
    LUCIUS N. AND EUGENE LITTAUER, COPARTNERS TRADING UNDER THE FIRM NAME AND STYLE OF LITTAUER BROTHERS, v. THE UNITED STATES
    [No. C-761.
    Decided February 14, 1927]
    
      On the Proofs
    
    
      Contract; consideration stated in part as “premium.” — Where a contract provided that for articles to be manufactured by the contractor delivered to the Government in December, 1917, the contractor was to receive $3.00 per unit plus a “ premium ” of 50 cents, and those delivered in January, 1918, $3.00 plus a “ premium ” of 45 cents, and it appears from the circumstances and negotiations of the parties prior to and at the time the contract was made that for such deliveries it was their mutual intention that the contractor should receive $3.50 and $3.45, respectively, the contractor is entitled to the said sums for deliveries made in the required time. For deliveries thereafter, in February, 1918, the contractor can not recover more than $3.00 per unit.
    
      The Reporter’s statement of the case:
    
      Mr. Dallas 8. Townsend, for the plaintiff. Mr. Stewart McDonald and Barry, Wairvwright, Thacher & Symmers were on the brief.
    
      Mr. John E. Hoover, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. The plaintiffs are citizens and residents of the United States and in all respects duly qualified and entitled to sue in this court and on the claim herein. At all times material herein they were engaged in business as copartners under the firm name of Littauer Brothers.
    II. The claim of the plaintiffs, which is for the sum of $9,132.95, was made on April 12, 1918. It is based upon an agreement in writing evidenced by a letter from the Office of the Depot Quartermaster, Philadelphia, to the plaintiffs, dated November 3, 1917, and by a contract entered into between Colonel M. Gray Zalinski, Q. M. Corps, IT. S. Army, by Captain V. Stone on behalf of the Government, and Lucius N. Littauer on behalf of the plaintiffs, dated November 5, 1917, numbered 1709 Philadelphia. Copies of the letter of November 3, 1917, and the contract are attached to the petition, marked “Annex B ” and “Annex A,” respectively, and made a part of this finding by reference.
    III. During November and December, 1917, the regular specification winter gauntlet in use by the War Department was made of yellow horsehide hand with a split cowhide cuff, and this gauntlet was at that time being supplied by the plaintiffs to the defendant at $3.00 per pair under a previous contract which was separate and distinct from the contract sued on.
    IV. At the time of the negotiations leading up to this contract No. 1709 the Government negotiating officer was authorized to accept and contract for a suitable substitute for the specification winter gauntlet, due to the impossibility of getting a sufficient number of the specification article.
    V. On or' about November 2,1917, one Frederick C. Baggs, representing the plaintiffs, entered into negotiations with W. W. Wheeler, jr., a captain in the Quartermaster Corps, at Philadelphia, who was the Government negotiating officer and was acting as Assistant to the Chief of the Purchasing Department in the C. and E. Division of the Philadelphia depot, for the purchase and sale of winter gauntlets. During these negotiations Mr. Baggs informed Captain Wheeler that, due to a lack of materials, the plaintiffs could not make any gauntlets of the regular standard specifications for delivery in December, 1917, and January, 1918, in addition to those already contracted for, and that they Avould contract for and provide winter gauntlets of khaki smoked degrained horsehide with suede cuff for $3.50 per pair.
    VI. The winter gauntlet made of khaki smoked degrained horsehide hand with suede cuff was not a standard specification article and was more expensive to make than the standard specification article, which was made of yellow horsehide hand and split cowhide cuff.
    
