B-145432, MAY 1, 1961

B-145432: May 1, 1961

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ON THE BASIS THAT BOTH PARTIES ARE EXCUSED FROM FURTHER PERFORMANCE BY OPERATION OF LAW. THE CONTRACT WAS ENTERED INTO ON AUGUST 3. SLUDGE PUMP DURING PERIOD OR PERIODS WHEN SEWAGE FROM WAGONER FIELD NAVAL AIR TRAINING STATION IS BEING TREATED AND GOVERNMENT WILL AT ITS EXPENSE REPLACE OR REPAIR ANY OF SAID FACILITIES SO INSTALLED BY IT THAT SHOULD BECOME DAMAGED OR DESTROYED FROM ANY CAUSE WHATSOEVER NOT RESULTING FROM NEGLIGENCE BY CITY OR ITS EMPLOYEES. SOMETIME AFTER THE EXECUTION OF THE CONTRACT WAGONER FIELD WAS TRANSFERRED TO THE ATOMIC ENERGY COMMISSION AND BY SUPPLEMENTAL AGREEMENT DATED APRIL 7. THE CONTRACT WAS AMENDED TO PERMIT THE CITY TO CONNECT NOT MORE THAN 45 PRIVATE HOMES TO THE GOVERNMENT'S SEWER LINE.

B-145432, MAY 1, 1961

TO CHAIRMAN, UNITED STATES ATOMIC ENERGY COMMISSION:

ON MARCH 24, 1961, YOUR ASSISTANT GENERAL MANAGER FORWARDED HERE FOR DECISION THE QUESTION WHETHER THERE WOULD BE ANY LEGAL OBJECTION TO CANCELLATION OF THE COMMISSION'S SEWAGE DISPOSAL CONTRACT WITH THE CITY OF LIVERMORE, CALIFORNIA, ON THE BASIS THAT BOTH PARTIES ARE EXCUSED FROM FURTHER PERFORMANCE BY OPERATION OF LAW.

THE CONTRACT WAS ENTERED INTO ON AUGUST 3, 1942, BETWEEN THE CITY AND THE NAVY DEPARTMENT FOR THE PURPOSE OF FURNISHING SEWAGE TREATMENT AND DISPOSAL FOR THE WAGONER FIELD NAVAL AIR TRAINING STATION LOCATED APPROXIMATELY TWO MILES EAST OF THE CITY. THE CONTRACT WHICH CONTAINED NO PROVISION CONCERNING THE LENGTH OF ITS TERM PROVIDED FOR THE CONSTRUCTION AND MAINTENANCE BY THE GOVERNMENT OF A SEWER PIPE LINE FROM WAGONER FIELD TO THE CITY'S SEWAGE PLANT WHICH HAD BEEN CONSTRUCTED IN 1927. ALSO, THE CONTRACT PROVIDED FOR THE CONSTRUCTION AND MAINTENANCE BY THE GOVERNMENT OF ADDITIONAL FACILITIES AND APPURTENANCES TO THE CITY'S PLANT FOR THE PURPOSE OF ENLARGING THE PLANT SUFFICIENTLY FOR PROPER TREATMENT AND DISPOSAL OF SEWAGE FROM WAGONER FIELD ,BASED ON A MAXIMUM PERSONNEL ON SAID STATION OF 2250 PERSONS.' THE CONTRACT RECITED THAT---

"WHEREAS GOVERNMENT DESIRES THAT CITY AGREE TO OPERATE SAID SEWAGE DISPOSAL PLANT, AS ENLARGED BY AFOREMENTIONED ADDITIONAL FACILITIES, IN SUCH MANNER AS TO PROPERLY TREAT AND DISPOSE OF SEWAGE FROM WAGONER FIELD NAVAL AIR TRAINING STATION IN ADDITION TO SEWAGE FROM THE CITY OF LIVERMORE, WITHOUT COST TO GOVERNMENT FOR SUCH OPERATION, EXCEPT THAT GOVERNMENT SHALL PROVIDE FOR THE INSTALLATION OF AN ELECTRIC METER AND PAY FOR ALL ELECTRIC ENERGY TO BE USED OR CONSUMED IN THE OPERATION OF THE CLARIFIER, COMMINUTOR, AND SLUDGE PUMP DURING PERIOD OR PERIODS WHEN SEWAGE FROM WAGONER FIELD NAVAL AIR TRAINING STATION IS BEING TREATED AND GOVERNMENT WILL AT ITS EXPENSE REPLACE OR REPAIR ANY OF SAID FACILITIES SO INSTALLED BY IT THAT SHOULD BECOME DAMAGED OR DESTROYED FROM ANY CAUSE WHATSOEVER NOT RESULTING FROM NEGLIGENCE BY CITY OR ITS EMPLOYEES;

