POUND, HAS AUTHORIZED THE FOLLOWING RELIEF TO YOUR COMPANY ON ACCOUNT OF THE SALE OF 3,000,000 POUNDS OF PRUNES AWARDED ON JUNE 10, 1919.

(A) THE LEHMAN'S FOOD MARKETS COMPANY WILL PAY THE UNITED STATES GOVERNMENT THE SUM OF 22-1/8 CENTS PER POUND FOR ALL PRUNES ACTUALLY SOLD TO DATE.

(B) THE GOVERNMENT WILL TAKE OVER FROM YOUR COMPANY ALL THE PRUNES NOT DISPOSED OF AND WILL REIMBURSE YOUR COMPANY FOR ANY FREIGHT CHARGES ON UNSOLD PRUNES WHICH YOUR COMPANY MAY HAVE SHIPPED TO AN EASTERN DESTINATION.

2. THE BOARD REQUESTED THAT A COMPLETE STATEMENT OF THE EXACT STATUS OF THE PRUNES AS OF OCTOBER 11, 1919, BE FURNISHED BY THE L. LEHMAN'S FOOD MARKETS, WHICH STATEMENT WILL BE SWORN TO BY A MEMBER OF YOUR FIRM AND FURNISHED IN TRIPLICATE.

3. THE SURPLUS PROPERTY DIVISION HAS BEEN INFORMALLY ADVISED THAT THE ABOVE ACTION IS AGREEABLE TO YOUR COMPANY, BUT IN ORDER THAT THE RECORDS MAY BE CLEAR IT IS REQUESTED THAT IMMEDIATE STEPS BE TAKEN IN ACCORDANCE WITH THE ABOVE RECOMMENDATION AND ADVICE BE FURNISHED THE SURPLUS PROPERTY DIVISION SO THAT NO DELAY MAY BE OCCASIONED IN THE DISPOSITION OF THE PRUNES WHICH WILL BE RETURNED TO THE GOVERNMENT BY YOUR COMPANY.

BY AUTHORITY OF THE QUARTERMASTER GENERAL, DIRECTOR OF PURCHASE AND STORAGE.

L. M. PURCELL,

COLONEL, Q.M.C.,

CHIEF, SURPLUS PROPERTY DIVISION

BY W. C. PLUNKETT,

1ST LIEUT., Q.M.C., CONTRACTING OFFICER.

IN ACCORDANCE WITH THIS LETTER THE PRUNES WHICH HAD BEEN DELIVERED TO THE BUYER WERE TURNED OVER TO AND ACCEPTED BY THE ARMY AND DISTRIBUTED TO VARIOUS STATIONS TO BE RESOLD.

THE SUM OF $66,000, THE AMOUNT OF THE DEPOSIT WHICH ACCOMPANIED THE BID, WAS RETURNED TO THE BUYER JANUARY 13, 1920, AND REFUNDS ON ACCOUNT OF PURCHASE PRICE OF THE PRUNES TURNED BACK WERE MADE TO THE BUYER AS FOLLOWS: BY MAJ. LEGG IN MAY, 1920 ------------------------------- $125,183.25 BY MAJ. LEGG IN MAY, 1920 ------------------------------- 63,498.78 BY MAJ. LEGG IN JULY, 1920 ------------------------------ 26,976.00 BY CAPT. STARTZMAN, SEPTEMBER 11, 1920 ------------------ 82,133.41

TOTAL ----------------------------------------- 297,791.44

THE FREIGHT CHARGES, INCLUDING WAR TAX, PAID BY THE BUYER ON 1,345,950 POUNDS OF PRUNES SHIPPED FROM PORTLAND, OREG., TO EASTERN MARKETS WHERE SAME WERE IN STORAGE WHEN TURNED BACK TO THE GOVERNMENT AGGREGATED $19,802.23. A REFUND OF $12,023.97 ON ACCOUNT OF SUCH CHARGES WAS MADE BY MAJ. S. B. ARMAT OCTOBER 5, 1920, THE REFUND BEING ON THE BASIS OF WHAT IT WOULD HAVE COST THE GOVERNMENT IF THE SHIPMENTS HAD BEEN MADE ON GOVERNMENT BILL OF LADING. THE DIFFERENCE BETWEEN THE AMOUNT PAID BY THE BUYER AND THE AMOUNT REFUNDED CONSISTS OF $576.79 WAR TAX AND $7,201.47 LAND GRANT DEDUCTIONS, MAKING A TOTAL OF $7,778.26, THE AMOUNT WHICH IT IS NOW PROPOSED TO REFUND FROM FUNDS IN A SPECIAL DEPOSIT ACCOUNT BEING PROCEEDS OF SALES OF OTHER PRUNES.

