271 F. 701 | N.D. Ohio | 1920
This action was brought originally against the city of Cleveland alone to recover a balance alleged to be due on a contract for constructing a clear water reservoir, upon a unit price basis and certain additional items of extra compensation. The city of Cleveland obtained an order making also a defendant the National Surety Company, surety on plaintiff’s performance bond. See Walsh Construction Co. v. City of Cleveland (D. C.) 250 Fed. 137. The city thereafter filed an answer and also a cross-petition, seeking to recover judgment against the plaintiff and its surety for damages alleged to be due for defective work in building tlie reservoir. After the issues were made up, all parties, by consent, waived the right to a trial by jury, and by like consent the issues were referred to Robert L. Hoffman as special master to hear and decide the cause and all issues arising therein, with instructions to report separately his findings of fact and conclusions of law. His report having been made, certain exceptions thereto have been taken by the several parties, and the cause is now before me for decision upon the report and exceptions.
Plaintiff has taken ten exceptions to the master’s report, all of which purport to except to the master’s conclusions of law; his findings of fact being accepted as conclusive. The city has taken two sets of exceptions, and the surety company has joined in the city’s exceptions, and in addition thereto has taken an additional exception to the master’s ruling that the surety is not discharged by reason of the changes and alterations made without its consent in the plans and specifications during the progress of performance. These several exceptions need not now be fully stated, but will sufficiently appear in the course of this opinion. Many of them raise the same question of law, and depend upon certain general legal principles. The most important questions thus raised are the following: (1) The legal force and effect of the exhaustion by previous payments of the amount certified by the city director of finance at the time the contract was made. (2) Whether the contract was substantially performed, and whether the refusal of the director of public utilities to accept was arbitrary and unreasonable, so that the plaintiff might recover if there had been a sufficient certification of funds. (3) The true measure of damages for faulty workmanship, and the amount of such damages. (4) The city’s right to recover liquidated damages at the stipulated rate for plaintiff’s delay in- performance. (5) Whether on the facts as found, plaintiff is entitled to recover the amounts found due by the master on its third and fourth causes of action.
1. The contract is dated March 29, 1915, and the city director of finance certified thereon that there was the-sum of $272,636 in the city treasury to the credit of the fund and not appropriated for any other purpose, from which payment to the contractor was to be made. The contract was for furnishing materials and performing labor in constructing a clear water reservoir as a part of a filtration plant for the city of Cleveland. This reservoir was approximately 1,000 feet long by 200 feet wide, divided into 2 basins, known as No. 1 and No. 2, covered by a concrete roof supported by side walls and 600 columns approximately 22 feet in height, with cross-walls and baffle walls. The contract was upon a unit basis, consisting of 21 separate items, of which 6 only were for lump sums, aggregating $15,900. The remaining 15 called for general excavation per cubic yard, excavation for back-filling per cubic yard, rolling foundations and embankments per ton mile,
The master finds that the plaintiff had performed labor and furnished materials upon this unit basis in the amount of $301,739.40, extra work under the second cause of action $7,444.39, extra work under the fifth cause of action $793.58, and extra Work under the sixth cause of action $1,090.04, aggregating $311,067.41. Of this amount, he finds that the city had paid during the progress of performance the sum of $272,188.20, and that the funds certified were wholly exhausted November 15, 1915. His conclusion of law is that notwithstanding the contract may have been fully performed, and the refusal to accept would be arbitrary and unreasonable, the plaintiff cannot recover because of the charter provisions of the city of Cleveland relating to the making of municipal contracts, and particularly that provision relating to the certificate of the director of finance.
