#### DAYTON LUMBER & MANUFACTURING CO. v. THE UNITED STATES

[No. D-373.

Decided December 5, 1927]

*On the Proofs*

*Dent Act award; subsequent settlement of items not included in award.*— Where an award under the Dent Act, on distinct items of a claim, recites that it is in full payment, adjustment, and discharge of a contract that has been canceled under clauses (herein providing for cancellation and making the Secretary *277of War final arbiter over disputes, but does not in fact include disputed items which are thereafter embraced in a general settlement signed by the contracting officer under the direction and authority of the Secretary of War, the award so made, accepted by the contractor, does not preclude it from recovering on the subsequent contract of settlement.

*The Reporter's*statement of the case:

*Mr. J ohn P. Bmmhall*for the plaintiff.

*Mr. John, E.*Hoover, 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 ifs a corporation duly created, organized, and existing under the laws of the State of Ohio, with its principal place of business at Dayton, in said State.

II. On May 27, 1917, there was executed between the plaintiff and the defendant a formal written contract No. 7865, whereby the plaintiff contracted to construct an aviation field, thereafter known as Wilbur Wright Field.

On October 1, 1917, the parties likewise entered into a formal written agreement No. 50045, whereby the plaintiff agreed to construct an aviation experimental station at Wilbur Wright Field. This same part of Wilbur Wright Field as used in this contract was also known to the service during this period as McCook Field and sometimes designated as such.

On December 19, 1917, said parties entered into a third formal written agreement, No. 50231, whereby the plaintiff contracted to construct an addition to the hospital at the Wilbur Wright Field.

All of thejse contracts were upon the cost-plus basis and authorized the contracting officer to make changes in the drawings and specifications, to issue additional instructions, require additional work, or direct the omission of work previously ordered, and the contractor was to comply with these instructions. The contractor was to be reimbursed for such of its actual expenditures in the performance of the work a;s should be approved or ratified by the contracting officer and included in a list of items set forth in the contract. It also *278gave the right to terminate the contract. An article relative to settlement of disputes is as follows:

“ This contract shall be interpreted as a whole, and the intent of the whole instrument, rather than the interpretation of any special clause shall govern. If any doubts or disputes shall arise as to the meaning or interpretation of anything in thi/3 contract, or if the contractor shall consider himself prejudiced by any decision of the contracting officer made under the provisions of Article IY hereof, the matter shall be referred to the Chief Signal Officer for determination. If, however, the contractor shall feel aggrieved by the decision of the Chief Signal Officer, he shall have the right to submit the same to the Secretary of War, whose decision shall be final and binding upon both parties hereto.”

III. Work under these three contracts proceeded until about March 20, 1918, when the work was discontinued by mutual consent, the defendant undertaking to complete the *projects,*

IV. Because of the original indefinitenes^ as to the scope of the projects due to the confusion in the prosecution of the war and the lack of understanding of aviation needs, there arose several questions as to what additional payments, if any, were to be made for work clone under or in connection with the contracts. This resulted in the plaintiff filing, on or about May 15, 1919, its statement of claims for relief under the act of Congress approved March 2,1919, addressed to the Secretary of War.

These claims, so far as the instant case is concerned, were for discounts and for the cost of lumber used in the construction of the field. They were grouped with others and the groups given the following numbers by the Board of Contract Adjustment, the claims now forming the basis of thijs suit being in the following amounts:

*Under third contract*

Claim No. 150-C-2134, Wilbur Wright addition — discount— $95 80

*Under first contract*

Claim No. 150-0-1726, Wilbur Wright Field — discount_10,148. 67

Claim No. 150-C-1726, Wilbur Wright Field — lumber_21, 316.83

*279*Under second contract*

Claim No, 150-C-1901, McCook Field — discount_$2, 910. 55

Claim No. 150-C-1901, McCook Field — lumber_11,137. 77

Total_ 45, 609. 62

V. Under date of October 2, 1919, tlie plaintiff executed to the defendant a release for the recited consideration of $39,927.92 by which it discharged the defendant from all claims or demands whatsoever which the plaintiff might have against the defendant by reason of the contract of May 27, 1917, the said release, however, being given without prejudice to the rights of the plaintiff in “ claim C-1726 filed with the Board of Contract Adjustment amounting to $62,259.10.”

Likewise under same date plaintiff executed to the defendant a release for the recited consideration of $6,821.92 by which it discharged the defendant from all claims or demands whatsoever which the plaintiff might have against the defendant by reason of the contract of October 1, 1917, the said release, however, being given without prejudice to the rights of the plaintiff in “ claim ASA-87 filed with the Air Service Claims Board amounting to $55,934.74, and which claim is now before the Board of Contract Adjustment as claim No. 1901.”

Likewise under same date plaintiff executed a like release for the reported consideration of $683.88 for all claims arising under the contract of December 19, 1917, given, however, without prejudice to the plaintiff’s rights in claim ASA-86. This said claim ASA-86 was the same claim before the Board of Contract Adjustment known as claim 150-C-2134.

