Krieg v. Union Pac. Land Resources Corp.

CourtSupreme Court of Oregon
Writing for the CourtBefore O'CONNELL; McALLISTER
Citation269 Or. 221,525 P.2d 48
PartiesWilliam E. KRIEG, dba Krieg Construction Company, Respondent, Cross-Appellant, v. UNION PACIFIC LAND RESOURCES CORPORATION, a Utah Corporation, Respondent, J. C. COLHOUER, dba Colhouer Construcion Company, Appellant, Cross-Respondent, Cascade Construction Company, Inc., an Oregon corporation, Respondent, The Bohemian Restaurant, Inc., an Oregon corporation, and Walter J. Kraus, Defendants.
Decision Date01 August 1974

Page 48

525 P.2d 48
269 Or. 221
William E. KRIEG, dba Krieg Construction Company,
Respondent, Cross-Appellant,
Corporation, Respondent,
J. C. COLHOUER, dba Colhouer Construcion Company, Appellant,
Cascade Construction Company, Inc., an Oregon corporation, Respondent,
The Bohemian Restaurant, Inc., an Oregon corporation, and
Walter J. Kraus, Defendants.
Supreme Court of Oregon.
Argued and Submitted Sept. 7, 1973.
Decided Aug. 1, 1974.

[269 Or. 223]

Page 49

Ferris F. Boothe, Portland, for appellant, cross-respondent J. C. Colhouer, dba Colhouer Construction Co. With him on the briefs were Douglas G. Beckman and Black, Kendall, Tremaine, Boothe & Higgins, Portland.

Frank H. Lagesen, Portland, for respondent Union Pacific Land Resources Corp. On the brief were Cosgrave & Kester, Portland.

Alan K. Brickley, Portland, for respondent, cross-appellant William E. Krieg, dba Krieg Construction Co. On the brief were Davis, Jensen, DeFrancq & Holmes, Portland.


McALLISTER, Justice.

This is a suit to foreclose a mechanic's lien on a city block in downtown Portland bounded by Washington and Alder Streets and Ninth and Tenth Avenues, known as Block 216, owned by the defendant Union Pacific Land Resources Corportion, hereinafter referred to as 'U.P.'

On May 17, 1971, U.P. contracted with the defendant J. C. Colhouer to demolish and dispose of the buildings on three-fourths of Block 216 and to construct on the cleared land a surface automobile parking facility.

Colhouer, in turn, on June 21, 1971, subcontracted with the plaintiff William E. Krieg that Colhouer [269 Or. 224] would wreck and remove the buildings, cap the sewers, remove the sidewalks, fill the basements up to one-tenth of grade and that Krieg would 'furnish all labor, material and equipment necessary to complete all rocking, asphalt paving, stop blocks, waterlines, catch basins, all concrete and shrub plantings' and 'all other work required * * * to complete the parking lot' according to U.P.'s plans and specifications.

The primary question is whether certain paving in the streets surrounding Block 216, required by the city of Portland, was a part of the work required by the U.P.-Colhouer contract or was extra work to be paid for by U.P. If Colhouer was responsible for the street paving under the contract the next question is whether Krieg was responsible for this item under his subcontract with Colhouer. In addition, there is a dispute between Colhouer and Krieg as to (1) the amount due Krieg for additional asphalt required to pave the parking lot, (2) whether Colhouer owes Krieg for other alleged extras, and (3) who was responsible for the cost of the

Page 50

permit for the sidewalk and curb work. Krieg also claimed interest on the amount due him from Colhouer. 1

We turn first to the street paving. It is clear that when their contract and subcontract were entered into none of the parties anticipated that any street paving would be required in connection with the construction of this parking lot. As a part of the demolition and removal of the buildings the old sidewalks and curbs were removed. For some reason which is not disclosed [269 Or. 225] by the record, the city set the grade for the new curbs substantially higher than the grade for the former curbs. The city required that the street paving be no more than seven inches lower than the new curbs. To accomplish this, the city required that additional asphalt be laid from the curbs out into the street and joined with the existing paving by a process called 'feathering.' This is the street paving called 'skin patching' about which the parties are in dispute.

