Nelley v. Mayor of Baltimore

⁴ Bruns, C. J., delivered the opinion of the Court. Eugene J. Nelley and James O. Sanders, partners trading as Patapsco Crane & Pile Co., (Patapsco) brought this suit at law against the Mayor and City Council of Baltimore (the City) for damages to compensate them for additional costs incurred by Patapsco in the performance of a contract for the construction of a new sewer line, which costs were due to the concealment of a material fact by the City. The verdict of the jury was in favor of Patapsco. On motion of the City, judgment n. o. v. was entered in its favor on the grounds that the Patapsco’s claim was within the scope of the arbitration clause of the contract, that it had been submitted to the arbitrator specified in the contract and that it had been determined by him adversely to Patapsco prior to the institution of this suit.

Patapsco appeals from the judgment. At issue on this appeal is the correctness of the above holdings of the trial judge. The City filed a motion to dismiss the appeal on the ground that Patapsco had failed to comply with the requirements of Rule 828 (b) as to what shall be included in the appendix or printed record extract. This motion was argued immediately prior to the hearing on the merits and decision thereon was reserved.

We think that the appellants’ appendix does contain enough of the evidence, pleadings and other parts of the record to enable us to determine the sufficiency thereof to support the judgment of the trial court, and we therefore deny the motion to dismiss. 1 See Brown v. Fraley, 222 Md. 480, 482-83 , 161 A. 2d 128 ; Reddick v. State, 219 Md. 95, 97 , 148 A. 2d 384 , cert. den. 360 U. S. 930 ; cf. Columbian Carbon Co. v. Kight, 207 Md. 203, 205 , 114 A. 2d 28 (which arose under a former rule). ⁵ The facts in this case are simple and essentially undisputed. Bids were requested by the City for the construction of a sewer line and for the work incidental thereto. In response to this invitation, and after visiting the site of the proposed construction and receiving from the City the specifications and a drawing of the work to be done, Patapsco submitted a bid. Prior to the submission of this bid Mr. Nelley, a partner in Patapsco, called the Bureau of Sewers and asked if there was any other information Patapsco would need to formulate its bid—he was told that Patapsco had all the information requisite to making its bid.

Neither Patapsco nor any other bidder was supplied at that time with a drawing of an old sewer line, showing the cracks therein, though the old line was within ten feet of the proposed new line and the City had the drawing in its files prior to its request for bids. On September 29, 1959, Patapsco being the lowest responsible bidder, was awarded the contract, known as Sanitary Contract No. 468. Soon after Patapsco began excavating a trench for the new line, it was confronted with the seepage of raw sewage from the old line into its excavation. Upon being faced with this problem Mr. Nelley contacted Mr. Arthur P. Shanklin, Field Engineer for the Bureau of Sewers.

Mr. Shanklin, in an attempt to be of assistance to appellants, supplied them with the above mentioned drawing of the old sewer line. Though believing that the City had wrongfully concealed this drawing from it, Patapsco elected to “complete the contract and obtain damages for the misrepresented portion of the project later.” After completing the contract Patapsco engaged Mr. Owen W. Turpin, a consulting engineer, who arranged a meeting on Patapsco’s behalf, with Mr. John J. Hunt, the City’s Sewerage Engineer. At this meeting Patapsco sought compensation for the expenses it had incurred in coping with the seepage of sewage from the old sewer line. In order to press its claims, which involved this matter and several others, the appellants and their then counsel attended a meeting with Mr. George A. Carter, then the Director of the City’s Department of Public Works and, as such, the referee named under the arbitration clause of Sanitary Contract No. 468 (the Arbitration Clause).

This meeting was evidently in the nature of ⁶ a hearing, for Mr. Carter testified that he had then heard the same evidence that he had heard in court. The Arbitration Clause reads as follows: “Authority of Sewerage Engineer and Director of Public Works. 58. Subject to the power and authority of the Director of Public Works as provided by law and in these contract documents, the Sewerage Engineer shall in all cases, determine the amount or quantity, quality and acceptability of the work and materials which are to be paid for under this contract; shall decide all questions in relation to said work and the performance thereof; and shall, in all cases, decide questions which may arise relative to the fulfillment of the contract or to the obligations of the Contractor thereunder. To prevent disputes and litigations, the Director of Public Works will be the referee in case any question shall arise between the Contractor and the City touching the Contract, and his determination, decision and/or estimate shall be final and conclusive upon the Contractor and shall also be a condition precedent to the right of the Contractor to receive any moneys under the contract.” Two days after the meeting with Mr. Carter, the appellants were informed by him by letter (copies of which are stated to have been furnished to their then counsel and to the Sewerage Engineer) that “[ajcting in pursuance * * * [of his] power and authority as referee under the contract,” their “claim for * * * pumping and time lost [was] denied,” and they were also advised of his action as referee upon their other five claims, three of which appear to have been allowed in part and one in whole.

