
    PACIFIC COAST CONSTRUCTION COMPANY v. THE UNITED STATES.
    [No. 30850.
    Decided June 10, 1918.]
    
      On the Proofs.
    
    
      Contracts, what is not delegation of power to suspend. — Where a contractor refuses to proceed with the work and the engineer in charge telegraphs his superior that fact and requests authority to suspend the contract in case the contractor should not conclude to go on with the work, and the Director of the Reclamation Service, in communicating that telegram to the Secretary of the Interior, recommends that the authority be granted in order that the engineer may act promptly, as indicated in the telegram, and the Secretary of the Interior grants authority as recommended, and after such suspension approves it, such suspension must be regarded as the act of the Secretary.
    
      Contracts, departure from terms i/n completing, effect of; damages, measure, where contractor’s plant improperly used. — Where the contract is properly suspended but the Government materially departs from the contract terms in taking over and completing the work, the contractor is entitled to recover the value of his plant and equipment at the time it was seized. And, under such circumstances, the Government is not entitled to recover on a counterclaim for the excess of cost to complete over the contract price.
    
      The Reporter’s statement of the case:
    
      Messrs. George A. King and George R. Shields for the plaintiff. King <& King were on the briefs.
    
      Mr. George T. Stormont, with whom was Mr. Assistant Attorney General Huston Thompson, for the defendants.
    
