National Cored Forgings Co. v. United States

• Decision Date: 30 September 1953
• Docket Number: No. 50420.,50420.
• Citation: 115 F. Supp. 469,126 Ct. Cl. 250
• Parties: NATIONAL CORED FORGINGS CO., Inc. et al. v. UNITED STATES.
• Court: U.S. Claims Court

115 F. Supp. 469

126 Ct. Cl. 250

NATIONAL CORED FORGINGS CO., Inc. et al. v. UNITED STATES.

No. 50420.

United States Court of Claims.

September 30, 1953.

COPYRIGHT MATERIAL OMITTED

David Cobb, Washington, D. C., for plaintiff. I. S. Weissbrodt and Abe W. Weissbrodt, Washington, D. C., were on the briefs.

Bruce G. Sundlun, Washington, D. C., with whom was Asst. Atty. Gen. Holmes Baldridge, Washington, D. C., for defendant.

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

HOWELL, Judge.

In this case plaintiffs seek to recover the sum of $309,799.29, alleged to represent either fair compensation for services rendered without a formal contract under section 17(a) of the Contract Settlement Act of 1944, 58 Stat. 665, 41 U.S.C.A. § 117(a), or damages for breach of contract by the defendant. As a third alternative, plaintiffs ask reformation of an agreement in writing on the ground of mutual mistake and of misrepresentations by the defendant, and damages for breach of the agreement as reformed. The case is before us on plaintiffs' motion to strike special defenses asserted in defendant's answer to the petition, and defendant's motion for judgment on the pleadings.

Plaintiff National Cored Forgings Company, Incorporated (hereinafter National), is successor by change of name to the Greenport Basin and Construction Company (hereinafter Greenport). Plaintiff Marloch Manufacturing Company (hereinafter Marloch) was incorporated in the State of New York in 1946 as a wholly owned subsidiary of Greenport. In the course of its dissolution in 1947, all of Marloch's assets, including the claims here asserted, were transferred to Greenport.

At the close of World War II there was a very serious housing shortage, sharply accentuated by the large number of veterans then returning to civilian life. In an effort to alleviate this shortage, Congress passed the Veterans' Emergency Housing Act of 1946, 60 Stat. 207, 50 U.S.C.App. (1946 Ed.) § 1821 et seq. U. S. Code Cong.Service 1946, p. 199. Section 12 of the Act provided that the powers vested in the Reconstruction Finance Corporation (hereinafter RFC) might be used to underwrite or guarantee markets for new type building materials and prefabricated houses, but only to the extent that the Housing Expediter¹ found this necessary to assure a sufficient supply for the veterans' emergency housing program. This section also contained the standards to be applied by the Housing Expediter to such underwriting or guaranty.

We are here concerned with a controversy growing out of a contract entered into pursuant to the market guarantee program established by section 12 of the Veterans' Emergency Housing Act, supra.

The allegations of the petition are lengthy, but we shall attempt to summarize them as briefly as possible. Pursuant to a directive of the Office of the Housing Expediter (hereinafter OHE) issued under section 12 of the Act, the RFC entered into a market guarantee contract with General Houses, Incorporated (hereinafter General Houses), an Illinois corporation, for the production of 2,000 prefabricated housing units by the end of 1947. The contract, dated February 7, 1947, contained a provision that the RFC would purchase from General Houses, at a price to be determined in accordance with a formula contained in the contract, the prefabricated houses not otherwise sold by General Houses.

General Houses was unable to get into production under the contract, and in early March of 1947 it approached Marloch, and entered into an informal arrangement whereby Marloch would manufacture the houses at its plant with its own funds, and General Houses would act as selling agent for Marloch. This arrangement was contingent upon obtaining the government's consent.

Thereafter meetings were held with representatives of the OHE and RFC for the purpose of obtaining the consent of the government. As a prerequisite to entering into production of the houses Marloch indicated that it desired a transfer to it of the market guarantee contract. The OHE official who had been instrumental in negotiating the market guarantee contract expressed his approval of the new arrangement, and in order to save time represented to and assured Marloch that a "short-cut" technique would be worked out to provide Marloch with the same basic protections as were afforded by the government to all other producers under the market guarantee program. The basis of the "short-cut" arrangement was that in consideration of Marloch's assumption of all of General Houses' obligations under the contract, the government would consent to an assignment to Marloch by General Houses of all of its claims against the RFC under the contract. Marloch was requested to begin production immediately.

