City of Albertville, Ala. v. UNITED STATES FIDEL. & G. CO.

• Decision Date: 11 February 1960
• Docket Number: No. 17746.,17746.
• Parties: CITY OF ALBERTVILLE, ALABAMA, Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

272 F.2d 594 (1959)

CITY OF ALBERTVILLE, ALABAMA, Appellant, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Appellee.

No. 17746.

United States Court of Appeals Fifth Circuit.

December 7, 1959.

Rehearing Denied February 11, 1960.

Maurice F. Bishop, Birmingham, Ala., T. J. Carnes, Albertville, Ala., for appellant.

S. R. Starnes, Birmingham, Ala., Spain, Gillon & Young, Birmingham, Ala., of counsel, for appellee.

Before RIVES, Chief Judge, and BROWN and WISDOM, Circuit Judges.

RIVES, Chief Judge.

The appellee, The United States Fidelity & Guaranty Company, sued the appellant, City of Albertville, Alabama, seeking to recover $38,100 (and the interest thereon) which the appellant had withheld as liquidated damages (381 days at $100 per day) under a provision of a contract between appellant and appellee's principal requiring completion of the contract within a stated time (150 days extended to 164 days). Appellee claimed that the provision was void because it was impossible to complete the contract within the stated time. The case was tried before a jury which returned a verdict in favor of the plaintiff in the amount claimed, $38,100 to which was added interest calculated by the Clerk in the amount of $5,689.95; and judgment was rendered in favor of the appellee against the appellant for the total sum of $43,668.95. This appeal is from that judgment.

Appellee's principal, C. N. Mason, entered into a contract with the City of Albertville for the construction of a sanitary sewer extension. Appellee was the surety on Mason's performance bond and on his bond guaranteeing payment of labor and materials. Prior to bidding on the job, Mason secured a copy of the plans and specifications prepared by the appellant's engineer, which later became a part of the contract. The specifications called for the laying of about twenty miles of sanitary sewer pipe. Appellant's engineers had estimated the quantity of rock to be excavated at 5000 cubic yards. Actually, it proved to be a little more than three times that amount. The theory upon which the appellee recovered judgment was that it was impossible to excavate such a large amount of rock and to complete the contract within the 164 days.

Pertinent parts of the specifications¹ and of the bid proposal² are quoted in the margin.

Mason's total bid was $346,882.76, included in which was a unit price of $3 per cubic yard on the estimated 5000 cubic yards of rock excavation. Mason's bid proposal was accepted and incorporated into the contract which provided in part:

"2. That the first party shall commence the work to be performed under this agreement on a date to be specified in a written order of the second party, and shall fully complete all work hereunder within 150 consecutive calendar days from and after said date.

* * * * * *

"6. It is mutually agreed between the parties hereto that time is the essence of this contract, and in the event the construction of the work is not completed within the time herein specified, it is agreed that from the compensation otherwise to be paid to the Contractor, the second party may retain the sum of $100.00 per day for each day thereafter, Sundays and holidays included, that the work remains uncompleted, which sum shall represent the actual damages which the Owner will have sustained per day by failure of the Contractor to complete the work within the time stipulated, and this sum is not a penalty, being the stipulated damage the second party will have sustained in the event of such default by the first party."

There was no contention that the quantity or hardness of the rock, or any other circumstance, rendered ultimate performance of the contract impossible or so impractical as to excuse the contractor. In fact, before the institution of this suit the contract had been finally and completely performed except for the time period, as to which there was an admitted overrun of 381 days.

The issue decided by the jury's verdict may be understood from the following portion of the Court's charge to the jury:

"One may be excused from the performance of his contract if performance is impossible. The impossibility, however, must consist in the nature of the thing to be done, and not merely in the incapacity or inability of the party making the promise to do it.

"The impossibility of performance which will excuse the promised performance is that the promised performance was at the making of the contract impracticable owing to some extreme or unreasonable difficulty, expense, injury or loss involved, rather than that it is scientifically or actually impossible.

"Mere unanticipated difficulty not amounting to impracticability is not included within the definition of `impossibility\' as here employed.

"Impracticability in the sense stated above, rather than absolute impossibility, is the test by which `impossibility of performance\' is measured.

