Case Name: JOSEPH H. BEUTTAS, JOHN W. BEUTTAS, AND PAUL H. BEUTTAS, TRADING AS B-W CONSTRUCTION CO., NOT INC., v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1944-06-05
Citations: 101 Ct. Cl. 748
Docket Number: No. 44978
Parties: JOSEPH H. BEUTTAS, JOHN W. BEUTTAS, AND PAUL H. BEUTTAS, TRADING AS B-W CONSTRUCTION CO., NOT INC., v. THE UNITED STATES
Judges: Whaley, Chief Justice, concurs.
Reporter: United States Court of Claims Reports
Volume: 101
Pages: 748–777

Head Matter:
JOSEPH H. BEUTTAS, JOHN W. BEUTTAS, AND PAUL H. BEUTTAS, TRADING AS B-W CONSTRUCTION CO., NOT INC., v. THE UNITED STATES
[No. 44978.
Decided June 5, 1944]
Mr. P. J. J. Nicolaides for plaintiffs. Mr. William F. Kelley was on the brief.
Mr. Donald B. MacGuineas, with whom was Mr. Assistant Attorney General Francis M. Shea, for defendant.
Defendant’s petition for writ of certiorari pending.

Opinion:
Whitaker, Judge,
delivered the opinion of the court:
Plaintiffs sue to recover extra costs incurred due to a suspension of the work for 69 days during which a change in the plans and specifications was being considered. It is stipulated that they are entitled to recover $8,727.44 on this account.
They also sue to recover for increased wages which they were required to pay common laborers, carpenters, cement finishers, and hoisting engineers.
Plaintiffs had a contract for the construction of the foundations of the Jane Addams Houses in Chicago. It was a relief project; it was intended to relieve unemployment, to provide a living wage for laborers and so to increase their purchasing power. What a living wage was, was fixed by the contract. The contractor was required to pay a minimum wage for common laborers of 82% cents an hour, and for carpenters, cement finishers, and hoisting engineers of $1.31% an hour. It was recognized, however, that the cost of living might increase during the progress of the work or for some other reason that the Government might find it desirable that even higher wages should be paid, and so it was provided in article 19 of the specifications that if the Federal Emergency Administrator of Public Works "establishes different wage rates, the contract price shall be adjusted accordingly. "
The contract was entered into on November 26, 1935, but defendant held up the work until February 17, 1936, when it gave plaintiffs notice to start work; however, work was not begun until February 28, 1936, due to bad weather. While the work was under suspension the defendant on February 15,1936, asked for bids on the construction of the building above the foundation. (Plaintiffs' contract was for the foundation only.) This advertisement for bids required bidders to pay a minimum wage to the before-mentioned laborers higher than was provided for in plaintiffs' contract. A successful bidder on this part of the building could not pay common laborers less than 95 cents an hour, instead of the 82% cents on the foundation contract, and could not pay carpenters, cement finishers, and hoisting engineers less than $1.50 per hour, instead of the minimum of $1.31% on the foundation contract.
Whereas on November 26, 1935, the Government thought not less than $1.31% was a fair wage for carpenters, cement finishers, and hoisting engineers, and 82% cents for common laborers, by February 15, 1936, conditions had changed to such an extent that it no longer considered these fair wages and demanded of the superstructure contractor the payment of higher wages.
Plaintiffs' work did not commence until after this change in the wage rate. So, when they offered- to pay their carpenters, cement finishers, and hoisting engineers $1.31% and common laborers 82% cents, these men very naturally said, no, the Government has said that no less than $1.50 and 95 cents is fair; and when plaintiffs would pay no more, they struck. In order to induce them to work plaintiffs had to pay the $1.50 and 95 cents.
All the proof goes to show the laborers would not have struck except for the Government's action in establishing a higher minimum wage on the very same building on which plaintiffs' laborers were employed.
That they should have struck was well-nigh inevitable. They had no contract with plaintiffs to work at any fixed wage and, so, when their Government said that the least that ought to be paid for such labor was more than plaintiffs offered, of course they demanded the amount fixed by the Government as fair and refused to work for less.
