Opinion · United States Court of Claims
Beuttas v. United States
60 F. Supp. 771
- Type
- Opinion
- Court
- United States Court of Claims
- Jurisdiction
- Federal
- Date
- 1944-06-05
- Topic
- general
WHITAKER, Judge. 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.
Citator
Beuttas v. United States has been questioned or limited by later authorities: relies on overruled authority: 24 L. Ed. 148 (overruled by Terral v. Burke Construction Co.). Read them before relying on it. 28 later decisions cite it.
- Authority status
- caution
- Cited by
- 28 opinions
BEUTTAS v. UNITED STATES, (1944)
60 F. Supp. 771
BEUTTAS et al. v. UNITED STATES.
No. 44978.
United States Court of Federal Claims.
June 5, 1944.
Judgment for plaintiffs in accordance with opinion.
This case having been heard by the Court of Claims, the court, upon a stipulation entered into between the parties hereto, the evidence, and the report of a commissioner, makes the following special findings of fact:
1. The plaintiffs, Joseph H. Beuttas, John W. Beuttas, and Paul H. Beuttas, trading as B-W Construction Company, not incorporated, are citizens of the United States engaged in the building construction business, and maintain their office in the city of Chicago, Illinois.
2. The plaintiffs entered into a contract with the defendant November 26, 1935, signed by Horatio B. Hackett as Assistant Administrator for Federal Emergency Administrator of Public Works, whereby, for the consideration of $104,890, plaintiffs undertook to furnish all labor and materials and perform all work required for Project No. H-1405, in Chicago, Ill., consisting of the construction of the foundations of the Jane Addams Houses.
The work was to be commenced upon receipt by the contractors of notice to proceed and be completed within 75 calendar days after receipt of notice.
3. Article 28 of the contract provided:
"(a) The term `Head of Department' as used herein shall mean the Federal Emergency Administrator of Public Works, and `his representative' means any person authorized to act for him.
"(b) The term `Contracting Officer' as used herein shall mean any person or persons duly authorized by the Federal Emergency Administrator of Public Works to have general direction of the work under the contract."
4. Article 3 of the contract provided:
"The contracting officer may at any time, by a written order, and without notice to the sureties, make changes in the drawingsWest Page 772and (or) specifications of this Contract and within the general scope thereof. If such changes cause an increase or decrease in the amount due under the Contract, or in the time required for its performance, an equitable adjustment shall be made and the contract shall be modified in writing accordingly. No change involving an estimated increase or decrease of more than $500 shall be ordered unless approved in writing by the head of the department or his duly authorized representative. Any claim for adjustment under this article must be asserted within 10 days from the date the change is ordered, unless the Contracting Officer shall for proper cause extend such time, and if the parties cannot agree upon the adjustment the dispute shall be determined as provided in article 15 hereof. But nothing provided in this article shall excuse the Contractor from proceeding with the prosecution of the work so changed."
Article 15, thus referred to, provided:
"All labor issues arising under this contract which cannot be satisfactorily adjusted by the Contracting Officer shall be submitted to the Head of the Department. Except as otherwise specifically provided in this contract, all other disputes concerning questions arising under this contract shall be decided by the Contracting Officer or his duly authorized representative, subject to written appeal by the Contractor within 30 days to the head of the department concerned or his duly authorized representative, whose decision shall be final and conclusive upon the parties thereto as to such questiors. In the meantime the Contractor shall diligently proceed with the work as directed."
5. Paragraph 1 of Section 12 of Division I of the specifications provided that: "Subject to the specification, general conditions and the contract, there shall be paid each Employee in the Trade or Occupation listed below not less than the hourly wage rate set opposite same. * * * ."
Carpenters ..................... $1.3125 Cement finishers ............... 1.3125 Hoisting engineers ............. 1.3123 Common laborers ................ 0.825
Paragraph 2 of Section 12, supra, provided that: "The above wage rates are subject to review and adjustment by the Federal Emergency Administraor of Public Works, as provided in Article 19(a) of the contract."
Paragraph 4 of Section 12 also provided as follows:
"The Government will not consider any claims for additional compensation made by the Contractor because of payment by the Contractor of any wage rate in excess of the applicable rate contained herein. All disputes in regard to the payment of wages in excess of those specified herein shall be adjusted by the Contractor."
Articles 18(a) and 19(a) of the contract, omitting irrelevant portions, provided as follows:
Art. 18. "There shall be paid each employee engaged on the project in the trade or occupations listed in the Specifications, the hourly, weekly, or monthly wage prescribed for the same in the Specification. * * *"
Art. 19. "The wage rates established in the Specification shall be subject to change by the Federal Emergency Administrator of Public Works. In the event that the Federal Emergency Administrator of Public Works establishes different wage rates, the contract price shall be adjusted accordingly on the basis of all actual labor costs on the project to the Contractor, whether under this contract or any subcontract. * * *"
The specifications were by Article 1 of the contract made a part thereof.
