Opinion ID: 2317903
Heading Depth: 1
Heading Rank: 12

Heading: The Structural and Fabricated Steel Claims:

Text: There remain in connection with the first count Terminal's claims for payment of disputed items of structural and fabricated steel by bulk. The engineer, as hereinbefore mentioned, had the power to make necessary explanations as to the meaning and intent of the specifications and drawings; to the amount, quality, acceptability and fitness of the work and materials to be paid for; and to decide in all cases every question which may arise relative to the fulfillment of this contract. As hereinbefore determined, these provisions were binding upon the contractor in the absence of proof of constructive fraud, namely, arbitrary action on the part of the engineer. Evidentiary support for this claim is lacking. Not only does the contract support the engineer's ultimate treatment of these items from the viewpoint of judicial construction of contracts, but there is no evidence from which it may be inferred that the engineer's decisions in reference to these items were arbitrary or the result of gross mistake. Those decisions were binding on Terminal in the absence of proof of constructive fraud as hereinbefore discussed. T. Foster Callahan, Inc., v. Comm'rs, etc., Union Twp., supra (102 N.J.L., at pages 706-707); Benjamin Foster Co. v. Commonwealth, supra (61 N.E. 2 d at page 151). The mere fact that there was evidence that other determinations by the same representative of Bogert-Childs, i.e., by the engineer, were arbitrary does not supplant the necessity for introduction of evidence that their determinations as to these items of claim were arbitrary. The Appellate Division correctly determined that the trial court should have granted the authority's motion for judgment, made at the close of the reception of evidence, in reference to the structural and fabricated steel claims. R.R. 4:55-2 (formerly Rule 3:54-2), supra.
Insofar as the questions involved relate to the claims advanced in the second count of the complaint, the questions again assert the agency and fraud issues hereinbefore discussed, and our general determinations thereon are to be applied. Again we are called upon to construe the pertinent specific provisions of the contract. This count is identified as the claim for dewatering operations. During the course of the entire project construction, a faulty construction by the contractor holding Contract No. 6 (construction of a 60-inch sewer extending from the screen chamber at the sewage treatment plant in the Borough of Little Ferry, beneath the Hackensack River to a point west of the track of the New York, Susquehanna & Western Railroad in the Borough of Ridgefield) caused difficulties by flooding through installations in the Contract No. 6 area and by failure to connect properly with the installations on Terminal's portion of the entire project. The resident representative of Bogert-Childs, namely Mr. Lincoln, issued a memorandum on August 3, 1950, which called upon Terminal to reconstruct the terminal portion of its neighbor's work and in connection with this state of events Terminal was required to effect a considerable amount of additional pumping to remove water from the scene of these particular operations. Article 39 of the form of Contract required Terminal to relocate or reconstruct its own construction which endangered adjacent construction; it authorized Terminal to claim damages from an adjacent contractor but not from the authority. However, it did not bar a claim by Terminal against the authority for work done to repair or relocate an adjacent contractor's installations, and Article 40 authorized Terminal to claim (against the authority) compensation for any damages sustained by reason of the acts of the authority, or its agents   . Power to act in the premises was also given the engineer and Terminal in the following clause: Art. 55. Power of Contractor to Act in an Emergency. In an emergency threatening injury to persons or damage to the work or any adjoining property, the Contractor may act, to prevent such threatened injury or damage, and will so act if instructed or authorized by the Engineer. The amount of reimbursement merited by the Contractor on account of any such action shall be determined by the Engineer. The evidence indicates that there was an abnormal water seepage through the Contract No. 6 installations from as early as December, 1949, that Terminal complained of it and Mr. Lincoln was aware of it. Terminal did not sue for pumping necessitated by such seepage but only for dewatering in the Contract No. 6 installation area after August 3, 1950. There was evidence that Terminal treated the subsequent condition as an emergency situation, developing from the operations required by the engineer under Mr. Lincoln's August 3, 1950 directive to perform work on the Contract No. 6 installation and his orders from time to time during that work. Mr. Ivan L. Bogert testified that emergency pumping equipment and crews were customarily kept at cofferdam operations. He further testified that we did not deny the water came from contract No. 6. He had been advised that a serious amount of water was coming out of contract 6 installation as early as July 27, 1950. He and Mr. Lincoln testified they approved substantial bills for work done under the August 3, 1950 order above adverted to. Mr. Lincoln testified that Terminal's pumping was necessary for it to handle the water to enable Terminal to perform its work under the August 3, 1950 directive, that the engineer made no other recommendation for handling the water and was satisfied with the methods employed by Terminal. There is evidence that the authority itself was aware of the situation. Mr. Lincoln never disputed the amount of the bills for this work as such. He testified that