Case ID: us-ct-cl_65/html/0364-01.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

KISSEL MOTOR CAR CO. v. THE UNITED STATES
    [No. A-260.
    Decided April 16, 1928]
    
      On the Proofs
    
    
      Cancellation of contract; termination clause; liquidated damages for delay. — Upon finding that plaintiff's contract was duly canceled and delay in delivery of articles was due to the Government’s delay in delivering materials called for by the contract, liquidated damages for delay were remitted and judgment was entered for plaintiff in accordance with the provisions of the termination clause.
    
      
      The Ref oner's statement of the case:
    
      Mr. L. A. Spiess for the plaintiff. Mr. John Walsh was on the brief.
    
      Mr. 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 Kissel Motor Car Company, plaintiff herein, is now, and was at the times hereinafter mentioned, a corporation organized and existing under the laws of the State of Wisconsin, with its principal office and place of business at Hartford, Wisconsin, and engaged in the business of manufacturing and selling automobiles and automobile parts.
    II. On or about December 11, 1917, Major W. G. Wall, acting as negotiating officer for the War Department, in the matter of four-wheel-drive trucks for the Army, entered into negotiations with George A. Kissel, president of the Kissel Motor Car Company, plaintiff herein, with a view to the Kissel Motor Car Company’s entering into a contract with the War Department for the construction of 2,000 four-wheel-drive trucks for the United States Army. Several conferences were held between Major Wall and Mr. Kissel, president of the Kissel Motor Car Company, and between Major Wall and Roger M. Newbold, the Washington representative of the plaintiff company, in which the terms and conditions of the proposed contract were carefully considered by the parties. As a result of these conferences it was agreed by George A. Kissel, president of the Kissel Motor Car Company, and Major Wall that the Kissel Motor Car Company was to furnish the Government, for the Army, 2,000 F. W. D. trucks and certain spare parts on a cost-plus basis at a bogie price of $2,850.00 a truck, meaning a price which was set by the Government as the estimated price of a truck, with the understanding that steel wheels for the trucks were to be furnished by the Government and not charged against the bogie price, and that the contractor would .furnish oil side and tail lamps, gas lamps, and acetylene generators.
    
      It was further understood by and between the parties that the Kissel Motor Car Company should immediately begin making preparations for the manufacture of the 2,000 chassis and spare parts without waiting for a written contract, based on such negotiations, that was to follow in due course.
    III. In the latter part of February a formal contract, numbered C. M. E. 518, was forwarded to the Kissel Motor Car Company, which contract was dated December 20, 1917. At the time said contract was forwarded to the Kissel Motor Car Company it was notified that the Government was in urgent need of the trucks and spare parts, and plaintiff was requested to sign the contract and return the same with the understanding that if there were any mistakes therein the same would be corrected by a supplemental contract. With this understanding plaintiff, through its proper officers, caused said contract to be executed and immediately brought to the attention of the Ordnance Bureau that there was a mistake in said contract; that the same provided that the contractor was to furnish steel wheels and that the Government would furnish oil side and tail lamps, when it was the intention of the parties that the contractor was to furnish the oil side and tail lamps and the Government was to furnish the steel wheels.
    By the terms of the contract contractor obligated itself to manufacture and furnish to the Government 2,000 B-ton chassis of F. W. D. Auto Company, Model B, and sets of spare parts consisting of individual parts approximating in value thirty per cent of the cost of said 2,000 chassis. A true copy of said formal contract is attached to the petition, marked “ Exhibit B,” and is made a part of this finding by reference.
    IY. The formal contract did not correctly express the intentions of the parties in that it erroneously provided that the contractor was to furnish the steel wheels and the Government was to furnish the oil side and tail lamps, whereas it was the intention of the parties that the Government should furnish the steel wheels and the contractor should furnish the oil side and tail lamps.
    
