Court Opinion

ID: 5443539
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:06:55.163527+00
Date Added: 2024-06-11T08:30:49.321585
License: Public Domain

Temple, J., dissenting.
Charles McLaughlin entered into a contract with the Western Pacific Railroad Company to construct and equip the railroad from San José to Sacramento for five million four hundred thousand dollars, payable partly in stock. Having this contract on the seventh day of January, 1865, McLaughlin contracted with Cox, Myers & Co., to build, construct, complete, and furnish materials for the construction of the road-bed of the railroad from San José to Stockton, a distance of seventy-four and one quarter miles, for nine hundred thousand dollars.
Before the contract was entered into, a preliminary survey had been made and a profile of the road showing the cuts and fills. Specifications were made as to other work. Prices were attached, showing the estimated cost of the different species of work, the excavations and fills at certain rates per cubic yard, the bridging per lineal foot, etc. There was a stipulation in the contract, however, that the location of the road might be varied by the company and yet no change should be made in the contract price for the work, whether the actual amount was increased or diminished. It was further stipulated that, in case certain bonds were issued by named counties to aid the corporation to construct the road, “all *73work done and materials furnished, and all other things required to be done and performed by and on the part of the parties of the second part, by the terms of this indenture of contract, shall be allowed and paid as the work progresses and materials are furnished, from time to time, at the prices and quantities made and fixed by an approximate estimate of the cost of said work made by ... . chief engineers of said company, dated January 4, 1865, and hereto attached.....Said estimates shall be made upon the report of the chief engineer of said company from time to time as the work progresses and materials are furnished as aforesaid, and which said engineer shall examine and report to the parties hereto as the said work progresses and materials are furnished, as aforesaid, giving accurate estimates thereof from time to time, as often as once per month if so required by the parties of the first part.”
Cox, Myers, and Arnold, in March, 1865, entered into an agreement in writing with the engineer, who was to superintend the work for the company, and make the estimates provided for in the contract, and whose salary was to be paid by McLaughlin, by which they agreed to give to the engineer ten per cent of their profits upon their said contract with McLaughlin, in consideration for which said engineer agreed that as such engineer he would take pains in the location of the work and in laying it out so as to save as much work as possible to them, and make such changes as would make the work lighter. This agreement was kept secret, and was unknown to McLaughlin and his agents.
Estimates were made as provided in the contract by the engineer, based upon the alignment and profile, although both had been departed from.
The first four estimates so made were paid, less ten per cent reserved, within a few days after they were certified. The fifth, for $44,530.80, was made September 9,-1865, and a portion only was paid, leaving about $14,000 due. McLaughlin, who had been absent from the state *74when the previous estimates were paid, then objected to the mode of making the estimates, claiming that they should have been made, not on the profile where the line of the road had been changed, but upon accurate estimates of the work actually done—made from time to time—by the engineer. The line of the road had been changed by the engineer so as to greatly diminish the amount of work to be done, yet in making the estimates he ascertained the proportion of the work done necessary to complete the road-bed for a specified distance, and then allowed for that proportion of the work which would have been required if the line had not been changed. It was claimed, for instance, that in the fourth estimate thirty-one road and farm crossings and $7,285 of masonry had been included, none of which were required in the new location; and in the fifth estimate a charge of $80,000 for tunneling when the line and grade of the road had been so changed as to avoid the proposed tunnel altogether.
This controversy was settled October 2, 1865, McLaughlin paying seven thousand dollars more, only on the fifth estimate. At that time a supplemental contract was entered into, in which it was provided that thereafter accurate estimates should be made monthly of the work actually done, as the basis for the progress payments, and it was stipulated “if the contract is at any time annulled by mutual consent, or the work under it entirely suspended by direction of McLaughlin, then in such case (but in no other event except upon the full completion of said contract) the said Cox and Arnold shall be allowed for all the work done up to that time, the amounts and quantities shown in said profile for the corresponding sections or'portions of said actual quantities of work performed.”
The contract between Cox and Arnold and the engineer, it is said, was terminated about the time McLaughlin was expected to return from the East, after three or four estimates had been made. After the fifth estimate a new chief engineer was appointed.
*75Three other estimates were made. But between November 20, 1865, and June 5, 1866, no estimate was made, although plaintiffs insisted and repeatedly requested to have them made. May 5, 1866, however, $9,000 was paid without an estimate. The eighth estimate was made on June 5, 1866, for $35,254.83. On this $2,500 was paid in addition to the $9,000, leaving $23,754.83 still unpaid.
