B-9598, MAY 2, 1940, 19 COMP. GEN. 903

B-9598, MAY 2, 1940, 19 COMP. GEN. 903

DISTRICT OF COLUMBIA CONTRACT LIABILITY - EFFECT OF ACTS OF FEDERAL GOVERNMENT IN ITS SOVEREIGN CAPACITY THE GOVERNMENT IN ITS SOVEREIGN CAPACITY IS SEPARATE AND DISTINCT FROM THE GOVERNMENT IN ITS CAPACITY AS A CONTRACTOR AND IS NOT LIABLE AS A CONTRACTOR FOR ITS ACTS AS A SOVEREIGN, AND A FORTIORI IS THE DISTRICT OF COLUMBIA IN ITS CAPACITY AS A CONTRACTOR NOT LIABLE FOR THE ACTS OF THE FEDERAL GOVERNMENT IN ITS ACTS AS A SOVEREIGN. A CONTRACTOR FURNISHING DAIRY PRODUCTS UNDER CONTRACT WITH THE DISTRICT OF COLUMBIA MAY NOT BE GRANTED ANY MONETARY OR OTHER RELIEF BY REASON OF ANY INCREASED COSTS OF PERFORMING THE CONTRACT DUE TO ENFORCED COMPLIANCE WITH A MILK MARKETING ORDER ISSUED, AFTER THE DATE OF THE CONTRACT, UNDER THE AGRICULTURAL MARKETING AGREEMENT ACT OF JUNE 3, 1937, 50 STAT. 246, AS AMENDED, WHERE THE CONTRACT MAKES NO PROVISION FOR ANY INCREASE IN THE PRICES STIPULATED THEREIN FOR ANY CAUSE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE PRESIDENT, BOARD OF COMMISSIONERS, DISTRICT OF COLUMBIA, MAY 2, 1940:

I HAVE YOUR LETTER OF APRIL 10, 1940, AS FOLLOWS:

REFERENCE IS MADE TO CONTRACT DCF-13592, ENTERED INTO BETWEEN THE RICHFIELD DAIRY CORPORATION AND THE COMMISSIONERS OF THE DISTRICT OF COLUMBIA, FOR FURNISHING MILK, CREAM, AND BUTTERMILK DURING THE CURRENT FISCAL YEAR. A COPY OF THE REFERRED-TO CONTRACT IS ON FILE IN YOUR OFFICE.

THE CONTRACT CARRIED CERTIFICATE BY THE CONTRACTOR THAT HE IS COMPLYING WITH ALL MARKETING AGREEMENTS, LICENSES, ORDERS, OR AMENDMENTS THERETO, IN EFFECT AT THAT TIME, AND THAT HE WILL CONTINUE TO COMPLY WITH SUCH PROVISIONS "IN EFFECT ON THE DATE OF OPENING OF THIS BID.'

ATTACHED HERETO IS COPY OF A LETTER ADDRESSED THE PURCHASING OFFICER OF THE GOVERNMENT OF THE DISTRICT OF COLUMBIA BY THE RICHFIELD DAIRY CORPORATION, UNDER DATE OF MARCH 7, 1940, IN WHICH IT IS SET FORTH THAT AT THE TIME THE CONTRACT WAS ENTERED INTO THERE WAS NO AGRICULTURAL MILK MARKETING ORDER IN EFFECT, PENDING OR ANTICIPATED BY THE DAIRY, IN VIEW OF WHICH THE PRICES CARRIED BY THE CONTRACT WERE BASED UPON UNREGULATED PRODUCTION COSTS AND PREVAILING COMPETITIVE MARKETING CONDITIONS.

IT IS FURTHER SET FORTH THAT ON FEBRUARY 1, 1940, THE SECRETARY OF AGRICULTURE ISSUED AN ORDER, WHICH WAS SIGNED BY THE PRESIDENT OF THE UNITED STATES, REGULATING AND FIXING THE PRICE TO BE PAID THE MILK PRODUCERS FOR MILK PRODUCED AND SOLD TO HANDLERS. A COPY OF SUCH ORDER IS LIKEWISE HERETO ATTACHED.

THE CONTRACTOR STATES IN HIS LETTER OF MARCH 7TH THAT THE REFERRED TO ORDER DID NOT MATERIALLY INCREASE THEIR COST ON CLASS 1 MILK, BUT DID AFFECT THE COST ON CLASS 2 TO SUCH AN EXTENT THAT IT WILL ADD CONSIDERABLE TO THEIR COST AND IMPAIR A REASONABLE PROFIT ENJOYED HERETOFORE.

