Court Opinion

ID: 9776428
Source: CourtListenerOpinion
Date Created: 2023-08-29 19:35:07.780895+00
Date Added: 2024-06-11T07:32:38.715514
License: Public Domain

John A. Fogleman, Justice, dissenting. I would reverse the judgment of the lower court. The major basis for my disagreement with the majority is the belated application of the contractor for arbitration. The difficulty giving rise to this cause of action became known to all in December 1961. After considerable investigation of the cause of the problem, the architect, by letter of August 14, 1962, gave specific written instructions- as to procedure with reference to the defect discovered. No reply by the contractor was made to the architect until October 12, 1962. The contractor’s letter of that date advised that the work directed in the architect’s letter had been undertaken and a considerable part of the required removal completed. This was the first advice that the contractor considered the instructions of August 14, 1962, to constitute a chang’e in the work in accordance with Article 16 of the General Conditions of the Contract. There was a specific demand for a change order, and the contractor advised that it was keeping a record of all labor, material and equipment cost incurred. On November 12, 1962, the architect advised that it was his opinion that the work was the obligation of the contractor and refused in unequivocal terms to issue a change order. This letter contained the following paragraphs: “This matter must be immediately resolved. On several occasions, we have been advised verbally as to dates when the building would be turned over for occupancy, and this information has been passed on to the owner. It is not now possible to meet these dates. In the meantime, the city is deprived of the use of the New Library which should have been completed months ago. We are asking, you to proceed immediately with the replacement of the topping under those parts of Article 19 of the General Conditions of the Contract as they apply. If this is not done immediately, we must advise the Owner to act under Article 21 of the General Conditions of the Contract and appeal to your Bonding Company.” Nothing further was said or done about this decision of the architect until sometime in August 1965 when the contractor advised the architect that its costs in carrying out the architect’s instructions of August 14, 1962, amounted to $49,702.45 and again demanded a change order. This demand was refused by the architect in a letter dated December 27,. 1965, in which reference was made to the architect’s decision set out in the letter of November- 12, 1962. The contractor communicated with the owner about this demand for the first time by letter of January 14, 1966, in which a demand for arbitration was made. There is no evidence that the contractor’s contentions were ever made known to the owner prior to this time. The contractor stated that it did not send copies of its letters to the architect to the library board. The owner, through its attorney, A. F. House, rejected the demand for arbitration in a letter dated January 31, 1966. The letter contained this paragraph: “The Library rejects your demand for arbitration with respect to each and all of the items set forth in your letter of January 14th. Article 40 of the General Conditions provides that ‘The demand for arbitration shall be made within a reasonable time after the dispute has arisen.’ On November 12,1962, the architects notified you that no change order would be issued, and, in their opinion, ‘the removal and replacement of the topping is the obligation of the contractor. ’ A delay of more than three years in asserting the claim set forth in paragraphs 1 and 3 of your letter is patently unreasonable. Furthermore, witnesses who were familiar with the inadequacy of your work have moved away, and one has died, and as the Library was not given notice that you intended to contest the ruling of the architects with reference to the items set forth in paragraphs 1 and 3, it has exhausted the funds allotted to it for constructing a new building.” To me, the conclusion that the contractor accepted ihe decision of the architect is so inescapable that reasonable minds could not come to any other conclusion. I consider that appellee did not conform to the requirements of its contract. I further consider that it waived any right to arbitration that it might otherwise have had. These points were raised in appellants’ Point IV. This point related to both estoppel and waiver. In considering these matters, it is necessary that the applicable terms of the contract be reviewed. They are: GENERAL CONDITIONS Article Í2 (in part): “He [the Contractor] shall make good any such damage, injury or loss, except such as may be directly due to errors in the Contract Documents or caused by agents or employees of the Owner, or due to causes beyond the Contractor’s control and not