Hostetter v. City of Pittsburgh

Chief Justice Mercur

delivered the opinion of the court, January 5th, 1885.

This judgment was recovered against the plaintiff in error on his bonds as surety of Hartupee. The latter had contracted to build for the city of Pittsburgh, certain graduating plunger pumping engines, according to the terms of two contracts between them. Each bond was conditioned that Hartupee should “ well and truly keep and perform all the terms and conditions of the said contract on his part to be kept and performed.”

The contracts and specifications designated the quality and strength of the iron to be used, and provided that the whole machinery should be constructed in a neat, substantial and workmanlike manner, and be put in successful operation to the satisfaction and acceptance of the board of water commissioners by a day specified. It was further agreed that the city might deduct and retain out of the moneys which may be due or become due to said Hartupee under the agreement, the sum of one hundred dollars per day, as liquidated damages for each and every day the work might be uncompleted beyond the time stipulated for its completion.

Monthly estimates should be made for all iron and composition work completed, and eighty per cent, thereof be paid monthly, and the residue be paid on the completion of the contract. The agreement further stipulated that in case of a failure to perform the conditions and obligations of the contract, and due notice thereof by the mechanical engineer, the contract might be declared null and void; and further, in case of such failure to perform the contract, the said Hartupee should become liable for any damages caused the said city by reason of said non-performance, and besides, under any circumstances, should forfeit to the city the twenty per cent, retained out of the monthly estimates, or of any other moneys held in reserve bv the city. It was expressly agreed “in case any question or dispute between the parties shall arise under this contract, or touching the quantity, quality, or value of any work done thereunder, the same shall be referred to the mechanical engineer whose decision shall be final and conclusive. And tbe said party of tbe second part hereby waives and releases all right of action and suit at law, under or by virtue of this contract.”

When the work was partially completed tbe city complained that the iron and materials used were not of good quality nor of the strength stipulated in the contract: that they were of such defective materials as to have resulted in numerous breakages, thereby causing great loss and damage to the city; also that the workmanship was inferior and defective, and not according to the agreement.

It further alleged that the work was unreasonably delayed, and was not completed at the expiration of several years after the time stipulated for its completion. After due notice to tho contractor, and demand of possession, under claim of forfeiture, the city took possession of the works in an unfinished condition, refused to pay for them and claimed damages. The contractor denied the claims and allegations of the city; and claimed there were large sums due him on the contract and for extra work. The contentions were submitted to tbe mechanical engineer, who after a full bearing and consideration of the testimony, and of all tbe claims on each side, decided and reported that there was nothing dire to the contractor, that he had been fully paid for all work done and materials furnished, and above this he owed and was indebted to the city on each contract in a certain sum which be named, by reason of his breach of the contract in furnishing inferior and improper iron and in making defective castings, neither of which was in accordance with the terms of the contract, and said referee therefore adjudged that said Hartupee owed and should pay said sum to the city of Pittsburgh. This suit was for the recovery of the sums thus awarded.

It is contended by the plaintiff in error that this submission is not authorized by the language of the agreement.

Tbe clear and comprehensive words therein answers this question. They are 1st, “any question or -dispute ” between the parties that “ shall arise under this contract ” shall be so referred. This language is very broad. It is not restricted to questions of disputed fact, nor to questions of disputed law, arising on the contract, but includes both. 2d. It proceeds, disjunctively, “or any question or dispute that shall arise touching tbe quantity, quality or value of any work done thereunder ” shall be referred to the same person. The reasonable and manifest meaning and sense of “ under,” in the connection in which it is used, is “the subject of” or “ covered by ” the contract. This is not only the plain and palpable import of “ under,” but it corresponds with the meaning of the word as given by both Worcester and Webster. As further indicating an intention that all questions of dispute that might arise connected with the subject matters of the contract should be so submitted, Hartupee waived and released all right of action and suit at law “ under or by virtue of this contract; ” that is, arising from or based upon its force, power and effect. The language clearly proves an agreement that all questions of dispute between the parties, which should arise on the contract, should be referred to the mechanical engineer, and that his decision should be final.

