Case Name: Gilbert et al. v. The United States
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1868-12
Citations: 4 Ct. Cl. 290
Docket Number: 
Parties: Gilbert et al. v. The United States.
Judges: Milligan, J., concurred with the Ohiee Justice.
Reporter: United States Court of Claims Reports
Volume: 4
Pages: 290–316

Head Matter:
Gilbert et al. v. The United States.
On the Proofs.
The claimants contract to construct a dry cloak to be placed upon such site at San Francisco as the defendants shall designate and procure. The defendants are to prepare a basin, piers, and machinery necessary to the working af the same. They neglect to procure the site and to make the proper preparations to receive the dock. Thereby the claimants are subjected to expense for demurrage, and for delay in the execution of their contract. It is then agreed that the claimants shall procure the site and construct the necessary basins, piers, and machinery, and transfer the whole to the defendants, who agree as condensation therefor to deliver the dock and appurtenances to the claimants to be used by them for th/ree years in docking merchant vessels for their own profit, they docking Che vessels of the defendants without charge when required. The defendants also reserve the right to repossess the dock before the expiration of the three years, on giving six months’ notice in writing and paying the claimants such compensation for the unexpircdportion of the three years as the Secretary of the Navy shall deem reasonable. It is a condition of the original contract that the dry dock shall be at the risk of the contractors till tested and accepted by the defendants. Nearly three years elapse before the claimants complete and the defendants accept it. During this time the claimants dock merchant and government vessels on several sections of the dry dock. Immediately after acceptance the defendants give notice in writing lhal they will resume possession. The claimants yield possession. The Secretary of the Navy subsequently fixes the claimants’ damages for the imex-pired portion of (heir tlwee years at f59,233 94, provided that Congress shall deem this term began at the time of the acceptance of the dock by the defendants, and not when the claimants began to dock vessels. Tire defendants do not seek to recoup for moneys received by the claimants for dockage before delivery, nor for delay in completing the worknor do they plead the statute of Imitations, though more than six years have expired behceen the Secretary’s award a/nd the bringing of this action.
I. Where it is provided in the contract that the builder of a government dry dock may hold the same for three years after it shall he delivered and aecejited, he to dock merchant vessels at reasonable rates, and gov ernment vessels free, the term of three years must he deemed to begin at the time of actual acceptance by the defendants, and cannot be set back to the time when the contractor began to dock vessels on a portion of the dry dock before completion and delivery.
II. Where, during the construction of a dry dock built at the risk of the contractor till tested and accepted by the defendants, the contractor docks strangers’, and also defendants’ vessels, on sections of the dock, the former for pay, the latter free, it must be deemed a use of the dock during construction for the mutual benefit and by the joint consent of the parties.
Messrs. Hughes, Denver, and. Peels, for tbe claimants :
The first contract, dated May 19, 1851, required the contractors to build the dock within two years. The United States were to designate the site as soon as the material should be prepared. This was of necessity a condition precedent to the completion of the work.
A basin or pier was indispensable to the launching, securing, and working of the dock. This was to be built by the United States, and was also necessarily a condition precedent.
The Navy Department was called upon to designate the site for the dock in November, 1851, but was unable to do so. The contractors.were directed to ship the material to San Francisco, and there await the further action of the department: They did this, and such delay was caused that the demurrage on the vessels amounted to. $40,000. The government remained in default until the 4th of August, 1852, when the second contract was signed.
The second contract required contractors .to release their claims for demurrage amounting to $40,000, to procure a proper site for the dock, and to build the necessary pier or other structure for seeming and working the dock, the expense of which was about $200,000, one-third additional to the original undertaking. They were also to dock all government vessels free of charge, and for these considerations were to have the use of the dock for three years from the date of Us completion md acceptance. Six or seven sections of the dock were so far completed that they could be used by the month of November, 1853, and the incomplete dock was used for merchant vessels, and during this use of it the contractors docked twenty-nine government vessels, for which no charge was made. The actual net receipts by tbe contractors from the use of the incomplete dock were $43,112 85, (p. 36,) but to receive this net gain the contractors had released demurrage claims for $40,000, and had expended other large sums in building the necessary pier.
The dock was finished in August, 1855, but was not finally tested or accepted by the United States until the following March. On the 17th of March, 1856, it was formally turned over to the United States, submitted to the required tests, and accepted; it was then re-delivered-to the contractors to be used by them under the lease, and the reserved instalment of temper cent, paid on the purchase money.
During this interval between August, 1855, and March, 1856, the complete dock was not used by the contractors, but was held to await the trial test and acceptance.
On the 20th of-March, 1856, the Secretary of the Navy served the required notice of six months to terminate the lease, and in November following possession was resumed by the government, and in pursuance of this notice.
The contractors submitted their claim for damages to the Secretary of the Navy; he suggested the objections that they had been in default by not completing the dock within the two .years limited by the first contract, and also that they had had the use of the dock for three years from the time they corii-menced using a portion of it in November, 1853.
