author: PER CURIAM: SCHWARTZ, Trial Judge:

text:
    INLAND CONTAINER, INC. v. The UNITED STATES.
    No. 350-70.
    United States Court of Claims.
    March 19, 1975.

      Edward M. Garrett, Salt Lake City, Utah, attorney of record, for plaintiff; Hanson & Garrett, Salt Lake City, Utah, of counsel.
    Gerald L. Schrader, Washington, D. C., with , whom was Asst. Atty. Gen. Carla A. Hills, for defendant.
    Before DAVIS, KASHIWA and BENNETT, Judges.
   OPINION

PER CURIAM:

This case comes before the court on exceptions by the parties to the recommended decision filed March 4, 1974, by Trial Judge David Schwartz, pursuant to Rule 134(h), having been submitted to the court on the briefs and oral argument of counsel. Upon consideration thereof, since the court agrees with the trial judge’s recommended decision, as hereinafter set forth, it hereby affirms and adopts the same as the basis for its judgment in this case. Therefore, it is concluded that plaintiff is entitled to recover and judgment is entered for plaintiff and against defendant in the sum of $34,831.72.

OPINION OF TRIAL JUDGE

SCHWARTZ, Trial Judge:

This is an action for $92,570 as damages for breach by the Defense Depot at Ogden, Utah, of three contracts with plaintiff for the Depot’s requirements of fiberboard shipping boxes. The claim is here found valid. Damages, held assessable under the convenience-termination clauses in the contracts, are found to be proven under the third contract only, in the amount of $34,831.72.

The Defense Depot, a facility of the Defense Supply Agency, Department of Defense, stocks and, as needed, packs and ships electronic equipment, clothing and other supplies to military installations throughout the world, primarily, at the times involved, to installations in Southeast Asia. Plaintiff is a manufacturer of corrugated fiberboard boxes, with its principal place of business in Ontario, California. Beginning in 1967 the Depot awarded to plaintiff three consecutive, annual contracts for boxes. The first contract covered only Schedules VI and VII of the invitation, the second contract only Schedule VII. In the third contract, which extended from September 1969 to September 1970, plaintiff was awarded Schedules III through VI, a substantial portion of the total invitation and a significant increase over the previous contracts.

The contracts were what is known as requirements-type contracts. The first contract obligated the Depot “to order from the contractor all of its- requirements” of the designated boxes “that may in the judgement [sic] of the contracting officer be required during the contract term.” The second and third contracts provided that “the Government shall order from the Contractor all the * * * [boxes] which are required to be purchased by the” Depot.

Prior to the award to the third contract, Depot officers, including the contracting officer — the Depot’s procurement officer for boxes — had solicited plaintiff, and other box manufacturers, to locate a branch plant near the Depot. The officers did this in the interest of promoting competition and facilitating Government orders of boxes. Plaintiff was willing, if it could get enough business from the Depot to warrant a branch plant. Accordingly, on receipt of the substantial award of the third contract, plaintiff established a second plant at Clearfield, Utah, not far from the Depot in Ogden, with the expectation that the Depot’s business would carry the plant for a year and the hope that meanwhile other business would be developed.

The alleged breach resides in the practice of the Depot, throughout the three contracts, of ordering the boxes it needed from the General Services Administration, under a system to be described, before placing an order with plaintiff pursuant to the contract in force. The Depot’s orders for plaintiff’s boxes during the third contract amounted to $146,-099; during the same period orders placed with GSA for the type of boxes covered by the contract amounted to $446,720.

The Depot-GSA relationship was unknown to plaintiff until well into the third contract, when plaintiff had al~ ready established the branch plant and saw that it was practically idle for insufficient orders. The branch plant, opened in mid-November 1969, did a gross business of $54,000, of which $35,000 was for boxes for the Depot, before it closed in March 1970, with a loss of $35,000.

It appears that GSA, and particularly GSA Denver, with which the Depot dealt, stocked not only boxes but other supplies as well for requisition by federal agencies. Specifically, GSA regularly stocked most of the boxes on the schedules of the contracts with plaintiff. Operating under requirements contracts, with box manufacturers other than plaintiff, providing for 70-day delivery, GSA ordered boxes in advance of the Depot’s needs, to meet those needs. The Depot paid GSA for the boxes; the payments went into a revolving fund which financed the system, and the price was fixed so that GSA would “break even” on the operation.

GSA and the Depot had a close working relationship involving forecasts of need by the Depot, periodically updated, a computerized system at GSA which would automatically reorder boxes when stocks fell below a pre-set level and the storage of boxes in GSA warehouses until the Depot called for them. Telephone orders were placed by the Depot for boxes needed urgently and deliveries or pick-ups could be arranged by telephone on GSA or Depot trucks. In consequence, GSA could deliver boxes to the Depot with great promptness, often on the same day, from stocks kept by GSA suppliers or warehouses as near to the Depot as Clearfield. If GSA Denver was unable to meet the Depot’s needs from its own stocks, it would draw on other GSA warehouses, in Texas or elsewhere.

The net result was that GSA stocked or was able promptly to provide a ready supply of most of the kinds of boxes used by the Depot. Plaintiff got the leavings, including, prominently, all of the Depot’s need for special boxes, called full-flap, difficult and time-consuming to make. Almost 35 percent of the boxes ordered from plaintiff under its third contract were these full-flap boxes. GSA did not stock these boxes.

The Depot was not without some doubts over its treatment of plaintiff, though, as will appear, its officers believed they were doing the correct thing under “regulations.” The contracting officer testified that at about the time of the award of the third contract it occurred to him that in the light of the Depot’s practice of ordering boxes from GSA, the requirements clauses in the outstanding contracts might be confusing or misunderstood. A clause was thereupon drafted, to be added to solicitations for such contracts, stating that “boxes available from Government Agencies will not be' ordered under this contract” [emphasis in the original].

What the effect of such a clause might have been — whether it gives sufficient notice of the practice described here— need not be decided, for the clause was not added to any of the contracts now in suit. The episode is important as tending to show some awareness by the Depot that the contract words “required to be purchased” and “required,” might (as is now held) be taken to include the boxes ordered from GSA and purchased by it to meet the Depot’s requirements.

As a defense to the claim of breach, the Government says, first, that the boxes were not “purchased” (a word found only in the clause in the second and third contracts, see note 2, supra), but requisitioned. Except for this, there is apparently no contest of the basic proposition that the language used was clear enough to create an obligation to order from plaintiff all of the Depot’s requirements of boxes to be purchased. Goldwasser v. United States, 325 F.2d 722, 163 Ct.Cl. 450 (1963); Locke v. United States, 283 F.2d 521, 151 Ct.Cl. 262 (1960).

The contention is that boxes available on the shelves of a sister agency, when obtained by requisition, are not “purchased.” This may well be so in a simple case of the reimbursable requisition of boxes originally procured by the sister agency for its own needs. Here, however, boxes were being purchased systematically and continually, at the request of a using agency, to meet the needs of that agency. The effect was the same as-if the Depot itself was purchasing in advance of requirements, to meet its requirements. The Depot was purchasing, by ordering from GSA, and GSA was, in these circumstances, the purchasing agent or arm of the Depot, engaged in regularly purchasing boxes on behalf of the Depot, to meet the Depot’s requirements. Purchases, in the sense of the contract, could be said to have been made by either the Depot or GSA.

The Government emphasizes that no purchases were made to fill a specific Depot order. True, GSA made -purchases only to replenish stocks and not, upon receipt of an order, to fill that order. But it makes little difference, for purposes of a contract for boxes “required to be purchased,” that purchases are made in advance of the need, to provide stocks to meet needs when they arise, rather than after the need has become immediate. The boxes were still required to be purchased, and were in fact purchased, by the Depot or by its purchasing agent to meet the principal’s requirements.

That the ordering paper was called a “requisition” is also immaterial. A “requisition” is an administrative name, here, for the paper transfer from an agent-purchaser to a principal-user of boxes which had already been purchased. The whole system was designed to bring about the purchase of required boxes, and the using agency paid a price which included all the elements of a purchase, including, presumably, the costs of the buying agency.

A next defense is based on regulations of the Defense Supply Agency, internal to the Agency and not published in the Federal Register, and a provision in the Armed Services Procurement Regulations (ASPR), published, of course, in the Federal Register, and thus binding on the plaintiff and having the force of law. Depot personnel testified that regulations of their Agency known as DSAR 4140.39, DSAM 4140.2 and DSAM 5335.1 required them to order boxes from GSA as they did, despite the contract with plaintiff; they had not heard of the regulation in ASPR. The text of the Agency regulations, without their context, was introduced in evidence. The Government in its post-trial brief recognizes that the Defense Supply Agency regulations were internal to the Agency, that is, not officially printed in any way that would give plaintiff constructive notice of them. Reliance is put on the latter two of the internal regulations, which are said to have presumably issued in implementation of the ASPR provision, and on the ASPR provision, itself.

