Mundy v. Louisville & N.R. Co.

• Citation: 67 F. 633
• Decision Date: 07 May 1895
• Docket Number: 201.
• Parties: MUNDY et al. v. LOUISVILLE & N.R. CO.
• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)

67 F. 633

MUNDY et al. v. LOUISVILLE & N.R. CO.

No. 201.

United States Court of Appeals, Sixth Circuit.

May 7, 1895

This is a controversy over the amount due the contractors under a railroad construction contract. The complainants, J. A. Mundy Jr., a citizen of Virginia, J. H. McTighe, a citizen of Arkansas, and J. V. Hussey, a citizen of Tennessee, compose the firm of Mundy, McTighe & Co., who made a contract on July 7, 1890, with the Louisville & Nashville Railroad Company, a Kentucky corporation, for the grading of what is called the Clarksville Mineral Branch of the Louisville & Nashville Railroad, together with a branch of that branch 6 miles in length, called the Vanleer Spur. The road projected and to be constructed extended 31 miles, from a point in Montgomery county on the Memphis Division of the Louisville & Nashville to a point in Dickson county on the Nashville, Chattanooga &amp Memphis Railroad. The Vanleer Spur, or branch six miles in length, left the main branch about 10 miles from the latter terminus, and ran to the Cumberland Furnace. The complainants constructed the entire line and the Vanleer Spur, except a division of 7 miles, from the fourteenth to the twentieth mile, inclusive. This middle division they cleared for grading, but were then notified by the company to do no further work thereon. Monthly and final estimates were prepared by the chief engineer under the contract, and the work, as done, was accepted by the company. The contractors refused to accept the final estimate on the ground that they were not allowed therein what should have been allowed, in accordance with the terms of the contract, by $83,000. They filed a bill against the company in the chancery court of Montgomery county, at Clarksville, Tenn.; and this was removed, by petition of defendant for removal, to the circuit court of the United States for the Middle district of Tennessee. The bill attaches the contract under which the work was done, as an exhibit. In the contract were the following provisions: 'The contractors further bind themselves * * * to promote good order among the laborers upon the work embraced in this contract, by giving them assurance of the full payment of their wages. ' 'It is further agreed that if, out of any monthly estimate paid to the contractors, they shall fail to pay the wages of the laborers for that month, it shall be at the discretion of the engineer thereafter to provide for the payment of the laborers for each month out of the estimate for the month, according to such rules as he shall prescribe. * * * It is further agreed that the amount of force employed by the contractors is at all times subject to regulations, and must be increased or diminished as required by the engineer. * * * And it is distinctly understood and agreed between the parties that the work under this contract shall, at every stage of its progress,-- from beginning to end,-- be subject to the direction, inspection, and acceptance of the engineer, who shall determine what, in any case, a fair construction of the contract requires to be done by either party, and whose measurements, classifications, and estimates, monthly or final, shall be conclusive upon both parties, unless founded on fraud or mistake. * * * And the railroad company, in consideration of the full and complete performance of this contract, to the entire satisfaction of the engineer, to be evidenced by his certificate, agrees to pay to the said Mundy, McTighe & Co. the prices set forth in the schedule to the proposal of the said Mundy, McTighe & Co., a copy of which is attached, and which is to be taken and considered as a part of this contract, and to have the same effect as though inserted in it, to wit, on or about the first day of each month, during the progress of the work, the engineer shall make an estimate of the relative value of all the work done by the contractors for the month preceding, and on or about the 20th of the month 90 per cent of such estimate shall be paid to the contractors at the office of the railroad company, in Louisville, Kentucky, in cash. And when all the work embraced in this contract shall have been completed agreeably to the specifications, and in accordance with the directions, and to the satisfaction and acceptance of the engineer, there shall be a final estimate made of the quantity, character, and value of said work, agreeable to the terms of this contract; the balance appearing due to the contractors shall be paid to them upon their giving a release, under seal, to the railroad company, from all claims or demands whatsoever growing in any manner out of this contract. And in computing said final estimate, and giving his final certificate, the said engineer shall not be bound by any preceding estimates and certificates, but such preceding estimates and certificates shall be held to be only approximate to the final estimate; and the said monthly estimates and certificates on unfinished work shall in no case be taken as an acceptance of the work, or a release of the said contractors from responsibility therefor, until the final estimate is made, and the work, in its entirety, is accepted as complete under this agreement. ' In the general specifications appear the following: 'Excavations will be classified under the following heads, to wit: Earth loose rock, solid rock, iron ore and excavation in water. Earth will include clay, sand, gravel, loam, decomposed rock and slate, stone and boulders, containing less than one cubic foot, indurate clay, cement gravel, and all other material of an earthly () kind. Loose rock: All boulders and detached masses of rock measuring over one cubic foot, and less than one cubic yard; also slate, coal, shale, soft friable sandstone, and soapstone, and all other materials except solid sandstone and limestone in place, and those described above except solid sandstone and limestone in place, and those described above as earth; also stratified stone in layers six inches thick and under, separated by a strata of clay. Solid rock: All rock in place which rings under the hammer, in masses of more than one cubic yard, with the exception of stratified stone, described in the specification for loose rock. Borrow pits will be located by the engineer on land provided by this railroad company, and shall be excavated in conformity with such shape and to such depth as directed by the engineer; and all material so removed and placed in the embankment will be measured in accordance with actual sections of finished roadway and adjuncts. * * * In sections where the embankments exceed the excavation, the excess may be supplied from the sides of the adjacent cuts, or from such other places as the engineer may direct; but the excess so excavated shall be estimated as embankment only, and paid for as such. * * * Contractors must satisfy themselves of the nature of the soil; of the general forms of the surface of the ground; of the quantity of materials required for forming the embankments or other work, and all matters which can in any way influence their contract; and no information upon any such matters derived from the maps, plans, profiles, drawings, or specifications, or from the engineer or his assistants, will in any way relieve the contractor from all risks, or from fulfilling all other terms of this contract.'

