#### CALIFORNIA BRIDGE & CONSTRUCTION COMPANY v. THE UNITED STATES.

[No. 29916.

Decided January 4, 1915.]

*On the Proofs.*

This suit grows out of a contract made by the plaintiff with the United States to erect a sawmill, boiler house, and steel chimney at the Mare Island Navy Yard, San Francisco, on the 21st day of December, 1898. The contract did not fix the exact location of the structures to be erected, but simply provided for their construction, at said navy yard, and the definite location was left to the officers of the navy yard in charge of the work to recommend a site to the department officials, which was not approved. Subsequently another site recommended was approved, and on March 1, 1899, the plaintiff was so advised. In May following an officer of the plaintiff inspected said site *41and protested against being required to erect the structures there without additional compensation. In June following the Navy Department, through its proper officer, refused to allow the plaintiff’s said claims for additional compensation^* and the plaintiff thereupon refused to proceed with the work. Later plaintiff was allowed six months’ additional time to complete the work, but on March 16,1900, the plaintiff declined to proceed; and on April 26 a supplemental contract was prepared and presented to the plaintiff, which it also declined to execute; and on January 2, 1901, the defendants declared the contract null and void, with the result that this suit was instituted to recover from the United States alleged losses.

I.The general rule is, where an action is brought in a court of competent jurisdiction and judgement rendered thereon, it is conclusive in a subsequent action between the same parties or their privies upon the same subject matter in the same court or another court of concurrent jurisdiction.

II.When it is said that a judgement binds parties and privies, the reference is, generally speaking, to privies in law, and not to a privity by contract or deed.

III.The rule is elementary that all prior negotiations are merged in the written contract, and that such contract is presumed in law to express the final understanding of the parties signing it, and that, prior understandings can only be referred to for the purpose of explaining and construing uncertain terms of the contract.

IY. Where the record shows statements which are utterly inconsistent with the claim that the plaintiff did not understand in the beginning of the negotiations that the site for the buildings had not been definitely selected, and where the record further shows that the plaintiff proceeded with arrangements for doing the work after the site had been selected, and without complaint, the plaintiff is not justified in refusing to proceed under the contract.

V.Where the contractor /ncurs expenses for labor and material in connection with the execution of the contract prior to its annulment, he is entitled to recover therefor.

VI.Where the Government after notifying the contractor of its purpose to have the work done and hold the contractor for the cost in excess of the original contract price did not complete the work in substantial compliance with the original plans, but changed them in material features, the Government is not entitled to recover therefor.

VII.Where the Government elects to complete the contract work and charge the contractor for the cost in excess of the original contract price, the Government must show that the’ work of completion did not materially or substantially depart from the plans and specifications of the original contract.

*42*The Reporter's*statement of the case:

The facts as found by the court are sufficiently stated in the opinion.

*Mr. Archibald King*for the plaintiff. *King & King*were on the brief.

A right, question, or fact determined in a former suit between parties or privies can not again be raised. It is true that the f omer action was one by the United States to recover damages from-the contractors and their sureties and the present is by the contractors to recover damages from the United States, but that does not prevent the application of the principle of *res judicata.*The principle of *res judicata*applies not only to the demand, but also to every fact or legal conclusion involved in the determination of the case. The best statement of this principle is in *Southern Pacide Railroad Company*v. *United States,*168 U. S., 1, 48.

The principle for which we here contend was also clearly stated in *New Orleans*v. *Citizens’1 Bank,*167 U. S., 371, 396, wherein the language of the Supreme Court is directly applicable to the present case. “ The question upon which the recovery of the second demand depends” is whether the United States could rightfully require claimants to build at the second site. That question has “been previously concluded by a judgment between the parties or their privies,” for that was exactly the question submitted to the jury by the court.

The rule was also stated in *Forsyth*v. *Hammond,*166 U. S., 506, 517, thus:

“Though the form and causes of action be different, a decision by a court of competent jurisdiction in respect to any essential fact or question in the one action is conclusive between the parties in all subsequent actions.”

In the recent case of *Gunter*v. *Atlantic Coast*Line, 200 U. S., 273, it was held that where the right of a State to tax a railroad had once been judicially denied in a suit between privies, it might not again be set up; even though in the *43second suit the parties and the nature of the action were' wholly different. So here we contend that the right of the United States to require claimants to build on the second site, after being once judicially denied, may not be again set up.

Two earlier examples of the application of this principle, in the same volume of the reports, are *Aurora*v. *West, 7*Wall., 82, and *Beloit*v. *Morgan, 7*Wall., 619. Both were actions on municipal bonds, and in each the validity of other bonds of the same series, though not the identical ones, had been determined in prior suits between the parties or their privies. It was held that that determination made the validity of the bonds now in suit *res judicata,*as the question at issue was the same, though the subject matter of the two suits might be different.

Other cases in the Supreme Court holding that every fact or question at issue and decided in a former suit is *res judi-cata*are *Thompson*v. *Roberts,*24 How., 94; *Cromwell*v. *Sac County,*94 U. S., 351; *Weflein*v. *New Orleans, 177*U. S., 390; *Mitchell*v. *First National Bank,*180 U. S., 471; *Fayer-weather*v. *Rich,*195 U. S., 276; *Northern Pacific By. Co.*v. *Slaght,*205 U. S., 122; *Kessler*v. *Eldred,*206 U. S., 285.

Other cases in the Supreme Court, applying in one form or another the principle of *res judicata*are *Young*v. *Blade, 7*Cranch, 565; *United States BanTe*v. *Beverly,*1 How., 134; *Lumber Co.*v. *Buchtel,*101 U. S., 638; *Last Chance Mining Co.*v. *Tyler Mining Co.,*157 U. S., 683; *United States*v. *California db Oregon Land Co.,*192 U. S., 355; *Brady*v. *Daly,*175 U. S., 148; *Montemma Canal Co.*v. *Smithville Canal Co.,*218 U. S-, 371.

