Case ID: us-ct-cl_62/html/0191-01.html
Source: Caselaw Access Project
Author: {"author": "Hat, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PRESSED STEEL CAR COMPANY v. THE UNITED STATES
    
    [No. A-239.
    Decided May 10, 1926]
    
      On the Proofs
    
    
      Contract; fabrication of steel; contractor's estimate of fabrication; material furnished by Government. — Where in a contract for the fabrication of steel to be furnished by the Government the contractor estimates the tonnage it will produce but does not agree to produce the amount so estimated, and the Government does not furnish material for the full amount so estimated, the contractor, upon termination of the contract by the Government, can not recover anything in excess of the contract rate for the tonnage which it actually fabricates.
    
      Same; expense of getting bach into production. — Where a contract is terminated by the Government in accordance with its terms* the contractor can not recover overhead expense accruing after the contract was terminated and before its plant, a portion of which it had agreed to devote exclusively to said contract, had attained normal commercial production.
    
      Same; expense of reinstalling machinery. — The provision in a contract that upon its termination the Government shall pay “ the cost of relocating and reinstalling ” the contractor’s machinery, displaced by the machinery necessary in the performance of the contract, does not obligate the United States to pay the overhead expenses of such relocation and reinstallation.
    
      The Reporter's statement of the case:
    
      Mr. George R. Shields for the plaintiff. Messrs. William B. King and Robert J. Dodds, and King <& King were on the briefs.
    
      
      Mr. Oliarles F. Kincheloe, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant. Mr. Howard J. Bloomer was on the briefs.
    The court made special findings of fact, as follows:
    I. The Pressed Steel Car Co. is a corporation organized under the laws of the State of New Jersey, with its principal office in the city of New York and plants in Pittsburgh, Pa., and other places.
    II. On June 15, 1918, the plaintiff entered into a in writing with the United States Shipping Board Emergency Fleet Corporation, representing the United States, whereby the plaintiff agreed to allocate a portion of its car-building plant known as the Allegheny works in Pittsburgh for the purpose of the fabrication of steel ship materials, and the said contract further provided for the installation of machinery and for the payment for the fabrication of said ship material, and also provided for the general conduct of the business. A copy of the said contract is annexed to the petition, marked “ Exhibit A,” and is made a part hereof by reference.
    The contract as originally drawn and submitted to the plaintiff provided as follows: “ The contractor agrees that it will produce fabrication of ship materials as follows,” but at plaintiff’s instance the word “ agrees ” was changed to the word “ estimates.”
    III. The heavy losses occasioned by the submarine activities of the Imperial German Empire created a demand for an extensive shipbuilding program on the part of the Government. The United States Shipping Board Emergency Fleet Corporation was created to carry on the business of the United States in the building and operation of ships.
    The United States Shipping Board Emergency Fleet Corporation had as its agent the American International Shipbuilding Corporation, with its principal place of business at Hog Island, in or near the city of Philadelphia, in the State of Pennsylvania. Admiral Francis T. Bowles was the assistant general manager of the United States Shipping Board Emergency Fleet Corporation, having entire charge on the part of the Government of the fabricating yards at Newark Bay, Bristol, and Hog Island.
    
      IV. On June 5, 1918, Admiral Bowles attended a meeting of the Kailway Car Manufacturers’ Association in the city of New York and stated the requirements of the Emergency Fleet Corporation for the fabrication of steel for ships, and sought the aid of the car manufacturers to participate in this work. It was of the highest importance that the establishments which were located in the Pittsburgh district and points east thereof be utilized in order to minimize the distances from the steel mills to the fabricating plants, and memorandum was prepared and left with the association for use of its members by Admiral Bowles:
    " ;>. 1918.
    “ The American International Shipbuilding Corporation is desirous of placing the fabrication of 100,000 tons of ship plates in shops outside of those already under contract. If the car builders will take on this work, the shipbuilding company will supply material, as follows:
    Tons
    In June_15,000
    In July_ 20, 000
    In August_ 20/000
    In September_ 20,000
    In October_15, 000
    In November_10,000
    “ It will be desirous that fabrication of this steel and its shipment to Hog Island be made within thirty days after of material by the fabricator.
    All of this on on the ship for shell plating decks and bulkheads. The plates will vary in size. Thickness will run from a minimum of 34" on the bulkheads to a maximum of f-J-" on shell plate. The width of plates will vary from 62" to 100", and the length will practically all be over 16 ft. and up to 30 ft.
    
