UNITED STATES
v.
GEORGE A. FULLER CO., Inc.

*814 *815 *816 *817 *818 *819 *820 *821 *822 *823 *824 Jerome Michael, Sp. Asst. Atty. Gen. (Al. F. Williams, U. S. Atty., of Topeka, Kan., Paul Shipman Andrews, Henry Gale, and William T. Chantland, Sp. Asst. Attys. Gen., on the brief), for the United States.

Robert N. Golding, of Chicago, Ill. (Weymouth Kirkland, of Chicago, Ill., and John S. Dean, of Topeka, Kan., on the brief), for defendant in error.

O. M. Brockett, of Des Moines, Iowa, amicus curiæ.

Before SANBORN and LEWIS, Circuit Judges, and PHILLIPS, District Judge.

LEWIS, Circuit Judge (after stating the facts as above).

This action is founded on the contract between the parties of date June 20, 1917 (set out above), for the Construction of Camp Funston on the Fort Riley Military Reservation; and the errors assigned are directed to the ruling of the court in sustaining a general demurrer to the third amended petition and its judgment of dismissal of the cause on that ruling. The original and first amended petitions each set up one alleged cause of action for damages based on a claimed breach of the contract by George A. Fuller Co. because of alleged lack of skill and negligence in its execution; and the second and third amended petitions each contain four alleged causes of action. To each petition a copy of the contract was attached and made a part of the pleading by reference. The preceding petitions were each held bad on motions to strike, to make more certain and demurrers filed thereto by the defendant. Before we come to the issue presented by the demurrer the rights and duties of the parties and the basis on which they rest should be determined, for the purpose of pleading. In reference to the third amended petition plaintiff's counsel in his argument here says: "One of those causes of action is negligence, one in breach of contract, one in quasi-contract, and one in fraud and deceit." We fail to see any distinction between counts 1 and 2. Each of them charges the same negligence in general terms as constituting breach of the contract. The third count may be an attempt to charge damages for fraud and deceit; and the fourth is clearly for money had and received. But it is not necessary to define them. The rights of each party rest on the contract and the acts complained of were done in its performance. Technical definitions are of no avail. The facts stated in the petition determine its character and sufficiency. Code pleading deals with substance, not with formalities. In Hamilton v. Empire Gas & Fuel Co., 297 F. 422, this court had occasion to consider the effect of stating a cause of action as for a tort when the plaintiff's rights and duties rested on contract. We accepted the rule announced by Underhill and Pollock on Torts when applied to Code pleading and quoted from the latter thus:

"Now that forms of pleading are generally abolished or greatly simplied, it seems better to say that wherever there is a contract to do something the obligation of the contract is the only obligation between the parties with regard to the performance, whether there was a duty antecedent to the contract or not. But injury which would have been a tort as breach of a duty existing at common law if there had not been any contract is still a tort;" — and from Whittaker v. Collins, 34 Minn. 299, 25 N.W. 632, 57 Am. Rep. 55:

"Where the action is not maintainable without pleading and proving the contract — where the gist of the action is the breach of the contract, either by malfeasance or nonfeasance — it is, in substance, whatever may be the form of the pleading, an action on the contract. * * * The foundation of the action is the contract, and the gravamen of it its breach."

Pomeroy's Code Remedies (3d Ed.) § 576, says:

"Since the reformed pleading requires the facts to be averred as they actually took place, it does not in general permit a single cause of action to be set forth in two or more different forms or counts, as was the familiar practice at the common law. The rule is undoubtedly settled, that, under all ordinary circumstances, the plaintiff who has but one cause of action will not be suffered to spread it upon the record in differing shapes and modes as though he possessed two or more distinct demands; and when he does so without special and sufficient reason, he will be compelled, either by a motion before the trial or by an application and direction at the trial, to select one of these counts, and to abandon the others."

