City of Lawton v. Sherman Mach. & Iron Works

• Decision Date: 15 March 1938
• Docket Number: Case Number: 26631
• Citation: 77 P.2d 567,182 Okla. 254,1938 OK 175
• Parties: CITY OF LAWTON v. SHERMAN MACHINE & IRON WORKS
• Court: Oklahoma Supreme Court

1938 OK 175

77 P.2d 567

182 Okla. 254

CITY OF LAWTON v. SHERMAN MACHINE & IRON WORKS

Case Number: 26631

Supreme Court of Oklahoma

Decided: March 15, 1938

Syllabus

¶0 1. SET-OFF AND COUNTERCLAIM - Claim Based on Another Distinct Contract not Proper Counterclaim in Action on Contract.

When plaintiff's action is on contract, a counterclaim based upon another separate and distinct contract is not a ground of defense arising out of the contract set up in the petition as the foundation of plaintiff's claim, and is improper.

2. CONTRACTS - Building Contract Designating Engineer as Arbiter as to Work Done and Amount Due Therefor - Binding Effect of Engineer's Certificate of Approval in Absence of Fraud.

Generally, where an engineer is designated in a building or construction contract as the person who shall be the arbiter of the amount and character of the work done, and the amount due the contractor under the contract, the final certificate of approval of such engineer is binding upon the parties. The approval or certificate, however, may be avoided upon a showing of actual fraud or of such gross errors or mistakes as to constitute constructive fraud.

3. SAME - Right to Recover Damages Due to Latent Defects of Construction Notwithstanding Engineer's Approval.

Where a construction contract provides the final certificate or approval of designated engineer shall be conclusive upon the parties, such approval does not preclude a recovery by seasonable action for damages due to latent defects of construction or material.

4. APPEAL AND ERROR - TRIAL - Waiver of Incompleteness of General Findings by Failure to Object Below - General Findings Presumed to Embrace All Facts Proved.

Where the trial court makes general findings upon the facts, a party who does not assail such findings in said court as incomplete and incomprehensive will be deemed to have waived his right to further findings, and the general findings will be presumed by this court to embrace all the facts of the controversy established by the evidence.

5. APPEAL AND ERROR - Sufficiency of Evidence to Support Finding and Judgment in Jury-Waived Action.

In an action for money judgment, where the trial is to the court, a jury having been waived, the finding and judgment of the trial court will not be disturbed on appeal for insufficiency of the evidence, if there is competent evidence reasonably tending to support such finding and judgment.

6. MUNICIPAL CORPORATIONS - City Under Construction Contract Held not Liable for Work Performed by Reason of Changes not Formally Approved by City Council.

A construction contract with a city, which provides that the city through proper officers may, by resolution, make changes in the work, contemplates action on the part of the governing body, in this case the city council, and where a substantial change is made which is not within the terms of the contract as written, without the approval of such governing body, the city is not liable for the work performed by reason of the change.

Appeal from District Court, Comanche County; R.W. Higgins, Assigned Judge.

Actions by the Sherman Machine & Iron Works, a corporation, against the City of Lawton to recover balances due under construction contracts. Actions consolidated, and from judgment in plaintiff's favor substantially as prayed, the defendant appeals. Affirmed in part and reversed in part.

Chas. E. Bledsoe, Lawton Burton, John F. Thomas, and Frank M. Bailey, for plaintiff in error.

Tomerlin, Chandler & Shelton, Richard W. Fowler, and Richardson & Cline, for defendant in error.

WELCH, J.

¶1 This is an appeal from the district court of Comanche county upon two cases consolidated therein and tried to the court. Plaintiff recovered judgment upon allegations of balances due it under construction contracts, and the defendant city has perfected the appeal. We will refer to the parties as plaintiff and defendant, as they appeared in the trial court.

¶2 In March, 1930, the defendant city voted bonds in the sum of $600,000 for waterworks improvements. Thereafter plaintiff contracted with defendant under three separate contracts made under three separate bids to construct such improvements. Contract No. 1 was for the furnishing of materials and construction of a 24-inch supply main from the defendant's filtration plant to the Fort Sill area, and a 16-inch line in and about such areas. Such contract was entered into in January, 1931.

¶3 Under contract No. 2 a 24-inch pipe line running from what is known as station 300 to the city of Lawton was constructed, two old pipe lines being taken up and the pipe relaid at various points, and certain improvements and extensions to the existing distribution system within the city of Lawton were made. Such contract was made on January 17, 1931.

