author: KASHIWA, Judge:

text:
    UNITED PACIFIC INSURANCE COMPANY v. The UNITED STATES.
    No. 163-73.
    United States Court of Claims.
    June 19, 1974.
    As Amended Oct. 4, 1974.

      Herman L. Fussell, Atlanta, Ga., attorney of record, for plaintiff; McNeill Stokes and Stokes, Boyd & Shapiro, Atlanta, Ga., of counsel.
    Bernard M. Brodsky, Buffalo, N. Y., with whom was Acting Asst. Atty. Gen., Irving Jaffe, for defendant, Leslie H. Wiesenfelder, Washington, D. C., of counsel.
    Before COWEN, Chief Judge, DUR-FEE, Senior Judge, and KASHIWA, Judge.
   KASHIWA, Judge:

This is an action brought under the general jurisdiction of the court, 28 U.S.C. § 1491 (1970), for review of an administrative decision under the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1970). The plaintiff contests the decision of the Armed Services Board of Contract Appeals (hereinafter referred to as “ASBCA”).

The parties filed cross motions for summary judgment. The material facts are not in dispute. Plaintiff’s motion for summary judgment is allowed for reasons hereinafter stated.

On or about June 30, 1970, the Defense Supply Agency, an agency of defendant, and Knoxville Acoustical Co., Inc. entered into contract No. DSA 400-70-C-6216 for the recovering of roofs at the Defense General Supply Center, Richmond, Virginia, being Project PR 1-69 (Second Increment), warehouses 4, 10, and 12, and Project PR 1-69 (Third Increment), warehouses 30, 31, 32, and 33. The fixed contract price was $155,439.

Plaintiff, as surety, executed a payment and performance bond on said contract. Knoxville Acoustical Co. did not perform any work on said project and was defaulted under said contract by the Government. Plaintiff was then requested to perform said contract.

Plaintiff and the Government entered into a takeover agreement whereby both parties agreed that plaintiff would become the contractor on said construction contract. On or about June 1, 1971, plaintiff contracted with L. F. Still and Co. for the performance of all work under said contract and takeover agreement.

A dispute arose over the method of installing bituminous flashings on the firewalls of said project. The firewalls, about 8 inches wide, rose more than a foot above the warehouse roofs. Plaintiff contended that under the terms of the contract, the plaintiff could install the flashings on the firewalls in either of two ways. Either plaintiff could “cap and seal” the flashings or “return and seal” the flashings. Under the former method, the flashing would be installed up the vertical side of the firewalls and would be capped and sealed to the under-edge of the terra cotta coping which was located on the horizontal surface of the top of the firewall. The latter alternative, commonly referred to as returning and sealing, requires the removal of all terra cotta coping on the tops of the firewalls. Then new flashings would be installed up the vertical side of the firewalls, over the top of the firewall, and down the other vertical side of the firewall. New terra cotta coping would then be sealed on top of the flashing on te horizontal portion (tops) of the firewalls.

The Government contended that the contract did not allow for alternative methods of installing the flashings. Instead, the Government demanded that the more expensive return-and-seal method be used. Plaintiff urged that under the contract either the cap-and-seal method or the return-and-seal method was allowed. Under protest, the plaintiff complied with the Government’s demand. The return-and-seal method was considerably more expensive than the cap- and-seal method.

This dispute centers around the legal interpretation of the contract documents and particularly the following provisions of the contract:

TP2-2 GENERAL: * * * New bituminous flashings shall be installed in accordance with these specifications at all locations where existing flashings■ are bituminous type. [Emphasis supplied.]
* * * * * *
TP2-8 FLASHINGS:
a. General: All bituminous flashings shall be replaced. Flashings shall be provided in the angles formed at walls and other vertical surfaces and where required to make the work watertight. Except where metal flashings are indicated or are specified in other sections, bituminous-plastic base flashings shall be provided and installed before the top pouring and surfacing aggregate aré applied to the roofing. The raggle or groove in which flashings are installed shall be not more than 14 inches nor less than 8 inches above the roof. Step flashings shall be used where vertical surfaces abut sloped roof surfaces. Flashings shall be returned and sealed or capped and sealed to waterproof edges and ends. [Emphasis supplied.]
•>:■ -x- -x- * * -x-
TP5-1:
This section covers removing and reinstalling all coping as necessary in connection with replacement of flashings, it being specifically understood that contractor shall provide all material necessary to replace broken or cracked coping irrespective of whether or not damage resulted from contractor’s operations. [Emphasis supplied.]

For the extra work caused by the Government’s demanding the returning and sealing of the flashings, plaintiff sought an equitable adjustment of the contract price. After an adverse finding by the contracting officer, plaintiff appealed to the ASBCA. The Board ruled adversely to the plaintiff and held that the contract required the flashings to be returned and sealed (ASBCA No. 17748). Plaintiff then filed suit in this court to recover $44,003.92.

The Board’s decision turned entirely upon the application of law to the undisputed provisions of the contract. At page 8 of the decision, the Board stated that the issue was the interpretation of the specifications and drawings. Defendant concedes that under Wunderlich Act standards the issue of whether the subject construction contract requires installation of bituminous flashings on the tops of firewalls required an interpretation of the contract terms and, therefore, is a question of law which this court is free to answer independently of the Board’s decision. The cases are legion which establish that an administrative board’s interpretation of the language of the contract documents is a question of law and not binding on nor entitled to finality by the court. Martin Lane Co. v. United States, 432 F.2d 1013, 1015, 193 Ct.Cl. 203, 206-207 (1970); HRH Constr. Corp. v. United States, 428 F.2d 1267, 1271, 192 Ct.Cl. 912, 918 (1970).

Plaintiff contends that the contract allowed either of two alternative methods of installation and under the terms of the contract, plaintiff had the option of either capping and sealing the flashings or returning and sealing the flashings. On the other hand, the Government claims the contract required the return- and-seal method of installation.

The contract provisions expressly provide that the plaintiff may use either of the aforementioned methods. Section TP2-8 provides:

a. General: All bituminous flashings shall be replaced. Flashings shall be provided in the angles formed at walls and other vertical surfaces and where required to make the work watertight, •x- * -:<• gtep flashings shall be used where vertical surfaces abut sloped roof surfaces. Flashings shall be returned and sealed or capped and sealed to waterproof edges and ends. [Emphasis supplied.]

The crucial sentence is, “Flashings shall be returned and sealed or capped and sealed to waterproof edges and ends.” The word “or” unequivocally indicates that alternative methods of installation were authorized. The second sentence states, “Flashings shall be provided in the angles formed at walls and other vertical surfaces and where required to make the work watertight.” Thus, where the roof met a firewall, flashing was to be installed and the flashing was to extend vertically up the side of the firewall. But there is no requirement that the flashing extend along the horizontal top of the firewalls. Instead, rather than requiring the flashings to extend over the firewalls, the provision required the flashing to be applied where needed to make the work watertight.

Plaintiff’s interpretation of the contract is entirely consistent with all the provisions of the contract. It is an elementary rule of contract interpretation that all parts of a contract must be read together and harmonized if at all possible. Gelco Builders & Burjay Constr. Corp. v. United States, 369 F.2d 992, 177 Ct.Cl. 1025 (1966); Southern Constr. Co. v. United States, 364 F.2d 439, 176 Ct.Cl. 1339 (1966); Hol-Gar Mfg. Corp. v. United States, 351 F.2d 972, 169 Ct.Cl. 384 (1965). A corollary to this general rule of law is the principle that all provisions of a contract are to be given effect and no provision is to be rendered meaningless. Jamsar, Inc. v. United States, 442 F.2d 930, 194 Ct.Cl. 819 (1971).

The Government points to section TP2-2 which provides:

* * * New bituminous flashings shall be installed in accordance with these specifications at all locations where existing flashings are bituminous type.

The Government argues that plaintiff’s position does not give effect to TP2-2. We are of the view that TP2-2 and TP2-8 are consistent with each other and are consistent with the plaintiff’s interpretation of the contract. TP2-2 requires the installation of flashings in all locations where required in the specifications. TP2-8 is the specification defining “all locations” where the flashings are to be installed, i. e., “Flashings shall be provided in the angles formed at walls and other vertical surfaces and where required to make the work watertight.” The above language describes where the flashings were required to be installed. As noted, supra, where the roof met a firewall, flashing was to be installed, and the flashing was to extend vertically up the side of the firewall. However, there is no requirement that the flashing extend along the horizontal top of the firewalls. By the rule expressio unius est exclusio alterius, when language specifically provides where the flashings are required to be installed, there is manifested an intention that the flashings are not required to be installed elsewhere. Therefore, the contract did not require the installation of flashings on the tops of the firewalls.

Moreover, if references to “all” in TP2-2 and TP2-8 were meant to encompass the tops of the firewalls, the specific language in TP2-8 pertaining to where the flashings were required would have been unnecessary and redundant. The tops of the firewalls were to be covered if the plaintiff chose the return- and-seal method of installation. If, as the plaintiff desired, the cap-and-seal method were chosen, flashing would not be required on the tops of the firewalls.

The Government also points to section TP5-1 which reads as follows:

This section covers removing and reinstalling all coping as necessary in connection with replacement of flashings, it being specifically understood that contractor shall provide all material necessary to replace broken or cracked coping irrespective^ of whether or not damage resulted from contractor’s operations.

TP5-1 pertains to the removal and installation of coping. This section does not state that all terra cotta copings shall be replaced and reinstalled but, instead, the coping is to be replaced “as necessary in connection with replacement of flashings, it being specifically understood that contractor shall provide all material necessary to replace broken or cracked coping irrespective of whether or not damage resulted from contractor’s operations.” This language is consistent with TP2-8a. Had plaintiff chosen to cap and seal the flashings, under TP5-1 plaintiff would have been obligated to repair that coping damaged or cracked, irrespective of whether or not the plaintiff had caused those damages. Under TP5-1, had plaintiff chosen to return and seal the flashings on the firewalls, plaintiff would have, of course, removed all the coping in the process and would have reinstalled new coping on the top of the returned flashings.

