Plymouth Village Fire Dist. v. New Amsterdam Cas. Co., 1161 and 1173.

• Decision Date: 28 January 1955
• Docket Number: No. 1161 and 1173.,1161 and 1173.
• Citation: 130 F. Supp. 798
• Parties: PLYMOUTH VILLAGE FIRE DISTRICT v. NEW AMSTERDAM CASUALTY COMPANY and P. DiMascio & Son, Inc. P. DI MASCIO & SON, Inc. v. PLYMOUTH VILLAGE FIRE DISTRICT.
• Court: U.S. District Court — District of New Hampshire

130 F. Supp. 798

PLYMOUTH VILLAGE FIRE DISTRICT v. NEW AMSTERDAM CASUALTY COMPANY and P. DiMascio & Son, Inc.

P. DI MASCIO & SON, Inc. v. PLYMOUTH VILLAGE FIRE DISTRICT.

Nos. 1161 and 1173.

United States District Court, D. New Hampshire.

January 28, 1955.

Robert G. Wakefield, Plymouth, N. H., Nighswander, Lord & Bownes, Arthur H. Nighswander, Laconia, N. H., for Plymouth Village Fire District.

Orr & Reno, Robert H. Reno and Malcolm McLane, Concord, N. H., for P. DiMascio & Son, Inc.

CONNOR, District Judge.

These are two actions arising out of a contract entered into between the Plymouth Village Fire District, a municipal corporation organized and existing under the laws of the State of New Hampshire, hereinafter referred to as the district, and P. DiMascio & Son, Inc., a body corporate existing under the laws of the Commonwealth of Massachusetts, and hereinafter referred to as the contractor, for the laying of about 5.3 miles of water mains, together with incidental work and associated projects, in the town of Plymouth, New Hampshire.

The district brought suit in the Superior Court for Grafton County, New Hampshire, upon a performance bond dated June 19, 1951, in the penal sum of $105,172, executed by the contractor as principal and the New Amsterdam Casualty Company as surety. It alleges that the contractor materially breached the contract, sufficient to warrant termination, and seeks to recover the cost of completion, less certain credits, plus liquidated damages for the failure to timely complete. The net claim of the district is in the sum of $34,180.98. In answer to the district's complaint, the contractor and the casualty company specifically deny the allegations of the complaint charging breach of contract, and aver that the district waived certain provisions and conditions, prevented performance, caused delays, and terminated the contract without legal justification. It is likewise contended that the district did not come into court with clean hands, and that the contract itself was illusory, unconscionable, and unenforceable.

The action was removed to this court and tried without jury with that of P. DiMascio, Inc. v. Plymouth Village Fire District, filed in this court shortly after the above action had been removed, and brought to recover for the alleged refusal of the district to pay the sum of $11,917.86, with interest from December 22, 1951, for services rendered under the contract.

The district had retained the engineering firm of Howard & Whitman of Boston, Massachusetts, to formulate plans and specifications for the improvement of the water supply system, and to supervise and inspect the work as it proceeded. The contractor, having provided the lowest bid on a proposal to lay these water mains upon the engineer's estimate of quantities, was awarded the contract on a unit price basis. Work was to be completed 150 days after July 9, 1951. The contractor proceeded to work and continued to lay pipe as was indicated by the resident engineer, and had laid a total of 23,396 feet when operations were suspended during December. At that time, there remained work to be done, the extent of which is in dispute. The project was not pursued during the winter months, and on April 10, 1952, the district, on notice to the contractor, terminated the contract, alleging various grounds which will be dealt with in detail. The district commissioners thereafter, invoking the provisions of Article 12, engaged another contractor, on a cost plus basis, to complete the job, and work was resumed May 20, 1952.

Findings and Rulings.

The nub of the primary controversy is the existence or lack of sufficient grounds warranting the action of the district in terminating the contract. On April 10, 1952, the district sent a letter to the contractor directing it to discontinue all work. The assigned reasons in the order appearing in the directive are (1) that the contractor had abandoned the work to be done under the contract, (2) that the engineers in charge of the project certified that they were of the opinion that the conditions specified in the contract as to the rate of progress were not fulfilled and that the work was unnecessarily and unreasonably delayed, and (3) that it was the information of the commissioners that the corporation P. DiMascio & Son, Inc. was dissolved by vote of its board of directors on December 24, 1951.