THE SALE TO L. LEHMAN'S FOOD MARKETS APPEARS TO HAVE BEEN LEGAL TO AND IN ALL OTHER RESPECTS REGULAR AND PROPER, AND THERE DOES NOT APPEAR TO HAVE BEEN ANY BREACH OF CONDITION OR WARRANTY BY THE GOVERNMENT. SUCH BEING THE CASE, IT WAS NOT WITHIN THE POWER OR AUTHORITY OF THE CONTRACTING OFFICER, THE CHIEF, SURPLUS PROPERTY DIVISION, THE DIRECTOR OF PURCHASE AND STORAGE, OR THE QUARTERMASTER GENERAL TO RESCIND OR ABROGATE THE SALE CONTRACT OR TO MAKE THE ADJUSTMENT OUTLINES IN THE LETTER OF NOVEMBER 21, 1919, HEREINBEFORE QUOTED. SUCH DAMAGE AS THE BUYER MAY HAVE SUFFERED IN THIS CASE WAS THE RESULT OF CONDITIONS ARISING OR ACTION TAKEN AFTER COMPLETE CONSUMMATION OF THE SALE AND COULD AFFORD NO JUSTIFICATION FOR CANCELLATION OR REVOCATION OF THE SALE AGREEMENT. THE RIGHTS WHICH BECAME VESTED IN THE UNITED STATES UPON THE ACCEPTANCE OF THE BUYER'S BID COULD NOT BE WAIVED OR RELINQUISHED BY ANY ADMINISTRATIVE OFFICER OF THE GOVERNMENT AND THERE WOULD APPEAR TO BE NO LEGAL AUTHORITY FOR THE ADJUSTMENT MADE IN THIS CASE. ASSUMING THAT CERTAIN ACTION TAKEN BY THE GOVERNMENT AFTER THE SALE IN THIS CASE WAS MADE DID OCCASION A LOSS TO THE PURCHASER, THE CLAIM FOR DAMAGES ON ACCOUNT OF SUCH LOSS WOULD BE ONE WHICH NO OFFICER OF THE ARMY OR THE WAR DEPARTMENT WOULD HAVE THE POWER OR AUTHORITY TO ADJUDICATE. WM. CRAMP AND SONS S. AND E. BUILDING CO. V. UNITED STATES, 216 U.S., 494.

THE PRUNES ACTUALLY HAVE BEEN TAKEN BACK AND OTHERWISE DISPOSED OF BY THE WAR DEPARTMENT AND THE PURCHASE PRICE THEREOF REFUNDED TO THE PURCHASER, AND THE EXISTING STATUS OF THE PARTIES TO THE TRANSACTION WILL NOT NOW BE DISTURBED. BUT THE CLAIM NOW UNDER CONSIDERATION BEING IN THE NATURE OF A CLAIM FOR DAMAGES BASED ON TRANSPORTATION CHARGES PAID BY THE PURCHASER WOULD NOT BE A PROPER CHARGE AGAINST THE PROCEEDS OF THE PRUNES SOLD TO THIS COMPANY EVEN IF THE RECISION OF THE SALE HAD BEEN AUTHORIZED, AND IT IS NOT A LEGAL CHARGE AGAINST THE PROCEEDS OF SALE OF OTHER PRUNES OR ANY APPROPRIATION MADE BY CONGRESS.

THE PROPOSED PAYMENT IS NOT AUTHORIZED AND THE VOUCHER AND ACCOMPANYING PAPERS ARE RETURNED HEREWITH.