Odell v. Colmor Irrigation & Land Co.

OPINION OF THE COURT BRATTON, J. This suit was instituted by the Odell Bros. Construction Company, a copartnership, against the Colmor Irrigation & Land Company, a corporation. For convenience, the former will be referred to throughout as the plaintiff, while the latter will be referred to as the defendant. On May 4, 1918, the parties entered into a written contract whereby the plaintiff was employed to construct for the defendant a certain intake canal of the Lake Charette irrigation system, to belong to the defendant and h> be situated in Colfax county. This contract contained the .following provisions with regard to the duty and authority of the engineer to be in charge of such work: “When the word ‘engineer’ is used herein it shall mean Bartlett & Ramney, Inc., and their duly authorized assistants limited to the particular duties entrusted to them. “All the work shall be done to the satisfaction of the engineer who shall in all cases determine the amount, quality, acceptability, and fitness of the several amounts of work, materials and equipment. “The engineer shall have the final decision on all matters of dispute involving the character of work, the compensation to be made therefor, or any question arising under this contract, and his decision shall be final and binding on both parties to this contract.” The materials to be excavated in the construction of such intake canal were divided into four classes, the provisions of the contract with reference to such classification being as follows: “Materials on all canals and ditches, will be classified in accordance with the following definitions: “Class 1. Material shall comprise all material which can be plowed with a strong ten (10) inch grading plow, well handled, behind a good six (6) mule or horse team. “Class 2. Material shall comprise: First, hard shale or soapstone lying in its original or stratified position, coarse boulders_ in gravel, cemented gravel, hardpan, or any other material requiring in the judgment of the engineer, the use of pick and bar, or which cannot be plowed with a strong ten (10) inch grading plow, well handled behind a good six (6) mule or horse team. It is to be understood that the plowing test shall apply to all materials named herein, and that only such material is entirely loose rock, which, in the judgment of the engineer, it is impracticable to plow at all with a strong ten (10) inch grading plow, well handled behind a good six (6) mule or horse team. Any material in which a portion of a days work in plowing can be done with a strong ten (10) inch grading plow, well handled behind a good six (6) mule or horse team, will be classified as a percentage of class 1 and a percentage of class 2, the amount of such percentages to be finally determined by the engineer. Second, detached rock or boulders in masses exceeding one and one-half (1%) cubic feet and less than one cubic (1) yard. “Class 3. Material shall comprise: First, rock in solid beds or masses in its original or stratified position. Second, boulders or detached masses of rock exceeding one (1) cubic yard, and all other material which in the judgment of the engineer cannot be removed without continuous drilling and blasting and which is as difficult and expensive to remove as solid limestone or sandstone. The fact that blasting may be resorted to by the contractor, or may be the most economical means of working a material, will not of itself entitle such material to be classed as class 3 material. Class 3 material shall not comprise ‘malpais’ or Basalt rock. “Class 4. Material shall comprise solid beds or masses of ‘malpais’ or basalt rock in its original position or in detached masses exceeding one (1) cubic yard. The company may omit class 4 materials at its option from the work to be done. “Compacted embankments or plowing of natural surface below spoil banks will be force account work. The force account in case of compacting embankment or hauling material as ordered shall cover in addition to cost of the said work itself the cost to contractor of delay to steam shovel if there be any.” By the further terms of the contract, the prices to be paid for the respective materials so excavated were: For all in class 1, 20 cents per cubic yard; for all in class 2, 60 cents per cubic yard; for all in class 3, $1.25 per cubic yard; and for all in class 4, $3 per cubic yard. Plaintiff charged in its first amended complaint: That it had performed all of its obligations under the terms of the contract, and had' completely constructed such intake canal in accordance with and as required by its provisions. That after such completion, John S. Fenner, the resident engineer, had prepared a final estimate required by the terms of such contract, which purported to show the quantities of materials in each class excavated and moved by the plaintiffs, as well as the prices to be paid and received therefor, and that such final estimate had been adopted and approved by the chief engineer, Terrill Bartlett, who had acted upon behalf of Bartlett & Ranney, Inc. That