
    CHAS. W. ENDEL, JACOB ENDEL, AND IRVING ENDEL, DOING BUSINESS UNDER THE FIRM NAME AND STYLE OF COHEN, ENDEL & CO., v. THE UNITED STATES
    [No. A-266.
    Decided April 13, 1925]
    
      On the Proofs
    
    
      Contract; counterclaim; failure of consideration. — Where plaintiffs have entered into certain contracts with the Government which have been fully executed and the consideration therefor is due and owing to them by the United States, the Government can not set off against the amount due as aforesaid, a sum paid to plaintiffs under another contract with the United States in which there was no failure of consideration.
    
      The Reporter's statement of the case:
    
      Mr. David Vorhaus for the plaintiffs. Messrs. Louis J. Vorhaus, Avel B. Silverman, and Mouse, Grossman & Vor-haus were on the briefs.
    
      Mr. Dwight E. Rorer, with whom was Mr. Assistant Attorney General William J. Donovan, for the defendant.
    The following are the facts as found by the court:
    I. The plaintiffs in this suit are partners doing business under the firm name and style of Cohen, Endel & Co., having their principal ofiice in the city of New York, and are citizens of the United States.
    II. On the following dates the plaintiffs entered into contracts in writing with the United States, to wit, on July 3,1918, July 25,1918, and on July 27,1918. Copies of these contracts are filed as Exhibits A, B, and C respectively, with the petition and are made a part hereof by reference.
    Under the terms of these contracts the plaintiffs agreed to manufacture service coats, overcoats, and cotton breeches at a price fixed in said contracts, and upon terms and conditions set out in same. Under these contracts the plaintiffs delivered to the United States 30,102 coats for which the' defendant has not paid, 72,009 overcoats upon which delivery there remains a balance due the plaintiffs by the defendant, and 28,244 cotton breeches; and there is due the plaintiffs upon the last-named delivery the sum of $9,268, and upon the coats the sum of $5,871.06, and upon the overcoats the sum of $1,238.11; in all, the sum of $16,737.17, which is due and owing to the plaintiffs by the defendant as a result of the contracts above mentioned.
    III. On June 29, 1917, the plaintiffs entered into a contract in -writing with the United States for the manufacture of 200,000 overcoats at $1,947 each from materials chiefly furnished by the defendant. The contract was subsequently amended by reducing the number of overcoats by 10,000, and for which 15,000 service coats were to be manufactured and delivered in substitution of the 10,000 overcoats; and afterwards, on November 5, 1917, the said contract was further changed to provide for the substitution of short overcoats in place of the long overcoats originally provided for in the contract.
    On October 10, 1917, the following contract was entered into by the parties:
    “ Whereas on June 29th, 1917, a contract was entered into between the United States, represented by Colonel M. Gray Zalinski, Quartermaster Corps, U. S. A.; and Cohen, Endel & Co., of the city, county, and State of New York (hereinafter designated as contractor), for the manufacture and delivery at the New York depot of 200,000 overcoats.
    “And whereas it is believed that a considerable yardage in cloths, etc., furnished contractors for the manufacture of coats, breeches, and other articles cut, from'patterns, has been lost to the Government through careless and inefficient cutting, whereby the saving in uncut cloth returned to the Government is materially reduced, and in order to encourage skillful and painstaking cutting from the patterns furnished the contractors it is to the interest of the United States that said contract be modified in the following particulars :
    “Now, therefore, it is hereby agreed between the parties hereto that the above-named contract is hereby amended so as to embody the following proviso, viz:
    “ That in cutting textile materials furnished by the United States for use in the manufacture of garments, etc., under said contract, the contractor shall use best efforts to avoid all-possible waste. For the additional work and special care so involved the contractor shall be paid as separate compensation and premium an amount equal to twenty per cent of the net cost price of such Government-owned materials, to the extent of the savings in uncut yardage on comparing the quantities actually used in the cutting with the allowances for the purpose listed in the accompanying schedules — -the material of the yardage so saved to remain the property of the United States. There shall not, however, be any skimping whatever in the cutting of the garments, etc., and in event of the violation of this condition no compensation shall be made for the saving in yardage resulting from the lays of such skimped cuttings, and the Government shall also have the election of annulling the contract for such cause.
    “ In all other respects the stipulations of said original contract shall remain in full force and eifect.
    “ Witness our hands this tenth day of October, 1911.
    “ThoMas, S. B.,
    “ Colonel, Quartermaster Corps, U.S.A.
    
    “ Cohen, Endel & Co.,
    “By Chaeles W. Endel,
    “(One of the firm).
    “ Witnesses:
    “ John It. Holt.
    “M. McCluskey.
    “ The undersigned sureties to the bond pertaining to the above-described original contract assent to the foregoing modification thereof and hereby stipulate that said bond shall be construed to apply accordingly.
    “Witness our hands and seals this tenth day of October, 1911.
    “American Security Company
    oe New York.,
    “[seal.] By E. J. Sadler, Resident Vice President.
    
