#### AMERICAN CAN COMPANY v. THE UNITED STATES

[No. D-347.

Decided December 5, 1927]

*On the Proofs*

*Contracts; cancellation; agreed, loss; rescission of settlement agreement.*— Where tbe Government cancels a contract which does not authorize such action, and the parties thereto settle the amount of loss incurred but it is thereafter refunded under an agreement rescinding the settlement so made and reserving to the contractor the right to sue in the Court of Claims, the contractor is entitled to recover.

*The Reporter's*statement of the case:

*Mr. OhaTlen B. ElUs*for the plaintiff. Ellis, Harrison, *Ferguson <& Gary*were on the briefs.

*Mr. Dwight E. Rarer,*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 organized and existing under the laws of the State of New Jersey and was at the times herein mentioned engaged in the business of manufacturing and distributing tin cans of various sizes, kinds, and grades.

II. From time to time prior to November 4, 1918, plaintiff entered into contracts with the Quartermaster Corps, United States Army, pursuant to which it manufactured *286at some of its various plants and distributed large quantities of hard-bread cans.

III. On November 4,1918, plaintiff entered into a contract, numbered 15080-G, with the Quartermaster Corps, United States Army, by the terms of which it was agreed that the plaintiff should deliver 15,000,000 hard-bread cans in accordance with the specifications mentioned in the contract at the rate of 300,000 cans daily, beginning November 4, 1918, to certain designated bakeries at the unit price of $0,051 per can, and for a total price of $165,000. The contract contained no cancellation clause. A copy of the contract is attached to the petition marked “ Exhibit A” and made a part of these findings by reference.

IY. Plaintiff promptly entered upon the performance of the contract, and pursuant thereto produced and delivered 1,464,591 hard-bread cans at the times and to the places indicated, as provided in the contract. It continued the performance of the contract without any delay or defalcation on its part until on or about the 24th day of November, 1918, when the contract was suspended by the United States and the plaintiff was ordered by the Quartermaster Corps to stop work on said contract and not to produce and deliver any more cans. The suspension and stoppage of work on said contract caused to be undelivered under said contract 13,535,403 hard-bread can's, or 90.2% of the amount of cans called for by the contract.

V. In order properly to perform said contract it was necessary for plaintiff, and it was so directed by officers of the Quartermaster Corps duly authorized in the premises, to install special facilities at two of its factories. Because of the suspension of the said contract plaintiff was unable to absorb 90.2% of the cost of the installation of said special facilities, less their salvage value. The loss unable to be absorbed at the two said factories of plaintiff, allowed by the Government in the agreement of February 25, 1919, hereinafter referred to, amounted to $2,450.86.

VI. The suspension of said contract caused plaintiff to have on hand at its two said factories certain can bottoms and can covers theretofore cut which could not be used except in the manufacture of hard-bread cans. The loss on this ac*287count, allowed by the Government in the agreement of February 25,1919, hereinafter referred to, amounted to $78.14.

VII. At the time of the suspension of the contract plaintiff had on hand an amount of tin plate suitable and sufficient for the production of 13,535,403 hard-bread cans of the kind and character called for by said contract. Such tin plate was of special size and gauge, suitable for use in that state in the manufacture of hard-bread cans, and after the suspension of said contract had only a salvage value in so far as it might be recut with more or less waste for use in the manufacture of ordinary commercial lines of tin cans. The tin plate remaining at the two said factories amounted to 38,225 base boxes, and the loss on this account, allowed by the Government in the agreement of February 25, 1919, hereinafter referred to, amounted to $95,748.41.

VIII. A claim arising out of the suspension and stoppage of work on said contract was presented to the proper officials of the defendant, was considered, and resulted in the execution of a certain agreement, dated February 25, 1919, which is in words and figures' as follows:

“ Cancellation Agreement No. 565

“Agreement entered into this twenty-fifth day of February, 1919, between Major John R. Holt, Quartermaster Corps, United States Army (herein called ‘contracting officer’), acting by authority of the Director of Purchase and Storage of the Army, and under direction of the Secretary of War, for and in behalf of the United States of America (herein called ‘United States ’), party of the first part, and American Can Company (herein called ‘ contractor ’), party of the second part:

“ Whereas a certain contract was entered into between the United States and the contractor, No. 15080-G, dated November 4, 1918 (herein called ‘ original contract,’ which term shall also include wherever used herein all agreements or orders, if any, supplementary to said contract or purchase order, except this agreement);

“Whereas the furnishing and delivery of further articles or work under said original contract would exceed the present requirements of the United States; and

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

“Whereas the contractor, in pursuance of Jhe original contract, has incurred expenses and obligations for the pur*288pose of furnishing and delivering articles or work remaining undelivered under said original contract and is relinquishing prospective profits on the unexecuted portion thereof:

“ Now, therefore, in consideration of the premises and of the mutual covenants herein contained it is agreed between the parties hereto as follows:

“ 1. The contractor shall not furnish or deliver and the United States shall not accept or pay for any further articles or work to be delivered under said original contract.

