State Ex Rel. Lane v. Dashiell

Delaplaine, J., delivered the opinion of the Court. In this suit for a declaratory decree the State of Maryland, for the use of Governor Lane, State Comptroller Lacy and State Treasurer Miles, constituting the Board of Public Works, as complainants, and J. Roland Dashiell, ⁶⁸³ a building contractor, as defendant, alleged that defendant entered into a contract in May, 1946, to build a hospital in Salisbury for complainants, but was delayed in beginning the work for ten months because of the refusal of the Civilian Production Administration of the Office of Temporary Controls to grant a permit required by its Veterans’ Housing Program Order. The decree, from which the State appealed, declares (1) that it was the State’s duty to obtain the permit for the construction of the building, (2) that failure to obtain the permit in time to prevent an interruption of the work constituted a breach of contract, and (3) that the Federal statutes and regulations do not excuse the State from liability. In 1945 the Legislature of Maryland, in accordance with recommendations made by the Commission on PostWar Reconstruction and Development, authorized the Post-War Construction Loan of $4,625,000.

Laws of 1945, ch. 747. At the same session the Legislature directed the Board of Public Works to formulate a program of construction and to approve certain projects for a number of State agencies and institutions. Among the specific recommendations of the Legislature was the construction by the State Department of Health of three chronic disease hospitals. Laws of 1945, ch. 1085.

The Board approved the plan of the Department of Health to build a chronic disease hospital in Salisbury, to be known as the Deer’s Head State Hospital, and allotted for that project the entire unexpended balance of $1,950,000 from the loan. The Board advertised for bids for construction of the building. Dashiell submitted the low bid. On May 14, 1946, the Board adopted a resolution accepting his bid on two conditions: (1) that he would agree to reduce the time for completion of the work to 18 calendar months, and (2) “that the contract would be conditioned upon the necessary clearance being obtained from the Federal authorities for proceeding with the work without delay.” The second condition was ordered in view of the Veterans’ Housing Program Order, which prohibited the ⁶⁸⁴ construction of buildings except when authorized by the Civilian Production Administration.

The War and Defense Contract Acts, enacted by Congress in 1940, empowered the President of the United States to establish administrative procedures for the allocation and rationing of building materials. 50 U. S. C. A. Appendix, § 1152. Under authority of those Acts, President Roosevelt in January, 1942, established the War Production Board. The Acts were amended by the Second War Powers Act of 1942. 50 U. S. C. A. Appendix, § 633. Under these Acts, President Truman, by Executive Order No. 9638, signed on October 4, 1945, and effective on November 3, 1945, 50 U. S. C. A. Appendix, § 601 note, terminated the War Production Board and transferred its functions and powers to the Civilian Production Administration. 3 C. F. R., 1945 Supp., 125.

Section 4700.1 (c) of the Veterans’ Housing Program Order, which was promulgated by the Civilian Production Administration on March 26, 1946, provided: “No person shall begin to construct * * * any structure, public or private, * * * except to the extent permitted under paragraphs (d), (e) and (f), or when and to the extent specifically authorized under paragraph (h).” Paragraph (d) made allowances for small jobs; paragraph (e) made exemption for repair and maintenance work in industrial utility and transportation buildings and structures; and paragraph (f) provided that the prohibitions did not apply to minimum work necessary to prevent more damage to a structure damaged by flood, fire, tornado, or similar disaster. Paragraph (h) provided that persons wishing to begin work prohibited by this section could apply for authorization. 32 C. F. R., 1946 Supp., 4725. The contract in this case followed the Standard Form of Agreement between Contractor and Owner for the Construction of Buildings, which was issued some years ago by the American Institute of Architects. It was dated May 15,1946, and was signed by Governor O’Conor, State Comptroller Tawes and State Treasurer Miles, then constituting the Board of Public Works, and by Dr. ⁶⁸⁵ Robert H. Riley, Director of the Department of Health.

A copy of the resolution stipulating the two conditions of the contract was sent to the State Board of Health, and on May 29 copies of the contract were forwarded to Edwin Wilson Booth, of Salisbury, the architect employed by the State. The architect was instructed to submit the copies of the contract to Dashiell for his signature. The Board of Health notified the architect of the first proviso of the resolution, but for some unexplained reason failed to notify him of the second proviso. The architect accordingly notified Dashiell of the requirement that the work be completed within 18 months, but did not notify him that the contract would be contingent upon “the necessary clearance being obtained from the Federal authorities.” Dashiell signed the contract on May 31 and began work on the project on June 1.

It was not until June 6, however, that a copy of the resolution of the Board of Public Works was furnished the architect at Salisbury. And it was not until July 15 that the Department of Health applied to the Civilian Production Administration for the permit required by the Veterans’ Housing Program Order. On July 18 a Federal inspector visited the site of the hospital. Shortly afterwards the inspector notified the State officials that work on the project must be stopped because no permit had been issued.