"NOW THEREFORE, IN CONSIDERATION OF THE FOREGOING AND OF THE COVENANTS AND AGREEMENTS HEREINAFTER MADE TO BE KEPT AND PERFORMED BY THE PARTIES HERETO, CITY DOES HEREBY CONSENT TO THE CONSTRUCTION, MAINTENANCE AND USE BY GOVERNMENT OF SAID SEWER PIPE LINE ON, ALONG AND ACROSS SAID CITY STREETS, AND DOES FURTHER CONSENT TO THE CONSTRUCTION AND MAINTENANCE OF SAID ADDITIONAL FACILITIES AND SAID SEWAGE DISPOSAL PLANT BY THE GOVERNMENT AT THE EXPENSE OF GOVERNMENT, AND DOES AGREE TO OPERATE SAID SEWAGE DISPOSAL PLANT.'

THE CONTRACT OBLIGATED THE GOVERNMENT TO CONSTRUCT, MAINTAIN, AND FURNISH ELECTRIC ENERGY FOR THE OPERATION OF THE SEWER PIPE LINE AND THE ADDITIONS TO THE SEWAGE DISPOSAL PLANT AND TO MAKE PERIODICAL INSPECTIONS OF THE SAME TOGETHER WITH RECOMMENDATIONS FOR MAINTENANCE, REPAIR OR RECONSTRUCTION OF ANY PORTION OF PLANT WHICH MIGHT BE DEEMED NECESSARY TO MAINTAIN THE OPERATING EFFICIENCY THEREOF. IN ADDITION, THE CONTRACT PROVIDED THAT THE GOVERNMENT WOULD PAY--- WHENEVER NECESSARY--- THE COST OF SUCH REPAIRS AND RECONSTRUCTION ON ALL FACILITIES SO INSTALLED BY THE GOVERNMENT AND IT FURTHER PROVIDED THAT ALL REPAIR OR RECONSTRUCTION OF THE IMHOFF TANK OWNED BY THE CITY AND THE FILTER AND/OR SLUDGE BEDS WOULD BE BORNE IN EQUAL SHARES BY THE GOVERNMENT AND THE CITY.

SOMETIME AFTER THE EXECUTION OF THE CONTRACT WAGONER FIELD WAS TRANSFERRED TO THE ATOMIC ENERGY COMMISSION AND BY SUPPLEMENTAL AGREEMENT DATED APRIL 7, 1952, THE CONTRACT WAS AMENDED TO PERMIT THE CITY TO CONNECT NOT MORE THAN 45 PRIVATE HOMES TO THE GOVERNMENT'S SEWER LINE. THIS AMENDMENT PROVIDED THAT THE 1942 AGREEMENT AS SO AMENDED "SHALL CONTINUE DURING THE PERIOD WHICH THE GOVERNMENT SHALL MAINTAIN SAID SEWER LINE FOR ITS USE IN CONNECTION WITH ANY GOVERNMENT PROPERTY" AND THAT IT WOULD "IN ALL RESPECTS NOT CHANGED HEREIN, REMAIN IN FULL FORCE AND EFFECT.'

