Case Name: THOMPSON-STARRETT CO. v. LA BELLE IRON WORKS
Court: United States Court of Appeals for the Second Circuit
Jurisdiction: United States
Decision Date: 1927-02-14
Citations: 17 F.2d 536
Docket Number: No. 144
Parties: THOMPSON-STARRETT CO. v. LA BELLE IRON WORKS.
Judges: Before HOUGH, MANTON, and HAND, Circuit Judges.
Reporter: Federal Reporter 2d Series
Volume: 17
Pages: 536–546

Head Matter:
THOMPSON-STARRETT CO. v. LA BELLE IRON WORKS.
(Circuit Court of Appeals, Second Circuit.
February 14, 1927.)
No. 144.
Eidlitz & Hulse, of New York City (Charles H. Tuttle, Harry N. French, and Frederick Hulse, all of New York City, of counsel), for plaintiff in error.
Louis Marshall, of New York City, W. D. Stewart, of Pittsburgh, Pa., and Leonard Acker, of New York City, for defendant in error.
Before HOUGH, MANTON, and HAND, Circuit Judges.

Opinion:
HAND, Circuit Judge
(after stating the facts as above). This cause was upon written stipulation referred to a referee, to-hear the evidence and report it back for the action of the District Court. When the judge, upon the coming in of the report, adopted the findings of the referee as his own after an examination of the evidence, he tried the eause under Revised Statutes, § 649 (Comp. St. § 1587), quite as though the written stipulation had merely waived a jury. Pneumatic Scale Co. v. Mainwaring, 286 F. 378 (C. C. A. 2); Philadelphia Casualty Co. v. Fechheimer, 220 F. 401, Ann. Cas. 1917D, 64 (C. C. A. 6); Board of Com'rs v. Sherwood, 64 F. 103 (C. C.A. 8); Cleveland v. Walsh Cons. Co., 279 F. 57 (C. C. A. 6). It is quite true that a reference "to hear and determine," even on written stipulation, is not such a trial. Chic., Mil. & St. P. Ry. v. Clark, 178 U. S. 353, 20 S. Ct. 924, 44 L. Ed. 1099; David Lupton's Sons v. Auto. Club of America, 225 U. S. 489, 495, 32 S. Ct. 711, 56 L. Ed. 1177, Ann. Cas. 1914A, 699; Roberts v. Benjamin, 124 U. S. 64, 71, 74, 8 S. Ct. 393, 31 L. Ed. 334; Paine v. Central Vermont R. R., 118 U. S. 152, 158, 6 S. Ct. 1019, 30 L. Ed. 193. Such eases are in fact tried by an arbitrator, a practice known to the common law. Hecker v. Fowler, 2 Wall. 123, 17 L. Ed. 759.
Moreover, though the referee does not decide the cause, hut only reports to the court, if the consent is not by written stipulation as provided in section 649, while the court decides the cause, it too acts as arbitrator, and the trial is not under section 649. Shipman v. Straitsville Mining Co., 158 U. S. 356, 361, 15 S. Ct. 886, 39 L. Ed. 1015. It is only when the two conditions coexist that section 649 applies. It has indeed been held that a cause may be referred under the local statute (Tiernan v. Chicago Life Ins. Co., 214 F. 238 [C. C. A. 8]), a practice apparently recognized by us in Parker v. Ogdensburgh, etc., Co., 79 F. 817; but how far this can be reconciled with the decisions of the Supreme Court we need not consider.
Steel v. Lord, 93 F. 728 (C. C. A. 2), Steger v. Orth, 258 F. 619 (C. C. A. 2), and Demotte v. Whybrow, 263 F. 366 (C. C. A. 2), were eases of references to hear and determine; in each we said that no question was presented but of the sufficiency of the findings. They were not therefore trials under •section 649. Any language to the contrary in Fifth Nat. Bank v. Lyttle, 250 F. 361, 363 (C. C. A. 2), was an inadvertence. Hudson, etc., Co. v. Warner & Co., 99 F. 187 (C. C. A. 2), was a case like that at bar, where the stipulation was in writing and the reference was only to report. So far as it held by implication that the action of the District Court upon the report was not a trial under section 649, it was overruled by Pneumatic Scale Co. v. Mainwaring, supra. As the case at bar was therefore a trial by the court under section 649, Revised Statutes, § 700 (Comp. St. § 1668), applies to it.
