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UNITED STATES v. HOFFMAN

June 24, 1963

UNITED STATES of America, Plaintiff,
v.
Stephen L. HOFFMAN, Defendant



The opinion of the court was delivered by: ZAVATT

This is an action to recover the sum of $ 15,296 plus interest allegedly due from the defendant as the unpaid balance on a contract to purchase Government surplus leather jackets, dated July 21, 1954. In addition to a general denial, the defendant pleads three affirmative defenses, two of which are also pleaded as setoffs. The first affirmative defense alleges (1) a breach of warranty by the auctioneers, as agents of the plaintiff, by means of a misleading brochure; (2) misleading oral representations and (3) the prevention of inspection of the jackets by the defendant. The second affirmative defense alleges that the representations made by the auctioneer, as agent of the plaintiff, were falsely and fraudulently made with the intent that the defendant rely on them; that the defendant did so rely and was falsely induced to enter into the contract. The affirmative defense alleges that the plaintiff defaulted in its performance by failing to make the jackets available for inspection; by requesting and accepting bids for merchandise other than what was actually offered for sale and that the goods attempted to be delivered were inferior and unusable waste.

The defendant, Stephen L. Hoffman, is a person of wide business and legal experience. He has been a practicing attorney for thirty-two years, dealing mainly in commercial matters. During seven of these years he was employed by the federal Government in the Legal Department of the Office of Price Administration. In addition to his legal practice, he is engaged in the operation of several substantial factoring corporations worth several hundred thousand dollars. Prior to July 21, 1954 he had dealt in leather goods but had not dealt in Government surplus property.

On June 23, 1954, Milton J. Wershow and David Weisz, auctioneers of Los Angeles, California, were the successful bidders for the contract to conduct an auction sale (No. 55-1) of 400 lots of Government surplus property encompassing a variety of items, including Men's Air Crew Jackets. The action sale was to be held at Wilkins Air Force Depot, Shelby, Ohio, on July 21, 1954 commencing at 8:30 A.M.

 Under the general supervision of the Supply Disposal Officer at Wilkins, the auctioneers prepared an auction 'catalog'. The auctioneers prepared a brochure, which was distributed widely several days before the sale, and inserted advertisements of the sale in several newspapers. One of these newspaper advertisements appeared at page 29 of the New York Herald Tribune of July 9, 1954 and was read by the defendant while he was in New York City several days before the announced date of the sale. It stated that a majority of the items offered for sale were 'unused' and listed the Men's Air Crew Jackets under the heading of 'UNUSED CLOTHING.' At least three days before the sale, and while the defendant was in New York City, he received at least two copies of the brochure which had been prepared by the auctioneers -- one by mail from the auctioneers and one from a Mr. Rappaport, an experienced fur auctioneer of New York City. In several places, the brochure stated that a majority of the items being offered for sale were unused. It listed 6700 Aircrew Leather Jackets -- Type D-1 Full Fleece Lined under the heading 'UNUSED CLOTHING' and the subheading 'UNUSED MEN'S CLOTHING.' The brochure stated:

 '* * * Quantities and descriptions are listed for buyer's guidance and are not to be considered a guarantee or warranty. The auctioneers and/or the Air Force will not be held responsible for advertising inaccuracies. * * * A printed catalog, with Government standard contract form, terms, and conditions of sale and description of each lot will be AVAILABLE ON SITE DURING THE INSPECTION PERIOD and AT THE AUCTION. Sale will be held from catalog in an auditorium.'

 The brochure stated the dates during which all of the items to be sold were available for inspection at Wilkins, i.e., between 7:00 A.M. and 3:30 P.M. (E.S.T.) on July 16, 17, 19 and 20, 1954, and urged all interested persons to inspect the property. That the property should be inspected appeared in three places in the brochure -- two of them in boldface type, one of which is followed by an exclamation point.

 The defendant conferred in New York City with Mr. Rappaport who agreed to accompany defendant to Wilkins and attend the sale as defendant's advisor at the defendant's expense. They left New York City by commercial airplane on July 20, 1954 and arrived at Mansfield, Ohio (the nearest town to Wilkins) during the afternoon of that day. They checked in at the same hotel in Mansfield where Milton J. Wershow, one of the auctioneers, was staying. The defendant and his advisor visited Wershow in his room for approximately five minutes that same afternoon during which Wershow said that the leather jackets would be a bargain at a price under $ 7 or $ 8. Defendant's testimony was contradictory as to whether Wershow said that all of these jackets were new or unused, or whether he said that most of them were new, or whether he said that only some of them were new. (It is to be noted that the defendant has instituted an action in the Supreme Court, New York County, against the auctioneers, alleging fraudulent misrepresentation by them in connection with the auction sale. That action has not been tried).

 The defendant then stated to Wershow that he would like to inspect the jackets that afternoon. Whereupon, Wershow suggested that the defendant drive out to Wilkins and see Meyer Poster, one of the auctioneers' employees. Defendant and his advisor drove out to Wilkins that afternoon to inspect the jackets. They met Poster who escorted them to the area of Wilkins where the jackets were crated in 185 to 200 wooden boxes set out in orderly rows of piles of such boxes covered with tarpaulin. Each box contained approximately three dozen jackets. The tarpaulin covering some of the boxes was pulled back by workmen in the defendant's presence. Poster climbed up on one pile of the boxes, opened one box from which he removed three or four jackets and showed them to the defendant and his advisor. The defendant and his advisor inspected these jackets. They did not ask to see any other jackets in that box or any jackets in any other box nor did the defendant attempt to remove any jackets himself from any boxes for, as he testified, he did not wish to soil his clothes. He could have inspected other jackets had he desired to do so. The limited inspection the defendant did make took place late in the afternoon, after 3:30 P.M., i.e., after the time when goods were officially available for inspection.

 The court finds that the defendant did not rely upon any representations made by auctioneer Wershow as to the quality of the jackets, assuming arguendo that the statements made by Wershow that day were representations rather than mere puffing by an auctioneer. Rather, the defendant relied upon his own inspection.

 Defendant and his advisor attended the auction sale on July 21, 1954. The defendant received a copy of the auction catalog and a bid form. The front cover of the catalog stated in italics:

 'SPECIAL NOTE: While some items are listed as used, this does not necessarily mean that items not so listed are unused. All merchandise is sold 'as is' with no warranties or guarantees as to condition.'

 In smaller print under the heading 'PROCEDURES, TERMS AND CONDITIONS,' it was stated on the front cover of the catalog:

 'All merchandise will be sold as is, where is, with warranty only as to count and title.'

 A copy of the general sales terms and conditions had been inserted into the catalog in front of page 1. of all catalogs distributed on the morning of the sale. The defendant read these terms of sale while the sale was going on and before he made his bid. The catalog which defendant received before he entered the auditorium described the jackets in question as follows: LOT NO. QUANTITY DESCRIPTION 219 ...


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