Hollingsworth v. Leachville Special School District

• Decision Date: 26 February 1923
• Docket Number: 192
• Parties: HOLLINGSWORTH v. LEACHVILLE SPECIAL SCHOOL DISTRICT
• Court: Arkansas Supreme Court

249 S.W. 24

157 Ark. 430

HOLLINGSWORTH v. LEACHVILLE SPECIAL SCHOOL DISTRICT

No. 192

Supreme Court of Arkansas

February 26, 1923

Appeal from Mississippi Chancery Court, Chickasawba District; Archer Wheatley, Chancellor; modified and affirmed.

Decree affirmed.

L C. Going, for appellant Hollingsworth.

The school district contracted with Mitchell Selligman as architect alone, not with Selligman & Edelsvard. See contract of March 20, 1919. Article 2 thereof recites: "It is understood and agreed by and between the parties hereto that the work included in this contract is to be done under the direction of the said architect (meaning Selligman),and that his decision as to the construction and meaning of the drawings and specifications shall be final." That bound both parties. 88 Ark. 213; 112 Ark. 83. There has been a substantial compliance with the contract, and that entitled Hollingsworth to his pay. 97 Ark. 278; 64 Ark. 34; 105 Ark 353; 122 Ark. 308; 131 Ark. 481.

Edward B. Klewer, for appellant Maryland Casualty Company Ashley Cockrill, of counsel.

1. There was a substantial compliance with the contract. 97 Ark 278, 133 S.W. 1032. The architect, Selligman, was of the opinion that there had been a substantial performance of the contract. His decision cannot be questioned, except for fraud, or gross mistake, necessarily implying bad faith or failure to exercise an honest judgment. 48 Ark. 522, 3 S.W. 639.

2. There was no certificate by the architect of such refusal, neglect or failure on the part of the contractor as to justify the owner in terminating the employment of the contractor, and taking over and completing the building, Mitchell Selligman being the architect authorized by the contract to make such certificate. Such certificates are conditions precedent to the right of the contractor to furnish labor and material, or the right to terminate the employment of the contractor; and such a provision in a building contract is in the nature of a forfeiture which should be strictly construed, it being incumbent on the owner to show a strict compliance with the contract, or a valid excuse for noncompliance. 77 Ark. 305, 90 S.W. 1000; 142 Ark. 539, 219 S.W. 328; 100 Ark. 565, 568; 87 Conn. 41, 86 A. 755; 127 F. 671, 62 C. C. A. 397; 80 Conn. 134, 67 A. 369, 13 L. R. A. (N. S.) 448; 56 Minn. 410, 57 N.W. 943. Even if Edelsvard was an "architect" within the meaning of the contract, a joint certificate by both was necessary before the owner would be justified in terminating the contractor's employment. 30 Ind.App. 342, 65 N.E. 1061; 173 Ill. 179, 50 N.E. 716; 165 Cal. 497, 133 P. 280, Ann. Cases, 1916-C, 44; 193 Mo.App. 132, 182 S.W. 143. See also 144 N.Y. 691, 39 N.E. 394; 157 N.Y.S. 782; 21 Ga.App. 758, 95 S.E. 113.

3. If Edelsvard, associate architect, was authorized by the contract to give such certificate, the purported certificate given by him was insufficient in law to comply with the contract, article 5. 157 N.Y.S. 782; 70 N.J.L. 4, 56 A. 304; 68 N.J.L. 627, 54 A. 815; 104 F. 930; 144 N.Y. 691, 39 N.E. 394; 193 Mo.App. 132, 182 S.W. 143; 95 S.E. 113; 105 A. 467.

4. The three days' notice prescribed by article 5 of the contract to be given to the contractor by the owner after the making of such certificate by the architect was not given to the contractor. 193 Mo.App. 150; 213 S.W. 151; 165 Cal. 497; 213 S.W. 151.

5. The decision of the architect as to compliance was final, and could be impeached only by clear and convincing proof of fraud, or mistake so gross as to imply bad faith or the exercise of dishonest judgment, and the evidence does not justify such finding. 70 Ill.App. 273; 84 Ill. 225; 158 Ill. 432; 90 N.Y.S. 115, 44 Misc. 555; 165 Pa.St. 394, 30 A. 988; 37 Ark. 145; 38 Ark. 419; 92 Ark. 509, 122 S.W. 649; 112 Ark. 83, 164 S.W. 1137; 88 Ark. 213, 114 S.W. 242; 83 Ark. 136, 103 S.W. 620; 79 Ark. 506, 96 S.W. 70; 68 Ark. 185, 56 S.W. 1068; 48 Ark. 522, 3 S.W. 639.

6. As to liquidated damages for delay in completion, there was no notice of default, and the surety was therefore relieved of its obligation to pay such damages.