THE PURCHASING OFFICER, UNDER DATE OF MARCH 13TH, REQUESTED THE CONTRACTOR TO FURNISH FURTHER FACTS SHOWING THE ACTUAL INCREASE IN COST, ETC. A COPY OF THIS LETTER IS FORWARDED HEREWITH.

REPLYING TO LETTER ADDRESSED THEM, UNDER DATE OF MARCH 22D, THE CONTRACTOR SETS FORTH THAT SINCE WRITING THEIR LETTER OF MARCH 7TH THEY NOW FIND THAT THE ORDER HAS ALSO MATERIALLY INCREASED THEIR COST ON CLASS MILK. IN THIS LETTER IT IS SET FORTH THE COST PRIOR TO THE ISSUANCE OF THE ABOVE REFERRED-TO ORDER, AS WELL AS THE COST UNDER THE ORDER.

WITH VIEW TO VERIFYING THE STATEMENTS CONTAINED IN THE LETTER FROM THE CONTRACTOR, THE MARYLAND AND VIRGINIA MILK PRODUCERS ASSOCIATION WAS CONTACTED BY LETTER, COPY OF WHICH IS HERETO ATTACHED, REQUESTING ADVICE AS TO THE ARRANGEMENTS WHICH HAD BEEN MADE WITH THE RICHFIELD DAIRY CORPORATION PERTAINING TO THE FURNISHING OF CLASS 1 AND CLASS 2 MILK BY THAT ASSOCIATION. REPLY FROM THE MARYLAND AND VIRGINIA MILK PRODUCERS ASSOCIATION IS FORWARDED HEREWITH. THE FACTS CONTAINED THEREIN SUBSTANTIATE THE CLAIM OF THE RICHFIELD DAIRY CORPORATION.

ATTENTION IS INVITED TO DECISION BY THE ACTING COMPTROLLER GENERAL (C.G. 17-317) IN WHICH IT IS, IN SUBSTANCE, HELD THAT THERE IS NO AUTHORITY FOR REQUIRING AN UNDERTAKING BY A BIDDER TO COMPLY WITH AGREEMENTS WHICH MIGHT BE APPROVED AND EXECUTED SUBSEQUENT TO THE DATE OF OPENING OF BIDS; THE MOST THAT COULD BE REQUIRED OF A BIDDER IN THIS RESPECT IS AN UNDERTAKING TO COMPLY WITH AGREEMENTS IN EFFECT ON THE DATE OF OPENING OF BIDS.

IN VIEW OF THE FACT THAT THERE WAS NO MARKETING AGREEMENT IN EFFECT AT THE TIME OF RECEIPT OF BIDS FOR THE FURNISHING OF MILK, AND THE FURTHER FACT THAT THE DAIRIES IN WASHINGTON MUST COMPLY WITH THE ORDER ISSUED BY THE SECRETARY OF AGRICULTURE, IT WOULD APPEAR THAT THE CONTRACTOR SHOULD BE GRANTED RELIEF IN SOME WAY TO COVER THE ADDITIONAL COST ACCOUNT OF THE REFERRED-TO ORDER.

IT IS RESPECTFULLY REQUESTED THAT YOU INFORM THE COMMISSIONERS:

(1) WHETHER OR NOT THE RICHFIELD DAIRY CORPORATION IS ENTITLED TO MONETARY RELIEF BY REASON OF THE INCREASED COST IT PRESUMABLY HAS BEEN PAYING SINCE FEBRUARY 1, 1940, AND MUST CONTINUE TO PAY FOR THE BALANCE OF THE TERM OF THE CONTRACT, AND IF YOUR ANSWER BE IN THE AFFIRMATIVE;

(2) HOW THE ADDITIONAL COST, IF ANY, IS TO BE DETERMINED AND SETTLED.

THE CONTRACT TO WHICH YOUR SUBMISSION HAS REFERENCE WAS DATED JULY 15, 1939, UNDER BIDS OPENED MAY 16, 1939, AND AWARD MADE JUNE 9. THE CONTRACT REQUIRED THAT THE RICHFIELD DAIRY CORPORATION ,IN STRICT ACCORDANCE WITH THE INSTRUCTIONS TO BIDDERS, GENERAL CONDITIONS, SPECIFICATIONS, AND SCHEDULE HEREUNTO ATTACHED, ALL OF WHICH ARE MADE PARTS OF THIS CONTRACT, FURNISH AND DELIVER TO THE DISTRICT OF COLUMBIA INSTITUTIONS NAMED IN THE ATTACHED SCHEDULE, DURING THE FISCAL YEAR ENDING JUNE 30, 1940, THE MILK, CREAM, AND BUTTERMILK SPECIFIED IN SAID SCHEDULE FOR THE PRICES NAMED THEREIN.'

