Nager Electric Company, Inc. v. United States

CourtCourt of Federal Claims
Citation177 Ct. Cl. 234,368 F.2d 847
Docket NumberNo. 348-64.,348-64.
PartiesNAGER ELECTRIC COMPANY, INC. and Keystone Engineering Corporation v. The UNITED STATES.
Decision Date14 October 1966

177 Ct. Cl. 234, 368 F.2d 847 (1966)

NAGER ELECTRIC COMPANY, INC. and Keystone Engineering Corporation

No. 348-64.

United States Court of Claims.

October 14, 1966.

368 F.2d 848
368 F.2d 849
368 F.2d 850
Edwin Efros, New York City, for plaintiff; Albert Foreman, New York City, attorney of record; M. Carl Levine, Morgulas & Foreman, New York City, of counsel

Ray Goddard, Washington, D. C., with whom was Asst. Atty. Gen. John W. Douglas, for defendant.

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

DAVIS, Judge.

Plaintiffs had a contract, as joint venturers, with the Atomic Energy Commission to construct a certain facility at the Knolls Atomic Power Laboratory near West Milton, New York. In July 1958, after some preliminary warning, the Commission's representative, acting under the Termination-for-Default Article, terminated some sixteen items of the work. In August 1958, nine more items were similarly ended. In each instance the plaintiffs were informed that they would be held liable to the Government for the cost of accomplishing the terminated work. Defendant asserts that the entire contract was completed and accepted on October 6, 1958.

Under the Disputes clause, the contractors appealed various controversies to the Commission, including the claim that these partial terminations-for-default had been improper. In September 1963, the Commission's hearing examiner decided certain of the disputes but did not pass upon the termination claim because this "claim was recognized by Nager to constitute a claim for breach of contract, and thus to be beyond the jurisdiction of this forum; therefore, it is not considered herein." Both the contracting officer and the contractors sought review by the Commission of the hearing examiner's determinations on the merits. (No appeal was taken from the refusal to decide the termination claims.) The Commission denied the companies' petition but granted (in part) that of the contracting officer, and subsequently upheld his position. This decision was rendered on April 23, 1964.

Suit was instituted in this court on October 16, 1964, by a petition alleging three causes of action. The first relates to the claim for improper default terminations. The other two causes of action involve demands for equitable adjustment for changes which were denied by the Commission on review of the hearing examiner.

The defendant now moves for summary judgment on the first claim as barred by limitations under 28 U.S.C. § 2501.1 As it was originally presented to us on brief and orally, the argument was that the plaintiffs did not treat this claim, in contrast to the other two, as within the purview of the administrative appellate system, and therefore that this particular claim accrued when the termination orders issued (in July and August 1958), and in any event no later than the completion of the contract (said to have been on October 6, 1958) — all of these dates being more than six years prior to the filing of the petition. At that stage the defendant seemed to acknowledge that the statute would not begin to run on claims subject to administrative appellate

368 F.2d 851
determination until the completion of the administrative process, but maintained that the contractor, having chosen to consider these termination claims as beyond the Commission's "disputes" jurisdiction, should be held to that election

To this initial contention plaintiffs gave three main responses. One was that the Commission's hearing examiner ruled, with the acquiescence of both sides, that this claim was a "breach" claim outside his jurisdiction, and that it was contemplated by all that this termination matter would be brought to this court together with the other claims which were clearly within conventional administrative jurisdiction; that ruling and understanding (in October 1959) was enough, it is argued, to permit plaintiffs to sue here in October 1964. The second reply to the defense of limitations was that, in any case, limitations did not commence until final payment in August 1959 and February 1960. The third, closely related to the second, was that acceptance and completion occurred, not on October 6, 1958, but some month-and-a-half later.

After the oral argument, defendant modified its stand to contend that in Government contract cases the claim arises, and the limitations period starts, no later than the completion of the work.2 This is said to be so regardless of the pendency of administrative proceedings under the Disputes clause and regardless of whether the claim in suit is for a "breach" or arises "under" the contract within the coverage of the Disputes clause (see United States v. Utah Constr. & Mining Co., 384 U.S. 394, 404-405, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966)). This general approach to limitations has since been taken by the defendant in a number of pending contract cases which we also pass upon today.3

Because of the Government's insistence on its new position and in the light of recent decisions by other courts (States Marine Corp. v. United States, 283 F.2d 776 (C.A.2, 1960); Northern Metal Co. v. United States, 350 F.2d 833 (C.A.3, 1965); Crown Coat Front Co. v. United States, 363 F.2d 407 (C.A.2, decided June 22, 1966), pet. for a writ of cert. filed, 87 S.Ct. 87, Oct. Term 1966, No. 371), we have reexamined the long chain of our limitations rulings in the contract field to determine the standards to be applied in this and the companion cases.