      V. Thereafter the contracting section of the War Department, in order to correct the error made in the original contract, prepared and forwarded to the Kissel Motor Car Company a supplemental contract, proxy signed, dated May 6, 1918, which in part reads as follows:
    “Whereas the parties hereto entered into an agreement dated December 20, 1917, for 2,000 3-ton chassis and seis of spare parts, and desire to amend and supplement said agreement, as hereinafter provided, in order to set forth a certain part of the original understanding which was omitted through oversight from the original contract:
    “ Now, therefore, under the laws of the United States in such cases made and provided, and in consideration of the mutual agreements herein contained, the said parties have agreed, and by these presents do agree, to and w,ith each other as follows:
    “Article I. The contractor agrees to furnish oil side lamps and tail lamps for the articles. The United States agrees to furnish f. o. b. cars at contractor’s plant, without cost to the contractor, 2,500 sets of cast-steel wheels and 2,500 name plates at such times and in such quantities as will enable the contractor to perform all the terms of said contract. Such wheels and name plates shall remain the property of the United States, and the contractor agrees to use due and proper care in the handling and storing of same while in .its possession.
    “Article II. All other provisions of the agreement dated December 20, 1917, shall remain in full force and effect.”
    A true copy of the first supplemental contract is attached to the petition, marked “ Exhibit C,” and made a part hereof by reference.
    YI. Due to the fact that the first supplemental contract was proxy signed, a second supplemental contract was prepared by the War Department, dated July 15, 1918, and •executed by the parties, said contract in part reading as follows:
    “Whereas the parties hereto entered into an agreement ‘dated December 20, 1917, for a 2,000 3-ton chassis and sets •of spare parts, and
    “ Whereas the parties desire to amend and supplement said .■agreement in the interest of the United States, as hereinafter set forth, so as to provide for the sets of spare parts to be furnished by the contractor, and so as to provide for ¡certain additional items to be furnished for the chassis by the contractor and by the United States, which items were omitted from the original contract through inadvertence.
    “ Now, therefore, under the laws of the United States, in such cases made and provided, and in consideration of the mutual agreements herein contained, the said parties have agreed, and by these presents do agree, to and with each other as follows:
    $ ^ H’ ‡
    “ARticle IV. The contractor agrees to furnish oil side lamps and tail lamps for the chassis. The United States agrees to furnish f. o. b. cars contractor’s plant, without cost to the contractor, 2,000 sets of cast-steel wheels and 2,000 name plates at such times and in such quantities as will enable the contractor to perform all the terms of said contract. Such wheels and name plates shall remain the property of the United States, and the contractor agrees to use due and proper care in the handling and storing of same while in its possession. The provisions of this article were omitted from the original contract through inadvertence.”
    A true copy of the second supplemental contract is attached to the petition, marked “ Exhibit D,” and is made a part hereof by reference.
    VII. The 2,000 sets of steel wheels provided for in the contracts were furnished by the Government to the contractor for use on the F. W. D. trucks to be constructed by the contractor. The steel wheels were purchased by the United States from different manufacturers and ranged in cost from $138.00 per set to $182.00 per set, and averaged in cost about $150.00 per set.
    Contractor assisted the Government in the purchase of the steel wheels in that the officers of plaintiff company made inquiries of and wrote letters to various manufacturers of steel wheels, inquiring as to the price and also as to the ability of the manufacturers to furnish the steel wheels at such times as they would be needed by plaintiff company in the performance of its contract with the Government.
    The 2,000 name plates referred to in the first and second supplemental contracts were furnished by the Government to the contractor and were not charged to- or included in the bogie price.
    The steel bodies attached to the 2,000 trucks by the contractor were furnished by the War Department to the contractor and were not charged to or included in the bogie price.
    On account of some slight changes that were made the bogie price was increased $7.20 per truck, thereby making the bogie or estimated price for each truck the sum of $2,857.20.
    VIII. On the 25th day of September, 1918, the War Department sent the following letter to plaintiff:
    WAR DEPARTMENT,
    Office of the Quartermaster General of the Army,
    Washington, September £5, 1918.
    
    From: Quartermaster General.
    To: Kissel Motor Car Company, Hartford, Wisconsin.
    Subject: Contract CME 518.
    1. This office is in receipt of instructions from the purchasing officer to draw an amendment to the above contract, increasing the quantity of trucks to be delivered thereunder by 1,500 to be delivered during the months of February, March, and April, 1919.
    2. The contract covering this amendment will be forwarded to you for signature in the course of a few days.
    By authority of Acting Quartermaster General.
    s/H. M. Lewy,
    H. M. Lewy,
    
      Captain, Q. M. C.,
    
    
      Motors Division, Contract Section.
    
