Sunday, May 19, 2019

Northern Pacific Vs Milwaukee Road


120 F.Supp. 710 (1954)
CHICAGO, MILWAUKEE, ST. P. & P. R. CO.
v.
NORTHERN PAC. R. CO.
Civ. A. No. 1761.

United States District Court W. D. Washington, S. D.
February 26, 1954.

711
*711 B. E. Lutterman, Chas. F. Hanson and Morrel E. Sharp, Seattle, Wash., for plaintiff.

Dean H. Eastman and Roscoe Krier, Seattle, Wash., for defendant.

BOLDT, District Judge.

Plaintiff Chicago, Milwaukee St. Paul and Pacific Railroad Company (hereafter the "Milwaukee") pursuant to 49 U.S. C.A. 1(2) seeks to enjoin defendant Northern Pacific Railroad Company (hereafter the "Northern Pacific") from constructing approximately three miles of tracks with sidings and other subsidiary tracks. The proposed line would extend from a principal branch of the Northern Pacific to a 400-acre tract in the outskirts of the town of Moses Lake, Washington, which land, presently without industry, the Northern Pacific owns and proposes to develop into an industrial tract.

During the past ten years, because of extensive irrigation development from the Grand Coulee Dam, Moses Lake has been growing at a rapid rate. The town is centrally located in a vast area that eventually will be one of the great agricultural areas of the world. Moses Lake and its immediate vicinity has been served by the Milwaukee for many years by a branch line running into the town. From time to time as necessity demanded, additions to the Milwaukee's branch have been made and further additions to the branch for serving the area of the proposed Northern Pacific industrial tract are entirely feasible; in fact, the area already has been surveyed and Milwaukee engineers have drawn alternative plans for such project.

The Northern Pacific proposed industrial tract is located in an agricultural area in which no industries are presently located; however, at least two firms have made commitments to locate therein if the proposed line is built. Industrial sites are available on the existing Milwaukee branch line in Moses Lake and vicinity.

The Northern Pacific estimates the cost of the proposed construction at approximately $205,000; the Milwaukee estimate is considerably higher.

The terminus of the proposed construction would be about one mile from the end of the Milwaukee Moses Lake branch line and less than one-half mile from the city limits of Moses Lake. Under the plans for the proposed line there would be no separate station or agent for the line, no regularly scheduled trains or passenger service thereon, rates would be as for the station of Wheeler on the Northern Pacific principal branch line and the Wheeler agent would provide billing and other services.

The law pertaining to a controversy of this kind is well settled by the decisions cited in the trial briefs. In the following cases proposed tracks were held to be "extensions": Texas & Pacific Ry. Co. v. Gulf, Colorado & Santa Fe Ry. Co., 1926, 270 U.S. 266, 46 S.Ct. 263, 70 L.Ed. 578; Marion & Eastern R. R. Co. v. Missouri Pacific R. R. Co., 1925, 318 Ill. 436, 149 N.E. 492; Missouri Pac. R. Co. v. Chicago, Rock Island & Pacific Ry. Co., 8 Cir., 1930, 41 F.2d 188, 193, certiorari denied 282 U.S. 866, 51 S.Ct. 74, 75 L.Ed. 765; Southern Pac. Co. v. Western Pacific California R.
712
*712 Co., 9 Cir., 1932, 61 F.2d 732; Missouri Pacific R. Co. v. St. Louis Southwestern Ry. Co., 8 Cir., 1934, 73 F.2d 21; Union Pacific R. Co. v. Denver & Rio Grande Western R. Co., 10 Cir., 1952, 198 F.2d 854. "Spurs" or "industrial" tracks were found in the following: State of Idaho v. United States, D.C., 10 F. Supp. 712, affirmed 1936, 298 U.S. 105, 56 S.Ct. 690, 80 L.Ed. 1070; Missouri, K. & T. R. Co. of Texas v. Texas & N. O. R. Co., 5 Cir., 1949, 172 F.2d 768; Chicago, Milwaukee, St. Paul & Pacific R. R. Co. v. Chicago & Eastern Illinois R. Co., 7 Cir., 1952, 198 F.2d 8; Jefferson County v. Louisville & N. R. Co., Ky. 1952, 245 S.W.2d 611. In none of the cited cases are the facts exactly apposite to those in the present case, but under the decisions referred to there is no question as to the general principles applicable.

A detailed discussion of each of the cited cases would not serve any useful purpose. Suffice it to say that it is believed the decision made herein is not out of harmony with any of the cases cited by either party. The case closest to the defendant's situation is Missouri, K. & T. R. Co. of Texas v. Texas & N. O. R. Co., supra, but even that case has very important factual features that distinguish it from the present case.

Under the Interstate Commerce Act, 49 U.S.C.A. § 1 et seq., a railroad desiring to build new track constituting an extension of its line must have an I.C.C. certificate of public convenience and necessity authorizing the construction, Section 1 (18), and the building of proposed extension tracks without a certificate must be enjoined on an appropriate application therefor, Section 1 (20). The jurisdiction of the I.C.C., however, does not apply to the laying of tracks which are merely for spur or industrial services, Section 1 (22).

It appears to be well settled that the Court must give a liberal or broad construction to the word "extension" and a limited or narrow construction to the words "spur" and "industrial" as applied in the Transportation Act to proposed railroad tracks. Lancaster v. Gulf C. & S. F. Ry. Co., D.C., 298 F. 488 at page 490; Texas & Pac. Ry. Co. v. Gulf, C. & S. F. Ry. Co., 270 U.S. 266, 46 S.Ct. 263, 70 L.Ed. 578; Piedmont & Northern Railway Co. v. Interstate Commerce Commission, 286 U.S. 299 at page 311, 52 S.Ct. 541, 76 L.Ed. 1115; Interstate Commerce Commission v. Piedmont & Northern Railway Co., D.C., 51 F.2d 766 at page 774.

Under the statutes, this Court has no concern with and no right to consider whether public convenience and necessity require or would be furthered by the proposed track and any factors bearing on convenience or necessity of the public are irrelevant to the ultimate question that must be determined in this case. Neither the making of an application by defendant in 1948 for a certificate authorizing construction of proposed track in the same general area nor the action of the Interstate Commerce Commission in denying that application has any bearing on whether the presently proposed track is an extension or a spur; however, the fact is that there is no substantial or material difference in the essential elements of the situation presented by the 1948 application and that presented by the track-laying proposal now under consideration. The two proposals in all material respects are identical. Inasmuch as the Interstate Commerce Commission, with exclusive jurisdiction to consider and determine public convenience and necessity, held that the track proposed by defendant in 1948 was not authorized on such grounds, there would be all the more reason for this Court not to permit any consideration of public convenience or necessity to justify the building of the presently proposed track as a spur or industrial line.