to his fault or negligence.” Article 15 (in part): “In giving instructions, the Architect shall have authority to make minor changes in the work, not involving extra cost, and not inconsistent with the purposes of the building, but otherwise, except in an emergency endangering life or property, no extra work or change shall be made unless in pursuance of a written order from the Owner signed or countersigned by the Architect, or a. written order from the Architect stating that the Owner has authorized the extra work or change, and no claim for an addition to the contract sum shall be valid unless so ordered. ftThe value of any such extra work or change shall be determined in one or more of the following ways: * * * (c) By cost and percentage or by cost and a fixed fee. ¶ If none of the above methods is agreed upon, the Contractor, provided he receives an order as above, shall proceed with the work. In such case and also under case (c), he shall keep and present in such form as the Architect may direct, a correct amount of the cost, together with vouchers. In any case, the Architect shall certify to the amount, including reasonable' allowance for overhead and profit, due to the Contractor. Pending final determination of value, payments on account of changes shall be made on the Architect’s certificate.” Article 16: “If the Contractor claims that any instructions by drawings or otherwise involve extra cost under this contract, he shall give the Architect written notice thereof within a reasonable time after the receipt of such instructions, and in any event before proceeding to execute the work, except in emergency endangering life or property, and the procedure shall then be as provided for changes in the work. No such claim shall be valid unless so made.” Article 19 ,('in part): “The Contractor shall promptly remove from the premises all work condemned by the Architect as failing to conform to the Contract, whether incorporated or not, and the Contractor shall promptly replace and re-execute his own work in accordance with the Contract and without expense to the Owner * * *. ¶ If the Contractor does not remove such condemned work within a reasonable time, fixed by written notice, the Owner may remove it and may store the material at the expense of the Contractor.” Article 31: “DAMAGES — Should either party to this Contract suffer damages because of any wrongful act or neglect of the other party or of anyone employed by him, claim shall he made in' writing to the party liable within a reasonable time of the first observance of such damage and not later than the final payment, except as expressly stipulated otherwise in the case of faulty work or materials, and shall be adjusted by agreement or arbitration.” Article 38: “The Architect shall have general supervision and direction of the work. He is the agent of the Owner only to the extent provided in the Contract Documents and when in special instances he is authorized by the Owner so to act, and in such instances. he shall, upon request, show the Contractor written authority. He has authority to stop the work whenever such stoppage may be necessary to insure the proper execution of the contract. As the Architect is, in the first instance, the interpreter of the conditions of the Contract and the judge of its performance, he shall side neither with the Owner nor the Contractor, but shall use his powers under,the Contract to enforce its faithful performance by both. ¶[ In case of the termination of the employment of the Architect, the Owner shall appoint a capable and reputable Architect against whom the . Contractor makes no reasonable objection, whose status under the contract shall be that of the former Architect; any dispute in connection with such appointment shall be subject to arbitration.” Article 39 (in part): “The Architect shall, within a reasonable time, make decisions on all claims of the Owner or Contractor and on all other matters relating to the execution and progress of the work or the interpretation of the Contract Documents. ¶[ The Architect’s decisions, in matters relating to artistic effect, shall be final, if within the terms of the Contract Documents. ¶ Except as above or as otherwise expressly provided in the Contract Documents, all the Architect’s decisions are subject to arbitration. ’ ’ Article 40: “ARBITRATION — All disputes, claims or questions subject to arbitration under this contract shall be submitted to arbitration in accordance with the provisions, then obtaining, of the Standard Form of Arbitration Procedure of The American Institute of Architects, and this agreement shall be specifically enforceable under the prevailing arbitration law, and judgment upon the award rendered may be entered in the court of the forum, state or federal, having jurisdiction. It is mutually agreed that the decision of the arbitrators shall be a condition precedent to any right of legal action