Central Trust Co. of New York v. Louisville, St. L. & T. Ry. Co.

• Decision Date: 01 October 1895
• Docket Number: 6,345,6,346.
• Citation: 70 F. 282
• Parties: CENTRAL TRUST CO. OF NEW YORK v. LOUISVILLE, ST. L. & T. RY. CO. (NICHOLS et al., Interveners. Two cases).
• Court: United States Circuit Court, District of Kentucky

70 F. 282

CENTRAL TRUST CO. OF NEW YORK v. LOUISVILLE, ST. L. & T. RY. CO. (NICHOLS et al., Interveners. Two cases).

Nos. 6,345, 6,346.

United States Circuit Court, D. Kentucky.

October 1, 1895

Butler Stillman & Hubbard and Pirtle & Trabue, for plaintiff.

J. D Atchison and Humphrey & Davie, for interveners.

BARR District Judge.

This intervening petition claims that the railway company on the 23d of July, 1892, made a contract with H. M. McCracken, who agreed to procure the necessary right of way for an extension of its line from its terminus at West Point, at a place called Howard, across to a junction with the Louisville &amp Nashville Railroad, and also agreed to erect a bridge across Salt river. McCracken was to construct and complete said extension to the Nashville Railroad, and get therefor, from the railroad company, $25,000 of its first mortgage 6 per cent. bonds, and $25,000 of its capital stock, for each mile of road thus constructed. On the 6th of October, 1892 McCracken entered into an agreement with the interveners Nichols, Watkins & Co., to construct, in a substantial and workmanlike manner, to the satisfaction and acceptance of the engineer in charge of the same, all the grading, clearing, grubbing, masonry in culverts and bridges, trestlework, pile-driving, riprap, on the extension from Howard of the said defendant's railway. In said contract the specifications and price of the work are given, and among other provisions are these:

'(20) * * * During the progress of the work, and until it is completed, there shall be monthly estimates, made by the engineer in charge, of the quantity, character, and value of the work done during the preceding month, or since the last monthly estimate, 90% of which value shall be paid the parties of the first part on or about the 20th day of each month, in this manner,-- that is, paid under such regulations as may be agreed upon between the parties, and at such place as the party of the second part may appoint; and when the said work is completed, and so accepted by the engineer in charge, there shall be a final estimate made by the engineer of the quantity, character, and value of said work, agreeably to the terms of this agreement, when the balance appearing to be due to the said parties of the first part shall be paid to them, upon their giving a release, under seal, to the party of the second part, from all claims or demands whatsoever growing in any manner out of this agreement. (21) The monthly estimates of the engineer shall be subject to correction by him in any subsequent monthly or final estimate. The monthly estimate being merely made out as a basis of payment on account, it will necessarily be only approximately correct as to quantity and value; pains being taken, however, to make them as accurate as possible. (22) The contractor shall render an account monthly, through the proper superintending engineer, of any extra work which he may have been authorized to do; and, to prevent disputes hereafter, it is hereby understood that no bills for extra work will be allowed unless authorized and ordered in writing by the engineer in charge, and the bill for said work presented at the end of the month in which the work was done, and approved by said engineer.' '(28) The word 'engineer,' wherever used in this agreement, shall be understood to mean the chief engineer. Now, therefore, in consideration of these premises, this agreement further witnesseth that the said H. M. McCracken hereby agrees with Nichols, Watkins, & Co., of the first part, that he, the said H. M. McCracken, shall and will, for doing and performing the work aforesaid well and truly, pay, or cause to be paid, to the said Nichols, Watkins & Co., of the first part, their surviving partners, executors, or administrators, the following prices, viz. (Then follows a list of the prices for the different work, and following this, as follows:) The above payments shall be made in the following manner; that is to say: (Then follows the language already first quoted herein.)'

