Case ID: us-ct-cl_53/html/0536-01.html
Source: Caselaw Access Project
Author: {"author": "BaRNey, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

S. R. H. ROBINSON & SON CONTRACTING COMPANY v. THE UNITED STATES.
    [No. 32688.
    Decided June 3, 1918.]
    
      On the Proofs.
    
    
      Contracts, suspension of, when proper. — Suit on contract for construction of diversion dam for Reclamation Service, performance to be completed by April 1, 1908. In March, 1908, plaintiff applied for extension of time on ground that defendants’ officers had delayed plaintiff by nondelivery of materials. Giving plaintiff benefit of doubt the Secretary of the Interior extended the time 10 days, and as plaintiff failed to complete within such extended period, defendants’ officers deducted the stipulated per diem, for liquidated damages from the monthly amount earned. Plaintiff insisted defendants’ officers were without authority so to do, and declined to continue the work, whereupon, after due notice, the Secretary suspended the contract under its provisions, seized plaintiff’s plant and materials, and completed the work. On completion defendants’ officers rendered an account to plaintiff in which it was credited with retained percentages and charged with the agreed per diem for liquidated damages from the date, as extended, for completion and the date defendants assumed possession and control, leaving a balance due plaintiff, the acceptance of which was refused and suit brought as for a fraudulent and wrongful suspension and, by an amended petition, for improper charges assessed to plaintiff by the defendants for completing the work.
    
      Held,: A proper construction of the contract provisions relative to delays and deductions for failure to complete authorized suspension of the contract and assessment of liquidated damages to the date of suspension.
    
      Contracts; Proof, when burden on Government. — Where the Government completes the work of a defaulting contractor the burden of proof is upon it to justify the necessity for, as well as the reasonableness of, all charges against the former for completion of the work, even though the contractor’s complaint is for a fraudulent suspension.
    
      Practice; Pleadings. — A petition seeking to have a suspension of the contract held fraudulent need not be amended to enable the plaintiff to question the propriety of charges against his account for work and materials used by defendants in completing the contract.
    
      The Reporter's statement of the case:
    
      Mr. William, B. King for the plaintiff. King c& King were on the briefs.
    What is the legal consequence of delay by the United States causing the plaintiff to be unable to complete the work on time? That has been exactly pointed out recently by the Supreme Court in United States v. United Engineering <& Oon. Go., 234 U. S.,'236. The court says, p. 241:
    
      “ The precise question here is whether, when the work was delayed solely because of the Government’s fault beyond the time fixed for its completion and afterwards the work was completed without any definite time being fixed in which it was to be done, the claimant can be charged for the subsequent delays for which he was at fault by the rule of the original contract stipulating liquidated damages, or was that stipulation waived by the conduct of the Government and was it obligatory upon it in order to recover for the subsequent delays to show the actual damages sustained? We think the better rule is that when the contractor has agreed to-do a piece of work within a given time and the parties have stipulated a fixed sum as liquidated damages not wholly disproportionate to the loss for each day’s delay, in order to enforce such payment the other party must not prevent the performance of the contract within the stipulated time, and that where such is the case, and thereafter the work is completed, though delayed by the fault of the contractor, the rule of the original contract can not be insisted upon, and liquidated damages measured thereby are waived.”
    This same doctrine had been declared by this court some years before in Ittner v. United States, 43 C. Cls., 336.
    The application of the above doctrine to this case is exact and the conclusion is peremptory that the right to exact liquidated damages for any period of delay after April 1, 1908, was lost by the United States by its own acts in causing delay in the completion of this contract. This is quite independent of the question whether the plaintiff itself contributed to the ultimate delay.
    The Supreme Court has decided very clearly that delay in making the payments required by the contract warrants a contractor’s abandoning his work. In Ganal Company v. Gordon, 6 Wall., 561, a contract was made for building a mining canal or flume for twenty-five miles in California. The contract provided that payments should be made monthly as specified. The payments due on June 7 were not made. The contractors quit work on June 13 and entered suit against the company. The justification for their abandoning the work was the direct issue. The Supreme Court said of this, p. 569:
    “ We think the fault of the rupture lies wholly with the company. Gordon & Kinyon adhered to the contract, and pursued the work longer than they were bound to do. When they retired they were fully justified, and had a clear equity to be paid a fair compensation for the work they had performed.”
    That case was followed in this court by Pigeon v. United States, 27 C. Cls., 167. A contract for dredging provided for monthly payments. The engineer officer refused on October 5 to pay the contractor the money earned by him in September on the ground that he apprehended that claimant would not prosecute the work with sufficient vigor. On the next day the claimant stopped work. This court said, p.176:
    
      “ It seems to us that the law of this case fully authorized claimant to do what he did upon the failure of the defendants to pay according to the requirement of the contract.”
    
