138 US 185 Chicago Co v. Price
138 U.S. 185
11 S.Ct. 290
34 L.Ed. 917
CHICAGO, S. F. & C. R. CO.
PRICE et al.
January 26, 1891.
This action was brought by Price, McGavock & Co., for the use of Jones, Forrest & Bodkin, to recover from the Chicago, Santa Fe & California Railroad Company the balance alleged to be due them under a written contract, made March 21, 1887, for the clearing, grubbing, and masonry necessary to complete the road-bed of that company from a point on the Mississippi river to Galesburg, Ill., a distance of about 50 miles. The parties, in writing, waived a jury, and tried the case before the court, which made a special finding of facts. There was a judgment against the railroad company. 38 Fed. Pep. 304.
The contract contained, among other provisions, the following: 'The aforesaid party of the first part, [Price, McGavock & Co.,] in consideration of the prices hereinafter agreed to be paid to them by the party of the second part, [the railroad company,] hereby agree and bind themselves to construct and in every respect to complete the grubbing and clearing, grading, and masonry, including the furnishing of materias a nd all other things requisite and necessary to complete the road-bed and prepare the same ready for receiving the superstructure, upon that portion of the railroad of the party of the second part known and designated as 'section ___, number ___, the first fifty (50) miles eastward from station thirty, (30,) east bank of Mississippi river, of the Chicago, Santa Fe & California Railway,' in such a manner as will conform in every respect to the annexed specifications and to the following conditions, viz.:
'(1) That the work shall be commenced within ten (10) days after the execution of these presents, or as soon after as the railway company shall have acquired a title to the lands, and shall be completed on or before the 1st day of August, one thousand eight hundred and eighty-seven.
'(2) The work shall be executed under the direction and supervision of the chief engineer of said railway company and his assistants, by whose measurements and calculations the quantities and amounts of the several kinds of work performed under this contract shall be determined, and whose determination shall be conclusive upon the parties, and who shall have full power to reject or condemn all work or materials which in his or their opinion do not fully conform to the spirit of this agreement; and said chief engineer shall decide every question which can or may arise between the parties relative to the execution thereof, and his decision shall be binding and final upon both parties; and whereas the classification of excavation provided for in the annexed specifications is of a character that makes it necessary that special attention should be called to it, it is expressly agreed by the parties to this contract that the determination, by the measurements and calculations of the said engineer, of the respective quantities of such excavation shall be final and conclusive.
'(5) If any damage shall be done by the party of the first part (or persons in their employ) to the owners or occupants of lands or other property adjoining or in the vicinity of the work herein contracted to be done, the engineer of said company shall have the right to estimate the amount of said damage, and to pay the same to said owner or occupant, and the amount so paid for such damage shall be deducted from the value of work done under this contract.
'The aforesaid party of the second part hereby agrees that whenever this contract shall be completely performed on the part of the said party of the first part, and the engineer has certified the same in writing, the said party of the second part shall, within ten days thereafter, pay to said party of the first part any remaining sums due for said work, according to this contract, as follows, to-wit: [Here follow the prices agreed upon for different kinds of work to be done.]
'It is further agreed between the parties that monthly payments shall be made by the party of the second part, on the certificate of the engineer, for work done, deducting ten per cent. from the value of work done, as agreed compensation for damages, to be forever retained by the party of the second part in case the whole amount of work herein named shall not be done in accordance with this agreement.
'For the purpose of avoiding all causes of difference or dispute between the parties to this contract relative to its true intent or meaning, and for the purpose of adjusting in an amicable manner any difference that may or can arise relative thereto, it is hereby mutually understood and agreed by the parties as follows, towit:
'(1) No extra charges will be claimed or allowed on account of changes, either in the line or grade of the road, the prices herein mentioned being considered as full compensation for the various kinds of work herein agreed to be performed.
'(2) Whenever work is required to be done which is not now contemplated or covered by the prices herein mentioned, the engineer shall fix such prices for the work as he shall consider just and equitable, and the said parties shall abide by such prices, providedthe party of the first part enter upon and commence such work with full knowledge of the prices so fixed by the engineer; but if the party of the first part decline executing said work at the price fixed by the engineer, then the party of the second part may enter into contract with any person or persons for its execution, the same as if this contract had never existed; and if extra work, or work not provided for in this contract, is performed by the contractors, without protest, or notice in writing to the engineer and to the party of the second part before prices shall have been fixed to such work, then the engineer shall estimate the same at such prices as he shall deem just and reasonable, and his decision shall be final, and the party of the first part shall accept of said prices in full satisfaction of all demands against the party of the second part for said extra work; but nothing shall be deemed extra work that can be measured or estimated under the provisions of this contract.
'(5) It is expressly agreed by the party of the first part that the party of the second part may at any time pay so much of the money due the party of the first part on the running or final estimates above mentioned to the laborers employed by the party of the first part as may be due said laborers, and charge the same to the party of the first part.
'(6) In case any or all work embraced in this contract shall be permanently suspended by and on account of the party of the second part, which it is hereby agreed the party of the second part may do, for other causes than heretofore provided in this contract, then, in that case, all further operations under this contract shall be suspended within three days after receiving written notice from the party of the second part requiring the further progress of the work to be suspended, and the party of the first part shall have their choice either to consider such suspension temporary and resume work on the same within ten days after receiving notice to resume work, or may consider the same at an end, and shall receive full pay for all work by them performed under this contract, and at the prices herein stipulated, upon the estimate of the engineer, which shall be final and conclusive between the parties to this contract; which estimates shall not include any anticipated profits that might have accrued from the completion of the said work, it being understood that no claim for damages shall be made by the party of the first part on account of any profits that might accrue from the completion of the same.'