That in order to ascertain exactly what was determined in the former suit, it is proper to examine the charge of the court to the jury, appears from *Miles*v. *Caldwell,*2 Wall., 35, where the Supreme Court examined the judge’s charge for that very purpose.

When we turn from the reports of the Supreme Court to those of this court we find the rule contended for equally well recognized. The first case is *Spicer*v. *United States,*5 C. Cls., 34, where Nott, Judge, now the distinguished re*44tired chief justice, at the close of a most elaborate review of the authorities on *res*judicata, concludes (p. 44):

“By all of these cases it is apparent that it is not the formality of a judgment on the same cause of action which-constitutes an estoppel; but, as was said by Lord Hardwicke in *Hugh Smithson’s case*(cited in Buller’s N. P., 228),£ it is an established rule of law that *a fact*which has once been directly decided, shall not be again disputed between the same parties.’” (The italics are in the official report.)

*Langston*v. *United*States, 26 C. Cls., 256, was a similar case for salary. There this court ruled that a fact recited in the findings of fact might not be contradicted by the United States in a subsequent suit between the parties.

But the clearest statement in the opinions of this court of the rule for which we are contending is in *Le More*v. *United*States, 35 C. Cls., 9. ' Said the court, speaking through the chief justice:

“The rule is elementary that where a controverted fact has been judicially established upon the evidence by a court of competent jurisdiction such fact so established can not be again' controverted in any other action of a not higher nature between the same parties. *Spicer’s case*and authorities there cited, 5 C. Cls. B.., 34; *Hopkins*v. Lee, 6 Wheat., 109, 113; *Case*v. Beauregard, 101 U. S., 688.”

The principle contended for has been well stated in decisions of some of the State courts. Thus in *Bazille*v. Murray, 40 Min., 48, 50, it was said :■

“It is not the fruit of litigation that constitutes the es-toppel, but the facts put in issue and found, upon which the recovery is based.”

In *Redden*v. Metzger, 46 Kans., 285, 289, it was said:

“ ‘ When a fact has been once determined in the course of a .judicial proceeding, and a final judgment has been rendered in accordance therewith, it can not be again litigated between the same parties without virtually impeaching the correctness of the former decision, which, from motives of public policy, the law does not permit to be done. The estoppel is not confined to the judgment, but extends to all facts involved in it as necessary steps, or the groundwork upon which it must have been founded. It is allowable to *45reason back from a judgment to the basis on which it stands, upon the obvious principle that, where a conclusion is indisputable, and could have been drawn only from certain premises, the premises are equally indisputable with the conclusion.’ *Burlen*v. *Shannon,*99 Mass., 200; *Board*v. *M. P. Rid. G.o.,*24 Wis., 124; *Freeman, Judgm.,*sec. 257; *Wells, Res. Adj.,*sec. 226; 1 *Herman, Estop.,*sec. 111.”

Another case closely similar to the present is *Braden*v. *United States,*10 C. Cls., 412; 12 C. Cls., 164. That arose upon a contract with the Quartermaster’s Department of the Army, which each party charged the other with breaking. The United States sued Braden and his sureties in the United States Circuit Court for the Western District of Texas, and a judgment was rendered in favor of the defendants therein. Subsequently Braden sued in the Court of Claims on the same contract. The view of the law taken by the court, speaking through Nott, Judge, in the first opinion, and Richardson, Judge, in the second, is exactly the same as that we contend for in the present case.

The question upon which the present case turns is whether the United States could require claimant, under the contract in suit and the circumstances attending its execution, to build upon the second site. Any right, question, or fact once determined by a court of competent jurisdiction can not again be drawn in question in a subsequent suit between the parties to the former suit or their privies. *Southern Pacifie R. R. Go.*v. *United States,*168 U. S., 1, 48. The question above stated upon which the present case turns, was determined against the United States in the case of *United States*v. *California Bridge c& Construction Company,*No. 80, October session 1902, in the Circuit Court of the United States for the Eastern District of Pennsylvania. That the question •there decided was the same as that here involved, and that that determination must now control under the rule just stated, clearty appears from *Atlantic Dredging Co.*v. *United States,*35 C. Cls., 463.

It has been held again and again that the construction of a contract by the acts of the parties themselves after its execution is entitled to great weight and will ordinarily govern. *Chicago*v. *Sheldon,*9 Wallace, 50, 54; *Topliff*v. *Topliff,*122 *46U. S., 121, 131; *District of Columbia*v. Gallaher, 124 U. S., 505, 510.

*Peek*v. *United*States, 102 U. S., 64, was a casé of estoppel against the United States. There claimant was led to suppose by the agents of the Government, prior to the execution of a contract for a supply of hay, that he could get the hay at a certain place. Afterwards the Government itself had the hay at that place cut by others. The Supreme Court said that evidence of the representations was admissible “ for the purpose of showing the conduct of the agents of the defendants by which the claimant was encouraged and led on to rely on a particular means of fulfilling his contract until it was too late to perform it in any other way.”

Looking at the case in the light in which we now propose to regard it, without reference to the actions of the parties, the first argument to which we invite the court’s attention is one based upon the familiar rule of construction that every contract must be construed most strongly against the party drawing it. *Insurance Gos.*v. *Wright,*1 Wall., 456, 468; *Garrison*v. *United*States, 7 Wall., 688; *Noonan*v. *Bradley,*9 Wall., 394, 407; *Gibbons*v. *United*States, 15 C. Cls., 176, 192; *Edgar & Thompson WorJcs*v. *United*States, 34 C. Cls., 205.

