
    KESSLER MOTOR COMPANY v. THE UNITED STATES
    [No. E-219]
    
      On the Proofs
    
    
      Contracts; experimental work continuing to date of cancellation; recovery of expenses. — Where Government contracts involving experimental work-in the manufacture of airplane engines provide for deliveries on certain dates, and both parties down to the date of cancellation disregard the dates of delivery and treat the contracts as continuing, the contractor is entitled to the sum expended by it with the consent and approval of the Government in the construction and production of the articles named.
    
      The BeportePs statement of the case:
    
      Messrs. William 8. McDowell and Ashby Williams for the plaintiff.
    
      Mr. Alexander H. McCormick, with whom was Mr. Assistant Attorney General Herman J. Gailowny, for the defendant. Mr. J ames J. Lenihan for defendant on the second trial.
    Decided June 6, 1927.
    Motion for new trial allowed March 5, 1928. On the second trial judgment was, on June 18, 1928, entered for the original amount and the findings of fact and opinion theretofore filed were allowed to stand.
    I. The plaintiff is a corporation duly organized and existing under the laws of the State of Colorado, having its principal office and place of business in the city of Detroit, Michigan, and duly licensed thereunto by the State of Michigan to conduct business therein.
    II. Stock in the plaintiff corporation is owned by divers persons who are citizens of the United States, residing in the several States of the Union, all of whom, as well as the plaintiff, have at all times borne true allegiance to the Government of the United States, and said stockholders themselves and the plaintiff corporation have not aided, abetted, or given encouragement to the enemies of the Government of the United States or encouragement to any rebellion against said Government.
    III. For some time prior to the events hereinafter mentioned the plaintiff company had been engaged in certain experiments in the field of internal-combustion engines, had obtained patents on the results of their experiments, and had been engaged in the manufacture of said engines.
    ■ IY. On June 5, 1911, the plaintiff received from the office of the Chief Signal Officer, War Department, order No. 8128 calling for the construction of four six-cylinder 200 h. p. Kessler engines, per specifications furnished May 11,1911, at the rate of $6,000.00 each, and four four-cylinder 135 h. p. Kessler engines, as per specifications of May 11, 1917, at $4,000.00 each, the total order amounting to $40,000.00. The said engines according to the order were to be ready for inspection within six months from date of order. This order was followed by a contract as of the same date, duly executed and bearing No. 1417. The contract required delivery on or before December 3, 1917.
    V. On November 15, 1917, the said contract No. 1417 was amended by adding thereto another article by which the defendant agreed to furnish the plaintiff with $10,000.00 worth of materials, supplies, and parts to be used in the production of articles contracted for, the said amount to be deducted from the amount to be paid as heretofore set forth.
    Said contract No. 1417 was again amended by a supplemental agreement dated ApriJ 10, 1918, by which it was stated that in consideration of the defendant having furnished the plaintiff with materials to the value of $7,500.00, the amount due under the contract was further reduced by this additional amount.
    
      The originals of the order, contract, and two amendments thereto were attached to and made a part of the petition, and are made a part of these findings by reference.
    VI. Under date of July 20,1917, the plaintiff received from the office of the Chief Signal Officer an order for the manufacture of five special Kessler double-volume aviation engines at the rate of $25,000.00 each, or a total of $125,000.00, one of the said engines to be furnished within approximately 90 days and the other four within 120 days. This order was followed by a contract embracing the same subject matter, which contract was dated July 23, 1917, and bore No. 1485.
    This said contract No. 1485 was thereafter, on November 15, 1917, amended by adding thereto an article in which it was agreed by the defendant to furnish the plaintiff $40,-000.00 worth of materials, supplies, and parts to be used in the production of the articles contracted for, said amount to be deducted from the price heretofore named.
    Again, the said contract No. 1485 was by supplemental agreement dated April 1, 1918, amended so as to provide that in consideration of the defendant having furnished the plaintiff with materials to the amount of $17,500.00, the contract price to be paid by the defendant was in that amount further reduced from the original contract price.
    The originals of the order, contract, and two amendments thereto were attached to and made a part of the petition, and are made a part of these findings by reference.
    . VII. Under date of August 23, 1917, the plaintiff received from the office of the Chief Signal Officer, order No. K-9661 for the following:
    Item:
    1 1 complete 4-cylinder Kessler engine, unassembled- $4,000.00
    2 1 complete 6-cylinder Kessler engine, unassembled- 6,000.00
    3 12 inlet valves, at $8.00 each_ 96.00
    4 12 exhaust valves, at $8.00 each_ 96.00
    5 24 valve stems, at $1.00 each_ 24.00
    6 24 piston rings, at $2.00 each_ 48.00
    7 12 rocker arms, at $12.00 each_ 144. 00
    8 5 sets of gaskets, for 4-eylinder engine, at $164.00 each- 820.00
    9 5 sets of gaskets for 6-cylinder engine, at $246.00 each- 1,230.00
    Total 12,458.00
    