The definitions in DSAR 4140.39, of “DSA Manager,” “DSA-managed Items” and “DSA Centrally Procured Items,” describe a system for procurement by a “DSA Manager” of items of supply which are “DSA-Managed.” None of the regulations list or describe DSA-Managed items. A “DSA-Managed” item is “managed by the DSA Manager normally for DoD as a whole.” “DSA-Managed Items” may be procured by two methods. They are “either centrally procured by the DSA Manager or are decentralized to the using Military Services for local procurement.” The DSA Manager makes the decision that the item of supply shall be “centrally procured by the DSA Manager for DoD as a whole, or that the item is decentralized to the using Military Services for local procurement from the General Services Administration or commercial sources.” “Local Purchase,” the last of the terms defined, is said to mean: “The action of a requisitioning or using activity to purchase, for its own use or for use by supported units, items of supply authorized for local purchase from commercial sources.”

This regulation, DSAR 4140.39, is entitled “Authorization for Local Purchase of DSA Centrally Procured Items.” Aside from the definitions already described, it refers to the two methods of procurement of DSA-managed items— centralized and decentralized — and with certain immaterial exceptions it authorizes two kinds of “[l]oeal purchase of any DSA centrally procured, commercial-type item”: (1) to fill an emergency, immediate use requirement, and (2) where the procurement line item does not exceed $2,500.

DSAM 4140.2 and DSAM 5335.1 revise and increase to three the permitted instances of local purchase of centrally procured items as follows: (1) for emergency, immediate use, (2) where the value of the local purchase will not exceed $10, and (3) when authorized specifically by the “central item manager.” DSAM 5335.1 then adds this sentence, presumably the language relied upon by the defendant: “General Services Administration (GSA) and Defense Logistics Services Center (DLSC) excess listings are a primary source of supply.” The sentence plainly refers to the three kinds of authorized local purchases of centrally procured items.

The Government’s contention is, apparently, that the procurement of boxes which took place in the instant case was a “local purchase,” for which GSA was designated as a “primary source of supply,” and that the designation prevailed despite and during the term of the contracts with plaintiff.

It is difficult to accept that the term “local purchase” could ever have included such systematic, substantial procurement of boxes as here took place under the contracts with plaintiff. For instance, at one time, at least, during the period here involved, under DSAR 4140.-39, effective June 13, 1969 (the only one of the three regulations bearing an effective date), local purchases were permitted only in emergencies and for items whose value was not in excess of $2,500. Moreover, the, term “local purchases” seems to be limited to items “centrally” procured or managed. No showing has been made that (1) boxes were a “DSA-Managed Item,” (2) that they were such an item “centrally procured” or, (3) that the procurement here was a “local purchase” of a DSA-managed item, centrally procured. If, as has not been shown, fiberboard boxes were a “DSA-Managed Item,” it seems most likely that the procurement of boxes by the Depot was not a local purchase of a centrally procured item but rather a “local procurement” of a “decentralized” item of supply.

The three regulations are thus not shown to be applicable to the present case. They are addressed to “local purchases” as an exception to “centralized procurement” of “DSA-Managed Items,” and there has here been no proof that boxes were such items, so procured, and that the Depot’s purchases were “local purchases.”

The regulation published in the Federal Register, ASPR 5-201, 32 CFR § 5.201 (1969), is similarly not shown to be applicable. It too relates to “local purchases”; it provides that items “decentralized for local purchase * * * will be ordered from the [GSA] Depots unless delivery requirements cannot be met.” Here, again, there is no showing that the formal and very substantial procurement which took place was a “local purchase” and thus no showing that the regulation is applicable, and no need to reach questions as to the force of the regulation, were it applicable.

Another defense raised by the Government would justify orders to GSA on the ground that plaintiff frequently failed to meet the delivery-time requirements in the contract — 14 calendar days in the first contract and 10 working days in the second and third contracts — and that GSA had a better record in making deliveries. Plaintiff was late in delivering 75 percent of its orders. According to a rating system used by the Depot, plaintiff got “poor” and “very poor” marks for delivery more than 50 percent of the time. GSA delivered 60 percent of orders placed with it in 14 days or less; plaintiff delivered only 25 percent of its orders in that number of days.

The comparison between plaintiff and GSA in this respect is unfair. GSA had the advantage of a revolving fund which financed advance buying and warehousing of boxes until they were needed. Moreover, there is evidence that plaintiff’s poor delivery record was due in substantial part to the fact that the Depot ordered from plaintiff all of its requirements of the special “full-flap” box which took more time and trouble to manufacture than regular boxes. Orders for these boxes, while within the contract, were unexpectedly large in volume and they .slowed plaintiff down in making deliveries of both the special and regular boxes. Nevertheless, it does seem that plaintiff’s delivery record was far from perfect, and that GSA’s record was substantially better.

The contracting officer testified, in support of the defense based on delivery records, that the Depot’s war-related mission was such that it could not have tolerated plaintiff’s delivery record on all the boxes the Depot needed. The testimony is rejected as unconvincing. It was self-serving, given by an officer not particularly expert, and not corroborated by contemporary documents or any communication of such a view to plaintiff at the time.

Further, an exchange of letters early in the third contract, between plaintiff and the Depot’s general counsel, evidences recognition by the Depot that even orders for boxes needed in 24 hours were by the contract to be offered to plaintiff. It appears that in October 1969, the Depot solicited bids on a contract for boxes to be supplied within 24 hours. Plaintiff promptly protested, citing a clause in the third contract providing that orders for boxes required sooner than 10 working days must first be offered to plaintiff, and could be placed elsewhere only if plaintiff declined the business. The Depot’s general counsel agreed, and replied that the invitation was designed to, and would be amended to provide only for orders of those boxes for 24-hour delivery as plaintiff first refused.

The defendant’s concern over plaintiff’s delays in deliveries is greater now than it was at the time. At the time, there may well have been adequate ground to terminate plaintiff for default. This, however, the Government deliberately chose not to do. The contracting officer testified that he did not terminate plaintiff’s contract for the reason that the Depot could not have obtained better deliveries by going elsewhere. The Depot complained of plaintiff’s deliveries only to the extent of issuing three cure notices, and in all three instances plaintiff cured the default in the time allowed. In no other way did the Government seek to urge plaintiff to make faster delivery or deliveries as required by the contract.

Having taken no other steps to complain or to terminate the contract at the time, the Government cannot now raise plaintiff’s delay as a retroactive default to excuse its own breach. The delay was waived. Cf. De Vito v. United States, 413 F.2d 1147, 188 Ct.Cl. 979 (1969).

There is no valid defense to the claim of breach.

For the breach, plaintiff claims damages composed of estimated lost profits under all three contracts, at 10 percent of the dollar volume of business diverted from it to GSA, and an operating loss of $34,831.72 at the Clearfield branch plant for the year of the 1969 — 70 contract.

Lost profits may not be recovered, by reason of the termination-for-convenience clause, present in all three contracts. Though the contracts were breached without reference to or reliance upon the termination-for-convenience clauses, it is settled that the clause nevertheless restricts the damages recoverable for the breach to those which would have been allowable under the convenience-termination clause, had it been invoked. Nesbitt v. United States, 345 F.2d 583, 170 Ct.Cl. 666 (1965), cert. denied, 383 U.S. 926, 86 S.Ct. 931, 15 L.Ed.2d 846 (1966); G. C. Casebolt Co. v. United States, 421 F.2d 710, 190 Ct.Cl. 783 (1970); John Reiner & Co. v. United States, 325 F.2d 438, 163 Ct.Cl. 381 (1963), cert. denied, 377 U.S. 931, 84 S.Ct. 1332, 12 L.Ed.2d 295 (1964).

In Nesbitt v. United States, supra, the court held that even if plaintiff’s contract be deemed, as alleged, to be a contract for all of the Government’s requirements, the Government could still have placed orders elsewhere, on a partial termination for convenience from time to time; and that the omission to invoke the termination clause “makes no difference and that the clause nevertheless sets the limit to any possible recovery.” 345 F.2d at 585, 170 Ct.Cl. at 669. The case is thus particularly apposite, for the convenience-termination clause in the contract here also permits termination “in whole, or from time to time in part.” 32 CFR § 8.701(a) (1969) subparagraph (a), April 1966 text.

