Case ID: us-ct-cl_52/html/0400-01.html
Source: Caselaw Access Project
Author: {"author": "Hay, Judge,\n    ", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

HENRY A. WISE, TRUSTEE IN BANKRUPTCY OF AMBROSE B. STANNARD v. THE UNITED STATES.
    [No. 31961.
    Decided May 14, 1917.]
    
      On the Proofs.
    
    
      Contract; liquidated, damages. — Where a contractor agrees to “ complete the said work in all its parts ” within a stated period, and in default thereof to pay a liquidated sum for damages that are uncertain, a contention that a breach has not been committed where he completed only one part within the specified time, is untenable.
    
      The Reporter's statement of the case.
    
      Mr. WiUiam B. King for the plaintiff. King c& King were on the briefs.
    It is sometimes asserted that Sun Printing Association v. Moore, 183 U. S., 642, holds that the literal expression of the parties in the contract, not their ultimate intent, must determine whether they have provided for liquidated damages or a penalty. This is a misapprehension. The contract there fixed the amount to be paid upon failure to return a rented yacht. The court upheld the claim for the amount so fixed. The principle asserted was the right of parties to liquidate their own damages in advance. But in warning against an abuse of the application of this decision, the court quotes this language approvingly, page 674:
    “ I am not disposed to deny that a case may arise in which it is doubtful, from the language employed in the instrument, whether the parties meant to agree upon the measure of compensation to the injured party in case of a breach.”
    
      In a later case, United States, v. Bethlehem Steel Go., 205 U. S., 105, the Supreme Court showed that it did not abandon the doctrine as stated by us above. It there held that the word “ penalty ” in a contract might be construed by the accompanying documents to mean liquidated damages, the court saying, page 120:
    “Either expression is not always conclusive as to the meaning of the parties.”
    That is exactly the principle for which we are contending here.
    This has been followed in numerous cases, nowhere better stated than by the Court of Appeals of the District of Columbia in District of Columbia v. Harlan c(i Hollingsworth, 30 App., 270, where, after citing Sun Printing Assn. v. Moore, this general rule is laid down, page 279:
    “ Whether the sum agreed to be paid as damages for the failure to perform the conditions of a contract shall be treated as liquidated damages or as a penalty is to be drawn from the subject matter of the agreement, the meaning and intent of the parties as expressed in the contract, and the terms used to express that intent. In determining this question, courts will not be bound by the exact language of the contract. The contract may use the terms ‘forfeit’ and • penalty ’; and yet be construed to call for liquidated damages ; and, likewise, the words ‘ liquidated damages ’ used in a contract may be held to mean a penalty.”
    See also McCall v. Deuchler, 174 Fed., 133; Chicago, Burlington db Quincy Railroad Co. v. Dockery, 195 Fed., 221, and cases cited.
    This contract was for the erection of two severable units capable of independent completion and separate occupation and use. A single amount is fixed as the liquidated damages for the failure to complete either or both of these units on lime. The liquidation of damages necessarily involves a declaration by the parties that the damages are bona fide fixed at the sum liquidated. It is impossible that the same damages could be caused to the United States by the failure to complete one building as by the failure to complete both. This sum is, therefore, not liquidated damages but a penalty.
    