      The difference between the pending case and the case in the Supreme Court is much more favorable to the contractor here. In that case there was but six days’ delay in payment. In this case there was an absolute declaration that the payment would be made only subject to a deduction of $100 a day. In the Pigeon case in this court, there was only a temporary suspension of payment; yet the court justified the stoppage of work the day after that suspension. Authorities more directly in point are rarely found.
    Plaintiff insists that under no conditions can both actual damages and liquidated damages be charged and therefore that, even if the suspension was justified and the plaintiff in the wrong, these charges must be wholly disallowed and judgment rendered in. plaintiff’s favor’for the amount thus wrongfully charged.
    The principle here asserted arises out of the very nature of stipulated or liquidated damages. The parties agree that these are the damages for breach. When the breach occurs, the sum named fixes the damages, no more and no less. It would be quite inconsistent with the very nature of liquidated damages to allow their recovery and then to add actual damages. The parties have agreed to exclude the question of actual damages.
    The rule is admirably stated by the Supreme Court of Maryland in Smithson v. U. S. Telegraph Go., 29 Md. 162, saying, p. 166:
    “ Where the precise sum has been fixed and agreed upon by the parties that sum is the ascertained and liquidated damages, and the jury must assess that amount, no more and no less.”
    In Welch v. McDonald, 85 Ya. 500, a building contract provided for liquidated damages of $5 a day for delay, and the Court of Appeals said, p. 506, of the charge of the court below:
    “ It erred in not instructing the jury that they could not consider any question of damages beyond the measure fixed by the contract, nor for any amount greater than $5 per day during such delay.”
    
      In Holmes v. Holmes, 12 Barb. 137, the court said, p. 147:
    “That when the damages to be recovered are liquidated in advance by the terms of the contract, * * * the amount to be paid is not to be diminished, neither is it to be enlarged.”
    See also Darrow v. Cornell, 12 App. Div., 604, 42 N. Y. S. 1081; Go Fun v. Fidalgo Island Co., 37 Wash. 238; Woodford v. Kelley, 18 S. D. 615; and Liglvtner y. Menzel, 35 Cal., 452.
    
      Mr. Horace S. Whitman, with whom was Mr. Assistant Attorney General Huston Thompson, for the defendants.
    Section 21 of the specifications specifies wliaf delays will entitle the contractor to extensions of time. Certain formalities were waived and the time for completion was extended 10 days. The latter part of section 21 with regard to computation of damages for delay by the contractor is superseded by section 42. Beading those two sections together it is evident that the time agreed upon for completion was the first day of April, 1908, if no extension was granted; and, if an extension was granted, the time of the extension was to be added after the 1st of April, in order to arrive at the date for completion agreed upon. There is no other possible interpretation of the contract.
    The plaintiff cites two authorities to sustain his legal position — United States v. United Engineering Co., 234 IT. S., 237, and the Ittner case, 43' C. Cls., 336. The facts in the case at bar are so different from those in the United Engineering Company case that law applicable to one set of facts would not be applicable to the other. In the Engineering Company case there was no time set for the completion of the work by the supplemental contracts entered into; nor was there any extension of time under the contract as in the present case. The very quotation in the plantiff’s brief shows that in that case there was no time “ fixed in which it (the work) was to be done.”
    The court said, p. 243:
    “The same rule was followed with approval by the New York Court of Appeals in a well-considered case, Mosler Safe Co. v. Maiden Lane S. D. Co., 199 N. Y., 479, in which it was held that, even where both parties are responsible for the delays beyond the fixed time, the obligation for liquidated damages is annulled, and in the absence of a provision substituting another date it can not be revived, and the recovery for subsequent delays must be for actual loss proved to have been sustained.”
    In the Ittner case, supra, the facts do not in any way coincide with the facts in this case. In the Ittner case there was no extension of the time of performance under the terms of the contract; but several supplemental contracts for additional work were entered into in which the time for completion was not mentioned.
    The proper rule is laid down in Hudson on Building Gon- ■ tracts, Yol. I, p. 524:
    “ Liquidated damages stipulated for at a rate for each day or week of delay in completing the works must begin to run from some definite date. Kemp v. Rose (1858), 1 Giff., 258. It follows, therefore, that if there is no date in the contract, or if the date in the contract has for some reason ceased to be the proper date for the completion of the works, there is no date from which liquidated damages can run, and, therefore, all right to recover liquidated damages has gone. Dodd v. Ghurton (1897), 1 Q. B., 562.
    “In order to meet this contingency, a provision is generally inserted that the architect may grant an extension of time for the completion of the works in case of delay from various causes, such as strikes, lockout, alterations and additions, etc., and that in case of such extension of time being granted, the builder shall complete within the extended time.
    “This clause, if duly acted upon, fixes another date for completion, and the obligation of the builder may then be to complete by that other date.”
    In the following cases liquidated damages were enforced, though the court definitely found delay on the part of the Government in the completion of the work. United States v. Bethlehem Steel Co., 205 U. S., 105; Morris v. United States, 50 C. Cls., 154; Wise, Trustee, v. United States, 52 C. Cls., 400; Ellicott Machine Go. v. United States, 43 C. Cls., 232.
    The plaintiff’s theory of damages is untenable. The rule for damages in the event of one party preventing the performance of the contract without the fault of the other party is laid down in Behan v. United States, 110 U. S., 338.
    
