B-9965, MAY 16, 1940, 19 COMP. GEN. 933

B-9965: May 16, 1940

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WHERE A CONTRACTOR'S CLAIM AGAINST THE DISTRICT OF COLUMBIA FOR DAMAGES (AS DISTINGUISHED FROM A CLAIM FOR VALUE OF WORK PERFORMED OR MATERIAL FURNISHED) IS NOW PENDING IN COURT AND THE DISTRICT CONCEDES PARTIAL LIABILITY. IT IS PROPOSED TO CONFESS JUDGMENT FOR SAID AMOUNT. THE ACTION IS BASED ON FIVE SEPARATE CLAIMS FOR ADDITIONAL COMPENSATION OR DAMAGES GROWING OUT OF ITS CONTRACT WITH THE DISTRICT OF COLUMBIA. THE CONTRACTOR WAS PAID $13. COPY OF HIS DECISION IS ENCLOSED. THE QUESTION UPON WHICH THE COMMISSIONERS WOULD APPRECIATE ADVICE FROM YOU IS WHETHER OR NOT THE UNEXPENDED BALANCE OF $103. THE REPRESENTATIVES OF THE PUBLIC WORKS AGENCY OF THE PUBLIC WORKS ADMINISTRATION HAVE INDICATED INFORMALLY THAT AS THIS CLAIM ARISES OUT OF A CONTRACT INVOLVING EXPENDITURE OF FUNDS ADVANCED UNDER THE PROVISIONS OF THE ACT OF JUNE 25.

B-9965, MAY 16, 1940, 19 COMP. GEN. 933

CLAIMS AGAINST THE DISTRICT OF COLUMBIA - APPROPRIATION AVAILABILITY AN APPROPRIATION FOR THE CONSTRUCTION OF A PROJECT UNDER THE DISTRICT OF COLUMBIA, WHICH DOES NOT SPECIFICALLY PROVIDE THAT IT SHALL BE AVAILABLE FOR PAYMENT OF DAMAGE CLAIMS, MAY NOT BE USED FOR PAYMENT OF A CONTRACTOR'S CLAIM FOR DAMAGES AS DISTINGUISHED FROM ONE FOR THE VALUE OF WORK AND LABOR PERFORMED OR MATERIALS FURNISHED, 12 COMP. GEN. 482, DISTINGUISHED. WHERE A CONTRACTOR'S CLAIM AGAINST THE DISTRICT OF COLUMBIA FOR DAMAGES (AS DISTINGUISHED FROM A CLAIM FOR VALUE OF WORK PERFORMED OR MATERIAL FURNISHED) IS NOW PENDING IN COURT AND THE DISTRICT CONCEDES PARTIAL LIABILITY; THE CONTRACTOR HAS AGREED TO ACCEPT THE AMOUNT OFFERED BY THE DISTRICT; AND IT IS PROPOSED TO CONFESS JUDGMENT FOR SAID AMOUNT; THE MATTER COMES WITHIN THE PURVIEW OF THE ACT OF FEBRUARY 11, 1929, 45 STAT. 1160, OUTLINING A PROCEDURE FOR THE REPORTING TO CONGRESS FOR SPECIAL APPROPRIATION OF CLAIMS AGAINST THE DISTRICT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE PRESIDENT, BOARD OF COMMISSIONERS, DISTRICT OF COLUMBIA, MAY 16, 1940:

THERE HAS BEEN RECEIVED YOUR LETTER OF APRIL 30, 1940, AS FOLLOWS:

THE VIRGINIA MACHINERY AND WELL COMPANY, INC., HAS BROUGHT SUIT AGAINST THE DISTRICT OF COLUMBIA, CIVIL ACTION NO. 5323, UNDER CONTRACT NO. 12215 FOR THE CONSTRUCTION OF WELL NO. 3 AT THE TUBERCULOSIS SANATORIA, GLENN DALE, MARYLAND, MAKING CLAIM FOR $5,000.90 WITH INTEREST AND COSTS. THE ACTION IS BASED ON FIVE SEPARATE CLAIMS FOR ADDITIONAL COMPENSATION OR DAMAGES GROWING OUT OF ITS CONTRACT WITH THE DISTRICT OF COLUMBIA. THE CONTRACT PROVIDES FOR PAYMENT ON A UNIT PRICE BASIS AT AN ESTIMATED COST OF $23,497.00, AND THE CONTRACTOR WAS PAID $13,348.57, WHICH LEFT AN UNEXPENDED BALANCE OF $10,148.43 (SUBSEQUENTLY RELEASED FOR OTHER PURPOSES).

