Delaware, Lackawanna & Western Railroad v. Monroe County Water Power & Supply Co.

Opinion bt Mr. Justice Elkin, The appellee, an incorporated power company, was about to build a dam across a stream which ran through lands owned by it upon which a power plant was to be constructed. The stream at this point runs through a deep gorge, and alongside of it is the right of way of appellant railroad company. It was apparent to all interested parties that the construction of [389] the dam would necessarily cause the water to back flow upon the right of way of the railroad company which skirted the base of the mountain at this point, and do injury to its embankment, which extended down almost to the water line. In order to protect its property from threatened injury the railroad company was about to institute proceedings to restrain the power company from obstructing the stream in such manner as to do injury to its right of way by causing the back flow of water. At this juncture the two companies got together amicably, and entered into an agreement whereby the controversy between them was settled without resort to a restraining order. Under the terms of -this agreement the power company was required to build a solid concrete retaining wall alongside of and between the creek and the right of way of the railroad company, and to fill in with earth backing the space between the Avail and the embankment, in accordance with the specifications and requirements of the railroad company. The power company complied with its agreement to build the retaining Avail, but, finding it inconvenient, and perhaps expensive, not having easy access to the place where the fill Avas to be made, or to materials Avith which to make it, concluded to make an arrangement with the railroad company to furnish the materials and do the Avork necessary to make the fill as required by the railroad company. This agreement is dated October 31, 1905, and refers to the former agreement whereby the power company had undertaken to construct the retaining wall and make the earth fill, and in express terms coArenanted to pay the railroad company the sum of forty cents per cubic yard for furnishing the materials and doing the Avork necessary to make the fill and complete the undertaking of the power company. The engineer of the railroad company had estimated that 8,930 cubic yards would make the fill, and the contract limited the liability of the power company to this amount. The railroad company, as shoAvn by the testimony, completed the fill to its oavu satisfaction, caused 10,780 cubic yards of earth to be put in the fill, and then demanded payment from the poAver company, claiming $3,572, the maximum liability under the contract. The poAver company refused payment, and this suit Avas brought to enforce it. It Avas successfully contended in the court below that [390] there could be no recovery of any amount whatever on the contract, because the railroad company had not strictly complied with the original specifications and requirements provided therein for making the fill. The learned court below, at the conclusion of the plaintiff’s testimony, directed the jury to return a verdict for defendant on the ground that there can be no recovery for part performance of an entire contract, or where there has been failure to complete according to the terms thereof. It was held that inasmuch as the testimony showed that the fill had not been tamped in, and had not been placed as high up on the retaining wall as the specifications required, there was not a substantial compliance with the provisions of the contract, and the right of recovery was thus defeated. "We agree with the contention of the learned counsel for appellant that this position fails to take into consideration the true relation of the- parties to this contract and the rights and duties of each thereunder. This position would seem to assume' that the power company is the owner, and the railroad company the contractor, when, in the legal sense, under the facts of this case, the railroad company is the owner and the power company the contractor. It is true the railroad company did perform the work, but it did so in the capacity of a subcontractor of the power company, which in the first instance undertook to do the work and subsequently arranged with the railroad company to do it, and agreed to pay a certain amount when completed. It may be conceded that where an owner enters into a contract with a contractor for the construction of a building, or other improvement, to be erected according to plans and specifications agreed upon, which construction is under the supervision of an architect, who has authority to pass upon the kind and quality of materials used, and the character of work done, and who is authorized to determine disputes between the owner and contractor, substantial compliance with the plans and specifications must be shown, and, when required, a certificate from the architect showing completion must be produced before there can be a recovery. But this rule can have no application to the present case because the owner here, the railroad company, is not raising any question about the character of work done, or the quality of materials used, or that there is any dispute concern [391] ing the work between the parties, and concedes that there has been substantial compliance with the requirements of the contract. The railroad company concedes that the work was done to its entire satisfaction under the direction of an inspector, its own employee, authorized by the terms of the contract to pass upon and approve the work. Under these circumstances, it is not within the legal rights of the power company to say the railroad company demanded the work to be done in a certain way for its protection, our company agreed to do it in that way, but it not being convenient for our company to do the work, we agreed to pay your company for doing it according to its own specifications and requirements, and now that your company has done the work to its own satisfaction, our company will not pay for doing it, as it agreed to do, because your company made some changes in the method of doing the work required in the original specifications. It cannot be doubted, if the power company had performed the work itself instead of employing the railroad company to do it, and while doing the work the railroad company had suggested the changes made, and the power company, acting on these suggestions, had done the work in precisely the same manner as the railroad company did it, that there would have been substantial performance by the power company, and it would be relieved from further liability thereunder. When the work was done to the satisfaction of the railroad company, the party at whose instance aud for whose protection it was done, and accepted by it in full compliance with the contractual obligation of the power company, there was substantial performance of the contract and the right to recover attached. This would be true between the owner and contractor even in a building contract, as, for instance, suppose the owner had the right under the contract to insist upon the contractor completing the building according to plans and specifications, and in point of fact it was not so completed, but being satisfied with the building as completed the owner accepted it as a substantial performance of the contract, surely, in such a case, it could not be successfully contended, that there could be no recovery on the ground of failure to complete according to plans and specifications. It does not appear in the pleadings, or in the evidence produced at the trial, or in the argument of counsel here, [392] that the retaining wall and the earth fill were constructed for any purpose connected with the business for which the power company was incorporated, but the whole record shows and the parties themselves concede that this construction was intended as a protection to the embankment and right of way of the railroad company. The earth fill, the subject-matter of this controversy, was not even located on the property of the power company. From the beginning of the negotiations between the parties every step taken indicates the sole purpose of the contracting parties to be the protection of the embankment and right of way of the railroad company. Protection from the back flow of water is what the railroad company demanded and what the power company agreed to give. "When, therefore, the railroad company which demanded this protection to its property and specified the kind of construction that would satisfy its demand, accepted the wall and fill as complete performance of the undertaking of the power company, how can the power company either in equity or in law deny its responsibility to pay what it agreed to pay by alleging that the work was not done according to the specifications and requirements of the railroad company ? Again, the power company is not injured by the changes made by the railroad company in the method of making the fill. No additional financial burden is imposed at present and there can be no increased liability in the future. If at any time the construction should prove to be inadequate for the protection intended to be secured, and the embankment should give way at this point, and the railroad company should attempt to recover damages from the power company, or should undertake to compel additional protection, it would be a complete answer for the power company to say that the railroad company had taken the responsibility of changing the requirements of the construction intended for its protection, and had accepted the wall and fill as complete performance of the undertaking of the power company, and if this protection is inadequate, the fault is that of the railroad company, and not of the power company, and the railroad company is precluded by its own acts from claiming damages' or demanding additional protection. Judgment reversed and a venire facias de novo awarded.