The question for determination in this proceeding is very narrow and limited. Basically it is: whether or not the track that the Northern Pacific proposes to build is an extension into territory new to that railroad and invading a field properly within or immediately adjacent to the area presently served by the Milwaukee.
713
*713 In dealing with similar controversies the Courts have considered a variety of principal factors, not any one of which has been held controlling in any given case. Among these factors are those indicated by the following questions:

Is the proposed track to improve rail facilities required by shippers who are already being served?

Is the proposed track to provide service to new shippers situated similarly to old ones and who are likewise entitled to service?

Will the track extend into "virgin territory"?

Is the territory to be served by the proposed track within or adjacent to a general area or community already being adequately served by another carrier?

Is it feasible or practicable for the entire area to be served and occupied by the carrier already serving the area?

Will the proposed track necessitate a substantial capital outlay?

These may not be all of the specific questions that have been posed in similar cases, but certainly they are the principal ones. As may be noted, the questions have been framed for the most part in the specific language of the decisions previously cited.

A further matter discussed in the cases relates to the presence or absence in connection with the proposed new track of stations, agents, line haul rates, billing by existing facilities, regular and continuous movement of trains and other similar circumstances. The authorities indicate that the presence of these conditions would be indicative of an extension, but the absence thereof does not necessarily establish the existence of a spur or industrial track.

If each of the questions above stated be answered in the light of the evidence in the present case, and the Court has considered the matter in exactly that way, in every instance the answer will indicate that the proposed track here in question is an extension rather than a spur or industrial track. Except for the absence of a station, independent billing and similar circumstances the Court does not find a single factor in the case supporting a determination that the proposed track is a spur. Irrespective of where the burden of proof lies in a case of this character, the evidence overwhelmingly establishes that as a matter of fact the proposed line is an extension and not a spur or industrial track. Accordingly, a certificate of the Interstate Commerce Commission certifying public convenience and necessity is required for the building of such a line. It being admitted that none has been issued, the defendant must be permanently enjoined from building the proposed track unless and until a certificate be issued.

Decree to such effect may issue.

Saturday, May 18, 2019

Northern Pacific Vs United States


188 F.2d 277 (1951)
UNITED STATES
v.
NORTHERN PAC. RY. CO.
NORTHERN PAC. RY. CO.
v.
UNITED STATES.
Nos. 13895, 13896.

United States Court of Appeals Eighth Circuit.
March 22, 1951.

278
*278 M. L. Countryman, Jr., St. Paul, Minn., for Northern Pac. Ry. Co.

C. U. Landrum, U. S. Atty., St. Paul, Minn., Spencer L. Baird, Regional Counsel, Bureau of Reclamation, Amarillo, Tex., and A. B. Rood, Attorney, Department of Justice, Washington, D. C., for the United States.

Before GARDNER, Chief Judge, and WOODROUGH and THOMAS, Circuit Judges.

WOODROUGH, Circuit Judge.

This action was brought in the United States District Court of Minnesota by the Northern Pacific Railway Company against the United States of America under 28 U. S.C.A. § 41 (20), now 28 U.S.C.A. § 1346. (2), to recover a balance claimed to be due the railroad for freight charges on six shipments of cement from six points in the State of Washington to Odair, Washington, from which point the cement was transported over a government-owned railroad to the site of the Grand Coulee dam, where it was used in the construction of the dam. Northern Pacific claimed that the amount
279
*279 which should have been paid for the shipments involved in its action was the regular tariff rate, less the applicable land-grant deductions; while the government claimed the rates applicable to the shipments in question were lower rates granted by the Company to the Government pursuant to a special contract entered into between the Railway Company and the government under the Interstate Commerce Act, 49 U.S. C.A. § 22. The total amount claimed by the Northern Pacific to be due on the six shipments was $1,645.19. Adjudication of government liability for that amount, however, would establish its obligation for similar claims of the Company amounting to some $2,000,000. The government denied liability as charged and filed eight counterclaims against the plaintiff in the amount of approximately $5,500,000. On the trial of the case to the court without a jury, the court entered judgment dismissing the action of the railroad and dismissing the counterclaims of the government. Each of the parties appeal.

The facts, including controlling provisions of the contract involved and documentary evidence, are set out at length in the opinion of the District Court at 70 F. Supp. 836, but are epitomized for the purpose of this opinion as follows: In 1933 the United States government set out to build a dam and power plant at Grand Coulee, Washington. The initial appropriation voted by Congress was $63,000,000. Limited by this amount, government engineers knew that it would not be possible to build a dam large enough to fulfill all the requirements of a proper dam for the location. Accordingly, plans were drawn for a dam which could later be expanded into a larger dam. This "low" dam would provide electric current, but would not be large enough to provide any irrigation for the area. The fact that no irrigation would be provided made the "low" dam unsatisfactory to everyone concerned, but it was decided that nothing else could be done at the time.

On July 16, 1934, a contract was entered into between the government and the Silas Mason Company, Walsh Construction Company, and the Atkinson-Kier Company for "construction of Grand Coulee Dam and Power Plant, as covered by Items 1 to 85, inclusive, of the Schedule of Specifications No. 570. * * *" Specification No. 570 provided for a low dam which would provide hydro-electric power. Construction was started under this contract, but continuing discussions were held concerning the advisibility of building a "high" dam. Finally on June 5, 1935, by "Order for Changes No. 1" (which changes were authorized by the contract of July 16, 1934, between the government and the Mason-Walsh-Atkinson Companies) the design was changed, and the structure which was built was a foundation structure adapted to economical construction of the "high" dam upon it. Subsequently, the Mason-Walsh-Atkinson contract was terminated by "Change Order No. 2" on March 21, 1938, by which time further funds had been appropriated by Congress and the work proceeded to completion of the "high" dam under a contract dated February 7, 1938, between the government and Consolidated Builders, Inc.

Solution of the transportation problem was of course one of the first tasks of the government. After much discussion of various means, methods, and routes of transportation, the government decided that the best solution was to build a branch line railroad itself and to enter into a contract under the Interstate Commerce Act, 49 U. S.C.A. § 22, with the Northern Pacific Railway Company for the transportation of cement and other materials. After many negotiations, a preliminary draft of a contract was drawn which the Railway Company found acceptable on August 10, 1934, and which the government approved on November 12, 1934. Further revision was then asked by the Company, and finally a contract was drawn acceptable to both parties. This formal contract was dated November 19, 1934, but was actually signed by the Company on March 4, 1935, and by the government on July 17, 1935. By the terms of this contract, the government was to build a railroad from Odair, Washington, to the site of the dam, and the Company was to transport cement and other materials at specified rates.

