Quigley v. Spencer Stone Co.

BAKER, Circuit Judge,

after stating the facts as above, delivered the opinion of the court.

In sustaining the partial demurrer and in entering a decree upon the master’s report, the court adopted appellees’ contention that the contract between appellants and the receivers was void for lack of mutuality because the receivers were not bound to take and pay for the 100,000 cubic yards of stone ballast.

*89 The intention of the parties; as it is fairly and faithfully gathered from the entire instrument, is the pole star of interpretation. The receivers exacted of appellants a covenant to crush and put on the receivers’ cars 100,000 cubic yards of ballast “at the rate of 400 cubic yards per day until the completion of this contract.” The receivers, in turn, covenanted to furnish the railroad tracks “necessary for the convenient and economical prosecution of the work,” the grading and bridging to be done at appellants’ expense. That is, the receivers were to bear all other expenses, such as rails, ties, etc., in constructing such sidings and quarry tracks as were necessary. Necessary for what? For getting out 5 or 500 cubic yards of ballast? No; “for the convenient and economical prosecution of the work.” What work? The only work that had been mentioned, the work that was the subject-matter about which the parties were negotiating, the work of getting out “100,000 cubic yards of stone ballast at the rate of 400 cubic yards a day” until completed. The receivers further covenanted to furnish free transportation for all “men, teams, tools, and machinery necessary to be used upon the work”—the same work. They further agreed to pay the stipulated price upon monthly estimates, less 10 per cent, reserved, “until the completion of the contract.” We think it clear from these express provisions that the receivers impliedly covenanted to take and pay for the 100,000 cubic yards, and that the contract was mutually obligatory upon the parties—upon appellants to furnish and upon the receivers to accept and pay for the whole quantity. This conclusion, in our judgment, is made inevitable by a consideration of the further provisions of the contract. If the receivers were taking a mere option, terminable at will, why should they have been solicitous to provide a 10 days’ notice of cancellation for appellants’ failure to deliver 400 cubic yards a day of the specified quality? Why require that the monthly estimates be subject to correction in the “final certificate”? Why protect themselves so carefully as to the quality and measure of the entire 100,000 cubic yards by constituting the resident engineer the arbiter of differences? The only intention to be gathered is that the receivers should be liable for damages if they failed to accept and pay. for the 100,000 cubic yards,' provided appellants faithfully performed the contract on their part. St. Louis & Denver Land Co. v. Tierney, 5 Colo. 582 ; Bangor Furnace Co. v. McGill, 108 Ill. 656 ; Morier v. Moran, 58 Ill. App. 235 ; Black v. Woodrow, 39 Md. 194 ; Baker Co. v. Merchants’ Ice Co. (Sup.) 37 N. Y. Supp. 276 .

The contract between appellants and the receivers was not deprived of mutuality by the provision that the receivers’ engineer should be the arbiter of controversies respecting quality, amount, or time of deliveries, and that the appella.nts should have no right of action except such as might be found to exist under the final certificate. Such provisions are common in building and construction contracts. The architect or engineer is required to act in perfect good faith in making his certificate; and, if he does not, the builder or contractor may recover without the certificate. 3 Page on Contracts, art. 1467.

The stone company assumed Blue’s obligations to appellants. But *90 there was ho privity of contract between appellants and the stone company. So, appellants could sue the stone company only in equity, where Blue could be brought in to answer as to his insolvency and the fact of his assignment to the stone company. National Bank v. Grand Lodge, 98 U. S. 123 , 25 L. Ed. 75 ; Keller v. Ashford, 133 U. S. 610 , 10 Sup. Ct. 494, 33 L. Ed. 667 ; Willard v. Wood, 135 U. S. 309 , 10 Sup. Ct 831, 34 L. Ed. 210 ; McKee v. Lamon, 159 U. S. 317 , 16 Sup. Ct. 11, 40 L. Ed. 165 .

There was no adequate remedy at law. True the appellants might have retaken the machinery under their reservation of title as a security for the debt. But the value of second-hand machinery, less wear and tear, would not be likely to equal the purchase price plus interest. As the agreement to pay the purchase price was unconditional, appellants had the right to waive the return of the machinery, treat the contract as an executed sale, and recover the agreed price. 1 Mechera on Sales, art. 615. It is also true that appellants might also have prosecuted an action at law on Blue’s $5,000 bond. But the unpaid balance of the purchase price of the machinery and supplies was $6,533.01, without interest; and this leaves out of view the items of damage to which the demurrer was sustained. Plainly the only remedy that was adequate to the situation was to bring all the matters into one suit in equity.

This equitable right was not destroyed by Blue’s joining the stone company in the attempted rescission. Their action was wrongful, was an attempted fraud upon appellants, and from.it no equitable rights should accrue to them or either. Further, as between appellees, there was no attempt by the stone company to rescind its assumption of Blue’s obligations. Their notice was on the basis that Blue had incurred no obligations. And, finally, if the notice were to be construed as a rescission by the stone company of its obligations to Blue, there was no consideration for the release, and in an action at law by Blue against the stone company on its assumption the nudum pactum would be no defense.

The balance of the purchase price of the machinery and supplies was to be paid in monthly installments. But when appellees, on August 11, 1900, repudiated the contract, they committed a breach on account of which appellants were entitled to sue at once. Roehm v. Horst, 178 U. S. 1 , 20 Sup. Ct. 780, 44 L. Ed. 953 . On that part of the complaint which was answered appellants are entitled to $6,-533.01, with 6 per cent, interest from August 11, 1900, less credits, as partial payments, of the amount received by appellants on account of the stone company’s partial performance of the contract with the receivers and the $4,002.34 left in appellants’ hands on March 4, 1901, as the proceeds of the caretaker’s sale.. .

The demurrer to parts of the bill should be overruled and appellants permitted to show the amount of legal damages, if any, which they have sustained by the stone company’s failure to complete the contract with the receivers.

No part of the costs in the way of the caretaker’s charges and expenses should have been taxed to appellants. The general costs *91 should be taxed to appellees, apart from those that may accrue on the hearing respecting further damages, and in that respect the costs should abide the event.

The decree is reversed, with the direction to proceed in accordance with this opinion.