THE CORPORATION COUNSEL HAS ADVISED THE COMMISSIONERS IN SUBSTANCE THAT IT WOULD BE TO THE INTEREST OF THE DISTRICT TO CONFESS JUDGMENT IN FAVOR OF THE VIRGINIA MACHINERY AND WELL COMPANY, INC., IN THE SUM OF $2,630.67. COPY OF HIS DECISION IS ENCLOSED.

THE QUESTION UPON WHICH THE COMMISSIONERS WOULD APPRECIATE ADVICE FROM YOU IS WHETHER OR NOT THE UNEXPENDED BALANCE OF $103,757.43 IN THE APPROPRIATION 99-998 PUBLIC WORKS, LOANS BY FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, D.C., WOULD BE AVAILABLE FOR THE PAYMENT OF THIS JUDGMENT, INCLUDING INTEREST AND COSTS, IF ANY. THE REPRESENTATIVES OF THE PUBLIC WORKS AGENCY OF THE PUBLIC WORKS ADMINISTRATION HAVE INDICATED INFORMALLY THAT AS THIS CLAIM ARISES OUT OF A CONTRACT INVOLVING EXPENDITURE OF FUNDS ADVANCED UNDER THE PROVISIONS OF THE ACT OF JUNE 25, 1934 (48 STAT. 1250) AS AMENDED, IT IS AGREEABLE TO THEM THAT THIS AND OTHER LEGALLY ADJUDICATED CLAIMS BE PAID FROM THESE FUNDS (30 PERCENT GRANT, 70 PERCENT LOAN). YOU WILL RECALL THAT UNDER YOUR DECISION OF OCTOBER 2, 1934, TO THE COMMISSIONERS (14 C.G. 273) IT WAS HELD "THAT THE UNEXPENDED PART OF EACH OF SUCH LOANS WILL REMAIN AVAILABLE FOR THE PURPOSE FOR WHICH LOANED UNTIL EXPENDED OR REPAID TO THE UNITED STATES.' THIS AND OTHER CLAIMS ARISING UNDER SEVERAL PUBLIC WORKS CONTRACTS WITH THE DISTRICT OF COLUMBIA, UNDER THE PROVISIONS OF THE ACT OF JUNE 25, 1934, AMOUNT TO APPROXIMATELY $99,000.00, BY FAR THE MAJORITY OF WHICH CONSISTS OF LIQUIDATED DAMAGES DEDUCTED FROM THE CONTRACTORS WHICH YOUR OFFICE HAS HELD MAY BE PAID FROM CONSTRUCTION FUNDS ON THE THEORY THAT THE AMOUNT WAS "ERRONEOUSLY WITHHELD AS LIQUIDATED DAMAGES.'

IN 12 C.G. 482, QUOTING FROM THE SYLLABUS, IT WAS HELD:

"A JUDGMENT AGAINST THE DISTRICT OF COLUMBIA GROWING OUT OF A CONTRACT FOR CONSTRUCTION OF A SCHOOL BUILDING MAY BE PAID FROM THE APPROPRIATION FOR THE CONSTRUCTION OF THE BUILDING ONLY TO THE EXTENT THAT THE JUDGMENT IS IN PAYMENT OF THE PORTION OF THE CONTRACT PRICE DETERMINED BY THE JUDGMENT TO HAVE BEEN ERRONEOUSLY WITHHELD AS LIQUIDATED DAMAGES. UNLESS THE AMOUNT OF THE JUDGMENT, EXCLUSIVE OF INTEREST AND COSTS, WILL BE ACCEPTED IN FULL SATISFACTION OF THE JUDGMENT THE CONSTRUCTION APPROPRIATION SHOULD NOT BE USED FOR PAYMENT OF ANY PART THEREOF.'