280
*280 In this contract, Section 12 provided: "The following maximum rates, in cents per hundredweight, are hereby established by the Company on cement moving over existing rail routes in cars loaded to maximum capacity from certain points, as herein listed, in the State of Washington to Odair, Washington, on Government bills-of-lading, for use in the construction of the Grand Coulee dam and power plant: * *."

The suit of the railroad was based on the claim that said contract was not applicable to the shipments of cement involved in the action because those shipments were used in construction of the "high" dam that was actually constructed. It alleged that the contract between Northern Pacific and the government (including Section 12 above) provided a contract rate only for the transportation of cement required for a so-called "low" dam, as proposed in the contract of July 16, 1934, between the government and the Mason-Walsh-Atkinson Companies. The government on the other hand contended that the contract entered into with Northern Pacific provided for the transportation of all the cement needed for building the Grand Coulee dam and power plant in its finished form, or in other words, the "high" dam as completed under the contract between the government and Consolidated Builders, Inc. The trial court's ruling and judgment sustained the government's contention and we consider first the appeal of the Railway Company asserting error in the judgment dismissing the railroad's action.

It is evident from the record that the dispute in that action turns upon the meaning to be ascribed to the words "Grand Coulee dam and power plant" as used in the contract. Both parties contended, and contend here, that the entire contract is not ambiguous, but each party claims the phrase used in the contract means a different thing. The trial court recognized that "Grand Coulee dam and power plant" had a very definite meaning as generally used, but in view of the varying constructions contended for, the court heard extrinsic evidence to explain the term in dispute as used in the contract.

On consideration of the extrinsic evidence adduced before it, the trial court held that the contract was ambiguous, and that it should be judicially construed. The question as to whether an ambiguity exists in a contract is to be determined by the court as a matter of law. 17 C.J.S., Contracts § 617; Whiting Stoker Company v. Chicago Stoker Company, 7 Cir., 171 F.2d 248; Golden Gate Bridge & Highway District of California v. United States, 9 Cir., 125 F.2d 872. The phrase in question would ordinarily have only one definite meaning — that contended for by the government. However, in view of all the facts — the manner in which the construction contracts were awarded by the government, the supplementing of the first contract by another, the long course of negotiations between the railroad company and the government concerning transportation — the court logically concluded that the attendant circumstances gave rise to such indefiniteness of designation of the project as to render the contract ambiguous.

When it is once established that the contract is ambiguous then the meaning of its terms is a matter of fact to be determined in the same manner as other questions of fact. Floyd v. Ring Construction Corporation, 8 Cir., 165 F.2d 125, 129, and cases there cited. In the present case, the court, having properly determined that the contract was ambiguous, heard extrinsic evidence for the purpose of clarifying the uncertain term. After considering this evidence the trial court found that "when the contract was executed by the plaintiff in March and the defendant in July, 1935, with full knowledge that the high dam was then being constructed, manifestly both parties accepted Grand Coulee dam and power plant to mean the high dam."

This finding of fact is amply supported by the evidence and must be sustained in this court on this review. The court's finding that at the time of making the contract the parties intended to cover and fix a rate for transportation of cement for the entire construction designated "Grand Coulee dam and power plant", i.e. the "high" dam, is conclusive of the dispute as to the rate applicable to the shipments included in
281
*281 the railroad's action. It precluded recovery by the Company in the action. We think the provisions of Section 20 and Section 12 of the contract as construed by the trial court present no such conflict as to require a contrary conclusion. The trial court's ruling to that effect was without error.

The appeal by the railroad presents no error in the judgment dismissing its case and that part of the judgment is affirmed.

II.

We turn to the government's appeal from the part of the judgment which dismisses the government's counterclaims.

The counterclaims of the government against the railroad were based on allegations that the Company induced the government to execute the contract fixing excessively high and unjust transportation rates on cement and materials for the Grand Coulee dam and power plant by means of fraud and deceit.

In order to defeat the claim asserted by the railroad to the effect that no valid contract between the parties fixed rates for the transportation for which the railroad sued, and that the regular tariff rates with land grant deductions controlled, the government had insisted that the contract fixed the rates and that the contract was controlling and valid. The court, as stated, found the contract to be subsisting throughout the work of construction, applicable to shipments for use in the construction, and valid, and therefore it dismissed the plaintiff's action.

But in its counterclaim the government took the position that when the Northern Pacific first sought the business of transporting the cement and materials for the Grand Coulee project the only line which the Company had available from the west coast to Odair, Washington, was a long, circuitous route covering an average of 440 miles from the six cities named in the contract to Odair. See map in the opinion of the District Court at 70 F.Supp. 844. Other railroads, especially the Great Northern, had more direct routes which would serve the same places from the coast to within a short distance of the dam site at an average haul of 235 miles. In order for these other lines to be utilized in getting supplies to Odair, and thence to Grand Coulee, they would have to go into the city of Adrian, Washington, from the west over their own lines and thence north to Odair (a distance of about 21 miles) over the line of Northern Pacific. The government alleged that the Company representatives told the government representatives that Adrian could not be "opened up" to the other railroads, and that if the Northern Pacific got the hauling contract, the cement and materials would have to be hauled over the long circuitous line of that Company. As a matter of fact, after Northern Pacific had been awarded the contract, an agreement was entered into between Great Northern and Northern Pacific and the cement was actually transported over the shorter lines through Adrian. The government contended that the Company knew at all times that this shorter route would be employed, but that the Company made the representations that the longer route would have to be used in order to obtain an excessively high and unjust contract rate from the government.

The government also claimed that the representatives of the railroad had figured out and knew the correct land grant deductions applicable to the regular tariff rates on the cement shipments but that the government representatives had mistakenly figured the deductions too low. That the railroad representatives purposely and wrongfully failed to disclose the mistake of the government agents in this matter.

Although the trial court found that the government agents had made a mistake in their computations of the land-grant deductions, it was clear that the contract rates were not related in any way to the deduction figures, and the mistake as to such figures in no wise affected the validity and binding effect of the contract.

The government contended that the alleged misrepresentations and alleged wrongful failure to disclose constituted fraud. It contended that on account of such fraud the court should order a reduction in the contract rate proportionate with the difference between the length of haul which plaintiff's agent represented would
282
*282 have to be made and the length of haul as it actually was. The Grand Coulee project was almost completed when the counterclaims were set up and the freight charges had been paid in accordance with the contract through the years of construction. The counterclaims sought a refund of part of the payments made by the government, as well as other specified items of alleged damage.

