129 Ct. Cl. 8 | Ct. Cl. | 1954
Lead Opinion
delivered the opinion of the court:
The plaintiff, a Tennessee Municipal Corporation engaged in the business of supplying water, on April 23,1942, entered into a contract to supply water to the Berry Hills Air Crew Classification Center, a Government installation located near Nashville, Tennessee. The plaintiff sues for profits lost because the Government did not, during the period that the contract was in effect, take all of the water which it used from the plaintiff, as the plaintiff claims it was obligated to do, but took most of its water from another supplier.
The Classification Center was being constructed in 1942. It was at first expected that water would first be required in September or October of that year. Some time before April 23,1942, the date of the plaintiff’s contract, the Government’s contracting officer had negotiated with the plaintiff about a contract, and the plaintiff had stated what its rates would be. Four or five days before April 23, the contracting officer had made a contract with the City of Nashville for the supply of water at the project. Two local newspapers had reported the award of that contract to the city, and the plaintiff’s managing officer, Mr. Saindon, had seen those newspaper reports.
A few days later, the Government’s contracting officer Colonel Walsh called Mr. Saindon in and told him that if he would figure closely, they might be able to make a contract. He turned Mr. Saindon over to subordinate civilian officials, and the contract here in suit was agreed upon and signed. The contracting officer had in mind that water would be needed by July 1942 instead of September or October as earlier contemplated; that the City of Nashville would not be able to supply the needed amount of water at the required pressure as early as in July, and that water would be taken from the plaintiff until the city was ready to supply it, the city’s rates being substantially lower than the plaintiff’s rates. But none of these thoughts which were in Colonel Walsh’s mind were imparted to Mr. Saindon.
The plaintiff’s contract called for the expenditure of $28,000 in necessary facilities to furnish the water. It provided that the Government would advance $18,000 of this amount, and repay itself by deducting 10 percent from its
Article X of the contract was as follows:
SERVICES TO BE RENDERED
• Contractor shall supply the water required by the United States for use at the project.
The Government began using water furnished by the plaintiff in July of 1942. At first it took all or most of its water from the plaintiff but, when the facilities of the City of Nashville were completed, it began to take more water from the city and less from the plaintiff until October 1946, when it ceased taking any water from the plaintiff. On June 12,1947, it gave the plaintiff notice of the termination of the contract. The Government had not, during the period of the contract, taken enough water from the plaintiff to recoup its advance of $18,000 by the deduction of 10 percent from its water bills.
The Government would have us interpret Article X of the contract as meaning that the plaintiff was to furnish such water as the Government asked for. As language, standing by itself, it does not mean that. It says that the contractor is to supply the water required l>y the United States for use at the project. If it had said water required it might be argued that it meant some of the water, or such of the needed water as the Government might choose to take from this supplier. But the water required does not leave room for that interpretation. It is not physically possible that the water required could be furnished by the plaintiff, and at the
In the preceding discussion we have assumed that the word “required” as used in the contract, was synonymous with “needed.” A considerable number of decisions have dealt with variations of the word “require,” when used in contracts. In Edison Company v. Thacher, 229 N. Y. 172, 128 N. E. 124, the court held that a contract by A to furnish cover castings “as required” in B’s business for a period of twelve months bound A to furnish and B to take all such covers which B used within the period. In Ehrenworth v. Stuhmer and Co., 229 N. Y. 210, 128 N. E. 108, 24 A. L. R. 1354, a contract whereby A agreed to furnish to B as much of a specified kind of bread “as he would require for his customers” as long as the parties remained in business, bound A to furnish and B to take all such bread which B used on his route. In Minnesota Lumber Co. v. Whitebreast Coal Co., 160 Ill. 85, 43 N. E. 774, the contract provided that A should buy “its requirements of anthracite coal for the season of 1886-1887” from B. The court said that the amount of coal “required” for the business of that season was the amount of coal needed for the business, and that the contract bound the parties to furnish, and accept, all the coal needed. To the same effect is Fuchs v. United Motor Stage Co., Inc., 135 Ohio State 509, 21 N. E. 2d 669. In Wells v. Alexandre, 130 N. Y. 642, 29 N. E. 142, the contract did not use any variation of the word “require,” but the court, in discussing the contract, itself used the word “requirements” as synonymous with “needs.”
