Chism v. Schipper

51 N.J.L. 1 | N.J. | 1888

Lead Opinion

The opinion of the court was delivered by

Beasley, Chief Justice.

A comprehension of the facts stated in the summary of the declaration prefixed to this opinion will make it manifest that the question to be decided is, Can the defendant cheat the plaintiff bv due course of law?

The case, in brief, is this: The plaintiff has done work for the defendant to the value of $600, which work was additional to that specified in the written contract; the money was payable on the certificate of the architect, whose decision was to be final; such architect fraudulently decided that the work in question was not additional, but was embraced in the contract, and the defendant, being notified of the facts, refused to pay the demand. As the demurrer confesses the truth of this statement, it will be observed that the defendant stands now before the court saying: I admit that this money is due for additional work; I admit that the architect fraudulently certifies to the contrary; and I claim, that by a correct application of legal principles, I have the right to take advantage of this fraud, and to appropriate to myself the moneys that are its fruits. The inquiry is, Does the law, in reality, justify this immoral attitude ?

It should be premised to the inquiry, that if this action will not lie, neither will any action lie against the defendant, founded on the facts stated, either at law or in equity. As such a result would be one much to be deprecated, and would stand as a blot on the jurisprudence of the state, it would seem that the most cogent reasons should be forthcoming to afford a satisfactory answer to the interrogatory: Why should a man be permitted to take advantage of the fraud of another ? The only known reply is, that the plaintiff has covenanted to that effect; that he has agreed that the action of the architect, whether honest or dishonest, shall be conclusive.

It is proper to say, in limine, that it is not by any means deemed certain that this contract, if to be read in the sense just specified, is sustainable in law. It is assumed that a man cannot contract that he himself may commit a fraud; for example: this defendant could not have agreed that this money should not be payable except on his own written certificate, and that he might fraudulently withhold such certificate. If such a stipulation would, as it is thought, be expurged from the instrument on grounds of public policy, how can the party legally stipulate that another may commit this same crime for him ? The capacity of parties to a contract to provide that one or the other, as the case turns out, may be cheated, does not appear to be a faculty requisite in the transaction of any legitimate business; while, at the same time, its existence is palpably offensive to good morals, and, consequently, may well be said to be adverse to the public welfare. The consequence is that it is, in my opinion, doubtful whether such an agreement can be legally made; but it is not deemed necessary to pursue the inquiry, inasmuch as, by proper rales of construction, applied to the facts set forth in this record, the proper conclusion is, that the contract existing between these parties does not contain this stipulation, so highly questionable.

The inquiry is: What did these parties mean ? Did they intend, or by reason of the language employed must it be concluded de jure, that they intended, to be bound by the award of the architect, even though such award was the creature of fraud ?

The clause thus referred to is in the common form, that has loug been in frequent use; and yet, it may be safely said, that it is most improbable that it would have been adopted in a single instance if it had expressed in plain terms the meaning that it is now contended lies latent in its expressions. It is hard to believe that any self-respecting man would put his name to an agreement that a third party might do in his favor a fraudulent act. Nor- does it seem probable that to the ordinary mind any suggestion of so extraordinary a purpose would be made by the generality of the expressions of this clause of the contract under criticism. And this last is an important consideration, for it is truly remarked by Chief Justice Gibson, in Schuylkill Nav. Co. v. Moore, 2 Whart. 477, 491, that in the interpretation of contracts “ the best construction is that which is made by viewing the subject of the contract, as the mass of mankind would view it, for it may be safely assumed that such was the aspect in which the parties themselves viewed it.” Tested by this standard, it would seem to be certain that the construction of this term of the contract insisted on by the defence in this ease cannot prevail.

But the adverse argument is, that the agreement of the parties is to be ascertained from the plain language used by them, and such agreement is to be enforced, no matter what the intention may have been.

