United States v. John Kerns Const. Co.

• Decision Date: 10 March 1944
• Docket Number: Civil Action No. 12717.
• Citation: 140 F.2d 792
• Parties: UNITED STATES, for Use of GILLIOZ, v. JOHN KERNS CONST. CO. et al.
• Court: U.S. Court of Appeals — Eighth Circuit

140 F.2d 792 (1944)

UNITED STATES, for Use of GILLIOZ, v. JOHN KERNS CONST. CO. et al.

Civil Action No. 12717.

Circuit Court of Appeals, Eighth Circuit.

February 10, 1944.

Rehearing Denied March 10, 1944.

Thomas S. Buzbee, of Little Rock, Ark. (Edward L. Wright, John M. Harrison, and Alvin S. Buzbee, all of Little Rock, Ark., on the brief), for appellant.

Howard Cockrill, of Little Rock, Ark. (John Sherrill, of Little Rock, Ark., on the brief), for appellees.

Before SANBORN, and WOODROUGH, Circuit Judges, and HULEN, District Judge.

HULEN, District Judge.

Appellant in this case sued for a balance due for work performed under a sub-contract with appellee John Kerns Construction Company.¹ Appellees answered with a counter-claim, alleging there was due from appellant liquidated damages for failure to complete the work called for by subcontract within the time specified.

The case was tried without a jury. The parties stipulated there was due appellant $14,023.86. The contest is on the counterclaim. The Court found for the Construction Company on its counter-claim in the sum of $34,750 and awarded judgment in its favor for the difference between the respective amounts or $20,726.14. From this judgment appellant prosecutes this appeal. He presents the following grounds for reversal of the judgment.

First: That the delay of appellant in completing work under the sub-contract was "caused or contributed to by the failure of the engineers to furnish plans", thereby cancelling any obligation of appellant to respond in liquidated damages for delay so caused or contributed to.

Second: That the Construction Company agreed to waive any claim it had against appellant for liquidated damages, subsequent to the events and time which were the basis therefor.

Third: That mutual accounts were submitted from time to time and the Construction Company failed to make any claim for liquidated damages in the account submitted by it and that the stated accounts became final between the parties.

On June 10, 1940, the Construction Company entered into a contract² with the United States for the erection of a dam, known as the Blue Mountain Dam Project in Yell County, Arkansas. The Construction Company furnished a bond, with appellee, Hartford Accident & Indemnity Company as surety, conditioned upon the Construction Company making payment to all persons supplying labor and material provided for by the contract.

The appellant and the Construction Company entered into a sub-contract on June 22, 1940, for appellant to perform part of the work covered by the prime contract.

The prime contract work was to be completed within 400 days. The sub-contract work was to be completed by December 15, 1940. The Construction Company defaulted on its contract in 1941. Its completion was taken over by the surety. Appellant completed work under its sub-contract and a subsequent modification thereof on June 5, 1941.

The sub-contract provided for liquidated damages of $250 — "per day for each and every day of delay". The prime contract set forth penalties "as liquidated damages", for failure to complete the contract on time, excepting delays due to "unforeseeable causes beyond the control and without the fault or negligence of the contractor, including * * * acts of the government". The prime contract set out the procedure by which the contractor could apply for, and the Government could grant, extensions of time for the completion of the work by the contractor.

The Government engineers were first charged with delay in November, 1940. The Construction Company wrote to appellant on November 12, 1940, in answer to a complaint by appellant, that he was being delayed in completion of his work under the sub-contract, by "crews waiting for engineers (Government) stakes." The letter stated: "Any decision on changes have to be made by the Little Rock offices, so therefore the engineers crew could not go ahead with staking until that approval had been given".

On December 13, 1940, appellant wrote the Construction Company, describing conditions as they affected proceeding with the work called for by the sub-contract. We quote: "On the north portal and access road there has not been anything definite to date — the engineers only had one core boring on the entire length of the access road. The contractor has been forced to locate the rock elevations and has also been forced to do the exploration work and open up the work before any definite stakes or instructions could be furnished by the engineers. This has caused our crews much serious delay as they have been disorganized at all times, for as each new classification is exposed our crews have been delayed until the engineers could decide what should be done. If soundings had of been taken our crews would not have been delayed, as the shovel would have excavated the top conglomerate materials and then the drill crew could have drilled and shot the rock far enough in advance to keep the shovel busy."

