Johnston v. Cincinnati, N. O. & T. P. Ry. Co.

• Decision Date: 01 May 1922
• Citation: 240 S.W. 429,146 Tenn. 135
• Parties: JOHNSTON v. CINCINNATI, N. O. & T. P. RY. CO. ET AL.
• Court: Tennessee Supreme Court

240 S.W. 429

146 Tenn. 135

JOHNSTON v. CINCINNATI, N. O. & T. P. RY. CO. ET AL.

Supreme Court of Tennessee.

May 1, 1922

Appeal from Chancery Court, Scott County; John Jennings, Jr.Chancellor.

Suit by Hu M. Johnston, as receiver, against the Cincinnati, New Orleans & Texas Pacific Railway Company and the Director General of Railroads.Judgment for plaintiff against both defendants, and both sides appeal.Affirmed in part, and reversed and remanded in part.

CHAS C. TRABUE, Special Judge.

H. H Thrasher is a railroad contractor in Knoxville.A general creditors' bill was filed against him, and Hu M Johnston, complainant, was appointed receiver of his property and assets, and in that capacity brought this suit against the Cincinnati, New Orleans & Texas Pacific Railway Company and the Director General of Railroads to recover a balance alleged to be owing Thrasher under a construction contract, and a further sum for the alleged wrongful use of Thrasher's equipment and supplies.There was a decree below for $118,594.36 with interest from the filing of the bill, and both sides appealed.

On June 27, 1917, Thrasher entered into a contract with the railroad company to construct 10.6 miles of railroad in Morgan county on a unit price basis; that is to say, he was to be paid different unit prices for earth, loose rock, soft rock, and hard rock.War conditions and other circumstances caused the contract to become very burdensome, and in January, 1918, Thrasher went to Washington with Judge Lindsay, one of the attorneys representing him in this suit, and announced to Mr. Spencer, vice president of the railroad, that he could not go on under existing conditions, and had determined to abandon the contract.

The present suit is not based on the original contract, but on a new agreement alleged to have been entered into orally on the occasion of this visit of Thrasher in Washington, by which new agreement it is claimed that the road bound itself to pay Thrasher the cost of the work from its beginning until its completion.

When complainant filed his bill in this cause he based his claim to a recovery on two grounds: First, upon an alleged custom of the defendant railroad company to pay all contractors for construction work who might be losing money on their contracts the cost of the work plus a reasonable profit; and, second, upon the alleged oral agreement of January, 1918, to pay him actual cost--and in his prayer he asked to be allowed the actual cost, "together with a reasonable profit."However, there was no proof in support, of the alleged custom to pay cost and profit, and that ground of the bill was abandoned.Later complainant, in his answer to a cross-bill in the cause, stated that the oral agreement of January was "to allow him cost and profit," but nothing was shown in the proof to have been said about any profit, and the suit at last resolved itself into one of whether defendants had agreed to pay him actual cost.

Defendants likewise claimed that an oral agreement was had in Washington at that time, but they denied that it was an agreement to pay cost; and the question of what that oral agreement was is the fundamental question in the case.

There were present at this conference in Washington Mr. Thrasher and his attorney on the one side, and on the other Mr. Spencer and his chief engineer of construction, Mr. Wells, and assistant chief engineer, Mr. Durham.After some discussion Mr. Spencer asked Mr. Thrasher to make him a definite proposition, and Mr. Thrasher and his attorney withdrew and prepared and submitted to Mr. Spencer a letter containing several propositions looking to the completion of the work.When they came back the next day Mr. Spencer declined these propositions, and there was a general discussion, in which complainant's attorney stated that complainant was having to remove a large quantity of material, such as blue slate, which was classed under his contract as soft rock, with a 28-cent unit price, but which was as hard and expensive to remove as hard rock, and should, he claimed, be classed as hard rock with a 60-cent unit price.

Mr. Spencer asked his engineers if this was so, and they answered in the affirmative, and thereupon he stated that he would like to confer with them privately.After this conference, and when the parties again came together, Mr. Spencer stated that he thought complainant ought to go on with the work and leave the matter to the engineers; whereupon complainant's attorney asked that he and complainant be permitted to talk privately with the engineers, and the four of them retired to an anteroom for that purpose.