Therefore, the plaintiff’s interpretation of the contract, that it had the option to either return and seal or cap and seal the flashings, is a fair interpretation. When read as a whole, the contract provisions are entirely consistent with this interpretation and the interpretation is reasonable.

While the plaintiff’s- interpretation coordinates the provisions, the Government’s interpretation forces the provisions to be contradictory. The Government erroneously and unreasonably construed the contract absolutely to require the flashings to be returned and sealed. As is described above, this process would require the removal of all existing terra cotta copings, the installation of new flashings over the top of the firewalls, and the subsequent reinstallation of new coping over the flashings. The Government’s interpretation fails to abide by the established principle of law that all aspects of a contract are to be given effect and none are to be rendered meaningless. Jamsar, Inc. v. United States, supra. The Government’s interpretation renders meaningless “or cap and seal” in TP2-8. It is impossible to make the Government’s contentions consistent if the above language is given meaning.

While ignoring the crucial alternative language of the contract, the Government gives exaggerated emphasis to the general provisions of TP2-2 and TP2-8. Particularly, the Government gives strained meanings to “all bituminous flashings shall be replaced” (TP2-8) and “all locations” (TP2-2). Such heavy emphasis is misplaced in that when there are two clauses in a contract which are in any respect conflicting, the clause which is specially directed to a particular matter (TP2-8) controls over a clause which is general in its terms (TP2-2), although within its general terms the part may be included. W. E. Callahan Constr. Co. v. United States, 91 Ct.Cl. 538 (1940); Occidental Life Ins. Co. v. Marmaduke Corbyn Agency, 187 F.2d 553 (10th Cir. 1951). Clearly, the language “flashings shall be provided in the angles formed at walls and other vertical surfaces and where required to make the work watertight” is specific language focusing directly upon where the flashing is to be installed. Therefore, the specific language should be given effect over the general language relied upon by the Government.

Moreover, under the Government’s interpretation of the contract, section TP5-1 is unnecessary and meaningless. If the Government is correct, section TP5-1 should simply read, “All terra cotta copings shall be replaced.” But, clearly, TP5-1 expressly provides that all the terra cotta copings need not be replaced. Instead, TP5-1 provides that if in the plaintiff’s operation coping is removed, as would happen if the return- and-seal method of installation were utilized, the plaintiff was obligated to install new coping. On the other hand, TP5-1 provides that even if all the coping is not removed and reinstalled, the plaintiff was obligated to replace any old and broken coping, irrespective of whether such damage resulted from the work of the plaintiff. This language is obviously consistent with the cap-and-seal method of installing the flashings in that such method would not require the removal of all the copings.

It seems that the logical consequence of the Government’s interpretation of the contract is to create an ambiguity. The Government places heavy emphasis upon TP2-2 and TP2-8, which in pertinent part provides “flashings shall be installed * * * at all locations where existing flashings are bituminous type” and “all bituminous flashings shall be replaced.” Contrary to the plaintiff’s contentions, the Government urges that the use of such language means that the flashings on the tops of the firewalls were to be replaced. If such is the natural meaning of the words, the words are absolutely inconsistent with TP2-8 which provides “flashings shall be returned and sealed or capped and sealed to waterproof edges and ends.” So it must be concluded that if all flashings on the tops of the firewalls were to be replaced, the language in TP2-8 referring to capping and sealing would not require placing flashings on the tops of firewalls and would be, if meaningless, also confusing.

Furthermore, it is well established that if a drawing or specification is ambiguous and the contractor follows an interpretation that is reasonable, this interpretation will prevail over one advanced by the Government, even though the Government’s interpretation may be a more reasonable one since the Government drafted the contract. Peter Kiewit Sons’ Co. v. United States, 109 Ct.Cl. 390 (1947). The Government as drafter of the contract had a duty to shoulder the major task of seeing within a zone of reason that words of the contract correctly and concisely communicate the proper notions and intentions of the parties, and the Government must bear the burden of a failure to carry that responsibility. L. Rosenman Corp. v. United States, 390 F.2d 711, 182 Ct.Cl. 586 (1968). The Government drafted this contract and as a result, any ambiguities that were created should be strictly construed against the Government. Merritt v. United States, 95 Ct.Cl. 421 (1942); Wunderlich Contracting Co. v. United States, 166 F.Supp. 741, 143 Ct.Cl. 876 (1958).

In concluding, we find that the only reasonable and consistent interpretation is that the Government had no right to demand the returning of flashings over the tops of the firewalls and removing and replacing all the terra cotta coping. This court finds, for the reasons above stated, that the plaintiff’s interpretation that the contract allowed plaintiff either of two alternative methods of installation as expressly provided in TP2-8, “Flashings shall be returned and sealed or capped and sealed to waterproof edges and ends,” is the proper interpretation.

We, therefore, allow plaintiff’s motion for summary judgment and deny defendant’s cross motion for summary judgment. This case is remanded to the ASBCA for the holding of such hearing or hearings as may be deemed advisable and for a determination, in the first instance, of the precise amount of plaintiff’s recovery, with appropriate proceedings under Pub.L. 92-415 (codified at 28 U.S.C. § 1491 (Supp. II, 1972)), this opinion and the General Order No. 3 of 1972. Further judicial proceedings are suspended pending completion of the remand proceedings. The duration of the stay of proceedings shall be not longer than six months from the date of this judgment. The attorney of record for plaintiff is designated as the responsible reporting attorney under paragraph 9(a) of General Order No. 3.

      . Previous proceedings covered by Genera] Order No. 3 of 1972 are now provided for in Rules 149, 150 effective October 1, 1974.


source: Caselaw Access Project

author: KILEY, Senior Circuit Judge.

license: Public Domain

text:
    In the Matter of CREATIVE BUILDINGS, INC., an Illinois corporation, Debtor.
    No. 73-1328.
    United States Court of Appeals, Seventh Circuit.
    Argued Feb. 11, 1974.
    Decided June 24, 1974.

      Donald G. Beste, Peoria, 111., for appellant.
    Frank O. Wetmore, II, Chicago, 111., for appellee.
    Before SWYGERT, Chief Judge, KI-LEY, Senior Circuit Judge, and CUMMINGS, Circuit Judge.
   KILEY, Senior Circuit Judge.

This appeal is from a district court judgment refusing to set aside the denial by a Referee in Bankruptcy of Meyer Furnace Company’s (Meyer’s) petition for reclamation of goods it had shipped to Creative Buildings, Inc. before Creative filed its Chapter XI petition for an arrangement under the Bankruptcy Act, 11 U.S.C. § 701. We affirm.

Meyer had transacted business with Creative since June of 1969, with a sixty-day credit line and was doing so when Creative filed its petition for arrangement on January 28, 1972. Creative had given Meyer two checks for goods, one for $47,859.23, dated November 18, 1971, and the other for $9,900.76, dated December 1, 1971. Both checks were returned for insufficient funds (NSF). The first check was paid when represented. Meyer redeposited the second check and requested its bank to hold it for collection. Meyer’s bank account had not been debited with the amount of the second check when on January 5, 1972, it shipped the goods in controversy to Creative. No debit for the $9,900.76 amount appearing on its December 31, 1971 bank statement, Meyer assumed that the check had cleared, and when the goods were shipped to Creative on January 5, 1972 Meyer was unaware that its bank was still holding the check. Its account was not debited for the check until January 31, 1972.

Meyer filed this petition on March 9, 1972 for reclamation. The Referee denied the petition and denied rehearing. The district court denied Meyer’s petition for review after a hearing. Meyer’s appeal followed.

I

Meyer contends that when Creative gave it the NSF checks in November and December 1971 it had “ceased to pay its debts in the ordinary course of business” and had demonstrated that it could not “pay its debts as they became due” or was then “insolvent” under the Federal Bankruptcy Act; and was therefore insolvent by definition under Section 1-201 of the Illinois Uniform Commercial Code.

There is no proof that the “fair value” of Creative’s assets were less (when the cheeks were given) than its total liabilities and accordingly it was not insolvent under the Bankruptcy Act. Meyer’s argument that Creative’s NSF checks as a matter of law rendered it insolvent attributes an absolutely literal meaning to the Code’s “definition” of insolvency. We reject an application of an absolutely literal meaning to the words of the Code. There are a variety of business transactions in which for one reason or another NSF checks issue either through mistake, or miscalculation, or good faith reliance by the drawer on anticipated income, or other more or less innocent circumstances. See Hamm Brewing Co. v. First Trust & Savings Bank, 103 Ill.App.2d 190, 242 N.E.2d 911, 914 (1968). We think that the drawer cannot reasonably be held to have ceased paying bills in ordinary course, or to be unable to pay its debts when due, in every case in the variety of transactions regardless of circumstances.

In our view decision must rest on the facts of each transaction. The issuance of the NSF checks may indicate an impecunious status and be notice that the drawer may be insolvent. But in context of the testimony here, Meyer does not argue and we cannot hold that the district court’s decision — that Creative was not insolvent when the checks were issued — is clearly erroneous.

II

Meyer’s principal contention is that the two checks given Meyer in November and December 1971 amounted to misrepresentations of solvency. There is no transcript reference supporting Meyer’s comptroller’s testimony that he relied upon five NSF checks given Meyer between October 1971 and December 1971, in releasing the shipment. He said at trial that he relied upon telephone assurances as well as upon NSF checks. On appeal, Meyer relies only upon two NSF checks. The parties agree that if Meyer is to have a remedy in this case, it must derive from the proper interpretation of Chapter 26, Section 2-702, Illinois Revised Statute (Illinois Uniform Commercial Code).

Meyer argues that the two NSF checks were a misrepresentation of solvency “in writing” within three months of Creative’s receipt of the shipment, entitling Meyer to reclaim the goods. Creative argues that Meyer had the burden of proving Creative’s insolvency and its alleged misrepresentation of solvency in November and December 1971; and that Meyer offered no proof of insolvency, except the two checks, and did not prove by the checks that Creative misrepresented its solvency.