Alleged lost profits aside, there remains the operating loss of $34,831.72 suffered by plaintiff at its Clearfield branch in the year of the third, 1969 — 70, contract.

By the reasoning of Nesbitt v. United States, supra, plaintiff is in the position as if from time to time during the third contract the Depot notified it of a partial termination to the extent of a particular order placed with GSA for boxes which should, under the contract, have been ordered from plaintiff. Such a partial termination would surely not have required plaintiff to abandon performance. The Government was in reality and in the hypothetical partial, repeated terminations, insisting upon performance by plaintiff. “Reasonable commercial judgment” required that plaintiff continue performance. Northern Helex Co. v. United States, 455 F.2d 546, 553, 197 Ct.Cl. 118, 129 (1972).

In establishing its plant at Clearfield, in preparation for the Government’s orders, plaintiff is to be analogized to the contractor who buys a bulldozer to perform a Government contract which is then terminated for the Government’s convenience. Appeal of Grimsrud, ASBCA 7971, 1962 BCA H 3562.

The plant was established on the strength of the award of the third contract, and closed in less than 6 months, with a loss of $34,831.72 for lack of orders. It would not have been established without the contract and its promise of all the Depot’s box purchases for a year. Plaintiff had no right, of course, to expect further contracts, but it could and did expect that the Government’s business would enable it to break even, at the new plant, in the year of the contract; meantime other business might be found. That the expectations were not unreasonable is shown by the volume of the GSA’s purchases for the use of the Depot, $466,720.98. Had this business come to plaintiff, the reasonable profit, at 10 percent, would have approximated the losses suffered.

The Government argues that since a substantial part of the $446,000 worth of boxes was ordered in the first 2 months of the contract, before the Clearfield plant became operational in mid-November, 1969, the arithmetic of hypothetical profit for the Clearfield plant shows that it would have lost $2,000 even had it received the business diverted to GSA. Perhaps so, but with the larger volume of business, the plant would not have closed in March 1970, when it did, and in the months following March might well have netted $2,000 and more from private business. Such de minimus calculations as the Government relies upon are beside the point — which is that the plant was established — reasonably so and at the urging of the Government — in preparation for the performance of the work under the contract. In consequence, when the plant was forced to close in 6 months, for lack of Government orders, in breach of the contract, its operating loss is a fair approximation of the “initial costs and preparatory expense,” within the meaning of the convenience-termination clause. The result is no more a penalty or damages for a tort or for consequential damages than any conventional award of out-of-pocket losses for breach of contract or an allowance, in an administrative termination settlement, of substantial preparatory costs, economically wasted by reason of an early convenience termination.

It is immaterial to the stated result that such orders as were placed were communicated to plaintiff’s main plant at Ontario, California, and that $70,000 of the $106,000 in orders placed after the Clearfield plant became operational were in fact filled at the Ontario plant. The loss at Clearfield was hardly deliberate or self-inflicted to buttress the case for breach. Plaintiff doubtless planned to fill some orders at its main plant, and it cannot be expected that the main plant should have been entirely deprived of what business there was, in favor of the new branch plant. Had the Depot ordered from plaintiff the boxes it required, the additional orders would doubtless have been filled at Clearfield.

It may be said that the analogy to Appeal of Grimsrud, supra, is not entirely apt, that the equation of the operating loss with allowable “preparatory expense” is not exact, or that some more refined basis exists for computing plaintiff’s “preparatory expense.” The answer to such doubts can only be that the use of the amount of the operating loss as a measure of initial costs and preparatory expense is a reasonable and the best possible method for computing damages, on the limited record presented. As such, it is sufficient basis for a verdict. It is difficult and perhaps impossible to apply the allowable-costs convenience-termination rules literally in judicial proceedings for a determination of breach-of-contract damages. Analogies must be used, and leeway allowed to absorb the strains inevitable in a judicial inquest into damages under a set of rules written for an administrative negotiation. G. L. Christian & Associates v. United States, 312 F.2d 418, 427, 160 Ct.Cl. 1, 17, rehearing denied, 320 F.2d 345, 160 Ct.Cl. 58, cert. denied, 375 U.S. 954, 84 S.Ct. 444, 11 L.Ed.2d 314 (1963), rehearing denied, 376 U.S. 929, 84 S.Ct. 657, 11 L.Ed.2d 627, 377 U.S. 1010, 84 S.Ct. 1906, 12 L.Ed.2d 1059 (1964), 170 Ct.Cl. 902, cert. denied, 382 U.S. 821 (1965); Man-loading & Management Associates, Inc. v. United States, 461 F.2d 1299, 198 Ct.Cl. 628 (1972), 203 Ct.Cl. 725 (1973). Especially is this so in the unusual case presented in which the preparatory expenses are not the costs of preliminary work on a single job in an existing and continuing plant, but the losses suffered when a whole plant is established to perform one piece of work and closes with a loss when the work is not forthcoming.

This is still a breach of contract ease, though damages are to be determined under the convenience-termination clause. In estimating damages, this court “occupies the position of a jury under like circumstances.” Specialty Assembling & Packing Co. v. United States, 355 F.2d 554, 573, 174 Ct.Cl. 153, 184 (1966). Judgment against a liable defendant for damages suffered is not to be withheld for inability to compute the damages precisely; mathematical precision is not essential to the determination. Eastman Co. v. Southern Photo Co., 273 U.S. 359, 379, 47 S.Ct. 400, 71 L.Ed. 684 (1927); Brand Investment Co. v. United States, 58 F.Supp. 749, 102 Ct.Cl. 40, 44, (1944), cert. denied, 324 U.S. 850, 65 S.Ct. 684, 89 L.Ed. 1410 (1945). In the absence of a more reliable method of determining damages, the amount of the verdict in a bench trial, whether comprising “initial costs and preparatory expense” or more traditional elements of damages, may, therefore, be as unarticulated — as approximate or, even, as subjective — as a verdict by a jury.

On these principles it is concluded that $34,831.72, the amount of the first year operating loss at the Clearfield plant, is a “fair and reasonable approximation” of the damages, such as a termination settlement officer might allow, or, if not, then in any event such as a jury might award. Specialty Assembling & Packing Co. v. United States, supra; cf. W. R. B. Corp. v. United States, 183 Ct.Cl. 409, 425 (1968).

Plaintiff is entitled to recover $34,-831.72.

      . The first, 1967-68, contract provided:
      “THIS IS A REQUIREMENT TYPE CONTRACT FOR FIBERBOARD BOXES. THE CONTRACTOR WILL BE REQUIRED TO FURNISH THE SUPPLIES ORDERED DURING THE LIFE OF THE CONTRACT IN THE QUANTITIES ORDERED WITHIN THE LIMITATIONS SPECIFIED HEREIN. THE GOVERNMENT WILL BE OBLIGATED TO ORDER FROM THE CONTRACTOR ALL OF ITS REQUIREMENTS OF THE ITEMS PROVIDED HEREUNDER THAT MAY IN THE JUDGEMENT [sic] OF THE CONTRACTING OFFICER BE REQUIRED DURING THE CONTRACT TERM.”

      . The second and third contracts, for 1968-69 and 1969-70, provided:
      “ * * * the Government shall order from the Contractor all the supplies * * * which are required to be purchased by the Government activity identified in the ‘Ordering’ clause.”

      . “§ 5.201 Procurement from General Services Administration stores depots.
      “It is the policy of the Department of Defense that for an item which has been decentralized for local purchase and which is available from the General Services Administration stores depots, such items will be ordered from the Depots unless delivery requirements cannot be met. The mandatory provisions of Department of Defense, General Services Administration Interagency Purchase Assignments (§ 5.1201 — 7) are not applicable to decentralized items which are within these assignments and which are available from the stores depots. Such items will be ordered in accordance with the above stated policy. [28 F.R. 12562 Nov. 23, 1963]”

      . “e. If delivery of any quantity of an item covered by the contract is required by reason of urgency prior to the earliest date that delivery may be specified under this contract and if the Contractor will not accept an order providing for the accelerated delivery, the Government may procure this requirement from another source.”

      . “(a) The performance of work under this contract may be terminated by the Government in accordance with this clause in whole, or from time to time in part, whenever the Contracting Officer shall determine that such termination is in the best interests of the Government. Any such termination shall be effected by delivery to the Contractor of a Notice of Termination specifying the extent to which performance of work under the contract is terminated, and the date upon which such termination becomes effective.”

