#### JOHN H. BROWN, SURVIVING PARTNER OF JOHN H. BROWN AND HARVEY M. MUNSELL, TRUSTEES, v. THE UNITED STATES.

[No. 29,949.

Decided December 6, 1915.]

*On the Proofs.*

*Contract;*ordnance.—Plaintiffs contracted with the United States to furnish certain wire-bound rapid-fire guns and the mounts for the same. The contract provided for certain tests to be made of a sample gun of each caliber and that the acceptance of the guns by the Government would depend upon such tests proving *23satisfactory. When submitted to the tests the gun passed some of the requirements satisfactorily, but in others did not, and certain material defects being apparent, the War Department requested plaintiffs to submit the guns to an additional test before approving the gun. Upon failure of plaintiffs to comply with this request, and before any guns were delivered, the contract was annulled by the defendants. Plaintiffs sue for the amount alleged to have been expended toward the performance of the contract before its annulment.

*Test;*acceptance.—Where a contract provides that a sample gun shall be tested and the acceptance thereof “ *will depend upon the type gun passing its test satisfactorily,”*and where in the test certain defects were disclosed, it is held that the gun was not only to pass successfully through the ordeal to which it was to be subjected, but in addition its conduct during the test and its condition afterward must be such as to be satisfactory to the officers of the Government.

*Held,*That the gun not having passed the test “ *satisfactorily ”*in the first instance, and the Chief of Ordnance not having thereupon rejected it, as he had a right to do under the contract, but instead granted the plaintiffs an opportunity for an additional test *de hors*the contract, this was a favor to the plaintiffs, and if they did not accept it the contract was properly annulled.

*The Reporter's*statement of the case:

*Messrs. George H. Lamar*and *George A. King*for the plaintiff. *King <& King*were on the briefs.

Immediately upon the execution of the contract, the claimants made a subcontract with the Diamond Drill and Machine Co. to make all the guns contracted for. The officers of that company were sureties on the bond given by the claimants for the performance of the contract. The company owned and operated a large and well-appointed steel foundry at Birdsboro, Pa., and was fully equipped to construct the guns required by the contract. It immediately built a gun shop for the special purpose of carrying out this contract and purchased a large amount of material, as well as special machinery for the purpose of making the guns.

The contract contains a provision that the first gun shall be delivered for test within three months from the date of the execution of the contract.

*24The test began at the proving ground of the subcontractors near Birdsboro, Pa., March 8, 1899, and continued for 300 rounds, the maximum number permissible under the contract. The test was completed August 9, 1899.

The claimants were naturally desirous of knowing the official action of the department on the test and had repeated inteiwiews with Major (now Brigadier General) Charles S. Smith, the officer specially in charge of the subject in the Ordnance Office of the War Department. General Smith orally informed Mr. Munsell that the gun appeared to have passed its test, and in answer to an inquiry of Mr. Munsell whether they could go on with the completion of the guns, gave an affirmative response.

The request for an official statement that the gun had passed was an entirely proper one. It was a demand for an already too long delayed official announcement of the result of the test. It made it incumbent upon the Government immediately to place in formal shape a certificate of what had been orally stated, that the gun had passed its test. This letter, reminding the Chief of Ordnance that the test had taken place nearly three months previously, that the claimants had been informed on inquiry at the Ordnance Office that the gun had passed the test, and requesting written confirmation of that statement, plainly called upon the Chief of Ordnance to make prompt official announcement of the position of his office. But this letter remains unanswered to the present date.

There are cases in which a person being called upon to state his position is required to speak or forever after hold his peace. *Wiggins*v. Burkham, 10 Wall., 129; *Shrewsbury*v. *United*States, 10 C. Cls., 37; *Sturtevant*v. *Wallack,*141 Mass., 119.

The question, however, whether the gun was in accordance with the contract requirements is a question of law, as to which the court can not even derive any light from the testimony of a witness, much less accept his opinion as conclusive.