2. Is such an agreement valid, so that an award made under it shall be of binding force?

In Monongahela Navigation Company v. Fenlon, 4 W. & S. 205, it was held, when the parties to an executory contract stipulate that any dispute which shall arise between them on the subject of the contract shall be determined by an individual named, whose decision shall be final, no action will lie for a breach of the agreement by one against the other : but they must resort to the tribunal appointed by themselves, from whose award there is no appeal. In that case as in the present case the agreement was that the decision of the engineer should be conclusive. The agreement was held valid although the engineer was interested as a stockholder of the company. The binding effect of a similar agreement to refer to a person named all questions which may arise on an executory contract is affirmed in McGheehen v. Duffield, 5 Barr 497; Reynolds v. Caldwell, 1 P. F. Smith 298; O’Reilly v. Kerns, 2 Id. 214 ; Howard v. Allegheny Valley Railroad Co., 19 Id. 489; Connor v. Simpson, 8 Out. 440. This last case arose on an agreement to grade a portion of a railroad bed. It contained a clause appointing the chief engineer of the railway company a common arbiter to whom all and every question of 'difference between the parties growing out of the contract should be referred, and whose decision should be final and binding on both parties. The contractor entered on the work, and for some reason abandoned it in an unfinished condition, whereby the company claimed damages. It was held, although the submission was prospective, yet it was special and to the arbitrament of a person designated, and was binding on the parties. In Hartupee v. City of Pittsburgh,

Out. 107, we considered the very contract now before us. We then held, as to all questions covered by the agreement, neither party could maintain a common law action without a previous arbitrament of the engineer, or an offer by one and a refusal by the other to so refer.

It is contended by the plaintiff in error that the present agreement is invalid under the ruling in Snodgrass v. Gavit, 4 Casey 221. The agreement then in question did not provide for submitting matters in dispute to any particular person or official named, but to three persons to be mutually chosen by the parties. This distinction was there made. It was distinctly affirmed that when parties stipulate that disputes, whether actual or prospective, shall be submitted to the arbitrament of a particular individual or tribunal named, they are bound by their contract, and cannot seek redress elsewhere.

The principle involved in Rea’s Appeal, 13 W. N. C., 546, does not apply to the present case. That was not on an agreement to submit disputed questions relating to performance, or of damages arising on the contract, and between the parties thereto; but it was to provide for a final decree of a distribution of the fund between parties who were not legal parties to the agreement. The trustee was not entitled to any share in the distribution. Its purpose was not to settle the sums due as between the parties, but to make a final decree of distribution. It was therefore held the trustee could not set up the agreement so as to take away the jurisdiction of the courts.

Lauman v. Young et al., 7 Casey 306, is perhaps a stronger ease in favor of the view of the plaintiff in error, yet it does not profess to overrule Monongahela Navigation Co. v. Fen-Ion, supra, and kindred cases, but distinctly affirms them to be correct. It does not deny the law to be as therein stated; but it is ruled on the language of the agreement which the court construed to limit the submission to the specific matters named. While wo may think that construction rather forced, yet it in nowise controverts the rule of law, so often declared as to the binding effect on all matters of dispute which come within the prospective submission. There was no stipulation in that agreement by which either party waived and released all rights of action under or “ by virtue of the contract,” as there is in the present case.

We have shown the earlier, as well as the later, authorities clearly and distinctly hold that when a contract for the construction of work contains a stipulation that all questions of dispute arising thereon shall be submitted to a person named for final decision, that it is a bar to a common law action therefor.

The evidence clearly establishes that the questions submitted to, and decided by the mechanical engineer in the present case were within the letter and spirit of the agreement authorizing the submission. Hartupee was duly notified of the time and place of hearing. He appeared by counsel, and was heard fully and at length.

The award on its face is certain, final and mutual. There is no apparent mistake in law or in fact. No irregularity in the examination of witnesses, nor in the conduct of the arbitrator, appears. No corruption or misbehavior of the arbitrator is shown. The award then is as conclusive on the parties to the agreement, upon the matters then directly in issue, as if it was a judgment: Whar. on Evidence § 800 ; Merrick’s Estate, 5 W. & S. 9; Lamb v. Miller, 6 Harris 450.

3. It is further contended that if the award be conclusive on Hartupee, it is not on the surety. Why not ? He was duly notified of the time and place of hearing, and that he might attend the hearing and take part therein if he saw proper. He appeared personally and by counsel. Thus he had an opportunity to be heard, and was heard .at length. He was directly interested in the questions being tried and in the award to be rendered. He had a right to make defence to the claims of the city, and did so, and he controlled the proceedings on the part of the defence. He had the right to adduce testimony, and to cross-examine witnesses of the other side. He availed himself of all the rights of a party in the trial.

