Opinion
No. 49052
November 6, 1951
On the Proofs
Government contract; shipment by War Assets Administration without shipping instructions. -- In a suit to recover on two claims for freight and storage charges arising out of the shipment by War Assets Administration of 27 carloads of storage tanks, being a portion of the total of 450 tanks purchased by plaintiff under the Government's policy of disposing of surplus war property, where the Government admits liability on plaintiff's first claim for $1,328.35 for the erroneous shipment of certain tanks of the wrong size; and where plaintiff's second claim for $7,022.23 is based on the action of War Assets Administration in shipping the balance of the purchase to plaintiff, without shipping orders, after plaintiff had failed to issue requested shipping instructions under the contract of sale; it is held that plaintiff is entitled to recove on its first claim only, and the second claim is denied.
Same; provision of sales agreement concerning shipment. -- In 1946, plaintiff entered into a writen agreement with War Assets Administration to purchase 450 storage tanks of various capacities. The agreement, which was a standard form of surplus sales contract, provided that within ten days purchaser should issue shipping instructions unless otherwise agreed in writing. On the sales contract in suit the statement "Hold for shipping instructions", which was filled in under the heading "Shipping Instructions", even if construed to mean that the parties intended to postpone the date of shipment beyond the stipulated ten-day period, cannot reasonably be construed to mean that the defendant agreed to store the tanks until such times as might suit plaintiff's convenience.
Same; piecemeal shipment of surplus war goods not intended. -- Under the conditions existing at the end of World War II, and at the time of the sale involved in the instant suit, it was not the intention of the War Assets Administration to become involved in small piecemeal shipments of any particular items of surplus war property.
Same; failure of purchaser to give shipping instructions. -- It is well settled that in the case of a sales contract in the absence of a specified time for the giving of shipping instructions by the purchaser, or for the removal of the goods by him, the law requires that the purchaser act within a reasonable time. The failure of the purchaser to take the necessary steps may be regarded by the seller as a breach of the contract, or may be treated by the seller as authorization to forward the goods to the purchaser without the shipping instructions required by the contract.
Same; seller not at fault in forwarding balance of purchase without notice. -- Where the goods purchased had been fully paid for; and where the seller, within a reasonable time, had repeatedly urged the purchaser to furnish shipping instructions and had notified the purchaser that it could not continue to hold the goods, it is held that the defendant was not at fault in forwarding the balance of the purchase without notice.
Mr. Irwin Geiger for the plaintiff.
Mr. William A. Stern, II, with whom was Mr. Assistant Attorney General Holmes Baldridge, for the defendant.
Mr. Marion T. Bennett, Trial Commissioner.
Plaintiff sues to recover on two claims for freight and demurrage charges arising out of the shipment by War Assets Administration of 27 carloads of storage tanks, being a portion of the total of 450 tanks purchased by plaintiff under the surplus property disposal program.
The Government admits liability on plaintiff's first claim for $1,328.25 for the erroneous shipment of certain tanks of the wrong size.
Plaintiff's second claim for $7,022.23 is based on the action of War Assets Administration in shipping the balance of the purchase to plaintiff after plaintiff had failed to issue requested shipping instructions under the contract of sale.
The question involved in the second claim is whether, under the circumstances of this case, War Assets Administration was authorized by the contract to ship the tanks to plaintiff without first receiving shipping instructions from plaintiff, and, if so, whether the defendant is liable because the War Assets Administration did not give plaintiff notice, before making such shipment, of its decision to do so.
The court, having made the foregoing introductory statement, entered special findings of fact as follows:
1. The plaintiff is a Washington corporation and maintains its office and principal place of business in Seattle.
2. On March 19, 1946, the plaintiff offered to purchase 450 storage tanks of various capacities for $72,000 from the defendant, represented by the War Assets Administration.The offer to purchase culminated in a sales agreement dated April 26, 1946. This agreement, which was the Government's standard form of surplus sales contract, provided in part:
(3) Unlss otherwise agreed upon, the purchaser shall accept delivery of the property listed herein and issue shipping instructions within ten (10) days from the date of sale.