6. The work called for by the contract with plaintiffs was confined to the substructures or foundations of the buildings to be erected by defendant.
7. On November 15, 1935, before the contract had been executed by defendant, plaintiffs received a telephone call from a representative of the defendant in Washington, D.C. by the name of Small, to have a steam shovel on the project the following morning. Plaintiffs complied and placed the steam shovel on the project the next morning, after having let a subcontract for the steam shovel, as plaintiffs had planned, for the excavation work. This direction was given to plaintiffs for publicity purposes. The shovel brought on the work by plaintiffs excavated only four or five cubic yards of earth on November 16. It does not appear from the record whether or not the direction given to plaintiffs by Small to have a steam shovel on the project on the morning of the 16th was given by direction of the Director of Housing or the Assistant Administrator of Public Works, as the authorized representative of the head of theWest Page 773department. After plaintiffs had excavated a few cubic yards of material with the steam shovel, as above stated, defendant's project manager at the site told plaintiffs to do no other work.
8. On November 21, 1935, the District Manager of the Housing Division of Public Works Administration at Chicago wrote plaintiffs a letter, in reply to their letter of November 19, 1935, with reference to the disposal of excavated material on the project and concluded said letter to plaintiffs with the statement that "With this information at hand, please arrange to proceed with the work under your contract for Foundations for Jane Addams Houses Project H-1405, as outlined in the Plans and Specifications." Plaintiffs proceeded with the work in accordance with this direction of November 21, confining their work at that time to preparatory work such as organizing personnel, surveying, and subletting contracts for materials and services. There were some structures on the site which plaintiffs' contract required them to remove.
9. On December 9, 1935, A. R. Clas, Director of Housing, directed plaintiffs by telegram to proceed with the work.
At noon the next day, December 10, 1935, the contracting officer, due to changes that were being made by him, ordered plaintiffs to suspend all work until further notice. The changes made by the contracting officer consisted of raising the footings of the foundations about two feet and certain other changes which related to the boiler room and coal storage room. The changes in the boiler and coal storage rooms referred to had been decided upon, and revised drawings dated November 20, 1935 with reference thereto had been made and sent to the project manager at the site prior to December 10, 1935, but the work by plaintiffs was suspended and held up by the contracting officer until February 17, 1936, solely for the purpose of consideration by him of the amount by which the contract price should be reduced by reason of the changes shown on said revised drawings of November 20, 1935. This delay of 69 days was unreasonable. There was no provision in the contract which authorized the Government to suspend the work.
On February 12, 1936, the contracting officer advised plaintiffs that —
"* * *, you are instructed to proceed at once with the work under this contract, as modified by the following revised drawings:
"FC-1 to FC-14, inclusive, dated November 20, 1935.
"An equitable adjustment of your contract price and time will be made, as provided in the contract, and a formal Change Order issued, modifying your contract accordingly."
Plaintiffs received this order to proceed on February 17, 1936, and in their letter to the contracting officer, acknowledging receipt thereof, they advised him as follows:
"We wish to inform you that, due to this delay beyond our control, we have been subjected to expenses of superintendent, watchmen and paymaster wages, insurance, miscellaneous job costs, government office maintenance, estimating and traveling costs, waiting time of excavating equipment, and certain expenses of our Chicago office.
"The totals of the above listed expenses we shall forward to you in due time for your approval."
The contracting officer replied to this February 25, 1936, saying:
"As stated in the Proceed Orders issued to you, equitable adjustment of your contract price and time, due to the changes ordered, will be made. Careful consideration will be given to claims presented by you in connection with them."
Due to weather conditions plaintiffs were unable to proceed with the work after receipt February 17, 1936, of the order to proceed, until February 26, 1936, and on February 27, 1936, plaintiffs requested of the contracting officer extension of time "up to February 28, 1936," and repeated their request for additional compensation. Extensions of time were allowed.
Plaintiffs proceeded with the work, as directed, and eventually completed it.
10. Subsequent to the proceed order of February 12, 1936, the contracting officer issued Change Order No. 1 April 17, 1936, under Art. 3 of the contract in which he decreased the contract price in the amount of $9,656.36, based upon the revised drawings of November 20, 1935. Plaintiffs made written protest to the contracting officer in which they renewed their claims for extra costs and expenses as a part of the equitable adjustment to be made under Art. 3 during the period December 10, 1935 to February 17, 1936, when work was suspended becauseWest Page 774of and in connection with the change under Art. 3. The contracting officer refused to make any adjustments in the change order and on April 22, 1936, advised plaintiffs as follows:
"* * *. Change Order No. 1 is issued without prejudice to your numerous claims which you filed in connection with the authorized revisions. I have previously informed you that although it is my intention to recommend reimbursement for some of these claims, it will be necessary to submit them to the Comptroller General. All of these claims will be presented for his decision at the same time, and as a result it is necessary that you submit itemized substantiation covering those which have been presented in general form only."
Plaintiffs appealed to the head of the department under Art. 15 of the contract.
