Case ID: us-ct-cl_63/html/0392-01.html
Source: Caselaw Access Project
Author: {"author": "Hay, Judge,\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

HEID BROTHERS v. THE UNITED STATES
    [No. F-23.
    Decided April 4, 1927]
    
      On the Proofs
    
    
      Reformation of contract; mutual mistake. — In a contract to furnish fuel wood a provision tRat the price named is to be increased or decreased corresponding to changes in freight rates is by mutual mistake omitted. Held,, that the contractor is entitled to have his contract reformed to speak the intention of the parties thereto and to judgment accordingly.
    
      
      The Reporter’s statement of the case:
    
      Mr. M. Walton Hendry for the plaintiff.
    
      M'i. Edwin S. McCrary, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. The plaintiff is a corporation organzied under the laws of the State of Texas and having its principal place of business at El Paso, Tex.
    II. Under date of June 15, June 30, and July 1, 1920, plaintiff entered into four contracts with the United States, known as Contracts Nos. 2330, 2384, 2393, and 2528, for delivery of fuel wood during the fiscal year 1921. All of the provisions of said contracts are identical, except as to the amount, price of wood, and time and rate of delivery, which are not in issue in this case, and being so identical, a copy of one of the contracts, No. 2393, is attached to the plaintiff’s petition, marked “ Exhibit No. 1,” and is made a part hereof by reference.
    III. The proposals for furnishing fuel covered by the said ■contracts were required to be opened May 14, 1920, at 10 a. m., at the office of Lie'ut. Col. C. A. Dravo, Director of Purchases, Baw Material and Paints Division, Quartermaster Corps, War Department, Munitions Building, Washington, D. C.
    A copy of the circular proposal is attached to the petition of the plaintiff marked “ Exhibit No. 2 ” and is made a part hereof by reference.
    IY. Lieut. Col. C. A. Dravo was chief of the Division of Baw Materials and Paints, Quartermaster General’s office, War Department, and Avas authorized by the United States to open bids submitted in pursuance of said circular proposal and to award and execute contracts made thereunder.
    Prior to the opening of said bids the plaintiff advised the said Colonel Dravo that it desired it to be distinctly understood that its bid was based upon present freight rates and that if the freight rates were increased or decreased after the contracts Avere entered into its delivery price would be governed accordingly, and the said Colonel Dravo replied that this was clearly understood and informed plaintiff that paragraph 11 of the specifications, which paragraph would be pasted on the contract and marked paragraph 19a, would provide for such increase or decrease of prices, but as a further precaution plaintiff asked permission of said contracting officer, as well as Colonel Elliott, who was Major Dravo’s superior, to file with its bid a letter stipulating that the said bid was based upon freight rates then in effect, and providing for increase or decrease of the then present freight rates. Upon being advised by Colonel Dravo and Colonel Elliott that they had no objection to such letter being filed along with said bid, plaintiff therefore attached to its said bid, before delivery to the defendant, a letter dated May 14, 1920, addressed to the said Colonel Dravo, reading as follows:
    “Referring to the attached proposals on wood for various posts and camps, beg to advise that our prices are based on freight rates now in effect. Should these rates be increased or decreased during the term of the contract, should we be awarded any of this business, our prices are to be governed accordingly.”
    Y. When the said bids were opened by the defendant the said letter of May 14,1920, was found pinned and attached to said bid, and the defendant, acting through Lieutenant Colonel Dravo, accepted the said bid as submitted and awarded the plaintiff the contract for the said wood in accordance with said bid with said letter attached.
    VI. Due to a mistake of the subordinate in Colonel Dravo’s office, no specific clause as was intended by the plaintiff and defendant was written into the said contracts providing for additional payment to plaintiff in the event the freight rates were increased or providing for reduction in the event freight rates were decreased, as provided for in the award and as stipulated in plaintiff’s bid, and when said contracts were executed by the plaintiff the said plaintiff overlooked the fact that there was no such specific clause in the contract, so that due to mutual mistake of the parties to this suit no specific clause was inserted in said contracts providing for increase or decrease in freight rates as stipulated in plaintiff’s bid, acceptance of the same, and the award of the said contract by the defendant.
    
