Case Name: SUN SHIPBUILDING COMPANY v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1924-06-09
Citations: 59 Ct. Cl. 757
Docket Number: No. B-317
Parties: SUN SHIPBUILDING COMPANY v. THE UNITED STATES.
Judges: Hay, Judge; Booth, Judge, and Campbell, Chief Justice, concur.
Reporter: United States Court of Claims Reports
Volume: 59
Pages: 757–768

Head Matter:
SUN SHIPBUILDING COMPANY v. THE UNITED STATES.
[No. B-317.
Decided June 9, 1924]
On the Proofs
Contract; 'board of compensation; finality of award. — Where a shipbuilding company enters into a contract with the United States to construct several vessels, and the contract contains a clause that the Secretary of the Navy may appoint a board of officers to award compensation in case of dispute, whose determination shall be binding upon both parties, the Court of Claims lias no power to review said decision.
The Reporter's statement of the case:
Mr. F. E. Scott for the plaintiff. Mr. Robert A. Dean was on the briefs.
Mr. Dwight E. Rorer, with tvhom was Mr. Assistant Attorney General Robert H. Lovett, for the defendant.
The following are the facts of the case as found by the court:
I. The plaintiff, the Sun Shipbuilding Company, was at all the times herein mentioned and is, a corporation organized and existing under the laws of the State of Pennsylvania. Beginning with the year 1916, the plaintiff construe- ted, owned, and operated a shipbuilding yard at Chester, Pennsylvania, comprising five similar shipbuilding ways, each adequate for the construction thereon of vessels of upwards of 12,000' D. W. tons, together with an auxilliary fabricating and engine building plant sufficient to supply the requirements of the said five shipbuilding ways, the whole being of the capacity for the efficient employment of upwards of nine thousand men.
On June 13, 1917, the plaintiff had contracts on hand for the construction of 18 vessels of 10,000' D. W. tons capacity each, according to the contracts, but of actual tonnage ranging from 10,375 to 12,130.
II. On May 16,1917, four of plaintiff’s ways were occupied by vessels under construction, but way No. 5 was unoccupied, being held for the purpose of laying thereon the keel of contract vessel No. 7, the materials for which were on hand and then being fabricated preparatory to the laying of the keel.
TIT. About May 16,1917, and thereafter the Secretary of the Navy had under consideration the construction of 24 vessels known as mine sweepers, and addressed a letter to the plaintiff requesting information as- to ■ the suitability of plaintiff’s plant for that purpose, but plaintiff did not desire to undertake any of this work because of the schedule of ship construction which it already had on hand, and represented that the mine sweepers could be constructed in ship yards less suitable for the construction of large vessels. Following conferences upon the subject the Secretary of the Navy announced the conclusion that the early construction of these vessels was o'f such importance that it was deemed best to place orders for their construction with large, well-equipped yards and on or about June 12, 1917, placed with the plaintiff the following order:
“ Navy Department,
“ Washington, D. O., June 1#, 1917.
“ Gentlemen: Referring-to your telegram of June 11,1917, in reference to the construction of seagoing mine sweepers, the President hereby places with you, as an order under the provisions of the naval appropriation act of March 4, 1917, the requirement that you comply with the terms of a contract, to be signed hereafter, to construct seagoing mine sweepers Nos. 22, 23, and 24.
“ You will be paid for these vessels on the basis of actual cost plus ten per cent profit.
“All detailed Avorking plans and schedules for material of all kinds Avill be supplied by the Government through the Harlan & Hollingsworth Corporation, Wilmington, Delaware. The Government Avill likewise supply through that corporation all patterns for both hull and machinery castings ; furthermore, that corporation will place orders for all material of all kinds entering into the construction of all of the 24 of these vessels which are to be constructed by various shipbuilders at this time. Such material for mine SAveepers Nos. 22, 23, and 24 Avill be billed to you direct by the subcontractor for the material, and will be paid for by you, such payments being included in the actual cost of the vessels. You will be under no financial obligation to the Harlan & Hollingsworth Corporation. All of the charges for the sendees performed by them Avill be paid by the Government. The only material which Avill be supplied direct by the Government will be that listed in the specifications, and the hull auxiliaries, namely, steering gear, windlass, capstan, special towing machine, and Avinches, for which the Government Avill pay direct, and their cost Avill not enter into your actual cost of construction, as referred to above.
