Case Name: DAVID A. WRIGHT v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1925-04-13
Citations: 60 Ct. Cl. 546
Docket Number: No. A-300
Parties: DAVID A. WRIGHT v. THE UNITED STATES
Judges: Graham, Judge; Hay, Judge; -Downey, Judge; and Campbell, GMef Justice, concur.
Reporter: United States Court of Claims Reports
Volume: 60
Pages: 546–552

Head Matter:
DAVID A. WRIGHT v. THE UNITED STATES
[No. A-300.
Decided April 13, 1925]
On the Proofs
Contract; termination clause; award of board; evidence. — Where an award is made by a war claims board under the termination clause of a contract between plaintiff and tlie United States and the Government relies exclusively upon the finding of said . board as to the value of certain materials, and the plaintiff submits competent testimony taken under the rules of the court as to the value of said materials, the evidence of the plaintiff will control.
The BeportePs statement of the case:
Mr. Ashby Williams for the plaintiff. Mr. George W. Burleigh ivas on the briefs.
Mr. Dwight E. Borer, with whom was Mr. Assistant Attorney General Bobert H. Lovett, for the defendant. Mr. Percy M. Oox was on the brief.
The following are the facts as found by the court:
I. The plaintiff is a citizen of the United States and of the State of Illinois, and during the transactions hereinafter described was a machine-tool manufacturer and dealer, with his place of business and residence in the city of Chicago, Ill.
II. On September 12, 1918, the plaintiff entered into a contract with the Government to manufacture and furnish to the United States three 60-inch by 86 feet, heavy duty, tripled geared, Fifield engine lathes for $20,000 each, or a total of $60,000, f. o. b. cars Chicago, Ill., deliveries to begin at once and to be completed before January 1, 1919. There was a provision for cancellation of the contract, which read:
“Article XIV. Termination. — This contract being necessitated by a state of war now existing, it is desirable and expedient that provision be made for its cancellation upon fair and equitable terms in the event of the termination or limitation of the war, or if in anticipation thereof or because of changes in methods of warfare the Chief of Ordnance should be of the opinion that the completion of this contract has become unnecessary. It is therefore provided that at any time and from time to time, during the currency of this contract, the Chief of Ordnance may for any of the causes above stated notify the contractor that any part or parts of the articles then remaining undelivered shall not be manufactured or delivered.
“ In the event of such complete or partial termination the United States shall inspect all completed articles then on hand and such as may be completed within thirty (30) days after such notice, and shall pay to the contractor the price herein fixed for all articles accepted by and delivered to the United States. The United States shall also pay to the contractor the cost of the materials and component parts purchased by the contractor for the performance of this contract and then on hand in an amount not exceeding the requirements for the completion of this contract provided they comply with the specifications, and also all costs shown by the contractor to have been theretofore necessarily incurred in the performance of this contract and remaining unpaid; and the United States shall also protect the contractor on all obligations incurred necessarily and solely for the performance of this contract of which the contractor can not be otherwise relieved. To the above may be added such sums as the Chief of Ordnance may deem necessary to fairly and justly compensate the contractor for work, labor, and service rendered under this contract.
“ Title to all such materials and component parts paid for by the United States under this article shall, immediately upon such payment vest in the United States.
“ The United States may refuse to make any payment or to reimburse the contractor for or on account of material or component parts intended to form a part of the articles, whether unused or in the process of manufacture or manufactured, in respect of the delivery of which the contractor shall be in arrears not due to causes beyond its control at the time of such termination.”
The contract is attached to plaintiff’s petition as “ Exhibit A,” and is made part of this finding by reference thereto. •
III. After the armistice of November 11, 1918, the plaintiff, on November 13,1918, procured from the United States, through the War Credits Board, an advance of $18,000, to be used for its pay roll, material, and working capital in carrying out its contract of September 12, 1918. The terms upon which this advance payment was made, and the manner in which repayment was to be made of the borrowed money, were set out in a supplemental agreement dated November 13, 1918, between plaintiff and the United States, Article IY of which reads:
“ The contractor shall, as hereinafter provided, account to the Government for the amount of said advance payment, with interest on the outstanding balances thereof at the rate of seven per cent per annum for the month now current and thereafter at such rate or rates as the War Credits Board may from month to month determine.
