Chicago, M. & St. P. Ry. Co. v. Clark, 178 U.S. 353 (1900)

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Chicago, Milwaukee & St. Paul Railway Company v. Clark

No. 266

Argued April 20, 23, 1900
Decided May 28, 1900
178 U.S. 353

CERTIORARI TO THE CIRCUIT COURT OF

APPEALS FOR THE SECOND CIRCUIT

Syllabus

The record shows that the cause came on for trial without a jury, a trial by jury having been expressly waived by written consent of the parties, that a referee was duly appointed by similar consent in accordance with the rules and customs of the District in which the trial was had, and that his findings, rulings, and decisions were made those of the court. Held that the question whether the judgment rendered was warranted by the facts found was open for consideration in the circuit court of appeals, and is so here.

Clark contracted with the railway company for the construction of part of its road. He also contracted for the completion of his work on a day named. It was not completed till sometime after that day. Clark contended that the failure was caused by the neglect of the company to procure a right of way. When the time for settlement came, there were also other disputes between him and the company, which are set forth in detail in the statement of facts. The result was that Clark signed a paper in which, after stating the disputed claims in detail, it was said:

Now, therefore, be it known that I, the said Heman Clark, have received of and from the said Chicago, Milwaukee and St. Paul Railway Company, the sum of one hundred and seventy three thousand, five hundred and thirty-two and 49/100 dollars in full satisfaction of the amount due me on said estimates, and in full satisfaction of all claims and demands of every kind, name and nature arising from or growing out of said contract of March 6, 1886, and of the construction of said railroad, excepting the obligation of said railway company to account for said forty thousand dollars, as herein provided.

This paper, after signature, was given by him to the railway company, and in return they gave him a check for the balance named. Five years and more after this transaction, this action was brought to recover the disputed claims. Held that Clark was barred by his release from recovering the disputed sums.

The rule laid down in Cumber v. Wane, 1 Strange 426, that where a liquidated sum is due, the payment of a less sum in satisfaction thereof, though accepted as satisfaction, is not binding as such for want of consideration, has been much questioned and qualified, and is considered so far with disfavor as to be confined strictly to cases within it.

Heman Clark constructed some 200 miles of railroad in the States of Iowa and Missouri for the Chicago, Milwaukee & St. Paul Railway Company under a written contract dated March 6, 1886, which is set forth in the findings hereafter referred to. During the period of construction, the company paid Clark large sums of money on account. After the road was completed, the chief engineer of the company, as was his duty under the contract, certified to the total amount that Clark had earned under the contract. This amount was $3,895,798.79. But Clark claimed also the further sum of $34,598.90 for material sold by him to the company, and certain rebates and other matters of that description, which would make the aggregate $3,930,397.69. As to the amount that should be credited to the company, the company claimed credits to the amount of $3,716,865.20, while Clark contended that the total amount that should be credited was $3,667,306.59, or $49,558.63 less than the amount claimed by the company. This latter amount was made up of two items -- one of $40,000, for overtime forfeiture or penalty, and the other of $9,558.63, the amount paid by the company for nut locks furnished to Clark, and used by him in the construction of the road. The company prepared an account stated which allowed the $34,598.50 on one side of the account and included the $40,000 and the $9,558.63 on the other, and appended to it a release for Clark to sign if he accepted the balance therein stated. The account stated and release were sent to him with notice that, upon signing and returning the same to the vice-president of the company, a check for the balance shown by the account to be due would be sent to him. Immediately thereupon, on March 9, 1888, the account and release were returned by Clark to the vice-president, signed and witnessed, and a check for the full amount of such balance, $173, 532.29, was at once delivered to Clark, who endorsed, and deposited it in his bank and received the proceeds thereof.

August 5, 1893, Clark commenced this action against the railroad company to recover amounts which he claimed to be due him on account of the construction of the road, and for extra work and other claims growing out of the contract. The complaint originally contained three causes of action, but by amendment the number was increased to six. The second, third, fourth, and sixth causes of action, and part of the first cause, were eliminated from the case by the judgment, and Clark recovered on the two items of $40,000 and $9,558.63 under the first cause of action, and also under the fifth cause for $2,425, a matter arising subsequent to the release, and not included within it.

The action was originally brought in the state court, but was removed on the application of the company to the Circuit Court of the United States for the Southern District of New York. After issue was joined, the cause came on for trial at a regular term of the circuit court. Trial by jury was waived by written consent of the parties, filed with the clerk, and the cause was referred to a referee, who in due time made his report and findings. The court adopted the findings of the referee and ordered judgment thereon for the sum of $80,479.35. This judgment was subsequently affirmed by the circuit court of appeals. 92 F. 968.