In *Fowler*v. *Bushby,*125 N. Y. Supp., 890, the contract provided that the architect’s decision should be final. The *25architect wrote a letter stating that the items claimed .by the contractor as extras were not included in the contract, but on other grounds expressed the opinion that the owner was not bound to pay for them. The court said:

“ The only part of this letter that deals with the question as to which the architect’s decision was to be final under the contract is that which relates to ‘the true construction and meaning of the drawings,’ and as to that the decision is against the defendant, for he distinctly states that these matters were not included in the drawings and that plaintiff did not figure on them. The remaining portion of the letter deals with a construction of the contract, and amounts to nothing more than the gratuitous opinion of a layman, having no force or effect whatever.”

This view accurately fits the present case. Here the highest officers of the Government again and again admitted orally and in writing that the type gun had met the requirements of the contract. The Chief of Ordnance, the arbiter mentioned in the contract, so decided. His suggestion for modifications and for further tests, which alone formed the basis for delay in acceptance, went to the type of gun, which had been passed on when the contract was made, and therefore a question which was no longer open under the contract.

The Government has been put to its proof on the suggestion that claimants had agreed to the additional test; yet its own witnesses have admitted there was no such agreement.

In the case of *Kountze*v. *Omaha Hotel*Co., 107 U. S., 378, the principal and surety executed an appeal bond containing provisions not justified by the basic law, and the Supreme Court held that this contract should be construed the same as if no such unauthorized insertion had been made. The parties to the bond were apparently doing what the lower court required as a condition precedent to effecting their appeal.

In the case at bar the evidence shows that the claimants were in a condition of practical duress, and that they did endeavor to meet the obstacles to acceptance as far as they consistently could, but they steadfastly adhered to and did not waive any of the provisions of their contract.

*26A desire not to accept future guns until certain modifications had been made might be proper as a basis for negotiation with the contractors for such changes, but did not affect the admitted fact that the type gun had met its test prescribed by the contract or authorize the Government to withhold payment or annul the contract.

It might be suggested here that annulment is tantamount to forfeiture, which is abhorred by the courts, and contracts will be liberally construed to prevent forfeiture. *P. W. & B. R. R.*v. Howard, 13 How., 307.

Where a contract provides for a certificate, estimate, determination, or decision of an architect or engineer as to the quantity or quality of articles furnished any determination so made is as conclusive if made in favor of the work in question as it would be in case of being made against it. *Chicago & Santa Fe R. R.*v. Price, 38 Fed., 304; affirmed, 138 U. S., 185. In such case there is stronger ground for holding the owner of the work bound by the certificate than there is for holding the contractor, for it is the owner who appoints and pays the engineer, architect, or other expert.

In *Elliott*v. *M. K. & T. Ry.,*74 Fed., 707, the circuit court of appeals refused to allow a railway company to have a classification of ties made by their own inspector set aside by showing that a subsequent count disclosed mistakes.

After the question whether this test gun came up to the requirements of the contract had been first decided in the affirmative by the Chief of Ordnance and then upon reference, by mutual consent, to a committee of experts, had been still more favorably reported upon by them, it is too late to contend that the gun failed to meet its contract requirements.

Under the circumstances existing at the time of this action it is impossible to hold that it was a *bona fide*annulment of the contract under the provisions of article 5 thereof.

The power of annulment under that article could only be exercised “if any default shall be made by the parties of the first part in delivering all or any of the guns, etc., mentioned in this contract,” etc. There had been no default on *27the part of the claimants in deliveries under the contract. They tendered a type gun for test, and the contract did not allow them to deliver any more until that had been “ tested and passed upon.”

The gun was admitted to have met its contract requirements. Without, however, accepting and paying for the first type gun as the contract clearly required the United States to do when it was ascertained it had passed its contract test, it was agreed between the parties by the correspondence that the matter be referred to certain experts over whose movements the contractors had no more control than the department, and over one of whose movements—that of the Army officer—the department had complete control. It was clearly understood in making this reference that the condition stated in the “brief” of the Chief of Ordnance “the acceptance of the guns to remain in abeyance,” etc., was to be in force. As was said by this court in *King*v. *United*States, 37 C. Cls., 428, 437, “ It was equivalent to a notice that while that condition of affairs lasted the engineer in charge would not annul the contract.” Just as these experts were in the act of reporting the contract was annulled.

Much weaker circumstances than those existing in the present case were held to constitute bad faith on the part of the officers of the Government in *Savage Construction Co.*v. *United States,*47 C Cls., 298. See also *Wakefield Construction Co.*v. *City of New*York, 142 N. Y. Supp., 743.