      See also Hinckley v. Pittsburgh Steel Go. 121 U. S., 264; Star Chronicle Pub. Go. v. United Press Assn., 204 Fed., 217; Pamsh v. McVeigh, 214 U. S., 124. *
    In the event of lawful exercise of the power to terminate a contract, and the contract is completed at less than the contract price, the contractor can recover only the retained percentages. Quinn v. United, States, 99 U. S., '30. The retained percentages are, however, liable to be charged with any liquidated damages that may accrue.
    Liquidated damages were to be deducted “ for each and every day occupied in excess of the time agreed upon,” and the fact that the defendant took over the contract was not an election of a remedy on his part that would suspend the running of the liquidated damage clause. The same question with regard to liquidated damages was raised in this court in the case of the California Bridge and Construction Co., 50 C. Cls., 40, but the court did not pass upon the question, saying:
    “We allow nothing on account of the defendant’s counterclaim — liquidated damages to the time of the completion of the contract — because we think that the changes in the specifications made by the subsequent contracts resulted in material and substantial alterations of the work.”
    The facts in this case are like the facts in the case of Yeadon Water Works Co., in the 72d Law Times Eeport, p. 538. In that case it was provided that the owner might “ terminate the contract so far as respects the performance of the same under the direction and by means of the contractor, but without thereby affecting in any other respects the liabilities of the said contractor, and to enter upon and take possession of the works ” and to complete the contract. The contractor failed and the owner took over the contract and completed it by a subcontractor, and under a clause#for liquidated damages the owner was allowed to deduct liquidated damages from the date agreed upon for the completion of the work down to the time the work was completed by the second contractor.
    While the language of the contract in the case at bar is not as definite with regard to the enforcement of liquidated damages after the breach by the contractor, we respectfully submit that the intention of the parties is clear when the contract is taken by the four corners, and the intention of the parties must prevail in the enforcement of the clause for liquidated damages. United States v. Bethlehem Steel Go., 205 U. S., 105; Sun Printing ds Publishing Association v. Moore, 143 U. S., 642.
   BaRNey, Judge,

reviewing the facts found to be established, delivered the opinion of the court:

This suit arises out of a contract between plaintiff and the Government Reclamation Service. This contract was made February 15, 1907, and was for the construction of a diversion dam and head work on the North Platte project in Nebraska, a copy of the same being attached to and made a part of the petition herein. According to its terms the performance of the contract Avas to be completed April 1, 1908. Not long before the expiration of this time the plaintiff made strenuous application for an extension of this contract period, claiming that it had been delayed in its performance of the contract by the Government. The Government denied this delay on its part but finally concluded (as stated in the correspondence on this subject) to give the plaintiff the “benefit of the doubt,” and granted 10 days additional time in which to perform its contract. The plaintiff failed to perform the contract within the time provided for in the contract, including such extension of 10 days, and thereafter as long as the plaintiff continued work the Government refused to pay plaintiff the amount earned under paragraph 43 of the specifications except upon the deduction of the liquidated damages of $100 per day provided by paragraph 42 of the specifications. In consequence of this action on the part of the Government the plaintiff declined to proceed with the work under the contract and stopped such work May 29, 1908. On July 24, 1908, the Secretary of the Interior notified the plaintiff that if it did not resume work by August 15, 1908, the contract would be suspended under paragraph 22 of the specifications. Plaintiff did not resume work in accordance with this notice, and having refused to do so unless further deductions were not made for liquidated damages the Secretary of the Interior notified the plaintiff that the contract was suspended and the work taken over by the Government; and it thereafter took possession of plaintiff’s plant and completed the work March 31, 1909.

