Commonwealth v. Eastern Paving Co.

• Decision Date: 24 May 1926
• Docket Number: 111
• Citation: 8 Pa. D. & C. 357
• Parties: Commonwealth v. Eastern Paving Company
• Court: Pennsylvania Commonwealth Court

8 Pa. D. & C. 357

Commonwealth v. Eastern Paving Company

No. 111

Common Pleas Court of Dauphin County, Pennsylvania

May 24, 1926

Commonwealth Docket, 1925

James O. Campbell, 1st Deputy Attorney-General, for plaintiff.

Walter Biddle Saul (with him Beidleman &amp Hull ), for defendant.

OPINION

Rule to show cause why the appeal from the settlement of the Auditor General and State Treasurer should not be dismissed and stricken from the Record.

WICKERSHAM J.

The defendant in this case entered into a written contract with the Highway Department of the Commonwealth of Pennsylvania, by the Secretary of Highways, dated May 10, 1919, for the construction of a road in Salem Township, Luzerne County, known as Route No. 4, section 1- B. The said contract contains, on page 140 thereof, the following provisions for the arbitration of claims arising thereunder:

" In case any question or dispute arises between the parties hereto respecting any matter pertaining to this contract, or any part thereof, said questions or disputes shall be referred to the State Highway Commissioner and Attorney-General, or First Deputy Attorney-General, of the Commonwealth of Pennsylvania, whose decisions shall be final, binding and conclusive upon all parties without exception or appeal; and all right or rights of any action at law or in equity under and by virtue of this contract, and all matters connected with it and relative thereto, are hereby waived by the contractor."

The defendant filed a statement of claim against the Commonwealth of Pennsylvania under the provisions of the Act of March 30, 1811, P. L. 145, in the amount of $ 28,000, founded upon the failure of the State Highway Department to comply with the said contract. To this statement of claim the Commonwealth, by its Attorney-General, filed an affidavit of defence on behalf of the Highway Department without raising an issue as to the facts, contending that, under the provisions of the contract from which we have quoted, it was mutually agreed by and between the plaintiff and defendant -- referring at length to the arbitration clause found on page 140 of said contract. The defendant refused to submit the whole or any part of said claim to the arbitrament of the arbitrators for which provision was made in the above-quoted section of the contract. The Auditor General and State Treasurer reached the following conclusion after referring to the arbitration clause of the contract:

" From the above we find that, under the provision of the contract above referred to, the question in dispute must be arbitrated in the manner there set out; that this was not done nor was same requested by the claimant, although the State Highway Department stands ready and willing to submit the same to arbitration; that nothing has been determined in the manner provided in the contract to be due the claimant; we, therefore, find there is nothing now due and owing by the Commonwealth to the claimant under said contract, and herewith disallow its claim and dismiss its petition for settlement."

From the settlement of the Auditor General and State Treasurer the defendant appealed to this court. The Attorney-General, on Oct. 26, 1925, filed its petition, setting forth the facts as above stated, and praying for a rule to show cause why the defendant's appeal from the settlement by the Auditor General and State Treasurer of its account against the Commonwealth, as filed to the above number and term, should not be dismissed and stricken from the record because the said Eastern Paving Company irrevocably agreed in its written contract with the Commonwealth to submit its said claim to arbitration and therein waived all right of exception or appeal to the decision of arbitrators thereon, whereupon a rule was granted to show cause, to which we have referred.

This case came on to be heard and was argued at length by the First Deputy Attorney-General and by counsel representing the defendant. The questions involved are:

1. Can the contractor revoke such agreement without the consent of the Commonwealth and submit its claim, based upon said contract, to the Auditor General and State Treasurer for settlement under the Act of 1811?

2. Having so submitted such claim for settlement, which was dismissed by the Auditor General and State Treasurer because of said arbitration agreement, without consideration of the merits of the claim, and the applicant referred to its remedy by arbitration, does an appeal lie to the Court of Common Pleas of Dauphin County?