Even if the annulment was valid, the right of suit by the contractors for prior breaches of the contract remained. It was so held by the Supreme Court in *P. W. & B. R. R. Co.*v. *Howard,*13th How., 307, 339-342, 343-344. The syllabus says:

“Under a power reserved to a party to declare a contract no longer binding, held, this extended only to the work which remained to be done, and did not deprive the contractor of compensation for what had been done.

“In an action for breach of a contract to permit the plaintiff to construct a railroad and to pay him therefor, at certain rates, the profits, meaning thereby the difference *28between the cost to him of doing the work, and the price to be paid for it, are a proper subject of damages.”

In *United States*v. O’Brien, 220 U. S., 321, affirming 159 Fed., 671, it was held that even when the Government rightfully annuls a contract, it is limited to the precise remedy stipulated in the contract.

The rule for the measure of damages is that laid down in the masterly opinion of the Supreme Court by Mr. Justice Bradley, in *United States*v. Behan, 110 U. S., 338.

In *Pneumatic Gun-Carriage Co.*v. *United States,*36 C. Cls., 71, it was held that damage incurred by a subcontractor could be recovered by the contractor. It is evident that this must be the law as regards damages sustained by subcontractors. Otherwise nobody could recover against the United States, the contractor because he personally sustained no damage, the subcontractor because he had no contract with the United States. Substantially similar was *Stout, Hall & Bangs*v. *United States,*27 C. Cls., 385.

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

Barnet, *Judge,*

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

On the 18th of May, 1898, the plaintiff entered into a contract with the Government to manufacture for the use of the Ordnance Department of the Army 50 segmental, tube wire-bound rapid-fire guns, of which the claimant, Brown, was the inventor, together with Navy rapid-fire gun mounts for the same. Twenty-five of these guns were to be of 5-inch and 25 of 6-inch caliber. The twenty-five 5-inch guns were to be paid for at $9,175 each, and the twenty-five 6-inch guns at $10,950 each, making a total contract price of $503,125.

The contract was subsequently annulled by the Government before any of the guns had been delivered. This suit is brought to recover the sum of $140,502.95, the amount alleged to have been expended toward the performance of the contract before its annulment. Of this sum $42,578.18 is *29alleged to have been expended by the plaintiff, and the remainder by the Diamond Drill & Machine Co., the subcontractor at whose works the guns were to be manufactured for the fulfillment of the contract.

None of the guns ever having been delivered under this contract, as before stated, the question for decision in this case is whether the contract was ever legally annulled by the Government.

The contract provided that a sample gun of both calibers should be furnished by the plaintiffs and submitted to test, and that the acceptance of the guns by the Government would depend upon such test proving satisfactory. The clauses of the contract relating to this subject are as follows:

> “ The first gun manufactured will be fired with full service charges of powder, such as that used in testing other rapid-fire guns of similar caliber, and with not more than the regular service pressures for endurance, and the gun must be fired for endurance 300 rounds or less as rapidly as practicable at the proving grounds of the manufacturers, commencing as soon as the gun is completed and continue firing as the department may require, 5 rounds to be fired with pressures of about 45,000 pounds, and shall not exceed 50,000 pounds, these to be included in but at close of the test, and the acceptance of the remainder of the same caliber will depend upon the type gun passing its test satisfactorily.,

> “ The first gun made of the other caliber to be tested at the same place and passed upon in the same manner, without any unnecessary delay, and the acceptance of the remainder of the same caliber will depend upon the type gun passing its test satisfactorily.

> “ Both gun and carriage must endure these tests in all- respects satisfactorily, both as to the strength of material and facility of operation.

> í{; í{í «{•»{• íjí íj»

> “ The work must pass the required inspection at all stages of its progress, and shall be inspected and passed upon at all times without any unnecessary delay, and be approved by the officers of the Ordnance Department before being accepted and paid for by the United States.”

The first complete gun with mount, etc., was to be deliv: ered for test within three months from the date of the contract, but several delays had been granted by the Government, so that the first gun was not tested till March 8, 1899. *30The test was made under the inspection of Capt. Ira MaeNutt, of the Ordnance Office, on proving grounds provided by said Diamond Drill & Machine Co., near the company’s plant at Birdsboro, Pa. It is considered unnecessary to state here in detail just what occurred during this test, and it is only necessary to say that the findings show that while the gun passed some of the requirements satisfactorily, in others it did not. The breech bushing and jacket of the gun were cracked, the diameter of the gun fluctuated, there being both increases and decreases, changes in the cross-section of the bore from a round to an elliptical form, and other defects were disclosed as shown particularly in the findings.

