
    FRANK PIGEON v. THE UNITED STATES.
    [No. 14235.
    Decided February 23, 1892.]
    
      On the Proofs.
    
    A contract for dredging on a public work provides for payment by monthly installments; for the withholding 10 per cent, and for the annulment of the contract in the discretion of the defendants’ engineer. The officer in charge withholds the entire payment. The contractors refuses to proceed with the work. Eight months afterwards the officer annuls the contract and declares the moneys due thereunder forfeited.
    I. The forfeited 10 per cent reserved until the completion of the work in Government contracts must be treated as penalty and not as liquidated damages.
    II. The law requires the right of forfeiture to be exercised in apt time. If a cause of forfeiture be waived, and the contractor be allowed to proceed, it cannot be revived.
    III. The refusal of the defendants’ to pay in monthly installments, according to the terms of a contract which authorizes them to retain 10 per cent, gives the contractor the right to abandon further x>erformanee. The 10 per cent measures the limit of the amount which the defendants’ may retain by way of indemnity.
    
      The Reporters’ statement of tbe case:
    The following are the facts of this case as found by the court.
    I. On the 25th of October, 1880, the claimant and defendants entered into a certain agreement, which is correctly set forth in Exhibit A, annexed to claimant’s petition. Preceding said contract are the advertisement and specifications, which are also correctly set forth in said Exhibit A. After claimant entered upon the performance of said contract he proceeded with work until on the 15th day of June, when the time for completing contract was extended by said party of the first part until September 30, 1881. And again on the 27th day of September, 1881, the said party of the first part extended the time for completing said contract to the 30th day of November, 1881. The claimant, under said last-mentioned extension, continued to prosecute said work until the 5th day of October, 1881. All of extensions were at request of claimant.
    II. During the month of September, 1881, the claimant performed work on said contract which amounted to the sum of $3,500.03, and which was accepted by the agent and officer of tbc defendants in charge of the work. From the 1st of October, 1881, to said 5th of October the claimant performed other work, which was also accepted by the agent and officer of the defendants in charge of the work.
    III. On the 5th of October the defendants, through the engineer officer in charge, refused to pay the claimant the said stun earned by him in the month of September less the 10 per cent. The refusal of the officer in charge was based upon the apprehension of said officer that claimant would not prosecute the work with sufficient vigor to complete it within the time, to the prejudice and loss of the defendants. The officer was informed by claimant at the time the refusal was made that unless payment was made he (the claimant) would not be able to go on with the work. The officer in charge refused to give the claimant any assurance that he would be paid for the work done in October at the end of the month, or that he would be paid for the work done in November at the end of that month; and upon such refusals the claimant told the officer in charge that he would be compelled to quit work, which he did, on the 6th day of October, 1881.
    IY. The appropriation of $40,000 was sufficient to complete all the work provided for in the contract with claimant.
    Y. The following communication was addressed to and received by claimant in due course of mail:
    “United States Engineer Oeeice,
    “1125 Girard Street,
    “ Philadelphia, Pa., May 8th, 1882.
    
    “Mr. Frank Pidgeon, Jr.,
    “No. 116 Wall 8t., New Torh:
    
    “Sir: In conformity with the instructions of the Chief of Engineers, approved by the Secretary of. War, it becomes my duty to inform you that your contracts of October 25th, 188Ó, for dredging in the Schuylkill River and on Mifflin Bar are annulled, and that, in accordance with the provisions of those contracts, all amounts remaining unpaid thereunder are forfeited to the United States.
    “Respectfully,
    “WilliAM Ludlow,
    “ Captain of JSngineers, Pvt. Lt. Ool., U. 8. A?
    
    YI. Total amount dredged, 50,813 cubic yards. Of this, 2,884 cubic yards was at the rate of 34 cents, and the balance, 47,927 cubic yards, at 29 cents per yard, aggregating tbe sum of $14,879.39. Upon this work claimant bas been paid tbe sum of $8,961.70. Of said amount of yards 3,404 yards was redredged from tbe Mifflin basin by defendants, where it bad been temporarily deposited by claimant. Tbe redredging was worth tbe sum of $289.34.
    YII. Tbe claimant did not commence tbe work until about tbe 1st of May, 1881. It does not appear that tbe delay was caused in anyway by tbe acts of tbe defendants. The force and machinery used by tbe claimant were not adequate to dredge 800 cubic yards per day. At tbe close of tbe fiscal year, 30th June, 1881, tbe claimant bad dredged 8,240 yards, 3,404 of which were yet to be redredged from Mifflin basin. At tbe end of September 30, 1881, claimant bad dredged 40,920 in addition to tbe quantity dredged before tbe '30th of June, 1881. On tbe apjdication of claimant for tbe last extension, be promised to increase the capacity of bis plant and force, but did not materially do so.
    Yin. On tbe 11th day of October, 1881, the claimant addressed tbe following letter to tbe Secretary of War upon tbe subject of bis contract:
    “Philadelphia, Oet.llth, 1881.
    