Subsequently the contracting officer made some other changes for which he issued change orders, from which plaintiffs also timely appealed to the head of the department. However there was no suspension of the work or delay in connection with any of the change orders other than Change Order No. 1 of April 17, 1936.
11. The items of the claim made in the petition herein by plaintiffs are as follows:
(1) Maintenance of staff and equipment December 12, 1935, to February 17, 1936;increase of wagerates due to delay forthat period;increased cost of removal of earth due to frost penetration .. $20,000.00
(2) Failure to include overhead and profit in Change Order No. 1 ............ 186.32
(3) Allowance of less than fair and reasonable compensation for removing hidden obstructions .............. 155.28
(4)Increased wages............ 6,396.00 ---------- $26,737.60
The parties herein stipulate and agree by written stipulation signed by counsel for plaintiffs and by the Assistant Attorney General that plaintiffs are entitled to recover the sum of $8,727.44, and only that amount, in connection with all their claims against the defendant presented by this suit, other than their claim based on the wage increases which took place during the course of performance of the contract in question. Defendant consents to entry of a judgment in the amount of $8,727.44 and plaintiffs accept said amount as full compensation for all the said claims, other than that based on the wage increases, item 4 above, amounting to $6,396.
12. On December 28, 1935, plaintiffs received a report from their superintendent on the project based on information obtained by him that the Federal Emergency Administration of Public Works was about to change the scale of wages for carpenters and laborers on P. W. A. projects. At that time the Government had not issued invitation for bids and specifications for the project covering the superstructures of the Jane Addams Houses, the foundations of which were covered by plaintiffs' contract. The Government specifications and invitation for bids for such superstructures were issued February 15, 1936, and set forth the scale of wages, applicable to the superstructures, of certain wage earners, among others, as follows:
Rate per hour
Carpenters .................... $1.50 Cement finishers .............. 1.50 Hoisting engineers ............ 1.50 Common laborers ............... .95
At the commencement of their work plaintiffs began paying the rate of wages set forth in this contract for the foundations (see finding 5) and continued to pay such wages until sometime in February or March of 1936. Defendant did not at any time expressly request plaintiffs to pay higher wages. Plaintiffs' force was unionized and, because plaintiffs were not paying the wage scale provided in the invitation and specifications for the superstructures, which were not a part of plaintiffs' contract, the Union called a strike and thereby enforced the payment by plaintiffs of the wage scale provided for the project for the superstructures. The Union demanded payment of back wages on the increased scale, retroactive to January 8, 1936, and plaintiffs acceded to the demand.
13. The scale of wages announced in the invitation for bids and specifications for the superstructures was higher than the scale prevailing in the territory at that time on private jobs. The Government did not participate in negotiations between plaintiffs and the striking workmen.West Page 775
The difference paid by the plaintiffs between the two scales, that on the foundations and that on the superstructures, amounts to $4,321. With added workmen's compensation and social security, the sum of $4,321 is increased to $4,660.83.
14. A dispute arose between the parties to the contract in suit as to reimbursement by defendant to plaintiffs for the additional wages they paid over and above those set forth in the invitation for bids and the contract, the plaintiffs contending that defendant had established higher wages on the project and that they were also entitled to be reimbursed such increase as an added cost due to changes made by defendant in the foundations and consequent suspension and postponement of the work to the time when defendant's higher scale of wages for the superstructures was announced.
The final Change Order No. 1 (first issued by the Director of Housing April 17, 1936), covering the foundations was revised and reissued by the Assistant Administrator on June 25, 1936, after plaintiffs' work had been substantially completed, and such change order did not include the wage increases in dispute, but reserved to plaintiffs their right to prosecute their claim, then pending, to such increase. This change order of June 25, 1936, decreased the contract price, as a result of the changes shown on the revised drawings dated November 20, 1935, by $4,721.94, instead of $9,656.36, as first decided by the contracting officer.
15. At the time the contracting officer issued the formal change order of April 17, 1936, as above-mentioned, he advised plaintiffs that he would not allow therein, as a part of the equitable adjustment under Art. 3 of the contract, the actual costs and expenses incurred by plaintiffs in connection with the changes made in the revised drawings, or the increased wages, due to the stoppage and suspension of the work, but that a determination with respect to such items of extra costs and expenses would be made and a recommendation with respect thereto transmitted to the General Accounting Office for action. Plaintiffs asserted that all their claims for extra costs and expenses were directly attributable to the stoppage and suspension of work in connection with and due to the change and made claim therefor as a part of the equitable adjustment to which they insisted they were entitled under the provisions of Art. 3 of the contract.
