
    SILAS MASON COMPANY, INC., WALSH CONSTRUCTION COMPANY, ATKINSON-KIER COMPANY v. THE UNITED STATES
    [No. 44659.
    Decided October 1, 1945.
    Plaintiffs’ motion for new trial overruled February 4, 1946]
    
    
      
      The Reporter's statement of the case:
    
      Mr. Samuel T. Ansell for plaintiffs. Messrs.. Ansellr Ansell <& Marshall were on the briefs.
    
      Mr. John B. Miller, with whom was Mr. Assistant Attorney General Francis M. Shea, for the defendant.
    
      
      Plaintiffs’ petition for writ of certiorari pending.
    
   Madden, Judge,

delivered the opinion of the court:

The plaintiffs, three firms of contractors, made a contract with the Government on July 16, 1934, for the construction of the “first development” of the Grand Coulee Dam and Power Plant on the Columbia River in the State of Washington. The consideration was an estimated one of $29,-339,301.50, the actual payments to depend on the number of units of excavation, concrete, etc., the plaintiffs having bid certain prices per unit of work. Work was begun in October 1934. Early in 1935 the Government decided that the dam should be built to its full ultimate height, and by a' change order assigned to the plaintiffs the job, considerably larger than the one for which they had contracted, of building the lower part of the ultimate complete project. The plaintiffs were paid approximately $40,000,000 for their work as so changed. It was intended that another contract would be let for the completion of the project so that that work could follow the plaintiffs’ completion of its job.

The plaintiffs completed their work on March 21,1938, one year and twelve days before the date set in the contract. Another contractor got the contract for the building of the rest of the project and completed it in 1941. The dam is 500 feet wide at the base, 550 feet high, and 4,300 feet long at the crest. It is the largest man-made structure in the world. It impounds the water of the Columbia River for 151 miles, to the Canadian border. It contains 10,500,000 cubic yards of concrete, of which the plaintiffs placed 4,524,000 cubic yards.

The plaintiffs worked more than 5,000 men at the peak of the work in three shifts. The Government had from 500 to 1,000 employees at the job. Discussions and controversies occurred as to whether the Government was, in its inspections and directions, requiring more of the contractors than the contract called for, or otherwise impairing their rights. Many of these controversies were settled at the site of the work. The contracting officer designated in the contract to act for the Government was the Chief Engineer of the Bureau of Reclamation, whose headquarters were in Denver. He was not often at the site of the work, where a “construction engineer” was in charge for the Government. The plaintiffs’ job superintendent did not pay much attention to the provisions of the contract papers that protests concerning matters in controversy be made promptly and in writing. Such written protests as he made concerning the matters here in litigation were temperate and well stated.

In November 1937, when the work was substantially completed, some 93 percent of the concrete having been poured, the plaintiffs addressed two communications to the Secretary of the Interior, who was the head of the department which had jurisdiction of the building of the dam. The second of these letters, dated November 22, contained an appendix setting forth sixteen items of claimed breaches of contract by the Government. The claims were based on asserted arbitrary and unreasonable requirements and interpretations made by the contracting officer and his subordinates during the course of the work, which had increased the costs of performance or had denied compensation to the plaintiffs for work done. On November 26 the plaintiffs’ counsel requested of the Secretary an opportunity to discuss the claims orally with him. On December 18 counsel was informed that under the provisions of the contract the claims had to be submitted to the contracting officer for his decision, and that the claims previously sent by the plaintiffs to the Secretary had been forwarded by him to the contracting officer with directions that he proceed with them under Article 15 of the contract. The letter suggested that any additional claims be sent directly to the contracting officer. On December 21, counsel replied that plaintiffs had not in terms invoked Article 15 because, in their view, it was “without binding force and effect in respect of the matters we have presented”; that the plaintiffs did desire, however, to try to reach a satisfactory administrative settlement; that “the methods and procedure to be adopted and the officials to be designated for bringing these matters under full and fair departmental consideration are, of course, for your determinationbut that “We assume that such methods and procedure will accord us a full and fair opportunity to be heard in person and by counsel and other representatives, and, upon such assumption, we shall be pleased to participate in such hearings in a spirit of helpful cooperation.”

