United States Fidelity & Guaranty Co. of Baltimore v. United States

ROSS, Circuit Judge (after stating the facts as above). The findings, as well as the evidence, show many failures on the part of the contractor to perform his obligations under the contract, including his refusal to remedy defects pointed out to him by representatives of the government and his failure to remedy such defects within the stipulated time after the serving upon him of the required notice, and also his. failure to complete the work contracted for within the stipulated time. The taking of possession by the government of the premises, together with all materials, tools, and machinery thereon belonging to the contractor, was therefore fully authorized by the contract; but for the purpose, as is expressly declared in the contract, “at the expense of said party of the second part, to complete or have completed the said work, and to supply or have supplied the labor, materials and tools of whatever character necessary to be purchased or supplied by reason of the default of the said party of the second part; in which event,” proceeds the contract, “the said party of the second part and his sureties on the bond to be given for the faithful performance of this agreement shall be further liable for any damages incurred through such default and any and all other breaches of this contract.” While the complaint alleges that the subsequent contract made by the government with Owen for the construction of the mess-hall and kitchen, which Boggs' had failed to build and complete as he had agreed to do, was, except as to the time of completion thereof, based upon the same plans and specifications, and! was in all respects the same as the Boggs’ contract, the findings of fact made by the court below, as well as the evidence in the case, show such allegations to be far from true. The court expressly finds, what the evidence abundantly shows, that the contract between the government and t Aven and the plans and specifications upon which it was based “were different in many substantial respects from the contract, plans, and specifications between plaintiff and the said Augustus W. Boggs; that [616] the building required to be erected and actually erected by the said James H. Owen under his contract, plans, and specifications was different in many substantial respects from the building required to be erected by the said Augustus W. Boggs under his contract, plans and specifications; that $1,200 of the contract price, required to be paid and actually paid to the said James H. Owen under his contract applied to work wholly outside of the work provided for in the contract, between the said Augustus W¡. Boggs and plaintiff; that $500 of the aforesaid contract price required to be paid and actually paid to the said James H. Owen under his contract by plaintiff was for work and materials in excess of what was embraced and included in the contract between the said Augustus W. Boggs and plaintiff; that the cost of labor and building supplies was different in 1907 from their cost in 1905; that plaintiff waited from the 28th day of December, 1905, to the 22d day of January, 1907, before entering into a new contract for the construction of said building; and that by reason of the lapse of time and the changes in prices in the meantime, a comparison betwen the two contracts furnishes no basis for estimating the plaintiff’s damages in this case.” The government, pursuant to the terms of the contract between it and Boggs, byj' reason of his default, took from him the possession of the premises as well as all of his material's, machinery, and tools thereon for the purpose of having, at his expense, his contract fulfilled ; and for that his surety bound itself, but not for the fulfillment of any essentially different contract. It is true that by its contract with Boggs the government reserved to itself the right “to make changes, alterations or omissions from or additions to the work and materials herein provided for” ; that is to say, changes in, additions to, or omissions from, the work covered by the plans and specifications of the contract. This is plainly shown by the subsequent provisions of article 3 of the Boggs’ contract, in which the reservation occurs. It is, in the same clause, followed by these provisions: “The valuation of such work and materials (that is to say, such work and materials as might be embraced by the authorized changes and alterations), if not agreed upon, to be determined on the basis of the contract unit of value of material and work referred to, or, in the absence of such unit of value, on prevailing market rates, which market rates, in the case of dispute, are to be determined by the said Commissioner of Indian Affairs, whose decision with reference thereto shall be binding upon both parties; that no claim of damages on account of such changes or for anticipated profits shall be made or allowed; that the party of the second part (Boggs) shall not be allowed any additional compensation for labor or material unless he receives written authority from the Commissioner of Indian Affairs, and the price agreed upon before execution of the work; that no addition to or omission from the work herein specifically provided for shall make void or affect the other provisions or covenants of this contract, but the difference in the cost thereby occasioned, as the case may be, shall be added to or deducted from the amount of the contract; and that in the absence of any express agreement or provision to the contrary, no addition to or omission from the work herein specifically provided for shall be construed to extend the time fixed herein for the final completion of the work.” That reservation, in our opinion, affords no ground for holding the government entitled to make a substantially different contract with a [617] third party at the expense of the former contractor and his surety. And such was the ruling of the Supreme Court in a similar case. In speaking of a like clause in the case of United States v. Freel, 186 U. S. 309, 311, 317, 22 Sup. Ct. 875, 878 (46 L. Ed. 1177), the court said: “Coming, then, to the question of the effect on the responsibility of the surety of the supplemental agreement of August 17th,' we, agree with the Circuit Court and the Circuit Court of Appeals in holding that the alterations thereby caused were beyond the terms of the undertaking of the surety, and extinguished his liability. The seventh action had in view such changes as might be found advantageous or necessary in the plans and specifications. But the changes called for by the new agreement had no reference to the original plans and specifications, but changed the location of the dry dock, requiring the contractor to make additional excavations and connections with the water, at an increased expense, and gave an increased time of performance.” We do not understand the case just referred to (United States v. Freel) to be overruled by the very recent decision of the same court in the case of United States v. McMullen et al. (decided January 9, 1912) 222 U. S. 460, 32 Sup. Ct. 128, 56 L. Ed. -. In the present case not only do the findings show that the contract and the plans and specifications upon which it was based, subsequently made between the government and Owen, were different in many substantial particulars from the contract for which the plaintiff in error became surety, but that the government waited more than one year before entering into a new contract, during which time there was such a change in the cost of labor and building supplies as, according to the findings of the trial court, “the two contracts furnishes no basis for estimating the plaintiffs damages.” In the case of American Bonding Co. v. United States, 167 Fed. 910, 93 C. C. A. 310, the question here involved was carefully considered by us, and, being satisfied of the correctness of that decision, if is useless for us to pursue the subject further. Boggs’ surety is not, in our opinion, liable in this action for the reason that the government did not complete Boggs’ contract, as it had the right to do, but instead chose to have the structures erected in a subs! antially different manner, pursuant to the contract made by it with Owen. It results that the judgment must be reversed, and' the cause remanded, with directions to the court below to enter judgment for the defendant surety company on the findings. It is so ordered.