#### POOLE ENGINEERING & MACHINE COMPANY v. THE UNITED STATES.

[No. 34585.

Decided January 2, 1923.]

*On the Proofs.*

*Contract; reformation of; mutual mistake of foot.*— Where the facts proved establish mutual mistake in the original contract, and that both parties understood the obligations to be different from those stated in the written instrument, the court will reform the contract in accordance with the real intention and understanding of the parties shown by the evidence and give judgment for the amount found due under the reformed contract.

*10*The Reporter's*statement of tbe case:

*Mr. George R. Shields*for the plaintiff. *King & King*were on the briefs.

*Mr. W. F.*Norris, with whom was *Mr. Assistant Attorney General Robert TI.*Lovett, for the defendant.

The following are the facts of the case as found by the court:

I. The plaintiff is a corporation organized and existing under the laws of the State of Maryland, having its office and factory at Baltimore, in said State.

II. On August 9, 1918, the projectile section of the Ordnance Bureau of the War Department, by direction of the Chief of Ordnance, wrote plaintiff stating that the department was anxious to secure promptly 132,000 complete rounds of 37-millimeter sand-loaded shells, specially loaded and calibrated, and requested a proposal from plaintiff for furnishing the shells in question at the earliest possible date.

On August 14, 1918, plaintiff replied to said letter as follows:

“ GeNtuemeN : Replying to your favor of August 9th, in reference to 132,000 sand-loaded rounds 37 m/m ammunition, we beg to quote you a unit price of 91$ cents each f. o. b. our loading plant, Texas, Md.

“ It is understood the Government is to furnish all raw materials on this order with the exception of the base primer.

“ The following is an analysis of our bid:

Shell_ $0. 30

Primer_ .05

Plug_ .03J

Cartridge case-.17

Labor of assembling, packing, preparing for shipment, and testing-.30

Total_ . 914

“ It is understood the Government is.to supply us box for shipping. We can start deliveries within two weeks at the rate of 6,000 daily, continuing that delivery until the order is completed.”

III.On September 30, 1918, the procurement division of the Ordnance Bureau, pursuant to plaintiff’s said proposal *11of August 14,1918, prepared and sent to the contract section ■a requisition for the preparation of a contract with plaintiff for supplying said shells. In preparing the requisition for the contract, the officer of the procurement division who had negotiated the contract with plaintiff, overlooking the fact that plaintiff’s said proposal called for the furnishing of the shipping boxes by the Government, assumed that the cost of such boxes was included in and covered by the item of 36 cents for cost, of “ labor of assembling, packing, preparing for shipment, and testing ” which entered into the 91-J cents per round of plaintiff’s proposal, and therefore merely stated in the requisition that delivery was to be made by plaintiff “ f. o. b. manufacturer’s plant, Baltimore, Md.,” omitting all reference as to who ivas to furnish said boxes.

The contract was thereupon prepared by the contract section and submitted to the plaintiff company for its signature. Shortly thereafter, and before the execution of the contract by plaintiff, one of the officials of plaintiff company called upon the officer of the Ordnance Bureau, by whom the contract had been negotiated, and called his attention to the fact that the unit price of 91-| cents per shell in plaintiff’s proposal did not cover the cost of the boxes for shipping, but simply covered labor and expense of packing the shells in the boxes, and that the proposal called for the boxes to be furnished by the Government. Said negotiating officer recognized such to be the facts in the matter, and thereupon proposed that, in order to save time so that the Government might get the shells at the earliest possible moment, plaintiff should execute the contract as it had been drawn, with the mutual understanding that a supplemental contract would be drawn and entered into by the parties providing for the furnishing of the shipping boxes by or at the expense of the Government. This being agreed to, the original contract was thereupon executed by plaintiff and the Government under date of October 14, 1918, a copy of which is annexed to plaintiff’s petition as Exhibit B thereto, and is by reference made a part of these findings of fact.

IV. It was mutually understood by and between the officers of the plaintiff company and the officers of the Bureau *12of Ordnance by whom said contract was negotiated, that said contract was to provide for the furnishing of the shipping boxes by the Government; and on November 4, 1918, plaintiff wrote the War Department, attention of Captain Goodwillie, packing container section of the procurement division, as follows:

“ In connection with the above contract we will require 2,200 boxes, which is the same type of box as used on other-contracts for 37 m/m shell. These have been furnished to-drawing 76-1-38.

“Due to a cancellation of 500,000 shells which we have-been loading for the Toledo Screw Products Co., on their contract G1089-582 A, we have quite a supply of these boxes on hand at our loading plant. The terms of this new contract call for these boxes being furnished by the Government. We would, therefore, be glad to dispose of the above quantity of boxes for use on this contract at cost to us, which is $1.02 each plus $0,097 each freight.