The Secretary declined to decide these questions, and insisted that Congress must act. He was then reminded by the contractors that if Congress should decide to make them compensation, the contract provided that the extent of the damages shoidd be determined by him, and in response to this suggestion he made up a statement of the proper compensation claimants should receive if they should procure a favorable decision upon the merits of their claim.
This estimate was made upon the apjilication of claimants, and exhibited to them before any action was had in Congress.
The Secretary insisted that claimants should apply to Congress, and that he would then transmit his estimate of damages to that body for its action. This was done and the damages ivere fixed by the Secretary at $59,223.
No further action was ever taken by Congress, but the case has been brought before this court for á decision upon the questions involved.
We will consider, first, tlie objections urged by tbe Secretary of tbe Navy, and, in conclusion, those wbicb bave been brought forward in tbis court.
Tbe first is tbe alleged failure to complete tbe dock within the time of two years limited in tbe first contract, and to tbis we reply:
1st. Construing tbe two' contracts together, there was no express limitation as to time.
2d. If there was such a hmitation, time was not of tbe essence of tbe contract.
3d. If time were originally of tbe essence of tbe contrae t, it has been waived by tbe government.
In discerning tbe intention of parties from the language they have used in a contract, a reasonable and probable construction is always preferred to one that is improbable and extraordinary; and such a conclusion is always adopted unless tbe language is too plain to admit of a doubt. To give effect to tbis rule courts will inquire into tbe circumstances surrounding parties at tbe time tbe agreement is made, in order to discover whether it is more consonant with reason and justice to give one effect or another to language wbicb is in itself of doubtful import.
Where a term or a phrase is equivocal in regard to tbe subject to which it refers, resort may be bad to tbe circumstances under wbicb tbe contract was executed, and tbe cotemporaneous exposition of tbe parties as evidenced by possession and other similar acts. (Gray v. Ciarle, llYerm., 583; Kelly v. Mills, 8 Ham., 325; Poindexter v. Cannon, l .Dev. Oh. B.., 377; Patríele v. Grant, 2 Shep., 233.)
In construing tbe language of a written contract tbe court may take into view tbe situation of tbe parties and tbe subject-matter of tbe transaction. (Hildebrand v. Foyle, 20 Ohio, 147; Brown• v. Slater, 16 Conn., 192; ' Gunnison v. Bancroft, 11 Verm., 490; Laiorence v. Bole, ibid., 549; JLolden v. Weaver, 7 Wats., 466; Lowry v. Adams, 22 Verm., 160.)
In construing contracts, courts will endeavor to avoid what is unequal, unreasonable, and improbable, if tbis can be done consistently with the words of tbe contract. (Boyalton v. B. & W. Turnpike Co., 14 Verm., 311;- Holloway v. Lacy, 4 Humph., 468.
In tbis case we have shown you, almost to a demonstration, that tbe dock could not have been finished by May 19, 1853, tbe contractors being compelled to ñnd tbe site, and build tbeir own pier to secure it by. Only nine months of tbe time remained, and it required one month for a letter to go to San Francisco, and six months for a loaded vessel to make tbe trip one way. Tbe Secretary of tíre Kavy stated tbe impossibility of it, and tbe witnesses aver unhesitatingly that tbe work could not have been done.
This case is, therefore, a proper one for tbe application of these rules of construction. If tbe language of tbe second contract leaves any doubt as to whether tbe time was limited to that named in tbe first contract, you must decide that tbe contractors did not agree to perform an impossibility.
Tbe counsel for tbe United States must not only insist that tbe fair construction of tbe second agreement required tbe contractors to deliver the dock all complete by tbe Í9th of May, 1853, but he must also insist that time was of tbe essence of tbe contract. A party who executes a contract with reasonable dispatch, but not strictly within tbe time agreed upon, does not forfeit any of bis rights unless time was made of tbe essence of tbe contract ; and whether this is so depends upon tbe intention of tbe parties from tbe expressions used in tbe contract, and as evidenced by tbe surrounding circumstances.
Time is not considered of tbe essence of tbe contract, unless it has been so declared in express terms or is necessarily implied from tbe nature of tbe transaction and tbe avowed objects of tbe parties. (Taylor v. Long-worth, 1 McLean, 395; Taylor v. Longivorth, 14 Peters, 172; Slum v. Turnpike Go., 2 Penn., 454; L>e Gamp v. Feay, 5 S. & R., 323; Williams v. Champion, 6 How., 171; Sneed v. Wiggins, 3 Kelley, 94; Liddel v. Simms, 9 S. & M., 596; Tyler v. MeOardle, ibid., 230.)
If the contractors covenanted to complete and deliver this dock by tbe 19th of May, 1853, and time was of tbe essence of tbe contract, we assert that tbe United States is estopped from denying our right to tbe lease.
Tbe words for which this construction is claimed, and for tbe present conceded, are, that,“on tbe completion and reception of said dock and appurten anees according to tbe contract and specifications thereof, tbe party of tbe second part will surrender to tbe party of tbe first part tbe entire control of said dock and appurtenances, * * * for tbeir use and benefit for tbe term of three years from tbe date of tbe reception of said dock, and further until notified by the Secretary of the Navy, in writing, of his intention to terminate this contract.”
