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on a note of $12,000 to the First National Bank of Albuquerque. Mr. Toledo had the reputation of being a man of substantial means. In the discussion plaintiffs had with him, it was agreed that in view of his experience, he would manage the feeding operations under the contract with the Department of Labor and would be in charge of all personnel. Plaintiff McPhail was to be stationed at El Paso, which was regarded as the central artery of the five centers, and was to receive daily reports showing the number of meals served, the cost of labor, and the amount of food used at each center. Plaintiff Montoya was to be located in the center at El Centro, California, but the record does not show what duties he was to perform. In consideration of Mr. Toledo's services and financial assistance, it was agreed that he would be paid 50 percent of the net profits resulting from the contract with the Department of Labor. Payments received from the Government were to be deposited in the First National Bank of Albuquerque under the name of Western Enterprise Co., and the bank was to be given a power of attorney to endorse and deposit such checks in that account. The parties met again on June 11, 1955, in Albuquerque in the office of Mr. Toledo's attorney who prepared a contract, designated as a "Management Agreement", between plaintiffs as first parties and Mr. Toledo as second party. The agreement was duly signed and acknowledged by plaintiffs and Mr. Toledo on June 11, 1955. It is in evidence as plaintiffs' exhibit "O" and provides in pertinent part as follows:

WHEREAS Parties of the First Part are the contractees with the government of the United States under which contract they are to provide food for certain persons. (A copy of which contract is attached and marked Attachment One, not as part of this contract, but for identification only) and

WHEREAS Parties of the First Part are desirous of retaining the services of the Party of the Second Part as manager of their operations under said government contract,

Now, THEREFORE, in consideration of the mutual promises and covenants herein contained the parties agree as follows:

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Parties of the First Part hereby employ the Party of the Second Part to operate and manage all feeding centers, together with any and all stores, concessions, PX's, and commisaries [sic] of whatever nature with the following powers, and under the following terms and conditions.

Party of the Second Part to take charge of the business of the Parties of the First Part resulting from the contract with the United States Government; to employ and discharge all personnel deemed necessary by the Party of the Second Part for the operation of the business; to purchase, and sell, either for cash or on credit, all such articles and property as the Party of the Second Part may deem useful and proper as connected with said business; sign, accept, and endorse notes, drafts, and bills; to state accounts; to sue and proseucte, [sic] collect, compromise, or settle all claims or demands which may hereafter become due, or hereafter arise in favor of the Parties of the First Part; to adjust, settle, and pay all claims and demands which may arise out of the operation of the business, and therein to buy, sell, pledge, or mortgage, and to execute and enter into bonds, contracts, mortgages and in general do all other acts and things which the Party of the Second Part may consider useful or necessary for the aforementioned business and interest; and to enable the Party of the Second Part to effect the powers heretofore mentioned the Parties of the First Part both residents of the County of Sandoval and State of New Mexico hereby make, constitute and appoint Party of the Second Part, Manuel B. Toledo, of the County of Bernalillo and State of New Mexico, jointly and severally, their true and lawful attorney for each and both parties of the First Part and in their name, place and stead, to execute in and under their name any and all instruments of whatever nature, as the Party of the Second Part may deem useful or necessary for the business.

The Party of the Second Part shall under and pursuant to the powers herein given him, keep a set of books which shall be available for inspection and auditing by the Parties of the First Part at all times; pursuant to said powers, he shall have the duty to secure and record all necessary licenses and permits that may be required for the operation of the business and shall at all times as part of the operation of said business, keep in force such Workmen's Compensation, employer's liability, and public liability insurance as the

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Party of the Second Part may deem necessary for the protection of the business, but under no circumstances may such insurance be less than that required by the state in which the business is being conducted.

Any and all monies whether received by the Parties of the First Part or the Party of the Second Part shall immediately be deposited into the bank account designated by the Party of the Second Part and the Party of the Second Part shall have the sole and exclusive power to draw upon said account, but no monies may be drawn from said account for other than the operation of the business except as hereinafter specified.

The parties of the First Part will not demand of and the Party of the Second Part will not during the first sixty (60) days commencing July 1, 1955, give to the Parties of the First Part any funds for personal use. After the expiration of the first sixty (60) days neither parties of the First Part nor the Party of the Second Part shall obtain any funds from the business unless it has first been determined by the Party of the Second Part that there are sufficient funds on reserve for the continued safe and economical operation of the business.