such final estimate showed that plaintiff had excavated 61,328 cubic yards of material in class 1; 2,127 cubic yards in class 2; 1,948 cubic yards in class 3, and 5,539 cubic yards in class 4; whereas, there were actually 49,284.6 cubic yards of material in class 1; 7,506 cubic yards in class 3; 4,606.3 cubic yards in class 3, and 9,363.2 cubic yards in class 4. That such final estimate was not based upon actual and correct classifications made in good faith by a competent engineer and competent assistants, in the exercise of an honest judgment, but that said engineer and his assistants had willfully, knowingly, fraudulently, in bad faith, and with the intent, purpose, and design to decrease the amount which the defendant would be required and compelled to pay under the terms of such contract, and without regard to the rights of the plaintiff, so wrongfully and erroneously measured and classified such materials. Plaintiff further alleged that the amount yet due and unpaid according to the work actually done and the materials actually excavated was $17,480.53. It further pleaded that it had furnished materials and performed labor upon what was termed a “force account” to the extent of $1,464.60, of which $272.32 remained unpaid. It prayed that the final estimate of the engineer be vacated and set aside; that the true amount due the plaintiff be determined and judgment rendered therefor. The defendant answered with certain admissions and denials and pleaded specifically the above quoted provision of the contract with regard.to the decision of the engineer being final and binding upon both parties. It tendered the amount still due according to the final estimate of the engineer, which had been previously refused by the plaintiff. It further pleaded an overpayment of $222.05, which occurred through mistake of the resident engineer, for which it sought a credit, and by way of cross-complaint it sought to recover $186 for certain articles of personal property which it had sold to the plaintiff. After defendant’s demand for a jury trial, and its request for a postponement of the case had each been denied, a trial was had before the court which resulted in a finding that the final estimate had not been founded upon actual and correct classifications, made in good .faith by a competent engineer and in the exercise of an honest judgment; that said engineer made gross mistakes and errors in the classification and computation of the amount of yardage of the various materials excavated by the plaintiff, upon which findings the trial court concluded as a matter of law that such final estimate should be vacated and canceled. Judgment was rendered in plaintiff’s favor in the sum of $13,385.09, from which this appeal was seasonably perfected. Many questions have been thoroughly discussed by counsel for the respective parties, and they are to be complimented upon the exhaustive manner in which, and the zeal with which, the case has been presented. Our conclusion upon one of these questions renders it unnecessary to discuss or determine the remaining ones. It is urged by the defendant that the evidence is insuf: ficient to overcome the decision of the engineer to whom the right and power of settling disputes which might arise between the parties from time to time was committed by the terms of the contract. The record is extremely long; it consists of more than 1,000 pages, and yet we have repeatedly read the same in order that we might correctly determine this question. From such careful and prolonged consideration we are convinced that the defendant is correct in this contention. There is no moral rule, nor reason of public policy, which prevents contracting parties from inserting in such contracts a provision by which all disputes which may arise between them from time to time during the execution of such contract may be submitted to some third person, whose judgment and determination shall be binding upon them, as the parties are dealing at arm’s length with each other and have the right to so bind and obligate themselves. From an examination of this contract, we must presume that the parties realized at the time they entered into it that such disputes would arise between them, and that the engineer might err in his determination of such matters; that in order .to provide a forum within which such disputes might be speedily determined, they agreed upon such engineer as their umpire. Neither party reserved the right to revise his determination of such questions for mere errors or mistakes on his part, but, rather, they chose to make such decision final and binding upon them. Under such circumstances, mere errors or mistakes on the part of such engineer with regard to the kind, class, or quantities of materials excavated by the contractor are insufficient to warrant a court of equity in vacating and setting aside his decision. There must be fraud, or such gross mistakes which necessarily imply bad faith, or the failure on the part of such engineer to exercise an honest judgment with regard to such matters. The mistakes must be