The Government cites the case of Merriam v. United States, 107 U. S. 437. In that case the contract did use the expression “as may be required” but the Supreme Court, in interpreting the expression as not equivalent to “as may be needed,” or “as may be used,” expressly found that the construction of the contract asserted by the plaintiff could not have been his understanding of the contract when it was made, but was an afterthought. The plaintiff was one of several bidders on a contract to supply oats, and several contracts were awarded to different parties for parts of the en
In Converse, et al., v. United States, 69 C. Cls. 670, the Government agreed in a dredging contract to furnish the contractor a specified amount of fuel oil in addition to a money compensation for each cubic yard dredged, the oil to be furnished “as and when required.” The contractor used electric power for some of its work, and therefore did not need the oil, but nevertheless claimed that it was entitled to receive it. The court held that it was so entitled, since otherwise it would have been deprived of a part of the consideration for its dredging work. To the Government’s contention that the word “required” meant “needed,” the court said that it is sometimes so used, hut more often is used in the sense of demand, request, or ask of right.
In Tayloe v. United States, 58 C. Cls. 470, affirmed, without opinion, 267 U. S. 576, the contract provided that the plaintiff would furnish teams for use on a Government project “as may be required.” Other similar contracts were made with other persons, and the Government also had its own teams and trucks on the job. The Government’s officer in charge, when work was slack, laid off the teams of contractors on the basis of seniority, that is, the teams last employed were first laid off. The plaintiff sued because his teams were laid off while the Government’s teams, and, to some extent, the teams of other contractors were retained. This court, in its discussion, used the word “required” as if it were the equivalent of “needed” but refused to attempt to substitute its judgment for that of the officer in charge as to whether and how many teams were “required.”
In all the “requirement” decisions discussed above, the courts have reached conclusions which are obviously sound, without attempting to fix some meaning of the word “require” and its variations to fit all cases, as if they were writ
We, in the interpretation of contracts, have felt free to look at the circumstances for enlightenment as to the intention of the parties. Among the circumstances here is the fact that this is a contract to supply water to a Government project. If it were to supply potatoes, or lumber, one could easily imagine several possible supplieis, and might, yielding to strong evidence of intention, obliterate the the from the contract. But the likelihood of two or more suppliers of water installing facilities to put their water in the same pipes at the same time is indeed small.
An important circumstance is that Mr. Saindon had read in the papers of the earlier contract made with the city. Was he obliged to believe that that report was true, or that that contract was effective, when he was called in and asked to make a contract about the same subject matter ? Was it his business to ask the Colonel if he really knew what he was doing? He testified that he did not intend to make a contract subject to the right of some other contractor to absorb a part or most of the benefits of the contract, and that no one remotely suggested to him that he was doing such a thing. That testimony was uncontradicted; our Commissioner believed it, and we have no reason not to accept it.
If it is thought, as the contracting officer seems to have thought, that Mr. Saindon “should have been on notice” of the city’s contract, the short answer is that there is no doctrine in the law which treats one as knowing what he did not in fact know, except when he is a person who asserts that he is an innocent purchaser who should have priority over existing equities or unrecorded titles.
We have, then, a contract with a plain, an unusually plain meaning. We have a Government contracting officer whose intention, completely unexpressed, is contrary to that meaning. We have the other contracting party, who did not write or compose the language of the contract, intending that the contract mean what it said. These being the circumstances,
On March 3,1943, the plaintiff protested the action of the Government taking water from the city. The Government responded, denying any obligation to take water from the plaintiff in any amount and saying that if the plaintiff would request, in writing, the termination of the contract, the Government would consider terminating it if it could be shown that losses were being sustained by the plaintiff and that the termination of the contract would not be a detriment to the interests of the Government. The plaintiff did not request that the contract be terminated. The Government urges that the plaintiff thereby acquiesced in the Government’s interpretation of the contract.