These sections of the General Code had, previous to their re-enactment in the municipal charter, received in Ohio a definite and well-settled construction. They were held to apply only in those cases in which a contract was to be paid from revenues raised by general taxation, and not to contracts which were to be paid from the proceeds of bonds lawfully issued, or other revenues of self-sustaining public utilities. In the cases last mentioned, a certificate is held not to be an essential condition precedent to a valid and binding contract. Kerr v. Bellefontain, 59 Ohio St. 446, 52 N. E. 1024; Comstock v. Nelsonville, 61 Ohio St. 288, 56 N. E. 15; Emmert v. Elyria, 74 Ohio St. 185, 78 N. E. 269; Akron v. Dobson, 81 Ohio St. 66, 90 N. E. 123; Frisbie v. East Cleveland, 98
Moreover, a contract if valid at all is valid when made and does not become invalid as a result of contingencies arising during the performance. The sections in question are directed primarily to the making of a valid contract, and do not contemplate that a valid contract may be terminated during performance because the funds then certified prove to be inadequate. It is no answer to say that if, in the course of performance, it appears that the funds certified will be or have been exhausted, the city can or should appropriate additional funds and furnish a supplementary certificate. The city’s power so to do implies a like power to refuse so to do. New officials may then be in office. Both parlies are equally at liberty to refuse to perform further. In any event, a contractor would be.faced with the necessity of suspending performance, a'nd perhaps abandoning the work, and then be confronted with the proposition that he could recover nothing because the contract had not been substantially performed. Obviously the proper construction of these sections, whenever applicable, must be one which will permit a valid contract to he made and will enable both parties to determine at the time of making it whether or not the contract is a valid one and susceptible of full performance. It is either valid at that time or it is invalid; if valid when made, it binds both parties until fully performed; it does not become invalid because of the failure to estimate correctly in advance the amount necessary to be certified. 'Granting the parties act in good faith and that the contract as made is free from fraud,
2. The master finds that the contract was substantially performed in January, 1916; that the contractor was entitled to have a formal acceptance within a reasonable time thereafter, as provided in the contract, and that any refusal so to accept was unreasonable and arbitrary. This finding, it is not contended, is not supported by substantial evidence; but the city’s contention, as I understand it, is that these findings are nullified and overthrown by certain other findings which show conclusively that the contract was not in fact substantially performed, and that hence no recovery can be had. This contention is raised by several exceptions.
The master’s findings are very full and definite. He properly separates his findings of fact from his conclusions of law. It is not necessary to summarize or state them fully, but it will be sufficient merely to refer to such as are necessary to a disposition of this contention.
On January, 1916, the work called for by this contract was fully performed and acceptance of it was demanded in writing. All the work had been done under the supervision and direction of the city’s engineer. It was subject to inspection and was, in fact, inspected during the entire course of performance. After its completion, a final estimate was prepared by the city engineer preliminary to a final acceptance by the director of public utilities, and certain meetings were held with the director in the early part of 1916, at which a final acceptance was the subject o'f discussion. The only questions then in dispute related to the conti-actor’s claim for extra compensation, as is now claimed by him in some of the causes, of action. The amended petition alleges, and the answer admits, that the engineer had made a final estimate; but, while it is claimed that the director of public utilities had in fact verbally accepted the work, no formal written acceptance by him had been given at the time the events happened out of which this controversy has arisen. The master’s findings are not that there was an acceptance by the director, but that he should have accepted and his refusal so to do was unreasonable and arbitrary.
On July 9, 1916, a portion of the reservoir, consisting of four columns, together with part of the reservoir roof, collapsed. The fallen part of the roof consisted of four panels, comprising a total area only of about 31Y2 square feet, which had been supported by the four columns. An examination disclosed,that the collapse of the columns was due to defective concrete. This led to an extensive examination and inspection by numerous experts, which continued during a period of many months. Demand w,as made upon the plaintiff, under paragraph AA of the contract, to make repairs, and upon his failure so to do the city entered into a contract with John F. Casey Company for a recon
This reconstruction plan, pursuant to which the Casey Company did the reconstruction work, was of an entirely different design from that of the original construction, and different from that according to which the plaintiff had been ordered to make repairs. It did not consist merely of the replacement of defective work or repairing parts of the original structure, but provided for the surrounding of each column with a concrete shell or jacket, and further provided for the placing of steel reinforced concrete inside of the lining at the bottom and sides of the reservoir and steel reinforced concrete covering the outside of the roof of the reservoir. All this construction was tied together by heavy steel concrete reinforcement.
The necessity for this plan of reconstruction, the master finds, was. due to defects in the original design, and not to faulty work or defective materials. The effect of it was not merely to remedy or repair such faulty workmanship or defective material, but to remedy and overcome the defects in the original design. The walls of the original structure, as designed, were of the gravity type, relying upon their weight and shape for the strength required to resist the pressure of the outside surface and pressure of the water from within. The bottom and top were to be made of a large number of units, not tied together by steel and not having special construction to insure equal settlement of the structure or uniform loading upon the foundation soil. A reservoir of this type, the master finds, required a firm, unyielding foundation so that no unequal settlement or movement could take place. It was designed upon the assumption that a suitable soil would be encountered for the foundation. In brief, his finding is that the failure of the reservoir as originally constructed, and the necessity for the plan of reconstruction such as was adopted, was due to the nature and character of the original plans and specifications, for which the city, and not the contractor, was responsible. The only faulty workmanship of the contractor, the master finds, was due immediately to the use of excess water in the mixing of the concrete and to the use of a special kind of concrete mixer employed upon a part of the work; in fact, that substantially all the defects were those of workmanship, and not of materials. He further finds that the plaintiff showed at all times a willingness to comply with instructions; that it committed no serious breaches of the contract intentionally; that it did not willfully violate the specifications or depart therefrom to any extent except as was done with the knowledge of the city’s engineers or inspectors; that the entire structure grew step by step from foundation to completion under city supervision; that each, part of it, with the exception of the columns, was susceptible to examination and criticism before the portion resting upon it was placed. The faulty workmanship, he finds, was not large, but was present only in 2042.7 cubic yards of the concrete, the contract price of which on a unit basis amounted only to $14,635.68.
