Case ID: us-ct-cl_63/html/0234-01.html
Source: Caselaw Access Project
Author: {"author": "Moss, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

POOLE ENGINEERING & MACHINE CO. v. THE UNITED STATES
    [No. A-331.
    Decided March 7, 1927]
    
      On the Proofs
    
    
      Contract; delay liy Government; decision of contracting officer; release of Government from damages. — In a contract with the United States the plaintiff agreed to make and deliver barbette gun carriages at a fixed price and at stated times, the Government to furnish castings therefor within a fixed period. The castings were not furnished by the dates agreed upon and by reason thereof the plaintiff was delayed in its work and was granted an extension of time partially covering such delay. The contracting officer found that the entire period of delay in the work was due to nondelivery of the castings and liquidated damages provided for by the contract for delays were remitted to the contractor and it was paid the full contract price, as modified by additions and' deductions due to changes in specifications. The contract provided that in making settlement the contractor should be credited for all delays which the contracting officer might “ determine to have been due to action of the United States,” and that such cause should not “ constitute a basis for action against the United States for damages.” Held, that plaintiff could not recover the additional expense due to the delay on the part of the Government.
    
      The Reporters statement of the case:
    
      Mr. George R. Shields for the plaintiff. King & King were on the briefs.
    
      Mr. George H. Foster, with whom was Mr. Assistant Attorney General Herman J. Galloway, for the defendant.
    The court made special findings of fact, as follows:
    I. The Poole Engineering and Machine Company is a corporation organized under the laws of the State of Maryland, having its principal office and place of business in the City of Baltimore, and had been for many years, and was at the times hereinafter mentioned, conducting a general engineering and machinery business.
    II. On January 3, 1917, plaintiff entered into a contract with the United States, represented by Colonel J. H. Rice, Ordnance Department, for the manufacture and delivery of nine barbette gun carriages at a fixed price of $49,000.00 each. These carriages were to be delivered, the first by January 3, 1918, and the last by July 3, 1918. A copy of said contract is filed with the petition as Exhibit “A” and is made a part hereof by reference.
    III. The Government agreed to finish the castings entering into the manufacture of the carriages, the delivery of the castings to begin by the 3d day of April, 1917, and be completed by October 3, 1917. Several hundred separate parts entered into the manufacture of a completed carriage, and in order to do the work properly and in order it was necessary that the castings be furnished in a regular and systematic way. The plaintiff worked out a schedule for the delivery of these castings and forwarded it to the United States Arsenal at Watertown, Massachusetts, and the Government approved the schedule.
    IY. A large planer which had been ordered by the plaintiff from the Detrick & Harvey Machine Company was not completed and ready for operation 'until the middle of J anuary, 1918. This machine was needed to plane large cast* ings. The contractor had an old planer of obsolete design on which he endeavored to plane the large side frames, but this heavy work was beyond its capacity, and owing to the lack of proper crane facilities for handling large castings, the many adjustments necessary on this old planer, and the handling of the frames by inadequate facilities, excessive time and labor were consumed, which greatly retarded the work and added to the cost.
    On December 28, 1917, the plaintiff, in writing, requested the War Department to extend the contract period of delivery for 90 days, assigning as the reason for the extension the fact that this special machinery, which was relied on to complete the carriages on time, was greatly delayed through no fault of the contractor, and also assigned the interruption of the labor market by the declaration of war in April, 1917, which occasioned the loss in operators by voluntary enlistments and the draft.
    On April 3, 1918, the Government extended the contract time sixty days. This action of the Government extended the period of final completion from July 3, 1918, to September 1, 1918.
    The contractor was experienced in gun-carriage work, having manufactured carriages of a smaller type under previous contracts; the plant was supplied with certain equipment and facilities for performing the work, the necessary labor was available, and all the necessary skilled superintendence and assistance were on hand, but it was necessary to provide certain special machinery which could handle the large castings with greater ease and accuracy. This machinery was ordered by the plaintiff on J anuary 18, 1917, but was not delivered until the late fall of 1917.
    Y. The Government delivered a few castings prior to April 3, 1917, but did npt at that date, or for. some time thereafter, deliver all the castings necessary in the manufacture of one complete gun carriage and failed to deliver all the castings necessary in the manufacture of the nine gun carriages by October 3, 1917, but continued to deliver the castings from time to time thereafter until June 17, 1919, on which date the last casting was delivered.
    
