#### MacARTHUR HANGER COMPANY *v.*THE UNITED STATES

[No. C-915.

Decided February 15, 1926]

*On the Proofs*

*Contract; construction of lock and dam.-*— -Where a contract for the construction of a lock and dam provided that the contractor was to be paid on the basis of stone as measured in place and a supplemental agreement was entered into providing that the contractor should be paid, upon storage of the stone preparatory to its being placed, “ in monthly estimates 40 per cent of the contract price, the remaining 60 per cent to be paid when the stone is placed in the work,” the supplemental contract did not change the terms of the prime contract and the contractor’s compensation is to be determined by the volume of the stone as placed in the work.

*The Reporter's*statement of the case:

*Mr. George R. Shields*for the plaintiff. *King di, King*were on the brief.

*Mr. John E.*Hoover, with whom was *Mr. Assistant Attorney General Herman J.*Galloway, for the defendant. *Mr. George T. Stormont*was on the brief.

The court made special findings of fact, as follows:

I. The MacArthur Hanger Co. is a corporation organized under the laws of the State of Delaware, with offices in Richmond, State of Kentucky.

The Ohio River Contract Co. is a corporation organized under the laws of the State of Indiana, with offices at Evansville, Ind.

By contract dated October 19, 1911, between the United States, represented by Maj. Ljdle Brown as contracting officer, and the Ohio River Contract Co., the latter undertook to construct and complete Lock and Dam No. 48 on the Ohio River in accordance with certain specifications. The contract provided that the contractor should furnish the necessary materials, etc., at unit prices and construct said lock and dam. Among the unit prices named was riprap at $3.50 per cubic yard. The contract also provided:

*615“ 3. All materials furnished and work done under this contract shall, before being accepted, be subject to a rigid inspection by an inspector appointed on the part of the United States and such as do not conform to the specifications of this contract shall be rejected. The decision of the contracting officer as to quality and quantity shall be final.”

And—

“ 10. Until final inspection and acceptance of, and payment for, all of the material and work herein provided for, no prior inspection, payment, or act is to be construed as a waiver of the right of the contracting officer to reject any defective work or material or to require the fulfillment of any of the terms of the contract.”

The specifications provided:

“ 20. *Payments.*— When funds are available payments will be made monthly on estimates of work accepted. Ten (10) per cent will be reserved from each payment until the total amount so reserved shall equal 65,000 dollars. Upon completion and acceptance of the entire work all reserved percentages will be paid to the contractor.”

“ 46. *Riprap.-*— This will include all stone furnished and placed by the contractor except stone for concrete and stone paving. All stone shall be of good, durable quality approved by the contracting officer. All riprap not otherwise shown on the drawings shall be of one and two man stone. All riprap back of the land wall abutment shall include a 3-inch bed of quarry spalls or gravel.”

“ 48. *Measurement.*— All stone, including 3-inch bed of gravel or quarry spalls, will be measured as the volume in place when practicable to do so, otherwise as approved by the contracting officer. No deduction will be made for voids too small to be filled with stone.”

A copy of said contract and specifications is filed in the case as Exhibits A and A-l to the petition and is by reference made a part of this finding.

From time to time agreements supplemental to this contract were made providing for changes, additional work, time extensions, etc., copies of which are in the case as Exhibits B, C, D, E, and F to the petition and are by reference made a part hereof.

II. At the December term 1915, of the Circuit Court of Yanderburg County, Ind., the Ohio Eiver Contract Co. was placed in the hands of a receiver, and Charles B. Enlow was appointed receiver and qualified and entered upon his duties.

*616On June 2, 1916, Charles B. Enlow, as receiver aforesaid, employed MacArthur Bros. Co. and Mason & Hanger Co., corporations, to complete Lock and Dam No. 48 on the Ohio Biver, to the approval of the United States, under the contract and supplemental agreements of the Ohio Biver Contract Co., previously referred to, and agreed that the payments accruing to the receiver from the United States for work so done should be turned over to the said companies and belong to them.

The MacArthur Hanger Co. thereafter became the successor of the MacArthur Bros. Co. and Mason & Hanger Co., and by a certain written contract with said companies became entitled to all the benefits and liabilities of said MacArthur Bros. Co. and Mason & Hanger Co.

At the March term, 1923, of the said court, Alvin F. Sutheimer was appointed receiver in succession to Charles B. Enlow and qualified and entered upon his duties.