The evidence as to the conferences, correspondence, and circumstances connected with the negotiations for, the formulation, agreement upon, and execution of the contract in this case was voluminous and was carefully analyzed and considered by the trial court. The court concluded there was nothing to indicate that there were fiduciary relations between the parties to the contract, but on the contrary, the participating agents were intelligent, experienced men of affairs, dealing at arm's length with each other. Each side had much data on all subjects considered, and had means available to inform itself on any matter relevant to the contract. It was not a situation where either party was dependent upon or had a right to rely upon the other party for information as to any material matter. The court did not make a finding sustaining the government's charge that a railroad agent had represented that the materials would have to be hauled over the long route if the contract were made with the plaintiff Northern Pacific. Nor was there evidence to support a finding that the railroad agent referred to (Mr. Clark, officer in charge of traffic) had made any false statements in the negotiations for the rate contract. No "gateway" through Adrian had been opened at the time of the negotiations but it was opened subsequently through contract entered into between the railroads. Such contract was on terms advantageous to the Northern Pacific because that railroad had the contract for the business with the government. The court held specifically that the written contract between the government and Northern Pacific fully and accurately expressed the agreement made by the parties, that fraud was not a basis for any counterclaim by the government, and that the contract was not vitiated by fraud.

It is clear from the record that in the trial court the government took the position that it was entitled to obtain the money judgment against the plaintiff which it sought in its counterclaim on account of the alleged fraud of the railroad either through rescission of the contract that had been entered into and almost entirely executed, or through a reformation thereof, and the court on full consideration concluded none of such remedies was open to the government. We find no error in that conclusion, or the reasoning in support of it, and find no merit in the contentions presented against it here.

But on this appeal it is strenuously urged for the government that the alleged fraud of the Company gave rise to a right of action in the government for damages for deceit, and reversal is sought for the refusal of the trial court to award judgment for the government on that theory. The effort has been to assimilate the government's case here to the situation presented in the old case of United States v. Barlow, 132 U.S. 271, 10 S.Ct. 77, 33 L.Ed. 346. In that case, the United States brought a statutory action against Barlow, a sub-contractor on a mail-hauling contract, for recovery of sums paid Barlow due to a mistake of fact on the part of the government. This mistake of fact was occasioned by the misrepresentation that additional men and horses would be needed if Barlow was to be able to provide speeded-up service over a new mail route. Barlow had calculated the time necessary on the new route on the basis of the extremely slow miles-per-hour rate at which the mail had been carried over the old slow and difficult route. The mistake or misrepresentation that Barlow made was readily apparent, but the government paid him the money demanded for more men and horses for the speedier service. It was admitted that the additional men and horses were never used. The Supreme Court held that the government was entitled to recover the sums paid for the men and horses not used. The argument is that there was a similar situation and a similar right to recovery on the part of the government in the case at bar.

283
*283 This case is readily distinguishable from the Barlow case. In that case, the amounts paid by the government were determined on the basis of Barlow's costs in performing the work. These costs were misrepresented to be higher than they actually were. But there is no claim here that the rates specified in the contract were related to or made dependent upon costs or disbursements to be incurred by the Northern Pacific. The government agreed to pay the rates and it imposed no restriction upon the Company as to which lines of railroad should be used in the transportation. What was considered and discussed was possible trucking from Great Northern points, possible extension of the government railroad to connect with the Great Northern, the possible construction of a cement mill at the dam site, and precedent established by the Union Pacific's 20¢ rate for a similar haul over a distance comparable with the short haul available in this case in connection with the Boulder Dam project. The evidence shows that the contracts which the Northern Pacific made with the Great Northern and the Milwaukee accorded a large percentage of the proceeds of the hauling to the Northern Pacific in view of the small percentage of the haul actually made on Northern Pacific tracks. On account of that fact the trial court did at one place in its opinion refer to the contract as a "bonanza" for the Northern Pacific. But the contracts the railroads made between themselves are not within the issues of this case. The government entered into the contract freely and voluntarily with means and opportunity to be fully informed at the time and throughout the period of its execution. The trial court made no finding that the contract rate was based on the longer mileage, and an examination of the record shows that no such finding could have been made. The rate finally agreed on in the contract compares favorably with rates contemporaneously allowed the Union Pacific in the Boulder Dam project, and it appears that at the time that was a deciding factor.

It is therefore apparent that the alleged misrepresentations as to the mileage of haul could not afford any basis for an action in tort for deceit. To afford a basis for such an action, the alleged misrepresentation must have been a substantial factor in causing the defrauded party to act to his detriment. It "must have had such relation to the transaction in hand as to operate as an inducement to the action or omission of the complaining party, and it must have been relied on by him." The complaining party "must have used due diligence to discover for himself the truth or falsity of the representation, or the relations of the parties to each other or the location or character of the subject-matter of the transaction must have been such as to excuse investigation and to justify his reliance upon the assertion of the other." Roosevelt v. Missouri State Life Insurance Company, 8 Cir., 78 F.2d 752, 757. The evidence does not bring this case within the applicable principles.

Here, the rates agreed upon and specified in the contract were not related to or based upon the mileage of the haul, but were to be paid without regard to the route or distance of transportation. The railroad was left entirely free to contract with other railroads whose hauls would be shorter and it was within its rights in making such contracts.

It may be stated that the government did not present to the trial court the theory of the case which it has most strenuously contended for here. In the trial court the counterclaims were not presented as actions in tort for damages for deceit. The government did not plead or claim a cause of action for damages in tort for deceit. As stated, it sought recovery by means of an accounting after a reformation, rescission, or modification of the contract; and the grounds for such reformation, rescission, or modification were the alleged misrepresentions of the Company. But we are mindful that "in all dealings with the government, contractors and agents alike are under obligation to deal strictly within the limits of the statutes and with absolute honesty." "* * * the doctrines of fraud, unconscionable dealing and unjust enrichment are to be strictly applied to insure fair and honest dealing between the government and its citizens." Muschany v. United States, 324 U.S. 49, 59, 65 S.Ct. 442, 448, 89 L.Ed.
284
*284 744. We have therefore considered whether a case was made out for the government on any theory and we hold there was not.

Freight Other Than Cement.

In the contract here involved, in Section 12 after the provisions for transportation of cement, there was the following further provision: "On the balance of the items of materials, supplies and equipment to be used in the construction of the Grand Coulee dam and power plant and moving on Government bills-of-lading, the established commercial freight rates over existing routes, less land-grant deductions, shall apply, with the following exceptions: * *."

It is the contention of the government that this provision gave the government a special rate for such materials — that is, the rate then existing, and not merely the commercial rate which other shippers paid at the time of the particular shipment billed. There were substantial raises in the commercial rates from the time the contract was made to the time of the last shipment made under the contract.

In construing this provision, the trial court held that it merely gave the government the right to ship the other materials and to be billed at the regular tariff rate less the applicable land-grant deduction. With this conclusion we are in accord. It is the contention of the government that if this construction is adopted, the provision in the contract is meaningless. Such is not the case. Immediately preceding this clause is one granting the government a special rate on cement. This clause was then put in to show that the government was not to get a special rate on other materials.

Cement Shipments From Trident, Montana, and Portland, Oregon — two points not named in the contract.

