DR Smalley & Sons, Inc. v. United States

• Decision Date: 17 February 1967
• Docket Number: No. 422-65.,422-65.
• Citation: 372 F.2d 505
• Parties: D. R. SMALLEY & SONS, INC., v. The UNITED STATES.
• Court: U.S. Claims Court

372 F.2d 505 (1967)

D. R. SMALLEY & SONS, INC., v. The UNITED STATES.

No. 422-65.

United States Court of Claims.

February 17, 1967.

Donald A. Moon, Brighton, Mich., attorney of record for plaintiff.

Ray Goddard, Washington, D. C., with whom was Asst. Atty. Gen. Barefoot Sanders, for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.

SKELTON, Judge.

The plaintiff, an Ohio Corporation engaged in the highway construction business, sued defendant for damages in the sum of $6,000,000 in connection with six contracts executed in 1956 and 1957 for the building of certain Federal-Aid Highway projects in the State of Ohio.

In two of the contracts the plaintiff was the principal contractor, and in the other four it was a subcontractor under Maxon Construction Company, Inc., the principal contractor, who is not a party to this suit. The State of Ohio was the other contracting party in all of the contracts. The United States was not a party to any of the contracts.

The agreements between plaintiff and the State of Ohio required the plaintiff to furnish all labor and materials and to build the highways involved in accordance with the plans and specifications agreed upon by the parties for which the plaintiff would be paid the various sums of money specified in the respective contracts.

The projects were a part of the Federal-Aid Highway System of interstate highways on which the United States would reimburse the State of Ohio to the extent of ninety per cent of the total cost in accordance with the various Federal-Aid Highway Acts passed by Congress.¹ The state would pay the other ten per cent of the total cost.

Plaintiff alleged that: the contracts were drafted pursuant to standards and regulations required by defendant; the defendant approved the contracts and they were executed with its express approval; and all changes in the contracts were required to be submitted to defendant for its approval.

During the course of the work on the projects, the plaintiff encountered many difficulties, financial and otherwise, and completed the work only after reorganizing its corporate structure and by subletting portions of the contracts to other contractors. It claims that it lost by way of damages on all six projects the sum of $2,923,573.22. A claim in this amount was filed with the Ohio Sundry Claims Board, which approved and paid the claim to the extent of $195,690, leaving $2,727,883.22 unpaid. The plaintiff has filed this suit to recover such balance, together with other alleged damages to which it claims it is entitled, all in the total sum of $6,000,000.

The basis of plaintiff's claims against the State of Ohio and now against the United States was that during the work on the highway projects the state did not timely obtain rights-of-way nor remove obstructions therefrom, did not promptly provide time extensions as promised, required work to be done in wet and freezing weather, directed that work be done under traffic conditions, forced plaintiff to subcontract some of the work to others at increased costs, and admitted liability on certain phases of the projects that required redesign of the plans.

Plaintiff's theory of recovery against the defendant is that by reason of the contents of the Federal-Aid Highway Acts, supra, including the provision obligating the Government to reimburse a state to the extent of ninety per cent of the cost of any approved highway project completed in the state as a part of the Federal-Aid Highway System, together with acts of the defendant in connection with the projects under consideration here, made the defendant the real party in interest instead of the State of Ohio.

The plaintiff contends that the State of Ohio was the agent of defendant and that defendant is liable for all of the wrongful acts and omissions of the state in connection with the contracts. To support this claim, plaintiff points out that: the contracts were drafted pursuant to the regulations and requirements of defendant; the contracts were approved by defendant; the work was inspected and approved by defendant as it progressed; changes in plans were approved by defendant; the final completion of the work was inspected and approved by the defendant; and defendant agreed by the provisions of the law to pay the state (for the benefit of plaintiff) ninety per cent of the cost of the contracts. By reason of these claims, plaintiff asserts that it had express contracts with the defendant and in the alternative, the defendant was bound by implied contracts. Also, plaintiff says that defendant has deprived it of its property without remuneration contrary to the fifth and fourteenth amendments of the United States Constitution.

Defendant answered by saying there was no privity of contract between it and the plaintiff, and the defendant has not given its consent to be sued. It also pleads the sovereign act doctrine as a defense. We believe the defendant is correct as to these defenses and that they are controlling in the disposition of this case.

When Congress passed the Federal-Aid Highway Acts which obligated the Government to reimburse the states to the extent of ninety per cent of the cost of construction of any approved highway...