State Highway Dept. v. MacDougald Const. Co.

• Decision Date: 12 October 1939
• Docket Number: 12854.
• Parties: STATE HIGHWAY DEPARTMENT v. MacDOUGALD CONST. CO.
• Court: Georgia Supreme Court

6 S.E.2d 570

189 Ga. 490

STATE HIGHWAY DEPARTMENT v. MacDOUGALD CONST. CO.

No. 12854.

Supreme Court of Georgia

October 12, 1939

Judgment Adhered to on Rehearing Dec. 16, 1939.

Mandate of Supreme Court Conformed to Feb. 15, 1940.

Syllabus by the Court.

1. The motion to dismiss the writ of certiorari as improperly granted is without merit.

2. Where, in a contract between a contractor and the State Highway Department for surface treatment of a road, it is stipulated that a decision of the State highway engineer upon any question connected with the execution of the contract should be final and conclusive, his decision upon any such question should be held binding upon the parties, in the absence of fraud, or such gross mistake as would necessarily imply bad faith, or a failure to exercise an honest judgment.

(a) Interpretation of the contract in reference to the kind or class of material required by its terms and the specifications, may become a matter for decision by the engineer within the scope of such stipulation.

(b) In such case, the finality of the engineer's decision will depend, not on its correctness, but on whether it was tainted with fraud, or was so grossly erroneous as to imply fraud bad faith, or failure to exercise an honest judgment.

(c) Accordingly, where under the terms of such contract one of the materials to be used was a substance known as 'aggregate,' which unless more particularly defined might consist of any one of several substances such as gravel, stone, or slag, and in the various writings constituting the contract the material was described only by the general term quoted, except that, in standard specifications of file in the office of the State highway engineer and made by reference part of the agreement the term 'slag' was used in a section relating to 'construction methods,' and where in these circumstances a difference arose as to whether the contractor was entitled to use stone aggregate as distinguished from slag, which was more expensive, and on submission of the question to the State highway engineer he decided that only slag was permissible, such decision, even if erroneous, was not so clearly and manifestly wrong as to imply fraud, bad faith, or failure to exercise an honest judgment, and nothing of the kind being alleged, it should be treated as final and conclusive as to the kind of aggregate required by the contract.

(d) In a suit by the contractor against the State Highway Department, to recover a sum as additional expense alleged to have been sustained in complying with the decision of the State highway engineer, as indicated, the petition failed to state a cause of action, and was properly dismissed on general demurrer. The Court of Appeals erred in ruling to the contrary, and in reversing the judgment dismissing the action.

Lamar Murdaugh, Asst. Atty. Gen., Beck, Goodrich & Beck, of Griffin, D. C. Chalker, of Hawkinsville, and C. E. Jackson, of Adel, for plaintiff in error.

MacDougald, Troutman & Arkwright, Hirsch & Smith, Marion Smith, and Harllee Branch, Jr., all of Atlanta, for defendant in error.

BELL Justice.

