Thomas Creek Lumber and Log Company v. Kempthorne , 250 F. App'x 316 ( 2007 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2007-1054
THOMAS CREEK LUMBER AND LOG COMPANY,
Appellant,
v.
Dirk Kempthorne, SECRETARY OF THE INTERIOR,
Appellee.
Kevin R. Garden, The Garden Law Firm, P.C, of Alexandria, Virginia, argued for
appellant.
Reginald T. Blades, Jr., Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for appellee.
With him on the brief were Peter D. Keisler, Acting Attorney General, and Jeanne E.
Davidson, Director.
Appealed from: United States Department of the Interior Board of Contract Appeals
Administrative Judge Candida S. Steel
NOTE: This disposition is nonprecedential.
United States Court of Appeals for the Federal Circuit
2007-1054
THOMAS CREEK LUMBER AND LOG COMPANY,
Appellant,
v.
Dirk Kempthorne, SECRETARY OF THE INTERIOR,
Appellee.
___________________________
DECIDED: October 3, 2007
___________________________
Before RADER, BRYSON, and PROST, Circuit Judges.
RADER, Circuit Judge.
The Department of the Interior Board of Contract Appeals (IBCA) decided that
Thomas Creek Lumber and Log Company (Thomas Creek) is not entitled to
compensation for deterioration of timber between 1991 and 1995. Appeals of Thomas
Creek Lumber and Log Company, IBCA No. 3917R-3921R-2005, 06-2 BCA ¶ 33,342(July 20, 2006). Because no contract existed before October 26, 1995, this court
affirms.
I
On September 11, 1991, the Board of Land Management (BLM), offered for sale
timber within an area known as Rocky Road in the state of Oregon. Although it was the
highest bidder, Thomas Creek was not immediately awarded the timber contract.
Instead, the BLM delayed 4 years due to questions regarding Thomas Creek's ability to
pay as well as the requirement for consultation under the Endangered Species Act to
protect spotted owl habitat. On Jan 30, 1992, the habitat requirement halted the sale.
In 1994, BLM formally cancelled the sale.
The Rescissions Act, on July 27, 1994, intervened to require BLM to award
certain timber sale contracts, such as the Rocky Road contract, to the previously
designated highest bidders "with no changes in originally advertised terms, volumes and
bid prices." Pub. L. No. 140-19; 109 Stat., 1995. Accordingly, the BLM offered the
contract to its highest bidder from 1991, Thomas Creek. The BLM clarified that Thomas
Creek had no obligation to accept the award because over 90 days had elapsed since
the bid.
In July of 1995, Thomas Creek conducted another inspection and found that
additional damage had occurred to the site since 1991. Nonetheless, and knowing that
it had no obligation to enter into the contract, on October 26, 2005, Thomas Creek
accepted the contract in its original form.
Over the next three years (1995-1998), BLM modified the contract price several
times to account for deterioration of the timber on the site. The final purchase price
agreed to by BLM was $716,262, which was lower than the original contract price.
Thomas Creek, still dissatisfied, sought from the Contracting Officer (CO) additional
compensation for damage to the timber. The CO increased BLM's liability by $55,973.
Thomas Creek wanted more, $286,164, and therefore appealed to the IBCA.
On May 18, 2005, the IBCA determined that Thomas Creek was not entitled to
any compensation for the deterioration of timber between 1991 and 1995. The IBCA
2007-1054 2
determined sua sponte that no contract bound the parties until October 26, 1995.
Therefore, the Board did not award Thomas Creek any compensation for damage to the
timber prior to that time. After additional briefing on reconsideration, the Board
sustained its holding. Thomas Creek now appeals.
II
Section 6 of the contract specifies that Thomas Creek accepts the timber
after its examination in "as is" condition:
Sec. 6. Inspection of Timber and Disclaimer of Warranty:
(a) Purchaser warrants that this contract is accepted and executed on the
basis of its examination and inspection of the timber sold under this
contract and its opinion of the value thereof.
(b) Government expressly disclaims any warranty of fitness of the timber
for any purpose, all timber sold hereunder is accepted As Is without any
warranty of merchantability by Government. Any warranty as to the
quantity or quality of the timber sold hereunder is expressly disclaimed by
Government…. (emphasis in original).
Section 6(a) of the contract shows that Thomas Creek accepted the contract
based on its own examination of the site. Thomas Creek examined the site not only in
1991 before it submitted its bid, but also again in 1995 before signing the contract.