The findings of fact and conclusions of law of the referee were as follows:

Findings of Fact

1. That in the month of March, 1886, the defendant, the Chicago, Milwaukee & St. Paul Railway Company, made and entered into a contract in writing with the plaintiff, dated the 6th day of March, 1886, for the construction of a line of railroad from a point in the City of Ottumwa, Iowa, to a place called Harlem Station, in the State of Missouri, a distance of about 202.8 miles, to be completed on the 1st day of August, 1887, a copy of which contract is hereto annexed, marked "A."

2. That immediately after the execution of the said contract, the plaintiff proceeded to carry out and perform the same, and did carry out and perform the same except a portion thereof otherwise agreed between the parties, and substantially completed the same on or about the 1st day of November, 1887, and the same was duly accepted by the defendant on or about the first part of March, 1888.

3. That on or about the third day of March, 1888, the chief engineer in charge of said work under said contract made a final certificate and estimate, which is copied in full in the twentieth and twenty-first findings of fact last asked by the defendant, and by this reference is made part hereof.

4. That said certificate and estimate were delivered to the defendant, but were never delivered to the plaintiff or any of his agents, and were not seen by the plaintiff or any of his agents or brought to his knowledge otherwise than by the reference thereto in the receipt of March 9, 1888, hereinafter referred to, until the trial of this action.

5. That the consideration for the performance of said contract originally mentioned in said contract was $3,914,600, but before the execution of said contract by the plaintiff, by and with the consent of the defendant, the consideration was changed and made $3,954,600.

6. That the plaintiff made and entered into a supplemental contract whereby he agreed with the defendant to complete his performance of said contract on or before June 1, 1887, and to allow the said defendant, by way of forfeiture, in case the said railway were not so completed by the 1st of June, 1887, the sum of $40,000.

7. That the defendant failed to furnish the plaintiff with rights of way as by said contract it had agreed to do in time to enable the plaintiff to complete his contract prior to the 1st of June, 1887, or prior to the 1st of August, 1887, but, on the contrary, delayed the plaintiff in the performance of said contract at a point upon the said road known as Minneville until October 27, 1887, by reason of the neglect, failure, and omission of the defendant to obtain the necessary right of way at said point so as to permit the construction of the road and completion of the contract at said point.

8. That the plaintiff was thereby prevented from completing his contract on or prior to August 1, 1887, and also on or prior to June 1, 1887, by the negligence, omission, and fault of the defendant.

9. That during the progress of the work, the defendant purchased and furnished to the plaintiff and charged him for patented nut locks, for which the defendant paid $9,558.63.

10. That the said nut locks so furnished by the defendant were used by the plaintiff in the construction of the road.

11. That there are no provisions in the contract which require that the plaintiff, and the plaintiff never agreed that he, should use in the construction of the railroad under said contract any patented nut locks.

12. That the plaintiff was ordered by defendant to put such nut locks on the road at the beginning of the work. That he protested against their use, and finally yielded and used them in track laying upon the promise that the matter of the charge for said nut locks should be adjusted after the completion of the contract.

13. That upon the 9th day of March, 1888, the plaintiff signed and caused to be delivered to a representative of the defendant a paper, writing, or receipt presented to him by the defendant for signature, of which the following is a copy, and upon the signature thereof by said Clark, and its delivery by him to the defendant, the plaintiff was paid by the said defendant the said sum named therein of $213,532.49, less the sum of $40,000 claimed in said paper to be retained for forfeiture in not completing performance of his work under said contract on or prior to June 1, 1887, and the sum of $3,626,865.20 included therein embraces said sum of $9,558.63 claimed by defendant to be due for nut locks. Said $40,000 was deducted, and the actual amount so paid was $173,532.49.

Whereas, a final estimate has been made by D. J. Whittemore, Chief Engineer of the Chicago, Milwaukee & St. Paul Railway Company, of all the work done and material furnished under the contract made between said railway company and Heman Clark, bearing date March 8, 1886, for the construction of the railroad from Ottumwa, in Iowa, to the Missouri River, including all extra work performed and material furnished of every kind and description, which estimate, with prior monthly estimates, less deductions made for work not done and work assumed by said company, amounts to $3,895,798.79;

And whereas the further sum of $34,598.90 should be credited to said Clark for materials sold by him to said company, and certain rebates and other matters of that description, making, with the amount of said estimates, the sum of $3,930,397.69;

And whereas the said Chicago, Milwaukee & St. Paul Railway Company has paid the said Clark to apply on said contract, in money, material, labor, and transportation, the sum of $3,626,865.20;

And whereas, by the terms of section 4, article 13, of said contract, said Clark was to be charged in addition for transportation the sum of $50,000;

And by a supplemental contract was to allow the said railway company, by way of forfeiture in case said railway was not completed by the first day of June, 1887, the further sum of $40,000;

Making the amount paid on said contract, together with the allowance of said transportation and the allowance of said forfeiture, the sum of $3,716,865.20;

Leaving the amount still due said Clark on said contract the sum of $213,532.49.

