JA La Porte Corporation v. Mayor and City Council, 5421.

• Decision Date: 12 February 1936
• Docket Number: No. 5421.,5421.
• Citation: 13 F. Supp. 795
• Parties: J. A. LA PORTE CORPORATION v. MAYOR AND CITY COUNCIL OF BALTIMORE.
• Court: U.S. District Court — District of Maryland

13 F. Supp. 795

J. A. LA PORTE CORPORATION v. MAYOR AND CITY COUNCIL OF BALTIMORE.

No. 5421.

District Court, D. Maryland.

February 12, 1936.

Bartlett, Poe & Claggett, of Baltimore, Md., for plaintiff.

R. E. L. Marshall and Paul F. Due, City Sols., both of Baltimore, Md., for defendant.

WILLIAM C. COLEMAN, District Judge.

This is a suit by the plaintiff, a corporation of the state of New York, against the mayor and city council of Baltimore, a municipal corporation under the laws of the state of Maryland, arising out of a written contract whereby the plaintiff, hereinafter called the contractor, agreed to construct for the mayor and city council of Baltimore, hereinafter called the city, the so-called Prettyboy Dam in the northern part of Baltimore county, Md., about 3 miles southwest of the town of Parkton, across the Western branch of the Gunpowder river. It was an extensive and costly project for the enlargement of the water supply system for the city of Baltimore. The contractor's suit is embodied in a declaration which contains 23 counts alleging claims in the aggregate sum of $850,000. To all but 5 of these counts, namely, Nos. 13, 14, 15, 17, and 21 (on which the city has joined issue and which are not now before the court), the city has filed demurrers and the question involved in the present proceeding is whether these demurrers should be sustained or overruled as to any or all counts.

The basis of this court's jurisdiction is supported by the requisite averments as to diversity of citizenship and amount in dispute.

Apart from any technical description of the various parts of the work under the contract which are involved in the present controversy, and which the contractor claims it properly performed but for which it has not been properly compensated, the work as a whole may be grouped into three broad classes: (a) regular work under the contract; (b) extra work under the contract; and (c) work falling entirely outside of the contract. The first 4 counts of the declaration are the usual common counts, and all of the remaining 14 counts with which we are here concerned, namely, counts Nos. 5, 6, 7, 8, 9, 10, 11, 12, 16, 18, 19, 20, 22, and 23, relate either to regular or extra work under the contract except the twenty-third count, which, as hereinafter explained, relates to matters entirely unprovided for by the contract.

The formal written contract contains 51 pages of closely printed "General Specifications," numerous provisions of which are involved in the present proceeding. The grounds of the demurrers are numerous, but we will confine our consideration to two grounds, because, as hereinafter explained, upon the answer thereto depends the sufficiency or insufficiency of the demurrers. Briefly stated, the first of these grounds is that paragraph 22 of the general specifications makes the findings of the chief engineer of the city final and conclusive upon the contractor with respect to performance under the contract; that, therefore, the obtaining of the chief engineer's certificate of satisfactory completion of each and every part of the work is a condition precedent to the right to recover for each and every part. Paragraph 22 reads as follows: "To prevent disputes and litigation, the Chief Engineer shall in all cases determine the amount, quality and acceptability of the work and materials which are to be paid for under the contract; shall determine all questions in relation to said work and materials and the performance thereof, and shall in all cases decide every question which may arise relative to the fulfillment and the construction of the terms and provisions of the contract. His determination, decision and estimate shall be final and conclusive in respect to the fulfillment thereof or the construction of the terms and provisions thereof, and in case any question should arise between the parties touching the contract, or the construction of its terms, and provisions, such determination, decision and estimate shall be a condition precedent to the right of the Contractor to receive any money under the contract."