      . 32 CFR § 8.701(a) (1969) subparagraph (e)(ii)(A), April 1966 ed. provides as follows:
      “(ii) The total of—
      “(A) The costs incurred in the performance of the work terminated, including initial costs and preparatory expense allocable thereto, but exclusive of any costs attributable to supplies paid or to be paid for under paragraph (e)(i) hereof;”


source: Caselaw Access Project

author: PER CURIAM:

license: Public Domain

text:
    EVERETT PLYWOOD CORPORATION v. The UNITED STATES.
    No. 743-71.
    United States Court of Claims.
    Feb. 19, 1975.

      James F. McAteer, Seattle, Wash., for plaintiff. Emmett G. Lenihan, Seattle, Wash., atty. of record. William F. Lenihan, Seattle, Wash., of counsel.
    Russell W. Koskinen, Washington, D. C., with whom was Asst. Atty. Gen. Carla A. Hills, for defendant.
    Before DAVIS, KASHIWA and KUN-ZIG, Judges.
   OPINION

PER CURIAM:

This case comes before the court on plaintiff’s and defendant’s exceptions, filed October 1, 1974, and October 30, 1974, respectively, to the recommended decision of Trial Judge Hal D. Cooper, filed July 12, 1974, pursuant to Rule 134(h). The court has considered the case on the briefs and oral argument of counsel. Since the court agrees with the recommended decision of the trial judge, with minor modifications by the court, it hereby adopts the same, as modified, as the basis for its judgment in this case as hereinafter set forth. Therefore, it is concluded that plaintiff is entitled to recover in accordance with the opinion and judgment is entered for plaintiff in the sum of $34,570.83.

Trial Judge Cooper’s opinion, with minor modifications by the court, is as follows:

This action asserts a breach by the Forest Service of a contract for the sale of timber on Tonga Ridge. It is a sequel to the court’s earlier decision in Everett Plywood & Door Corp. v. United States, 419 F.2d 425, 190 Ct.Cl. 80 (1969), hereinafter referred to as Tonga I. In Tonga I, the court found a breach of warranty of quantity for which plaintiff was awarded damages. The present case asserts an additional breach of the same contract based on defendant’s refusal to grant an extension thereof which would have allowed plaintiff to cut the remaining timber on Tonga Ridge. In addition, plaintiff seeks recovery of certain road repair and maintenance costs it incurred in the performance of the contract.

In defense, it is contended that plaintiff has so split its cause of action that, by reason of the court’s judgment in Tonga I, plaintiff is barred from any further relief. Also defendant denies there was any breach of the contract and denies that plaintiff is entitled to any recovery whatsoever.

The facts regarding the contract were fully stated in Tonga I and will be restated here only to the extent necessary to an understanding of the parties’ contentions. The original term of the contract, executed in 1955, extended to December 31, 1960. When plaintiff commenced logging, excessive defects in the timber were discovered, resulting in a substantial underrun. It was this under-run that was the basis for the Tonga I case. During the pendency of that suit, filed in 1964, plaintiff was granted successive extensions of the contract and logging continued through the 1967 season. By that time, the only remaining timber was on Unit 15 of Tonga Ridge.

In requesting an extension of the contract for the 1968 season, plaintiff assigned as the reason therefor the difficulties presented by the short logging season at the high elevation at which Unit 15 was located and closed its request with the statement that “we should have no trouble completing the sale this coming season.”

The Forest Service’s policy governing extensions, both when the contract was entered in 1955 and when plaintiff’s request for 1968 was made, was a very liberal one. The Forest Service Handbook stated it in the following terms:

2438.12 — Procedure. Ordinarily, the timber sale contract is written on the basis that time is not of the essence. The termination date is fixed when the sample contract is drafted and thus becomes a condition of sale, * * an extension of time may be granted by the officer approving the sale, his successor, or his superior, unless disadvantageous to the United States.

Extensions were regularly granted for a variety of reasons ranging from bad weather to poor economic conditions. Forest Service personnel testifying at trial could recall no specific instance where, prior to 1969, an extension had been denied and plaintiff had never been denied an extension on any of its other Forest Service contracts. The fact is that extensions of contracts were granted by the Forest Service with very little urging.

On April 8, 1968, the Forest Service granted plaintiff’s request for an extension, but warned plaintiff that “only under extraordinary conditions will this sale be considered for another extension.”

Plaintiff attempted but failed to complete logging on Unit 15 in the 1968 season. Although a number of excuses were given, it is doubtful, in view of the normally adverse conditions prevailing at high elevations, that any of the difficulties encountered by plaintiff were truly “extraordinary.”

In November 1968, prior to any request by plaintiff, the Forest Service decided to grant no further extensions of the contract. This decision was communicated to plaintiff on December 20, 1968. By letter of January 24, 1969, plaintiff formally requested an extension of the contract for the 1969 season. There then followed a series of events, summarized in finding 19, the net result of which was the grant of a one-month extension of the contract from March 31, 1969 to April 30, 1969, followed by a final refusal, on April 22, 1969, of any further extension. Meanwhile, on March 20, 1969, the trial judge’s decision in Tonga I was handed down.

When its request for reconsideration of the Forest Service’s decision was denied, plaintiff appealed to the Board of Forest Appeals which, ultimately, dismissed the appeal on the ground it had lost jurisdiction by reason of the subsequent resale of the timber on November 30, 1969, by the Forest Service. The Board’s dismissal occurred on February 2, 1971, some 14 months after the court’s per curiam affirmance of the trial judge’s decision in Tonga I.

I. The Split Cause of Action Defense

On the foregoing facts, defendant contends that plaintiff has split its cause of action and is barred from any further relief.

In Nager Electric Co. v. United States, 368 F.2d 847, 177 Ct.Cl. 234 (1966), the court, in considering the issue of statute of limitations, stated the controlling principle governing the rule against split causes of action:

For reasons of judicial economy, convenience, and fairness to litigants, it is important to retain the principle that one nondivisible contract normally gives rise to only one claim, not to a succession of individual-item claims with all the burdens they would bring and problems they would entail. Supra, 368 F.2d at 861, 177 Ct.Cl. at 254.

See, also, Restatement, Judgments § 62 (1942).

Nonetheless, a separate action founded on a single nondivisible contract may be maintained if the later claim is severable from the earlier one, and, if at the time of commencement of the earlier suit, the later claim was not then capable of being asserted. United States v. Pan-American Petroleum Co., 55 F.2d 753, 777 (9th Cir. 1932), cert. denied, 287 U.S. 612, 53 S.Ct. 14, 77 L.Ed. 532; Fellows v. National Can Co., 13 F.2d 210, 211 (E.D.Mich.1926); Restatement, Judgments § 62, example (h.) (1942). However, if the claimant, before filing its first suit, is in possession of all the facts on which its second suit is based, the splitting of the claims into multiple suits is fatal to maintenance of the later-filed action. Container Transport International, Inc. v. United States, 468 F.2d 926, 199 Ct.Cl. 713 (1972).

In this case, essentially three claims are presented, the principal one being based on the Forest Service’s refusal to grant an extension. A final decision on the request for an extension was not made until April 22, 1969, and the contract did not expire until April 30, 1969. Obviously, until the Forest Service had finally refused an extension, any claim based on a refusal to extend the contract would have been premature. Hence, it appears that it was not until April 22, 1969, at the earliest, that the extension claim accrued. The road repair claim arose in late 1968 and the road maintenance claim did not accrue until after the contract had expired.

Thus all of the claims now asserted arose some four or more years after the first suit had been filed and subsequent to the trial held in 1967 in Tonga I. Moreover, two of the three claims accrued after the opinion of the trial judge had been filed in the earlier case.

It is recognized that this court’s holding in Electric Boat Co. v. United States, 81 Ct.Cl. 361 (1935), cert. denied, 297 U.S. 710, 56 S.Ct. 573, 80 L.Ed. 997 (1936), requires a litigant to seek to amend a pending suit to add later accruing claims under a single contract if he is to avoid dismissal of a later suit on the ground he has split his cause of action. However, defendant has cited no authority, and none has been found, to support the proposition that the obligation to amend extends to claims accruing after a trial has been held and after the trial judge’s decision has been rendered. While, in an appropriate case, it may be desirable even under those circumstances for a party to seek to amend, it does not follow that judicial economy, convenience, and fairness to litigants will always be served by imposing such a requirement either on the parties or the court.

