B-105789, AUGUST 4, 1952, 32 COMP. GEN. 67

B-105789, AUGUST 4, 1952, 32 COMP. GEN. 67

CONTRACTS - LIQUIDATED DAMAGES - REMISSION BY THE COMPTROLLER GENERAL SECTION 10 (A) OF THE ACT OF SEPTEMBER 5, 1950, *WHICH AUTHORIZES THE COMPTROLLER GENERAL TO REMIT LIQUIDATED DAMAGES ASSESSED AGAINST A GOVERNMENT CONTRACTOR IN SUCH AMOUNTS AS IN HIS DISCRETION "MAY BE JUST AND EQUITABLE," CONTEMPLATES THE EXERCISE OF THE CONFERRED POWER ONLY IN CASES WHERE THE CLAIM FOR RELIEF IS SUPPORTED BY STRONG EQUITIES IN THE CONTRACTOR'S FAVOR, AND THEREFORE, THERE IS NO BASIS FOR REMISSION OF LIQUIDATED DAMAGES ASSESSED AGAINST A CONTRACTOR WHOSE DELAY IN COMPLETING THE CONTRACT WORK WAS ATTRIBUTABLE TO HIS FAILURE TO PROSECUTE THE WORK WITH PROPER AND REASONABLE DILIGENCE. A PECUNIARY LOSS SUFFERED BY A CONTRACTOR IN COMPLETING PERFORMANCE OF HIS LEGAL DUTY AFFORDS NO BASIS FOR RELIEVING HIM OF THE BARGAIN HE MADE OR FOR WAIVING ASSESSMENT OF LIQUIDATED DAMAGES ACCRUED AGAINST HIM, AND NEITHER THE FACT THAT PROLONGED DELAY IN PERFORMANCE RESULTED IN AN ACCRUAL OF DAMAGES EQUAL TO A SUBSTANTIAL PERCENTAGE OF THE CONTRACT PRIOR NOR THE FACT THAT THE GOVERNMENT SUFFERED NO PERCEPTIBLE LOSS IN CONSEQUENCE OF THE DELAY JUSTIFIES WAIVER OF THE LIQUIDATED DAMAGES PROVISIONS AGREED TO BY THE CONTRACTING PARTIES.

COMPTROLLER GENERAL WARREN TO FEDERAL BUILDING CONTRACTORS, AUGUST 4, 1952.

REFERENCE IS MADE TO YOUR LETTER OF JUNE 5, 1952, ACKNOWLEDGING RECEIPT OR DECISION B-105789 DATED APRIL 25, 1952, WHICH DENIED YOUR CLAIM FOR REMISSION ON AN EQUITABLE BASIS OF LIQUIDATED DAMAGES OCCASIONED BY DELAYS IN CONNECTION WITH WORK PERFORMED UNDER CONTRACT NO. WA21PB-45, DATED JANUARY 3, 1950, AT THE POST OFFICE, CORNING, NEW YORK, AND CONTRACT NO. GS-028-277, AT THE POST OFFICE IN HORNELL, NEW YORK.

AT THE OUTSET, YOU SUGGEST THAT HAD YOU NOT BEEN HONEST IN ADMITTING SOME NEGLIGENCE ON YOUR PART, BUT INSTEAD WOULD HAVE CONCOCTED A STATE OF FACTS NECESSITATING THE TROUBLE OF THIS OFFICE TO DISPROVE THEM, PERHAPS THE FOREGOING DECISION WOULD HAVE BEEN DIFFERENT. YOU THEN EXPLAINED THAT AS A RESULT OF THE TWO MENTIONED CONTRACTS YOU HAVE SUFFERED A PECUNIARY LOSS, EXCLUSIVE OF THE AMOUNTS ASSESSED AGAINST YOU AS LIQUIDATED DAMAGES AND, ACCORDINGLY, YOU REQUEST A RECONSIDERATION OF THE CASE IN THE LIGHT OF YOUR ADMITTED HONESTY AND IMPECUNIOUS CIRCUMSTANCES. YOU ALSO URGE THAT THE DISCRETIONARY POWERS CONFERRED UPON THIS OFFICE BY SECTION 10 (A) OF THE ACT OF SEPTEMBER 5, 1950, 64 STAT. 578, 591, BE RESORTED TO FOR THE PURPOSES OF WAIVING AT LEAST A PORTION OF THE LIQUIDATED DAMAGES ASSESSED AGAINST YOU UNDER THE CONTRACTS.