    “ To tbe honorable The Secretary op War,
    “ Washington, D. O.:
    
    “ Sir : I respectfulty make application for tbe termination of' my contracts for tbe improvement of tbe Delaware Eiver at Miffin Bar and for the improvement of tbe Schuylkill Eiver, without prejudice to my receiving tbe retained percentages.
    “At the time of taking tbe contracts I bad good reason to expect to complete tbe same early in tbe season, so as to enable me to return to New York, where my home is (at Saugerties) before tbe severity of tbe season would prevent my doing so or make such return dangerous and expensive to me.
    “My expectations have not been fulfilled, as I have been greatly delayed in tbe work, at one time for weeks together for alleged defects in tbe dumping ground. This was unexpected to me, as there bad been no specification for tbe dumping-ground dike, and it was patterned after other dikes used by the Government.
    “ There have also been serious delays at the dumping ground [in] tbe return of my scows, which I have endeavored to supply in sufficient numbers to keep tbe dredges constantly employed.
    “I have earnestly endeavored to recover time lost by working long hours and by dumping on tbe night tides, but tbe officers in charge bad not deemed it best to do so, although I was willing to pay the extra expense of the night inspector.
    “I have lately had the indulgence of an extension of time until December 1, but as I have not received the amount of my estimate for the month of September I am embarrassed thereby, as my running expenses are very large.
    “I have heretofore done my work for the Government and have pleasure in referring to my record.
    “ I do not believe the Government would unnecessarily inflict loss upon me in these contracts, and this application is made with the understanding that contracts for the further improvement of these rivers at these points have already been made.
    “I am, very respectfully, your obedient servant,
    “FrankPidgeon, Jr.”
    IX. The application of Mr. Pidgeon to terminate the contract was not considered because of the hearing being delayed for an argument of his agent, Gen. Geo. H. Sharpe. Pidgeon thereupon, on December 20, made another application to the Secretary of War, in which he asked for payments in proportion to the progress of the work on such terms as the Department should on examination deem just. Action on it was, by order of the Secretary of War, deferred until Mr. Sharpe presented his argument. Gen. Sharpe still failing to present his argument, no further action was had until April 4,1882. The Chief of Engineers made the following indorsement on a letter of advice from Oapt. Ludlow suggesting the reletting of the dredging remaining of the Pidgeon contracts:
    “Office of Chief of Engineers, U. S. Army,
    
      “April 4, 1882.
    
    “Respectfully submitted to the Hon. The Secretary of War.
    “The question of the annullment of F. Pidgeon’s contracts for dredging in the Schuylkill Biver and at Fort Mifflin Bar, on the Delaware Biver, which were abandoned by him, and for which he desires payment without prejudice to his recovery of the retained percentage for faithful performance, was reported upon by this office Nov. 2, 1881, and final action upon it was deferred at the request of Gen. Geo. H. Sharpe, the representative of Mr. Pidgeon, until he could be heard in the matter.
    “Gen’l Sharpe has not, so far as known to this office, as yet given the question his attention, and as the season for active operations is at hand, I beg leave to recommend that Capt. Ludlow be authorized to issue advertisements, calling for proposals for the uncompleted portion of the work .covered by Mr. Pidgeon’s contracts, and that the money due or to become due, including tbe retained percentages, etc., in accordance witb tbe provisions of bis contracts, be forfeited to tbe United States.
    “Previous papers in tbe case are returned herewith.
    « H. G. Weight,
    “ Chief of Engineers, Brig, and Bvt. Mag. GenP
    
    Tbe Secretary of War made tbe following indorsement:
    “War Department, April6,1882.
    
    “Approved.
    “Bobert T. Lincoln,
    “ Secretary of WarP
    
    Gen. Sharpe, learning of this action, asked time to be beard upon tbe pending application of Pidgeon to be paid ratably for tbe work done by him, and also a delay of action respecting tbe proposed reletting of said work. Tbe case was soon after presented to tbe Secretary of War by Mr. Bead, an attorney for Pidgeon, and, after a bearing of tbe same, tbe Secretary of War reconsidered bis indorsement of approval of tbe suggestion of tbe Chief of Engineers of May 4 recommending tbe forfeiture of all moneys due and retained percentages, and amended it as follows:
    “War Department, May 17,1882.
    