      The plaintiffs’ representative refused to contract for the smoked degrained horsehide gauntlet at $8.00 per pair for delivery at any time.
    VIL Captain Wheeler informed the plaintiffs’ representative that a price of $3.50 per pair was satisfactory to the Government, but that the formal contract would have to state this price in different language. And so the contract when drafted provided for the payment of $3.00 per pair plus the so-called “ premium ” of 50 cents and 45 cents.
    VIII. On November 2, 1917, Captain Wheeler, acting for the defendant, agreed with the plaintiffs’ representative to pay $3.50 per pair for December, 1917, deliveries of winter gauntlets made of khaki smoked degrained horsehide with suede cuff, and $3.45 per pair for January, 1918, deliveries of the same gauntlet.
    IX. The defendant’s negotiating officer was not permitted to enter into a contract with a penalty clause. For this reason the contract was prepared in the terms, as to price, in which it was entered into. The actual intention of the contracting parties was that the plaintiffs were to receive $3.50 for each pair of gauntlets delivered under the contract in December, 1917, and $3.45 for each pair delivered in January, 1918.
    X. The contract for the supply of these winter gauntlets was awarded the plaintiffs by the War Department, office of the depot quartermaster at Philadelphia, by its letter of November 3, 1917 (Finding II). Acting on and in compliance with this award the plaintiffs proceeded with the making and shipping of the gauntlets specified in the letter of November 3,1917.
    XI. The formal contract for the supply of these gauntlets was prepared by the defendant. It was dated November 5,1917 (Finding II), and was not received by the plaintiffs until December 11,1917.
    XII. The plaintiffs shipped to the defendant from their factory at Gloversville, New York, 4,320 pairs of the gauntlets during December, 1917, and 15,999 pairs of the gauntlets during January, 1918, the shipments being made via American Express Company. There were rejected and returned 5 pairs of the December shipments and 498 pairs of the January shipments. • The net shipments in December, 1917, were 4,315 pairs and in January, 1918,15,501 pairs.
    At the time the contract was entered into the average time consumed in transit between Gloversville, New York, and Philadelphia, was between 36 and 48 hours.
    XIII. By Fuel Administration Publication No. 17, dated January 17, 1918, the plaintiffs were required to shut down their factory at Gloversville, New York, on January 18, 19, 21, 22, and 28, 1918.
    Compliance with this order stopped their production for five days and delayed them proportionately in making deliveries under the contract.
    XIY. There were four previous contracts between the plaintiffs and the defendant, three of which provided for riding gloves and one, No. 1164, for the regular specification winter gauntlets. Whatever delay, if any, was encountered in the production of the standard or specification gauntlet under Contract No. 1164 was caused solely by the inability of the plaintiffs to obtain the raw material necessary therefor, whereas the materials necessary for the manufacture and production of the gauntlet provided for in this contract were on hand at the time the contract was entered into.
    The manufacture and production of the gloves and gauntlets specified in the previous contracts with the defendant were not interfered with in any way by the manufacture and production of the gauntlets under this contract.
    XV. There were delivered to the defendant at Philadelphia 2,520 pairs of the gauntlets during December, 1917, and 13,325 pairs during January, 1918. Of the December, 1917, deliveries, 5 pairs were returned to the plaintiffs, and of the January, 1918, deliveries, 338 pairs were returned to the plaintiffs.
    The net amount of the December deliveries at Philadelphia was 2,515 pairs, and the net amount of the January deliveries at Philadelphia was 12,987 pairs.
    A shipment of 360 pairs on January 18, 1918, was delivered to the defendant at Philadelphia on February 2, 1918. Of this shipment 3 pairs were rejected, leaving net deliveries on February 2, 1918, 357 pairs.
    