■Giving 'to this language all the force claimed for it, when the dock was finally completed and accepted, the. contractors by the delay had forfeited all right to a lease, and the Navy Department would have been justified in ignoring their claims. If they had done so, any complaint of the contractors would have been met with the reply, “ you were in default as to time; this was of the essence of the contract, and you have thereby forfeited your right to a lease.”
The law is well settled that if any party to a contract wishes to avail himself of the failure of the other party in the performance of a* material condition he must act in good faith, and decide in apt time whether he will avail himself of the forfeiture, or waive it and accept the benefits of the contract. He cannot elect to waive the forfeiture at the time, and call upon the delinquent party to go on with the further execution of the contract and still hold the delinquency in terrorem.
A condition may be waived by consent or by acts; and a party who does not insist upon the condition, at a time when equity and good conscience demand that he should do so, thereby waives its performance. (Fleming v. Gilbert, 3 Johnson R., 530; Smith v. Lynes et al., 1 Selden, 41; Cole v. Ghanyplain Go., 26 Term., 87; Dixon v. Hovill, 4 Bing., 665.)
It will always excuse the performance of a condition precedent that the performance was hindered or waived by the other party. (Gamp v. Barker, 21 Term., 469; The Mayor, &e., of Heio York v. Butler, 1 Barb., 338; Mains v. Haight, 14 Barb., 77; Smith v. Gugeety, 4 Barb., 615; Marshall v. Graig, 1 Bibb., 384; Majors v. Hickman, 2 Bibb., 218; Jones v. Walker, 13 B. Mon., 163.)
Forfeitures are not favored in law.
Any act which recognizes the continuance of the former relations existing between the parties, subsequent to the breach and with, knowledge of it, is considered a waiver of the forfeiture. (Lester and Beddington’s ease, 1 C. Gis. R., p. 52; Douglas’s case, 2 G. Gis. R., p. 347.)
The government now claims that the lease expired by limitation in November, 1856. Our claim is that it extended three years from-May, 1856, and could only be terminated within that time by giving us six months’ notice, and then paying adequate damages. Tbe Secretary admitted otir position, so far as it was advantageous to tbe government, and took tbe benefit of tbe option to give tbe six months’ notice, and by that means obtained the possession of tbe dock. Having derived tbe advantages from recognizing onr term, be cannot withdraw that recognition and refuse to pay tbe damages which were to follow tbe six months’ notice.
The dock, while in process of construction, was tbe property of tbe contractors. (Johnson v. Hunt, 11 Wendell R., 139; Croolc-shcmlc v. Burrill, 18 Johns. R., 58; Sewall v. Fitch, 8 Cowen R., 215; Mixer v. Hoioarth, 21 Pick., 205; Merritt v. Johnson, 7 Johnson R., 473; Andrews v. Durant, 1 Neman, 40.)
They bad, therefore, a right to use it without paying rent, if the government officers knew of the use and did not object.
The objections presented in this court as a bar to our recovery may be stated as follows:
1st. That we have brought our action upon an award of the Secretary of the Navy, and that we do not adduce sueh an award.
2d. That the contract shows an agreement to submit the case to the arbitration of the Secretary, and therefore we cannot sue upon a quantum, meruit.
3d. That if the agreement to submit the matter to the Secretary does not amount to an agreement to arbitrate, it is at least an agreement to allow him to certify our damages, and that we can only recover by producing his estimate, and that the report we offer as such evidence is insufficient for that purpose.
To the first of these objections we reply that we have not sued upon an award, of the Secretary of the Navy, if that term is used in its technical sense, implying a submission and an arbitration.
To the second objection we reply that the contract of lease does not contain an agreement to arbitrate any controversy.
“ No officer of the United States has authority to enter into a submission on its behalf which shall be binding on it unless the power is given by a special act of Congress.” (United States v. Ames, 1 Woodruff & Minot R., p. 76; Frémont contract cases, 2 C. Cls. R.; 1 Paine, 646.)
An agreement to arbitrate a controversy never ousts a court of its jurisdiction over the subject-matter. (Thompson et al. v. Ghamocli, 8 T. B., 139; Kill v. Hollister, 1 Wilson lb, 129; Watson on Arbitrations, pp. 8,9; Gates v. Bishop of Carlisle, 8 T. Ib, 139; Tattersall v. Groote, 2 Bos. & Pul., 131; Beeves v. White, 10 Eng. Law and Eq. lb, 343; Agar y. Maelclow, 2 S. & S., 418; Williams y. Davis, 3 Mer., 507; Street y. Bigby, 6 Yes., Jr., 815; Mitchell v. Harris, 2 Yes., Jr., 129; Waters y. Taylor, 15 Yes., 10; Gourlay v. Somerset, 19 Yes., 431; Haggart v. Morgan, 4 Sandf. Supreme Court B., 198; Haggart y. Morgan, 1 Selden, 427; Tobey y. County of Bristol, 3 Story O. Ct. B., 800; Allegro y. Maryland Insurance Co., 6 Har. & J., 408; Bandel y. Canal Co., 1 Harring., 234; Gray v. Wilson, 4 Watts, 39; Horton y. Stanley, 1 Miles, 418; Stone y. Dennis, 3 Porter, 231; Balcer v. Hesty, 1 Crancb O. Ct. B., 249.)
