Case ID: us-ct-cl_61/html/0061-01.html
Source: Caselaw Access Project
Author: {"author": "Graham, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

MOSLER METAL PRODUCTS CORPORATION v. THE UNITED STATES
    
    [No. C-940]
    
      On the Proofs
    
    
      Settlement contract; acceptance. — Where a settlement contract fully discharges the Government 'and a balance stated therein as due the United States is recovered by set-off from other balances, and such adjustment is accepted, the contractor can not maintain suit for interest in connection with an alleged postponement of credit.
    
      The Reporter's statement of the case:
    
      Mr. Raymond M. Hudson for the plaintiff.
    
      Mr. Joseph Henry Cohen, with whom was Mr. Assistant Attorney General Robert H. Lovett, for the defendant.
    Decided June 8, 1925.
    Motion for new trial overruled October 26, 1925.
    The following are the facts as found by the court:
    I. During the years of 1918, 1919, and 1920, the' A. E. Mosler Company was a corporation organized and existing under the laws of the State of New York. Some time subsequent to January 1, 1921, and prior to May 18, 1922, the said A. E. Mosler Company became insolvent, and core-ceivers were appointed for said corporation by the Judge of the United States District Court, Southern District of New York (the exact date on which the receivers were appointed is not shown by the evidence in the record).
    II. On May 18, 1922, by virtue of an order of the court, assets of the A. E. Mosler Company, including the claim sued on in this action, were sold at public auction and bid in by one S. Alexander Cohen, who, it appears from the evidence, was representing parties who at the time were contemplating the organization of a corporation to take over the assets of and to conduct the business of A. E. Mosler Company, if the said Cohen was the successful bidder at said sale. The said Cohen being the successful bidder, the sale was made to him and subsequently confirmed by the court. Subsequent to the daté of the sale, the Mosler Metal Products Corporation, plaintiff herein, was duly organized under the laws of the State of New York, as a corporation, and by virtue of an order of the court the assets of the A. E. Mosler Company, including the claim herein sued on, were transferred, conveyed, and delivered by said coreceivers to the Mosler Metal Products Company, plaintiff herein. (The question of the appointment of the receivers, the authorization of and confirmation of the sale, rests in parole. No orders or decrees of the court were introduced in evidence.)
    III. From the date of its organization, which was some time in 1922 (the exact date is not shown by the evidence), the Mosler Metal Products Corporation, plaintiff herein, has been continuously and is now a corporation organized and existing under the laws of the State of New York.
    IV. On June 19, 1918, F. D. Schnacke, first lieutenant, A. S. Sig., E. C. (later captain), issued and delivered to the A. E. Mosler Company order No. 31199, for 10,000 Mos-ler spark plugs, Liberty type, at $1.2o each, a copy of which order is filed with paragraph 3 of plaintiff’s petition, marked “ Exhibit A,” and is made a part hereof by reference.
    This order was followed by a formal contract, No. 4120, dated June 21, 1918, by and between the United States, represented by F. D. Schnacke, first lieutenant, A. S. Sig., E. C., the said officer having been duly authorized to execute said contract in behalf of the United States, and the A. B. Mosler Company, represented by A. B. Mosler, president and treasurer. A copy of order No. 31199 was made a part of said formal contract. A true copy of said contract is attached to plaintiff’s petition and marked “Exhibit B,” and is made a part hereof by reference.
    V. On October 10, 1918, F. D. Schnacke, captain, A. S. A. P., issued and delivered to the A. B. Mosler Company order No. 730586, for 1,500,000 Mica spark plugs for Liberty engines, to be delivered at the rate of 5,000 per day during November and December, 1918, to be increased to 10,000 per day not later than January 1, 1919. Thirty thousand plugs to be paid for on a building price of $1.30 each, subject to adjustment, and the final price for the entire order to be determined at the time the 30,000 plugs were delivered. Money advanced for machinery and buildings up to $75,000 to be repaid by the A. B. Mosler Company at the rate of 5 cents per plug. This order cancelled and superseded order No. 31199. A true copy of the order is filed with and attached to plaintiff’s petition marked “ Exhibit C,” and is made a part hereof by reference.
    VI. Order No. 730586 was followed by a formal contract dated October 10, 1918, by and between the United States, represented by F. D. Schnacke, captain, A. S. A. P., U. S. A., the said officer having been duly authorized to execute said contract in behalf of the United States, and A. B. Mosler Company, represented by A. B. Mosler, president. This contract covered the same material as described in the order No. 730586, which order was made a part of the contract. Said contract was approved by the Director of Aerial Production under date of October 16, 1918. Attached to and forming a part of this contract was a rider providing many of the terms and conditions of said contract. The evidence in the record does not show the date that said rider was executed, but it is shown that the last article in the contract was article 11, and the first article in the rider was article 12. This rider was accepted in writing as follows: Accepted, A. B. Mosler Company, by A. B. Mosler, president, for contractor; F. D. Schnacke, for the Government. A true copy of the contract is filed with plaintiff’s petition and attached thereto and marked “ Exhibit D,” and is made a part hereof by reference. A true copy of the rider is attached to said contract and is filed with the plaintiff’s petition and attached thereto, marked “ Exhibit D-l,” and is made a part hereof by reference.
    VII. On October 19,1918, the United States and the A. R. Mosler Company entered into another contract, supplemental to the contract dated October 10, 1918, No. 4987, and order No. 730586 (which order was made a part of contract No. 4987), by the terms of which supplemental contract the United States agreed to make an advance payment to the contractor under the principal agreement to an amount not exceeding the sum of $175,000, on the terms and conditions mentioned therein, to be repaid, together with interest therein specified, out of proportionate deductions from the purchase price of the spark plugs as delivered. This supplemental contract was executed in behalf of the contractor by Arthur R. Mosler, its president and treasurer, and in behalf of the United States by F. D. Schnacke, captain A. S. A. P., the said officer having been duly authorized to execute said contract. This contract was approved October 22, 1918, by the director of the aircraft. A true copy of the supplemental contract is filed with and attached to plaintiff’s petition and marked “ Exhibit E,” and is made a part hereof by reference.
    VIII. After the armistice the Government reduced the order to 200,000 spark plugs, suspended further production, and over the objections of the contractor canceled the contract. It does not appear from the evidence what notice, if any, was given to the contractor of the Government’s intention to terminate and cancel the contract. No evidence was offered by either party as to the method of cancellation. Paragraph 6 of article 13 of the contract under date of October 10, 1918 (Exhibit D-l of plaintiff’s petition, made a part of Finding VI hereof by reference), provides that the “ contract may be terminated by the United States by ten (10) days’ notice in writing from the contracting officer to the contractor.”
    