Revised Statutes, § 700, prescribes that in trials under section 649, when there are special findings the review is limited to the inquiry whether these support the judgment, and whether there were erroneous rulings in the course of the trial. The testimony cannot be regarded for any purpose other than as it is involved in such rulings, and we have there-, fore no concern with whether the findings are against the weight of the evidence. Norris v. Jackson, 9 Wall. 125, 19 L. Ed. 608; U. S. v. Fid. & Guar. Co., 236 U. S. 512, 527, 35 S. Ct. 298, 59 L. Ed. 696; Steger v. Orth, supra; Pneumatic, etc., Co. v. Mainwaring, supra; U. S. Fidelity Co. v. Board of Commissioners (C. C. A.) 145 F. 144, 150. The question whether there is any evidence whatever to support a finding, being, however, considered a question of law, may be reviewed, if presented to the court during the progress of the trial, and a ruling secured to which there is an exception. R. S. § 700. In the Eighth Circuit the practice has long, been that the party aggrieved must request the court before its report is filed to make rulings of law. Mercantile Trust Co. v. Wood (C. C. A.) 60 F. 346, 348, 349; U. S. Fidelity, etc., Co. v. Board of Commissioners (C. C. A.) 145 F. 144, 151; Seep v. Ferris-Haggarty, etc., Co. (C. C. A.) 201 F. 893, 896; Wear v. Imperial Window Glass Co. (C. C. A.) 224 F. 60, 63; First National Bank of Ardmore v. Litteer (C. C. A.) 10 F.(2d) 447. We can only understand this as requiring the party to request- a ruling that a specific finding has no evidence to support it. On the other hand, Chief Justice Taft, while Circuit Judge, said in Humphreys v. Third National Bank (C. C. A.) 75 F. 852, 855, 856, that to bring up the quéstion whether a special finding had any evidence in its support, the party may except to it; it being an absurdity to ask a court to charge itself. This language has received the sanction of the Supreme Court in Fleischmann Co. v. U. S., 270 U. S. 349, 356, 46 S. Ct. 284, 70 L. Ed. 624, though, like the original, only in a dictum. It seems to us a needless and idle form to require the party aggrieved to request a ruling that putative future findings, or special findings already made, are without any evidence, and we regard an exception taken on that ground before final action of the court an exception to rulings made "in the progress of the trial."
Our review here would therefore be limited to whether the findings of fact justify the disposition of the cause, and, if the exceptions were adequate, whether there is any evidence to support any finding to which exception was taken on that ground. In passing on these questions we are confined to the findings properly so called, and may not look at the referee's opinion or the court's. Fleischmann Co. v. U. S., 270 U. S. 349, 355, 46 S. Ct. 284, 70 L. Ed. 624; British Queen Mining Co. v. Baker Silver Mining Co., 139 U. S. 222, 11 S. Ct. 523, 35 L. Ed. 147; Raimond v. Terrebonne Parish, 132 U. S. 192, 10 S. Ct. 57, 33 L. Ed. 309; U. S. v. Stockyards Co., 167 F. 126, 127 (C. C. A. 8); China Press, Inc., v. Webb, 7 F.(2d) 581 (C. C. A. 9).
The necessity of the rule could not be better illustrated than by the case at bar. The referee's opinion was not, and should not have been, a statement of the "ultimate facts." It was an extraordinarily impartial and capable discussion of the evidence, giving its substance, and weighing and balancing the inferences to be drawn from it. Such a document is exactly what the Supreme Court has set its face against as the equivalent of findings, even when there were no findings properly so called, and when the result was to leave nothing for review but the judgment roll. To treat such an opinion as part of the findings, when there are such, called by that name and expressly so intended, would be wholly unwarranted.
Strictly, the plaintiff took no exceptions which raise any question in this court. The exceptions to the referee's report were not exceptions to the rulings of the District Court, and the exceptions taken to the rulings of the District Court confirming the referee were taken after judgment, and can by no theory be regarded as made "in the progress of the trial." It seems to us, however, unduly strict not to treat the exceptions taken to the referee's report as exceptions to the rulings of the District Court in the progress of the trial, and we shall therefore consider them as such. The exceptions to the referee's findings respecting the superintendent's conduct do not raise the question whether they were without any evidence, in this respect differing from the exceptions taken, too late, to the action of the District Court in confirming the referee. In no view, therefore, have we before us more than the question whether the findings support the judgment.