IT IS STATED THAT IN 1957 THE VOTERS OF LIVERMORE APPROVED A GENERAL OBLIGATION BOND ISSUE FOR THE PURPOSE OF IMPROVING ITS SEWAGE DISPOSAL FACILITIES. THEREAFTER, THE CITY OBTAINED A FEDERAL GRANT OF $250,000 UNDER SECTION 6 OF THE WATER POLLUTION CONTROL ACT OF JULY 9, 1956, 70 STAT. 498, 502, WHICH AUTHORIZES THE SURGEON GENERAL TO MAKE GRANTS FOR THE CONSTRUCTION OF NECESSARY TREATMENT WORKS TO PREVENT THE DISCHARGE OF UNTREATED OR INADEQUATELY TREATED SEWAGE OR OTHER WASTE INTO WATERS. FOLLOWING THIS GRANT THE CITY CONSTRUCTED A NEW PLANT IN A NEW LOCATION AND THE OLD PLANT, INCLUDING THE FACILITIES CONSTRUCTED BY THE GOVERNMENT UNDER THE 1942 AGREEMENT (OTHER THAN THE GOVERNMENT'S SEWER PIPE), WAS ABANDONED AND IS NO LONGER USED.

BY LETTER DATED MARCH 16, 1959, THE MAYOR OF THE CITY TRANSMITTED TO THE COMMISSION A REPORT ENTITLED "SANITARY SEWAGE TREATMENT SERVICE AS PROVIDED FOR THE UNITED STATES ATOMIC ENERGY COMMISSION.' THIS REPORT REQUESTS (1) CANCELLATION OF THE EXISTING AGREEMENT AND (2) THE NEGOTIATION AND EXECUTION OF A NEW AGREEMENT. IN COMMENTING ON THE REPORT IT IS STATED IN THE SUBMISSION THAT IT IS THE COMMISSION'S VIEW THAT IT SHOULD AGREE TO A FORMAL CANCELLATION OF THE CONTRACT ON THE GROUND THAT THE CITY IS NO LONGER OBLIGATED TO TREAT THE SEWAGE FROM THE COMMISSION'S FACILITIES UNDER THE 1942 CONTRACT AS AMENDED AND THAT SUCH CANCELLATION WOULD THUS FORMALLY EXPRESS THE AGREEMENT OF THE PARTIES THAT BOTH PARTIES ARE EXCUSED FROM FURTHER PERFORMANCE OF THE CONTRACT, A RESULT WHICH IT IS SUGGESTED MAY HAVE ALREADY BEEN REACHED BY OPERATION OF LAW. IN SUPPORT OF THIS PROPOSED ACTION REFERENCE IS MADE TO THE GENERAL RULE THAT WHEN PARTIES TO A CONTRACT CONTEMPLATE AND EXPECT TO USE A SPECIFIC MEANS OF PERFORMANCE AND SUCH MEANS IS NO LONGER AVAILABLE FOR USE, PERFORMANCE IS EXCUSED. IT IS POINTED OUT THAT WHILE THE CONTRACT IN THIS INSTANCE DOES NOT EXPRESSLY STATE THAT THE PARTIES TO THE AGREEMENT CONTEMPLATED THE THEN EXISTING SEWER PLANT TO BE THE MEANS OF TREATING THE SEWAGE FROM THE LIVERMORE SITE, IT IS APPARENT THAT THEY SO CONTEMPLATED AS EVIDENCED BY VARIOUS PROVISIONS OF THE CONTRACT. THE VIEW IS EXPRESSED THAT WHEN THE CITY- - FOR REASONS BEYOND ITS CONTROL--- ABANDONED THE SEWAGE DISPOSAL PLANT AND BEGAN OPERATION OF ANOTHER SEWAGE PLANT CONSTRUCTED WITHOUT FINANCIAL ASSISTANCE FROM THE COMMISSION, THE CITY WAS EXCUSED FROM FURTHER PERFORMANCE UNDER THE 1942 CONTRACT. IT IS CONCLUDED THAT SUCH A RESULT IS CONSONANT WITH THE PRINCIPLES ANNOUNCED IN OUR DECISION OF JUNE 10, 1949, B-73813 AND IN 22 COMP. GEN. 1087, WHERE THE INVOLVED CONTRACTORS WERE HELD TO BE RELIEVED FROM PERFORMANCE BECAUSE OF EXCUSABLE DELAYS BEYOND REASONABLE TIMES WHICH PREVENTED THE CONTRACTORS FROM FULFILLING THEIR OBLIGATIONS.

