Caldwell & Drake v. Schmulbach

DAYTON, District Judge (after stating the facts as above). Records like this, weighing over 100 pounds, consisting of over 3,200 typewritten pages of evidence (which counsel with commendable industry have sought to abstract within a limit of 800 pages), books of accounts, plans, specifications, drawings, correspondence, contracts, stipulations, and agreements, all of which must receive careful study and consideration, may possibly throw some light upon the vexed question o i the law’s delays and failure of the courts to expedite business. It seems clear to me, after having read this record, that a reference to a master will be absolutely necessary, no matter how much the delay is to he regretted, unless I take the time to state an account between these parties involving more than 200 items, on the one hand, ranging from 20 cents to over $0,000 for extras, and, on the other hand, for similar items of omitted and defective work. It does seem to me, however, that I should, in order to expedite this work before a master, indicate that sufficient evidence in my judgment lias already been taken to fully enable him to state such account, and that, unless special reasons be shown to the contrary, he should be limited1 to the record as it now stands. Further, it seems to me that I may very well pass upon matters of principal dispute herein involving legal propositions, leaving him thus unembarrassed, to make the necessary calculations as to such items. It becomes necessary, therefore, to consider first the claim of defendant for $29,150 damages for delay in the completion of the contract. It is claimed by defendant that this contract was a West Virginia one, and that the Supreme Court of Appeals of West Virginia in the recent case of the Charleston Lumber Co. v. Friedman, 64 W. Va. 151 61 S. E. 815. lias determined that a provision similar to the one here fixing a specific sum to be paid per day for delay in the execution of the contract is enforceable, not as a penalty, but as liquidated damages. And the cases of Wheeling Mold & Foundry Company v. Wheeling Steel & Iron Co., 58 W. Va. 62, 51 S. E. 129, and Sun Printing & Publishing Association v. Moore, 183 U. S. 642, 22 Sup. Ct. 240, 46 L. Ed. 366, are cited in support of this contention. There can be no question of the soundness of this position where delays in execution of such a contract are wholly occasioned by the default of the contractor, but this I perceive to be the full extent to which these decisions go. In the Dumber Co. v. Friedman Case the contractor undertook to erect complete a store building by a fixed date, and to pay $10 per day for each day thereafter that the building remained incomplete and unfinished. The enforcement of this clause was resisted on the ground that it was a penalty, and equity would not enforce it. Reversing the court below so holding', the Supreme Court of Appeals held such sum per diem for delay not to be a penalty, hut to be liquidated damages for which the owner could recover. In the Foundry Company Case the contractor agreed to manufacture and deliver by a fixed date certain machinery, and, in default, $50 was to be deducted for each day’s delay. The Supreme Court of Appeals, reversing the lower court, held this provision to provide not a penalty, but a liquidated sum for damages, and that the contractor could not — 434 — excuse the delay “by showing merely that it (plaintiff) proceeded in good faith and with due diligence, with the use of all means in its power and at its command, to perform the contract.” And this for the very cogent reason that/‘under such contract the plaintiff was required to furnish sufficient means and ability to perform the contract on its part, according to its terms.” In the case of the Sun P. & P. Association v. Moore a yacht was chartered for a specified period upon conditions that it should be returned within the time fixed or the sum of $75,000 should be paid. It was wrecked within the time and not returned!, and the hirer was held responsible for the fixed value of it. The principles here established have no application to cases where, under such contracts for liquidated damages for delays, such delays have arisen from (a) the fault of the owner; or (b) that of his agents and independent contractors; or (c) by the joint and mutual default of owner and contractor. Such cases must be governed, I conceive, by the rulings in such cases as Jefferson Hotel Co. v. Brumbaugh (C. C. A., 4th Ct.) 168 Fed. 867; Vilter Mfg. Co. v. Tygart’s Valley Brewing Co. (C. C.) 168 Fed. 1002; Stewart v. Keteltas, 36 N. Y. 388; Heckmann v. Pinkney, 81 N. Y. 211; Weeks v. Little, 89 N. Y. 566; Lilly v. Person, 168 Pa. 219, 32 Atl. 23; Focht v. Rosenbaum, 176 Pa. 14, 34 Atl. 1001; Wilkens v. Wilkerson (Tex. Civ. App.) 41 S. W. 178. In the Jefferson Hotel Case, supra, the Circuit Court of Appeals for this circuit fully considered this very question, and determined that the courts would not undertake to “apportion” the damages occasioned by mutual delays and I think very clearly set forth some of the pertinent reasons why it would not do so. In this case there can be no question