(4) Shipping terms f.o.b. present location unless otherwise indicated.
(10) Any other terms or conditions, or variations from aforesaid terms, must be agreed to in writing by seller and purchaser.
(13) Purchasers must accept delivery of property within ten days from the date of confirmation of sale unless a longer period of time is expressly permitted in writing by the War Assets Administration. When acceptance of delivery is not made within ten days or such longer period, if permitted as aforesaid, the War Assets Administration without limiting any other rights it may have, (1) reserves the right to cancel the contract with respect to such property or (2) may require the payment of storage charges. [Italics supplied.]
The location of the property was designated as Naval Advance Base Depot, South Tacoma, Washington, and the agreement under a blank space, entitled "Shipping Instructions -- Routing and Delivery," stated "Hold for shipping instructions."
3. The plaintiff gave written shipping instructions to the defendant for certain tanks on May 7, 14, 16, 21, 29, June 4, 12, 27, and July 2, all in 1946.The defendant carried out the shipping instructions dated through June 27, except in one instance where it erroneously shipped eight 500-barrel tanks to Savage, Minnesota, instead of eight 250-barrel tanks as directed. The freight and demurrage charges for this erroneous shipment totaled $1,328.35, which sum the defendant has agreed to pay.
4. Sometime in May 1946, following the issuance of several small lot shipping instructions, Mr. Shain, an agent of the War Assets Administration, spoke to the plaintiff's secretary and told him that Government facilities could not be used for a storage warehouse; that under the contract all of the tanks purchased were for immediate shipment and that the Government could not ship individual orders throughout the United States.From that time, defendant constantly protested to the plaintiff about the shipping of partial orders and the plaintiff was told that surplus property was always sold for immediate delivery. The plaintiff's operating head insisted that he had been promised by the salesman who had sold the tanks that such partial shipments might be made. It is not shown that this person had authority to contract. Such promise, if made, was not in writing. The defendant's reply was that, regardless of what had been promised in this way, it could not and would not be done.
When notice of the incorrect shipment (finding 3) came to the defendant sometime between June 10 and 15, 1946, an agent of the War Assets Administration told the plaintiff that the officials of the Navy who were in charge of making the shipments absolutely refused to carry out another shipment until the WAA had received shipping instructions for the balance of the tanks in storage. Similar conversations had been held with the plaintiff's secretary as to all subsequent partial purchase orders. In these conversations and in reply to the defendant's demand for immediate shipment, the plaintiff's secretary promisd to furnish such orders if the defendant would take care of the small orders that were than before it. The defendant complied with this suggestion, although the plaintiff never gave the promised shipping instructions for the balance of the tanks.
5. On July 1, 1946, Mr. Shain, the subregional director of the South Tacoma Naval Base for War Assets Administration, spoke to the plaintiff's secretary and told him that the Government would have to have immediate shipping instructions. Despite this conversation of July 1, plaintiff's secretary, on July 2, 1946, again issued an instruction for a small lot shipment. On the same date, July 2, Mr. Deede, the field supervisor of War Assets Administration at Tacoma, issued an order to ship all of the remaining tanks to the plaintiff in Seattle, even though no shipping instructions had been received from plaintiff concerning the bulk of the tanks. Except to the extent above mentioned, plaintiff was not notified that the remaining tanks would be shipped to it.
This shipment arrived in Seattle on July 12, 1946. It consisted of 27 carloads of tanks. The plaintiff notified the defendant that this shipment had been made without instructions from it. However, following a conference between plaintiff's secretary and officials of War Assets Administration, an agreement was entered into on July 18, 1946, whereby the plaintiff agreed to unload the cars to prevent the accumulation of additional demurrage charges without prejudice to any claim it might have for freight and demurrage resulting from said shipment. On July 19, 1946, the plaintiff wrote the defendant a registered letter confirming the arrangement of July 18, 1946, for unloading and in the same letter asserted its claim for freight and demurrage.
6. The freight and demurrage incurred by the plaintiff by reason of said shipment of tanks was $7,022.23, made up of $6,198.53 freight charges and $823.70 demurrage.