Another indication that the contract in suit contemplated the erection of a building on a fixed site is to be found in the language of the advertisement.' In a Government contract the advertisement, proposals, and acceptance, which are preliminary steps required by law, are a part of the contract. *Garflelde*v. *United States,*93 U. S., 242; *Harvey*v. *United States,*105 U. S., 671, 688; *Mueller*v. *United States,*19 C. Cls., 581, 590; *Proffit*v. *United States,*42 C. Cls., 248.

The placing of stakes at the first site and permitting them to remain there constituted an election. Having made their election of a site, defendants were bound by it and could not make another choice. It is elementary law that an election once made is irrevocable. *Golee upon Littleton,*146a; *Brown*v. *Bass,*4 Wallace, 262; *Peters*v. *Bain,*33 U. S., 670, 695; *Brown*v. *Royal Insurance Go.,*1 Ellis & Ellis, 853. That the foregoing position is sound appears from *United States*v. *Freel,*186 U. S., 309, already discussed.

*47Forfeitures are *strictissimi juris*and a forfeiture can not be sustained unless made in precisely the manner pointed out by the contract. Said the Supreme Court in *Philadelphia, Wilmington & Baltimore Railroad Go.*v. *Howard,*13 How., 307, 340:

“The law leans strongly against forfeiture, and it is incumbent on the party who seeks to enforce one to show plainly his right to it.”

That the identity of parties need not be absolute is clear from the circumstance that according to all the authorities it is sufficient if the parties in the former and the present suit are privies one to another. *1 Greenleaf on Evidence,*sec. 523, quoted with approval by the court in *Gill*v. *United States,*7 C. Cls., 522, 526. Just what is meant by the “ thing sued for” is not clear. That there need not be entire identity in the cause of action was decided in *Southern Pacific Railroad Go.*v. *United States,*168 U. S., 1, 48, where the modern doctrine on this subject is thus set forth:

“The general principle announced in numerous cases is that a right, question or fact distinctly put in issue and directly determined by a court of competent jurisdiction, as a ground of recovery, can not be disputed in a subsequent suit between the same parties or their privies; and even if the second suit is for a different cause of action, the right, question or fact once so determined must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified.”

It is not the form or object of the action which must be the same, but the fact or question at issue. Said this court in *Spicer*v. *United States,*5 C. Cls., 34, 44.

In *American Bonding & Trust Go.*v. *Gibson Comity,*127 Fed. Rep., 671, the Circuit Court of Appeals for the Sixth Circuit (Lurton, Severens, and Richards, justices) said (p. 674):

“In case the contractors failed to finish the work, the owner might take over the job by complying with certain provisions. But, if he did, he was obliged to complete the work in accordance with the specifications.”

*48In *American Surety Go.*v. *Woods,*105 Fed. Rep., 741, it was held under a contract authorizing annulment and completion at the expense of the contractor that where the works were never in fact finished by the owner after the default of the first contractor, he might not recover the excess which it would have cost him to finish them.

It has been repeatedly decided by the Supreme Court of the United States and this court that where the building owner delays the contractor he can not legally deduct liquidated damages or time penalties. *District of Columbia*v. *Camden Iron Works,*181 U. S., 453; *Crocker*v. *United States,*21 C. Cls., 255; *Ittner*v. *United States,*43 C. Cls., 336; *New Jersey Foundry Machine Co.*v. *United States,*44 C. Cls., 178; *Pickley*v. *United States,*46 C. Cls., 77; *United Engineering c& Contracting Co.*v. *United States,*47 C. Cls., 489.

*Mr. Charles F. Jones,*with whom was *Mr. Assistant Attorney General Huston Thompson,*for the defendants.

There are certain well-settled principles that it is important to bear in mind in the consideration of the question of *res •judicata.*In the first place, it is settled that as a rule estoppels are not favored defenses; but when the alleged estoppel is a matter of record embodying the result of a judicial proceeding, the courts, as a matter of strict legal right and on the grounds of public policy, enforce as against the parties the legal effects of that result. *The Atlantic Dredging Co.*v. *The United States,*35 Ct. Cls., 463, 483.

In the next place it is settled that in order to render a matter *res judicata*there must be a concurrence of four conditions, namely:

(1) Identity in the thing sued for; (2) Identity of the cause of action; (3) Identity of persons and parties to the action; (4) Identity of the quality in the persons for or against whom the claim is made. Bouv. Law Diet., 467.

The above was quoted with approval by the Supreme Court of the United States in *Lyon*v. *Perrin and Gaff Manufacturing Company,*125 U. S., 700.

*49The same rule is also stated in the following language:

“To make a judgment conclusive upon the parties it is required that it should have been rendered upon the matters directly in issue and not on a thing incidentally brought in controversy.” Bouv., 8 Inst., sec. 8101.

In the case of *Packet Company*v. Sickles, 5 Wall., 580, the principle is laid down in the following language:

“As we understand the rule in respect to the conclusiveness of the verdict and judgment in a former trial between the same parties, when the judgment is used in pleading as a technical estoppel or is relied on by way of evidence as conclusive, *per se,*it must appear by the record of the prior suit, that the particular controversy sought to be concluded was necessarily tried and determined — that is, if the record of the former trial shows that the verdict could not have been rendered without deciding the particular matter, it will be considered as having settled that matter as to all future actions between the parties; and further, in cases where the record itself does not show that the matter was necessarily •and directly found by the jury, evidence *aliunde*consistent with the record may be received to prove the fact; but, even where it appears from the extrinsic evidence that the matter was properly within the issue controverted in the former suit, if it be not shown that the verdict and judgment necessarily involved its consideration and determination, it will not be concluded.”