THE CLAIM OF THE VIRGINIA MACHINERY AND WELL COMPANY, INC., IS SIMILAR TO THE QUESTION PRESENTED IN THE FOREGOING DECISION, EXCEPT THAT NO PART OF THIS CLAIM REPRESENTS A CHARGE AS LIQUIDATED DAMAGES.

IF YOU HOLD THAT THIS AMOUNT MAY NOT BE PAID FROM THE APPROPRIATION 99- 998 PUBLIC WORKS, LOANS BY FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, D.C., WOULD THERE BE ANY OBJECTION TO CHARGING 30 PERCENT OF THE JUDGMENT, INCLUDING INTEREST AND COSTS, WHEN AND IF APPROPRIATED BY CONGRESS, TO THIS FUND?

AS THE GENERAL DEFICIENCY ITEMS WILL BE SUBMITTED TO THE BUDGET BUREAU AND TO CONGRESS WITHIN A FEW DAYS, THE COMMISSIONERS WOULD APPRECIATE EARLY ADVICE FROM YOU IN THIS MATTER.

THE CONTRACT WITH THE VIRGINIA MACHINERY AND WELL CO., INC., PROVIDED FOR THE CONSTRUCTION, AT THE GLENN DALE PROJECT, OF A WELL TO BE KNOWN AS WELL NO. 3, INCLUDING WELL DRILLING, PUMPING EQUIPMENT, AND EXTENSION TO DISTRIBUTION SYSTEM AT THE SITE. IT APPEARS FROM THE FACTS STATED IN THE OPINION OF THE CORPORATION COUNSEL OF THE DISTRICT OF COLUMBIA, REFERRED TO IN YOUR LETTER, THAT THE DISTRICT SUSPENDED WORK UNDER THE CONTRACT ON MAY 22, 1936, WHEN IT WAS DETERMINED DEFINITELY THAT BEDROCK HAD BEEN ENCOUNTERED AT A DEPTH OF 946 FEET; THAT IT SUBSEQUENTLY WAS DETERMINED THAT AN ADEQUATE SUPPLY OF POTABLE WATER--- A MINIMUM OF 200 GALLONS PER MINUTE--- WAS NOT ENCOUNTERED FROM THE WELL; AND, THEREFORE, THAT IT WAS DETERMINED TO ABANDON THE WELL. IT FURTHER APPEARS THAT WORK WAS SUSPENDED FROM MAY 22, 1936, UNTIL OCTOBER 10, 1936, ON WHICH DATE THE CONTRACTOR WAS ORDERED TO REMOVE ALL 8-INCH CASING TO A DEPTH OF 750 FEET, THE ORDER RECITING THAT IT WAS THE INTENTION OF THE DISTRICT TO CONSIDER THE CONTRACT COMPLETED AS SOON AS THAT OPERATION WAS PERFORMED.

THE ITEMS COMPRISING THE SUM OF $2,630.67, REFERRED TO IN YOUR LETTER (THE CORRECT TOTAL APPEARS TO BE $2,620.67), AND FOR WHICH IT IS PROPOSED TO CONFESS JUDGMENT AGAINST THE DISTRICT OF COLUMBIA, CONSIST, IN THE MAIN, OF EXPENSES INCURRED BY THE CONTRACTOR DURING THE PERIOD OF SUSPENSION OF WORK, IN KEEPING MEN AND MACHINERY AT THE SITE, THE CONTRACTOR NOT KNOWING, OF COURSE, JUST WHEN THE WORK WAS TO BE RESUMED. THAT IS TO SAY, THE AMOUNT CLAIMED DOES NOT RELATE TO WORK PERFORMED BUT RATHER TO EXPENSES INCURRED SIMPLY BY REMAINING IDLE.