We see nothing in this contention. In the first place, the Government did not offer to terminate the contract. It attached conditions to its statement which could hardly have been satisfied. Of course it would have been detrimental to the interests of the Government to have terminated the contract. It had, for nothing, a second available supply of water, which had to be ready to serve it if it called for service. It would have been foolhardy to have given up that privilege, and, on second thought, it would seem that it would not have done so. Further, there was no reason why the plaintiff should have requested it to do so. It had its facilities in and its money expended. Unless it had a pressing need to salvage those facilities for use elsewhere, it was better to hope that things might take a turn in which the Government would use more of its water, than to close out even that possibility, within less than a year after it had gone to all the trouble and expense necessary to get ready to furnish the water.-
For the first time, at the taking of evidence in this case, the Government contended that the plaintiff would have been unable to fulfill its contract, as the plaintiff interprets that contract. The plaintiff installed its facilities in complete
The parties have stipulated that, by reason of the Government’s failure to take all of its water from the plaintiff, the plaintiff lost profits in the amount of $10,945.73. The plaintiff is entitled to a judgment for that amount.
It is so ordered.
Dissenting Opinion
dissenting:
I am unable to agree with the conclusion reached by the majority.
The case turns on the construction of Article 10 of the contract between plaintiff and defendant, which reads as follows:
Contractor shall supply the water required by the United States for use at the project.
The majority of the court has construed the phrase “the water required” to mean “all the water needed.”
The word “required” is a very flexible term. Its meaning depends largely upon the circumstances surrounding its use and the setting in which it is used. According to Black’s Law Dictionary, 4th Edition, 1951, it is defined as follows:
Require. To direct, order, demand, instruct, command, claim, compare, request, need, exact.
As was stated by the Supreme Court in the case of Merriam v. United States, 107 U. S. 437, 441:
It is a fundamental rule that in the construction of contracts the courts may look not only to the language employed, but to the subject-matter and the surrounding circumstances, and may avail themselves of the. same light which the parties possessed when the contract was made.
Let us examine the circumstances under which this contract was executed. In early 1942 the War Department planned a defense project near Nashville, Tennessee. The design contemplated water supply requirements of about 1,360,000 gallons per day, or 950 gallons per minute, with 50 percent increased capacity during peak loads. Both the plaintiff and the City of Nashville submitted quotations and the contract was awarded to the city. Notice of the award was carried in two local papers, and it was seen by a representative of the plaintiff.
It had been anticipated that water would first be needed under the contract with the city during September or early October 1942. However, a change in plans necessitated an earlier date for at least partial occupancy in midsummer. It was found that the city could not possibly complete the work involved in its contract, including the construction and installation of a new 16-inch water main so as to provide water at the earlier date. A representative of the defendant then went to the plaintiff to ascertain if it could furnish the water, and a contract was entered into by the terms of which plaintiff agreed to furnish water for 18 cents per hundred cubic feet, the rate to be reduced to 15 cents after a certain minimum had been used.
The plaintiff contends that under these circumstances the defendant was obligated to obtain from it all the water it used not only for the period of construction, but also during operation, to the exclusion of any other source of supply. The defendant contends that it was obligated to take only such amounts as it might elect to take.
In my judgment the facts of this case very much favor the construction placed on the language by the defendant. In the first place, the plaintiff had submitted bids on the original contract to supply the water for the project generally. That contract had been awarded to the City of Nash
This was a utility company. I have been inclined to consider people who run utility companies as being somewhat experienced businessmen. Does anyone believe that having submitted quotations for the furnishing of water, and having seen a notice of the awarding of the contract in the paper, plaintiff was still in darkness as to the existence and terms of the city contract? If it did not find out all about those terms its officials were babes in the woods in a business sense, and if thpy were, they had no business going into the woods.