Again:

“ In order that a judgment may constitute a bar to another suit, it must be rendered in a proceeding between the same parties or their privies, and the point of controversy must be the same in both cases and must be determined on its merits.” *Hughes*v. *U.*/S'., 4 Wall., 232, 237.

In the case of the Washington, *Alexandria and Georgetown Steam Packet Company*v. Sickles, 24 How., 333, it was held that where in a declaration containing a special count upon a contract, and also upon common counts, that the judgment was not conclusive, because the verdict might have been rendered without reference to the special count and upon the common counts only, that extrinsic evidence showing upon which count the verdict was rendered was necessary to make the judgment an estoppel. See also *50*Paclcet Company*v. *Sickles,*5 Wall., 580; *Fayerweather*v. *Ritch,*195 U. S., 276; *Fendall*v. *U. S.,*12 Ct. Cls., 305.

It has been held that where the contract provides that the owner shall withhold a certain per cent of the contract price until the contractor has completed, the building, the failure to withhold such money will discharge the surety. *Bragg*v. *Shain,*49 Cal., 131; *McConnell*v. *Poor,*113 la., 133; *Am. ds Eng. Enc. of Law,*496.

Also that an extension of time to the contractor, without the consent of the surety, will discharge the surety. The burden is upon the claimant to prove that the questions in the two cases were identical. If it appears, therefore, from the record that the jury in the *Philadelphia case*could have reached a verdict without deciding the question involved in this case, the judgment therein rendered is not a bar. This is the rule as laid down in *Paclcet Company*v. *Sickles, supra,*and which has been followed and adhered to from that time to the present. The record does not show that the jury decided the case on the same question that is involved in this case, for the reasons hereinbefore stated; therefore, the former judgment is not a bar to the defense interposed by the defendant in this case.

*The Atlantic Dredging Company case, supra,*upon which counsel for plaintiff relies so much, is so different that it falls short of substantiating their contention. In that case the former suit was against the identical corporation which was a claimant in the second suit. The parties were precisely the same in both cases, and the proofs show that the issues were the same, and they sued in the same right.

The decision in *Braden*v. *The United States,*10 C. Cls., 413, also relied on by counsel, is, in fact, against instead of in favor of claimant.

In Bigelow on Estoppel, pages 137-138, in discussing the case of *Pritchard*v. *Hitchcock,*6 Man. *&*G., 151; 6 Scott, N. B.., 851, the author says:

“ The decision shows that in the relation of guarantor and principal no privity, in the sense in which the law of estoppel is applied, exists; and the same is true by the weight of authority of the relation of surety and principal, cosureties *inter se,*principal and agent, and the like cases where parties *51are answerable over. There is no succession of rights and duties to the new party in such cases.”

See also Am. & Eng. Enc. Law, vol. 27, p. 455, and cases there cited: *Sheehy*v. *Mandeville and*Jamesson, 6 Cranch, 253.

It is inconceivable that the judgment relied upon could be held to be an- estoppel in any sense or to any extent, but admitting, for the sake of argument and for no other purpose, that it does create an estoppel, the bar would be limited to that which was actually litigated and determined, because the action in this case is upon a different claim and demand. *Virginia-Garolina Chemical Go.*v. Kirven, 215 U. S., 252, 257; *GrorrmeTl*v. *Goimty of Sac,*94 TJ. S., 351; *The Northern Pac. By. Go.*v. *Seaght,*205 TJ. S., 122.

In *Bluthenthal*v. Jones, 208 TJ. S., 64, it was held that—

“Courts are not bound to search the records of other courts and give effect to their judgments, and one who relies upon a former adjudication in another court must properly present it to the court in which he seeks to enforce it. See also *United States*v. *Bliss,*172 TJ. S., 321.”

No opportunity has been afforded in the present case to cross-examine the two witnesses whose depositions the claimant asks to be considered, and none can now be availed of; hence the testimony given by these witnesses in the suit at Philadelphia is not the same as it would be if the opportunity existed to cross-examine them in this suit, for the reason that the legal issues and the measure of damages in the suit at Philadelphia were not the same as in the suit at bar. The depositions of these witnesses were taken with reference to the issues involved in that case and not to the issues involved in the present case.

“Unless the issues were then the same as they are when the former testimony is offered, the cross-examination would not have been directed to the same material points of investigation, and therefore could not have been an adequate test for exposing inaccuracies and falsehoods. Unless, furthermore, the parties were the same in motive and interest, there is a similar inadequacy of. opportunity, for the present opponent can not fairly be required to abide by the possible omissions, negligence, or collusion of a different party whose proper utilization of the opportunity he has no means of *52ascertaining.” *Wigmore on Evidence,*vol. 2, sec. 1386. See also *Wharton on Evidence,*vol. 1, sec. 177, third edition, p. 162.

“Where, however, the parties in interest in two civil suits are essentially different, though the subject matter is the same, the evidence is not receivable.” *Norris*v. *Monen,*3 Watts, 465; *Fellers*v. Davis, 22 S. C., 425.

“ Unless the issues in the two suits are substantially the same, the evidence of the witness in the first suit can not be reproduced.” *Orr*v. Hadley,• 36 N. H., 575; *Sample*v. Goulson, 9 Watts and S., 62.

“And the point in issue must be the same in order to make the actions the same, even though the action be between the same parties and on the same general subject.” *Melvin*v. Whiting, 7 Pick., 79, 81; *Jackson*v. *Lawson,*15 Johns., 539; 1 Phil. Ev., 230; *Wilbur*v. *Selden,*6 Cowen, 162; *Walker*v. *Walker,*16 Serg. and Eawle, 377.