On June 29, 1936, the Assistant Administrator of Public Works made written decisions and findings of fact with reference to the various items of the claim asserted by plaintiffs on appeal. His findings and decision with reference to Item 3 of plaintiffs' claim, as a part of the equitable adjustment to which they insisted they were entitled, in the amount of $8,743.42 for extra costs resulting from the stop order and delay due to the change in connection with the revised drawings, were typical of all other findings made by him in connection with such items. In this connection he advised plaintiffs as follows:
"I have reviewed the various claims presented by you involving appeals from decisions made by the Director of Housing as contracting Officer with reference to your contract, * * *. I am listing below the items of your claims, together with my finding with reference thereto: * * *"Item No. 3 — Contractor's Claim for Damages in the Amountof $8,743.42 Resulting from Delay Caused by Revised Drawingsand Stop Order
"This claim includes such items as superintendent's time, watchmen's time, paymasters' time, power shovel waiting time, including watchmen, miscellaneous job expenses and pro-rated Chicago office expenses. I find that this claim is occasioned by the stopping of work by the Government on December 12, 1935, from which time until February 17, 1936, the job was shut down. I further find that the inability of the contractor to perform any work during this period was occasioned by the direct orders of the Government and was without fault or negligence on the part of the contractor. I further find that as a result of this delay the contractor was occasioned expenses, over and above those figured in computing the credits allowed under Change Order No. 1 above referred to and which, but for the stopping of the work by the Government, would not have been occasioned, in the amount of $4,085.58. Attached and marked Exhibit "B" is a detailed statement of such expenses. The matter of the payment of any amount because of additional expenditures involved must be submitted to the General Accounting Office for its ruling as to whether or not any of the items submitted in your claim for $8,743.42 are properly payable by the Government. Your claim, together with my findings as above noted, will be transmitted to the General Accounting OfficeWest Page 776at the time the final voucher is submitted for payment and that office will make final settlement."
16. In the same decision and findings of June 29, 1936, the Assistant Administrator made findings of fact and decisions with reference to the claim of plaintiffs for wage increases above the minimum wage rates set forth in the specifications of their contract, which findings and decision were transmitted to plaintiffs, as follows:"Item No. 6 — Wage Increase in the Amount of $6,936 over andabove Minimum Wage Rate Specified
"I find that the increase in wage rates was occasioned by no fault of the Government, that the Contract placed upon the contractor the obligation of securing workers for the project, and that except as directly authorized by the Government no allowance would be made for increased wage rates. Accordingly, the claim in the amount of $6,936 must, therefore, be disallowed."Item No. 7 — Wage Increase in the Amount of $3,467 over andabove Minimum Wage Rates Specified, Resulting from Delay Due toRevision of Drawings and Stop Order
"This claim arises because of the fact that from the 12th day of December, 1935, at which time work was stopped, up to January 8, 1936, the wage rates in effect were lower than those prevailing after January 8, 1936. I find that, had the contractor been permitted to work during the period from December 12 to January 8, he could have obtained workers at the lower rate prevailing up to such date; and because of the delay the work which would otherwise have been performed during the time of the lower pay rate had to be performed after the new wage rate went into effect. I find that because of this delay the contractor was put to an additional expense of $909, which includes 10 percent for overhead and 10 percent for profit. The payment of this item is dependent upon the opinion of the General Accounting Office and will be submitted to it in the same manner as the claims listed under Item No. 3. [i. e., for settlement.]"
17. Following the above-mentioned findings and conclusions, the contracting officer proceeded with the matters of final acceptance of the work which had theretofore been completed by plaintiffs, the preparation of the final voucher under the contract, and the securing of releases from plaintiffs and their surety for the purpose of making final settlement. During this time, and before the final voucher was prepared, plaintiffs on February 12, 1937, in a letter of that date addressed to the Federal Emergency Administrator of Public Works, the head of the department, petitioned him to make a decision on the various items of the claim which had been considered by the Director of Housing and by the Assistant Administrator, as his authorized representative, and to allow such items of the claim as a part of the equitable adjustment under the contract and to include them in the voucher for final payment under the contract.
Plaintiffs on March 29, 1937, executed a voucher as the final voucher under the contract for $24,048.25 as the claimed "balance due on contract and changes." To this voucher was attached a release signed by plaintiffs and their surety specifically reserving their rights with respect to seven items in stated amounts totaling $23,548.31, one of which, in the amount of $1,725.20, had been allowed for payment by the Assistant Administrator.
