
    MERCANTILE NATIONAL BANK AT DALLAS v. THE UNITED STATES
    [No. 488-56.
    Decided July 15, 1960.
    Defendant’s motion for reconsideration overruled November 2, 1960]
    
      
      Mr. Hubert Dee Johnson for the plaintiff.
    
      Mr. Gerson B. Kramer, with whom was Mr. Assistant Attorney General George Ooehram, Doub, for the defendant.
   Madden, Judge,

delivered the opinion of the court:

The plaintiff, a national banking association with a place of business in Dallas, Texas, brings this action as an assignee of moneys allegedly due under a supply contract between Minera Fernandez, S.A., of Parral, Chihuahua, Mexico, and the United States. The plaintiff seeks in the action to recover moneys withheld and applied by the United States to recoup the amounts of alleged overpayments theretofore made by the United States under the contract.

The contract involved in the litigation was entered into as of October 20, 1951. The contracting officer who signed the contract on behalf of the United States was an official of the Emergency Procurement Service, General Services Administration. Under the contract, Minera Fernandez, S.A., (which will usually be referred to hereafter in the opinion as “the contractor”) agreed to supply, and the United States agreed to buy, 100,000 long dry tons of manganese ore. The ore was to be mined in and exported from Mexico. Specified quantities were to be delivered to the United States during the period April 1-June 30, 1952, and during each of the subsequent fiscal years 1953, 1954, 1955, and 1956.

. The contract provided that the United States was to pay for the ore at the rate of 93 cents per unit of contained manganese. However, the Special Terms, Conditions, and Specifications of the contract contained a paragraph (4-b) which stated in part as follows:

The unit prices shown in this Contract are based on the present official rate of exchange between the United States Dollar and the Mexican Peso of 8.65 Pesos to One Dollar * * *. Any increase or decrease in such rate of exchange * * * shall be for the account of the Government.

On May 5, 1953, the contractor, which had not yet begun deliveries under the contract and, hence, was in default, requested that the delivery schedule set out in the contract be revised so as to fix July 1,1953, as the date for the beginning of deliveries. The General Services Administration agreed to the contractor’s proposal and, accordingly, the contract was amended on May 6, 1953, by changing the delivery schedule in the manner requested by the contractor. At the same time, in consideration of the Government’s action in agreeing to the modification of the delivery schedule, there was inserted in the Special Terms, Conditions, and Specifications of the contract a new paragraph (4-e) stating in part as follows:

Notwithstanding any other provisions of the contract the unit price * * * which shall apply to the first 9,000 long dry tons delivered during the period July 1, 1953 to June 30, 1954; the first 9,000 long dry tons delivered during the period July 1, 1954 to June 30, 1955; and the first 6,000 long dry tons delivered during the period July 1, 1955 to June 30, 1956 shall not exceed $0.93 per long ton unit of contained manganese * * *.

Subsequently, in consideration of the Government’s action in agreeing to a further modification of the delivery schedule, paragraph 4-e was revised on July 16, 1954, to read as follows:

Notwithstanding any other provisions of the contract, including, without limitation, any increase in the “rate of_ exchange * * *” provided for in paragraph b of this Article 4, the unit price * * * which shall apply to all manganese ore delivered after July 1, 1954 shall not exceed $0.93 per long ton unit of contained manganese * * *.

At the time the contract was entered into on October 20, 1951, the official rate of exchange between the Mexican peso and the United States dollar was 8.65 pesos to 1 dollar (i.e., the Mexican peso was worth $0.115606). As of April 19,1954, the Mexican peso had been devalued to the point where the official rate of exchange was 12.51 pesos to 1 dollar (i.e., the Mexican peso was worth $0.079936). However, the contractor, both with respect to ore shipments made prior to April 19,1954, and those made after that date, submitted to the General Services Administration invoices on the basis of a unit price of 93 cents. The GSA paid such invoices on this basis up to and including invoice No. 284, which covered a shipment of ore delivered on April 17, 1955.

During the period April 23-May 26,1955, the contractor furnished to the General Services Administration 2,429.247 tons of ore under the contract, and submitted invoices totaling $95,322.73 on the basis of the unit price of 93 cents used by the contractor, unadjusted for any devaluation of the Mexican peso. No payment was made by the GSA for these shipments, except in the form of credits against alleged overpayments theretofore made on prior invoices. The contractor’s right to proceed with further deliveries was subsequently terminated by the contracting officer because of the contractor’s failure as of June 30,1955, to deliver by that date the minimum quantity of ore required by the contract.

The reason for the discontinuance of payments by the General Services Administration under the contract was the discovery, on or about May 13, 1955, by personnel of the agency engaged in the administration of the contract that the Mexican peso had been devalued. The GSA took the position that it had been overcharged on the ore delivered between the date of the devaluation of the Mexican peso and April 17, 1955, and that such overpayments (estimated at more than $150,000) should be set off against amounts otherwise due for ore delivered during the period April 23-May 26, 1955.

A preliminary question in the case is whether the proper unit price in United States money for the ore delivered under the contract after the devaluation of the Mexican peso was 93 cents, as set out in the contractor’s invoices, or a proportionately lower figure computed in accordance with paragraph 4-b of the Special Terms, Conditions, and Specifications to reflect the decrease in the value of the peso.

