The opinion of the court was delivered by: RIPPEY
The general contract of construction between the Government and the Morley Construction Company is dated July 23, 1932. Article 1 reads as follows:
"Article 1. Statement of work. -- The contractor shall furnish all labor and materials, and perform all work required for constructing and finishing complete, at Veterans' Administration Hospital, Batavia, New York, Main Bldg. #1, Dining Hall and Attendants' Quarters Bldg. #2, Recreation Bldg. #4, Nurses' Quarters Bldg. #5, M. O. C. Residence Bldg. #6, two officers' Duplex Quarters Bldgs. Nos. 7 and 8, Laundry Bldg. #9, Storehouse Bldg. #10, Boiler House Bldg. #12, Garage Bldg. #13, Flagpole #14, Incinerator Bldg. #15, Sewage Pump House #17, Connecting Corridors Nos. 1-2 and 1-4, providing slate as specified under 'Roofing and Sheet Metal,' Section 21C, in lieu of shingle tile where shown on drawings, and providing tile wainscot 7'-O" high (including plastered walls and partitions above the wainscot) and quarry tile base as specified, in Dining Hall and Attendants' Quarters Bldg. #2 and Nurses' Quarters Bldg. #5 in lieu of enameled blocks and base; also Roads, Walks, Grading and Drainage in connection with these buildings, but not including Plumbing, Heating, Electrical Work and Outside Distribution Systems, Electric Elevators, Steel Water Tank and Tower, Refrigerating and Ice Making Plant and Zoolite Water Softening System, for the consideration of five hundred forty thousand three hundred dollars ($540,300.00) in strict accordance with the specifications, schedules, and drawings, all of which are made a part hereof and designated as follows: Specifications for Buildings and Utilities for Veterans' Administration Hospital at Batavia, New York, June 3, 1932, and the schedules and drawings mentioned therein; Addenda No. 1 dated June 28, 1932 and No. 2 dated July 1, 1932; as contemplated by Item I and Alternates (a), (b), (d-a), (d-b), (d-c) and (e) of the Contractor's proposal dated July 9, 1932; the Contractor's telegram dated July 12, 1932, and letter of acceptance dated July 23, 1932.
"The work shall be commenced within Ten (10) Calendar Days after date of receipt of notice to proceed, and shall be completed within Two Hundred Forty (240) Calendar Days after date of receipt of notice to proceed, except that Storehouse Building No. 10, Radial Brick Chimney, pipe tunnel, and sufficient work in Boiler House Building No. 11 to permit the installation of boilers and equipment will be completed 90 days prior thereto."
Article 4 authorizes the Government to make necessary changes in drawings and/or specifications with increase or decrease of cost and/or difference in time in the event that subsurface and/or latent conditions at the site materially differing from those shown on the drawings or indicated in the specifications are encountered during the progress of the work.
Article 5, with reference to extras, reads as follows:
"Article 5. Extras. -- Except as otherwise herein provided, no charge for any extra work or material will be allowed unless the same has been ordered in writing by the contracting officer and the price stated in such order."
Article 6 (and provisions elsewhere in the contract) makes the Government the sole judge as to whether workmanship and materials are such as are required by the contract and as to whether work is performed as required by the contract, and in the event of rejected workmanship or material or faulty or improper construction, the contractor is required to correct the work, replace rejected material, or make changes as directed, and segregate and remove rejected or replaced material at his own cost.
Under article 8 the contractor is required not only to give his personal superintendence to the work, but to have a competent superintendent, satisfactory to the Government, on the work at all times during the progress of the work, with authority to act for him.
Article 15, with reference to disputes, reads as follows:
"Article 15. Disputes. -- Except as otherwise specifically provided in this contract, all disputes concerning questions of fact arising under this contract shall be decided by the contracting officer or his duly authorized representative, subject to written appeal by the contractor within thirty days to the head of the department concerned, whose decision shall be final and conclusive upon the parties thereto as to such questions of fact. In the meantime the contractor shall diligently proceed with the work as directed."