      VI. The contractor made frequent protests, verbal and in writing, to the contracting officer, and others in authority at the War Department, about the failure of the United States to furnish the castings in a timely and orderly fashion and called attention many times to the fact that delay by the Government was greatly interfering with its scheduled production and adding to the cost of manufacture.
    VII. The failure of the special machinery to arrive on time and the failure of the Government to deliver the castings per schedule occasioned additional cost in the performance of the work. The uncertain and tardy delivery of the castings prevented the contractor from carrying on the work in accordance with any system and obliged it to shift its operations needlessly. The period of performance was prolonged into a time when labor and overhead costs had advanced greater than those during the period fixed in the contract.
    At the time work on the contract in suit was in progress the plaintiff was. performing work on other contracts with the Government, and during the periods of delay on the contract in suit labor employed thereon which otherwise would have been idle was shifted to work on the other contracts.
    VIII. The gun carriages were completed and delivered at various dates in 1919, and delivery of the last carriage was on June 19,1919.
    IX. In the course of the work the Government assessed liquidated damages for failure to complete deliveries in accordance with the terms of the contract.
    On May 6, 1919, the plaintiff sent and in due course the War Department received the following letter:
    May 6th, 1919.
    Subject: Liquidated damages — 12" barbette carriage contracts.
    Lieut. Col. J. H. Rice,
    
      Office of the Ohief of Ordnance,
    
      War Department, Washington, D. O.,
    
      Via Inspector of Ordnance, U. S. A.
    
    Sirs: The Poole Company is now nearing completion of its contract for barbette carriages, and we wish to bring to jour attention at this time certain facts which will have a bearing on the claim the Poole Company intends to make for additional compensation due to conditions arising beyond its control, and on a claim which we intend to make for a waiver of liquidated damages.
    This contract was taken prior to the United States going into the war. At that time our estimates were based on certain wage rates then existing and on certain conditions. Due to war conditions, resulting in a practical control of all interests by the Government, wages were advanced, and we were forced to take work which we otherwise would not have been obligated to take. The net result is that we have suffered a great loss on each one of the carriages produced.
    The principal point, however, in connection with this proposition is that, due to delays on the part of the Government in supplying us with castings, and due to changes in the specifications, drawings, etc., we were delayed many months. During these months daily wage rates were increased, and we were damaged to the extent of the difference.
    We simply want to go on record at this time that we intend to ask the Government to reimburse us up to our fair cost, otherwise we feel that we would be clone a great injustice. We have all the facts and data in connection with this contract, and would be pleased to have you advise us how to proceed.
    Respectfully,
    Poole ENGINEERING & Machine Co.,
    By Dudley Shoemaker, Vice President.
    