“Although a party has cross-examined the testimony of a witness on a former trial, the testimony of the witness, if deceased, can not be adduced against him unless the opposite party be the same as in the former suit or a successor or representative of the same.” *Doe*v. *Derby,*1 A. & E., 783; *Morgan*v. *Nicholl,*L. E. 2 C. P., 117; *Atkins*v. *Hum-phreys,*1 M. & Eob., 523.

“ The rule of the common law is that no evidence shall be admitted but what is or might be under the examination of both parties; and it is agreeable also to common sense that what is imperfect and, if I may so say, buifhalf an examination, shall not be used in the same way as if it were complete.” *Gazenove*v. *Vaughn,*1 Maulé and Selwyn’s Eeports, 4 and 6.

The rule that all prior negotiations *are*merged in the written contract, and that such contract is presumed in law to express the final understanding of the parties, and that prior transactions can only be referred to for the purpose of explaining and construing uncertain terms of the contract, is elementary. This principle was clearly announced in *Brawley,*96 U. S., 168-173, wherein it is said—

“The written contract merged all previous negotiations and is presumed in law to express the final understanding of the parties. If the contract did not express the true agreement, it was the claimant’s folly to have signed it. The court can not be governed by any such outside considerations. Previous and contemporary transactions and facts may be very properly taken into consideration to ascertain the sub*53ject matter of a contract and the sense in which the parties may have used particular terms, but not to alter or modify the plain language which they have used.”

Atkinson, *Judge,*

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

This is a suit growing out of a contract entered into by the plaintiff company with the United States to erect a sawmill, boiler house, and steel chimney at the Mare Island Navy Yard, near San Francisco, Cal., according to certain plans and specifications which are attached to and form a part of the contract. Said contract and specifications are made a part of the petition in this case, to which reference is here made.

The contract was duly signed and executed on the 21st of December, 1898, but it did not provide for the exact location of the structures required to be erected on the navy yard property at Mare Island. It simply provided for the construction of said improvements *at said navy yard.*The findings show that it was tacitly understood that these proposed improvements were to be erected on a certain portion or part of the Mare Island Navy Yard property, but the definite location was thereafter to be left to the officials of the United States Navy in charge of the work. In accordance with the rules of the Navy Department a board of officers was assembled to inspect the premises and recommend ■to said department a site upon which the structures were to be erected by the contractors. It appears from the findings that the site selected by said board was not approved, and another site was subsequently recommended which was approved and selected as the site for the structures provided for in the contract.

It, however, further appears that prior to the submission of bids, the prospective bidders, including the plaintiff company, visited the navy yard premises and were informed by the naval officials that the exact site for said structures had not been definitely determined; that the location indicated by certain stakes was the point that had been recommended by a naval board, but it was liable to be changed to some other place within the limits of the navy yard. The *54report of the board recommending a location was not approved by tbe Navy Department, and the board was ordered to reassemble and select another location, which was accordingly done on December 27, 1898, six days after plaintiff company had signed the contract to construct the buildings; and on March 1, 1899, plaintiff company was advised that a *permanent site had been chosen.*Early in the month of May following one or more of its officers inspected the site that had been selected by the naval board and protested against being required to do the work at the place selected without additional compensation.

In the month of June following, the Bureau of Tards and Docks, acting under a provision in the contract which gave to it the power to decide, refused to allow the claims of the plaintiff company for an increase in price above that which was fixed by the contract. Plaintiff company thereupon refused to proceed with the work, and on'December 7, 1899, the Bureau of Yards and Docks directed the appointment of a board of officers to consider the case and report thereon.

It was thereafter agreed to allow plaintiff company six months’ additional time to complete the work under its contract, but on March 18, 1900, it declined to proceed with the execution of its contract, and on April 26 of said year a supplemental contract was prepared and presented to plaintiff company, which it also declined to execute; consequently, on January 2, 1901, the Bureau of Yards and Docks declared the contract null and void, and immediately thereafter said bureau readvertised the proposed work and entered into a new contract with another party, who executed his contract according to its terms.

By reason of the alleged illegal annulment by the defendants of the plaintiff’s contract, this suit has been instituted to recover from the United States alleged losses on materials, wages of men employed, .time and expenses of officers and employees of plaintiff, general and office expenses chargeable to the contract, cost of changing location of material, cost of testing foundations of the two alleged sites for the construction of the required buildings and smokestack, and anticipated profits on the contract, aggregating $17,308.42. On *55the other hand, the defendants file a counterclaim of $35,-607.32 as damages resulting from the failure of the plaintiff company to comply with the provisions of its contract.

The plaintiff company had given a bond to secure the performance of its contract, and a suit was brought thereon by the United States in the Circuit Court of the United States for the Eastern District of Pennsylvania, the plaintiff company and its sureties being named as parties defendant to said suit. Plaintiff company was not a resident of Pennsylvania and was not summoned to appear, and did not appear in that action, but proceedings were had against its surety— The American Surety Co. — with the result that there was a verdict and judgment in favor of the surety company.

At the outset, we are met with the contention of plaintiff that the question of breach of the contract is *res judicata,*because of the judgment in favor of the surety in the said suit in Pennsylvania. As stated by plaintiff’s counsel, “ the main question at issue is, Were the United States legally justified in annulling the contract ” ? and that issue, they urge, “ has already been determined by a court of competent jurisdiction in a suit between parties privy to the parties herein and is therefore *res*judicata,” and consequently there is nothing for the court to do but to assess the damages which plaintiff alleges to be due.

Having in mind the relation of principal and surety, the proposition that a judgment in favor of the surety should inure to the principal’s benefit and work an estoppel in the latter’s favor when sued upon its contract, would seem, upon the face of it, to be an unusual application of the rule relating to the binding effect of a judgment upon the parties and privies; but as counsel has urged with much earnestness that the defendants here are concluded by the judgment in favor of said surety, although the claimant was not a party to said suit or to the judgment rendered therein, we proceed to consider the question in the light of the authorities involved therein.