In making up its final account with the plaintiff the Government charged it $100 per day for liquidated damages from April 11 to August 18, 1908, giving it credit for retained percentages under paragraph 43 of the specifications, thereby leaving it indebted to plaintiff in the sum of $2,713.64, which the plaintiff refused to accept.

The first question to be considered by the court is whether the Government had the right under the contract to charge the plaintiff with the $100 per day liquidated damages therein provided for after April 11, 1908, when the contract period, including the 10 days’ extension, expired. The answer to this question involves the right of the plaintiff to abandon work under the contract. If the Government had no right to withhold that sum from the monthly payments due under paragraph 43 of the specifications, we think the plaintiff had the right to abandon the work. Canal Co. v. Gordon, 6 Wall., 561; Pigeon v. United States, 27 C. Cls., 167. Otherwise it was not justified in doing so. Upon the decision of this question practically depends all of the issues in this case.

It is contended by the plaintiff that by the extension of the time for the performance of the contract by the Government owing to its delay the liquidated damages provided in the contract were thereby waived, and cites United States v. United Eng. & Con. Co., 234 U. S., 236, and Ittner v. United States, 43 C. Cls., 336, in support of that contention. This is a very important question which this court must decide when properly presented but will refrain from doing so before that time, and we do not think it is necessary in this case. Whatever may be the general rule upon that subject the parties to a contract certainly have the right to change it by proper provisions, and we think that has been done in the instant case. The following are the provisions of the specifications on that subject:

“ 21. Delays. — The contractor shall not be entitled to any compensation for delays or hindrances to the work, except that if, in the judgment of the engineer, direct and unavoidable extra cost to the contractor of any part of the work, covered by these specifications is caused by the failure of the United States to provide right of way or material, then upon the presentation of a written claim by the contractor, not later than 30 days after the close of the month during which such extra cost is claimed to have been incurred, such claim, if found correct by the engineer, will be approved. Extension of time will be allowed for unavoidable delays that may result from unforeseen causes that, in the opinion of the egnineer, approved by the Secretary of the Interior, are undoubtedly beyond the control of the contractor. If the Avork be delayed by specific orders to stop work given by the Secretary of the Interior or by the engineer, or if any delay or hindrance be caused by their failure to provide’ material sufficient to carry on the work, or to provide necessary right of way, then such delay will entitle the contractor to an extension of time equivalent to the time lost in such delay, provided the contractor shall have submitted to the engineer written claim within 30 days from the cause thereof. Any extension of time, however, shall not release the sureties from their obligations, which shall remain in full force and effect until the discharge of the contract. Any application for an extension of time must be accompanied by the formal consent of the sureties thereto, or other sufficient sureties must be furnished by the contractor. Should the contractor fail to complete the work in the time agreed upon in the contract, or in such extra time as may have been allowed for delays as herein provided, the engineer will compute and appraise the direct damages for the loss sustained by the United States on account of further employment of engineers, inspectors, and other employes, including all disbursements on the engineering account, properly chargeable to the work. íhe amount so appraised and computed is hereby agreed upon as the damages for the delay, and will be deducted from ahy money due the contractor under his contract, añd the contractor and sureties shall be liable for any excess. The decision of the chief engineer as to the appraisal of such damages shall be final and binding on both parties. Any provisions in the detail specifications concerning deduction for delay shall be held as modifying or revoking the provisions of this paragraph.
“42. Deduction for failure to complete. — If the several parts of the work are not completed within the time agreed upon there will be deducted from any sum otherwise due under the contract the following amounts for each and every day occupied in excess of the time agreed upon, viz, for the work included under schedule 1, $50 per day; for the work included under schedule 2, $50 per day. This deduction will be in lieu of that provided for in paragraph 21, and is agreed upon as liquidated damages for the loss to the United States on account of engineering, superintendence, and value of operation of the irrigation works dependent thereon.”

These two paragraphs must be read and construed together and both of them given effect as far as possible, as that is elementary in the construction of contracts. Paragraph 42 modifies paragraph 21 only to the extent of agreeing upon a sum for damages in case of delay in performance of the contract or, as it is called, agreeing upon liquidated damages. With that exception paragraph 21 gives us the provision relating to delays. The last sentence of paragraph 21 provides that “ any provisions in the detail specifications concerning deduction for delay shall be held as modifying or revoking the provisions of this paragraph.” This provision is given full effect by modifying this paragraph in the manner stated.