The plaintiff, as an assignee of the contractor, contends that paragraph 4-b of the Special Terms, Conditions, and Specifications, when considered in connection with paragraph 4-e, was so ambiguous as to be ineffective; and that the actions of the parties between April 19, 1954, and April 17, 1955, in billing and paying for ore deliveries on the basis of 93 cents per unit of contained manganese, notwithstanding the devaluation of the Mexican peso, constituted a practical construction by the parties of the contract provisions on price as meaning that the unit price of 93 cents originally fixed in the contract should not be affected by changes in the relationship between the Mexican peso and the United States dollar during the life of the contract.

As previously indicated, paragraph 4-b of the Special Terms, Conditions, and Specifications stated that the unit price of 93 cents was based on the then current exchange rate of 8.65 Mexican pesos to 1 United States dollar, and then provided that “Any increase or decrease in such rate of exchange * * * shall be for the account of the Government.” In the context, however, the provision could have only one reasonable meaning. The phrase, “Any increase or decrease in such rate of exchange,” could only have referred to any future expansion or contraction of the ratio representing the relationship between the value of the Mexican peso and the value of the United States dollar. The phrase, “shall be for the account of the Government,” undoubtedly meant that the United States should benefit from any expansion, and bear the disadvantage of any contraction, of the exchange ratio that might occur during the life of the contract, the unit price in United States money being adjusted downward or upward proportionately to reflect any fluctuation in the exchange rate.

The view expressed in the preceding paragraph is confirmed by the fact that paragraph 4-b of the Special Terms, Conditions, and Specifications was included in the contract pursuant to a request from the contractor that the contract contain such an escalator clause. The contractor’s representation in this respect was stated as follows:

All our production and shipping costs are based on the present value of the Mexican Peso (8.65 Pesos to $1.00 U.S. Cy.). Therefore, any contract awarded by the United States Government to our company must contain the provision that in the event that the Mexican Peso is revalued upward or downward the contract price for the ore will be adjusted accordingly.

The contractor assigned to the plaintiff on October 8, 1954, all moneys due or to become due under the contract (except for $6.90 per ton previously assigned to the Export-Import Bank of Washington). Notice of the assignment was promptly furnished to the Government by the plaintiff. The assignment was part of an arrangement whereby the plaintiff agreed to provide, and subsequently did provide, financing for the contractor’s operations under the contract. This financing amounted to approximately 60 percent of the invoice price of each carload of ore delivered by the contractor to the General Services Administration.

The contractor began to make deliveries under the contract at some time after May 5, 1953. By the time of the assignment to the plaintiff on October 8,1954, some 150 invoices had been submitted by the contractor, and paid by the Government to the contractor, except for the amount covered by the assignment to the Export-Import Bank. The invoices for shipments after October 8, 1954, and up to April 17, 1955, were paid to the plaintiff, excepting the amount which went to the Export-Import Bank, and were paid at the 93-cent rate.

Invoices No. 285, dated April 23,1955, through 293, dated May 10, were in the total amount of $20,140.34, at the 93-cent rate. Invoices 294, dated May 17, through 328, dated May 26, were in the total amount of $75,182.39, at the 93-cent rate.

On May 13, 1955, an employee of the General Services Administration advised the contracting officer that, because of a drastic devaluation of the Mexican peso on April 19, 1954, the Government had made overpayments of some $170,000 on the contract. This same employee on the same day telephoned the Export-Import Bank giving it the information which he had given the contracting officer. At some time between May 17 and May 20 a representative of the Export-Import Bank advised the contractor of the position which the Government was taking with regard to the devaluation of the peso.

In the meantime, between May 17 and May 26, the plaintiff had loaned the contractor $61,207.12 on ore that the contractor had delivered to the Government during that period. Not a dollar of this money would have been advanced by the plaintiff if it had known that the Government did not intend to pay for the ore.

As we have said, the Government did not pay for any of this ore, nor for the ore that had been delivered on April 23 and thereafter. The plaintiff recovered, from collateral which had been pledged by a third person, enough to reduce the contractor’s debt to it to $52,666.29.

As we have seen, deliveries under the contract did not begin until about the middle of 1953. On April 19, 1954, the peso was drastically devalued. Beginning then, the Government made the overpayments which, by May 13,1955, were estimated to amount to possibly $170,000. The plaintiff, on October 8, 1954, took its assignment of the supplier’s right to receive payments as ore was delivered to the Government. By that time there must have accrued a substantial part of the $170,000 overpayment. That meant that at the very time of the assignment, the contractor was under an obligation to deliver to the Government large quantities of ore without receiving any pay at all for it.

When the plaintiff, on October 8, 1954, notified the Government, as the statute required, that it had taken an assignment of the contractor’s right to receive payments under the contract, the plaintiff did not know, had no reason to suppose, and was not charged with knowledge that the Government had large offsets against the contractor which it could assert against future deliveries. The Government did not know it, in the sense of being conscious of it. But the reason it was not conscious of it was because it had been careless in administering its contract with the supplier.