“2. The United States shall pay forthwith to the contractor the sum of ninety-eight thousand two hundred seventy-seven and 41/100 dollars ($98,277.41), which sum, together w.ith payment for the finished articles’ or work heretofore delivered to the United States and not yet paid for, shall constitute full and final compensation for articles or work delivered, services rendered, and expenditures incurred by the contractor under the original contract.

“ 3. The contractor does hereby for itself,ri its successors, heirs, legal representatives, and assigns remise, release, and forever discharge the United States 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 original contract. Upon receipt of the amount herein agreed to be paid, the contractor shall execute and deliver to the United States such further or additional instruments of receipt or release as the United States shall demand.

“ 4. This agreement shall not become a valid and binding obligation of the United States unless and until the approval of the board of review of the office of the director of purchase and storage or of a zone supply officer has been noted at the end of the instrument.

“ In witness whereof the parties hereto have executed and delivered this agreement in triplicate as of the date first hereinabove written.

“John R. Holt,

“ Major, *Q. M.*Corps, *U. 8. Army.*

“American Can Compant,

“ By It. H. Ismon, *Treasurer.*

“ Office

“ Zone Supply Officer,

March 3, 1919.

“Approved Zone Board of Contract Review,

W. R. C.

“Approved: Board of Review, .

“ By 3-3-19. W. R. C.”

*289By virtue of this agreement, the plaintiff was paid by the defendant the sum of $98,271.41 under a Treasury draft dated March 26, 1919.

IX. On March 20, 1924, the following document was signed by plaintiff and the Secretary of War in words and figures as follows:

“ Rescission

Whereas it has been and is claimed and asserted by the United States that the within contract (Cancellation Agreement No. 565) was executed by mistake, now therefore the within contract is by mutual consent hereby rescinded, canceled, and held for naught, the party of the second part hereby repaying the consideration ($98,277.41) to the party of the first part, receipt whereof is hereby acknowledged by party of the first part. And in consideration of the premises it is agreed by the parties hereto that the party of the second part shall and does-hereby reserve its original rights and claims under the contract 15080-G, dated November 4, 1918, growing out of the termination, cancellation, suspension, or breach thereof by the party of the first part, including any right of action in the Court of Claims of the United States.

*“*Dated at Washington, D. C., the 20th day of March, 1924.

“ United States of America,

*“*By John W. Weeks,

*“Secretary of War.*

“ American Can Company,

“ By H. W. Phelps, *President.*

“ Attest:

“ R. A. Berger, *Asst.*Secretary.”

On or about March 20, 1924, the plaintiff paid to the defendant $98,277.41. Neither the whole nor any part of said sum has been repaid to the plaintiff.

The court decided that plaintiff was entitled to recover.

Graham, Judge,

delivered the opinion of the court:

On November 4, 1918, plaintiff entered into a contract with the defendant, through the Secretary of War, for the supplying of hard-bread cans. Thereafter, on the 24th of November, 1918, the defendant canceled the contract. The *290contract contained no provision authorizing the defendant to cancel. On February 25, 1919, the parties entered into a formal cancellation and settlement agreement, by which the plaintiff in consideration of the. payment to it of $98,277.41 agreed to the cancellation of the contract and to release the United States from all liability arising out of the original contract and cancellation agreement. After the execution of this agreement plaintiff was paid the sum stated. About five years thereafter, for reasons which do not appear in the record, the Secretary of War and the plaintiff entered into what may be called a “ rescission agreement,” by which the said cancellation and settlement agreement wap “ rescinded, canceled, and held for naught,” and the plaintiff repaid to defendant the sum of $98,277.41, being the consideration it received from defendant under the cancellation agreement, reserving its rights and claims under the original contract of November 4, 1918, “ growing out of the termination, cancellation, suspension, or breach thereof.”

The plaintiff entered suit in this court on May 22, 1924, to recover damages under its original contract, and the only question before the court is as to what it is entitled to recover under that contract.

The firpt seven findings were based upon a stipulation of the parties. Findings Y, VI, and VII show that plaintiff suffered losses by reason of the suspension and cancellation of its contract amounting to $98,277.41, not including anticipated profits, as to which there is no proof. This is the sum allowed in the cancellation agreement, which agreement, after its execution and before payment was made to plaintiff, wap approved by the Zone Board of Contract Review and Board of Review.

The plaintiff is entitled to recover the sum of $98,277.41, and it is so ordered.

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