United States v. Edward Freel

• Decision Date: 02 June 1902
• Docket Number: No. 224,224
• Parties: UNITED STATES, Plff. in Err. , v. EDWARD J. FREEL, as Executor of the Last Will and Testament of Edward Freel, Deceased
• Court: U.S. Supreme Court

186 U.S. 309

22 S.Ct. 875

46 L.Ed. 1177

UNITED STATES, Plff. in Err.,

v EDWARD J. FREEL, as Executor of the Last Will and Testament of Edward Freel, Deceased.

No. 224.

Argued April 17, 1902.

Decided June 2, 1902.

Messrs. George Hines Gorman and Assistant Attorney General Pradt for plaintiff in error.

Mr. James Russell Soley for defendant in error.

Mr. Justice Shiras delivered the opinion of the court:

In September, 1898, the United States of America brought an action in the circuit court of the United States for the eastern district on New York against John Gillies, Henry Hamilton, and Hugh McRoberts, Catharine Freel, Edward J. Freel, and Frank J. Freel, as executors of Edward Freel, deceased.

The complaint alleged that theretofore, and on the 17th November, 1892, the defendant John Gillies entered into a contract in writing with the plaintiff to construct a timber dry dock, to be located at the United States Navy Yard, Brooklyn, New York, according to certain plans and specifications attached to and made part of said contract; that on said 17th November, 1892, the said John Gillies, as principal, and Henry Hamilton and Hugh McRoberts, and Edward Freel, as sureties, executed their joint and several bond to the United States in the penal sum of $120,600, conditioned for the faithful performance by the said Gillies of his contract to construct said dry dock; that Gillies entered upon the performance of said contract; that subsequently, on June 16, 1893, Gillies and the United States agreed in writing to change and modify the plans and specifications so as to increase the length of said dry dock from 600 to 670 feet; that on August 17, 1893, Gillies and the United States further agreed in writing to change and modify the contract in certain particulars; that Gillies proceeded with the work under said original and supplemental contracts so slowly, negligently, and unsatisfactorily that the Secretary of the Navy, under the option and right reserved to him by the said contract, declared the said contract forfeited on the part of said Gillies; that thereupon, by a board duly appointed, the market value of the work done and of the materials on hand was appraised at the sum of $170,175.40; that thereafter, under the provisions of said contract, the Secretary of the Navy proceeded to complete said dry dock and appurtenances in accordance with the said contracts, plans, and specifications, at a cost to the United States of the sum of $370,000; that the sum of $72,414.16 represented the damages sustained by the plaintiff by reason of said Gillies' breach of contract; that Edward Freel died on the 24th day of December, 1896, leaving a last will appointing Catharine Freel, Edward J. Freel, and Frank J. Freel executors thereof; that the said defendant John Gillies neglected and refused to perform the terms and conditions of said contract on his part, and that the plaintiff has performed, fully and completely, all the terms and conditions of said contract on its part. Wherefore the plaintiff demanded judgment against the said defendants in the said sum of $72,414.16, with interest from April 1, 1897.

On November 26, 1898, Edward J. Freel, as executor of Edward Freel, deceased, appeared and demurred to the complaint upon the ground that it appeared upon the face thereof that said complaint did not state facts sufficient to constitute a cause of action. On May 24, 1899, after hearing the counsel of the respective parties, the circuit court sustained the demurrer, and dismissed the complaint as to said Edward J. Freel as executor. 92 Fed. 299. The case was taken to the circuit court of appeals for the second circuit, and on January 5, 1900, that court affirmed the judgment of the circuit court. 39 C. C. A. 491, 99 Fed. 237. On December 22, 1900, a writ of error was allowed, and the cause was brought to this court.

The question in this case is whether a surety on a contractor's bond, conditioned for performance of a contract to construct a dry dock, was released by subsequent changes in the work made by the principals without his consent.

As the question is presented to us on a general demurrer to the complaint, it is necessary to set forth, with some particularity, portions of the original and of the supplemental contracts, which form parts of the complaint.

The original contract, dated November 17, 1892, contained, after alleging that proposals had been made and accepted for the construction by contract of a timber dry dock, to be located at the United States Navy Yard, Brooklyn, New York, the following provisions:

'First. The contractor will, within twenty days after he shall have been tendered the possession and occupancy of the site by the party of the second part, which possession and occupancy of the said site during the period of construction and until the completion and delivery of the work hereinafter mentioned, shall be secuared to the contractor by the party of the second part, commence, and within twenty-seven calendar months from such date, construct and complete, ready to receive vessels, a timber dry dock, to be located at such place on the water line of the navy yard, Brooklyn, N. Y., as shall be designated by the party of the second part.'

* * * * *

'Seventh. The construction of said dry dock and its accessories and appurtenances herein contracted for shall conform in all respects to and with the plans and specifications aforesaid, which plans and specifications are hereto annexed and shall be deemed and taken as forming a part of this contract with the like operation and effect as if the same were incorporated herein. No omission in the plans or specifications of any detail, object, or provision necessary to carry this contract into full and complete effect, in accordance with the true intent and meaning hereof, shall operate to the disadvantage of the United States, but the same shall be satisfactorily supplied, performed, and observed by the contractor, and all claims for extra compensation by reason of or for or on account of such extra performance are hereby, and in consideration of the premises, expressly waived; and it is hereby further provided, and this contract is upon the express condition that the said plans and specifications shall not be changed in any respect except upon the written order of the Bureau of Yards and Docks; and that if at any time it shall be found advantageous or necessary to make any change, alteration, or modification in the aforesaid plans and specifications, such change, alteration, or modification must be agreed upon in writing by the parties to the contract, the agreement to set forth fully the reasons for such change, and the nature thereof, and the increased or diminished compensation, based upon the estimated actual cost thereof, which the contractor shall receive, if any; Provided, That whenever the said changes or alterations would increase or decrease the cost by a sum exceeding five hundred dollars ($500) the actual cost thereof shall be ascertained, estimated, and determined by a board of naval officers to be appointed by the Secretary of the Navy for the purpose; and the contractor shall be bound by the determination of said board, or a majority thereof, as to the amount of increased or diminished compensation he shall be entitled to receive in consequence of such change or changes: Provided further, That if any enlargement or increase of dimensions shall be ordered by the Secretary of the Navy during the construction of said dry dock, that the actual cost thereof shall be ascertained, estimated, and determined by a board of naval officers, to be appointed by the Secretary of the Navy, who shall revise said estimate and determine the sum or sums to be paid the contractor for the additional work that may be required under this contract: And provided also, That no further payment shall be made unless such supplemental or modi- fied agreement shall have been signed before the obligation arising from such change or modification was incurred and until after its approval by the party of the second part: And further provided, That no change herein provided for shall in any manner affect the validity of this contract.'

The supplemental contract of June 16, 1893, contained, among other things, the following:

'This agreement, entered into this 16th day of June, 1893, between John Gillies, contractor, for the construction of a dry dock at the U. S. Navy Yard, Brooklyn, New York, party of the first part, and Norman H. Farquhar, Chief of the Bureau of Yards and Docks of the Navy Department, for and in behalf of the United States, party of the second part,

'Witnesseth: That, whereas, the Navy Department has decided to lengthen the said dry dock from six hundred (600) feet, as called for in the specifications forming a part of the contract for the construction of a dry dock at the above-mentioned location, entered into by the above-mentioned parties of the first and second parts on the 17th of November,...