Case ID: us-ct-cl_55/html/0031-01.html
Source: Caselaw Access Project
Author: {"author": "Downey, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

PELTON WATER WHEEL COMPANY v. THE UNITED STATES.
    [No. 33712.
    Decided December 1, 1919.]
    
      On the Proofs.
    
    
      Contract; release. — Where a contractor executes a release aclrnowl- . edging the receipt of a sum of money “ as full and final payment for all material furnished under said contracts,” and releasing the United States “from any and all claims on account of the contracts except the sum of $4,175.09, deducted as liquidated damages,” a claim for additional expenses incurred in making certain unspecified changes and additions required during the construction of the work is barred, and the doctrine of inclusio unius est exclusio alterius applies.
    
      Liquidated damages; no jurisdiction to review. — Where a contract contains a clause for liquidated damages for delays caused by the contractor and the right to finally determine the cause and extent of such delays is given to the chief engineer, there being no bad faith on the part of such officer, or error so gross as to necessarily imply bad faith, the court has no jurisdiction to review the decision of such officer, whether the United States did or did not suffer actual damages by reason of such delays. '
    
      The Reporter's statement of the case:
    
      Mr. Robert B. Honeymdh for the plaintiff.
    It affirmatively appears that no damage was sustained by the United States. A provision to liquidate damages equitably, at least, requires that there should be some damage to liquidate.
    The case of Bethlehem Steel Go. v. United States, 205 U. S., 105, holds that proof of damage is not required where there is a provision for liquidated damages, but in that case evidence was admitted there from which it appeared that there was damage. It is true that the Court of Claims made a finding that the Government had not sustained any damage, but a proper interpretation of that finding, in the light of the evidence, will show that the Court of Claims did not consider the element of damage pointed out by the opinion of the Supreme Court, viz, that the Steel Company had named a higher price in consideration of a prior delivery and that by taking a longer time for the delivery the Steel Company was, in effect, obtaining the highest price for the longest delivery; in other words, the Steel Company would have contracted on the basis of the longer delivery at a much lower price, as a result of which the Government was obviously damaged on the face of the contract. The court does not hold that where there is no damage whatsover there can be a recovery because there is a liquidated sum provided to measure the damage.
    We contend that where it affirmatively appears that no damage has been sustained, to award a sum as damages is to impose a penalty, and that in the consideration of the question of what was the intent of the parties the court-must consider whether it was the intent to award a liquidated damage when there was no probability of any damage at any time, and, in fact, no damage did occur, and that if it so finds it must conclude that a penalty was intended, especially when the provision is so inadequate to measure any possible damage.
    The proposal made by claimant was based upon the plans and specifications furnished by the commission. The award was scarcely made before claimant was advised that the entire alignment, location of power house, and designs of the headgates were to be changed, and it was not until fifty-five days later that claimant received these revised plans. The changes called for by these plans were so radical that it was deemed necessary to have a supplemental contract calling for some hundreds of feet of vertical bends of penstock pipe, additional to that called for in the original plans. In this supplemental contract there is no provision for any liquidation of damage, and yet these vertical bends form an integral part of the completed penstock of the power units called for in the original contract, and a deduction was made for their nondelivery at the specified time. As a matter of fact, the original contract called for a delivery of the penstock complete on March 31st, and the supplemental contract was not made until April 2d, so that in reality claimant’s performance of the original contract containing the provision for a liquidation of damages was rendered absolutely impossible by the acts of the commission itself.
    The Supreme Court in United, States v. United Engineering and Contracting Co., 234 U. S., 236, 241, say:
    “ 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 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 cannot be insisted upon, and liquidated damages measured thereby are waived. Under the original and first supplemental agreements the claimant knew definitely that he was required to complete the work by a fixed date. Presumably the claimant had made its arrangements for completion within the time named. Certainly the other contracting party ought not to be permitted to insist upon liquidated damages when it is responsible for the failure to complete by the stipulated date; to do this would permit it to recover damages for delay caused by its own conduct.
    “ It may be that damages were sustained by the failure to carry out the subsequent agreement. But the Government, as well as the claimant, saw fit to go on with the work with no fixed rule for the time of its completion, so that it be reasonable, and the Government required no stipulation in the second and third supplemental contracts as to damages in a fixed and definite sum for failure to complete the work as required. Under such circumstances we think it must be content to recover such damages as it is able to prove were actually suffered.”
    The court cites with approval Mosley Safe Go. v. Maiden Lane Go., 199 N. Y., 479, in which case the contract contained a provision that if any alteration or deviation were required “the same can be made without annulling or invalidating the contract,” and in such event that “ an allowance shall be made for the same on one side or the other as the case may be ” by the architect, etc., as appears from the opinion at p. 488.
    We contend that the provision for the liquidation of damages was rendered inoperative by the act of the Commission in making radical changes in its plans and designs, necessitating a supplemental contract for material and necessary parts without which the power units could not operate and” in which there was no provision for liquidated damages, and that the supplemental contract having been made after the time for performance of the original contract had expired, claimant was only required to perform within a reasonable time under the ruling above cited.
    We do not charge the engineers with fraud, but we do say that they clearly misapprehended the requirements of the contract, not technical requirements but obvious reasonable requirements, and that any such misapprehension on their part of the claimant’s duty under the contract will not foreclose claimant in any court of justice. If the action of the engineers is so obviously arbitrary and unreasonable as to amount to confiscation of claimant’s rights, we are confident that the injustice will be as readily corrected as though it were a fraudulent act.
    
