6 S.E.2d 570 | Ga. | 1939
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 *491 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.
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 *493
upon the subject. (
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 *494 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 italicised in the next succeeding paragraph.
There are many decisions to the effect that where parties to a building or construction contract designate a person who is authorized to determine questions relating to its execution, and stipulate that his decision shall be binding and conclusive, both parties are bound by his determination of those matters which heis authorized by the contract to determine, except in case of fraud, or of such gross mistake as would necessarily imply bad faith, or a failure to exercise an honest judgment. In an editorial note in 54 A.L.R. 1255, following the report of Zimmerman v. Marymor,
In Grant v. Savannah, Griffin North Alabama R. Co.,
In Green v. Jackson,
The same principle was applied in Kihlberg v. United States,
So the mere existence of error in the arbiter's conclusion will not, without more, open the matter for judicial examination. Nor will the fact that the chosen umpire is an officer or employee of one of the contracting parties destroy the force of his decision, the relationship being stated in the contract or known to the parties at the time of his selection. Edwards v. Hartshorn,
The present case differs on its facts from Mallard v.Moody,
In Cannon v. Hunt,
The Court of Appeals quoted the following statement from Donnelly's Law of Public Contracts, 349: "The stipulation in public contracts that all questions and differences which may arise between the public body and the contractor shall be referred to the engineer, and his decision shall be final and conclusive, does not give the engineer jurisdiction to determine that work, which is not done under the contract or specifications, and which is not governed by them, was performed under and is controlled by the agreement, and his decision to that effect is not binding." An examination of that text shows that it was based upon only two decisions, Salt Lake City v. Smith, 104 Fed. 457, and United States v. Smith,
For other decisions involving awards or the like which were held invalid, though for reasons not present in the instant case, see United States v. Utah c. Stage Co.,
It is insisted in this case that the stipulation would not authorize the engineer to construe the contract, and some decisions have been cited which apparently support this contention. See King Iron Bridge Co. v. St. Louis, 43 Fed. 768; Lewis v. Ry. Co., 49 Fed. 708; Dock Contractor Co. v. New York, 296 Fed. 377; McGillivray Construction Co. v. Hoskins,
Although construction of a contract may be a pure question of *504
law, this within itself is not a valid objection, because questions of law may be submitted to arbitration. In such case, the decision of the arbitrator is binding in the absence of fraud or corruption, even though it may be erroneous. Forbes v.Turner,
We do not overlook the rule that a stipulation of this nature is subject to strict construction; nor do we fail to note that according to numerous decisions a general agreement to arbitrateall questions which may arise in the execution of a contract, both as to liability and loss, should be treated as against public policy and void, as an attempt to oust the courts of jurisdiction. Parsons v. Ambos,
It is contended by the plaintiff that the reference to slag, contained only in specifications as to construction methods, should have gone for naught in deciding as to the kind ofmaterial that was intended. While, if construction of the contract had fallen to the court in the first instance, the mention of slag solely as indicated might not have justified the conclusion that this type of aggregate was mandatory (compare Moreing v. Weber,
There is no allegation of fraud or collusion, and whatever may be the strict legal meaning of the contract on the point at issue, that is, whether the engineer construed the contract as a court on original consideration should have done, his decision does not in any view appear upon its face to be so grossly erroneous as to imply bad faith or a failure to exercise an honest judgment. Accordingly, his decision should be an end of the matter.
The conclusion which we have reached in this case follows, we *506 think, from previous decisions by the courts of this State, but since the question may not have been clearly settled thereby and is regarded as one of importance, we have deemed it proper to examine decisions of other courts. While there may be some conflict in outside decisions, the views expressed herein are supported, we think, by the weight of authority, — with, so far as we are aware, no Georgia decision to the contrary.
The Court of Appeals erred in holding that the "decision" of the State highway engineer was not final and conclusive, and in reversing the judgment of the trial court dismissing the petition.
Judgment reversed. All the Justices concur.