Meyer’s demand was not made within ten days of the January 5, 1972 delivery to invoke the remedy in the first clause of Section 2-702; Accordingly, the remedy provided in the second clause of the paragraph is the basis of Meyer’s complaint. In order to successfully reclaim the goods, therefore, Meyer had the burden to prove, prima facie, that Meyer discovered that Creative was insolvent when the latter received the goods on January 5, 1972 and that Creative misrepresented its solvency in writing to Meyer within three months prior to that date. There is also a requirement implicit in paragraph 2 that Meyer must prove he relied upon the two NSF checks in shipping the goods.

Both parties rely upon the decision of the Appellate Court of Illinois in the Hamm Brewing Co. case supra. There, Lape, a Hamm beer distributor, borrowed money from the bank under a Security Agreement and Consignment of Inventory with an after-acquired property clause. The Bank perfected its security interest. Lape defaulted in payments and the bank took possession of the consigned beer and sold it. Hamm sued the bank under Section 2-702(2), asserting the right to possession of the beer based on allegation that dishonored checks given Hamm by Lape were written representations of solvency. The Hamm trial court decided, as a matter of law, that the dishonored checks did not amount to representation of solvency and that Hamm could not use the checks to invoke the benefit of Section 2-702(2). The appellate court affirmed.

The appellate court stated at p. 914 of 242 N.E.2d that it could affirm only if, on the undisputed facts, the trial court could rule as a matter of law that the checks and “affidavits and exhibits” in evidence were not representations of solvency. But the court’s holding at pp. 915-916 is that the undisputed facts showed no reliance by Hamm upon the dishonored checks in granting credit to Lape.

The appellate court noted several rules which are pertinent to our decision: whether the cheeks are representations of solvency is a question of fact, p. 914; implied in Section 2-702(2) is the requirement that the “writing” be treated by the Seller as a representation, pp. 914-915;' Illinois decisions in commercial transactions involving misrepresentation are to be considered in Section 2-702(2) cases, p. 915; in determining the right of reliance on the representations, the facts, knowledge of which the Seller had, or in prudence should have had, must be taken into consideration, p. 915 ; under Section 1-203, good faith in dealing is required and a Seller who continues to sell and to extend credit knowing the Buyer’s insolvency is not in good faith and should not profit by his lack of prudence. Id. The appellate court applied these rules in finding Hamm lacked good faith and prudence in its dealing with Lape.

We are not persuaded that under these Illinois rules we are bound by Meyer to apply the Hamm, decision to reverse the district court judgment in favor of Creative. It is true that the Hamm court noted, p. 915, that “Official Comment” indicates that any receipt of goods on credit is a “tacit representation” of solvency. But since the question is one of fact, and unless the trial court’s finding against Meyer on the factual issue of misrepresentation of solvency is clearly erroneous, the finding must stand.

Acceptance by Creative of the goods on credit and payment by check may have been a tacit representation of solvency. But there are facts in the record which could reasonably overcome that silent prima facie testimony. The November 1971 NSF check given Meyer was paid before the January 5 shipment after Meyer redeposited it in its bank. That check was for goods previously accepted by Creative £nd its payment for the $47,859.23 in goods would be an indication of solvency. The fact that an original check had been dishonored ought to be sufficient to cause some uneasiness in a Seller as to whether or not the Buyer is financially stable. But if uneasy, a reasonable Seller should be expected to make prudent inquires before extending further credit.

In any event, that substantial check was paid, and its payment could have been an inducement for Meyer’s comptroller, to some extent, to make the shipment for which the December 1971 $9,900.76 Creative check was given. Testimony by Meyer’s comptroller that he relied upon payment of the $47,859.23 check and issuance of the $9,900.76. check in making the subsequent $9,900.-76 shipment is perhaps plausible. That testimony, however, is inconsistent with his testimony on cross-examination that before that shipment was made he did not agree to make it until he was satisfied by Creative’s telephone assurance that the payment would come from a source other than Creative, that is, from a Chicago Title and Trust Company escrow.

We think, at best for Meyer, the comptroller’s direct testimony would have proven prima facie that the issuance of the checks was a “tacit representation” of solvency which contributed to some extent to induce the shipment. Hamm, p. 915. The Referee found that in making the January 5, 1972 shipment Meyer did not rely upon the NSF checks as representative of solvency, but relied “primarily if not entirely” upon the representation that payment for the shipment would be made out of the Chicago Title and Trust Company escrow. Meyer’s comptroller testified, inter alia, that he relied on both the checks and the promise of the escrow payment. The Referee therefore could find as a fact under all the circumstances either that Meyer did not truly rely upon the NSF checks as representation of solvency, but rather on the assured payment from the Chicago Title and Trust Company escrow; or relied upon both the payment of the checks and the escrow. The Referee was in a better position than we are to decide the factual issue whether the assurance of payment by checks from the escrow account was the primary, if not the only, inducement.

The decision of the appellate court in the Hamm case does not compel reversal of the district court judgment approving the Referee’s finding. On the contrary, it supports our affirmance.

We hold that the Referee’s finding, undisturbed by the district court, is not clearly erroneous. It is unnecessary for us to consider any other points raised by Meyer.

Affirmed.

      . Insolvency is defined in Section 1-201(23) of the Code as follows :
      A person is “insolvent” who either has ceased to pay his debts in the ordinary course of business or cannot pay his debts as they become due or is insolvent within the meaning of the federal bankruptcy law.

      . Section 2-702(2) provides as follows:
      (2) Where the seller discovers that the buyer has received goods on credit while insolvent he may reclaim the goods upon demand made within 10 days after the receipt, but if misrepresentation of solvency has been made to the particular seller in writing within 3 months before delivery the 10 day limitation does not apply. Except as provided in this subsection the seller may not base a right to reclaim goods on the buyer’s fraudulent or innocent • misrepresentation of solvency or of intent to pay.

      . In the bankruptcy court Meyer relied, in support of his petition for reclamation, upon a letter written January 10, 1972 to Meyer’s comptroller by Creative. That letter is not urged on appeal.


author: SNEED, Circuit Judge: WALLACE, Circuit Judge

text:
    James D. HODGSON, Secretary of Labor, United States Department of Labor, Appellant, v. YB QUEZADA, Individually and d/b/a La Bonita Food Products, Appellee.
    No. 72-2896.
    United States Court of Appeals, Ninth Circuit.
    June 7, 1974.
    John M. Orban, Associate Regional Sol., Jeannie J. Meyer, Donald S. Shire, Counsel for Secty. of Labor, Jacob I. Karro (argued), John K. Light, U. S. Dept, of Labor, Washington, D. C., for appellant.
    Robert F. Walker (argued), of Paul, Hastings, Janofsky & Walker, Los Angeles, Cal., for appellee.

      Before WALLACE and SNEED, Circuit Judges, and EAST, District Judge

       Honorable William G. East, United States .District Judge, District of Oregon, sitting by designation.

   OPINION

SNEED, Circuit Judge:

This action was initiated by the Secretary of Labor under Section 17 of the Fair Labor Standards Act, 29 U.S.C. § 217, to enjoin appellee from violating the Act’s overtime and bookkeeping requirements and to restrain the continued withholding of overtime compensation. The parties eventually agreed to the entry of a consent judgment directing in part that appellee pay $11,000 in settlement of amounts due for overtime. Conflicts developed, however, over the eventual disposition of the unclaimed portion of the settlement. The appellee argued that sums unclaimed after two years should revert back to the employer. The Secretary took the position that such sums should be deposited in the Treasury of the United States on behalf of future claimants to the settlement.

After initially accepting the Secretary’s position, the District Court reversed itself and entered the following order:

In the event of Plaintiff’s inability to locate any employee(s) referred to in paragraph (4) of the Stipulation for Partial Judgment or because of the refusal of any said employee(s) to accept payment of the back wages due, then within two years after entry of final judgment herein which occurred on April 19, 1972, the amount(s) shall be returned to Defendant Employer.

We begin by noting that the restraint embodied in Section 17 serves at least two important purposes: it serves to increase the effectiveness of the Act by depriving a violator of any gains resulting from his violation, and it protects those employers who comply with the Act from unfair competition by those who do not comply. See Wirtz v. Malthor, Inc., 391 F.2d 1 (9th Cir., 1968). Thus, the District Court in a Section 17 ease has the authority to order that sums wrongfully withheld but unclaimed be deposited with the Treasury of the United States on behalf of future claimants. 28 U.S.C. §§ 2041, 2042. See Hodgson v. Wheaton Glass Co., 446 F.2d 527 (3rd Cir. 1971). While in exceptional circumstances it may be proper to permit unclaimed sums to revert to the employer, we do not believe such circumstances exist here.

We find nothing in the facts of this case which warrant reversion of unclaimed sums to appellee. In our view, the fact that the Secretary permits such a reversion in cases of voluntary compliance is of little assistance to appellee, whose appearance in this Court can hardly be viewed as an instance of voluntary compliance. Moreover, the availability of greater leniency in the administrative enforcement of the Act than in its judicial enforcement tends to encourage more prompt and less expensive settlement of disputes. The irrevocably offered carrot does not prompt a speedy response.

We therefore remand to the District Court for entry of an order consistent with the views expressed in this opinion.

WALLACE, Circuit Judge

(dissenting) :

I respectfully dissent.

Had the district judge refused to order payment for overtime due, we would properly reverse his decision. Wirtz v. Malthor, Inc., 391 F.2d 1 (9th Cir. 1968). But here, the narrow question concerns the ultimate beneficiary of unclaimed overtime funds. I am persuaded that the Secretary’s plan is superior to that proposed by the employer. However, as the Secretary conceded, the district court has broad discretion in framing equitable relief. Therefore, the question is whether the plan adopted by the district court was so violative of the statutory scheme that there has been an abuse of discretion. I do not believe there has been and, therefore, I would affirm.


author: PER CURIAM:

text:
    UNITED STATES of America, Plaintiff-Appellee, v. Camilo JUAREZ-RODRIGUEZ, Defendant-Appellant.
    No. 74-1118.
    United States Court of Appeals, Ninth Circuit.
    May 21, 1974.
    Lewis A. Wenzell, Federal Defender, San Diego, Cal., for defendant-appellant.
    Harry D. Steward, U. S. Atty., San Diego, Cal., for plaintiff-appellee.