The purpose of the Assignment of Claims Act of 1940, as amended, 54 Stat. 1029, 65 Stat. 41, was to induce financial institutions to loan money to contractors to finance them in supplying goods to the Government. See Central Bank v. United States, 345 U.S. 639, 643, 646; United States v. Hadden, 192 F. 2d 327, 329; Waxman v. United States, 125 Ct. Cl. 464, 500; S. Rep. No. 217, 82d Cong., 1st Sess., 1951-2 U.S.C. Cong, and Adm. Service 1414. We think that when the Government receives notice of such an assignment, it should have in mind the prime purpose of Congress in authorizing it, the purpose of enabling the Government to get its supplies without itself advancing the money to finance their production. If the Government knows that the right of the contractor to receive payments is worthless because the contractor has already been paid, the Government is under a duty to so advise the bank, so that the bank will not lend its money on worthless collateral. If the Government has the facilities for knowing that the collateral is worthless, and is unconscious of the fact only because of its carelessness in the handling of public money, we think it may not take advantage of its own negligence, and recoup its negligent overpayments by accepting supplies bought with money loaned by the assignee bank on the faith of the assignment.

We think the Government had no right to withhold payments from the plaintiff assignee for offsets accrued before the plaintiff took its assignment. The transaction should take a fresh start from the time of the assignment on October 8,1954.

Beginning with the invoices submitted by the contractor after the assignment to the plaintiff, the 1951 amendment to the Assignment of Claims Act of 1940, 65 Stat. 41, 31 U.S.C. (1952 ed.) § 203 is applicable. That statute provides:

In any case in which moneys due or to become due under any contract are or have been assigned pursuant to this section, no liability of any nature of the assignor to the United States or any department or agency thereof, whether arising from or independently of such contract, shall create or impose any liability on the part of the assignee to make restitution, refund, or repayment to the United States of any amount heretofore since July 1, 1950, or hereafter [i.e., after May 15, 1951] received under the assignment.

For the invoices presented for shipments made after October 8, 1954 and up to April 17, 1955, the plaintiff made advances to the contractor and received payments from the Government at the 93-cent rate. The statute says that the fact that the contractor was overpaid, and was under a liability to make restitution, did not impose any liability on the plaintiff assignee to make “restitution, refund, or repayment” to the United States. Surely the purpose of the statute cannot be frustrated by the Government’s paying itself by offset, instead of suing to get its money back. The statute is a drastic one, written to correct what experience had shown to be frequent occurrences in which assignees, having in good faith financed Government suppliers, found themselves subjected to refunds or offsets because of mistakes or discoveries made by Government fiscal officers.

The statute is so drastic that it is foreseeable that in some case, such as that of an obvious arithmetical mistake in a computation, it will be necessary, in the interest of justice to the Government, to depart from the words of the statute. This is not such a case. The Government made the contract, its attention was drawn particularly to the provision relating to the value of the peso at the time the contract was negotiated and on two occasions thereafter when the contract was modified. The plaintiff took the contract by assignment when it was a completed document, and it was not unnatural that it should suppose that the Government’s fiscal officers knew what the Government had agreed to and would pay only what the contract called for. The plaintiff advanced only approximately 60 percent of the invoice price of the ore, which left a prudent margin which would have taken care of most fluctuations of the value of the peso. It had much less reason than the Government had to be alert to the details of the contract. We repeat that the case is not one which calls for a departure from the language of the 1951 statute.

The Government may not, then, obtain the “restitution, refund or repayment” of the money which it paid to the plaintiff under assignment, by the obvious device of calling it an offset against amounts subsequently due to the plaintiff.

That brings us to the invoices for the shipments made from April 23 to May 26,1955, for which the Government has not paid anything. It should first be said with regard to the shipments received after May 13, that if the Government had been considerate of the interests of the plaintiff, which had made it possible for the Government to get the manganese which it needed, it would have advised the plaintiff that it wasn’t going to pay any more invoices. That would have meant that the plaintiff would not have loaned any more money, and the Government would not have gotten any more manganese. Since, as the 1951 statute provides, the prior payments were a closed booh, there is no reason why the Government should not have paid for these latter shipments at the price of the devalued peso. The contractor was at that time indebted to the plaintiff in the principal amount of $52,666.29, and the plaintiff is entitled to a judgment for the amount of the invoices, and at the price mentioned above, but the judgment may not be in excess of $52,666.29. The effect of our decision is that the Government, and not the plaintiff, will pay for the manganese ore which the Government received and used. Therefore, the plaintiff is entitled to recover and judgment will be entered to that effect with the amount of recovery to be determined pursuant to Buie 38(c).

It is so ordered.

Dureee, Judge, and Jones, Chief Judge, concur.

Laramore, Judge,

dissenting:

I cannot agree with the majority. I believe the proper and only unit price that could be paid for the ore delivered under the contract was the lower figure to which the Mexican peso had been devalued.

