#### PITTSBURGH PLATE GLASS CO. v. THE UNITED STATES

[No. E-279.

Decided November 7, 1927]

*On the Proofs and Demurrer to Cownterclaim*

*Settlement contract; grounds for setting same aside; offer to restore property.*— (1) Where upon cancellation of the prime contract a contract of settlement is entered into by officers having full authority to do so, under which a specified sum is paid the contractor as “ full and final compensation for ¿rticles of wort delivered, services rendered, expenditures and obligations incurred under the original contract and this contract,” and there is no element of fraud present or such gross mistake as to impute fraud, the settlement will not be set aside to con*257sider a claim that the sum so paid was in excess of that actually due.

(2) In the circumstances recited, the Government, if it seeks to have the settlement set aside, must first offer to restore to the contractor the property surrendered as a condition to the execution of the contract.

*The Reporter's*statement of the case:

*Mr. Hugh H. Otear*for the plaintiif. *Mr. Sidney G. DeKay*and Douglas, *Otear <& Douglas*were on the brief.

*Mr. Joseph Henry*Cohen, with whom was *Mr. Assistant Attorney General Hermcm J.*Galloway, for the defendant. *Mr. Alexander Holtzoff*was on the brief.

The court made special findings of fact, as follows:

I. The plaintiff is a corporation organized under the laws of Pennsylvania, with offices in the Frick Building, Pittsburgh, Pa.

II. Under date of December 5, 1923, the United States Veterans’ Bureau wrote the plaintiff inviting bids for furnishing to the Veterans’ Bureau certain articles listed in said proposal. Pursuant thereto and under date of December 13, 1923, the plaintiff submitted to the Veterans’ Bureau an offer to furnish and deliver twenty-four dining-room tables of certain specifications at Charleroi, Pa., at the total price of $624.00, copies of which proposal and offer are attached to the petition as Exhibit A and made a part hereof by reference.

III. Under date of December 18, 1923, the plaintiff received a written order from the Veterans’ Bureau accepting the aforesaid offer and directing that said twenty-four dining-room tables be shipped by freight to the medical officer in charge of United States Veterans’ Hospital, Tapper Lake, N. Y., a copy of which order is attached to the petition as Exhibit B and made a part hereof by reference.

IV. The plaintiff manufactured twenty-four dining-room tables in compliance with the aforesaid order and in accordance with the specifications set out therein, and on or about January 12, 1924, delivered them to the medical officer in charge of the United States Veterans’ Hospital, Tupper *258Lake, N. Y. A credit of $9.45 was given the United States by the plaintiff for freight equalization, leaving a balance unpaid on account of said order of $614.55.

The court decided that plaintiff was entitled to recover.

Moss, Judge,

delivered the opinion of the court:

This action was instituted for the recovery of the contract price of certain articles of furniture furnished and delivered by plaintiff on the order of the authorized representative of the Government, amounting to the sum of $614.55.

The defendant interposed herein a counterclaim based upon the following transaction:

By contract dated September 14, 1917, executed on behalf of the Government by A. G. Downey, captain, Signal Corps, United States Reserves, and on behalf of plaintiff company by Charles *W.*Brown, president, and C. R. Montgomery, secretary, of said company, plaintiff undertook to furnish the Government with optical glass and certain plant equipment fully specified and described in an order attached to and by express terms made a part of the contract. Said contract contained a provision giving authority to the Government to cancel the same, which reads as follows:

> “Article Y. To cancel the contract as to the undelivered and unaccepted portion of the product, upon giving written notice to the party of the second part; and the party of the second part shall be entitled to receive payment for only such glass as shall have been accepted and such apparatus mentioned in attached order as shall have been installed, and, upon being called upon by the party of the first part so to do, shall deliver to the first party, f. o. b. second party’s works, the said apparatus or the salvage thereof.”

On January 16, 1919, plaintiff was notified by the Government to discontinue production under said contract.