Marloch, acting in reliance on defendant's notice to proceed, took steps to get into production immediately. Pursuant to the oral arrangements with the government reached at the meeting, Marloch and General Houses executed an instrument in writing dated March 14, 1947, whereby Marloch agreed to produce the 2,000 houses and General Houses agreed to act as selling agent for Marloch. On March 27, 1947, Marloch and General Houses executed an assignment under which Marloch agreed to perform all of the obligations of General Houses under the market guarantee contract. In the instrument the RFC was requested, directed, and authorized to pay to Marloch any or all moneys due or to become due from RFC to General Houses pursuant to the contract, but General Houses was to remain liable to RFC under the terms of the contract to the same extent as if the assignment had not been made. This instrument was a standard RFC form assignment of moneys due which was modified and adapted by an employee of RFC and then submitted to Marloch and General Houses for execution. The terms of the March 27 instrument were accepted and approved by RFC.²

Marloch completed its first houses in May of 1947, and by June its plant was geared to produce at the rate of 20 units per day. It had no orders to fill, however, and General Houses, which had undertaken to act as selling agent for Marloch by the contract of March 14, had not been able to obtain orders for the houses.

Marloch became compelled to seek additional financing. The bank to which it went indicated a willingness to make a loan directly to Greenport, Marloch's parent company, upon the collateral of the market guarantee contract. Marloch consulted legal counsel as to the procedures for transferring the contract from it to Greenport, and was apprised for the first time that the assignment of March 27 might have been ineffective to give Marloch the market guarantee protection it thought it had obtained.

Marloch then sought a meeting with the government officials in charge of the market guarantee program. A meeting was held on July 9, 1947, at which time Marloch was again assured that it was operating under the full protection of the market guarantee contract. Shortly thereafter, however, the government representatives took the position that Marloch did not have a contract with the government, and despite Marloch's urgings, this position was consistently maintained. In order to mitigate its losses, Marloch discontinued production, and arranged to liquidate the prefabricated housing enterprise.

Claims were then filed against the OHE and the RFC under section 17 of the Contract Settlement Act. The claims were denied whereupon they were appealed to the Appeal Board of the Office of Contract Settlement. The Board granted a motion of OHE to dismiss the appeal as to it because OHE was not a "contracting agency" within the definition of section 3(g) of the Contract Settlement Act, 41 U.S.C.A. § 103(g), and held that Marloch had not proceeded "without a formal contract" within the meaning of section 17(a) of the Act. National Cored Forgings Co., Inc., v. Reconstruction Finance Corporation, 5 App.Bd. OCS No. 353.

Plaintiffs thereafter timely filed a petition in this court containing the above allegations, seeking relief under section 17(a) of the Contract Settlement Act or under the general jurisdiction of this court to award damages for breach of contract. Plaintiffs also ask, as an alternative, that the court reform an agreement in writing on the ground of mutual mistake and misrepresentations by defendant, and award damages for breach of the agreement as reformed.

On the same day that the petition was filed in this court, plaintiffs filed a complaint in the United States District Court for the District of Columbia, asserting there the same claims here involved, against the RFC alone, in its corporate capacity and in its own behalf. Plaintiffs and the RFC have filed a stipulation for stay of proceedings in the District Court until final action has been taken by this court.

Plaintiffs' petition in this court nominates as defendants the United States, the OHE, and the RFC. Our jurisdiction is limited to the rendition of judgments upon claims against the United States, 28 U.S.C.(Supp. V) § 1491, and we therefore treat the naming of the OHE and the RFC as defendants as surplusage. Cf. Warner Construction Company v. Krug, D.C., 80 F.Supp. 81, 84.

On January 18, 1952, defendant filed a motion to dismiss plaintiffs' petition on the ground that as plaintiffs had pending in the United States District Court for the District of Columbia another suit seeking the same relief on the same claim, this court had no jurisdiction under the provisions of 28 U.S.C. (Supp. V) § 1500, quoted infra. After oral argument, the motion to dismiss was overruled by an order dated May 6, 1952. Defendant then filed an answer to the petition in which it asserted as special defenses (1) the failure of the petition to state a cause of action, (2) the lack of jurisdiction in this court on the ground relied on in its motion to dismiss, and (3) that under the provisions of section 13(b) (2) of the Contract Settlement Act, 41...