Paragraph 4-b of the special terms, conditions, and specifications stated that the unit price of $0.93 was based on the then current exchange rate of 8.65 Mexican pesos to one United States dollar, and then provided that “any increase or decrease in such rate of exchange * * * shall be for the account of the Government.” This provision could only have one reasonable meaning. The phrase “any increase or decrease in such rate of exchange,” could only have referred to any future expansion or contraction of the ratio representing the relationship between the value of the peso and the value of the United States dollar. The phrase, “shall be for the account of the Government,” could only reasonably mean that the United States should benefit from any expansion and bear the disadvantage of any contraction of the exchange rate ratio that might occur, the unit price in United States money being adjusted upward or downward to reflect any fluctuation in the exchange rate. Thus when the Mexican peso was devalued the United States was making overpayments solely due to a mistake of fact regarding the current rate of the peso in relation to the value of the United States dollar. To permit payment at any rate other than based on the devalued peso would be to change the contract provision to the detriment of the Government, which of course cannot be accomplished by any officer or agent of the Government. United States v. American Sales Corporation, 27 F. 2d 389, 391-392, affirmed 32 F. 2d 141, cert. denied 280 U.S. 574.

Furthermore, by simply reading the contract the plaintiff assignee could and should have known that payment would be made on the basis of the then value of the Mexican peso. Just because the assignee sat idle and accepted payment at a higher value would not obliterate the terms of the contract. If the assignee bank did not know of paragraph 4-b it should have, and if the assignee bank did not know of the devaluation of the peso it should have. Its inaction could not give rise to a change in the contract such as to permit recovery here.

I would dismiss plaintiff’s petition.

Whitaker, Judge, joins in the foregoing dissenting opinion.

FINDINGS OF FACT

The court, having considered the evidence, the report of Trial Commissioner Mastín G. White, and the briefs and argument of counsel, makes findings of fact as follows:

1. The plaintiff is a national banking association with a place of business in Dallas, Texas. It brings this action as an assignee of moneys allegedly due under a certain supply contract, described in subsequent findings, between Minera Fernandez, S.A., of Parral, Chihuahua, Mexico, and the United States. The plaintiff seeks in the action to recover moneys withheld and applied by the United States to recoup alleged overpayments theretofore made by the United States under the contract.

2. Pursuant to Rule 38(c), the trial was limited to the issues of law and fact relating to the right of the plaintiff to recover. The determination of the amount of recovery and the amount of offsets, if any, was reserved for further proceedings.

3. (a) On or about March 15, 1951, Minera Fernandez, S.A., submitted to the Emergency Procurement Service of the General Services Administration a proposal to furnish to the Emergency Procurement Service 100,000 long dry tons of metallurgical grade manganese ore at a price of 91 cents per long ton unit of contained manganese, f .o.b. railway cars at Brownsville, Texas. Deliveries were to be made in specified annual quantities during the fiscal years 1952-1955 and the first half of the fiscal year 1956. The proposal indicated that the manganese was to be shipped from Morita, Chihuahua, Mexico.

(b) A covering letter accompanying the proposal of March 15,1951, stated in part as follows:

All our production and shipping costs are based on the present value of the Mexican Peso (8.65 Pesos to $1.00 U.S. cy). Therefore, any contract awarded by the United States Government to our company must contain the provision that in the event that the Mexican Peso is revalued upward or downward the contract price for the ore will be adjusted accordingly.
The contract should further provide that the price for the ore will be adjusted insofar as any changes that may be made relative to Mexican Railroad freight rates, Mexican Production and Ad Valorem Taxes.
Please be advised that after conferences with the officials of the Export-Import Bank, we were informed that if we were awarded a contract by the United States Government for 100,000 long dry tons of Manganese Ore, at the price submitted m our proposal said bank; will consider a loan to our company for sufficient funds to cover the cost of additional machinery and equipment.

4. (a) On or about July 19, 1951, Minera Fernandez, S.A., submitted to the Emergency Procurement Service of the General Services Administration a revised proposal for che sale and delivery of 100,000 long dry tons of metallurgical grade manganese ore. The price quoted in the revised proposal was 98 cents per long ton unit of contained manganese, f.o.b. railway cars at the International Bridge between Matamoros, Mexico, and Brownsville, Texas, or the International Bridge between Juarez, Mexico, and El Paso, Texas. The quantities specified for delivery annually were different from those set out in the first proposal (except that the quantity specified for delivery during the fiscal year 1955 was the same in both proposals); and the revised proposal contemplated that deliveries might extend throughout the fiscal year 1956, instead of being completed during the first half of that fiscal year.

(b) A covering letter accompanying the revised proposal of July 19, 1951, contained the following paragraphs (among others) :

All our production and shipping costs are based on the present value of the Mexican Peso (8.65 Pesos to $1.00 U.S. Cy.). Therefore, any contract awarded by the United States Government to our company must contain the provision that in the event that the Mexican Peso is revalued upward or downward the contract price for the ore will be adjusted accordingly.
The contract should further provide that the price for the ore will be adjusted insofar as any changes that may be made relative to Mexican Railroad freight rates, Mexican Production and Ad Valorem Taxes.
We are attaching herewith pro-forma balance sheet at April 5,1951, giving effect to loan of $350,000 from the Export-Import Bank.

5. In a letter dated August 29, 1951, and addressed to the Emergency Procurement Service of the General Services Administration, Minera Fernandez, S.A., again revised the proposal for the sale and delivery of manganese ore by making further changes in the amounts of the proposed annual deliveries during the fiscal years 1952, 1953, 1954, and 1956. (No change was made in the amount proposed for delivery during the fiscal year 1955.) The company also withdrew its previous request that the contract provide for the adjustment of the price to reflect future changes in the Mexican production and ad valorem taxes.