And whereas, in and by said contract, it was provided that the said Heman Clark, party of the first part, should save the said railway company free and harmless from all claims that might be made against said railway company for liens of workmen and claims of subcontractors, and from all damages arising from not keeping sufficient fences to preserve crops and restrain cattle, and from all damages for cattle or other domestic animals killed or injured, and from all damages suffered by said subcontractors and employees while engaged upon said work, of which said class of claims, about $40,000 in amount, have been made upon and are now pending in courts by divers claimants against said railway company, and the sum of $40,000 of the amount so due, as aforesaid, under said contract to the said Heman Clark, has been reserved and set aside by said railway company, as indemnity or security for the payment of said claims and of such other claims of the same class as may hereafter be made, in case said claimants, or any of them, recover judgments against said railway company, and the said $40,000, or the balance thereof after paying and settling such claims as may be established against said railway company, is to be paid over to the said Heman Clark as soon as said claims are satisfied or said railway company suitably indemnified from any loss on account of the same, which $40,000 deducted from the sum of $213,532.49, so, as aforesaid, due said Clark, leaves due and owing by said railway company and now payable on said contract to said Heman Clark the sum of $173,532.49,

Now therefore be it known, that I, the said Heman Clark, have received of and from the said Chicago, Milwaukee & St. Paul Railway Company the sum of one hundred and seventy-three thousand five hundred and thirty-two and 49/100 dollars ($173,532.49), in full satisfaction of the amount due me on said estimates, and in full satisfaction of all claims and demands of every kind, name, and nature, arising from, or growing out of, said contract of March 6, 1886, and of the construction of said railroad, excepting the obligation of said railway company to account for said forty thousand dollars, as hereinbefore provided.

Heman Clark

Wm. C. Edwards

14. That said receipt and paper contained an accurate, truthful, and undisputed account of all dealings between said parties except in the matter of the $40,000 deducted for time forfeiture, the $9,558.63 for nut locks embraced in the $3,626,865.20, and the lumber hereinafter referred to, and herein valued at $2,425. Besides the above, the defendant has paid the $40,000 reserved as indemnity or security for the payment of claims against Clark, and in addition thereto, upon like accounts, the sum of $521.75.

15. That at the time of the signing and delivery of said last-mentioned paper, the final certificate or estimate of the chief engineer under the contract had not been delivered to the plaintiff or any of his agents by the defendant or the said engineer, and the contents thereof were not known to the plaintiff other than by the reference thereto contained in said receipt of March 9, 1888.

16. That no other final settlement of the accounts under said contract had been had between the plaintiff and the defendant at the time that the said last-mentioned paper was signed and delivered.

17. That at the time of the signing and delivery of said last-mentioned paper, the question of the liability of the plaintiff for nut locks, which had been left by the parties to this action open for settlement and adjustment until after the completion of the work under said contract, and had been referred by the defendant to the chief engineer under the said contract; had not been passed upon by him; that the said chief engineer had referred the question for the opinion of the defendant’s counsel, who had not at said time given his opinion in relation thereto.

18. That no account was ever, otherwise than by said paper and the receipt of said money, stated of the transactions under and connected with said contract between the plaintiff and the defendant.

19. That in or about the months of March and April, 1888, the plaintiff was the owner of 97,000 feet B. M. bridge timber then in the yard of the defendant at Chillicothe and along the line of the railroad.

20. That the said lumber did not conform to the standard of the defendant, and was not purchased by the defendant from the plaintiff, or allowed in the final certificate of the chief engineer, under the contract in this section to the plaintiff.

21. That in and about the month of June, 1888, the defendant took possession of the said lumber and converted the same to their own use without assent or knowledge of the plaintiff.

22. That the value of the said lumber at the time of the taking, in June, 1888, was $2,425.

Conclusions of Law

1. That the defendant is not entitled to charge the plaintiff or to retain and deduct from the amount earned and payable to the plaintiff under the said contract the sum of $40,000 as a forfeiture or liquidated damages for not completing the contract upon June 1, 1887.