that either party may have against the other. ¶ The Contractor shall not cause a delay of the work during any arbitration proceedings, except by agreement with the Owner. ¶ Notice of the demand for arbitration of a dispute shall be filed in writing with the other party to the contract, and a copy filed with the Architect. The demand for arbitration shall be made within a reasonable time after the dispute has arisen; in no case, however, shall the demand be made later than the time of final payment, except as otherwise expressly stipulated in the contract. [¡The arbitrators, if they deem that the case requires it, are authorized to award to the party whose contention is sustained, such sums as they or a majority of them shall deem proper to compensate him for the time and expense incident to the proceeding and, if the arbitration was demanded without reasonable cause, they may also award damages for delay. The arbitrators shall fix their own compensation, unless otherwise provided by agreement, and shall assess the costs and charges of the proceedings upon either or both parties.” The specifications provide: “Re-examination of questioned work may be ordered by the architect and if so ordered the work must be uncovered by the contractor. If such work be found in accordance with the contract documents, the owner shall pay the cost of re-examination and replacement. If such work be found not in accordance with the contract documents, the contractor shall pay such costs.” The contractor relies on Articles 15, 16 and 38 for recovery, but admits that the work was neither a minor change nor an emergency. It does contend that the architect is the agent of the owner under Article 38. Its only excuse for not making an earlier demand for arbitration is that it could not do so until the architect turned down its claim on December 27, 1965. Of course, this excuse should avail the contractor nothing because the architect had clearly made a decision rejecting this contention more than three years previously. Article 40 specifically provides for the continuation of the work during arbitration. The dispute to be determined originally was the decision that the contractor was at fault. The matter of cost, in case of a decision favorable to appellee, would have required a later decision by the architect under Article 15. This would not have been a matter for award under Article 40 incidental to the determination of the matter disputed. Appellee admitted that it was directed by the architect on November 12,1962, to proceed in accordance with Article 19 of the General 'Conditions of the Contract at its own expense, and that it did proceed until the job was finished. Appellee’s president and only stockholder admitted that after receiving that letter, there was no donbt in his mind that it was the opinion of the architect that appellee was not entitled to payment for this work. He also admitted that there was not any donbt in his mind that the request for a change order had been rejected. He also admitted that there was no correspondence about this work between the contractor’s letter of December 1962 and that of August 1965. Although he says that there were numerous conversations with the architect and his representative in the intervening period, he does not suggest that there was any indication of an alteration of position in any of these conversations. He states that the architect did tell him in a conversation prior to the letter of November 12, 1962, to keep track of this cost, but did not say that payment would be made. The director of the Little Rock Public Library, the person designated to approve change orders on behalf of appellants, had no idea that appellants were going to be asked to pay for this work prior to receipt of the demand of January 14, 1966. Mr. William Allen, the partner of the architectural firm having this job under his direction, died on March 13, 1967, before the trial. Mr. Kellogg, the construction inspector for the architects, died on August 25, 1964. I do not see how it can be said that the request for arbitration, a necessary prerequisite to this action, can be said to have been timely made. For nearly three years every act of the contractor was consistent with the idea that it conceded the correctness of the architect’s decision, and inconsistent with any other thought. The time limitation on a demand for arbitration was clearly stated. The decision of arbitrators was clearly a condition precedent to this action. It was to be made within a reasonable time after the dispute had arisen. This court has defined, or approved, definitions of the phrase “reasonable time.” In a case where the question was whether a notice to terminate a lease was given within a reasonable time, this court approved a definition declaring a reasonable time to be so much time as is necessary under the circumstances for a reasonably prudent and diligent man to do, conveniently, what