California Sand & Gravel, Inc. v. United States

36 Cont. Cas. Fed. 75,968, 22 Cl. Ct. 19, 1990 U.S. Claims LEXIS 437, 1990 WL 177549
CourtUnited States Court of Claims
DecidedNovember 14, 1990
DocketNo. 280-89C
StatusPublished
Cited by52 cases

This text of 36 Cont. Cas. Fed. 75,968 (California Sand & Gravel, Inc. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
California Sand & Gravel, Inc. v. United States, 36 Cont. Cas. Fed. 75,968, 22 Cl. Ct. 19, 1990 U.S. Claims LEXIS 437, 1990 WL 177549 (cc 1990).

Opinion

ORDER

MOODY R. TIDWELL, III, Judge:

This case is before the court on defendant’s motion to dismiss or in the alternative, for summary judgment. Plaintiffs opposed the motion.

FACTS

In 1941, the Army Corps of Engineers designed and constructed Hansen Dam to control Los Angeles Basin flood waters. The Corps initially allocated a portion of the pool storage capacity for sediment deposits that subsequently proved insufficient because of heavy rains, and the residue of fire. Excavating the dam was expensive, and budgetary constraints led to an innovative program under which the Corps granted four licenses for the excavation and sale of sand and gravel from the pool for five cents a cubic yard. Each licensee had a designated excavation area within the basin, as well as an area in which to set up a processing plant. On March 26, 1982, the Corps issued an excavation license to California Sand and Gravel, Inc. that provided in part:

The Secretary of the Army hereby grants to California Sand and Gravel, Inc., a California Corporation ... a license for the period of one year commencing on 29 March 1982 and ending on 28 March 1983, and thereafter renewable on a year-to-year basis during an additional 4-year term, to 28 March ’87, but revocable at the will of the Secretary of the Army, to remove 600,000 cubic yards of sediment annually from the Hansen Dam Basin.1

Conditions 12 and 30 of the license provided, respectively:

12. The license is to be issued for a period of one year and renewable on a year-to-year basis during the next four year [sic], subject to satisfactory performance by the licensee.
30. Unless otherwise specified herein, the license may be revoked or can-celled at any time when required for flood control purposes. The Corps of Engineers shall reserve the right to revoke th s [sic] license on 30 days notice.

Under Army regulations, contracting authority lies with the Secretary of the Army who can delegate the authority to appropriate persons. In this case, the Secretary had delegated contracting authority to the Chief of Engineers, the Deputy Chief of Engineers, and the Director of Real Estate. These officers then could re-delegate the authority in writing to other officers whom they, respectively, supervised.2 According to the letter of delegation applicable to the [22]*22Hansen Dam project, Colonel Taylor, the District Engineer, and Mr. William Cheadle, the District Chief of Real Estate, were the only officers with contracting authority to approve, execute, amend, renew, revoke, or terminate California Sand and Gravel’s license. The District Chief of Operations, Mr. Robert Land, did not have that authority.

Subsequent to execution of the lease, Mr. John H. King introduced himself to certain unidentified District or Division officers explaining that he was considering the purchase of California Sand and Gravel, and wanted to discuss certain provisions, as well as any problems that might occur with the license because of a change in ownership of the licensee. In response to Mr. King’s questions, the District officers allegedly explained that Condition 30 of the license meant the Army would cancel California Sand and Gravel’s license only in case of a flood or disaster. When Mr. King asked what “revocable at the will of the Secretary of the Army” meant, these same unnamed officers allegedly told him that the government would terminate pursuant to this clause only in case of war or national disaster. Plaintiff also alleged that he was assured yearly reapplication for the license was unnecessary as the Army would renew it automatically each year for the five-year term, so long as plaintiff’s work was satisfactory. Plaintiff maintained that these verbal assurances constituted binding agreements.

Mr. King eventually purchased plaintiff California Sand and Gravel. Its relationships with the other three plaintiffs arose through a convoluted series of transactions. Originally, California Sand and Gravel was a wholly owned subsidiary of Recon Investments, Inc. (Recon). Mr. King then formed Illinois-California Sand and Gravel, Inc. (Illinois-California) which obtained a controlling interest in Recon and purchased all of Recon’s California Sand and Gravel stock. The result was that Illinois-California now controlled both California Sand and Gravel and Recon. In order to attract additional capital, Mr. King formed a general partnership known as Hansen Basin Sand and Gravel (Hansen Basin) to control Illinois-California. Mr. King did not insist on renegotiating the license to include Illinois-California, Recon, or Hansen Basin; neither was the license assigned.

At some point, California Sand and Gravel encountered start-up problems with its plant. Therefore, the parties amended the license to establish the run of the first term from March 28, 1982, to July 29, 1983. By July 29,1983, plaintiff had not received any notice of renewal, but continued to operate with no objection from defendant.

Sometime in early 1982, discord developed between the Corps and Paul Hums who allegedly had removed sediment and silt from outside his license area. California Sand and Gravel also experienced problems with Hums, and eventually instituted legal action against him.

In late 1983, the Corps informed Mr. King that it intended to select a single, exclusive licensee to operate at Hansen Dam Basin because the four current licensees had not removed enough sediment and silt, thereby creating possible flood conditions. In early March of 1984, Mr. Land, the District Chief of Operations, informed Mr. King that Channel and Basin Reclamation, Inc. (Channel) likely would be the new licensee.3 Mr. Land allegedly encouraged Mr. King to subcontract to Channel. Mr. Land also allegedly told Mr. King that, if California Sand and Gravel would relinquish its claims under the Hansen Dam license, defendant would grant plaintiff a new license to excavate material at the Santa Fe Dam. Mr. King alleged that shortly thereafter he met with the District Engineer and the District Chief of Real Estate, who both told him that anything he [23]*23worked out with Mr. Land would be fine with them.

On April 9, 1984, the Corps executed an exclusive five-year license with Channel to operate at Hansen Dam. One day later, on April 10, 1984, defendant terminated plaintiffs license based on paragraph two of what has been described as Amendment Five to the license, to wit: “this license may be terminated at any time by the Government by giving a 30-day advance written notice to the licensee.” Paragraph one of Amendment Five, which the court will address later in this opinion, stated “[t]hat the term of the license is extended on a month to month basis beginning on 1 August 1983, subject to the same conditions as contained in same (sic) license as amended.” However, amendment five never was executed and was thus, a nullity. Shortly thereafter, plaintiff approached Channel with an offer to subcontract. Channel declined.

On May 9, 1984, Mr. King sent two letters to the District Chief of Operations. The first confirmed that plaintiff would vacate the Hansen Dam premises. The second requested that the Corps grant plaintiff a license to remove sediment and silt at the Santa Fe Dam project. Soon after sending the letters, plaintiff sent defendant a proposal for operation under a license at the Santa Fe Dam project as he allegedly had discussed with Mr. Land.

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Cite This Page — Counsel Stack

Bluebook (online)
36 Cont. Cas. Fed. 75,968, 22 Cl. Ct. 19, 1990 U.S. Claims LEXIS 437, 1990 WL 177549, Counsel Stack Legal Research, https://law.counselstack.com/opinion/california-sand-gravel-inc-v-united-states-cc-1990.