This is the general rule, beyond a doubt, but such required literalism is not to be pushed to the preposterous length of requiring, that by its operation the general intention of the parties, as evidenced by their contract itself, shall be frustrated or perverted, either in whole or in part. The terms employed ’are servants and not masters of a perspicuous intent; they are to be interpreted so as to subserve and not to subvert such intent. As an illustration: it plainly appears on the face of this instrument that it was the evident and sole purpose of the provision in question to provide for the fair and definite decision of certain matters; and it is now said that by force of the terms used, the decider is empowered to cheat either party at will; and yet it is obvious that the existence of such a power in the agent has no tendency to effectuate the object in view, but so far as it can operate, is destructive of it. The stipulation giving the quality of finality to the action of their agent, is part of a contrivance of these parties to enforce fair dealing between them in certain particulars; there seems to be no reason why they should impart to such a contrivance a fraudulent potency. It was quite reasonable for these parties to say to their agent, decide honestly between us and your decision shall be final; but it was utterly unreasonable for them to agree to abide by such award if it were fraudulent. For my own part, I do not believe that in the history of the human race, the transaction has occurred in which a man has consciously agreed that another should be clothed with the power to cheat him, and that the decision of the fraudoer should be conclusive on the subject. And in the present instance such a stipulation cán be constructed only by an abstract interpretation of the conventional terms; for, if such language be construed as a part of an integer, and in the view of purpose in hand, it can be made to produce no such result. There is no more important rule of construction than that which requires that words shall be interpreted in the reflected light of the context in which they are found. And applying this rule to the case in hand it is not perceived how it can be reasonably said that these parties have given to the provision in question that noxious efficacy that is sought to be imparted to it.

That the clause under discussion cannot be, out and out, construed literally, appears to be undeniable. This and similar engagements are never so read. Undoubtedly, if we construe these terms with entire literalness, the builder is required to produce, before he can claim the money due him, the certificate of the architect. There are no exceptions provided for nor indicated if the language is thus alone regarded. But suppose the money be earned, and the architect die before the signing.of the certificate, is the claim lost or forfeited? Such a result, it is presumed, would not be claimed; and yet it is avoidable only in one way, and that is, to construe file terms of the contract reasonably as applied to their subject, and not literally. The exception can stand on no other ground than this, for the maxim, “ actus dei nemini faoit injuriam ” is never applied in violation of a contract. Looking to the letter alone, these parties have said that under all possible circumstances the certificate shall be a condition precedent to the right to payment. Admitting this as the true construction, the impossibility of the performance of such condition would not avoid it; and that such an effect has never been judicially given to such provisions, shows conclusively that they have been interpreted according to their spirit and not in subservience to their very letter.

And, indeed, in my view, the entire legal course that has been pursued in the construction of submissions to arbitration, in the common-law form, can be explained only on the ground that they have been construed liberally and not with literal narrowness. In all these submissions the stipulation is in the most unqualified form, that the award shall be final and conclusive; but if such award be tainted with fraud, it is set aside on the application of the party. And yet, it is plain that such party could not be permitted to make such application if his submission is to be read by its letter, and thus made to mean an engagement on his part to ¿bide by the award, whether honest or dishonest. In such cases it has never been pretended that the parties by the terms of their submission, reasonably understood, méant anything of the kind. The grounds of decision in that entire class of cases would seem to be precisely applicable to the present case.

As another illustration of the principle that a literal interpretation is out of place when its adoption will run counter to the expressed general object of the contract, reference may be made to the familiar case of clauses so frequent in leases, that if the rent is in an’ear for a certain time the instrument shall become void. In all these instances the courts have declared, notwithstanding the literal meaning of the terms, that the lease, on the happeniug of the event, is not absolutely vacated, but only becomes voidable at the option of the lessor.

In looking to the authorities, I do not find that the point now in question has ever been put under the consideration of any of the courts of this state. The subject was not discussed or considered in any of the three cases cited in the brief of the counsel of the defendant, in the decision of which I participated.