that the delays were the result of mutual default. It is not denied that the ground upon which this building was to be and was erected was hemmed! in by other buildings; that in the very start wholly unexpected and extraordinary measures, not contemplated by the contract, had to be taken to protect these adjoining buildings from damage and destruction; that the architects by some strange error by their plans and specifications provided for a larger building than the lot of ground would contain; that a number of additional contracts were let to contractors wholly independent of plaintiffs, who delayed the work; that a very great number of changes were made, so many, in fact, that the original specifications could hardly describe the final result. Under such circumstances, I am clearly of the opinion that this case, like the Jefferson Hotel one, presents a very striking example of how impossible it would be for a court to attempt to determine and apportion the cause of delay between the owner and contractor, both of whom are in default. But it is insisted that the contract itself here provides in express terms for such apportionment of delay, and in this particular differs from the terms of the one in the Jefferson Hotel Case. It seems to me that this cannot change the situation. The law is that courts by reason of the very uncertainty, the impossibility to fairly and justly determine the causes of such mutual delays and their effects will not attempt to apportion. This being true, no private contract by its terms can change the law or compel them so to do. For these reasons the defendant’s claim for $29,150 damages for delays must be wholly disallowed. — 435 — But it is insisted by defendant that the contract required the work to he completed and to be satisfactory to architects and owner before final payment could he required, that such work was not so completed, and therefore plaintiffs’ hill must be dismissed as prematurely brought, and the three case.s of Barrett v. Coal & Coke Co., 51 W. Va. 416, 41 S. E. 220, 90 Am. St. Rep. 802, Plumber Co. v. Carr, 54 W. Va. 212, 46 S. E. 458, and Lunsford v. Wren, 64 W. Va. 458, 63 S. E. 308, are cited in support of this proposition. In the first case the matter in controversy was 500,000 brick to be manufactured in a certain manner, “and to the satisfaction of the general superintendent of defendant company or his authorized representative.” The right of the superintendent to reject the brick, in absence of fraud, was held to be absolute, but recovery for the actual work done upon quantum meruit was upheld; the failure to complete the work being without the fault of die plaintiff. In the second case cited the controversy arose over a heating plant to be installed, for which “the final payment shall be made when the work is completed satisfactory to owner and1 architect.” The right of the owner or architect to reject the work in the absence of bad faith was held to be absolute. In the third case, where a church building was involved, the court held: “Although the rate of compensation to be finally paid such contractor is to depend on completion of the contract, yet; if completion thereof is prevented by the insolvency of the owner, or his neglect or refusal to make the payments as required by the contract, the contractor will thereby he excused from completing the contract on his parr, and entitled to his compensation for the part; performed.” None of these cases it seems to me meet the facts disclosed in this case. The mere statement of the proposition that the owner under such a contract for mere trifling defaults or at his own will may declare himself dissatisfied, and thereby be permitted to retain, as in this case, over $20,000 of the contract price for all time and at the same time take possession of and receive the use and benefit of the work done, refutes its soundness in morals and good conscience. It has therefore long since been held that substantial compliance with the terms of the contract is all that can be required. This is the holding of the Supreme Court of Appeals in this state in West V. Building Co. v. Saucer, 45 W. Va. 483, 31 S. E. 965, 72 Am. St. Rep. 822. The contract price in this case was- $231,698. The claim of the defendant for omitted and defective work is $6,329.06. A number of these items are disputed by the contractors, who claimed in their notice of lien that the owner was only entitled on this account to a credit of $106.80. Admissions made in testimony may increase this somewhat. On the other hand, the contractors claimed $26,122.97 for extras. The owner disputing this claim to the fullest extent, however, substantially admits his liability for $6,455.40 on account of these extras. If we were to admit the whok- demand of the owner for the omitted and defective work of $6,329.06, it would be less than 3 per cent, of the whole work represented bv the contract price of $231,698 alone, and, if we deduct from this claim the extras admitted by him of $6,155.46, a balance of $173.66 would remain, for which it is Contended he is entitled to retain the final payment of over $20,000! Such a position by — 436 — the owner is entirely