      The following are the facts of the case as found by the court:
    I. On the 25th day of September, 1906, the plaintiff company entered into a contract with the Secretary of the Interior, acting with authority for the United States, to furnish all materials, with certain exceptions, and labor and to construct a dam and accessory structures on the lower Yellowstone Eiver, in Montana, at stated unit prices. A copy of the contract with the specifications is attached to the petition as Exhibit A and is made a part hereof by reference. The dam and accessories to be built under this contract were a part of a reclamation project.
    II. During the times material herein the United States was represented on and in connection with the work by certain engineers, attached to the Eeclamation Service, viz — A. P. Davis, as chief engineer, H. N. Savage, as supervising engineer, one Sanders, as consulting engineer, and Frank E. Weymouth, as project engineer.
    After some portions of the work had been done, during which there was considerable delay, the four engineers named, on September 13, 1908, telegraphed to the Director of the United States Eeclamation Service, at Washington, a night message as follows:
    “Huson, president Pacific Coast Construction Company, refuses to proceed further with construction lower Yellowstone Dam under terms of his contract. Prompt authority is requested to suspend contract and to seize materials and equipment under provisions paragraph twenty-two in case he should not change his mind. Wire answer day.”
    On the 14th of September, the director in a written communication transmitted a copy of this message to the Secretary of the Interior, added a general statement as to the contract involved, and recommended as follows:
    “ In order that the engineers may be able to act promptly should emergency require, as indicated in the telegram, it is recommended that the engineer be authorized to suspend the contract and take posession of all the machinery appliances, and animals employed in the work or on the ground, as provided in paragraph 22 of the specifications.”
    On this communication the then Acting Secretary of the Interior, over his signature, indorsed: “Approved and authority granted as recommended, September 14, 1908,” and on the same day the Director of the Reclamation Service telegraphed Savage, the said supervising engineer, as follows :
    “ Acting Secretary has granted authority to suspend contract Pacific Coast Construction Company per your telegram September fourteenth.”
    Under date of September 14, 1908, Davis, the chief engineer, addressed and delivered to the president of the plaintiff company the following communication:
    “ Sir : In view of your oral refusal to proceed with the construction of the lower Yellowstone Dam under the terms of your contract therefor you are hereby notified that if you do not proceed with the necessary work thereon before noon, Sept. 15, 1908, recommendation will be made that the contract be immediately suspended and the work completed under the provisions of paragraph 22 of said contract.”
    On September 15, Weymouth, the project engineer, addressed and delivered to the president of the plaintiff company the following communication:
    “ Sir : In accordance with a letter from the chief engineer dated September 13, 1908, and by authority of the Acting Secretary, your contract for the construction of the lower Yellowstone Dam is hereby suspended.
    “Your plant and equipment, commissary supplies, etc., as enumerated in paragraph 22 of the specifications, will be taken over by the United States in accordance with said paragraph.”
    On September 16, the plaintiff company, by its president, addressed to Weymouth, project engineer, and the Secretary of the Interior the following communication:
    “ GeNteemeN : The Pacific Coast Construction Company hereby objects and protests to the suspension of their contract for construction of lower Yellowstone Dam and the seizure of their machinery, tools, appliances, material, camp equipments, and supplies done and made by you on September 15, 1908, for the reason that same was and is premature, illegal, and unjust in that the Pacific Coast Construction Company was not in default in any way at the time of such suspension and seizure; had not and do not now refuse to comply strictly with all the terms and conditions of their said contract upon their part; that up to the time of such suspension and seizure the Pacific Coast Construction Company had at all times maintained an adequate force upon such work and was prosecuting the same as vigorously and energetically as was possible under the existing conditions; that the Pacific Coast Construction Company was at all times and is now ready, willing, and financially able to complete said contract and fulfill all the terms and conditions thereof if the United States will do the same.
    “ Wherefore the Pacific Coast Construction Company now demands that you deliver to it all property so seized, pay to it all moneys now due upon said contract, and permit it to complete the same fully according to its terms and conditions.”
    On October 3, 1908, the Director of the Declamation Service addressed to the Secretary of the Interior the following communication:
    “ SiR: Under date of September 14 the department granted authority to the engineer in charge of the lower Yellowstone project, Montana, to suspend, should it become desirable to do so, the contract of the Pacific Coast Construction Company for the erection of the dam on the lower Yellowstone project. The engineer was advised of this action by wire on the same date. The contractors in the meantime had continued in their failure to prosecute the work in accordance with the contract, and accordingly, on the 15th day of September, acting under the authority of the department, the contract was suspended by the engineer. Request has now been received for authority to complete the work by force account.
    “ In view of the above facts, it is respectfully recommended that the action of the engineer be ratified and approved by the department and that this office be authorized to instruct the engineers to proceed with the completion of this work by force account.”
    And on said communication, on the same day, the Acting Secretary of the Interior, over his signature, indorsed:
    “ Action of engineer ratified and approved and authority given as requested October 3, 1908.”
    On the 15th of September, 1908, and within a short time after the delivery to the president of the plaintiff company of the communication of that date quoted above, representatives of the United States took possession of the plaintiff company’s plant, camp, materials, and supplies and thereafter proceeded to complete the work called for by plaintiff company’s contract.
    
      III. In the completion of the work by the United States after the suspension of plaintiff company’s contract the original specifications were not substantially complied with but there were material deviations therefrom.
    IV. There was due the plaintiff company, and unpaid, on September 15, 1908, over and above amounts paid for materials furnished and labor performed, including retained percentages, the sum of $14,282.50.
    The reasonable value of plaintiff’s plant, camp, and equipage at the time of the taking, was $12,719.87.
    The value of subsistence supplies and stores belonging to the plaintiff and taken by the United States but without payment therefor was $281.
    The charge of $3,310 for “ lumber taken and used but not paid for by the United States ” is not sustained by the evidence. This item was not declared on in the original petition.
    It is not shown that wooden sheet piling was driven by direction of the representatives of the United States for experimental purposes independent of efforts to perform the contract or after it was apparent that it could not be driven at the points where attempts were made so to do.
   DowNex, Judge,

delivered the opinion of the court:

The plaintiff entered into a contract with the defendant, represented by the Secretary of the Interior, for the furnishing of labor and material and the construction of a dam and accessory structures on the lower Yellowstone River, a part of a reclamation project, and after a part of the work had been done, during which there was much delay, the contract was suspended, the contractor’s plant taken over, and the work completed by the United States.