On the fifteenth day of June, ten days after the estimate was made, Cox and Arnold notified McLaughlin’s agent that in consequence of the failure to pay the estimate they were compelled to suspend work entirely from that date, and would settle with him according to the terms of the contract.
McLaughlin, through his agent, promptly replied, denying the right to abandon the contract, and requesting Cox and Arnold to proceed with the work.
McLaughlin was at that time in New York, endeavoring to place the bonds he had received, or in some other mode to procure money to make these payments.
This court has, on former appeals, unmistakably held that the installments or progress payments, provided for in the contract, are not conditions precedent, the failure to perform which would justify plaintiffs in abandoning the contract, and enable them to sue for profits they would have made had they performed it, or for compensation at conventional rates. It was held that this did not constitute prevention or excuse the plaintiff from performance. For this breach plaintiffs had simply their right of action for damages.
Counsel now say they do not claim to have established technical prevention, such as this court has said the default to make the payments does not amount to; but they do claim that McLaughlin’s failure incapacitated the plaintiffs to perform, and authorized them to consider it a consent to a rescission on the part of McLaughlin, which, if plaintiffs assented to, would justify them *76in demanding payment at contract rates; that is, it is not technical prevention, but yet is prevention which will have the same effect. I do not understand this distinction. In fact, I think it is trifling with the rulings of the court. This court attached no importance to the word. It simply held that the failure to pay did not authorize Cox and Arnold to abandon the work and sue on the contract.
There certainly was no rescission by mutual consent. McLaughlin is not shown to have been insolvent and unable tó perform. He did not entirely refuse to perform his part of the contract. Plaintiff apparently knew he was absent trying to realize upon his securities, to enable him to make the payments. Under such circumstances, it seems absurd to claim that by this temporary failure McLaughlin indicated an intention of abandoning the contract or of refusing to go on with it. This court has held that this failure was one which did not authorize plaintiffs to cease work and sue on the contract, but that their remedy was an action for damages. Of course it did not terminate the contract or authorize plaintiffs to rescind.
Undoubtedly there are cases which hold that a total failure of performance, which indicates a disposition on the part of one party to abandon the contract, or a refusal to go on with it, may be considered as a consent to a rescission; but where it is known that the party in default is struggling to perform, it would be as unreasonable as unjust to .conclude from a temporary failure a consent, to a rescission.
But if the charge of fraud be considéred, it is equally plain to my mind that it constituted such a breach of the contract on the part of the plaintiffs as would of itself render' it impossible for them to recover upon the contract.
The parties contracted for payments to be made upon the certificates of the engineer. He was to ascertain the *77amount of the various kinds of work done, and to make the estimates upon which the installments were to be paid. The contract provided for changes in the alignment and grades, which would, of course, only be made upon surveys and recommendations of the engineer. Cox and Arnold secretly bribed this engineer by contracting to give him ten per cent of all the profits they might make. They say that for this interest the engineer was to take pains to locate the road so as to save as much expense as possible without injury to the corporation. Unfortunately, however, by the terms of the contract, the profits of the contract would be increased to the advantage of the engineer, as much by changes to the injury of the road as by those which were indifferent or advantageous. Had McLaughlin known of this corrupt bargain, it would plainly have been his duty to end the relation at once, and it is not clear that he would not be liable to the corporation for changes assented to by them only upon the advice of their confidential agent who had been secretly interested against them by McLaughlin’s employees.
But I think, in addition to being a fraud for which equity could give relief, it was a clear violation of the contract.
The engineer to some extent occupied the position of a chosen umpire. He was to ascertain the proportion of the work performed, and upon his certificates the installments were to be paid. Certainly it was an agreement for a disinterested umpire, and clearly when one of the parties to the contract made the umpire a secret partner, he disqualified him from acting. He thereby rendered it impossible to perform the contract.
The finding that there was no fraud contradicts the other findings of fact, and is not only unsupported by evidence, but is as clean a traverse of all the evidence upon the subject as could be drawn. McLaughlin was injured by being deprived of the services of an impartial *78engineer and umpire, and by risking the loss of his expenditures on the ground that the corporation would not be bound by alterations assented to under the advice of a corrupted engineer.