The general rule is that where an action is brought in a court of competent jurisdiction, a judgment rendered thereon is conclusive in a subsequent action between the same parties *56or their privies upon the same subject matter in the same court or another court of concurrent jurisdiction. The maxim of the law is *“nemo debet bis vexari fro una et eadem causa,”*and the reason of it as stated in Broom’s Legal Maxims, 329, is that “to unravel the grounds and motives which maj have led to the determination of a question well settled by the jurisdiction to which the law has referred it would be extremely dangerous; it is better for the general administration of justice that an inconvenience should sometimes fall upon an individual than that the whole system of law should be overturned and endless uncertainty be introduced.” Confirmatory of this statement it was said by Mr. Justice Clifford in *City of Aurora*v. *West,*7 Wall., 82:

“ Courts of justice, in stating the rule, do not always employ the same language, but where every objection urged in the second suit was open to the parties within the legitimate scope of the pleadings in the first suit and might have been presented in that trial, the matter must be considered as having passed *in rem judieatum*and the former judgment in such a case is conclusive between the parties.

It was also held in *Packet*v. *Siekles,*24 How., 341, that “ the essential conditions under which the exception of the *res judicata*becomes applicable or the identity of the thing demanded, the identity of the cause of the demand and of the parties in the character in which they are litigants.” *Aspden*v. *Nixon,*4 How., 467. In *Northern Pac. R. Co.*v. *Slaght,*205 U. S., 122, 131, it was said that “ the general rule of the extent of the bar is not only what was pleaded or litigated but what could have been litigated or pleaded.” In *Fayerweather*v. *Ritch,*195 U. S., 276, the following language is adopted from *Cromwell*v. *Sac County,*94 U. S., 353, which is denominated a leading case:

“The language, therefore, which is so often used, that a judgment estops not only as to every ground of recovery or defense actually presented in the action, but also as to every ground which might have been presented, is strictly accurate when applied to the demand or claim in controversy. Such a demand or claim having passed into judgment can not again be brought into litigation between the parties in proceedings at law upon any grounds whatever.” *Western*v. *New*Orleans, 177 U. S., 390, 397.

*57The rule is thus applicable to the questions actually litigated and to those within the legitimate scope of the pleadings in the cause whether actually raised in the particular case or not.

It is to be noted, however, that there is a difference between the effect of a judgment as a bar or estoppel against the prosecution of a second action upon the same claim or demand and its effect as an estoppel in another action between the same parties upon a different claim or cause of action, because the estoppel in the latter case operates “ only as to those matters in issue or points controverted upon the determination of which the findings or verdict was rendered.” *Keokuk & West R. Co.*v. *Missouri,*152 U. S., 301, 315; *Cromwell*v. *Sac County,*94 U. S., 351. The general rule has been stated in this court to be that parties and privies are concluded by a judgment of a court of competent jurisdiction upon every material issue clearly presented by the pleadings, tried by the court, and judgment rendered thereon. *Langston’s case,*26 C. Cls., 256; *Braden’s case,*12 C. Cls., 164.

Confessedly, the plaintiff company was not á party to the Pennsylvania case mentioned, but its counsel contends that it is privy to the defendant therein, who was in fact the surety on its bond given to the United States for the faithful performance of its contract. It was a stranger to that suit and as such is not entitled to plead the estoppel relied on here, unless it be that it was in privity with its said surety.

When it is said that a judgment binds parties and privies, the reference is, generally speaking, to privies in law and not to a privity by contract or deed. The plaintiff was not a party to the Pennsylvania case and was the principal in the bond there sued upon, and therefore the relation between these parties was that of principal and surety, which relation was created by contract. “ If there be any privity between them it is that of contract, which is not admitted to be sufficient by any court or authority whatever.” *Masser*v. *Strickland,*17 Sarg. & Rawle, Pa., 359. In that case it was distinctly ruled that whilst a judgment against a constable for official misconduct is conclusive against his sureties as to the *58misconduct and *quantum*of damages, it is not *res judicata*against the sureties so far as preventing them interposing personal defenses.

In *Brown*v. Chaney, 1 Kelly, Ga., 410, is a careful analysis of the question wherein the court defines privies to be—

“those who are so connected with the parties in estate or in blood or in law as to be identified with them in interest and consequently to be affected with them by the litigation, as lessor and lessee, heir and ancestor, executor and testator; all others not included in either of these classes are, of course, strangers,”—

and consequently the court declined to apply the rule of *res judicata*in a case where the indorser was sued and who attempted to rely upon a prior judgment in favor of one of the makers. After discussing the authorities and pointing out that a judgment against the principal (there being no fraud or collusion shown) may be *frima facie*evidence of the amount of the damages, the court thus concludes:

“ But to hold that a judgment is conclusive upon third persons would be to overturn a uniform course of decisions from the Year Books to the present day.”

In *Douglass*v. Howland, 24 Wend., 35, the court discusses the meaning of privity in reference to parties to a cause, collates the authorities upon the effect of a decree against the principal in a subsequent action against a guarantor, and adds:

“ It is admitted in the books cited that the verdict is not only evidence against the immediate parties, but against all claiming under them, which very nearly, expresses the meaning of the word privy when used to signify those persons off the record who may be affected to the same extent as if they were parties. It means anyone who takes the subject matter of litigation after the suit is determined or, in some cases, while it is pending. He is either privy in blood, as an heir on whom the estate in litigation descends; a privy in estate, as one who takes by conveyance; or a privy in law, as one who takes a right of dower. In all these cases the reason is obvious; the heir purchaser, etc., always comes in subject to any act or default of the predecessor by which the title may have been affected. But, subject to this exception, the law .is extremely jealous of the rights of all who *59are not actual parties, even though, they may appear and be made so.”