the total amount of the bills was $216,535.59 and they contained complete itemization. There seems to have been an emergency situation. The engineer had the power to act as the authority's agent in this respect. The submission to the jury of the issue of the facts that would be the basis of a finding of an emergency by the engineer enured to the benefit of the authority. The authority contended that the total dewatering claim in question was not entirely related to the alleged emergency situation but was due at least in part to other conditions on which the evidence was in dispute. The authority also contended that the engineer had no power to order Terminal to reconstruct adjoining installations. Article 3 of Contract No. 1 directed the contractor (Terminal) to leave intact the work of adjoining contractors, unless otherwise ordered by the Engineer. (Emphasis supplied) Terminal was also not responsible for damage caused by agents of the authority (Article 41). There was a further defense of the authority that payment should be denied because this was work done under an extra work order that required written approval by the authority. The Extra Work clause, Article 36 of the Form of Contract, upon which the authority relies, claiming the engineer had no power to order Terminal to do the work covered by this count, without written approval of the authority, related to major and material additions or changes to the items involved in Contract No. 1, not to adjacent portions of the overall project. Although not properly a defense to be submitted to the jury, the trial court did so on the constructive fraud basis both as to Mr. Lincoln's and Bogert-Child's conduct in refusing to submit the specific bills to the authority and as to the authority's conduct in the premises with notice and knowledge of the situation. No prejudice was done to the authority and as a result of the verdict of the jury no harm was done to Terminal. In addition the authority contended that the engineer determined the amount merited by Terminal to be $20,000, and that this was binding on Terminal under the provisions of Article 55 of the contract. Under all the evidence, including evidence that Mr. Lincoln ordered emergency work, approved the fact of work done and cost thereof, and calculated the total as $216,535.59 from records kept by his own assistants, it was for the jury to say whether the engineer's allowance of approximately one-tenth of what his own figures showed to be reasonable was arbitrary on his part. The submission to the jury of the claim under the second count was not prejudicial to the authority. The jury could have determined the extrinsic facts, in relation to constructive fraud, in relation to construction of the contract (see Jennings v. Pinto, supra ), or in relation to Terminal's alleged responsibility for creation or avoidance of the situation. There was therefore an area of decision in which the jury might have found for the authority on the evidence. The authority on this appeal contended that the emergency theory of this claim was advanced by the Appellate Division. The record does not support this contention. The record demonstrates that the emergency theory was tried. The nonexistence of an emergency was part of the trial course of the authority. Further the instructions of the trial court to the jury submitted the claim for dewatering operations, referred to the contract as being designed to reach every contingency that might arise, discussed the second count at length including Terminal's allegations that an emergency existed and the authority's contention that no emergency, in fact, existed. Terminal's 24th request to charge was pertinent and was charged. The authority's request No. 43 was charged, and it was favorable to the authority. After the jury retired, the authority made a blanket objection to refusal of the trial court to instruct the jury on several of its requests to charge and these requests indicated its awareness of the emergency question. The pertinent requests (including No. 59, No. 61, and No. 66) were either adequately covered by the general instructions to the jury or called for binding instructions which would have been opposed to the evidence. Further, the authority expressly objected to the submission of the emergency issue to the jury, on the ground that there was no evidence relative to an emergency in fact. We find no merit in that objection. There was no error prejudicial to the authority in the instructions to the jury and in the trial court's disposition of the requests to charge, in regard to this subject matter. The essence of the controversy on the second count is whether the engineer's determination as to the amount merited by Terminal was fraudulent on the theory hereinbefore discussed. The fraud issue is inextricably interwoven with the engineer's conclusions as to the scope of the work in its relationship to Emergency work within the terms of the contract, i.e., to test the validity of his allocation, and warrants its submission, as was done, to the jury. Article 55, hereinbefore quoted, authorized the engineer to determine the amount of compensation to be paid to Terminal for this item of claim. There is sufficient evidence to also present a jury question, and it was so submitted, whether the engineer's action in setting the amount of payment for this work was arbitrary and therefore in the sense of the authorities hereinbefore discussed, constructively fraudulent. As hereinbefore noted, the engineer confirmed the actual value of the work performed and materials furnished, in the amount claimed by Terminal. We find no error on the part of the trial court in the submission of the second count to the jury, including the issue of fraud. Fraud in the sense here applicable is inseparable from the entire claim under this count.