“ Will you kindly advise if it will be satisfactory to handle it in this manner? ”

In reply to this letter, the said packing container section wrote plaintiff on November 6, 1918, as follows:

“ 1. The packing container section desires to acknowledge your letter of November 4th, our file P457.1/17730.

“ 2. At a conference held yesterday between Captain Good-willie, of the packing container section, and Captain Garrett, of the projectile section, it was found the contract you refer to provided that the Poole Engineering & Machine Company is to supply the necessary boxes to properly ship the material called for on same. ,

“ 3. You are directed to be guided by the above.”

On November 8, following, plaintiff, in reply, wrote the War Department, attention of said Captain Goodwillie, as follows:

“ We are in receipt of your letter of November 6th, file P-457.1-17908, with reference to war order P-16361-3917-A, covering subject of shipping boxes for one hundred and thirty-two (132) thousand rounds of 37 m/m sand-loaded ammunition. After having noted contents of your letter referred to, we are somewhat at a loss to understand in what manner it was found that it was provided the Poole Engineering & Machine Company should furnish boxes for shipping this material. If you will refer to our letter of August *1314th you will note that it specifically states that Government is to furnish the necessary boxes, and as far as we can ascertain this letter has not subsequently been supplemented, changing the condition of basis of our quotation; therefore, we respectfully' suggest that you review again the facts in connection with our quotation on this contract, and we feel assured that you will find that we will not be required to furnish the necessary packing containers.”

On November 14, following, the projectile section of the Bureau of Ordnance, by direction of the Chief of Ordnance, wrote plaintiff in reply as follows:

“ 1. The Chief of Ordnance directs me to acknowledge your letter of November 8th, addressed to Captain Good-willie, which letter has been referred by him to this section for attention.

*“*2. It is true that you quoted in your letter of August 14th on the basis of the Government supplying the boxes and your procurement order therefore should not have read that you were to furnish these. The writer, when placing this order, overlooked the analysis when listed, and saw that the cost of labor for assembling, boxing, preparing for shipment, and testing, cost 36 cents, and therefore assumed that this included packing box.

“3. We suggest, rather than having an amendment put through, that possibly these rounds could be shipped without boxing. Please let us know if they could go forward in this way; otherwise, it will be necessary to put through an amendment.”

November 18, following, plaintiff acknowledged the above letter of November 14, and informed the bureau that it knew of no way in which the shells could be properly shipped without containers or boxes, and requested any suggestions the bureau might have to make in the matter.

On December 23, 1918, the projectile section wrote plaintiff as follows:

“ 1. The Chief of Ordnance requests me to advise you that we have not yet received information from you as to the price you could furnish boxes in connection with the above order for 132,000 rounds of 37 m/m sand-loaded ammunition. It is very important that we have this knowledge at once so that your contract can be amended to take care of this price. The department prefers that you furnish these boxes.”

*14On December 27, following, plaintiff wrote the bureau as follows:

“ In reply to yours of December 23rd we are quoting below our letter of November 4th, which we believe will give you the information requested: -

“£ In connection with the above contract we will require' 2,200 boxes, which is the same type of box as used on other contracts for 37 m/m shell. These have been furnished to drawing 76-1-38.

*“*Due to the cancellation of 500,000 shells, which we have been loading for the Toledo Screw Products Co., on their contract G 1089-582 A, we have quite a supply of these-boxes on hand at our loading plant.

“£ The terms of this new contract call for these boxes being furnished by the Government. We would, therefore,, be glad to dispose of the above quantity of boxes for use on this contract at cost to us, which is $1.02 each plus $0.097 each freight.

“ ‘ Will you kindly advise if it will be satisfactory to-handle it in this manner? '

“ This is covered by your file P471.1/1632."

On January 2, 1919, the projectile section wrote plaintiff as follows:

“ 1. The Chief of Ordnance directs me to acknowledge-your letter of December 27th and to advise you that we are putting through a memorandum to your order whereby you will furnish 2,200 boxes for use in connection with the above order at a price of $1.117 each.”

V. Under date of January 8, 1919, a “ supplemental contract ” was entered into by and between plaintiff and the United States for the purpose of correcting the admitted error in said original contract of October 14, 1918, by providing for the furnishing of said shipping boxes by plaintiff and the payment of plaintiff therefor by the Government. A copy of said supplemental contract is annexed to plaintiff’s petition as Exhibit C thereto, and is by reference made a part of these findings of fact.

VI. Plaintiff thereupon proceeded to furnish the necessary 2,200 boxes for the packing and shipping of the shells contracted to be supplied by it, and furnished, packed, and delivered said shells as desired and required by the Govern*15ment, and was paid tbe contract price of 91-| cents per shell for the shells so furnished and delivered.