In the context of this case, the Forest Service notice in December 1968 that no further extensions would be granted was the first indication to plaintiff that it may have another claim against defendant. At that point, plaintiff had several options. Plaintiff might have treated the communication as a breach, but because trial was completed and briefs had been filed in Tonga I, it would have had either to file a new petition or seek leave to amend the pending suit. Had the latter course been followed, and assuming such a belated request had been allowed, it still would have entailed additional discovery, a second trial in Seattle, Washington, and additional briefs by the parties. The alternative, and the one followed by plaintiff, was to seek resolution of the issue by asking the Forest Service to reconsider its position in light of specific reasons supporting the request for an extension. The latter approach was entirely reasonable and in keeping with the notion that parties should be encouraged to resolve their differences rather than rushing into court at the first hint of a claim.

By April, when the Forest Service had rejected the formal request for an extension, matters had changed somewhat. By that time, both parties were aware of the trial judge’s decision and, as more fully discussed infra, the implicit assumption therein that plaintiff would receive all of the timber yet to be cut on Tonga Ridge. At that point, it would not have been inappropriate to bring the evolving controversy to the court’s attention.

Neither party did so and, since the assumption in the trial judge’s decision as to the volume of timber plaintiff would cut was only indirectly related to the computation of damages and had no effect at all on the issue of defendant’s liability, it is understandable that they did not. Moreover, in view of the advanced stage of Tonga I, there would have been little, if any, savings in terms of convenience and expense to the litigants had they done so. The only potential saving is that, had the court been made aware of the additional claim by, say, May 1969, it might have suspended its review of the trial judge’s decision pending a trial and decision on the additional count, thereby combining all matters in a single review. However, balanced against that saving is the substantial additional delay plaintiff would have encountered in obtaining a recovery on its breach of warranty claim.

Under the circumstances present in this case, it is concluded that it would be an unwarranted extension of Electric Boat to hold that plaintiff’s failure to seek to assert the present claims in Tonga I bars it from any further relief. Accordingly, the defense based on splitting of the cause of action is denied.

II. The Refusal to Extend Claim

Plaintiff contends that defendant’s refusal to grant a further extension of the contract which would have enabled it to cut the timber on Unit 15 was arbitrary and capricious and constituted a breach of the contract. Defendant denies that this is so, maintaining that the refusal was entirely proper in view of plaintiff’s inability to perform the contract.

While plaintiff apparently construes the contract, particularly in light of the decision in Tonga I, as giving it an unfettered, absolute right to the timber remaining on Unit 15, neither the contract itself nor the court’s earlier decision supports such a position. In Tonga I, the court was concerned with timber that defendant had warranted to be present but was not; here, the issue is as to timber that was present but which plaintiff did not receive. Although the court clearly assumed that plaintiff would receive all of the timber yet to be cut, nothing that was said in Tonga I can be construed as a holding that defendant was obliged to extend the contract ad infinitum.

That the original term specified in the contract, 5 years, was unrealistically short is undisputed. The parties contemplated, at the time of entering into the contract, that extensions of the term would be requested by plaintiff and granted by defendant. However, the contract itself offers no guidelines by which to govern the grant of those extensions.

But the evidence is clear that, at the time the contract was executed, the Forest Service had a well-established practice or custom with respect to granting extensions. As noted previously, this practice was a very liberal one in which extensions were granted with very little urging by the contractor, and plaintiff was well aware of that practice. In practical operation, extensions of contracts were always granted by the Forest Service unless there was a demonstrable disadvantage to the United States.

An oft-used principle in contract law is that where a well-established practice or custom is shown to exist, it is assumed that the parties to a contract intended that practice or custom to apply, in the absence of express language in the contract to the contrary. Robinson v. United States, 80 U.S. (13 Wall.) 363, 366, 20 L.Ed. 653 (1871); John McShain, Inc. v. United States, 462 F.2d 489, 199 Ct.Cl. 364 (1972); Buffalo Merchandise Warehouses, Inc. v. United States, 88 F.Supp. 276, 277, 115 Ct.Cl. 568, 572 (1950). Also, regulations in effect at the time of a contract are a useful guide in the resolution of a contract case. Firestone Tire & Rubber Co. v. United States, 444 F.2d 547, 195 Ct.Cl. 21 (1971). Here, usual custom or practice was for the Forest Service to set a fixed term for performance; however, it was recognized by the parties that time was not of the essence and it was the practice of the Forest Service that the term originally set would be liberally extended in accordance with published Forest Service regulations. Those regulations, together with the custom of the Forest Service in granting extensions for a variety of reasons, make it clear that extensions would be granted, upon request, unless, as stated in paragraph 2433.12 of the Forest Service Handbook, it would be “disadvantageous to the United States.”

In entering into this contract, plaintiff had every reason to assume, there being nothing in the contract to the contrary, that it would receive extensions in accordance with the prevailing custom or practice. Indeed, the evidence is that, from 1960 to 1968, plaintiff did receive extensions on that basis. The rights and obligations of the parties under the contract must, therefore, be construed in light of this established practice or custom. Stoeckert v. United States, 391 F.2d 639, 647, 183 Ct.Cl. 152, 165 (1968). If, in refusing to extend the contract for 1969, defendant departed from that practice, and in fact used a different basis in passing on the requested extension, plaintiff’s claim for breach is sustainable. Cf. Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972). Specifically, the question is whether defendant denied the extension because it was “disadvantageous to the United States” or on some other, and materially different, basis.

Although the warning in 1968 that no further extensions would be granted except “under extraordinary conditions” is not itself inconsistent with a determination by the Forest Service that further extensions would be disadvantageous to the United States, there has been no showing that the Forest Service evaluated the matter in that context. From the evidence, it appears that the warning was principally based on the belief that plaintiff would not make any effort to clear the remaining timber from Unit 15 until after the court’s decision in Tonga I. However, even if the belief were correct, there is no evidence that the Forest Service made any determination that such inactivity by plaintiff would be disadvantageous to the United States. In any event, and more importantly, testimony at trial revealed that this belief was based on no facts whatever and was sheer speculation by some of the Forest Service personnel. A standard of “disadvantageous to the United States” vests wide discretion in defendant in passing on requests for extensions. Even so, the exercise of that discretion must be fair and reasonable, not arbitrary and capricious. Pacific Far East Line, Inc. v. United States, 394 F.2d 990, 998, 184 Ct.Cl. 169, 184 (1968); Gadsden v. United States, 78 F.Supp. 126, 128, 111 Ct.Cl. 487, 490 (1948). To impose, unilaterally, an additional condition on further extensions merely on the basis of speculation is neither fair nor reasonable and is contrary to defendant’s obligation to administer the contract in an evenhanded manner consistent with its well-established practices and published regulations.

What has been said, of course, does not establish an actionable breach for if, in refusing an extension for the 1969 season, defendant fairly determined that a further extension would be disadvantageous to the United States, the prior warning is irrelevant and plaintiff has no cause for complaint. But it is apparent that the requirement of “extraordinary conditions,” rather than disadvantage to the United States, was the basis for the determination not to extend the contract. That was the principle reason given to plaintiff, and internal correspondence of the Forest Service confirms that to be the fact. That correspondence also indicates that the Forest Service, in early 1969, was still acting on the belief, unfounded in fact, that plaintiff was “holding back” from cutting the timber pending the outcome of Tonga I. None of the Forest Service employees testifying at trial knew of any disadvantage to the United States by a further extension of the contract. Nor is there any doubt that the efforts made by plaintiff in 1968 to remove the timber, together with the conditions it encountered on Unit 15 in that year, would have been accepted, in prior years, as sufficient grounds for granting a further extension. The fact is that the Forest Service’s decision rested squarely on its determination that none of the excuses advanced by plaintiff amounted to “extraordinary conditions,” a standard entirely different from that theretofore applied by the Forest Service, both under this contract and all other contracts.

It is concluded that defendant had an obligation to administer this contract and to evaluate plaintiff’s requested extension in conformity with its own regulations and its then-existing policy of granting extensions unless disadvantageous to the United States. Its unilateral imposition of an additional condition for obtaining an extension, having no apparent relation to its past administration of that policy, constituted a breach for which plaintiff is entitled to recover damages.

Turning to the matter of damages, plaintiff’s claim is in two parts, the first seeking an award, in addition to that given in Tonga I, for loss of road amortization, and the second being based on the value of the timber it was denied from Unit 15.

As to the matter of road amortization, it is clear from finding 37, in Tonga I, that the award for road amortization was based on the assumption that plaintiff would cut all of the remaining timber on Unit 15. Based on that assumption, the computation included the uncut timber as a part of the timber volume plaintiff would realize under the contract. By reason of defendant’s breach, the volume plaintiff received was less than that. By utilizing the computations employed in Tonga I, it appears defendant’s refusal to permit cutting of the remaining 3,000 MBF on Unit 15 resulted in plaintiff failing to recover $29,295.27 of its road-development costs. The refusal having been improper, plaintiff is entitled to recover that amount as one element of damage flowing from the breach.