As the construction work proceeded, the rate of pouring of cement exceeded all expectations. Consequently, it became apparent that the cement mills in the six cities named in the contract could not produce and ship sufficient cement to meet the building contractors' requirements. Negotiations were then begun by the government with cement mills in the cities of Trident, Montana, and Portland, Oregon, and shipments of cement were made from those two cities.

The government paid for these shipments at the regular tariff rates less the applicable land-grant deductions. Now in its counterclaim the government contends that a special rate should have been applied to such shipments, and that the government has therefore overpaid the Company to the extent of the difference between the regular tariff rate less land-grant deductions and the special rate, which the government claims should be an "equitable rate". It is the contention of the government that when the contract between Northern Pacific and the government was entered into, it was the intention of both parties that the government should have an "equitable rate" on all shipments of cement to the dam.

As a means of recovering these alleged overpayments the government seeks reformation of the contract with Northern Pacific so as to make it include special rates from the two cities named. As a basis for this proposed reformation, it is claimed that there has been a mutual mistake in omission of cities other than the six named in the contract. The Company denies that there was any mistake on its part, and the terms of the contract, which sets out with particularity the six cities and the rates applicable to cement shipments from each, bear out the railroad's position. Further, the trial court found "there is no ground for reformation because the written contract fully and accurately expressed the agreement made by the parties." In the face of this, the government can hardly be said to have sustained the burden of proof resting on the party alleging the mistake and seeking reformation to "show exactly in what it [the mistake] consists and the correction that should be made. * * * The mistake must be mutual, and common to both parties to the instrument. It must appear that both have done what neither intended." Moffett, Hodgkins, & Clarke Company v. Rochester, 178 U.S. 373, 385, 20 S. Ct. 957, 961, 44 L.Ed. 1108. See also Maryland
285
*285 Casualty Company v. United States, 8 Cir., 169 F.2d 102, 111, and cases there cited.

Other than this, there is a clause in the contract itself which refutes the government's claim of a mutual mistake in omitting other cities. The last sentence of Section 12 of the contract states: "If the necessity arises for revising said rates or for the fixing of rates on additional items or from additional points, adjustments will be made in the established rates or such new rates will be made as may be agreed to by the authorized representatives of the Company and the United States." Thus the parties to the contract expressly provided for the exact situation which arose — "the fixing of rates * * * from additional points." Since the government chose not to negotiate new rates, and paid, without protest at the time, the regular tariff rate less land-grant deductions, the government must be held to have consented to have that rate be the contract rate from the two additional cities.

In the absence of a negotiated special rate from Trident and Portland, the government has no grounds for its counterclaim for overpayment on cement shipments from those two cities.

Conclusion.

On consideration of the whole record the conclusion of the court is that the judgment appealed from is without error and it is in all respects affirmed.

Friday, May 17, 2019

Winston-Utah Vs United States


WINSTON BROS. COMPANY and the Utah Construction Company; Roy L. Bair & Company and James Crick & Sons; J. A. Terteling & Sons, Inc.; and T. E. Connolly, Inc.,
v.
The UNITED STATES.
Congressional No. 6-52.

United States Court of Claims.
April 5, 1955.

375
*375
376
*376 Garfield O. Anderson, San Francisco, Cal., for plaintiffs. Sherman E. Burt, Washington, D. C., was on the briefs.

John B. Miller, Washington, D. C., with whom was Warren E. Burger, Asst. Atty. Gen., for defendant.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and LARAMORE, Judges.

MADDEN, Judge.

This case has come to us pursuant to a Resolution of the Senate of the United States, approved June 27, 1952, Sen. Res. 343, Report 1872, 82nd Congress, 2d Sess. The Resolution states that there was pending in the Senate a bill, S. 3326, for the relief of certain construction firms, and this court was asked to proceed in accordance with sections 1492 and 2509 of title 28 of the United States Code and to report to the Senate in accordance with those statutory provisions.

The bill referred to in the Resolution proposed to pay to the plaintiffs certain sums as compensation for the increased costs incurred by them as a result of the disruption or delay in their construction work under contracts with the Bureau of Reclamation. The bill stated that the disruption or delay was caused by insufficiency of appropriated funds for payment of normal construction earnings.

Pursuant to the rules of this court, the plaintiffs filed a petition, the case was referred to a Commissioner of this court who held extensive hearings at places convenient to the parties. He made findings of fact, the parties took exception to certain of his findings, filed briefs and made oral arguments to the court.

Each of the four plaintiffs had a contract with the Government, which acted through the Bureau of Reclamation of the Department of the Interior. Each contract was for the construction of some facility intended to make the water impounded by the Grand Coulee Dam on the Columbia River in the State of Washington available for irrigation. The four plaintiffs, two of which were joint ventures, will be designated in this opinion as Winston, Bair-Crick, Terteling and Connolly. Winston was to construct two canals; Bair-Crick was to construct an earthen dam; Terteling was to construct an earthen dam and portions of a canal; and Connolly was to construct a tunnel and a "siphon". The period of performance of the contracts was 800 days as to two of them and 900 days as to the other two. All of them, therefore, contemplated work extending beyond the fiscal year in which the contracts were made, and into the fiscal years ending June 30, 1948, and June 30, 1949.

Each contract contained the following provision:

    "Specifications, par. 11.

    "Failure of Congress to appropriate funds. If the operations of this contract extend beyond the current fiscal year, it is understood that the contract is made contingent upon Congress making the necessary appropriation for expenditures thereunder after such current year has expired. In case such appropriation as may be necessary to carry out this contract is not made, the contractor hereby releases the Government from all liability due to the failure of Congress to make such appropriation."

The authority for the Bureau to make contracts which contemplated payments being made from funds not yet appropriated was contained in the following provision of 43 U.S.C.A. § 388:

    "When appropriations have been made for the commencement or continuation of construction or operation and maintenance of any project, the Secretary may, in connection with such construction or operation
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    *377 and maintenance, enter into contracts for miscellaneous services, for materials and supplies, as well as for construction, which may cover such periods of time as the Secretary may consider necessary but in which the liability of the United States shall be contingent upon appropriations being made therefor."

There were many other contracts, in addition to those of the plaintiffs, for construction in connection with the Columbia Basin Project. There were additional power units to be installed in the dam for the generation of electricity, there were pumps for the pumping plant to lift the water, impounded by the Grand Coulee Dam over to the reservoir from which it could be carried by gravity to the some 400,000 acres of land which it was intended to irrigate. In making up its estimates in 1946 for the money which it would need to carry all these things forward in the fiscal year beginning on July 1, 1947, and ending on June 30, 1948, the Bureau of Reclamation arrived at a figure of $62,500,000. The Secretary of the Interior cut this figure back to $52,500,000. The Bureau of the Budget approved a figure of $27,500,000. The House of Representatives included less than half that amount in its bill; the Senate included a higher figure; the bill went to a Conference Committee which agreed on $17,500,000, and the bill containing that amount was enacted.