       Honorable Fred M. Taylor, United States District Judge, District of Idaho, sitting by designation.

   OPINION

Before CHAMBERS and BROWNING, Circuit Judges, and TAYLOR, District Judge.

PER CURIAM:

On May 6, 1974, this case was ordered submitted for decision on June 3, 1974. That order is vacated, and the case is ordered submitted for decision today.

On September 20, 1973, Border Patrol agents at the San Clemente immigration checkpoint on interstate route 5, approximately 66 miles from the Mexican border, made a routine stop of a station wagon driven by appellant. The agents searched the station wagon and found 244 pounds of marihuana in the luggage well and spare tire well. No claim is made that the agents had a “founded suspicion” to justify stopping appellant’s vehicle, see, e. g., United States v. Jaime-Barrios, 494 F.2d 455 (9th Cir. 1974) ; United States v. Bugarin-Casas, 484 F.2d 853 (9th Cir. 1973), or probable cause to search the vehicle, see Carroll v. United States, 267 U.S. 132, 45 S.Ct. 280, 69 L.Ed. 543 (1925).

Appellant moved to suppress the marihuana. His motion was denied. He then reserved his right to renew the motion, waived jury trial, and proceeded to trial upon stipulated facts. He was convicted of possessing marihuana with intent to distribute in violation of 21 U.S. C.§ 841(a)(1) (1970).

In the absence of founded suspicion and probable' cause, the stop and search of appellant’s vehicle at the San Clemente alien checkpoint violated appellant’s Fourth Amendment rights. Almeida-Sanchez v. United States, 413 U. S. 266, 93 S.Ct. 2535, 37 L.Ed.2d 596 (1973); United States v. Bowen, 500 F.2d 960, 962-967 (9th Cir. May 9, 1974). Evidence concerning the stop, search, and discovery of marihuana should therefore have been suppressed.

Since the stop and search in this case took place after June 21, 1973, the date on which the Supreme Court decided Almeida-Sanchez v. United States, supra, the non-retroactivity of that decision as applied to fixed alien checkpoints, see United States v. Bowen, supra, at 975-982, need-not concern us.

The judgment is reversed.


text:
    UNITED STATES of America, Plaintiff-Appellee, v. 105.22 ACRES OF LAND, MORE OR LESS, Situated IN the TOWNS OF MIDDLEBURY, ET AL., COUNTY OF NEW HAVEN, STATE OF CONNECTICUT, and Peter J. Regan, et al., Defendants-Appellants.
    No. 525, Docket 73-1794.
    United States Court of Appeals, Second Circuit.
    Argued Feb. 26, 1974.
    Decided May 20, 1974.
    David S. Maclay, Bridgeport, Conn. (Marsh, Day & Calhoun, Bridgeport, Conn., on the brief), for defendants-appellants.
    Terrence L. O’Brien, Atty., Dept, of Justice, Washington, D.C. (Wallace H. Johnson, Asst. Atty. Gen., and George R. Hyde, Atty., Dept of Justice, Washington, D.C., Stewart H. Jones, U.S. Atty., Bridgeport, Conn., and Henry S. Cohn, Asst. U.S. Atty., Hartford, Conn., on the brief), for plaintiff-appellee.
    Before LUMBARD, FRIENDLY and TIMBERS, Circuit Judges.
   PER CURIAM:

Appellant landowners appeal from a judgment entered March 9, 1973 in their favor in a land condemnation action after a bench trial in the District of Connecticut before M. Joseph Blumenfeld, Chief Judge.

The property which was condemned on April 4, 1967 consisted of 35.9 acres of land, together with a house, a barn and a roadside snack bar. The property was located almost entirely in the extreme southwest corner of Waterbury, where the town lines of Waterbury, Naugatuck and Middlebury converge. The property was condemned by the United States for public use as part of a flood control project in the Housatonic River Basin.

After a thorough condemnation trial, at which the parties agreed that the highest and best use of the property was for development purposes in conformity with existing zoning, Chief Judge Blumenfeld filed a memorandum of decision setting forth his findings of fact and conclusions of law. He found that the fair market value of the property at the time of taking was $84,800. Since the government had already paid $54,600 at the time the declaration of taking was filed, Chief Judge Blumenfeld ordered that judgment enter for the difference between the two sums, plus interest on the difference at the rate of 6% per annum since April 4,1967.

On appeal, appellants’ essential contention is that the award was too low. They seek in effect a trial de novo in this Court. We have carefully considered all of appellants’ claims of error and find them without merit. Whatever our own views might have been as to fair market value had we been the triers of the facts, we cannot say that Chief Judge Blumenfeld’s findings were clearly erroneous. We affirm on his unreported opinion. Civil Action No. 11893, D.Conn., filed February 9, 1973.

Affirmed.


text:
    UNITED STATES of America, Appellee, v. Jake Frank RICHARDSON, Appellant.
    No. 74-1159.
    United States Court of Appeals, Eighth Circuit.
    May 15, 1974.
    Jake Frank Richardson, pro se.
    Bert C. Hurn, U. S. Atty., Kansas City, Mo., for appellee in this Court but did not make appearance.
    Before VAN OOSTERHOUT, Senior Circuit Judge, and STEPHENSON and WEBSTER, Circuit Judges.
   PER CURIAM:

This ease came before the court upon appellant’s motion for appointment of counsel. We denied that motion and entered an order on April 4, 1974, directing appellant to show cause why his appeal should not be dismissed as frivolous and entirely without merit. Having now received and considered the response to the show cause order, we dismiss the appeal. See Local Rule 9.

Appellant was convicted of four counts for the distribution of heroin. 21 U.S.C. § 841(a)(1). Sentence was four concurrent ten-year sentences. Thereafter the court on its own motion vacated defendant’s sentence and resentenced him to four ten-year concurrent sentences and in addition imposed a special parole term of six years on each count. The basis for vacation of the first sentence was the court’s failure to impose the mandatory special parole required by 21 U.S.C. § 841(b)(1)(A).

Appellant contends that the imposition of the six-year special parole term constituted double jeopardy and that the ten-year sentence should have been reduced. The trial court disagreed citing Bozza v. United States, 330 U.S. 160, 165-167, 67 S.Ct. 645, 91 L.Ed. 818 (1947). We agree with the trial court that Bozza controls this case. Where the original sentence is invalid, vacation of that sentence and imposition of another sentence, even though more severe, does not constitute double jeopardy.

Appeal dismissed.


author: PER CURIAM.

text:
    Gerald GAUGH, Plaintiff-Appellee, v. Wilbur J. SCHMIDT and Sanger B. Powers, Defendants-Appellants.
    No. 74-1073.
    United States Court of Appeals, Seventh Circuit.
    Argued April 3, 1974.
    Decided June 5, 1974.
    Robert W. Warren, Atty. Gen., Robert D. Repasky, Asst. Atty. Gen, Madison, Wis., for defendants-appellants.
    Anthony J. Theodore, Corrections Legal Services Program, Madison, Wis., for plaintiff-appellee.
    Before HASTINGS, Senior Circuit Judge, SPRECHER, Circuit Judge, and STECKLER, District Judge

       District Judge William E. Steckler of the Southern District of Indiana is sitting by designation.

   PER CURIAM.

Defendants Wilbur J. Schmidt, Secretary of the Wisconsin Department of Health and Social Services, and Sanger B. Powers, Administrator of the Division of Corrections of Wisconsin, appealed from an order enjoining them “from denying published materials to plaintiff and other persons confined at adult institutions . . . unless judicial proceedings are instituted against the publications within 15 days from receipt at the institution. . . . ”

In the district court’s opinion, it held that “censorship of reading matter ordered by prisoners can be undertaken only in accord with the procedures for prior administrative restraint of expression enunciated in Freedman v. Maryland, 380 U.S. 51, 85 S.Ct. 734, 13 L.Ed.2d 649 (1965), and Blount v. Rizzi, 400 U.S. 410, 91 S.Ct. 423, 27 L.Ed.2d 498 (1971).” The district judge therefore concluded that “[he] must enjoin defendants Schmidt and Powers from denying plaintiff access to reading matter he has ordered unless they initiate judicial proceedings against the reading matter promptly upon its receipt at the correctional institution.” Gaugh v. Schmidt, 369 F.Supp. 877, 880 (W.D.Wis.1974).

The court applied different standards to the censorship of prisoner mail than those subsequently set forth by the Supreme Court of the United States in Procunier v. Martinez, 416 U.S. 396, 94 S.Ct. 1800, 40 L.Ed.2d 224, 42 U.S.L.W. 4606 (1974). We therefore vacate the injunctive order and remand the cause for further proceedings in the light of that case.

Vacated and remanded.

       The plaintiff had been denied receipt of three paperback books ordered by him through the mail containing explicit descriptions of sexual acts and perversions, and described by defendants as pornographic.


author: PELL, Circuit Judge.

text:
    Robert J. WASHINGTON, Individually and as former Acting Principal of the Washington School, District 89, et al., Plaintiffs-Appellants, v. BOARD OF EDUCATION, SCHOOL DISTRICT 89, COUNTY OF COOK, STATE OF ILLINOIS, a body politic and corporate, et al., Defendants-Appellees.
    No. 73-1338.
    United States Court of Appeals, Seventh Circuit.
    Argued Dec. 3, 1973.
    Decided May 20, 1974.

      Patrick Keenan, Chicago, 111., William A. London, Cook County Legal Assistance Foundation, Brookfield, 111., for plaintiffs-appellants.
    Lawrence A. Passarella, Melrose Park, 111., for defendants-appellees.
    Before CUMMINGS, PELL, and STEVENS, Circuit Judges.
   PELL, Circuit Judge.