      IX. Following the termination of the contract by the Government, contractor filed its claim with the air service section of the War Department Claims Board, in the sum of $275,586.11, as damages resulting from the cancellation of the contract. This claim was audited by the Government auditors of the liquidation division of the Air Service, and on April 6, 1920, after a full hearing, said board awarded to the contractor the sum of $130,944.30. The contractor declined to accept this award and appealed therefrom to the Board of Contract Adjustment. The latter, after a hearing on June 30, 1920, rendered a decision affirming the award of the Air Service Board with exception of the modification of item No. 5, not deemed herein material. Thereupon the contractor appealed from the decision of the Board of Contract Adjustment to the Secretary of War, who, after a hearing, approved and affirmed the decision of the Board of Contract Adjustment, with the exception of that part wherein it modified item No. 5, of the award as above mentioned. On November 23, 1920, pursuant to the decision of the Secretary of War, the Board of Contract Adjustment reconsidered its former decision and modified the same in accordance therewith. Said claim was then transmitted back to the air service section of the War Department Claims Board with the finding and decision as above set forth. Both before and during the time that the claim was pending before the boards and the Secretary of War, contractor contended that the award should be made as of April 1, 1919, and that contractor should not be charged after that date with interest on the money advanced.
    X. Due to the contentions of the contractor, a settlement was held in abeyance for some time, and during the period of extended negotiations, on December 3,1920, FrederickW. Sperling, an attorney at law representing contractor in the matter, wrote the Secretary of War as follows:
    FREDERICK W. SPERLING,
    COUNSELOR AT IjAW,
    
