YALE & TOWNE MANUFACTURING COMPANY v. THE UNITED STATES

YALE & TOWNE MANUFACTURING COMPANY v. THE UNITED STATES. [No. A-67. Decided November 12, 1923.] On the Proofs. Contract; final decision. — The rule that where there is a provision in a contract mating the decision of the officer in charge final, his decision, in the absence of fraud or mistake so gross as to imply bad faith, is final, is equally applicable to both parties to a contract. The Reporter's statement of the case: Mr. Fred G. Coldren for the plaintiff. Loving & Hamner were on the briefs. Mr. W. F. Norris, with whom was Mr. Assistant Attorney General Robert H. Lovett, for the defendant. The following are the facts of the case as found by the court: I. On January 23,1918, the plaintiff, Yale & Towne Manu- . facturing Co., a Connecticut corporation, entered into a contract with the United States of America, defendant, acting through Col. John R. Simpson, Ordnance Department, National Army, to furnish 50,000 snaffle bits and 50,000 curb bits and chains at a total cost of $69,500.00. A copy of said contract, numbered E-1087, is attached to plaintiff’s petition as Exhibit B and is made a part hereof by reference. II. In the process of the negotiations leading up to said contract the following letter was written by the plaintiff to Lieutenant Charles B. Price, representing the defendant, as follows: JAN. 22, 1918. Lieut. Chas. B. Pkice, Equipment Division, Office of the Ghief of Ordnance, 1330 F St. NW., Washington, D. G. Re: War Orders EH-841 & EH-840, snaffle bit, curb bit, and chain. Leak SiR: Referring to your letters of Jan". 15th, inclosing us orders for 50,000 additional snaffle bits, model 1909, and 100,000 additional curb bits and chain, we are writing to say that tbe schedule of delivery called for therein, seems ambiguous. Our agreement with Capt. Johnson was, beginning Feb. 7th, we would produce bits on all contracts we had, so that our total production would be at the rate of 17,000 per week for each of the two styles of bits which we were making. Will you kindly arrange in preparing the official contracts that the delivery schedules are made up on this understanding? This of course is now modified by our enforced five-day shut down, and balance of nine Mondays, during which the fuel administrator compels us to keep our plant closed. This will delay the beginning of our schedule at the rate of 17,000 per week and will cut our production down to 14,200 per week each. Is there any way in which your department can get us a release from the fuel administrator’s orders for this work? Several contracts which we are doing for the Navy Department have been released. Further delay in delivery is liable to be caused by the fact that the steel which we have ordered for this job will be delayed by the order of the fuel administrator. Consequently any final contract which we would sign would be contingent upon delivery of materials and definite working days allowed us by the Government. Would it not be possible to substitute for the old contracts new ones which would take in the combined quantities and which would state explicit deliveries contingent upon working days per week allowed ug and upon delivery of material? Yours very truly, The Yale & TowNb Meg. Co., Maxwell C. Maxwell, Asst. Geni. Suft. III. Thereafter the plaintiff applied for an allowance of 47 days to extend the final date of delivery on this contract, which application was approved for allowance, 47 days, by order of the contracting officer, as follows : It is requested that consideration be given to claim for an allowance of 47 days to extend the final date of delivery on contract #E-1087 dated Jan. 23, 1918, from Mar. 15, 1918, to May 2, 1918. EH-578 & EH-579. Claim is based on a delay of 47 days, which made necessary additional delay in production of-days- The primary delay was caused by delay in receipt of material due to fuel administrator’s shutdown order and delays in railroad transportation under Government control. The incident additional delay in production was made necessary, reason of_ The Yale & Towne Meg. Co., Contractor. Per (Signed) Maxwell C. Maxwell, Asst. Geni. Supt. For indorsements by the Ordnance Dept. Attest by Inspector of Ordnance: I certify that the statement made by the contractor in this claim are to the best of my knowledge and belief correct. There is record of the fact in my files. Approved for allowance, 47 days. (Signed) Lt. E. A. MaRshall, Inspector of Ordnance. By order of the contracting officer. Chas. B. PRICE, Oapt. Ord., N. A. Certified a true copy. (Signed) A. E. Pinanski, Oaptavn, Ord. Dept., N. A. Lieutenant Charles B. Price, who signed the above order, was a member of the staff of Col. John K,. Simpson in the Procurement Division in the Ordnance Department and was the officer with whom defendant negotiated this contract. IV. On final settlement the defendant deducted from the contract price one-thirtieth of one per cent of the price for each day of delay in delivery of all equipment delivered after the date of delivery fixed in the original contract, and made no allowance for delay in delivery of 47 days, applied for and allowed by the contracting officer, or any other period. The difference between the amount which was deducted on order EH-579, contract No. E-1087, and the amount which would have been deducted if the 47 days’ delay had been recognized was $756.75. The difference between the amount that was deducted on order EH-578 on said contract No. E-1087 and the amount that would have been deducted if the 47 days’ delay had been recognized was $222.25, making a total difference between the amount actually deducted on both orders covered by the contract and the amount that would have been deducted if the 47 days’ delay had been recognized of $979.00. The disbursing officer made this deduction notwithstanding the extension of time granted on the ground that his payments might not be approved by the auditor if the auditor were not satisfied that the reason for extending the time was proper, and referred the plaintiff to the Auditor for the War Department for settlement of the claim. V. The Auditor for the War Department disallowed the claim, and on appeal the Comptroller of the Treasury affirmed the disallowance on the following ground: “ The claim now under consideration is for remission of a part of the liquidated damages so