Hartupee had agreed, in case of his failure to perform the contract, that he should be liable for any damages the city might sustain by reason thereof. The surety had agreed that Hartupee should “well and truly keep- and perform all the terms and conditions of said contract.” The contract provided that anj question or dispute between the parties, that should arise under it, should be referred to the engineer, whose decision should be final. The surety became bound for the fulfilment of every part of the contract. The manner of ascertaining the measure of disputed damages, and all other questions arising thereon, was a part of the contract. He was bound for the acts and omissions of his principal in the contract: Giltinan v. Strong, 14 P. F. S. 242.

The award of a referee duly appointed is as conclusive on parties and privies as is a judgment: Whar. Ev., supra; Greenleaf Ev. 524. The surety became substantially a party on the trial before the referee, and a privy to tbe award. A court looks beyond the nominal party, and treats as the real party one whose interests are involved in the issue, and who conducts and controls the action or the defence, and holds him concluded by any judgment which may be rendered: Peterson et al. v. Lothrop, 10 Casey 223. When there is full opportunity, by notice or otherwise, to come in and. to adduce evidence and cross examine, then the judgment is a bar, even when the persons having this opportunity are not parties to the record: Whar. on Ev. § 763. While a recovery in ejectment against a covenantee is not evidence of the defect of his title against the covenantor unless the latter had notice, yet if he had notice, and especially if lie defended the suit, it is conclusive: Leather v. Poultney, 4 Binn. 356; Bender v. Fromberger, 4 Dall. 436; Coates v. Roberts, 4 Rawle 100; Chambers v. Lapsley, 7 Barr 24. The rule that the real party in interest will be bound by the judgment, although not named, is further held in Kinnersley v. Orpe, 2 Doug. 517; Castle v. Noyes, 4 Kernan 329; Rogers v. Haines, 3 Greenleaf 362; Mehaffy v. Lytle, 3 Watts 314.

It is urged that the surety could not appeal from the award. That is true: but as his principal could not appeal, the rights of one in that respect were equal to the rights of the other. The agreement for which the surety became bound waived that right. It follows this award was as conclusive against the surety as against the party named therein.

It is not necessary to refer to the authorities which hold that the record of a judgment against the principal is not evidence to establish the debt against the surety. This may be conceded to be the general rule in the mere case of a surety for an unliquidated demand. It, however, does not apply here where the agreement, conduct and active participation of the surety in the award take the case out of that rule.

The award, like a judgment, may undoubtedly be impeached for fraud, which avoids all judicial acts. The fraud, however, must be actual and intentional, and not constructive, such as flows from an erroneous or unjust judgment. Partiality and some improper conduct of the arbitrator in making the award will not impeach it unless the party benefited thereby be implicated in that misconduct: Brad dick v. Thompson, 8 East, 344. The award of a referee to whom questions of law and of fact are submitted cannot be impeached and avoided unless by proof of fraud practised on him, or by proof of mistake or accident, by which he was deceived or misled so that in fact the award is not the result of his own judgment. A mistake in drawing conclusions of fact from evidence, or in adopting erroneous rules of law, does not avoid the award: Boston Water Power Co. v. Gray, 6 Metcalf 131.

Loose and general allegations of fraud without stating the facts which constitute the fraud are not sufficient: The Jurist N. S., 3 Pt. 1, 58 (Bainbrigge v. Moss). Even when an account is sought on the ground of fraud, it is not sufficient to make . such a charge in general terms, but it must be pointed, and state particular acts of fraud: Bright. Eq. Juris. § 57; Bisp. Eq. § 217; Clarke v. White, 12 Peters 178; Marr’s Appeal, 28 P. F. S. 66.

It is not claimed that the city was guilty of fraud in obtaining the award. There was no offer to prove any particular act of the city tending to prove fraud. We have carefully considered all the offers of evidence as made. There is either an ' omission to aver sufficient facts, or a blending of some improper evidence, so we think the learned judge committed no error in rejecting the several offers.

We consider it unnecessary to answer the specifications of error separately.

It will be seen by what we have already said that the ease was well tried, and the judgment should not be disturbed.

Judgment affirmed.