Independent School Dist. No. 35 v. A. Hedenberg & Co.

• Decision Date: 02 January 1943
• Docket Number: No. 33221.,33221.
• Citation: 214 Minn. 82,7 N.W.2d 511
• Court: Minnesota Supreme Court
• Parties: INDEPENDENT SCHOOL DIST. NO. 35, ST. LOUIS COUNTY, v. A. HEDENBERG & CO., Inc., et al.

7 N.W.2d 511

214 Minn. 82

INDEPENDENT SCHOOL DIST. NO. 35, ST. LOUIS COUNTY, v. A. HEDENBERG & CO., Inc., et al.

No. 33221.

Supreme Court of Minnesota.

January 2, 1943.

Appeal from District Court, St. Louis County; Albert H. Enersen, Judge.

Action by the Independent School District No. 35, St. Louis County, Minn., against A. Hedenberg and Company, Inc., and others, for breach of contract for construction of a gymnasium for the plaintiff. Verdict for plaintiff, and defendants appeal from an order denying their alternative motion for judgment or a new trial.

Order reversed, and new trial granted.

Fryberger, Fulton & Boyle, of Duluth, for appellants.

M. J. Mulvahill, of Hibbing, for respondent.

STREISSGUTH, Justice.

Action for breach of contract for the construction of a gymnasium for plaintiff school district. Plaintiff recovered a verdict for $6,000, and defendants, contractor and surety, appeal.

The asserted breach of contract consisted in (1) the failure to lay brick in the manner specified, and (2) the failure to completely fill the joints between bricks with mortar. It is claimed that the walls were thereby caused to leak, especially during and immediately after heavy rainfalls.

The brick walls were built in four tiers. The specifications required that common brick be so laid that every sixth course be a full header course anchored in or bonded to the adjoining tier and that face brick be so laid that every third course have alternate headers and stretchers.¹ Face brick were required to be laid with close shoved joints completely filled with mortar, as contrasted with joints only "buttered" on the outside edges of the bricks.

The gymnasium was completed late in the spring of 1939, the final payment being made in May of that year and the building formally accepted on June 20. In August 1939, following a heavy rainfall, it was discovered that the walls leaked so extensively as to form large pools of water on the gymnasium floor and as to suggest sieves instead of impervious walls. Eight pails were put on the floor to catch the water flowing from a single recess in the wall. In other places water trickled down the inside walls in sizable streams. After discovery of the leaks, experiments made with a garden hose showed that water readily flowed from the exterior into the interior at many places. The leaking of the walls caused doors to swell and floors to warp, and the building had a musty odor.

Following the discovery of the leaky walls, the school board on August 23, 1939, wrote the contractor requesting that it appear before the board on August 28. In response, one Farnam, the contractor's construction foreman, appeared and discussed with the board the leaks and the cause thereof. He insisted that the gymnasium was built according to specifications and that the leaks were due to the concrete bricks selected by the board and which the contractor was directed to use. He finally told the board: "You got just what you asked for," and walked out. The architect was not present at the meeting; in fact, he had been previously paid off and discharged. No demand was made then or later by either party for arbitration to fix the blame or to determine the extent of the damage.

Subsequently the board wrote one Joseph A. Wise of the University of Minnesota, an expert, for advice. Wise replied, apparently suggesting several possible causes and recommending a complete and thorough inspection of the walls. His reply was submitted to the architect, Thomas J. Shefchik, for his reaction. On September 29, 1939, the architect wrote a letter to the secretary of the school district in which, inter alia, he said: "About the only thing that the School Board would gain by * * * an investigation would be the definite establishment of the cause of the leak. If the fault lies in the brick then, of course, that would end the entire matter because the School Board definitely purchased the brick on their own responsibility. Should it develop that the mortar is at fault then, of course, the Board would have recourse against Mr. Hedenberg; although I have my grave doubts as to the success of any action taken against him because a careful visual examination of the mortar suggests an A-1 job."

An inspection by Mr. Wise and other experts revealed that many of the joints between the bricks were merely "buttered," the mortar extending to a depth of only one-half or three-quarters of an inch instead of to the full four-inch depth of the brick as required. What appeared on the outside of the wall to be header bricks were, in many instances, brick bats, which did not extend through to the next tier or bind the two tiers together. There were many wide and open spaces between the several tiers of brick.