I can reach no other conclusion than that these good businessmen who were operating a successful utilities company knew within 24 hours every provision in the city contract. Then, too, another circumstance tends to bear out the defendant’s construction of the language used in the contract. In order for the plaintiff to supply the water needed for the building of the project it was necessary to have additional plant facilities which the plaintiff was in a position to construct immediately, but according to the contract with the defendant those facilities would cost $28,000. The Government agreed to advance $18,000, thus making it necessary for the plaintiff to furnish only $10,000, which was the estimated scrap value of the additional facilities. The advance was to be gradually recouped by deducting 10 percent from the water bills. If the parties had intended that all of the water that was to be used or needed by the defendant throughout the operation of the project was to be covered by the contract with the plaintiff then certainly it would not have been necessary for the defendant to make an advance payment. The very fact that the Government was willing to make this advance payment tends to indicate at least that it was not certain just how long the plaintiff would be called upon to furnish water to the defendant.
The plaintiff was not taking much chance since regardless of whether much, little, or any water was taken it would have new plant facilities constructed at scrap prices.
The majority opinion cites a great many cases, most of which can be clearly distinguished, and practically all of which recognize the shaded meaning of the word “require” as used in contracts under different circumstances. A number of cases are also cited by the defendant showing the different meaning as the term is used under different circumstances. I quote from the case of Converse v. United States, 69 C. Cls. 670, 679:
It is true that the word “require” is sometimes used as synonymous with the word “need,” but more often the word “require” means to demand, request, or ask of right, and numerous authorities could be cited to show that in similar cases the courts have given it this meaning. [Citing cases.]
I find that the conduct of the parties and the circumstances under which the contract was made negatives the meaning placed upon it by the majority. I believe that the interpretation placed upon it by the parties’ own conduct should govern in the circumstances of this case.
It may be added that it is doubtful whether plaintiff has shown that it was able to furnish all the water which was needed by the project throughout its operation. The plaintiff was furnishing water to a number of other customers and the evidence indicates that it was not equipped to furnish its regular customers and the total amount which the needs of the project would call for.
At any rate, since it appears that the plaintiff entered into this contract fully cognizant of the outstanding contract with the city, and since it knew or should have known that the defendant was contracting to pay it for water at rates 50 percent higher than its contract with the city called for, and since it demanded as a requirement that the defendant advance all the cost of the additional construction except its scrap value, and since early in 1943 in response to a letter of protest by the plaintiff against the defendant’s
Judge Whitaker agrees with the foregoing dissent.
FINDINGS OF FACT
The court, having considered the evidence, the report of Commissioner Currell Vance, and the briefs and argument of counsel, makes findings of fact as follows:
1. The plaintiff is a municipal corporation, organized under the laws of Tennessee, with its principal place of business in the city of Nashville, Tennessee. Mr. H. C. Sain-don is, and was at all times pertinent hereto, the manager and secretary-treasurer of the plaintiff. Plaintiff is a water utility, sometimes referred to as Radnor Water District.
2. On April 23, 1942, the defendant, through Col. O. E. Walsh, contracting officer, acting for the Corps of Engineers, U. S. Army, entered into a contract with plaintiff for furnishing water for the Berry Hills Air Crew Classification Center, located near the city of Nashville. The contract provided for the installation by plaintiff of certain facilities estimated to cost approximately $28,000, specified in an appendix to the contract. Of this amount of $28,000, plaintiff was to furnish $10,000 and the defendant $18,000, which latter sum was to be recouped by defendant by withholding 10 percent of all bills for water supplied by plaintiff.
3. Pertinent provisions of the contract were as follows:
ARTICLE I
FACILITIES TO BE FROVIDED
1. The Contractor shall proceed to acquire or construct all necessary equipment, materials and rights of way needed for Contractor’s New Facilities, which are described more fully in Appendix “A” attached hereto and made a part hereof.