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Norman Williams, for plaintiff in error.
P. S. Grosscup, for defendants in error.
Mr. Justice HARLAN, after stating the facts in the foregoing language, delivered the opinion of the court.
The written contract between the parties in this case does not materially differ from the one before this court in Railroad Co. v. March, 114 U. S. 549, 553, 5 Sup. Ct. Rep. 1035. In that case the contractor did not allege in his declaration that the engineer ever certified in writing the complete performance of the contract, together with an estimate of the work done and the amount of compensation due him according to the prices established by the parties, which certificate and estimate was made by the agreement a condition of the liability of the company to pay the contractor the balance, if any, due him. Nor did the declaration allege any facts which, in the absence of such a certificate by the engineer, whose determination was made final and conclusive, entitled the contractor to sue the company on the contract. It was held, in accordance with the principles announced in Kihlberg v. U. S., 97 U. S. 398, and Sweeney v. U. S., 109 U. S. 618, 3 Sup. Ct. Rep. 344, that the declaration was fatally defective in that it contained 'no averment that the engineer had been guilty of fraud, or had made such gross mistake in his estimates as necessarily implied bad faith, or had failed to exercise n h onest judgment in discharging the duty imposed upon him.' Some observations in that case are pertinent in the present one. It was said: 'We are to presume from the terms of the contract that both parties considered the possibility of disputes arising between them in reference to the execution of the contract; and it is to be presumed that in their minds was the possibility that the engineer might err in his determination of such matters. Consequently, to the end that the interests of neither party should be put in peril by disputes as to any of the matters covered by their agreement, or in reference to the quantity of the work to be done under it, or the compensation which the plaintiff might be entitled to demand, it was expressly stipulated that the engineer's determination should be final and conclusive. Neither party reserved the right to revise that determination for mere errors or mistakes upon his part. They chose to risk his estimates, and to rely upon their right, which the law presumes they did not intend to waive, to demand that the engineer should at all times, and in respect to every matter submitted to his determination, exercise an honest judgment, and commit no such mistakes as, under all the circumstances, would imply bad faith.' The only difference between that case and the present one is that the alleged mistakes of the engineer in the former were favorable to the railroad company, while in this case they are favorable to the contractors. But that difference cannot affect the interpretation of the contract. In the present case the agreement was that the work should be executed under the direction and supervision of the chief engineer of the railroad company and his assistants, by whose measurements and calculations the quantities and amounts of the several kinds of work should be determined, and 'whose determination shall be conclusive upon the parties.' Any decision of the chief engineer relating to the execution of the contract was to be 'binding and final upon both parties.' His measurements and calculations as to excavations were made 'final and conclusive.'
What are the substantial facts found by the court below? The work was in four divisions, each division being in charge of an assistant or division engineer, who acted under the general direction of the chief engineer. The agreement provided for monthly payments to the contractor, on the certificate of the engineer, 'for work done;' 10 per cent. from the value thereof to be retained by the company until the whole work was completed in accordance with the contract. The work was under the immediate supervision of the division engineer. On the first day of each month he made up and forwarded to the assistant chief engineer an estimate of work done on each section of his division, according to quantities and classifications. Upon such estimates the assistant chief engineer ascertained the amount due the contractor to the beginning of the month. These monthly estimates were approved by both the assistant chief engineer and chief engineer. This course was pursued until the work was substantially completed, and was accepted and taken possession of by the company. Subsequently, without the knowledge or co-operation of the contractors, Baker, a subordinate engineer of the railroad company, who had not supervised the work of the plaintiffs, re-estimated and reclassified it, and upon such re-estimate and reclassification, which were approved by the chief engineer, the company claimed that the monthly estimates upon which the plaintiffs had been paid from time to time were much too large.
We are of opinion that the ultimate facts, as found by the court, do not authorize the railroad company to go behind the estimates made from time to time by its division engineer, which were approved and certified by the assistant chief engineer and chief engineer. Within a reasonable interpretation of the contract, the last monthly estimate of work done on division 9, (that being the only dvis ion here in dispute,) followed by the acceptance by the company of the whole work, was a certificate of complete performance, entitling the plaintiff to be paid in full according to the terms of the contract. While there was evidence tending to show that the estimates by the division engineer, upon which the last monthly certificate was based, were not made up from actual measurements on the ground, but from reports by subcontractors, there was also evidence tending to show that the remeasurements and reclassifications which the company caused to be made after the completion and acceptance of the work, and which it calls the 'final estimate,' were inaccurate. But there is no fact distinctly found indicating fraud upon the part of the company's engineers, or such gross mistakes by them as imply bad faith. It is found only that the monthly estimates might, with reasonable care, have been made nearly accurate, and that, if the remeasurements and reclassifications were correct, the discrepancy between them and the monthly estimates, upon which the plaintiffs were paid from time to time, could be explained only upon the ground of negligence, incompetency, or dishonesty upon the part of the division engineer. But the court did not find that the monthly estimates were inaccurate, or that the chief or division engineer was dishonest, or that the subsequent remeasurement and reclassification were correct. The mere incompetency or mere negligence of the division or chief engineer does not meet the requirements of the case, unless their mistakes were so gross as to imply bad faith.
We are of opinion that the judgment is supported by the finding of facts, and it is affirmed.