February 17, 1942

not seem that the lease in any way precluded the use of gravel on the land.

It is my opinion that the claimant has shown no tenable reason for his failure to take the simple precaution of graveling this roadway, which the evidence shows would have prevented the loss complained of, and that the only fair measure of damages is the estimated cost of making the suggested improvement.

Entirely aside from the question of mitigation of damages, it does not appear that the claimant has offered adequate or satisfactory proof of his alleged loss of profits. While it is the general rule to permit recovery for loss of profits, in the proper case, the proof thereof must be specific and positive. Recovery is not permitted for vague, speculative, anticipated profits. There must be definite and positive proof of the loss. Blakiston v. Osgood Panel and Veneer Company, 173 Wash. 435, 23 P. (2d) 397 (1933); Andreopulos v. Peresteredes, 95 Wash. 282, 163 Pac. 770 (1917). Here the claimant merely gives general estimates of the profits he thinks he may have lost over the 2-year period in question. This is entirely inadequate.

Further, it has been held that there can be no recovery for loss of profits unless the business has been in successful operation for such period of time as to give it a certain permanency and recognition, so that alleged loss of profits can be reasonably approximated. Carolene Sales Company v. Canyon Milk Products Company, 122 Wash. 220, 210 Pac. 366 (1922). In this case, the claimant, while apparently having operated a truck farm for some period of time, had only constructed the warehouse and commenced this new business venture in 1939, at which time he contends the damage started to accrue by reason of the overflow. However, despite the present inadequacy of the proof with regard to loss of profits, it probably can be assumed safely that the claimant can offer satisfactory evidence of losses to the extent of $150, which fact justifies the allowance of the cost of graveling the road as the fair measure of damages.

The other two items of damage, namely, the loss of an onion crop and the spoilage of certain fruits and vegetables stored in the warehouse, both of which it is claimed resulted from the muddy road conditions, are entirely too remote to warrant serious consideration.

Having carefully considered the entire record, including the reports, statements, and arguments presented, it is my opinion that recovery cannot be allowed under the act of 1929, supra, for the reason that it does not apply to damages resulting from acts of negligence on the part of the Government, or to damages resulting from remote causes, and that recovery under the act of 1922, supra, should

be limited to the estimated cost of graveling the road from the main highway to the warehouse. Accordingly, the claim should be allowed and certified to the Congress in the amount of $150, contingent upon the claimant's indication of his willingness to accept the reduced

amount.

Approved:

OSCAR L. CHAPMAN,

Assistant Secretary.

ALGOMA LUMBER COMPANY ET AL.

Opinion, February 27, 1942

INDIAN LUMBER CONTRACTS-PRACTICAL CONSTRUCTION.

The practical construction given to a contract by both parties for several years may not be repudiated by a party that has profited therefrom even though such construction is incompatible with the literal terms of the contract. INDIAN LUMBER CONTRACTS ALLOWABLE INCREASES OF STUMPAGE PRICES-PRAOTICAL INTERPRETATION-ESTOPPEL.

Where an Indian lumber contract authorized the Commissioner to readjust stumpage prices at three-year intervals on the basis of prices prevailing during such periods, and stumpage price readjustments were made at other times and on other grounds to the benefit of the contractor, the contractor is estopped from objecting to a continuance of the practice when it runs to his disadvantage.

INDIAN LUMBER CONTRACTS-ALLOWABLE INCREASES OF STUMPAGE PRICES-AUTHORITY OF COMMISSIONER OF INDIAN AFFAIRS-DAMAGES.

The Commissioner of Indian Affairs, authorized by contract to readjust stumpage prices by a given date, and having done so, had exhausted his authority and was not empowered to make a further adjustment a few days later. The profit drawn from such unauthorized action would be properly deductible from any claim against the Government based upon the same contract. INDIAN LUMBER CONTRACTS-WAIVER.

Express consent by the contractor to a proposed course of action constitutes a waiver barring any claim grounded on the illegality of such action.

INDIAN LUMBER CONTRACTS ASSIGNMENT.

An assignee is bound by the practical interpretation of the assigned contract concurred in by his assignor.

INDIAN LUMBER

PRICES.

CONTRACTS-INTERPRETATION-READJUSTMENT

OF

STUMPAGE

Where an Indian lumber contract provided for readjustment of stumpage prices every three years such readjustments could be fixed at rates varying during the period before the next readjustment.

CLAIMS OF CONTRACTORS-OFFSETS.

Moneys legally due the Government under a contract and not paid, by reason of a mistake of law, may be set off against a subsequent claim of the contractor.

February 27, 1942

INDIAN LUMBER CONTRACTS-INTERPRETATION-BURDEN OF PROOF. Where a contract has been loosely construed by both parties for many years, the contractor seeking to establish a breach must bear the burden of showing that the interpretation put upon the contract by the Government was unreasonable.

BOARD OF APPEALS (Felix S. Cohen, Chairman, W. H. Flanery, Leland O. Graham).

By reference from the Solicitor, the Board of Appeals has considered the claims of the Algoma Lumber Company, the Lamm Lumber Company and the Forest Lumber Company, which are embodied in S. 943, upon which this Department has been asked to submit a report. In the course of such consideration, on March 20, 1941, the Board conducted a hearing relative to the said claims. The purpose of this bill is to authorize payments in accordance with the decisions of the Court of Claims handed down on January 12, 1938, in favor of the abovementioned three corporations in the sum of $25,094.56 for Algoma, $12,126.39 for Lamm and $44,772.62 for Forest. These decisions of the Court of Claims were reversed by the Supreme Court on January 3, 1939 (Algoma Lumber Co. v. United States, 305 U. S. 415), on the ground that the Court of Claims had no jurisdiction of the controversy. The Supreme Court did not consider the cases on the merits.