7. Plaintiff, by letters dated May 17 and June 28, 1946, submitted to the War Assets Administration's regional office in Seattle its claims for freight and demurrage arising out of the erroneous shipment of the wrong sized tanks, and by letters dated July 15 and July 19, 1946, submitted its claim arising out of the final bulk shipment. On January 9, 1947, the Seattle regional office allowed the $1,328.35 claim for freight and demurrage incurred on the erroneous shipment, but disallowed the claim for freight and demurrage on the final bulk shipment on the ground that under the terms and conditions of the sales contract the government was authorized to ship the property to the purchaser on the purchaser's failure to complete shipping instructions.
8. Plaintiff appealed, and by a decision dated May 1, 1947, the Washington, D.C., office of War Assets Administration denied both claims.
9. On November 13, 1947, plaintiff appealed this decision to the Office of the General Counsel for War Assets Administration and, in addition, submitted additional evidence in support of the $1,328.35 claim arising out of the erroneous shipment. On August 16, 1948, that office rendered its decision on the plaintiff's claim for freight and demurrage charges incurred by it as aforesaid, entitled "DECISION ON CLAIM NO. SEA-545." On the basis of the new evidence submitted to support the claim arising out of the erroneous shipment, War Assets Administration allowed the plaintiff reimbursement in the amount of $1,328.35 in consideration for plaintiff's consent to accept delivery of the wrong sized tanks at Savage, Minnesota. With respect to the claim based on the shipment of 27 carloads of tanks representing the bulk of plaintiff's purchase, War Assets Administration held;
Athough the sales conditions require that shipping insructions be supplied within ten (10) days, in this case the ten day limitation was extended by the entry on the face of the Sales Document "Hold for shipping instructions." While such notation is recognized as an extension of the ten day limitation, since no specific duration of the extension was set, such duration must therefore be established at a reasonable period of time, and in establishing what is a reasonable time surely no more than three times the original ten day period could be held reasonable and therefore it is established that a thirty day period in which to submit shipping instructions is reasonable. Repeated requests for shipping instructions was [sic] sufficient notice to the claimant that the reasonable period for issuing instructions had expired.
There were on hand, one month after the date of sale on May 12, 1946, 113 tanks of 100 barrel capacity, 171 tanks of 250 barrel capacity, and 89 tanks of 500 barrel capacity, for which shipping instructions had not been received, and for which storage charges commenced to accrue. Applying the storage rate as supplied by the Regional Office the first month of accrued storage charges would amount to $7,245.17 covering the period from May 12, 1946, to June 12, 1946. During the period for which storage was being charged two additional 100 barrel tanks were shipped thus at the start of the period June 12, 1946-July 2, 1946, which was the last day of storage, there were 111 tanks of 100 barrel capacity, 171 tanks of 250 barrel capacity, and 89 tanks of 500 barrel capacity. Applying the same rates but reducing the amount by one third for this twenty day period, the charge amounts to $4,820.31 (Daily rate of $241.0156 based on thirty day month X 20). The total storage charge then is $12,065.48 ($7,245.17 plus $4,820.31).
Having agreed to hold for shipping instructions, notwithstanding that an unreasonable period of time had elapsed, the seller is found to have been negligent in not notifying the buyer that shipment of the balance would be made to buyer's address. It is concluded therefore that the seller is liable for the freight and demurrage occasioned by the shipmet of 27 carloads to Seattle and allowance should be made in the amount of $7,022.23 as requested by the claimant and which amount is supported by paid bills.
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RECOMMENDARTION
In view of the foregoing all previous decisions on this claim are hereby set aside and it is recommended that the claimant be billed in the amount of $12,065.48 covering storage charges, and that the sum of $8,350.58, as allowed on claims (b) and (c) be credited against the storage charges upon execution of a general release, and that the balance of $3,714.90 be collected from the claimant.