Under the contract provisions deliveries of the shells contracted for were to commence upon receipt of the contract by the plaintiff, and were to be completed by plaintiff not later than November 9, 1918; but owing to causes for which plaintiff was not chargeable, deliveries were not commenced until some time after said contract date for their completion, and they were not completed before about March 21, 1919.

Plaintiff, on or about May 8, 1919, duly submitted to the proper officials of the Government a claim of $2,457.40 for the said 2,200 boxes so furnished by it, this amount being the value of said boxes at the rate of $1,117 per box provided for by said supplemental contract of January 8, 1919, which was the fair value of said boxes.

This claim was certified as correct and approved for payment by certain officers of the Bureau of Ordnance, but was disapproved by the Zone Finance Office of the War Department, and was disallowed by the Auditor for the War Department, which disallowance was, upon appeal, affirmed by the Comptroller of the Treasury, and no part of said claim has been paid to the plaintiff.

Graham, Judge,

delivered the opinion of the court:

This suit arises out of a contract between the plaintiff and the Bureau of Ordnance of the War Department, acting with authority in the premises for the defendant, for the manufacture of 132,000 complete rounds of ammunition specially loaded and calibrated in accordance with certain drawings named in the proposal. The initiative in the matter was taken on behalf of the projectile section of the procurement division of the Bureau of Ordnance, by Lieutenant Wright,, acting for said projectile section by authority of that bureau, by requesting a proposal from the plaintiff for the manufacture of said ammunition and requesting to be informed as to the plaintiff’s price and delivery at the earliest possible-, date.

In response to this proposal the plaintiff submitted a detailed bid at a unit price of 91-J cents per round, f. o. b.. *16plaintiff’s loading plant at Texas, Md. Among the items making up this price of 91| cents was the following:

> *“Labor*of assembling, packing, preparing for shipment and testing, 36 cents.”

The proposal also contained the following:

> “It is understood the Government is to furnish all raw materials on this order with the exception of the base primer.

> “ It is understood the Government is to supply us *box*for shipping.”

The matter of these preliminary negotiations, as stated, was in the hands of said Lieutenant Wright. After the bid was received and before the procurement order for the contract had been forwarded from the projectile section to the contract section of the procurement division for the drafting of the contract, Lieutenant Wright was superseded by Lieutenant Andrews. That the bid was accepted is the fair conclusion from the facts found. Without having conducted the original negotiations, Lieutenant Andrews proceeded to prepare the procurement order in accordance with the data which was submitted in the office which appears to have been the request for a bid and plaintiff’s proposal. In reading the said proposal he seems to have gotten no farther than the last item of the unit proposal 91-| cents, namely, “Labor of assembling, packing, preparing for shipment, and testing, 36 cents,” and to have overlooked what followed it in the bid, namely, the statement, supra, “It is understood the Government is to supply *box*for shipping,” and prepared the order accordingly. This procurement order, dated September 30, 1918, states nothing specifically with regard to boxing or supplying boxing.

In a letter of November 14 to the plaintiff, written by authority of the Chief of Ordnance, Lieutenant Andrews said “the writer when placing this order overlooked the analysis when listed and saw that the cost of labor of assembling, packing, preparing for shipment, and testing was 36 cents, and, therefore, assumed that this included packing boxes.”

The contract was dated the 14th day of October, 1918. It provided that the work should be completed not later than *17the 9th day of November, 19,18. Owing to delays interposed by the defendant all of the material contracted for was not finally delivered until October 8, 1919, and was not paid for until November 8, 1919, with the exception of the charge for boxes furnished, which is the matter of dispute in this suit.

The plaintiff had the facilities for manufacturing the article contracted for. The Government was to furnish all material except base primers and the plaintiff was to furnish the necessary labor and machinery and deliver the goods packed and boxed, ready for shipment, f. o. b. its plant.

The contract and specifications contained the following-provisions :

> “Article VI. Delivery. The articles shall be suitably packed, boxed and marked by the contractor, as directed from time to time by the Chief of Ordnance and shall be delivered by the contractor, f. o. b. cars at the railroad station nearest to the place of manufacture, unless some other place of delivery is herein specified. The contractor shall, at the cost of the United States, ship the articles to any point in the United States designated by the Chief of Ordnance.”

> * * * *Ifi**

> “Article Xb. The conti’actor at its own expense shall suitably pack, box, or make such other shipping provisions as will assure the articles arriving at destination in as good condition as when accepted by the United States at the plant of the contractor.”

> “All raw material, with the exception of the base primers, necessary for the due and timely performance of this contract at such times and in such quantities as the Chief of Ordnance may deem requisite, f. o. b. contractor’s plant. Contractor shall pay any demurrage, storage, cartage, or switching charges thereafter accruing.”