SINCE THE REFERRED-TO DECISION OF THIS OFFICE WAS PREDICATED UPON THE ASSUMPTION THAT THE FACTS SUBMITTED WITH YOUR CLAIM REPRESENTED AN ACCURATE PRESENTATION OF THE CASE, THERE WOULD APPEAR TO BE NO NECESSITY FOR COMMENT WITH RESPECT TO YOUR SUGGESTION RELATIVE TO A "CONCOCTED STATE OF ACTS" EXCEPT TO BRING TO YOUR ATTENTION THE PROVISIONS OF SECTION 231, TITLE 31 OF THE UNITED STATES CODE WHICH SETS FORTH IN DETAIL THE PENALTIES WHICH MAY BE INCURRED AS THE RESULT OF PRESENTING FALSE CLAIMS AGAINST THE GOVERNMENT. IT MAY BE ADDED, HOWEVER, THAT OTHERWISE SUCH A STATEMENT HAS NO PLACE IN THE CONSIDERATION OF THE MERITS OF YOUR CASE.

THE UNFORTUNATE FACT THAT YOU EXPERIENCED A PECUNIARY LOSS IN THE PERFORMANCE OF THE CONTRACTS, WHILE TO BE REGRETTED, AFFORDS NO BASIS NOR JUSTIFICATION FOR A WAIVER OF THE LIQUIDATED DAMAGES WHICH HAVE ACCRUED TO THE GOVERNMENT. YOU NO DOUBT ARE AWARE THAT INCONVENIENCE OR THE COST OF COMPLIANCE, ALTHOUGH THEY MIGHT MAKE COMPLIANCE A HARDSHIP, CANNOT EXCUSE A PARTY FROM THE PERFORMANCE OF AN ABSOLUTE AND UNQUALIFIED UNDERTAKING TO DO A THING THAT IS POSSIBLE AND LAWFUL. FURTHERMORE, THE PRICE IS ONE OF THE ELEMENTS WHICH THE CONTRACTOR TAKES INTO ACCOUNT WHEN HE MAKES HIS BARGAIN, AND HE CANNOT EXPECT THE OTHER PARTY TO GUARANTEE HIM AGAINST UNFAVORABLE CHANGES IN THOSE PRICES. SEE CHOUTEAU V. UNITED STATES, 95 U.S. 61. AND, IN THE CASE OF DAY V. UNITED STATES, 245 U.S. 160, THE SUPREME COURT OF THE UNITED STATES, IN TREATING OF THIS PHASE OF THE LAW OF CONTRACTS, STATED IN PERTINENT PART AS FOLLOWS:

ONE WHO MAKES A CONTRACT NEVER CAN BE ABSOLUTELY CERTAIN THAT HE WILL BE ABLE TO PERFORM IT WHEN THE TIME COMES, AND THE VERY ESSENCE OF IT IS THAT HE TAKES THE RISK WITHIN THE LIMITS OF HIS UNDERTAKING. * * *

WITH RESPECT TO THE DISCRETIONARY POWERS CONFERRED UPON THIS OFFICE TO WAIVE LIQUIDATED DAMAGES, SECTION 10 (A) OF THE ACT OF SEPTEMBER 5, 1950, PROVIDES AS FOLLOWS:

WHENEVER ANY CONTRACT MADE ON BEHALF OF THE GOVERNMENT BY THE HEAD OF ANY FEDERAL AGENCY, OR BY OFFICERS AUTHORIZED BY HIM SO TO DO, INCLUDES A PROVISION FOR LIQUIDATED DAMAGES FOR DELAY, THE COMPTROLLER GENERAL UPON RECOMMENDATION OF SUCH HEAD IS AUTHORIZED AND EMPOWERED TO REMIT THE WHOLE OR ANY PART OF SUCH DAMAGES AS IN HIS DISCRETION MAY BE JUST AND EQUITABLE. (ITALICS SUPPLIED.)

MANIFESTLY, IN THE LIGHT OF THE PROVISIONS OF THIS SECTION THE COMPTROLLER GENERAL OF THE UNITED STATES IS AUTHORIZED TO REMIT LIQUIDATED DAMAGES WHICH IN HIS JUDGMENT CONTAIN SUCH ELEMENTS OF EQUITY AS TO BE DESERVING OF RELIEF. SUCH AUTHORITY HOWEVER, BEING EQUITABLE IN NATURE, IS EXTRAORDINARY AND MUST BE EXERCISED WITH CONSIDERABLE CAUTION IN ORDER TO PREVENT ITS ABUSE. EQUITY, AMONG OTHER THINGS, IS USED TO DESCRIBE THE STANDING OF A PARTY TO CLAIM RELIEF, THE MERIT OF HIS CLAIM IS PRESENTED FOR CONSIDERATION UNDER THE FOREGOING ACT, THIS OFFICE HAS REQUIRED, FOR FAVORABLE ACTION, THE EXISTENCE OF STRONG AND PERSUASIVE EQUITIES ON BEHALF OF THE CLAIMANT. THIS IS PARTICULARLY TRUE IF, AS INDICATED BY THE RECORD, THE CONTRACTOR THROUGH THE EXERCISE OF PROPER DILIGENCE COULD HAVE AVOIDED A SUBSTANTIAL PART OF THE DELAY. NEEDLESS TO SAY, SUCH A VIEW FINDS SUPPORT IN THE LONG ESTABLISHED POLICY FOLLOWED BY THE EQUITY COURTS IN A CHAIN OF DECISIONS, A FEW OF WHICH ARE CITED BELOW.

