B-83735, JUNE 3, 1949, 28 COMP. GEN. 686

B-83735, JUNE 3, 1949, 28 COMP. GEN. 686

CONTRACTS - REFORMATION - UNILATERAL MISTAKE IN STATEMENT OF PRICE WHERE, UNDER A CONTRACT FOR THE RENTAL OF GOVERNMENT-OWNED FACILITIES, THE CONTRACTOR UNEQUIVOCALLY AGREED TO PAY A SPECIFIED RENTAL BASED ON A PERCENTAGE OF THE APPRAISED VALUATION OF THE FACILITIES PER ANNUM, THERE IS NO LEGAL AUTHORITY TO REFORM THE RENTAL AGREEMENT TO CORRECT AN OVERSTATEMENT OF THE RENTAL CHARGE ON THE BASIS THAT THE GOVERNMENT MADE A MISTAKE IN COMPUTING THE CONTRACT RENTAL CHARGE BY ERRONEOUSLY APPRAISING THE VALUE OF THE FACILITIES COVERED BY THE CONTRACT.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE NAVY, JUNE 3, 1949:

REFERENCE IS MADE TO LETTER OF FEBRUARY 10, 1949, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE NAVY, REQUESTING A DECISION AS TO THE LEGAL PROPRIETY OF REFORMING RENTAL AGREEMENT CONTRACT NO. NORD 26859, DATED MAY 1, 1945, WITH THE BILLARD MACHINE AND TOOL COMPANY, TO CORRECT AN OVERSTATEMENT OF THE RENTAL CHARGE.

IT APPEARS FROM THE AFORESAID LETTER AND ITS ENCLOSURES THAT THE BUREAU OF ORDNANCE FURNISHED TO BILLARD MACHINE AND TOOL COMPANY CERTAIN GOVERNMENT-OWNED FACILITIES FOR USE IN PERFORMING CONTRACTS FOR THE PRODUCTION OF MATERIALS NECESSARY FOR THE PROSECUTION OF THE WAR. THE FACILITIES SO FURNISHED, AS LISTED IN ENCLOSURE A TO THE CONTRACT, CONSISTED OF ONE LANDIS 6 INCHES BY 18 INCHES PLAIN CYLINDRICAL GRINDER AND ONE GALLMEYER AND LIVINGSTON HYDRAULIC FEED SURFACE GRINDER. AS SET FORTH IN THE CONTRACT, THE CONTRACTOR AGREED TO CERTAIN STATED CONDITIONS AND OBLIGATIONS INCLUDING, UNDER PARAGRAPH 6 OF THE CONTRACT, THE OBLIGATION TO PAY RENTAL TO THE GOVERNMENT FOR THE USE OF THE FACILITIES. PARAGRAPH 6 PROVIDES IN PART AS FOLLOWS:

THE AMOUNT OF THE RENTAL WILL BE 10 PERCENT OF THE APPRAISED VALUATION OF THE FACILITIES PER ANNUM. THIS RENTAL AMOUNTS TO $177.41 PER QUARTER AND WILL COMMENCE ON THE DELIVERY DATE SET FORTH ABOVE.

IT IS STATED IN THE ASSISTANT SECRETARY'S LETTER THAT IN PREPARING CONTRACTS OF THE TYPE HERE INVOLVED, THE PRACTICE WAS FOR THE BUREAU OF ORDNANCE PERSONNEL IN WASHINGTON TO ASCERTAIN THE VALUE OF THE FACILITIES INVOLVED FROM PROPERTY RECORD CARDS; TO SET FORTH THE FACILITIES AND THE VALUE THEREOF AS SO ASCERTAINED IN AN EXHIBIT TO THE CONTRACT DESIGNATED ENCLOSURE A; AND AFTER COMPUTING ANNUAL RENTAL OF THE FACILITIES BY APPLICATION OF THE ABOVE STATED PERCENTAGE TO THE VALUE OF THE FACILITIES, TO COMPUTE THE QUARTERLY RENTAL AND SET FORTH THAT RENTAL ALSO IN ENCLOSURE A TO THE CONTRACT FORM. THE VALUE OF THE FACILITIES IN THE PRESENT CASE WAS SET FORTH IN SAID ENCLOSURE A AS $1,906.48 FOR THE CYLINDRICAL GRINDER AND $5,190 FOR THE SURFACE GRINDER. SUBSEQUENT TO EXECUTION OF THE CONTRACT, THE CONTRACTOR ASCERTAINED THAT THE ORIGINAL PRICE TO THE GOVERNMENT OF THE CYLINDRICAL GRINDER HAD BEEN SUBSTANTIALLY LESS THAN THE BASE FIGURE OF $1,906.48 USED IN PREPARING THE CONTRACT; AND, UPON INVESTIGATION BY THE BUREAU OF ORDNANCE, IT WAS DISCOVERED THAT THE FIGURE $1,906.48, APPEARING OPPOSITE THE WORD "TOTAL" ON THE PROPERTY RECORD CARD COVERING THIS MACHINE, WAS ERRONEOUSLY COPIED OFF THE CARD AS REPRESENTING THE VALUE OF THE MACHINE, WHEREAS, IN FACT, THAT FIGURE INCLUDED FREIGHT CHARGES OF $42.84 AND INSTALLATION CHARGES OF $263.64. CONSEQUENTLY, THE VALUE OF THE CYLINDRICAL GRINDER FOR RENTAL PURPOSES WAS $1,600 RATHER THAN $1,906.48, AS STATED IN ENCLOSURE A TO THE CONTRACT.