    DS: D
    On February 25,1920, the contractor applied for an official determination of the responsibility for the delays, and asked for remission of the liquidated damages. On May 21, 1920, the contracting officer made a finding, which was approved by the Ordnance Department, that the contractor was delayed 351 days between January 3, 1918, and June 19, 1919, inclusive, by reason of the failure of the Government to furnish the castings. The liquidated damages theretofore assessed were remitted to the contractor, and the full contract price was paid to the plaintiff as modified by certain additions and deductions made necessary by the changes in the plans and drawings in accordance with section 5 of the contract.
    X. Payments to the plaintiff by the defendant on the contract of January 3, 1917, were provided for by a supplementary contract between the parties dated April 18, 1918, whereby, among other things, the defendant agreed to advance the plaintiff on designated security money for working capital, the plaintiff to repay the advance with interest, the defendant being authorized to deduct thirty-five per cent from each bill presented by the plaintiff in the course of the work and to apply such deductions first to the repayment of the advance and thereafter to the payment of interest accrued on outstanding balances. In accordance with , this arrangement the defendant on April 18,1918, by its disbursing officer, advanced the plaintiff $130,000, and thereafter as the work progressed and deliveries were made there were further payments to the plaintiff on bills presented by it with allowances for liquidated damages for the several delays in the delivery of each carriage, and for retained percentages of twenty-five per cent of the several bills in addition to the aforesaid recoupment of thirty-five per cent.
    The last principal payment on the carriages was made July 10,1919. Thereafter the payments made were compensation to the plaintiff for authorized changes, refundments of the liquidated damages theretofore deducted, and refund-ments of the retained percentages, with deductions for accrued interest and charges for material, patterns, etc., furnished by the Government, so that in all the plaintiff has received, under the terms of its said principal and supplementary contracts, the net sum of $441,562.20.
    Final payment was made June 29, 1921, for $12,250.00, representing retained percentage on the first carriage delivered.
    XI. The excess cost of labor, overhead, and other administrative expenses incurred by the plaintiff by reason of the nonreceipt of the aforesaid castings, and paid by it, is not satisfactorily proved.
    XII. The defendant sets up a counterindebtedness on the part of the plaintiff and in favor of the United States for excessive or erroneous payments under three war contracts. (1) Construction contract No. 771, dated August 12, 1918_$2,547.95
    This amount was paid the plaintiff as contractor for work performed by a subcontractor, but there is no evidence substantiating an erroneous payment.
    
      (2) Ordnance contract P 2191-1188A, dated March 11, 1918- $7,260. 61
    The Secretary of War made an award in final settlement of this contract under the Dent Act.
    (3) Ordnance contract P12536-3099A, dated July 24, 1918- $56,846. 08
    The Secretary of War on September 19, 1919, after an audit, made an award under the Dent Act in full and final settlement of this contract.
    XIII. No claim was presented by the plaintiff to the War Department or General Accounting Office.
    The court decided that plaintiff was not entitled to recover.
   Moss, Judge,

delivered the opinion of the court:

On January 3, 1911, the plaintiff, Poole Engineering and Machine Company, entered into a contract with the United States Government for the manufacture for the use of the Ordnance Department of nine 12-inch barbette gun carriages in accordance with certain plans and specifications, at the price of $49,000 each to be delivered, the first carriage on or before January 3, 1918, and all of the nine carriages on or before July 3, 1918. Said contract provided that the steel castings necessary for the construction of the carriages would be furnished by the Ordnance Department beginning on or before April 3,1917, and to be completed on or before October 3,1917.

The Government failed to furnish the castings for the first carriage by April 3,1917, and also failed to furnish the castings required for all the carriages by October 3, 1917. Castings for the first carriage were not delivered until November 6, 1917, and the last of the castings for the whole number were not delivered until June 17, 1919, more than a year after the entire work was to have been completed.

It is alleged that the rates of wages prevailing during 1917 and the first half of 1918 were substantially lower than they were in the last half of 1918 and the first half of 1919, for the same character of labor. Plaintiff avers that but for .the delay by the Ordnance Department in furnishing the steel castings it-could and would have completed the contract within the specified time* and under the lower rates of wages, and that by reason of said delay ,it has been damaged-in the sum of $150,000. It is also alleged by plaintiff that it was required to maintain its organization for the performance of its contract, and that the overhead expenses chargeable to this work after July 3, 1918, together with the proper share of administrative expenses, likewise chargeable to defendant’s delay, amounted to the sum of $15,000. This suit is for the recovery of the sum of these two items, $225,000.

On May 6, 1919, which was a few weeks before the completion of the work under the contract, plaintiff wrote a letter to the Chief of the Ordnance Department, calling attention to delays occasioned by the failure of the Government in furnishing the castings and also on account of changes in specifications provided for in the contract. In this letter particular reference is made to the matter of liquidated damages which might be claimed by the Government under the terms of the contract. It is further stated, “We simply want to go on record at this time that we intend to ask the Government to reimburse us up to our fair cost, otherwise we feel that we would be done a great injustice. We have all the facts and data in connection with this contract, and would be pleased to have you advise us how to proceed.”