The plaintiff seeks to recover for the value of work done and not paid for, retained percentages, value of plant, camp, etc., taken over, lumber taken and not paid for, and alleged experimental work not within the contract obligation. The defendant, by counterclaim, seeks to recover a large amount as the alleged cost to-the United States of completing the work in excess of the contract price. The plaintiff alleges that the suspension of the contract was unwarranted and in a replication to tbe counterclaim it alleges that the United States, in the completion of the work, departed from the specifications and did work of a wholly different character from that required by the contract.

It is contended by the plaintiff that the contract was not suspended (a term which seems to be peculiar to the Reclamation Service) by one authorized so to do — that is, the Secretary of the Interior. The procedure in connection with the suspension is set out in full in the findings, and therefrom it appears that the Secretary of the Interior authorized the action taken and thereafter approved it. The argument is that the power to suspend was in the Secretary, that he did not in fact suspend the contract, but that he authorized the engineer to suspend, and that such authority was based upon inaccurate information.

The Secretary of the Interior, as well as most Government officials having to do with varied and extensive governmental activities, must of necessity in many instances act through subordinates. We do not understand this proposition to be questioned, but rather the contention is that the Secretary did not in fact act, but authorized others to act, in effect delegating to them a discretion vested in him alone. If he had categorically directed one of the engineers to notify the contractor that its contract was suspended, no question would be made because he acted through a subordinate, but because of the manner of his action the question arises.

The work is shown to have been in Montana. The Secretary of the Interior and the Department of the Interior are located in Washington. Four engineers had to do with the work in different supervisory capacities. By them, through the Director of the Reclamation Service, he is informed that the president of the plaintiff company has refused to proceed with the work, and authority is asked to suspend the contract “in case he should not change his mind.” The condition quoted implied no discretion to be vested in the engineers. It rather contemplated an opportunity to the plaintiff to escape final action and sought to avoid the receipt of a positive order to suspend from the Secretary after, perchance, the plaintiff had by his action removed the cause therefor. The Director of the Reclamation Service, communicating the telegram of the engineers to the Secretary, recommended, “in order that the engineers may be able to act promptly should emergency require, as indicated in the telegram,” that “ the engineers be authorized to suspend the contract,” etc. The emergency “as indicated in the telegram” plainly referred to the contingency that plaintiff’s president “should not change his mind” as to proceeding with the work. This recommendation was approved by the Secretary and “ authority granted as recommended,” of which action by the Secretary one of the engineers was informed by wire.

In the meantime the president of the plaintiff company had been notified by the chief engineer that if he did not proceed with the work by noon of the following day recommendation would be made that the contract be immediately suspended and on the following day, presumably after noon, “ by authority of the Acting Secretary ” the contract was suspended.

There is no apparent contingency or uncertainty in the whole transaction except such as was dependent upon the action of the plaintiff. The ■ situation was as well understood and defined as if the Secretary had instructed one of the engineers to suspend the contract if the contractor did or refused to do a specific thing. Such a direction would have involved no delegation of discretion and would have been only such departure from a specific unconditional direction as the facilitating of business supervised from a distant point requires.

But if there remains any infirmity in the procedure up to this time, it is found that report was thereafter made to the Secretary of the suspension of the contract with the recommendation as to the completion of the work, at which time, the plaintiff having in the meantime protested in writing, the Secretary specifically ratified the action of the engineer in suspending the contract. We must conclude that the suspension was the act of the Secretary.

It is further contended that the suspension was not justified by the facts. We think we have no occasion to discuss this matter, since the paragraph of the specifications on the subject of suspension of the contract contains the provision that—

“ In the determination of the question whether there has been such noncompliance with the contract as to warrant the suspension thereof, the decision of the Secretary of the Interior shall be binding upon both parties.”