untenable upon its face, if it were not further refuted by such further facts tha.t the owner has taken possession, installed numerous tenants, and) is receiving the rents, issues, and profits of the building in large sums. Here, again, it seems to me, the ruling-in Jefferson Hotel Co. v. Brumbaugh (C. C. A.) 168 Fed. 867, is exactly in point, and must control. The contention of the defendant in this particular must therefore be overruled. Some questions arise as to the allowance for extras that must be determined. By the specifications it was provided that “no allowance will be made for extra work, unless the same shall be previously authorized by the issue of an order signed by both the owner and architect” ; while the contract itself provides that such extra work should be allowedl for only “upon the written order of the architect or owner.” Some extra work was done upon the written order of the architects alone, and this the owner now disclaims all liability for insisting that the written order of the architects was worthless unless he joined therein. This contention must be overruled for at least this reason: These specifications were first prepared, as shown by the terms of the contract. They could not have been made a part of the contract, as they were, if they at the time did not exist. The contract, therefore, was the final meeting of the minds of the parties, the final agreement. By the terms of the contract the architects were constituted the agents of the owner and the power' to issue these written orders was vested in either the owner himself or in the architects alone. The law will presume that this clause changed and superseded) that contained in the specifications; that failure to correct the latter to conform to this change was a mere oversight. The extras performed, therefore, upon the written orders of the architects alone, must be allowed for at their just values. But it is insisted that some extras were performed by verbal orders of the architects, and allowance for these should be made because the owner has taken possession of the property, is deriving the benefit thereof, and must be held to have waived the requirement in writing of the orders therefor. This contention is most vigorously contested here by the defendant owner. Touching allowances for extras generally; the words of the court in the Jefferson Hotel Case are pertinent here: “The temptation on the part of contractors to recoup losses on improvident contracts by claims of this kind is frequently present and strong. It is therefore the clear duty of courts to carefully scrutinize such demands and allow them only upon clear and satisfactory evidence sustaining them.” It therefore becomes the duty of the contractor claiming extras to show clearly (a) that they are in fact such; (b) that the prices charged therefor are reasonable; and (c) that they were furnished in compliance with the exact terms of the contract, or else under a waiver of such terms constituting in effect a new and different contract in relation thereto. While these propositions are true, it is not for a moment to be questioned, as held in Copeland v. Hewett, 96 Me. 525, 53 Atl. 36, that, “where a contract provides that neither party thereto shall have any claim for alterations or additions unless first particularly described — 437 — in writing, * * * it is competent for either party to waive this provision intended for his benefit,” and, “however evidenced, a contract remains in force until it is superseded by a later one inconsistent with it, and' no longer; and one who has agreed that he will only contract in writing in a certain way does not preclude himsel] from making a parol bargain to change it, and there is no more force in an agreement in writing not to agree by parol than in a parol agreement not to agree in writing.” Insurance Co. v. Earle, 33 Mich. 143; Canal Co. v. Ray, 101 U. S. 522, 25 L. Ed. 792; Bartlett v. Stanchfield, 148 Mass. 394, 19 N. E. 519, 2 L. R. A. 625. This last case is exactly in point here. It is there held: “A written contract fo-r building a house, stipulating that no charge for extra work or materials shall he made, unless ordered in writing, will not prevent. the contractor from recovering for extra expense incurred on tile express agreement of the other party to pay for it, or on his request therefor, under circumstances implying a consent to be liable for it, irrespective of the written contract. Parties cannot, by contract, tie up their freedom of dealing with each other.” If, therefore, extra work was performed by the contractors here, under express oral contract upon the part of the owner personally or by and through his agents, the architects, or under such circumstances implying a consent to be liable therefor, such extra work should be allowed for, hut for reasons stated the evidence should he clear, and the burden is upon the contractor to prodiace it. But, finally, in this connection, it is insisted that as to these extras the contract provides that, in case of dissent of either party to the values allowed therefor by the architects, the determination thereof should he submitted to arbitration which was