Thomas Creek also knew that it had no obligation to accept the contract. Thus,
knowing of the changed circumstances on the site, Thomas Creek chose to sign and
accept the contract in its original form. Moreover section 6(b) of the contract expressly
disclaims any warranty on the quantity or quality of the timber.
2007-1054 3
Thomas Creek argues that contract does not specify the point in time to which
the "As Is" condition refers. Because "as is," by its terms, refers to the present tense,
the Board reasoned properly that “As Is” means “As Is” at the time of contract entry.
[RB 12]. As the Court of Claims expressed in its analysis of an identical disclaimer, “[i]t
is difficult to imagine how the disclaimer could have been any clearer.” Webco Lumber
Inc. v. The United States, 677 F. 2d 860, 863 (Ct. Cl. 1982).
Thomas Creek refers to the behavior of the parties as evidence that the contract
had a different meaning. Thomas Creek notes that the CO behaved as if the
government was liable for some of the damage that occurred prior to the signing of the
contract. Thomas Creek argues that the CO, apparently, believed that the contract
allowed payment of lost quantity and quality value from date of its original bid. The
conduct of the parties, however, is not necessary or, even relevant to interpret an
unambiguous contract. As this court has stated, contract terms "phrased in clear and
unambiguous language. . . must be given their plain and ordinary meaning, and we may
not resort to extrinsic evidence to interpret them." Coast Federal Bank v. United States,
323 F.3d 1035, 1038 (Fed. Cir. 2003) (quoting McAbee Constr. Inc. v. United States,
97 F.3d 1431, 1435 (Fed. Cir. 1996)). This court has considered extrinsic evidence in
order to discern the presence of an ambiguity in contract terms, but in this case, the
evidence presented does not demonstrate that Thomas Creek reasonably relied on a
competing interpretation of “As is” when it entered into the contract. See Metric
Constructors, Inc. v. Nat'l Aeronautics & Space Admin., 169 F.3d 747, 751-52 (Fed. Cir.
1999) (trade practice and custom examined when party relied upon competing
interpretation at contract formation); Beta Sys. Inc. v. United States, 838 F.2d 1179,
2007-1054 4
1183 (Fed. Cir. 1988). Because the disclaimer of warranty in section 6 of the contract
as to the fitness, quality, and quantity of the timber was unambiguous, this court
declines to examine the extrinsic evidence pointed to by the appellant. City of Tacoma
v. United States, 31 F.3d 1130, 1134 (Fed. Cir. 1994) (“[E]xtrinsic evidence . . . may not
be considered unless an ambiguity is identified in the contract language.”).
Section 7 also does not place the risk of loss on the government for damage that
occurred prior to the formation of the contract:
Sec. 7. Passage of Title and Risk of Loss:
Title to timber sold under this contract shall remain in Government and
shall not pass to Purchaser until such timber has been paid for and
removed from the contract area. Unless cut timber is sold under this
contract risk of loss shall be borne by Purchaser after the timber is cut:
Provided, however, that if loss results from a fire that was not caused by
Purchaser, his contractors, subcontractors, or the employees of any of
them, the risk of loss shall be borne by the party holding title. Risk of loss
to Government shall not exceed the value of such timber computed at the
prices per unit for the species involved as set forth in Exhibit B. As used
in this section, the term cut timber refers only to timber which has been
felled, bucked, or otherwise severed by direct human activity prior to the
date this contract was entered into.
Generally, a government contract must be in writing and signed by the parties
before it binds them. American General Leasing, Inc. v. U.S., 587 F.2d 54 (1978). In
particular, for timber contracts such as that at issue, 43 C.F.R. § 5424.0-6(b) provides:
2007-1054 5
The severance and or removal of any vegetative resource for personal or
commercial use requires a written contract or permit issued by the
authorized officer or other person authorized by the United States. All
contracts shall contain the following:
(1) The name of the purchaser…
(2) Signature of the purchaser (emphasis supplied).
Thomas Creek argues that section 7 provides that the BLM bore the risk of loss
until the timber was cut. Indeed, this section does place the burden on the BLM for any
damage that occurred between the execution of the contract and the time of timber
cutting. Nothing within section 7, however, indicates that the risk of loss provisions
apply to any events before existence of the contract. As noted, the parties entered the
contract in 1995. Thomas Creek’s reliance on section 7 is misplaced.
III
Because the terms of the contract were clear that the purchaser based its
decision on its inspection as required by section 6(a) and accepted the merchandise “As
Is,” this court affirms the decision of the IBCA that no contract was in existence before
October 26, 1995.
AFFIRMED
COSTS
Each party shall bear its own costs.
2007-1054 6