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UNITED STATES v. TRI-STATE METAL PRODS.

May 28, 1957

UNITED STATES of America, Plaintiff,
v.
TRI-STATE METAL PRODUCTS, Inc., Defendant



The opinion of the court was delivered by: GOURLEY

The United States of America claims damages against Tri-State Metal Products, Inc., for an alleged breach of contract for the sale of metal shelving units. The case was tried without jury.

It does not appear that the corporation, after it came into existence on July 22, 1948, executed or signed the contract allegedly concluded with the Quarter Master Division of the government. However, prior to its corporate existence, Johnson and Simpson, who subsequently became directors of said corporation, made a firm bid to the Quarter Master Corps which the government accepted.

 Two questions are presented for the determination of the court:

 1. Were the actions of Simpson and/or Johnson binding on the corporation after it came into existence on July 22, 1948, upon the legal theory that Simpson and/or Johnson engaged in activities which would bind the corporation after it came into legal existence? If this answer is in the negative, judgment should be entered for the defendant. If it is in the affirmative, the second question must be resolved, that is --

 2. Was there a meeting of the minds when the Defendant Corporation submitted the offer to the government and the government accepted the offer by its telegram of acceptance?

 At the time this proceeding was called for trial, the court's attention, for the first time, was called to the government's filing of an amended complaint to include Simpson and Johnson, as additional party defendants. In view of the government's failure to comply with Rule 15(a) of the Federal Rules of Civil Procedure, 28 U.S.C. in not securing consent of the adverse party and leave of court to file the same, and by reason of the failure of the complaint to assert any allegation whatsoever which would support a right to recover either against Simpson or Johnson, said amendment was stricken without prejudice to the government to file a subsequent action. My determination in the instant proceeding in no way affects my prior ruling in this connection one way or another.

 During the course of testimony, consideration was given to the empanelling of an advisory jury in resolving the factual dispute as to whether a meeting of the minds had been effectuated between the parties to create a legally valid contract. Upon review of the record and exhibits, however, I am convinced that the weight of the credible evidence so clearly preponderates in favor of the conclusions herein enunciated that the empanelling of an advisory jury is unnecessary and would prove redundant.

 Upon a most detailed review of the record, I am satisfied that even though defendant did not come into formal legal being as a de jure corporation until July 22, 1948, nevertheless Johnson and Simpson prior to such date were negotiating as responsible agents with the government at a time when said corporation enjoyed de facto status. Since a de facto corporation cannot be inquired into collaterally, it is a necessary corollary that defendant would be bound by any contractural obligations brought about by its responsible agent. Cochran v. Arnold, 58 Pa. 399.

 The facts, however, do not lend themselves to the conclusion that there was a meeting of the minds when Defendant Corporation submitted the offer to the government by its agent, Johnson, and the government's telegram of alleged acceptance.

 We are confronted with negotiations conducted between defendant and the government which never resulted in the effectuation of a formal contract. An evaluation of the exhibits discloses a bid or offer on the part of defendant which did not conform to government specifications.

 The evidence, in fact, discloses that defendant, through its agent, Johnson, never saw the specifications when it agreed to supply metal shelving to government specifications. The illusory nature of the relationship existing is cogently demonstrated by the fact that subsequent to its bid or offer, and the government's acceptance of the same on June 26, 1948, defendant on July 1, 1948 submitted written request for the government's desired specifications. It would appear a patent anomaly to hold a binding contract to exist when the offeror was not even acquainted with the requirements and terms of the contract.

 I must, therefore, conclude that even though Defendant Corporation was bound by the negotiations of its responsible agents at the time of its de facto existence, a meeting of the minds between said agents and the government had never been brought about and that a legally valid contract was not perfected.

 The court enters the following Findings of Fact and ...


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