The interveners allege that under this contract, and according to the schedule of prices therein, they have done work to the amount of $88,597.61, and also extra work amounting to $9,551.19, making a total of $98,148.80, and that there has been paid on account of extra work, $843.88, and on account of work specifically described in the contract, $47,355.86, leaving a balance due of $49,949.16. They do not allege that this amount is due according to the final estimate made by the chief engineer, but allege:

'That the chief engineer mentioned in said contract has made a final estimate of the work specifically included in the contract, and also given the vouchers for the extra work, and that through the failure of said engineer to properly measure said work included in the contract, and properly classify the same according to the terms and true intent thereof, the said final estimate and vouchers for said extra work are not as large as the true amount due to your interveners according to the terms of said contract; but, through a mistake of said engineer, he has, both in measurement and classification, made such amount to be much less than that which it correctly is, on proper measurement and classification.' The interveners claim a lien for this balance on the property of the railway under the act of Kentucky approved March 27, 1888. They allege that said railway company on the 1st of February, 1887, executed a deed of trust to the Central Trust Company, on its road which should be located and constructed from Louisville to Henderson, but provided that no extension of said road beyond the termini mentioned, to wit, Louisville and Henderson, or any branches which might be thereafter constructed, or any property or franchises pertaining exclusively to said extension of branches, should be deemed to be included in said conveyance, but same was expressly excepted therefrom, and that on the 24th of May, 1889, said railway company made, executed, and delivered a writing whereby they conveyed a branch line at Green River to trustees for same purpose, which branch was about a mile in length, and on the 23d of August, 1892, executed to said trust company another deed of trust, in which it conveyed and mortgaged, all and singular, the main line of railway and branches of said railway, as then constructed or to be constructed, from Louisville to Henderson, or its eastern terminus; also, said railway company's line of road purchased from the Louisville, Hardinsburg & Western Railway Company, from Irvington, in Breckinridge county, Ky., and Fordsville, in Ohio county, Ky., and its branches, as now constructed, to Hardinsburg and Falls of Rough. It is alleged that under an arrangement between the railway company and the Central Trust Company, trustee in the deed of February 1, 1887, there were reserved 370 of the bonds secured by said deed of trust; that none of said bonds were issued until long after the year 1891, and all were unissued at the time said contract was entered into between said defendant railway company and said McCracken; that 'whatever may be the right of any holder of bonds issued prior to the passage of the mechanic's lien law, under which the interveners are claiming, the interveners say that in no event could the holders of these 370 bonds, or any of them, claim priority to these interveners, but are subject thereto.'

This intervening petition is demurred to by the trust company, and several grounds presented, but the only ones which have been argued by counsel are those which raise the question of the finality of the chief engineer's estimates, and the priority of the lien of interveners to the holders of the 370 bonds. It is insisted for the trust company that, by the terms of the contract between McCracken and the interveners, the final estimate is conclusive between the parties, and that no other or different amount can be recovered. We think it is true, under the authorities, that where the parties contract for the conclusiveness of the estimate of a chief engineer, or other person, under a contract, both parties are bound, unless there is fraud or such a mistake in the estimate as would show a want of good faith in the party making the estimate. See Kihlberg v. U.S., 97 U.S. 398; Sweeney v. U.S., 109 U.S. 618, 3 Sup.Ct. 344; Railroad Co. v. March, 114 U.S. 549, 5 Sup.Ct. 1035; Railroad Co. v. Price, 138 U.S. 185, 11 Sup.Ct. 290. It must be conceded in this case, however, that there is no express agreement to make the chief engineer's final estimate conclusive. It is, however, insisted that the conclusiveness of his estimate is necessarily implied from the terms of the contract. The provisions of the contract are:

'When the work is completed and accepted, there shall be a final estimate made by the engineer, of the quantity, character, and value of the work, agreeably to the terms of this contract; and the balance, after deducting the several monthly payments, and upon the contractor's giving a release to the parties of the second part for all claims and demands whatsoever, will be paid in full.'

I do not see that this is an agreement that this estimate of the engineer is to be conclusive. The court should not imply such an agreement, but should require clear and express language because it is contracting away the right of the party to appeal to the courts of justice in case of a controversy. It was at one time seriously contended that the conclusiveness of a contract making a party the arbitrator, in instances like this, was against public policy, and would not be permitted; but now, as it seems from the foregoing cases, it is settled that such a contract can be made between the parties, and will be enforced. In the case of ...