the contract or duty requires should be done, having regard for the rights and possibility of loss, if any, to the other party to be affected. Citizens Bank Building v. L. & E. Wertheimer, Inc., 126 Ark. 38, 189 S. W. 361, Ann. Cas. 1917E 520. In Federal Land Bank of St. Louis v. Goodman, 173 Ark. 489, 292 S. W. 659, we said: “* * * It may be said that what is a reasonable time in any case depends on the circumstances of that particular case, and means such time as a prudent man would exercise or employ about his own affairs. It, of course, does not mean indulgence in unnecessary delay on the one hand, nor does it mean that he is to act without any regard to the circumstances and convenience of transacting business of that kind. It is whatever time is necessary to conveniently do what should be done in the particular case. It has been said that it means such length of time as may fairly, properly, and reasonably be allowed or required, having regard to the nature of the act or duty and to the attending circumstances.” A reasonable time is such a period as would suffice for the performance if the one whose duty it was to perform used such diligence, care and prudence as a person of ordinary diligence, care and prudence would use in the performance of a like duty under like circumstances. Alphin v. Matthews, 175 Ark. 1020, 1 S. W. 2d 79. While the determination of what is a reasonable time under the circumstances is usually a question of fact, it becomes a question of law when the facts are clearly established, undisputed or admitted. First National Bank of Litchfield v. Pipe & Contractors’ Supply Co., 273 F. 105 (CCA 2d 1921); Colfax County v. Butler County, 83 Neb. 803, 120 N. W. 444 (1909); Rudolph Wurlitzer Co. v. Strand Enterprises, 7 Ohio Op. 336, 32 N. E. 2d 62 (1936); Goltra v. Penland, 45 Ore. 254, 77 Pac. 129 (1904); Hazelton v. First Nat’l Stores, 88 N. H. 409, 190 Atl. 280 ,(1937); Ridglea Interests, Inc. v. General Lumber Co., 343 S. W. 2d 490 (Tex. Civ. App. 1961). This is the case where the question is one of construction of a contract in writing*. Alford v. Creagh, 7 Ala. App. 358, 62 So. 254 (1913). See, also, Corneil v.Swisher County, 78 S. W. 2d 1072 (Tex. Civ. App. 1935). In Citizens Bank Building v. L. & E. Wertheimer, Inc., supra, the court reached the conclusion that under the undisputed testimony the time was reasonable and the facts did not call for a submission of that issue to the jury- Two years delay in bringing* suit on a note not arising* from the conduct of the adverse party was held to be more than a reasonable time. Mehelm v. Barnet, 1 N.J.L. (Coxe) 86 (1791). A delay of nearly one year by vendor in obtaining title from a supposed owner upon whom he had some claim for a conveyance was held to be unreasonable. Saunders v. Curtis, 75 Maine 493 (1883). Three years after notice that a claim on a contractor’s bond was disputed was held not to be anything approximating a reasonable time for bringing of suit. Hurst v. Dawson Bros. & Beaver, 167 Tenn. 572, 72 S. W. 2d 767 (1934). Six weeks delay was held to be in violation of a rule requiring that a motion to set aside a judgment be made within a reasonable time but not later than six months after judgment. Marques v. Rapid Harvest Co., 1 Ariz. App. 138, 400 P. 2d 345 (1965). A delay of three years in moving to set aside a judgment was held to be unreasonable as a matter of law where a rule required the motion to be made within a reasonable time. Osterhus v. King Construction Co., 259 Minn. 391, 107 N. W. 2d 526 (1961). Under the circumstances existing here, I do “not see how a conclusion that the time was reasonable could he reached. Appellee’s argument that the time limitation is the time of final payment is not well taken. The language on which it relies is that “in no case, however, shall the demand be made later than the time of final payment.” It is quite clear that the expression of this ultimate limit did not in any way operate as a determination of what constituted a reasonable time or to extend the period for demand beyond a reasonable time. If this had been the intention, no reference would have been made to a demand being made within a reasonable time. The clause simply would have read: “The demand for arbitration shall be made not later than the time of final payment.” There is nothing ambiguous about the clause in Article 40 and its meaning is clear. The reference to the limitation on demands as the time of final payment actually serves as a diminution of the period to what might he said to be a shorter time for disputes which arise near the conclusion of the performance of the contract. Appellee also contends that appellants have effectively waived the condition precedent to appellee’s right of action and the time limitation contained therein. Mr. House, the attorney for appellants, in a letter of February 22, 1967, stated that “acceptance of final payment [by the contractor] will not prejudice the rights of H. C. Enterprises, Inc. to litigate the claims for additional compensation.” I cannot agree that this statement constitutes an express waiver of the arbitration clause by appellants. Mr. House, by his statement, certainly cannot be held to have voluntarily relinquished his client’s right to stand upon the requirement of a decision by arbitrators prior to legal action by the contractor. Such is an absurd interpretation of his statement, if due and proper consideration be given the circumstances of the case. Appellants have denied liability throughout this proceeding. To say that by the above statement appellants’ counsel intended to thereby abandon a contractual defense to any possible right of recovery by appellee is preposterous. It seems inescapable to me that the only inference to be drawn from the statement is that the Library Board agreed not to contend that acceptance of final payment waived any breach by the Library Board, as it might have contended under the authority of such cases as Truemper v. Thane Lbr. Co., 154 Ark. 524, 242 S. W. 823. The contractor needed to receive payment for the uncontested work which it had performed. By the letter of February 22, 1967, counsel for the appellants agreed to allow it that payment without prejudice to its right to sue, but retained all defenses due the Library Board under the contract. He simply agreed that the contractor would not be giving up any rights. It is not clear whether appellee is contending that this defense by appellants was barred by failure to plead estoppel. If it is, the point is not well taken because the trustees of the Little Rock Public Library did plead waiver by alleging that appellee had a right to ask for arbitration in 1962 but failed to do so and never informed the Little Rock Public Library of its claim for extra compensation until January 1966. The distinction between waiver and estoppel has been clearly made by this court in cases such as Sovereign Camp W. O. W. v. Newsom, 142 Ark. 132, 219 S. W. 759, 14 ALR 903. Estoppel arises only where one party has been innocently induced to change his position for the worse by the act of the other party. Not so, in case of waiver. It is simply the voluntary surrender of a known right. Waiver has been clearly defined in Sirmon v. Roberts, 209 Ark. 586, 191 S. W. 2d 824, quoting from 67 C. J. 290, 291: “* * * the voluntary abandonment or surrender, by a capable person, of a right known by him to exist, with the intent that such right shall be surrendered and such person forever deprived of its benefits; or such conduct as warrants an inference of the relinquishment of such right, or the intentional doing of an act inconsistent with claiming it. Thus, ‘waiver’ occurs where one in possession of a right, whether conferred by law or contract, with full knowledge of the material facts, does or forbears to do something, the doing of which or the failure or forbearance to do which is inconsistent with the right or his intention to rely upon it.” I also feel that the trial court should have held as a matter of law that there was no waiver of the requirement for a change order as a basis for extra compensation. I do not agree that any course of conduct was shown which would have constituted a waiver under the circumstances existing here. In all of the previous instances there was no doubt that the work directed was “extra work.” None of the previous instances required any removal of work already done by the contractor, except where this was admittedly done because of a specific change in design. None of the previous instances followed an extensive investigation to determine the cause of a defective condition. In none of the previous instances had a change order been specifically and unequivocally refused. In each of the previous instances a change order was issued before payment was made. Nowhere is there an indication by any conduct that the Little Rock Public Library Board intentionally and voluntarily surrendured the right to require a change order before payment for any work, much less the type and nature of work required in this instance. The fact that change orders were issued after the work had been done in some cases did not justify an assumption by the contractor that the requirement of a change order was waived, and it proceeded at its peril. See Savignano v. Gloucester Housing Authority, 344 Mass. 668, 183 N. E. 2d 862 (1962). Certainly appellee proceeded at its peril in the face of a refusal of a change order after request therefor. In no instance had the owner paid for extra work where a change order had been refused. The contractor obviously did not think that the requirement of a chang’e order had been waived, else he would not have requested one. I feel that the trial court should have directed a verdict for appellants. I am authorized to state that BrowN, J., joins in this dissent.