It appears that, after the completion of the work contracted for and the payment of portions of the consideration thereof from time to time, a semifinal estimate was made and a part of the amount so found due was paid to the contractor, but a portion thereof was retained by the Commonwealth because of the alleged failure of the contractor to conform with the specifications, in that it had failed in certain designated areas to furnish and lay a concrete base of the depth or thickness required by the specifications. The contractor was notified of such defects and called upon to remedy the same, but has failed to do so. The question thus at issue has not been submitted to the arbitrament of the arbitrators as provided for in the contract.

On May 5, 1926, the following stipulation was filed:

" Now, May 5, 1926, it is hereby stipulated by counsel for the plaintiff and counsel for the defendant that the contract upon which the claim in suit is based contains, as a part of the specifications attached and made part thereof, the following:

" Engineer to be referee. To prevent misunderstanding and litigation, the engineer shall decide any and all questions which may arise as to the quality and acceptability of materials furnished and work performed and as to the manner of performance and rate of progress of said work, and shall decide all questions which may arise as to the interpretation of any or all plans relating to the work and of the specifications, and all questions as to the acceptable fulfillment of the contract on the part of the contractor; and the engineer shall determine the amount and quantity of the several kinds of work performed and materials furnished which are to be paid for under the contract, and such decision and estimate shall be final and conclusive, and such estimate, in case any question shall arise, shall be a condition precedent to the right of the contractor to receive any money due under the contract. Any doubt as to the meaning of, or any obscurity as to the wording of, these specifications and contract will be explained by, and all directions and explanations requisite or necessary to complete, explain or make definite any of the provisions of the specifications or contract and to give them due effect, will be given by the engineer."

It thus appears that if, for any reason, the contractor is not satisfied with the final conclusion of the engineer, he may still appeal to the arbitrament of the Secretary of Highways and the Attorney-General, or the First Deputy Attorney-General.

We think the arbitration clause contained in this contract provides an exclusive remedy for the adjudication of the claim in question and is not revocable. In Werneberg v. Pittsburgh, 210 Pa. 267, an arbitration clause in a municipal contract provided that " in case any question or dispute shall arise between the parties of the second part hereto and the said city, party of the first part hereto, under the said plans, drawings, . . . general conditions or terms of this contract respecting the quality or value of the work, or labor done, or materials furnished or to be done or furnished, or any of the terms, stipulations, covenants or agreements herein contained, or respecting any claim for extra work, or respecting any matter pertaining to this contract, or any part of the same, said question shall be referred to the director of the department of public works of the city, whose decision thereon shall be final, binding and conclusive upon all parties, without exception or appeal, and all right or rights of any action at law or in equity under and by virtue of this contract, and all matters connected with and relative to the same, are hereby expressly waived by the parties of the second part." It was held: " Where a municipal contract provides that all matters in dispute shall be submitted to the director of the department of public works, whose decision shall be final, and it appears that, after the work under the contract was completed, a dispute arose, and the director then in office sat as an arbitrator and heard testimony, but before rendering his decision was removed from office, and then refused to take any further action as arbitrator, the arbitration clause became a nullity and the jurisdiction of the courts attached. In such a case, as soon as the director assumed to act as an arbitrator, he did so, not as an official, but also as an individual, and, although removed from office, he should have concluded the arbitration by rendering his decision." It was further held " that the measurement clause and the arbitration clause were not inconsistent with each other, inasmuch as the former applied merely to the measurement of the amount of work performed, while the latter applied to 'any question of dispute' between the parties growing out of the contract." It was said by Mr. Justice Mestrezat, writing the opinion of the Supreme Court, page 274: " . . . It is well settled in this State that parties to an executory contract may agree to submit their differences arising out of the contract to a person or tribunal named, whose decision or award shall be final, and that when they do so they cannot seek redress elsewhere until the arbiter agreed upon has been...