Faunce v. Burke & Gonder ( 1851 )

The opinion of the court, filed July 3, was delivered by

Chambers, J.

This action is brought by'the plaintiff for. the recovery of damages on account of the alleged violation, of a contract between him and defendants for the construction of a section of the York and Cumberland Railroad. The plaintiff was a subcontractor under the defendants, who had contracted with the York and Cumberland Railroad Company for the construction of the entire road of this company. The article of agreement between the parties contains many stipulations, specifications, and conditions; and also refers to the specifications in the contract between the defendants and the company, which are adopted as part of the contract between the parties in this suit. The plaintiff, after setting forth the agreement and specifications as the foundation of his action, avers a performance of the covenants on his part, and a willingness to perform the same; and that whilst he was, at great expense to himself, prosecuting the work according to the contract, the defendants fraudulently declared the said work abandoned, and the contract annulled, and dismissed the plaintiff from the execution and performance of his contract, and had failed to pay him for the work done according to the said contract. The defendants deny that they annulled the contract and suspended the work without cause, but for causes provided for in the contract, and which were essential to the progress of the work.

The agreement contained the stipulations and provisions that have generally, if not uniformly, formed a part of the contracts between States, corporations, and their contractors, for the construction of railroads and canals, as to the mode of conducting the work, estimating the progress of the work, and the payments to be made from time to time. A provision in this contract which was new, but no doubt proper and useful for the habits of the laborers engaged in the work, as well as for the due prosecution of it, forbid that ardent spirits be kept or used in any building occupied by the plaintiff or his workmen on or near his section, and plaintiff agreed that he would discharge any workman or laborer from his employment that did keep or use it. It was further provided that monthly estimates were to be made by the engineers of the York and Cumberland Railroad Company of the quantity, character, and value of the work done; four-fifths of which value should be paid over monthly to the plaintiff, and one-fifth retained till the work should be finally completed. It was further provided that the monthly and final estimates of the engineer as to the quantity, character, and value of the work should be final and conclusive between the parties; and that if the plaintiff should not well and faithfully perform every portion of his part of the contract, or if the engineer of the company should be of opinion that the work was not progressing as it should do, the defendants might give the plaintiff three days’ notice that they had annulled the contract; and from that time the agreement was to become null and void, and they were at liberty to take possession of the work and carry it on, or give it out to others, as they might deem proper; and the unpaid portion of the road, forfeited by the plaintiff, become the right and property of the defendants. Some of the provisions in this contract, at first view, seem stringent, arbitrary, and penal upon one of the parties, and without the mutuality of obligation and remedy which usually characterize contracts between individuals.

Stipulations and provisions of a like kind form a part of all contracts for the construction of canals or railroads by the parties engaged in undertakings of such character, magnitude, and public interest. It is for the advantage of the prosecution of such improvements and an accommodation to laborers and men of small capital, that the work should be given out in small sections, so as to admit of a large number of contractors, who both work and manage the labor of others on their job. It is important to the company and the public that the work should be prosecuted in all its divisions without delay; and with reasonable diligence and attention, so as to secure its completion at a time appointed. The failure of one or two contractors with their sections might suspend the use of the nearly completed improvement, with all its advantages, to the detriment of the company to an extent that the contractors could not indemnify or repair. To protect the company against such disappointments and failure of contract, it would be necessary to require from the contractors, who would also have to require from their sub-contractors, heavy and responsible security for the faithful performance of their contracts in the prosecution of the work. As such contractors are generally strangers, and men of small capital, the requirement of such security would be an obstacle that would deprive them of the opportunity of becoming contractors for the construction of parts of the road, and lessen to the company the number of competitors for the work. This is obviated by substituting the stipulations and provisions described, in place of personal security not attainable; and which stipulations might have the influence of inducing the diligent prosecution of the work, the faithful performance of the contract, and save the company from the evils of delay and from expensive and harassing litigation, that would retard the work and be onerous and ruinous to both parties. The engineers who were to make the estimates, judge of the progress of the work, and annul the contract, were not the agents of the defendants, but the officers of the company. They were familiar with such works, and from experience of the necessity of such powers to be delegated, were made the judges of the execution of the contract between the company and their contractors; and also between the principal contractors and their sub-contractors. In the execution of these powers, the engineer, by the contract of the parties, was made the absolute judge. The stipulations and provisions in this contract for its execution. and termination, and the selection of the engineer as the arbitrator between the parties to adjudge finally on the contract, were all parts of the contract assented to and adopted, as evidence of their intention and agreement, and as such were binding on them. Stipulations of a like character were brought before this court for its consideration in the case of the Monongahela Bridge Company v. Fenlon, 4 Watts & S. 205, and were sustained as legal and binding on the parties. It was there ruled that if the parties by contract appoint an arbiter to settle their difference, they are bound by his award, although he may be interested in the contract which was the subject of reference. This action by the plaintiff on the contract is in affirmance of it, and it is not for him now to impeach the stipulations to which he assented, and by which he obtained the contract. He was bound to know what he was doing when he entered into such contract; and as the court below rightly said, there was no evidence of any fraud or imposition in its procurement.