MacDougald Construction Company filed a suit against the State Highway Department of Georgia, to recover about $7,000, claiming that in the performance of a contract for surface treatment of a road in this State it had been required by the engineer of the State Highway Department to use material of a kind different from that specified in the contract, and more expensive. The suit was dismissed on general demurrer, and the plaintiff excepted. The Court of Appeals reversed that judgment, sustaining the plaintiff's contention as to the kind of material contemplated by the contract, and holding further that a provision in the contract that 'a decision of the State highway engineer upon any question connected with the execution of this agreement * * * shall be final and conclusive,' did not confer authority upon the engineer to construe the contract for the purpose of determining the kind of material required by its terms. The omitted portion of the stipulation regarding authority of the engineer is not material in the present case. On application of the State Highway Department the writ of certiorari was granted. For a full statement of the facts, see report of the decision under review, MacDougald Construction Co. v. State Highway Department, 59 Ga.App. 708, 2 S.E.2d 197. The controversy arose out of the use of the word 'aggregate' as descriptive of material to be used by the contractor in performance of the contract. According to the plaintiff's petition, the term as used in reference to construction of roads is a general term designating a solid material which is bound into a solid mass by cement, asphalt, tar, or other binding elements. The petition alleged that 'aggregate' may consist of stone; that this type of aggregate is regarded as the premier road-building material of the world, and is in more general use than any other kind of aggregate; and that when 'aggregate' is specified, contractors generally consider that stone aggregate, and not the more infrequently used material, such as gravel or slag, is intended. The various writings constituting the contract used only the general term 'aggregate, 'except that in standard general specifications of file in the office of the State highway engineer, and made by reference a part of the agreement, the term 'slag' was used in the specifications relating to 'construction methods.' The plaintiff alleged in effect that the contract, considered as a whole and in the light of circumstances, contemplated the use of stone aggregate, but that a difference arose between the plaintiff and the highway engineer, and that the engineer decided and so notified the plaintiff that under the terms of the agreement slag was required. This type of aggregate is more expensive than stone aggregate, and the plaintiff proceeded to use it only after protest, and notice that a claim would be made for the difference in cost.

1. The defendant in certiorari moved to dismiss the writ, on the ground that it was improvidently granted. The insistence is that the case does not involve any question of public gravity and importance. It is contended that the petition shows upon its face that it is based upon a solitary contract made in pursuance of plans and specifications no longer used by the highway department, and that no similar case is likely to arise. It is insisted also that the ruling of the Court of Appeals on the effect of the stipulation regarding decision by the highway engineer 'upon any question connected with the execution' of the contract does not bring the case within the rule as to public gravity and importance. The writ of certiorari was granted before adoption of the new rules upon the subject. 187 Ga. 841, 843, 931. We are inclined to agree to the first contention, but we regard the stipulation concerning 'decision' by the highway engineer and the exceptions to the rulings thereon as being sufficient to justify retention of the case for decision. It is to be inferred from the motion to dismiss and from the briefs that this stipulation is generally contained in contracts made by the State Highway Department for the construction of roads, and we are of the opinion that the question presented as to its meaning and effect is a matter of public gravity and importance. Accordingly, the motion to dismiss the writ of certiorari is denied.

2. We deem it unnecessary to pass upon the rulings contained in the first and second divisions of the decision of the Court of Appeals. Regardless of these rulings, we are of the opinion that the petition did not state a cause of action and was properly dismissed by the trial court. According to our view of the case, it does not turn upon an interpretation of the contract without reference to the decision of the engineer, but depends upon the effect that should be given to such decision, as applied to the contract and the specifications.

The contract for the construction of the road contained the following stipulation: 'The decision of the State Highway Engineer upon any question connected with the execution of this agreement * * * shall be final and conclusive.' A difference arose as to whether the contract, in specifying 'aggregate' as one of the materials to be used, would permit the use of stone aggregate, or whether some other kind of aggregate, as slag, must be used. It is true, this was a matter depending in a manner on construction of the contract but it involved only an incidental construction for the purpose of determining the class or kind of material required by the contract and the specifications, and being a question calling for decision during the progress of the work, it fell within the authority conferred by the parties upon the engineer. As to such matters as he was authorized to decide, the parties agreed that his decision should be final and conclusive; and in the absence of fraud, or such gross mistake as would necessarily imply bad faith, or a failure to exercise an honest judgment, any decision made by him within the scope of his authority must be treated as final and conclusive, as the parties declared it should be. They agreed to the stipulation, as they were free to do, and the question is, what did they mean or intend thereby? We have the words 'final and conclusive,' whereas without these or similar words a very different case might have been presented, and while in this case the engineer was authorized to determine 'any question connected with the execution' of the contract, that is, the performance of it, the authority of such an arbiter will depend in each case upon the terms of the stipulation assented to by the parties. Compare the general language...