“ The said advance payment shall be applied and credited in part payment for the supplies to be furnished by the contractor under the principal agreement; and for this purpose the contractor authorizes .the Government, acting through its proper. disbursing officer, to deduct thirty-five per cent from the gross face amount of each voucher for supplies presented by the contractor under the principal agreement and to deduct 100 per cent from vouchers for amounts payable to the contractor under the principal agreement by reason of the cancellation thereof, until such deductions shall equal the principal of such advance payment in full, and thereafter, the interest accrued on the outstanding balances thereof, the dates when vouchers are paid to govern in computation of interest and in the determination of outstanding balances. If these deductions are not made, or deductions are made of a different percentage than specified, the proper disbursing officer is hereby authorized to make such other and additional deductions from subsequent vouchers as will cause the total deductions to equal the above specified percentage. But the last deduction shall not exceed an amount equal to the balance of the such advance payment and interest. then accrued. The contractor may, however, at any time, return to the Government, in cash, the entire outstanding balance of the such advance payment, with accrued interest or any part thereof.
“ If the total amount of such advance payment with interest accrued thereon shall not be applied and credited in payment for supplies, as aforesaid, or if the contractor for any cause shall not furnish to the Government the supplies in whole or in part thereof, as provided in the principal agreement, even though the Government shall terminate said principal agreement, or if the contractor shall become insolvent, or shall commit an act of bankruptcy, or if the contractor’s assets shall be placed in the hands or a receiver, the contractor shall immediately return to the Government any balance of the said advance payment and interest, after deducting :
“(a) The total of any credits made as hereinbefore provided.
“(&) All liquidated accounts that may be due and owing under the principal agreement from the Government to the contractor.”
IV. On November 14, 1918, the following notice was sent by direction of Chief of Ordnance to the plaintiff and received by him in due course:
“ Subject: Cancellation of machine tool contracts for relining project. W ar-Ord-P14859-1047 C.
“ David A. Weight, Esq.,
“ 568 'Washington Boulevard, Chicago, III.
“ Sie : 1. The project calling for the machine tools under the above order has been canceled and I am directed by the Chief of Ordnance to request you to make no new commitments and to stop „all work both in connection with the tools themselves, except as hereinafter provided, and in connection with the providing and installing of new facilities for the performance of the order. Until further advised, you may proceed with the work on any tools called for in the above order upon which the work has been completed to the extent of approximately 75 per cent thereof. Kindly send to the undersigned .as promptly as possible a list of such tools, together with an estimate of the time required to complete same and the expenditure involved.
“ 2. The adjustment necessary by reason of the cancellation of this contract will be effected in accordance with the provisions of the cancellation clause therein contained.”
V. At the time the notice of cancellation of the contract was sent as set out in Finding IV the work was about 65 per cent completed and the plaintiff had expended on the manufacture of the said lathes under the terms of his contract the following amounts:
(1) For unworked direct material, $8,348.46.
(2) For worked direct material, $2,994.41.
(8) For direct labor and overhead expenses, $8,630.71.
(4) For engineering patterns, drawings, and development, $5,150, a total of $20,123.58.
VI. At the time the said contract was canceled forty-seven and one-half (47%) gross tons of scrap material was left over from work on the said lathes in plaintiff’s plant and in his possession. The "fair market value of the salvage or scrap material at the date of the cancellation of the said contract was $15 per ton.
VII. This claim was passed upon by the Ordnance Claims Board, which made an award of $2,022.54 on April 23, 1920. in favor of the United States.
