Walsh Const. Co. v. City of Cleveland

• Decision Date: 12 November 1920
• Docket Number: 9406.
• Citation: 271 F. 701
• Parties: WALSH CONST. CO. v. CITY OF CLEVELAND et al.
• Court: U.S. District Court — Northern District of Ohio

271 F. 701

WALSH CONST. CO. v. CITY OF CLEVELAND et al.

No. 9406.

United States District Court, N.D. Ohio, Eastern Division.

November 12, 1920

[Copyrighted Material Omitted]

Klein &amp Harris, of Cleveland, Ohio, for plaintiff.

Tolles Hogsett, Ginn & Morley, of Cleveland, Ohio, and Alfred Clum, City Sol., of Cleveland, Ohio, for defendant city of Cleveland.

WESTENHAVER District Judge.

This action was brought originally against the city of Cleveland alone to recover a balance alleged to be due on a contract for constructing a clear water reservoir, upon a unit price basis and certain additional items of extra compensation. The city of Cleveland obtained an order making also a defendant the National Surety Company, surety on plaintiff's performance bond. See Walsh Construction Co. v. City of Cleveland (D.C.) 250 F. 137. The city thereafter filed an answer and also a cross-petition, seeking to recover judgment against the plaintiff and its surety for damages alleged to be due for defective work in building the reservoir. After the issues were made up, all parties, by consent, waived the right to a trial by jury, and by like consent the issues were referred to Robert L. Hoffman as special master to hear and decide the cause and all issues arising therein, with instructions to report separately his findings of fact and conclusions of law. His report having been made, certain exceptions thereto have been taken by the several parties, and the cause is now before me for decision upon the report and exceptions.

A preliminary question is raised as to the legal force and effect of the master's findings of fact, which it is necessary first to determine in order to settle the scope of the inquiry arising upon these exceptions. Section 649, Rev. St. of U.S. (section 1587, U.S. Comp. St. 1916), authorizes the trial and determination by the court of issues of fact in civil cases whenever the parties waive a jury in writing, and provides that the finding of the court upon the facts, which may be either general or special, shall have the same effect as the verdict of a jury. When a jury is waived, the court may, by like consent, refer the issues to a master, with instructions to hear and determine the issues and to make findings of fact and conclusions of law. Whenever findings of fact are thus made, either by the court or by the special master, these findings can be reviewed only on exception for errors of law. Kimberly v. Arms, 129 U.S. 512, 9 Sup.Ct. 355, 32 L.Ed. 764. Such seems also to be the law of Ohio. See sections 11470-11480, G.C. The master's conclusions of law are consequently always subject to review, but his findings of fact, whether general or special, if supported by substantial evidence, are as binding upon the court as is the finding of a jury. Hence, in considering the present exceptions, the scope of our inquiry is limited to whether or not the master's findings respond to and are supported by the pleadings; whether the findings of fact as made support the conclusions of law; whether the findings of fact are supported by substantial evidence; and whether or not the conclusions of law are correct. A master's findings of fact become a question of law only when not supported by substantial evidence. See Tilghman v. Proctor, 125 U.S. 136, 149, 8 Sup.Ct. 894, 31 L.Ed. 664; Kimberly v. Arms, 129 U.S. 512, 9 Sup.Ct. 355, 32 L.Ed. 764; Davis v. Schwartz, 155 U.S. 631, 636, 15 Sup.Ct. 237, 39 L.Ed. 289; Adamson v. Gilliland, 242 U.S. 350, 353, 37 Sup.Ct. 169, 61 L.Ed. 356.

Plaintiff has taken ten exceptions to the master's report, all of which purport to except to the master's conclusions of law; his findings of fact being accepted as conclusive. The city has taken two sets of exceptions, and the surety company has joined in the city's exceptions, and in addition thereto has taken an additional exception to the master's ruling that the surety is not discharged by reason of the changes and alterations made without its consent in the plans and specifications during the progress of performance. These several exceptions need not now be fully stated, but will sufficiently appear in the course of this opinion. Many of them raise the same question of law, and depend upon certain general legal principles. The most important questions thus raised are the following: (1) The legal force and effect of the exhaustion by previous payments of the amount certified by the city director of finance at the time the contract was made. (2) Whether the contract was substantially performed, and whether the refusal of the director of public utilities to accept was arbitrary and unreasonable, so that the plaintiff might recover if there had been a sufficient certification of funds. (3) The true measure of damages for faulty workmanship, and the amount of such damages. (4) The city's right to recover liquidated damages at the stipulated rate for plaintiff's delay in performance. (5) Whether on the facts as found, plaintiff is entitled to recover the amounts found due by the master on its third and fourth causes of action.

