Hume v. United States
132 U.S. 406 (1889)

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U.S. Supreme Court

Hume v. United States, 132 U.S. 406 (1889)

Hume v. United States

Nos. 102, 103

Submitted November 13, 1889

Decided December 13, 1889

132 U.S. 406

APPEALS FROM THE COURT OF CLAIMS

Syllabus

When a contract is so extortionate and unconscionable on its face as to raise a presumption of fraud or to require but slight additional evidence to justify such presumption, fraud may be set up as a defense in an action at law with the same effect with which it could be set up in equity as a ground for affirmative relief, and if articles delivered in performance of such an unconscionable contract have been accepted in ignorance, and under circumstances excusing their nonreturn, and they have some value, the amount sued for will be reduced to that value in the judgment.

Persons dealing with public officers are bound to inquire about their authority to bind the government, and are held to a recognition of the fact that government agents are bound to fairness and good faith as between themselves and their principals.

The plaintiff contracted in writing to sell to the government a quantity of shucks at 60 teats a pound at a time when the market value of that article was 14 cents a pound. He delivered them and they were consumed in the government service. He then claimed to be paid at the contract price, which, being refused, he sued therefor in the Court of Claims. Held that he could only recover the market value of the shucks.

The Court in its opinion stated the case as follows:

Claimant filed his petition against the United States in the Court of Claims, averring that on the 9th day of August, 1883, he entered into a contract in writing with the acting Secretary of the Interior department for the furnishing of certain articles, constituting items in his proposal numbered 2, 9, 19, 32, 42, 56, 71, 77, 78, 79, 89, 90, 91, 97, 102, and 103, to the government hospital for the insane near Washington at rates

Page 132 U. S. 407

specified therein; that he had furnished merchandise amounting to the sum of $5,695.89 according to the prices established by the terms of the contract, and had been paid only the sum of $1,663.89, and that there was still due and owing to him the sum of $4,032, which he was entitled to recover, with interest from the 1st day of July, 1884, and that the accounting officers of the Interior Department had refused and neglected to pay such balance of $4,032 because, as they alleged, the price charged for item 97 in claimant's proposal was excessive,

"notwithstanding the charge therefor was based upon the amount stated in said proposal, and accepted by said defendant's officers and agents, and by them incorporated in said contract as aforesaid."

To this petition a special plea was filed February 12, 1886, on behalf of the United States, to the effect that claimant had agreed to furnish shucks to the government hospital at the rate of sixty cents per hundredweight, and entered into a written contract, to recover damages for the breach of which this suit was instituted, whereby he agreed to furnish (inter alia) shucks at the rate of sixty cents per pound; that this was a clerical error, the real contract being that shucks were to be furnished by claimant to said hospital at sixty cents per hundredweight; that notwithstanding this,

"claimant attempts to practice a fraud against the United States in attempting to establish an allowance of the claim as made by him, and by his effort to obtain a judgment in this Court upon such written contract, as if such mistake and clerical error had not been made, and for the amount due for the shucks furnished, as expressed by mistake in said written contract."

To this special plea claimant replied, by his attorney, denying that he agreed to furnish shucks at the rate of sixty cents per hundredweight, and averring that he bid for shucks

"at the rate of sixty cents per pound, in accordance with the printed schedule furnished him by the United States upon which to make out his bid; that the said price was the price at which he intended to bid, and that there was no mistake on his part in making out the bid; . . . that the said contract contained fifteen other items of goods, which were furnished

Page 132 U. S. 408

as ordered, and some items furnished in much larger quantities than the estimated quantity contained on the printed schedule; that upon some of the items the claimant lost money; upon others there was a very small profit, and that upon the whole contract, adjusted at contract rates, the claimant will not receive more than a fair and reasonable profit. Claimant denies emphatically any attempt to practice a fraud on the United States, and avers that the whole transaction was in absolute good faith, in the ordinary course of business; that there was no inducement or promise made in regard to the matter, except the written proposal of the claimant and the written contract."

Evidence was adduced on behalf of the United States tending to show that shucks at the time of the contract were worth from three-fifths of a cent to one cent and three-quarters per pound; that it was the custom of the government to buy shucks by the hundredweight, and that the mistake in question had occurred by reason of the word "pounds" in the printed form not having been struck out, and "hundredweight" inserted, all of which evidence was objected to on behalf of the claimant.

The Court of Claims filed its findings of fact and conclusion of law on the 3d of May, 1886.

The first finding sets forth the advertisement of the Secretary of the Interior for proposals for furnishing supplies to the government hospital for the insane for the fiscal year ending June 30, 1884, stating, among other things:

"Proposals must be made in duplicate on the forms furnished by the department.. . . . Bids will be considered on each item separately. Schedules containing blank forms for bidding, items, and approximate estimates of amounts will be furnished on application."

A description of what the quality of many of the articles, not including shucks, must be is given at length in the advertisement.