Mr. Donald F. Sheely, an engineer employed by U.P., was in charge of this project for U.P. In early August 1971, Sheely first learned that the city was going to require street paving in connection with the construction of the parking lot. He thereupon wrote the following letter to the City Engineer:

'August 16, 1971


Mr. James Apperson

City Engineer

City of Portland

1800 S.W. Sixth Avenue

Portland, Oregon 97201

Dear Mr. Apperson:

This is in regard to Block 216, located in Southwest Portland, and its interim use as a surface automobile parking facility.

It was recently brought to our attention that it is the property owners obligation to build up the street areas adjacent to their property at such time as a permanent structure is located thereon.

This will confirm that at such time as a permanent structure is located on its Block 216 property that the Union Pacific Land Resources Corporation[269 Or. 226] will take care of the above mentioned obligations.

Yours very truly,

s/ O. W. RYAN

Director-Land &

Industrial Development



It will be noted that the letter was, in effect, an acknowledgment by U.P. that, as the property owner, the street paving was its responsibility. According to Sheely, the city did not respond to this letter. After the city appeared to have declined, sub silentio, U.P.'s offer, Sheely took the position that Colhouer was obligated under his contract to perform the street paving.

On August 24th Krieg signed an application for a permit to construct the curbs, sidewalks and gutters, which described the work as: 'Replacing combination sidewalk and curb to new grades, skinpatching if necessary', and issued his check in payment of the permit fee. The permit fee of $240 was calculated only on the area of sidewalks, curbs and driveways with no charge for skin patching. He testified that he applied for the permit even though he did not think it was his responsibility because he was ready to pour the sidewalks and the city would not come out and set the grade until the permit was issued.

On August 26th Sheely, who testified that he was concerned over delay in the sidewalk construction and was unaware that Krieg had already taken care of the permit, accompanied Colhouer to City Hall, where Colhouer signed a permit application.

Page 51

This application was practically identical with Krieg's except that the work was described as: 'Replacing sidewalk and curb [269 Or. 227] to new grade, and paving roadway if necessary.' Krieg testified that when he learned, on that same day, that Colhouer and Sheely had obtained a new permit he immediately stopped payment on his check.

The contract provided that the work had to be completed by September 21, 1971. Sheely apparently did not inform either Colhouer or Krieg that the city would require that the streets be built up. It is not clear from the record precisely when Krieg learned of the skin patching requirement or the extent thereof. Colhouer testified that he first learned of it around September 8th or 10th. Both men consistently denied any responsibility for the street paving, but Colhouer insisted that if the street paving was not extra work, then Krieg was responsible for the work under his subcontract.

During the last three weeks in September there was an exchange of correspondence between the parties, including an offer by Colhouer to U.P. and Krieg to submit the dispute to arbitration. This offer was refused by U.P. and was apparently ignored by Krieg. Although all the work on the parking lot except the street paving was completed by the September 21st completion date, the city would not issue a certificate of acceptance until the paving was done. Since Colhouer could not get paid by U.P. until he furnished a certificate of acceptance he wrote letters on September 30th to U.P. and Krieg informing them that he was proceeding with the paving, but that he intended to hold them liable for the post. Colhouer then ordered the paving done by the city at a cost of $1,040.

In contending that Colhouer was obligated by his contract to do the street paving, U.P. relies on several provisions of its agreement with Colhouer and the [269 Or. 228] specifications attached thereto. Those were general provisions requiring the work to be done in compliance with the city code and requiring the contractor to furnish U.P. evidence that the city 'has accepted the portion of the work over which it had jurisdiction', and the following provisions of the specifications concerning the scope of the work:


'Scope of Work:

'(B) Miscellaneous Work: The following items of work will be classed...

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