United States v. Brookridge Farm, Inc. , 111 F.2d 461 ( 1940 )

BRATTON, Circuit Judge.

This is a suit instituted by Brookridge Farm, Incorporated, against the United States under the provisions of subdivision (20) of section 24 of the Judicial Code, 28 U.S.C.A. § 41 (20), as amended, to recover damages for alleged breach of a contract to furnish milk for consumption at Fitzsimons Hospital, located at Denver, Colorado.

Under date of March 26, 1938, the Quartermaster, Purchasing and Contract Officer, at the hospital wrote the Quartermaster General requesting authority to issue to dairies in the vicinity of Denver*invitations for bids to furnish milk for the hospital throughout the fiscal year commencing July 1, 1938, and ending June 30, 1939. The authority was granted, and invitations were mailed on April 14 inviting bids to be opened on April 29. Plaintiff submitted a bid to furnish the estimated quantity of milk at a total cost of $61,830, and City Park Dairy submitted a similar bid at a total cost of $43,867. Each bid was accompanied by a surety bond conditioned for the performance of the contract. The bid of plaintiff was accepted, the contract was awarded to it, and the formal contract was executed April 30. Within a day or two thereafter, plaintiff placed an order for a large quantity of bottles and cases and began the purchase of additional cows necessary for the performance of the agreement. On May 9, the Quartermaster, Eighth Corps Area, radiogramed the Quartermaster at the hospital to suspend the award pending a decision of the Comptroller General concerning the legality thereof, and on the same day the Quartermaster at the hospital mailed a copy of the radiogram to plaintiff. Despite such notice, plaintiff continued its preparations for the performance of the contract, and by July 1 it had purchased ninety-six additional cows, a truck for the transportation of the milk, and a large number of bottles and cases, and had made enlargements and improvements of its plant necessary for the fulfillment of the contract. On June 30, plaintiff was advised that the contract had been cancelled, that no milk would De accepted, and that the truck would not be allowed to come on the premises. Plaintiff sold at a loss milk which had been bottled for delivery on July 1; during the remainder of the month it furnished milk to the hospital on a day-to-day basis at the same prices as those contained in the contract; and in August and September the hospital purchased its supply of milk from City Park Dairy. Invitations were issued early in' September for the furnishing of milk from October 1, 1938, to June 30, 1939; plaintiff submitted a bid containing lower prices than those contained in its former bid; the bid was accepted and a contract was entered into; and plaintiff furnished the milk throughout the remainder of the fiscal year.

The court found that the first contract was valid; that it was wrongfully breached; that the second did not compromise, rescind, abrogate, or discharge the first as to the time common to both; that the loss of profit which plaintiff’ sustained during August and September amounted to $5,891.-51; and that the loss of profit from October 1, 1938, to June 30, 1939, amounted to more than $10,000. Judgment was rendered against the United States for $10,000, with interest thereon from date at four per cent per annum, D.C., 27 F.Supp. 909.

The validity of the contract is challenged. It is not contended that the Quartermaster lacked authority in law to enter into a contract of that kind. Neither is fraud or bad faith on his part charged. On the contrary, his good faith is expressly conceded. The contention is that the contract should have been awarded to the lowest bidder or all bids rejected. Section 3709, Revised Statutes, 41 U.S.C.A. § 5, is a general statute having application to all departments of the Government. It provides that except as otherwise provided by law all purchases and contracts for supplies shall be made by advertising a sufficient time previously for proposals, when the public exigencies do not require the immediate delivery of such articles; and that when immediate delivery is required by the public exigency, the articles may be procured by open purchase or contract at the places and in the manner in which they are usually bought and sold. The Act of July 5, 1884, 23 Stat. 109, as amended, 10 U.S.C.A. § 1200, relates only to the purchase of supplies for the Army. It provides that, except as otherwise provided for, and except in cases of emergency, which must be reported at once to the Secretary of War for his approval, all purchases of regular and miscellaneous supplies shall be made by contract after public notice of not less than ten days for small amounts for immediate use, and of not less than from thirty to sixty days whenever in the opinion of the Secretary the circumstances of the case and conditions of the service shall warrant such extension of time; and that the award in every case shall be to the lowest responsible bidder for the best and most suitable article, the right being reserved to reject any and all bids. And section 219, Revised Statutes, 10 U.S. C.A. § 1192, provides, among other things, that the Secretary of War shall from time to time define and prescribe the kinds as well as the amount of supplies to be purchased by the Quartermaster Corps of the Army and the duties and powers thereof respecting such purchases. Army Regulations AR S — 160, S. 2, Part 5, Par. 5 (b) provides that a responsible bidder is “one who (a) qualifies as such under the laws and regulations governing the purchase of articles in question, (b) has complied with all of the requirements for the invitations of bids, * * * (d) is in a position to perform the contract and whose previous record for the faithful performance of similar obligations does riot justify determination that he is irresponsible.” And Army Regulations AR 5 — 169, Part 8, Par. 11 provides that the lowest bid as to price may be rejected by the purchasing officer “if (1) The bidder does not qualify as a responsible bidder * * * (3) All the essential conditions of the invitation have not been complied with.” The purpose of these statutes and regulations is to give all persons equal right to compete for Government contracts; to prevent unjust favoritism, or collusion or fraud in the letting of contracts for the purchase of supplies; and thus to secure for the Government the benefits which arise from competition. In furtherance of such purpose, invitations and specifications must be such as to permit competitors to compete on a common basis. Conditions or limitations which have no reasonable relation to the actual needs of the service and which are designed to limit bidding to one of several sources of supply are interdicted, and render the award of a contract made in such circumstances voidable..

