NIPPON HODO COMPANY v. United States

160 F. Supp. 501, 142 Ct. Cl. 1, 1958 U.S. Ct. Cl. LEXIS 123

• Court: United States Court of Claims
• Decided: April 2, 1958
• Docket: 479-54
• Status: Published

Opinions

MADDEN, Judge.

The plaintiff, a Japanese corporation, made a contract with the United States on June 28, 1950, for the construction of a runway, taxiways and aprons at an air base in Japan. The contract price was some $744,000. Upon the completion of the work, the plaintiff was paid the amount admittedly due it, and executed a release, from which release, however, five specific items of claim were excepted.

One of the five excepted items was a claim for “increased cost required for construction of the base course in a manner different from plans and specifications.” It is that claim which is here sued upon.

The five excepted claims were presented to the contracting officer, who denied them. The plaintiff appealed this decision to the Far East Air Forces Board of Contract Appeals. That board denied each of the claims, except Claim V, which was for “compensation for increased prices resulting from the Korean Hostilities.” The board allowed Claim V and directed the parties to negotiate an equitable price adjustment to compensate for the increased prices.

The parties negotiated a price adjustment of $59,035.06. The contracting officer prepared a “Statement of Acceptance” dated September 30, 1953, for the signature of the plaintiff, which the plaintiff’s president signed. The statement contained six numbered paragraphs, and paragraph 3 recited that claims 1, 2, 3, 4 and 5 had been appealed by the plaintiff to the board. Paragraph 6 said that the sum of $59,035.06 would be accepted “in full settlement and satisfaction of all the claims referred to” in the statement.

Funds were not available to pay the $59,035.06 until 1955. About May 12, 1955, the plaintiff received the $59,035.-06 and a Japanese agent of the plaintiff executed a “Supplemental Agreement” which recited the prior steps in the dealings of the parties and said:

“The Contractor hereby releases and forever discharges the Government from all liability and from all claims and demands which the Contractor now has, except as follows: * * *»

The excepted claim was not one of the five which had been presented to the Board of Contract Appeals.

The plaintiff had, on December 20, 1954, some months before the receipt of the $59,035.06 and the execution of the last mentioned release, filed its present suit. About a month before the execution of the 1955 release, the Government filed its answer denying the plaintiff’s right to recover. About a year after the execution of the 1955 release, the Government filed its “Supplemental Answer and Affirmative Defense.” Its affirmative defenses were and are the 1953 “Statement of Acceptance” and the 1955 “Supplemental Agreement” which contained the release quoted above.

The plaintiff filed a reply to the defendant’s supplemental answer and affirmative defense. In its reply it says, in effect, that it was not the intention of the parties, in negotiating and executing the two documents relied on as releases, to release the claim here in suit; that it was their intention only to comply with the direction of the Board of Contract Appeals and negotiate the amount to which the plaintiff was fairly entitled under the board’s decision on Claim V.

The Government has made a motion for judgment on the pleadings. The pleadings, as we have summarized them, raise a vital question of fact, and the case will not be ripe for judgment until that question of fact is resolved. To grant the Government’s motion would require a decision on our part that the execution of a release broad enough in terms to include the claim here in question, ipso facto, releases the claim even though the parties did not intend to release it. This court, under its jurisdiction over claims founded upon contracts with the United States, has and frequently uses the power of a court of equity to reform contracts so that they conform to the intention of the parties, if the evidence shows that reformation is necessary.

In L. W. Packard & Co. v. United States, 66 Ct.Cl. 184, at page 192, this court said:

“We need not cite authorities to sustain the fact that a receipt or release, however inclusive in terms, is subject to explanation as to the subject matter of the accord and satisfaction.”

We think this statement is good law. We see no tendency of the law in the direction of elevating form over substance; or of imposing upon parties a bargain which they never intended to make.

The defendant’s motion will be denied.

It is so ordered.

LARAMORE and LITTLETON, Judges, concur.