The Circuit Court of Vanderburg County, Ind., having entered a finding that MacArthur Hanger Co. was the equitable owner of all the claims and demands of the receivership estate and of the Ohio Biver Contract Co. against the United States arising out of the construction of Lock and Dam No. 48, Alvin F. Sutheimer on July 9, 1923, as receiver, transferred and assigned by writing to the MacArthur Hanger Co. all claims of the receivership estate and of the Ohio Biver Contract Co. against the United States in connection with or by reason of Lock and Dam No. 48, and July 11, 1923, said circuit court canceled and annulled the assignment that had been theretofore made to MacArthur Bros. Co. and Mason & Hanger Co. and approved the assignment of July 9, 1923, of the receiver to the MacArthur Hanger Co., and directed the receiver to deliver to said company the assignment. Copies of the assignment of July 9, 1923, Exhibit M to the petition, and the order of the court regarding the same, above referred to, Exhibit L to the petition, are by reference made a part of this finding.

III. On April 19, 1917, the then receiver, Enlow, entered into an agreement with the United States, represented by George B. Spalding, Corps of Engineers, United States Army, as contracting officer, which referred by dates to *617the original contract for Lock and Dam No. 48, and to all the supplemental agreements that had to that time been made, and stated, “ it is found advantageous and in the best interests of the United States to modify the said contract as modified by the aforesaid agreements, as hereinafter specified,” and that, “ *Noto, therefore,*the said contract is, by this supplemental agreement between Maj. George R. Spald-ing, Corps of Engineers, United States Army, and the said contractor, on this 27th day of April, 1917, hereby modified in the following particulars, but in no others.” One of the particulars that followed was:

“ 8. That the contractor shall store at suitable places at or near the site of Lock and Dam 48, which shall meet with the approval of the contracting officer, stone of suitable size and quality which shall be used in the construction of the dam as riprap. Upon storage of this stone and its acceptance by the contracting officer the contractor shall be paid in monthly estimates 40 per cent of the contract price, the remaining 60 per cent to be paid when the stone is placed in the work. It is understood and agreed that from and after the initial payment the stone shall become the property of the United States.”

A copy of this agreement of April 27, 1917, Exhibit H to the petition, is by reference made a part of this finding.

As detailed in Finding II above, the contractor had failed and the company had been placed in the hands of a receiver. It was in poor financial condition, unable to borrow money for the purposes of the contract except at great expense, and was slow and behind in its work on the contract. By agreement and understanding of both parties thereto paragraph 8 of the aforesaid supplemental contract was included with the object of expediting the work by providing a means whereby the contractor could receive advance payments on monthly estimates on stone delivered and stored, thus enabling it to purchase and store stone in the winter months when the water was high and transportation easy, and have it readily available for use in the spring and summer months when the water was low and transportation difficult or uncertain and likely to retard the work.

IY. Section 8 of the river and harbor act of July 18, 1918, authorized the Secretary of War, in his discretion and *618with the consent of the contractor, to make readjustment of contracts for river and harbor work entered into but not completed prior to April 6, 1917, which he might determine had become inequitable and unjust by reason of war conditions. Upon application made by the receiver of the Ohio River Contract Co., the Secretary of War determined that the terms of the contract-of October 19, 1911, as amended by the supplemental agreements thereto, should be further modified in certain particulars, one of which was as follows:

“ That the said contractor shall be paid an increase of 53.85 per cent of the present contract prices on all work done after July 19, 1918, said increased payments to be made as follows í

“ The increase in payment of 53.35 per cent on all work done on the contract since Juty 18, 1918, to the date of approval of this supplemental agreement will become due on that date and payable within thirty (30) days thereafter. Subsequent payments will be made as provided for in paragraph 20 of the original specifications increased by 53.35 per cent.”

A supplemental agreement embodying such modification was entered into July 31, 1919, between Charles B. Enlow, the then receiver of the Ohio River Contract Co., and the United States, represented- by Col. G. M. Hoffman, as contracting officer. A copy of said agreement, Exhibit I to the petition, is by reference made a part of this finding.

V. After April 27, 1917, the receiver, acting through the MacArthur Hanger Co., proceeded under the contract of that date to deliver and store at sites satisfactory to the engineer officer in charge, .during the high-water season, stone for the completion of the work. The stone so delivered and stored was, as delivered, measured by the defendant’s inspector or subinspector by calculating roughly the cubic contents of each barge load before unloading, no attempt being made to obtain accurate dimensions or measurements, as the calculations were made only as a basis for preliminary estimates; and the contractor (receiver) was regularly paid 40 per cent of the contract price of said stone, except for that delivered during the last working season, in accordance with the supplemental contract of April 27, 1917.