“ You Avill be responsible for workmanship and for the most expeditious prosecution possible of the work after receipt of necessary materials, and for the time of delivery, except as affected' by delivery of material, and subject to the usual contract clause permitting extension of time in case of delays due to strikes or causes beyond your control. The responsibility for suitability of and delivery of materials, and for performance of the vessels, inso far as affect by design and materials, will rest with the Government.
“ Orders have been placed for the construction of other vessels of this same class with the following firms:
“ Todd Shipyards Corporation, NeAv York, N. Y.
“ Standard Shipbuilding Corporation, New York, N. Y.
“Pennsylvania Shipbuilding Company, Gloucester. N. J. “
“ Chester Shipbuilding Company, Chester, Pa.
“ The Pusey & J ones Shipbuilding Company, Wilmington, Del.
“Baltimore Dry Dock & Shipbuilding Company, Baltimore, Md.
“ Staten Island Shipbuilding Company, Port Richmond, N. Y.
“ It is suggested that the work in connection with the construction of these vessels might be expedited and simplified if you arrange to perform certain portions of it, such as laying down in the mold loft and preparation of molds, in conjunction witli such of the firms listed aboye as may be located in your vicinity.
“ The construction of these vessels in the quickest possible time is considered by the military authorities to be of the highest importance, and work on them, and the materials for them, has been assigned a place in order of relative importance with other war work equal to and parallel with torpedo-boat destroyers, which gives them jirecedence over all other classes of naval construction, with the exception of repairs and conversion work on completed ships and work on submarine chasers. The department trusts that you will do all in your power to expedite the completion of these vessels at the earliest possible date.
“ Very respectfully,
“ Josephus Daniels,
“ Secretary of the Navy.
“ The Sun Shipbuilding Company,
“ Finance Building, Philadelphia, Pa.”
IV. At some time during the course of the negotiations between the Navy Department and the representatives of the plaintiff, from May 16,1917, to June 12,1917, with reference to the construction of these mine sweepers, representatives of the Secretary of the Navy directed the plaintiff to hold its way No. 5 open for the construction of three mine sweepers. Plaintiff represented that if it might be permitted to go ahead with its program as to the use of way No. 5, it could free another way in time for the mine sweepers but the representatives of the Secretary were unwilling to take any chance in this respect and insisted on No. 5 being-held for the Government’s vessels.
V. Subsequently the Secretary of the Navy forwarded to the plaintiff for execution a contract bearing- date June 13, 1917, a copy of which is attached to plaintiff’s petition herein marked Exhibit A, and is made a part hereof by reference. Said contract was not executed until some time subsequent to the date thereof but the date of its execution does not appear.
On June 19, 1917, plaintiff represented that the Alabama Dry Dock & Shipbuilding Company'was willing and anxious to build four mine sweepers and asked authority to assign this contract to that company but the Secretary of the Navy, in a letter of June 22, refused to consent thereto and the plaintiff, on June 29, 1917, acknowledging receipt of the Secretary’s letter, stated that it was accordingly entering order for these vessels and, as to the contract, said:
“ We have gone over your form of contract for the sweepers and believe it to be fair and reasonable in every particular, save that pertaining to the demurrage on other ships, for which we have contracts. We shall, of course, expect your department to protect us against our paying any and all demurrage accruing on these contracts due to the building of these mine sweepers.
“ We await a formal contract from you for our execution.”
It does not appear that any other contract was submitted or executed than that of date June 13, 1917, a copy of which appears as an exhibit to the petition.