The cases most strongly relied upon by the city are the following: Trustees of Trenton v. Bennett, 27 N. J. Law, 513, 72 Am. Dec. 373; Dermott v. Jones, 2 Wall. 1, 17 L. Ed. 762; Creamery Package Co. v. Russell, 84 Vt. 80, 78 Atl. 718, 32 L. R. A. (N. S.) 135; Day v. U. S., 245 U. S. 159, 38 Sup. Ct. 57, 62 L. Ed. 219. All these cases belong to an entirely different class, and relate to contracts in which there is an absolute undertaking to do a particular thing or to insure a given result, or where the loss or failure is due to accident during the progress of
3. The measure of damages adopted by the master for the faulty work done by plaintiff, and the amount of such damages, are also challenged by the city. The master finds that it would have been necessary to expend the sum of $56,350 to have removed the faulty concrete and to have replaced it with sound concrete. He makes no finding as to the difference in value between what would have been the value of the reservoir if constructed without this faulty work, and its value with the faulty work. His conclusion is that inasmuch as the sum of $56,350 was not expended in remedying the faulty work, the true measure of damages under all the circumstances is the amount paid by the city to the contractor for that part of the work which was defective, amounting to the stun of $14,635.68, and in addition thereto, the sum of $3d6.40, for replacing the collapsed portion of the reservoir. Plaintiff does not except to the master’s finding or conclusions in this respect, and upon this hearing announced a willingness to accept and stand thereon.
The city’s cross-petition is framed on the theory that it has the right to recover the amount paid to the John F. Casey Company on the reconstruction contract. This, obviously, could be true only on the view that the contractor undertook to construct and deliver in completed condition a reservoir suitable and fit to answer the desired purpose. As already said, this view of the contract and of the law is not sustainable. Treating, however, the city’s cross-petition as adequate to justify a recovery of damages upon any proper measure due to faulty workmanship, the question arises as to what, under all the circumstances, is the proper measure of damages.
5. The master’s findings that the plaintiff is entitled to recover on its second cause of action $7,444.39, on its fifth cause of action, $793.58, and on its sixth cause of action, $1,090.04, are not excepted to by the city. The correctness of these findings need not therefore be consider
6. Plaintiff’s fourth and fifth exceptions to the master’s findings and conclusions of law that under the third and fourth causes of action, respectively, plaintiff is not entitled to recover, are not urged before me, and need not, therefore, be considered at length. Upon the facts found, it is sufficient to say that the master’s conclusions of law appear to be in accord with the authorities. See Day v. U. S., 245 U. S. 159, 38 Sup. Ct. 57, 62 L. Ed. 219.
Applying these conclusions to the master’s report, and sustaining and overruling the several exceptions in accordance therewith, judgment should be entered as follows: Plaintiff is entitled to recover the sum of $38,879.21, with interest on $32,657.86 from June 19, 1916, and interest on $6,22F35 from April 15, 1917; and the city is entitled to recover* against plaintiff $5,95Q liquidated damages, with interest from June 19, 1916, $14,635.68, with interest from November 1, 1916, and $346.49 with interest from May 15, 1917. A journal entry embodying these conclusions may be-prepared and submitted by counsel.
’The exceptions of the defendant the National Surety Company, in view of these conclusions, become immaterial. Its contention that it is released because of changes made in the plans and specifications without its consent, during the progress of the work, seems to me not to be well taken, and its exceptions on that ground should, if it becomes material, be overruled. See U. S. v. U. S. Fidelity & Guarantee Co., 236 U.S. 512, 35 Sup. Ct. 298, 59 L. Ed. 696; U. S. v. McMullen, 222 U. S. 460, 32 Sup. Ct 128, 56 L. Ed. 269.