Notwithstanding the inspection, the dispute continued unsettled for over a year without a request or demand, either oral or written, by either party for a formal decision of the architect or for arbitration. Not until December 13, 1940, was this action for damages for breach of contract begun. Defendants incorporated in their separate answers article 20 of the "general conditions" of the contract, hereinafter quoted, but made no demand therein for arbitration; nor did they at any time during the progress of the litigation make such demand or move for a stay of the court proceedings to permit arbitration.

As their principal defense, the contractor and its corporate surety relied upon certain contract provisions relating to arbitration found in the "general conditions." They urged that under these provisions a decision of the architect and a submission to arbitration were conditions precedent to any court action. A reference to the pertinent provisions is therefore essential. They are as follows:

"Art. 20. Correction Of Work After Final Payment.—Neither the final certificate nor payment nor any provision in the Contract Documents shall relieve the Contractor of responsibility for faulty materials or workmanship and, unless otherwise specified, he shall remedy any defects due thereto and pay for any damage to other work resulting therefrom, which shall appear within a period of one year from the date of substantial completion. The Owner shall give notice of observed defects with reasonable promptness. All questions arising under this article shall be decided by the Architect subject to arbitration.

* * * * *

"Art. 25. Certificates Of Payments.— * * * "No certificate issued nor payment made to the Contractor, nor partial or entire use or occupancy of the work by the Owner, shall be an acceptance of any work or materials not in accordance with this contract. The making and acceptance of the final payment shall constitute a waiver of all claims by the Owner, other than those arising from unsettled liens, from faulty work appearing after final payment or from requirement of the specifications, * * *.

* * * * *

"Art. 31. Damages.—If either party to this Contract should suffer damage in any manner because of any wrongful act or neglect of the other party or of anyone employed by him, then he shall be reimbursed by the other party for such damage.

"Claims under this clause shall be made in writing to the party liable within a reasonable time at the first observance of such damage and not later than the time of final payment, except as expressly stipulated otherwise in the case of faulty work or materials, and shall be adjusted by agreement or arbitration.

* * * * *

"Art. 39. Architect's Decisions.—The Architect shall, within a reasonable time, make decisions on all claims of the Owner or Contractor and on all other matters relating to the execution and progress of the work or the interpretation of the Contract Documents.

"The Architect's decisions, in matters relating to artistic effect, shall be final, if within the terms of the Contract Documents.

"Except as above or as otherwise expressly provided in the Contract Documents, all the Architect's decisions are subject to arbitration.

"Art. 40. Arbitration.—All questions subject to arbitration under this Contract shall be submitted to arbitration at the choice of either party to the dispute.

"* * * Should the party demanding arbitration fail to name an arbitrator within ten days of his demand, his right to arbitration shall lapse. * * *

"If there be one arbitrator his decision shall be binding; if three the decision of any two shall be binding. Such decision shall be a condition precedent to any right of legal action, and wherever permitted by law it may be filed in Court to carry it into effect." (Italics supplied.)

1. The question whether the contractor was at fault was never "decided by the architect" within the meaning of article 20. The decision thereby contemplated is a final and not a mere tentative or informal one. The letter of the architect, from which we have quoted, was properly excluded as evidence. It indicated on its face that the architect had made only a "visual examination of the mortar" and that the letter was not intended to be his final decision as to the quality of the mortar, much less as to compliance with the specifications relating to header bricks and to slushed joints. Nor was the letter admissible as an admission on the part of the school district, for, under a distinct provision of the contract, the architect was not the agent of the owner but "the interpreter of the conditions of the contract and the judge of its performance."

2. Article 20 obviously was intended to apply to remediable defects appearing after "substantial completion" and the issuance of the final certificate. It required the correction of such defects if so "decided by the Architect," without the necessity of resorting to a claim for damages under article 31. But the owner, in addition to his right under article 20 to have "defects due" to "faulty materials or workmanship" remedied, with payment "for any damage to other work resulting therefrom," also had the right, under article 25...