6. In a letter dated October 1,1951, from Minera Fernandez, S.A., to the Emergency Procurement Service of the General Services Administration, the proposal that had been submitted for the sale and delivery of manganese ore was further revised by reducing the proposed price from 98 cents to 93 cents per long dry ton unit of contained manganese.

7. As of October 20, 1951, Minera Fernandez, S.A., and the United States, represented by an official of the Emergency Procurement Service, General Services Administration, as contracting officer, entered into contract No. GS-OOP-2410(SCM), under which Minera Fernandez, S.A., agreed to supply, and the United States agreed to buy, 100,000 long dry tons of manganese ore in accordance with the specifications and under the terms and conditions set forth in the contract. Such ore was to be mined in and exported from Mexico. Payment therefor was to be made on the basis of a unit price per long ton unit of contained manganese. It was estimated that the 100,000 long dry tons of ore would contain 4,200,000 long ton units of manganese when computed on the basis of a 42-percent manganese content, and that the maximum contract price would be $3,906,000. (The contract mentioned in this finding will usually be referred to in subsequent findings as “the contract,” and Minera Fernandez, S.A., will usually be referred to as “the contractor.”)

8. The General Conditions of the contract obtained the following provision (among others):

10. assignment or patments. If this contract provides for the payment in the aggregate of $1,000.00 or more, then all moneys due or to become due thereunder may be assigned by the contractor to a bank, trust company or other financing institution, including any Federal lending agency, in accordance with the provisions of the Assignment of Claims Act of 1940 (54 Stat. 1029,31 U.S.C. 203,41 U.S.C. 15.)

9. The Special Terms, Conditions, and Specifications of the contract contained the following provisions (among others):

2. DELIVERY PERIOD AND SCHEDULE:
a. The entire quantity of 100,000 long dry tons of manganese ore covered by this Contract shall be delivered in its entirety by June 30,1956.
b. Delivery under this contract shall be made in approximately equal quarterly shipments, starting April 1, 1952 on the following yearly schedule.
April 1,1952 to June 30,1952 3,000 Long Dry Tons
July 1,1952 to June 30,1953 21,000 “ “ “
July 1,1953 to June 30,1954 24,000 “ “
July 1,1954 to June 30,1955 24,000 “ “
July 1,1955 to June 30,1956 28,000 “ “ “
4. PRICE SCHEDULE:
a. The unit price the Government shall pay the Contractor for all material delivered and accepted pursuant to this contract shall be as follows (delivery points to be at the Government’s option):
1. Material delivered and accepted f.o.b. railway cars, Brownsville, Texas — $0.93 per long ton unit of contained manganese.
2. Material delivered and accepted f.o.b. railway cars, El Paso, Texas — $0.93 per long ton unit of contained manganese, less $0.80 per long natural ton freight allowance for differential in freight to Brownsville, Texas and El Paso, Texas.
3. Material delivered and accepted f.o.b. railway cars, Morita, Chihuahua, Mexico — $0.93 per long ton unit of contained manganese, less present freight charges from Morita, Chihuahua, Mexico to Brownsville, Texas and less any applicable Mexican tax, brokerage and/or other charges which would have been payable by the Contractor. Published- tariff to govern in computing freight allowance.
b. The unit prices shown in this Contract are based on the present official rate of exchange between the United States Dollar and the Mexican Peso of 8.65 Pesos to One Dollar, and Mexican freight rates in existence on October 15, 1951. Any increase or decrease in such rate of exchange and/or Mexican freight rates shall be for the account of the Government.
11. SPECIAL conditions:
*****
d. It will be the responsibility of the Contractor to comply with the delivery schedule herein, and it is further understood that no extension thereof will be granted except under strict force majeure conditions. Any failure of the Contractor to comply with all contract conditions, including delivery of material meeting contract requirements, will afford adequate justification for termination of the contract by the Government and purchase against the Contractor’s account. Such right to terminate shall be in addition to any rights of the Government under Article 12 of the General Conditions of this contract.
*****
12. assignment:
Contractor has assigned to the Eximbank [Export-Import Bank of Washington] all payments due to the extent of $4.50 per ton, dry basis, and Government shall promptly make such payment to Eximbank directly on the acceptance of any lot; provided that such payment to Eximbank shall operate, to the extent of such payment, as a complete discharge of any and all liabilities owed by Government to Contractor. Article 10 of the General Conditions is modified accordingly. Any additional assignment under such article of moneys due must be with the permission of Government, and if permitted, will only be upon the consent of Eximbank.

10. Paragraph “b” of article 4 of the Special Terms, Conditions, and Specifications (see finding 9) was included in the contract pursuant to the contractor’s request that the contract contain a “provision that in the event that the Mexican Peso is revalued upward or downward [in relation to the exchange rate of 8.65 pesos to 1 I7.S. dollar] the contract price for the ore will be adjusted accordingly,” and that the contract “further provide that the price for the ore will be adjusted insofar as any changes * * * may be made relative to Mexican Bailroad freight rates” (see findings 3(b) and 4(b)).