In December, 1951, weather conditions precluded continuation of the work, and the contractor stored all its equipment in the town. Maintenance of the areas of work during the winter was not overlooked. The continued upkeep of the streets was the subject of a conference between P. DiMascio, the president, and the representatives of the district. While there is some doubt whether the arrangements made resulted therefrom, it is clear that the contractor was notified that agents of the district would look after the streets and that it would be held responsible, and liability for the expense was readily admitted.

As spring approached, the contractor returned to Plymouth on several occasions. The intention of the contractor at that time is the subject of conflicting testimony. I find that its activities were equally consonant with an intention to resume as soon as the frost left the ground. Moreover, on February 4, 1952, the district issued a draft for $2,017.35 in payment for the work performed in December, 1951. Surely such tender is not supportive of a belief that the contract had been abandoned. The dissolution of the corporation was motivated by reasons unrelated to the Plymouth contract. The stockholders entered into an agreement whereby all the corporation's equipment would be available to finish the project. The old corporation would see the Plymouth job through, but it would not take on any new work. Under the statute, the corporation remained in esse for specified purposes (infra). These considerations negate any inference of abandonment which otherwise might be drawn. Accordingly, this court finds that the contractor was willing and able to complete the job at the time the district issued its directive.

The second ground alleged by the district in its letter concerns itself wholly with the contractor's dilatory conduct. It is not seriously contended that the contractor should have continued to perform during the winter or that it should have resumed operations before the date of termination. Thus it appears that this allegation relates to the failure to complete the project within the agreed time.

It seems advisable to set forth in detail the principles which this court deems applicable to this phase of the case. When a contract is broken in a material respect, the injured party is accorded a choice of remedies. He may treat the contract at an end and sue for the breach, or he may continue the contract in operation despite the breach and retain the right to such damages as he has suffered. Williston on Contracts, s. 683. An election between these remedies must be made within a reasonable time after knowledge of the breach. Bechard v. Amey, 82 N.H. 462, 136 A. 370. When the injured party treats the contract as operative after knowledge of the breach, his conduct is incompatible with an intention to consider the contract at an end, and, therefore, he is deemed to have elected not to assert the breach as cause for refusing to continue the contract. "If after the time has already elapsed the owner permits the builder to continue to work, even if the contract or materiality of the breach gave the owner power to terminate the contract on such a contingency, his conduct is an election to go on with the contract rather than to forfeit it, and on the completion of the work the owner is liable for the price, though he is entitled to a cross-claim for any damages caused by the delay." Williston on Contracts, s. 699. "If a party to a contract which remains wholly or partly executory has ground for rescinding or terminating the same, and is aware of the fact, but nevertheless permits the other party to continue in the performance of the work * * * particularly where this involves the expenditure of labor or money, this amounts to a waiver of the right to rescind." Black on Rescission and Cancellation, s. 605. See also, Corbin on Contracts, s. 756; Restatement, Contracts, s. 309; Bechard v. Amey, supra. Election is final; it cannot be nullified at the whim or caprice of the injured party. See Williston on Contracts, s. 688.

Applying these principles to the facts at bar, I rule that the district elected to forego its right to terminate the contract because of delay in 1951 and to rely upon damages for breach of contract. The district permitted the contractor to continue after the time fixed for completion. An estimate and certification for payment for work done during December was compiled in January, 1952, and the district issued its check dated February 4, 1952, in payment. The work remaining was inventoried on January 15 by the resident engineer, and therein is found the notation "contemplated spring work." In short, the district gave every indication that it did not intend to terminate due to the contractor's delinquency. The fact that the district relied upon a certificate of the engineers in asserting delay as a justification for terminating does not add to the validity of this claim. The contract contained a clause directing that the engineer's determination of questions pertaining to the contractor's fulfillment of its obligation shall be "final and conclusive." The engineer in effect is appointed an arbitrator of controversies arising in the course of performance, and the existence of the facts which he certifies cannot be controverted in the absence of fraud or bad faith. However, such procedure cannot provide a party to a contract with insulation from the consequences of the application of the legal principles of waiver and election.

Finally, the district in its directive assigned...