18. On May 20, 1937, Harold L. Ickes, Federal Emergency Administrator of Public Works, after considering plaintiffs' appeal to him, as above-mentioned, made findings of fact, conclusions, and recommendations on the various items of plaintiffs' claim in a letter addressed to the Comptroller General, and accompanied by the final voucher above mentioned. With respect to the claim made by plaintiffs for reimbursement under the contract for increased wages, Mr. Ickes stated in this letter to the Comptroller General as follows:
"Reference is made to the Contractor's claim in the total amount of $10,403 for wage increases over and above the minimum wage rates specified. This claim may be divided into two parts: one for $6,936, resulting, according to the Contractor, from fundamental changes in economic conditions, and the other for $3,467, resulting, according to the Contractor, from the issuance of the specification for superstructure work on this project, which specification established wage rates different from those set up in the foundation specification and different from those applicable at the time of issuance of the aforementioned stop order. I find, after checking the certified pay rolls in connection with the entire project from its inception on DecemberWest Page 77712, 1935, up to and including its completion of final pay roll on May 19, 1936, that the B-W Construction Company did actually pay a total of $4,259.12 in excess of the minimum rate specified to the laborers and mechanics employed directly at the project site. I find also that the N. Cullen Company, a Subcontractor, actually paid $61.88 in excess of the minimum rates specified. By totaling the increase in wages over and above the minimum rates specified, as indicated above, it is noted that the Contractor and the Subcontractor did pay $4,321 more than the minimum wages required by the contract. The Contractor in arriving at his total of $10,403 used a percentage basis rather than the actual excess wages paid over those specified. I find that there were no fundamental changes in economic conditions as contemplated by Article 19(a), as amended, of the contract, and I recommend that the claim for $6,936 be disallowed. As to the Contractor's claim for $3,467, you are informed that the labor rates specified in the contract are minimum rates only. I understand that the minimum rates specified are in accordance with those set forth in an agreement entered into between the Building Trade Employers' Association and the Unions of the City of Chicago. I do not have at my disposal a copy of this agreement, which I understand established the rate contractors were to pay as wages up to and including January 1, 1936. I understand that the Contractor is a member of this Association and had in his possession a copy of the agreement with the Unions prior to the time of his bidding. The Government had no way of knowing what minimum rates would be established after January 1, 1936, as the Unions and the Building Trade Employers' Association had not established the rates for the year 1936 at the time the foundation work was bid upon. Consequently, the Contractor should have been guided by the Unions' agreement, and it is my opinion that it was his obligation to provide, in his bid, against any possible increase in wages over and above the minimum specified, due to the fact that the Government did not specify the maximum rate. Moreover, Division I, page 6, paragraph 4, Section 13 [12] of the Specification, states:
"The Government will not consider any claims for additional compensation made by the Contractor because of payment by the Contractor of any wage rate in excess of the applicable rate contained herein. All disputes in regard to the payment of wages in excess of those specified herein shall be adjusted by the Contractor."
"I am of the opinion that this claim should be disallowed in its entirety, as I find that the acts of the Government, in advertising for the superstructure contract and in establishing rates for that contract on February 15, 1936, did not increase the wage rates that the Contractor was obligated to pay, and that wages were increased because of the expiration on January 1, 1936, of the agreement with the Unions, and the signing of a new agreement. Furthermore, I am of the opinion that the Contractors in the City of Chicago were advised by the Unions that on January 1, 1936, the wages in the old agreement would be cancelled and higher wages would be established after January 1, 1936.
"I find that the issuance on December 12, 1935, of the aforementioned stop order, prevented the Contractor from proceeding with the work until a proceed order was issued on February 17, 1936. The expenses incurred by the Contractor, due to this act of the Government prohibiting him from starting with his work on December 12, which would have allowed him to pay the prevailing rates for wages as of that date, namely, 82 1/2¢ per hour for laborers and $1.31 1/4 for carpenters, up to and including January 8, 1936, which is the date upon which the Contractor started to pay a higher rate, namely 95¢ per hour for laborers and $1.50 per hour for carpenters, is a fair and just charge against the Government. Therefore, I recommend that the Contractor be reimbursed for the increase of wages he paid to laborers at the rate of 12 1/2¢ per hour and the increase of wages he paid carpenters at the rate of 18 3/4¢ per hour for the total hours of laborers employed and the total hours of carpenters employed in the 26 days following the date of Proceed Order, namely, February 17, 1936. The manner in which I arrive at this 26 days is by using the Stop Order date of December 12, up to and including January 8, which is the date the higher wages went into effect, as the amount of days, the Contractor would have been able to employ men at the lower wages. The total number of labor hours in the first 26 days after February 17 (which in reality was February 24 due to the fact the Contractor could not proceed on account of weather conditions) indicated on the Contractor's and his Subcontractor'sWest Page 778certified pay rolls as having been paid on the increased wage basis, namely, 95¢ per hour, is 983 1/2 hours, and when extended at the rate of 12 1/2¢ per hour equals $122.94. The total number of carpenters' hours in the first 26 days after February 17, 1936 (which in reality begins on March 16, 1936, due to the fact that the carpenters were on strike), as indicated in the certified pay rolls, is 3,351 hours, and when extended at the rate of 18 3/4¢ per hour is $628.31, making a total increase for laborers and carpenters of $751.25 and I recommend that the Contractor be paid 10 percent overhead and 10 percent profit, which is in accordance with the specifications when an extra is involved, which makes a total of $909.00, and my finding is that this amount is chargeable to the cost of arriving at the settlement between the original contract plans and the revised plans and is an item of damages against the Government. * * *
"There is enclosed a voucher in the amount of $24,048.25, which amount includes all of the Contractor's claims enumerated and commented on herein. Also enclosed are the Certificate of Completion and the Certificate and Release relating to this contract.