Briefly stated, the second ground for the demurrers is that compliance with paragraph 62 of the general specifications is likewise a condition precedent to the right on the part of the contractor to recover. This paragraph is as follows: "If the Contractor shall claim compensation for any damages sustained by reason of the acts of the City, or its agents, he shall, within five days after the sustaining of such damage, make a written statement of the damages sustained to the Engineer. On or before the fifteenth day of the month succeeding that in which any such damage shall have been sustained, the Contractor shall file with the Engineer an itemized statement of the details and amount of such damage, and unless such statement shall be made as thus required, his claim for compensation shall be forfeited and invalidated, and he shall not be entitled to payment on account of any such damage."

None of the counts now before us assert that either of these paragraphs of the general specifications has been complied with, or even refer to them. Nor is reference made to the issuance or nonissuance of a certificate of completion by the city's chief engineer (except in the twenty-second count), the contractor denying, for reasons hereinafter more fully set forth, that compliance with either one of them is a condition precedent to its right to recover.

In addition to voluminous, detailed recitals throughout the general specifications with respect to work falling within the first class, namely, regular work under the contract, there is specific provision for work of the second class; namely, extra work. This is covered by paragraphs 67 and 68, which are as follows:

"67. The Contractor shall perform extra work, for which there is no quantity and price included in the contract, whenever, to complete fully the work contemplated, it is deemed necessary or desirable, and such extra work shall be done in accordance with the specifications therefor, or in the best workmanlike manner as directed. This extra work will be paid for at a unit price or lump sum to be agreed upon previously in writing by the Contractor and the Engineer, or where such a price or sum cannot be agreed upon by both parties, or where this method of payment is impracticable, the Engineer may order the Contractor to do such work on a `Force Account' basis. No work will be paid for as extra work upon which a unit price has been bid under the contract.

"68. No order for extra work, at any time or place, shall in any manner or to any extent relieve the Contractor of any of his obligations under the contract; all extra work orders being given in accordance with the contract and to be considered a part of the same and subject to each and all the terms and requirements thereof."

We reach the conclusion that as to each of the counts now under consideration which embraces work of either the first or second class, the demurrer must be sustained for the following reasons. First, we find that obtaining the chief engineer's certificate of satisfactory completion, pursuant to paragraph 22 of the general specifications, is a condition precedent to recovery upon every item of such work. It is well settled that when parties to a construction contract provide that estimates and decisions of an architect or engineer as to questions arising in the execution of the contract, shall be final and conclusive, such provisions have the effect of an award of an arbitrator, and, in the absence of fraud or such gross mistakes as imply bad faith or failure to exercise an honest judgment (none of which is charged in the counts here under consideration), they are conclusive and binding upon the parties. See Corporation of Charles Town v. Ligon (C.C.A.) 67 F.(2d) 238, and cases therein cited.

Second, we believe that paragraph 22 is properly to be construed as binding upon both the city and the contractor. This paragraph recites that the chief engineer's "determination, decision and estimate shall be final and conclusive in respect to the fulfillment thereof the contract or the construction of the terms and provisions thereof, and in case any question should arise between the parties touching the contract, or the construction of its terms, and provisions, such determination, decision and estimate shall be a condition precedent to the right of the Contractor to receive any money under the contract." (Italics inserted.) It is reasonable from this language to conclude that it was intended to bind both parties. The contractor apparently agrees with this interpretation, but asserts that paragraph 22 is directly contrary and repugnant to paragraph 65, and, therefore, both must be declared inoperative. Paragraph 65 is as follows: "The City shall not, nor shall any department or officer thereof, be precluded or estopped, by any return or certificate made or given by the Chief Engineer or other officer, agent or appointee of the City, under any provision of the contract, from showing the true and correct amount and character of the work done and materials furnished by the Contractor or any other person under the contract, at any time before or after the final completion and acceptance of the work and payment thereof pursuant to any such return or certificate; or from showing at any time that any such return or certificate is untrue and incorrect or improperly made in any particular; or that the work or any part thereof does not in fact conform to the specifications; and the City shall not be precluded or estopped, notwithstanding any such return or certificate and payment in accordance therewith, from demanding and recovering from the Contractor such damages as it may sustain by reason of his failure to comply with the specifications."

Summarized, the argument of the contractor is that the only reasonable construction to be placed upon paragraph 65 is...