In June 1972, Robert Washington, acting principal of Washington School, a public elementary institution in May-wood, Illinois, was told by the district superintendent that he would be reassigned in the fall as a classroom teacher in a different school. Two weeks later, the Board of Education ratified the demotion and transfer, which entailed a substantially lower salary than Washington had been receiving. Subsequently, Washington, the Parent Teachers Organization of Washington School (P.T. 0. ), and a member of that organization filed a civil rights complaint alleging that the officials had acted in retaliation for plaintiffs’ exercise of rights guaranteed by the First and Fourteenth Amendments.

The district court held that the plaintiffs other than acting principal Washington had no standing under 42 U.S.C. § 1983 to complain of the wrongs allegedly committed. The court therefore dismissed the action as to those plaintiffs. Relying in part on Pickering v. Board of Education, 391 U.S. 563, 88 S.Ct. 1731, 20 L.Ed.2d 811 (1968), and several teacher nonretention decisions from this circuit, the court further concluded that plaintiff Washington had failed to state a claim upon which relief could be granted.

I

The complaint (and accompanying exhibits) reflect the following.

In October 1971, defendant district superintendent Peterson appointed Robert Washington acting principal of Washington School when the then principal, who later resigned, was suspended. Peterson “by statute and delegation [was] charged with supervising the day to day operation of the schools . . . [and was] empowered to hire, suspend, remove and transfer employees of District 89 subject to ratification by Defendant Board.” In a confirmatory letter dated November 19, 1971, the superintendent stated that Washington would be acting principal until either the Board of Education approved a new principal or Peterson terminated the appointment. Plaintiff was to receive two weeks’ notice.

The following month, when superintendent Peterson requested the Washington faculty and the P.T.O. to recommend a permanent principal, both groups named Robert Washington. On several occasions thereafter, Peterson indicated that the recommendations would be followed.

On January 25, 1972, the Executive Board of the P.T.O. determined the agenda for its February 8th meeting. The principal or acting principal of Washington School is an ex officio member of the P.T.O. Board. The agenda adopted included discussion of the following issues: (a) the $6 book fee assessed annually against each child in the school district; (b) the Board’s rejection of a preliminary proposal for $217,000 in federal funds; (c) the Board’s failure to fill the principalship vacancy at Washington School; and (d) the Board’s failure to assign a full-time nurse at the school.

On January 27th, the defendants issued a news release announcing that plaintiff Washington had been named principal of Washington School. A few days later, defendants submitted to plaintiff for his signature a contract for the 1971-72 academic year designating him “Acting Principal.”

Several days before the scheduled February P.T.O. meeting, P.T.O. members were sent a bulletin, sent over the name of the P.T.O. president, containing the agenda for the coming meeting. On the bulletin were the words “Approved: R. J. Washington, Acting Principal.” During this period, Washington was interviewed by a local reporter about “what student needs have to be met to provide quality education.” The acting principal’s remarks, some of which touched topics on the P.T.O. agenda, were quoted at length in a February 9, 1972, article in the Maywood Herald. At least three other District 89 principals were quoted in the local press in February on educational-financial problems.

Plaintiff maintains that “[tjhese two instances of the exercise of free expression . . . —the approval of (or perhaps failure to censor) the P.T.O. agenda, and the Maywood Herald article of February 9 — cost him his job as principal.” He points to a two-page memorandum listing “Reasons for decision to reassign,” which he was given in June 1972 by superintendent Peterson. The bulk of the memorandum was devoted to what it denominated “your two major actions against the Superintendent and the Board of Education . . .,” namely, the P.T.O. bulletin and the article in the Maywood Herald.

The defendants emphasize the remainder of the memorandum, which listed eight additional criticisms and which by necessary inference might be deemed minor actions. Three concerned the manner in which Washington returned the contract defendants had tendered to him; the others cited instances when plaintiff allegedly had failed to follow acceptable procedures. “The following items added to your two major actions . . . only add to the evidence that has accumulated to verify your inability to perform as required in District 89.” Washington characterizes this further “evidence” as drummed-up charges.

The defendants in this appeal also cite other factual matters claimed to support the result reached by the district court but which are not evident from the complaint and which matters we have not considered as we are only concerned with the correctness of dismissing the complaint because of failure of the complaint to state a claim upon which relief may be granted.

II

Under Rule 12(b), Fed.R.Civ. P., a complaint should be dismissed for failure to state a sufficient claim only if the plaintiff would be entitled to no relief under any state of facts he could prove in support of his claim. The briefs clearly show that the parties disagree as to the “real reasons” defendants reassigned plaintiff. We must, of course, accept the allegations of the complaint as true. Therefore, the primary issue is whether the reassignment and demotion of Washington because he gave an interview to a reporter and permitted the dissemination of the P.T.O. bulletin infringed Washington’s rights under the First and Fourteenth Amendments. If the case law establishes that a school administrator has no right to take these actions, then the district court properly dismissed Washington’s complaint. Our reading of the applicable decisions, however, discloses no such absolute rule.

In Hostrop v. Board of Junior College Dist. No. 515, 471 F.2d 488 (7th Cir. 1972), cert. denied, 411 U.S. 967, 93 S.Ct. 2150, 36 L.Ed.2d 688 (1973), decided a week after the district court ruled in the present case, we reversed the dismissal of a complaint by the president of a state junior college. Hostrop had alleged that he had been removed from his position because of certain statements he had made. The “basic question” on appeal was “whether the rights of free expression and procedural due process traditionally given to teachers and other public employees extend also to a college president who was hired to act as the direct agent of a school board.” 471 F.2d at 489. The district court in Hostrop, like the district court here, had reasoned from a remark in Pickering, supra, that First Amendment rights of persons in personal and intimate working relationships with their superiors may be restricted.

Judge Castle, speaking for the court, stated:

“Pickering holds that an employee’s speech may be regulated only if a public entity can show that its functions are being substantially impeded by the employee’s statements .... Absent actual proof of such an impairment, the face of the pleadings shows no reasons to deny Dr. Hostrop’s first amendment rights. It was therefore error to dismiss his complaint for failure to state a cause of action on first amendment grounds.” 471 F.2d at 492-493 (footnotes omitted).

Hostrop also pointed out the difficulties of deciding on a motion to dismiss what rights a particular administrator has. 471 F.2d at 491.

Hostrop plainly governs the case before us. The face of Washington’s complaint reveals no deterioration of the relationship between Washington and his superiors so as to require the conclusion that plaintiff’s expressive acts “substantially impeded” the public entity’s functions. Indeed, according to the complaint, Washington continued to perform as an acting principal for four months after his two “major acts,” that is, until June 1972, when defendant Peterson informed him that he would be reassigned and demoted. Paragraph 30 states in part: “On June 26, 1972 after the close of the 1971-72 school year, Plaintiff R. J. Washington met with Defendant Peterson to discuss his various requisitions for goods and services in connection with the forthcoming 1972-73 school year.”

Also, as in Hostrop, the record does not reveal the nature and details of the complainant’s relationship with his superiors. For example, we do not know whether the defendants had created properly drawn grievance procedures which plaintiff was supposed to have exhausted prior to making public statements about the problems confronting his school. Nor do we know from the complaint whether the defendants had promulgated a rule against the giving of press interviews such as Washington gave. If there was such a rule and if Washington’s failure to adhere to it was the basis for defendants’ disapproval of the interview, then the scope and constitutional validity of the rule would have to be examined. The record also fails to disclose whether defendants and plaintiff were authorized to censor P.T.O. material or whether the Board had directed the head of Washington School to withhold what plaintiff terms a pro for-ma approval of P.T.O. material if the principal considered P.T.O. statements to be inaccurate.

In sum, the dismissal of the complaint precluded fact-finding as to (1) the “real reasons” defendants reassigned acting principal Washington; (2) the nature of the relationship between Washington and his superiors; (3) the “health” of that relationship; and (4) the deleterious effects, if any, of Washington’s acts on the performance’ of his daily duties and on the regular operation of Washington School. Pickering and Hostrop suggests questions that are relevant to the analysis of points (2) through (4).

Ill

Also presented on this appeal was a procedural point involving the application of Rule 60(b), Fed.R.Civ.P.

The decision and order of dismissal were entered by the district court on December 14, 1972. The opinion of this court in Hostrop, sv/pra, was filed on December 21, 1972, reversing the district court judgment in that case on which the district court in the present case had in part relied. The plaintiffs filed notice of appeal on January 12, 1973. On the same day, they filed in the district court their motion for relief from the decision and order entered December 14, 1972. The latter motion was filed pursuant to Rule 60(b) and was based upon the decision of this court in Hostrop, which was claimed to be dis-positive of the present case and which we have determined on this appeal to be a correct evaluation.

On the assumption that the district court in the light of Hostrop might have reached a different conclusion as to the propriety of dismissing the action, it is to be regretted that considerable time and expense, both of the litigants and the judiciary, became involved in this appeal. The district court on the authority of Swam v. United States, 327 F.2d 431, 433 (7th Cir. 1964), cert. denied, 379 U.S. 852, 85 S.Ct. 98, 13 L.Ed.2d 55, and upon the basis that the trial court’s jurisdiction had been divested by the filing of the notice of appeal “dismissed” the 60(b) motion.

Because of the disposition we have given to this appeal it is unnecessary to decide whether the district court properly ruled on the motion. Indeed, it would appear that the denial of the motion, which itself would have been the basis of an appeal, is not properly before this court as no notice of appeal was directed to the denial.

However, because it is not infrequent that an appellate court does hand down a decision shortly after a trial court judgment, which decision would arguably cause a different judgment to be reached by the trial court, we address ourselves in our supervisory capacity to the particular aspect of Rule 60(b) here involved.

Of course, if time permits, an appellant may have an opportunity to present his 60(b) motion before filing his notice of appeal and may thus secure the relief sought before the expiration of time for the filing of the notice of appeal. In the present case, the time had almost expired and apparently out of an abundance of caution counsel did not pursue the possibility of a 30-day extension under Rule 4(a), Fed.R.App.P.