"The Contractor has refused to execute separate vouchers, one for the final payment under the contract as adjusted, in the amount of $2,225.06 and one for the amount of his claims, namely, $21,823.19. Therefore, of the total amount of the voucher enclosed I hereby certify that $2,225.06 is due the Contractor as final payment under the contract as adjusted.
"The balance of the enclosed voucher in the amount of $21,823.19 is referred to you for direct settlement without my certification, but it is my recommendation that, in addition to the amount I have certified as being due under the contract, the Contractor be reimbursed for the individual items recommended in settlement of this claim."
19. The statement made in the above-quoted letter that the labor rates of wages provided for by the agreement between the Building Trade Employers' Association and the Unions of the City of Chicago terminated January 1, 1936, and that thereafter higher rates were to be established, was an error. The agreement between the Building Trade Employers' Association and the Unions fixing rates of wages did not expire until May 31, 1936.
20. The Comptroller General upon receipt of the final voucher executed by plaintiffs and the letter and recommendations of Administrator Harold L. Ickes refused to authorize payment under the contract of any of the controverted items of plaintiffs' claim, but approved the voucher for the amount of $2,225.06 as the amount otherwise due under the contract, as certified by the head of the department, and issued a certificate of settlement accordingly on February 7, 1938.
Donald B. MacGuineas, of Washington, D.C. and Francis M. Shea, Asst. Atty. Gen., for defendant.
Before WHALEY, Chief Justice and LITTLETON, WHITAKER, JONES, and MADDEN, Judges.
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 1/2 cents an hour, and for carpenters, cement finishers, and hoisting engineers of $1.31 1/4 cents 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 theWest Page 779work 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 1/2 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 1/4 on the foundation contract.
Whereas on November 26, 1935, the Government thought not less than $1.31 1/4 was a fair wage for carpenters, cement finishers, and hoisting engineers, and 82 1/2 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 1/4 and common laborers 82 1/2 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, 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 Ct.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. 1293A; Anvil Mining Co. v. Humble,153 U.S. 540,551,14 S.Ct. 876,38 L.Ed. 814. 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.West Page 780
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. Home Ins. Co. v. Morse, 20 Wall. 445, 450,22 L.Ed. 365, et seq.; Doyle v. Continental Ins. Co.,94 U.S. 535,537,24 L.Ed. 148; Guaranty Trust Safe Deposit Co. v. Green Cove R. R.139 U.S. 137,142,11 S.Ct. 512,35 L.Ed. 116; Martin v. Baltimore O. R. R.,151 U.S. 673,684,14 S.Ct. 533,38 L.Ed. 311; Terral v. Burke Construction Co.,257 U.S. 529,42 S.Ct. 188,66 L.Ed. 352, 21 A. L.R. 186. See also cases cited in 13 Corpus Juris, p. 455, notes 3, 5 and 8; 17 C. J.S., Contracts, § 229, 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, 94 U.S. on page 538,24 L.Ed. 148:
"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. 529,42 S.Ct. 188,66 L.Ed. 352, 21 A.L.R. 186, 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. 398,24 L.Ed. 1106; Sweeney v. United States,109 U.S. 618,3 S.Ct. 344,27 L.Ed. 1053; Martinsburg Potomac R. R. Co. v. March,114 U.S. 549,5 S.Ct. 1035,29 L.Ed. 255; United States v. Gleason,175 U.S. 588,20 S.Ct. 228,44 L.Ed. 284; Ripley v. United States,223 U.S. 695,750,32 S.Ct. 352,56 L.Ed. 614; Plumley v. United States,226 U.S. 545,33 S.Ct. 139,57 L.Ed. 342; United States v. Mason Hanger Co.,260 U.S. 323,43 S.Ct. 128,67 L.Ed. 286); but provisions leaving to the final judgment of the engineer or architectWest Page 781tect the question of whether or not there has been a breach of the contract and preventing resort to the courts for a determination 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. 109,120,121,44 S.Ct. 274,68 L.Ed. 582.
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, 1855,10 Stat. 612, 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. § 28 U.S.C.A. § 250. 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 founded 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 Ct.Cl. 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.
The Government breached this term which we read into the contract because it is fair and the parties to the contract must have intended it. Yet the Government urges that Article 15 of the contract gave the Contracting Officer the power to read this term out of the contract, by deciding that the plaintiff was not entitled to a remedy for its breach. I think there are two objections to this argument.
(1) There is no indication that the Contracting Officer ever made a decision or gave any consideration to such a term of the contract, or was aware that it contained any such term. This fact points to one of the difficulties that would be created by lodging in a contracting officer, nearly always a layman, the power to decide a question which cannot be decided without an understanding of the way in which the law has traditionally interpreted the texts of writings which appear in litigation. The consequence would be an interpretation which would stick in the letter of the contract, and fail to reach its real meaning and equity. I think, therefore, that the Contracting Officer never decided the question which we are called upon to decide.