“Privity denotes mutual or successive relationship to the same rights of property, or, as is said in *Bigelow on Estop.,*p. 142, the * ground of privity is property and not personal relation.’ ” *The Stanwood,*19 Fed., 577.

“A privy to a judgment or decree is one whose succession to the rights of property thereby affected occurred after the institution of the particular suit and from a party thereto.” *Orthwein*v. *Thomas,*127 Ill., 554; 11 Am. St. R., 159, 171.

Defining the term *privity,*the court in *Gittinan*v. *Strong,*14 P. F. Smith, Pa., 246, says:

“ It is the right to represent which creates privity in law as between ancestor and heir, decedent and administrator, etc., but clearly the principal in an action against himself alone can not represent the surety.”

And further:

“The privity of the surety with his principal is in the contract alone and not in the action.”

To the same effect is *Park*v. *Ensign,*66 Kans., 50, 97 Am. St. R., 352, and cases there cited; *Hartley*v. *Phillips,*198 Pa. St., 9; *Pennington*v. *Hunt,*20 Fed., 195; *City of Lowell*v. *Parker,*51 Mass., 309, 315; *Morris*v. *Lucas,*8 Blachf. Ind., 9; 1 Freem. Judgts., sec., 162; *Wells Res Judicata,*sec. 87 et seq., and other cases *supra.*

The authorities we have cited are sufficient to establish the proposition that the plaintiff company and its surety were .not privies in such sort that the judgment of the Federal court in Pennsylvania in favor of the plaintiff’s surety will warrant it in setting up said judgment as *res judicata*in this action wherein it is suing for damages for an alleged breach of the contract between it and the United States. And upon principle it can not be claimed that because a fact was in issue in an action against the surety the opposite party is concluded by the judgment therein when the principal is being sued, or when, as in this case, the principal seeks to take advantage of a judgment in its surety’s favor.

The relationship existing between principal and surety is well understood in the law. As affects the obligee, they may both or either be bound, but as between themselves one *60is primarily and the other secondarily bound. The surety is allowed to interpose defenses which are not available to the principal. Their interests are not always identical, *Gittinan*v. Strong, 64 Pa. St., 246. The principal obligor and the obligee may agree to a valid extension of the bond or of the time in which a contract is to be performed, but if the surety does not agree to such extension he will be released. The principal may agree to an alteration of material parts of the contract and remain bound, but the surety, not consenting, may be such changes be released. The surety’s undertaking in the present case was that the claimant would do certain work under the contract between the parties, and was not that the surety would do the work. The rights of the United States are therefore based both upon the contract and the bond.

When a judgment rendered against the principal is admissible against the surety in a subsequent action by the creditor against the surety, it is not admitted upon any theory of privity, but as a link in the proof of a case against the surety, and ascertaining as it does the liability of the principal it may fix the *quantum*of damages for which the surety is answerable. But it does not preclude the surety from making personal defenses. *Douglas*v. Howland, 24 Wend., 35 As was said in *Deck*v. Johnson, 30 Barb., 283, 290:

“A judgment in favor of a surety against the condition in a separate action by the latter against the former would not affect the rights of the condition against the principal debtor, because such a judgment would not necessarily extinguish the debt, and such principal debtor would be neither party nor privy to the action.”

It is allowable, where material and where the pleadings do not sufficiently show it, to prove by extrinsic evidence consistent with the record that a certain fact, right, or question was litigated in a cause between parties in a prior action, *Miles*v. Caldwell, 69 U. S., 35; *Fendall's case,*14 C. Cls., 247, and claimant has introduced herein depositions given by witnesses in the said suit in Pennsylvania. We agree with counsel for plaintiff that the pleadings in said cause taken in connection with the charge of the court *61therein show sufficiently the questions at issue, and whilst we do not exclude the testimony offered for said- purpose, we take occasion to say that the method adopted for making such proof is not the approved practice, but the fact, right, or issue sought to be proven must be shown by evidence relating thereto and not by the testimony adduced at the hearing of the case, because it unnecessarily encumbers a record to bring into it the testimony of witnesses in another proceeding much of which is immaterial upon the matter sought to be proven.

It is unnecessary for us to discuss the Pennsylvania case, because, as has been stated, we hold that the judgment there is not conclusive upon the defendants to this suit.

Plaintiff’s second contention is that the United States were not justified in annulling the contract for plaintiff’s failure to comply with its terms, because of an alleged change of the site upon which the buildings were proposed to be erected. The contract contains the following provision with respect of annulment:

“ If said parties of the first part shall fail in any respect to perform this contract on their part, it may, at the option of the United States, be declared null and void, without prejudice to the rights of the United States to recover the defaults herein or violations hereof, and that for such default the United States may demand and recover of said parties of the first part and their representatives aforesaid as liquidated damages a sum of money equal to the penalty of the bond forming part of this contract.”

Section 8 of the specifications, which also authorizes the annulment of the contract should certain conditions arise, is in the following words:

“If at the close of any month the progress of the work shall not have been such as to indicate that it will be completed within the time specified in the contract, the officer in charge of the work shall so report to the commandant, and the Government shall have the power to refer the matter to a board of three officers, and if recommended by- them and the interests of the Government so require the Government shall have the right to annul the contract and complete the work in such manner as is deemed best at the expense of the contractor and his sureties.”

