American Propeller & Mfg. Co. v. United States

• Decision Date: 06 April 1936
• Docket Number: No. B-28.,B-28.
• Citation: 14 F. Supp. 168
• Parties: AMERICAN PROPELLER & MFG. CO. v. UNITED STATES.
• Court: U.S. Claims Court

14 F. Supp. 168

AMERICAN PROPELLER & MFG. CO. v. UNITED STATES.

No. B-28.

Court of Claims.

April 6, 1936.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

J. Kemp Bartlett, of Baltimore, Md. (Williams, Myers & Quiggle, of Washington, D. C., and Bartlett, Poe & Claggett, of Baltimore, Md., on the briefs), for plaintiff.

George H. Foster, of Washington, D. C., and Frank J. Wideman, Asst. Atty. Gen., for the United States.

Before BOOTH, Chief Justice, and GREEN, LITTLETON, WILLIAMS, and WHALEY, Judges.

GREEN, Judge.

The plaintiff during the World War was engaged in the manufacture of airplane propellers and was given a series of orders by defendant for these propellers. In preparation for the work required and in order to expedite it, the plaintiff enlarged its plant, installed additional machinery and equipment and otherwise increased its facilities. As the work progressed the defendant suspended or canceled orders which it had given by reason of change in design or some other cause and finally as the war came to a close suspended work on the contracts altogether. Some of the propellers ordered were finished and paid for, some were finished but not paid for, and there were a large number upon which more or less work had been done at the time when the contracts were canceled. After all work on the propellers had ceased by reason of directions received from defendant, the plaintiff and defendant entered into an agreement known as the Potter-Downey agreement which provided for payment to the plaintiff for the work it had done on the unfinished propellers and for the cost of material used in this work. But after this agreement had been executed the plaintiff and defendant were still unable to agree as to the amount to which plaintiff was entitled under the contracts and plaintiff has not been paid even the amount provided for by this so-called Potter-Downey agreement. Plaintiff now brings this suit to recover the amount which is due under this agreement and also the loss and damage which it alleges it has sustained by reason of the suspension and cancellation of the contracts.

The defendant has filed a counterclaim for taxes assessed for the three years 1917, 1918, and 1919, but it is conceded that any further collections for the years 1917 and 1919 are barred by the statute of limitations.

In plaintiff's petition, seventeen items of charges, loss and damage are listed against defendant totaling $582,129.04. Plaintiff concedes, however, that there is due the defendant for lumber $437,891.01 and asks judgment for the balance, $144,238.03.

Eight of plaintiff's claims are conceded by defendant and it is only necessary in determining the amount of plaintiff's recovery to pass on the disputed items which will be hereinafter set out and considered.

Among the claims disputed by defendant is one for $84,365.41 "for continuing overhead expenses from date of discontinuance of manufacture to date of termination of contracts" which includes 10 per cent. profit thereon.

The so-called Potter-Downey agreement which will be considered more at length hereinafter provided for the payment to plaintiff of overhead expenses and 10 per cent. profit thereon. The agreement clearly covered the claim now being considered but it is said that plaintiff was at the same time engaged on work for other parties and that it has failed to establish by the evidence the proportion of overhead properly chargeable to defendant. This is a question of fact upon which the commissioner of this court found in favor of the plaintiff. After reviewing the evidence, we agree with the court commissioner and think it would serve no useful purpose to discuss the oral and written testimony in relation to this item. It is therefore allowed to plaintiff.

The next item of plaintiff's claims disputed by defendant is $34,306.55 "for loss resulting from erection of second story and office floors of claimant's Key Highway Plant and from installing additional special equipment therein."