But while this is clearly so, it does not follow that plaintiffs could not recover the value of their work which had been received by McLaughlin to the extent to which McLaughlin had been benefited thereby, and not exceeding the contract price.
In my judgment, the allowance of the amendment setting up the claim for the actual value of the labor performed was, under the circumstances, an abuse of discretion, which ought to be reviewed by this court. This litigation has been pending for some sixteen years, during all of which time plaintiffs had been contending for compensation at the conventional rates fixed in the contract. During all this time defendant has contended that plaintiffs have been paid the full value of the services rendered and the materiáls furnished. Defendant, had he desired, could not have made an issue upon that question, because plaintiffs persisted in urging their unfounded claim for the contract rates. Not only so, but this contest has been kept up after most clear and explicit rulings of this court that no such action could be maintained, and intimations that plaintiffs’ remedy, if they had any, was for the reasonable value of the labor performed and materials furnished. Now, even one who has a grievance owes some duty to his adversary and to society. Because he has been injured, he is not justified in vexing the wrong-doer with malicious litigation, nor can he persist for years in waging a suit which he cannot maintain, and then, upon being defeated, amend and recover that which for years he has virtually declined to accept, when the suit he might have brought has been barred by the statute.
Here, before this amendment was asked, the suit upon a quantum meruit had been barred seven times over. It *79may be, admitted that, if made in time, such an amendment would have been proper. Courts are now very liberal in allowing amendments. It is often" only a question as to whether the plaintiff should be put to the expense of bringing a new suit. But because the courts are liberal in allowing amendments, parties cannot thereby be deprived of a defense to what is really a new cause of action. If barred when the amendment is asked, it should not be allowed.
This was a new cause of action. It was founded upon a different contract from that alleged; it was for services and materials differing in amount and differently classified. One is for actual services, and the other, though not in form, yet in reality, largely for services and materials only constructively done and furnished. The evidence required to sustain the two actions differs materially.
On former appeals this court has held that the action was not brought upon the implied promise to pay for the actual value of the work, but was an action upon the contract to recover for the part performed according to an arbitrary and conventional standard found in the specific contract, and the precise ground upon which they claimed the right to recover was, that they had been prevented by the defendant from performing. ’ Prevention constituted a part of their cause of action.
Here if they can recover at all, it is upon the ground that the defendant has been guilty of a breach of the contract on his part, in consequence of which he cannot insist upon the performance on the part of plaintiffs, and that, therefore, plaintiffs can abandon the contract and sue for the actual value of the service rendered, and the defendant cannot defeat the action because of the non-performance of the specific contract simply because he was first in default himself. In such a suit the specific contract cuts no figure except as evidence. It is evidence that the work was performed at the instance *80and request of the defendant; and as the plaintiff cannot by refusing to perform recover a greater price for his work than he would have been entitled to had he fully performed, the contract price will constitute a limit to his recovery. The contract may also, in a proper case, furnish evidence by way of admission, of the value of the services. But in no sense is this an action upon the specific contract. To the contrary, if that can be established as still subsisting, that fact will defeat the action upon the quantum meruit.
Admitting, however, that the amendment was properly allowed, and that the claim was not barred by the statute of limitations, is there any evidence whatever in the record to support the finding that the actual value of the work and labor done in constructing twenty miles of the railroad was $275,304.07? or that the actual value of the labor performed and materials furnished in the construction of the twenty-first mile was $28,214.42?
It is a circumstance of some significance that the plaintiff upon the last trial, which was the first under a complaint claiming the actual value, put in no new evidence upon the subject. All his evidence consisted in reading from the testimony given on former trials where the specific claim was to recover compensation at contract rates for the profile quantities. And as it is shown without conflict that much of the profile work was never done, it is literally true that in an action upon a quantum meruit plaintiff has recovered upon proof of the value of labor not done and for materials not furnished. The proof was as to the value of contemplated work delineated upon a profile which the contract stipulated might be departed from, and which, in fact, was not followed, but ■was intentionally departed from, the work actually done being upon a new survey upon another and a distinct line.
It is claimed, and numerous authorities are cited to the point, that where a specific contract has been partly *81performed and abandoned, under such circumstances that the contractor may sue for the work actually performed, the contract rate of compensation governs even in the suit for actual value. That such rates generally constitute prima facie evidence of the value of the services, by the way of an admission of the parties, is not disputed. But it would be so only when, under general rules applicable to admissions, in reason and justice, such stipulation is an admission of the actual and reasonable value of the service rendered. There is no ironclad rule that it should constitute an admission, however plainly it may appear that it was in fact no admission.
