Opinion of the Court

to an equity in favor of the defendant that it should be applied in payment of the amount due the plaintiff and that such an application was in effect a return of the money to the defendant, having been applied to its benefit upon a debt which it was found to be owing, and the court further said that

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* the whole doctrine of refund upon repudiation of a contract of settlement is not technical, but equitable, and requires merely that the practical rights of the other party shall not thereby be prejudiced; that he shall be no worse off than if he had never made the contract of settlement."

When the plaintiff filed its claim with the War Department it gave credit to the defendant for all that had been paid to plaintiff by the Government. The payments which the Government made after plaintiff filed its claim, for linters manufactured after January 1, 1919, were made with full knowledge that the plaintiff repudiated the contract for settlement and that if plaintiff had a right so to do the moneys so paid were due plaintiff upon the original contract and could be rightfully applied thereon. There is nothing in this transaction to estop plaintiff from maintaining its action.

The case of Swift Co. v. United States, 111 U.S. 22, 28-29, was cited at length in the opinion in the Hazelhurst case, supra, but is so directly in point that it may be well to call attention to it again. In that case the plaintiff was entitled to a commission from the Government but the Government refused to make payment of the amount due except in a manner that reduced the amount to which the plaintiff was entitled, and the fact that the plaintiff accepted and held the amount which it received from the Government under the arrangements into which it had been coerced was held by the Supreme Court not to prevent its recovery of the amount due under the original contract. As was said in the Hazelhurst decision, the plaintiff has here presented a stronger case than was found in the quotation from the opinion of the Supreme Court in the Swift case, supra, in that the threatened action of the defendant's officials

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Opinion of the Court

was not only illegal but would have resulted in irreparable injury. In all cases where recovery is sought on account of injury or damage received through an unlawful act, the party complaining is required to so act that it will not intensify the damage caused by the unlawful act. Here the chief defense of the defendant is that plaintiff ought to have increased the damage done by refusing to accept money that was still due it under the original contract, after it had been compelled to make another contract by duress.

It is contended on behalf of defendant that the original contract was canceled in accordance with its terms, but this is far from being the fact. The plaintiff, it is true, did receive notice of cancellation, but what was finally required of it made no pretense of conforming to the terms set out in the original contract upon which cancellation might be made. It was not in fact a cancellation of the original contract which would have simply stopped proceedings under it at the date of notification and entitled plaintiff to just compensation; but an entire nullification of the original contract accompanied with threats not to pay what was already due thereunder. In fact the contract obtained by duress recited that it was made "in lieu of cancellation."

It is claimed on behalf of the defendant that the regulations of the Food Administration limited the profit per ton of seed crushed to $3.00 a ton, and that plaintiff's profits exceeded $3.00 a ton and the amount of its damage should be lessened accordingly. Counsel for plaintiff contended that the regulations were not absolute in this respect. We do not find it necessary to determine this question. Assuming the regulations to be as claimed by defendant, we find that the evidence fails to show that plaintiff realized a profit in excess of $3.00 a ton. It is true that defendant's expert, McCallum, testified that plaintiff's books so show, but his testimony is negatived by that of the witness Kidd also called on behalf of defendant but cross-examined at length by plaintiff. The cross-examination of the witness Kidd tended to show that McCallum failed to include considerable sums that in determining a profit would be allowed

Opinion of the Court

for depreciation, and otherwise tended to show that the witness McCallum had not correctly computed the amount of the profit. Counsel for defendant contend that the matter relied upon by plaintiff was not proper cross-examination and should be excluded from consideration, apparently on the ground that the witness did not testify in chief directly upon these matters. But the cross-examination tended to rebut inferences that might be drawn from his examination in chief with reference to the amount of profits realized by plaintiff, and we are inclined to think the better rule is that such matters are a proper subject for cross-examination. In any event, the admission of such evidence is clearly within the discretion of the court and we think it ought to be received.