These features disclosed by the test created an apprehension on the part of the ordnance officers of danger of rupture, and the Chief of Ordnance and the Secretary of War refused to accept the gun unless it was subjected to and would satisfactorily pass a further test of 100 rounds. In October, 1899, the claimants had a conversation with Maj. Smith, who had immediate charge of matters under this contract, in which he informed them that the gun appeared to have passed the test, and that they could go on with the completion of the contract. Shortly after the plaintiffs wrote the Chief of Ordnance, informing him of this conversation and requesting an official letter to the same effect. No response was made to this request. November 9, 1899. the Chief of Ordnance submitted to the Secretary of War the report of Capt. MacNutt on the test of the gun with an official indorsement thereon, stating in substance that while the gun apparently had met the contract requirements certain defects had developed during the test which should be remedied before acceptance, and suggesting that the gun be submitted to 100 additional rounds, and that the guns be modified so as to remedy these and any further defects which might be developed in these additional firings. This indorsement was approved by the Secretary of War November 30, 1899, and, pursuant thereto, on February 6, 1900, the plaintiffs were notified of this action. On February 9, 1900, the claimants wrote the Secretary of War asking that further action in the premises be suspended until they could be *31heard, and stating that they had not assented to any modifications of the gun and objecting to the further test recommended, as above stated.

On May 16, 1899, while the construction of the type gun was in progress the plaintiffs had been requested by the Chief of Ordnance to present to him some mathematical calculations in reference to the qualities of the gun. Nothing was done in the matter by the plaintiffs until after the receipt by them of the above notification of February 6, 1900; but on February 17, 1900, they wrote the Chief of Ordnance, apparently in response to the above request, requesting the selection of a board to make the calculations requested, naming two members themselves and suggesting the name of Maj. Ingalls, of the War Department, as the third member of the board. The War Department acceded to this request, and Maj. Ingalls was assigned to said duty. The said board was practically a year in making their investigations, at the close of which they'made their report to the claimants, but not until after the annulment of the contract, as hereinafter stated. This report was, on the whole, favorable to the gun, but material defects were pointed out and modifications suggested.

On January 11, 1901, the Chief of Ordnance returned Capt. MacNutt’s report on the test of the gun to the Secretary of War with an indorsement recommending that his office be authorized to declare the claimants’ contract null and void because of the claimants having failed “ to comply with the requirements of the Secretary of War and in further accordance with the provisions of the contract.” This recommendation was approved by the Secretary of War, and the contract was annulled. The claimants appealed from this decision to the Secretary of War, but he refused to revoke this annulment.

It is contended by the claimants that the type gun successfully passed the test required by the contract, as shown by the facts connected with said test as well as by the statements and reports of those officers of the War Department who had that question to decide. It will be seen that the test of this gun was made in accordance with the terms of *32the contract as to the number of rounds fired, the amount of pressure, etc., and while the Chief of Ordnance in his report to the Secretary of War said that the guns “ apparently met the contract requirements,” he said, in the same report, that a further test should be made to prove the gun satisfactory. This report is doubtless a little loose in expression, but it must be interpreted as a whole, and so interpreted shows that the gun was not in every respect satisfactory to this officer.

It may be well to pause here and discuss briefly to what officer of the War Department this gun must prove satisfactory and what latitude of discretion such officer would have in the premises. While the contract seems to be silent as to what officer should exercise this discretion, the parties seem to have interpreted it as leaving that subject to the Chief of Ordnance; and that is doubtless the way in which it should be construed, subject, however, perhaps to the Secretary of War, which question will be noticed later. The contract provided that the gun must pass “its test satisfactorily.” This, of course, did not mean satisfactorily to Maj. Smith or any other subordinate of the War Department, but satisfactorily to the highest authority if finally submitted to such authority.