10. Plaintiff obtained a review of the deicsion of August 16, 1948, insofar as it permitted the Government to impose storage charges. Plaintiff contended that any claim of War Assets Administration for storage charges had been extinguished and was nonexistent at the time of its attempted exercise, because defendant had not made the necessary election under the contract to either rescind or to collect storage charges. Plaintiff further asserted that War Assets Administration should have given notice of its decision to assert its alternative contract right to charge storage. On November 24, 1948, the Office of the General Counsel for War Assets Administration rendered another decision affirming its prior decision of August 16, 1948, and holding that the August 16th decision constituted sufficient notice to the plaintiff that the claim for storage charges was being asserted, and that this notice was given within the Statute of Limitations.
11. The defendant has not paid any part of the claim asserted against the War Assets Administration, and plaintiff has not paid the amount held due as storage in the decisions of the War Assets Administration.
The court decided that the plaintiff was entitled to recover on its first claim only.
LITTLETON, Judge, delivered the opinion of the court:
Plaintiff herein seeks to recover $8,350.58, arising out of two separate claims for freight and demurrage paid by plaintiff on shipments made by the War Assets Administration, under a surplus property sales contract. The Government has admitted liability upon one claim of $1,328.35, which resulted from an erroneous shipment of the wrong type property. The second claim is for $7,022.23 freight and demurrage charges paid by plaintiff on twenty-seven carloads of storage tanks shipped to it about July 2, 1946, by the War Assets Administration after plaintiff failed, after repeated requests, to issue shipping instructions for the bulk of its purchase.
On April 26, 1946, following a period of negotiations, plaintiff, a Seattle, Washington, surplus dealer, entered into a written agreement with the War Assets Administration, represented by officials of its Seattle regional office, to purchase 450 storage tanks of various capacities for $72,000. These tanks were located at South Tacoma Naval Base, Washington. The agreement, which consisted of a standard form surplus sales contract, provided that the purchaser should accept delivery and issue shipping instructions within ten days from the date of the sale, unless a longer period of time was expressly permitted in writing by the War Assets Administration. If the acceptance of delivery was not made within the above-mentioned period, War Assets Administration, without limiting any other rights it might have, reserved the right to cancel the contract, or to charge storage for the goods sold. The right to ship in the event plaintiff delayed unreasonably to furnish shipping orders, was one of the rights of defendant under the contract. The agreement further provided that any other terms, or variations of the written terms, had to be agreed upon in writing by both parties. In a blank space on the agreement marked "Shipping Instructions -- Routing and Delivery," the statement "Hold for shipping instructions," was filled in.
During the period from May 7, 1946, to July 2, 1946, plaintiff issued a series of nine shipping orders or instructions to defendant, all of which called for small lot shipments to various destinations. Such instructions issued through June 27, 1946, were accepted and executed by the defendant. However, in one instance, War Assets Administration erroneously shipped eight tanks of the wrong size to Savage, Minnesota, and it is the demurrage and freight charges for this shipment that constitute plaintiff's claim of $1,328.35. This item is not here in controversy.
Sometime in May 1946, about a month after purchase and after plaintiff had issued several small lot shipping instructions, an authorized agent of War Assets Administration informed plaintiff's secretary that these tanks had been sold for immediate bulk shipment and that War Assets Administration could not henceforth honor requests for individual shipments. Thereafter, defendant's agents constantly protested to plaintiff about this practice, but these protests by defendant were disregarded by plaintiff which insisted that the salesman of defendant had promised that small lot shipments might be made. War Assets Administration continued to ship tanks under small lot shipping instructions.
Sometime between June 10 and 15, 1946, following the erroneous Minnesota shipment, a War Assets Administration agent once again notified plaintiff that the Government would only fulfill instructions calling for the shipment of the balance of the tanks on hand. At this time plaintiff agreed to issue such shipping instruction if defendant would honor the small orders then before it. Defendant complied with plaintiff's request, but never received the promised shipping order.By July 1, 1946, War Assets Administration had made shipment of all small lot orders on hand, and on that date the subregional director of the South Tacoma Naval Base again contacted plaintiff and requested the immediate issuance of the promised shipping instructions for the balance of the tanks to one destination. Despite this request, plaintiff on July 2, 1946, again issued shipping instructions for a small order.On the same day, July 2, the field supervisor of War Assets Administration assigned to the South Tacoma Base, issued an order authorizing and directing the loading and shipment of the balance of the tanks to plaintiff's Seattle address, freight collect, although no instructions as to the bulk of the purchase had been issued by plaintiff. Plaintiff was not notified that this order was being issued.
