Ark-Mo Zinc Co. v. Patterson

McCulloch, J., (after stating the facts.) The chancellor found from the evidence certain defects in the constructed plant, but declared that there had been, on the part of the contractor, who seeks to recover the balance of the contract price, a substantial performance of the contract. He declared the law applicable to the facts found to exist, as follows: “The owner has no right to rescind a contract for the construction of a concentrating plant where the contract provides for partial payments as the work progresses, and large payments are made when the owner has provided for and actually placed a director on the ground to supervise the work. In such ca'se the owner is estopped from pleading a rescission of the contract, but must stand on the contract, and be satisfied with damages for failure to do the work in a skillful and workmanlike manner; and especially is this the law when said owner pays sub-contractors for material used in the construction of the plant after the plant has been completed, as it has done in this case.” We are unable to agree with him either as to findings of facts or as to the declarations of law. It is undoubtedly the law that, in the absence of an agreement to the contrary, a substantial performance is all that is required to authorize a recovery of the contract price, less the additional cost of a literal compliance with the contract. But it has been held by this court that (quoting the syllabus of Hot Springs Ry. Co. v. Maher, 48 Ark. 522) “where parties agree that all questions relating to quality, quantity, or manner of construction of work to be done shall be decided by an engineer in charge of the work, and that his decision shall be final and conclusive, his decision can not be questioned by either party except for fraud or such gross mistake as would necessarily imply bad faith, or a failure to exercise an honest judgment.” This decision is followed in the later case of Ozan Lumber Company v. Haynes, 68 Ark. 185, and is in line with the authorities generally. 30 Am. & Eng. Enc. Law, p. 1237; Kihlberg v. U. S., 97 U. S. 398; Martinsburg & Potomac Ry. Co. v. March, 114 U. S. 549; Chicago, S. F. & C. R. Co. v. Price, 138 U. S. 185; Sweeney v. U. S. 109 U. S. 618; National Contracting Co. v. Commonwealth, 183 Mass. 89; Bentley v. Davidson, 74 Wis. 420. The contract in this case provides that, upon completion of the work, “the test must show to the satisfaction of the said W. N. Allen, or such other person appointed by first party, that the plant as a whole has been built in conformity to this agreement, and that it will crush and properly clean in ten hours or less at least fifty tons of ore from the said mine, or ore of a similar character to that of said mine.” This is a valid feature of the contract, and is binding upon the parties; but an arbitrary and capricious expression of dissatisfaction will not prevent recovery, and by some courts it is held that such stipulations require only the performance of the work by the contractor in such a manner as ought to satisfy the owner. 30 Am. & Eng. Enc. Law, p. 1236; Williams Co. v. Standard Brass Co., 173 Mass. 356; Electric Lighting Co. v. Elder, 115 Ala. 138; Singerly v. Thayer, 108 Pa. St. 291; Howard v. Smedly, 140 Pa. St. 81; Exhaust Ventilator Co. v. C., M. & C. P. R. Co., 66 Wis. 218; Duplex Boiler Co. v. Garden, 101 N. Y. 387; Lloyd on Buildings, § 22. The law upon the question is, we think, correctly stated by Chief justice Brickell, speaking for the Supreme Court of Alabama, in Electric Lighting Co. v. Elder, 115 Ala. 138, as follows: “There is no reason of public policy which prevents parties to a contract for the performance of work from agreeing that the decision of one or the other, or- a third person, as to the sufficiency of the performance shall be conclusive. Having voluntarily assumed the obligations and risks of a contract, these legal rights and liabilities are to be determined solely according to its provisions. Where the decision is left to a third person, the authorities almost universally hold that his action, in the absence of fraud, or such gross mistake as would necessarily' imply bad faith or a failure to exercise an honest judgment, is conclusive upon the parties. So, where, by the terms of a contract to do a piece of work or perform services, the excellence of which is not a mere matter of taste or fancy, o.r to furnish a piece of machinery or other article, the suitableness of which involves a question of mechanical fitness to do certain work or accomplish a certain purpose, the one party warrants the work o.r article to be satisfactory to the other, the weight of authority is, though the cases are not entirely harmonious, that there can be no recovery when the employer o.r purchaser is in good faith dissatisfied. And this is true where there is no express warranty that the work or article shall be satisfactory, but a provision making the payment'contingent upon its being satisfactory.” W. N. Allen, the person