Nevertheless, as to the findings regarding the superintendent's conduct and that he was not in good faith satisfied with the plaintiff's performance, both as respects method and construction, we think that there was supporting evidence. That he did express himself as generally dissatisfied is, indeed, not disputed. There were numerous imperfections of construction which might have been the occasion for his dissatisfaction with that, as well as with the general conduct of the work.. These both the referee and the District Court were at pains to point out in their opinions. Given such a possible basis for dissatisfaction, it would' be substantially impossible to disturb the finding on the theory that nothing supports it. It must'in the end depend more upon personal observation than any other single factor, which is necessarily lost in print. That he may have been self-willed and prejudiced is not inconsistent with an actual belief that the work was not being done as the contract required. He was not in any sense, as the plaintiff appears to suppose, an arbiter chosen by both sides because of his presumptive impartiality. He was the representative of a party to the contract, the party itself for the occasion, which could only act by an agent. As such, impartiality could not be expected of him, though honesty could. Thus, even if the exceptions had justified an inquiry into the basis for the findings, we should not disturb them.
Coming then to the merits, if it were necessary, we should disagree with the referee in limiting-the third article of the contract to the question whether the houses when completed conformed to the specifications, and excluding whether the methods employed resulted in the lowest cost consistent with good workmanship. It is true, as he says, that, in the case of a building contract at a fixed sum, the owner can have no interest in the extravagance or economy of the contractor's methods of work; his only interest is in what he gets, since what he pays is settled in advance. But we are unable to see the relevancy of that consideration in the ease of a "cost plus" contract, in which the owner is equally interested in the contractor's methods as in his construction. He is, of course, concerned that he should get the work which he specifies; but he is as much concerned with the way it is done, for that controls the cost. Indeed, since bad construction can be remedied by money, his interest as to each is in the end precisely the same. Literally, but only so, the phrase "work to be done" has nothing to do with the cost. Work that is to be done under a man's direction is certainly to be managed and conducted in ways that he approves. If he thinks it done wastefully, it is not done to his satisfaction, quite as much as though the result was not to his liking. We can see. no justification for reading the clause in such a context as limited to only a part of what the owner must reasonably have thought necessary to his protection.
Nor should we agree that a contractor is more exposed to abuse in one respect than in the other. The quality of his workmanship is quite as open to captious objection as the extravagance of his methods. The owner, on the other hand, needs as much protection in the one case as in the other; indeed, it is even more difficult for him later to challenge the way in which the work was done, which necessarily must have disappeared, than the actual product which remains for comparison with the specifications. On the first issue he is peculiarly at the contractor's mercy, whose employees collectively can make a much stronger case than the fewer inspectors whom the owner will employ. It is quite true that such contracts are hazardous, but we must construe them so as to give that protection which on their face they seem intended to secure.
Therefore we should hold, if the facts required it, that the phrase "the work • • * is to be done under the direction and to the satisfaction" of the superintendent required the plaintiff to satisfy him, not only that it performed its covenant in the seventh article that "all material and workmanship delivered under this agreement shall be strictly in accordance with the plans and specifications," but that it also performed its covenant in the first "to erect and construct said buildings at the lowest cost consistent with good workmanship and the quality of materials contracted for." Since, however, the cause was disposed of upon the more limited interpretation, and since the findings correspond with that theory as well as with ours, we need not positively hold that the broader is the true one. The result is the same in either ease, though the questions of estoppel and prevention, considered below, are relevant only to the limited interpretation. On the other hand, it was not an absolute condition upon any recovery whatever to satisfy the superintendent as to the methods employed; that only went to its amount.