On July 12, 1946, this shipment, consisting of twenty-seven carloads of tanks, arrived in Seattle, and on July 18, 1946, pursuant to an agreement betwen the parties, plaintiff, without prejudice to its claim for freight and demurrage resulting from this allegedly unauthorized shipment, unloaded the cars to prevent the further accumulation of demurrage charges.
Thereafter, plaintiff filed claims totaling $8,350.58 with the War Assets Administration, which amount represented a claim of $1,328.35 arising out of the erroneous shipment, and a claim of $7,022.23 representing the combined total of the freight and demurrage charges on the final shipment. The Seattle regional office, on January 9, 1947, admitted liability for the $1,328.35, but disallowed the claim arising out of the final shipment because of plaintiff's failure to issue shipping instructions in accordance with the contract. Plaintiff's appeal to the Washington, D.C., office of War Assets Administration resulted in a denial of both claims.
Plaintiff then took a further appeal to the Office of the General Counsel for War Assets Administration on November 13, 1947, and submitted with the appeal additional evidence in support of the $1,328.35 claim arising out of the erroneous shipment. By a decision dated August 16, 1948, the War Assets Administration allowed the full amount of both of plaintiff's claims, that is, $8,350.58, on the grounds that War Assets Administration was at fault on the claim for $1,328.35 in making the erroneous shipment, and that it was negligent in not notifying plaintiff that shipment of the balance of plaintiff's purchase was being made. However, the War Assets Administration also found that under the terms of the contract, it was entitled to charge plaintiff storage on the tanks for the period from May 12 to July 2, 1946, pursuant to paragraph (13) (2) of the terms and conditions of the contract (finding 2). Consequently, War Assets Administration entered a decision in the amount of $12,065.48 in favor of itself and against plaintiff, thereby leaving a balance, after deduction of plaintiff's claims of $8,350.58, of $3,714.90 due and owing from plaintiff to defendant, and payment of this balance was demanded.
Plaintiff obtained from the Office of the General Counsel a further review of the August 16, 1948, decision in so far as it permitted War Assets Administration to recover storage charges. Although plaintiff insisted that War Assets Administration had neither made the necessary election to assert its contract right to charge storage, nor given plaintiff notice of this election, the War Assets Administration, on November 24, 1948, affirmed its prior decision of August 16, 1948. The decision of August 16 was found to constitute sufficient timely notice to plaintiff that the claim for storage charges was being asserted.
In this suit the Government does not assert its claim for the $12,065.48 in storage charges, and concedes liability upon the $1,328.35 claim growing out of the erroneous shipment of the wrong-sized tanks. On the second claim defendant insists that it was justified in shipping the balance of the tanks, without either notifying plaintiff in writing, or receiving instructions authorizing shipment, and that it is not liable for the freight and demurrage incurred. This justification is based upon the terms and conditions of the contract, and defendant's repeated requests for shipping instructions, and also upon plaintiff's failure to issue those instructions within a reasonable time as it had promised. Defendant also insists that even if the notation on the contract, "Hold for shipping instructions," is construed as evidence of an intention of the parties to postpone the date of shipment beyond the required ten-day period, the notation nevertheless did not waive the requirement that the purchaser furnish shipping instructions within ten days, and that those instructions designate one or more destinations for the entire purchase; that it was not the intention that the Government's facilities should be used as a warehouse. Plaintiff insists that since it did not issue shipping instructions for the balance of the tanks, the agents of War Assets Administration, under their contractual duty to hold the goods for shipping instructions, should have at least sent out a written notice of their intention to make the shipment in question. Plaintiff also maintains that it was promised, at the time the sale was consummated, that small-lot shipments might be made, but plaintiff's proof is not sufficient to establish this point, and the contract is not reasonably susceptible of that interpretation.