    “Upon a reconsideration tbe within endorsement of tbe Secretary of War, made April 6, 1882, is amended to read as follows:
    “Tbe within two mentioned contracts, made by Frank Pid-geon, jr., bearing date October 25,1880, are hereby annulled by reason of said Pidgeon having failed to prosecute faithfully and diligently tbe work in accordance with tbe specifications and requirements of said contract.
    “ Captain Ludlow will be directed to give notice in writing to this effect to tbe said Frank Pidgeon.
    “ Tbe form of notification to Mr. Pidgeon, enclosed in Captain Ludlow’s letter of May 3,1882, to the Chief of Engineers, is hereby approved. * * *
    “Bobert T. Lincoln,
    “ Secretary of WarP
    
    Oapt. Ludlow, on May 26, 1882, in accordance witb tbe directions in tbe foregoing amended indorsement, gave notice in writing, by sending Mr. Frank Pidgeon, jr., a copy of tbe amended indorsement of tbe Secretary of War, notifying him that it was to take tbe place of those notices sent him May 8, 1882.
    
      Mr. F. Pidgeon, jr., acknowledged receipt of said notice June 1,1882.
    X. It does not appear that tlie claimant would have made any net profit on the balance of the work if he had performed it.
    It does not apj)ear that the G-overnmont suffered any damage by the defendant refusing to perform the rest of the work. The amount allowed by the court for the work not paid for is a reasonable compensation for the amount of work done by claimant and unpaid for.
    
      Mr. John 8. Blair and Mr. Silas W. Pettit for the claimant.
    
      Mr. William J. Bannells (with whom was Mr. Assistant Attorney-General Qotton) for the defendants.
   Weldon, J.,

delivered the opinion of the court:

The contract which is the foundation of this suit was made on the 25th day of October, 1880, by a duly authorized agent of the United States and the claimant.

It relates to a large amount of work in the improvement of the Schuylkill River, near the city of Philadelphia. By the terms of the agreement the claimant was to dredge from the bottom of that river 108,000 cubic yards of earth by the end of June, 1881, for which he was to receive 34 cents per cubic yard for a part of the work, and 29 cents per cubic yard for the balance. Although the contract was made on the 25th day of October, 1880, and was to be completed by the 30th of June following, nothing was done in the prosecution of the work until about the 1st of May, 1881. In June an extension of time for the completion of the contract, upon the application of the claimant, was made by the proper agent of the United States, and in September, upon a like application, the time for the completion of the agreement was again extended to the 30th of November, 1881.

The officer in charge, and the successor to the officer who made, the agreement on the part of the defendants, in August and September became dissatisfied with the progress of the work, but upon the assurance that more vigorous measures would be adopted made the last extension. On the 5th of October, 1881, the claimant made application to the officer in charge for the payment of the estimate for labor done during the month of September, which the officer refused to pay, upon the ground that the work was not progressing as it should, and that he would retain not only the per cent but the compensation for the work as an indemnity to the defendants for the faithful performance of the agreement. He was notified by the claimant that without payment he was unable to proceed with the work. The officer also refused to assure claimant that he would be paid for the work-he might do in October and November. Whereupon the claimant refused to proceed with the work, and nothing further was done.

This suit was brought to recover the 10 per cent retained, the amount due for work done, and profits for the portion remaining unperformed.

To the recovery of any of those items the defendants interpose the defense that the claimant violated his agreement, and that the failure upon "the part of the claimant to perform his contract in damages is much more than any amount which the plaintiff can legally claim for labor performed by him under the contract. Much evidence was taken for the purpose of showing that the prosecution of the work was materially retarded by the unwarranted interference of the officer in charge; that in consequence of the unauthorized construction of the agreement on the part of the Government the price to the claimant of the work was increased; and that in consequence plaintiff has suffered damages, which should be added to his compensation for the work actually done.

The defendants say: “ It will be conceded that the claimant will have a right to recover his retained percentages and unpaid earnings less such damages to the defendants as were incident to his failure to perform the work.”

In the case of Kennedy (24 C. Cls. R., 122) we held, on a contract of a similar nature, that the 10 per cent reserved until the completion of the work, though declared forfeited by the agreement in the case of its annulment, must be treated as a penalty and not as liquidated damages.” The case in 24 Court of Claims follows the doctrine announced in the case of Van Buren v. Diggs (11 How., 361), in which it is said:

“In the refusal of the court to admit the evidence thus tendered we think they decided correctly. It would have been irregular in the court to go out' of the terms of the contract and into tbe consideration of matters wholly extraneous,,and with nothing upon the face of the writing pointing to such matters as proper or necessary to obtain its construction or meaning. The clause of the contract providing for the forfeiture of ten per centum of the amount of the contract price upon a failure to complete the work by a given day can not be properly regarded as an agreement or settlement of liquidated damages. The term forfeiture imports a penalty; it has no necessary or natural connection with the measure or degree of injury which may result from a breach of contract or from an imperfect performance. It implies an absolute infliction, regardless of the nature or extent of the .causes by which it is superinduced.
“Unless, therefore, it shall have been expressly adopted and declared by the parties to be a measure of injury or compensation, it is never taken as such by courts of justice, who leave it to be enforced, where this can be done, in its real character, viz, that of penalty. In a defense like that attempted by the defendant in the Circuit Court, upon the essential justness and fairness of the acts of the parties, a positive immutable penalty could hardly be applied as a fair test of their merits.”

