Ball v. Doud

Opinion by Mr. Justice Moore. 1. Appellant’s counsel contend that, the contract having provided a method for ascertaining the value of the extra labor and materials necessitated by a change in the plans and specifications, no suit to recover the amount due on account thereof can be maintained until the plaintiff has ascertained it according to the terms of the contract, or, at least, till he has made an ineffectual attempt to do so. On the other hand it is contended for plaintiff that he may, at his option, disregard the mode of settlement agreed upon, and resort directly to the tribunals provided by the state for the determination of questions in controversy. It is undoubtedly true that no person can be bound to deprive himself of his constitutional right to have his cause — 20 — tried in a court of law or equity, and lie may, if lie chooses, revoke an agreement to submit all matters of dispute to arbitration, at any time before an award has been made: Morse on Arbitration and Award, 280. An agreement to refer all matters of dispute that may arise under an executory contract would oust courts of jurisdiction (Delaware, etc., Canal Company v. Pennsylvania Coal Company, 50 N. Y. 250), and therefore such an agreement does not bar a party’s remedy by action at law or by suit in equity: Smith v. Boston & Concord Railroad Company, 36 N. H. 458. But, while a party may withdraw an agreement to submit all matters of dispute to arbitration, he cannot withdraw from an agreement to submit a particular question to the judgment of a third person for the purpose of ascertaining some particular fact: United States v. Robeson, 9 Peters, 327. If the work is to be done or materials are to be furnished to the satisfaction or acceptance of a third person, or the amount to be paid is dependent on his decision as to quantity, quality, or price of materials or workmanship, such provision is a condition precedent, and must be complied with before any cause of action exists: Smith v. Boston, etc., Railroad Company, 36 N. H. 458. This doctrine probably had its origin in the case of Scott v. Avery, 5 House of Lords Cases, 811, in which it was held that no agreement of the parties can oust the courts of law of jurisdiction, but that a covenant to submit some particular fact, or to determine an amount due from one party to the other, was a condition precedent to any right of action. In an exhaustive note to the case of Kinney v. Baltimore & Ohio Employes Association, 35 W. V. 385, 15 L. R. A. 142, 13 S. E. 8, the learned editor has collated a list of cases in the American courts in which the distinction in Scott v. Avery has been observed, and among them that of Holmes v. Richet, 58 Cal. 307, 38 Am. Rep. 54, which was an — 21 — action to foreclose a mechanics’ lien. There thj contractor claimed a lien for extra work upon a building under a contract which provided that if any dispute should arise respecting the true value of the extra work, or work omitted, the same should be valued by two competent persons,—one employed by the owner and the other by the contractor,—and, in case they could not agree, those two should have power to name an umpire whose decision should be binding on all parties. The court held that no .right of action accrued to the contractor for the extra work done by him until the same was valued, or some good and sufficient excuse for a failure to value the same in accordance with the agreement was shown.’ This decision was approved in Scammon v. Denio, 72 Cal. 393, 14 Pac. 98, which was also an action to foreclose a mechanics’ lien embracing a claim for extra work done under a contract providing that such claim should be submitted to arbitration. In Meyers v. Pacific Construction Company, 20 Or. 603, 27 Pac. 584, it was held that where a contract provided that disputes arising between parties should be submitted to some certain person for settlement, whose decision should be final, it was incumbent upon the plaintiff, in an action upon the contract, to allege and prove a compliance with that condition, or at least that a reasonable effort had been made to comply with the stipulation, and thus the distinction in Scott v. Avery, was established as the rule of interpretation in this state. The parties having agreed that arbitrators, to be chosen in a designated manner, should ascertain the expense necessitated or saved by alterations in the plans and specifications, and add or deduct the amount, as the case may be, to or from the contract price, and this provision being an agreement to refer a particular question, the decision of the arbitrators became a — 22 — condition precedent to any right of suit for extra labor and material. 2. Another question presented is whether the agreement to refer would deprive the plaintiff of his right to recover the balance of the amount expressly agreed to be paid for the building. It was agreed that the last installment of the contract price, being twenty-five per cent, thereof, should be withheld thirty-five days after the satisfactory completion and acceptance of the building, which amount was to be applied, under the direction of the architect, in satisfying and discharging liens, and in liquidation of damages. This would probably mean such damages as the owner might sustain in consequence of a failure to complete the building within the agreed time, from defective material and from faulty workmanship. If the contract had contained no provision to deduct from the agreed price the deficiency caused by alterations in the plans and specifications, there can be no doubt that the lien might have been claimed, and a suit maintained to foreclose it, for the balance due, if the claimant honestly contended that the contract had been fully executed, without referring the question to arbitrators; and the damages sustained by the owner, if any, could then have become an issuable fact in the suit, and the decree could have settled the amount due under the express contract to pay five thousand dollars for the completion of the building according to the plans and specifications. The owner agreed to pay seventy-five per cent, of the contract price as the work progressed, but reserved the right to make such alterations therein as he chose. If the changes made had lessened the cost of constructing the building twenty-five per cent., then there would have been nothing due under the contract; and in such case, had the contractors claimed more, they would have to submit the question of difference between the cost of constructing — 23 — the building according to the plans and specifications, and as modified by the change, to the decision of the arbitrators, before a suit could be maintained therefor. The agreement to deduct the value of the work omitted would make the amount of the final payment, in case of change and disagreement, dependent upon the decision of the arbitrators, and it can make no difference whether the changes would have increased or reduced the contract price, and hence no suit can be maintained for any amount in excess of the seventy-five per cent, of the contract price until the value of the alterations has been ascertained in the manner agreed upon by the parties. 3. The remaining question is whether the defendant has waived her right to insist upon this defense. The plaintiff having set out a copy of the contract, and not having alleged a compliance with its conditions, his complaint was demurrable: Meyers v. Pacific Construction Company, 20 Or. 603, 27 Pac. 584; 2 Estee’s Pleading (3d ed.), § 3183. By answering to the merits, and not pleading in abatement, it is contended that the defendant has waived her right to insist upon the provisions of the contract. The object of a plea in abatement is to show to the court some allegation of fact that does not appear from the pleadings: Koenig v. Nott, 2 Hilt. 328. The complaint having set out the contract containing the provision to refer, the court was in possession of the fact, and-there was no need of a plea in abatement. Failing to allege, after setting out the contract, that the amount due had been ascertained in the manner therein required, the complaint did not state facts sufficient to constitute a cause of suit (Meyers v. Pacific Construction Company, 20 Or. 603, 27 Pac. 584), and this objection is not waived by failure to demur or answer (Hill’s Code, § 71), and may be urged on appeal: Evarts v. Steger, 5 Or. 147. The complaint not — 24 — having stated a cause of suit, the decree will therefore be reversed, and the complaint dismissed. Reversed.