Case ID: us-ct-cl_15/html/0270-01.html
Source: Caselaw Access Project
Author: {"author": "Bicilardson, J.,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

THE MERCHANTS’ EXCHANGE CASE.
    The Merchants’ Exchange Company of Baltimore v. The United States.
    
      On the Proofs.
    
    
      The claimants convey property in Baltimore to the government and enter into a written eontraet to malee certain alterations in the bittlding for a price specified. The contract is fully performed and the consideration paid. During the progress of the xoorlc the government’s superintendent in chatrge requests extra worn to he done at a price estimated by him. The claimants refuse; but offer to furnish the extra xoorlc at its actual cost. They proceed , xoith this understanding. The accounting officers alloio and pay to them the amount estimated by the superintendent, but refuse to pay more. In the progress of the alterations the elahxnants vohmtarily malee improvements neither required by the contract nor directed by the sxiperintendent.
    
    
      I. A surety on the kond of a contractor is interested in the result of the suit and incompetent to testify under Rev. Stat., § 1077, if the defendants have set up a breach; hut where the contract has been performed, and the demand is for extra wort, and no breach of the contract is alleged, he is a competent witness.
    II. A creditor of a claimant is a competent witness.
    IIL Where a contract authorizes a superintendent to order alterations and additions, provided that he agree beforehand upon the price, and he orders some, for which he mates an estimate, but the contractors refuse to make them for that price, offering, however, to make them for their actual cost, if he allows them to proceed in that understanding, they may recover therefor.
    IV. There are cases wherein the government may be held liable for private property taken, or received and retained, for public use; but where extra work and material are voluntarily furnished by contractors with knowledge that the payment therefor must depend upon the action of Congress, they cannot recover, though the extra work may embellish and improve a government building.
    
      The Reporters' statement of tbe ease:
    Tbe only clause of tbe original contract between tbe parties wbicb was involved in this case is fully set forth in tbe opinion of tbe court. Tbe facts as found by tbe court are as follows:
    I. Tbe claimant, a corporation duly established by law, entered into written contracts to convey to tbe United States certain real estate in Baltimore, Md., for tbe sum of $267,000, and to make certain alterations of, and repairs upon, the buildings thereon for tbe sum of $60,000, as set forth in said contracts, copies of wbicb are annexed to tbe petitions, marked Exhibits A and B.
    Tbe claimant gave bond to tbe defendants in tbe penal sum of $15,000, with J. O. Neilson and W. Sperry as sureties, for tbe faithful performance of its contract to make said alterations and repairs.
    II. Tbe conveyance of said real estate was made, and tbe alterations and repairs required by said contracts were completed by tbe claimant to tbe satisfaction of tbe defendants, and tbe claimant was paid tbe contract price therefor.
    III. During tbe progress of tbe work tbe defendants required certain additional alterations and repairs not specified in said contracts, wbicb tbe superintendent estimated beforehand to cost $15,733.08. To this estimate tbe claimant, through its architect, objected as totally inadequate, and did not agree thereto, but proposed to supply the bills of expense to sliow the real cost of the work. Upon that understanding, the extra work was performed, and the extra alterations and repairs were made.
    The actual cost of said extra work was $7,750.93 more than said estimate.
    The amount of the estimate only has been paid to the claimant.
    IY. For the purpose of further improving and embellishing the property, the claimant also made certain other alterations and repairs on its own responsibility, relying upon a subsequent appropriation by Congress for reimbursement. The cost of this work was $2,604.71.
    Y. By errors in the settlements made with the defendants, the claimant has been paid for some contract work omitted by agreement, to the amount of $1,135.05, and has received a further overpayment to the amount of $651.70, both of which sums the claimant allows, as an offset to that extent, to its claim against the defendants.
    
      Mr. John Selden and Mr. Alexander P. Jíorse for the claimant :
    Where the defendants accept the benefit of extra work, and. where changes ordered by its agents necessarily imply an increased outlay on the part of the contractor, the defendants are liable. (Cooper’s Case, 8 C. Ols. R., 199.) A contractor for extra work or services may recover beyond the price stipulated in the original contract, though not beyond the limit fixed by the statute authorizing his employment. (Curtis’s Case, 2 C. •Cls. R., 144.) A contractor, though acting under a written agreement, may recover for accepted work and material, even when not embraced in such agreement. (Grant’s Case, 5 C. Cls. R., 72 5 Kingsbury’s Case, 1 O. 'Cls. R., 13.)
    Though bound by no express contract, the defendants may still be liable under a quantum meruit. (Johnsorts Case, 4 ¡0. Cls. R., 248, 250.) The authority of the agents of the defendants to order extra work will be implied under circumstances. (Cooper’s Case, 8 G. Ols. R., 199.) An executive department of the government may ratify a contract through official correspondence, and sucb ratification will be respected by tbe court. (Wateres Case, 4 C. Ols. It., 391, 394.) And where tbe bead of an executive department accepts on behalf of tbe government materials furnished under a contract not previously authorized by that department, tbe contract will be treated as adopted and ratified. (Adams’s Case, 2 C. Cls. B., 70.)
    
      Mr. A. D. Robinson (with whom was tbe Assist-ant Attorney-Q-eneral) for tbe defendants.
   Bicilardson, J.,

delivered the opinion of tbe court:

Tbe claimant corporation sold and conveyed to tbe defendants, for tbe sum of $267,000, certain lands and buildings thereon in Baltimore, Md., for a post-office and custom-house, and entered into a written contract to make alteration in tbe buildings and certain repairs, according to specifications agreed upon, for tbe sum óf $60,000.