so gross as to clearly indicate that süch engineer has acted consciously unjust in the discharge of the duties imposed upon him, and has thereby violated the rights of the complaining party. Mundy v. Louisville & N. Ry. Co., 67 F. 633, 14 C. C. A. 583; Elliott v. M., K. & T. Ry. Co., 74 F. 707, 21 C. C. A. 3; Choctaw & M. Ry. Co. v. Newton, 140 F. 225, 71 C. C. A. 655; Cook v. Foley, 152 F. 41, 81 C. C. A. 237; Memphis Trust Co. et al. v. Brown-Ketchum Iron Works, 166 F. 398, 93 C. C. A. 162; Martinsburg & Potomac Ry. Co. v. March, 114 U. S. 549, 5 S. Ct. 1035, 29 L. Ed. 255; Chicago, Santa Fe & California Ry. Co. v. Price, 138 U. S. 185, 11 S. Ct. 290, 34 L. Ed. 917; Vanderwerker et al. v. Vermont Cent. Ry. Co., 27 Vt. 130; Hot Springs R. Co. v. Maher, 48 Ark. 522, 3 S. W. 639; Ark-Mo Zinc Co. v. Patterson, 79 Ark. 506, 96 S. W. 170; Carlile, Corrigan & Dunn v. Corrigan, 83 Ark. 136, 103 S. W. 620; Williams et al. v. Chicago, S. F. & C. Ry. Co. et al., 153 Mo. 487, 54 S. W. 689; Rialto Const. Co. v. Reed, 17 Cal. App. 29, 118 P. 473; Mercantile Trust Co. v. Hensey, 205 U. S. 298, 27 S. Ct. 535, 51 L. Ed. 811, 10 Ann. Cas. 572, and the voluminous notes thereto appended. In Mundy et al. v. Louisville & N. Ry. Co., supra, the court, in speaking through Circuit Judge Taft, said: “The authorities leave no doubt that construction contracts, in which the contractor stipulates that the engineer or architect of the owner shall finally and conclusively decide, • as between him and the owner, what amount of work has been done, and its character, and the amount to be paid therefor under the contract, are legal, and should be enforced. In such cases, after the work has been done, the contractor can recover nothing in excess of the amount found due by the engineer, unless he can. make it appear that the engineer’s decision was fraudulently made, or was founded on palpalable mistake.” The Supreme Court of the United States, in Martinsburg & Potomac Ry. Co. v. March, supra, through Mr. Justice Harlan, declared: “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 of every matter submitted to his determination, exercise an honest judgment, and commit no such mistakes as, under all the circumstances, would imply bad faith.” And in Chicago, Santa Fe & California Ry. Co. v. Price, supra, that court, still speaking through Mr. Justice Harlan, further said: “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.” While in Vanderwerker v. Vermont Cent. Ry. Co., supra, the Supreme Court of Vermont announced this doctrine in this language: “The contract contains the usual clause that ‘the engineer shall be the sole judge of the quantity and quality of the work, herein specified, and from his decision there shall be no appeal,’ and in Herrick’s Case it was considered upon great deliberation, that the engineer thus became the sole umpire, and that unless the company failed to furnish suitable engineers tq make the estimates, no recovery could be had for work under such a contract, until estimated by the engineer, and after an estimate by the engineer, no recovery could be had beyond that sum, unless upon the most irrefragable proof of mistake in fact, or positive fraud in the opposite party in procuring an under estimate, or corruption in the engineer, and in such case the appropriate tribunal for redress was a court of equity.” S. J. Sackett, of Raton, and J. O. Seth, of Santa Fe, for appellant. Crampton, Phillips & Darden, of Raton, for appellees. A review of the authorities cited will suffice to demonstrate that the proof of a party who attacks the award of an agreed umpire in a case of this character must be clear, convincing, overwhelming, and irrefragable. It must come within close proximity to what is called beyond a reasonable doubt. Such proof must meet these standards in order to have substance, and it must have substance in order to be regarded as substantial within the substantial evidence rule so oft repeated by this court. From our painstaking review of the record, we think it contains no substantial evidence to support the material findings of the lower court, namely, that the final estimate was not founded upon actual and correct classifications made in good faith by a competent engineer in the exercise of an honest judgment, or that such engineer had made such gross mistakes and errors as to amount to fraud. That we have the authority to review the evidence to determine its sufficiency or insufficiency- in this kind of a case, see Bavaria Inv. Co. v. Washington Brick, Lime & Sewer Pipe Co., 82 Wash. 187, 144 P. 681; Rogers v. Burt, 157 Ala. 91, 47 So. 226. Such findings cannot, therefore, be upheld on appeal. Epstein v. Waas, 28 N. M. 608, 216 P. 506. A further or more detailed discussion of the lengthy record before us will avail nothing. For the reasons stated, the decree of the lower court must be reversed, and the cause remanded, with directions to enter a decree for the plaintiff for the amount due according to the final estimate of the engineer in charge, and It is so ordered. PARKER, C. J., and BOTTS, J., concur.