Acting upon that notice, the State officials notified the contractor to stop work on or about July 23. It was not until then that Dashiell learned of the second condition of the resolution. Dashiell complained several times thereafter to the State officials that he was maintaining his labor force and machinery at considerable cost while expecting to resume work from day to day, and that the cost of labor and materials was constantly increasing. As it was impossible to determine how much his increased cost would amount to, it was agreed that further discussions as to additional payments that should be made by the State in excess of the contract price would be deferred until ⁶⁸⁶ the completion of the building, when the additional cost could be accurately determined.

The first application of the Department of Health for a Federal permit to begin construction of the hospital was denied on October 17,1946. The Civilian Production Administration, in refusing authorization at that time, explained that it was imperative that construction be postponed to allow the Veterans’ Emergency Housing Program to proceed as rapidly as possible during the critical shortage of construction materials and facilities, and that deferment of the project would help in bringing about a speedy completion of the program. It gave assurance, however, that the period of postponement would be as short as possible consistent with the critical shortage of materials. From time to time the Department of Health filed renewed applications.

On January 31, 1947, the Administration granted a permit to pour concrete footings. But it was not until March 28,1947, ten months after the formation of the contract, that the Administration granted an unqualified permit to begin construction of the building. Work was thereupon resumed on April 1. Upon completing the building, the contractor submitted his claim for the increased cost of labor and materials resulting from the delay in obtaining the permit.

A small part of his claim was for work on the foundation, which had to be done over as the result of deterioration that took place during the stoppage of work, but all the rest of the claim was for increased cost of labor and materials. The Board of Public Works requested the Attorney General for his opinion as to the validity of the claim. The Attorney General advised that the State was not liable for the increased cost of construction due to the delay and that, even if the Board recognized the claim as a moral obligation, it could not use any of the general contingent funds to make such payment. He further advised that the Legislature could not constitutionally appropriate additional funds for such purpose.

The Uniform Declaratory Judgments Act, under which this suit was brought, provides that any person interested ⁶⁸⁷ under a written contract may have determined any question of construction or validity arising under the contract, and obtain a declaration of rights, status or other legal relations thereunder. It declares that the word “person” shall be construed to mean any person, association, or society, or municipal corporation of any character whatsoever. Code Supp. 1947, art. 31A, secs. 2, 13. The contract in this case was made for the State by the Governor, State Comptroller and State Treasurer, constituting the Board of Public Works, and by the State Department of Health, as Joint Owners.

The suit was brought by the State of Maryland for the use of the Board of Public Works. We need not consider here whether the suit could have been maintained if the Legislature had not given its sanction for the institution of this suit. In creating the General Construction Loan of 1950, the Legislature made an appropriation of an amount in the discretion of the Board of Public Works, not to exceed $250,000, to satisfy the claim for additional compensation of J. Roland Dashiell & Sons, Contractors, “to be paid only in the event of final judicial determination of legal obligation and legal ability to pay.” Laws of 1950, ch. 109. This conditional appropriation is a clear implication, even if not a mandate, that there should be a judicial determination of the question of liability.

Neither side has questioned the jurisdiction of the Court. Both sides prayed for an adjudication on the merits and waived as far as they could all jurisdictional defenses. First. The Attorney General contended that the permit was one of a temporary nature, and hence it was not the duty of the State to apply for and obtain it.

He relied on the following provision of Article 11 of the General Conditions of the Contract: “Permits and licenses of a temporary nature necessary for the prosecution of the work shall be secured and paid for by the Contractor. Permits, licenses and easements for permanent structures or permanent changes in existing facilities shall be secured and paid for by the Owner, unless otherwise specified.” He contended that a permit for a ⁶⁸⁸ permanent structure, within the contemplation of the contract, is one that remains effective not only during the period of construction but throughout the existence of the structure. As an example he cited the permit granted by a zoning board for use of a building, such a permit being an authorization to use the building for a certain purpose as long as it stands. He contended that a permit issued by the Civilian Production Administration was merely an authorization to begin work, and did not make any regulation as to the size or appearance of the building or as to its use after its completion.

But, as the contractor argued, even though the permit needed in this case was an authorization to begin work in the nature of a grant of priority, nevertheless it was required by an authorized governmental agency for the erection of a permanent structure to cost approximately $2,000,000. We think it was a permit for a permanent structure. It is quite different from permits to block a street temporarily, to connect with a water or sewer main, and to make an attachment to an electric line, which are needed for a limited time during the period of construction of a building. There is nothing to indicate that the permits required during the Second World War by the War Production Board and later by the Civilian Production Administration were contemplated by those who drafted the Standard Form of the General Conditions of the Contract for the American Institute of Architects.

In Staunton and King v. Wellington Education Board, 28 N. Z. L. R. 449, 455, upon which the Attorney General relied, the Supreme Court of New Zealand ruled that where a builder enters into a contract to erect a building, in the absence of any stipulation in the contract, it is his duty to apply for and obtain all permits necessary under the by-laws of any local authority before the work can be started. But in that case, which was decided in 1909, the evidence showed that it was “the invariable custom” in New Zealand at that time for the builder to apply for all permits. In the case before us there is no ⁶⁸⁹ evidence of any invariable custom with reference to applications for permits from the Federal Government. Second.

The Attorney General contended that, even though it was intended by the parties that the State would apply for and obtain the Federal permit, the State was excused from that duty by impossibility of