Sweet v. Morrison

• Decision Date: 08 October 1889
• Parties: SWEET et al. v. MORRISON et al.
• Court: New York Court of Appeals Court of Appeals

116 N.Y. 19

22 N.E. 276

SWEET et al.

v.MORRISON et al.

Court of Appeals of New York, Second Division.

Oct. 8, 1889.

Appeal from an order of the general term of the supreme court in the second judicial department reversing a judgment entered upon the decision of the court at special term and ordering a new trial. On the 29th of September, 1871, the defendants, comprising the firm of Payson, Canda & Co., entered into contract with the Northern Pacific Railroad Company to furnish the materials and build that part of its road known as the ‘Dakota Division,’ extending from the Missouri river to the Red River of the North, and consisting of more than 200 miles. The contract provided that the work should conform to the specifications annexed, and to the instructions and directions of the chief engineer of the railroad company. Among other provisions were the following: ‘And it is further mutually agreed, with a view of preventing disputes and misunderstandings, and for the speedy adjustment of such as may occur, that the engineer in chief shall determine the amount and quantity of work herein contracted to be done, and shall decide every question which can or may arise relative to the execution of the work under this contract on the part of said contractors, and his decision shall be final and conclusive. In case any difference of opinion shall arise between the parties hereto as to the construction of this contract, and the true intent and meaning thereof, and of the parties in forming the same, such difference shall be considered and decided by the engineer in chief. And the said parties hereto do hereby submit all and singular the premises to the award, arbitrament, and decision of the engineer in chief, and do hereby agree that the same shall be final and conclusive between them to all intents and purposes.’ On the 29th of March, 1872, the plaintiffs, comprising the firm of E. Sweet, Jr., & Co., entered into contract with Payson, Canda & Co. to construct the bridges, trestle, and other timber work ‘required to fill the contract between the’ defendants ‘and the said railroad company.’ They agreed to perform their contract to the satisfaction and acceptance of the chief engineer of the railroad company, or the assistant engineers, to whose directions and instructions in relation to the work as it progressed they were to conform in all respects.

The agreement also provided as follows: ‘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 chief engineer of the Northern Pacific Railroad shall be, and hereby is, made an umpire to decide all matters arising or growing out of this contract between them. It is further mutually agreed and expressly understood that 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 every of said parties hereby waives any and all right of action, suit or suits, or other remedy, in law or otherwise, under this contract, or arising out of the same. And the said first party, in consideration of the fulfillment and performance of all the stipulations contained in this contract to be by said second party fulfilled and performed, and whenever said work shall have been, in the opinion of the 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 estimate 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 the sum or sums which shall be due said second party on a final settlement, within 10 days after said certificate and estimate shall have been furnished by said chief engineer, and said frist party shall have been paid for the work embraced in said estimate by the Northern Pacific Railroad Company, in accordance with their contract, the sum which may be due under this contract, agreeably to said estimate, at the following rates and prices. It is further understood and agreed by the parties hereto that this contract is made upon the same terms and conditions, and to conform in said respects to a certain agreement, as made by and between the first party and the Northern Pacific Railroad Company, and designed to be copied substantially from said last-named contract as far as it may apply to the same.’ The plaintiffs completed the work required by their contract, and thereupon the defendants laid the track thereon, and the railroad company accepted the road and began to operate it. The trial court found the foregoing facts, and also found ‘that the chief engineer of the railroad company gave estimates of and certificates purporting to be for all the work performed by the plaintiffs, and by Payson, Canda & Co.’ It was further found that the chief engineer inserted the quantities in his final estimate without personally measuring the work, and only upon information furnished to him by persons other than the plaintiffs, who, at about the time when the final estimate was signed, applied to him for leave to show, by the ‘sworn testimony of a competent witness,’ the true quantities of plaintiffs' work as performed; that this application was denied by the chief engineer, ‘who declined to permit plaintiffs to contradict the statements already made to him concerning said work by subordinate engineers, by any witness, respecting said quantities, and thereupon made said final estimate.’ The trial court held that there was no arbitration that was binding upon the plaintiffs, and that, ‘if they can show that there was a mistake made in the quantity of materials furnished, or work done in the estimates or accounts, they are entitled to have it rectified.’ A reference was directed ‘to take an account between plaintiffs and defendants in the premises on the principles of this decision.’ An interlocutory decree was entered accordingly, and the cause directed to stand over until the coming in of the referee's report. The trial judge did not find that there was any underestimate by the chief engineer, and the referee did not find so directly; but he found that the materials furnished and work done by the plaintiffs amounted to the sum of $117,297.73, and that the payments and credits amounted to $90,671.94, leaving due and unpaid from defendants to plaintiffs a balance of $26,625.79, which represents the amount of the underestimate as found by the referee. There was no dispute as to the payments. The plaintiffs alleged in their complaint that the underestimate, according to the terms of the contract, amounted to $15,479.50. The referee also allowed to the plaintiffs $13,194.54 for interest from September 10, 1872, upon said sum of $26,625.79, making $39,820.38 in all. Upon the final hearing before the trial court the findings of the referee were adopted, and judgment was directed in favor of the plaintiffs accordingly. Upon appeal to the general term the judgment was reversed, and a new trial ordered.

E. W. Paige, for appellants.

John Van Vorhis and W. W. Niles, for respondents.

VANN, J., ( after stating the facts as above.)

The person selected by the parties to make the estimate was in the employ of neither, yet, as chief engineer of the railroad company, he sustained such a relation to both as to make it the interest of each that his estimate as to the materials furnished and work done by the plaintiffs should be as large as possible; for it determined the amount of the plaintiffs' compensation as subcontractors, and of the defendant's profits thereon as contractors. This case, therefore, is unlike those, so frequently arising, in which the certificate or estimate is required from an architect or engineer in the employment of one of the parties. In that class of cases the danger that the person acting as an arbitrator might favor his employers is obvious. While neither natural nor legal disabilities hinder a person from being an arbitrator, provided the fact is known to the parties at the time of the submission, still, as he is the agent of both parties alike, and impartiality is the fundamental requisite, the courts closely scrutinize the action of an arbitrator whose relation to one of the parties was such as to naturally influence the judgment even of an honest man. Morse, Arb. 99; Russ. Arb. 105. In this case, however, there was no reason why the person selected should not be wholly disinterested and impartial. The parties stood upon an equal footing. Their contract was without legal objection, and the arbitration clause is as binding and should be enforced the same as any other provision. In one sense, as was said in a case somewhat analogous, the submission to the determination of the engineer is more obligatory than any ordinary submission to arbitration, inasmuch as, being upon consideration, it is not revocable, and the obligation upon the defendants to pay did not, by the terms of the contract, arise until the estimate was made by the engineer. Herrick v. Railroad Co., 27 Vt. 673, 679. A valid award or estimate operates as a final and conclusive judgment, and, however disappointing it may be, the parties must abide by it. Id.; Perkins v. Ciles, 50 N. Y. 228;Fudickar v. Insurance Co., 62 N. Y. 392;Kidwell v. Railroad Co., 11 Grat. 676; O'Reilly v. Kerns, 52 Pa. St. 214; Vanderwerker v. Railroad Co., 27 Vt. 130; Ranger v. Railway Co., 5 H. L. Cas. 71; 2 Wood, Ry. Law, 995; 1 Redf. R. R. 438. The estimate made by the chief engineer should not, therefore, be set aside or disregarded unless some good reason is shown for such action. The trial court, without...