YOU SUGGEST THAT THE PRESENT CASE IS SIMILAR TO THAT CONSIDERED IN DECISION OF DECEMBER 29, 1932, 12 COMP. GEN. 482, WHEREIN IT WAS HELD THAT A JUDGMENT FOR REMISSION OF LIQUIDATED DAMAGES AND INSPECTION COSTS ERRONEOUSLY WITHHELD FROM THE CONTRACT PRICE COULD BE PAID FROM THE APPROPRIATION AVAILABLE FOR, AND PROPERLY CHARGEABLE WITH, THE CONSTRUCTION COST OF THE BUILDING UNDER THE CONTRACT THERE INVOLVED. OTHER WORDS, IT WAS HELD IN THAT CASE THAT THOUGH THE CONTRACTOR'S CLAIM HAD BEEN REDUCED TO JUDGMENT YOU WERE AUTHORIZED TO PAY THE JUDGMENT, EXCLUSIVE OF INTEREST AND COSTS, FROM THE APPROPRIATION UNDER WHICH THE CONTRACT WAS MADE FOR THE REASON THE JUDGMENT REPRESENTED THE UNPAID BALANCE OF THE ORIGINAL AGREED CONTRACT PRICE. THERE IS A MATERIAL DISTINCTION BETWEEN THAT CASE AND THE PRESENT ONE. HERE THE PRINCIPAL QUESTION INVOLVED DOES NOT RELATE TO PAYING THE BALANCE OF AN AGREED CONTRACT PRICE, BUT RATHER RELATES TO THE PAYING OF DAMAGES REPRESENTING EXPENSES INCURRED BY THE CONTRACTOR DURING THE PERIOD OF DELAY CAUSED BY THE DISTRICT OF COLUMBIA.

IT REPEATEDLY HAS BEEN HELD BY THIS OFFICE, UNDER SUCH CIRCUMSTANCES, THAT THE MATTER OF WHETHER THE COURTS MAY DETERMINE LIABILITY FOR DAMAGES FOR BREACH OF CONTRACT IS ENTIRELY DIFFERENT FROM THE QUESTION OF THE AVAILABILITY OF AN EXISTING APPROPRIATION FOR THE PAYMENT OF SUCH DAMAGES- -- THE AVAILABILITY OF THE APPROPRIATION BEING DEPENDENT UPON WHETHER THE DELAYS WERE ORDERED BECAUSE OF ADMINISTRATIVE NEEDS, WERE ESSENTIAL TO THE ACCOMPLISHMENT OF THE OBJECT FOR WHICH THE APPROPRIATION WAS MADE, AND PROXIMATELY CONTRIBUTED THERETO, 7 COMP. GEN. 645; 12 ID. 179; 15 ID. 779. THIS HOLDING IS BASED ON THE PRINCIPLE THAT, UNLESS OTHERWISE PROVIDED, AN APPROPRIATION FOR A PARTICULAR PURPOSE IS NOT AVAILABLE FOR THE PAYMENT OF DAMAGES ARISING OUT OF, OR INCIDENT TO, THE ACCOMPLISHMENT OF THAT PURPOSE. THE RULE IS SUPPORTED BY THE COURTS AND AN APT STATEMENT THEREOF IS FOUND IN THE CASE OF DISTRICT OF COLUMBIA V. BAILEY, 171 U.S. 161, WHEREIN MR. JUSTICE WHITE, IN SPEAKING FOR THE COURT, STATED:

* * * IT CANNOT BE SAID THAT BECAUSE CONGRESS HAD APPROPRIATED FOR THE IMPROVEMENT OF STREETS, AND THEREFORE AUTHORIZED A CONTRACT FOR SUCH IMPROVEMENT TO THE EXTENT OF THE APPROPRIATION, THAT IT HAD ALSO AUTHORIZED AND APPROPRIATED FOR A CLAIM IN DAMAGES ASSERTED TO HAVE ARISEN FROM THE FACT THAT WORK HAD BEEN STOPPED BECAUSE THE APPROPRIATION MADE BY CONGRESS HAD BEEN EXHAUSTED. THE APPROPRIATION OF MONEY TO IMPROVE STREETS WAS IN NO SENSE THE APPROPRIATION OF MONEY TO PAY A CLAIM FOR UNLIQUIDATED DAMAGES ARISING, NOT FOR WORK AND LABOR PERFORMED AND MATERIALS FURNISHED, BUT FROM THE REFUSAL TO PERMIT THE PERFORMANCE OF WORK AND LABOR AND THE FURNISHING OF MATERIALS. ( ITALICS SUPPLIED.) THAT CASE INVOLVED A CLAIM AGAINST THE DISTRICT OF COLUMBIA FOR DAMAGES ARISING FROM A BREACH OF CONTRACT BY THE DISTRICT IN REFUSING TO PERMIT THE CONTRACTOR TO COMPLETE A CONTRACT FOR RESURFACING CERTAIN STREETS. THE HOLDING OF THE COURT WAS, IN EFFECT, THAT IRRESPECTIVE OF THE LIABILITY OF THE DISTRICT OF COLUMBIA FOR SUCH BREACH, THE COMMISSIONERS HAD NO AUTHORITY TO BIND THE DISTRICT BY CONTRACTING FOR THE PAYMENT OF MONEY FOR ANY CLAIM NOT APPROPRIATED FOR. SPECIFICALLY, THE COURT DENIED THE AUTHORITY OF THE COMMISSIONERS TO ARBITRATE THE MATTER THERE INVOLVED, OR TO SUBMIT IT TO A THIRD PERSON ARBITRATOR. IT WAS TO OVERCOME THIS LACK OF AUTHORITY, AND TO OBVIATE THE NECESSITY OF DEFENDING SUITS WHERE THE LEGAL LIABILITY OF THE DISTRICT WAS CLEAR BUT NO APPROPRIATION WAS AVAILABLE FOR PAYMENT IN SUCH CASES, THAT THE CONGRESS PASSED THE ACT OF FEBRUARY 11, 1929, 45 STAT. 1160. SAID ACT PROVIDES, INSOFAR AS HERE MATERIAL, AS FOLLOWS:

THAT THE COMMISSIONERS OF THE DISTRICT OF COLUMBIA BE, AND THEY HEREBY ARE, EMPOWERED TO SETTLE, IN THEIR DISCRETION, CLAIMS AND SUITS, EITHER AT LAW OR IN EQUITY, AGAINST THE DISTRICT OF COLUMBIA WHENEVER THE CAUSE OF ACTION---

(B) ARISES OUT OF THE EXISTENCE OF FACTS AND CIRCUMSTANCES WHICH PLACE THE CLAIM OR SUIT WITHIN THE DOCTRINES AND PRINCIPLES OF LAW DECIDED BY THE COURTS OF THE DISTRICT OF COLUMBIA OR BY THE SUPREME COURT OF THE UNITED STATES TO BE CONTROLLING IN THE DISTRICT OF COLUMBIA.

SEC. 3. NO SETTLEMENT OF ANY CLAIM OR CAUSE OF ACTION HEREIN AUTHORIZED TO BE MADE BY THE COMMISSIONERS OF THE DISTRICT OF COLUMBIA SHALL IN ANY EVENT EXCEED THE SUM OF $5,000 AND ALL SETTLEMENTS ENTERED INTO BY THE COMMISSIONERS OF THE DISTRICT OF COLUMBIA ACTING UNDER THE TERMS AND PROVISIONS OF THIS ACT SHALL BE PRESENTED TO THE CONGRESS, TOGETHER WITH A BRIEF STATEMENT OF THE NATURE OF THE CLAIM OR SUIT, THE AMOUNT CLAIMED, AND THE AMOUNT OF THE SETTLEMENT, WITH A SUMMARY OF THE EVIDENCE AND CIRCUMSTANCES UNDER WHICH THE SETTLEMENT WAS MADE. APPROPRIATIONS FOR THE PAYMENT OF SUCH SETTLEMENTS ARE HEREBY AUTHORIZED, PAYMENT THEREOF TO BE MADE IN THE SAME MANNER AS ARE OTHER EXPENDITURES FOR THE DISTRICT OF COLUMBIA.