The letter of the Quartermaster at the hospital addressed to the Quartermaster General requesting authority to issue invitations to the dairies to submit bids made reference to the regulations which provided that Grade A pasteurized milk should be procured for the Army whenever available; it stated that an extensive survey disclosed that none of- the dairies in the vicinity of the hospital was in position to furnish milk of that grade but that several had expressed a desire to make the necessary changes in their plants and to increase their stock of dairy cows to enable them to furnish it, provided they were able to secure the business for at least a year, and that in order to insure an uninterrupted supply of milk it would be necessary to mail bidding forms at the earliest practicable date in order to allow time to enter into contract with the successful bidder and to enable it ■ to make the necessary changes in its dairy and pasteurized plants. Standard forms of invitations for bids were sent to the dairies. Standard forms of instructions and specifications which accompanied and were a part of the invitations provided that the award of contracts would be limited to bidders whose establishments had passed an army sanitary inspection within the calendar month preceding the opening date of the bids and were listed as approved sources of supply, and that provision was in strict conformity with existing general instructions issued by the Quartermaster General. The medical inspector at the hospital filed with the Quartermaster there a certificate dated April 29, in which he certified that he had inspected the respective plants of plaintiff, City Park Dairy, and Carlson-Frink Company, and that as the result it was considered that plaintiff was the only dairy company qualified to deliver fresh, Grade A milk. The inspector made a second certificate under date of May 16, in which he certified that in conjunction with the station veterinarian he had made inspections of the respective plants of plaintiff and City Park Dairy with a view to determining whether either or both were in position to furnish Grade A pasteurized milk; that as the result it was his opinion that on the date of the award plaintiff was a model and up-to-date dairy that met all requirements for furnishing such milk, provided a plate glass partition 32 x 12 in size be installed between the bottle washer and the bottle filler; that the estimated cost of such partition was $200, and would require less than a week of labor; that according to his understanding it was then in process of construction; that he considered the installation of such partition would in no way enhance the quality of the milk of plaintiff and was more of a theoretical rather than a practical necessity; that City Park Dairy was old and in a bad state of repair; that it did not meet the requirements on the date of the award; and that before it could qualify to furnish Grade A milk, as defined in the requirements of the United States Public Health Service Milk Ordinance and Code, it would be necessary to construct a new dairy barn and milk house. On the same date, the attending veterinarian made a similar certificate. And on June 22, the dairy of plaintiff was approved without condition or qualification, and a regular form of that effect was filled out and transmitted through regular channels. City Park Dairy did not meet the requirements for eligibility in that it failed to pass successfully an army sanitary inspection within the calendar month preceding the date fixed for the opening of the bids; it did not then have the facilities with which to furnish the desired supply of Grade A pasteurized milk; and it failed to give assurance which was deemed satisfactory that it would provide such facilities before the beginning of the fiscal year. Plaintiff had seasonably passed the requisite inspection, and was in all substantial respects prepared to furnish the needed quantity of Grade A milk. The only requirement was the installation of a partition at the nominal cost of $200 and a week of labor, and that requirement was more .theoretical than otherwise.

In view of the expressly conceded fact that the Quartermaster acted in good faith, that the condition contained in the instructions and specifications limiting the award of contract to bidders whose plants had within the specified time passed an army sanitary inspection was a general provision in use throughout the service, not an extraordinary provision specially prepared for use in limiting'the bidding and the award of the particular contract in question to plaintiff, that it had reasonable relation to the needs of the service, that City Park Dairy failed to comply with its requirements, was not facilitated to furnish the desired quantity and quality of milk, and did not give satisfactory assurance that it would be able to do so, we cannot say that in disregarding the bid of City Park Dairy and accepting that of plaintiff, the Quartermaster exceeded the authority vested in him by the statutes and regulations to which reference has been made. It follows that the contract became a binding obligation at the date of its execution, and its subsequent repudiation constituted a breach for which the United States incurred responsibility in damages. And the amount of the damages sustained during August and September is not in dispute.