*20 ARTICLE VI
GENERAL PROVISIONS
* * i’fi * *
3. Disputes. All disputes concerning questions of fact arising under this contract shall be decided by the Contracting Officer subject to written appeal by the Contractor within thirty (30) days to the Chief of Engineers, whose decision shall be final and conclusive upon the parties hereto.
ARTICLE VII
1. This contract shall take effect as of the date of execution thereof and continue until further notice. Notice of intention to terminate this contract shall be at the option of the United States and shall be given in writing by the Contracting Officer to the Contractor not less than ninety (90) days in advance of the effective date of termination.
ARTICLE IX
DESCRIPTION OE FACILITIES TO BE PROVIDED
The facilities to be provided for supplying water under this contract shall be sufficient for furnishing the project 1,500,000 gallons of water per day under a minimum continuous operating pressure of 50 pounds per square inch.
article x
SERVICES TO BE RENDERED
Contractor shall supply the water required by the United States for use at the project.
ARTICLE XXI
RATES
The rates to be paid by the Government to the contractor for water consumed each month under this contract shall be eighteen (18) cents per one hundred (100) cubic feet up to and including one hundred thirty three thousand six hundred and eighty (133,680) cubic feet, and fifteen (15) cents per one hundred (100) cubic feet for all water consumed over one hun*21 dred thirty three thousand six hundred and eighty (133,680) cubic feet.
4. Some 4 or 5 days before the date of plaintiff’s contract, a similar contract had been entered into with the city of Nashville for supplying water to the Berry Hills Air Crew Classification Center. News of the execution of said contract was published at the time in two Nashville daily papers, and those articles were seen by Mr. Saindon.
5. The Government began using water furnished by the plaintiff in July of 1942. It continued to use and pay for water from the plaintiff over a period of years. However, as the city of Nashville facilities were completed, the Government began to take more water from the city and less from the plaintiff until October 1946, when it ceased taking any water from plaintiff, and thereafter took all water needed from the city of Nashville.
By a written notice of June 12, 1947 to plaintiff, the defendant notified plaintiff of the termination of the contract, pursuant to Article VII thereof.
6. The plaintiff protested the action of defendant in taking water from the city of Nashville by letter of March 23, 1943. In response, the Corps of Engineers wrote plaintiff on May 1, 1943, denying liability of the Government to take water in any amount from plaintiff and stating that that office upon receipt of a letter from the plaintiff requesting termination of the contract would consider terminating the contract if it could be shown that losses were being sustained by the plaintiff and that the termination of the contract would not be a detriment to the interests of the Government. The plaintiff did not make a request to the Government that the contract be terminated.
7. Through its attorneys, plaintiff in writing, on October 24, 1947, protested the failure of the Government to take from the plaintiff’s system all the water used at the project during the period of the contract.
8. Thereafter, on May 17, 1948, Robert W. Logan, contracting officer, in writing issued his findings of fact and determination of the claim, which because of its length is not reproduced here. Summarized, the pertinent findings and conclusions of such determination were as follows:
(b) The project was still under construction as of April 23,1942.
(c) The first water contract was awarded to the city, the second to plaintiff.
(d) Plaintiff’s contract was to procure the Government’s requirements at the project for construction purposes.
(e) The city’s water pressure, prior to- completion of a booster station at the project, was inadequate for construction purposes. ■
(f) Since December 1942, the need for higher water pressure was reduced as construction neared completion.
(g) Plaintiff’s claim was for lost profits.
(h) Plaintiff knew or should have been on notice that the Government had a prior contract with city and that construction of city’s supply lines was in progress.
9. Plaintiff thereafter appealed to the Chief of Engineers by letter of May 27,1948.
10. The above appeal resulted in further additional findings of fact by the Air Force Contracting Officer, Eobert W. Logan, on October 29,1948, which reaffirmed and elaborated on that officer’s findings of May 17,1948, noted above.