This case differs somewhat from the Kennedy case in this— in the Kennedy case, at the time of the declared forfeiture, the claimant was in full possession of the work, claiming the right to prosecute it; was interrupted in such prosecution by the forfeiture of the contract, and the assumption of possession on the part of the officers and agents of the Government. In this case-the claimant refused to perform the contract because of the failure on the part of the defendants, to keep, as he alleges, their agreement; and the forfeiture was not declared until the 2Gthof May, 1882, nearly eight months after the abandonment of the work on the part of the claimant.

Preliminary to the consideration of the question of the claim for compensation or damages on either side, we must settle the question which of the parties violated the agreement. The findings of the court eliminate all questions of the manner in which the officers in charge of the work for the defendants acted in the performance of their duties, as well as all claim for alleged improprieties upon the part of the claimant in the delay of the work; and the court has by those findings circumscribed the inquiry as to the right of the parties to, the time the work was abandoned, fixing the legal responsibility of each party because of and from that abandonment. At the time the officer in charge refused to pay for what bad been done, or give any assurance of payment of wbat might be done in October and November, 1881, he was not intending to forfeit the contract, but to secure indemnity for the Government against the chances of probable failure upon the part of the contractor.

The law requires the right of forfeiture to be exercised in strict pursuance of the power and in apt time. It can not be founded upon a fault once forgiven, and upon the faith of which forgiveness the derelict party has ventured forward in the performance of his duty.

This controversy, crystallized into its legal essence, involves the question whether the refusal of the defendants to pay in monthly installments gave the claimant the right to abandon the further performance of the contract so as to save all his legal rights in the agreement.

If a party is prevented by the other party from the performance of his agreement he is not only entitled to recover the contract price for what he has done, but he is entitled to be recompensed in whatever profits he might make by the execution of the contract. To him, in both elements, it becomes a chose in action, recognized and protected by the law with the same care it extends over the most valuable form of property.

This is the general principle of the law, sometimes subject to a limitation as to profits.

The claimant was not in the sense of absolute prevention interfered with by the Government. He might have invested his own funds in the enterprise, or he might have borrowed money to perform the agreement.

His condition might have been such, that without monthly . payments it was not practicable for him to proceed with the work. He had a right to assume from the inception of the work that he would be paid according to the requirement of the contract; and the failure of the Government to pay justified him in refusing to proceed on the 5th of October, 1881. Whatever might have been his faults up to that time, the Government having permitted him to proceed, having accepted the performance of the contract during the month of September, and having received the benefit of his labor during that period, it was not in its power to withhold the pay in order that it might be secured against the consequence of a probable or possible failure. The 10 per cent which by the terms of tbe agreement it bad tbe right to retain measures tbe limit of its power to secure indemnity.

In tbe case of Canal Company v. Gordon (6 Wall., 561) tbe Supreme Court says, in substance, as given in tbe syllabus:

“In a contract to make and complete a structure with agreements for monthly payments, a failure to make a payment at tbe time specified is a breach, which justifies the abandonment of tbe work and entitles tbe contractor to recover reasonable compensation for tbe work actually performed. And this notwithstanding a clause in tbe contract providing fox tbe rate of interest which tbe deferred payment shall bear in case of a failure.”

It seems to us that tbe law of this case fully authorized claimant to do what be did upon tbe failure of tbe defendants to pay according to tbe requirement of. tbe contract.

In that view of tbe rights of tbe parties it remains for us to inquire what shall be tbe judgment in this proceeding.

Tbe whole amount of work done by tbe contractor is 50.813 cubic yards; 2,884yardsat34 cents per yard, and47,927 yards at 29 cents per yard, making in tbe aggregate of price $14,879.39, upon which be has been paid tbe sum of $8,961.70. Of said amount of yards 3,404 were redredged by tbe defendants from tbe Miflin basin, where it bad been temporarily deposited by claimant. The redredging was worth the sum of $289.34, which, being added to $8,961.70, makes the sum of $9,251.04, which being deducted from the whole amount of work, leaves a balance of $5,628.30.

This sum represents the value of the work performed at the time the contract was abandoned, after deducting the amount of payment and the sum expended by the defendants in the removal of that portion of the excavation not fully removed by tbe claimant.

A legal question might arise as to the right of the plaintiff to recover more than the value of bis work, inasmuch as he could have proceeded under the agreement by investing his own money in the expense of tbe labor; but as the findings do not show that he would have made any profit on the unfinished work, that question does not arise.

The judgment of the court is that the plaintiff recover the sum of $5,628.30.  