Payments under the contract were provided for in article 16. Partial payments were to be made as the work progressed at the end of each calendar month on estimates made and approved by the contracting officer less 10 per cent. on the estimated amount until final completion and acceptance of the work covered by the contract, except that any time after 50 per cent. of the work had been completed the Government might, if it saw, fit make any of the remaining partial payments in full. The final payment was to be made after completion and acceptance of all work required upon the presentation of a properly executed and duly certified voucher, after the contractor shall have furnished the Government with a release, if required, and after taking into consideration allowable deductions.
Ten Change Orders were made by the Government during the progress of the work, as authorized by the terms of the contract. These orders involve a decrease in the contract price of $403.16 and an increase of $3,579.19, thus leaving the total contract price for the entire work at $543,476.03. Change Order E, under date of May 5, 1933, made a change on account of rock excavation discovered necessary during the progress of the work and contemplated and authorized by section 2(c) of the Standard Specifications for Earthwork of $89.10, increase on account of deep footing and trench excavation by hand, 8.10 cubic yards at $11 per cubic yard, and power shovel excavation of 226.45 cubic yards at $9 a cubic yard, amounting to $2,038.05, making a total increase in contract price of $2,127.15 on account of this item. Change Order I provided for an increase of $112.32, under date of September 16, 1933, on account of 12.48 cubic yards of rock excavation at $9 per cubic yard, in accordance with an agreement between the contractor and the Government under date of September 5, 1933.
On May 5, 1933, forty days' additional time were granted by the Government to complete the contract on account of the additional work required as specified in Change Order E, above mentioned, and on May 8, 1933, because of Change Order F requiring reconstruction of the foundations of the pump house in a new location in accordance with revised contract drawings and including additional cribbing and concrete and because of encountering quicksand, an additional time of twenty-five days was allowed for completion of the work; the contractor being allowed an additional sum of $995.45 for the work included in the above totals. The Government did not terminate the previous extension for an additional twenty days. Notice to proceed was given to Morley on August 19, 1932. With the extensions granted, the contractor had 325 calendar days within which to complete the work. This time expired July 19, 1933. The work was not completed until October 31, 1933.
The Government accepted the work as finally completed and approved final settlement on November 9, 1933, and the amount was audited and a check for final payment was issued to Morley on November 13, 1933, in the sum of $59,780.22. The Morley Company was unable to cash the check because the Government was restrained from paying the check on suit of the surety. No release was given by Morley as contemplated under the provisions of article 16(d) of the contract and none was required. Article 9 of the contract provided for damages for delay or failure to complete the contract within the time specified, but no such damages were exacted by the Government under that clause.
Under the provisions of article 8, Herbert F. Morley, president of the contractor, gave his personal superintendence to the work. The contractor also provided a competent superintendent by the name of Reimer, who was satisfactory to the Government and who had full authority to act for the Morley Construction Company and to bind it by any agreement made or act performed by him.
The Morley Construction Company executed and delivered its performance bond on or about August 1, 1932, in the penal sum of $275,000 with the Maryland Casualty Company of Baltimore, Md., as surety. Attached to and made a part of the bond was the contract above referred to. The defeasance clause of the bond reads as follows:
"Now therefore, if the principal shall well and truly perform and fulfill all the undertakings, covenants, terms, conditions, and agreements of said contract during the original term of said contract and any extensions thereof that may be granted by the Government, with or without notice to the surety, and during the life of any guaranty required under the contract, and shall also well and truly perform and fulfill all the undertakings, covenants, terms, conditions and agreements of any and all duly authorized modifications of said contract that may hereafter be made, notice of which modifications to the surety being hereby waived, and if said contract is for the construction or repair of a public building or a public work within the meaning of the act of August 13, 1894, as amended by act of February 25, 1905, shall promptly make payment to all persons supplying the principal ...