Following negotiations looking to a discharge of the Government’s obligations to plaintiff growing out of its cancellation of said contract, and under date of March 18, 1919, a contract, which will hereinafter be referred to as the settlement contract, was entered into between plaintiff and the United States, repres'ented by F. D. Schnacke, captain, *259A. S. A. P., United States Army, by which plaintiff, in consideration of. the payment of $18,498.66 and certain other items mentioned- in said contract, released and discharged the Government from all obligations under the original contract. This amount was paid plaintiff in May, 1919. Plaintiff filed a demurrer, to said counterclaim.

It is the contention of the Government that the payment made was in excess of the amount actually due plaintiff in the sum of $7,121.14, and was therefore “ beyond the authority of the officers making such payment.” The settlement contract was attached as an exhibit and made a part of the counterclaim.

It is recited in said settlement contract that “ it is in the interest of the Government to terminate said original contract as herein provided; and whereas the contractor, in pursuance of the original contract, has incurred expenses and obligations for the purpose of furnishing and delivering articles or work remaining undelivered under said original contract and is relinquishing prospective profits on the un-executed portion thereof: Now, therefore, in consideration of ,the premises and of the mutual covenants herein contained, the parties hereto agree as follows.” The contract then set forth in minute detail the terms of the settlement, and provided in Article IV thereof that—

> “ The Government shall pay to the contractor the sum of eighteen thousand four hundred ninety-eight dollars and sixty-six cents ($18,498.66), which sum, together with payment for the finished articles or work (other than the finished articles or work specified for delivery to the Government herein identified in said Schedule A), delivered to and accepted by the Government on or before the execution of this contract and not yet paid for, shall constitute full and final compensation for articles or work delivered, services rendered, expenditures and obligations incurred under the original contract and this contract.”

By Article Y of said settlement contract plaintiff agreed to “ remise, release, and forever discharge the Government of and from all and all manner of debts, dues, sums of: money, accounts, reckonings, claims, and demands whatsoever due or to become due in law or in equity, under or by *260reason of, or arising ont of, the original contract, except the sums herein agreed to be paid.”

This contract was signed by plaintiff and by Captain F. D. Schnacke, acting in his official capacity, and was duly approved by the claims board for the Air Service, without which approval the contract, as provided in its terms, was not to become a valid and binding obligation of the Government.

There is no charge of either actual fraud nor of such gross mistake as would impute fraud in the compromis'e settlement; nor is there any question raised as to the general authority of the officers of the Government parties to the settlement contract to effect a settlement in a controversy of this character. It is contended merely that the payment made to plaintiff was in excess of the amount actually due, and was .therefore “beyond the authority of the officers making such payment.”

The settlement contract shows on its face that it was intended to be and was in fact a mutual settlement of conflicting claims and obligations.

It is deemed worthy of notice that, so far as this record discloses, no claim was ever made by the Government and no action taken, looking to the recovery of the alleged overpayment made in May, 1919, until the filing of the counterclaim herein, June 2, 1926.

The cases cited by the Government in support of the general principle of law, to the effect that the Government may recover back any payment made by its officers in excess of its actual liability, would seem to have no application to this case which involves a compromise settlement of conflicting claims, effected by representatives of the Government having authority to make some character of settlement, with no charge of fraud nor of such gross mistake as might impute fraud, and in which the amount agreed upon was voluntarily paid by the Government.

It is the opinion of the court that the settlement contract involved herein is binding upon both parties. At any rate, the Government can not set aside the settlement contract in this case without offering to restore to plaintiff the property surrendered as a condition to the execution of such contract. *261This principle is supported by the decision oí the United States Supreme Court in the case of *United States*v. *Corliss Steam-Engine Company,*91 U. S. 321. The demurrer must be sustained, and it is so ordered.

It is therefore the judgment of the court that plaintiff recover herein the sum of $614.55.

Graham, *Judge;*Booth, *Judge;*and Campbell, *Chief*Justice, concur.

Hat, Judge, absent.