WE AGREE WITH THE COMMISSION'S CONCLUSION IN THE PRESENT SITUATION THAT THE PROVISIONS OF THE 1942 CONTRACT REASONABLY SUPPORT THE VIEW THAT WHEN THE PARTIES ENTERED INTO THE CONTRACT THEY CONTEMPLATED THE OLD PLANT AS THE MEANS OF CARRYING OUT THEIR CONTRACTUAL OBLIGATIONS. WE DO NOT FEEL, HOWEVER, THAT THE PRINCIPAL EVENTS AND CONDITIONS WHICH LED UP TO THE ABANDONMENT OF THE OLD PLANT WERE NOT REASONABLY FORESEEABLE AT THE TIME THE ORIGINAL CONTRACT WAS EXECUTED--- A NECESSARY REQUIREMENT FOR RELIEVING THE CITY FROM ITS OBLIGATIONS UNDER THE CONTRACT ON THE BASIS PROPOSED. OLIVER-ELECTRICAL MFG. CO. V. I. O. TEIGEN CO., 177 F.S. 572; RESTATEMENT, CONTRACTS SECS. 457, 467. IN THIS RESPECT IT IS NOTED THAT THE DATA FURNISHED IN THE CITY'S REPORT SHOWS THAT THE TREND IN THE CITY'S INCREASING POPULATION -- PRESENTLY STATED TO BE 14,000--- APPARENTLY BEGAN IN 1940 OR APPROXIMATELY TWO YEARS BEFORE THE EXECUTION OF THE ORIGINAL CONTRACT AT WHICH TIME IT IS INDICATED THAT THE POPULATION DID NOT EXCEED 3,000.

NEITHER DO WE FEEL THAT IT HAS BEEN CLEARLY ESTABLISHED THAT THE OLD PLANT COULD NOT HAVE CONTINUED OPERATION BY REVAMPING THE MECHANICAL EQUIPMENT AND ENLARGING THE CAPACITY OF ALL THE INSTALLATIONS AS SUGGESTED IN THE INTER-OFFICE MEMORANDUM OF FEBRUARY 19, 1959, FROM THE DIRECTOR OF PUBLIC WORKS TO THE CITY MANAGER. IN THIS RESPECT THERE HAVE NOT BEEN OVERLOOKED THE ARGUMENTS ADVANCED IN THE CITY ATTORNEY'S LETTER OF MARCH 4, 1959, TO THE CITY MANAGER WHEREIN IT IS INFERRED THAT THE GOVERNMENT WAS RESPONSIBLE FOR THE CONDITIONS LEADING UP TO THE ABANDONMENT OF THE OLD PLANT BECAUSE OF ITS FAILURE TO COMPLY WITH THE REQUIREMENTS OF THE PROVISIONS OF PARAGRAPHS 5 AND 6 OF THE ORIGINAL CONTRACT AND THAT SUCH FAILURE JUSTIFIES CANCELLATION OF THE CONTRACT. IT IS URGED IN EFFECT THAT THE GOVERNMENT BREACHED ITS OBLIGATIONS UNDER THESE PARAGRAPHS IN THAT IT MADE NO INSPECTIONS OF THE PLANT NOR DID IT MAKE ANY RECOMMENDATIONS FOR ITS MAINTENANCE, REPAIRS OR RECONSTRUCTION WHICH MIGHT HAVE BEEN CONSIDERED NECESSARY TO MAINTAIN THE OPERATING EFFICIENCY OF THE PLANT. IT IS STATED THAT THE GOVERNMENT'S FAILURE IN THESE RESPECTS OCCURRED IN SPITE OF THE FACT THAT IT WAS COMMON KNOWLEDGE AND THE PUBLIC RECORDS DISCLOSED THAT A TREMENDOUS INCREASE IN THE CITY'S POPULATION WAS TAKING PLACE WHILE AT THE SAME TIME THE OPERATING CONDITION OF THE PLANT WAS STEADILY DECREASING. WHILE IT MAY BE TRUE AS ASSERTED BY THE CITY ATTORNEY THAT THE GOVERNMENT FAILED TO COMPLY WITH THE CONTRACTUAL REQUIREMENTS IN THE FOREGOING RESPECTS, AS WE SEE IT, EVEN IF THE GOVERNMENT DEFAULTED IN THIS RESPECT, NO RIGHT TO RESCISSION ON THAT BASIS COULD NOW EXIST INASMUCH AS EQUITY DEMANDS THAT SUCH ENFORCEABLE RIGHT BE PROMPTLY AND DILIGENTLY ASSERTED. AS OBSERVED IN 12 AM.JUR. CONTRACTS, SEC. 447,"A RIGHT TO RESCIND, ABROGATE, OR CANCEL A CONTRACT MUST BE EXERCISED PROMPTLY UPON DISCOVERY OF THE FACTS FROM WHICH IT ARISES; IT MAY BE WAIVED BY CONTINUING TO TREAT THE CONTRACT AS A SUBSISTING OBLIGATION.' SEE ALSO 12 ID. SEC. 449.