2. That under the facts proved in this case, the plaintiff is not legally liable to the defendant for any damages for failure to complete the contract within the contract time or the time agreed upon, for the reason that the plaintiff was prevented by the negligence of the defendant and its omission to procure the necessary right of way, from completing the said work in such time.

3. That the plaintiff is not liable to the defendant for the sum of $9,558.63, the cost of patent nut locks furnished by the defendant to the plaintiff and used by him in the performance of the said contract.

4. That there was no obligation imposed by the contract upon the plaintiff to furnish and pay for patent nut locks to be used in the construction of the said road.

5. That the plaintiff is not legally indebted to the defendant in any sum whatever for patent nut locks furnished by the defendant and used in the construction of the railroad under said contract.

6. That the plaintiff is entitled to recover from the defendant the sum of $2,425, with interest from June 1, 1888, for the conversion by the defendant of lumber belonging to the plaintiff.

7. That the signing and delivery by the plaintiff of the receipt on or about the 9th day of March, 1888, and the acceptance of the check of $173,532.49, under the facts and circumstances proved in this case were, as to the two sums of $9,558.63, charged for nut locks, and $40,000 charged by way of forfeiture for nonperformance in time, wholly without consideration, and in violation of the contract between the parties, and do not constitute any bar to the recovery of the plaintiff for the sums of $9,558.63 and $40,000 otherwise as due under the contract.

8. That the signing and delivery of said receipt, and the acceptance of the check thereunder, do not constitute a legal payment or accord and satisfaction of the said sums of $9,558.63 and $40,000, or either of them, or any part or either of them.

9. That no account of the transactions under this contract, and of the claims sued on in this action, was ever had or stated between the parties to this action otherwise than by said receipt or paper of March 9, 1888.

10. That the plaintiff is entitled to recover the amount certified by the chief engineer of $3,895,793.79 without the deduction claimed by the defendants for nut locks of $9,558.63, and without allowance to the defendant by way of forfeiture for noncompletion of the railway on the 1st day of June, 1887, said sums together amounting to $49,558.63 with interest from March 9, 1888, and is also entitled to recover for timber used by the defendant on the 30th day of June, 1888, to the amount of $2,425 with interest from June 30, 1888, the whole amounting at the date of this report, viz., the 4th day of December, 1897, to the sum of $81,305.88, for which with interest from this date and disbursements the plaintiff is entitled to judgment, less amount paid by the defendant in excess of the reserved $40,000, $521.75, with interest from and to the same date, being in all this day $826.53.

There will be judgment, therefore, for the plaintiff for $80,479.35 with interest and costs, interest to be computed from December 4, 1897.

In addition to the foregoing findings of fact, twenty-seven additional findings of fact were made at the request of defendant. They related to or set forth the execution of the contract for the construction of the road, a supplemental agreement by which the sum of $40,000 was to be deducted from the contract price if the road was not completed by June 1, 1887, the failure of Clark to complete the road in that time, the final estimate and certificate of the chief engineer of the company, the sending of the statement of account and release to Clark, with the information that, on the same’s being signed and returned by him, a check for the balance due him, $173,549, would be sent to him; the return of said statement and release signed by Clark, and the sending to him of a check for such balance, March 9, 1888, the deposit by Clark of said check and his retention of the amount paid him thereon, the expenditure of the $40,000 (and the $521.75 besides), reserved by the company, with Clark’s consent at the time of the settlement, to meet unpaid claims against Clark, incurred in the construction of the road, the furnishing of nut locks to Clark by the company for the construction of the road, and that the company did not require Clark to furnish any material or perform the work of furnishing or erecting any structures of a more expensive design than required of him by the contract for the construction of the road, otherwise than as set forth in the final estimate of the chief engineer.

Amendments to the complaint were allowed by the referee over defendant’s objection and exception, and approved by the court under like objection and exception.

The errors assigned were that (1) the court below erred in holding that the findings of fact supported the judgment as to the item of $9,558.63 for nut locks, and the item of $40,000 for time forfeiture; (2) the court below erred in holding that there was no consideration for the settlement made by the parties as to the items of $9,558.63 for nut locks, and $40,000 for time forfeiture; (3) The court below erred in holding that the question whether there was any evidence in the record to sustain the finding that the defendant in June, 1888, wrongfully took possession of certain lumber and converted it to its own use was not reviewable; (4) The court below erred in holding that it was proper to allow plaintiff to amend his complaint on the trial against defendant’s objection, by adding thereto an action sounding in tort and to recover thereon.