#### WEST LEECHBURG STEEL CO. v. THE UNITED STATES

[No. D-114.

Decided December 7, 1925]

*On the Proofs*

*Settlement contract; mutual mistalce; reformation.-*— The court will reform a settlement contract to express the intention of the parties thereto as to the amount which was to constitute full and final compensation.

*295
      *The Ref oner’s*statement of the case:

*Mr. George F. Snyder*for the plaintiff.

*Mr. Joseph Henry*Cohen, 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 duly incorporated under the laws of the State of Pennsylvania, with its principal place of business at Pittsburgh, Pa., and is engaged in the manufacture of steel.

II. On April 29, 1918, contract No. 3741 was executed by and between the plaintiff and the United States, whereby plaintiff undertook the manufacture of special vanadium steel for 500 sets of Handley Page metal airplane parts at a total cost of $75,000, more or less. The contract provided that the material should be made, furnished, and delivered in accordance with an order, No. 21017, placed on April 24, 1918, which order was made a part of said contract and provided that after inspection at the plant of the plaintiff the material be packed for domestic shipment and furnished f. o. b. cars point of origin. The said order, No. 21017, provided for the shipment on Government bills of lading to be furnished by the Government. Under date of July 31,1918, order No. 21017 was amended as follows:

“ 1. Referring to Order No. 21017 placed with you April 24, 1918, for Steel, you are advised that this order is hereby amended to provide that billing is to be made by you in accordance with the attached price list.

“ 2. Inasmuch as there are no funds available from which the Bureau of Aircraft Production can pay the prepaid express charges on the shipments under this order, you are instructed to proceed as outlined below for receiving reimbursement for same.

“ 3. The different consignees to whom shipment was made by prepaid express should be instructed to have the Bills of Lading certified by the Government Inspector at their giants to the effect that the shipment made thereon was a iovernment shipment. The consignees should then be instructed to return these Bills to you.

“ 4. The Bill of Lading should then be presented to the Express Company for payment. The Express Company will reimburse you for the payment made on the Bills of *296Lading and in turn present same to the Quartermaster for payment.”

III. In accordance with said order as amended, the plaintiff made shipments and prepaid express charges thereon to the amount of $3,637.35.

IY. Production under contract No. 3741 was terminated by telegraph on December 21, 1918. Thereafter, on March 6, 1919, the plaintiff and duly authorized officers of the Government, after an examination and investigation of the plaintiff’s claim, reached a preliminary agreement with reference to the extent of the plaintiff’s damaiges and thereupon prepared and signed a memorandum showing that the following items were considered and covered by said preliminary agreement:

Classification of claim: iontractor

Finished material on hand_$4,206. 06

Cost of partly finished products on hand_ 91. 62

Raw materials on hand_ 1, 332. 50

Total amount of claim_ 5, 630. 78

Less salvage value on finished products, partly finished products, and raw materials_ 1,026.40

Net amount of claim_ 4, 604. 38

Y. In pursuance of said preliminary agreement the following settlement contract, No. 3741-A, dated March 25, 1919, was duly executed on behalf of the Government and the plaintiff, and the plaintiff received thereunder the sum of $4,604.38:

CONTRACT NO. 3741-A, ORDER NO. 21017, BUREAU OF AIRCRAFT PRODUCTION, UNITED STATES ARMY

This contract, made this twenty-fifth day of March, 1919, by and between the West Leechburg Steel Company, a corporation with an office in the city of Pittsburgh, State of Pennsylvania, hereinafter called the “ contractor ” party of the first part, and the United States of America, hereinafter called the “ Government ” represented by S. M. Wiley, captain, A. S., A. P., hereinafter referred to as the “ contracting officer,” acting by the authority and under the direction of the Secretary of War, party of the second part, witnesseth that:

*297Whereas the Government and the contractor did on April 29, 1918, enter into a certain contract for the delivery by the contractor to the Government of special vanadium steel for the total consideration of seventy-three thousand eight hundred ninety-six dollars and ninety cents ($73,896.90), which said contract is known as contract No. 3744, and is confirmatory of order No. 21017, dated April 24, 1918; and

Whereas the furnishing and delivery of further articles or work under said contract would exceed the present requirement of the Government; and

Whereas it is in the public interest to terminate said contract as herein provided; and

Whereas the contractor, pursuant to said contract, has incurred expenses and obligations for the purpose of furnishing and delivering the articles or work remaining undelivered under said contract, and is relinquishing prospective profits thereon; and

Whereas the contractor has submitted a sworn statement of its said expenses and obligations, which said statement has been investigated, together with the books, records, and plant of the contractor, by the accounting department of the Bureau of Aircraft Production, and said accounting department has submitted to the contracting officer a report from which it appears that there is now due by the Government to the contractor for work performed and material furnished by the contractor under said contract the sum of forty-six hundred and four dollars and thirty-eight cents ($4,604.38); and

Whereas a copy of said statement of claim and said report are filed in the office of the contracting officer;

Now, therefore, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, the parties hereto mutually covenant and agree as follows:

Article I. The contractor shall not furnish or deliver, and the Government shall not accept or pay for any further articles or work agreed to be delivered under the contract hereinbefore mentioned.

Article II. The Government shall pay forthwith to the contractor the sum of forty-six hundred and four dollars and thirty-eight cents ($4,604.38), which sum shall constitute full and final compensation for articles or work delivei’ed, services rendered, and expenditures incurred by the contractor under said contract.

Article III. The contractor does hereby for itself, its successors and assigns, remise, release, and forever discharge the Government of and from all and all manner of debts, dues, sum or sums of money, accounts, reckonings, claims, and demands whatsoever due or to become due in law or in equity under or by reason of or arising out of said contract.

*298Article IY. All of the raw material and other property scheduled in said report shall remain the property of the contractor.

Article Y. This agreement shall not become a valid and binding obligation of the Government unless and until the approval of the Claims Board, Air Service, has been noted at the end of this instrument.

In witness whereof the parties hereto have caused this instrument to be executed by their respective representatives thereunto duly authorized the day and year first above written.

(Signed)

(Signed)

Witnesses:

(Signed)

(Signed)

West Leeohbtjeg Steel Compahy, By James LippiNcott, *Prest.*

ÜNxted States op Ameeica,

By S. M. Wiley,

*Captain, A.*/S'., *A. P.*

JOHN E. Gaebity.

HeleN E. BubNett.

This is to certify that the foregoing contract has this 1st day of April, 1919, been duly approved by the Claims Board, Air Service.

(Signed) G. I. Rowley, Jr.,

*Captain, A. 8., A. P., Recorder, Claims Board, Air Service.*

YI. Prior to the execution of said settlement contract the plaintiff had submitted to the Government a voucher for $3,637.35, covering prepaid express charges on shipments under contract No. 3741 as made in accordance with the amendment thereto dated July 31, 1918, and had also submitted a voucher for $679.70, covering material already furnished and delivered under said contract, making the total amount due the plaintiff as $4,317.05. These vouchers were approved and in the possession of an Army disbursing officer at the time the settlement contract was executed. But upon the receipt of notice thereof the disbursing officer refused payment, and the vouchers were forwarded to the Air Service Claims Board for its consideration. This board after an examination into the matter concluded that the settlement contract, due to a mutual mistake of fact, did not express the true intent of the parties, and that the bills or vouchers in question should be paid. It thereupon for*299warded to the Auditor for the War Department the vouchers and data in connection therewith with the recommendation that settlement contract No. 3741-A be reopened ..on the ground of a mutual mistake. The auditor, by certificate No. 743373, dated September 30, 1920, and January 6, 1921, disallowed these claims because the plaintiff had entered into final settlement contract No. 3741-A.