Up to this point both sides agree about what occurred, and they further agree that, in the meeting that then ensued of the two engineers and Thrasher and his attorney, an understanding was reached.Thrasher and his attorney say that they asked Wells, the chief engineer, what Mr. Spencer meant by his suggestion that the matter should be left to the engineers, and that Wells replied that Spencer had authorized him to classify or estimate the materials according to cost, which meant, they say, that the railroad would pay the actual cost of the work; and they go on to say that, after this agreement was reached, they went back into Mr. Spencer's room and told him that, since talking with the engineers, Thrasher was willing to go on with the work.

On the other side, Wells had died, so that the only witness was Durham.He testifies that, when the engineers met with Thrasher and his attorney in Mr. Spencer's anteroom, Wells, the chief engineer, stated to Thrasher that the railroad was willing to reclassify the blue slate as hard rock from the beginning, and to pay hard rock prices for it; and he says that this was assented to by Thrasher, and that this was the agreement and the only agreement that was made.

A singular thing is that the agreement, which on either theory involved an increase of probably over $100,000, was not put in writing then or thereafter.Nor were the terms of it repeated in Mr. Spencer's presence when the parties came back into his office.

Complainant asked for a jury, and the parties formulated a large number of issues, which were reduced by the chancellor to four, and these four issues were without objection submitted to and determined by the jury.The first issue was whether the agreement of January 5th was, as contended for by complainant, "to pay H. H. Thrasher actual cost for the work already done and to be done," and the jury answered this in the affirmative; the second issue was whether that agreement was, as contended for by the railroad, namely, to "classify all material which was as expensive to move as solid rock as solid rock and pay the contract price of solid rock therefor," and the jury answered this issue in the negative.

Defendants asked for a peremptory instruction in their favor upon both of these issues, but their request was refused, and this refusal is made the basis of one of their principal assignments of error in this court.

After the jury had thus determined that the railroad had bound itself to pay actual cost (and both sides agreed that the understanding then had was to govern and be effective from the very beginning of the contract in May, 1917) the chancellor directed a reference to the master to take and state an account.

Thrasher had gone on with the work from the time of the new agreement in January, 1918, until September 30, 1918, at which time he had abandoned the work altogether, and his equipment and supplies had been taken over by defendants for the purpose of completing the work, and some six or seven months later had been returned to Thrasher or his receiver.

Accordingly the reference to the master was divided into two heads, the first having to do with determining the amount owing Thrasher for work done by him up to the time he abandoned the contract on September 30, 1918, and the second having to do with determining the amount owing Thrasher by reason of the use by the railroad of his equipment and supplies on and after September 30th.The determination of the amount owing him under the first head was to be on the basis, as found by the jury, of paying him "actual cost."

Proof was taken on this reference, and a report was filed by the special master, and exceptions were taken by both sides.The chancellor allowed some exceptions and disallowed others, the following being a summary of his decision as embraced in the final decree.

Owing Thrasher under contract to pay cost up to

September 30, 1918:

Balance due on payroll, etc ............................ $20,227 71

For Thrasher's personal services ......................... 6,400 00

For rental of his equipment ............................. 40,800 00 $ 67,427

71

----------

Owing Thrasher for use by railroad of his equipment

and supplies after September 30, 1918:

Value of material not returned ......................... $24,766 65

Rental of equipment returned ............................ 26,400 00 51,166 65

---------- ----------

$118,594

36

1.It is first objected by defendants that the right to a jury trial in this case was taken away by section 1 of chapter 90 of the Acts of 1919, repealing those provisions of the Code that gave either party in a chancery case the right to demand a jury.

The bill in this case was filed in January, 1919, and the repealing act took effect in April of that year, and the case was tried before a jury in the following August.Defendants did not object to the jury or to the issues that were submitted to the jury, but raised this question for the first time after the verdict was rendered.

If a jury trial was improper in this case, the question would arise of whether defendants could...