As to the timber itself, and after several revisions in its approach, plaintiff ultimately tried the case on a theory of lost profits, contending that it is entitled to the profits it lost as measured by the difference between the contract price and the price it would have received upon resale of the timber in the export market. According to plaintiff’s calculations, this amounted to $145,846.05.

The usual measure of damages for the failure to deliver goods is the difference between the contract price the buyer was to pay and the fair market value of those goods. Dulien Steel Products, Inc. v. United States, 143 Ct.Cl. 484 (1958); McCormick, Damages § 175 (1935); Uniform Commercial Code § 2 — 713. In making its calculations, plaintiff’s experts took as fair market value the price the logs would have commanded in the export market in the latter part of 1969 and the first half of 1970 and, from this base, then calculated the profit plaintiff would have made at those prices.

Reliance on the export log market is inappropriate as a measure of damages. Use of the export log price has the effect of treating the contract as one for the purchase of goods for resale. In a purchase for resale, it is appropriate to measure the buyer’s damage upon nondelivery as the difference between the contract price and the price at which the goods were to be resold. Benjamin v. United States, 348 F.2d 502, 520, 172 Ct.Cl. 118, 145 (1965); McCormick, Damages, supra. Had this been a purchase of timber for resale, the price plaintiff could have obtained in the export market would have been pertinent. However, this contract was not of that character. Plaintiff is a manufacturer of plywood, not an exporter of logs. Its timber purchases are for the purpose of supplying its plywood operations and it was for that purpose it entered the present contract. Nor is there a showing that an important part of its business consisted of selling logs to others at export prices. In that context, the foreseeable damages, Dale Construction Co.v. United States, 168 Ct.Cl. 692, 734 (1964), for which defendant is properly charged are the additional costs plaintiff incurred, or would have incurred, in procuring timber for its operations to replace the timber denied to it by defendant’s breach.

Under the facts surrounding this contract, plaintiff’s claim for lost profits based on resale of the timber in the export-log market must be viewed as consequential damages and can be recovered only if it is shown that defendant knew, or should have known, that plaintiff intended to resell a substantial number of the logs and that plaintiff sought to prevent its losses or mitigated its damages by procuring other timber. Uniform Commercial Code § 2 — 715. Neither condition has been satisfied in this case. As stated previously, plaintiff is a plywood manufacturer. There has been no showing that defendant had any reason to know that any substantial amount of the timber would have been used for any purpose other than in plaintiff’s operations. Nor is there any evidence that plaintiff ever advised defendant that it intended to export the logs remaining on Unit 15, or to sell a substantial number of them. Also missing is any evidence that plaintiff made any effort to cover by procuring or diverting other logs to the export market or that, if it did so, it suffered any damage whatever. In particular, although plaintiff logged more timber in 1969 than it had in previous years, and apparently exported some, there is no evidence that any portion of that timber was logged as a substitute for the Tonga Ridge timber or, if so, that it cost plaintiff anything more than the Tonga Ridge timber would have cost. Under these circumstances, plaintiff’s claim for consequential damages must be denied.

Consequential damages not being recoverable, there remains the question of whether plaintiff is entitled to any damages at all. Had plaintiff procured timber to replace the Tonga Ridge timber, it would have been entitled to recover the amount it had to pay in excess of the contract price. There is no evidence that this happened. In fact, it appears that plaintiff had a number of contracts with the Forest Service and had no difficulty in obtaining as much timber as its operations could handle. Nonetheless, to the extent the contract price was below fair market value, plaintiff is entitled to the benefit of its bargain as measured by that difference.

But therein lies the real difficulty. Plaintiff’s evidence as to fair market value is based on the inappropriate resale price for export logs. This evidence is inappropriate because, as already suggested, there is insufficient showing that • the plaintiff or any manufacturers of plywood would have resorted to the export market to buy logs for manufacturing purposes. The appraisals conducted by the Forest Service in redetermining the rates for Unit 15 and the subsequent resale of that timber by the Forest Service are the only other evidence bearing on this issue. That evidence is that the Forest Service appraised the timber on Unit 15 for 1969 at about $50 per MBF, established an advertised bid rate of $47.40 per MBF, unsuccessfully offered it at $34.50 per MBF and ultimately sold it at $23 per MBF. Under the contract, plaintiff was obliged to pay a minimum of $26.55 per MBF for approximately 1,300 MBF and a redetermined rate for the remainder. However, even the $26.55 was only a minimum figure, for the Service had the right to redetermine the rate upward any time it extended the contract. In fact, it never did raise the rate, and did not plan to do so in 1969, because of the road amortization. This is clear from its redetermination appraisal for 1969 where it allotted a figure of $46.29 for road amortization, thereby arriving at a redetermined rate of $3.20 to be charged plaintiff. However, by the award in Tonga I and the additional award for road amortization it is entitled to receive in this case, plaintiff has been fully compensated for its road-development costs, so road amortization is no longer a factor to be included in determining the stumpage rate plaintiff was to pay under the contract. Thus, considering the road fully amortized, plaintiff is not entitled to the $3.20 rate as a contract price but rather the rate should be increased by $46.29.

What all of this adds up to is that, by reason of the redetermination provision, and assuming no factor for road amortization, plaintiff would have been obliged in 1969 to pay a contract price that was reasonably reflective of fair market value. Stated otherwise, the evidence indicates that the price plaintiff would have had to pay, had it sought to procure comparable timber in the marketplace, would have been essentially the same as the redetermined value it was obligated to pay for the timber under the contract. If anything, the evidence suggests that plaintiff would have paid less in the marketplace. This is borne out by the redetermined value of approximately $50 established for 1969 as compared to the advertised bid rate of $47.40, the offer at $34.50, and the actual sale of that timber at $23.

Under these circumstances, it is concluded that plaintiff suffered no compensable damage by the denial of the timber and is entitled to no recovery on this phase of its claim. Gulf Chemical and Metallurgical Corp. v. Sylvan Chemical Corp., 122 N.J.Super. 499, 300 A.2d 878, aff’d, 126 N.J.Super. 261, 314 A.2d 73 (1973). In so concluding, it is recognized that this court has, where the proofs are uncertain but it is clear some damages were suffered, entered a judgment in the nature of a jury verdict. See e. g., Specialty Assembling & Packing Co. v. United States, 355 F.2d 554, 174 Ct.Cl. 153 (1966). That approach is deemed inappropriate here because it has not been satisfactorily shown that plaintiff suffered any damage not otherwise compensated for by the additional road-amortization award.

III. Road Repair and Maintenance Claims

The first of these claims occurred in early 1968, when the main Tonga Ridge road was washed out. (Findings 9-11.) The contracts for two of the three timber sales serviced by that road required defendant to bear all of the repair costs. The other contract, the one here in issue, placed the burden for road repairs on plaintiff. Defendant refused to share in any of the costs initially incurred by plaintiff in repairing the road and agreed to defray only 5% of those costs thereafter.

Defendant’s argument that plaintiff repaired the road as a “volunteer” is utterly without merit.' Plaintiff, before undertaking the work, asked defendant to share in the cost, and defendant promised to have a response in 10 days. Four months elapsed before defendant replied. In the meantime, plaintiff had to proceed with the repairs if it was to have any hope of completing operations on Unit 15 in the 1968 season. Having inexcusably delayed in responding to plaintiff’s request, defendant is in no position to reap the benefits of plaintiff’s labors on the basis they were volunteered.

Nor can defendant’s contention that it was obligated only to pay 5% of the costs be accepted. That figure might have validity if the costs were for repairs occasioned by past use of the road, but that is not the case here. The repairs were needed to restore the road for future logging operations and as to those, 80.5% of the timber remaining to be transported over the road was from sales on which defendant was obliged to bear the repair costs. Applying that percentage, defendant should have borne $5,275.56 of the costs, and plaintiff is entitled to reimbursement in that amount.

The other road claim is as to maintenance work performed in 1969 by plaintiff under section 40(7) of the contract. That provision required plaintiff, at the conclusion of the contract, to perform final maintenance work on the roads. Consistent with its position that the contract was at an end, the Forest Service, on May 14, 1969, directed plaintiff to perform this work.

It is clear that, under the contract, plaintiff had the obligation to maintain the roads, both at the close of each season and at the termination of the contract. It is unclear from plaintiff’s proofs precisely what work was done and for what purpose since some of the work was apparently performed prior to the directive by the Forest Service on May 14, 1969. In any event, there is no evidence that the maintenance work was anything other than what was required of plaintiff under the contract.