VII. Upon application by the plaintiff to the Comptroller General for revision of the action of the Auditor for the War Department in disallowing its claims, the Comptroller General sustained the auditor in a letter dated November 7, 1921, Appeals Nos. 37560 and 37564.

VIII. In executing the settlement contract the plaintiff and the officers of the Government through a mutual mistake did not consider the outstanding unpaid vouchers for $3,637.-35 and $679.70.

The court decided that plaintiff was entitled to recover, and decreed that the said settlement contract (Finding V) be reformed so that Article II should read as follows:

Article II. The Government shall pay forthwith to the contractor the sum of $4,604.38, which sum, together with the payment of two outstanding vouchers heretofore rendered and properly approved in the aggregate sum of $4,-317.05, shall constitute full and final compensation for articles or work delivered, services rendered, and expenditures incurred by the contractor under said contract.

Campbell, *Chief*Justice,

delivered the opinion of the

court:

The facts are stipulated. The plaintiff had a contract, dated April 29, 1918, with the United States and was proceeding with its performance. It involved the manufacture of vanadium steel for 500 sets of certain airplane parts to be furnished and delivered in accordance with an order. The order directed that after inspection at plaintiff’s plant the material should be packed for domestic shipment and furnished f. o. b. cars, point of origin, and shipped on Government bills of lading. This order was later changed so as to provide for some shipments by express prepaid. In accord-*300anee with this last order plaintiff made shipments and prepaid express charges to the amount of $3,637.35 for which it «duly submitted voucher, and it also submitted another voucher for $679.70 covering material it had already fur-, nished and delivered under the contract,. the two sums aggregating $4,317.05. These two vouchers were duly approved and in the possession of an Army disbursing officer for payment. But before they were paid the Government, in December, 1918, terminated production under the plaintiff’s contract, and on March 6, 1919, the plaintiff and authorized Government officers proceeded to ascertain the damages caused by the termination. They reached the conclusion that plaintiff should receive $4,604.38 on that account, and a settlement contract was entered into which, among other things, recited that the plaintiff, pursuant to the contract, had incurred expenses and obligations for the purpose of delivering the “ articles remaining undelivered ” under the contract and was relinquishing prospective profits thereon. It provided for the payment of the $4,604.38, and added “ which sum shall constitute full and final compensation for articles or work delivered, services rendered, and expenditures incurred by the contractor under said contract.” Because of this language in the settlement contract the disbursing officer declined to pay the two approved vouchers issued, as above stated, before the termination of the original contract. His action was sustained by the accounting officers upon the same grounds. In the settlement the parties were concerned with the conditions that arose .out of the termination of plaintiff’s contract No. 3741, as its recitals plainly show. It refers to the fact in the language above quoted that expense had been incurred toward the furnishing of work “ remaining undelivered.” The question is put at rest by the stipulation that “ in executing the settlement contract, the plaintiff and the officers through a mutual mistake did not consider the outstanding vouchers.” No reason is assigned why those vouchers should have been taken into the settlement when they were for work delivered before the contract was terminated and the damages caused by the termination were the subject of the settlement. The

*301language adopted was broader than was necessary to describe what the plaintiff was being paid for, and there is no question that this court may in proper cases reform a written instrument to speak the intention of parties to it. See *Milliken Imprinting Co.*case, 202 U.S. 168, 174; *Ackerlind*case, 240 U.S. 531, 534. We are satisfied that the intention was to determine the amount due plaintiff growing out of the termination of the contract and that it was not the intention of either plaintiff or those representing the Government in making such settlement to consider, or include, the outstanding vouchers for material that had been furnished before the contract was ended, and that were due whether there was a settlement contract or not. The contract should be’reformed so as to provide that in addition to the sum of $4,604.38 therein mentioned the plaintiff should receive the sum of the two vouchers above mentioned, amounting to $4,317.05. An order setting forth the clause as amended should be entered. And it is so ordered.

Graham, *Judge;*Hay, *Judge;*Downey, *Judge;*and Booth, Judge, concur.