In the situation where the notice of appeal has been filed before the filing of the appellate court opinion which would indicate a result contrary to that reached in the trial court, there are alternative procedures available to the district court which may save an unnecessary appeal.

The historical background and alternative procedures which have developed are set forth in 11 Wright & Miller, Federal Practice and Procedure: Civil § 2873, at 263-65 (1973):

“The earlier cases on Rule 60(b) took the view that the district court has no power to consider a motion under that rule after a notice of appeal has been filed. This always has seemed anomalous since the time for making the motion continues to run while the case is pending on appeal. Those cases required a party seeking relief from a judgment during the pendency of an appeal first to present his grounds for relief to the appellate court. If it thought that the motion should be heard it would remand the case to the district court for that purpose. An alternative to actual remand was for the appellate court to give permission to the district court to rule on the motion.
“Other cases have developed a different and more satisfactory procedure. They hold that during the pendency of an appeal the district court may consider a Rule 60(b) motion and if it indicates that it is inclined to grant it, application then can be made to the appellate court for a remand. This procedure is sound in theory and preferable in practice.” (Footnotes omitted.)

In the narrow situation here involved of a supervening and probably controlling authority, district courts in this circuit should avail themselves of the last mentioned procedure.

Accordingly, we reverse the dismissal of Washington’s complaint, and we remand the cause to the district court for further proceedings. We affirm the judgment as to the other plaintiffs.

Reversed and remanded.

      . The complaint sought (1) a declaration that the defendants had abridged the plaintiffs’ right to freedom of speech; (2) ■ an injunction reinstating plaintiff Washington to a position at Washington School comparable to that which he had held prior to his demotion; and (3) $10,000 as compensatory and punitive damages.
      In oral argument, plaintiffs’ counsel stressed the vindication of Washington’s rights at a judicial hearing and the recoupment of damages. Plaintiff Washington apparently no longer seeks reinstatement at Washington School. (According to the complaint, defendant School Board in July 1972 appointed someone to the vacant permanent principalship.)

      . The memorandum provided in part:
      “1. Bulletin to Parents 2/3/72

      The bulletin approved by you insinuated that something unsavory was happening in District 89 which was attributable to the Board of Education.
      The bulletin seems to be scolding the Board of Education for refusing $200,000 in Federal Funds when in fact no funds had ever been scheduled for District 89. The bulletin suggests that the $6 book rental fee might be going astray when in fact you could have explained how the $6 was being used.
      The bulletin contained many untruths and inaccuracies. It should never have been allowed to go home to parents because it berates the Superintendent and the Board of Education in a way that cannot be justified.
      “2. Article in the Maywood Herald dated 2/10/72

      This article was very critical of the Superintendent and the Board of Education. The article was written in such a way that the intent seems to be clear that the Superintendent and the Board have deliberately acted in a way which has hurt the boys and girls at Washington School.
      Such action on your part cannot be construed as constructive criticism because your first responsibility is to exhaust all efforts through regular administrative channels and this was not done. It was quite apparent to many people that the intent was to castigate the Superintendent and the Board of Education for what must have been political motives.”

      . The Supreme Court lias laid to rest the notion, that a public school employee’s lack of a contractual or tenure right to reemployment defeats the claim that the adverse action of which he complains violated his rights under the First and Fourteenth Amendments. Perry v. Sindermann, 408 U.S. 593, 597-599, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). Plaintiff Washington, who was not promised the post of principal or acting principal beyond the 1971-72 academic year, does not maintain that he was denied procedural due process; rather, he asserts that he was reassigned for constitutionally impermissible reasons.


author: LEVIN H. CAMPBELL, Circuit Judge.

text:
    Jorge R. MARTIN et al., Plaintiffs, Appellants, v. The VECTOR COMPANY, INC. Defendant, Appellee.
    No. 73-1249.
    United States Court of Appeals, First Circuit.
    Argued Feb. 7, 1974.
    Decided May 16, 1974.
    Rehearing Denied June 26, 1974.

      Herman W. Colberg, San Juan, P. R., with whom Reichard & Colberg, San Juan, P. R., was on brief, for appellants.
    Garrard Harris, Rio Piedras, P. R., for appellee.
    William M. Simmons and von Baur, Coburn, Simmons & Turtle, Washington, D. C., for appellee.
    Before COFFIN, Chief Judge, McENTEE and CAMPBELL, Circuit Judges.
   LEVIN H. CAMPBELL, Circuit Judge.

On July 9, 1969, Vector Company and the individual plaintiffs entered into a written agreement (the Agreement). Plaintiffs agreed to sell and Vector to buy a tract of land in Ponce, Puerto Rico, at a price fixed by a formula not now in dispute. Several years later plaintiffs sued in the Superior Court of Puerto Rico for specific performance, and the case was removed to the district court where it was tried. The district court denied specific performance, and plaintiffs appeal.

The facts, which we recite in detail, are largely undisputed. Plaintiffs had accumulated the tract in question intending that it should be developed and sold to Puerto Rico Urban Renewal and Housing Corporation (URHC) for low-cost “turnkey” housing. Under the “turnkey” program a private developer with access to a site makes a preliminary proposal to sell to the local housing authority a completely developed project. If the authority accepts, the developer then works closely with it developing detailed plans, specifications and more precise estimates. See 24 C.F.R. § 275.-6(b). The plans proceed through various stages of approval by the local authority and the Department of Housing and Urban Development (HUD), and after the design and price are finally settled, the developer and local authority enter into a contract under which the latter agrees to purchase the land and described buildings and improvements for a set figure. The contract is backed by HUD’s financial commitment, and once it has been signed, the developer is able to secure commercial construction financing. He constructs the buildings and improvements, and eventually delivers the property to the local authority against payment of the agreed price.

Plaintiffs early in 1969 proposed to develop the land and sell the completed project to URHC for an estimated price of $5,565,000. URHC and the local HUD office approved, and some preliminary appraisal activity may have taken place. The district court found,

“At this stage of the proceeding plaintiffs could have engaged a contractor to build the houses in accordance with the plan approved by HUD and it would then have sold the entire project, ready for occupancy, to URHC for the sum of money which had previously been authorized by the local housing authority and HUD. This price would have been equal to that which HUD had agreed was a proper estimate for the completion of the project, covering the cost of the land, the construction, architects’ fees and other services, and the necessary costs incidental to the final completion of the project. On the other hand, the plaintiffs could sell the project as a package to someone else who, presumably, might be interested in taking the project over on the assumption that it could complete it and execute a contract of sale to URHC at a figure in excess of what it had agreed to purchase it for from the plaintiffs, plus the costs of completion.”

Plaintiffs chose the second alternative and found an interested party in Vector, a firm which had developed a great number of turnkey projects, most of them in the mainland United States. Its two chief executive officers concluded with plaintiffs the Agreement here sought to be enforced. It was drafted by Vector’s Puerto Rico counsel and executed in counsel’s office.

Arrangements with URHC were in their formative stages when the Agreement was signed. Plaintiffs and Vector’s local representative worked with URHC and HUD to refine the plans and secure the approvals needed before Vector could execute a contract with URHC and take over the project. Proposals were made, and were accepted by URHC and HUD, to increase the number of housing units from 350 to 396 and to increase the total project price. In September, 1970, a feasibility conference was held with government officials at which preliminary plans and pricing were reviewed. URCH and HUD agreed to increase the total project price to a figure in excess of $6,200,000. These changes in units and price were entirely agreeable to Vector, which stood to benefit from them. The district court found that Vector acquiesced and in December, 1970, confirmed by letter its desire to proceed.

Early in January, 1971 Vector’s principals met with plaintiffs. The district court found “as a fact” that plaintiffs told Vector’s president that they had received from another party an offer for the project which would net them more than was called for in the Agreement, but that Vector insisted upon its right to the property. Plaintiffs complained that the sale .provided for under the Agreement had not yet been consummated. Vector’s people responded that they had not been able to obtain bids for completion of the project because they had not yet received detailed plans and specifications then being prepared by the architects.

Upon receipt of the plans and specifications later in January, Vector submitted them to various contractors but, as the district court found, was unable to obtain bids that would permit Vector to break even under the commitment from URHC. Plaintiffs, meanwhile, had secured approval from URHC to substitute Vector as the developer; they advised Vector, and submitted evidence at trial, of their desire and ability to perform the Agreement. Vector does not seriously question plaintiffs’ offer and ability to perform, or URHC’s willingness to have contracted with Vector at a figure in the neighborhood of $6,225,570.

Vector’s defense is that the July, 1969 contract was, in essence, an option which Vector had an unqualified right not to exercise. Vector points to the fact that it never executed a contract of sale with URHC, and that under clause 5(a) it has no obligation to purchase unless it did so. Vector’s reason for not so doing, as stated in its answer, is that in order to execute a contract with URHC, it had to find “a bondable contractor willing to construct the project at a price which would leave a profit for defendant. Such contractor has not been found and therefore the prerequisites of the Purchase Agreement has not been satisfied.”

We can dispose of the “option” argument rather rapidly, as did the district court. The terminology and structure of the Agreement, which was prepared by an attorney and was between sophisticated businessmen, is of purchase and sale. “Seller” agrees to sell and “Buyer” states that it is “willing to purchase the same, provided such governmental approvals necessary for the construction of the project are obtained.” There is to be a closing “at two o’clock in the afternoon of the fifteenth business day after the execution of the contract as provided in paragraph 4 (a).” Had Vector been granted an option, its duration would presumably have been set forth and there would have been consideration for plaintiffs’ willingness to restrict alienage of the property without any assurance that Vector would buy. See Rossy v. Superior Court, 80 P.R.R. 705 (1958); 1A A. Corbin, Contracts §§ 263, 269, 274 (1963).