      27 Cedar St., New York City, December 3, 1920. Subject: Claim of A. B. Mosler & Co., No. 150rC-2659.
    Dear Sir: In the above matter an appeal was taken to you from the decision of the Board of Contract Adjustment and you made a decision on the 12th ult. confirming the findings of the Board of Contract Adjustment, with the exception of item 5, on which you found in our favor as appellant. You returned the case to the appeal section for the adjustment of item 5.
    The contractor in this case borrowed a sum of money, on which there is a balance of $137,000 due, plus interest claimed by the War Credits Board. At the time the appeal was taken to you the Government had already decided that the contractor was entitled to about $130,000. The result of your decision increases this award to approximately $135,000. For many months I have been trying to get the Government to pay my client a substantial sum on account of the amount concededly due, that sum to be applied against the indebtedness to the War Credits Board, in order to prevent the further accrual of interest so far as possible. The Government has taken the position that it will not pay interest on the amount of its indebtedness to us.
    What I desire now is to have some one in authority authorize the proper department to make a partial payment on account. I am being constantly referred from one department to another without being able to get any relief unless I am willing to accept as final and binding the Government’s decision on this claim. The air service section declines to take any action until the papers are returned by the appeals section. The appeals section declines to return the papers unless we approve of the Government’s decision on the appeal. I am not prepared as yet to acquiesce in the decision of the appeals section, but no matter what happens we are entitled to at least $135,000; and all I ask at this time is that we be paid, or rather that there be turned over to the War Credits Board a substantial part of that amount, leaving us free to determine after due deliberation whether we are going to take any further action. The attitude of the various departments is working this very unjust result, namely, we are being told that if you do not accept what we have offered, then you may keep up your fight and we-are going to withhold what is justly due you under every decision of every board before whom this matter has come for hearing, as a result of which the interest on the amount owing to the War Credits Board continues to accrue without any relief, since the Government declines to pay any interest on any amount that it may owe.
    I urge you most respectfully to consider the plight in which we are placed and to afford us some relief. Unquestionably thére is some one who has authority to direct a partial payment. Who that some one is seems to be buried under a mass of rules and regulations which result in a gross injustice to us. I beg of you therefore to assist us in this matter and trust that you will let me hear from you with as little delay as possible, as each succeeding day is adding intolerable burdens to those my client is already unfairly compelled to bear.
    With reference to a settlement of the entire controversy I am willing to do this, to wit: If you will direct that the final contract of settlement between us and the Government shall provide that whatever amount is ultimately found to be due to us shall be paid to us as of April, 1919, the date when our claim should have been settled, and that the payment so made shall be turned over to the War Credits Board as of that date and shall be accepted by the War Credits Board as of that date as a payment by us on account of our indebtedness to the War Credits Board, which will result in saving us interest on the amount of such payment from that date; then, providing such a provision is carried out, I will agree to accept as final the settlement which the Government offers under your decision.
    I am reliably informed that a similar settlement was made in a case pending in your department and I feel sure that you will agree with me that it is an equitable adjustment of the interest controversy. The War Credits Board will accept the payment as of April, T919, and will only charge us interest on the difference due to that board. I understand that there are acts of Congress under which an adjustment on that basis would be sanctioned, and as it would result in a final settlement of the entire case, I hope that if you do not decide to pay us a substantial amount on account, then at least you will decide the final adjustment to be made as I propose.
    Most respectfully yours,
    FREDERICK W. STERLING.
    Hon. Newton D. Baker,
    
      Secretary of War, Washington, D. 0.
    
    On December 8,1920, the Secretary of War, in reply to the letter received from Attorney Sperling, wrote said attorney as follows:
    War Detartment, Washington, December 8, 19%0.
    Mr. Frederick W. Sterling,
    
      27 Cedar Street, New Yor'/c City.
    
    Sir: I have the honor to acknowledge receipt of your favor of December 3d, and in reply thereto would state that your suggestion of dating the award back to April 1st, 1919, is in effect the same claim as was denied by the Board of Contract Adjustment and by me on appeal. Interest that has accrued to the United States is a right which the Secretary of War is without legal authority to disregard.
    It has also been explained to you and your client heretofore that neither the Secretary of War nor the War Department Claims Board, acting for him, can certify that an account has been stated between the United States and A. It. Mosler & Company until in fact there has been an agreement.
    Should your client not be willing to accept the proposed award as a satisfactory adjustment as prescribed by the Dent Act, and desire to take the case to the Court of Claims, I am informed that the War Department Claims Board will be willing in that event, upon your application, to make a partial award not in excess of seventy-five per cent of the proposed award. I understand that my orders in the case of November 12th were promptly communicated to you and no solution of this claim can be made until you determine what line of action relative thereto you desire to take.
    Very respectfully yours,
    (Signed) Newton D. Bauer,
    
      Secretary of War.
    