ATTACHED TO AND MADE A PART OF THE BID OF THE RICHFIELD DAIRY CORPORATION, WHICH BECAME A PART OF THE CONTRACT, WAS A "COMPLIANCE CLAUSE" IN PERTINENT PART AS FOLLOWS:

THE BIDDER CERTIFIES, IRRESPECTIVE OF WHETHER HE IS A PARTY THERETO, THAT HE IS COMPLYING WITH ALL MARKETING AGREEMENTS, LICENSES, ORDERS, OR AMENDMENTS THERETO NOW IN EFFECT, IF ANY, EXECUTED OR ISSUED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF PUBLIC ACT NO. 10, 73D CONGRESS, AS AMENDED AND AS REENACTED AND AMENDED BY THE AGRICULTURAL MARKETING AGREEMENT ACT OF 1937, PERTAINING TO MILK OR ITS PRODUCTS AND APPLICABLE TO ANY OF THE COMMODITIES TO BE FURNISHED UNDER THE CONTRACT FOR WHICH THIS BID IS OFFERED AND/OR TO THE BIDDER. IF THIS BID IS ACCEPTED THE BIDDER WILL CONTINUE TO COMPLY WITH ALL THE PROVISIONS OF SAID MARKETING AGREEMENTS, LICENSES, ORDERS, OR AMENDMENTS THERETO ACCORDING TO THE TERMS THEREOF, IN EFFECT ON THE DATE OF THE OPENING OF THIS BID, WITHOUT REGARD TO WHETHER HE IS HIMSELF A PARTY TO ANY OF THE SAID REGULATIONS. ( ITALICS SUPPLIED.)

THE CONTRACT IS CLEAR AND UNAMBIGUOUS IN ITS TERMS AND MAKES NO PROVISION FOR ANY INCREASE IN THE PRICES STIPULATED THEREIN FOR THE VARIOUS GRADES AND KINDS OF MILK SPECIFIED IN ANY EVENT OR FOR ANY CAUSE. AND SINCE, AS YOU STATE, THERE WAS NO AGRICULTURAL MILK MARKETING ORDER IN EFFECT IN THE WASHINGTON MARKETING AREA ON THE DATE OF THE OPENING OF THE BIDS, MANIFESTLY THERE WAS AND IS NO CONTRACTUAL OBLIGATION UPON THE RICHFIELD DAIRY CORPORATION TO COMPLY WITH THE "ORDER REGULATING THE HANDLING OF MILK IN THE WASHINGTON MARKETING AREA" THEREAFTER ISSUED BY THE SECRETARY OF AGRICULTURE ON JANUARY 29, 1940, EFFECTIVE FEBRUARY 1. THE OBLIGATION OF THE CORPORATION TO COMPLY WITH SUCH REGULATORY ORDER IS WHOLLY UNRELATED TO THE CONTRACT AND ARISES OUT OF THE CONTRACTOR'S AMENABILITY TO THE AGRICULTURAL MARKETING AGREEMENT ACT OF JUNE 3, 1937, 50 STAT. 246, ET SEQ., AS AMENDED, AND TO ORDERS ISSUED BY THE SECRETARY UNDER AUTHORITY CONFERRED BY SAID ACT.

IT IS A WELL-ESTABLISHED PRINCIPLE OF LAW THAT VALID CONTRACTS ARE TO BE ENFORCED AND PERFORMED AS WRITTEN AND THAT THE FACT THAT SUPERVENING OR UNSEEN CAUSES RENDER PERFORMANCE MORE BURDENSOME OR LESS PROFITABLE, OR EVEN OCCASION A LOSS, IS NOT SUFFICIENT TO EXCUSE PERFORMANCE OR TO ENTITLE A CONTRACTOR TO ADDITIONAL COMPENSATION. AS SAID IN PENN BRIDGE CO. V. UNITED STATES, 59 CT. CLS. 892, 896,"CONTRACTUAL RIGHTS ONCE FIXED IN A PROPER CONTRACT EXECUTED BY AUTHORITY ARE INVIOLATE. THEY MAY BE FORFEITED BY ONE PARTY OR THE OTHER, CONSTRUCTION IS PERMISSIBLE IF THE TERMS ARE AMBIGUOUS, BUT IN THE ABSENCE OF AMBIGUITY OR FORFEITURE OF RIGHTS BY CONDUCT, SUCH A CONTRACT CANNOT BUT BE ENFORCED AS WRITTEN.' ALSO, SEE SATTERLEE ADMX. V. UNITED STATES, 30 CT. CLS. 31; PENNSYLVANIA HARDWARE CO. V. UNITED STATES, 49 CT. CLS. 327, 331; SUN PUBLISHING CO. V. MOORE, 183 U.S. 642; SIMPSON V. UNITED STATES, 31 CT. CLS. 244. CITATIONS COULD BE MULTIPLIED.