      The leading case upon this point in the Supreme Court of the United States is Bignall v. Gould, 119 U. S., 495, where the bond was given “in the penal sum of $10,000, lawful money, liquidated damages.” The condition of the bond was that the obligor should secure the dischai’ge of the obligee from certain debts and claims against him. Upon this subject the Supreme Court said (p. 498) :
    “ The object of the bond is to secure the obligee’s discharge from a large number of claims against him, held by certain • third persons severally, amounting in all to something like $39,000, and varying from more than $8,000 to less than $10 each. A failure of either of those persons to release any one of those claims would be a breach of the bond, and for any such breach a just compensation might be estimated in damages. The sum of $10,000 must therefore be regarded as simply a penalty to secure the'payment of such damages as the obligee may suffer from any breach of the bond.”
    The principle of that case is like that involved here. The contractor here agreed to complete two buildings, either one of which could be independently used; yet it is declared that the damage is as great, if one building is delivered and the other not delivered, as if both were not delivered. That is impossible. Liquidated damages essentially mean the agreement of the parties upon the amount of damage. They have obviously, upon the face of the contract, not so agreed here. In United States v. United States Fidelity di Guaranty Co., 151 Fed., 534, this definiton of liquidated damages occurs, page 536:
    “ * * * These words are used in reference to the breach of a contract or the nonperformance of a duty as expressing a fixed sum which is agreed upon between the parties as the ascertained damage which the one is to receive and the other to pay because of the default.”
    See also Clydebank Engineering Co. v. Don Jose Barrios, 1905 App. Cas. N. S., 6; Mt. Airy Milling Co. v. Runldes, 118 Md., 371; Raymond v. Edeibrocle, 15 N. D., 231; Union Pac. Railroad v. Mitchell-Grittenden Tie Co., 190 Fed., 544; O'Brien v. Illinois Surety Go., 203 Fed., 436; Lansing v. Dodd, 45 N. J. Law, 526; Northioestern Terra Cotta Co. v. Caldwell, 234 Fed., 491; Watts v. Shepherd, 2 Ala., 425; Curry v. Barer, 7 Pa. St., 470; Palestine- Ice Go. v. Connolly, 
      148 S. W., 1109; St. Louis dc San Francisco Railway Go. v. Shoemaker, 27 Kan., 677.
    It is not an answer to say here that the actual breach complained of was of the entire contract. The .evidence throughout the record shows that laboratory “A” was always in advance of laboratory “B,” and was completed before it, although the Government did not accept it sooner. But this is immaterial. It is plain that the two were perfectly sever-able units'of which one could be completed and occupied in advance of the other. That is the criterion of the question here. The question as to the nature of the compensation for delay provided by the contract, whether liquidated damages or a penalty, involves the interpretation of the contract.
    That is not affected by the particular conditions which may have arisen. The words used in Steer v. Brown, 106 Ill. App., 361, apply completely here:
    It can not be held for some purpose to be a penalty and for others to be liquidated damages.”
    * * * % $ ijc *
    “ We must examine the whole scope of the possible liabilities of the parties in order to correctly construe the contract.”
    In Van Burén v. Digges, 11 How., 461, the Supreme Court says on a question of penalty and liquidated damages, page 477:
    “ It would have been irregular in the court to go out of the terms of the contract, and into consideration of matters wholly extraneous, and with nothing upon the face of the writing, pointing to such matters as proper or necessary to obtain its construction or meaning.”
    The question whether the word “ day ” in a contract is to be considered a working day or a calendar day has been the subject of much discussion. Whatever might be the decision on this point as a new question, it is settled here by the prompt and decisive action of the Secretary in construing the word in this contract to mean a working day. The contemporary decision of the party to a contract is the best possible evidence of its meaning.
    In Gava&os v. Trevino, 6 Wall., 773, the Supreme Court said (p. 785):
    
      “ The practical interpretation, which the parties, by their conduct, have given to a written instrument in cases like this is always admitted, and is entitled to weight. There is no better test of the intention of the instrument. None are less likely to be mistaken.”
    In Insurance Go. v. Duicher, 95 TJ. S., 269, the court said, p. 278:
    
      “ The practical interpretation of an agreement by a party to it is always a consideration of great weight. The construction of a contract is as much a part of it as anything else. There is no surer way to find out what the parties meant than to see what they have done.”
    This principle is confidently invoked to sustain the practical construction of the word “ day ” adopted by the Secretary. His later construction was plainly forced upon him by his obvious mistake and a desire to reach the same result notwithstanding.
    
      Mr. John E. Hoover, with whom was Mr. Assistant Attorney General Huston Thompson, for the defendants.
   Hay, Judge,

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

On the 14th day of December, 1904, a contract was made between Ambrose Stannard and the United States whereby the said Stannard agreed “ to perform all work required for the erection and general construction of two laboratory buildings for the United States Department of Agriculture at Washington.” Another provision of the contract was that the contractor should “ complete the said work in all its parts within 30 months from the date of the receipt of the notice referred to in paragraph 2 of the contract. Time is to be considered as of the essence of the contract, and in case the completion of said work shall be delayed beyond said period, the party of the second part may, in view of the diflu culty of estimating with exactness the damages which will result, deduct as liquidated damages, and not as a penalty, the sum of two hundred dollars ($200) for each and every day during the continuance of such delay and until such work shall be completed, and such deduction may be made from time to time from any payment due hereunder, provided, however, that when the Secretary of Agriculture is satisfied that such delay has been caused by the act of the party of the second part, or by circumstances, including fire, water, and strikes of employees, beyond the control of the party of the first part, then said deduction shall not be made, and an extension of time equal to said delay shall be allowed for completion of said work.”