    True copies of said letters are filed with and attached to plaintiff’s petition marked “ Exhibits F and G,” respectively.
    XI. Contractor refused to accept the award as a full and final settlement between the parties, and declined to accept •75 per cent of the proposed award and leave the questions of deductions on account of interest and the unrecouped part of the principal for determination by the Court of Claims.
    Under date of December 16, 1920, the Government submitted to the contractor a settlement contract dated December 15, 1920, a true copy of which is filed with and attached to plaintiff’s petition marked “ Exhibit F,” and is made a part hereof by reference.
    This contract purports, on its face, to be a full, true, and complete settlement of all claims of every kind, character, and description by reason of or arising out of said original contract. Article 3 of said contract provides as follows:
    “ The contractor does hereby for itself, its successors and assigns, remise, release, and forever discharge the Govern-
    
      ment of and from all manner of debts, dues, sum or sums of money, accounts, reckonings, claims, and demands whatsoever due or to become due in law or equity, under or by reason of or arising out of said original contract.”
    XII. Five copies of the termination contract (Exhibit F of petition) were sent to the A. E. Mosler Company by the Air Service division, together with a request that said contract be properly executed and returned. Numerous letters and telegrams passed between the Air Service section and the A. S. Mosler Company in reference to the execution of said settlement agreement.
    On January 6, 1921, Mr. Lawrence J. Heller, attorney at law, Washington, D. C., representing the receivers of the A. K. Mosler Company, appeared before the air service division and requested a modification of the proposed settlement contract to the effect that $130,944.30 of the amount due the contractor be awarded as of April 6, 1920, and be applied against the indebtedness of the contractor to the War Credits Board as of that date. Under date of January 7, 1921, the air service section, War Department Claims Board, replied to Mr. Heller and stated that the plaintiff was not entitled to an award in the terms requested, and again suggested the execution of the settlement contract without further delay. A copy of this communication was sent to the A. E. Mosler Company. On January 19, 1921, the air service section again wrote the A. E. Mosler Company inviting attention to the correspondence with Mr. Heller, and advising that steps would be taken to cancel the award if not accepted. On January 21, 1921, the chairman of the claims board telegraphed the A. E. Mosler Company requesting immediate advice as to Avhen the contract would be executed. Under date of January 22, 1921, Mr. Frederick W. Sperling, attorney for the A. E. Mosler Company, returned to the air service section of the War Department Claims Board the five copies of the termination contract duly executed as requested.
    XIII. Until the final execution of the settlement contract there was never any agreement by the contractor as to the amount it would accept from the War Department in final discharge of all liabilities of the Government under the contract, but the settlement contract when executed was considered by the War Department to have been a final settlement of all matters in controversy.
    XIY. Under the aforesaid settlement contract the sum of $132,681.90 was credited as of January 26, 1921, against the A. E. Mosler Company’s indebtedness to the War Credits Board of $137,875.70, which was the then balance of the principal due for the $175,000 advanced payments made in October and December, 1918. This left $5,193.80 as a balance of principal due the United States. There was also due the United States as interest on these advances until the entire indebtedness was recouped the sum of $20,178.60.
    After the execution of the settlement contract it appears that the A. E. Mosler Company at various times for a period of thirteen months, sold goods to the United States for Avhich it periodically submitted invoices. From amounts of these sales the Government at divers times made deductions on account of said balance due the Government after giving the credits named in the settlement contract, and periodically gave the A. E. Mosler Company notice of these deductions. The last of these several notices was as follows:
    FINANCE DEPARTMENT, UNITED STATES ArMT,
    Finance Oppice, Washington, February 27, 1922.
    
    A. E. Mosler & Company,
    A. E. Lemieux, Co-Receivers in Equity,
    
    
      Mt. Vernon, New York.
    
    Inclosed please find check No.-in payment of bill as
    follows:
    Date 2/16/22 your invoice No.-. Our purchase order
    No. 64-22.
    Amount
    Invoice No. 9437, contract 7317, dated Dec. 21, 1921_$10, 000.00
    Less 2%_ 200. 00
    9, 800.00
    Less balance due ou interest on advance payment. Voucher No. 3055 October, 1918, and 8808 December, 1918_ 8,988. 36
    811.64
    Written upon the face of this notice were the words: “Settlement of complete recoupment of advance and interest attached hereto.”
    