SINCE THE CONTRACT HERE INVOLVED MADE NO PROVISION FOR ANY DISPENSATION IN CASE OF INCREASED COSTS OF PERFORMANCE, THE STATED PRINCIPLE OF LAW CLEARLY IS FOR APPLICATION HERE, AND THE RICKFIELD DAIRY CORPORATION IS BOUND TO PERFORM THE CONTRACT IN ACCORDANCE WITH ITS TERMS AND AT THE PRICES STIPULATED. THE FACT THAT AT THE TIME THE CONTRACT WAS ENTERED INTO THERE WAS NO AGRICULTURAL MILK MARKETING ORDER PENDING, OR ANTICIPATED BY THE CONTRACTOR, AND THAT THE PRICES CARRIED BY THE CONTRACT WERE BASED UPON UNREGULATED PRODUCTION COSTS AND PREVAILING COMPETITIVE MARKETING CONDITIONS, IS NOT SUFFICIENT TO AFFORD THE CONTRACTOR RELIEF. INCREASED COST OF PERFORMANCE, WHETHER FORESEEN OR UNFORESEEN, IS ONE OF THE HAZARDS OF A CONTRACT WHICH NEITHER EXCUSES PERFORMANCE NOR ENTITLES A CONTRACTOR TO ADDITIONAL COMPENSATION. AS WAS SAID IN SATTERLEE ADMX. UNITED STATES, SUPRA,"IF THE LAW CASTS A DUTY UPON A PARTY, THE PERFORMANCE WILL BE EXCUSED IF BY THE ACT OF GOD IT BECOMES IMPOSSIBLE; BUT IF A PARTY ENGAGES TO DO SOMETHING AND FAILS TO PROVIDE AGAINST CONTINGENCIES, THE NONPERFORMANCE IS NOT EXCUSED BY A CONTINGENCY NOT FORESEEN AND WHICH BY ITS CONSEQUENCE INCREASES THE COST AND DIFFICULTY OF PERFORMANCE.'

NOR IS THE FACT THAT THE INCREASE IN COST OF MILK TO THE CONTRACTOR IS ATTRIBUTABLE TO THE MILK-MARKETING ORDER ISSUED BY THE SECRETARY OF AGRICULTURE OF AVAIL TO CHANGE THE RULE. IN PROMULGATING SAID ORDER THE SECRETARY ACTED PURSUANT TO AUTHORITY IMPOSED IN HIM BY AN ACT OF CONGRESS AND AS THE ORDAINED REPRESENTATIVE, FOR THE PURPOSE, OF THE GOVERNMENT IN ITS SOVEREIGN CAPACITY. THE COURTS HAVE HELD THAT THE GOVERNMENT IN ITS SOVEREIGN CAPACITY IS SEPARATE AND DISTINCT FROM THE GOVERNMENT IN ITS CAPACITY AS A CONTRACTOR AND IS NOT LIABLE AS A CONTRACTOR FOR ITS ACTS AS A SOVEREIGN. HOROWITZ V. UNITED STATES, 267 U.S. 458. A FORTIORI IS THE DISTRICT OF COLUMBIA IN ITS CAPACITY AS CONTRACTOR NOT LIABLE FOR THE ACTS OF THE FEDERAL GOVERNMENT IN ITS ACTS AS A SOVEREIGN. ALSO, THERE MIGHT BE FOR CONSIDERATION THE RULE THAT PUBLIC CONTRACTS PROPERLY ENTERED INTO MAY NOT BE MODIFIED BY PUBLIC OFFICERS TO THE DETRIMENT OF THE PUBLIC.

UPON THE FACTS PRESENTED THERE WOULD APPEAR TO BE NO LEGAL AUTHORITY FOR GRANTING THE RICHFIELD DAIRY CORPORATION ANY MONETARY OR OTHER RELIEF BY REASON OF ANY INCREASED COSTS OF CONTRACT PERFORMANCE DUE TO THE CORPORATION'S ENFORCED ADHERENCE TO THE MILK-MARKETING ORDER EFFECTIVE FEBRUARY 1, 1940.

ACCORDINGLY, YOUR FIRST INQUIRY MUST BE ANSWERED IN THE NEGATIVE, WHICH RENDERS AN ANSWER TO YOUR SECOND QUESTION UNNECESSARY.