Guild v. Andrews

• Decision Date: 17 April 1905
• Docket Number: 1,977.
• Parties: GUILD et al. v. ANDREWS et al.
• Court: U.S. Court of Appeals — Eighth Circuit

137 F. 369

GUILD et al. v. ANDREWS et al.

No. 1,977.

United States Court of Appeals, Eighth Circuit.

April 17, 1905

This was an action at law by the sewer district against George Guild, J. C. Guild, and the United States Fidelity & Guaranty Company to recover damages claimed to have been sustained by the plaintiff through the failure of the Guilds, for whom the guaranty company was surety, to construct and complete a sewer system in accordance with a contract entered into with the sewer district. The defense was that the sewer system had been constructed and completed under the supervision and to the satisfaction of the engineer selected by the sewer district, and that the terms of the contract made his acceptance of the work final and conclusive. The defendants Guild also interposed a counterclaim for a balance claimed to be due to them under the contract. The crucial issue presented by the pleadings, and to which the evidence was directed, was whether or not the engineer's supervision and acceptance of the work were fraudulent or attended by such gross mistakes as implied bad faith or a failure to exercise an honest judgment. These provisions were in the contract:

'19. * * * No pipe shall be laid, or other construction work done except in the presence of the engineer or his authorized inspectors, and the engineer may order the removal and relaying of any pipe or the reconstruction of any work which has been done without such presence. * * * '

'25. Upon notification by the contractor of the completion of the work, the engineer will carefully inspect all sewers appurtenances and all other work done by the contractors. * * * In general the work shall comply with these specifications and if found not to be so in any respect, it shall be brought to the proper conditions by cleaning, pointing, or if necessary excavating and rebuilding, all at the expense of the contractor. But if it be found, after uncovering any pipe or other work, at the order of the engineer, that no defects exist, or that a defect was not due to the fault of the contractor, then the expense of this shall be borne by the District.

'26. * * * The work shall be prosecuted in such manner and from as many different points, at such time and with such force as the engineer may determine from time to time during the progress of the work. * * * '

'28. When any work or material is found to be imperfect, whether passed upon by the inspector or not, the said work shall be taken up and replaced by new work without delay, at any time prior to final acceptance. * * * '

'33. The Engineer-in-charge shall have the final decision of all matters in dispute involving the character of the work, the compensation to be made therefor, or any question arising under this contract. He shall, as representing the District have the option of making any changes in the line, grade, plan, form, position, dimensions or material of the work herein contemplated either before or after construction is begun, and all other explanations or directions necessary for carrying out or completing satisfactorily the different descriptions of work contemplated and provided for under this contract will be given by the engineer.

'34. The contractor must perform the work contracted for strictly according to these specifications, and follow at all times, without delay, all orders and instructions of the engineer in the prosecution and completion of the work, and every part thereof, and be constantly on the ground or be represented by a duly qualified person to look after the work and receive instructions.

'35. * * * When the contract shall have been completely performed on the part of the contractor, the engineer shall proceed to make final measurement and estimates of same, and shall certify the same to the Board.

The jury found for the plaintiff, and the defendants now seek to reverse the judgment which was rendered upon the verdict.

Frank Spurlock and J. F. Loughborough (F. V. Brown and D. H. Cantrell, on the brief), for plaintiffs in error.

M. L. Stephenson and Jacob Fink (R. W. Nicholls, on the brief), for defendants in error.

Before SANBORN, VAN DEVANTER, and HOOK, Circuit Judges.

VAN DEVANTER, Circuit Judge, after stating the case as above, .

A stipulation in a contract like the one here sued upon, making an engineer, inspector, or other person the arbiter of the amount and character of the work done, its conformity to the contract, and the compensation to be paid, is valid and obligatory upon the parties, and the action of the arbiter thereunder is final and conclusive, in the absence of fraud or such gross mistakes as imply bad faith or a failure to exercise an honest judgment. Kihlberg v. United States, 97 U.S. 398, 24 L.Ed. 1106; Sweeney v United States, 109 U.S. 618, 3 Sup.Ct. 344, 27 L.Ed. 1053; Martinsburg & Potomac R.R. Co. v. March, 114 U.S. 549, 5 Sup.Ct. 1035, 29 L.Ed. 255; Chicago, Santa Fe & California R. Co. v. Price, 138 U.S. 185, 11 Sup.Ct. 290, 34 L.Ed. 917; United States v. Gleason, 175 U.S. 588, 20 Sup.Ct. 228, 44 L.Ed. 284; Elliott v. Missouri, Kansas & Texas Ry. Co., 21 C.C.A. 3, 74 F. 707; United States v. Bonness, 60 C.C.A. 321, 125 F. 485; Hot Springs Ry. Co. v. Maher, 48 Ark. 522, 3 S.W. 639.

The contention is made that, to be efficient to destroy the final and conclusive character of the arbiter's action, gross mistakes must be such as not only to imply, but to necessarily imply, bad faith. The distinction is ideal rather than practical, as is illustrated in Martinsburg & Potomac R. Co. v. March, and Chicago, Santa Fe & California R. Co. v. Price, supra, where the two expressions are used interchangeably and as having the same meaning. Good faith, which is presumed in the absence of clear and convincing evidence to the contrary, renders the action of the arbiter final and conclusive. Bad faith renders it of no effect. Gross mistakes imply bad faith only when, all the circumstances duly considered, they cannot be reconciled with good faith, and then they not only imply, but necessarily imply, bad faith.

The evidence produced upon the trial covers more than 800 pages of the printed record. It has been attentively read and carefully considered, with the result that we are agreed in the conclusion that there was substantial evidence tending to show mistakes in the work so numerous, so serious, so readily observable, so generally favorable to the contractors, and therefore so gross, as to imply bad faith in the supervision and acceptance of the work. There was also substantial evidence to the contrary. The conflict made it necessary to submit the case to the jury, and the defendants' request for a directed verdict was properly refused.

Several instructions requested by the defendants were to the effect that if the work was done in the presence of inspectors, and as directed or permitted by them, the contractors would not be responsible for or affected by any defects due to mistakes of the inspectors, whether or not the manner in which they directed or permitted the work to be done was in accordance with the contract. These requests were properly refused because they erroneously assumed that the sewer district would be concluded by all mistakes of the inspectors, whether made honestly and in good faith, or otherwise, and because they erroneously disregarded the provision of the contract requiring the engineer to make a final and careful inspection of the work after its completion, and the further provision requiring the contractors to take out and replace any work found to be imperfect prior to final acceptance, whether it had been passed upon by an inspector or not. In this connection it should be observed that the court charged the jury that as the inspectors represented the engineer, and were clothed with a power of supervision over the work as it progressed, mere negligence or errors of judgment on their part...