To the third of these objections we reply, that we have-always conceded the right of the Secretary of the Navy to estimate our damages, and we are willing to abide by Ms estimate; that he has made an appraisal at the request of the claimants, and that we ought not to be prejudiced because he insisted upon publishing it by a report to Congress; and finally, if the Secretary has not made any such appraisal, the contractors used all reasonable efforts to induce him to do so, and having failed to obtain it, they áre entitled to sue upon a quantum meruit, and there is sufficient evidence outside of the Secretary’s report to show the value of the lease.
There is a recognized distinction between an agreement to arbitrate a controversy and an. agreement to submit to the decision of a third person the value of an article sold, or of work done.
But in this case there has been an estimate made by the Secretary, and his report to Congress is admissible in evidence to show his award.
If the report of the Secretary is not in evidence, the claimants made every reasonable effort to procure an award, and the failure to have the damages assessed is attributable to the defaults of the defendant.
Where the plaintiff has bound himself to submit to the decision of a third person, and having used every reasonable diligence to obtain such decision has failed, he may recover upon a quantum meruit, and introduce other evidence as to his damages. (Sedgwick on Damages, p. 224; Broion v. Overbury, 34 Eng. Law and Eq. B., 610; United States v. Bobeson, 9 Peters', 319; Saggartr. Morgan, 1 Selclen B., p. 427; McMahon v. The JY. Y. and IS. Ii. B., 20 N. York li., p. 463; Mills v. Weeks, 21 Ills. B., p. 570; Parmelee et al. v. JTambleton, 24 Ills. B., p. 570.)
Mr. T. IT. Talbot (with, whom was the Assistant Attorney General) for the defendants:
It is proposed in the discussion of this case to consider it 'under two heads.
1st. The obligations of the contractors under the contract of May 19, 1851.
2d. Their obligations and rights under the contract of August 4, 1862, being the lease under which they claimed the right to use the dock they had constructed for the term of three years from the date of its acceptance by the government.
By the first of these agreements, the contractors agreed to complete the dock within ttoo years from the date of making the contract. On the part of the United States, it ivas agreed that a suitable site for said dock should be selected by the United States—
“And that if the location selected by the party of the second part does not afford a sufficient depth of water for docking vessels of the foregoing description, dimensions, and displacement, then and in that case such dredging or other excavation as may be necessary to procure a sufficient depth of water for using the dock in raising the vessels above described, shall be done by and at the expense of the party of the second part.”
Here were distinct obligations assumed on the part of the United States 'and of the contractors. On the one side, there was an agreement to complete the dock within two years, on the other, to provide a suitable site, and perform other needed work.
It is assumed that time was not of the essence of this contract so far as the contractors were concerned. That must be determined by the contract itself, in connection with the objects designed to be attained by it. And in determining this question, the-court may rightfully take into consideration the condition of affairs at the place where this dock was to be constructed, and whether the necessity for its construction was immediate or remote. If the parties stipulated a specific time for the completion of the work, then they are not excused from perform- an.ee, unless such non-performance was tlie result of tbe conduct of tbe United States. Whether tbe United States were in default depends again upon the contract. There is no time specified in which the United States shall perform the work required of it. It must, therefore, have been done within a reasonable time. What ivas a reasonable time for the fulfillment of the obligations of the United States assumed, is a question of law for the court to determine. (Parsons on Contracts, vol. 2, p. 661, and authorities there cited.)
It is no answer to the default 'of the contractors for them to say that the United States subsequently accepted and paid for the dock, if they were bound to complete it in a specified time. They could not have maintained an action on the contract itself by reason of sueh acceptance, although they might have maintained a quantum valebant for the labor and materials furnished by them. (Lucas v. Goodwin, 3 Bing. N. 0., 737; Warren v. Mains, 7 Johns. B., 476; Lindsey v. Gordon, 13 Me. B., 60; Smith v. Gugerty, 4 Barb. B., 614.)
The acceptance of the dock by the United States after such default did not necessarily give the contractors the right to demand the lease for the term of three years after such acceptance. They might have recovered payment for the value of the work performed by them, but were in no position to demand from the United States a specific fulfillment of the contract.
We may now consider the rights and obligations of these contractors under the lease or contract of August 4, 1852.
That agreement left the contract of May 19,1851, unchanged, except in so far as it absolved the United States from its obligation to select and prepare the necessary site for setting up the dock. And in consideration of the claimants assuming this obligation, they were to have the use of the dock, for their own benefit, for the term of three years from the date of its acceptance by the United States.
The material question may be as to the time when the term commenced.
But it may be worthy of consideration to inquire whether the contractors were in any position to demand a compliance with this second contract on the part of the United States.
The contractors now demand that the court shall decide—
1st. That they were entitled to the use of the dock for the term of three years, from March, 1856, the date of its acceptance by the United States.
2d. That they had in every respect complied with the requirements of both their contracts, and had incurred no defaults.