The Managers on the Part of the House of Representatives, in reporting the results of the Conference to the House, appended to the report of the Conference Committee the following statement:

    "Realizing that repayment of construction cost is an essential part of the reclamation policy, and that a major portion of repayment of the cost of the Columbia Basin project must depend upon power revenues, the conferees are agreed that funds provided in the bill should be so allocated as to permit completion and installation of the six generators presently on order for this project at the earliest possible date."

This statement meant that there were ready cash customers for all the power that could be generated at the dam, and that the prompt installation of the additional generators, the manufacture and installation of which had been delayed by World War II, would be the quickest way to secure some additional income to offset the Government's vast expenditures on the Columbia Basin project. The irrigation facilities, on which the plaintiffs were working, would not, at best, have led to the receipt by the Government of any income until several years later.

The officials of the Bureau of Reclamation took the statement above quoted of the Managers on the Part of the House as law. While it was not in the Conference Report, it said that the conferees had agreed that that was the intention of the appropriation. There was, and is, no reason to doubt the truthfulness of the statement. In the circumstances it was the duty of the Bureau of Reclamation to respect the known intent of the responsible managers of the legislation.

The officials of the Bureau of Reclamation were faced, then, with the problem of how to use the appropriated funds which were not sufficient to permit the carrying on of the work contracted for, and at the same time pay for the maintenance of the Bureau's own organization, and for some materials not yet contracted for, but which were necessary, at that stage, for the orderly development of the project. Our finding 8 shows the allocation which the Bureau made. Even the expenditures directly related to, or incidental or necessary to the carrying out of the power programs, were cut back from $22,313,000 to $16,254,000. The balance of the money, including a carryover of nearly $4,000,000 from the preceding appropriation, was allocated as available for the continuation of the irrigation features of the project. But of this amount, $1,071,000 had, when the Bureau's allocation was made on August 8, 1947, already been covered by the estimates for the irrigation work done in July. The money for irrigation for the
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*378 remaining eleven months of the 1948 fiscal year was only $4,015,000.

The irrigation contractors, including the four plaintiffs in this suit, would have required an estimated total of nearly $14,000,000 to have proceeded on full schedule for the remaining eleven months of the fiscal year. They would have required $7,393,000 to have continued on full schedule through January 1948. Consideration was given to that date because it was hoped that by February 1, Congress might have appropriated additional money for the project.

When the problem was considered in August, 1947, there were three ways in which the money allocated for irrigation might have been used. The contractors might have been authorized to proceed at regular speed, in which case the funds would have been exhausted in October. They might have been required to slow down to such a rate as would have distributed the reduced available funds over all the remaining months of the fiscal year. That would have tied up equipment and resulted in overhead expense disproportionate to accomplishments. The third possible method was to apportion the available funds for expenditure during the months ending with January 1948, thus permitting the contractors to maintain, to a considerable extent, their working organizations, and be ready to proceed at full schedule if Congress did, as it was hoped it would, appropriate the necessary funds by that time.

Mr. Banks, the District Manager of the Bureau, met with the irrigation contractors on August 12. He told them that if they could agree among themselves as to a proper apportionment of the funds under the third alternative the Bureau would adopt it. If that was done, the individual contractor would be permitted to use up his money on whatever features of his work he chose. The contractors protested the fact that the appropriation was insufficient. They disagreed among themselves as to the allocation among them of the available funds. At later meetings, on August 14 and 16, adjustments were made in the tentative allocations to the individual contractors, and the contractors reluctantly agreed to the allocation to each contractor of a specified amount of the reduced funds. They did not waive their objection to the fact that they were not to be permitted to proceed on their regular schedules. The final allocation to the irrigation contractors was $1,430,000 more than the $4,015,000 which was thought to be available. The Bureau was able to make its payments under this increased schedule, from what source the record does not show. Perhaps there was a larger carryover from the preceding year than had been counted on; perhaps some of the contractors did not use up all of the funds allocated to them; perhaps the apparent deficit was made up out of the supplemental appropriation which became available in December, 1947, which was sooner than had been anticipated.

About September 1, 1947, Mr. Banks addressed to each of the irrigation contractors an "Order for Changes" which stated how much the contractor would be permitted to earn under the reduced schedule, and how many days his time for completion of his entire contract would be extended, because of the curtailment of funds. The proposed change orders were not accepted by any of the contractors. They protested that the extensions of time were insufficient, and that their rights to recover damages for delay in performance were not preserved. After discussion during the early part of September, extensions of time were fixed by the Bureau, in one case considerably greater than had been proposed in the September 1 letter. No further attempt seems to have been made to get the contractors to agree to formal change orders. On November 26, 1947, letters were written to the contractors extending their times for performance by the number of days which the Bureau had decided upon early in September, except in the one case noted above.

The plaintiffs, and presumably the other irrigation contractors, proceeded on the basis of their reduced allotment of funds. Congress reconvened during December,
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*379 1947, and by supplemental appropriations made sufficient funds available to permit resumption of full construction schedules on the irrigation contracts for the remainder of the fiscal year. On December 26, 1947, the Bureau by letter advised the contractors of that fact, but did not specify an amount which would be available to any particular contractor. On February 6, 1948, each contractor was advised of the amount available to it, an amount which would permit full scale operation for the balance of the year.

The plaintiffs assert that they did, in fact, curtail their operations because of the shortage of funds; that by reason of the curtailment their schedules were disrupted, their equipment was caused to stand idle, and their overhead expenses continued without their being able to obtain earnings proportionate to the overhead. They urge that the Bureau of Reclamation had no legal justification for curtailing their funds. They say that Congress' appropriation of $17,500,000, plus the carryover from the preceding year, was more than sufficient to keep the irrigation contracts going, if it had been used for that purpose, which, they say, it should have been. They base their argument that the appropriation, if insufficient for all the requirements of the Columbia Basin project, should have been used first for the irrigation features, upon earlier legislation and one judicial decision. They cite the title to the original Reclamation Act of 1902, 32 Stat. 388, which named only irrigation as the objective of the Act. They cite the 1906 Amendment of the Reclamation Act, 34 Stat. 116, 117, § 5, which first authorized the Secretary of the Interior, if the development of electric power was necessary for irrigation purposes, to lease any surplus power or power privilege, but said:

    "Provided, That no lease shall be made of such surplus power or power privilege as will impair the efficiency of the irrigation project."