      XYI. The first payment by the defendant was made on or about January 22, 1918, by voucher No. 4054, in the amount of $2,160, against a consignment of 720 pairs of gauntlets. This voucher was returned by the plaintiffs to the Depot Quartermaster at Philadelphia with a claim for the additional 50 cents per pair, or $360, and the defendant, by the Assistant to the Depot Quartermaster at Philadelphia, replied to this claim on January 24, 1918, advising that the premium would be adjusted later in accordance with the respective dates on which the shipments were received. The only payments made by the defendant under the contract have been on the basis of $3.00 per pair, irrespective of the dates upon which the various consignments were shipped and delivered.
    XVII. The plaintiffs’ claim for the balance due .them was presented to the Depot Quartermaster prior to June 30, 1919, and was a sufficient presentation of claim under the Dent Act of March 2, 1919, chap. 94, 40 Stat. 1272. The claim was rejected.
    XVIII. On November 6, 1918, the plaintiffs presented the claim to the Auditor for the War Department, by whom it was referred to the Director of Finance, Office of the Quartermaster General, for administrative examination and report, on December 3, 1918. It was placed before the Classification Claims Board, Settlement Division, Finance Service, by which it was referred without recommendation to the Board of Contract- Adjustment.
    After examination of the papers, and oral hearing, the Board of Contract Adjustment decided that the plaintiffs were entitled to receive $3.50 for each pair delivered to the defendant in Philadelphia during December, 1917, and $3.45 for each pair delivered to the defendant in Philadelphia during January, 1918.
    XIX. The plaintiffs requested and obtained a review of the Board of Contract Adjustment’s decision by the Secretary of War, contending that the award of the Board of Contract Adjustment was insufficient in amount, in that it did not allow for shipments made during January but not delivered until after January 31, owing to railroad congestion. Upon recommendation of the special advisers the Secretary of War approved and affirmed the decision of the Board of Contract Adjustment on June 3,1920, and awarded the plaintiffs the sum of $6,909.65 in full adjustment.
    XX. The plaintiffs thereupon accepted this decision and award of $6,909.65, and a voucher therefor was furnished to the plaintiffs, signed and returned by them for collection, but the Auditor for the War Department caused payment on the voucher to be refused, and on appeal the Comptroller of the Treasury, on August 24, 1922, sustained the auditor’s decision.
    XXI. If the plaintiffs are entitled to recover on the basis of the deliveries by them to the express company they should receive 50 cents each for 4,315 pairs, or $2,157.50, and 45 cents each for 15,501 pairs, or $6,975.45, making a total of $9,132.95.
    If the plaintiffs are entitled to recover on the basis of the deliveries by them to the defendant at Philadelphia, they should receive 50 cents each for 2,515 pairs delivered in December, 1917, or $1,257.50, and 45 cents each for 12,987 pairs delivered in January, 1918, or $5,844.15, making a total of $7,101.65.
    An allowance of the first five days in February, 1918, for deliveries to the defendant at Philadelphia, would entitle the plaintiffs to an additional sum of $160.65, representing 357 pairs shipped on January 18, 1918, and delivered on February 2, 1918. This allowance, in addition to the sum of $7,101.65 for “gauntlets received,” would entitle the plaintiffs to the sum of $7,262.30.
    The court decided that plaintiffs were entitled to recover, in part.
   Graham, Judge,

delivered the opinion of the court:

On November 5, 1917, plaintiffs executed a contract with the defendant for the manufacture and delivery on or before January 31, 1918, of approximately 20,000 pairs of smoked d egrainp.fi horsehide gauntlets, with suede cuffs. They were not the regulation gauntlets used by the War Department.

Prior to entering into this contract plaintiffs were solicited by defendant’s representative to take a contract for the manufacture of regulation gauntlets at $3.00 per pair. This they declined to do, for the reason that they did not have the material necessary therefor, but offered to make gauntlets of khaki smoked degrained horsehide, with suede cuffs, for $3.50 per pair. These were more expensive gauntlets, the materials for the manufacture of which plaintiffs had on hand. The plaintiffs at this time had four contracts with the defendant for the manufacture of gauntlets. The latter were badly needed, and defendant wished to avoid delay in delivery under these four contracts and at the same time secure the gauntlets involved in the contract in this case as speedily as possible. Defendant’s representative agreed to pay plaintiffs $3.50 a pair for gauntlets delivered in December, 1917, and $3.45 a pair for those delivered in January, 1918, delivery to be made at the Quartermaster’s Depot, Philadelphia. The Government’s representative stated that the contract would be prepared in different form than usual, and as drawn it stated the price per pair at $3.00 plus a premium of 50 cents for gauntlets delivered in December and 45 cents for those delivered in January.