On December 26, 1940 (11 days after sub-contract work was to be completed or penalty to start), the Construction Company wrote the Government engineer in charge of the project. The following paragraph from that letter refers to work covered by the sub-contract: "On Monday, December 26, 1940 Mr. Pittman and Mr. Whittemore were here. Mr. Hays, Mr. Andrews, our Mr. Laird and the writer spent considerable time going over these north tunnel end conditions and we were advised that a redesign of the areas to be excavated could probably be expected at once".

Changes in the plans and specifications affecting work to be done under the subcontract continued until April 14, 1941, when the Government engineers approved Change Order No. 5. This change order modified the prime contract with respect to the work to be done by appellant under the sub-contract. The Change Order extended the time for completion of work under the prime contract for 24 days. The Change Order was issued approximately four months subsequent to the date work under the sub-contract was to be completed. Change Order No. 5 was the subject of the following finding by the trial court: "8. The subcontractor discovered latent conditions which he deemed differed from those indicated by the specifications, advised the contractor of it, and in turn the contractor called this to the attention of the contracting officer, who issued Change Order No. 5 modifying the contract and increasing the price and awarding additional time for completion, the total amount of which time was allowed the subcontractor."

Appellant and the Construction Company entered into a supplemental contract on April 18, 1941, whereby the Construction Company took over certain of the work called for by the sub-contract. Proceeding under the two agreements, appellant finished his work on June 5, 1941. This was 173 days past December 15, 1940, the date provided in the sub-contract for its completion. The Construction Company allowed appellant 34 days extended time, which had been allowed to it for completing its prime contract work. The result, 139 days at $250.00 per day, is the basis of appellee's claim for liquidated damages and the Court's finding against the appellant in the sum of $34,750.

The sub-contract listed various items of work, such as "clearing site"; "comm. excav., general", etc.; set out quantity of work to be done on each item; unit price, with payment to appellant based on amount of work done. By the supplemental contract appellant surrendered the right to perform certain work under his sub-contract. This work being performed by the Construction Company, it in turn was entitled to be paid therefor and not appellant.

The Court found that preceding the execution of the supplemental contract the Construction Company had agreed with appellant to relieve appellant from any liability for penalty or liquidated damages for failure to complete work called for by the sub-contract on December 15, 1940. This finding is based on substantial evidence.

Under this state of facts can appellant be held liable for liquidated damages where the evidence shows that performance of the work specified in the sub-contract within the time provided by it was rendered impossible by change in plans and specifications made subsequent to the completion date?

The law is universally recognized, that where a party to a contract agrees to do something prior to a day certain and in default to pay a sum of money as liquidated damages, if the other party to the contract engages in conduct which prevents the doing of the thing contracted for in the specified time, such action amounts to a waiver of the claim for liquidated damages for delay. In United States v. United Engineering & Construction Co., 234 U.S. 236, loc.cit. 242, 34 S.Ct. 843, loc.cit. 845, 58 L.Ed. 1294, the Supreme Court said: "We think the better rule is that when the contractor has agreed to do a piece of work within a given time, and the parties have stipulated a fixed sum as liquidated damages, not wholly disproportionate to the loss for each day's delay, in order to enforce such payment the other party must not prevent the performance of the contract within the stipulated time; and that where such is the case, and thereafter the work is completed, though delayed by the fault of the contractor, the rule of the original contract cannot be insisted upon, and liquidated damages measured thereby are waived. Under the original and first supplemental agreements, the claimant knew definitely that he was required to complete the work by a fixed date. Presumably the claimant had made its arrangements for completion within the time named. Certainly the other contracting party ought not to be permitted to insist upon liquidated damages when it is responsible for the failure to complete by the stipulated date; to do this would permit it to recover damages for delay caused by its own conduct."

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