I don't know whether Hemingway liked using 'utilize' or not. But I expect he used different rules in writing dialogue than in writing narrative. Word usage in dialogue can be used to give us cues about the character speaking. E.g., that he's the sort of person who pontificates by using words like 'utilize'. (Word usage in narrative can even be used to give us cues about the narrator.) I don't know enough to tell whether that's what Hemingway was doing in the quoted dialogue. But good writers often violate usage rules when writing fiction that they'd normally apply to themselves, e.g., when writing an essay.