CLIMATIC RAINWEAR, CO. v. United States

• Decision Date: 06 February 1950
• Docket Number: No. 47888.,47888.
• Citation: 115 Ct. Cl. 520,88 F. Supp. 415
• Parties: CLIMATIC RAINWEAR, CO., Inc. v. UNITED STATES.
• Court: U.S. Claims Court

88 F. Supp. 415

115 Ct. Cl. 520

CLIMATIC RAINWEAR, CO., Inc. v. UNITED STATES.

No. 47888.

United States Court of Claims.

February 6, 1950.

Paul A. Porter and Norman Diamond, Washington, D. C., for the plaintiff. Arnold, Fortas & Porter, Washington, D. C., on the brief.

Kendall M. Barnes, Washington, D. C., Assistant Attorney General H. G. Morison, for the defendant.

Before JONES, Chief Judge, and HOWELL, MADDEN, WHITAKER, and LITTLETON, JJ.

HOWELL, Judge.

Plaintiff sues to recover a balance of $53,964.35 under its contract for raincoats and ponchos with defendant acting through the Philadelphia Quartermaster Depot of the War Department. This contract numbered W-36-030-qm-14952 (hereinafter referred to as Contract 14952) was entered into on April 16, 1945.

Defendant has admitted that the aforesaid sum became due plaintiff but has denied liability on two grounds: first, by virtue of an alleged release of all plaintiff's claims under Contract 14952 and second, by way of set-off against the amount in question of an equivalent sum representing excess costs and liquidated damages claimed by defendant under a prior contract between it and plaintiff for the manufacture of Army raincoats. This contract had been entered into on August 14, 1942, numbered W-669-qm-20481 (hereinafter referred to as Contract 20481).

Plaintiff by replication denies the asserted release and set-off, and alleges that the withholding and setting off of the amount in question was unauthorized and illegal.

The parties filed certain stipulations of fact, which are a part of the record, including an agreement that the arithmetical calculation of the liquidated damages assessed under Contract 20481 was correct; thus the amount thereof is not in question — only the plaintiff's liability therefor.

We have these two fundamental questions with which to deal, first whether plaintiff released its claim for the sum of $53,964.35 which defendant admittedly owed it under Contract 14952, and secondly, whether defendant was entitled to withhold and set off against that amount an equivalent sum on account of excess costs and liquidated damages assessed against plaintiff under the other and previous Contract 20481.

The Release

On April 11, 1945, defendant demanded payment by plaintiff of the sum of $53,964.35, the excess costs and liquidated damages assessed under Contract 20481. For reasons that will appear later on in this opinion, plaintiff did not pay this sum and defendant withheld $33,009.00 by a "no-payment" voucher of June 9, 1945, and $20,985.35 by a "partial payment" voucher of June 23, 1945, both of which bore the notation "reimbursement withheld to protect the interests of the Government because of default under Contract W-669-qm-20481."

Article 8 of Contract 14952 provided that the contractor should be paid "upon the submission of properly certified invoices or vouchers, the prices stipulated herein for articles, delivered and accepted * * *." Plaintiff made deliveries thereunder beginning on or about May 3, 1945, and it was from the sums due from such deliveries that the above sums were withheld.

Later, however, on August 14, 1945, this contract (14952) was terminated for the convenience of the Government. The termination notice provided in subparagraph 6 (Finding 5) as follows: "6. Completed Articles. — Completed articles which have been shipped but not received prior to the effective date of termination will be considered for all purposes as articles delivered prior to such effective date. Other completed articles accepted and delivered after the effective date of termination, in accordance with directions of the Awarding Contracting Officer will be treated as articles delivered under the Contract. In both instances, they should, therefore, be invoiced in the usual way and not included in your termination claim."

On April 3, 1946, a supplemental agreement was entered into in connection with the termination. Plaintiff, in submitting its termination settlement proposals, did not include claims for finished articles under Contract 14952, payment having been sought therefor only by way of invoices in accordance with paragraph 6, supra, of the termination notice.

The defendant's defense of release is based upon this "Supplemental Agreement to Contract 14952" entered into pursuant to the Contract Settlement Act of 1944, 41 U.S.C.A. § 101 et seq., the provisions of which concerning what was released being as follows:

"Article 4 (a) * * *

"(b) Upon payment of said sum of $33,290.07 as aforesaid, all rights and liabilities of the parties under the Contract * * * shall cease forthwith and be forever released except:

* * * * * *

"6. All rights of the Contractor to payment of the contract price therefor for completed items, if any, delivered and accepted pursuant to the Contract, for which payment has not previously been made."

