Opinion
No. 618.
July 20, 1943.
Buzbee, Harrison Wright, of Little Rock, Ark., for plaintiff.
John A. Sherrill and Howard Cockrill, both of Little Rock, Ark., for defendants.
Action by the United States on the relation of M.E. Gillioz against John Kerns Construction Company and another for damages resulting from fact that the relator, a subcontractor, was prevented from completing his subcontract within time provided. Defendant filed counterclaim for liquidated damages for relator's failure to complete the subcontract within the time provided.
Complaint dismissed as to defendant Hartford Accident Indemnity Company, and judgment for defendant John Kern Construction Company for $20,725.14.
Statement of Facts.
This is a suit brought in the name of the United States for the use and benefit of M.E. Gillioz, a subcontractor, against the John Kerns Construction Company, a corporation, the general contractor, and the Hartford Accident and Indemnity Company, surety on the general contractor's performance bond.
It is alleged that on the 10th day of June, 1940, the defendant John Kerns Construction Company, a corporation, hereinafter called the defendant, entered into a contract with the United States of America, hereinafter called the owner, for the construction of a dam and outlet works on the Blue Mountain Dam Project on the Petit Jean River in Yell County, Arkansas. This was a part of the Flood Control Project in the valley of the Arkansas River.
On June 22, 1940, the contractor sub-let a portion of this work to the use-plaintiff, M.E. Gillioz, hereinafter called the plaintiff, whereby the plaintiff took over the portions of the general contract specified in this subcontract. In view of the decision here, the details of the work to be performed need not be stated.
It is further alleged that the plaintiff immediately entered upon the performance of his contract, and that through no fault of his own but due to interruptions on the part of and delays caused by the defendant and by representatives of the owner, he was prevented from completing his contract within the time provided; that upon representations made to him by the defendant that it would not undertake to hold him liable for liquidated damages for delay in completing his contract within the time provided, and that the defendant would undertake to procure reimbursement from the United States Government for the loss and damage suffered by the plaintiff on account of the delays caused by the representatives of the owner, the plaintiff continued to carry out his subcontract until the 5th day of June, 1941, although he continued to suffer great loss and damage due to interruptions in the prosecution of the work on the part of the defendant and representatives of the United States Government.
It is further alleged that on the 18th day of April, 1941, pursuant to negotiations previously had between the plaintiff and the defendant, the original contract was modified to allow the defendant to take over certain items of construction which the plaintiff had undertaken in the original subcontract. It is also alleged that the plaintiff completed his undertakings on the 5th day of June, 1941, and that on said date the defendant was indebted to the plaintiff in various sums set out in the complaint.
Copies of the contract and subcontract are attached to the complaint as exhibits.
In Article 3 of the general contract, it is provided that the contracting officer of the owner had the right to make changes in the plans and specifications. This section also provides for methods of arriving at adjustments in prices and costs.
Article 15 empowers the contracting officer of the owner to decide on disputes as to questions of fact arising under the contract, and his decision is final unless appealed to the department concerned. If an appeal is taken to the department, the decision there is final and conclusive upon the parties.
Article 4 of the general contract provides that if and when changed conditions are discovered, the contracting officer shall make investigations. If the conditions are found materially different, he shall modify the contract, with the approval of the department concerned, and shall provide for any increased or decreased cost or difference in time resulting from such changed conditions.
Under Article 5 of the general contract, the contracting officer could consider claims for delay which would prevent the completion of the work within the contract time, and could grant extensions, with the approval of the department. This extension of time must be in writing, and was subject to appeal. Unless it was appealed, the decision of the contracting officer was final and conclusive.
Under Sections 4 and 5 of the subcontract, the contractor reserved the right to make such changes in work and material as he may be required to make by the owner, change orders therefor to be signed by an officer of the contractor. This section also provides that no allowance of time, for any cause whatever, shall be made unless upon written request of the subcontractor for such extension, within forty-eight hours after the cause for such delay occurred, and unless the contractor and subcontractor have agreed in writing. However, if they failed to agree, the engineer of the owner could determine by certificate in writing, what, if any, extension of time should be allowed. This section also provided that all matters necessary to be taken up by the subcontractor with the owner or its engineer shall be done by or through the contractor.