Apparently because of the plaintiffs’ nonrecognition of the validity of Article 15, they sent ten additional claims direct to the Secretary, who forwarded them to the contracting officer and so advised the plaintiffs. Between February 14 and April 18,1938, three additional claims, and additional details in support of the claims previously filed, were filed with the contracting officer. Between March 4 and May 3 statements of the amounts of damages claimed, under all of the claims previously filed, were submitted. The amount involved in the claims sued for here is $5,283,526.28.

The plaintiffs’ counsel sought to have the contracting officer hear witnesses and counsel on behalf of the plaintiffs and give plaintiffs’ counsel an opportunity to examine the Government’s witnesses. The contracting officer denied these requests, and ultimately made his findings and decisions on the basis of the detailed statements of the plaintiffs in support of their claims, and the information which was available to him from the files of the job and his observation of the work as it progressed. Beginning with a letter of July 14,1938, plaintiffs’ counsel complained bitterly to the Secretary about the proposed procedure of the contracting officer, and what counsel asserted as the contracting officer’s intention to delay action on the claims, and his intention to decide them adversely to the plaintiffs. Counsel, in the first of these letters on July 14 requested the Secretary to direct the contracting officer “to submit to you his findings of fact together with all pertinent matters within sixty days from today, a period of time which we believe to be amply sufficient for that purpose.”

Counsel was advised that inquiry would be made as to whether the findings could be made within sixty days. On August 11 counsel repeated his earlier complaints and told the Secretary that it was his duty to appoint a representative other than the contracting officer to hear the claims and said:

We respectfully insist that such a representative be appointed by you; that we be permitted to present to him our evidence of the facts and our views of the law and the contracting officer be permitted to do likewise; and that each party be permitted to hear and examine the other’s witnesses.

Counsel was advised that every effort was being made to expedite the findings, but that the claims were extensive and the amounts involved were large. Another letter from counsel on October 12 was followed by a long telegram on October 23 to the Secretary, addressed to a hotel in Portland, Oregon, where he seems to have been stopping in the course of a trip. The telegram was highly accusatory of the contracting officer, and contained the statements: “When the findings of fact are made they will as such be inherently worthless. * * * There can be no justification for the procedure being used by Mr. Walter: It is clearly a ‘defense preparing’ and not a ‘fact finding’ procedure.” It again requested the Secretary to appoint a representative “whose duty it shall be to conduct a full and fair hearing and advise you of the merits of our claims.”

■The Secretary’s response, also by telegram, was in bad temper. It took exception to counsel’s assumption that his claims had been prejudged, and to his accusations of derelictions of duty on the part of persons in the department. It then indulged in a wholly irrelevant and improper reflection upon counsel with regard to using experience gained in former service of the Government for his personal benefit. There was some further correspondence between the Secretary and counsel relating to the exchange of telegrams. The contracting officer’s findings were issued on December 5,1938.

In the several communications addressed to the Secretary by counsel for plaintiffs while the claims were pending before the contracting officer, various statements were made concerning the purpose of the contracting officer, Mr. Walter, to construct a defense to the plaintiffs’ claims rather than to consider them on their merits. These statements all relate, apparently, to the same incident. The only sworn testimony relating to the incident is the answer “They are” made by plaintiffs’ counsel from the witness stand to the question addressed to him by other counsel for plaintiffs, “Are the things stated in your letters as occurring between you and officials of the Government true?” The question related to plaintiffs’ Exhibit I, a large compilation of correspondence. Because of the seriousness of the charge against the contracting officer, who, we are told, had died before the hearing, and the cryptic manner in which the charge was supported by the testimony, the matter needs careful examination. In the plaintiffs’ exceptions to the commissioner’s report, at page 302 of the record, occurs this statement, with no citation to any testimony or exhibit: ■ ■

(e) On July 2,1938, counsel and other representatives went to Denver and conferred with Mr. Walter and his first assistant urging action on the claims by the contracting officer and an early hearing. _ At that conference the contracting officer acquiesced in the statement of his assistant that any hearing upon matters of fact or law was superfluous and that time was necessary to prepare the best possible defense against the claims.

In counsel’s letter of October 12, 1938, to the Secretary, at page 252 of plaintiffs’ Exhibit I, in giving a chronological story of relevant incidents, counsel says, inter alia—

On May 19, 1938, we again went to Denver and conferred with Mr. Walter in an effort to obtain action.
On June 30,1938, we went to the Grand Coulee Dam, where Mr. Walter then was, and made the same effort.
On July 2,1938, the same trip, we also went to Denver and saw Mr. Harper, Mr. Walter’s chief assistant, on the same question.