YI. Following a hearing held March 14-17, 1920, the said Board of Contract Adjustment, on May 27-29, 1920, made its decisions in the matter of claims numbered 2134, 1726, and 1901, allowing as to claim No. 2134 — discounts, the sum of $26.14; as to claim No. 1726 — discounts, the sum of $3,143.44; and as to claim No. 1901 — discounts, the sum of $666.94. On the matter of the lumber claim for Wilbur Wright Field amounting to $21,316.83, being claim No. 1726, and the lumber claim for McCook Field, amounting to $11,137.77, being-claim No. 1901, the board directed that these claims should be settled, based, among other things, on the price per thou*280sand feet, as shown in the Southern Pine Lumber Association lists in force on the dates of delivery at the field. It thereupon returned the claim to the Claims Board, Air Service, for adjustment in accordance with such prices.

In its consideration of this claim, namely, adjustment of lumber prices, the board erroneously assumed that the Southern Pine Lumber Association issued price lists for lumber. The fact that there were no such lists left the Claims Board, Air Service, without a basis for the computation of the amount indicated to be allowed by the decision of the Board of Contract Adjustment.

To remedy this error, plaintiff attempted to obtain the consent of the board to make a change in its direction so that a basis of fact might be obtained, but because of a change in the personnel of the board was unable to do so, and finally, as a matter of settlement, accepted the offer of $11,000.00 made on these two items by the new chairman of the board. This $11,000.00 was divided into two |>arts by the defendant, it applying $1,511.59 to the McCook Field lumber item and $3,482.41 to the Wilbur Wright Field lumber account.

The total amount decided to be due on all of these items by the Board of Contract Adjustment was, therefore, $14,836.52.

VII. On or about August 30, 1920, there was an award under the act of March 2, 1919, called the Dent Act, upon claim No. ASA-85 for additional construction work, and this sum, was accepted by the plaintiff, the award reciting that.it was in full payment, adjustment, and discharge of said agreement of May 27, 1917.

On or about August 13, 1920, there was an award under the terms of the Dent Act upon claim No. ASA-86 under the contract of December 7, 1917, for additional construction work, which recited that it was in full payment, adjustment, and discharge of said agreement. The amount thus awarded was accepted by the plaintiff.

On or about the 8th day of September, 1920, an award was made under the Dent Act under claim No. ASA-87, reciting it to be in full payment, adjustment, and discharge of said agreement, referring to contract of October 1, 1917. This amount was likewise accepted by the plaintiff. These *281several payments were recommended by the Air Service section of the War Department claims board.

VIII. On July 26, 1921, a general settlement contract numbered 7865-A was entered into by and between the plaintiff and the defendant by which contract the defendant agreed to pay the plaintiff the said sum mentioned in the contract. A copy of this contract ,is attached to the petition as Exhibit B and made a part hereof by reference.

This said general settlement contract was presented to the Comptroller General for payment and disallowed October 22, 1921. A request for review was made and the same had under date of April 22, 1922, and likewise a re-review was requested and had under date of June 11, 1923. On said dates the Comptroller General affirmed his previous decisions.

The court decided that plaintiff was entitled to recover $14,836.52.

Campbell, *Chief*Justice,

delivered the opinion .of the court:

Attached to the petition is a copy of a contract between plaintiff and the Government purporting to be a final settlement of matters growing out of three contracts made in 1917, upon a cost-plus basis, for construction work at the Wilbur Wright Field and the McCook Field in Ohio, as well as a settlement of claims duly presented to the Secretary of War under the terms of the Dent Act. This contract ascertains the balance due the plaintiff to be a stated amount, which plaintiff agrees to accept and the defendant agrees to pay in full settlement of all items of claims then remaining unsettled, it appearing therefrom that other items had already been paid. It is executed on behalf of the United States by the contracting officer acting by the authority and under the direction of the Secretary of War. It was approved by the Air Service Section, War Department Claims Board, and bears the certificate of Assistant Secretary of War Wainwright to the effect that “ this agreement was directed and approved by me for the Secretary of War.” The plaintiff sues for the amount agreed upon ,in settlement, alleging that the settlement contract had been “presented *282for payment and. that payment thereof was disapproved by the Comptroller General.” The question is upon the plaintiff’s right to recover.

