United Contracting Co. v. Duby

• Decision Date: 23 September 1930
• Citation: 134 Or. 1,292 P. 309
• Parties: UNITED CONTRACTING CO. ET AL. v. DUBY ET AL., STATE HIGHWAY COMMISSION.
• Court: Oregon Supreme Court

292 P. 309

134 Or. 1

UNITED CONTRACTING CO. ET AL. v. DUBY ET AL., STATE HIGHWAY COMMISSION.

Supreme Court of Oregon

September 23, 1930

Department 1.

Appeal from Circuit Court, Multnomah County; Louis P. Hewitt, Judge.

Suit by the United Contracting Company and others against William Duby and others, constituting the State Highway Commission. Decree for plaintiffs, and defendants appeal.

Reversed and remanded, with instructions.

J. M. Devers, of Salem (I. H. VanWinkle and J. W DeSouza, both of Salem, on the brief), for appellants.

Homer D. Angell, of Portland (Omar C. Spencer, of Portland, on the brief), for respondents.

ROSSMAN J.

This is a suit to impeach a final award made by the state highway engineer and approved by the state highway commission for work done by the plaintiffs pursuant to a contract between the United Contracting Company, which is one of the plaintiffs, and the state of Oregon, on the ground that the engineer committed such gross errors when he made his computations that the principles of law applied in the case of Mayer v. East Side Logging Co., 130 Or. 341, 278 P. 957, 280 P. 343, and the authorities therein reviewed render his award a nullity. The plaintiffs further pray that after the court has impeached the engineer's award, it determine the amount due them for the work performed. The state has paid to the plaintiffs $63,607.80; the engineer's final estimate showed that the plaintiffs had earned $66,029.60, and that hence there was a balance due them of $2,421.80. The complaint alleges that the balance should be $56,157.29.

The state highway commission consists of three members appointed by the Governor, who serve without compensation. Section 4428, Or. L. Those three officials are the defendants in this suit. The Legislature has delegated to them authority "* * * over all matters pertaining to construction of state highways, letting of contracts therefor and the selection of materials. * * *" Section 4432, Or L. Our statutes (section 4435) further provide: "All contracts executed for the improvement of state highways shall be made in the name of the state of Oregon and executed by the commission." The highway legislation empowers the commission to appoint a State Highway Engineer, section 4430, Or. L., also, "to enter into such contracts, appoint such officials, and do any other act or thing necessary to fully meet the requirements" of the legislation. Section 4491, Or. L. The state highway funds are in the custody of the state treasurer and are expended by him under the jurisdiction of the commission. Section 4489, Or. L. The sources of the highway fund are several, section 4487, Or. L.; they consist in part of a state tax, the proceeds of the sales of the state bonds, revenue derived by the state from the licensing of motor vehicles and chauffeurs, taxes upon gasoline, etc. The contract between the state and the construction company does not stipulate the precise sum payable for the work to be performed, but specifies in detail the clearing to be done, the excavations to be made, the culvert pipe to be laid, the hauling to be performed, etc., and recites the amounts to be paid per unit for the different classes of the above-mentioned work. It provides that at the conclusion of the work the highway engineer shall make a "final estimate" setting forth the quantities of the various classes of work performed, and that upon its approval by the highway commission the state shall pay to the contractor the entire sum found due. The contract out of which this suit arose bears the signatures of the United Contracting Company and of the state of Oregon as the contracting parties. Its opening paragraph recites: "This agreement made and entered in, in quadruplicate this 28th day of May, 1924, by and between the state of Oregon, hereinafter called the State, by the State Highway Commission of said State, party of the first part, and the United Contracting Company * * * Witnesseth, that the said contractor, in consideration of the sum to be paid to him by said state. * * *" The above language and the manner in which the instrument is signed is authorized by section 4435, Or. L., previously quoted. The United Contracting Company assigned the contract to the other two plaintiffs who constitute a partnership and who performed the work. When the undertaking had been completed the highway engineer made his final estimate, and subsequently it was approved by the Commission. The plaintiffs, however, refused to accept the amount awarded and charged that the estimate was incorrect. When the commission refused to yield, the complaint, which prays for a decree impeaching the final estimate and determining the amount due to the contractors, was filed. This pleading does not aver that the state gave its consent to the institution of the suit, and thereupon the defendants filed a demurrer which is predicated in part on the contention that, in the absence of such an allegation, the suit cannot be maintained. When the demurrer was overruled the defendants filed an answer, which, in addition to challenging the merits of the plaintiffs' claim, also alleged that, when the defendants transacted this piece of business, they did not do so in their individual capacity but as officers of the state. At the conclusion of the presentation of the evidence the defendants moved for a dismissal upon the ground that the suit was in effect against the state, and that, since it had not granted its consent, the proceeding must be dismissed; this motion was denied. The evidence satisfied the circuit court that the engineer's final estimate was based upon gross errors; it thereupon set aside his award and granted to the plaintiffs a substantially larger sum. From this decree, the defendants appealed.