At the hearing so conducted before Messrs. Felix S. Cohen, William H. Flanery, and Leland O. Graham, Members of the Board of Appeals, there were present: William S. Bennet, Attorney for the lumber companies; Ernest L. Wilkinson, Attorney for the Klamath Tribe; Boyd Jackson, Delegate of the Klamath Tribe; W. Barton Greenwood, Finance Officer and Business Manager, Office of Indian Affairs; LeRoy D. Arnold, Director of Forestry; J. Donald Lamont, Assistant Director of Forestry; and S. J. Flickinger, Assistant Chief Counsel, Office of Indian Affairs. Subsequent to the hearing a brief was submitted on April 14, 1941, by W. S. Bennet, attorney for the three lumber companies, and an answering brief was submitted on May 31, 1941, by Ernest L. Wilkinson, attorney for the Klamath Indians, following which a reply brief was submitted on behalf of the claimants. These three briefs are made a part of the Department's record in this matter. The amounts claimed by the respective companies grow out of an increase of 40 cents per thousand feet in the stumpage price of lumber alleged to have been illegally imposed by the Commissioner of Indian Affairs in 1928 in administering contracts for the sale of the lumber to be cut by the companies on various units of the Klamath Indian Reservation. The contract in each case fixed the price to be paid for stumpage during its initial period but provided for adjustment of the price at regular intervals by the Commissioner of Indian Affairs. Under the Algoma and Lamm contracts, which were made in 1917,

stumpage prices were to be adjusted as of April 1, 1920, 1923, 1926. and 1929, while under the contract in the Forest case, which was originally made in 1920 with the Williamson Logging Company but subsequently assigned to the Forest Lumber Company, stumpage prices were to be adjusted as of April 1, 1924, 1927, 1930, 1933, and 1936. All three contracts provided that, in determining whether to increase stumpage rates, the Commissioner should take into consideration whether there had been any increase in the cost of logging operations and lumber manufacture, as well as whether there had been any increase in the wholesale price of lumber. No increase in stumpage rates could be made unless there had been such an increase in wholesale lumber prices, and any increase in stumpage rates could not exceed 50 percent of the increase in wholesale prices in the periods to be compared under the contracts. Under the Algoma and Lamm contracts, before stumpage rates could be increased, there had to be an increase in wholesale prices "during the three years preceding January 1 of each year in which each new schedule of prices is fixed." However, the language of the contract in the Forest case was different with respect to the method of comparison. The provision was the same for the period beginning April 1, 1924, but with respect to the subsequent 3-year periods the wholesale prices to be compared were stated to be those "determined and used for the preceding three-year period." All three contracts on the other hand, contained the uniform provision that the parties could request a hearing 30 days before new price scales became effective, although declaring that "the determination of new rates shall be wholly within the discretion of the Commissioner of Indian Affairs." There was another important difference between the Algoma and Lamm contracts and the contract in the Forest case. The latter expressly provided that any increase in stumpage rates could subsequently be canceled, while the former contained no provision for reduction.

All three of the lumber companies contend that the 40 cents increase in stumpage rates made effective April 1, 1928, was illegal for two reasons (1) that it was not made at a time permitted by the contract and (2) that there had been no increase in the level of wholesale prices in the preceding 3-year period. The main argument made on behalf of the Government when the three cases were before the Court of Claims was that the action of the Commissioner was lawful in view of the practical interpretation put upon the contracts by the parties themselves. The Board of Appeals, having before it a question involving mixed elements of policy and of law, has felt obliged to give consideration to equities involved in these cases which the Court of Claims apparently was not free to consider. Furthermore, the Board. having examined the history of the administration of the contracts, is

February 27, 1942

of the opinion that other legal questions, which are raised by facts peculiar to each of the three cases, must also be considered. The Court of Claims did not deal with these questions, which, if they had been presented to the court, might have induced it to dismiss the suits. In view of the peculiarities of each case, each will be examined separately. 1. Algoma case: The principal question to be considered in this case is whether the parties did not put such a practical construction upon the contract that, even if it is at variance with its terms, the company is now estopped to contest the Commissioner's action, in view of the financial or other benefits which it obtained thereby.

When the first adjustment period of the contract arrived in 1920, the Commissioner increased the stumpage rate by 67 cents, effective April 1. The Commissioner arrived at this figure by subtracting the amount of the increase in the cost of lumber production from the amount of the increase in wholesale prices of lumber during the preceding 3-year period. This was the method of determining the extent of any stumpage price increase followed by the Commissioner in every adjustment period except 1923. The Commissioner was directed by the contract to take into consideration any increase in production costs although his discretion was expressly limited only by the provision that an increase in stumpage rates could not be made which exceeded 50 percent of the increase in wholesale prices during the preceding 3year period. Thus the deduction of any increase in production costs was within the framework of the contract but only as long as it was not understood to be obligatory.

The company in its letter of March 30, 1920, explained that it was accepting the increase imposed not because of the rise in wholesale prices during the preceding 3-year period but because it was "justified by present conditions," and declared that its "greatest objection" to it was that no price increase had been made upon the lumber unit of a competitor-factors that had nothing to do with the permissibility of stumpage rate increases under the contract. The letter noted also the Commissioner's promise that he would consider reducing the price at the end of the contract year if conditions warranted, and concluded by thanking the Commissioner for this "additional concession." The company itself thus characterized the Commissioner's promise as a departure from the strict terms of the contract. Moreover, by calling it an "additional concession," the company must have been referring either to the fact that the Commissioner had taken into consideration "present conditions," or to the fact that he had deducted the increase in the cost of production from the increase in wholesale prices during the preceding 3-year period. On April 5, 1920, the Commissioner, pursuant to this promise, instructed the Superintendent of the Klamath