Terminal in the third and fourth counts sought damages for alleged fraudulent (arbitrary) action of the engineer in requiring Terminal to construct concrete wall work and concrete slab work contrary to the contract and to plaintiff's schedule of operations. The trial court dismissed these counts on the authority's motion after the entire reception of evidence. R.R. 4:55-2 (formerly Rule 3:54-2), supra, and the Appellate Division affirmed. We are of the opinion that the evidence on this phase of the case disclosed no more than a mere difference of opinion as to the proper spacing of construction joints. Under Article 29 of the Form of Contract the Engineer's determination was binding upon Terminal in the absence of proof of arbitrary, or fraudulent, conduct on its (or his) part. No evidence of arbitrary or grossly mistaken conduct referrable to these claims was introduced. A plaintiff's recovery of damages may not be based upon conjecture and speculation. Cf. Stanley Co. of America v. Hercules Powder Co., 16 N.J. 295, 312 (1954). For the above reasons we are of the opinion that the Appellate Division did not err in affirming the dismissal of the third and fourth counts.
In the fifth count of the last amended complaint Terminal sought payment for 14 items of modification in the work (which are relatively insignificant and may be termed fringe items), ordered either by Mr. Lincoln as resident engineer, or by Bogert-Childs directly and through Mr. Ivan L. Bogert as project engineer. By process of elimination and withdrawal during the trial these items were reduced to 7, which were submitted to the jury (Terminal claiming $2,980.55 therefor) on the theory of breach of contract coupled with constructive fraud as hereinbefore discussed. With respect to this count the questions involved also principally relate to the agency and fraud issues, but as a result of the apparent applicability of certain provisions of the contract in addition to provisions hereinbefore mentioned our task of determination is more difficult. In their direct application to the fifth count the questions involved raise the questions whether the Appellate Division erred in construing the contract as a bar to this count because no written Extra Work orders were obtained and in determining that if there was constructive fraud, such fraud would not have a material bearing upon Terminal's known duty to obtain written Extra Work orders. On the items claimed under the fifth count with which we are concerned on this appeal, there was evidence of extrinsic circumstances which raised fact issues for the jury to decide, if the contract requires a construction obviating written Extra Work orders signed by the authority, of which more will be said. First, the contract provisions: Article 1 of the Form of Contract, as hereinbefore discussed, made Bogert-Childs, Mr. Lincoln and Mr. Ivan L. Bogert, or any one of them, the engineer under the contract. Article 1 also provided:  Extra Work, as used herein, refers to and includes work required by the Authority, which in the judgment of the Engineer, involves changes in or addition to that required by the plans, specifications and addenda in their present form. (Emphasis supplied) Article 3 of the Form of Contract was entitled Scope of the Work and, inter alia, required Terminal to furnish labor, tools, materials, etc., to do all work including extra and additional work and pay all costs incidental thereto (emphasis supplied); to bear all losses due to the nature of the work and cost incidental to suspension or discontinuance of the work, except as herein provided (emphasis supplied); to undertake all cutting, fitting, or patching of his work required to bring it into conformity with the contract documents; and to perform and complete the work in the manner best calculated to promote rapid construction and consistent with safety to life and property to the satisfaction of the Engineer, and in strict accordance with the contract documents   . The construction program was controlled by the engineer under Article 11. Article 20 clearly demonstrated that the estimated quantities of the several classes of work and kinds of materials stated in the Form of Proposal were only designed for the purpose of comparing bids and were not binding even if any of the estimated quantities be found not even approximately correct. Under Article 29, the engineer was given broad powers, including among others hereinbefore adverted to the power to give all orders and directions contemplated under the contract. Article 35 provided:  Minor Changes in Plans. The Authority reserves the right to make minor changes in the location, line, grade, plan, form and dimensions of the work, or any part thereof, either before or after the commencement of construction. Such