No controversy arose as to tbe fulfillment of tbe contract. All tbe work was done to tbe satisfaction of tbe defendants, and they paid tbe full contract price for it.

Tbe claimant corporation made certain additional alterations and repairs not specified in tbe contract, as tbe defendants admit.

Tbe differences between tbe parties which have led to tbe institution of this action relate wholly to tbe amount of compensation which tbe claimant corporation became entitled to for sucb extra work.

At tbe trial tbe claimant’s counsel offered as evidence tbe deposition of one Neilson, to which tbe counsel for tbe defendants objected on tbe ground that Neilson was a surety on tbe bond given by tbe claimant corporation for tbe faithful performance of tbe written contract, and because be is a creditor of tbe corporation, and so is interested in tbe event of this action.

A surety on tbe bond of a contractor for tbe faithful performance of the agreements made by bis principal would be interested, and therefore incompetent to testify, according to tbe provisions of Bevised Statutes, § 1077, in an action wherein tbe defendants allege a breach of tbe contract on tbe part of tbe claimant, and set up a counter-claim for damages on account ot it. In sucb case the judgment of tbe court might materially affect the claimant pecuniarily, and be would bave an interest in tbe event of tbe suit. This court so held in the case of Albert Wood v. The United States (10 C. Cls. R., 395). But tbat is not tbe present case. The defendants bave never claimed a breach of tbe contract on tbe part of tbe corporation, and bave set up no counter-claim. On tbe contrary, tbe findings show tbat tbe contract bas been faithfully performed to tbe satisfaction of the defendants, and tbat they bave paid tbe full contract price. Tbe bond bas ceased to bave any force. It bas beén satisfied and is as effectually extinguished as though it bad been "¡surrendered and canceled by agreement of tbe parties. Sublato fundamento cadat et opus. Besides, this action is not brought upon tbe contract, but is for extra work done and performed outside of tbe contract. This objection is therefore not tenable.

The other objection, founded on tbe fact tbat tbe witness is a creditor of tbe claimant corporation, is equally untenable. A creditor of one of tbe parties to a suit, whether tbat party be a corporation or an individual, bas no legal, certain, and immediate interest in tbe event of tbe suit, and by tbe strict rules of tbe common law, now everywhere much relaxed by statute except for this court, bas never been excluded as a witness in favor of bis debtor on that account. (Paul v. Brown, 6 Esp., 34; Nowell v. Davies, 5 B. & Ad., 368.)

Tbe deposition of tbe surety was properly admitted in evidence, notwithstanding tbe objection.

On tbe merits of tbe case tbe facts are these. Tbe contract contains, among other stipulations, tbe following provisions:

“The whole of tbe above work to be done in a faithful and workmanlike manner, to tbe entire satisfaction of tbe superintendent appointed by tbe President to inspect tbe work; and if, during its progress, said superintendent shall require any alterations, be shall bave the power to make them in tbe several parts, provided, always, tbat be shall, beforehand, fix upon and agree to tbe amount of payments to be made for additional work, or subtract it in tbe event of diminution, and such amount, as estimated by him, shall be final in tbe premises.”

During tbe progress of tbe work tbe defendants required certain specified alterations in addition to those set forth in tbe contract, and tbe superintendent, who was tbe defendants’ officer, made an estimate of tbe cost, to which tbe claimant corporation objected and never agreed. On tbe contrary, tbe claimant proposed to supply the bills of expense to show the actual cost of the work, and upon that understanding the extra work was done. The actual cost proved to be $7,756.93 more than the estimate. The defendants paid the amount of the estimate, and the claimant now seeks to recover the balance of the actual cost.

It was the duty of the superintendent not only to make an estimate, but “ to fix and agree to the amount of payments to ■be made for additional work.” The claimant was not to do the work until an agreement had been entered into, and that required the concurrence of both parties. When the superintend•ent made his estimate and presented it to the claimant, that was an offer on the part of the defendants. The claimant rejected it and made a different proposition for compensation, to wit, the actual cost of the work to be determined by the bills, of expense. To this it does not appear that the superintendent made any objection, and it seems that the work was done upon that understanding. In our opinion, the defendants became liable to pay the actual cost of the work, and that they cannot discharge their liability by paying the amount of the underestimate made by their superintendent, to which the claimant did not agree, but which it expressly rejected.

There is another claim for $2,604.71 for other extra work done by the claimants, without authority from the defendants, but on its own responsibility, relying upon a subsequent appropriation by Congress for reimbursement. . This created no legal' liability on the part of the defendants. Congress alone can furnish a remedy. (Bradley’s Case, 13 C. Cls. R., 166, affirmed on appeal; 96 U. S., 104.) There are cases in which the United States may be held liable for property taken or received and retained by their officers for the clear and undoubted use and benefit of the government under such circumstances as to give rise to an implied contract to pay for them. But this is not one of those cases. Here the work and materials were voluntarily furnished with a full knowledge that payment was to depend upon the action of Congress. They were intermingled with the work and materials which the defendants did order and pay for, and they cannot be separated and returned. Although they niay have embellished and improved the property, it is not for this court to determine, under the circumstances, that they were, in fact, of use and benefit to the United States. That was left for tbe consideration of Congress, according to tbe understanding upon Vbicb tbe work was done.

Tbe claimant corporation admits a set-off to. tbe extent of $1,786,75 on account of overpayments and errrors in former settlements, and tbis will be deducted from tbe claim of $7,756.93 proved against tbe defendants, and judgment will be entered for the claimant for tbe balance, $5,970.18.