1. The contract is dated March 29, 1915, and the city director of finance certified thereon that there was the sum of $272,636 in the city treasury to the credit of the fund and not appropriated for any other purpose, from which payment to the contractor was to be made. The contract was for furnishing materials and performing labor in constructing a clear water reservoir as a part of a filtration plant for the city of Cleveland. This reservoir was approximately 1,000 feet long by 200 feet wide, divided into 2 basins, known as No. 1 and No. 2, covered by a concrete roof supported by side walls and 600 columns approximately 22 feet in height, with cross-walls and baffle walls. The contract was upon a unit basis, consisting of 21 separate items, of which 6 only were for lump sums, aggregating $15,900. The remaining 15 called for general excavation per cubic yard, excavation for back-filling per cubic yard, rolling foundations and embankments per ton mile, concrete in foundations per cubic yard, concrete in solid walls in conduit sections and in piers and vaulting per cubic yard, steel reinforcement per pound, furnishing and placing special castings, furnishing and placing iron castings, furnishing and placing wrought iron, steel, and pipe, furnishing and placing cast-iron pipes, all per ton, brick masonry per cubic yard, furnishing and placing three-inch tile drains and twelve-inch drain pipe, per linear foot. The quantities of each class of work thus to be done upon a unit basis were approximate only and were given as a uniform basis for the comparison of bids. The city also reserved the right to increase or decrease the amount of any class or portion of the work as might from time to time be deemed necessary. The amount certified represents the price per unit bid by the plaintiff on the basis of this approximate estimate.

The master finds that the plaintiff had performed labor and furnished materials upon this unit basis in the amount of $301,739.40, extra work under the second cause of action $7,444.39, extra work under the fifth cause of action $793.58, and extra work under the sixth cause of action $1,090.04, aggregating $311,067.41. Of this amount, he finds that the city had paid during the progress of performance the sum of $272,188.20, and that the funds certified were wholly exhausted November 15, 1915. His conclusion of law is that notwithstanding the contract may have been fully performed, and the refusal to accept would be arbitrary and unreasonable, the plaintiff cannot recover because of the charter provisions of the city of Cleveland relating to the making of municipal contracts, and particularly that provision relating to the certificate of the director of finance.

The city of Cleveland, prior to the making of this contract, had adopted what is known as a 'Home Rule Charter.' Under the heading 'Department of Finance' are three sections, 122, 123, and 125, which are relied on as sustaining the master's conclusion. Section 122 provides in substance, that no contract shall be entered into or authorized unless the director of finance shall first certify that the money required for such contract is in the treasury to the credit of the fund from which it is to be drawn, and not appropriated for any other purpose. Section 123 provides what shall be deemed to be moneys in the treasury to the credit of a fund and subject to certification. Moneys in the treasury are therein declared to include, not merely money actually in the treasury at the time, but money that is expected to come into the treasury before the maturity of the contract, whether from taxes or assessments, or from sales of services, products or by-products, or from any city undertakings, fees, charges, accounts, bills receivable, or other credits in process of collection, and the proceeds to be derived from bonds lawfully authorized to be sold and in process of delivery. Section 125 provides, in substance, that all contracts adopted contrary to the provisions of the preceding sections shall be void, and that no person shall have any claim against the city thereunder, nor shall the council or any officer of the city waive or qualify the limits fixed by any ordinance, resolution, or order, as provided in section 122, or fasten upon the city any liability whatever in excess of such limits. These sections are appropriated bodily from the General Code of Ohio, and have been in force for many years. Section 122 is the exact counterpart of section 3806, G.C. Section 123 is the substantial equivalent of section 3810, especially when that section is supplemented by section 3797, G.C. Section 123 combines the provisions of these two sections of the General Code and...