minor changes shall not warrant any claim for damages on the part of the Contractor through consequent increase or decrease of quantities in any items of the work. If such changes increase the amount of work to be done, the Contractor will be entitled to an extension of time and to additional compensation under the various contract items affected, or if mutually agreeable, under the Extra Work clause of the contract. (Emphasis supplied) Article 36 provided:  Extra Work. The Authority may at any time, by a written order, and without notice to the sureties, require the performance of such Extra Work or changes in the work as it may find necessary or desirable   . Article 36 then proceeded to set up three methods for determining the amount of compensation to be paid the contractor, i.e., Terminal. The three methods were: (a) By such applicable unit prices, if any, as are set forth in the contract; or (b) if not set forth in the contract, by such unit prices or lump sum mutually agreed upon by the Authority and the Contractor; or (c) upon a third basis, which may be adverted to in the vernacular as cost plus provisions, provided that if the work were done under the third method no such order for work or materials so issued by the Authority shall be valid unless first approved and countersigned by the Authority. Major changes in plans could be made as Extra Work or as the subject of supplementary contracts under Article 37. Compliance with instructions of the Engineer was made mandatory by Article 53(f). The provisions of the contract papers, including those which we have hereinbefore selected as being the more descriptive ones, clearly demonstrate and require the following construction: the authority contemplated the possibility of four classes of changes (excluding those due to emergency which are otherwise expressly dealt with in the contract), namely: (a) minor changes not entitling the contractor to additional compensation; (b) minor changes and minor additional work not constituting material alterations in the project but entitling the contractor to additional compensation; (c) major changes ordered in writing for which the contractor could be paid (as change orders or as Extra Work orders) either under the contract or under mutual agreement or on a cost plus basis; or (d) extraordinary alterations in the project, which might be made the subject of supplementary contract. The evidence would support the inference that the items claimed by Terminal under the fifth count fall in either the second or the third category above outlined. The contract clearly made the engineer the authority's agent in all these matters of classification except for approval of work to be done on the cost-plus basis. This is not only indicated by the final sentence of Article 36(c), ante, but is clearly contained in the power vested in the engineer to give all orders contemplated under the contract (Article 29, ante ) and the requirement for the contractor to comply with all instructions of the engineer (Article 53 (f) ante ). It necessarily follows that upon the agency question the trial court should have instructed the jury that the Engineer was the authority's agent in giving change and Extra Work orders, except on the cost plus basis. This indicates error in the trial court's charge as it related to the fifth count. For the reason that the trial court's charge on the agency issue was favorable to the authority ( i.e., that the jury could have determined under the charge that the engineer was not the authority's agent), the error was not prejudicial to the authority. There remains the question involved whether the trial court erred in submitting the issue of fraud, i.e., constructive fraud as hereinbefore discussed, to the jury in respect to the seven claims remaining under the fifth count. These seven claims must be considered individually within the frame of the pertinent contract provisions and the law as hereinbefore set forth. The broad powers given to the engineer, both as agent and arbiter, throughout the contract papers establish the fact that the engineer was the judge of the character of specific work ordered, that is, whether it was contract covered, a minor immaterial change, minor material change, major change, or Extra Work. The engineer had the authority to issue any order, except an order contemplating cost plus extra work orders. There is no dispute in the evidence as to the fact that the engineer ordered the work done in the seven instances for which Terminal's claims under the fifth count were submitted to the jury. (a) The plaintiff's evidence as to an equipment bases item of $266.76 was weak, and seems to have presented no jury question as to fraud since it pointed to a mere difference of opinion rather than arbitrary or