      “ Detailed drawings will be furnished for all rectangular plates, and all holes will be spaced for multiple punching. Templates will be furnished for all sketch plates. These can be fabricated on single punches.
    A on We will have inspectors in every shop who are instructed to see that the work conforms to detail, templates, and specifications, which are made up in conformity to Lloyd’s rules. Any work which does not. conform to same can not be accepted by the inspector, but if the material is not spoiled and can be corrected by reasonable measures same will be authorized by the proper authority. Practically all holes will be countersunk. Plates are ordered from the mills of such size as should not require shearing, but a great many of them have to be sheared. Wherever butt joints occur the edges of the plates have to be planed. The extent of this is not to exceed 10% of the total.”
    Y. The Allegheny works of the contractor at Pittsburgh were fully equipped as a steel freight car building plant, occupied about 680,000 square feet of space, and had a capacity of about 50 steel cars per day, or a fabrication capacity of 450 tons per day of steel-car materials at the beginning of the Fleet Corporation work. Fabrication of steel-car materials was quite similar to the work of fabricating steel-ship materials and required the use of similar with some additional equipment.
    VI. The’ contractor set aside and reserved in its Allegheny works for the exclusive use of the United States the full space agreed to be devoted to the fabrication of ship materials, expeditiously installed therein the additional machinery furnished by the United States, and promptly provided the necessary labor and organization for fabricating the quantities of steel-ship materials named in paragraph 6 of the contract.
    Approximately 64 per cent of space was devoted to work under the contract and 36 per cent of space retained for the car company’s work.
    VII. The contractor estimated that it would produce fabrication of ship material as follows:
    Tons
    July, 1918_ 1, 000
    August, 1918_ 2,000
    September, 1918_ 3, 000
    October, 1918_ 4, 000
    November, 1918_ 5,000
    December, 1918_ 8, 000
    January, 1919, and monthly thereafter_10, 000
    but stated that its agreement to fabricate this amount of tonnage per month was subject to strikes, fires, and labor1 conditions and other contingencies over which the contractor had no control, and provided the owner supplied sufficient and regular quantities of material and promptly furnished full details of the fabrication to be done, and provided machinery and equipment called for therein were promptly furnished. The total amount of 113,000 tons during the period of the life of the contract was not furnished by the United States. The United States furnished to the plaintiff during the life of the contract steel tonnage as follows:
    Tons received
    _ June-
    _ July-
    _ August_
    _ September.
    _ October_
    _ November-
    _ Decembei--
    1919
    January_ .
    February- .
    March- ..
    April- ..
    May- ..
    June-
    July-
    August-
    September
    57,734
    amouting to 57,734 tons. Of this amount 38,711 tons were fabricated and shipped; of the residue 14,742 tons were returned to the United States and-4,281 tons consisted of rejected steel and scrap. Had the United States supplied the plaintiff with 113,000 tons of steel the plaintiff would have fabricated 74,288 tons more than it did, which at $10 per ton would have amounted to the sum of $742,880.
    YIII. Both the plaintiff and the United States at the time of the execution of the contract had full knowledge of the difficulties that would be involved in supplying steel. ,
    The United States Shipping Board Emergency Fleet Corporation, like all other governmental organizations during the war, was subject to the orders and directions of the War Industries Board for priorities in shipments of material. The War Industries Board was a governmental agency for the purpose of allocating to the different agencies of the Government raw materials and supplies which were necessary to be furnished the departments in order to prosecute the war to its greatest effectiveness. Steel was in great demand by the War Department, the Navy, the Shipping Board, and the aircraft divisions. Only such steel as was allocated by the War Industries Board on priority orders could be obtained by the United States Shipping Board Emergency Fleet Corporation from the steel mills, and it could only furnish the amount allocated by the War Industries Board to its agent, the American International Shipbuilding Corporation, and the American International Shipbuilding Corporation could only ship to the Pressed Steel Car Co. such amounts as were allocated to it.
    IX. During the period from June 15, 1918, to September 29, 1919, steel was furnished the plaintiff by the United States. The plaintiff requested that there should be a supply of steel on hand at the beginning of each month sufficient to permit the fabrication of the quantity which the plaintiff estimated it would fabricate for that month. The United States did not in every instance furnish the steel so requested, and the plant was not utilized to its full capacity. The United States was also often delinquent in furnishing necessary information, dies, and templates essential to the work.
    X. During the month of June, 1918, and thereafter for the months following the Government shipped and the plaintiff received at its Allegheny works the following steel tonnage:
    June_ 114
    2,124
    August- 1, 759
    September- 7, 351
    October_ 3, 038
    November- 4, 413
    December_ 4, 034
    