The district court likewise rejected, as do we, Vector’s argument that, under clause 5(a), it possessed an absolute right, for any or no reason, to decline to complete a contract with URHC, and could raise its own default to avoid a duty to purchase from plaintiffs. Such a literal reading either would make the contract a pure option — a reading we have rejected — or would expose clause 5(a) to Article 1072 of the Civil Code of Puerto Rico:

“The condition shall be considered as fulfilled when the obligated party should voluntarily prevent its fulfillment.” 31 L.P.R.R. § 3047.

Or as the Louisiana court has said,

“. . . the condition is considered as accomplished, when the debtor, whose obligation depends on this condition, prevents the accomplishment of it ... . the law does not permit the party whose obligation depends on a condition to allege the non-performance of that condition in defense, where it was through his fault it was not performed.” Walls v. Smith, 8 La. 498 (1832).

Under the civil law a condition is deemed “performed” when nonperformance is utterly within the control of one of the parties. See A. Corbin, Contracts § 149 n. 74 (1963), § 767 (1960). See also Article 1068, 31 L.P.R.A. §§ 3043, 3373. However, like the district court, we think the 5(a) condition was not meant to be read so literally as to put nonperformance utterly within Vector’s control. We construe it, rather, as imposing some degree of duty upon Vector.

The district court found that Vector’s duty under the Agreement was

“within a reasonable time [to] make a good faith effort to complete the final steps that were necessary to put itself in a position to offer to URHC an acceptable contract of sale if it could do so by the exercise of reasonable business judgment, but that it was not obligated to complete the purchase from the plaintiffs if its failure to make a contract of sale with URHC resulted from its inability successfully to carry out its obligations just stated.”

In keeping with this theory the court found that Vector, by expending money to make rough plans, obtaining cost “take offs”, and approaching contractors, made “a reasonable effort to place itself in a position where it could do the act which would satisfy the condition.” Having done so, and the condition remaining unsatisfied, the court concluded that Vector need do no more.

We do not disagree with much or even most of the above. Our difficulty arises insofar as the court determined that Vector’s duty to make good faith, reasonable efforts to contract with URHC was discharged by the anticipated unprofitability of the transaction. We believe the court erred in reading into the Agreement a condition of profitability.

We are prepared to assume that the interpretation of an instrument, and in particular a condition, as troublesome as this, calls for an inquiry more “factual” than “legal”, see 3 A. Corbin, Contracts § 554 (1960); but see Seaboldt v. Pennsylvania R. R., 290 F.2d 296 (3d Cir. 1961); Taylor v. Gowetz, 339 Mass. 294, 158 N.E.2d 677, 680 (1959). Thus we must observe the “clearly erroneous” standard of F.R.Civ.P. 52(a). We would not substitute our interpretation for that of the trier if the language were reasonably capable of the meaning he found, particularly if that meaning were to be supported by extrinsic evidence of the parties’ intent. We have sought, therefore, for all facts and principles which might lend support to the finding of an implied condition of profitability the frustration of which justifies nonperformance of the Agreement.

But we are confronted at the beginning with a well-accepted rule of construction in the commercial law that the obligor under a contract takes the risk of increase in the cost of performance, unless the contract provides otherwise. Peerless Casualty Co. v. Weymouth Gardens, Inc., 215 F.2d 362 (1st Cir. 1954). Although the American Law Institute has proposed in § 281 of its Restatement (Second) of Contracts (Tent.Draft No. 9) (1974) that an obligor may avoid his performance after the occurrence of an event, “the non-occurrence of which was a basic assumption on which the contract was made”, it adds in comment b:

“The continuation of existing market conditions and of the financial situation of the parties are ordinarily not such assumptions, so that mere market shifts or financial inability do not usually effect discharge under the rule stated in this Section.”

Comment d adds:

“A mere change in the degree of difficulty or expense due to such causes as increased wages, prices of raw materials, or costs of construction, unless well beyond the normal range, does not amount to impracticability since it is this sort of risk that a fixed-price contract is intended to cover.”

Cf. § 285, comment a; Uniform Commercial Code § 2-615; 6 A. Corbin, Contracts § 1361 at 494 (1962); R. Posner, Economic Analysis of Law § 3.5 (1973).

The foregoing interpretive rule is, of course, not inflexible. We must, therefore, look to see if there is evidence in the record from which the district court could reasonably infer an “intention” or unstated “assumption” consistent with its ultimate conclusion. If there were evidence supporting such an inference, we would defer to the district court even if another inference seemed more persuasive. See United States v. Yellow Cab Co., 338 U.S. 338, 342, 70 S.Ct. 177, 94 L.Ed. 150 (1949); cf. Engine Specialties, Inc. v. Bombardier Ltd., 454 F.2d 527 (1st Cir. 1972). But we find none. Certainly there is no evidence that before or at the time the Agreement was made, the parties so much as considered the effect of unprofitability upon Vector’s duty. The record is devoid of first-hand evidence concerning the subjective intentions of the signatories or of any relevant trade custom or usage. To the extent we are to divine “intention” it must be from the language of the Agreement, the history of later dealings between the parties, and the general circumstances. From these, even accepting as true all the facts found by the district court and construing any disputed evidence most favorably to Vector, we are unable to interpret the Agreement as did the district court.

The Agreement itself does not mention “profitability”. Clause 1 states that Vector is willing to buy provided that necessary governmental approvals are obtained. As the terms of a contract should be interpreted as a whole, and not out of the context of all the other terms, 3 A. Corbin, Contracts § 549 (1960), it seems most reasonable to read Clause 5(a), in connection with Clause 1, as limited to protecting Vector not against unprofitability but merely against the contingency that the governmental agencies might later refuse to buy the project. Vector had no use for the land or plaintiffs’ planning activities except to complete the turnkey transaction. Had URHC later rejected the proposed substitution of Vector as developer of the project, had it backed down for any other reason or perhaps had the project or its terms been materially altered without Vector’s approval, Clause 5(a) would have protected Vector.

Ambiguities in a contract should be construed against the party who drafted it. 31 L.P.R.A. § 3478; Prieto v. Hull Dobbs Co., 88 P.R.R. 407 (1963). Application of this general principle of contract construction is strengthened by the fact that the interpretation advanced by Vector runs contrary to the usual allocation of risk in commercial contracts. While Vector did not have the detailed plans and costs in 1969, it is not uncommon for businessmen to assume the risk of unavoidable miscalculation. Had Vector wished to reserve a right to withdraw for unprofitability, it could easily have inserted a clause to that effect. Without that clause Vector was obligated to execute the URHC contract, if URHC offered one, at the best price it could get.

Plaintiffs expended considerable effort and some monies to bring the project to the point where URHC was willing to sign the final contract. Vector insisted that plaintiffs surrender another allegedly profitable opportunity to dispose of the project. It now proposes to move off, leaving plaintiffs to bear the expenses of the unprofitable venture. If the Agreement allows such a unilateral withdrawal, it would, in effect, either be an option or else so minimize the duty of performance of one of the parties as to be illusory. Absent compelling reason to the contrary, courts should construe contracts as lawful and valid. See 3 A. Corbin, Contracts § 546 (1960). We find no such compelling reason. The Agreement was drafted and executed with formality in a lawyer’s office and was plainly thought to signify something.

On this record, bereft of direct evidence outside the contract relating to the intent of the parties, the contract clause itself, when we apply the relevant substantive and interpretive principles, does not seem capable of carrying the meaning assigned to it by the district court. Instead we think the findings of record compel a conclusion that Vector the court and the undisputed facts of violated the Agreement by declining to take steps to conclude a contract with URHC upon available terms, and thereafter to close with plaintiffs.

The remaining issue is the relief to which plaintiffs may be entitled. It is somewhat unclear why specific performance, as opposed to damages, would be in order in these circumstances, but we do not decide the point. We leave all questions pertaining to relief to the district court.

Reversed and remanded for further proceedings consistent herewith.

ON PETITION FOR REHEARING

The petition for rehearing is denied. Although the case is close on its facts, we remain of opinion that our disposition was the correct one.

Vector argues that the court failed to recognize that the HUD Regulations “which had the force and effect of law” were incorporated into and were “the very reason and purpose of clause 5(a)”. These, it is argued, provided in “clear and certain terms” the reasons for clause 5(a) and incorporated the mandatory trade custom or usage calling for a condition of “feasibility”, including profit. We were aware, however, of this possible argument. In particular, we considered Mr. Fortunato’s testimony outlining the steps in the manual and remarking (see footnote 6) that Vector had, on several occasions, withdrawn as the developer of a turnkey project, as, vis-a-vis the government, it had a perfect right to do. But Vector was in those situations acting as the sole developer. We do not think a developer’s right, prior to contracting with the local authority, to withdraw from the project is a “trade custom” shedding much light on the meaning of this contract between two private parties both of whom are on the “developer” side of negotiations with URHC. The project could indeed be terminated, but it remains necessary to determine what obligations the private parties had, in such event, created by their prior voluntary agreement. The regulations govern relations between a developer and the governmental authorities. They do not refer to situations of the sort here in dispute (viz. between developers), and we are unable to agree with Vector that this contract (which it drafted) provides in “clear and certain terms”, or anything approaching them, that Vector was to have the same rights as to plaintiffs that a developer would have with the local authority. Nothing in the regulations prevents private parties from allocating the risks among themselves as they see fit. The thrust of Vector’s position seems to be that, notwithstanding its execution of what appears to be a contract of purchase and sale, it bound itself to do no more than look out for its own interest, retaining at all times the right but not the duty to appropriate the benefits of the turnkey deal. Such a one-sided interpretation, placing all the risk on plaintiffs is, if not utterly beyond belief, at least so unusual in the case of a bilateral contract that we think it unsupportable in the absence of evidence that such was actually intended.

Vector’s argument that the concept of feasibility, incorporated in HUD regulations, includes recognition of a profit factor cuts against, as well as for, Vector. Vector would more likely assume the risk of unprofitability knowing that any arrangement with HUD would, at least in theory, allow for a developer’s profit. In any event we are confronted with a contract drafted by and for a sophisticated company by its attorney; there was evidence that Vector was well aware of what conventional option agreements were, and this was plainly not that; and we have no evidence to go on from those who negotiated the contract as to what might actually have been intended. We think Vector must bear the cost of ambiguity.

