United States v. P & D Coal Mining Co., Inc. , 358 F.2d 619 ( 1966 )

McALLISTER, Senior Circuit Judge.

The above cause came on to be heard on the record and briefs of the parties, and the argument of counsel in open court. It appears that a contract was entered into between the National Lead Company and the P & D Coal Mining Company, in which it was agreed that, for a certain price, the Coal Company would deliver coal which was to be used by the United States Atomic Energy Commission. The contract between the National Lead Company and the P & D Coal Mining Company provided, among other stipulations, the following:

“Term of This Agreement

“The term of this agreement shall be for the period from July 1, 1955, to and including June 30, 1956, provided, however, that the Company, with the prior written approval of the Commission, shall have the option to renew this agreement, and an option to renew any such renewal, for another year upon the same terms and conditions by serving a written notice upon the Seller on or before thirty (30) days prior to the expiration of the agreement term or any renewal thereof; provided, further, however, that the Seller may terminate this agreement by a written notice to the Company not less than sixty (60) days prior to the expiration of the agreement term or any renewal thereof. * * #

“The quantity of coal which the Seller agrees to sell and the Company agrees to buy under the terms of this agreement shall not be less than ten thousand (10,000) tons (net ton of 2,000 pounds) or exceed fifty thousand (50,000) tons except by mutual agreement of the parties hereto.”

On December 23, 1955, after failing to get the National Lead Company to agree to a price increase, the P & D Coal Mining Company informed the National Lead Company that it would not deliver any coal in excess of 10,000 tons. Thereafter, the National Lead Company informed the Coal Company that its Company would obtain its coal requirements from other sources and hold the Coal Company liable for any excess costs incurred by it up to the 50,000 tons mentioned in the contract. Subsequently, after the National Lead Company purchased the additional coal at an excess cost of $19,873.45, it assigned its alleged claim under the contract to the United States, and the Government, as such as-signee of the rights and obligations under the contract between the original parties, instituted this suit for $19,873.-45 for damages allegedly arising out of the Coal Company’s breach of contract. In answer, the Coal Company filed a counterclaim for $2,204.53, plus interest, for amounts admittedly owed it on unpaid invoices.

After hearing, the district court held that the contract, by virtue of the terms above quoted, gave the P & D Coal Mining Company the right to terminate the contract at any time up to 60 days prior to its expiration; that it had so terminated the contract; and that, accordingly, it did not owe the extra costs incurred by the National Lead Company in purchasing coal from other sources. Furthermore, the court held that while the United States, normally, cannot be held liable for interest unless there is express consent therefor in a statute or in the contract between the parties, that rule is not applicable where, as in this case, the United States first seeks enforcement under a claim assigned to it, against a private party, and that party then counterclaims against it; and that, in such a case, interest, as damages for the withholding of money due the private party, may be awarded on the counterclaim.

The Government was not a party to the contract. It mentioned that the National Lead Company had entered into a contract, referred to as the “Principal Contract,” with the United States of America, represented by the United States Atomic Energy Commission, and that, in furtherance of the “Principal Contract,” the Company desired to purchase coal from the P & D Coal Mining Company. It was stated and agreed in the contract that the purchase order for the coal was entered into by the National Lead Company for and on behalf of the Government; that title to the coal furnished by the P & D Coal Mining Company should pass directly from the Coal Company to the Government, as purchaser, at the point of delivery; and that the National Lead Company was authorized to, and would, make payment thereunder from government funds advanced and agreed to be advanced to it by the Commission and not from its own assets; and would administer the purchase order in other respects for the Government. However, regardless of the references to the Government in the contract, the contract was an agreement between the National Lead Company and the P & D Coal Mining Company; and it was signed by those contracting parties through their lawful agents. It may be added that the contract showed that it was approved by the United States Atomic Energy Commission. Irrespective of the fact that this purchase order for the coal was understood to be entered into by the National Lead Company for and on behalf of the Government; that title to all supplies furnished thereunder by the P & D Coal Mining Company would pass directly from it to the Government; and, that the National Lead Company was authorized to, and would, make payment thereunder from government funds advanced by the Government, and administer the purchase order for the Government, nevertheless the contract can, in no sense, be characterized as a contract between the P & D Coal Mining Company and the Government.

The National Lead Company was, by the terms of the agreement, given the right to terminate the contract with the P & D Coal Mining Company under certain circumstances. The Government had no right to bring a suit for damages under the contract; and the P & D Coal Mining Company had no right, under the contract, to sue the Government for any sums due on coal delivered. The Government was not, under any possible construction, one of the contracting parties, and, by securing an assignment from the National Lead Company and suing upon it, was not relieved of liability for interest on the proved counterclaim of the P & D Coal- Mining Company for coal already delivered under its contract with the National Lead Company.

Under the terms of the agreement between the National Lead Company and the P & D Coal Mining Company, above quoted, it is our conclusion that the Coal Company had the right to terminate the contract at any time up to 60 days prior to its expiration, and that such right was properly exercised. As to the claim that the Government, in this case, is not liable for interest, we agree with the holding of the district court that the Government’s claim was based upon an assignment from the National Lead Company, and that the obligations of the original parties to the contract are not altered by the mere assignment of those rights and obligations to the Government.

In accordance with the foregoing, the judgment of the district court is affirmed upon the opinion of Judge Brooks, reported in D.C., 251 F.Supp. 1005.