Continental Illinois Nat. B. & T. Co. v. United States

• Decision Date: 03 January 1949
• Docket Number: No. 45741.,45741.
• Citation: 112 Ct. Cl. 563,81 F. Supp. 596
• Parties: CONTINENTAL ILLINOIS NAT. BANK & TRUST CO. OF CHICAGO v. UNITED STATES.
• Court: U.S. Claims Court

81 F. Supp. 596

112 Ct. Cl. 563

CONTINENTAL ILLINOIS NAT. BANK & TRUST CO. OF CHICAGO v. UNITED STATES.

No. 45741.

United States Court of Claims.

January 3, 1949.

Herman J. Galloway, of Washington, D. C. (King & King, of Washington, D. C., on the brief), for plaintiff.

Carl Eardley, of Los Angeles, Cal., and H. G. Morison, Asst. Atty. Gen., for defendant.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN, and HOWELL, Judges.

JONES, Chief Judge.

The N. P. Severin Company, a partnership, under contract with the Government, furnished materials and performed certain work at a low-cost housing project known as Lockfield Gardens, in Indianapolis, Indiana. The lump-sum price was $2,440,921.

The partnership, with the approval of the defendant, entered into subcontracts and the subcontractors furnished certain materials and performed work on the project.

The plaintiff is the executor of the will of one of the parties and authorized liquidator of the company.

Plaintiff's action is to recover alleged damages to the partnership, and to recover on behalf of the subcontractors losses and damages due to alleged delays and other breaches of the contract by defendant, and to recover on behalf of the subcontractors for alleged extra work.

Each of the subcontracts contained the following provision:

"The contractor or subcontractor shall not in any event be held responsible for any loss, damage, detention or delay caused by the Owner or any other subcontractor upon the buildings; or delays in transportation, fire, strikes, lockouts, civil or military authority, or by insurrection or riot, or by any other cause beyond the control of Contractor or Subcontractor, or in any event for consequential damages."

Defendant moves the court for an order directing the commissioner of the court to omit from his report any findings of fact relating to claims on behalf of any subcontractor.

Defendant contends that, since by reason of the quoted provision in the subcontracts the prime contractor is not liable to the subcontractors for damages that may be caused them by the Government, the plaintiff cannot recover on behalf of the subcontractors for such damages.

In the case of Severin v. United States, 99 Ct.Cl. 435, certiorari denied 322 U.S. 733, 64 S.Ct. 1045, 88 L.Ed. 1567, in which this court construed an identical provision, it was held that the contractor could not recover on behalf of the subcontractor for damages caused by acts of the Government. This decision was followed in James Stewart & Co. v. United States, 63 F.Supp. 653, 105 Ct.Cl. 284.

The defendant's motion, therefore, must be granted.

We reach this conclusion reluctantly because of the peculiar provisions of the instant contract. We adhere to the principles laid down in the cases of Merritt v. United States, 267 U.S. 338, 340, 45 S.Ct. 278, 69 L.Ed. 643; Severin v. United States, supra, and James Stewart & Co. v. United States, supra. See also United States v. Blair, 321 U.S. 730, 737, 64 S.Ct. 820, 88 L.Ed. 1039. These cases clearly state the principle that where the contractor in his contract with his subcontractor stipulates that the contractor shall not be responsible to such subcontractor for any loss, damage or delay caused by the Government or by any other subcontractor, the contractor may not recover from the Government on behalf of and for the benefit of the subcontractor. The reasoning behind these decisions is that the contractor is not damaged regardless of any hardship suffered by the subcontractor and that the subcontractor may not sue because there is no privity of contract between him and the Government.

However, in this case the specifications which, both in the invitation to bid and in the contract itself, are made a part of the contract, contain the following language:

"Sec. 28, Subcontracts:

"1. (See Art. 26 of the Contract.) The Contractor shall not award any work to any subcontractor without prior written approval of the Contracting Officer, and the terms of all subcontracts shall be subject to the prior approval of the Contracting Officer.

"2. The Contractor shall be as fully responsible to the Government for the acts and omissions of subcontractors and of persons either directly or indirectly employed by them, as he is for the acts and omissions of persons directly employed by him.

"3. The Contractor shall cause appropriate provisions to be inserted in all subcontracts relative to the work to bind subcontractors to the contractor by the terms of the General Conditions and other Contract Documents insofar as applicable to the work of subcontractors (particularly, without limitation, as provided in Art. 26 of the Contract), and to give the Contractor the same power as regards terminating any subcontract that the Government may exercise over the Contractor under any provisions of the Contract Documents (see particularly Art. 25 and 26 of the Contract and Sec. 41 of these General Conditions).

"4. Nothing contained in the Contract Documents shall create any contractual relation between any subcontractor and the Government."

These provisions border on creating a privity of contract between the Government and the subcontractor. The subcontractor must be approved in writing and the terms of all subcontracts are made subject to the prior approval of the contracting officer. The subcontractor is also made subject to all the terms of the contract.

It is true that the specifications provide that nothing in the contract documents shall create a contractual relation between the subcontractor and the Government. But this is somewhat like the truant boy who, while admitting that he took, roasted and ate the chicken without the owner's permission, pleaded that he had no intention of depriving the owner of it — he didn't even know the owner. A mere statement that a contractual relation did not exist would be ineffective if all the elements of such a relation were otherwise present.

While the...