3d. That they are entitled to be paid as damages, for being ousted from the possession of the dock before the expiration of the term, the amount awarded them by the Secretary of the Navy.
In order to find all of these issues in favor of the claimants, the court must conclude—
1st. That there was no time specified in which the contractors were to complete the dock.
2d. That if there was a time specified for its completion, and default was made by the contractors in such completion, that the subsequent acceptance of the dock by .the United States left all the rights of the contractors unimpaired.
By the first contract the work was to be completed in two years — the United States selecting the site. The evidence is that within three months after the signing of the second contract the work on the dock commenced.
It may be assumed, therefore, that the United States might, by the use of proper diligence, have selected a site in that time. This would have left the contractors fifteen months in which to complete the dock. If there had been no change in the first contract, they would have been required to complete the work in that time. If they had failed the United States might have declared the contract at an end. There is no injustice to the contractors in requiring of them a completion of the dock within the two years after the signing of the second contract.
Could it be urged with any degree of plausibility that the contractors might take an indefinite length of time to complete the work, if this imaginary conversation had been reduced to writing; yet these contracts taken together must mean this. Taking this view of them, the question as to when the term of this lease commenced is of easy solution. It must be held to have commenced from the.time when the contractors, by the terms of their contract, ought to have had the doclc ready for acceptance by the United States.
If, however, the court shall hold that the term commenced from the date of the acceptance of the dock, then we insist that the contractors ought to account to the United States for the fees resulting to them from the use of the dock in its incomplete state.
It is no answer to this demand for the claimants to say that the dock until its acceptance belonged to them, and they might rightfully use it. The United States clearly had such an interest in the dock as gave them a right to direct in regard to its use.
But the claimants cannot recover here, because they have provided by their contract another tribunal to which questions growing out of the annulment of this lease should be remitted. They have elected to have all these questions referred to Congress. They have of their own volition provided, “that the Secretary of the Navy should allow such compensation as to him should seem 'just and reasonable,’ provided Congress appropriated the money upon his recommendation.” This part of the agreement either is not binding at all, or else the whble question of the damages these parties are entitled to receive for a violation of this contract is left exclusively with Congress, and is, by the terms of this contract, beyond the juris- • diction of this court.

Opinion:
Loring-, J.,
delivered the opinion of the court.
The petitioners in this case are Gilbert & Secor, claiming in their own right, and Courbland Palmer, who claims as assignee and executor of Samuel Dakin, deceased, and as assignee and administrator of Rutherford Moody and Eunice Moody, admin-istratrix of said Rutherford Moody.
The petitioners claim compensation for their dispossession by the United States, on the 1st November, 1856, of a floating dry dock at Mare Island, in the State of California, leased to them by the United States on the 17th March, 1856, for the term of three years therefrom.
And the court find the facts to be that, in pursuance of the acts of Congress of September 28,1850, (9 Stat. L., 516,) and of March 3,1851, (9 Stat. L., 622,) the Hon. William A. Graham, Secretary of the Navy, on behalf of the United States, on the 19th day of May, 1851, contracted in writing with John T. Gilbert, S. D. Dakin, Rutherford Moody, and Zeno Secor, that they, in consideration of the covenants and agreements in said contract contained, should furnish all the materials and construct a floating dry dock of ten sections, with all the machinery, fixtures, and appurtenances necessary for working the same, according to the plans and specifications annexed to said contract, to be completed in two years from said 19th day of May, 1851, and placed at such site or point in the bay of San Francisco as the United States should designate.
And the contract provided, among other things, that the' contractors might construct the dock at such place on the coast of the Atlantic or Pacific Ocean as they might prefer, but that all the parts of the dock should be delivered to the United States put together complete, and in every respect ready for use in raising vessels at such point in the bay of San Francisco as the United States should designate before the dock was ready for use; and that the work should be forthwith commenced and progress in its several stages and periods of construction in proportion to the time stipulated for its completion, and should be completed in all respects within two years from and after the date of the contract; and that the contractors warranted the dock should be capable of successfully raising and sustaining for repairs a ship of the line of five thousand and three tons displacement, or a steamer of three hundred and fifty feet in length; and that the experiment for testing the power and capacity of the dock should be performed by and at the expense of the contractors, with a vessel to be furnished by the United States within three months after notice of the completion of the dock.
And, in the language of said contract, it was "further agreed that if the parties of the first part shall fail to comply in each and every particular with the specifications and provisions of this instrument, all the materials of every kind delivered and used upon the work shall be held and used by the United States as their property, as collateral security for advances made, or until a satisfactory adjustment of the case shall be concluded."