At such time as the Party of the Second Part determines that the continued safe and economical operation of the business will not be endangered thereby, but in no event later than 120 days from the day of June, 1955, the Party of the Second Part shall withdraw such sums as may be needed to pay that certain note executed by the Parties of the First Part and co-signed by the Party of the Second Part, made payable to the First National Bank of Albuquerque together with interest thereon.

*

The party of the Second Part accepts the powers, duties, and obligations given him by the Parties of the First Part and agrees to operate and manage the said business of the Parties of the First Part to the best of his ability and judgment; further the Party of the Second Part agrees to help to finance the operations encompassed by this agreement for the first sixty (60) days commencing the 1st day of July 1955, by accommodating the parties of the First Part with his signature on a promissory note to be executed by the Parties of the First Part for the total amount of Twelve Thou

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sand ($12,000) Dollars to the First National Bank of Albuquerque. It is agreed and understood by the Parties that the extent of financial aid to be rendered by the Party of the Second Part shall be limited to the extent immediately hereinbefore stated unless by subsequent written agreement the parties agree otherwise.

As compensation for services rendered by the Party of the Second Part pursuant to the terms hereof, the Parties of the First Part agree to pay the Party of the Second Part a sum equal to fifty (50%) per cent of the net operating profit of said business; said compensation to be paid to the Party of the Second Part proportionately at such times as the Parties of the First Part draw funds subject to the limitations hereof that a reserve for future operations be maintained. It is understood that any drawings made by the Parties shall not be considered as operating expenses.

No representative of the defendant had notice or knowledge of the above-described agreement.

20. With a view to moving to El Paso on July 1, 1955, when performance of the feeding contract was to start, plaintiff McPhail decided to dispose of her restaurant in Bernalillo and she closed it on June 12, 1955. She and her husband were living in a rented home in Bernalillo, and shortly before June 15, 1955, she gave notice to the landlord that she would vacate the house on July 1, 1955.

On June 14, 1955, plaintiffs went to Albuquerque where they and their respective spouses signed a note for $12,000 payable to the First National Bank of Albuquerque. Manuel B. Toledo also signed the note.

21. On June 15, 1955, plaintiff McPhail and her husband went to El Paso and were joined there the next day by Mr. Toledo and plaintiff Montoya. Under the terms of the contract with the Department of Labor, the contractor was obligated to furnish all kitchen and mess hall equipment and utensils, as well as the food to be served to the laborers. The group's purpose in going to El Paso was to make arrangements for obtaining the equipment and to talk with various wholesalers from whom food for the five centers was to be purchased. On June 16, plaintiffs and Mr. Toledo went to the El Paso Reception Center where they were in

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troduced to Department of Labor personnel and to a Mr. Fuller, who held the feeding contract for the five centers for the fiscal year ending June 30, 1955. They inspected the feeding facilities at the center and observed the feeding operation.

22. On June 17 and 18, 1955, plaintiffs and Mr. Toledo negotiated with Mr. Fuller to purchase the latter's equipment. Since the equipment was already installed and since performance of the contract was to begin on July 1, 1955, they considered it advantageous to acquire Mr. Fuller's equipment. It was decided that on June 20, 1955, plaintiff Montoya and Mr. Toledo would visit all the centers for the purpose of inventorying the equipment and making arrangements to acquire it.

23. On June 19, 1955, plaintiffs met with Mr. Toledo and his attorney in Santa Fe, New Mexico. Mr. Toledo stated that in view of the cost of the equipment, considerably more capital would be required for the venture than he had at first believed, and he requested that plaintiffs agree to pay him 75 percent instead of 50 percent of the profits for his services and financial backing. Although plaintiffs refused to accede to this request, he did not withdraw from the agreement previously executed. Mr. Toledo planned to return to his home in Albuquerque in order that he could convert some of his bonds and securities into cash in order to provide funds needed for the operation.

24. On June 19, 1955, plaintiffs returned to Bernalillo, and on the morning of June 20, 1955, plaintiff Montoya and R. G. McPhail left Bernalillo to meet Mr. Fuller in El Paso as previously arranged.

25. By letter dated June 17, 1955, the Comptroller General advised the Secretary of Labor that the written bid signed by plaintiff McPhail was not complete, responsive, definite, or certain, and that to permit her to complete and explain the bid after the opening, would give an unfair advantage. The letter stated that the bid should be disregarded.

26. On June 20, 1955, after receiving the Comptroller General's letter of June 17, 1955, the contracting officer tele