In counsel’s letter of July 14, 1938, at pages 243, 244 of plaintiffs’ Exhibit I, counsel says:

The contracting officer has clearly indicated that he regards any hearing from us upon matters of fact or of law as unnecessary and superfluous and that it is his' intention to construct such defense against the claims as the evidence available to him, but not to us, may seem to him to justify.

In counsel’s exceptions, at page 303 of the record, he says of the Secretary’s testimony:

* * * nor did he know that Mr. Walter had said that time was necessary to prepare the best defense possible. * * *

In counsel’s letter of August 11, 1938, to the Secretary, at page 247 of plaintiffs’ Exhibit I, counsel says:

* * * We have been advised by the contracting-officer’s representative at the dam site that “the time is necessary to prepare the best defense possible.” It does not inspire confidence in departmental procedure as a means to settle claims, to observe a government officer charged by you to “find facts,” devoting his time to ere-ating the “best defense.” However, this is in accord with the attitude of the contracting officer throughout the life of the contract.

In counsel’s letter of October 12, 1988, at pages 251, 252 of plaintiffs’ Exhibit I, occurs this statement:

Mr. Banks, the contracting, officer’s representative at the dam, was present at that conference. •

This is the same letter referred to above which recited a conference in Denver with Mr. Harper, Mr. Walter’s chief assistant, to whom plaintiffs’ statement on page 302 of the record, also quoted above, attributes the statement about preparing a defense.

In counsel’s telegram of October 23, 1938, to the Secretary, he makes this statement, at page 259 of plaintiffs’ Exhibit I:

Mr. Walter has advised us that * * * it is his intention to construct such defense against the claims as the evidence available to him, but not to us, may seem to him to justify.

Upon the basis of the foregoing assortment of inconsistent statements, all supposed to be verified by the brief response “They' are,” to the question whether they, as well as other contents of a collection of correspondence, were true, we are asked to find intentional and gross dereliction of duty on the part of a public officer now dead. We could not possibly make such a finding.

As we have said, the contracting officer issued his findings on December 5, 1938. They comprise a large volume, plaintiffs’ Exhibit J, but by far the greater part of the volume consists of copies of the plaintiffs’ claims and supporting statements. The study of the problems involved and the preparation of the decisions would, however, have taken a good deal of time. As the plaintiffs knew when they agreed to submit their claims to him, his principal job was that of being Chief of Engineers of the Bureau of Reclamation, and his decision of claims such as these would have to be done, within reason, without too greatly interrupting his current work. We. think the plaintiffs’ impatience was largely due to the fact .that they had been advised by counsel that, although they had agreed to submit these claims to the contracting officer, their agreement was not binding, and their having to do so was only an irritating delay. Counsel was desirous of getting the claims before some other person in the department, preferably a lawyer, who had had no previous connection with the problems and could therefore reach an independent judgment. This desire is entirely understandable. The impediment to it was that his clients had agreed to something quite different, with full knowledge that the contracting officer who would decide their claims in the first instance under Article 15 would be the same person who had already, while the job was in progress, taken a position on most of them. It was natural that counsel’s repeated casti-gations of the very procedure to which his clients had agreed, and of the officials who regarded ■ themselves as bound by that agreement, though counsel did not, produced an accumulation of annoyance which resulted in an explosive, and, in part, improper, communication.

The Government contends that the plaintiffs neglected to file written protests within the short period set by the contract, and are, for that reason, barred from recovery. It is suggested that the contracting officer, by accepting and passing on the claims, though presented late, waived the defense. The contracting officer’s findings, in some instances, made pointed references to the lateness of the filing, showing that he was aware of the provision of the contract and that it had not been fulfilled. He stated no final grounds upon which he placed his denial of the claims, which were all denied except one small one, so it cannot be determined whether lateness of protest was a ground of any of his decisions. In view of what we conclude hereinafter concerning the appeal to the head of the department, it is not necessary to decide and we do not decide whether the claims were made late and, if so, whether there was an effective waiver of the lateness.