      Government voucher No. 9910 was prepared, showing the state of this account, and that a balance of $811.64 was due the A. E. Mosler Company. A check, dated February 27, 1922, for $811.64 was sent to the A. E. Mosler Company with the aforesaid notice of February 27, 1922. This check was accepted and cashed by the A. E. Mosler Company. There is no evidence of any protests against these recoup-ments or deductions.
    The court decided that plaintiff was not entitled to recover.
    
      
       Writ of certiorari denied.
    
   MEMORANDUM BY THE COURT

Plaintiff, Mosler Metal Products Corporation, sues to recover a sum of money alleged to be due from the Government to the A. E. Mosler Company, and to which the plaintiff claims to have succeeded. The facts show that the Mos-ler Company secured a loan from the Government in the amount of $175,000. Upon termination of its contract with the Government differences arose which were not finally settled until December 15, 1920, at which time a settlement contract was entered into between the parties, made Exhibit F to the petition, whereby it was ascertained that the amount due the Mosler Company was $132,681.90, and this amount was credited as of January 25, 1921, against the Mosler Company’s indebtedness to the War Credits Board on account of the advancements on loans to the Mosler Company, above referred to. Applying this credit to its indebtedness left the Mosler Company indebted to the United States in the principal sum of $5,193.80, and to the accrued interest on said loan in the sum of $20,178.60.

The principal insistence in this case is that the credit of the amount due the Mosler Company should have been made as of an earlier date, and thereby stop the interest on the indebtedness to the Government. If the matter stood upon this condition alone there could be room for the contention that the amount due the Mosler Company should be applied as of the date of the termination of its contract by the Government. But the facts show that this very question was raised by the attorney for the plaintiff during the period of the settlement, and he, on behalf of the plaintiff, urged that the credit should be made as of April, 1919. The Secretary of War declined to accede to this, but proposed instead to allow as much as 75 per cent of the claim and leave the matter open for suit in the Court of Claims. This proposition was refused. Thereafter, on or about December 15, 1920, a settlement contract (Exhibit F to the petition) was submitted for execution. When sent to the Mosler Company numerous letters passed between that company and- the air service section in reference to its execution, and in January an attorney representing the Mosler Company appeared before the air service section and requested a modification of the proposed settlement contract, urging that the contractor be awarded the stated sum as of April 6, 1920, and that this sum, $130,944.30, be applied against the indebtedness of the Mosler Company to the War Credits Board as of that date. This proposition was declined, and on January 22, 1921, the A. B. Mosler Company, through its attorney, Mr. Sperling, returned the copies of the settlement contract, duly executed, to the air service section of the War Department Claims Board.

In view of the history of the transaction' and of the language of the settlement contract the Mosler Company closed the transaction. In addition to this, after the credits had been given, as stated, the A. It. Mosler Company at various times during a period of thirteen months sold other goods to the United States, for which it periodically submitted invoices, and from the amounts due for these sales the Government at divers times made deductions on account of the said balance due the Government after the credits named in the settlement contract were given to the A. It. Mosler Company. That is to say, the Government recouped the amount due it by making deductions from other bills due to the A. B. Mosler Company, and periodically the Government gave that company notice of these deductions as and when they were made. One of these notices is set-out in the findings (Finding XIV). This was the last of the notices and closed the transaction. From' a bill due the Mosler Company of $10,000, less 2 per cent, there was deducted $8,988.36, leaving a balance of $811.64. This deduction was on. account of interest on the advance loan above mentioned, and written upon the face of the notice itself were the words that the settlement of the complete recoupment of advance and interest was attached. This $811.64 was paid by Government voucher, was sent to A. R. Mosler Company, was received by that company and cashed without protest or objection. This was a recognition of the settlement as the Government claimed it, and if it is necessary to add anything to the conclusiveness of the settlement agreement the subsequent action of the parties is conclusive. The suit was not brought until eighteen months after this final payment was made, and is now sought to be maintained by a purchaser of the claim at a sale by the receiver of the original contractor. Our conclusion is that the petition should be dismissed and it is so ordered.

Graham, Judge,

took no part in the decision of this case.