The defendants assail the decree of the circuit court in two particulars: (a) That this is in effect a suit against the state brought without its consent, and (b) that the facts do not warrant an impeachment of the final estimate of the engineer which had received the approval of the commission. If the first of these two contentions is sound, it will be unnecessary for us to express ourselves upon the latter. We shall therefore ignore the demurrer and assume that the evidence warrants a finding that when the engineer made his final estimate he was misled by gross errors. There is no contention that the defendants were aware of these errors or were actuated by any improper purposes. The engineer is not a party to this cause.

It may be well at the outset to determine the nature of this suit. As previously stated, the relief sought is twofold in nature: (1) A decree holding invalid and nugatory the award made by the highway engineer, and (2) upon the grant of that relief a judgment for $56,157.29 as the balance due to the plaintiffs (the engineer's award was only $2,421.80). The contract invested the engineer with the powers of an umpire in determining his award. We quote from the contract thus:

"It is mutually agreed between the parties to the contract that to prevent all disputes and misunderstandings between them in relation to any of the provisions contained in these specifications, or their performance by either of said parties, the Engineer shall be an umpire to decide all matters arising or growing out of said contract between them.

"The Engineer shall determine the amount or quantity of the work which is to be paid for under this contract, and decide all questions which may arise relative to the fulfillment of these specifications, and his estimates and decisions shall be final and conclusive and binding upon both parties to the contract. * * *

"As soon as practicable after the completion and acceptance of the work under this contract, there shall be prepared by the Engineer a final estimate of the quantities of the various classes of work performed, and after the approval of such final estimate by the State Highway Commission, the State shall pay to the contractor the entire sum found to be due, after deducting all previous payments and all amounts to be retained or deducted under the provisions of this contract."

The foregoing being the authority which the parties conferred upon the engineer, it follows that his final estimate concluded both the state and the contractor unless the engineer was guilty of the wrongful conduct upon which the plaintiffs rely, that is, gross errors in calculating quantities. Our most recent consideration of the rule which lends finality to an arbitrator's award, and the circumstances which warrant its impeachment, is Mayer v. East Side Logging Co. supra. The trial judge's memorandum opinion, after setting forth a careful summary of the evidence, concludes thus: "* * * The court is satisfied that there is error in the final estimate of materials moved of sufficient magnitude to require a revision of the estimate." Gross error and not fraud is the wrong upon which the plaintiffs rely. Since we assume that the circuit court's finding is warranted by the evidence, the only question which remains is whether the plaintiffs have brought before the court the proper parties defendant. It is evident that in a suit of this character the defendants should be the real parties in interest. 5 C.J. p. 198, § 505. The defendants insist that the state is the real party in interest, and that in its absence the court cannot set aside the engineer's award and assess the sum owing. The plaintiffs contend for the opposite conclusions. The essence of the plaintiffs' position is stated in the following language taken from their brief. "They only seek by this suit to compel the Highway Commission to perform a plain, official duty which they have agreed to perform under the contract. The contract provides that...