11. The Corps of Engineers Claims and Appeals Board in an opinion approved by the Chief of Engineers October 23, 1949, determined, in summary, that
(a) Plaintiff’s contract was the second one in point of time.
(b) The city contract was for water for the operation of the project' as contrasted with plaintiff’s contract for water for construction of the project.
(c) The city did not have the high pressure necessary for the period of construction.
(d) From January 1943 onward nearly all water was obtained from the city.
(e) The plaintiff knew of the prior contract at the time of the execution of its own contract.
12. The design for the Berry Hills Air Crew Classification Center contemplated water requirements of some 1,361,000 gallons per day, or approximately 950 gallons per minute, with 50 percent increased capacity per minute during peak loads, and a fire control capacity of 480,000 gallons over a period of four hours.
13. It had been anticipated by the defendant that water would be first required under the city contract during September or early October of 1942. However, a change in plans for the project set an earlier date for beneficial occupancy of certain high elevation areas, calling for their readiness about the first of July 1942.
14. The plaintiff had been under consideration for the water supply contract noted above, and had submitted quotations thereon, but at rates in excess of those incorporated in the city contract. Notice of the award of the city contract, noted above, was carried in two local newspapers and such notice was seen by Mr. Saindon.
15. It was defendant’s contracting officer’s intention to take all of its water requirements from plaintiff until the city of Nashville was in a position to supply that service, and as the latter facilities became adequate to take more and more water from it until no more water would be taken from plaintiff.
16. It is plaintiff’s contention that the language of Article X of the contract, quoted hereinabove, is plain and unambiguous, and obligated the defendant to take from the plaintiff all its needs of water.
The defendant’s position is twofold. It contends first, that the language of said Article X is ambiguous; that in this situation the circumstances existing at the time of the execution of the contract may be examined, and that such circumstances indicate an intention contrary to plaintiff’s claim.
In the second place, defendant contends that plaintiff was incapable of supplying the daily requirements of its contract, or in fact the water obtained by the defendant from it and from the city of Nashville.
Plaintiff’s expectation was shared by defendant’s civilian employees who prepared the contract and presented it to plaintiff for signing. When Mr. Saindon demurred at the investment of $10,000 by plaintiff in new facilities without a knowledge of the duration of the contract, and without a guaranteed service charge, they reassured him by calling attention to the large quantities of water involved.
18. The circumstances surrounding the parties at the execution of plaintiff’s contract, do not reveal conclusively any mutual understanding of the parties as to the proper interpretation of Article X of the contract.
19. As to defendant’s contention that plaintiff’s facilities were inadequate to supply all the water supplied, both by it and by the city of Nashville, at the required pressure per square inch, the testimony is conflicting. The witnesses arrived at their conclusions by the application of certain formulas. Among said formulas is one designated as a “C” factor, which defines the loss of pressure in pipes of various sizes of various ages over various distances. The chief difference between the results arrived at by plaintiff’s and defendant’s witnesses, arises over the proper “C” factor applicable to plaintiff’s facilities.
The new facilities installed by the plaintiff were those specified in Appendix A to the contract, and there is no contention by defendant that said facilities were not installed in conformity therewith. During the entire controversy between the parties, prior to the hearing before the Commissioner of this Court, in this case, there was no contention
20. Whether or not plaintiff could have supplied at the required pressure the minimum of 1,500,000 gallons per day, set out in the contract, it could, at any rate, have supplied at the required pressure all the water supplied by the city of Nashville, plus that supplied by itself.
21. Had plaintiff furnished to the defendant for use at the Berry Hills Air Crew Classification Center all of the water actually furnished by the city of Nashville, its profit thereon would have been the sum of $10,945.73.
CONCLUSION 03? LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes that as a matter of law the plaintiff is entitled to recover, and it is therefore adjudged and ordered that it recover of and from the United States ten thousand nine hundred forty-five dollars and seventy-three cents ($10,945.73).