We are aware that the regulations refer expressly to the availability of the HUD commitment to enable the developer to secure usual commercial financing. However, the record does not establish that it was commercially impossible to secure bank financing for the project on the terms available. Cf. Restatement, § 231, illustration 4. A question relating to the availability of financing was asked of only one witness who answered that he could not answer whether or not financing could have been obtained.

Vector’s final argument, that the court erroneously “shifted the burden of persuasion to Vector”, is not convincing. The burden was upon the plaintiffs to establish the existence of a contract and failure of performance. Plaintiffs made these allegations in their complaint and Vector admitted them in its answer. (See note 3.) Vector was then entitled to argue that its nonperformance was justified by the Agreement itself, given an interpretation of 5(a) favorable to Vector — but not too favorable to Vector lest the condition be deemed “performed” under Article 1068, 31 L.P.R.A. §§ 3043, 3373. (See opinion page 22.) Plaintiffs contested this reading of the provision and the issue was joined. After that joinder it is not helpful to speak of a “burden of persuasion” concerning the relevant law and guides to construction of a contract. In the absence of relevant evidence, the duty is upon the court to ascertain and apply the necessary legal rules, with the aid of both parties. Moreover, to the extent Vector is now arguing that, because the 5(a) condition on its face put performance solely within Vector’s discretion, the plaintiffs were under a duty to introduce evidence of a contrary meaning, the argument is brought up short by the civil law. An absolutist or “plain words” reading of the 5(a) condition would have resulted in its being considered as “performed”. In order to avert that consequence, the burden fell upon Vector, if it fell upon anyone, to show what content the condition “really” had. But whether the burden fell upon Vector, upon the plaintiffs, or upon no one, there must be some support for construing 5(a) to include an implied permission to decline to proceed because of unprofitability.

      . “PURCHASE AGREEMENT

      AGREEMENT entered into this 9th day of July, 1909, by and between MR. JAIME SALIORUP and his wife, MARIA TERESA FOS; MR. JORGE R. MARTIN and his wife, CONSUELO SURIA; MR. EMILIO J. VENEGAS, and his wife, MARIA DEL CARMEN VILARO (hereinafter collectively referred to as the “SELLER”) and VECTOR CO., INC. a corporation (hereinafter referred to as “The Buyer”).
      1. Seller is the owner of a certain parcel of land located in Ponce, Puerto Rico, more particularly described in Schedule “A”, attached hereto, and made a part hereof (hereinafter referred to as “The Property”). Seller has submitted to the Urban Renewal Housing Corporation (hereinafter referred to as “URIIC”) a proposal to construct on the property approximately THREE HUNDRED AND FIFTY dwelling units for rental to low or moderate income families. Seller desires to sell the property to Buyer for the construction of such project and the Buyer is willing to purchase the same, provided such Governmental approvals necessary for the construction of such project are obtained. Accordingly, Seller hereby agrees to sell to Buyer the property for a purchase price to be determined as follows: (i) Four Hundred ($400.00) Dollars per unit, plus (ii) the amount of the value of the property as determined by two independent appraisers chosen by URHC, provided, however, that the minimum value of the property shall not be less than $5.00 per square meter; (iii) the purchase price of that portion of the property lying outside of the project shall be FOUR THOUSAND ($4,000.00) DOLLARS per acre. Such sale shall be upon the terms, conditions, representations and warranties contained herein and in the form of Deed of Purchase and Sale attached hereto, made a part hereof and marked Exhibit “B”.
      2. The closing hereunder shall take place at two o’clock in the afternoon of the fifteenth business day after the execution of the contract as provided in paragraph 4(a) hereof, subject to the condition that all of the representations and warranties [made] shall at the closing hereunder be true and correct.
      3. The Seller represents and warrants the Property is recorded in the Registry of Property of Puerto Rico; that it is the owner in fee simple (pleno doyninio) of the Property and that the Property is free and clear of all mortgages, tenancies, liens, encumbrances and rights of third parties whatsoever and that the real property taxes applicable to the Property have been fully assessed and paid through June 30, 1969.

        4. At the closing hereunder the Seller and the Buyer will execute a deed of Purchase and Sale substantially in the form of Exhibit “B” hereto, ....
      5. Notwithstanding anything contained herein, the Buyer shall have no obligation hereunder unless the following conditions are satisfied in full:
      (a) It shall have executed a contract with the URHC in accordance with the Low Rent Housing Manual No. 221.1, dated December, 1968, as amended and/or as may be revised from time to time, and more specifically, Exhibit No. 12, thereto entitled “Contract of Sale,” Form . . . HUD — 53015.
      (b) Seller, at its sole cost and expense, shall have furnished to Counsel for the Buyer, an opinion of counsel for the Seller to the effect that the Seller (i) owns the Property, free and clear of all liens and encumbrances (ii) has good and marketable dominion title to the Property.
      In the event that the conditions contained in this paragraph shall not be duly met and complied with, or in the event that any of the representations or warranties contained herein or in Exhibit “B” hereto shall not be true and correct at the time of closing hereunder and shall not be waived in writing to the Buyer, the Buyer shall have the right to terminate this Agreement and its obligations hereunder.
      6. [No broker’s commissions.]
      7. The parties hereto agree to execute and deliver such additional instruments and documents at and after the closing hereunder as may be necessary to carry out the terms and intent of this Agreement.
      8. All notices, demands and communications hereunder shall be served or given by registered or certified mail .
      9. The Buyer shall have the right to assign all of its rights hereunder to another corporation affiliated to it by stock ownership, by notice to the Seller prior to the closing.
      10. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns, and shall be interpreted in accordance with the laws of the Commonwealth of Puerto Rico.
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective the date first set out above.”

      . On November 28, 1970 plaintiffs wrote to Vector:
      “On July 9, 1969 The Vector Company, Inc. thru it President Mr. Earl S. Worsham and the Sponsors and Owners of the above TURNKEY PROJECT, entered into an agreement to sell the above subject project to THE VECTOR COMPANY, INC..
      1. At the time the negotiation was made it was based on a proposal for 350 units at a total cost of $5,565,000.00 as total purchase price.
      2. Since then number of units has been changed to 396 units with a total cost of $6,-225,570.00.
      3. During all the changes and proposals were always reviewed before submittal with your Representative in Puerto Rico Engineer Pedro Jimenez. At this moment proposal has been approved both by [URHC] and H.U.D., — it is only awaiting approval from Washington which should be forthcoming in the next two weeks, when preliminary Contract of Sale will be issued by [URHC], —but since inasmuch as original proposal or present proposal varies both number of units and dollar value, — we wish for you to ratify intent of purchase upon receipt of this letter and confirm willingness for transaction upon receipt of [URHC] Preliminary Purchase Order.
      Hoping to bear from you in the next ten (10) days, we remain,
      Yours very truly,
      LA YUCA DEVELOPMENT CORPORATION”
      Vector responded on December 14:
      “This will serve to confirm our telephone conversation of December 9th with Mr. Dexter at which time we indicated that we were definitely interested in the La Yuca project and would formally advise you within a couple of days.
      . This will serve to confirm our intention to ratify the purchase of the above referenced turnkey project in accordance with the Agreement executed on July 9th between our mutual organizations.
      Please send us copies of your preliminary drawings and any additional information you may have regarding your most recent proposal on the above referenced turnkey. Please contact us through our representative, Mr. Pedro Jimenez, as soon as you are in receipt of the Preliminary Contract of Sale.
      Very truly yours.
      THE VECTOR COMPANY, INC.”

      . Vector admitted in its answer the following allegations in paragraph 4 of the complaint:
      “That plaintiffs have complied with all of its obligations under the aforementioned contract and have been and are ready and desirous of executing the deed and corresponding purchase and sale contract, but have not been able to do so due to the fact that the defendant, VECTOR CO., INC., has refused and refuses to comply with its obligations of buying and paying the corresponding and agreed to price.”

      . We believe the district court to be mistaken in reading this language, as it did, to call for a closing within two weeks after the Agreement was signed. The draftsman meant, we think, to refer to paragraph 5(a) ; the closing is to be within 15 days after A^ector signed the URHC contract. Neither URHC nor Vector could possibly have entered into the URHC contract in July, 1969 — final plans had not been prepared and approved and it remained open to URHC and HUD to back out. Vector, as shown in clause 5(a), had no intention whatever of buying plaintiffs’ property until it had a binding contract with URHC.

      . Cf. Tsakiroglou & Co. v. Noblee & Thorl G. m. b. H., 2 All E.R. 179 (H.L.1961) (increase in shipping costs caused by Suez Canal closing) ; Lloyd v. Murphy, 25 Cal.2d 48, 153 P.2d 47 (1944) (decrease in expected value of lease due to World War II regulations).

      . Mr. Fortunato, Vector’s employee, testified that in “all instances it was always understood that you would only purchase the project if you could make it fly . .” But since he was not involved until well after the Agreement had been executed, his testimony does not tell us what was actually understood. He also testified that several times when Vector was the sole developer of other turnkey projects it had withdrawn because of economic unfeasibility. But practices when Vector was the sole developer, and thus had a free hand, are of little assistance in determining its contractual obligations to a third party.

      . Vector does not contend, and the court did not find, that the government’s final offer materially varied, to Vector’s disadvantage, from the previous one. The government’s final offer was higher and more favorable than that under consideration at the time the Agreement was executed. The new offer and agreement to increase the number of units to be built had been negotiated in conjunction with Vector’s agent and had been submitted to Vector, which had reiterated its intention to purchase. See note 4 supra. From testimony at trial, from the district court’s finding of Vector’s acquiescence, and from the letter itself, it is clear that as late as January, 1971, Vector was satisfied with the terms offered by URHC. Dissatisfaction occurred after Vector circulated the plans and specifications among local contractors and became convinced that given the prevailing construction costs the venture was not advantageous.