      1919 Tons
    January_ 13, 060
    February_ 7, 642
    March_ 6, 657
    April_ 1,129
    May_ 1, 257
    June_ 1, 031
    July_ 24
    August_ 1
    September- 0
    The tonnage fabricated per month by the car company and the fabricated tonnage delivered were:
    
      
    
    The difference between the tons fabricated and the tons shipped is accounted for by the difference in methods of weighing. The 39,374 figure is the weight computed by the plaintiff; the 38,711 represents the weight accepted by the United States. The plaintiff is bound by the weights determined by the United States, and makes no claim on account of the difference in weights.
    XI. The armistice was signed on November 11,1918. The war with Germany was officially declared ended on July 2, 1921.
    On June 30, 1919, the United States notified the plaintiff of the termination of the contract 90 days from the date of said notice, namely, September 29, 1919, and the United States furnished no steel after September 29, 1919. The plaintiff protested against the termination of the contract but was obliged to and did stop operations as directed.
    XII. After conference in Philadelphia as to the overhead to be paid monthly the following letter was written by Admiral Bowles to plaintiff:
    UNITED States Shipping Board,
    Emergency Fleet Corporation,
    
      Philadelphia, December SI, 1918. Pressed Steel Car Company,
    Pittsburgh, Pa.
    
    (Yia A. C. Edgar, Authorized Representative.)
    Gentlemen: At a conference in my office this morning, attended by Messrs. Hofstott, Rider, McEnnalty, Chamberlain, and Mitchell, of your company, the subject of overhead allowance to be paid to you under your contract with the Emergency Fleet Corporation, dated June 15, 1918, was discussed, and it was agreed that payments during the first year of the life of this contract should be made to you at the rate of $118,000 monthly.
    It was determined that the amount set forth.in your statement of overhead expense as submitted to our traveling auditor, Mr. McEniry, for building material, miscellaneous castings, tools, and machinery, were proper overhead charges against the Fleet Corporation under this contract and that the only change in the schedule of overhead charges as submitted by Mr. McEniry would be with reference to the depreciation charge which was reduced by half. This reduction, amounting to approximately $5,000 per month, which deducted from the amount shown by Mr. McEniry’s statement — that is, $123,168.84 — -would leave slightly in excess of $118,000. The round sum above noted — that is, $118,000 per month — was therefore agreed upon as the amount of overhead charges to be paid under the contract.
    Yery truly yours,
    F. T. Bowles, Assistant General Manager.
    
    The exact and proper amount of overhead to be paid the contractor as a part of the costs of the work being so determined in the manner provided by the contract to be at the rate of $118,000 per month, this sum was paid the contractor in reimbursement of such cost during the first twelve months of operations under the contract. At the end of the first year of operations under the contract the Emergency Fleet Corporation, acting for the United States, and in agreement with contractor, accepted the fixed rate of overhead theretofore prevailing as applying during the life of the contract, and the contractor was thereafter reimbursed at the agreed and fixed rate up to and including September 29, 1919.
    The plaintiff, therefore, received from the United States during the period from June 15, 1918, to September 29, 1919, a total overhead charge of $1,825,066.67.
    The contract provided: “After the first year the exact and proper amount fixed for overhead charges shall be paid without regard to the estimated overhead charges named herein.”
    The exact amount of overhead charges for three months and fourteen days from June 15,1919, to September 29,1919, were $176,378.81; the amount of overhead paid by the United States during the aforesaid period to the plaintiff was $409,066.67; the amount overpaid the plaintiff was the sum of $232,687.86.
    XIII. After September 29,1919, the plaintiff under orders and directions and with the approval of officers or agents of the United States made direct labor expenditures and utilized its organization and forces in removing from its plant the machinery and equipment belonging to the United States and in replacing its own machinery. It was reimbursed only the actual cost of all direct labor so employed but was not allowed or paid any part of the general plant overhead expenses incurred in the same connection. The actual overhead and general expenses, exclusive of the overhead expense set forth in paragraph 12 hereof, was $26,821.17, no part of which has been reimbursed the plaintiff.
    XIV. After the termination of the contract on September 29, 1919, that part of the Allegheny works which had been used for work under the contract and the facilities pertaining thereto were in idleness, but for what length of time does not satisfactorily appear. The plaintiff, however, claims that it should be reimbursed the overhead costs for the time the plant was in idleness.
    