    On October 21, 1918, a second letter was written to the plaintiff, as follows:
    War Department,
    Office of the Quartermaster General of the Army,
    Washington, October £1,1918.
    
    From: The Quartermaster General.
    To: The Kissel Motor Car Company, Hartford, Wisconsin.
    Subject: Second series F. W. D. Orders.
    1. This will acknowledge and answer your letter of October 14th relative to the above.
    2. Be advised that under the new contract to be prepared the contractor will be called upon to furnish everything, including the steel wheels, the gas headlight, and generator. A higher bogie price will be named and the profit of the contractor increased accordingly.
    
      3. Full details will be furnished your company in the shape of a contract within a few days.
    By authority of the Acting Quartermaster General.
    s/H. M. Lewy,
    H. M. Lewy,
    Captain, Q. M. C.,
    
    
      Contract Section, Motor Branch, Motors and Vehicles Div.
    
    No formal contract was ever executed for the manufacture and delivery of the said 1,500 additional trucks.
    IX. Under date of December 16, 1918, the following telegram was sent plaintiff:
    “ Your contract number CME five eighteen for F. W. D. spare parts is hereby terminated in the public interest.”
    Under date of December 26, 1918, the War Department sent plaintiff a letter confirming the telegram dated December 16, 1918.
    On December 16, 1918, the date of the termination of the contract, the plaintiff had completed certain trucks and was holding them on account of the failure of the Government to supply cars for their transportation. It also had other trucks completed except the attaching of the wheels, which wheels the Government had failed to supply. It had manufactured and furnished only a part of the spare parts which the contract provided it should supply, due to the Government’s delay in furnishing materials for their manufacture, and there was á certain amount of work in process.
    X. The 2,000 trucks covered by the original contract CME 518 were constructed by plaintiff company and delivered to the United States, and accepted by the United States, but only a small part of the spare parts covered by contract CME 518, and the supplements thereto, was completed and delivered to the United States.
    Plaintiff did some work on the order for 1,500 additional trucks, for which settlement has been made.
    XI. Pursuant to the notice contained in the telegram of December 16, plaintiff suspended work on the additional 1,500 chassis and also on the spare parts. After the armistice plaintiff was requested by the Ordnance Department to extend its deliveries and to reduce the number of hours during which labor was employed so as to keep the maximum number of men employed and thereby disturb labor conditions as little as possible. Due to the fact that the number of hours during which labor was employed was reduced, and to the further fact that the Government failed to furnish steel wheels and also to furnish cars to contractor at such times and in such quantities as were necessary, the contractor was prevented from delivering the trucks and spare parts as per schedule. Otherwise all the chassis and spare parts would have been completed and delivered on schedule time. Final' deliveries of the chassis were made on May 29, 1919.
    XII. Plaintiff was in arrears in making deliveries, but the delays were occasioned by the Government’s failure to furnish materials at such times and in such quantities as were necessary. If the Government had furnished material at times when contractor needed it, contractor would have been able to make deliveries on schedule time.
    XIII. As the work progressed and deliveries of the chassis and spare parts were made, payments were made thereon. All of the material and manufacturing costs were paid for and are not at issue in this action.
    The total' gross cost of the 2,000 F. W. D. trucks was $5,390,716.64. The total gross cost of the spare parts delivered was $45,938.78. The total gross cost of the work in process at the time the work was stopped was $47,574.69. The total gross cost of the 2,000 F. W. D. trucks that were delivered, the spare parts that were delivered,'and the work in process was $5,484,230.11.
    Plaintiff has been paid on account of profit on chassis delivered, the spare parts that were delivered, and the work $3,632.57, or a total of $537,688.09.
    XIV. The actual cost of one F. W. D. truck was $2,695.36. The total cost of the 2,000 F. W. D. trucks was $5,390,716.64. The difference between the bogie price of $2,857.20 and the actual cost of one truck was $161.84. The difference between the bogie price of the 2,000 trucks and the actual cost was $323,680.00.
    XV. If the contract was canceled by the telegram dated December 16, 1918, and the letter confirming the same dated December 26,1918, and plaintiff is entitled to twenty-five per cent of the saving on the 2,000 F. W. D. trucks that were delivered, it is entitled to a profit of $80,920.00. Twenty-five per cent of the $2,758.32, which was the saving to the Government on spare parts, is $689.58. Ten per cent profit on the total gross cost of the 2,000 F. W. D. trucks delivered is $539,071.66. Ten per cent profit on the spare parts that were delivered is $4,593.88, and ten per cent profit on the work in process is $4,757.47. If under the law the contract was canceled, plaintiff is entitled to a gross profit of $630,032.59.
