Mayor of Baltimore v. Ohio Casualty Insurance

Moore, J., delivered the opinion of the Court. The principal questions in this appeal from an order that the City of Baltimore pay the remaining sum due on a masonry contract arise from the denial by the Superior Court of Baltimore City (Greenfeld, J.) of the City’s motions for summary judgment, directed verdict, new trial and/or judgment n.o.v. The questions are: 1) Should a contract between a municipal agency and a private company be interpreted more strictly than ordinary private contracts? 2) Was the City’s dispute with the contractor resolved by arbitration binding on the parties? The appellants also allege error in the trial court’s instructions; however, such error is predicated on appellant’s substantive arguments. Since we find those arguments unpersuasive, for the reasons stated herein, we shall answer both questions negatively, endorse the court’s instructions as proper, and affirm the result below.

I The G & M Painting Company was awarded a $34,900 contract by the Department of Education to clean, cut, point, and waterproof the 1916 brick building known as School No. 214 in Baltimore. G & M, after sandblasting the building and starting the cutting and pointing of the mortar joints, ⁴⁵⁷ subcontracted the work to Athens General Contractors, Inc., with the approval of the Project Supervisor, William A. Gieseking, who was named in the contract as the Assistant Superintendent’s Representative. 1 The contract called for the old mortar between the bricks to be cut out to a depth of 3/4 of an inch and new mortar troweled in, "unless approval of the Department of Education is granted in cases where a depth this great is not feasible in the interest of a first-class job.” During the cutting, the City’s inspector, Aaron S. Powell (since resigned), noticed that bricks were sagging in some places, particularly on the northwest side of the building which contained a "knock-out panel,” a 540 square foot area of face veneer brick which could be easily removed to provide access to the school’s heating system. The solution to this problem was disputed. Mr. Gieseking testified that he told Athens to cut to a depth of 1/2 inch only in the "knock-out” area.

Mr. Powell says Mr. Gieseking told Athens to "cut only where necessary.” The upshot was that only about half the brick surface was cut to 3/4 of an inch, about 35 percent was cut to 1/4 of an inch, and the rest was not cut at all. After the work was completed in July 1975, and partial payment of $22,500 was authorized by Mr. Gieseking, some of the "skim pointing” peeled off, resulting in an unsightly facade. Mr. Gieseking sent two letters to the contractors in September 1975, requesting that half the brick work be recut and repointed but he received no reply. Through the "bad weather” months no further action was taken.

On April 22, 1976, the Assistant Superintendent, Curtis E. Lantz, wrote a "Notice of Intent” letter to the contractors, giving them three days to resume cutting and pointing the bricks or be found in default under the terms of the contract. The following March, the Ohio Casualty Insurance Co., Inc., the surety under the original contract, filed a declaratory judgment action against the City of Baltimore. In April 1977, ⁴⁵⁸ Athens and G & M filed cross-claims. On March 13,1979, the City filed a separate action on the contract against all three parties.

The consolidated cases were tried before a jury. A premature appeal from the verdict against the City was dismissed sua sponte by this Court on October 21,1980. Subsequently, a Final Order resolved all claims and this appeal followed. II Appellant’s first contention that public contracts require stricter judicial construction than private contracts rests on no cited cases; and we have found none.

Indeed, only last year the Court of Appeals stated: "The rules which govern the construction of contracts between individuals and private corporations also govern the construction of contracts between individuals and municipalities.” Anne Arundel County v. Crofton Corp., 286 Md. 666, 673 , 410 A.2d 228 (1980). See also City of Frederick v. Brosius Homes Corp., 247 Md. 88, 92 , 230 A.2d 306 (1967). Appellant’s reliance on Gontrum v. Mayor of Baltimore, 182 Md. 370 , 35 A.2d 128 (1943) and its progeny, Inter-City Land Co. v. Baltimore County, 218 Md. 80 , 145 A.2d 263 (1958), and Kent County v. Abel, 246 Md. 395 , 228 A.2d 247 (1967), is an example of trying to make bricks without straw. 2 The Gontrum case reiterated the hoary principle that a municipal corporation cannot be held liable for the unauthorized acts of its agents, absent some ratification or adoption. 182 Md. at 376 . As the trial court in the instant case pointed out, the cases supporting that proposition involve a statute or ordinance that specifically vests power in a named public official.