And it was further agreed that all the materials and work of every description, shipped on the Atlantic coast for the said dock in California, should be fully insured and the policies of the insurance should be made payable in case of loss to the United States; and, in case of loss, the insurance for loss or damage paid by or recovered from the assurers should be held by the United States until the said materials, lost or damaged, shall have been replaced or the United States fully satisfied that they would be replaced ; and that if any default was made in progressing with the work and in the execution thereof, and especially if the said dock, after completion, should prove insufficient to dock successfully the vessels of the navy according to the warrant aforesaid, the contractors should forfeit and pay to the United States, as liquidated damages, the sums of money which may have been paid to them under the contract, with interest at six per centum, which liquidated damages might be recovered from time to time as they accrued; and the materials were not to be removed until the moneys and interest so advanced should have been refunded, but the said materials were to be held and used as the property of the United States as an additional security for the performance of the contract in all its parts ; and that the said dock should be constructed under the supervision of a competent naval constructor or other person, appointed by the United States, who should have power to reject any materials or workmanship from said dock which in his judgment were not suitable for their purpose, and who should see that said dock was constructed in conformity to said plans and specifications y and the United States covenanted and agreed, in consideration of the premises and of the covenants and agreements in said contract contained on the part of the said contractors, to pay to them, their heirs, executors, administrators, and assignees, the sum of $610,000, at the times and in the sums and manner specified in said contract.
The contractors having, according to the requirement of said contract, prepared the materials of the dock in the city of New York ready for shipment to California, on the 21st of November, 1851, notified the department of the fact, and asked that the place or site in the bay of San Francisco to which the materials should be sent might be designated 5 and, on the 22d November, 1S51, they were informed by the department that the materials might be shipped to San Francisco, and before their arrival there the site for the dock should be designated.
At this time the United States contemplated the construction of a basin or pier at the site of the dock, without which it could not be set up or worked. The vessels laden with the materials of the dock arrived at San Francisco, but the site of the dock bad not been fixed nor a basin or piers constructed, and tbns tbe contractors were prevented from unlading and discharging tbeir vessels, and from proceeding in tbe execution of tbeir contract, and incurred expenses in demurrage, &c.
Tbe contractors then proposed to tbe Secretary of tbe Navy that they should select a site for tbe dock and construct a basin or piers for working it, in consideration that they should be allowed to use tbe dock in docking private vessels for tbeir own profit for three years from tbe completion of tbe dock. Tbe Secretary of tbe Navy submitted this proposition to Congress, and, by tbe act of July 21, 1862, (10 Stat. L., 16,) it was provided as follows: "And said dock may be used for tbe purpose of repairing merchant ships when not in use for the government, in such manner and for such compensation, and upon such terms and conditions, as shall be prescribed by tbe Secretary of tbe Navy.77
And, on tbe fourth day of August, 1852, another contract was made by tbe Hon. John P. Kennedy, Secretary of tbe Navy, on behalf of tbe United States, with S. D. Daken, Rutherford Moody, John T. Gibert, and Zeno Secor.
This second contract, after referring to the statutes above specified and to tbe previous contract, provided, among other things, that tbe United States, so soon as tbe said dock should be in all things completed and delivered according to tbe terms of tbe first contract, would, " on tbe completion and'reception of said dock and appurtenances according to tbe contract and specifications thereof,77 surrender to the contractors tbe entire control of said dock and appurtenances, (unless it became necessary to deprive them of such control for docking vessels of tbe United States,) for them use and benefit for tbe term of three years from tbe date of tbe reception of said dock by tbe United States, and further, until notified by tbe Secretary of the Navy of bis intention to terminate tbe contract. And that tbe contractors should procure and provide at tbeir own cost and expense, and by tbeir own selection, at or near San Francisco, a safe and suitable site for tbe erection of said dock without cost to tbe United States of any sort, including demurrage and damage for detention of vessels and freight,* and to construct or procure safe and suitable piers and accommodations for tbe proper and safe working of said dock; and that they should keep tbe dock and appurtenances safely and in good and complete re pair and condition at all times for tlie docking of vessels of the United States and others ; that they should at all times give preference to vessels of the United States, and, when required by the Navy Department, or the senior officer present, they should receive and dock any United States vessel without charge or expense to the United States, and should, at their own cost, paint the interior of said dock with the mineral paint provided and shipped by the Navy Department to California for that purpose, and keep the exterior of said dock well coated with paint and make good all breakage and damage and deliver the dock and appurtenances over to the United States, as therein-after provided, in good and perfect condition, reasonable wear excepted.
And that, with the exception of vessels of the Uniited States which are to be docked free of charge, the contractors should have the right on the entire and complete fulfillment of the conditions recited to establish a reasonable tariff of prices to be charged for the use of the dock, to accrue wholly to their use and benefit, which tariff shall be regulated and approved by the Secretary of the Navy ; and no greater amounts shall be charged for the docking of merchant vessels than shall be approved by him.
And that, by authority of a law oi Congress, this second contract- might be annulled at any time, and likewise might be annulled ami the control of the dock resumed by the Secretary of the Na. ry on the fa,ilure of the contractors to comply with any of the foregoing conditions; likewise by six months' notice being given in writing to the contractors at any time before the expiration of the said term of three years; and that it might be so annulled by the Secretary of the Navy in writing at any time before the expiration of said t -rm of three years.