      XV. Before work was stopped in September, 1919, the contractor fabricated and delivered and the United States accepted 767.079 net tons of steel-ship materials and submitted invoices covering its agreed compensation therefor at the rate of $10 per net ton, which were correct and just. The contractor has never been paid all or any part of the agreed compensation for such work amounting to $7,676.79.
    XVI. After termination of the work the United States sold and delivered to the contractor and the contractor bought and accepted from the United States certain of the machinery installed by or for the United States in the Allegheny works of the contractor for use in the fabrication of steel-ship materials under this contract, and a price of $133,878.94 was agreed upon for this machinery, payment thereof to be taken care of in the final settlement of the contract. This sum has not been paid by the plaintiff to the United States.
    XVII. The amount of $498.91 set up in the counterclaim of the defendant is not sustained by the evidence.
    The court decided that plaintiff was entitled to recover the sum of $7,676.79 (Finding XV), and the defendant entitled to recover the sums of $232,687.86 (Finding XII) and $133,878.94 (Finding XVI).
    
      
       Writ of certiorari granted.
    
   Hat, Judge,

delivered the opinion of the court:

The plaintiff on June 16, 1918, entered into a contract with the United States whereby it agreed to fabricate certain ship materials and to set apart in its plant at Allegheny, near Pittsburgh, sufficient space for the work.

The materials for fabrication and certain plant equipment were to be sujjplied by the United States, the direct labor cost and overhead cost to be paid by the United States, and the plaintiff was to receive $10 for each ton of the materials fabricated.

The contract was terminated on September 29, 1919, in accordance with the provisions of the contract.

The plaintiff is now claiming that the United States is liable to it in the sum of $920,087.81. This aggregate sum is made up of three different items, which, for the sake of convenience, will be considered separately.

The first item is the sum of $742,887.11, which the plaintiff claims for loss at the contract rate of $10 per ton on 74,288,711 tons more material than was fabricated by it. The plaintiff alleges that under the provisions of the contract the United States, was obliged to supply this additional tonnage for fabrication, and that it could have fabricated it if it had been supplied with the material, and therefore that it is entitled to be paid said sum because it alleges that the United States breached the contract, and thereby prevented the plaintiff from earning the aforesaid sum of money.

The contract nowhere provides that the United States shall furnish to the plaintiff any specific amount of ship material for fabrication at any specific time; in fact, the contract is silent on that, and has no provision in it as to when and how the material shall be furnished for fabrication or how njuch thereof shall be furnished. The plaintiff, in the words of the contract, estimates how much of ship material it will fabricate, and then the contract provides that the contractor will not be able to live up to this estimate unless the United States shall supply “ sufficient and regular quantities of material,” but there is no obligation in the contract which binds the United States to supply these quantities of material at any particular time during the- life of the contract. As a matter of fact the United States did supply the plaintiff with materials for fabrication from June 15, 1918, to September 29, 1919, on which last-named date the contract was terminated.

The plaintiff now asks that it be paid the sum of $742,-887.11 for work which it never performed, and this upon the theory that the United States- ought to have supplied it with material enough to enable it to earn this sum. As the United States was not bound by its contract to furnish any specified amount of material and as the plaintiff never performed the work for which it is demanding payment, we are of opinion that this claim of the plaintiff can not be allowed.