It was clearly the intention and agreement of the parties to pay plaintiffs as consideration for the delivery of the gauntlets in December $3.50 per pair, and for the delivery in January $3.45 per pair. The Government was to receive as its consideration a higher priced gauntlet than the regulation one, and a prompt and speedy delivery during December and January, these deliveries not to interfere with the contracts which the plaintiffs then had for the delivery of other gauntlets; and the delivery of the latter was not interfered with. A large part of the gauntlets involved in this case were delivered in December and January, and as to these the plaintiffs are entitled to recover.

It will be readily seen that under the terms of the contract, if the plaintiffs failed to deliver the gauntlets on or before the 31st of January, they could only claim on the basis of $3.00 a pair. There was no provision in the contract for liquidated damages for failure to deliver within the time fixed by the contract, and it seems that the representative of the War Department felt that he did not have authority to include a penalty clause. The provisions for delivery in December and January gave assurance to the Government of speedy delivery.

The use of the word premium ” in this contract is an unusual application of the word. Under the facts of the case it clearly does not mean a gratuity. The use of this word in the contract and the fact that two bases of payment are named render it necessary to refer to the circumstances surrounding the parties prior to and at the time the contract was made, and previous negotiations, in order to discover the true intention; and, as stated, the true intention was to pay the plaintiffs on the basis of $3.50 a pair for gauntlets delivered in December and $3.45 for those delivered in January.

The case of J. J. Preis & Company v. United States, 58 C. Cls. 81, 86, relied upon by the defendant, is not in point. In that case the plaintiff had entered into a contract with the United States to make certain garments for a price named from cloth furnished by the latter. Some months after this contract was executed another contract was entered into providing that if the plaintiff would make a special effort to avoid all possible waste in cutting the material furnished by the United States, it would receive, for the additional work and care involved, a further compensation of twenty per cent of the net cost of the material saved. The court held as follows:

“ There is no evidence to show to what extent savings were made under the supplemental contract. To entitle plaintiff to recover it must show definitely how much material was saved by reason of the contract upon which it sues, and, having failed to do that, there is nothing upon which the court can give judgment.”

This is the ground upon which the case was decided. The court in its opinion alhided to the question presented, that the last contract was void for want of consideration, saying:

“ Without at this time passing upon that question it may not be amiss to say that contracts of this character will not be looked on with favor by the court.”

In the Preis case two contracts were involved. Under the first the plaintiff was obligated to do certain work for a fixed price. The second contract was an agreement to pay him in addition to the original consideration further compensation for the same work. That is not true of the case before us. The question here is, What was the consideration passing to the plaintiffs in the contract? To say that the 50 cents a pair additional to be paid for gauntlets delivered in December and the 45 cents additional for those delivered in January were gratuities is to beg the question. In the Preis case it was admitted that the contract price for the work had been fixed in the first contract, while here the question is, What was the intention of the parties as to the contract price? What was the consideration moving from the defendant to the plaintiffs — was it $3.00 per pair for the gauntlets or $3.50 for those delivered in December and $3.45 for those delivered in January? That is the question presented. If it must be admitted at the outset that the contract price of $3.00 was the consideration, there is nothing to decide. That would dispose of the case and make the additional sums payable in December and January mere gratuities. The case is thus easily distinguishable from the Preis case.

As to the gauntlets delivered to the American Express Company and shipped during January, but which reached the defendant after the 31st of that month, under the facts it must be held that the plaintiffs can not recover more than $3.00 a pair. This is in conformity with the finding of the Contract Adjustment Board, whose opinion shows a very careful consideration of all the facts and of the questions of law involved. This decision was approved by the legal advisers of the Secretary of War and in turn approved by him. The plaintiffs accepted this decision, a voucher was issued to them for the amount stated, and they indorsed and forwarded it for payment. The Auditor for the War Department stopped payment thereon, plaintiffs appealed to the comptroller, and the position of the auditor was sustained.

The plaintiffs are entitled to recover the sum of $6,909.65, for which judgment should be entered, and it is so ordered.

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

Booth, Judge, dissents.  