(2) I think that the parties never intended that the Contracting Officer should have the power to decide the question which we have before us, i. e., the question of whether or not the Government breached its contract. In spite of the broad language of Article 15 of the contract, it must be that there are limits to its scope. In fact, the evidence in cases before us shows frequent examples of situations in which the Contracting Officer has disclaimed any power to decide that the contractor is entitled to compensation for unreasonable delay caused by acts of the Government. He knows that his decision would be substantially meaningless, since he could not award compensation, except by the expedient of covering it into some change or adjustment which he is authorized to make as the contracting agent for the Government. So he advises the contractor to seek relief from the Comptroller General first and, if he does not get it there, from this court. The Comptroller General, whose powers are somewhat undefined and whose expenditures are, so far as the Government is concerned, practically unreviewable, sometimes gives relief. If he does not, the contractor may come to this court, and the Government may not urge that his case is concluded by a decision made somewhere else, since the Contracting Officer made no decision at all, and the Comptroller General's decision does not, either by the contract or by law, foreclose resort to this court.
Since the Contracting Officer cannot make a decision, effective against the Government, that the Government has breached its contract, and since, if he did so, we would not be bound by it, he frequently does not decide the question at all if his decision would be against the Government. This means that, in practice, the contractor, if he meant, by agreeing to Article 15, to lodge in the Contracting Officer the power to decide questions of breach of contract, has given that official power to decide cases against him, but no power to decide cases, effectively, in his favor. No contractor in his right mind would ever intend to do that. And no Government official, in drawing a contract, would intend to include in it such an unconscionable provision. And if both of them did, with their eyes open, intend any such agreement, we would feel bound to conclude that the law permitting Government agents to make contracts, and the statutes giving to a victim of the Government's breach of contract the right to sue in this court, do not authorize an agent of the Government to defeat that right by making such an unconscionable bargain about it. I therefore agree with the court that Article 15 was not intended to give to the Contracting Officer the power of decision which the Government claims for him, and that we are not foreclosed from deciding the case.
I recognize that, under Article 15 and other provisions of the standard Government contract, many matters of vital consequence to the contractor may be decided by the Contracting Officer without effective review by this court. The consequences are sometimes, in our opinion, harsh and unjust to the contractor. And the line between what the Supreme Court and this court have sanctioned in those cases, and what we refuse to sanction here may not always be easy to draw. But what the Government here urges, the power in the Contracting Officer to decide the ultimate question of whether his principal has breached its contract, should not be tolerated.
In support of their claim for the recovery of these increased wages plaintiffs insist that section 12, Division 1, of the specifications and article 18(a) of their contract (finding 5) fixed the wages that they were to pay under the contract and that, by article 19(a), the Government agreed to reimburse them by adjustment of the contract price in the event the Administrator of Public Works established different wage rates. They further insist that the Administrator did establish higher wage rates within the meaning of the provisions of the contract and specifications mentioned. I cannot agree. The wages specified in plaintiffs' contract were minimum rates only. Article 19(a) of the contract and paragraph 4 of section 12 of the specifications contemplated, I think, that the Government would increase plaintiffs' contract price only in the event the Administrator established greater minimum wage rates under their contract and directed them to pay wages at such increased rates. The "project," referred to in art. 19(a), was the foundation work and not the buildings which the Government might, under another contract, erect thereon. Each P. W. A. contract made was given a project number, and plaintiffs' contract was "Project No. H-1405." The Administrator did not establish greater minimum wage rates under plaintiffs' contract nor on the "project" covered thereby, nor did he direct or otherwise directly force them to pay any increased wages. He did nothing except what he had a perfect legal right to do so far as plaintiffs' contract was concerned. Perhaps he should not have advertised for another contract at higher minimum wages, which would result in a higher bid price to the Government, until plaintiffs had finished their contract which was closely related to the new work, but this was not a breach of any express or necessarily implied provision of their contract and cannot be made the basis of a claim for reimbursement under art. 19(a). Dravo Corporation v. United States, 93 Ct.Cl. 734. Moreover, section 12 of the specifications provided that the Government would not consider any claims for additional compensation because of payment by the contractor of any wage rate in excess of the applicable rate contained therein, and that all disputes with labor in regard to payment of wages in excess of those specified "shall be adjusted by the contractor." This provision appears to have contemplated an event such as actually happened, i. e., a strike for higher wages.
The minimum wage rates set forth in plaintiffs' contract were fixed by the Administrator of Public Works in the invitation for bids and specifications for the particular project covered by that contract under the Rules and Regulations approved by the President December 26, 1934, issued under authority of section 209, Title II of the National Industrial Recovery Act, and Executive Order No. 6929, which Regulations, so far as material here, were as follows:
"Whereas, the President, by Executive Order No. 6929, of December 26, 1934, has delegated to the Federal Emergency Administrator of Public Works the power * * * to prescribe new rules and regulations * * * I hereby prescribe the following rules and regulations under the authority of the said section 209 as necessary to carry out the purposes of said Act, which rules and regulations shall apply to all projects constructed in whole or in part under Title II of said Act: * * *
"3. Wages. The wages paid to employees directly employed on any such project shall not be less than the applicable minimum wage rates which the Administrator may fix from time to time. Should it appear that any individual employed on any such project has been or is being paid less than the minimum wage fixed by the Administrator and in force at the time such labor was performed, the employer of such individual shall be notified to pay him all wages due according to the prescribed rate. Upon ten days' default on the part of any such employer after the receipt of such notice he shall be subject to the penalties provided in said Act for violation of these regulations."