A great mass of evidence is brought up in t.he case by the record, and many points for the opinion of the court below were presented by the counsel on both sides. The counsel for the plaintiff in error, with commendable discretion, have confined their assignments of error in this court to a few of the many points presented to the court below, which relieves this court from a review of much of the record, and which was not material to the parties or the public.

The plaintiff has assigned for error the answer of the court to the first and sixth points presented by his counsel, and the eighth point presented by defendant, and as they are connected by the subject-matter, they will be considered together. The court did instruct the jury “ that monthly estimates were to be made by the engineer of the company, of the quantity, character, and value of the work done during the month, or since the last estimate, four-fifths of which value were to be paid the plaintiff, and that monthly estimates thus made were conclusive between the parties; and if such estimate fixed the amount to be paid, it would be final, unless the plaintiff could clearly prove fraud or such gross mistake as would amount to fraud; and if the amount was not fixed by the engineer, but the defendants paid according to quality and quantity reported, and according to price fixed in the contract, there would be no violation of the agreement on their part. If the defendants had delayed the plaintiff in his work by withholding funds, it would be unfair to take advantage of the forfeiture declared for want of prosecuting the work with due diligence, but there were no facts in the cause to support this point.” In answer to the sixth point the court said to the jury, “ that the percóntage might be retained till the work was finished, and that such clause is common, if not universal, in such contracts. If the work was unfinished and the contract annulled, the unpaid portion of the road which was forfeited became the right and property of the defendants, but there would be no forfeiture of the money then earned, excepting the 20 per cent., which the plaintiff would be entitled to only on the completion of the work. The engineers had a right to deduct from the quantity what they considered would equalize the part taken out as to quality and value with the whole ; and having done so, their decision was binding on both parties, in the absence of fraud or plain and palpable mistake. If there is money coming to plaintiff according to such estimates after deducting payments, that amount he is entitled to recover.” Was there error or not in the answers of the court recited ?

By the contract, the engineer of the company was the agent of both parties to make the monthly estimates of the quantity, character, and value of the work done during the month. This estimate would be evidence to all concerned of the progress of the work and furnish a standard for payment according to contract, four-fifths of which value were to be paid the plaintiff. The import of the term value, as used in the estimate as well as in the provision for the payment of four-fifths thereof, is in such a contract significant, distinguishable from the term price, as contended for by plaintiff, to be applied to the quantity of any of the different classes of work specified in the contract.

The plaintiff excepts to the answer of the court below in saying “ that the engineers had a right to deduct from the quantity what they considered would equalize the part taken out, as to quality and value, with the whole; and having done so, their decision is binding on both parties, in the absence of fraud or plain and palpable mistake.” Whereas, as the plaintiff contends, the estimate should have included every yard and perch of work done by the plaintiff, at the contract price, and that there had been a large deduction of rock excavation from plaintiff’s work by the engineer to equalize what was done with that remaining to be done. Where the heavy part of such work consists of excavations of rock or clay in deep or side cuts, and which by the contract are to be paid for at a certain price per yard, we can well understand that the first part of that work, at or near the surface, could be excavated with more facility and with much less labor and expense than the lower parts of the work. The expense of taking out the lower part of the rock, more solid and less accessible, might require three times or more of labor and expense than what would be required to excavate and remove the same quantity of rock at or near the surface. As the contract price for the entire excavation of solid rock was 45 cents per cubic yard, embracing all of that description to the lowest depth of the grade as well as to the surface, it would have been an unequal estimate to have estimated the work first done at the surface at the full price for all the work of that description, and left the last half to be estimated at the same price. To have made such an estimate, from which 20 per cent, was to be retained, would have given the plaintiff more than the full value of the work done, and left a sum totally inadequate in the hands of the defendants for their indemnity against the labor of plaintiff to prosecute and complete his contract. It would have been made the interest of the plaintiff, after receiving estimates and payments - according to the construction claimed by him, without regard to equalization and value, to have withdrawn from his job and leave his unfinished work, which could not, as he would be aware, be completed at any price near what he would be entitled to recover under his contract on the final estimate, the 20 per cent, retained.