    “ Witnesses:
    “ Daniel A. Galotta.
    “Attest:
    “ Harold W. Steur.
    “ [seal.] -,
    “ Resident Assistant Secretary
    
    IY. The contract of June 29, 1917, was fully executed by the delivery by the plaintiffs to the defendant of 190,000 overcoats and 15,000 service coats, and the payment by the defendant to the plaintiffs the contract price agreed upon.
    By reason of the amended contract dated October 10,1917, the defendant paid to the plaintiffs, in addition to the contract price specified in the contract of June 29, 1917. the sum of $16,162.51, which was the sum ascertained by the parties to have been due the plaintiffs as the result of additional work and special care bestowed by the plaintiffs in the execution of the Contract of June 29, 1917.
    The additional work and special care bestowed by the plaintiffs on the work called for by the contract consisted in acquiring a new plant and additional space; additional appliances at more expense; in the expediture of additional time, effort, and money in executing the contract; in the employment of men, labor, and expense in the handling of and measuring the cloth; and in the increase in the pay roll of employees.
    The benefit derived by the United States from the execution of the supplemental contract was in the saving of material consumed in the manufacture of the garments — to be exact, the saving of 5.592 inches per coat; and thus more garments were manufactured from the materials furnished by the United States than would have been manufactured under the terms of the original contract.
    V. When the plaintiffs demanded payment of the amounts due them on their contracts. A, B, and C, to wit, the sum of $16,737.17, the United States charged the plaintiffs with the sum of $16,162.52, which sum had been previously paid to the plaintiffs by the United States under the contract of June 29, .1917, amended by the contract of October 10, 1917, the United States claiming that the aforesaid sum of $16,-162.52 had been erroneously and illegally paid to the plaintiffs by reason of the fact that the United States claimed that the contract of October 10, 1917, was illegal and void and the United States tendered to the plaintiffs the sum of $574.59 as in full payment of the amount due plaintiffs on the contracts, A, B, and 0, sued on, the said amount being the difference between the sum of $16,737.11 and the sum of $16,162.17, which tender the plaintiffs refused to accept.
    VI. The defendant has set up a counterclaim, but has not proved it.
    The court decided that plaintiffs were entitled to recover. Counterclaim dismissed.
   Hay, Judge,

delivered the opinion of tbe court:

In July, 1918, the plaintiffs entered into three contracts with the United States whereby they agreed to manufacture certain garments for the use of the soldiers of the United States in the war with Germany. Under these contracts the plaintiffs manufactured and delivered to the United States certain of these garments, the contract price of which was the sum of $16,737.17. That this sum is due and owing to the plaintiffs by the United States under these contracts is not disputed. But the United States claims that under another contract with the plaintiffs the plaintiffs were paid by mistake the sum of $16,162.17, and that there is only due to the plaintiffs on the aforesaid three contracts the sum of $574.59.

The plaintiffs on June 29, 1917, entered into a contract in writing with the United States whereby they agreed to deliver a certain number of overcoats and service coats to the United States, which were to be manufactured from materials furnished by the United States. After the execution of this contract an amended contract was entered into between the parties, which was made a part of the contract of June 29, 1917, and which was executed on October 10, 1917, by the terms of which the plaintiffs agreed that in cutting textile materials furnished by the United States for use in the manufacture of garments under the contract of June 29, 1917, they would use best efforts to avoid all possible waste. The amended contract having recited that it was to the interest of the United States that the contract of June 29, 1917, be modified; it also contained the following clause: “For the additional work and special care so involved the contractor shall be paid as separate compensation an amount equal to twenty per cent of the net cost price of such Government-owned materials, to the extent of the savings in uncut yardage on comparing the quantities actually used in the cutting with the allowances for the purpose listed in the accompanying schedules. The material of the yardage so saved to remain the property of the United States.” The garments under the contracts were delivered to the United States, the contract was fully executed, and the plaintiffs were paid the contract price as separate compensation under the contract of October 10, 1917, Jthe additional sum of $16,162.17. The contracts in suit had nothing to do with the aforesaid contracts of June 29, 1917, and October 10, 1917.

Ordinarily, as between private parties, if a contract has been executed voluntarily and with full knowledge of the facts, and the money has been paid, it can not be reclaimed upon the ground that the contract is without consideration or that it was paid through a mistake of law. But where the contract is between an officer of the Government and a private party the rule is different. It is said by the Supreme Court of the United States in the case of Wisconsin Central Railroad Co. v. United States, 164 U. S. 190, 210: “As a general rule, and on grounds of public policy, the Government can not be bound by the action of its officers, who must be held to the performance of their duties within the strict limits of their legal authority, where, by misconstruction of the law under which they have assumed to act, unauthorized payments are made. The question is not presented as between the Government and its officer or between the officer and the recipient of such payments, but as between the Government and the recipient, and is then a question whether the latter can be allowed to retain the fruits of actions not authorized by law resulting from an erroneous conclusion by the agent of the Government as to the legal effect of the particular statutory law under or in reference to which he is proceeding.”

It is well settled that the parties receiving moneys illegally paid by a public officer are liable to refund them.

In this case the Government claims that the contract of October 10, 1917, was without consideration and therefore invalid, and that the amount paid to the plaintiffs under it can be recovered. If the contract was void for want of consideration and as being against public policy the sum paid to the plaintiffs under it was illegally paid and the plaintiffs must refund it.

Contracts of this character will not be looked on with favor by the court. J. J. Preis & Co. v. United States, 58 C. Cls. 81, 86. But the court in that case did not undertake to include all contracts of this character in its general statement. It specifically said that “the test in such cases is whether or not there was any benefit to be derived by the United States from the execution of the amended contract.” Each case' must be decided upon the facts proved and the circumstances surrounding it. If in this case the contract was valid, and the United States derived a benefit from its execution, then the payment which was made to the plaintiffs was a valid payment, the officer in making it committed no mistake and came to no erroneous conclusion as to the legal effect of the contract.

We think the facts in this case clearly show that the United States derived a benefit from the execution of the contract, that the contract was justified by the circumstances attending its making, and that the plaintiffs did additional work, gave special care, and incurred expense which they were not obliged to do under the original contract of June 29, 1917. The facts supporting this conclusion are fully set out in the findings, and it is not necessary to repeat them here.

Judgment will be entered for the plaintiffs in the sum of $16,737.11. It is so ordered.

Graham, Judge; DowNey, Judge; Booth, Judge; and CaMpbell, Chief Justice, concur.  