The questions presented by such a provision, both under federal decisions and those of Pennsylvania, the place of performance, is whether the promisor was in fact satisfied with the performance, and not whether he ought to have been. Goltra v. Weeks, 271 U. S. 536, 548, 46 S. Ct. 613, 70 L. Ed. 1074; In re George M. Hill Co., 123 F. 866 (C. C. A. 7); Cope v. Beaumont, 181 F. 756 (C. C. A. 3); J. H. Sullivan Co. v. Wingerath, 203 F. 460 (C. C. A. 2); American Music Stores v. Kussel, 232 F. 306, L. R. A. 1916F, 882 (C. C. A. 6), construing New York law; Robinson v. U. S., 251 F. 461 (C. C. A. 2); Corgan v. Lee Coal Co., 218 Pa. 386, 67 A. 655, 120 Am. St. Rep. 891, 11 Ann. Cas. 838; Morgan v. Gamble, 230 Pa. 165, 79 A. 410; Kann v. Bennett, 234 Pa. 12, 82 A. 1111. Such words as "fraud," "good faith," "whim," "caprice," "arbitrary action," and "legal fraud" appear to us to obscure the issue. The promisor may in fact be satisfied with the performance, but not with the bargain, in which ease, of course, he must pay. He may refuse to look at the work, or to exercise any real judgment upon it, in which case he has prevented performance and excused the condition. But if he does examine what has been done, and, after comparing it with the stipulations, in fact does not believe that it is truly described by them, the promisee, who necessarily has the burden, has not succeeded in fulfilling the condition, and cannot recover. So far as the words so commonly used describe the promisor's unwillingness to judge, or the untruth of what he says about his conclusion, they are, of course, appropriate, though not well adapted to define the question; but, if they mean to add anything to the issue of fact, they seem to us to be wrong.
The plaintiff argues that the fourth and seventh articles of the contract modify the third. It says that, since the work was to be done under the direction of the superintendent, since he could condemn any part of it and require its replacement, and since the plaintiff for a year after completion remained liable to remedy defects which should appear, the contract must be understood to mean that he was in fact satisfied with what he did not condemn, though he may have unequivocally asserted the contrary during its performance. The Circuit Court of Appeals for the Third Circuit, indeed, did hold as much in Fuller v. Young, 126 F. 343; but we cannot accede to the doctrine. The result is altogether to excise from the contract the satisfaction' clause, because the rights of the parties are left precisely as though it were not present. It seems to us, on the contrary, that the fourth and seventh articles of the contract were privileges accorded the owner, not obligations, and that, if he was not in fact satisfied, he was not required to exercise his power and condemn the work.
Whether the absence of any expression of dissatisfaction as the work proceeded might be paramount evidence of satisfaction, whether it might even estop him if the work went on, is another matter, on which we do not pass. Town of Packwaukee v. American Bridge Co., 183 F. 359 (C. C. A. 7). It may be true that the superintendent did not specify any defects in workmanship, nor did the company transmit any to the plaintiff, and that both contented themselves with general expressions of dissatisfaction. The findings are silent on the point, and we have no right to go behind them, there being no requests which raise it. It would make no difference, if there were. The expressions of dissatisfaction were not in terms confined to the methods employed,. and were apt to cover, not only these, but the conformity of the work to the specifications. On their face the plaintiff was bound either to ascertain on what specifically they were based, or to accept them as broadly as they were made. Just what in fact took place, and how far they may have been limited in talk, we have no means on this record of knowing.
The plaintiff, however, insists that, even if it had not performed, the company prevented, and so excused, further performance by taking over the houses, and thereafter excluding it from completing them to the company's satisfaction. A strict construction of the complaint would scarcely allow this view to be taken of it. It pleads performance, except as thereinafter mentioned, and there is no mention of prevention. Later it pleads that the defendant approved any departure from the contract, and waived any claim because of a variance between it and the work. This, too, would hardly admit proof of prevention, and we can find nothing in the requests, exceptions, or assignments of error which raises the point, unless it be in the equivocal word "waiver." If that, which covers so much ambiguity, can cover this, still the findings do not justify the position.
The referee found that on September 18, 1919, the plaintiff delivered the houses as a substantial performance, and the company accepted them, and that, except for accounting adjustments, plaintiff's work then terminated (finding 12). This finding in'eorporates the letter sent by the superintendent that day, in which he said that the company would not require the services of the plaintiff any longer, but would itself take care of the unfinished items, expecting the plaintiff to cooperate with respect to subcontracts not completed or adjusted. This letter also admits that certain undisclosed tools, supplies, and materials had been taken over, and asserts that the houses were to be thereafter completely in the company's care. At this time they were in fact ready for use and occupancy (plaintiff's request 43), though there were certain unfinished items. These are all the findings on whieh the claim of prevention can rest.