Judge Greenfeld stated: "I do not perceive this contract to fall in that category. The authority vested in the assistant ⁴⁵⁹ superintendent is not one vested by law. In other words, the law does not say that only the assistant superintendent can make modifications or changes in the contract. The assistant superintendent gets his authority from the governing body of the city under that governing body’s general powers.

"On that basis . . . this contract comets] under the normal rules applicable to contracts generally. . . . "Secondly, I would note that the assistant superintendent, himself, testified that he actually has no contact with the implementation of this contract. He never undertook, during the administration of the project, to do any of the acts that were given to him in the written contract itself. He delegated those acts to people under him, to his subordinates; so even by the assistant superintendent’s own procedures, people other than himself were given the power that the contract gives to him, alone.

"In addition to that, the City was quite willing to permit Mr. Gieseking to approve the assignment of the contract from G & M to Athens. The assistant superintendent was never even consulted about that and never expected to be consulted about that. "The sum and substance of all this is that the assistant superintendent never undertook to do the things that the contract says only he was entitled to do, by his own act.” Appellant’s argument that the City of Baltimore’s Charter somehow casts in concrete the terms of this contract collapses in a careful reading of Article VI, § 4 (b) and (g) (1964). These provisions cited by appellant cover the powers of the Board of Estimates in the bidding process and the bonding duty of the successful "lowest, responsible bidder.” 3 ⁴⁶⁰ There is nary a word about implementing or interpreting the contract itself.

The provisions are also silent on the subject of changes in the contract. Appellant’s strained interpretation of the City’s Charter is no foundation for its novel legal theory that municipal contracts are immovable monuments. Finally, oral modification of a contract, despite a provision requiring all modifications to be in writing, is permitted in Maryland. University National Bank v. Wolfe, 279 Md. 512, 522 , 369 A.2d 570 (1977).

Hoffman v. Glock, 20 Md. App. 284, 288 , 315 A.2d 551 (1974). We see no reason to make any exception for municipal contracts. While the contract in this case did require that all changes be effected in writing, modification of the cutting depth was necessary to forestall a "walls come a-tumblin’ down” result. At no time during trial did appellant contend that no change was ordered.

The factual dispute concerned the extent of the modification, and that was for the jury to resolve. We see no reason to disturb their decision. Ill The second question is whether the contractors are bound by the "decision” of the assistant superintendent as "arbitrator” that they were in default. A provision in the contract 4 states that the Assistant Superintendent shall ⁴⁶¹ decide all questions and disputes and his determination shall be final and conclusive.

While this contract language is similar to that interpreted in Nelley v. Mayor of Baltimore, 224 Md. 1 , 166 A.2d 234 (1960), but see Joseph F. Trionfo & Sons v. Ernest B. LaRosa & Sons, 38 Md. App. 598 , 381 A.2d 727 , cert. denied, 282 Md. 734 (1978), the record in this case discloses no attempt to comply with Md. Cts. & Jud. Proc. Code Ann. §§ 3-213 and 214 a. (1957,1980 Repl.

Vol.). No notice of an arbitration hearing was sent, no adversarial hearing was held, no evidence was received, and no arbitral decision was made. See Seldner Corp. v. W. R. Grace & Co., 22 F.Supp. 388 (D.Md. 1938). The City attempts some "skim pointing” of its own by arguing that a letter to the contractors on April 22, 1976, was notice of an arbitration decision and that several meetings between its representatives and the contractors were in fact a proper arbitration hearing.

As appellee notes, ⁴⁶² the letter follows the wording of the contract provision entitled, "Annulment of Contract,” under which the Assistant