YI. None of the materials to be used in the construction of the three mine sweepers was to be ordered or furnished the plaintiff, but all such materials, including all patterns for hull and machinery castings, by the terms of the order or contract, were to be and were, in fact, ordered and supplied by the Harlan & Hollingsworth Corporation, subject to the approval of the Navy Department for delivery direct to the plaintiff. Following the said orders and directions of the Secretary of the Navy and his duly authorized agents, plaintiff’s said way No. 5 was kept open and available for the construction of the three mine sweepers, but defendant and its agent, the Harlan & Hollingsworth Corporation, did not supply material sufficient to permit the laying of the keels of the first two mine sweepers until on or about October 8, 1917 and said way remained idle and unemployed between the dates June 18, 1917, and October 8, 1917, a total of 112 days. This delay in the delivery of materials was repeatedly called to the attention of the Navy Department by the plaintiff. After the material was supplied for the laying of the keels of the two mine sweepers on or about October 8, 1917, there were subsequent delays in the delivery of the necessary material for completion, and way No. 5 was occupied in said work until on or about May 30, 1918, when the last of the three vessels was launched.
A reasonable time for the occupation of said way No. 5 for the construction of the said three mine sweepers in the event the material for their construction had been promptly delivered to the plaintiff, would have been approximately 118 days. This finding is approximate only because based on estimates and a reported accomplishment in another yard. There is no basis for accurate determination of the time plaintiff would have required for the construction of these three vessels.
VII. Subsequent to the issuance of the final orders of the Navy Department, as provided in its letter of June 12, 1917, and its contract dated June 13, 1917, the plaintiff duly performed all the terms of said contract and duly completed in a good and workmanlike manner all of the work therein to be performed and delivered the three mine sweepers constructed to the satisfaction of the Navy Department.
VIII. In consideration of plaintiff’s due performance of said contract it was paid the sum of $1,664,390.09, but said payment did not include any compensation for certain items of claim which were made to the Navy Department as follows :
(1) Compensation for the use and occupation of plaintiff’s way No. 5, for the period of 228 days, being the difference between the total period of 346 days, from June 18, 1917, to May 30, 1918, and the period of 118 days, during which latter period it is alleged the mine sweepers should have been constructed, said period of 228 days comprising a period of 112 days between June 18, 1917, and October 8, 1917, during which time the way was idle awaiting material for the construction of the mine sweepers, and the period of 116 days which it is alleged was due to time lost between October 8, 1917, and May 30, 1918, on account of the delays in the delivery of material for the work.
(2) Compensation in the sum of $152,000 for amortization of war facilities or special rental which it is alleged is provided for in paragraph 1(f) of the sixteenth clause and paragraphs 2 and 3 of the seventeenth clause of the contract of June 13, 1917.
(3) Reimbursement of the sum of $4,000.76 for the alleged proper portion of plaintiff’s cost and expense for superin tendents’ and officers’ salaries and the additional compensation of 10 per cent thereof, aggregating $4,400.84, alleged to be provided for in paragraph 16 of the contract of June 13, 1917.
(4) Compensation in the sum of $1,335.70, representing 10 per cent of the actual cost in the payment by plaintiff of retroactive wages pursuant to the decision of the shipbuilding labor adjustment board.
(5) Balance of $1,500 considered to be clue the plaintiff under the contract, approved for payment by the Navy Department but payment withheld awaiting execution by the plaintiff of a final release.
IX. All of the items above enumerated from (1) to (4), inclusive, were incorporated in claims by plaintiff which were presented to and considered by the compensation board created as provided in the contract of June 13, 1917, and were by said board rejected.