They cite Burley Irr. Dist. v. Ickes, 73 App.D.C. 23, 116 F.2d 529, which cited and enforced the statutory provision quoted from the 1906 Act. They quote Section 2 of the 1935 Act authorizing the construction of the Grand Coulee Dam, 49 Stat. 1028, 1039, which mentions the generation of electric energy only "as a means of financially aiding and assisting" the flood control, navigation and irrigation features of the project. They point to the Reclamation Project Act of 1939, 53 Stat. 1187, 1195, which said:

    "No contract relating to municipal water supply or miscellaneous purposes or to electric power or power privileges shall be made unless, in the judgment of the Secretary, it will not impair the efficiency of the project for irrigation purposes."

They show that the above language was incorporated by reference in the Columbia Basin Project Act of 1943, 57 Stat. 14, 16 U.S.C.A. § 835 et seq. They quote a statement of the House of Representatives Committee on the Interior Department Appropriation Bill of 1949, as follows:

    "Statement of policy. — The committee desires to reemphasize its statement in former reports on the bill, that the reclaiming of arid lands by the construction of reclamation projects is and always has been the primary purpose of the reclamation laws. Development of hydroelectric power is incidental to irrigation and is made as a means of financially aiding and assisting such undertakings. This policy should not be departed from without specific legislation by the Congress."

The plaintiffs argue, from the premises above recited, that the officials of the Bureau of Reclamation were required by law to allot the limited funds which they were given to irrigation work rather than to power work. We do not agree. The specific intention of the Congress which made the 1948 appropriation, or at least of the conferees who finally agreed, for their respective bodies, to the appropriation, was officially made known to the Bureau by the statement
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*380 of the House Managers. If that intention was a departure from a previous long standing policy of Congress, it was no worse for that, as Congress of course had the power to change that policy at its will. Perhaps the statement of the House Committee on the 1949 bill was an expression of regret that there had been a lapse from the policy in the 1948 Act. We think that the Bureau was legally justified in giving the preference that it did to the power features of the project. We also think that Congress would not have intended that the Bureau should make cuts much deeper than it did make in its permanent staff and expenses in its Denver office and its regional office, or in its wage board payrolls for work on force account. Any further saving which would have been of substantial benefit to the irrigation contractors would seem to have required the substantial disruption of the Bureau's permanent organization and, as we have said, we think Congress would not have intended that.

Assuming, then, that the Bureau's allotment between power and irrigation was lawful, we reach the Government's defense that it was not a breach of contract for the Government to fail to make funds available to pay for work for which it had contracted. The Government bases this defense upon the provision of the contracts which we have quoted earlier in this opinion. That provision, Paragraph 11 of the Specifications, said that if the operations of the contract extended beyond the current fiscal year, the Government would not be liable for the consequences of the failure of Congress to appropriate funds to carry out the contract.

The plaintiffs urge that this provision is no defense. They point to the language "In case such appropriation as may be necessary to carry out this contract is not made * * *", and say that, taking each plaintiff's contract by itself, there was plenty of money appropriated to carry it out, even after giving the preference to the power features of the project. We think that this is a too literal reading of Paragraph 11. It would make the provision practically inapplicable except in cases where specific parts of appropriations were earmarked for particular contracts. We think the provision at least means that where the agency authorized to spend the appropriation allocates the funds on a rational and non-discriminatory basis and they prove insufficient, the Government is not liable for harm resulting from the shortage.

From what we have said it follows that in our opinion the contractual provision forecloses the plaintiffs from having any judically enforceable claim against the United States.

We have, however, considered the facts of the case with a view to informing the Senate as to the amount of the damage which, in our view, the several plaintiffs suffered because of the insufficiency of the appropriated funds.

WINSTON-UTAH CLAIM.

The plaintiff Winston-Utah had two contracts, one for the "West Canal" and the other for the "East Low Canal". A detailed recital of the facts concerning this plaintiff's claim is given in findings 18 to 31. By the end of July 1947 the West Canal was ready for concrete lining and for the construction of the two appurtenant concrete siphons. All this work was planned to be completed in the fall of 1947. Work on one of the siphons was discontinued on September 4 at which time eleven sections of the siphon were completed. This work would have, but for the shortage of funds, continued until November 8, at which time the plaintiff would have closed down all concrete work, in any event. The plaintiff lost 2.2 months of time on that siphon. No concrete lining on the West Canal was done that fall. The specially made equipment for that work was not delivered until September and it could not have been assembled and ready for operation before September 22. The plaintiff lost 1.7 months on that work. In substantially the same circumstances the plaintiff lost time amounting to 1.8 months on the siphons for the East Low
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*381 Canal. The plaintiff did not curtail any of its operations until September 4, and it did not curtail excavation in the East Low Canal at any time, this excavation work being continued through the winter. Mathematically it works out, as shown in our findings, that the plaintiff's work was slowed down by 79.4% during the period September 4 to November 8. We have applied this percentage to the plaintiff's fixed charges. As to its equipment, made idle by the curtailment of funds, the plaintiff in filing its claim with the Bureau of Reclamation used a formula which we are not familiar with, and which seems to us to give inadequate compensation. We have applied our usual formula to this item, eliminating however items already covered in the schedule of fixed charges.

Because of the shut-down of concrete work in September 1947 the plaintiff in order to get that work started as soon as the weather was suitable in 1948, set up its concreting equipment in February and March 1948. There was a considerable loss of efficiency of labor on account of the season, and we have made an allowance for that. We have also made allowances for a part of the cost of additional equipment purchased in 1948 partly to make up for time lost during the curtailment, and for increased costs of cement and carpenters' wages in 1948 over 1947. Our computation gives us a total figure of damages suffered by Winston-Utah of $102,475.41.

TERTELING CLAIM.

Terteling had two contracts, one for the construction of Long Lake Dam and one for the construction of a part of the Main Canal. When funds were curtailed, it elected to continue full scale operations on its Main Canal contract. It did so continue, and makes no claim on account of that contract. As to the Long Lake Dam work, our findings 34 to 44 show the facts as we have found them and they will not be repeated in this opinion. Before the curtailment of funds the plaintiff was substantially behind schedule on many items of its contract. To do the work practically and economically it had to be done in a fairly definite sequence and if some key items were behind schedule, other items could not be proceeded with. Also for several weeks after the curtailment of funds had occurred, the plaintiff worked more man-hours that it had done before the curtailment. However, after October 31, 1947, work was slowed down. The plaintiff claims that it would have done concreting work after that date if funds had been available to pay for the work. If such work had been done in the winter, the plaintiff would have been subjected to extra expense for heating the water and aggregate, protecting the concrete after it was poured, and for the general inefficiency of labor in winter weather.

We have concluded that the plaintiff Terteling was subjected to some delay and some extra expense because of the curtailment of funds, and have included the expense of moving some equipment, the loss resulting from idle equipment and some overhead expense, the total amounting to $24,666.41.

CONNOLLY CLAIM.