The language of the specifications is as follows:

“ líach bidder must submit his proposal with the distinct understanding that, in case of its acceptance, time for the completion of the work shall be considered as of the essence of the contract, that for the cost of all extra inspection and for all amounts paid for rents, salaries, and other expenses entailed upon the United States by delay in completing the contract, the United States shall be entitled to the fixed sum of $200 as liquidated damages, computed, estimated, and agreed upon, for each and every day’s delay not caused by the United States.”

The notice of the execution of the contract and the approval by the United States of the bond conditioned thereon was given to the contractor on the 29th day of December, 1904. The Secretary of Agriculture extended to the contractor five months’ time in which to complete the work, which date was the 29th day of November, 1907.

The work was accepted by the department on the 17th day of March, 1908, and in the final settlement made with the contractor the Secretary of Agriculture determined that the contractor should be charged with 101 days’ delay and deducted the sum of $20,200 from the final payment. It is for this amount that this suit is brought. It is claimed by the plaintiff that the contract was one of a penalty and not for liquidated damages.

The language of the contract and the specifications have been fully set out, because the issues involved must be determined by the writings, their nature, and the obligations arising from their execution.

It is now a well-settled principle of law that it is the duty of courts to give effect to the plainly expressed will of contracting parties. Sun Printing & Publishing Association v. Moore, 183 U. S., 642, 660. The court in that ease said:

“This court has consistently maintained the principle that the intention of the parties is to be arrived at by a proper construction of the agreement made between them, and whether a particular stipulation to pay a sum of money is to be treated as a penalty or as an agreed ascertainment of damages is to be determined by the contract, fairly construed, it being the duty of the court always, where the damages are uncertain and have been liquidated by an agreement, to enforce the contract” (p. 660).

The contract now under consideration provided for the payment of a sum of money, which is an agreed amount for damages, which in this case are uncertain, and they have been liquidated by an agreement, the terms of which are plain and unambiguous. The clear intent and meaning of the contract is that the contractor shall pay a certain sum of money as liquidated damages. The contractor can not now be heard to complain that he did not so understand the contract, for the specifications give him notice of what he would be required to do if his bid was accepted; and the contract which he voluntarily signed was clear and unmistakable in its provisions. The intent and meaning of the parties to the contract can be clearly ascertained from the language used, and when this is the casé the contract must be carried into effect. See also Sorensen v. United States, 51 C. Cls., 69, where the late cases are cited and reviewed and where the general principle is stated that when the parties agree in advance upon a sum which shall be paid in liquidation of damages in the event of breach the court should enforce the provision.

In this case the terms of the contract as well as its meaning are plain and unmistakable and the court must give effect to it. The defendants are plainly entitled to deduct from the contract price the amount of money found to be due by reason of the delay of the contractor in completing the work. The Secretary of Agriculture found that the work was delayed 101 days; from the evidence we think this number of days was fairly and equitably fixed, and that the sum of $20,200 was properly deducted as liquidated damages.

The contention of the plaintiff that the contract was for the erection of two separate buildings, capable of independent completion and separate occupation and use, is not borne out either by the contract or the evidence. The contract provided that the contractor should “complete the said work in all its farts within 30 months,” etc. It will not do to say that if he completed one part within the time specified, and failed to complete the other, he did not commit a breach of his contract.' As a matter of fact, he did not complete either part in the time specified. But the plain intent and meaning of the contract is that he was to complete all the work within the time specified, and the reason for those provisions in this contract and in all Government contracts is plain. It is impossible for the Government to prove the damages which it suffers by reason of delay in the completion of work under contracts which it makes with private parties. The Government therefore in making these contracts, where large, sums of money are involved, and where if nothing was done to protect itself it would lose not only the interest on the money, but suffer additional damage in the payment of rent and other expenses and other great inconveniences by delays in completing contracts, provides for liquidated damages instead of penalties. Contractors can not complain, as they are given full notice, and enter upon the contracts with full knowledge of their meaning and purpose.

For the foregoing reasons the petition of the plaintiff must be dismissed, and it is so ordered; and judgment is rendered in favor of the United States against the claimant for the cost of printing the record in this cause in the sum of $154.25, to be collected by the clerk as provided by law.

Downey, Judge, Barney, Judge, Booth, Judge, and Campbell, Chief Justice, concur.