Crowley v. United States

JoNes, Judge,

delivered the opinion of the court.

This case involves extra labor and material costs and liquidated damages.

R. H. Crowley, plaintiff, agreed to manufacture and deliver prefabricated buildings f. o. b. Spokane, Washington, to be used by the defendant in the erection of a CCC Camp. He was advised of the award on May 13,1940, and since the agreement stipulated that the work should be completed within 30 days from May 17, 1940, he began work without awaiting the receipt of a formal contract, which was not signed until June 11,1940. The contract price was $115,625.

The work was completed on July 13, 1940, 26 days after the specified completion date. Liquidated damages were assessed against plaintiff for the 26 days’ delay in the sum of $12,091.17. On appeal the Secretary of War remitted liquidated damages in the sum of $5,203.16, representing 9 days’ delay, and also allowed plaintiff $336.91 extra costs of some table tops caused by a change in the materials required. These amounts, however, have not been paid plaintiff, payment being held up by the General Accounting Office as an offset to the defendant’s claim against a corporation in which it asserts plaintiff had an interest, but which had no connection with this contract.

Defendant’s resident engineer did not arrive at plaintiff’s plant until May 26, 1940, 9 days after the commencement date of the contract, and after about one-third of the contract time for completion had expired. Some of the forms for fabrication of panels had been completed and plaintiff was completing the form for the floor panels. The resident engineer refused to accept the forms for floor and roof ' panels claiming that they were not heavy enough for the purpose. New forms and panels were constructed.

Defendant’s inspector refused to accept a quantity of the lumber containing black knots which had black rings around them, although the grading rulés permitted No. 2 dimension lumber to have sound knots not more than 2% inches in diameter. The same ruling was made as to lumber for flooring and siding. Much of this lumber was sound and suitable for the purpose intended.

The resident engineer, while an experienced lumberman, had not had experience in the particular type and quality of lumber required for this purpose in the particular area. His rulings made it necessary for plaintiff to use a better quality of lumber than the specifications called for, although he at no time specifically directed that this be done.

Plaintiff claims that this action made it necessary for him to furnish more expensive materials than otherwise would have been required, resulting in extra costs and extra labor; that the rejection of so much of the material-caused delay in the completion of the contract, and that consequently he should be permitted to recover this extra cost and that he should also be repaid the amount of the liquidated damages which were assessed against him. He asserts the delay was the fault of the defendant.

There is considerable ground for this complaint on the part of the plaintiff. However, the terms of the contract and the adverse action of the Department preclude recovery on most of these items.

Article 12 of the contract makes the action of the contracting officer on disputed questions of fact final, subject to appeal within 30 days to the head of the department. The specifications, SC-5, make final the interpretation of the drawings and specifications by the resident engineer, subject to appeal within 30 days to the head of the department.

The appeal was taken, the Secretary of War remitted liquidated damages for the 9-dav delay covered by the belated arrival of the resident engineer, and allowed plaintiff the item of increased costs due to the better quality of the lumber required for the table tops than was designated in the specifications.

The resident engineer w'as rigid and extreme in his interpretation of the contract and specifications. If the two provisions, referred to above, were the only ones involved we would be inclined to hold that the action of the engineer in charge was so clearly erroneous as to imply legal bad faith. This was not intentional on his part.. It was due to his inexperience in the type of lumber in that area called for by this contract. The lumber had been graded by the inspectors of the Association. It met their grading rules, as graded by them measured up to the quality called for in the specifications. It was suited to the purposes for which it was to be used. The action of the resident engineer in charge caused plaintiff delay and extra expense.

However, in addition to the provisions mentioned above, there were two others. One of them on materials (Specifications No. 2, Section I, paragraph 2 A) contained the following language:

Irrespective of grading rules quoted, any materials having defects that would be obviously detrimental, either to the construction or for the use for which it is intended, will not be accepted in fabricated materials.

The other provision (Specifications CCC No. 2, SC-6) was as follows:

* * * In all cases where an article is mentioned in the specifications in connection with the words “best quality”, “approved quality”, or “equal to”, the Resident Engineer shall decide what is the best quality and most suitable article to use, subject to appeal provision included under paragraph SC-5, above.

These provisions, to which plaintiff agreed, make the question of the quality of the materials one of fact to be determined by the resident engineer. In the light of these plain provisions we are unable to hold that the action of the resident engineer was so arbitrary as to imply legal bad faith. United States v. Gleason, 175 U. S. 588, 602.

Plaintiff, however, is entitled to recover the sum of $5,540.07 in accordance with the decision by the head of the department.

The reason assigned by defendant for nonpayment is that the plaintiff had an interest in the Crowley Millwork Company, a corporation, of Spokane, Washington, and that such company was indebted to the United States, arising out of the alleged default of such corporation in several contracts dated in 1935, which claims had not been liquidated.

Plaintiff had only a small interest in that corporation. On February 1,1938, the plaintiff and the Crowley Millwork Company executed an instrument whereby the corporation and Crowley mutually released each other from all claims in favor of either, and since that date plaintiff has had no further relations with that corporation. Since it was a corporation and he never had any substantial interest in it, and since his relationship with it was completely severed more than two years before the making of the instant contract, the defendant is not entitled to offset the debt owed from it to plaintiff by any claims wliich'it may have against the Crowley Millwork Company.

The plaintiff is entitled to recover the sum of $5,540.07. It is so ordered.

Whitaker, Judge/ Littleton, Judge; and Whaley, Chief Justice, concur. Madden, Judge, took no part in the decision of this case.