The facts with regard to the Connolly claim are detailed in findings 45 to 57. Before the curtailment of funds occurred, the plaintiff was already far behind its schedule. It had made a revised schedule on July 8, 1947, which might possibly have permitted it to finish its work on time. To have maintained that schedule would have put the plaintiff to very large extra expense for placing concrete in winter, and for the inefficiency of labor in winter work. But for late completion the plaintiff would have been subject to liquidated damages of $500 per day, hence it might have been willing to undergo the extra expense of the winter work.

The principal item of Connolly work was the Bacon Tunnel. The original plan was to work from both the north and the south ends of the proposed tunnel simultaneously. It was planned to first make a small tunnel from each end and, when these two had met, draw back to
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*382 each end and start excavating to the full dimensions of the tunnel. Excavation of the small, or "pilot" tunnel was commenced from the south end in December 1946 and from the north end in April 1947. Theoretically, by working from both ends, the tunnel could be driven in half the time it would take if worked from only one end. But in fact, the work from the south end went badly. The terrain over which the excavated materials had to be moved was bad, the elevation was unfavorable, and the plaintiff's ventilating equipment for purifying the air in the pilot tunnel after blasting worked badly, causing loss of working time. When the plaintiff on August 18, 1947, immediately after the discussions about the curtailment of funds, closed down the operation from the south end of the tunnel, we think it did what it had wanted to do for some time and had only refrained from doing because of the danger of subjecting itself to heavy liquidated damages for late completion. The shortage of funds discussion had assured the plaintiff of a generous extension of time for completion and relieved it of the pressure to continue inefficient and expensive operation just to gain time.

Our conclusion with regard to the Connolly claim is that, taking into account the accompanying extension of time, this plaintiff was not harmed by the shortage of funds.

BAIR-CRICK CLAIM.

The plaintiff Bair-Crick had a contract for the construction of the South Coulee Dam and appurtenant works. This dam was to form the south end of the balancing reservoir 30 miles long into which water was to be pumped from the Grand Coulee Dam, and from which reservoir water was to be taken for irrigation. The South Coulee Dam was 9,900 feet long made of earth and rock fill with a concrete core some 30 feet wide. The details with regard to this plaintiff's work are given in findings 59 to 67. In the fall of 1946 the plaintiff submitted a proposed construction program. By July 1947 the work was several months behind schedule. In July an estimate of this plaintiff's anticipated earnings for the period July 1947 through June 1948 was prepared by the Bureau at the plaintiff's request, and was approved by the plaintiff as prepared. It showed estimated earnings for the months of August 1947 through January 1948, the months during which the curtailment of funds was in effect, of somewhat less than this plaintiff actually earned and was paid during those months. Since the July estimate was prepared before there was any thought of reduced funds or operations, it is apparent that the reduction of funds did not cause the plaintiff to curtail its operations during the pertinent period. If the plaintiff did curtail its operations thereafter, it was because it obtained, in connection with the funds negotiation, an extension of time for completion which removed the danger of its being charged with liquidated damages for late completion.

Sparling Steel Company was a subcontractor with Connolly and Bair-Crick, furnishing steel to them for their contracts. It claims to have been damaged by their delay in accepting steel from it. Since we have found that neither Connolly or Bair-Crick was delayed by the reduction of funds, it follows that Sparling's derivative claim has no basis.

It has been urged on behalf of all the plaintiffs that the extensions of time granted them by the Bureau of Reclamation prove conclusively, or almost conclusively, that they were in fact delayed in their performance for the periods named in the extensions of time. It will be remembered that Mr. Banks of the Bureau first fixed upon the periods of extension before September 1, 1947, and notified the plaintiffs by letters of that date. Because the plaintiffs refused to accept the change orders embodied in those letters, there were no further letters about extensions of time until November 26, 1947, when Mr. Banks again wrote the plaintiffs, unilaterally granting
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*383 them the extensions of time which he had named on September 1 in the proposed change orders. The only exception to this was in the case of Connolly which had persuaded Mr. Banks to increase its extension from 146 days to 365 days. Estimates made when the curtailment of operations had just begun, on contracts which originally had 800 or 900 days to run, were of course largely guesswork. Banks and the Bureau were embarrassed at having, apparently for the first time, contracted for work which Congress would not support by appropriations. Due to lack of funds, all work on the pumping plant, which was the key structure of the irrigation project, was discontinued. There was, therefore, no longer any urgency for the completion of the canals, siphons and dams which could not be used until the pumping plant was in operation. The Bureau could be and was generous with time. If, with the additional time available, the contractors chose to rearrange their work for greater efficiency and economy, that was to their advantage, and was not a harm resulting from the shortage of funds.

We treat extensions of time granted by contracting agencies on account of action or inaction by the Government as admissions against interest by the Government. That means that they are pieces of evidence in favor of the contractor, to be weighed along with the other evidence as to how much delay was actually caused by the Government's action or inaction. When, as in the instant case, the other and more direct evidence is convincing, the admission involved in the extension of time is of little weight.

Our report to the Senate is as follows:

The plaintiffs have no legal claim against the Government, they having released the Government from any such claim by Section 11 of the Specifications of their contracts. For the same reason they have no equitable claim in the sense of a claim enforceable in a court of equity. Two of the plaintiffs, Winston-Utah and Terteling, suffered damages in the amounts of $102,475.41 and $24,666.41 respectively because they were obliged without fault on their part, on account of the insufficiency of the amounts appropriated by Congress, to curtail their operations under their contracts.

JONES, Chief Judge, and LARAMORE and LITTLETON, Judges, concur.

WHITAKER, Judge (dissenting).

I seriously doubt the right of the Bureau of Reclamation to so allocate the funds appropriated as to prefer one class of contracts over another.

The House managers reported to the House that "the conferees were agreed" that the funds appropriated should be spent first for the completion and installation of the generators. This was reported to the House of Representatives and it may be said that by the adoption of the Conference Report that House gave its assent to such an allocation; but the Senate is not shown to have given such assent. This body did not have before it this statement of the House managers. It had before it only the Conference Report, and this was silent on the basis for the allocation of the funds.

It, of course, takes the concurrence of the two Houses of Congress to pass a bill. They concurred only on the basis of the Conference Report, which, as stated, was silent on allocation.

It, therefore, comes down to this: There were outstanding $37,359,000 construction and supply contracts and limited force account demands. To carry them on, $17,500,000 was appropriated. This appropriation, plus the unexpended balance carried over from the previous fiscal year, amounted to $21,617,000.

It seems to me the several contractors had a right to expect that this amount should be prorated among their several
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*384 contracts. Since this was not done, I think the defendant is legally liable for the consequent delay.

It would have been otherwise if Congress had directed allocation to the power contracts first, but this was not done.

I, therefore, cannot agree to the report of the majority.