During the period of the pendency before said compensation board of plaintiff’s claim for 228 clays time at $474.82 per clay, $108,258.96, stated as “ loss of earnings to Sun Shipbuilding Company account of tying up No. 5 shipway, waiting for material for laying of keel and construction ot; the boats on the ways, ” plaintiff waived “ all claim arising from delay after material was received and construction started ” and made claim “ only for compensation for the period during which the way was held open before the receipt of the keel plates. ”
X. There is no averment or evidence that the compensation board in considering and acting on plaintiff’s claim acted in bad faith or otherwise than in the exercise of an honest judgment.
Appealed.

Opinion:
Downei,
Judge, delivered the opinion of the court.
The plaintiff's claim is for disallowed items growing out of the placing with it by the Secretary of the Navy of an order for the construction of three vessels known as mine sweepers and a contract entered into between the parties with reference thereto.
Plaintiff had established a shipbuilding plant in 1916, and at the time that the matters herein involved Avere the subject of discussion, in the latter part of May and early part of June, 1917, it had at its plant five shipbuilding ways, four of which were occupied by commercial vessels under construction, and it had a number of contracts for the construction of commercial vessels and anticipated the use of way No. 5, then vacant, for the construction of one of these, beginning about June 18.
The Secretary of the Navy, acting under authority of the President and under the provisions of the act of March 4, 1917, subhead "Naval Emergency Fund," 39 Stat. 1192, desired to procure the speedy construction of twenty-four mine sweepers for war purposes, and conferred, either personally or by naval officers authorized to represent him, with representatives of the plaintiff with reference to the construction of three of these vessels. Plaintiff did not desire to undertake this work and insisted that it ought to be placed with small yards not equipped for the construction of large vessels, but the Secretary, because of the importance of this building program, insisted that it should be undertaken by established yards competently equipped for the work and the plaintiff was told that it must hold its then vacant way No. 5 for the construction of these naval vessels. It asked permission to go ahead with its program for the contemplated use of this way which it was anticipated would begin about June 18, and use another way for these vessels when it should be vacated, but this plan was disapproved and its way No. 5 was held as directed.
A formal order with reference to the construction of these vessels was issued to plaintiff on June 12,1917, and this was followed by the contract, copy of which appears as an exhibit to this petition, which bears date June 13, 1917, but which it appears was executed subsequent to that date, but at a time not shown. This was a cost plus contract.
There were unanticipated delays in the furnishing of materials for these vessels by the agency of the Government to which that duty had been delegated. The first keel plates were received about September 15, but the keels of the first two of these vessels were not laid until about October 8, and until that time way No. 5 remained idle. It is because of this idle time and timé subsequently alleged to have been lost by reason of delay in furnishing materials that plaintiff asserts the first item of its claim. The claim as presented was for loss of earnings " account of tying up No. 5 shipway waiting for material for laying' of keel and construction of the boats on the ways," 228 days at $474.82 per day amounting to $108,259.96, the 228 days being arrived at toy taking 346 days as the total elapsed time from June 18, 1917, when it is said it ivas planned to lay the keel of a- merchant vessel on way No. 5, to May 30, 1918, when the last of the three vessels was launched, and deducting therefrom 118 days as the time during ivhich it is asserted this way would have been occupied in the construction of these vessels had there been no delay in furnishing materials, and 112 days of the 228 being assigned to the period from June 18 to October 8, when the way was idle awaiting keel plates. The remaining 116 days are ascribed to delays in furnishing materials after the work had commenced. "
There was no time fixed for the completion of the vessels and during the time plaintiff's claims here presented were pending before the compensation board provided for in the contract plaintiff, in a communication to the board, abandoned its claims on account of delays occurring after the work commenced and asserted it only as to the 112 days during which this way was idle before the keels were laid for the first two vessels on October 8. However this claim as originally asserted is now asserted here notwithstanding this abandonment.