As we have said, the contracting officer issued his findings on December 5, 1938. On January 4, 1939, the plaintiffs took an appeal to the head of the department, the Secretary, though restating their position that they were not bound by

Article 15, which accorded finality to the decision of that official. The Secretary on January 19 offered counsel the opportunity to present additional evidence or argument. Counsel on January 26 asked for a personal conference with the Secretary. The Secretary arranged for a conference with Solicitor Margold, which counsel had on February 6. On February 7 counsel wrote the Secretary criticizing the procedure which, he said, the Solicitor had proposed. This may have been due to a misunderstanding, but in any event the Solicitor wrote counsel on February 11, advising him that “circumstances have unexpectedly arisen which require me immediately to leave Washington for California and may delay my return for a few weeks”, and further saying, inter alia,

I have decided to grant, without any qualification, the request which you made during your personal conference with me last Monday for a full and complete hearing of the merits of this controversy. You will be at liberty fully to present all the oral and written testimony you deem pertinent to your case and to cross-examine any witness or witnesses that may be offered on behalf of the Government.

The Solicitor hoped that the Department of Justice would be willing to present the Government’s side of the case in the hearing, and he advised counsel in his letter that “it seems likely that the proposed arrangement can be effectuated.” Counsel replied to the Solicitor on February 16 quoting the Solicitor’s statement as to proposed procedure and saying:

We have the honor to inform you, and we have also advised the Secretary of the Interior, that your decision as above quoted is entirely agreeable to us.

When counsel for plaintiffs visited the Department of Justice to arrange for the hearings he was advised that that Department would not take part in the hearings except that an attorney could “attend the hearings in the capacity of an observer and as an adviser of the Department as to whether the procedure accorded to our clients the rights to which the Department of Justice may believe them to be entitled under the contract.” The language just quoted is from a letter of plaintiffs’ counsel to the Acting Secretary of the Interior, dated February 27. That letter then said:

We feel it our duty to say that the net result of our long-continued efforts to be granted a full and fair hearing and to be advised of the procedure instituted in the Department is essential to a full and fair hearing is the statement by the Solicitor in his February 11th letter that he has decided to grant without any modifications the request made by us for a full and complete hearing of the merits of this controversy. As stated in our letter to the Secretary of February 7th the procedural elements are of the highest importance as essentials of a full and fair hearing. It is our view that to establish essential procedure is an obligation laid upon the Department and that its failure to perform that obligation constitutes in effect a denial to us of a full and fair hearing to our great injury.

On March 9, the Acting Secretary wrote counsel saying, inter alia:

* * * I am unable to see that the result of your conference with officials of the Department of Justice as outlined in your letter in any way affects the hearing which is being accorded you, except insofar as it concerns the establishment of a date for such hearing.
It appears that there now exists no reason why a date may not be set for the inauguration of the hearing. Accordingly, in the near future you will be notified by the Solicitor as to a date which is agreeable to him ana advised as to the procedure which is deemed appropriate. Your desires with regard to any alteration in the established date, as well as any details concerning the procedure to be followed, will, of course, be given full consideration.

Solicitor Margold did not return to Washington until May 11. There having been no communication between the parties or inquiry by plaintiffs’ counsel from March 9 to May 1, 1939, the plaintiffs on the latter date filed their original petition, of seventy-six printed pages, in this suit, and counsel wrote the Secretary that they had done so, saying

With reference to the claims of the joint contractors for the construction of the First Development of the Grand Coulee Dam we beg to advise you that the contractors, compelled by the adverse attitude and the long-continued failure of the head of the Department to proceed to effective action (a situation which, by reason of being superimposed upon the arbitrariness and dilatoriness of the contracting officer, the more clearly reveals the futility of further efforts for redress by you) have this day filed suit against the United States in the Court of Claims.

Upon the facts recited above, we think that the plaintiffs abandoned, without justification, the administrative procedure which they had, in their contract, agreed to follow. They are not, therefore, entitled to sue here. There was nothing in their dealings with Solicitor Margold which gave them reason to suppose that they would not be accorded a full and fair hearing, and within a reasonable time. In his letter of February 11 he had told their counsel that he had been called away and would not be back for a few weeks. For a “few” weeks to turn out to be eleven, the time between February 11 and May 1, when counsel filed this suit, is not so unusual in the experience of lawyers that counsel had any reason to suppose that the delay indicated a repudiation by the Solicitor of his agreement to conduct a hearing, and to proceed upon that supposition without any inquiry as to what the facts were.