SEC. 4. THIS ACT SHALL TAKE EFFECT FROM AND AFTER ITS PASSAGE, BUT NOTHING HEREIN CONTAINED SHALL BE CONSTRUED AS PROHIBITING THE COMMISSIONERS OF THE DISTRICT OF COLUMBIA FROM PROCEEDING ACCORDING TO THE TERMS AND PROVISIONS HEREOF TO SETTLE ANY CLAIM OR SUIT PENDING AT THE TIME OF THE ENACTMENT HEREOF, IRRESPECTIVE OF THE DATE OF PRESENTATION OF THE CLAIM TO THE COMMISSIONERS OF THE DISTRICT OF COLUMBIA OR THE DATE OF THE FILING OF THE SUIT.

THE PRESENT CASE WOULD APPEAR TO FALL SQUARELY WITHIN THE SCOPE OF THAT ACT. THE MATTER IS NOW PENDING IN COURT, THE DISTRICT APPARENTLY CONCEDES LIABILITY FOR A PART OF THE AMOUNT CLAIMED, THE CONTRACTOR HAS INDICATED A WILLINGNESS TO ACCEPT SUCH AMOUNT IN SATISFACTION OF THE CLAIM, AND THE MATTER INVOLVES A CLAIM FOR DAMAGES AS DISTINGUISHED FROM ONE FOR THE VALUE OF WORK AND LABOR PERFORMED OR MATERIALS FURNISHED. THE ACT OF FEBRUARY 11, 1929, CLEARLY OUTLINES THE PROCEDURE TO BE FOLLOWED IN SUCH CASES AND WHILE IT DOES NOT SPECIFICALLY PROVIDE WITH RESPECT TO JUDGMENTS BY CONFESSION, SUCH JUDGMENTS, BECAUSE OF THEIR NATURE AND IN VIEW OF THE PURPOSES AND LEGISLATIVE HISTORY OF THE SAID ACT, MUST BE CONSIDERED AS COMING WITHIN ITS PURVIEW. I NOTE IN THIS CONNECTION THAT THE CORPORATION COUNSEL OF THE DISTRICT OF COLUMBIA, IN HIS MEMORANDUM OF APRIL 26, 1940, HAS RECOMMENDED THAT HE BE AUTHORIZED---

* * * TO CONFESS JUDGMENT IN FAVOR OF THE VIRGINIA MACHINERY AND WELL CO., INC., FOR THE SUM OF $2,630.67, WITHOUT INTEREST OR COSTS, IN FULL AND COMPLETE SETTLEMENT OF THE CASE OF VIRGINIA MACHINERY AND WELL CO., INC., V. DISTRICT OF COLUMBIA, CIVIL ACTION NO. 5323; THAT UNDER AUTHORITY OF THE ACT OF FEBRUARY 11, 1929, THE AUDITOR BE ADVISED TO INCLUDE THIS SUM IN THE AMOUNTS TO BE REQUESTED FOR INCLUSION IN THE NEXT DEFICIENCY APPROPRIATION, AND THAT THE SAID AMOUNT BE PAID TO THE VIRGINIA MACHINERY AND WELL CO., INC., IF AND WHEN APPROPRIATED BY CONGRESS.

FOR REASONS HEREINBEFORE STATED AND SINCE THE APPROPRIATION FOR CONSTRUCTION OF THE PROJECT DOES NOT PROVIDE THAT IT SHALL BE AVAILABLE FOR PAYMENT OF DAMAGE CLAIMS, THE SAID APPROPRIATION MAY NOT BE USED FOR PAYMENT OF THE PRESENT CLAIM. WHETHER THE SAID APPROPRIATION MAY BE USED TO SATISFY 30 PERCENT OF THE JUDGMENT OR CLAIM, WHEN AND IF APPROPRIATED FOR BY CONGRESS, IS A MATTER PROPERLY FOR THE CONSIDERATION OF CONGRESS AND WILL BE DEPENDENT UPON THE NATURE OF THE CONGRESSIONAL AUTHORIZATION AND SOURCE OF THE FUNDS APPROPRIATED FOR PAYING THE JUDGMENT.