The theory upon which this claim as to the 112 days is here asserted in brief and argument is that.the direction given to the plaintiff to hold its way No. 5 for the construction of these three naval vessels constituted a commandeering or a "taking" of that way for this preliminary period of 112 days such as entitles the plaintiff, outside of the provisions of the contract, to " just compensation " therefor. It is difficult to construe the petition as asserting this theory and in correspondence during the pendency of the claim with the compensation board the plaintiff did not contend that there was a commandeering of this way but that it was held open for this work pursuant to instructions and that it was " morally entitled to compensation " just as it " would have been legally entitled had the way been formally commandeered."
We do not take, within proper limitations, any issue with this quoted contention and, as the situation appears to us, would be inclined to award some moderate compensation, much less, however, than plaintiff claims, for this period, if it were within our province to do so, but Ave are of the opinion that, under the circumstances, we have no poAver to consider the question on its merits.
From this statement it is not to be assumed that Ave agree Avith plaintiff's contention iioaat made that there Avas a commandeering of this way for this period, resulting in effect in a separation of this period from the subsequent period during which the Avay was in actual use in the construction of the vessels and entitling the plaintiff to "just compensation" as for a taking. Such a contention can not be regarded as well founded.
If, proceeding under the " NaAral Emergency Fund " provision of the act of March 4,1917, the Secretary of the Navy had placed an order with the plaintiff for the construction of these vessels, Avith which the plaintiff, without other procedure, had complied, the provisions of the act as to just compensation would have been applicable as the proper basis of settlement, and, if the compensation fixed had been unsatisfactory, further claim might have been made in this court. But, with reference to- the construction of the vessels, the parties entered into a contract fixing the basis of compensation and granting broad powers with reference thereto to a " compensation board " to be created for the purpose. We need not quote here the applicable provisions of that contract which may readily be found by reference.
There is some apparent indisposition to recognize this document as a contract. It is sometimes referred to as " order " and it is suggested that its signing by the plaintiff was rather a formality than a necessity, but it is clearly a contract.. Plaintiff in writing the Secretary that it was " fair and reasonable " save in one respect, not here material, referred to it as a contract; in submitting its claim for the items here involved to the compensation board it referred to it as a contract, and by that action in so submitting its claims it recognized the jursidiction of the compensation board. The apparent fact that plaintiff might have dis-, charged its obligations under the law by complying with an order for the construction of the vessels without executing a contract, which was not required by the law, can not affect its obligations under a contract which it saw fit to execute. It may have deemed it for its own advantage to accept a proffered contract prescribing a basis of compensation, but its motive is immaterial.
Additional compensation for the use of this way during the period in question was considered by the compensation board upon the presentment of a claim therefor by the plaintiff, and it was within the power of that hoard, under the contract, to have made an additional allowance therefor. Such an additional allowance might properly have been included by the board in the costs which it was authorized to ascertain if it had deemed the plaintiff entitled thereto.
We need not consider the basis of the board's conclusion in the matter further than to suggest that, whether right or wrong, the claim was given careful consideration and there is no averment or evidence of bad faith or failure to exercise an honest judgment. Under the circumstances we can not review the finding of the board. Sufficient applicable authorities, although there are others, are cited by Judge Hay in his opinion in Brinck, Receiver, 53 C. Cls. 170.
It is averred in the petition, after reciting the disallowance by the hoard, that " the plaintiff accordingly brings this suit in the Court of Claims, not being satisfied with the decision of said compensation board in denying plaintiff's claim." We find nothing in the provisions of the contract authorizing resort to this court in case of dissatisfaction with the action of the board. The contract itself, as well as the law, precludes such a contention.
What has been said is necessarily determinative of all other items of plaintiff's claim, except the item of $1,500 retained because of plaintiff's refusal to execute a final release. The item discussed is apparently the only one which furnishes any room for argument upon the question of the jurisdiction of tbe compensation board, and our conclusion in that respect embraces them all.
The execution of a final release to entitle the plaintiff to receive the $1,500 retained but admittedly due is rendered unnecessary by this adjudication of the rights of the parties and judgment has therefore been awarded for that amount.
Hay, Judge; Booth, Judge, and Campbell, Chief Justice, concur.