* * * * * *

At the very time this agreement was executed, plaintiff's claim for payment of sums withheld under Contract 14952 was pending before the Comptroller General. Several months later, on August 28, 1946, the Comptroller General denied plaintiff's claim on the ground that the debt in question had been set off against amounts assessed against plaintiff as excess costs and liquidated damages under Contract 20481 pursuant to a termination of that contract for failure to deliver and plaintiff's alleged omission to take a timely appeal therefrom.

The plaintiff says that under the express instruction of the Government as contained in paragraph 6, supra, of the termination notice, it was required to exclude all claims for completed articles from its termination settlement proposals. Furthermore, that in accordance with such instructions, it did actually exclude such articles, and submitted invoices therefor, which became due and payable when the articles were delivered and accepted, under Article 8 of Contract 14952. Finally, that its rights to payment for completed items delivered and accepted pursuant to the contract for which payment had not previously been made were expressly reserved by Article 4, paragraph (6), supra, of the termination settlement agreement.

A consideration of these contentions in the light of the express language contained in the documents before us, reveals, in our opinion, that plaintiff's contentions are correct. To construe this language in such a way as to hold that plaintiff released its claim for payment of these articles would require us to disregard language which in no sense would constitute anything other than an express reservation of its rights in an unqualified manner. Certainly, the parties were competent to enter into these agreements, and their expressed intention is clear and unambiguous.

The Government contends that the plaintiff has been "previously paid" for completed items delivered and accepted pursuant to the contract under the language of Article 4 (b) (6) of the termination settlement agreement by reason of the "set-off" made by the Comptroller General in withholding payments for completed items due under Contract 14952 for excess costs and liquidated damages due the Government as a result of the cancellation of Contract 20481.

In effect, the Comptroller General applied amounts standing to the credit of plaintiff on the books of the United States against an amount believed by the Comptroller General to be the amount of damages for which it was claimed plaintiff was liable to the defendant. Such action could not possibly constitute a prima facie case in favor of the defendant, either on questions of law or of fact. A disputed claim for damages, for breach of contract, cannot in any sense of the word be considered a stated account and such claim is not subject to the control and decision of the accounting officers of the United States. As stated in Standard Dredging Co. v. United States, 71 Ct.Cl. 218, 240: "* * * The reason is plain. Such claims must be sustained by extraneous proof and often involve a broad field of investigation requiring the determination of difficult legal questions and the application of judgment and discretion upon the measurement of damages and the weight of conflicting evidence. * * *"

Accordingly, it cannot be said that by any such medium can a "payment" in favor of plaintiff be accorded. The power to withhold accords the Government advantage enough in disputes with those with whom it deals without converting the weapon into a device for expropriation. See Standard Surety & Casualty Co. v. United States, 10 Cir., 154 F.2d 335, 337, 164 A.L.R. 935. This account was in dispute between the parties and being thus unsettled, it could not equitably be used to apply against a sum due and owing to the plaintiff under the terms of Contract 14952 and the reservations made under the termination settlement agreement.

The Government's defense of release is, therefore, overruled.

The Set-Off Under Contract 20481

Plaintiff had originally entered the raincoat business as a result of the efforts of the B. F. Goodrich Rubber Company to find a subcontractor in the New York area willing to contract for the production of synthetic rubber raincoats made from a resin coated fabric known as Koroseal. The facts and circumstances leading up to the acceptance of the subcontract from Goodrich, as well as the prime contract numbered 20481 from the Government, are detailed in our Finding of Fact Nos. 9-11.

With the approval of the Philadelphia Quartermaster Depot, Goodrich concluded negotiations with plaintiff and on or about July 3, 1942, entered into a subcontract with it for 300,906 "double-needle seam-strapped" coats. This subcontract carried a preference rating of "A-1-i" and provided for the delivery of 1,600 coats by July 11, 1942, with increasingly larger weekly deliveries thereafter, and final delivery by September 26, 1942.

On July 13, plaintiff, after it had received the subcontract, submitted a bid for 300,000 coats under an invitation of...