1. Section 2501 of Title 28 of the United States Code bars claims in this court "unless the petition thereon is filed within six years after such claim first accrues." "First accrual" has usually been put, in broad formulation, as the time when all events have occurred to fix the Government's alleged liability, entitling the claimant to demand payment and sue here for his money.4 The prerequisite that the plaintiff must be able lawfully to demand payment goes back to the early days of this court.5 For contract cases, in the era before use of "disputes" clauses (or like devices for

368 F.2d 852
administrative determination), the general principle was refined to the more specific rule that normally the cause of action first accrues, and the statute begins to run, when the work is completed or the items delivered (and accepted), or the services rendered, or (if the contract was never completed) when the breach became total.6 That was considered to be the time when the contractor could ordinarily demand his money and bring his suit if payment was not made.7 Voluntary efforts thereafter to obtain compensation through executive channels or by negotiation would not defer or toll limitations.8

But we have always recognized that this is not a rigid rule — that, in the contract field as in others, a particular agreement, or a special statute, can establish some other pre-condition for liability or an unusual time for demanding payment. See Friedman v. United States, 310 F.2d 381, 385-388, 159 Ct.Cl. 1, 8-13 (1962), cert. denied, Lipp v. United States, 373 U.S. 932, 83 S.Ct. 1540, 10 L.Ed.2d 691 (1963). For instance, where the contract provided that payment would not be made until "within 10 days after the warrant shall have been passed by the Secretary of the Treasury", it was held that the limitations period did not start until after the lapse of that ten-day period plus a further reasonable span for the government officials to act upon the claimant's account. Smith Courtney Co. v. United States, 46 Ct.Cl. 262, 266-267 (1911). Similarly where the contract declared that an item was not payable until a determination by a designated agency. Penn Bridge Co. v. United States, 71 Ct.Cl. 273, 275-276, 278-279 (1930); Hugger v. United States, 66 Ct.Cl. 97, 104 (1928). See, also, to comparable effect, Maginnis v. United States, 52 Ct.Cl. 271, 276-277 (1917) (special statute); Utah Power & Light Co. v. United States, 67 Ct.Cl. 602, 606-607 (1929) (same). The co-existence of this class of cases (in which the agreement shows that the claim accrues not at, but after, completion of the work), together with the other group in which the cause of action does arise on completion-plus-acceptance, has led the court to note, from time to time, that there is no single inexorable principle of limitations for contract litigation but that the individual

368 F.2d 853
terms, conditions, and practices must always be studied.9

2. With the coming into vogue of mandatory "disputes" clauses — increasingly in the years since the late 1930's — this court has continued to apply this same set of rules. Where the contract has included no relevant "disputes" provision, or where that procedure was not duly invoked, or where the administrative proceedings have not extended beyond the date of completion-and-acceptance, the declarations have been that under the conventional contract the claim accrues, and the statutory period commences, at the time of completion or acceptance (if the latter is contemplated).10 But with respect to matters properly pursued through a "disputes" proceeding (which has lasted beyond completion) the court has said, again and again, that the cause of action does not arise and limitations does not run until the mandatory administrative determination.11 For example, in Cosmopolitan Mfg. Co. v. United States, 297 F.2d 546, 547, 156 Ct.Cl. 142, 144 (1962), cert. denied, Arlene Coats v. United States, 371 U.S. 818, 83

368 F.2d 854
S.Ct. 36, 9 L.Ed.2d 60 (1962), the court recently said: "Plaintiff grounds its claim on the alleged arbitrary and capricious action of the Army Board of Contract Appeals, and its approval by the Secretary of the Army. It follows that plaintiff's cause of action, if any, accrued at the time the appeals board acted, all events having occurred which were necessary to fix the liability of defendant and entitle plaintiffs (sic) to bring...

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