With respect to the English law touching this topic, I am inclined to think that it is still in a fluent condition, and that the last word, in reference to it, has not yet been spoken. In Clarke v. Watson, 18 C. B., N. S., 278, the allegation was that the arbiter had “wrongfully and improperly” neglected and refused to make his certificate — a form of allegation that manifestly did not involve the question of fraud on his part; so that this decision has no place in the present inquiry. Milner v. Field, 5 Exch. 829, goes beyond the requirements of the present case, for it maintains that even the collusion of the party in the fraud of the arbiter will not dispense with the production- of the latter’s certificate. The decision of the court is contained in four lines, and has no reference to either legal principles or authority; and in Clarke v. Watson, just referred to, which was decided ten years subsequently, in the opinions expressed, a different doctrine is stated; and in Batterbury v. Vyse, 2 Hurlst. & C. 41, this latter view appears to be the one sanctioned. Even the gross misconduct of the arbiter, without the imputation of fraud, in the case of Pawley v. Turnbull, 7 Jur., N. S., 792, was declared by Vice-Chancellor Stuart to dispense with the production of the certificates, and the payment of the money due was decreed notwithstanding their absence.

This attitude of the authorities it is deemed fully justifies the remark already made, that the principal question has not been definitively settled by the courts at Westminster.

The matter has been more definitely treated by the American tribunals, and the results reached seem to be very generally in accord with the views propounded in this opinion. Of this line of cases the following are leading illustrations: The Baltimore and Ohio R. R. Co. v. Polly, Woods & Co., 14 Gratt. 447; Lynn v. Baltimore and Ohio R. R. Co., 60 Md. 404; Herrick v. Belknap, 27 Vt. 673; Snell et al. v. Brown et al., 71 Ill. 133; Wyckoff v. Meyers, 44 N. Y. 143; Thomas v. Fleury, 26 Id. 26; Bowery Nat. Bank v. Mayor, 63 Id. 336; Martin v. Leggett, 4 E. D. Smith 255.

In Batchelor v. Kirkbride, 27 Fed. Rep. 899, the question present in this case was put directly in question, and was pointedly decided ; for the inquiry was whether the plaintiff was dispensed from producing a certificate if it had been refused by the fraud of the arbiter without collusion with the defendant. The jury was instructed at the trial, by Mr. Justice Bradley, that if such fraud was shown, the plaintiff was entitled to recover; and that ruling was upon reconsideration declared to be right, both by the distinguished -judge before whom the case had been tried, and by his associate, Mr. Judge Nixon. This case in itself is of great weight, and appears to be supported by the general current of American authority.

Nor does it seem to me that by the adoption of the foregoing theory of explication these arbitration clauses will be shown of any beneficial efficacy. The awards authorized by them will, for all useful purposes, be in truth finalities; they cannot be impeached for the want of skill or knowledge of the-arbiter, nor on the ground that his judgments do not square-with the judgments of other persons; such awards can be vitiated by fraud alone, and which must be proved to the satisfaction of a jury under a watchful, judicial supervision.

In fine, it appears to me that- the foregoing construction of the clause of the contract in question rests upon the triple gi*ound of legal principle, authority and public policy.

I think on this issue the plaintiff should have judgment.

---

Dissenting Opinion

Magie, J.

(dissenting). It is conceded that the contract sued on does not impose on the owner an absolute obligation. By its terms his obligation to pay arises only upon the performance of a condition precedent, viz., the production by the builder of the specified certificate by the architect named.

A count on such a contract must show performance of the condition precedent, or a valid excuse for. non-performance. Unless one or the other is shown, the count will be bad on demurrer. Since the count in question admits non-performance of the condition precedent, the sole question presented by the demurrer is whether it shows a valid excuse for non-performance.

Whether the builder, in such a ease, has or has not a remedy in some other action or court, is unnecessary to settle. If he has been defrauded by the architect or the owner, or both, it is inconceivable that he should be without remedy. If, in the absence of fraud, his contract deprives him of a i’esort to an action, he cannot complain, for courts can only construe and enforce his own contract voluntarily made.

The excuse alleged in this count for non-performance of the condition precedent is, that the architect willfully and fraudulently withheld, his certificate. There is no allegation that the owner was connected with the act or omission of the architect other than the averment that the willful and fraudulent conduct of the architect had been brought to the owner’s knowledge, but that he had not paid and had refused to pay the sum claimed.

The argument in support of the count was principally directed to the maintenance of the proposition that an architect’s fraud in withholding such a certificate, with which fraud the owner was in no way connected, excused its production and fixed the owner’s liability. The contention is that where the refusal is fraudulent, the contract does not require production.

