Action
by Shipman, Denny, Rhame & Co., a corporation, against the
Portland Construction Company and others. Judgment for
plaintiff, and defendants appeal. Reversed in part, and
modified.
The
plaintiff is a California corporation of consulting engineers
and the defendant Portland Construction Company is an Oregon
corporation. On August 14, 1908, the Construction Company, as
party of the first part, entered into a contract with the
plaintiff, as party of the second part, by which it was
provided in part: "That the said party of the first part
being about to undertake the construction and installation of
approximately two hundred miles of electric railroad in
central Oregon, with the necessary appurtenances of dams
power plants, transmission lines, etc., herewith engages the
said party of the second part to serve as its engineers in
the matter of the said construction and installation
throughout the whole work from surveys to completion; and to
have complete charge of all engineering matters, with the
single exception of the structural steelwork of dams and
bridges, upon the following terms and conditions: (1) That
the party of the second part agrees to form a pool on or
before September 1, 1908, to subscribe to $35,000.00 cash to
be paid into the treasury of the Portland Construction
Company, and for which the said Portland Construction Company
agrees to deliver to the said pool $35,000.00 of its common
stock, of the par value of one hundred dollars per share
fully paid and nonassessable, and in addition thereto thirty
'participating certificates' of the Oregon Gold
Prospecting & Promoting Company, carrying certain dividends
or profits, all in accordance with a contract of even date
between said Portland Construction Company and B. Carroll
Shipman. (2) That it is fully understood and agreed by the
parties hereto that the work covered by this contract is to
be undertaken and prosecuted in sections or divisions, and
that, for the purpose of estimate and payment, each section
of the work is to be considered by itself, payments from the
said party of the first part to the said party of the second
part being made in accordance with the terms below, only upon
such sections as may have been fully designed and set forth
in the plans and specifications submitted. (3) That in
consideration of services in securing the above-mentioned
subscription on the part of Shipman, Denny, Rhame & Company
party of the second part, to the stock of Portland
Construction Company, and of the further services as
engineers in accordance with this contract, the said Portland
Construction Company, party of the first part, its assigns or
successors, agrees to pay to the said Shipman, Denny, Rhame &
Company, party of the second part, its assigns or successors,
a total fee of five per cent. on the actual cost in labor and
material of the electric railroad with all its appurtenances
before mentioned except structural steelwork on bridges and
dams; payment of the said five per cent. fee to be made as
follows: Upon the presentation to the party of the first
part, or its representative, of one complete set of plans and
specifications with the estimate of cost of any section of
the work as before mentioned (the first section being from
Condon to John Day River), prepared as set forth below, a
partial fee of $15,000.00 the said fee to be due and payable
in cash at the time of the presentation of the plans and
specifications; the balance of the above-mentioned five per
cent. total fee to be paid in monthly installments in
proportion to the work done, and based on engineer's
estimates. It is expressly agreed and understood that the
payments herein mentioned in any specific instance are to
cover only that particular section of the work for which
plans, specifications and estimates are submitted, and that
payment for no more than one section shall be made until the
contract is let for first section. (4) As the party of the
first part desires to start the surveys of the first section
of the work between Condon and the John Day River at once,
before it is possible to obtain the actual payment of the
above-mentioned $35,000.00 into the treasury of the Portland
Construction Company, the party of the second part agrees to
begin work at once and to prosecute it with all diligence in
accordance with this contract, and it is hereby agreed and
understood, that if the said Shipman, Denny, Rhame & Company
shall not be able to cause to be delivered to the said
treasury of the Portland Construction Company all of the said
$35,000.00 in accordance with the foregoing provisions, then,
and in that event, this contract shall be void and of no
effect, except as hereinbefore provided, to wit, the said
Shipman, Denny, Rhame & Company, party of the second part,