It is therein provided in express terms for an extension of the contract period if the work be delayed by the failure of the Government “ to provide materials sufficient to carry on the work,” such extension to be “ equivalent to the time lost in such delay.” Then follows the provision, “ should the contractor fail to.complete the work in the time agreed upon in the contract or in such extra time as may have ieen allowed for delays as herein provided ” (italics ours), with a further provision as to damages arising from such delay and how they are to be appraised. Paragraph 42, which substitutes agreed for actual damages, says that such damages shall be assessed 'if the work is not “ completed within the time agreed upon,” which, of course, relates back to paragraph 21.

If our construction of these two paragraphs is correct, then the time for the performance of the contract in question expired April 11, 1908, and thereafter and until the Government took possession of the work the plaintiff became liable for a deduction from any sums which might otherwise be due it of $100 per day as liquidated damages. This, of course, assuming that the authorities refusing to grant further extension of time were not guilty of bad faith or such gross negligence or ignorance as to imply bad faith in such refusal. Upon this subject it is sufficient to say that the-findings show that such extension pf time for the completion of the performance of the contract was equivalent to the delay caused by the Government.

Paragraph 22 of the specifications contains the following provision:

“ In the determination of the question whether there has been such noncompliance with the contract as to warrant the suspension thereof the decision of the Secretary of the Interior shall be binding on both parties.”

This, of course, involves all questions of delay decided by the Secretary of the Interior. It follows as a corollary from this that the plaintiff was not justified in stopping work because of such deduction, and the Government was justified in taking over the work and completing it at the expense of the plaintiff.

This brings us to the question of proper charges against the plaintiff for such completion of the project and as to how long such deduction of liquidated damages should continue after the completion of the contract period, including the 10 clays extension. The Government contends that such charge should be made for every day from April 11, 1908, when the contract period expired, to March 31,1909, the date of the completion of the work by the Government, and files a counterclaim for that amount. In the final account stated between the parties the Government charged liquidated damages up to the time of the suspension of the contract, but after-wards filed a cross petition in which it claims additional liquidated damages up to March 31, 1909.

The Government concedes that if the contract had been canceled or annulled that thereafter liquidated damages for delay could not be enforced, but argues that such is not the rule when the contract is only suspended, and that in the latter case they continue until the contract is fully performed. We see no force in this contention and can not understand how a party can be said to be liable for delay when he is prevented from performing either by the annulment of the contract or the suspension of the work thereunder. His relation to the work is the same in either case. Doubtless a contract might provide for the liquidated damages to continue after its annulment or suspension until the owner should have a reasonable time to complete his performance. It is needless to say that this contract contains no such provision. The plaintiff was properly charged with the agreed liquidated damages from April 11 to August 19, 1908, and in addition thereto the costs incurred by the Government in completing the work as provided in paragraph 22 of the specifications, and no more.

In making up its account with the plaintiff for its expenses in the completion of the work after its suspension it charges the plaintiff with “ temporary dam and extra work,” “ repairs to temporary dam,” “ repairs to temporary headworks,” and “amount of extra fill required,” in all amounting to $18,562.03. This is submitted without any proof as to its necessity in the completion of the work under the contract and without being itemized except in the most general manner. This account thus submitted shows a balance due the plaintiff of $2,718.64.

This charge is presented as an affirmative defense to the plaintiff’s claim .and we think should at least be so fully itemized as to inform the plaintiff as to all of its details so that proper objections could be made to such charges as the plaintiff might deem were improper. In the absence of any such statement or proof we do not think this charge should be' allowed against the plaintiff.

It should be here observed that in its original petition filed in this case November 12,1913, the plaintiff made no mention of this charge of $18,562.03 as being wrongful, but July 4, 1917, filed an amended petition wherein it is averred that such sum is not a proper charge and that said charge is made to cover actual damages arising from the plaintiff’s delay in addition to the cost of the completion of the work and the liquidated damages provided for in the contract. On December 4, 1917, the defendant filed a motion to strike from the amended petition the paragraph containing such averment or in the alternative to order it to be made more definite and certain. This motion was ordered to be heard at the trial on the merits.

We do not think under the liberal practice in this court as to pleadings it was necessary for the plaintiff to have made any such amendment to its petition to enable it to raise the question of the impropriety of this charge upon the trial. It was the duty of the Government to properly present this item of its defense in the first instance and it was benefited rather than injured by being informed by this amendment that objection would be made to it and upon what grounds such objection would be made. If the Government had needed further time to meet these objections by explanatory evidence it certainly would have been granted, and therefore the motion is overruled.

It follows from the foregoing that the plaintiff is entitled to a judgment in the sum of $2,713.64 plus the item of $18,562.03, herein discussed, making in all the sum of $21,275.67.