VIII. If the plaintiff is entitled to recover, the amount would be $1,411.08, the difference between the amount expended on the work under his contract up to the time of its cancellation, $20,123.58, and $18,712.50, the advance payment on such work $18,000, plus the value of unused material for such work, $712.50, left on his hands by the cancellation of his contract.
The court decided that plaintiff ivas entitled to recover.

Opinion:
Booth, Judge,
delivered the opinion of the court:
The plaintiff was awarded a contract by the procurement division of the Ordnance Bureau on September 12, 1918. The contract called for the manufacture and delivery of three 60-inch Fifield engine lathes. Plaintiff was to receive $60,000 for the machinery, i. e., $20,000, for each lathe. There were numerous other covenants in the contract not important here. Article XIV of the contract provided for its termination. The contract ivas terminated on November 14,1918. This suit is the result of its termination, the plaintiff and defendant being unable to agree as to allowance to the plaintiff under the termination clause. We have set this article of the contract out in Finding II. By its express terms the defendant assumed the following obligations: First, to pay in full for all articles accepted and delivered to the United States. It is conceded that there were none. Second, to pay the cost of all materials and component parts purchased by the contractor left on his hands and which were necessary and requisite to complete the performance of the contract according to the specifications. Third, to pay the contractor all costs shown by the contractor necessarily incurred in performing the contract and at the time unpaid. Fourth, protect the contractor from expenditure for any commitments made in order to do the work upon which liability could not be avoided; and, lastly, "to the above may be added such sums as the Chief of Ordnance may deem necessary to fairly and justly compensate the con tractor for his work, labor, and service rendered under this contract."
The defendant subsequent to the termination of the contract referred the settlement under the above article to the Ordnance Claims Board, and this board, after an inspection of the premises, made an award allowing the contractor $19,265.23, deducting from this allowance, in addition to the $18,000 which the plaintiff admittedly owes the Government, $8',287.77 salvage value of property retained by the defendant. In our opinion the award made by the Ordnance Claims Board is completely overthrown by the record in this case. While the differences are not large, the defendant introduced no evidence of any character whatever to sustain this award. The result of the ordnance board's efforts was, in fact, presented by the plaintiff in the course of taking testimony as a part of the transaction, and the defendant rests its case upon this general i-eport, and nothing additional. On the other hand, the plaintiff, by indisputably competent witnesses, testifying after a careful audit of plaintiff's books, invoices, and accounts, going into minute details, conclusively establishes as to the items reported their exactness and verity. It is, in fact, the only competent evidence of plaintiff's loss.
Plaintiff insists that under the proof adduced the court should add 10 per cent of the amount awarded in virtue of the provisions of the final clause of Article XIV. To this contention we can not accede. The Chief of Ordnance was vested with a discretion in this respect, and the plaintiff has not brought the case within any of the rules whereby this court may review what was done by that officer in this regard.
After the contract was executed the defendant, through the War Credits Board, advanced the plaintiff $18,000 upon the contract. Whether this transaction be designated an advancement or a loan is seemingly immaterial. It was to be repaid by a 35 per cent deduction from each voucher issued to the plaintiff in the course of performance of the contract until fully discharged, and in the event of cancellation was to be deducted in full from any money due the contractor because of cancellation. There was due the con tractor, if we are correct, at the time of cancellation a sum more than sufficient to take up this'entire indebtedness.' Hence, under the express terms of the loan agreement, this obligation was paid and discharged. ' The note given for the amount of the loan was but an integral part of the entire transaction and did not alter, nor was it' intended so to do, the written agreement signed by the parties at the time the money was advanced. It is manifestly absurd to assert an indebtedness against the plaintiff when the defendant at the time had in its possession more than a sufficient sum to repay all obligations assumed under the loan agreement. The plaintiff received the advancement on November 13, 1918, and the following day the contract was canceled.
Plaintiff is awarded judgment for $1,411.08. It is so ordered.
Graham, Judge; Hay, Judge; -Downey, Judge; and Campbell, GMef Justice, concur.