But the terms of the contract make no exception whatever. Its stipulations require the production of the certificate at all events as a prerequisite to liability.

It is insisted, however, that an impossibility of performance, occasioned by the death of the architect, would excuse performance, and that, on similar grounds, an impossibility occasioned by his fraud will also excuse.

It is familiar doctrine that one who has contracted to do an act will be excused, if performance has become impossible by the act of God or of the law. But this doctrine has never been extended to impossibilities not created by vis major. He who engages that an act shall be done by another must procure that act to be done or submit to the consequences of failure. Doughty v. Neal, 1 Saund. 215; Lamb’s Case, 5 Rep. 23, 5 Vin. Abr. 239; Campbell v. French, 6 T. R. 200; Hesketh v. Gray, Say. 185.

The contract before us, however, is not that the architect shall make a certain certificate, but that the owner shall be liable only in case he does make such a certificate. The architect’s act is thus made a condition precedent.

Prof. Langdell, in his summary of principles established by the cases on contract selected by him (Vol. 2, p. 1075), shows that an act of God will not excuse the non-performance of a condition precedent, although it would excuse the performance ■of the same act when regarded as a covenant or promise. Tins doctrine obviously applies whenever the act to be done as a ■condition precedent furnishes the quid pro quo for the liability to arise on performance. Poussard v. Spiers, 1 Q. B. Div. 410; Stover v. Gordon, 3 M. & S. 308; Wells v. Calnan, 107 Mass, 514. Mr. Justice Drake considered that the doctrine was also applicable to cases where the condition precedent is the performance of an act which will protect him who is to ■become liable from undue liability. Roumage v. Ins. Co., 1 Gr. 110.

But it need not be determined whether the death of the •architect would have excused the production of his certificate. Iu my judgment, an impossibility arising from such an intervention of higher power would have furnished such an excuse. But it cannot be argued therefrom that an impossibility produced not by the intervention of superior power, but by the misconduct of the very person whose act is stipulated for, will furnish a like excuse.

For, if it be admitted that the true theory of the doctrine which excuses performance when rendered impossible by vis major, rests rather on a construction of the contract as not including performance under circumstances not contemplated by ■the parties, than on a destruction of the obligation by a ■superior and resistless force subsequently intervening (as was •suggested by Sir James Hannen, in Baily v. De Crespigny, L. R., 4 Q. B. 180), yet the conclusion argued for does not follow. No violence is done to the contract if the case of the •death of the architect be treated as excepted, because both parties must have known that such an event would render performance impossible. But where the parties expressly stipulate for an architect’s certificate, it is obvious that they had in ■contemplation his conduct, including his ability to do the act, his willingness to do it, and his honesty in doing it. His conduct was thus expressly stipulated for, and to eliminate any part of that stipulation does violence to the contract.

It may be true that the builder would not have entered into this contract if it had expressed that the owner would not become liable if the architect fraudulently withheld a certificate. It is probably equally true that he would have refused to sign if it had expressed that the owner would not become liable if the architect became unable or unwilling to make a certificate. Yet it is well settled that he has made precisely such a contract, and it seems to me to be a novel mode of discovering the construction of a contract — plain upon its face— which evades its direct meaning on the ground that if the parties had understood that meaning, they would not, in the judgment of the court, have made such a contract.

That the inability or unwillingness of the architect to make the certificate will not excuse its production has been established in the analogous case of insurance contracts, where the .insurer’s liability does not arise until the production of a certificate by some person designated or described in the contract. In the leading case in this state, the person thus designated was a clergyman, who declined to certify to the amount of loss because he had no such knowledge, of the property consumed as would justify him in so doing.' All the judges concurred in holding that the procuring of the required certificate was a condition precedent, a'ud that its non-production was not excused by reason of the inability or unwillingness of the clergyman to make the certificate. Roumage v. Ins. Co., 1 Gr. 110. The case was afterward overruled upon another point, but the doctrine for which I have cited it has not been questioned.

In that case the court approved and followed Worsley v. Wood, 6 T. R. 710, where it was held, in an action on such an insurance contract, that the “ unjust and wrongful” refusal of the minister and church wardens (who, by the terms of the contract, were to certify to the loss) to make the certificate would not excuse its non-production.