As to termination, the contract provided that the contract should continue in force for the period of the war, “and thereafter until receipt of ninety days’ notice by the United States of the cancellation of the operation pursuant to the terms of this paragraph.” The notice was given on July 1, 1919, and the contract terminated on September 29, 1919.

The next claim of the plaintiff is for the sum of $276,-581.68. This claim is for overhead costs accruing after the termination of the contract and before the plaintiff attained normal commercial production and which covers the period from September 29, 1919, to March 1, 1920. That the plaintiff incurred some expense during this period will not be questioned, but the plaintiff when it entered into the contract knew that the contract would be terminated sooner or later and that such expense would be incurred. If the plaintiff desired that such expense should be paid by the United States it should have protected itself by having inserted in the contract some provision which would have protected it. But there is not a word in the contract which can in any way be held to support such a claim. The contract provided for ninety days’ notice of cancellation, which notice was duly given. When the contract was so ended on September 29, 1919, the obligations of the parties ceased and determined. The plaintiff when it entered into the contract must have taken into account the fact that it would incur such an expense and must have been satisfied that the payments made to it by the United States during the life of the contract would repay it for any expense which it might incur after the contract expired and which might be brought about by reason of putting its plant back to the condition which would enable it to do normal commercial business.

The right of the United States to cancel the contract can not be questioned. And if the contract was canceled in the manner provided for in the contract no claim can accrue from damages which might have been suffered after the contract was terminated. The contract fixes the rights of the parties, and we can not go outside of it in determining those rights.

The next claim of the plaintiff is for the sum of $26,821.17, which it claims as overhead costs due it as chargeable to the work of removal of Government equipment and the rein-stallation of its own equipment after the termination of the contract.

The contract provides as follows:

“The owner agrees to pay the cost of direct labor, as herein defined, of moving and storing the machinery of the contractor necessary to be removed and stored for the purpose of creating the fabricating capacity called for herein, in order to make room for the necessary fabricating machinery, as well as the cost of relocating and reinstalling the present machinery units of the contractor at the conclusion of operations under this contract, as well as the cost of the installation of the new machinery provided for herein, as well as the cost of castors and other roller punch tables, swing cranes for punches, floor plate handling apparatus, air hoists, etc., the cost of all of which shall not exceed the sum of one hundred and fifty thousand dollars ($150,000.00).”

There is here not a word which could be held to mean that the United States is liable for overhead costs. The plaintiff admits that it was paid the direct labor costs, but construes the word “ costs ” in the last half of the paragraph to include overhead costs. We do not think that it can be held to have such a construction. The paragraph is dealing with a specific subject, which does not pertain to the general subject matter of the contract, and if overhead was contemplated by the parties it would have been provided for in plain words; especially is this so when we consider that the contract fully provides for overhead during the life of the contract and defines how overhead charges shall be made up. The contract failing to provide for overhead costs, we can not go outside of the provisions of the contract and theorize such charges into the contract.

We come now to consider the counterclaim of the defendant, the first item of which is the sum of $133,878.94 for machinery purchased by the plaintiff from the United States. The plaintiff admits its indebtedness as to this amount.

The next item of the counterclaim is for the overpayment to the plaintiff of overhead costs. The defendant contends that the plaintiff should only receive the actual overhead •cost per month during the whole period of the contract.

provides that for the first year of operation under the contract it is estimated that the overhead charge shall be about $100,000 per month, and it was agreed that the correct amount to cover these charges for the first year should be arrived at by an examination of the books of the contractor. This was to have been done within 30 days of the date of the contract. On December 31, 1918, the plaintiff and a representative of the United States authorized to act, determined that during the first year of the life of the contract the overhead allowance was to be the sum of $118,000 per month. Under these facts we are of opinion that the plaintiff during the first year of the contract was entitled to receive monthly the sum of $118,000. The contract also provided as follows: “After the first year the exact and proper amount fixed for overhead charges shall be paid without regard to the estimated overhead charges named herein.” It follows that any payments made after the first year of the contract which were in excess of the actual overhead costs were made in violation of the terms of the contract, and the plaintiff must repay them. We find the excess payments to have been the sum of $232,687.86.

The defendant is entitled to a judgment in the sum of $358,090.01. It is so ordered.

Graham, Judge; Downey, Judge; Booth, Judge; and Campbell, GMef Justice, concur.