It cannot be validly urged that the plaintiffs were excused from persisting in their appeal to the Secretary by the acrimonious exchange of messages between the Secretary and plaintiffs’ counsel. This exchange had taken place before counsel filed his appeal, and before he approved as “entirely agreeable” the proposed arrangement for the procedure in hearing the appeal. Counsel did not then think that the plaintiffs could not have a fair hearing on the appeal and, as we have concluded, nothing occurred thereafter which was a reason for changing that opinion.

We do not decide whether the Secretary’s decision, if the plaintiffs had not abandoned their appeal to him would or would not have been final, or would have foreclosed resort to this court on the merits of the claims. The plaintiffs agreed to submit their claims first to the contracting officer, and then, if they were dissatisfied with his decision, to the head of the department. They also agreed that the latter official’s decision should be final. If, because of the statute defining the jurisdiction of this court, the agreement as to finality was not binding upon the plaintiffs, that fact would not invalidate the rest of the agreement, which could have a useful purpose without the provision for finality. The Government had a right, and the plaintiffs had a right, if both were willing to agree to it, to keep their disputes out of litigation to whatever extent the law would permit. If they could be settled in the Department, by being brought to the attention of responsible officials, that would be desirable. Plaintiffs’ counsel, though insisting from the outset of his connection with the case that Article 15 of the contract was not binding, pressed for an opportunity to bring his evidence to the attention of responsible officials of the Department. He had a right, under the agreement, to do so, and the Government had a right that he should do so, to give it an opportunity to avoid the delay and expense of litigation. If, after this was done, the law, in spite of the agreement, still permitted litigation, that would not prove that the law frowned upon attempts, such as the plaintiffs made until they decided to abandon them, to keep their claims out of court, or upon agreements, such as Article 15, that such attempts would be made.

We recognize that there may be disputes to which, by fair construction of Article 15, it is not intended to apply. For example, in the form in which Article 15 is frequently written, it applies only to disputes concerning “questions of fact.” When so written, it would not, of course, bind the contractor to resort to, nor the Government to accord, administrative determination of disputes concerning questions of law. But Article 15 as written in the plaintiffs’ contract applied, except as to labor issues not here involved, to “all * * * disputes concerning questions arising under this contract.” We think, therefore, that the plaintiffs were required to submit all the disputes upon which this suit is based, to the stipulated administrative procedure. This is, of course, what plaintiffs insisted upon, though disclaiming any obligation to do so, until they abandoned the effort. They held the same view here expressed, that disposition of the disputes here involved could be made in the Department, and it would be useful and economical to dispose of them there, if possible.

. The contracting officer decided that the plaintiffs were entitled to $1,099.80, which had been deducted, as liquidated damages, from compensation otherwise due them. See find- ' ing 28. Under Article 15 his decision was final, since only the contractor is given the right to appeal. The Government does not contest the correctness of the- decision, and the plaintiffs may recover this amount.

In the plaintiffs’ thirtieth cause of action they sue for $125,120, which the contracting officer deducted from compensation otherwise due the plaintiffs, with the expectation that the money would be spent by the Government to repair the drainage facilities leading out of Rattlesnake Canyon. The facts are related in finding 29. The need for the repair did' not develop, and it is now known, though it was not known when the contracting officer made his decision, that the repair will never be made. Since his decision must, to have been fair, have been based upon a mistaken assumption as to future events, and since to allow it to stand would leave the plaintiffs’ money in the Government’s treasury, we conclude that the decision was not intended to be, and was not, final, and the plaintiffs may recover the amount deducted. The plaintiffs did not lose their right in this claim by their failure to appeal from this decision, because the abandonment of the Government’s intention to spend the money to repair the drainage facilities, which abandonment gave the plaintiffs a right to the money regardless of the merits of the controversy in other respects, did not occur until after the period for appeal had expired.

The plaintiffs may have a judgment for $126,219.80. It is so ordered.

Whitakee, Judge; LittletoN, Judge; and Whaley, Chief Justice, concur.

Jones, Judge, took no part in the decision of this case. 
      
       The article is quoted in full in finding 14.
     