It is true that prior to the contract a profile of the projected road had been made showing the estimated amount and character of work and materials required, and that when the contract price was agreed upon the engineer affixed to the specifications prices for the different kinds of work and materials which should govern as to progress payments, and which in the aggregate amounted to just nine hundred thousand dollars, the contract price. It was also stipulated that the profile might be departed from and a new alignment and grade fixed by the corporation; that the road should be constructed according to such changed alignment, but there should be no change in the compensation. The contract price was to be paid, no matter what changes were made. If changes were made, therefore, this amounted to an express stipulation that the payments should not be made upon the basis of the reasonable and actual value, but upon a conventional standard, expressly ignoring actual values. When the plaintiff brought suit upon a quantum meruit, he expressly waived the benefit of this stipulation. It is in its very nature inconsistent with a quantum meruit. It was a speculating contract, in which both took the chances of making or losing, but each expressly stipulated that the actual amount of work done should not affect the compensation.
*82The evidence shows, without contradiction, that the profile was widely departed from. Indeed, the diagram exhibited, and the correctness of which as to the alignment and grade is not contradicted by any evidence, shows that where the heavy work was done the coincidences of the profile and the actual location are hardly more than the crossing of different lines. Under such circumstances, the profile was not even prima facie evidence of the work actually done. When the changes were shown, it became as irrelevant as would be the profile of a road in China or Timbuctoo. The fact that the two alignments were near each other cuts no figure. The country was hilly, the surface constantly changing. The engineer states in explanation of his secret engagement with Cox and Arnold that the change of a few feet would make a material difference in the amount of work to be done.
It is claimed that Arnold and Cox have testified as to the reasonable value. Arnold died before suit was brought upon the quantum meruit. His evidence was in regard to the conventional rates, which he said was fair compensation for the work. He did not pretend to know the work actually done, and his whole testimony shows that he estimated it from the profile. For instance, he testified as to the twenty-first mile that four fifths of the work had been done, and his mode of arriving at this conclusion was this: The mile could be completed for ten thousand dollars, and the profile rate would be fifty thousand dollars. As the location had been altered, this might be true, although but one thousand dollars of the work had been actually performed upon this mile.
Cox’s testimony still more plainly refers to contract rates. He admits he did not know the amount of work actually done, and when questioned says: “We were not working by the yard.” He fixed the amount due at one hundred and seventy-three thousand dollars before he commenced suit at all; and his testimony was read from *83the evidence given at a former trial, when the suit was confessedly for contract rates. Evidently the plaintiffs only intended to testify to the fairness of the contract. But perhaps we may suppose they had been taught to believe that the profile afforded the best evidence of work actually performed, since they still insist upon that proposition, and their attorneys here insist in most elaborate briefs that the profiles showing work which it was agreed might not be done, and which confessedly was not done, and in a contract which expressly stipulated that compensation should not depend upon the amount of work done or materials furnished, constitutes the best evidence of work actually done and of materials actually furnished—in a suit not upon the contract, but upon a quantum meruit.
The learned judge before whom the case was tried is reputed to have based his estimate upon the evidence of defendant’s witness, Stangroom, who had made a recent survey and estimate of the work, so far as he thought Stangroom’s work reliable. But where, from lapse of time, he thought a present estimate could not be fairly made, he followed the profile.
If the learned judge did this, he followed the evidence where he thought it trustworthy, and where no evidence was forthcoming he followed the profile, which we have seen was entitled to no weight at all,—that is, he found without evidence. The burden was upon the plaintiff. If he were unable to establish his case by competent evidence, he was no worse off than plaintiffs often are; but this fact did not shift the burden. If he cannot prove his ease he cannot recover.
But this proposition emphasizes the argument against the propriety of allowing the amendment and the bringing in of a new cause of action after time has effaced the evidence necessary to sustain the plaintiff’s present contention, or essential to enable the defendant to make a just defense.
*84It is emphatically a case where, having made his own bed, the plaintiff should lie in it. Having persisted in a claim for years after he was distinctly told he could not recover upon that basis, he should not now be permitted to recover upon a new theory, when time has destroyed all evidence.
Holding these views, it is not necessary to review the other points made.