Whether the plaintiff delivered the houses unwillingly, because the company demanded it, or whether the delivery was with its consent, does not appear, and we have no right to assume that it had not done all it meant to do. If not, mere delivery was in no sense inconsistent with the plaintiff's completing what had not yet been done to the company's liking. The omission of the unfinished items, if by the consent of both, was no more than had occurred already, in respect of 64 houses, or than took place at this time in respect of the sewer and water services. So far as appears, the plaintiff might still have done such further work as it chose to make the houses conform. Indeed, if we were allowed to look into the evidence, it would appear that through subcontractors it actually did do further work, for example, in respect of the plastering. Certainly there is no warrant for saying from all this that the company stopped the work, and the contention is apparently an afterthought.
The next point is that, by taking over the houses, and with them the tools and materials on the ground, as well as by receiving from the subcontractors certain added materials after September 18th, the company became estopped to deny that the plaintiff had performed to its satisfaction. Assuming that this was comprised within the eighteenth article of the complaint, the point is not in our judgment valid. As to the materials delivered by subcontractors after September 18th, it must rest upon the plaintiff's tenth request, which is, however, indefinite as to time. However, the materials and tools on hand on that day. raise the point quite as well as any received later;
As a true estoppel it must depend upon the implication that the company was in fact satisfied, and upon the plaintiff's action to its detriment upon that understanding. The company had repeatedly declared that it was not in fact satisfied, both expressly when it made payment after January, and most effectively when it refused payment altogether after May. Nothing had happened meanwhile to indicate a change of heart, unless it were the inspections in August and September (finding 13). The superintendent and his assistants were present at these, and they pointed out some details for correction; but there is no finding that they expressed themselves as satisfied if these were remedied, and the referee refused to make findings (44, 45, 46, 48, 50, 51), designed to show that the superintendent was in fact satisfied, or had expressed himself so, if these were remedied. In the face of the continuous discontent with method,' if not with construction, which had gone before, if the plaintiff supposed that the situation had changed, its assumption was gratuitous. In delivering the houses, materials, and tools, so far as appears without protest, it did not, therefore, act upon the faith of an apparent change in the plaintiff's position.
The argument appears, however, to go further, and to rest, not upon estoppel, properly speaking, but upon the inconsistency in law of the company's acceptance of the property, while denying any responsibility for the price. As to the houses it is hard to see how it could have.done otherwise than accept, so long as it did not accompany acceptance with any expression of satisfaction. But this does not dispose of the claim in respect of the materials and tools. To state the argument as strongly as we can: The contract alone gave the company any right to the materials and tools, which under its thirteenth article were put in the same class. To take them'over was therefore to assert a right under it, which was inconsistent with the repudiation of all liability for the price.
But there was no inconsistency in law in the company's position. There might, indeed, have been, had it prevented the plaintiff from completing; but it had not. Its refusal to pay was not a repudiation, because it was under no obligation to pay; the plaintiff not having performed. True, it was not entitled to the materials and tools under the contract, if the plaintiff had not delivered them; but, if it chose to do so, any resulting obligation depended upon that transaction, and was independent of the contract. Even if it had taken them wrongfully, it would not have affected that obligation, though it raised an independent liability. So far as concerned the contract, it stood consistently upon its rights not to pay until the plaintiff should perform. In that it had been consistent, if grasping, and performance was not completed by taking over materials and tools, even if it was not entitled to them.
That the case is a hard one goes without saying. The plaintiff is defeated in a large recovery by what was apparently the obstinacy and prejudice of the company's superintendent — we speak from the opinion. But it is a misnomer to call this a forfeiture, as the brief repeats on almost every page. The promisee of a conditional promise always runs the chance of losing what he has done, if he fails to fulfill the condition, and when he puts his labor on 'the promisor's land, the promisor will be the gainer. There is no injustice in that, if he has agreed to bring to pass the condition. It is quite true that we must jnot read such contracts narrowly, for they are severe; but, once understood, it is as prime a consideration as in any other ease that the parties should be confined to their bargain.
Judgment affirmed.