11. As of October 26, 1951, the contractor assigned to the Export-Import Bank of Washington, pursuant to the Assignment of Claims Act of 1940, as amended, and the terms of the contract, the first $4.50 of moneys due or to become due on each ton of manganese ore under the contract. By subsequent similar assignments to the Export-Import Bank of Washington, the last of which was made as of July 2, 1954, this amount was increased to $6.90 per ton.

12. On May 5, 1953, the contractor, which had not yet begun deliveries under the contract and, hence, was in default, addressed to the Emergency Procurement Service of the General Services Administration a letter stating in part as follows:

With regard to deliveries under this contract, it is respectfully requested that the contract be amended so that deliveries shall be made in approximately equal quarterly shipments, starting July 1,1953, on the following yearly schedule:
July 1,1953 to June 30,1954_ 33,000 LDT
July 1,1954 to June 30,1955_ 33,000 “
July 1,1955 to June 30,1956_ 34,000 “
100,000 “
Following are [sic] several discussions with regard to the amendment of the delivery schedule as requested in the preceding paragraph, it is agreeable to the contractor to waive the right of the escalator clause on the first 24,000 tons delivered with regard to the official rate of exchange on the Mexican peso and the Mexican freight rates in existence on October 15, 1951, as is set forth in paragraph 4 b of the Special Terms, Conditions, and Specifications of this contract.

13. By Amendment No. 2, dated May 6,1953, the contract was amended in the following respects (among others):

(a) Paragraph “b” of article 2 of the Special Terms, Conditions, and Specifications was revised to read as follows:

Delivery under this contract shall be made in approximately equal quarterly shipments, starting July 1, 1953 on the following yearly schedule:
July 1, 1953 to June 30, 1954 — 33,000 long dry tons.
July 1, 1954 to June 30, 1955 — 33,000 long dry tons.
July 1, 1955 to June 30, 1956 — 34,000 long dry tons.

(b) The following new paragraph “e” was added to article 4 of the Special Terms, Conditions, and Specifications:

Notwithstanding any other provisions of the contract the unit price * * * which shall apply to the first 9,000 long dry tons delivered during the period July 1, 1953 to June 30, 1954; the first 9,000 long dry tons delivered during the period July 1,1954 to June 30,1955; and the first 6,000 long dry tons delivered during the period July 1, 1955 to June 30, 1956 shall not exceed $0.93 per long ton unit of contained manganese (before any applicable freight adjustments).

14. The new provision referred to in paragraph (b) of finding 13 was added to the contract as a benefit to the Government in consideration of the Government’s action in agreeing to the modification of the delivery schedule, as requested by the contractor.

15. In a letter dated January 21, 1954, and addressed to the Emergency Procurement Service of the General Services Administration, the contractor requested that the contract be amended so that the time for the completion of deliveries would be extended from June 30, 1956, to June 30, 1958.

16. By Amendment No. 4, dated July 16, 1954, the contract was amended in the following respects (among others) :

(a) Paragraph “a” of article 2 of the Special Terms, Conditions, and Specifications was revised to read as follows:

The entire quantity of 100,000 long dry tons of manganese ore covered by this contract shall be delivered in its entirety by June 30,1958.

(b) Paragraph “b” of article 2 of the Special Terms, Conditions, and Specifications, as revised by Amendment No. 2 (see finding 13(a)), was further revised to read as follows:

Delivery under this contract shall be made in approximately equal quarterly shipments, starting July 1,1953 on the following yearly schedule:
July 1, 1953 to June 30, 1954 4,000 long dry ton
July 1, 1954 to June 30, 1955 24,000 “ “ “
July 1, 1955 to June 30, 1956 24,000 “ “ “
July 1, 1956 to June 30, 1957 24,000 “ “ “
July 1, 1957 to June 30, 1958 24,000 “ “ “
The contractor shall have the right to accelerate deliveries under the contract.

(c) Paragraph “©” of article 4 of the Special Terms, Conditions, and Specifications, as added by Amendment No. 2 (see findings 13 (b) and 14), was revised to read as follows:

Notwithstanding any other provisions of the contract, including, without limitation, any increase in the “rate of exchange and/or Mexican freight rates” provided for in paragraph b of this Article 4, the unit price * * * which shall apply to all manganese ore delivered after July 1, 1954 shall not exceed $0.93 per long ton unit of contained manganese (before any applicable adjustments under paragraph a of this Article 4).

This revision of paragraph 4-e was adopted as a benefit to the Government in consideration of the Government’s action in agreeing to a further modification of the schedule for the delivery of ore under the contract.

17. By an assignment dated October 8,1954, the contractor assigned to the plaintiff all moneys and funds due or to become due to the contractor from the United States under the contract, with the exception of the moneys previously assigned by the contractor to the Export-Import Bank of Washington (see finding 11). The plaintiff furnished to the United States proper notice of the assignment, and receipt of the notice was acknowledged by the United States as of October 19,1954.

18. On October 20, 1951, the date when the contract was entered into, the official rate of exchange between the Mexican peso and the United States dollar was 8.65 pesos to 1 dollar, or, as expressed in United States money, the Mexican peso was worth $0.115606. Between October 20, 1951, and April 19,1954, the official rate of exchange between the Mexican peso and the United States dollar fluctuated from time to time. On April 19, 1954, the official rate of exchange between the Mexican peso and the United States dollar was 12.51 pesos to 1 dollar, or, as expressed in United States money, the Mexican peso was worth $0.079936. Subsequent to April 19, 1954, the official rate of exchange between the Mexican peso and the United States dollar fluctuated from time to time.