IN THE CASE OF MYERS ET AL., V. LOUISIANA AND A. RY. CO., 7 FED. SUPP. 97, THE COURT EMPHASIZED THAT A PARTY APPEALING TO AN EQUITY COURT FOR ENFORCEMENT OF RIGHTS SHOULD NOT BE RESPONSIBLE FOR THE CONDITION OF WHICH HE COMPLAINS. ALSO IN THOMASON ET AL., V. SWENSON ET AL., 169 S.E. 620, IT WAS STATED THAT: " ONE OF THE RULES AND MAXIMS OF EQUITY IS: " HE WHO SEEKS EQUITY MUST DO ITY.' A PARTY WHO SEEKS RELIEF MUST DO WHAT IS EQUITABLE TO BE DONE BY HIM AS A CONDITION PRECEDENT TO THE RELIEF.' THE CASE OF ARKANSAS POWER AND LIGHT CO. V. BAUER-POGUE AND CO., NC., ET AL., 110 S.W. 2D 529, IT WAS AFFIRMATIVELY POINTED OUT THAT "EQUITY DOES NOT RELIEVE ONE FROM THE CONSEQUENCES OF HIS OWN NEGLIGENCE AND CARELESSNESS.' AGAIN, THE COURT IN THE CASE OF B. F. GOODRICH RUBBER CO. V. BENNETT, 281 S.W. 75, REPEATED THE AGE-OLD ADAGE THAT "NO MAN IS ENTITLED TO AID OF THE COURT OF EQUITY WHEN THAT AID BECOMES NECESSARY THROUGH HIS FAULT; " AND, FINALLY, YOUR ATTENTION IS INVITED TO GRYMES V. SANDERS, ET AL., 93 U.S. 55, WHEREIN IT WAS HELD THAT "THE PARTY COMPLAINING MUST HAVE EXERCISED AT LEAST THE DEGREE OF DILIGENCE WHICH MAY BE FAIRLY EXPECTED FROM A REASONABLE PERSON.'

AS POINTED OUT IN THE DECISION OF APRIL 25, 1952, THE LIQUIDATED DAMAGES HERE INVOLVED AROSE AS A RESULT OF YOUR FAILURE TO PROSECUTE THE WORK WITH PROPER AND REASONABLE DILIGENCE, AND THE DELAY IN COMPLETION THEREOF WAS ACTUALLY ATTRIBUTABLE TO SUCH CAUSE. WHILE CONTRACT NO. WA21PB-45, WHICH PROVIDED FOR THE FURNISHING OF MATERIALS AND PERFORMING CERTAIN REPAIR WORK AT THE POST OFFICE IN CORNING, NEW YORK, CALLED FOR COMPLETION ON JUNE 11, 1950, NO WORK WAS PERFORMED UNDER THE CONTRACT UNTIL JULY 10, 1950--- APPROXIMATELY ONE MONTH AFTER THE COMPLETION DATE. THE RECAULKING AND REPOINTING WORK WAS SUBSTANTIALLY COMPLETED ON AUGUST 22, 1950--- 72 DAYS OVERTIME--- AND YOU CONTENDED THAT THIS WORK COULD NOT BE COMMENCED PRIOR TO THE COMPLETION DATE BECAUSE OF INCLEMENT WEATHER, NOTWITHSTANDING THE FACT THAT YOU DID REQUEST AN EXTENSION OF TIME FOR THAT REASON. INSTEAD, YOU BASED YOUR REQUEST WHOLLY UPON THE DELAY IN RECEIVING MATERIAL, BUT THE WEIGHT OF EVIDENCE INDICATES THAT HAD YOU EXERCISED DILIGENCE, YOU WOULD HAVE TAKEN STEPS TO HAVE THE RECAULKING AND REPOINTING WORK COMPLETED BEFORE THE COMPLETION DATE, OR AT LEAST YOU WOULD HAVE GIVEN THE PUBLIC BUILDINGS SERVICE NOTIFICATION THAT YOU WERE ENCOUNTERING DIFFICULTY.