deducted, on the ground that an extension of time of 4-7 days, extending the final date of delivery from March 15 to May 2, 1918, claimed by the contractor on the basis of delay in receipt of material due to Fuel Administration’s shutdown order and delays in railroad transportation under Government control,’ was granted by the contracting officer on the certificate 'of the inspector of ordnance of the correctness of the statement of the contractor in his claim. “ The contract makes no provision in respect of delays in the receipt of materials by the contractor, and as the Government was not to furnish those materials and did not undertake any duty in connection with the procurement of them by or for the contractor there is no privity of contract between the Government and the contractor in that connection upon which any responsibility on the part of the Government for such delays can be predicated. “ The provision which the contract makes for delays ‘ due to action of the United States ’ must be construed as referring to actions of the United States in the capacity of a party to this contract and not in its sovereign capacity, and as none of the alleged causes of delay resulted from actions of the United States in the capacity of a party to this contract they can not be covered by this provision of the contract. “ It only remains to consider whether the causes of delay alleged were ‘ unavoidable causes ’ within the meaning of the contract. It has heretofore uniformly been held by this office that a mere delay in transportation, without regard to the cause thereof, is not an unavoidable cause of delay in delivery under contract provisions similar to* those quoted. Moreover, this has been held where the delay in delivery affected directly the immediate subject matter of the contract, and the reasoning supporting that holding would be all the stronger when applied to a case like this, in which the transportation delay affected only remotely the product contracted for solely through its alleged effect upon the delivery to the contractor of materials to be used in the manufacture of that product. The causes of delay alleged here must therefore be held to be not unavoidable causes within the meaning of this contract. “As it does not appear that the delays for which liquidated damages were deducted under this contract were due to any of the causes for which the contract provided that the contractor might be excused, the action of the auditor is affirmed and a certificate of no differences will issue.” [MAJORITY — Downey, Jvdye,] Downey, Jvdye, delivered the opinion of the court: The action is for the recovery of $979 deducted from the amount otherwise due plaintiff, as liquidated damages for delay in the performance of a contract. It is averred and not disputed that the plaintiff was granted an extension of time for 47 days, but the disbursing officer in paying the final voucher for the amount found to be due plaintiff did not see fit to assume the responsibility of determining that the extension of time had been properly granted and refused payment to that extent. A claim was filed with the Auditor for the War Department, which was disallowed, and upon appeal to the Comptroller of the Treasury the action of the auditor was affirmed. While there might be some possible question on the record as to the actual granting of this extension of time by the contracting officer, it is apparent that it was so intended, and no question is raised in that respect. The other questions as presented are for consideration. The comptroller in passing upon the matter of appeal from the auditor’s disallowance discussed the dual capacity of the United States as a contractor and as a sovereign, and concluded that the delays for which liquidated damages were deducted were not due to any of the causes for which the contract provided that the contractor might be excused. Aside from this question, plaintiff contends that the contract reposed in the contracting officer or his successor the right to determine whether or not and the extent to which the contractor was entitled to extension of time, and that the finding of that officer was conclusive upon the parties in the absence of fraud or mistakes so gx‘oss as to imply bad faith. We find it unnecessary to discuss the view of the accounting officers with reference to the matter, since it seems to us beyond question that a long line of decisions not only by this court but by the Supreme Court requires the sustaining of the plaintiff’s contention. Provisions in Government contracts reposing in some designated official the right to determine certain questions and making his determination thereof conclusive are of frequent occurrence. Such provisions are inserted largely for the protection of the Government, and the cases in which such a determination by the designated official has been upheld by the courts have been largely cases in which the rule has been invoked in favor of the United States and against the plaintiff, but the rule is none the less effective if perchance it occasionally may operate the other way. We regard it as unnecessary to discuss the rule in detail or to prolong an opinion by applicable extracts from the many decisions on the question. In the well considered and perhaps to be denominated leading case of United States v. Gleason, 175 U. S. 588, fundamental principles applicable to the instant case are discussed, and to that case particularly we refer without quotation. It refers with approval and quotes from the case of Kihlberg v. United States, 97 U. S. 398, in which is to be found much in aid of the rule. In addition to these authorities we also refer to the case of Brinck, Receiver, v. United States, 53 O. 01s. 170, in which Judge Hay made a very accurate and exhaustive compilation of the authorities upon this question. There is no attempt in this case to charge the contracting officer with bad faith or with anything else than an honest attempt to do his. duty, and we must conclude that when he found that the plaintiff was entitled to an extension of time under the contract to the extent of 47 days his finding upon that question was conclusive, and the plaintiff is entitled to relief accordingly. This conclusion results in a judgment for the plaintiff in the sum of $979, and we have so directed. Graham, Judge; Hay, Judge; Booth, Judge; and Campbell, Chief Justice, concur.