And that if, for any other cause than by default of the contractors to execute the covenants and agreements in this second contract by them to be performed, the Congress of the United States, by its act, shall, at any time before the expiration of the said term of three years, dispossess the contractors of the dock and its appurtenances, that then, if it shall be made to appear that the contractors have been at a greater outlay for the accommodations to work said dock .than the value and receipts from its earnings, and the value of tbe said appurtenances for its accommodation erected or procured by them shall then at the time of their being dispossessed be' worth, the contractors should be entitled to receive from the United States, in consideration of said outlay and the deprivation of said premises, such sum or sums as Congress shall in its wisdom deem just and proper; and in like manner, if the Secretary- should deem it expedient to dispossess the contractors of the dock as before provided for before the expiration of the said three years, they should be entitled to receive from the United States such sum or sums as the Secretary of the Navy shall deem just and reasonable, provided Congress appropriate the money upon his recommendation.
And it was further agreed that the United States, the party of the second part, assume, after .its reception by them, the risk of said-dock against damage- or loss from lightning and fire only, and when proper care and watchfulness to guard the premises against accidents by those.elements shall have been duly exercised.
And it was further stipulated and agreed that if default should be made by the parties of the first part in any of the stipulations and conditions a-fore'said, that then, and in that case, the said parties will forfeit and pay to the United States the imnal sum of $610,000, the same being the contract price for the construction of said dock.
Under the contracts specified the contractors proceeded diligently in the execution of their contract, and, having selected a suitable site for the dock at Mare Island, they constructed and completed six sections of the dock, and thereafter continued to use the same for clocking and repairing vessels from November, 1853, until the completion of the dock in August, 1855, and in that time docked twenty-nine vessels of the United States free of charge, and also merchant vessels, and from the latter received a profit equal to $24,506 46 per annum.
Six sections of the dock admitted the docking of only one vessel at a time instead of two, and its use before its completion did not retard or interfere with its completion, .and was known and not objected to, but participated in by the government, and made under a- tariff fixed. by the contractors and approved by the Secretary of the Navy.
The ten sections of the dock were completed in August, 1855, and tlie experiment for testing its power and capacity was not made until March, 1856, because of the failure of the United States to furnish a vessel for tlie purpose.
On or about March 17,1856, the dock was tested in the manner provided for by the contract, and thereupon accepted by the government, and the full contract price, including the ten per cent, reserve*! by the contract, was paid by the United States to the contractors 3 and then, to wit, on the 17th day of March, 1856, the dock, after its reception by the United States, was surrendered to the contractors, to be held and used by them for the term of three years from the date of the reception of said dock by the United States.
On the 20th of March, 1856, the Secretary of the Navy, the Hon. J. 0. Dobbin, by a written notice addressetl to Messrs. Dakin & Moody, Gilbert & .Secor, at New York, notified them that the exclusive possession of the floating dock at Mare Island, California, would be taken by the Secretary of the Navy on the 15th of November, 1856, and on that day the United States took possession of said dock and its appurtenances and dispossessed the contractors 3 and thereafter the contractors presented their claim for such dispossession to the Secretary of the Navy for his appraisal of the damages therefor, and he declined to determine the question whether the lease for three years provided for in the second contract commenced in November, 1853, when the use of six sections of the dock by the contractors began, or on 17th March, 1856., when the completed dock was accepted and received by the United States and then surrendered to the contractors. The contractors then presented their claim to the 37th Congress, and, on February 9, 1859, the Senate, by resolution, referred the matter to the Secretary of the Navy, who, on the 22d February, 1859, reported to Congress.
The claimants have since presented their claim to the Navy Department and its payment was refused.
Upon thé facts found by the court, a majority of the judges concur in the opinion (though for different reasons) that the claimants are entitled to judgment for the sum of $59,223 94. My reasons for my opinion are as follows:
It was contended on behalf of the United States that the lease of the dock for the term of three years commenced in November, 1853, when the claimants began to use six sections of it, and ended three years thereafter, on November, 1856, when the government dispossessed the claimants. But by the contract, the thing to be leased was the whole dock and not six sections, or any other fractional part of it. And the dock was to be tested before it was accepted, and it was to be accepted before it was leased; and it was neither tested nor accepted till March 17,1856, when it was surrendered by the United States to the claimants according to the contract. And the words of the contract are express, and I think exclude construction or argument,• they are, " for the term of three years from the date of the reception of the said dock by the United States." And it is proved and admitted that the test and reception of the dock was not till March 17,1856.
Then the contract provided that the United States should assume, " after its reception by them, the risk of said dock against damage or loss from lightning and ñre only." And this shows that the United States were not to have the risks or rights of ownership in the dock till after its reception by them."
Then it was claimed on behalf of the United States that the claimants had the benefit of the dock in the. profit derived from docking merchant vessels, from November, 1853, till March 17, 1856, and that a recoupment or allowance should be made for this. The use of the dock for the benefit of either party was not provided for by the contract, and is to be ruled by the equity between the. parties, and this depends on their respective legal rights.