Patapsco then brought this suit in the Superior Court of Baltimore City, with the result above stated. In essence Patapsco contends that the trial judge erred in holding that the Arbitration Clause was broad enough to bar suit for the damages caused by the City’s concealment or mis ⁷ representation in the inducement of the substantive portions of the contract. In urging this contention, it asserts that the case of Soviero Bros. Contracting Corp. v. City of New York, 142 N.Y.S. 2d 508, 510 , cited and relied upon by the trial court as authority for restricting them to their rights under the Arbitration Clause, does not support the trial court’s holding.

It is clear, assuming the correctness of Patapsco’s claim that it was a defrauded party, that Patapsco, upon discovering the fraud perpetrated upon it by the City, had an election of remedies which are mutually exclusive. It could, by appropriate action, promptly rescind the contract and be restored to its former position (which here would have included obtaining reimbursement for work done prior to discovery of the fraud and rescission), or it could affirm by performing the contract and claim damages due to the concealment or misrepresentation. The latter remedy was the one actually and clearly chosen, and it is, of course, an affirmance of the contract. Wolin v. Zenith Homes, Inc., 219 Md. 242, 250-51 , 146 A. 2d 197 ; Sommers v. Dukes, 208 Md. 386, 393 , 118 A. 2d 660 ; Ortel v. Upper Ashburton Realty Co., 171 Md. 678, 686, 190 A. 239 ; Telma v. Gingell, 157 Md. 411, 413 , 146 A. 221 ; Groff v. Hansel, 33 Md. 161, 166 .

See also 5 Williston, Contracts § 1528 (Rev. ed., 1937) ; II Restatement of Contracts § 484. That this election constituted affirmance of the contract in its entirety is supported by the Soviero case. In that case a contractor after discovering that the City of New York had withheld material facts concerning a construction project elected to perform his part of the contract and to sue the City for the damages caused him by the deceit. The contract had a clause which barred any suit concerning the contract brought more than one year after the final certificate had been filed.

The City raised this clause as a defense to the contractor’s suit. Justice Breitel, speaking for the majority of the court, stated: “* * * the gravamen is misrepresentation, innocently or recklessly made.by the City, with respect to material facts, at a time when, somewhere in the files of the City, there were documents and maps clearly revealing the true facts, which were never ⁸ disclosed in advance to the contractor. Since, however, the action is based on damages at law for fraudulent inducement, it is in affirmance of the contracts. This being so, the City may avail itself of the short period of limitations contained in the written agreements with the contractor.” There the ratification of the contract included ratification of the short period of limitations clause; here it includes the Arbitration Clause.

In the instant case the very issue now in litigation was submitted to the referee or arbitrator specified in the contract. He held a hearing and made an award thereon, which was adverse to Patapsco on this issue. There is no suggestion that the hearing was not fair or that the referee acted otherwise than fairly and conscientiously, except that Patapsco claims, in effect, that he could not act in such a manner because he was an official of the City. This argument comes down to a contention that he was disqualified because of interest.

There is nothing before us to show any unfairness in fact on his part, notwithstanding that the jury later reached an opposite conclusion on the issue of concealment. (We may add that we find nothing in the evidence printed by the appellants, and we assume that there is none, to suggest that the concealment was due to any actual intention on the part of any city official or employee to deceive or defraud the appellants or any other bidders.) There may be some distinctions between executory and executed agreements to arbitrate and the scope thereof as to their enforceability and effect. For a recent case involving an executory agreement, see Eisel v. Howell, 220 Md. 584, 155 A. 2d 509 . Here, however, we are dealing with an executed agreement to arbitrate—the dispute had been submitted and the arbitrator’s decision had been made.

As to such an award Professor Corbin states (6 Corbin, Contracts § 1439) : “An award of arbitrators, once it is rendered, is valid and enforceable in the courts, if there has been a fair hearing and the arbitration was held and the award rendered in accordance with the submission agreement. * * * These statements are true without regard to whether the agreement of submission is expressly applicable to all future disputes or is limited to specified issues.” To like effect, see also 6 Williston, Con ⁹ tracts (Rev. ed. 1938), § 1927, where that learned author says: “If a claim is submitted to arbitration and an award is duly made by the arbitrators, its terms are conclusive on the parties.” The law of Maryland is in accord. Dominion Marble Co. v. Morrow, 130 Md. 255, 260 , 100 A. 292 ; O’Ferrall v. De Luxe Sign Co., 158 Md. 544, 552-554 , 149 A. 290 , and cases therein cited. See also Continental Milling & Feed Co. v. Doughnut Corporation of America, 186 Md. 669, 674 , 48 A. 2d 447 ; Waller v. Waller, 187 Md. 185, 193 , 49 A. 2d 449 ; Parr Construction Co. v. Pomer, 217 Md. 539, 543-544 , 144 A. 2d 69 . See also the cases cited below relating to the validity of the designation of a representative of one of the parties as the arbitrator.

Two questions then remain to be considered: first, can the arbitrator or referee who is to make the final and binding decision under the provision be an official of one of the parties to the contract; and, second, can a claim of concealment or misrepresentation in the inducement of the substantive contract be considered under the arbitration provision here involved? The latter question can be divided into two parts: (a) is the Arbitration Clause broad enough to cover it; and (b) if so, is its inclusion invalid as against public policy? As to the first question it is established that the parties to a contract may provide for the