It is not competent for this court to review the action of the Secretary in the absence of an allegation and proof of bad faith or fraud or mistake so gross as to justify an inference thereof. United States v. Gleason, 175 U. S., 588; Carstens Packing Co. v. United States, 52 C. Cls., 430; Fitzgibbon v. United States, 52 C. Cls., 164; Plumley v. United States, 43 C. Cls., 266 and 226 U. S., 545, and cases cited.

Upon this feature of the case it is also urged that the information given the Secretary as to the refusal of the contractor to proceed with the work was incorrect and that the Secretary therefore acted on inaccurate information. The contention, if of force, must inevitably lead to the conclusion that the Secretary had no right to rely and act upon the report of the engineers in charge, but in every such case mus] first investigate the facts for himself or subject his action to review and possible annulment.

All contracts such as these necessarily contemplate supervision of the work by subordinates. This contract, no less than is usual, so contemplates. The specifications refer in terms to the chief engineer of the Reclamation Service or any of his authorized assistants, and it would indeed be a strange situation if, when a report is made to the Secretary by the chief engineer, the supervising engineer, the consulting engineer, and the project engineer, he must then, without any reason to assume bad faith or dereliction of duty on their part, discredit their report and investigate for himself before he can act. But, further, it seems to us that to make effectual the power given the Secretary to determine whether there has been such noncompliance with the contract as to warrant the suspension, he must be permitted to determine for himself the sufficiency of the evidence of such noncompliance. He acted, presumably in good faith, on such evidence as was satisfactory to him, and his action, at least under the facts shown here, is not subject to review. Our conclusion must be against the contentions of the plaintiff as to the suspension of the contract.

The determination of the question presented as to the authorized suspension of the contract has been important from the standpoint of correct conclusion rather than as affecting the final result, for we have found that in the completion of the work after the suspension of the contract the United States did not substantially comply with the specifications but deviated materially therefrom. This finding precludes a recovery by the defendants on the counterclaim and, on the whole case, disregarding some technicalities which might arise under the pleadings, entitles the plaintiff to a recovery on some of the items sued for. California Bridge & Construction Co., 245 U. S., 337.

In this view of the case the plaintiff is entitled to recover the items of $14,282.50, for work done and not paid for, retained percentages, etc., about which there seems to be no dispute.

The value of the plant, camp, and equipage taken over, at the time of the taking, is found to be $12,719.87. Its remaining value when the work was completed, is not found because not shown.

The rules applicable in such cases dependent upon the finding as to the proper cancellation of the contract and the completion of the work in accordance therewith are familiar. What is the proper rule in this case, the contract having been suspended by proper authority but the work not completed in substantial compliance therewith? The authority of the contract was, in case of suspension, to take possession of the plant and “ use the same to complete the work,” meaning, evidently, the work or such work as the United States was authorized to complete at the expense of the contractor. And, conversely, it would seem that the United States had no right to use the contractor’s plant for some other work which it might undertake different from that which the contractor was required to do. The conclusion reached as to the counterclaim of the defendants, predicated on the finding as to noncompliance with and material deviation from the specifications would seem to require the conclusion as to this item that the plaintiff is entitled to the value of the plant at the time it was taken over. There could bo no question in any event about the item of $281 for subsistence supplies.

Aside from the question raised as to the statute of limitations as against the item of $3,310 claimed for lumber taken but not paid for, by reason of the fact that it was first declared on in the amended petition, filed September 20, 1917, and not in the original petition, a question which need not be decided, it is not so proven as to justify a recovery thereon. Its injection into the case seems to have been an afterthought and the evidence in support of it is far from satisfactory. The other items as to alleged experimental work required and for which no payment was made is not satisfactorily proven. The circumstances seem rather to be against the plaintiff’s contention.

On the whole case we conclude the plaintiff is entitled to recover $27,283.37 and judgment is awarded for that amount.

Hay, Judge, Booth, Judge, and Campbell, Chief Justice, concur.  