19. (a) For all the ore delivered to and received by the defendant under the contract, the contractor submitted invoices on the basis of a unit price of 93 cents, unadjusted for any devaluation of the Mexican peso. The defendant paid such invoices on this basis up to and including invoice No. 284, which covered a shipment delivered on April 17, 1955.

(b) Invoices Nos. 285, dated April 23, 1955, through 293, dated May 10, 1955, covered the delivery to the defendant of 526.796 tons of manganese ore under the contract. These invoices totaled $20,140.34 on the basis of the unit price of 93 cents used by the contractor, unadjusted for any devaluation of the Mexican peso.

(c) Invoices Nos. 294, dated May 17, 1955, through 328, dated May 26,1955, covered the delivery to the defendant of 1,902.451 tons of manganese ore under the contract. These invoices totaled $75,182.39 on the basis of the unit price of 93 cents used by the contractor, unadjusted for any devaluation of the Mexican peso.

(d) The defendant has made no payments on invoices Nos. 285 through 328, except in the form of credits against alleged overpayments theretofore made on invoices preceding invoice No. 285, dated April 23, 1955.

20. (a) The reason for the discontinuance of payments by the defendant under the contract was the discovery by an employee of the Credit and Finance Division, Office of the Comptroller, General Services Administration, that the Mexican peso had been devalued. On May 13, 1955, this employee sent to the contracting officer a memorandum containing the following paragraph (among others):

In reviewing the contract files from the standpoint of the present request, we have discovered estraordinary [sic] serious overpayments to the company over the past year or more. The contract provides in Article IV that the unit price of 930 per long ton unit with premiums and penalties is based on rates of exchange and Mexican freight rates in existence on October 15, 1951, and that any increase or. decrease in those factors would be for the account of the Government. Unfortunately, this provision has been completely overlooked. On April 19, 1954 the Peso was devalued from 8.65 to 1 U. S. dollar to 12.49 to 1. The result is that for some 12,000 tons delivered after April 19,1954, overpayments of approximately $14.00 per ton or $170,000, have been made.

(b) The evidence warrants an inference that the officers and employees of the General Services Administration concerned with the administration of the contract were unaware, until approximately May IB, 1955, that the Mexican peso had been devalued subsequent to October 20, 1951 (the date of the contract).

21. On May 13, 1955, the employee of the Credit and Finance Division, General Services Administration, mentioned in finding 20(a) telephoned the Export-Import Bank of Washington and stated that, in his opinion, the contractor had been overpaid more than $150,000 by reason of the failure to take into account the devaluation of the Mexican peso as of April 19,1954.

22. Sometime between May 17 and May 20, 1955, the contractor was advised by a representative of the Export-Import Bank of Washington regarding the position of the General Services Administration relative to the alleged over-payments that had been made under the contract.

23. Sometime during the latter part of May 1955, the contractor informed the plaintiff that difficulty had arisen with respect to payments by the defendant under the contract, and that the contractor was attempting to resolve the problem. The contractor did not explain the nature of the difficulty, and the plaintiff made no inquiry concerning, or investigation of, the matter.

24. From and after October 8,1954, the date of the assignment to the plaintiff, the amounts paid by the defendant on invoices submitted by the contractor, over and above the amounts assigned to the Export-Import Bank of Washington, were sent to the plaintiff; and all the loans made by the plaintiff to the contractor through April 20, 1955, had been repaid by May 10,1955.

25. (a) During the period from October 8, 1954, until about the middle of May 1955, the plaintiff made loans to the contractor on the basis of $1,200 per car of manganese ore delivered to the defendant under the contract. The figure of $1,200 per car represented approximately 60 percent of the contractor’s invoice price for each carload of ore, computed on the basis of a unit price of 93 cents, unadjusted for any devaluation of the Mexican peso.

(b) On or about May 7, 1955, the contractor advised the plaintiff that it had arranged to purchase ore from one Ulan Hill to meet the requirements of the contract, and it requested the plaintiff to increase the loans in order to cover the full amount which the contractor needed to purchase the ore. The plaintiff agreed to do this only when a pledge in the form of cashiers’ checks was given by Ulan Hill to cover the portions of loans in excess of the formula previously used of $1,200 per car.

(c) As of May 17, 1955, there were outstanding loans in the total amount of $10,800 which the plaintiff had previously made to the contractor and which were unpaid. These loans were paid by the application thereto of a part of the pledged cashiers’ checks on July 11, 1955.

(d) From May 17 to May 25, 1955, the plaintiff loaned to the contractor a total of $61,207.12 against invoices rendered by the contractor to the defendant. When the defendant ceased to make payments on invoices subsequent to invoice No. 284, the plaintiff set off the remainder of the pledges in the form of cashiers’ checks against the contractor’s total indebtedness to the plaintiff, leaving a principal amount of $52,666.29 owing by the contractor to the plaintiff.