An important question to be decided in this case is what effect should be given to the word “ satisfactorily ” as used in the contract in question. The contract provided in considerable detail the manner in which this test should be conducted and then said that the gun should pass this test “ satisfactorily.” Under the familiar rule in the construction of contracts some effect and meaning must be given to this word if not inconsistent with other provisions. It seems to us evident that it meant that the gun was not only to pass successfully through the ordeal to which it was to be subjected to the extent of being able to live through the 300 rounds and withstand the pressure to which it was to be called upon to endure but, in addition to that, its conduct during this test and its condition afterwards must be such as to be satisfactory to the proper officers of the Government. This does not signify that it could be rejected on account of *33mere caprice or for other cause without just and reasonable foundation. If the gun passed through the test in reasonable compliance with the contract, it was the contract duty of the Government to accept it. *Electric Lighting Co.*v. *Elder Bros.,*115 Ala., 138; *Greenberg*v. *Lumb,*129 N. Y. Supp., 182; *Fechteler*v. *Whittemore,*205 Mass., 6; *Exhaust Ventilator Co.*v. *Ry. Co.,*66 Wis., 218.

As was said in *Electric Lighting Co.*v. *Elder Bros., supra, “*In a case like the present one the party can not capriciously refuse to accept the work. He must be in good faith dissatisfied. He can not avoid liability by merely alleging that he is dissatisfied; he is bound to be satisfied when he has no reason to be dissatisfied; he must fairly and honestly test the work, exercising such judgment and capacity as he has. The dissatisfaction must not be capricious nor mercenary, nor result from a design to be dissatisfied; it must exist as a fact; it must be actual, not feigned; real, not merely a pretext to escape liability.” (Id., 153.)

In *Greenberg*v. *Lumb, supra,*the defendant had contracted to do certain work in a “ satisfactory maimer,” and in construing this phrase the court tersely said“ It was only bound to do the work in a manner that ought to satisfy.” It is unnecessary to say that we are not now discussing that class of cases where the acceptance of work performed under a contract is peculiarly a matter of fancy or taste and where a different rule prevails.

Of course the question of the passing of the test of the type gun had to be left to some one, and by the construction given to the contract this question was left to the Chief of Ordnance, and we do not think that the facts in the case show that he exercised this judgment in a capricious or unreasonable manner. In fact his judgment is in a measure confirmed by the report of the board which was practically selected by the claimants, for while reporting generally in favor of the gun they suggested certain necessary modifications in its construction. It follows from the foregoing that the Chief of Ordnance properly and rightfully required a test in addition to the one specified in the contract before approving the *34gun. The gun not having proved satisfactory under the first test, under the rule as stated he doubtless had the right at that time to reject it altogether. He did not do this, but gave the claimants an opportunity for an additional test *de hors*the contract to prove the gun satisfactory. This was a favor to the claimants and one which he doubtless had the right to grant, and it became their duty to submit the gun to this further test or to have the gun rejected and the contract annulled.

As to the contention by the claimants that the officers of the War Department were guilty of bad faith during the initial performance of the contract in question, and particularly in its annulment, it is sufficient to say that we find nothing in the record which justifies us in coming to any such conclusion.

It is contended by the defendants that by the terms of the contract the decision of the Secretary of War on the appeal to him made by the claimants from the decision of the Chief of Ordnance was a finality and can not be questioned here. This contention is based upon the following provision of the contract:

> “ If any doubts or disputes arise as to the meaning of anything in this or any of the papers hereunto attached and forming this contract, the matter shall be at once referred to the Chief of Ordnance, IJ. S. Army, for determination. If, however, the party of the first part shall feel aggrieved at any decision of the Chief of Ordnance, it shall have the right to submit the same to the Secretary of War, and his decision shall be final.”

We think any provision of a contract making the decision of any officer final should receive a strict construction, and by applying that rule to the clause quoted we do not think it should receive the construction asked for by the defendants. That provision relates in terms to the interpretation of the contract and doubtless could have been invoked if any question had arisen as to the kind of test required by the contract. But upon the broader question as to whether the gun had passed this test satisfactorily we do not think this clause has any application.

*35To sum up the whole case in a few words, we think the. findings show that the Chief of Ordnance was justified in his action in requiring an additional test of the type gun, and the claimants not having complied with this requirement that the contract was properly annulled.

It follows from the foregoing that an order will be entered herein dismissing the petition.

All concur.