McNamara & McCarty v. Harrison & Green

•RotheocK, C. J. I. The defendants were contractors for the construction of a branch of the Chicago, Milwaukee & St. Paul railroad from Sioux City to Manilla in this state. They entered into a written contract with the plaintiffs by which the plaintiffs undertook to grade a part of the line. The plaintiffs claim that they completed their contract, and that the defendants have failed and refused to pay them in full for said grading, and that there is a balance of about one thousand dollars yet due. The contract provided'that plaintiffs were to receive for making embankment the sum of fifteen cents per cubic yard, and the same price [488] for making earth excavations, except that in making-excavations all earth removed within an extreme haul of twelve hundred feet, and deposited in embankments, payment should be made for excavations only. If earth removed from excavations should be hauled more-than twelve hundred feet, plaintiffs were to be paid in addition for said hauling one cent per cubic yard for each one hundred feet beyond the first twelve hundred. It is claimed that after entering into the contract, and commencing the work, an assistant engineer of said railroad company directed the plaintiffs to excavate^ and waste a large quantity of earth from a deep cut,, which required them to borrow and haul earth to make-an adjacent embankment; that after the work was completed an estimate was made by the engineers by which all of the earth used in the embankment was estimated as though it had been hauled from the excavation. This manner of 'estimating the work reduced, the amount to be paid to plaintiffs, and plaintiffs claim judgment for the difference. It is averred in the petition that the final estimate- or measurement of the work was false, fraudulent, untrue and contrary to, the facts, and “ was made collu-sively and fraudulently in collusion with the defendants.” The defendants denied the alleged fraud. And to the end that we may come as speedily as possible to-the real questions in the case it is sufficient to say that there was no evidence of fraud. It appears that the-defendants had nothing whatever to do in counseling or-directing the manner in which the estimate should be-made. The contract was in the usual form. It provided for monthly estimates to be made as the work progressed, and for payment of eighty-five per cent, of these estimates. The other fifteen per cent, was to be retained until the completion of the work. These monthly estimates were made in a hurried manner, and were not supposed to be entirely accurate. It is conceded that these monthly estimates were made upon [489] the basis of the work as it actually was without reference to whether it was properly done or not, and that payments were made accordingly. When the work was completed the whole of the excavations and embankments were measured, and this was to be the basis for the final settlement. The contract is quite' voluminous, and we need not ■copy it in full; there are two of its provisions, however, which we think are decisive of the rights of the parties so far as this action is concerned. Said provisions are as follows: “Par. 4.' It is mutually agreed ■between said parties, that to prevent all disputes and misunderstandings between them in relation to any of the stipulations contained in this agreement, or their performance by either of said parties, the said chief engineer shall be, and hereby is made, an umpire to decide all matters arising or growing out of this contract between, them, and the decision of said chief engineer on any point or matter touching this agreement shall be final and conclusive between the parties hereto, and each and •eveiy one of said parties hereby waive any and all right of action, suit or suits, or other remedy,, in law or otherwise, under this contract, or arising out of same.” “Par. 17. And the said first party, in consideration of the fulfillment and performance of all the stipulations contained in this contract by said second party to be by such second party fulfilled and performed, and whenever said work shall have been, in the opinion of said chief engineer, completely finished in every respect, and performed agreeably to the various stipulations and specifications of this agreement, and said chief engineer shall have furnished to said first party a certificate of the fact under his hand, together with his estimates of the quantity of the various kinds of work done by said second party under this agreement (which estimate shall be final and conclusive between the parties hereto), will pay to said second party any balance due within fifty days after said certificate ;shall have been furnished by said chief engineer, the [490] sum which may be due under this contract, agreeably to said estimate, at the following rates and prices *- * * The defendants set up these clauses of the contract as a bar to the action. It appears from the evidence that the contractors were under the immediate supervision of one Watts, who was what is denominated a resident engineer. Watts was under the control of one Stevens^ who was a division engineer, and had charge of the work otthe whole line. These engineers were under the control of the chief engineer of the Chicago, Milwaukee & St. Paul Railway Company. No certificate, such as is contemplated by the above provisions of the contract, was introduced in evidence, and there was no evidence that any such certificate was ever at any time made by the chief engineer; and there was no excuse offered for the commencement of the action without such certificate having been made. It is claimed by counsel for appellant that the defendants, by their acts in adopting a final measurement of the work made by the division engineer Stevens, waived this condition precedent to the right to maintain the action. But we find no evidence of such waiver. It is true they paid the plaintiffs the full amount due as shown by the estimate made by Stevens, but this is no evidence of a waiver. It is further claimed that the estimate made by Stevens is a compliance with the requirement that a certificate shall be made by the chief engineer. It is surely not a compliance with the contract in terms. The parties expressly contracted for a certificate signed by the chief engineer, and “his estimate of the quantity of work done by the plaintiffs,” and the balance due was not payable until fifty days after the certificate was made and furnished. The parties contracted that they would settle and pay upon a certificate of the chief engineer. They did not bind themselves to act upon the estimate of a subordinate engineer. It may be correct, as claimed by counsel for appellant, that the part of the provisions of the contract above quoted which make the chief engineer an arbitrator or umpire between [491] tile parties, and by which, all rights of action under the contract are waived is void ; bat it is not claimed that the parties may not bind themselves to make payment or settlement upon the certificate or estimate of some third person, such as an engineer, architect or the like. Such contracts have uniformly been upheld by the courts. 1 Am. & Eng. Ency. of Law, p. 668 ; Loup v. California Southern Ry. Co., 11 Am. & Eng. R. R. Cases, 589; Smith v. Briggs, 3 Denio, 73; Morgan v. Birnie, 9 Bing, 672; Holmes v. Richet, 56 Cal. 307; Hennick v. Sewall, 27 Vt. 673; Fannce v. Burke, 16 Pa. St. 469; McMahon v. N. Y. & Erie Ry. Co., 20 N. Y. 463; North Lebanon Ry. Co. v. McGrann, 33 Pa. St. 535. Until it is shown that the chief engineer has made the required certificate, or there is some good reason why it has not been furnished, no action can be maintained. It may be that such a certificate would award to the plaintiffs, all that they claim, and, if so, this controversy would no doubt be speedily settled. The judgment of the district court is aeeirmed.