The most important controversy between the parties is whether a material called 'chert' should be classified as loose rock or earth, under the specifications. Complainants contend that it should be classified as loose rock. As they contracted to excavate loose rock at 39 cents a yard, and earth at 13 1/2 cents a yard, it will be seen that the difference was very material. The bill averred: That before the complainants made a bid they went over the projected line, and then asked the engineer how he would classify chert. That he replied that there was but little on the line that, if any was found, he would classify it as loose rock. That after the contract was signed he again promised so to classify it. That, notwithstanding these statements, he directed his assistant engineers not to classify it as loose rock; and, when they had classified a percentage of it in this way in monthly estimates signed by him, he, knowing that he was doing the complainants gross injustice, arbitrarily and fraudulently cut down the amount of loose-rock excavation in his final estimates so as to reduce the sum earned by complainants more than $10,000 below that which was allowed in the monthly estimates. The bill also averred that, in the same manner, the chief engineer cut down the measurements or quantities of excavation and embankment shown in the monthly estimates, without any sufficient examination or measurement by himself. An amendment to the bill averred that, by a custom prevailing with reference to the classification of material under these railroad-construction contracts, the engineer exercised an equitable discretion to classify as loose rock material not strictly within the words of the specifications, but which, because of the difficulty of excavating it, should be paid for at the same rate, but that the engineer in this case arbitrarily and fraudulently refused to exercise any such discretion. The bill further averred that the 'defendants knew that complainants had subcontractors on parts of this work; that these subcontractors were paid monthly for the work done by them according to the estimate made monthly, less a retained per cent held by the defendants. They were often paid directly by the chief engineer from the monthly estimates given complainants, and complainants had a right to presume that on a final estimate they would be allowed a larger amount than was given in the monthly estimates. On the contrary, however, and...