Meyers v. Pacific Const. Co.

• Decision Date: 08 July 1891
• Citation: 20 Or. 603,27 P. 584
• Parties: MEYERS et al. v. PACIFIC CONST. CO.
• Court: Oregon Supreme Court

27 P. 584

20 Or. 603

MEYERS et al. v. PACIFIC CONST. CO.

Supreme Court of Oregon

July 8, 1891

Appeal from circuit court, Benton county; R.S. BEAN, Judge.

L Flinn, Rufus Mallory, and John Burnett, for appellant.

James K. Weatherford, W.S. McFadden, and J.F. Watson for respondents.

LORD, J.

This action was brought by the plaintiffs against the defendant for work and labor performed by them under three separate contracts set out in the complaint, and also for damages alleged to have been sustained for breach of these contracts by the defendant. All the contracts contain the same provisions, and are identical, except that they cover different times for their performance,and different portions of the railroad to be constructed. They are minute in detail specifying the prices to be paid for the various kinds of work to be performed, and prescribing what is solid rock what is loose rock, what is cement gravel, what is hard-pan etc.; and providing also that the work done by the plaintiffs shall be measured and estimated by the company's engineer for each month, and that payment shall be made by the defendant for the amount so ascertained upon the 1st of every month, etc., less 10 per cent.; and that such monthly estimate shall cover the work done as fully as possible without complete detail measurements and calculations of all parts of the work done; but that the divisional engineer, in calculating or classifying, or approving the final estimate, shall not be bound by such monthly statements and classifications, but that such estimates shall be considered merely a basis for the defendant's monthly advances on account of the plaintiffs as contractors. And, finally, these contracts provide that "any dispute or difference between the company and the contractors under this contract as to the classification of work or otherwise shall be referred to the decision of the divisional engineer of the company, whose decision shall be final and conclusive on both parties to such dispute or difference." The contention for the defendant is that, under these contracts, neither party could claim the benefit of them upon any point in dispute or difference arising between them in estimating or classifying the work done, unless the same was submitted to the divisional engineer for his decision, which would be binding upon them in the absence of fraud or gross misconduct evidencing bad faith. Hence the defendant claims that the plaintiffs are precluded, by such stipulation in their contracts, from bringing or maintaining any action, unless they can allege and show that the matters in dispute, in respect to the work done under them, have been submitted to the divisional engineer, and that his decision in the premises was fraudulent, or characterized by such gross mistakes or misconduct as would amount to fraud or bad faith. Within this view, a complaint would fail to state a cause of action that omitted to allege the submission of the matter in dispute, arising out of the contract, to the decision of the divisional engineer, and the misconduct on his part, which operated to avoid the conclusive effect of his decision. The only allegation in the complaint which can have any reference to this aspect of the case is as follows: "As a reason for abandoning said work on and under said contract, was and is that the estimates of plaintiffs' work, given by the defendant's engineers, was for less than the amount of work done by the plaintiffs; and that said estimates and classification of said work by said engineers was false, unfair, and unjust, and was made so by said engineers with the intent on the part of the defendant to defraud the plaintiffs, and to deprive them of the just compensation for said work." It would seem from this allegation that the plaintiffs considered and intended to charge that the estimates given by the company's engineers for the work done by them were so much less than they had in fact performed, and that not only the estimates of the same, but its classification by them, were so plainly wrong and unjust, as to impute misconduct or bad faith on their part, indicating an intent to defraud the plaintiffs, and to deprive them of their just compensation. The wrong measurement and classification of the work as rendered by the company's engineers are the grounds of grievance, and to which the plaintiffs object. Assuming this to be true, the occasion would seem to be an appropriate one to invoke the decision of the arbiter selected by them to settle such differences, without resort to litigation, unless he was privy to the fraud, or practiced it himself. The reference to him was intended to correct any wrong or unfair measurement or classification of the work done by the engineers in charge, and his decision is binding and conclusive on both parties to the contract, unless he in some way practiced fraud, or was privy to it. It is fraud on his part, or refusal to act when alleged, that gives the right of action. Now, there is a total absence of any allegation that the incorrect estimates or classifications of the work made by the company's engineers, and alleged to be so gross and unfair that an intent to defraud is charged, were or have ever been submitted to the divisional engineer, so that this matter of difference arising out of the contract may have been decided by him, and litigation avoided. The object of such stipulations is to prevent disputes, and to secure accuracy of measurement and classification of the work done. Nor is there any allegation that he practiced or was privy to any fraud. All that is alleged is that the engineers who made the measurements and classifications committed gross error, or acted unfairly and unjustly; but this is no allegation of fraud which would excuse the reference of such disputed questions to the divisional engineer. It is owing to the supposed competency and fairness of such officer to properly classify the work performed, and to accurately estimate it, in case of dispute or difference, that he has been selected, and his decision made final and conclusive. A submission of the matter alleged to him, in the absence of any imputation of fraud or bad faith on his part, we have a right to assume would have resulted in correcting any mistake or wrong, either in the estimates or classification of the work performed, and thus

avoided the matter now in dispute. It is in this way that the plaintiffs would have received the just compensation to which they were...