IT IS STATED FURTHER THAT THERE WAS ADDED TO THE GRINDER A STARTER HAVING A COST OF $21; THAT THE COST OF THE STARTER WAS OMITTED FROM THE COMPUTATION OF THE VALUE OF THE GRINDER AT THE TIME THE CONTRACT WAS PREPARED; AND THAT THE TRUE VALUE OF THE CYLINDRICAL GRINDER ON WHICH RENTAL SHOULD HAVE BEEN COMPUTED WAS $1,621. IT IS ALSO STATED THAT THE FIGURE OF $5,190, SET FORTH IN ENCLOSURE A TO THE CONTRACT AS THE VALUE OF THE SURFACE GRINDER, WAS INCORRECT BECAUSE A TWO-POLE FUSIBLE SWITCH VALUED AT $5.78 HAD BEEN ADDED TO THE GRINDER AND, THEREFORE, THE TRUE VALUE OF THE SURFACE GRINDER UPON WHICH RENTAL SHOULD HAVE BEEN COMPUTED WAS $5,195.78 INSTEAD OF $5,190. IT IS POINTED OUT THAT, COMPUTED ON THE BASIS OF 10 PERCENT OF THE TRUE COST OF THE MACHINES, THE QUARTERLY RENTAL FIGURE WHICH SHOULD HAVE BEEN INSERTED IN THE CONTRACT WAS $170.42 PER QUARTER RATHER THAN $177.41 PER QUARTER. THERE IS ALSO ENCLOSED A STATEMENT BY THE CONTRACTING OFFICER TO THE EFFECT THAT INSOFAR AS THE AGREEMENT, AS EXECUTED, PROVIDED FOR RENTAL CHARGES BASED ON ERRONEOUS VALUATION, IT FAILED TO EXPRESS HIS INTENTION IN THE MATTER.

IT IS WELL SETTLED THAT A CONTRACT MAY BE REFORMED ON THE GROUND OF MUTUAL, AS DISTINGUISHED FROM UNILATERAL, MISTAKE. HOWEVER, PROOF OF THE MUTUAL MISTAKE MUST BE OF THE CLEAREST AND MOST SATISFACTORY CHARACTER--- A MERE PREPONDERANCE OF EVIDENCE NOT BEING SUFFICIENT. PHILIPPINE SUGAR ESTATES DEVELOPMENT CO. V. GOVERNMENT OF THE PHILIPPINE ISLANDS, 247 U.S. 385; SNELL V. INSURANCE CO., 98 U.S. 85; FIREMEN'S INS. CO. V. LASKER ( C.A.A.), B F.2D 375. IN THE PRESENT MATTER, THE EVIDENCE SUBMITTED INDICATES THAT A MISTAKE WAS MADE BY THE GOVERNMENT IN COMPUTING THE RENTAL FIGURE INSERTED IN THE CONTRACT. THE CLEAR WEIGHT OF AUTHORITY IS THAT A MISTAKE BY ONE PARTY IN THE STATEMENT OF A PRICE, IF NOT KNOWN TO THE OTHER PARTY, DOES NOT AFFECT THE VALIDITY OF THE CONTRACT AS MADE. TATUM V. COAST LUMBER CO., 16 IDAHO 471, 101 P. 957; STEINMEYER V. SCHROEPPEL, 226 ILL. 9, 80 N.E. 564; BOECKELER LUMBER CO. V. CHEROKEE REALTY CO., 136 MO. APP. 708, 116 S.W. 452; HARRAN V. FOLEY, 62 WIS. 584, 22 N.W. 837.

IN THE PRESENT CASE, THE CONTRACTOR UNEQUIVOCALLY AGREED TO PAY A RENTAL OF $177.41, PER QUARTER, FOR THE FACILITIES. THERE IS NO EVIDENCE THAT HE KNEW HOW THAT FIGURE WAS COMPUTED, OTHER THAN THAT IT WAS BASED ON "10 PERCENT OF THE APPRAISED VALUATION OF THE FACILITIES PER ANNUM.' AND, OF COURSE, THE TERM "APPRAISED VALUATION" WOULD NOT ORDINARILY BE SYNONYMOUS- -- EVEN IN THE CASE OF NEW FACILITIES--- WITH "ORIGINAL COST.' MOREOVER, THE MERE FACT THAT A SELLER, ACTING IN GOOD FAITH, ERRONEOUSLY APPRAISES THE VALUE OF THE THING SOLD, EITHER BY FAILING TO TAKE INTO ACCOUNT ELEMENTS OF VALUE THE THING HAD OR BY ASCRIBING TO IT ELEMENTS OF VALUE IT DID NOT HAVE, AFFORDS THE BUYER NO REDRESS IF THE PRICE FIXED IN THE CONTRACT OF SALE IS CLEARLY SET FORTH AND MUTUALLY AGREED UPON. CF. HAZELTON TRIPOD-BOILER CO. V. CITIZENS ST. RY. CO., 72 F. 317.

ACCORDINGLY, I FIND NO PROPER BASIS IN THE PRESENT RECORD FOR AUTHORIZING REFORMATION OF THE RENTAL AGREEMENT.