    In making settlement with the plaintiff the salvage value of certain tools, jigs, fixtures, etc., which plaintiff kept and retained, amounting to the sum of $1,100, was not taken into consideration. The original cost of these tools, jigs, fixtures, etc., was $6,576.80, but at the time the contract was canceled or finished the same were worth $1,100.
    The difference between the total profit of $630,032.59 and the sum of $537,688.09, the same being the amount that the Government has paid on account of profit, is $92,344.50. - Deducting from this amount the sum of $1,100 for the tools, jigs, fixtures, etc., that were retained by the plaintiff, leaves the sum of $91,244.50 unpaid.
    XVI. If the contract was not canceled and the cost of steel wheels at $150.00 per set is not charged to the bogie price and not included in the cost, the profit due the contractor would be $225.00 on each of the 2,000 trucks delivered, or $450,000.00, plus a ten per cent profit on the cost of spare parts, amounting to $4,593.87, plus a ten per cent profit on the work in process, amounting to $4,757.46, or a total of $459,351.33, plus twenty-five per cent of the difference between the bogie price of $2,857.20 and the actual cost of $2,695.36, representing a saving to the Government of $161.84 on each truck delivered, or a total saving to the Government of $323,680.00 on the 2,000 trucks delivered. Twenty-five per cent of $323,680.00 is $80,920.00. Twenty-five per cent of $2,758.32, representing the saving on spare parts, is $689.58. On this basis the.total profit would be $540,960.91. The difference between the sum of $537,688.09, which sum has been paid to the plaintiff, and $540,960.91, is $8,282.82, which amount has not been paid.
    XVII. If under the law the contract was not canceled and the cost of steel wheels at $150.00 per set is charged to the bogie price and included in the cost, contractor is entitled to a flat profit of $225.00 on each of the 2,000 F. W. D. trucks, or a total of $450,000.00 on the 2,000 F. W. D. trucks, plus a ten per cent profit on the spare parts completed, amounting to $4,593.88, plus a ten per cent profit on the work in process, amounting to $4,757.47, making in all a profit of $459,351.35.
    On the basis that the steel wheels were included in the cost, the actual cost of each truck was $2,845.36. The difference between the actual cost and the bogie price of $2,857.20 is $11.84 on each truck, or the sum of $23,680.00 on the 2,000 trucks. Twenty-five per cent of $23,680.00 is $5,920.00. Twenty-five per cent of the $2,758.32, representing the saving on the spare parts, is $689.58.
    The difference between the total profit, including the twenty-five per cent saving on the trucks and spare parts, amounting to $465,960.93, and the sum of $537,688.09, the same being the amount that the Government has paid on account of profit, is $71,727.16, which is on this basis an overpayment made to the plaintiff.
    XVIII. Subsequent to the receipt of the telegram dated December 16,1918, and subsequent to May 29, 1919, plaintiff submitted a claim to the Ordnance Claims Board in the sum of $93,090.86. The Ordnance Claims Board awarded plaintiff on said claim the sum of $47,401.22 in full settlement thereof, which plaintiff refused to accept.
    In September, 1920, plaintiff filed an appeal from the award of the Ordnance Claims Board to the War Department Appeals Section, which board on the 18th day of December, 1920, rendered a decision holding that in determining the contingent profit to which plaintiff was entitled on the 2,000 chassis manufactured by it and delivered to and accepted by the Government, the cost of steel wheels should not be taken into consideration, and transmitted its decision to the Auditor for the War Department.
    On the 6th day of April, 1921, the Auditor for the War Department certified as per certificate No. 105683, claim No. 760450, for payment to the plaintiff, a voucher for the sum of $47,401.22 in full settlement of plaintiff’s claim. A voucher for said amount was forwarded to plaintiff and plaintiff refused to accept the same and returned the check.
    On or about the 29th day of May, 1921, plaintiff filed an appeal from the award of the Auditor for the War Department with the Comptroller of the Treasury, and on the 23d day of May, 1921, the Comptroller of the Treasury rendered a decision on plaintiff’s claim, and certified that the sum of $18,095.67, consisting of $3,135.52 overpayment under contract CME 518 and supplements, and $14,960.15 liquidated damages, was due the Government from the plaintiff.
    Under date of October 9, 1922, plaintiff company requested a review of the Comptroller of the Treasury’s decision and settlement by the Comptroller General of the United States, and the Comptroller General rendered a decision holding that the Kissel Motor Car Company was indebted to the United States in the total sum of $93,095.67.
    The court decided that plaintiff was entitled to recover.
   Graham, Judge,