We come now to the question whether the execution and performance of the second contract forecloses plaintiff from recovering damages which accrued after October 1. The question must be determined by the law of Colorado. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. The facts in McKay v. Fleming, 24 Colo.App. 380, 134 P. 159, were that the parties entered into a written contract in which plaintiff purchased from defendant certain real estate for a fixed consideration to be paid part in cash and part in notes, and made a small down payment in cash. Later, and before the time expired for the payment of the balance and the execution and delivery of the notes, defendant advised plaintiff that he would be unable to convey the property for the reason that he owned only an undivided half interest in it and his co-owner declined to convey his interest for the fixed price. After some negotiations, plaintiff entered into a separate contract with the co-owner for the acquisition of his half interest, and at the same time entered into another contract with defendant quite similar to the first except that it was for only an undivided half interest. The sale was consummated in accordance with the two separate contracts, and plaintiff then sued for damages arising out of the breach of the first. In holding that he could not recover, the court said: “The plaintiff, by making the second contract .of purchase with the defendant, lost all right to rely upon the first contract either to enforce it as a contract of sale or to rely upon it in a suit for damages for a breach thereof. After the second contract was made, the defendant was put in a” position so that he could not comply with the first contract without violating the second, and the sale was closed under the second before the time expired within which the defendant could comply with the first. The plaintiff’s agent suggested and wrote the second contract, in which defendant acquiesced. The plaintiff says he was compelled to make the second contract in order to overcome defendant’s inability and refusal to comply with the first and in order to make certain the purchase of the entire property; but if plaintiff elected to sacrifice his rights under the first contract, in order to make certain his purchase of the property, he ought not thereafter to complain. He was not compelled to do this, except in the sense that he was compelled to choose this horn of the dilemma. This was not duress under the law, nor would it enable plaintiff to avoid the effect of the second contract.” The conclusion" there reached finds support in other cases, including one from this court. United States ex rel. International Contracting Co. v. Lamont, 155 U.S. 303, 15 S.Ct. 97, 39 L.Ed. 160; Housekeeper Pub. Co. v. Swift, 8 Cir., 97 F. 290; Wiley v. Dixie Oil Co., 10 Cir., 43 F.2d 51; Arizona-Parral Mining Co. v. Forbes, 16 Ariz. 395, 146 P. 504.

The two contracts between these parties related to the same subject matter. Each was complete within itself. The later one completely covered the subject matter for the period of nine months common to both, and its terms were inconsistent with the former in respect to prices to be paid for the milk. The two could not stand together. Performance of both was impossible. Even though it did not contain a provision to that effect, the latter superseded and rescinded the former; rights acquired under the former were' abandoned and relinquished ; and liability for damages for its breach was discharged. McKay v. Fleming, supra.

It is urged, however, that one injured by breach of contract is in duty bound to take reasonable steps to mitigate the damages, and that the execution of the second contract was a reasonable effort in that behalf. The general rule is that one who suffers injury as the result of a tort or a breach of contract is required to exercise reasonable care and diligence to avoid the loss, or to minimize the resulting damage. And it has been held that where one obligated by contract to purchase a quantity of corn breaches the contract by refusing to accept the corn when tendered, its subsequent sale to him by separate contract at the best price obtainable does not constitute a waiver of the right to rec'over damages for such breach. Arkansas & Texas Grain Co. v. Young & Fresch Grain Co., 79 Ark. 603, 96 S.W. 142, 116 Am.St.Rep. 99. But in the absence of any suggestion or indication by the Supreme Court of Colorado that where perishable property is involved such an exception should be engrafted upon the general doctrine enunciated in McKay v. Fleming, supra, we feel constrained " to follow that case.

Ordinarily an appellate court cannot direct the entry of judgment for the correct amount. Slocum v. New York Life Ins. Co., 228 U.S. 364, 33 S.Ct. 523, 57 L.Ed. 879, Ann.Cas.1914D, 1029. It is unnecessary to explore the question whether that rule applies in a case of this kind. A remittitur may be ordered. United States Potash Co. v. McNutt, 10 Cir., 70 F.2d 126; United States v. Utah-Idaho Sugar Co., 10 Cir., 96 F.2d 756, certiorari denied 305 U.S. 631, 59 S.Ct. 95, 83 L.Ed. 404.

The judgment will be reversed and the cause remanded, unless a remittitur reducing the judgment to $5,891.51, with interest thereon at the rate of four per cent per annum from the date of such judgment, is filed in the office of the clerk of the trial court within twenty days from the date on which this opinion is filed, and within ten days thereafter a certified copy of the record showing such remittitur is filed with the clerk of this court; but if such remittitur is filed and a copy furnished within such respective times, the judgment in the reduced amount will be affirmed.