Section 1 of the subcontract provided: "The subcontractor agrees to * * * perform all work * * * * in accordance with the terms, provisions and conditions of the Contract between the owner and contractor, dated June 10, 1940, including all the general and special conditions, drawings and specifications and other documents forming or by reference made a part of the contract between the contractor and owner, all of which shall be considered part of this subcontract by reference thereto, and the subcontractor agrees to be bound to the contractor and the owner by the terms and provisions thereof."
Section 8(f) of the subcontract provided: "The subcontractor assumes toward the contractor all the obligations and responsibilities that the contractor assumes toward the owner, as set forth in the contract, general and special conditions, drawings, specifications and other documents hereinabove referred to, insofar as applicable, generally or specifically, to the materials to be furnished and the work to be performed under this subcontract * * *".
Motion for a more definite statement was made by the defendant, and in response thereto the plaintiff filed an amendment to the complaint which was in the nature of a bill of particulars, the principal allegation being that the defendant John Kerns Construction Company assured the plaintiff from time to time that it would not undertake to hold him liable for liquidated damages for delay in completing the contract. It also repeated the allegation that the contract could not have been completed within the time specified in the contract because of delays necessitated by failure of the engineers of the United States Government to lay out the work. It is also alleged that the defendant, by its officers, orally advised the plaintiff that it was making claim against the Government for loss and damage suffered by the delay and that if successful it would undertake to see the plaintiff was reimbursed for like loss and damage.
Thereupon, defendant filed an answer denying all the material allegations and further answering that the defendant made repeated requests of the plaintiff that he prepare and present his claim for damages for delay alleged to have been caused by the engineer for the United States and offered to assist and aid in every way possible in the preparation of said claim, but that the plaintiff failed and refused to prepare the necessary facts and formal claim to support his claim for additional time, or to present same to the defendant for presentation to the United States Engineer. The answer then pleads the provisions of the general contract and subcontract above set out. The answer further alleges that the defendant, at the request of the plaintiff, did apply for an extension of time on December 18, 1940, and was granted twenty-four days' extension of time by the contracting officer, which has been credited upon the completion time of the subcontractor, along with other extensions allowed on work of the subcontractor. The contractor denies waiving liquidated damages.
As a counter-claim, defendant seeks liquidated damages at the rate of $250 per day as provided in the subcontract, together with certain rentals, repairs and labor alleged to have been done for the account of the plaintiff.
From the evidence it appears the parties entered upon the performance of the contract and subcontract, and about November 8, 1940, the plaintiff incurred what he considered changed conditions in the course of cutting down the north side of the mountain to prepare it for the commencement of the tunnel. Projections of rock were discovered amounting to five hundred cubic yards more than the amount shown by the engineer plans. Under the provision of the subcontract between the plaintiff and defendant, it was the duty of the subcontractor to continue his work of digging down the mountain side, and this he did. While this claim was under consideration, a slide took place, and the engineer gave consideration to lessening the grade of the slope by doing an additional sixteen thousand cubic yards of excavation, but concluded that the price demanded by the contractors made the work uneconomical and not justified. Relying upon his contract, the subcontractor notified the contractor, who, in turn, made a claim upon the owner through its engineer for additional allowance of time and for increased pay for doing this work. As a final result of this claim, the engineer executed change order No. 5 providing for five hundred cubic yards of additional rock excavation at the price of $1.65 per yard as against 70¢ per yard fixed by the original contract, all of which increased price was allowed to plaintiff by defendant. This seemed satisfactory to the plaintiff, and he accepted the change order and did the work, and no appeal was asked or taken from the engineer's finding.
The plaintiff requested that additional claims be made for other delays occurring after December, 1940, alleging that no definite staking of the entire work had been done; that accurate borings had not been made to show correct elevations and alignment of the rock and dirt and expensive working conditions occasioned thereby. This claim was accordingly submitted to the government engineers and repeatedly urged upon their consideration by the defendant. This contention and claim was answered on March 17, 1941, and was disallowed. The engineer advised the contractor, through whom the claim was made, and the subcontractor, for whom it was made, that they had a right of appeal. There is no contention but that the contractor presented this claim fully and fairly. The plaintiff accepted this ruling and took no appeal.