      Mr. Percy M. Cox, with whom was Mr. Assistant Attorney General Frank Davis, jr., for the defendants.
   Downey, Judge,

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

This action is predicated upon certain contracts between the plaintiff and the Isthmian Canal Commission for the delivery at Colon of enumerated items of machinery and appliances. The contracts are made a part of the findings, the material facts with reference to the transactions thereunder are also included therein, and the questions for determination are such that it is not deemed necessary to indulge in repetition herein.

The plaintiff seeks recovery upon three items: First, for the sum of $1,051.43 on account of alleged additional expense incurred by reason of governmental requirements as to changes and additions in the construction of the work, alleged not to be within the contract. Second, for $810.66 as interest on account of excessive delays in payment. Third, for $4,175.09 deducted by way of liquidated damages.

The claim for interest is eliminated from consideration not only because plainly untenable, but because of its abandonment by plaintiff’s counsel in the presentation of his case.

With reference to the claim first mentioned it is material to note as shown in the findings that after completion of the work and upon payment to the plaintiff of a sum of money therein stated a release was executed by the, plaintiff in form as follows:

“ In pursuance of the terms of Article IY of contract (W. O. 29725) dated December 2, 1911, and supplemental contracts dated April 3, 1912 (W. O. 29725-A and W. O. 29725-B), respectively, by and between the Isthmian Canal Commission and the Pelton Water Wheel Co., in consideration of the sum of $9,007.36, the receipt of which is hereby acknowledged as full and final payment for all material furnished under said contracts, the United States is hereby released from any and all claims on account of the contracts except the sum of $4,175.09, deducted as liquidated damages.”

We think it quite clear that the execution of this release bars the plaintiff from the presentation to this court of any claim arising out of or on account of these contracts except the one as to which there was a specific reservation. United States v. Wm. Cramp & Sons Co., 206 U. S., 118. So far as the intent of the parties at the time of the execution of this release is for consideration it seems quite apparent that they must have had in contemplation as stated in the release itself all claims except that of liquidated damages deducted, and the construction to be put upon the language used makes peculiarly appropriate the doctrine of the old maxim in-clusio unius est exclusio alterius.

So far as the claim for the recovery of the amount deducted as liquidated damages is concerned, the averment of the petition is that such deduction was “ without authority or justification,” in connection with which it is alleged that no damages were suffered by the United States by reason of the delay; but in plaintiff’s brief there is apparent an attempt to present also the objection that the provision of the contract with reference to liquidated damages did not. constitute a valid* liquidated-damage clause, and that under the contract, and the facts with reference to its performance, the deduction of the amount named was the imposition of a penalty.

We are unable to see that there is any question presented by. the record of this case with reference to the deduction of liquidated damages which has not been thoroughly settled by the decisions of the courts, and, as to some features, by a multiplicity of decisions. The preliminary notice to bidders as well as the subsequent provisions of the contract gave notice that time would be considered as of the essence of the contract; the bidders were requested to state in their bids, and this plaintiff did state, the time within which delivery would be made — a matter no doubt given consideration in •the awarding of the contract; the provision as to the amount of liquidated damages was not only reasonable but was upon an equitable basis; it is not shown that the United States suffered no damage by reason of the delay; and, in fact, whether the United States did or did not suffer actual damage is not for investigation; the right to determine the cause and extent of delay was vested in the chief engineer of the commission, whose decision the parties agreed would be final; the chief engineer gave careful consideration to the question as to the relative responsibility of the parties for delays, made liberal allowances to the plaintiff, determined in writing the number of days of delay for which the plaintiff was responsible, from which the amount to be deducted as liquidated damages was determined on the basis provided for in the contract, and there was no bad faith upon the part of the chief engineer or any of his subordinates, or any such gross error as requires that bad faith must be inferred therefrom. We do not deem it necessary to discuss in detail these various features of the case nor to cite separately as to each or quote from the applicable decisions of the courts. They leave no room for doubt that the conclusion upon all of these questions must be against the plaintiff.

A large number of authorities bearing on these questions are collected and cited in the opinion of this court in the case of Brinck, Receiver, v. United States, 53 C. Cls., 170, to which reference is made, in addition to which may be cited the well-known cases of Sun Printing & Publishing Association v. Moore, 183 U. S., 642; United States v. Bethlehem Steel Co., 205 U. S., 105; Plumley v. United States, 226 U. S., 545; and the more recent case appealed from this court and affirmed by the Supreme Court of Wise, Trustee, v. United States, 249 U. S., 361.

Our conclusion is against any right of recovery on the part of the plaintiff, and it is ordered that the petition be dismissed.

Grai-iam, Judge, Hat, Judge, Booth, Judge, and Campbell, OMef Justice, concur.