7. The school district waived strict compliance with the terms of the contract requiring completion within five months of its execution. 99 Ark. 340, 138 S.W. 467; 104 Ark. 9; 103 Ark. 484, 145 S.W. 234; Wait, Engineering & Architectural Jurisprudence, § 325; 9 N.Y.S. 538; 121 Ill. 571; 120 N.Y. 236; 1 N.Y.S. 500; 81 N.J.Eq. 286, 86 A. 958; 20 L. R. A. (N. S.) 350, notes; 2 L. R. A. 1916-E, 1180, notes.

8. The burden was on cross- complainant to legally prove its damages, and there is no legal proof of any damage sustained by it. 44 Ark. 439; 153 Ill.App. 43; 10 Ore. 440.

9. The provision of the contract with respect to the certificate of the architect, that he has audited the cost of completion, should be strictly construed.

R. A. Nelson, for appellee.

1. It being a question of fact as to whether or not there was a substantial performance of the contract by the contractor, the trial court's finding that there was not a substantial performance will not be reversed, if supported by the evidence, 148 Ark. 296; 129 Ark. 583; 130 Ark. 178; 6 Cyc. 54, 57, 58. 97 Ark. 282; 79 Ark. 115; 102 Ark. 53.

2. Propositions 2, 3 and 4 urged by the casualty company go only to the sufficiency of the notice to comply served upon the contractor, and of the architect's certificates, to warrant the owner in taking over the building, under article 3 of the construction contract, upon default of the contractor. These alleged defenses were not pleaded in the trial court and cannot be raised here. 37 Ark. 542; 91 Ark. 30; 129 Ark. 280.

If these matters were conditions precedent, and therefore defenses to the appellee's action against the contractor and his surety, they were material defenses, and should have been pleaded in the lower court. C. & M. Digest, § 1231; 85 Ark. 567; 128 Ark. 240.

3. As to proposition 5, it is not correctly stated in the form submitted to the trial court; but court's finding that Selligman's conduct was such as to amount to bad faith was in accordance with the proof.

4. As to liquidated damages and appellant's argument thereon, reference is had to the surety company's bond, viz: "Provided, that any alterations which may be made in the terms of the contract or in the work to be done under it, or the giving by the owner of any extension of time for the completion of the contract, or any forbearance on the part of the owner, shall not in any way release the principal and surety, or either of them, * * * from liability herein assumed, notice to the surety of any such alterations, extensions or forbearances being hereby waived." 4 R. C. L., 3547; 29 Cyc. 1117; 32 Cyc. 106, 107; 92 Ark. 519.

5. The above waiver carries with it appellant's proposition 7. Moreover there is no plea or proof that the school district ever received any consideration for the so-called waiver of completion on time. 4 R. C. L. 3719; 9 C. J. 794.

6. The method adopted in the audit or certificate of the architect was that agreed upon by the parties under article 5 of the contract, and the amount of the certificate was never questioned for fraud or mistake in the trial court, and all parties are bound by it. 6 Cyc. 40, 42; 48 Ark. 522; 68 Ark. 187; 79 Ark. 513; 83 Ark. 402; 88 Ark. 224; 91 Ark. 421.

OPINION

SMITH, J.

On March 11, 1920, J. E. Hollingsworth, a building contractor doing business as J. E. Hollingsworth & Co., sued the Leachville Special School District, alleging that on or about May 20, 1919, he and the said district entered into a written contract, whereby he agreed to erect and complete a certain brick school building in the town of Leachville, according to the plans and specifications made a part of the complaint, for the sum of $ 34,000. That he began the construction of the building under his contract, and had expended thereon the sum of $ 20,178.80, and that he had been paid by the school district, on the certificate of the architect, the sum of $ 12,800, leaving a balance due him of $ 7,378.80. That on or about December 10, 1919, the school district forcibly took possession of said partly constructed building, and refused and declined to permit him to complete same, and that such action on the part of the school district was unlawful and wrongful, in that he was constructing the building in accordance with the plans and specifications.

On March 27, 1920, the school district filed its answer and cross-complaint. It admitted the execution of the contract sued on, but denied that the building was constructed according to the plans and specifications, and denied that it had, without right, forbidden plaintiff to continue the work, and averred that its reason for not permitting plaintiff to continue was that he had refused to construct and complete the building in accordance with the plans and specifications.

In its cross-complaint the school district set up the contract, and alleged the execution of a bond for its faithful performance by the Maryland Casualty Company as surety. The plaintiff, the surety and Mitchell Selligman, the architect, were made parties to the suit. It was alleged that the architect had conspired with the plaintiff to obtain the contract for the plaintiff, and that the architect had fraudulently permitted the plaintiff to make substitutions of defective material, and had fraudulently approved defective work by the contractor.

Answers were filed by the cross-defendants, denying all the allegations of the cross-complaint, and alleging that the work of the contractor was in accordance with the plans and specifications, and had been accepted and approved by the architect, whose decision, according to the terms of the building contract, was final with...