It is interesting to note that, so far as this record discloses, the question of damages was never again mentioned by plaintiff. On receipt of the letter the question of a waiver of liquidated damages was taken up for consideration, and after an investigation by representatives of the Government it was determined that the Ordnance Department had been responsible for plaintiff’s delay, and the amount which had been retained from time to time as liquidated damages was paid to plaintiff. The final payment of the contract price, on the delivery of the last gun carriage, was made on July 10, 1919. Various other items constituting a claim for the extra cost of changes authorized by the contract and involving a substantial sum were paid at different periods, each being the subject of more or less correspondence, but at no time during the discussion and settlement of these various items did plaintiff suggest that he would claim damages against the Government. The purpose of the letters from plaintiff to the Government prior to May 6, 1919, according to the testimony of Clay C. Bartlett, purchasing agent of plaintiff, on cross-examination, was to expedite delivery in order that the contract might be completed within the specified time, thereby relieving plaintiff of liability for liquidated damages. Obviously, there was no thought during the progress of the work of any claim for damages.

The vice president of the company, Dudley Shoemaker, testified on cross-examination that the question of damages was first considered “ when we closed our books and the comptroller of the company showed us how much our cost exceeded our estimates.” Certainly the books were not closed on this account until long after the letter of May 6, 1919. Plaintiff’s damages, if any, grew out of the contract. It was a part of plaintiff’s claim on account of work performed under the contract. Plaintiff should have definitely asserted its claim at or before the final payment. The letter of May 6, 1919, is not the assertion of a claim for damages. It is nothing more nor less than the declaration of an intention to request a reimbursement of its loss on account of increased cost of labor and overhead. Plaintiff’s conduct thereafter was such as to justify the assumption that even if plaintiff in good faith intended on May 6, 1919, to claim damages that intention had been abandoned. In the light of the statement of the vice president that the first thought of a claim for damages was when the books were closed, there can be little doubt as to the correctness of this assumption.

Plaintiff’s course throughout the whole transaction, as will presently be more fully shown, is clearly indicative of a feeling of uncertainty as to whether or not it had a valid and enforceable cause of action against the Government.

The evidence as to the amount of damages herein is unsatisfactory. Witnesses endeavored to give an estimate as to the proportion of the increased cost of labor and cost of overhead expenses properly chargeable to plaintiff’s contract. During this same period plaintiff had on hand several other contracts with the Government, one of which involved the construction of two additional gun carriages of precisely the same type and class as those constructed under the first contract. It had ten times more work than it could handle, according to the testimony of one of plaintiff’s witnesses. The difficulty of distributing increased cost of operation to any particular contract is at once apparent. As illustrative of the indefinite and uncertain character of the evidence upon which plaintiff relies herein, it might be mentioned that plaintiff’s chief witness on this point, Allen O. Stehl, an accountant, estimated the amount chargeable to this contract on account of excess labor at $24,501.81; for excess cost of “shop overhead,” $68,039.41; and excess cost of “ general overhead,” $24,799.51, making a total of $117,340.79. This witness was introduced later and testified that in his first estimate he had included the excess cost on the two additional carriages mentioned above, and he therefore desired to reduce his total estimate to $95,984.77. This was accomplished by deducting from $117,340.79 two-elevenths of that sum. The witness stated that there was no way to determine the exact amount. Mr. Shoemaker, in response to a question on cross-examination concerning the proportion of “overhead ” cost chargeable to plaintiff’s contract, stated “ It is impossible for me to answer that question; it is impossible for anybody to answer it. We tried to do that on another contract, distributing overhead on other contracts going through at the same time.” Considering all the evidence we are inclined to agree with the witness, who with the advantage of a previous unsuccessful experiment declared that it was impossible of accomplishment. There was no appreciable loss of time on account of delays in the delivery of the castings. The labor employed on the gun-carriage contract was merely shifted to other work during any delay period.