*619The value of the stone not paid for but delivered and stored after April 27, 1917, on the basis of barge measurements thereof at the unit price for stone in place named in the contract, increased as provided, by the contract of July 31, 1919, would amount to $16,981.36, for which amount the plaintiff is entitled to recover if it be held that he should be paid on the basis of barge measurements.

VI. For the amount claimed in this suit, viz, $16,981.36, the receiver of the Ohio Elver Contract Co. presented a claim to the General Accounting Office on or about December 15, 1922, and payment thereof was refused by the Comptroller General March 5, 1923, and it has not been paid.

The court decided that plaintiff was not entitled to recover.

Geaham, Judge,

delivered the opinion of the court:

There is but one question to be considered — that is, whether the plaintiff is entitled to be paid for stone furnished for the erection of a dam on the .basis of cubic footage of loose stone or stone in place. The original contract provided in substance that the plaintiff should be paid for the riprap at the rate of $3.50 per cubic yard, but not until the stone in place had been inspected and accepted by the contracting officer as to quality and quantity, his decision being final. The measurements, as provided in paragraph 48" of the specifications to the original contract, were to be made as follows:

> “All stone, including 3-inch bed of gravel or quarry spalls, will be measured as the volume in place when practicable to do so, otherwise as approved by the contracting officer. No deduction will be made for voids too small to be filled with stone.”

Subsequent to the execution of the contract it developed that in periods of low water, stone and other material necessary for the work could not be delivered, causing delay in the progress of the work. The contractor being financially unable to lay in a supply of the material when high water made it possible to do so, the parties entered into a supple*620mental contract, which provided the contractor the necessary financial assistance to store up stone during periods of high water. It was therefore provided in the supplemental contract that the contractor should procure stone and deliver it at points to be designated by the contracting officer and be paid an advance payment of 40 per cent of the amount delivered based upon monthly estimates of the loose stone in piles, the remaining 60 per cent to be paid “when the stone is placed in the work.” The provision of the contract is as follows:

> “ 8. That the contractor shall store at suitable places at or near the site of Lock and Dam 48, which shall meet with the approval of the contracting officer, stone of suitable size and quality, which shall be used in the construction of the dam as riprap. Upon storage of this stone and its acceptance by the contracting officer, the contractor shall be paid in monthly estimates 40 per cent of the contract price, the remaining 60 per cent to be paid when the stone is placed in the work. It is understood and agreed that from and after the initial payment the stone shalL become the property of the United States.”

It is contended by plaintiff that the supplemental contract changed the manner of payment and that he was entitled to be paid on the basis of monthly payments of stone delivered measured in the piles. Defendant holds that this was merely to cover the advance payment of 40 per cent, and apply only to that, and that the ultimate adjustment and payment were to be based on stone in place less the advance payment made. It is admitted that in the original contract payment was based on stone in place.

In the light of the findings, showing the purpose of this supplemental contract, it seems clear that it was the intention of the parties not to vary from the original plan of a final settlement upon the basis of stone in place.. The supplemental contract says that the original contract is modified in certain particulars, “ but no others,” and among the enumerated modifications is the above paragraph as to the basis of payment. The original contract, it will be seen, contemplated not only payment on the basis of stone in place but *621final payment and settlement only after final inspection and acceptance of the completed work, with the stone in place, subject to the decision of the contracting officer as to quality and quantity.

If the plaintiff’s contention were upheld, the whole system of inspection and acceptance of the completed work and the decision of the contracting officer as to quality and quantity would be eliminated from the contract, as the plaintiff is seeking to recover payment upon the basis of loose stone which had not only not received any inspection *per se*but had not been placed in the work and subjected to final inspection and acceptance as a part of the work.

That such was not the intention of the parties seems too plain to require further discussion, and this is sufficient to dispose of plaintiff’s case. But the language of the supplemental agreement itself necessarily carries it back to the basis of payment fixed in the original contract.

The supplemental contract says that the plaintiff shall be paid 40 per cent of the contract price. It does not name any other price, so the price alluded to is the price to be paid according to the terms of the original contract. This method of payment must be read into the supplemental agreement to arrive at its meaning. The latter part of that agreement providing for the payment of the remaining 60 per cent “ when the s' tone is in place ” must be construed to mean, on the basis of the stone in place, for how otherwise is it possible to estimate the final payment?

Nowhere in the contract is an intention shown to purchase raw material such as stone in the loose state, nor is there a provision for payment on any other basis than the stone in place. This is the method of fixing the contract price, and the plaintiff under the supplemental agreement was to be paid on the basis of the contract price fixed in the original agreement.

The petition should be dismissed and it is so ordered.

Hay, *Judge;*DowNey, *Judge;*Booth, *Judge;*and Campbell, *Chief*Justice, concur.