After the contract had been prepared in the form in which it was afterwards executed it was sent to the plaintiff, and thereafter a representative of the plaintiff called upon the said Lieutenant Andrews, who had charge of the matter as representative of the projectile section, at his office and pointed out that the bid of 91-J cents simply covered the expense in connection with placing the shells in the boxes *18and did not cover the expense of furnishing the boxes, which the plaintiff’s proposal stipulated should be borne by the Government.

Whereupon the said Lieutenant Andrews, as he states, in order to save time and enable the Government to “receive the projectiles at the earliest possible moment,” told the plaintiff to approve the contract, with the understanding that a supplemental contract would be drawn making suitable provision for the extra cost of supplying the boxes. Whereupon the plaintiff executed the contract, but no supplemental contract was drawn at that time.

It transpired that the plaintiff had a supply of boxes on hand left over from an unfilled contract for shells as a subcontractor for the Toledo Screw Products Co. under a contract which that company had with the Government.

On November 4 the plaintiff wrote to the packing container section of the procurement division stating that the instant contract would require 2,200 boxes and that he had this number of boxes on hand, which he was willing to supply to the Government at a price named, being the cost to the plaintiff, which letter contained the statement “the terms of this new contract called for these boxes being furnished by the Government.” Thereupon, after consideration of the matter, on November 14, 1918, the said Lieutenant Andrews, by authority of the Chief of Ordnance, wrote to the plaintiff stating that “ your procurement order should not have read that you were to furnish these ” and that the provision of the plaintiff’s bid that the Government should supply the boxes had been overlooked, and suggested that the ammunition be supplied without boxes. It was found that this was not practicable. The plaintiff was asked to submit a bid for furnishing boxes. This it did on the 27th of December, being the same price it had previously submitted. On the 2d of January the said Lieutenant Andrews, acting by authority of the Chief of Ordnance, acknowledged this letter and stated “the Chief of Ordnance directs me to acknowledge your letter of December 27th and to advise you that we are putting through a memorandum to your order whereby you will furnish 2,200 *19boxes for use in connection with the above order at a price-of $1,117 each.”

Thereafter a supplemental contract was drawn and executed by the parties covering the matter of supply and payment for these boxes, the same being Exhibit C attached to the plaintiff’s petition, wherein it is provided that the plaintiff was to supply 2,200 boxes and be paid therefor at a price of $1,117 each and reciting, among other things, that “ the negotiations for the original contract show that it was the intention of the contractor and the United States that the United States should furnish the packing boxes,” and that—

> “ through inadvertence and mutual mistake the original contract in Article Xb provided that the contractor, at its own expense, shall suitably pack, box, or make such other shipping provisions as will assure the articles arriving at destination in as good condition as when accepted by the United States at the plant of the contractor; and that

> “ The true intention of the parties to the agreement at the time of making said original contract was that the United States should furnish the packing boxes for such shell, but the contractor should furnish all labor necessary for such .packing and do such packing of said shell in such boxes so furnished by the United States.”

Thereafter the boxes were furnished and the contract performed by the contractor in all other respects to the satisfaction of the Government. The voucher was drawn for payment to the contractor for the boxes furnished at the price agreed upon, properly certified and approved by the Ordnance Department on the 23d day of May, 1919. The amount named in this voucher is the amount sued for in this action.

When this voucher reached the Auditor for the War Department payment was refused.

This action of the auditor was approved by the Comptroller of the Treasury and thereafter the plaintiff brought suit in this court.

It is plain that this is not a case of an ambiguous contract as was suggested in the argument. There is no patent ambiguity. A mere mistake does not constitute a latent ambiguity. The facts establish that it was a case of mutual mistake which justifies this re-formation of the contract in ac*20cordance with the real intention and understanding of the parties so as to place upon the Government the obligation of furnishing the boxes for this ammunition. *Harvey*v. *United States,*105 U. S. 671, 688, 689. This court has power to do this and give a money judgment for the amount found to be due under the re-formed contract. *Cramp*v. *United States,*239 U. S. 221, 232, 233. Where there has been a mutual mistake the contract should be re-formed. *Ackerlind*v. *United States,*240 U. S. 531, 534, 535.

The contract is therefore re-formed to meet this view of the matter and to place upon the Government the obligation to supply the boxes. Inasmuch as the Government, instead of supplying the boxes, purchased the same from the plaintiff at an agreed price, as to the reasonableness of which there is no question raised, rather than supply the boxes itself and has received and used the same, judgment should be entered for the sum which it was agreed should be paid, which sum is $2,457.40, the amount claimed in the petition, and judgment should be entered in favor of the plaintiff for this amount, and it is so ordered.

Hay, *Judge;*DowNey, Judge, and Campbell, *Chief Justice,*concur.