26. A letter dated May 26, 1955, from the General Services Administration to the contractor stated as follows:

This is to advise you that overpayments in the approximate amount of $161,561.84 have been made to you under the subject contract as a result of failure to apply the provisions of Article 4.b. We hereby make formal demand upon you to remit immediately the above sum.
Until such time as this sum is remitted, or arrangements satisfactory to the Credit and Finance Division have been made otherwise in regard to its payment, no further payments can be made under the contract to the assignees.
The above amount has been computed as follows: $1.00 divided by rate of exchange on date of delivery. From this figure deduct the Contract rate of 8.65/1 and multiply the difference by the actual rate of exchange as quoted in the Federal Reserve System, Foreign Exchange Rate publication. The figure thus obtained is deducted from the unit price of $0.93 as billed. Also included are excess freight costs in the amount of $10,813.81.
The above amount is a preliminary computation, subject to further revision when we have completed a detailed examination of all previous payments.

27. In a reply dated June 3, 1955, from the contractor to the latter of May 26,1955, from the General Services Administration (see finding 26), it was stated in part as follows:

May we state categorically that we do not agree at all with General Services interpretation of that clause in our contract. In all of the negotiations leading up to the contract, it was not the actual fluctuation of the peso that was considered, but the effect of such fluctuation on the costs of production and on shipping costs. * * * * *
It was the undoubted intent of the contracting parties to have the matter of costs the determining factor, but in the actual drawing up of the contract, this intent was not clearly nor adequately expressed.
At a meeting held on June 2,1955 at General Services Administration with Messrs Katon, Wilkinson, Bussell, Harding and Kurzius, it was suggested that the Administrator of General Services Administration, could recommend to the Comptroller General that this contract be reformed to express the intent of the parties, if after a hearing by the Board of Review the Administrator found this action justified.
May we respectfully request that we be allowed to appear before the Board of Review in order to endeavor to have the contract reformed in line with the original intent.

28. (a) On June 10, 1955, a hearing on the contractor’s “appeal” of June 3,1955 (see finding 27) was held before the Board of Review of the General Services Administration. After considering all the evidence presented to it, including the testimony that was adduced at the hearing, the Board of Review reached the following conclusions:

1. That Article 4(b) of Contract GS-OOP-2410 (SCM) contained the language intended by the parties to be included therein; and
2. That the language of Article 4(b) of the contract is clear and unambiguous, and is susceptible to only one reasonable interpretation; and
3. That there was no mutual mistake of the parties in the language used in Article 4(b) and, therefore, there is no basis for recommending to the Comptroller General that this contract be reformed on the ground of mutual mistake; and
4. That there is no basis for amending the contract under the authority granted to the Administrator under the provisions of the First War Powers Act, 1941, as amended by Public Law 921, 81st Congress, and Executive Orders 10210 and 10227.

(b) The Board thereupon, on June 28,1955, recommended to the Administrator of the General Services Administration that the contractor’s “appeal” be denied.

(c) On June 28, 1955, the Administrator, of the General Services Administration approved the recommendation of the Board of Review.

29. In a letter dated June 23, 1955, and addressed to the General Services Administration, the plaintiff requested payment of invoices Nos. 285 through 328. By a letter dated July 13, 1955, the plaintiff’s request was denied on the basis of the prior proceedings referred to in finding 28.

30. In a letter dated August 8, 1955, the plaintiff again requested the General Services Administration to pay invoices Nos. 285-328. The plaintiff transmitted with its letter a statement of the plaintiff’s position with respect to the matter. By a letter dated December 28, 1955, the General Services Administration again denied the plaintiff’s request. The denial was based upon an opinion by the General Counsel of the General Services Administration, and a copy of this opinion was furnished to the plaintiff.

31. Under the date of August 16, 1955, the contracting officer transmitted to the contractor a registered letter stating in part as follows:

As of June 30, 1955 you were required to deliver a minimum of 28,000 long dry tons, whereas our records indicate you have delivered only 18,423.38 long dry tons and, therefore, are in default.
You are hereby notified that, pursuant to Article 11(d) of the Special Terms, Conditions and Specifications of the above referenced contract and Article 12 of the General Conditions for Strategic and Critical Materials and Services, which is a part of said contract, your right to proceed with further deliveries under said contract is terminated without prejudice to other rights resulting from breach of the conditions of said contract.

32. By means of a letter dated May 7, 1956, the plaintiff presented to the General Accounting Office a claim in the amount of $72,007.12 as an assignee under the contract.

33. In a letter dated July 16, 1956, the Comptroller General advised the plaintiff in part as follows:

Reference is made to a letter dated May 7, 1956, and enclosure, * * * relative to your claim in the amount of $72,007.12, as assignee under contract No. GS-OOP-2410 (SCM), entered into October 20,1951, between the General Services Administration and Minera Fernandez, S.A.
$ # * $ *
* * * Since, under the provisions of the contract, the Government was entitled to an adjustment in the contract price due to the revalued peso, there is no legal basis for payment of the amounts involved.
Accordingly, your claim is disallowed.

34. The present litigation was thereafter instituted on November 16, 1956.

CONCLUSION OE LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover and judgment will be entered to that effect. The amount of recovery will be determined pursuant to Rule 38(c).

In accordance with the opinion of the court and on a memorandum report of the commissioner as to the amount due thereunder, it was ordered on April 7, 1961, that judgment for the plaintiff be entered for $52,666.29.  