grossly negligent determination on the part of the engineer. (b) In respect to the reinforcing steel item of $861.12, the plaintiff's evidence was also weak, but presented an issue of extrinsic fact for the jury to determine. If the facts were as indicated by the defendant (namely that Terminal disregarded the engineer's instructions and thus made the additional expense necessary), there was a mere difference of opinion as to whether Terminal was entitled to be paid; if the facts were as represented by Terminal, the evidence supports an inference of arbitrary determination sufficient to present a jury issue. (c) The concrete bracket claim, $280.83, was not supported by proof of arbitrary action, but the evidence submitted by the plaintiff indicates that this claim was included in the payments already made to Terminal. (d) A hardware item of $229.17 was supported by evidence from which arbitrary action on the part of the Engineer could be inferred and was therefore properly submitted to the jury. (e) In respect to Terminal's claim for $350.91 for fuel oil meters, the evidence admits of no inference of arbitrary action on the engineer's part but on the contrary indicates that no additional expense was suffered by Terminal. At most there was evidence of a mere difference of opinion, which, under the authorities hereinbefore discussed, did not support its submission to the jury. (f) The evidence introduced by the plaintiff on a metal water stop claim $758.78, likewise raised no reasonable inference of arbitrary determination on the part of the engineer and should not have been submitted to the jury. (g) Finally, with respect to a brick skylight item of $232.98, the inference of arbitrary determination by the engineer was reasonably raised by the evidence and presented a jury issue. To recapitulate, claims for $758.78, and for $266.76, $280.83 and $350.91 (the latter three summing up to $898.50), a total of $1,657.28, should not have been submitted to the jury but should have been eliminated from the case by the trial court on the authority's motion. See R.R. 4:55-2, supra. In this respect it is noted that the jury verdict was less than Terminal's claims by $1,758.78, indicating that the jury itself eliminated the items which should have been withheld from its consideration.
The authority counterclaimed for $45,973 as a credit for damages for delay ($23,700) and for expenses allegedly incurred by the authority in repairing breaks, backfilling and other miscellaneous expense (in all $22,273). The authority does not deny that a jury question was presented but contends that the trial court's charge was confusing and contradictory in this respect. The trial court initially instructed the jury as to the authority's claims and to Terminal's defenses (a) that it was not responsible for these items, which included pipe breakage (a total of $13,295.15), other miscellaneous repairs, extra prints of contract, drawings, heating, etc., and (b) that if it were responsible for the pipe breakage, those specific items should be excluded from the case as referrable to the moneys retained for maintenance. It subsequently charged the authority's 32nd request as follows: Number 32: Under the terms of the contract, the obligation to repair pipe breaks was imposed upon the plaintiff and if it did not discharge this obligation, the Engineer was authorized to deduct the cost of the eleven pipe breaks and backfilling as set forth in the certificate of substantial completion from moneys otherwise due plaintiff. The trial court shortly thereafter charged the jury to determine whether the $45,973 claimed as credits was a proper deduction in whole or in part and later    We want your finding as to whether or not the Bergen County Sewer Authority should be allowed the whole amount of that claim, $45,973, or any portion of it, and asked a special verdict of the amount to which the defendant should be allowed for those credits. Counsel for the authority acceded to the statement by Terminal's counsel made during this colloquy between the trial court and counsel, that: It is understood and agreed by the Court and counsel that when the jury makes its findings as to the amount of credits, if any, that the defendant is entitled to, then, in that case, the difference between the amount of the credit and $45,793 will be added to the judgment of the plaintiff. Under these circumstances we are of the opinion that if any error existed in the charge as it related to the credit claimed by the authority it was not prejudicial to the substantial rights of the authority, and in the absence of any indicia of objection thereto at the trial level and in view of the stipulation of counsel disclosed, the Appellate Division erred in reversing the judgment on this phase of the case.