Since there is nothing in the contract to indicate that this obligation was dependent or contingent on plaintiff’s cutting any specific volume of timber, the question is simply whether, by reason of defendant’s breach, plaintiff was excused from performance of this obligation under the contract.

It is concluded that it was not. When, in 1969, defendant refused to grant a further extension, plaintiff had already cut and removed 43,000 M board feet of the total 46,000 M board feet available. Plainly, defendant’s breach neither defeated the whole purpose of the contract nor deprived plaintiff of substantially all that it had bargained for. To the extent it was deprived of anything, plaintiff has, through recovery of the road amortization, been fully compensated for all the damages it has been able to prove. Giving consideration to all of the circumstances, Restatement, Contracts § 275 (1932), it is concluded that defendant’s breach was not of such a character as to relieve plaintiff of its obligation to perform road maintenance at the conclusion of the contract.

Accordingly, plaintiff is not entitled to recover the costs it incurred in meeting its obligations under the contract.

In summary, plaintiff is entitled to recover a total of $34,570.83.

      . The proposed revision of the Restatement takes the same position with respect to successive breaches of a contract. Restatement (Second) Judgments § 61.2, pp. 132-33 (Tent. Draft No. 1, 1973).

      . Electric Boat was concerned with the effect of pursuing permissive administrative relief instead of seeking to amend to assert the claim in a pending suit. It is unclear from the evidence in the instant case precisely what claims plaintiff presented to the Board. It appears that the road claims never were presented and, of course, the breach claim for damages was beyond the Board’s jurisdiction. Accordingly, in considering this issue, it has been assumed that the relief sought from the Board was permissive.

      . Tonga I was only concerned with timber warranted to be present but which in fact was not. In computing damages for the breach of warranty, it was necessary to determine the quantity of timber present on Tonga Ridge and then determine the damages to plaintiff, based on the difference between the timber that was there and the timber warranted to be there. In so doing, it was assumed that plaintiff would receive all of the timber that was present and the award of damages was based only on the missing timber. However, in making that assumption, the court credited plaintiff with recovering certain costs which, as appears infra, it in fact did not recover due to its failure to receive all of the timber present on Tonga Ridge.

      . Although there is some indication the Forest Service wanted the timber cut so as to provide accurate information for use in Tonga I, the insubstantial nature of that interest is revealed by the fact the Forest Service had no intent to reoffer Unit 15 after plaintiffs contract was allowed to expire.

      . The additional reason stated to plaintiff that the timber was needed to relieve an acute lumber shortage played no part in the decision. In fact, the Forest Service had no intention of putting the timber on Unit 15 on the market and it was only at the urging of the Department of Justice attorney that it ultimately did so. The timber sold for less than what defendant would have received under the contract with plaintiff.

      . Equally inappropriate as transactional evidence of fair market value is the Great Northern sale, which was an export log sale.

      . Although plaintiff argues that the Forest Service redetermination appraisals do not reflect fair market value, the court’s findings 14 and 15 in Tonga I are to the contrary and are controlling here. In any event, there is no evidence from which it can be determined how much, if any, the appraisal is below fair market value.

      . Although not raised by the pleadings, defendant offered no specific objection and plaintiff was permitted to proceed at trial. (See Rule 39(b).)


author: DAVIS, Judge.

text:
    CONTRA COSTA COUNTY FLOOD CONTROL AND WATER CONSERVATION DISTRICT v. The UNITED STATES.
    No. 392-73.
    United States Court of Claims.
    March 19, 1975.
    E. V. Lane, Jr., Martinez, Cal., atty. of record, for plaintiff.
    Bernard M. Brodsky, Court of Claims Sec., Civil Div., Dept, of Justice, Washington, D. C., with whom was Asst. Atty. Gen. Carla A. Hills, for defendant.
    Before DAVIS, KASHIWA and KUN-ZIG, Judges.
   DAVIS, Judge.

In the 1960’s the Soil Conservation Service of the United States Department of Agriculture made agreements (under the Watershed Protection and Flood Prevention Act, 68 Stat. 666, 16 U.S.C. § 1001 et seq.) with plaintiff Contra Cos-ta County Flood Control and Water Conservation District, an agency of California, to fund (in large part) and to supply technical assistance for the construction of a channel improvement project in Marsh Creek within Contra Costa County. The Flood Control District was to supervise the construction which was to be performed by Oscar C. Holmes, Inc. (Holmes), a private contractor. After completion of the work Holmes made large claims against the plaintiff which were administratively rejected. Suit was then brought by Holmes on these demands, in 1968, against the Flood Control District in a California state court. The present action concerns, not the details of the Marsh Creek project or the validity of Holmes’ claims, but a separate agreement made by plaintiff and the Soil Conservation Service with respect to the legal fees for defending Holmes’ suit against the District.

Shortly after Holmes filed its action, the Service and the District made this attorneys-fees contract which declared, in a significant “whereas” clause, that “any judgment in favor of the contractor [Holmes] resulting from such action may result in an increase in the cost of construction of said works of improvement for which the Service will be obligated to cost-share with the Local Organization [the Flood Control District] as an additional cost of construction,” and then proceeded to arrange for the incidence of the lawyers’ costs.

At the suggestion and with the ap-' proval of the Conservation Service, plaintiff retained a local attorney to represent it in the Holmes litigation. Bills reflecting this lawyer’s fees and expenses were submitted by the Flood Control District to the Service which regularly reimbursed the District for them, under the agreement respecting legal expenses, until in September 1970 the Service indicated, for the first time, that it would not pay the plaintiff after the supposed “limitation” of $35,000 was reached. Thereafter the Service paid the legal bills up to the total of $35,000 but refused any further reimbursement, although the District consistently submitted bills for approval in ordinary course. The Service insisted that the plaintiff should pay the bills itself.

The total of legal fees and expenses incurred by plaintiff up to the commencement of the present action (in October 1973) is $58,856.14, of which defendant has reimbursed only $35,000. Plaintiff now seeks the remainder ($23,-856.14).

Stressing the contract’s repeated references to governmental approval and concurrence (see footnote 1, supra), defendant takes the position that either (a) the Conservation Service had at all times the plenary and untrammeled right to refuse to pay for legal fees and expenses whenever it decided not to, or (b) at least beyond the so-called “maximum” of $35,-000, the Government had that right which it could exercise in its unreviewable discretion. This interpretation, it is said, is the more reasonable construction of the contractual language, and the one which retains in the Government the full right of control which it was the purpose of the agreement to accord.

We cannot accept either of these readings which are contradicted, it seems to us, by the dominant themes, the terms, the structure, and the background of the fee agreement. The Government’s primary interest and the main reason why the pact was made are clearly reflected in the “whereas” clause we have quoted above — “any judgment in favor of the contractor [Holmes] resulting from such action may result in an increase in the cost of construction of said works of improvement for which the Service will be obligated to cost-share with the Local Organization [the plaintiff] as an additional cost of construction.” In March 1968 when the agreement was signed shortly after Holmes filed his suit, the United States considered that it might very well have to pay a goodly portion of a judgment favoring Holmes. For that reason it desired, as a potential copayor, substantial control over the defense of the action — but by the same token it knew it was in the same boat as plaintiff and they would have to float or sink together. The Government’s participation was neither charity nor a mere gratuity. It was, rather, the recognition of a common financial interest. Those are the twin principal threads of the contract — the fortunes of the Conservation Service with respect to the Holmes litigation were directly tied to those of the Flood Control District, and at the same time the Government, since it was to bear the legal costs and be responsible for part of any adverse judgment, was to have important input into and control over the conduct of that litigation.

These fundamental purposes are carried over into the contract’s terms— what they say and what they omit to provide. Federal control is obviously assured by the provisions that (a) the attorneys have to be satisfactory to the Conservation Service (paragraph B. 1., supra, footnote 1); (b) the attorney’s employment agreement must be approved in advance by the Service (paragraph D., 1. ); (c) the legal fees and expenses have to be approved by the Service as proper (paragraphs C., 1.; D., 2.); (d) the attorney’s contract cannot be terminated by the District alone, but only if the Service so requests (paragraph D., 1.); and (e) the Service can participate in the Holmes litigation “to the extent it deems advisable,” including the right to call for an appeal (if necessary) (paragraph B., 2. ).