delivered the opinion of the court:

This suit arises out of a cost-plus contract, with two supplements thereto, formally executed by the plaintiff and the authorized representatives of the defendant on or about December 11, 1917, by which the plaintiff undertook to furnish to the Government 2,000 F. W. D. trucks and certain spare parts therefor. For the construction of the spare parts as well as the trucks the Government was to furnish certain materials and parts and the plaintiff certain parts by manufacture. There was fixed for the cost-plus basis a bogie or estimated price of $2,850 per truck, and the plaintiff was to be paid a tentative price on each truck, and on the completion or termination of the contract, an additional sum in case the actual cost was less than the estimated cost.

In the original contract a mistake was made in that it provided that the plaintiff should furnish steel wheels for the trucks and the Government certain spare parts, oil side and tail lamps, whereas the intention and understanding of the parties before the contract was executed were that the Government should furnish the steel wheels and the plaintiff the oil side and tail lamps. This mistake was corrected ,in the two said supplemental contracts, thus placing upon the Government the obligation to furnish the steel wheels. This is the construction we give to these contracts.

Thereafter, on September 15, 1918, the War Department gave the plaintiff an order for 1,500 additional trucks bo be delivered in February, March, and April, 1919. No formal contract was entered into for the delivery of these trucks. Plaintiff did some work under the order, and the transaction is not of any significance here except that it bears out the construction we give to the above contracts, in that it provided that the plaintiff should furnish the steel wheels and an increase by reason thereof in the bogie price, showing that as the Governnent construed the previous contracts' the Government was under obligation to furnish these wheels.

All of the material furnished and delivered in this case has been paid for at the tentative price. The court has found that the delays in delivery by the plaintiff were caused by the Government’s delay in delivering the necessary parts and materials called for by the contract. The plaintiff is therefore not liable to be assessed for liquidated damages.

On December 16, 1918, the plaintiff’s contract was terminated, and this termination was confirmed by letter of December 26. We hold that this telegram terminated the whole contract. On December 16,- 1918, plaintiff had delivered a large number of the trucks, had some ready to deliver, and others completed except the attaching of the wheels, which the Government had not delivered. The delay in completion here was due to the failure of the Government to furnish the materials and the delay in delivery of the trucks completed was due to the failure of the Government to transport them. A part of the spare parts to be furnished by plaintiff at this time had been delivered, the delay in delivery of the balance being caused by the delay of the Government in supplying the necessary material. The Government afterwards supplied the wheels and transportation, and all of the trucks called for by the contract were delivered and the plaintiff was paid on the basis of the tentative price.

The one question remaining in this case, therefore, is what is the plaintiff entitled to recover under the provisions of the termination clause of the contract.

Under the termination clause plaintiff was to be paid all costs- and obligations incurred by it and not previously paid, pursuant to Article Y of the contract, together with the fixed profit “herein provided upon all articles previously delivered and accepted,” and in addition thereto a sum which together w,ith all fixed profits theretofore paid would be equivalent to 10% of all cost which the United States had already paid or was obliged to pay, except cost of materials purchased by contractor and for use in the performance of the- contract, but not used.

Article IY of the contract provides that in case of termination by the United States, if the actual cost should be found to be less than the estimate, the plaintiff should be paid 25% of the difference between the actual and estimated cost.

The figures and details determining the results under these two provisions of the contract are worked out in Finding XY, and show a sum due the plaintiff of $91,244.50.

Judgment should be entered for plaintiff for said sum, and it is so ordered.

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

GreeN, Judge, took no part in the decision of this case.