So, while the defendant did not expressly demand of these plaintiffs that they pay a higher minimum wage on their contract, it nevertheless brought about conditions that made this almost inevitable, and it must have known that this would be the necessary consequence of its act. Just as effectively as though it had directly ordered plaintiffs to pay a higher wage, it indirectly required them to do so.
In LeVeque, et al. v. United States, 96 C. Cls. 250, we held that the establishment by the Government of higher wages on another project in another part of the city did not require it to pay plaintiffs the increased wages they had to pay on their project. In that case we concluded the increase in wages paid by plaintiffs was not a necessary result of defendant's act. Here we think it was. The increased wages in this case were on the very same building on which plaintiffs were working. The Administrator did not directly establish different minimum rates to be paid by plaintiffs, but this was the necessary consequence of what he did. He did indirectly that which if done directly would have rendered the Government liable. We are of opinion that the defendant in fact established different wage rates on plaintiffs' job, and, therefore, it is obligated to pay the increase under article 19.
But whether or not this is so, it is an implied condition of every contract that neither party will hinder the other in his discharge of the obligations imposed upon him, nor increase his cost of performance. Restatement of the Law of Contracts, sec. 315 (1); Williston on Contracts, sec. 1293 A; Anvil Mining Co. v. Humble, 153 U. S. 540, 551. It was an implied condition of this contract that the Government would not do any act that as a necessary consequence would make performance by the plaintiffs more expensive. The Government breached that implied condition by increasing the minimum wage to be paid on a part of this building, which as a necessary consequence required plaintiffs to pay more wages than those specified.
It follows that the defendant is liable for the increased wages plaintiffs had to pay.
It is said, however, that the contracting officer and head of the department have decided that the Government has fully performed its obligations under the contract, and that this decision is final under article 15 of the contract and that, therefore, this court has no jurisdiction to determine the matter.
The defendant's position, otherwise stated, is that the parties agreed in advance of the dispute to waive their right to sue for this breach of the contract and to leave the final determination of the controversy to the decision of one of the contracting parties.
We do not think the parties intended article 15 to have such broad scope. If they did, it is clearly illegal under numerous decisions of the Supreme Court of the United States and of other Federal courts and of the State courts. It has long been settled that any agreement made in advance of the controversy which deprives a party of recourse to the courts is contrary to public policy and, therefore, void. Insurance Co. v. Morse, 20 Wall. 445, 450, et seq.; Doyle v. Continental Ins. Co., 94 U. S. 535, 537; Guaranty Trust Co. v. Green Cove R. R., 139 U. S. 137, 142; Martin v. B. & O. R. R., 151 U. S. 673, 684; Terral v. Burke Construction Co. 257 U. S. 529. See also cases cited in 13 Corpus Juris, p. 455, notes 3, 5 and 8; 17 Corpus Juris Secundum p. 603, notes 58-66.
In Insurance Co. v. Morse, supra, there was involved a statute of Wisconsin which imposed on foreign insurance companies, as a condition to doing business in the State, an agreement to submit to the exclusive jurisdiction of the Wisconsin courts and to forego removal of a case to the Federal courts. It was held that the statute was unconstitutional and void, because "a man may not barter away his life or his freedom, or his substantial rights."
The statement of this principle was somewhat amplified in Doyle v. Continental Ins. Co., supra, in commenting on the Morse decision. It was there said, on page 538:
It was held, first, upon the general principles of law, that although an individual may lawfully omit to exercise his right to transfer a particular case from the State courts to the Federal courts, and may do this as often as he thinks fit in each recurring case, he cannot bind himself in advance by an agreement which may be specifically enforced thus to forfeit his rights. This was upon the principle that every man is entitled to resort to all the courts of the country, to invoke the protection which all the laws and all the courts may afford him, and that he cannot barter away his life, his freedom, or his constitutional rights.
The majority of the court, however, held that, while a State could not impose this condition on an insurance company's entering into business, it nevertheless had the right to revoke its license, even though a breach of the condition may have been the reason for the revocation. Justices Bradley, Swayne, and Miller dissented on the ground that the same reason that prevented the imposition of such a condition prevented the revocation of the license for its breach. Both the majority and minority agreed, however, that a condition in a contract prohibiting resort to a tribunal otherwise having jurisdiction of the subject matter and the parties was illegal.