IN ADDITION TO THE ABOVE, IT WOULD APPEAR THAT YOU FAILED TO EXERCISE PROPER DILIGENCE IN THE PERFORMANCE OF CONTRACT NO. GS-02B-277 FOR REPAIRS TO THE POST OFFICE AT HORNELL, NEW YORK, FOR THE REASON THAT YOU WAITED UNTIL 19 DAYS BEFORE THE CONTRACT EXPIRED BEFORE AWARDING A SUBCONTRACT FOR THE WORK. AS STATED IN DECISION OF APRIL 25, 1952, YOUR OWN REPRESENTATIVE FRANKLY ADMITTED BEFORE THE BOARD OF REVIEW, GENERAL SERVICES ADMINISTRATION, THAT YOU HAD BEEN NEGLIGENT IN THE HANDLING OF BOTH PROJECTS. THUS, IN VIEW OF THE FACTS OF RECORD, THERE IS NOT PRESENT IN YOUR CASE THE EQUITIES CONTEMPLATED EITHER BY THE STATUTE OR THE RULES OF COURT SO AS TO WARRANT A REMISSION OF THE LIQUIDATED DAMAGES INVOLVED.

YOUR CONTENTION THAT THE AMOUNT OF LIQUIDATED DAMAGES WAS * DISPROPORTIONATE, AND THAT THE GOVERNMENT HAD NOT BEEN DAMAGED IN ANY WAY BY THE DELAY, FAILS TO CONSTITUTE A JUSTIFIABLE GROUND FOR GRANTING YOU RELIEF UNDER THE STATUTE. AS TO THE FORMER, IT APPEARS SUFFICIENT MERELY TO AGAIN POINT OUT THAT THE CONTRACT PRICE FOR REPAIRS AT THE POST OFFICE IN CORNING WAS $2,470, AND FOR THE WORK TO BE PERFORMED AT THE POST OFFICE IN HORNELL SUCH AMOUNT WAS $1,615, AND THE LIQUIDATED DAMAGES FIXED BY THE CONTRACTS WERE $10 PER DAY AND $5 PER DAY, RESPECTIVELY, FOR EACH CALENDAR DAY OF DELAY IN COMPLETING PERFORMANCE OF THE CONTRACTS BEYOND THE PERIODS SPECIFIED THEREIN. THE FACT THAT YOU PROLONGED THE DELAY IN PERFORMANCE TO SUCH AN EXTENT THAT THE TOTAL AMOUNT OF ACCRUED LIQUIDATED DAMAGES REACHED TO A HIGH PERCENTAGE OF THE CONTRACT PRICES DOES NOT EXCUSE YOU FROM THE CONSEQUENCES OF THE LIQUIDATED DAMAGES PROVISIONS OF THE CONTRACTS. FURTHERMORE, THERE WAS NOTHING UNREASONABLE OR UNCONSCIONABLE ABOUT THE LIQUIDATED DAMAGES PROVISIONS AT THE TIME THEY WERE AGREED UPON, NOR DID THE FACT THAT YOU PROLONGED THE DELAY LESSEN IN ANY WAY THE RATE OF DAMAGES BEING SUSTAINED BY THE GOVERNMENT. NOR DOES THE CIRCUMSTANCE THAT, AS CONTENDED BY YOU, THERE WAS NO DAMAGE OR LOSS OCCASIONED THE GOVERNMENT ON ACCOUNT OF THE DELAYS AFFORD ANY BASIS FOR RELIEF FROM THE ASSESSMENT OF LIQUIDATED DAMAGES, SINCE THE COURTS HAVE LONG HELD THAT A LIQUIDATED DAMAGE PROVISION IN A CONTRACT SUCH AS HERE INVOLVED IS VALID AND WILL BE UPHELD--- AND IT IS NOT NECESSARY FOR THE GOVERNMENT TO PROVE ANY DAMAGE OR LOSS UNDER SUCH A PROVISION. IN THIS CONNECTION, YOUR ATTENTION AGAIN IS INVITED TO SUN PRINTING AND PUBLISHING ASSOCIATION V. MOORE, 183 U.S. 642.

IN VIEW OF THE FOREGOING, IT MUST AGAIN BE HELD THAT YOUR CLAIM DOES NOT CONTAIN SUCH ELEMENTS OF EQUITY AS TO WARRANT REMISSION OF THE LIQUIDATED DAMAGES WHICH HAVE ACCRUED TO THE GOVERNMENT UNDER THE CONTRACTS.