It is finally contended on behalf of defendant that notwithstanding the plaintiff was required to give up its original contract and make a new one under which it would receive a less amount, plaintiff has concluded its operations with a profit and has been able to pay dividends. We do not think it necessary to discuss this matter at length, because we consider it entirely immaterial. If we are correct in what has been stated above, plaintiff was entitled to all of the benefits of the original contract and the fact, if it be a fact, that defendant's unlawful conduct did not prevent it from making some profit can not prevent plaintiff from recovering the amount of which it was unlawfully deprived. The plaintiff is entitled to judgment but another question arises not mentioned in the argument of either party.

If the amount due the plaintiff under the first contract is ascertained in accordance with its terms, in order to determine the net amount of plaintiff's damages it will be necessary to deduct therefrom $4,284.62, which the plaintiff realized on the sale of the hulls by reason of the change in the method of manufacture prescribed by the second contract in excess of what it would have received had the linters been manufactured in accordance with the original

contract.

The findings of fact show that plaintiff was paid for all linters cut prior to November 28, 1918, at the rate provided

Memorandum by the Court

in the original contract. All payments made thereafter were in accordance with the supplemental contract. The amount unpaid, computed in accordance with the terms of the original contract, is $31,370.69. This amount and the basis of its calculation are stated the same as in the commissioner's finding no. 20, and no exception was taken to this part of the finding by defendant. We conclude that as a matter of fact it is correct. It appears, however, that the claim of plaintiff, as set forth in the petition, is for a much less sum, the greater part of the difference arising by reason of the amount received for linters sold to others than the United States being stated in the claim to be $40,516.25, but in the finding which we have made to be $24,019.31, and there are other items of the claim which do not exactly agree with the findings. Apparently on account of the number of cases brought by counsel for plaintiff of the same nature some confusion has arisen and plaintiff will be given leave to amend its petition to conform to the evidence. When such amendment has been filed, the court will determine the amount of judgment to be rendered.

WHALEY, Judge; WILLIAMS, Judge; LITTLETON, Judge; and BOOTH, Chief Justice, concur.

MEMORANDUM BY THE COURT

[December 13, 1932]

An opinion has heretofore been rendered in this case holding that the plaintiff is entitled to judgment and giving plaintiff leave to amend its petition in accordance with the findings of fact made by the court and the evidence. Such an amendment now having been filed, it appears that the amount unpaid to plaintiff in accordance with the terms of the original contract between plaintiff and defendant, as shown by finding XXII made by the court, is $31,370.69. The next to the last paragraph of the opinion of the court shows that it is necessary to deduct therefrom the sum of $4,284.62 in order to ascertain the net amount of plaintiff's damages. This leaves $27,086.07 for which judgment will be entered in favor of plaintiff.

Reporter's Statement of the Case

CARALEIGH PHOSPHATE & FERTILIZER WORKS v. THE UNITED STATES

[No. L-228. Decided November 14, 1932.]

On the Proofs

Income and profits tax; interest on claim for refund; specific basis of claim stated in letter attached thereto.-Where, at the suggestion of the Bureau of Internal Revenue, a taxpayer attached to his claim for refund copy of a bureau letter showing the specific basis of the claim, the letter must be taken as forming part of the claim.

Petition; statute of limitations; prayer for interest on refund taken as prayer for interest on credit.-Plaintiff's original petition contained a prayer for recovery of interest on a "refund" of taxes for a designated year. Thereafter, and after the statute of limitations had expired, plaintiff filed an amended petition for interest on a "credit" which formed part of the same adjustment of overassessment made by the Commissioner of Internal Revenue. The original petition was sufficient in amount to cover interest both on "refund" and on "credit." Held, that in this connection the word "refund" may be construed to include a credit on the same schedule, and that the amended petition did not state a new cause of action.

The Reporter's statement of the case:

Mr. W. N. Wood for the plaintiff.

Mr. Erwin N. Griswold, with whom was Mr. Assistant Attorney General Charles B. Rugg, for the defendant. Messrs. Charles R. Pollard and D. Louis Bergeron were on the brief.

The court made special findings of fact as follows:

I. Plaintiff is and at all times material herein was a corporation organized and existing under the laws of the State. of North Carolina, with its principal office at Wilson, North Carolina.

II. On March 21, 1918, plaintiff filed with the collector of internal revenue for the district of North Carolina a corporation income and profits tax return for the calendar year 1917, from which it appeared that the income and profits