Fifty years later, this view was approved by the Supreme Court in the case of Terral v. Burke Construction Co., 257 U. S. 529, and we understand it to be the law today. Section 558 of Restatement of the Law of Contracts reads:
A bargain to forego a privilege, that otherwise would exist, to litigate in a Federal Court rather than in a State Court, or in a State Court rather than in a Federal Court, or otherwise to limit unreasonably the tribunal to which resort may be had for the enforcement of a possible future right of action or the time within which a possible future claim may be asserted, is illegal.
It is true that it is not uncommon in construction contracts for the parties to agree that the decision of the architect or engineer shall be final on such questions as the proper interpretation of the plans and specifications, whether or not the work or .materials comply with the specifications, the measurement of the work done, causes and extent of delay, and similar matters of fact (e. g., see Kihlberg v. United States, 97 U. S. 398; Sweeney v. United States, 109 U. S. 618; Martinsburg & Potomac R. R. Co. v. March, 114 U. S. 549; United States v. Gleason, 175 U. S. 588; Ripley v. United States, 223 U. S. 695; Plumley v. United States, 226 U. S. 545; United States v. Mason & Hanger Co., 260 U. S. 323); but provisions leaving to the final judgment of the engineer or architect the question of whether or not there has been a breach of the contract and preventing resort to the courts for a determina tion of that question and for enforcement of rights thereby accruing have never been upheld. For instance, in Guaranty Trust Co. v. Green Cove R. R., supra, a provision of a trust deed agreeing not to resort to the courts for its enforcement was held invalid on the authority of a number of English and State cases there cited.
Even arbitration agreements, not authorized by statute, leaving to arbitrators the final determination of whether or not there has been a breach of the contract, are illegal, but parties may legally agree on arbitration to determine facts upon which a duty depends. See Restatement of the Law of Contracts, secs. 550 and 551; Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109, 120-121.
Here the agreement, as construed by the defendant, is to leave the settlement of the dispute, not to arbitrators, but to an agent of one of the parties. It is an agreement to leave to the party who made the contract the determination of whether or not it had breached it.
If Article 15 is to be given such a broad scope, then an aggrieved contractor is denied access to this court save only in those cases where the decision of the contracting officer on whether or not he has breached his contract is arbitrary or capricious or so grossly erroneous as to imply bad faith. Such an agreement would be contrary to the Act of Congress giving its consent that the United States might be sued. On February 24, 1855, Congress passed an Act creating the Court of Claims and said, "the said court shall hear and determine all claims founded upon any contract, express or implied, with the Government of the United States. " (Italics supplied.) This provision is the law today. Section 145 of the Judicial Code; sec. 250, Title 28, U. S. C. It was the law when this contract was entered into. Can it be said that it was in the power of any officer or agent of the Government to set aside this Act of Congress and to say that the contracting officer, and not the Court of Claims, "shall hear and determine all claims bounded upon [this] contract"? Such a provision is contrary to the law established by Congress and, therefore, is void.
Not only is it beyond the power of a party to bargain away this right given by Congress, but it must be borne in mind that bidders on this work were forced to enter into this sort of an agreement. The Government contends that as to this project this governmental agency said, the right given by Congress to sue in the Court of Claims is hereby taken away; an aggrieved contractor can secure redress only by appealing to the contracting officer; he will decide whether or not we have paid you all we promised to pay.
This would be a shocking demand; Barlow, et al. v. United States, 35 C. Cls. 514, 546; we do not believe the government intended to make it. We are of opinion that they intended to demand only that the contracting officer should decide questions of fact arising as the work progressed, such as the proper interpretation of the requirements of the contract documents, the fitness of the materials, and the sufficiency and amount of the work, etc. Article 15, providing for decisions by the contracting officer, concludes, "In the meantime the contractor shall diligently proceed with the work as directed." This clearly indicates they had in mind only those disputes that arose during the progress of the work. It negatives the idea that after the contractor had done all the work required of him, the contracting officer should decide whether or not he had. been paid all he was entitled to.
We are of opinion the defendant is liable for increased wages paid by the plaintiffs in the amount of $4,660.83. On the whole case plaintiffs are entitled to recover the sum of $13,388.27. Judgment for this amount will be entered. It is so ordered.
Whaley, Chief Justice, concurs.