.The facts show that under dates of May 2?, 1917, October 1, 1917, and December 19, 1917, respectively, the plaintiff and the Government entered into contracts for construction work that involved large expenditures and many items of cost. For these expenditures and costs the contractor was to be reimbursed and its compensation was to be a percentage of the same, in accordance with a graduated scale, the percentage diminishing as the cost increased. In the ascertainment of the cost the contracting officer was given large powers, but the contractor was accorded the right of appeal ¡to the Chief Signal Officer from his decision to the Secretary of War, whose decision, it is provided, should be final and binding upon both parties. The work called for by these three contracts proceeded until some time in March, 1918, when the contractor’s work was discontinued by mutual consent, there being provisions in the contracts looking to their possible termination and providing for payments to the contractor in that event. Settlements not having been reached at the time of the enactment of the Dent Act, March 2,1919, the plaintiff filed claims, involving many items, on account of alleged cost of the work. On or about October 2, 1919, payments were made to the contractor under each of the contracts and releases were executed, but with the expressed reservation in the several releases of all of the contractor’s rights in certain claims then on file with the Board of Contract Adjustment. Thereafter, on or about September 8, 1920, awards were made on some of the items of claim filed as already stated, which purport to be awards under the Dent Act by the Secretary of War. These several awards, designating the claims covered by them, were accepted by the plaintiff and were fully paid. These payments were followed by the contract in suit, dated the 26th day of July, 1921. Its recitals are not contradicted and must be taken as true. It recites in effect what we have already stated about the contracts and claims and that payments had been made from time to time, 'but that there were “ disputed items ” growing out of the contracts and orders given by the Signal *283Corps of the United States Army, and that the amounts claimed by the contractor were described in the files and records of the Finance Contract Division of the Air Service, War Department. It further recites that the claims had been pending before the Air Service Section of the War Department Claims Board, the Board of Contract Adjustment, and the appeal section, and that “ certain decisions and findings have been rendered on various items of this claim ” and proceeds to an adjustment and settlement of the unsettled items by agreement, with the result that the unsettled claims, amounting to more than $45,000, were reduced in amount and agreed to be settled by the payment of $14,836.52, that being the sum sued for. We have referred to the several partial payments and the contract recitals because of the defense sought to be interposed by the defendant that the awards made by the Secretary of War in 1920, having been accepted by the plaintiff, preclude any further payments, the theory being that an award and acceptance are conclusive under the Dent Act. But where the award is made on distinct items of claim, leaving other items for future consideration and adjustment, it can not be said that a settlement in full was intended, especially where the officer vested with authority to make the settlements specifically agrees that such other items were not included in the awards mentioned. In such cases the awards are analogous to payments on account. The Comptroller General disallowed the claim because he-decided that the Secretary of War was <£ precluded from reopening the original awards.” In a more extended opinion under date of June 11, 1923, the Comptroller General refers to the prior payments referred to, but says: “ The claim now before this office is made up of items of alleged cost to the contractor in carrying out the contract work. They were not included in the claims heretofore awarded, settled, and paid by the War Department, nor are they covered by the receipts and releases given by the contractor on payment of those awards.” In these circumstances it can not reasonably be held that the payments, made under, the Secretary’s award, constituted a conclusive settlement or were by the parties intended to be conclusive upon the right to adjust remaining items of the claim, known to both *284parties to be disputed items then on file. However desirable it may be, and generally is, to make one settlement covering all claims, it was within the power and authority of the Secretary of War, in awards under the Dent Act or in authorized payments of claims arising under the written contracts, to authorize payments of conceded items and hold contested items for further consideration. This is manifestly what was done, and when it is recalled that these claims were parts' of the almost innumerable claims that arose out of contracts, formal and informal, made during the war, that were before the Secretary of War in one form or another for consideration and settlement, it was both proper and just that payments should be made, as far as could be, of uncontested items. We agree with the Comptroller General that the items of claim covered by the general settlement contract, in suit, were not included in prior awards or covered by prior payments. There is nothing in the case of *Delaine Mills, Inc., 57*C. Cls. 453, cited by defendant, that militates against the view here taken. After the award made in the case mentioned and payment of it, there was no further award or settlement by the Secretary of War, but suit was brought in this court instead. The acceptance of payment, without further appeal to the Secretary, was held conclusive.

It therefore appears that the contract in suit was made under the direction and approval of the Secretary of War. The original contracts made him the final arbiter of any differences that might arise between the parties. He has made his decision, and it is evidenced by the contract of general settlement. The controlling principle, namely, that it is competent for parties in contracts of the nature of those mentioned to make it a term that the decision of a designated official or board regarding matters about which disputes may arise in the performance of the work shall be "final and conclusive, has been repeatedly upheld in the absence of fraud or of mistake so gross as to necessarily imply bad faith. See *Gleason case, 175*U. S. 588, 602; *Merrill-Ruchgaber Co.,*241 U. S. 387, 393. In *Yale & Towne Mfg. Co. case,*58 C. Cls. 633, this court said:

> “ Provisions in Government contracts reposing in some designated official the right to determine certain questions *285and making bis determination thereof conclusive, are of frequent occurrence. Such provisions are inserted largely for the protection of the Government, and the cases in which such a determination by the designated official has been upheld by the courts have been largely cases in which the rule has been invoked in favor of the United States and against the plaintiff, but the rule is none the less effective if perchance it occasionally may opérate the other way.”

We conclude that the plaintiff is entitled to judgment. And it is so ordered.

Moss, *Judge;*Graham, *Judge;*and Booth, Judge, concur.