¶4 Under contract No. 3 a new filtration plant was constructed. Such contract was made on May 15, 1931. The first contract had been completed and the work accepted and paid for.

¶5 Plaintiff brought suit on contract No. 2, alleging a balance due thereunder of $22,404.43, being the difference between $164,008.62, the alleged total amount payable under the contract, and the total payments of $141,604.19.

¶6 Plaintiff also brought separate suit on contract No. 3, alleging a balance due thereunder of $16,729.68, same being the difference between $141,311.09, the alleged total amount due under the contract, and the total payments of $124,581.41.

¶7 The defendant answered in both of the cases, denying generally, and specifically alleging inferior workmanship, materials, etc., and denying that the plaintiff had performed in accordance with the contracts, and alleging fraud upon the part of two of its engineers. The cases were consolidated for trial, and shortly before trial the defendant, by amendment, and over plaintiff's objections duly saved, alleged as a counterclaim certain alleged overpayments and damages arising from various alleged details under contract No. 1. A jury was waived and the cause tried to the court, resulting in a judgment in favor of plaintiff substantially as prayed.

¶8 One of the questions for us to determine is whether the defendant may properly plead matters relating to contract No. 1 as a counterclaim in the present cause. The defendant urges that the point is controlled by the case of Donaldson & Yahn v. Benight, 105 Okla. 108, 232 P. 116, wherein this court treated several projects as constituting one contract involving the extension of the waterworks system for the city of Perry. It appears to be the settled law of this jurisdiction that the demands of a counterclaim may not be asserted where they arise wholly out of a separate contract (Allison v. Shinner, 7 Okla. 272, 54 P. 471; Harris v. Warren-Smith Hdw. Co., 44 Okla. 477, 144 P. 1050; Haffner v. First National Bank of Seiling, 152 Okla. 169, 5 P.2d 351, and Gooldy v. Klein Iron & Foundry Co., 170 Okla. 466, 40 P.2d 1070); and that rule was recognized in the Benight Case, supra, but in that case all the parties had treated the projects or contracts as one contract. Observe the following statement of the court therein:

"Benight treats the three contracts as one contract for the construction work in his action to recover on the assignment. He treats the assignment as one cause of action against the city. It appears that all parties treated the contracts as one contract in doing the construction work, as it related to the completion of a single project"

- which, together with other facts, justified this court in treating the contracts there as one.

¶9 We do not find that the parties here treated the three contracts as one. They were each bid upon and executed separately and at different times; the work appears to have progressed separately, and all the parties at all times appear to have treated them as entirely separate contracts. The work on contract No. 1 was performed and accepted by the city and paid for in full without reserving any of the amounts due as provided therein. The plaintiff brought separate suits upon each of contracts Nos, 2 and 3.

¶10 We do not consider the mere fact that the contracting parties are the same, and that the contracts each related to waterworks projects, sufficient to justify the legal conclusion that the counterclaim herein pleaded arose out of the same contract upon which plaintiff's actions are based. We therefore conclude that the trial court should have excluded from consideration any evidence pertaining to contract No. 1, and we shall not give the same consideration herein.

¶11 The record and briefs are lengthy, and we will endeavor to consider the questions as nearly as possible in the order presented by the defendant's brief, omitting, however, any discussion concerning contract No. 1. It is said that the trial court made no distinction in its finding of fact between apparent and latent defects. Our attention is called to National Surety Co. v. Board of Education of City of Hugo, 62 Okla. 259, 162 P. 1108. It is further suggested that it is apparent from the findings of fact that the trial court considered the final certificate of the engineer as binding, in the absence of a showing of "absolute fraud." The defendant urges the following quotations as stating the applicable law relative to the reports of engineers, and this the plaintiff does not dispute.

"There can be no doubt that notwithstanding the fact that a contract makes the certificate, report, opinion, or decision of an engineer or architect conclusive on the parties, the law writes into this provision that the conduct of the engineer or architect must be free from fraud. Fraud on his part destroys the effect of the provisions. Therefore, if the engineer or architect fails to exercise his honest judgment, or makes such gross mistake as implies bad faith, his decision, report, certificate, or opinion may be impeached." Vol. 6 R. C. L. par. 341.

¶12 And in Ilse v. Aetna Indemnity Co. (Wash.) 104 P. 787:

"It is urged by the plaintiff that

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