not done. Therefore this action was prematurely brought, and must be dismissed. The .contention is not tenable for these reasons: First. Independent of all questions of extras, the contractors had a clear right to file their mechanic’s lien within a limited time, fixed by statute, against this building for the balance of the contract price, which the owner disputed and: refused to pay, and they had the further right, within a limited time, also fixed by statute, to institute this suit in equity to enforce such lien. These extras were contemplated by the contract. They were performed with labor and material furnished either under its express terms or 'bv new and additional oral contracts in connection with the erection of this building and for which the contractors were also entitled to a lien upon the same terms and conditions. Equity having jurisdiction in part will assume it over all and settle the whole controversy by its own methods of procedure which are plenary and comprehensive. Second. Because, as held in Foster v. McKeown, 192 Ill. 339, 61 N. E. 514: “In ¡m. ac-iion to recover for extras furnished under a budding contract providing that, in case the valuation of such extras by the architect should not be agreed to. the matter should be submitted to arbitration, neither a report of arbitrators nor an offer to arbitrate as to such extras need be shown as a condition precedent to a right of recovery without the architect’s certificate, when> such certificate was refused, not because of any disagreement as to valuation, but by order of the owner of the property.” — 438 — This leaves us. but one other matter involving lega] propositions to consider. As hereinbefore indicated, the lot of ground upon which this building was to be and was erected was surrounded by other buildings, and it was very soon apparent after excavation for the foundation was commenced that extraordinary and! expensive measures would be required to protect an adjacent building from damage and destruction. The architect by written order directed these necessary measures to be taken by the contractors. Large sums were expended in this way, clearly extra and not contemplated by the contract. Much of this work, however, was done outside of the exact limits of the owner’s lot in strengthening and securing the walls of this adjacent building. It is now insisted that, while there may be a separate personal liability upon the owner for this work in favor of the contractors, the lot of ground and its building so erected under this contract thereon cannot be held liable under a mechanic’s lien for such work done outside of the limits of the lot. I cannot agree with this contention. The work in a very technical sense may have been done on ground outside the exact line of the lot, yet it was absolutely essential for it to be done in order that the contract be complied with and the building be erected on the lot. Suppose the wall of the German Bank Building or the building itself had collapsed and fallen into the excavation on this lot. Would not the removal of the débris therefrom have been necessary to the erection of the building? This was precisely what would have happened in all possibility if .the wall of this building had not been reinforced. It was not work provided for by the contract directly, but was expressly within its terms touching extras. The condition of this abutting wall could not be known until it was disclosed by the excavation on this lot, and wherein was there any practical difference in the character of the work necessary to cause this wall to stand and the removal of its débris after it had fallen? In this connection it may be proper to note that the courts of this state have changed their position touching mechanics’ liens. It was at first held that, this remedy being unknown to the common law, a strict compliance with and construction of the statute was necessary. Mayes v. Ruffners, 8 W. Va. 384; Stout v. Golden, 9 W. Va. 231. It is now held that the statute must be given a fair and liberal construction as to the creation of the lien and its enforcement. United States Blowpipe Co. v. Spencer, 40 W. Va. 698, 21 S. E. 769. Even under the old ruling, in Bodley v. Denmead, 1 W. Va. 249, it was held that “a stack erected in a building used as a porkhouse for the joint purpose of the porkhouse and generating steam and running machinery in a distillery attached thereto, and which can be used as a distillery only in connection with the porkhouse, must be regarded as a structure necessary to both establishments and as a part thereof, although the pork-house may be used independently of the distillery”; and in that case a mechanic’s lien for the stack in the porkhouse was sustained against the distillery lot and building. For similar decisions of other states, see Wilcox v. Woodruff, 61 Conn. 578, 24 Atl. 521, 1056, 17 L. R. A. 314, 24 Am. St. Rep. 222, and note; Menzel v. Tubbs, 51 Minn. 364, 53 N. W. 653, 1017, 17 L. R. A. 815; Maryland Brick Co. v. Spilman, 76 — 439 — Md. 337, 24 Atl. 297, 17 L. R. A. 599, 35 Am. St. Rep. 431; Sergeant v. Denby, 87 Va. 206, 12 S. E. 402. In addition to this, the Circuit Court of Appeals for this Four Hi Circuit iu the case of Canton Roil & Machine Co. v. Rolling Mill Co., 168 Fed. 465, 93 C. C. A. 621, construing our West Virginia statute, Lias gone farther, in my judgment, iu its liberality towards the upholding of mechanics’ liens and proceedings to enforce them than lias any other court in this country. In that case the contractor for machinery for a tin plate plant contracted to furnish, among ocher tilingo. 