These are significant rights, but all are quite consistent with the view that, in exercising them, the Federal Government could not wash its hands of the litigation and leave the District to sink or swim alone. The United States had the upper hand because it was to bear the expense, but it is implicit that it also undertook not to leave the District in a lurch but to see the litigation to its end. We think this is shown, negatively, by the absence of any form of termination clause in the contract, and, affirmatively, by the combination of the provisions that the Service was to pay “100 percent of the actual cost of the fees and expenses of the Attorneys which have been approved by the Local Organization, with the concurrence of the Service” (paragraph C. 1.), and that the Service could take over the whole defense of the lawsuit, including the removal of the attorneys hired by the plaintiff (paragraphs B. 2.; D. 1.). The United States was not required to pay outside legal costs if it considered that they were mounting too high, but its alternative was to assume the suit’s defense — not to withdraw from the arena, as it did, and allow the District to incur and pay the legal costs for itself as if the District alone were concerned with the outcome.

In response, defendant stands squarely, first, on the provision that the legal fees and expenses are “estimated to be $35,000” (paragraph C. 1., end), which the Government takes to be the upper limit of its mandatory responsibility; and, second, on the several indications that the Service has to approve or accept or concur in the legal costs, if they are to be paid (paragraphs C. 1.; C. 2.; D. 2.). In literal terms the $35,000 clause does not impose a maximum or say any more than that that amount was then anticipated as the total, and there is insufficient ground for expanding it to establish a definite maximum for the responsibility of the United States. The record contains no authoritative or even satisfactory explanation for its inclusion, and to read it as an upper limit on the participation of the Federal Government alone would run directly against paragraph D. 2., which prohibits the plaintiff from paying the lawyers any fees or expenses “without the concurrence of the Service.” If $35,000 was a maximum, it was necessarily a restriction for the District as well as for the Service — but this was certainly not the position taken by the Service when it reiterated that the District alone was to bear the excess. And if $35,000 was such an overall limitation, then it would seem that the Service should have called for the termination of the lawyers’ contract (paragraph D. 1.) and itself taken over the defense of the Holmes action (paragraph B. 2.). Otherwise the District would have been left foundering, contrary to one of the prime purposes of the agreement which was to tie the plaintiff and the Service securely together.

As for the references to Service concurrence, approval or acceptance, they are easily understood as calling upon the Government to monitor the claimed legal fees and expenses for ex-cessiveness, needless expenditures, insufficient proof, etc. The usual standard is that concurrence or approval is not left to unbridled discretion but can be withheld only if objectively reasonable in the particular circumstances, particularly when the item contracted for is not one which can be evaluated only on the basis of personal taste or fancy. See, e. g. Ard Dr. Pepper Bottling Co. v. Dr. Pepper Co., 202 F.2d 372, 377 (C.A. 5, 1953); 5 Williston Contracts § 675B (3d ed. 1961). The concurrence requirements in this case lend themselves readily to that interpretation. The United States was to be in a position to prevent itself from being “taken for a ride” by excessive or unnecessary outlays, but it was not to be free to reject necessary and reasonable legal expenditures — unless it was willing to end the private attorneys’ services and itself assume the defense of the Holmes case.

We think that in this way the separate provisions of the agreement can be harmonized with its major purposes, so as to hold the United States to its original undertaking, in March 1968, not to jettison the District whenever it might decide to do so. Bilateral contracts should be applied, if fairly possible, so as not to put one side at the mere will or mercy of the other. Padbloc Company v. United States, 161 Ct.Cl. 369, 376 — 77 (1963); Deloro Smelting & Refining Co. v. United States, 317 F.2d 382, 387, 161 Ct.Cl. 489, 496-97, (1963).

This coordination of the various terms of the agreement seems to us distinctly preferable, even without the contra proferentem rule, to the Government’s understanding that it had all (or nearly all) the rights and practically no responsibilities. But if the contract be deemed more ambiguous and less clear, then the usual canon should be invoked. Sturm v. United States, 421 F.2d 723, 727, 190 Ct.Cl. 691, 697 (1970). The Government presented plaintiff with the form of the agreement, and the plaintiffs interpretation was at least reasonable, if not in fact the better one.

The plaintiff’s motion for summary judgment is granted, the defendant’s is denied, and plaintiff is entitled to judgment. We return the ease for further proceedings under Rule 131(c), with respect to the amount of recovery, because defendant, which has hitherto rested wholly on its alleged unqualified right to refuse reimbursement, may possibly wish to question the propriety or necessity of some of the expenditures.

      . The relevant parts of the operative provisions of the contract are as follows: ******
      “A. This agreement relates to the employment of Attorneys to represent the Local Organization [the District] in the defense of said lawsuit.
      “B. The Local Organization will:
      1. Employ Attorneys satisfactory to the [Soil Conservation] Service.
      2. Permit the Service to participate to the extent it deems advisable in the preparation for and the trial of such lawsuit, and exercise the right of appeal in such lawsuit if requested to do so by the Service.
      3. Prepare and submit itemized billings to the Service covering fees and expenses payable monthly to the Attorneys', and make payments to the Attorneys.
      “C. The Service will:
      1. Provide 100 percent of the actual cost of the fees and expenses of the Attorneys which have been approved by the Local Organization, with the concurrence of the Service, based on the following fee and expense schedule.

        Attorneys’ Fees:

      $40 per hour, including trial time for Attorney in Charge.
      $10 to $25 per hour for each assistant, depending on their experience. Said sums to be computed on basis of one-quarter hour.

        Expenses:

      Transportation by public carrier.
      Subsistence and lodging not to exceed $16 per day.
      Personal vehicle mileage at $0.10 per mile. Costs and disbursements for litigation, including expert witnesses.
      Costs for depositions and transcripts.
      The above fees and expenses, estimated to be $35,000 shall be itemized and verified by the Attorneys and be supported by proper vouchers or billings.
      2. Upon receipt of vouchers or billings, if acceptable, make monthly payments to the Local Organization.
      “D. It is mutually Agreed that:
      1. The employment agreement between the Local Organization and the Attorneys will be approved by the Service before it is executed; and such agreement will be terminated by the Local Organization only upon the request of the Service.
      2. No fees or expenses incurred by the Attorneys in connection with the defense of said lawsuit will be approved for payment by the Local Organization without the concurrence of the Service.” ******

      . The Holmes lawsuit, which initially sought $600,000, was settled in September 1972 for $150,000, payable by the plaintiff. The present action does not involve any question as to the propriety of this settlement or the share, if any, to be borne by the Conservation Service.

      . Plaintiff first sought relief through an appeal to the Board of Contract Appeals of the Department of Agriculture. That tribunal dismissed the appeal for lack of jurisdiction. The legal-expenses contract does not contain a Disputes clause or provide for administrative settlement of controversies.

      . Seeing the Holmes litigation through to its end would not, of course, preclude a settlement, which is one important form of ending a lawsuit.

      . Defendant admits that there is" no explicit termination clause of any kind but argues that exercise of the right not to approve legal expenditures is the equivalent of a.-privilege to terminate at will. As we point out infra, that is not the normal interpretation of a mere right-of-approval, and in this instance it would be inconsistent with the dominant purposes of the agreement.

      . An affidavit by an employee of plaintiff suggests that $35,000 “represented the amount of money allocated to other projects which could be diverted and made available at the time of said Agreement [the contract in suit] to finance the defense of the Holmes’ litigation.”

      . In providing that even the District could not pay the lawyers any fees or expenses without the Service’s concurrence, paragraph D. 2. strongly supports the conception that the provisions for concurrence-approval-acceptance were designed to keep legal costs within proper bounds, not to accord the Service an unchecked discretion to reject reasonable costs.

      . The contract in Northwest Marine Iron Works v. United States, 493 F.2d 652, 203 Ct.Cl. 629 (1974) — on which defendant relies— made it absolutely clear that the Government had the plenary right to decide whether a certain type of insurance should be purchased by the contractor or whether the Government would itself assume the risk of loss. 493 F.2d at 656-57, 203 Ct.Cl. at 636-37. Even if we discount the plain difference in wording, the decision does not at all support defendant; the analogy to the current case is that the Soil Conservation Service had the election to pay reasonable and proper legal costs or to take over the defense of the Holmes suit. In fact it chose to do neither.

      . There is some indication in a letter from an Assistant Secretary of Agriculture, in April 1972, rejecting the District’s request for payment that by that date the Government had concluded, from the ongoing development of the grounds of the Holmes litigation, that even if Holmes obtained a judgment the Government would not be liable to the District for any part of it.

      . There has been no suggestion, thus far in this lawsuit, that any of the expenditures in suit were improper.

      . Plaintiff asks for interest but neither the contract nor any statute provides for it in this instance, and it cannot be allowed. United States v. Thayer-West Point Hotel Co., 329 U.S. 585, 67 S.Ct. 398, 91 L.Ed. 521 (1947).