      Delivery of these items was to be made on or before December 5, the shipment to be made with the engines on order No. 8128.
    This said order No. K-9661 was thereafter, on August 27, 1917, duly followed by contract No. 1589.
    YlII. The said contract No. 1589 was thereafter amended by the addition of an article by which it was agreed that the defendant would furnish the plaintiff with $3,000.00 worth of materials, supplies, and parts to be used in the production of the articles therein contracted for, the said amount to be deducted from the original amount to be paid by the defendant under the terms of the order.
    The originals of the order, contract, and amendment thereto were attached to and made a part of the petition, and are made a part of these findings by reference.
    IX. On November 15, 1917, a further contract bearing No. 2226 was entered into between defendant through the Signal Corps and the plaintiff in which it recited the existence of contracts Nos. 1417, 1485, and 1589, and in which it was agreed by the defendant to buy and the plaintiff to sell certain materials, supplies, and parts for the production of the motors and parts thereof agreed to be delivered to the defendant under the said terms of the three contracts and for which transfer of title the defendant agreed to pay the sum of $53,000.00.
    The subject matter of this contract represents parts which either had been used and broken up or those which were later removed by the defendant.
    It was recited in said contract that the same had been preceded by an order No. 30,062.
    X. On April 4, 1918, the plaintiff received from the office of the Chief Signal Officer order No. 30,657, in which it was directed to furnish certain named parts required in connection with the manufacture of the special 400 h. p. Kessler double-volume aviation engine under order No. 8783, contract No. 1485; certain parts required in connection with the manufacture of special 200 h. p. Kessler engine under order No. 8128, contract No. 1417; certain parts required in connection with the manufacture of special 135 h. p. Kessler engine under order No. 8128, contract No. 1417; and such other materials, parts, etc., as might be required in connection with the manufacture of engines and parts under order No. 8788, contract 1485; order No. 8128, contract No. 1417; and order No. K-9661, contract No. 1589; price to be paid for the whole being $25,000.00.
    This order was followed by an agreement bearing No. 3505 and predated to April 1, 1918, in which the existence of the said .three contracts was recited, and by which latter agreement the defendant agreed to buy and the plaintiff to sell the materials named in said order in consideration of which the defendant agreed to pay to the plaintiff the sum of $25,000.00. This sum the plaintiff agreed to deposit in a separate account to be drawn against only on check signed by itself and a Signal Corps representative, said fund to be used only to pay expenses occurring in connection with the said three contracts.
    It was further recited in said contract that contracts Nos. 1417 and 1485 be by the same modified by deducting the amount of the purchase price of the property therein transferred from the prices due under the sa,id two contracts.
    XI. The only amounts which the plaintiff has received for work done under the first three named contracts is the total sum of $78,000.00 consisting of the two items of $25,000.00 as named in contract No. 3505 and $53,000.00 named in contract No. 2226.
    The $53,000.00 payment was made by the furnishing of materials as recited in the amendments to contracts Nos. 1417, 1485, and 1589, dated November 15, 1917, valued at $10,000.00, $40,000.00, and $3,000.00, respectively.
    The $25,000.00 payment was made by the furnishing of materials as recited in the amendment to contract No. 1417 dated April 10, 1918, valued at $7,500.00, and in the amendment to contract No. 1485 dated April 1, 1918, valued at $17,500.00.
    XII. The plaintiff immediately on receipt of the original orders and contracts above referred to commenced work on the various items named therein and continued the same up to and including April 10, 1919, on which date it received from the defendant a telegram canceling the said orders and contracts.
    XIII. Work on the articles named in said contracts was of an experimental nature designedly for the purpose of providing the aviation service with an advanced type of motor. These engines were, during the per,iod involved, being continuously constructed, tested, torn down, redesigned, and reconstructed. This work was at all times during said period known by the defendant to be progressing in the form indicated, and changes in design both material and superficial and changes in the materials used were from t^me to time directed by the defendant and complied with by the plaintiff. Likewise, changes in design were made by the plaintiff from time to time and submitted to the defendant, some of which were incorporated in the resulting article manufactured. At the date of the cancellation of said contracts none of the articles named had been accepted by or delivered to the defendant, the experimental work thereon not having been completed.
    XIY. The plaintiff presented its claim to the War Claims Board and afterwards filed a petition for review from the decision of said board disallowing said claim. Thereafter the Secretary of War on October 9, 1920, disallowed the claim, affirming the decision of the board.
    XY. The total amount expended by the plaintiff in the construction and production of the articles named was $131,454.86. Deducting from this the amount of $78,000.00 paid by the defendant, as heretofore set forth, there js indicated a loss to the plaintiff under work done on this contract amounting to $53,454.86.
    The court decided that plaintiff was entitled to recover.
   Hat, Judge,

delivered the opinion of the court:

This is a suit brought by the plaintiff to recover from the United States the sum of $53,454.86. The facts are fully set forth in the findings, and it is not necessary to recapitulate them here.

While the contracts between the parties provided for the delivery of specific articles on certain dates, yet both parties down to the date of the cancellation of the contracts treated them as continuing contracts. The parties by their actions agreed that the contracts were continuing, and had the right so to do. The Government electing to treat them as continuing contracts is bound by them. The plaintiff with the consent and approval of the Government having expended the sum of $131,454.86 in the construction and production of the articles named in the several contracts is entitled to be paid the sum so expended. Of this sum the Government has paid to the plaintiff the sum of $78,000, leaving a balance due to the plaintiff amounting to the sum of $53,454.86. A judgment will be entered for the plaintiff for the sum of $53,454.86. It is so ordered.

Moss, Judge; Booth, Judge; and Campbell, Chief Justice, concur.

Graham, Judge, took no part in the decision of this case.  