As alleged in the complaint, on the 18th day of April, 1941, a supplemental agreement was entered into between the plaintiff and defendant. This agreement was the result of negotiations initiated by the plaintiff. He desired to be relieved of performing certain portions of the work remaining uncompleted, which he had found burdensome, and desired to bid on some contracts which were open for bids in the State of Missouri. The time for completion stated in the subcontract and all extensions of time allowed had elapsed.
It clearly appears from the evidence in this case that any and all claims for allowances made by the subcontractor to the contractor were promptly filed with the engineer, in accordance with the terms of the contract and subcontract, and the decisions thereon made known to the subcontractor. Allowances made thereon by the engineer were credited by the contractor to the subcontractor, and it notified him of its willingness to take any and all appeals he desired. The plaintiff is only entitled to extensions allowed upon his part of the work.
The evidence does not show anything done by the defendant which contributed to or caused any delay, if any, suffered by the plaintiff. If any delay was caused by other than the weather and the plaintiff, himself, it was caused by the engineer of the owner. However, in the period during which the subcontractor contends the delays occurred, no substantial delay was found by the engineer, and this finding was tacitly agreed to by the subcontractor.
The right of action and the jurisdiction of this Court in this case are conferred by a federal statute, but the construction of the federal statute is not involved, nor is the United States a real party in interest; hence the questions of substantive law arising herein are controlled by the laws of the State of Arkansas, which are both lex loci contractus and lex fori. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, and cases following that decision. Even though the parties must rely upon a federal statute for their remedies, this does not change the above rule of law. Dysart v. United States, 8 Cir., 95 F.2d 652; Ervin v. Texas Co., 8 Cir., 97 F.2d 806 (the last case arising in Arkansas), and United States v. Durrance, 5 Cir., 101 F.2d 109.
The well established principle of law that strict performance of a written contract may be waived by parol agreement of the parties needs no citation of authorities to sustain it.
Counsel have cited Tidwell v. Southern Engine Boiler Works, 87 Ark. 52, 112 S.W. 152; Grayling Lumber Co. v. Hemmingway, 128 Ark. 535, 195 S.W. 508, and American Mortg. Co. v. Williams, 103 Ark. 484, 145 S.W. 234. While the Court agrees with the principle announced in those cases, they are not in point here, for the question of consideration for the waiver or modification was not there in issue, as here. The other cases cited in plaintiff's brief are not in point on the issue of consideration for the waiver of performance upon which he relies. Certainly strict performance of a contract may be waived either expressly or by conduct, but such waiver is uninforcible when there is no consideration therefor.
This case falls within the principle announced in the decision of the Supreme Court of Arkansas in the case of Feldman v. Fox, 112 Ark. 223, 164 S.W. 766. At page 226 of 112 Ark., 164 S.W. at page 767, that Court said: "If no benefit is received by the obligee except what he was entitled to under the original contract, and the other party to the contract parts with nothing except what he was already bound for, there is no consideration for the additional contract concerning the subject-matter of the original one." Citing Thompson v. Robinson, 34 Ark. 44. * * * "Now, the parties to a contract may, by new agreement, change the terms thereof, and the mutual undertakings will support the new contract * * *; but in the present case there were no additional undertakings on the part of appellee. He was merely to perform the terms of his original contract, and gave up nothing as a consideration for the alleged agreement of appellant to guarantee the price of the cotton crop."
This case has not been overruled.
It will not improve plaintiff's position should the Court apply the Federal law instead of the State law. In Cuneo Press v. Claybourn Corporation, 7 Cir., 90 F.2d 233, 235, the Court said: "Modification of a contract by subsequent agreement is subject to the rules governing all contracts. Consequently any promise therein contained to do that which one is already obligated to do confers no advantage on the promisee, imposes no detriment on the promisor and is without consideration. 1 Williston on Contracts (1936) § 130; 1 Page on Contracts, § 589; Alaska Packers' Ass'n v. Domenico, 9 Cir., 117 F. 99; Empire State Surety Co. v. Hanson, 8 Cir., 184 F. 58; Frankfurt-Barnett Co. v. William Prym Co., 2 Cir., 237 F. 21; In re American Range Foundry Co., D.C., 14 F.2d 466; Brunswig Grain Co. v. Anchor Grain Co., 5 Cir., 10 F.2d 304; G.S. Johnson Co. v. Nevada Packard Mines Co., D.C., 272 F. 291. In other words, consideration is necessary to support a waiver or release of rights whether accomplished by an original instrument or by a modification of an existing contract. Frankfurt-Barnett Co. v. Prym Co., 2 Cir., 237 F. 21; Empire State Surety Co. v. Hanson, 8 Cir., 184 F. 58; Weed v. Spears, 193 N.Y. 289, 86 N.E. 10; Goldsborough v. Gable, 140 Ill. 269, 29 N.E. 722, 15 L.R.A. 294." See, also, Hasler v. West India S.S. Co., 2 Cir., 212 F. 862, 867; Gleason v. McDonald, 6 Cir., 103 F.2d 837, 838; Nash v. Towne, 72 U.S. 689, 18 L.Ed. 527; Fisher v. Underwriters at Lloyd's London, 7 Cir., 115 F.2d 641.