By the provisions of the contract, the United States had a lien on the dock as security for their advances and the full performance of the contract, which required the possession of the dock to be by the claimants, and at their risk till its completion and acceptance. And tiis lien was the whole right of the United States, and they had no right whatever to the possession of the dock or to the benefit they derived from its use. The relation of the parties was that of mortgagee and mortgagor in possession, and in such case, by the rule in law and equity, the mortgagor, as general owner in possession, has a right to any use of the property not inconsistent with the lien and its security. And if the United States had a right to object to the use of the dock before its completion, they did not do so, but permitted it and participated in it by taking the benefit of having their own vessels docked and repaired free of charge to them and at tbe risk and cost of the claimants. As thus the benefit of the use was mutual I think the benefit of one was the equivalent for the benefit of the other; and that the parties so intended is inferable from the fact that when the dock was accepted by the United States they paid the full contract price, including the ten per cent, reserved, without reclamation or claim for the antecedent use or objection of any kind.
Then it was claimed on behalf of the United States that the claimants, for the dispossession of the dock, are, by the express terms of the contract, " entitled to receive from the United States such sum or sums as thp Secretary shall deem just and reasonable, provided Congress appropriate the money on Ms recommendation and that Congress not haying made the appropriation which would be their approval of the Secretary's finding, that cannot be taken as the measure of compensation the contract provides. I think this is true, but immaterial, because it only remits the claimants to a quantum meruit on the evidence whether this action is or is not rested on the contract. And I think the claim here is not on the contract, but for a violation of it; and that the dispossession of the claimants was made by the government in November, 1856, not to determine the lease of three years during the term, but because they held that the term commencing with the use of six sections of the dock in November, 1853, expired in November, 1856.
It is observable that the notice of the Secretary to the claimants is dated March 20,1856, and states that possession will be taken on " the first of November next," and there is no perceptible reason for the specification of that date except the belief of the government that the three years would then have expired. And the notice is addressed to the claimants in New York, and would reach them there a day after it was mailed here. And I think the reason of the notice is this: by the terms of the contract the lease was to be " for the term of three years from the date of the reception of said dock by the United States, and further until notified by the Secretary of the Navy, in ivriting, of Ms intention to determine the contract." And thus the notice in writing was "to determine the contract" so as to prevent the lease from extending beyond what the department thought was the end of the three years, and the time the United States could take possession of the dock without incurring liability to the claimants for anything.
That tbe department thought the lease ended in November, 1856, and acted upon that, is, I think, proved by the evidence. On the 1st of October, 1856, Admiral Smith, the chief of the Bureau of Yards and Docks, called the attention of the Secretary of the Navy to the lease of the dock at Mare Island, and said, "it has been inactive use by the contractors in docking vessels for their own benefit since 1853 ,• three years from that time will consequently expire on the seventh day of November next.' And the testimony of the admiral is direct that the notice was given, because the three years.expired in November, 1856. In Ms report to Secretary Toueey, made in 1858, he said: " The Secretary of the Navy notified' the contractors that on the first November following, which was three years from the time they had commenced to use the dock for their own benefit, the department would take possession of the dock; and accordingly about that time the government did take possession." And in his deposition given in this case he says, in stating the substance of the transaction between the Secretary and the contractors, the Secretary of the Navy said to them: " Yon have failed to complete the dock within the time specified; you have used it for the term specified of three years, and now I am going to take possession of it. He took possession of it, and dispossessed them of the dock."
This testimony from the chief of the Bureau of Yards and Docks, to whose special jurisdiction the matter belonged, shows, I think, that the government acted on their belief that the lease of three years ended in November, 1856; and if so, then their notice of March 20 was not intended to determine the lease during the three- years, and was not the six months' notice required for that purpose by the contract, and their dispossession of the claimants was not the execution of that purpose; but it was merely an unauthorized act induced by their misapprehension as to the commencement and expiration of the three years, and as such it was a wrongful dispossession of the claimants, from two years and five months of their term for three-years, and was thus a violation or breach of the contract for which the measure of damages is not to be fixed by the Secretary and Congress, nor under the contract, but by this court upon the evidence.
And the measure of damages is the profits the claimants would have made on their lease if they had continued in posses sion till the expiration of the three years. Dpon this point the evidence shows that after the Dnited States took possession of the dock their receipts from it were at the. rate of $19,815 56 per annum, and this upon a tariff reduced by them fifty per cent, below that of the claimants, Avho on their tariff received from the dock $24,506 46 per annum. As these figures show a large increase in the business of the dock after the claimants were, dispossessed, I think they are entitled to as much as they received before their dispossession, which for two years and five months would amount to $59,223 94 j and this is the sum their i>etition claims.
In this case the petition contains a prayer for general relief, and therefore the claimants may recover on any cause of action shown by the evidence.
And we find as conclusions of law—
1. That by the contracts and facts above set forth, the Dnited States leased the dock abovementioned to said Samuel D. Dakin, Butherford Moody, John T Gilbert, and Zeno Secor, for the term of three years, from March 17,1856, and contracted with them that they should enjoy the same for said term, under and according to said contracts.
2. That by dispossessing said lessees on the 1st of November, 1856, the Dnited States became and are liable to pay to said lessees and their rejiresentatives, for their deprivation of the residue of said term, the net profits they would have received therefrom, which amount to said sum of $59,223 94.
Judgment is to be entered by the claimants for the sum of $59,223 94.