agrees to subscribe for themselves to $7,000.00 worth of said
stock of the Portland Construction Company, carrying with it
six 'participating certificates' of the Oregon Gold
Prospecting & Promoting Company and a proportionate amount of
dividend stocks and bonds, the subscription to be paid for in
cash or services, as elected by the said Shipman, Denny,
Rhame & Company, and they further agree to use their best
efforts to obtain subscriptions to as much of the $35,000.00
above-mentioned subscription, as possible, and in
consideration of such subscription by the said Shipman,
Denny, Rhame & Company, the said Portland Construction
Company, party of the first part, hereby agrees to engage the
services of the said Shipman, Denny, Rhame & Company as
engineers of the first section to the John Day River, to wit,
where said river intersects the north line of the land of
Prineville Land & Livestock Company, about one and one-half
miles above the mouth of Pine Creek only, of the
above-mentioned electric railroad upon the same terms and
conditions otherwise as stated in this contract for the
complete work." The contract then provides in some
detail what shall be performed by the plaintiff in the way of
examining conditions, furnishing plans, specifications, bills
of material, estimates of cost of construction, and equipment
of the proposed road, and further provides as follows:
"And upon presentation to the first party by second
party of such plans, specifications, surveys, estimates,
etc., for said section, second party shall be entitled to
payment of the sum of $7,000.00 forthwith, unless second
party shall have elected to pay its subscription of $7,000.00
par value of stock of first party in services in which event
upon completion of such plans, etc., second party shall be
entitled to be credited upon subscription the sum of
$7,000.00, and failure to pay such subscription in cash on or
before September 1, 1908, will be deemed an election to pay
in services. If within two weeks after the presentation of
such complete plans, etc., to first party actual construction
work shall not have been commenced and prosecuted with
reasonable diligence thereafter, then and in that event,
there shall become due and payable to second party the
further sum of $8,000.00, which payment when made will be in
full and complete settlement and discharge of all liability
to second party under this contract, if said railroad is not
constructed, but if constructed by first party the second
party shall be entitled to receive in the aggregate five per
cent. of cost of labor and material as hereinbefore
specified, and if construction work is begun within two weeks
after the presentation to first party of said plans, etc.,
and such work is thereafter diligently prosecuted then and in
that event second party shall be entitled to receive five per
cent. of actual cost of labor and material of said first
section to John Day River, from which shall be first deducted
the sum of seven thousand dollars aforesaid, and the balance
shall be paid in monthly installments as hereinbefore
specified. And it is also agreed that as soon as surveys,
etc., are completed from Condon to Mayville, second party
shall deliver to first party such surveys, plans, estimates,
etc., and again when said surveys are completed to Fossil,
the surveys, etc., shall be delivered to first party in order
to enable first party to prepare for construction work."
On
September 20, 1909, the plaintiff filed a complaint against
the other party to the contract, together with certain
stockholders of the defendant Construction Company, and
alleged, in substance, that the plaintiff had performed its
part of the contract, and, although frequent demands had been
made upon the Construction Company for the payment of the sum
of $8,000 claimed to be due the plaintiff here under the
contract, nothing had been paid except $4,050, and there was
a balance due the plaintiff from the Construction Company
amounting to $3,950, together with accrued interest. The
complaint then goes on to state: "That prior to August
14, 1908, and subsequent to the incorporation of defendant
Portland Construction Company, the defendants J.R. Bowles
H.I. Keeney, Mark W. Gill, H.J. Martin, O.B. Hathaway, W.F.
Hurlbert, J.H. Carpenter, and the defendant the Oregon Gold
Prospecting & Promoting Company, subscribed for a certain
amount of the capital stock of the defendant Portland
Construction Company, but failed and neglected to fully pay
for the same in accordance with their respective
subscriptions, and that there now remains due and unpaid from
the defendants last above named, on account of the unpaid
subscription to the capital stock of the said company, an
amount sufficient to pay the claim and demand of the
plaintiff herein, but that the exact amount of the unpaid...