The disadvantage and injustice were too great to be overlooked by those whose attention had been given to the construction of such works ; and to provide against it, we suppose, the stipulation was introduced into contracts to estimate according to quantity, quality, and value. This appears to this court as reasonable, and, as a part of the contract, was valid and binding on the parties,, unless, as was said by the court below in their charge, there was -fraud or plain and palpable mistake. It was open to the plaintiff to prove either, to relieve himself from the estimat.es and decision of tire engineer, and which would have been facts for the consideration of the jury.

It is alleged by plaintiff that his first point was not answered by the court as to the effect of short estimates on the ability of the plaintiff to progress with the work: to which the court said, that if the defendants had delayed the plaintiff in his work by withholding his funds, it would be unfair to take advantage of the forfeiture declared for want of prosecuting the work with diligence; but that they wrere not able to see any facts in the case to justify this point.

The short monthly estimates were only injurious to the plaintiff as they lessened the amount of his monthly payments, to enable him to prosecute his work with diligence. It was the funds alleged to be withheld that he was in need of, and the court did answer this point substantially, and as favorable to the plaintiff as if the language used by the counsel had been adopted by the court.

The answer of the court to the third point presented is also assigned for error, as to -the penalty or forfeiture inserted in the contract, w'hich the plaintiff alleges was merely to secure performance, and that it would be unconscionable and against equity that it should be enforced in this action. The court said that “ equity will often relieve against a penalty and forfeiture, but would not interfere with the action of a party in such a case as this, if the plaintiff has done or omitted any act which would justify the defendants in declaring the work abandoned.”

There is an inclination in courts to consider a specified sum as a penalty in contracts, as when such sum is evidently intended as a mere collateral security for the payment of a different sum which is the real debt; or where it is evidently intended to be in the nature of a mere penalty; or where it is uncertain what the parties really intended; in which latter case the courts have considered and inquired into the reasonableness of the provision for the payment of liquidated damages.

The reservation of the power to annul the contract was rendered necessary by the nature of the work to be constructed and the relation of the parties, and we may say here, as was said by this court in the case of the Monongahela Navigation Company v. Fenlon, before cited, that without such a provision as this, plaintiff would never have obtained the contract. It was his substitute for personal security, which it is probable he'could not procure. We cannot suppose that the company or their contractors for the entire work would have agreed that the execution of the several contracts, their construction, and any disagreements between the parties in the progress of the work, should be left open to innumerable suits at-law, and to the determination of juries unacquainted with the work and such contracts, with all the vexation, expense, and delay attendant upon such litigation. Such a stipulation of forfeiture, under the adjudication of a competent engineer, who was supervising the work, was, we think, a reasonable provision for securing the progress of the work, and a limited indemnity to the defendants in the retained 20 per cent., to allow the employment of other contractors or laborers to complete according to contract the unfinished section. The plaintiff was allowed, under the charge of the court, to recover the balance that might be supposed to be due him exclusive of the retained 20 per cent. It is, we think, to be intended by the parties to this contract, from the peculiar nature of it and the uncertainty of damages, that the measure of reparation on the failure of plaintiff to perform, and the forfeiture as adjudged by the engineer, were the 20 per cent, retained out of the estimates. There are no words evincing an intention that the sum reserved should be considered only as a penalty. The plaintiff chose to contract with such a stipulation, and it was in his power to be relieved from it by the due prosecution of his work, and entitle himself on its completion to the whole sum payable under the contract. Why shall the law undertake to make a new agreement for the parties which they did not intend to make for themselves. They were the best judges of the amount of the injury to be sustained by the interruption of the work and the failure of plaintiff to perform his agreement — an injury uncertain and incapable of estimation until the whole work was completed, and was a proper subject for a stipulated reparation.

The parties contracted upon the faith of that mode of adjustment through the estimates of the engineer and the retention of one-fifth and the forfeiture of that unpaid portion, and it is not for the court to make a different agreement for them than what they intended and did make for themselves; or allow a jury to disregard the stipulation and reparation provided by their estimate of the supposed injury, at a time subsequent to the transaction and remote from the place, unless there was fraud or palpable mistake.

The fourth error assigned in relation to the payments by Mr. Burke and the effect thereof is not sustained.

As this'court is of opinion that the errors assigned are not sustained, the judgment of the Court of Common Pleas is affirmed.