The evidence shows that in preparation for the work contemplated by the contracts the plaintiff added a second story to what was known as its Key Highway Plant and that this second story was specially fitted and equipped for use in connection with the lower story in constructing propellers. Defendant does not deny this, but says that there was no agreement that the government should pay for an addition to plaintiff's plant, or for additional machinery and equipment, and if there had been such an agreement the officer of defendant that made the arrangements with plaintiff had no authority to make any such contract. This may be conceded for the purposes of the argument, but we do not think these matters prevent plaintiff's recovery thereon. The evidence, however, does show that Lt. Ryerson, head of the propeller section who was charged with making arrangements for the production of propellers for the air service, visited plaintiff's plant and while expressing himself as pleased with it in a general way said it did not have capacity to manufacture the number of propellers that the War Department required and urged plaintiff to add another story with additional facilities, and plaintiff, through its president, agreed so to do. Subsequently, having in the meantime received orders for a very large number of propellers, the plaintiff went ahead with the construction of the second story which was completed some time in the middle of summer in 1918.

The case is very similar to that of the Barrett Co. v. United States, 273 U.S. 227, 47 S.Ct. 409, 412, 71 L.Ed. 621. In that case the Navy Department contracted for certain materials to be furnished within a given time. The contract also provided for the construction of a plant with equipment with which to carry out its provisions. The plaintiff, believing that a larger plant than was contracted for would be necessary for the manufacture of the material required by the government, expended a large sum to increase its capacity. None of these changes were directly authorized or approved by the Navy Department, but the Supreme Court said that the plaintiff was entitled to just compensation under the statute and that just compensation included "the outlay which it can show there was reasonable ground for making in order to fulfill its engagements." What we have stated above with reference to the case now before us shows that as the government requirements were presented to plaintiff there was abundant reason for an enlarged plant and additional facilities.

The defendant, however, contends that the Barrett Co. Case, supra, and other similar cases have no application for the reason that they were based on the statute of June 15, 1917, which provided for just compensation whenever war contracts were suspended, canceled, or modified, but applied only to contracts for the "building, production, or purchase of ships or material," and that other language in the statute shows that the word "material," as used therein, refers only to stores, supplies, and equipment for ships. This seems to be a very narrow construction of the statute, but we can find no case in which it has otherwise been applied. The defendant not only insists that the statute referred to above has no application to the case now before the court, but says also that if it did apply, the contracts were not canceled pursuant to its provisions. We do not think this precludes the plaintiff from recovering for loss or damage occasioned by the cancellation or suspension of the contracts. The general principles in relation to contracts will still apply and plaintiff is not left without a remedy for violation of the agreements, express or implied, made by defendant. Under well-settled authority plaintiff could have elected to treat the contracts as still in force, and, if it had so elected, could recover for potential profits, but by executing the Potter-Downey agreement it elected to consider the contracts terminated by the breach thereof made by defendant. We are clear that plaintiff may recover what it lost by reason of the cancellation of the contracts even if it be conceded that there is no special statute which so provides.

This court and the Supreme Court long ago fixed the rules for the measure of damage when a contract was suspended or canceled in the case of Behan v. United States, 18 Ct.Cl. 687, affirmed in United States v. Behan, 110 U.S. 338, 4 S.Ct. 81, 84, 28 L.Ed. 168. In that case this court said that "in calculating the damages to a contractor when, without his fault, the other party, during its progress, puts an end to the contract before completion, the object is to indemnify him for his losses sustained." The Supreme Court, in passing on the same question, said with reference to the contractor's rights in such a case: "When he elects to go for damages for the breach of the contract, the first and most obvious damage to be shown is the amount which he has been induced to expend on the faith of the contract, including a fair allowance for his own time and services."

The Supreme Court went on further to say that the contractor may also claim and recover, if proved, anticipated profits. In the case at bar there is no attempt to show any anticipated profits, probably because the Potter-Downey agreement rendered such profits not recoverable, but the Supreme Court went on to say that "It does not lie, however, in the mouth of the party, who has voluntarily and wrongfully put an end to the contract, to say that the party injured has not been damaged at least to the amount of what he has been induced fairly and in good faith to lay out and expend * * * after making allowance for the value of materials on...