The actual increased wages of $4,321, which plaintiffs incurred, were incurred and paid as a direct result of a demand and strike of their Union employees. Except for this, plaintiffs would not have been required by the Administrator, or otherwise, to pay any increased wages. Defendant did not request plaintiffs to increase the wage rates and no one representing the Government or the Administrator participated in the dispute between plaintiffs and the labor unions. The fact that the labor unions of the Chicago territory may have failed to abide by their wage agreement with the Building Trade Employers' Association, ofWest Page 784which plaintiffs were members, cannot be made the basis of a claim for reimbursement against the Government. Nor can the Government be held liable to plaintiffs for reimbursement of the increased wages which they were compelled to pay under the circumstances, because the Government on February 15, 1936, issued invitations for bids and specifications for another contract on another and a different project for the buildings to be constructed on the foundations covered by plaintiff's contract in which minimum wage rates higher than those contained in plaintiffs' contract were specified. The provisions of plaintiffs' contract did not expressly cover such a situation, and the language used in art. 19(a) and paragraph 12 of the specifications cannot be so extended as to include it by implication. LeVeque et al. v. United States, 96 Ct.Cl. 250; Hood Gross v. United States, 90 Ct.Cl. 258, 265; Barnes v. United States, 92 Ct.Cl. 32, 43, 44. Cf. Blair v. United States,321 U.S. 730,64 S.Ct. 820,88 L.Ed. 1039.
Art. 15 of the contract made the decisions of the contracting officer and the head of the department final on such questions. They both considered and rendered adverse decisions on the question whether the Administrator had established different wage rates in such a way as to require reimbursement to plaintiffs for the increased wages which they paid. This was clearly a "dispute concerning questions arising under this contract" and their decisions were final under the express agreement of the parties. These decisions were clearly not arbitrary, and they were clearly not so grossly erroneous as to imply bad faith. We cannot, therefore, ignore them. Ripley v. United States,220 U.S. 491,31 S.Ct. 478,55 L.Ed. 557; Id.,222 U.S. 144,147,32 S.Ct. 60,56 L.Ed. 131; Id.,223 U.S. 695,696,701,702,32 S.Ct. 352,56 L.Ed. 614; Burchell v. Marsh, 17 How. 344, 349, 350,15 L.Ed. 96.
Defendant makes the contention that plaintiffs did not appeal from the decision of the contracting officer to the head of the department. This contention appears to be based on the assumption that the Assistant Administrator was the contracting officer. Plaintiffs did appeal, and within time. Under the contract provisions the Director of Housing, A. R. Clas, was the contracting officer, as the Assistant Administrator stated in his decision of June 29, 1926. The Assistant Administrator of Public Works, Horatio B. Hackett, although he signed the contract, was the head of the department within the meaning of the contract as defined by article 28(a). He was duly authorized to act for the Administrator and he did so act with reference to approval of change orders and consideration and decisions of appeals.
Plaintiffs make the alternative claim that even if their claim for reimbursement of the increased wages, as such, should be denied they should have judgment for at least $909 on account of such wages (they claim the amount should be $1,856.08) under the findings and recommendations of the Assistant Administrator in his letters of June 29 and August 12, 1936, to plaintiffs and in the letter of the Administrator of May 20, 1937, to the Comptroller General (finding 18). These officials decided in connection with plaintiffs' claims for extra costs that the expenses necessarily incurred by plaintiffs, including a portion of the increased wages, as a result of the stoppage and suspension of their work from December 10, 1936, to February 17, 1937, in connection with changes could not be allowed by them as an increase in the contract price as a part of an equitable adjustment under art. 3 of the contract in connection with the change order. This position appears to have been taken because of certain rulings of the Comptroller General. See 7 Comp.Gen. 645; 12 Comp. Gen. 179, 227. They therefore made findings with reference to the amounts and the cause of these expenses, and recommended to the Comptroller General that certain amounts be paid. While these findings and recommendations should be given great weight if the items covered thereby are found by the Court to be allowable, either under the contract or as damages for a breach thereof, they are not such decisions as are made final and conclusive by art. 15 for such purposes. The evidence of record does not warrant a finding by the Court that of the total increased wages paid by plaintiffs the amount of $1,556.06, or $909 thereof, was incurred as a result of delay due to suspension of the work for 69 days in connection with the change under the contract as mentioned in the findings.
I think judgment should be entered in favor of plaintiffs for only $8,727.44.
JONES, Judge, took no part in the decision of this case.West Page 789