The doctrine generally prevails in reference to such conditions contained in insurance contracts. Johnson v. Phoenix, 112 Mass. 49; Columbia v. Lawrence, 2 Pet. 25; S. C., 10 Id. 5 ; Wood’s Fire Ins., § 416, and cases in note. Had courts applied to these analagous cases the rule of construction contended for here, it is obvious they might have discovered other ■exceptions from the contract.

So it is to be noted that where courts thus construe conditions precedent contained in building contracts, they have not limited the exception to the case of fraud on the part of the certifying architect. Thus, in Bowery Nat. Bank v. Mayor, &c., 63 N. Y. 336, the Court of Appeals of New York held an unreasonable withholding of such a certificate a sufficient ■excuse for its non-production. And in Batchelor v. Kirkbride, 9 N. J. L. Jour. 199, Mr. Justice Bradley is reported to have ■charged a jury, in an action involving such a contract, that if the architect withheld his certificate fraudulently or unreasonably and without collusion with the owner its production would be excused.

Such constructions obviously deprive the owner of the protection he sought to secure. For he required the builder to stipulate that no liability should exist until a person, in whom he had confidence, should certify to cértain facts necessary to ■his protection. The builder, being master of the contract he should make, chose to submit to the requirement. But as now ■construed, the owner is made liable, not on the expressed judgment of the person selected by him, but on the verdict of a jury determining whether that person withheld his judgment honestly or fraudulently, reasonably or unreasonably. The owner may well say non hceo infoedera veni.

It is urged that the architect in such cases occupies a position like that of an arbitrator, whose award may be set aside for fraud. But it is settled that an award cannot be thus dealt with except where the submission has been made a rule •of court, in which case the court exercises an equitable jurisdiction. Sherron v. Wood, 5 Halst. 7.

The result is, that I cannot yield to the construction of this 'contract which finds an exception to its terms in the case of an •impossibility arising from the mere act of the architect, with which the owner had nothing to do.

The remaining question is whether the count exhibits any 'Other excuse for non-production of the certificate.

Such an excuse would exist if the owner had prevented its production. Where performance of such a condition precedent has been prevented by the party who is to become liable on performance, prevention takes the place of performance,, and the liability will arise. 2 Langdell 1087; Addison Cont., § 326 ; Buller N. P. 164; Hothan v. East India Co., 1 T. R. 638; 1 Benj. Sales 105 and note.

If, therefore, the owner has procured or induced the architect to fraudulently withhold the required certificate, his liability will arise without its production, for his act has thus prevented performance, and he will not be permitted to thus, defeat his liability. This was the view of Mr. Justice Knapp in Byrne v. Sisters, &c., 16 Vroom 214.

There has been some vacillation in the English decisions with respect^ to this doctrine. In Milnor v. Field, 5 Exch. 827, the withholding of such a certificate by fraud and collusion with the owner was held only to give a right to a cross-action .

In Clarke v. Watson, 18 C. B., N. S., 278, it was intimated that if an owner colluded with a surveyor to withhold such a certificate, he could not shelter himself from liability under such wrongful act.

But in Batterbury v. Vyse, 2 Hurlst. & C. 42, a declarations on a building contract which stipulated for the production of an architect’s certificate before liability should attach, was held to be good because it averred that its non-production was caused by the neglect of the architect in collusion with and by the procurement of the owner.

The doctrine of the case last cited must, in my judgment,, prevail, for it imposes a just obligation on the owner, and. prevents his gaining advantage from his own wrong.

Does the count in question show such an excuse ?

The contention is that the owner’s collusion with the architect may be inferred from the averment that the owner refused to pay after the conduct of the architect had been “ brought to his knowledge.” It is not averred upon what ground his. refusal was put, and since it may have been on other grounds, the charge does not necessarily import collusion or procurement.

In my opinion, the demurrer was properly interposed to this count.

It is proper to point out that the case before us does not show the relation between the owner and the architect. When the latter is so employed as to become the agent of the owner with respect to the building, a new element is introduced which may require a different result. The adverse cases in other courts show, in some instances, the existence of such a state of facts.