Under the conditions existing at the end of World War II, and at the time of this sale, it reasonably appears that the War Assets Administration never intended to become involved in small piecemeal shipments of any particular item of surplus, such as the tanks in question, which composed only a small portion of the over-all surplus property program. On the contrary, the number of surplus items, the number of individual sales, and the mass of shipments involved, all indicate that sales such as the instant one were intended to be bulk sales resulting in a quick turnover and quick disposal, at least insofar as the South Tacoma Naval Base was concerned. This was the reason for the contract requirement that instructions for delivery be issued within ten days, unless otherwise expressly agreed upon in writing. Plaintiff, a dealer in such items, must have been cognizant of these facts. It definitely appears that plaintiff was simply trying to use Government facilities for the storage of the purchased tanks until such time as plaintiff could obtain individual purchasers therefor.
While admittedly the contract in question required defendant to hold the property for shipping instructions, this provision cannot be reasonably construed to mean that defendant agreed to store the tanks until such times as might suit plaintiff's convenience. Defendant, by fulfilling on many occasions plaintiff's requests for the shipment of small orders, neither waived the contract requirement of shipping instructions for the entire purchase, nor bound itself to continue such practices. Defendant constantly attempted to assert its right to have instructions for the entire purchase. If we assume that the statement in the contract, "Hold for shipping instructions," waived the requirement that plaintiff take delivery or furnish shipping instructions within the ten-day period specified elsewhere in the contract, and in its place substituted a requirement that plaintiff furnish shipping instructions for the entire purchase within a reasonable time, it is nevertheless well settled in the case of a sales contract that, in the absence of a specified time for the giving of shipping instructions by the purchaser, or for the removal of the goods by him, the law requires that the purchaser act within a reasonable time. Seabrook Coal Co. v. Moore, 25 Ga. App. 613, 103 S.E. 839; Barry v. Woodbury, 205 Mass. 592, 91 N.E. 902; Williston on Sales, 2d Ed., § 451. The failure of the purchaser to take the necessary steps may be regarded by the seller as a breach of contract, Maddox v. Wagner, 111 Ga. 146, 36 S.E. 609, or may be treated by him as an authorization to forward the goods to the purchaser without shipping instructions as required, by the contract. Cobb Lumber Co. v. Sunny South Grain Co., 36 Ga. App. 140, 135 S.E. 759.
Under the condition number thirteen of the contract, the War Assets Administration could have cancelled the contract upon plaintiff's failure to give instructions, or it could assert any other right it might have. We find that one of these other rights of the defendant as seller was to ship the goods to the purchaser without first notifying him in writing. In fact, such steps were the only logical ones for the War Assets Administration to take in this situation. Defendant had waited more than sixty days for the promised orders, which seems to us to have been more than a reasonable time in this situation. The Government had received full payment for the tanks and had delivered part of the purchase, and it was not therefore practicable for the War Assets Administration to cancel the contract. A cancellation would have defeated all that had been accomplished thus far and would have only necessitated a further disposal by the War Assets Administration, thereby further delaying the over-all surplus disposal program.
As to the contention that defendant should have given notice of its intention to forward the balance of the tanks, we find that such notice was unnecessary under the circumstances of this case. Defendant had on many occasions requested and urged plaintiff to give it such instructions, and it was plaintiff's failure to comply with these requests which culminated in the action taken by the War Assets Administration. Defendant had told plaintiff that it could not continue to hold the tanks, and plaintiff had promised to issue a shipping order for the balance of the tanks. It did not fulfill that promise. It should have been obvious to plaintiff, even in the absence of notice, that stronger measures by War Assets Administration would be forthcoming.
Accordingly, we conclude that plaintiff is entitled to recover the amount of $1,328.35, for which the Government concedes liability, and that plaintiff's claim for the $7,022.23 in freight and demurrage charges must be denied.
It is so ordered.
HOWELL, Judge; MADDEN, Judge; WHITAKER, Judge; and JONES, Chief Judge, concur.