who, under the terms of the contract, was selected to give direction to the work and to whose satisfaction the plant should be constructed, was a stockholder in appellant corporation and manager of the Climax mine where the plant was to be operated; and, under the view which we take of the evidence, it is unnecessary to decide whether he should be treated as a disinterested referee or as a party to the contract, or to decide which of the rules of law hereinbefore announced should be applied to his refusal to accept the plant. Upon a careful consideration of the evidence, we are forced to the conclusion that it does not establish a substantial performance of the contract on the part of the contractor, o.r that the completed plant met the requirements of the test stipulated in the contract. Nor do we think that the chancellor’s special finding of facts as to defects in the plant justify his general conclusion that there was a substantial compliance. He found that “the defects consisted in the floor lacking sufficient bracing, thickness of floor and failure to bat the hoister house; failure to put a mudsill lengthwise under the support to the ore-room; failure to line the mouth of the elevator and three pipes with iron; the failure to place a fourth girder, box and fixtures in the thirteen-foot space to support the main shaft; the failure to exactly plumb the piles in the foundation under the jig room; the failure to place sufficient piling under the west wall of the boiler and engine room, and to set the crusher on a solid foundation, and to sufficiently line the fire box under the boiler.” A large number of witnesses introduced by appellant testified that these defects and numerous others, particularly in the foundation of each of the several buildings, rendered the whole plant insecure and worthless. These witnesses, who appear to be men of intelligence and with more or less experience on the subject, testified in detail concerning the defects in the plánt, and that it wholly failed, on the final test, to perform the desired work. The effects of these defects in the plant are summarized in the following language of one of the witnesses, and is supported by the testimony of all the numerous witnesses introduced by appellant: “It was impossible to operate the mill continually on account of the choking of the spouts leading from the first roll to the elevator, and on account of the crusher being set so insecurely that the vibrations caused the taps holding the boxes on the crusher to become loose, and the jig was utterly unable to separate the sand from the ore, the ore now in the jack bin having a large per cent, of sand in it. The elevator showed a constant waste of fine ore, due to imperfect construction.” Appellee Patterson and a number of witnesses introduced by. him testified that the plant was constructed substantially according to contract, but that the final test failed solely because of an insufficient supply of water. While there is a sharp conflict in the evidence, we £j,re of the opinion that the contention of appellant is supported by" a decided preponderance. The chancellor found that the plant was never accepted by appellant, and was not approved by Allen upon the final test. Plis finding on this point is sustained by the evidence. It is contended, however, on behalf of appellee, that Allen was present during the progress of the work, that" by his failure to exercise his right of' disapproval while the work progressed he is deemed to have approved it, and that appellant is thereby estopped from rejecting the completed plant. This may be a correct statement of the law applicable to some building contracts, but can not be applied in this case where the contract stipulates for the .right of acceptance or rejection on final test after completion of the plant, which is expressly warranted to perform certain work. Brownell Imp. Co. v. Critchfield, 197 Ill. 61; Cornish-Curtis-Green Co. v. Dairy Association, 82 Minn. 215; Beharrell v. Quimby, 162 Mass. 571. The contract in this case did not call for an approval or rejection by Allen-until the final test should be made, and appellant was’not estopped by his failure to disapprove before completion of the plant. Nor did the payment by appellant of bills for material used in construction of the plant operate as a waiver of the right to reject thé whole plant. It follows from what we have said that appellee is not entitled to recover anything, and the decree in his favor was erroneous. Appellant is entitled to recover the amounts advanced and paid to appellee on the contract price with interest from dates of payment, but we find no satisfactory evidence -to justify an assessment of damages for the failure of appellee to construct .the plant. The decree 'is reversed, and the cause remanded with directions to enter a decree dismissing the plaintiff’s complaint for want of equity and in favor of the defendant for recovery of the amounts paid to appellee with interest from the respective dates of payment.