*62Although plaintiff company contends that it was justified in refusing to comply with its contract because of an alleged change in the location of the site for the buildings, it is shown by Finding IY, when a prospective site was pointed out to a member of the plaintiff company by a Navy official, yet he was informed by said officer that the site for the buildings had not been definitely determined, and that the same could not be finally decided until such action was approved by the Navy Department. Hence it is definitely shown that the site inspected by prospective bidders was only tentative, and as shown by the findings had only been recommended by the local naval board, but that the matter had to be referred to the Navy Department for approval or disapproval. The same was accordingly referred and was disapproved by said department, and another and permanent site was definitely selected under the directions of the Navy Department, upon which the buildings were to be constructed.

Plaintiff company purchased certain materials and proceeded to the work of carrying out its contract; and not until May 10,1899, one hundred and forty days after signing the contract, as set forth in Finding X, was any objection raised or protest offered to carrying on the work at the site selected by the Navy Department.

The advertisement for bids was for the construction of certain buildings at the Mare Island Navy Yard. The contract which plaintiff company signed was for the construction of these buildings at said navy yard. If the contracting company based its proposal upon the theory that the buildings were to be constructed at a particular point in the navy yard, it should have demanded that the contract should so state at the time it was submitted to it for execution. The rule is elementary that all prior negotiations are merged in the written contract, and that such contract is presumed in law to express the final understanding of the parties signing it, and that prior understandings can only be referred to for the purpose of explaining and construing uncertain terms of the contract. *Brawley’s case,*96 U. S., 168, 173. See also *Simpson*v. *United*States, 172 U. S., 372, 379; *Griefen*v. *United*States, 43 C. Cls., 107; *Callahan Construction Co.*v. *United*States, 47 C. Cls., 177.

*63In the *Simpson case,*above cited, the contract was for the building of a dry dock upon an “ available ” site, and in that respect it is not materially different from the contract under consideration. As said by the Supreme Court, page 380:

“ The contract imposed upon the contractors the obligation to construct the dock according to the specifications within a designated time for an agreed price upon a site to be selected by the United States. We look in vain for any statement or agreement or even intimation that any warranty, express or implied, in favor of the contractors was entered into concerning the character of the underlying soil.”

The contention in the case at bar that a certain site had been selected is not sustained by the findings of fact, and it is certain that no sort of test had been made of the soil underlying the location as first recommended or the location as secondly recommended. In the *Simpson case*it appeared that a test had been made, and it was insisted that the contractors were influenced in making their bids by that test, but the Supreme Court said, page 381:

“ The fact that the bidders knew that a test of the soil in the yard had been made, and drew the contract providing that the dock should be located on a site to be designated by the United States without any express, stipulation that there was a warranty in their favor that the ground selected should be of a defined character, precludes the conception that the terms of the contract imposed such.obligation on the Government in the absence of a full and clear expression to that effect, or at least an unavoidable implication.”

The plaintiff company after making the contract, and as early as January 19,1899, seems to have known, regardless of its claim to the contrary, that there was to be a change in the location of the buildings, because at that time its president stated:

“As soon as you are able to notify us that the changed location of the buildings has been definitely fixed we will immediately commence work on the foundation.”

And thereafter, on March 1st, a formal notice was given to the plaintiff that the site of the sawmill had been selected and that the contractors were at liberty to start work as soon as they desired. They immediately replied that they were *64pleased to learn that the site had been selected, and that work thereon would be commenced, adding:

“ In the meantime, will you kindly inform us whether the original site was finally decided upon, and if not, where the new location is ? ”

These statements are utterly inconsistent with the claim that the plaintiff company did not understand in the beginning of the negotiations that the site had not been definitely selected. This conclusion is fortified by the conduct of the plaintiff company in proceeding with arrangements for doing the work after the site had been selected and without complaint until some time in May following.

“ Light is thrown upon the plain meaning of the contract by the conduct of the parties in the execution of the work. It is not pretended that, when the character of the subsoil was discovered, the slightest claim was preferred that this factgave rise to an extra" allowance. The fact is that the contractors proceeded with the work, obtained delay for its completion, made their final settlements, and received their last payment without ever asserting that any rights which they now claim were vested in them. Without deciding that such conduct would be decisive if the claim was supported by the contract, it is nevertheless clear that it affords a just means of adding forceful significance to the unambiguous letter of the contract and the self-evident intention of the parties in entering into it.” *Simpson’s case, supra.*

The work was not done by plaintiff company in this case as in the *Simpson*case, but the principle stated in the quotation above is applicable here.

We allow nothing on account of the defendant’s counterclaim, because we think that the changes in the specifications made by .the subsequent contracts with Concannon resulted in material and substantial alterations in the work which claimant had undertaken to perform. In other-words, that the Government after notifying the claimant of its purpose to have the work done and hold claimant for the difference between what it would cost the defendants and the original contract price did not complete the work in substantial compliance with the original plans, but changed them in material features. The right secured by the original contract to make changes in the specifications and providing for a method of *65ascertaining the compensation to be paid in event of changes should not be extended into the new arrangement so far as the rights of the original contractor are concerned. When the Government took over the work and let a new contract, its rights and those of the original contractor were fixed by the law applicable to the rights and liabilities then existing. The Government could then sue for a breach of the contract or could have the work done and charge the contractor for the cost in excess of the original contract price. But electing to do the latter the Government must show that the work was done by another contractor under a contract and specifications which did not materially or substantially depart from the old contract and specifications. To allow the Government under the provisions of the original contract or specifications the right to make material changes in the specifications, resulting in substantial alterations of the buildings as originally contemplated, would be in effect to say that any sort of changes or alterations could be made after the declared breach. *Axman's*case, 234 U. S., 36; *McMullen's*case, 222 U. S., 460; *O'Brien's*case, 220 U. S., 321.

Our conclusion is that judgment shall be entered in favor of the plaintiff company against the United States for the sum of $1,254.65, as shown by Finding XIY. All other claims, including the defendants’ counterclaim, are dismissed.

Howey, Judge, took no part in the trial and decision of this case.