"`Impossibility\' as employed in the term `Impossibility of performance\' does not mean beyond every possibility. It means beyond every practicable possibility.

"The mere fact that the performance of a promise is made more difficult and expensive than the parties anticipated will not excuse the person making the promise.

"Where, however, unanticipated circumstances have made performance of the promise vitally different from, or wholly inconsistent with, what reasonably should have been within the contemplation of the parties when they entered into the contract, the one making the promise will be excused from his promised performance.

"The promised performance here involved was the completion of the contract in one hundred sixty-four calendar days — one hundred fifty days, as extended. Governed by these principles and under the facts in this case, was the contractor excused from the promised performance of this provision? And we have involved only one provision of the contract. If so, Plaintiff is entitled to recover. If not, it is not so entitled."

The district court, in its charge, adopted what is referred to by Professor Williston as "the modern defense of impossibility," to the effect that, "* * * impossibility means not only strict impossibility but impracticability because of extreme and unreasonable difficulty, expense, injury or loss involved." A.L.I., Restatement of Contracts, Sec. 454. According to Professor Williston and to the Restatement of Contracts, of which he was the Reporter, that modern doctrine applies to partial impossibility, that is, to impossibility to perform part of the performance promised. 6 Williston on Contracts, rev. ed., § 1956; 2 Restatement of Contracts, § 463. Williston undertakes to trace the process of evolution of the rule from the early cases accepting "a strict rule which will require the parties, when they form a contract, to foresee its consequences as accurately as possible, though at the expense of serious hardship to one of them if unforeseen circumstances render it impossible under such circumstances," to the modern rule which he advocates giving an excuse under such circumstances. According to Professor Williston:

"The important question is whether an unanticipated circumstance has made performance of the promise vitally different from what should reasonably have been within the contemplation of both parties when they entered into the contract. If so, the risk should not fairly be thrown upon the promisor." 6 Williston on Contracts, rev. ed., § 1931.

The Supreme Court of Alabama has not yet adopted this so-called modern doctrine, nor written one way or the other on it. Its decisions to date tend to hold a promisor strictly to the literal terms of his promise. Stone v. Dennis, 1836, 3 Port. 231, 241, 242; Lee v. Cochran, 1908, 157 Ala. 311, 47 So. 581, 582; Marx v. Kilby Locomotive & Machine Works, 1909, 162 Ala. 295, 50 So. 136, 137; Capital Fertilizer Co. v. Ashcraft-Wilkinson Co., 1918, 202 Ala. 92, 79 So. 484, 487.³

For example, in Stone v. Dennis, supra, the Alabama Court said:

"It is the duty of contracting parties, to provide against contingencies: they are presumed to know, whether the completion of the duty they undertake, be within their power. Therefore, to excuse them from the performance of their contracts, they must bring themselves within some one of the above provisions. — Chitty on Con. 14. Without it, however hard the case may be, the party is held to his contract. 1 Term R. 312." 3 Port. 231, 241, 242.

Again, in Lee v. Cochran, supra, the Supreme Court of Alabama spoke as follows:

"Where a contract is unambiguous, is plain in expression, we know of no canon of construction that warrants an interpretation the only effect of which is to relieve a party to the contract from consequences deemed by him hard or unfair. Indeed, where the parties express without ambiguity their intention, of course, no court can alter the agreement, and no room for judicial construction is left. The contract in hand is plain, speaks a legal undertaking on the part of all parties thereto, and, if the bargain is hard or unwise in any respect, the error in judgment is his or theirs, and, in the absence of fraud or other vitiating circumstances, cannot be relieved." 47 So. 581, 582.

In Marx v. Kilby Locomotive & Machine Works, supra, the Supreme Court of Alabama refused to relieve the locomotive works from its promise to "overhaul a locomotive thoroughly and put it in first-class running order" for the sum of $1,250.00 to be borne share and share alike by the contracting parties, for whose joint account it was agreed that the locomotive might later be sold at a price of $2,500.00. The Court held insufficient, as an excuse for nonperformance, a plea that inherent and hidden defects in the locomotive had been discovered by reason of which it would have taken about $3,000.00 or more to have made said engine marketable, and then it would have been worth only about $2,000.00 or $2,250.00, and would then have been a losing investment for both of the parties.

Encouraged...