Sternberg v. Drainage Dist. No. 17

• Citation: 44 F.2d 560
• Decision Date: 07 October 1930
• Docket Number: No. 8690.,8690.
• Parties: STERNBERG v. DRAINAGE DIST. NO. 17 OF MISSISSIPPI COUNTY, ARK.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

44 F.2d 560 (1930)

STERNBERG v. DRAINAGE DIST. NO. 17 OF MISSISSIPPI COUNTY, ARK.

No. 8690.

Circuit Court of Appeals, Eighth Circuit.

October 7, 1930.

Cooley & Adams, of Jonesboro, Ark., and Allen Hughes, of Memphis, Tenn., for appellant.

Zal B. Harrison, and Leon Smith, both of Blytheville, Ark., and Walter G. Riddick and Charles T. Coleman, both of Little Rock, Ark., for appellee.

Before VAN VALKENBURGH and GARDNER, Circuit Judges, and MUNGER, District Judge.

GARDNER, Circuit Judge.

This is an action to recover damages for a breach of contract. It is alleged in the complaint that the defendant is a drainage district, and that as a part of the work of the improvement of such district plaintiff was awarded a contract for the digging of a ditch described in the contract and the plans and specifications forming a part thereof; that he began work in connection with the improvement and continued to work thereon pursuant to his contract until the 1st day of May, 1921, at which time he was informed by the commissioners of the defendant district that no funds were available with which to compensate him. That by reason of defendant's failure to pay plaintiff's estimates as provided in the contract, he was forced to suspend operations from the 16th of May, 1921, until the 12th of December, 1921. That the defendant was fully advised that its failure to pay said moneys as provided in the contract would result in a forced suspension of plaintiff's operations. That during and by reason of the suspension of operations, plaintiff incurred losses, to his damage in the sum of $25,094.97. Apparently, a paragraph of the complaint, which is not reflected in this record, charged that the plaintiff had performed extra work, for which he was entitled to compensation, and the judgment of the lower court awarded him compensation for such extra work, in the sum of $1,362.52, and from this part of the judgment no appeal is taken, and, hence, the pleading upon which it is based has not been printed in the record.

The answer, after admitting certain formal jurisdictional allegations in the complaint, and that plaintiff was awarded the contract as pleaded, denies that plaintiff was forced to suspend his operations as alleged, admits that the district was forced to suspend cash payments in May, 1921, on account of its inability to dispose of its bonds, but alleges that, when this occurred, the plaintiff, together with other contractors similarly situated, made and entered into a contract with the defendant by which they agreed to continue the work under their respective contracts and to accept payment therefor in the manner specified in this contract, and that plaintiff continued under the collateral contract, was paid all sums due him, together with interest, which payments were accepted by him in full payment.

After issue joined, the parties, by written stipulation signed by their attorneys, waived a jury and agreed to submit the issue of fact to the court. Thereafter, on November 24, 1926, and before the trial of the issues, the plaintiff filed a motion to transfer the cause to the equity side of the docket, and this motion, by written indorsement thereon signed by attorneys for defendant, was confessed, and pursuant thereto the lower court entered its order transferring the cause to the equity docket and appointed a special master to make findings and report same to the court. The cause was heard before the special master, who made report, and, upon exceptions filed thereto, the lower court sustained the exceptions of the defendant as to all claims for damages for breach of the contract, but entered judgment in favor of the plaintiff for $1,362.55 on account of the extra work performed by the plaintiff.

No appeal has been taken by the defendant, and on plaintiff's appeal it is urged that the court erred in denying plaintiff's claim for damages for delay, and in finding that the agreement made October 18, 1921, between the contractors, of whom plaintiff was one, and the drainage district, was a waiver of plaintiff's right to recover damages on account of the delay. No question was raised in the lower court as to the propriety of the trial of said action as an equity suit, nor is any such question raised here by either of the parties.

The drainage district had embarked on a large project and had let a number of contracts covering different portions of the drainage project, the total estimated cost of which ran into millions of dollars. To secure the necessary funds the district had floated a large bond issue, but the cost of the project, as frequently occurs, was much greater than had been anticipated, and the funds raised by the bond issue were inadequate. The district was indebted in large sums for work already performed. A great many contracts were still uncompleted, the drainage system unfinished, and the district was without funds. By the terms of the plaintiff's contract, and, apparently, those of the other contractors, the defendant was required to make monthly payments on engineers' estimates as the work progressed, but the district, being without funds, was unable to make these payments, in consequence of which the plaintiff, and the other contractors as well, suspended work about May 16, 1921. The district had no means of raising funds, except by the sale of bonds, and it had exhausted its credit and was unable to sell additional bonds. The operations under the various contracts being at a standstill, the contractors, cooperating with the commissioners of the defendant and representatives of certain bond houses and prospective bond purchasers, investigated the affairs of the district, and, finding that its outstanding indebtedness and the necessary expenses to complete the improvements would only justify a bond issue in a certain amount, which it seemed was probably insufficient to pay the contractors for the work already done and to complete the project, the prospective bond purchasers declined to buy the proposed bonds. The contractors, including plaintiff, then submitted to the board of commissioners of the district a written proposition dated October 18, 1921, which reads as follows:

"Blytheville, Arkansas, October 18, 1921.

"Drainage District No. 17, Mississippi County, Arkansas, Blytheville, Arkansas.

"We, the Committee of Contractors, will make the following offer to arrive at a settlement and continue with the work in your district:

"The District to pay cash in full for all work performed and accounts due the contractors, which to date have not been paid in cash.

"Payments to be made as follows:

"50% on or about November 8, 1921;

"25% on or about November 30, 1921;

"25% on or about December 30, 1921.

"Contractors will accept payment, in cash, for the remainder of the work which they now have under contract on the basis of 95% of the total amount, providing the remaining 5% be set up as a reserve fund, and if, at the completion of the work now under contract, it is found that sufficient amount of cash is on hand to pay the contractors the 5% retained, with interest at (6%) six per cent, such retained percentage and interest on same shall then be paid; or any part of the 5% that may be on hand at completion of the work now under contract will be paid.

"This offer is made on condition that the contractors committee and Engineers Elliott and Harmon and O. M. Fairley and the Board go over latest Engineers' report and determine if the 5% so retained, or any part thereof, may be available when said work is completed, and further to ascertain if any saving can be made by modifying work which will not be injurious to the District's plan of drainage.

"It is to be strictly understood that any agreement entered into on the basis herein mentioned shall in no way invalidate the original contract.

"(S) Otto Kochtitzky "H. J. Sternberg "C. F. Adams "C. C. Hawley "Wm. Crumpecker."

This proposal on behalf of the contractors was accepted by the defendant, and, with this settlement of the pending breached contracts, the board was able to sell additional...