      VII. Thereafter, when the said contracts had been duly executed and freight rates were increased, plaintiff immediately made claim upon the defendant for additional payments due to said increase in freight rates, in accordance with its bid, and the defendant’s contracting officer, who had awarded said contracts, and who had full authority to act for the defendant, under date of April 25, 1921, advised plaintiff in writing as follows:
    “ Receipt is acknowledged of your communication of April 20th re increased freight rates. The position you take regarding refundment by the Government to you of increased freight rates granted by the Government subsequent to your entering into contract for furnishing wood is absolutely correct.
    “If provision covering this contingency was not made a part of your contract, it was due to an oversight in the office of which, at the time the contract was entered into, I was in charge. Your communication to me dated May 14, 1920, sets forth clearly that such a provision should have been made a part of your contract, and if at the present date such provision is not contained in your contract, the same should be so amended as to include that provision.”
    The office of the Quartermaster General, Washington, D. C., acting through Colonel Elliott, advised the plaintiff to like effect by letter dated September 2,1920. Plaintiff, therefore, believing that said increased freight rates would be paid, as advised by the defendant, proceeded with the delivery of the wood under said contracts, but by reason of said increased freight rates was compelled to pay out the total sum of $19,527.74 more than it would have been required to pay out had there been no change in freight rates. Plaintiff made claim upon the defendant for said amount, but the Comptroller General refused to allow said claim on the ground that there was no provision in said contracts for payment of any increase in freight rates.
    The court decided that plaintiff was entitled to recover $19,527.74.
   Hay, Judge,

delivered the opinion of the court:

The plaintiff is suing to recover the sum of $19,527.74, which it claims is due it by the United States.

On June 15, June 30, and July 1,1920, the plaintiff entered into four contracts with the United States whereby it agreed to furnish and deliver to the United States certain wood for use at Ellington Field, Olcott, Tex. The proposals for furnishing the fuel covered by the said contracts were required to be opened May 14, 1920, at the office of Lieutenant Colonel Dravo, who was the purchasing and contracting officer of the United States authorized to open the bids and award and execute the contracts. Prior to the opening of the bids the plaintiff informed the contracting officer that it desired it to be understood that its bid was based upon present freight rates, and that if the freight rates were increased or decreased after contracts were entered into its delivery price would be governed thereby. The contracting officer stated that that was clearly understood, and that the contract would provide, for such increase or decrease of rates; but the plaintiff was not satisfied with this verbal assurance and asked permission of the contracting officer to file with its bid a letter stipulating that the said bid was based upon freight rates then in effect, and providing for increase or decrease of the then existing freight rates. The plaintiff thereupon attached to its bid before delivery to the contracting officer a letter dated May 14, 1920, which reads as follows:

“ Referring to the attached proposals on wood for various posts and camps, beg to advise that our prices are based on freight rates now in effect. Should these rates be increased or deci’eased during the term of the contract, should we be awarded any of this business, our prices are to be governed accordingly.”

When the bids were opened by the defendant the letter of the plaintiff of date May 14,1920, was found attached to the bid, and the bid so submitted was accepted and the contract awarded in accordance with the bid. Due to a mistake, no specific clause was written into the contract covering the increase or decrease of freight rates as was contemplated by the parties and stipulated for in the bid of the plaintiff, and the plaintiff in signing the contract believed the clause aforesaid was incorporated therein and signed the contract in that belief. After the contract had been executed freight rates were increased and the plaintiff at once made claim for additional payments due to tire increase in freight rates. The contracting officer wrote the plaintiff under date of April 25. 1921, as follows:.

“ Receipt is acknowledged of your communication of April 20th re increased freight rates. The position you take regarding refundment by the Government to you of increased freight rates granted by the Government subsequent to your entering into contract for furnishing wood is absolutely correct.
“ If provision covering this contingency was not made a part of your contract, it was due to an oversight in the office of which, at the time the contract was entered into, I was in charge. Your communication to me dated May 14,1920, sets forth clearly that such a provision should have been made a part of your contract, and if at the present date such provision is not contained in your contract the same should be so amended as to include that provision.”

The plaintiff therefore believing that the increased freight rates would be paid proceeded with the delivery of the wood under said contracts, and by reason of the increase in freight rates was compelled to pay and did pay the sum of $19,527.14 more than it would have been obliged to pay had there been no increase in rates.

The plaintiff made claim upon the United States for the aforesaid amount; payment thereof was refused, and the plaintiff thereupon brought this suit.

It is quite evident that both parties to the contract believed the provision providing for the increase or decrease in freight rates was embodied in the contract when it was signed by them; due to mistake, which was mutual, the provision aforesaid was omitted from the contract. Both parties understood the obligations imposed by the contract to be different from those stated in the written instrument. In such a case the court will reform the contract in accordance with the real intention and understanding of the parties shown by the evidence. We are therefore of opinion that the plaintiff is entitled to have the contract reformed so as to make it speak the intention of the parties to the contract, and that upon such reformation the plaintiff is entitled to recover the amount clamed, to wit, the sum of $19,527.74. See Poole Engineering & Machine Company v. United States, 58 C. Cls. 9; Walter D. Lovell v. United States, 59 C. Cls. 494; Hygienic Fiber Company y. United States, 59 C. Cls. 598; Snellenburg Clothing Co. v. United States, 60 C. Cls. 592; West Leechburg Steel Co. v. United States, 61 C. Cls. 294. See also 1 Comptroller General’s Dec. 587 where in a case similar to this in all respects the Government ivas held liable.

Moss, Judge; Graham, Judge; Booth, Judge/ and Campbell, Chief Justice, concur.