American Textile Machine Corp. v. United States

• Decision Date: 25 March 1955
• Docket Number: No. 12184.,12184.
• Citation: 220 F.2d 584
• Parties: AMERICAN TEXTILE MACHINE CORP., Appellant, v. UNITED STATES of America, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

220 F.2d 584 (1955)

AMERICAN TEXTILE MACHINE CORP., Appellant, v. UNITED STATES of America, Appellee.

No. 12184.

United States Court of Appeals, Sixth Circuit.

March 25, 1955.

Judson Harwood, Nashville, Tenn., Cecil Sims, Nashville, Tenn., on brief for appellant.

Alan S. Rosenthal, Washington, D. C., Warren E. Burger, Samuel D. Slade, T. S. L. Perlman, Washington, D. C., Fred Elledge, Jr., Nashville, Tenn., on brief for appellee.

Before SIMONS, Chief Judge, and MILLER and STEWART, Circuit Judges.

MILLER, Circuit Judge.

The United States brought this action against the appellant, American Textile Machine Corporation, under Sec. 403(c) (2) of the Renegotiation Act as amended, 50 U.S.C.A.Appendix, § 1191(c) (2), to recover amounts determined by the War Contracts Price Adjustment Board to have been excessive profits realized by appellant on Government contracts during the fiscal years ended June 30, 1945 and June 30, 1946. The District Judge entered judgment against the appellant in the amounts of $209,926.66 and $194,504.30, with 3% interest, for the 1945 and 1946 years respectively, from which this appeal was taken.

The complaint, filed on January 9, 1951, set out the renegotiation proceedings, the determination by the Board of the excessive profits, the demand of payment, and appellant's failure to comply therewith. Appellant's answer admitted the unilateral determinations by the Board and that it had made no payment thereon, but denied the correctness and validity of such determinations, and alleged there was no indebtedness due from it to the Government, except as provided by a contract of compromise and settlement entered into between it and the Government on January 22, 1951, following the filing of the complaint herein, which it pleaded as "an accord and satisfaction" of the original claims asserted by the Government against it in this action. The answer stated that the appellant "has at all times been ready, willing and able to perform its obligations under said settlement agreement, and here and now offers to do so, but that the Government on March 23, 1951 arbitrarily and illegally elected to rescind the compromise settlement agreement and to enforce its demands as set out in the complaint." In rejecting this defense the District Judge made the following findings of fact.

Following the Board's determinations of excess profits, the appellant on November 30, 1948 filed petitions in the Tax Court for de novo redetermination of the alleged amounts, and such redetermination proceedings, after issue was joined by the Government, were still pending. On January 16, 1951, appellant submitted to the Attorney General of the United States a written offer to compromise its liability for the two years in question, which offer with several verbal supplements thereto was accepted by the Attorney General on January 22, 1951. The terms of the compromise settlement were: appellant agreed (1) to pay appellee the total amount of $58,000 as follows: $20,000 upon receipt of the acceptance of the offer, $500 on the 1st of each month from February 1951 through July 1951, $1,000 on the first of each month from August 1951 through December 1951, and $30,000 on January 1, 1952, with interest on unpaid balances at 6% per annum on the first of each month; (2) to waive all claims against appellee and to execute necessary forms required by appellee; (3) to dismiss its de novo redetermination proceedings in the Tax Court; (4) to secure the payments provided above by a mortgage of its plant and equipment and 510 shares of Hold-Stitch Fabric Machine Company stock owned by it; (5) to pay delinquent federal taxes assessed against it by the Nashville, Tennessee Office, Bureau of Internal Revenue; and (6) to convey to appellee non-exclusive, royalty-free licenses on patents owned by Hold-Stitch Fabric Machine Company. Appellee agreed that upon acceptance of the offer and compromise the summons and complaint in this action would be dismissed without prejudice, and that it would request removal of any "stop payment orders" against the appellant.

By telegram of March 23, 1951, the appellee rescinded the compromise agreement. At that time the appellant had mailed to appellee its check for $20,500 on January 26, 1951, its check for $55.48 on February 12, 1951, and its check for $672.60 on February 26, 1951. These checks were returned uncashed by appellee by letter of March 23, 1951. Appellant had not tendered or delivered to appellee its mortgage on its plant and equipment, the 510 shares of Hold-Stitch Fabric Machine Company stock as a pledge on the indebtedness, the non-exclusive, royalty-free license patents owned by Hold-Stitch Fabric Machine Company, and its waiver of all claims against the appellee. Nor had it dismissed its de novo redetermination proceedings in the Tax Court or paid the delinquent federal taxes assessed against it by the Nashville, Tennessee Office, Bureau of Internal Revenue. The District Judge also found that from January 16, 1951 until March 23, 1951 inclusive the appellant was unable to tender or deliver to appellee a mortgage of any kind on the 510 shares of Hold-Stitch Fabric Machine Company stock. Other checks sent by appellant after March 23 through December 3, 1951 were returned uncashed by appellee. See 119 F.Supp. 253.

The District Judge ruled that there was no executed accord and satisfaction between the appellant and appellee; that the Renegotiation Act of 1943 as amended was constitutional; that the granting of a judgment during the pendency of the de novo redetermination proceedings in the Tax Court did not violate the Fifth Amendment to the Constitution; and that the appellee was entitled to recover the net principal sums found to be excessive profits by the War Contracts Price Adjustment Board. Judgment was entered accordingly.

The only question presented by appellant on this review is the effect of the compromise agreement of January 22, 1951. In rejecting appellant's defense the District Judge expressed the view that the defense of accord and satisfaction depended upon a settlement being reached and carried out in full, and that; while an agreement had been reached between the parties which represented the accord, such agreement had not been carried out and satisfaction of the accord was therefore lacking, and that the defense of accord and satisfaction was accordingly not a valid one. Appellant contended that although the evidence failed to show an accord and satisfaction the compromise settlement was a valid and enforceable agreement which was a bar to the action and attempted to obtain a ruling from the District Judge on this contention. The District Judge declined to make any express ruling in addition to the ruling that he found the issue of accord and satisfaction in favor of the appellee.

Appellant strongly stresses the refusal of the District Judge to make an express ruling on the effect of the compromise settlement after ruling against the appellant on the issue of accord and satisfaction. It claims that it was entitled to have a ruling on such an issue raised by the pleadings. The District Judge was apparently of the view that the issue was not raised by the pleadings or had been waived by counsel, and that his ruling on the issue of accord and satisfaction was sufficient. In our opinion, this difference involves form only, rather than substance. Passing for the moment whether, for the purposes of this case, there is any substantial difference between the phrases "accord and satisfaction" and "compromise and settlement," it seems clear that the entry of the judgment in favor of appellee was in substance a rejection of whichever of the two defenses, or both of them, was presented by the pleadings and evidence. The evidence introduced was applicable to both defenses.

With respect to the pleadings, we think that although the appellant's answer used the phraseology of "accord and satisfaction," it also pleaded the compromise settlement itself as a bar to the action. In numerous places it refers to the "compromise" and "settlement" and specifically alleges "that said settlement became and remains binding upon the plaintiff so as to eliminate all claimed liability against the defendant except for that expressly set out and agreed upon in said compromise settlement agreement." Although appellant's counsel likewise used the phrase "accord and satisfaction" in his opening statement to the Court, it is clear from the colloquy between Court and counsel that the defense of "settlement" was never abandoned. Accordingly, the question for decision, is, regardless of the terminology of "accord and satisfaction" and "compromise and settlement," did the contract of January 22, 1951 between the appellant and the Government constitute a bar to the prosecution of the claims involved in this action after the Government notified appel...