FOR THE FOREGOING REASONS WE DO NOT FEEL JUSTIFIED IN AUTHORIZING CANCELLATION OF THE CONTRACT ON THE BASIS OF THE REASONS STATED IN THE COMMISSION'S REQUEST.

THERE REMAINS FOR CONSIDERATION HOWEVER, THE QUESTION WHETHER THE 1942 CONTRACT LEGALLY MAY BE CONSTRUED AS BINDING ON THE PARTIES IN THE LIGHT OF THE RECITAL THEREIN PROVIDING THAT THE GOVERNMENT DESIRES THAT THE CITY CONSENT TO THE CONSTRUCTION AND MAINTENANCE BY THE GOVERNMENT OF SEWAGE CLARIFIER UNIT WITH NECESSARY COMMINUTOR, SLUDGE PUMP, AND OTHER APPURTENANT STRUCTURES, WHICH FACILITIES WILL ENLARGE THE SEWAGE DISPOSAL PLANT OWNED BY THE CITY TO A SUFFICIENT SIZE FOR PROPER TREATMENT AND DISPOSAL OF SEWAGE FROM WAGONER FIELD NAVAL AIR TRAINING STATION,"BASED ON A MAXIMUM PERSONNEL ON SAID STATION OF 2250 PERSONS, IN ADDITION TO SEWAGE FROM THE CITY OF LIVERMORE.' THE FOREGOING PROVISION OF THE CONTRACT SHOWS A PURPOSE ON THE PART OF THE PARTIES TO LIMIT THE SEWAGE SERVICE BY THE CITY FOR SEWAGE FROM WAGONER FIELD TO A MAXIMUM PERSONNEL OF 2250 PERSONS. THE REPORT SHOWS THAT AS OF MARCH 16, 1959, THE NUMBER OF PERSONNEL HOUSED IN THE GOVERNMENT STRUCTURES LOCATED AT WAGONER FIELD TOTALED 4,085, AND IT IS UNDERSTOOD THAT THE PRESENT NUMBER IS ABOUT 5,300. HAVING REGARD FOR THE PREMISES UPON WHICH THE ORIGINAL CONTRACT WAS EXECUTED IT SEEMS CLEAR THAT THE CITY MAY NOT LEGALLY BE REQUIRED TO CONTINUE TO FURNISH SEWAGE SERVICE UNDER THE TERMS OF THE ORIGINAL CONTRACT AS AMENDED. ACCORDINGLY, THERE IS PERCEIVED NO VALID OBJECTION TO THE CANCELLATION OF SUCH CONTRACT AND THE NEGOTIATION OF A NEW CONTRACT AS PROPOSED IT BEING NOTED THAT IN THE CITY'S REVISED CONTRACT PROPOSAL THE FEDERAL GRANT OF $250,000 IS TAKEN INTO CONSIDERATION IN COMPUTING THE PROPOSED RATE TO BE PAID BY THE GOVERNMENT.