The second finding contains the bids of the claimant on forms furnished by the department, the schedule attached to his proposal enumerating some 107 articles, on all but twelve of which claimant made bids. This schedule,

Page 132 U. S. 409

under the head of estimated quantity, enumerates the articles by pound, dozen, gross, bushel, box, ton, barrel, bale, gallon, case, quart, and sack, and the bids are carried out per pound, per dozen, per gallon, etc.

The third finding gives the contract, by the terms of which the claimant agrees to furnish the items in the proposal, numbered as in the petition, and the Acting Secretary of the Interior agrees to pay or cause to be paid on behalf of the United States the prices specified in the proposal and contract, "for all the articles delivered and accepted," the right being reserved to order a greater or less quantity of each. The fourth and fifth findings and conclusion of law are as follows:

"IV. He (claimant) furnished under said contract all the articles included under items Nos. 2, 9, 19, 32, 42, 56, 71, 78, 79, 89, 90, 91, 102, 103, and has been paid therefor according to the contract. He also furnished in two or three lots, in the latter part of the year 1883, 6,720 pounds shucks under item No. 97, with memorandum bills accompanying the delivery thereof, with the price carried out at 60 cents per pound, the whole aggregating $4,032. For the shucks he has not been paid."

"V. At the time said contract was made, shucks were of the market value of from $12 to $35 a ton, according to quality, and whether they were hackled or unhackled, and those furnished by the claimant were of the market value of $35 a ton, or 1 3/4 cents per pound, aggregating, for all that were delivered, $117.60."

"Conclusion of Law. Upon the foregoing findings of fact, the court decides as a conclusion of law that the claimant is entitled to recover $117.60 and no more."

The opinion of the court was delivered by Richardson, C.J., 21 Ct.Cl. 328, who, after stating the facts and pointing out that the claimant was the only bidder for shucks, says:

"At the time the contract was made, shucks were worth from $12 to $35 a ton, or from 6 mills to 1 3/4 cents a pound, while the claimant was to receive nearly forty times as much as the highest value. "

Page 132 U. S. 410

"That an agreement to pay $1,200 a ton for shucks, actually worth not more than $35 a ton, is a grossly unconscionable bargain, defined in Bouvier's Law Dictionary to be 'a contract which no man in his senses, not under delusion, would make, on the one hand, and which no fair and honest man would accept on the other,' nobody can doubt. Such a contract, whether founded on fraud, accident, mistake, folly, or ignorance, is void at common law. It is not necessary to invoke the aid of a court of equity to reform it. Courts of law will always refuse to enforce such a bargain as against the public policy of honesty, fair dealing, and good morals."

After citing Story's Equity Jurisprudence § 188; James v. Morgan, 1 Levinz 111; Baxter v. Wales, 12 Mass. 365, and Leland v. Stone, 10 Mass. 459, the opinion thus concludes:

"These citations are sufficient to show that in suits upon unconscionable agreements the courts of law will take the matter in their own control, and will, without the intervention of courts of equity, protect the parties against their enforcement. If it be so in suits on contracts between private parties who act by and for themselves, how much more is it so in suits on agreements by the United States, acting always through public officers, who are mere agents, required to act in good faith towards their principal according to the laws of the land, as everybody dealing with them are bound to know. There is no finding by the court of actual fraud by any of the persons engaged in making the contract now under consideration. The unconscionable price inserted for shucks was no doubt a mere accident, perhaps from an idea that it was the price per hundred pounds instead of per pound, as printed in the proposals and contract, and from neglect to change the printed words accordingly, which, if it had been done, would have fixed the price at $12 a ton, the very price which the findings show to have been the lowest value of shucks of any kind at that time. But, however it may have happened, we hold, as was held in the case of Leland v. Stone, from which we have quoted the words of the court, that a contract may be held unconscionable without proof of actual fraud at its inception if its enforcement would be unconscionable. "

Page 132 U. S. 411

"It would be a fraud upon the United States to enforce such a contract as the one now in suit, and it never can be done through the Court of Claims."

Judgment was accordingly rendered in favor of the claimant for $117.60, and both parties appealed.

MR. CHIEF JUSTICE FULLER, after stating the facts as above, delivered the opinion of the Court.

In his celebrated judgment in Earl of Chesterfield v. Janessen, 2 Ves.Sen. 125, 155, Lord Hardwicke arranged all the forms of fraud, recognized by equity, in four classes, the first two of which he gives in these words:

"1. Then fraud, which is dolus malus, may be actual, arising from facts and circumstances of imposition, which is the plainest case. 2. It may be apparent from the intrinsic nature and subject of the bargain itself, such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other, which are unequitable and unconscientious bargains, and of such even the common law has taken notice, for which, if it would not look a little ludicrous, might be cited James v. Morgan, 1 Lev. 111."

The case referred to by the Lord Chancellor was ruled by Sir Robert Hyde, then at the head of the King's Bench, and is reported in 1 Levinz 111, in these words:

"Assumpsit to pay for a horse a barley corn a nail, doubling it every nail, and avers that there were thirty-two nails in the shoes of the horse, which, being doubled every nail, came to five hundred quarters of barley. And on non assumpsit pleaded, the cause being tried before Hyde at Hereford, he directed the jury to give the value of the horse in damages, being

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