A careful search of the brief and argument of plaintiff fails to disclose where he has distinguished the case of Feldman v. Fox, supra, from the case at bar, or has pointed out any consideration to the contractor or where the subcontractor has performed any work or furnished any material which he was not already bound to perform and furnish under the terms of his contract with the contractor. In view of this holding, the Court will not pass upon the admissibility of parole evidence to establish the purported agreement.
The plaintiff earnestly contends that the subcontractor was prevented from performing his contract by the conduct of the contractor and of the owner's engineers. However, in his briefs and in the evidence before the Court, the two matters complained of as causing the delay were (using the words of the pleader in the brief): "The delay is not claimed solely because of the additional five hundred cubic yards of rock excavation, although this would undoubtedly be substantial, but because plaintiff was not furnished with plans and stakes for the original work covered by the contract."
Counsel for plaintiff urge that the contractor, the defendant here, is responsible for the acts of the contracting officer or the owner's engineers and that if the engineers caused the delay the contractor is liable for such damages as the subcontractor may suffer. In taking this position, the plaintiff overlooks the fact that the subcontractor entered into a contract in which he assumed toward the contractor all of the obligations which the contractor assumed toward the owner, and that he would do the work "in accordance with the terms, provisions and conditions of the contract between the owner and the contractor * * * including all of the general and special conditions, drawings and specifications and other documents forming or by reference made a part of the contract between the contractor and owner, all of which shall be considered part of this subcontract by reference thereto and the subcontractor agrees to be bound to the contractor and the owner by the terms and provisions thereof."
It clearly appears from the evidence in this case, and there is no contention to the contrary, that every claim for allowance of time or increased costs made to the contractor by the subcontractor was duly filed with the engineer, properly urged for allowance, the decision thereon made known to the subcontractor, and the subcontractor invited to take an appeal, but no appeals were taken. These changes and delays were not occasioned by the contractor, nor were they in contravention of the contract, but were made in conformity to and in compliance with the very terms of the contract and the subcontract. There are two recent cases in which these very articles of the original contract in issue here were construed, United States v. Callahan Walker Construction Co., 317 U.S. 56, 63 S.Ct. 113, 87 L.Ed. ___, and United States v. Rice et al., Receiver for D.C. Engineering Co., Inc., 317 U.S. 61, 63 S.Ct. 120, 123, 87 L.Ed. ___. In the case of United States v. Rice, supra, the Court said:
"As pointed out, the delay here resulted from a change in specifications made necessary by discovery of soil unsuitable for foundation purposes. The government having reserved the right to make such changes upon discovery of `subsurface and (or) latent conditions at the site materially differing from those shown on the drawings or indicated in the specifications', delays incident to the permitted changes cannot amount to a breach of contract."
All claims urged by the plaintiff here are changes made in conformity with and pursuant to the terms of the contracts involved; and the contractor, defendant here, is not chargeable with the delays.
Under the terms of the contracts involved here, the contracting officer was made the arbiter of such questions of fact. His decision was subject to appeal, but if no appeal was taken his decision became final and binding. United States v. Callahan-Walker Const. Co., supra; United States v. Rice, et al., Receiver, etc., supra.
Plaintiff has raised some other questions, such as stated account, but the Court does not consider them of sufficient weight to pass upon them, and the questions here noticed are sufficient to determine all the real questions at issue.
The Court has prepared findings of fact, conclusions of law and decree in conformity with the memorandum, and is filing the same this day.