24 chilled rolls absolutely ami 24 additional ones, “six pairs to be delivered with the mills, balance when required.” Of these last 3-Í, 12 were furnished, and the remaining .12 were not required. On june 25, 1903, the contractor filed its mechanic’s lien in the county court clerk’s office of Monongalia county, setting forth its account and attached to which was the usual affidavit setting forth that it had ceased to furnish machinery under the contract upon a certain date. Upon this lien, so sworn to and recorded, it instituted in the state court its suit to enforce it against the lot and plant. After it had instituted this suit, it discovered! that it had filed its declaration of lien one day too late to comply with the statute, and thereupon it dismissed this suit. (See opinion of court below in the case 155 Fed. 321.) Nearly a year after, when title to the property had passed out of the Tin Plate Company and vested in a trustee in bankruptcy, this contractor knowing this fact, without further order, shipped the extra 12 rolls provided for by the contract, and then recorded a new declaration of lien for its whole account including these 12 rolls, and thereupon .instituted its suit in the Circuit Court of the United States to enforce this last declaration of lien, the sole allegation touching which in its bill was: “Your orator is entiilod to and lias tiled a meet'ante’s lien for ¡¡II lis said claim of 814,83!>.!)8, with interest as aforesaid, against said real estaie and manufacturing plant, in accordance with the laws of the stale of West Virginia, and claims and is entitled by virtue ihereof to a lien on said property.” These 12 additional rolls were never accepted, were never delivered on the ground or nearer to it than the railroad depot, never, of course, installed in the building, and in fact were not expected to be by the contractor when shipped because it knew of the company’s bankruptcy. The Circuit Court of Appeals, however, reversing the decree of the court below dismissing the bill, held these rolls to be an integral part of the mill machinery not necessary to be actually installed; that the contractor was not estopped by the filing of the first lien and the oath attached thereto fixing the date when it “ceased furnishing” machinery under the contract, nor from, nearly a year after, “furnishing” this additional machinery in this way, and declaring and asserting a new lien for the whole account, and, further, that the pleading quoted above was sufficient upon which to enforce it. But it may be insisted that such rulings are in direct conflict with those contained in Davis v. Alvord, 94 U. S. 545, 24 L. Ed. 283; Van Stone v. Stillwell & Bierce Mfg. Co., 142 U. S. 128, 12 Sup. Ct. 181, 35 L. Ed. 961; Liberty, etc., B. & L. Co. v. Furbush & Son Machine Co., 80 Fed. 631, 26 C. C. A. 38; Withrow Lumber Co. v. Glasgow Inv. Co., 101 Fed. 863, 12 C. C. A. 61; McGugin v. O. R. R., 33 W. Va. 63, 70, 71, 10 S. E. 36; Cen — 440 — tral City Brick Co. v. Norfolk & W. R. Co., 44 W. Va. 286, 28 S. E. 926; Lunsford v. Wren, 64 W. Va. 458, 63 S. E. 308. Evidently the Circuit Court of Appeals did not think so, for, while its attention was called to all these cases except the last one, decided by the Supreme Court of Appeals of this state since, it neither disapproved these cases nor sought to distinguish them. It is clear to me, therefore, that under the very great liberality touching the upholding of mechanics’ liens indicated by this decision by which I am bound it would be clear error for me to deny to the contractors in this case the benefit of such lien for this extra work on this adjacent wall made necessary to the erection of this building. Eet the cause be referred to a master, with directions to state an account from the pleadings and evidence in the cause, showing the true balance and interest due upon the contract; what extras were performed by the contractors under the express terms of the contract by reason of written orders of either owner or his agents, the architects, or under subsequent oral contracts, if any, or under such circumstances implying a consent on the part of the owner to be liable therefor, if any and they be clearly shown by the evidence; also to ascertain the true amount due the owner on account of defective and omitted work, the master to be guided in ascertaining these things by the rules and principles herein set forth. He shall also state the number of claims and their amounts which, by stipulations filed, are agreed to be liens upon any fund found due the contractors. Footnotes [*] For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexea [*] For other casos see same topic & § number in Dec. & Am. Digs. 1997 to dato, & Tlep’r Indexes