The contract involved herein contains another provision which is determinative of the case. It is as follows:

“In making settlements in which such charges are involved the contractor shall receive credit for all delays which the contracting officer or his successor may determine to have been due to action of the United States and for such other delays as the same authority may decide to have been due to such unavoidable causes, including fires, unseasonably severe storms, and labor strikes in the works of the contractor, as occurred before the date upon which final delivery is due under the provisions of Article I, or before the expiration of the time thereafter for which credit is allowed under this article; and the date of the final delivery shall be considered for the purpose of settlement as the date of actual final delivery less the delays for which credit has been allowed; but none of the above causes shall constitute a basis for action against the United States for damages.”

The history of this litigation deserves notice. The original petition in this case was filed December 7,1921. To this petition defendant interposed a demurrer, which was sustained by the court in an opinion by Chief Justice Campbell, in which the questions in issue were thoroughly considered. (57 C. Cls. 232.) After discussing the contract involved herein as to certain aspects of the case the court said, “but it also provides that ‘none of the above causes shall constitute a basis for action against the United States for damages.’ If there was otherwise a cause of action on account of alleged delays, this stipulation is sufficient to defeat it.”

Thereafter on motion for new trial the order of dismissal was set aside and by leave of court plaintiff filed an amended petition. Demurrer to the amended petition was overruled without prejudice. Evidence was taken, the case was referred to a commissioner for findings of fact, and the report of the commissioner was filed April 26, 1926. Plaintiff filed certain exceptions to the commissioner’s report, and on the same day presented a motion to defer further action in the prosecution of the case. This motion, which was granted, was predicated upon the following memorandum signed by plaintiff’s attorneys:

. “ Claimant is this day filing its exceptions to the commissioner’s findings in this case, but respectfully asks leave to defer printing these exceptions and asks the court to defer talcing any action on same pending action of the Supreme Court on writs of certiorari being filed in the three cases, Lange and Bergstrom, Nos. C-930 and C-931, and H. P. Converse & Co., No. C-Í202. If writs are denied in those cases motion to dismiss the present case will be made, as •claimant could bave no hope of favorable action by this court as long as this court’s interpretation of the Supreme Court’s decision in the H. E. Crook Co. case prevails.”

The Supreme Court denied the .writs in the three cases referred to in plaintiff’s motion. No motion was made by plaintiff to dismiss, nor did counsel for the Government move for dismissal on account of plaintiff’s stipulation, and the case was allowed to proceed. In its supplemental brief plaintiff offers through coimsel an “ explanation and apology for what might otherwise appear an anomalous situation,” the suggestion that plaintiff itself “ is unwilling to abide the then judgment of its counsel, and insists that the case proceed to trial on the merits.”

In granting a motion of this character the court has the right to rely upon the stipulated conditions contained therein. Plaintiff’s motion contained the declaration that plaintiff “ could have no hope of favorable action by this court as long as this court’s interpretation of the Supreme Court’s decision in the H. E. Crook Co. case, prevails,” and further declared its purpose to move for a dismissal in the event the writs should be denied. It is fair to assume that in granting the motion the court was influenced by the express avowal ■of plaintiff’s purpose to dismiss its action in the event the writs of certiorari should be denied, as offering the opportunity for a speedy disposition of the case.

The argument of plaintiff’s counsel on the question of the applicability of the decisions mentioned in said motion is not convincing. This court entertains the- same view now as was expressed in the opinion of the Chief Justice in sustaining the demurrer to the petition. The case is controlled by the Crook Co. case, 270 U. S. 4; Merchants’ Loan & Trust Co. case, 40 C. Cls. 117; Wells Bros. Co. case, 254 U. S. 83; Chas. F. Wood et al. case, 258 U. S. 120, and other cases.

It is the judgment of the court that plaintiff’s petition and amended petition should be and the same are hereby dismissed.

Geaham, Judge; Hay, Judge; Booth, Judge; and Campbell, Chief Justice, concur.