*825 And so here, the third amended petition, as well as the three that preceded it, each made the contract a part thereof by reference, and declared a breach thereof by the defendant. The contract provided that the material and supplies when brought to the site of the work should become the property of plaintiff, and we do not doubt that a good cause of action ex delicto might have been stated for its wanton waste or destruction by defendant. Such acts would have been separate and apart from the execution of the contract. But no case of that kind was attempted to be made. All allegations about destruction or waste of material were made not as independent causes of action but as instances of neglect of contractual duty to sustain the alleged breach and entitle plaintiff to general damages. We think it clear that plaintiff must rely on the contract and base its action thereon in seeking relief. The contract was made a part of the pleading and the allegations of the petition must be considered in connection with it.

The Contractor was to receive his net outlay in doing the work and a fee based on that outlay, as shown in Article III of the contract. Article IV provides for monthly settlements between the Contracting Officer and the Contractor to ascertain the cost for materials and labor during the preceding month, and a part of the fee based thereon, which were to be thereupon paid to the Contractor; and it says in reference to those settlements:

"The statement so made and all payments made thereon shall be final and binding upon both parties hereto."

Because of the possible magnitude of the undertaking it was contemplated (Art. II) that the Contractor might need engineers, superintendents, time-keepers, foremen and other employés in connection with the work; but Article I expressly provided that in the construction and completion of the cantonment the work should be done "in accordance with the drawings and specifications to be furnished by the Contracting Officer, and subject in every detail to his supervision, direction and instruction." The Contracting Officer was given the right to make changes in the drawings and specifications so to be furnished, to require additional work, to direct the omission of work previously ordered, notifying the Contractor from time to time in regard thereto. It is obvious that the power and control of the Contracting Officer over the extent of the work to be done and his supervision and control during its progress were complete. The schedule fixing the fees shows that the work which the Contractor would be called on to do might be less than $100,000 and it might greatly exceed $3,500,000. All material, equipment, machinery and supplies delivered at the site of the work, upon inspection and acceptance in writing by the Contracting Officer, became the property of the United States. The contract itself says it is a departure from the usual procedure in the matter of letting contracts and that the method which it adopted was for the purpose of insuring the most expeditious results; it also recognized the existence of disturbed conditions in the contracting industry throughout the country. It is plain that the Contractor did not have a free hand. It was required to be constantly ready to receive directions and instructions about the work from the Contracting Officer. These stipulations, agreements and recitals in the contract are to be borne in mind when we come to consider the sufficiency of the third amended petition.

A general demurrer is well taken when the petition shows that no legal wrong has been done, or when the petition omits some averment, necessary either to establish the wrong or to so connect the parties with it as to entitle the plaintiff to redress. Bliss on Code Pleading (2d Ed.) § 413. With the facts that have been stated and the principles of law to which we have adverted in mind, we come to an estimate of the third amended petition; and we think the petition shows on its face (1) that no legal wrong has been done, and (2) that it omits averments necessary to the establishment of a wrong to plaintiff. It avers that the contract was entered into on June 20, 1917, by which it was agreed that the defendant would construct the army cantonment known as Camp Funston, "the said army cantonment being hereinafter referred to for convenience as the `work,'" that defendant entered upon the performance of the work about June 28, 1917, and throughout the construction of said cantonment failed to exercise due care and skill in the respects stated; that the cost of the work (the cantonment) to plaintiff as performed by defendant was $8,766,985.12, that such cost by reason of defendant's breach of its duty in the respects aforesaid exceeded the reasonable cost of the work to the extent of $3,000,000 and plaintiff was damaged in that sum. The respects in which the defendant failed to exercise due care and skill and was thus negligent, constituting a claimed breach of the contract, are stated in paragraph 6, subds. (a) to (g) inclusive. As to these charges we agree with the learned *826 district judge, they are mere statements of glittering generalities and conclusions of the pleader. The pleader seems to have had in mind systems, methods and plans for the employment and discharge of workmen for direction of the work as it progressed, for procurement, receipt and distribution of material and supplies; but he did not inform the defendant what those systems, methods and plans are, whether they are established systems, methods and plans well known to and generally followed by contractors who do the kind of work provided for in this contract and under the conditions and requirements named in it. Obviously, he could not do this. The contract says it is a departure from the usual way of doing such things. The Contractor was put in the attitude of waiting on daily instructions from the Contracting Officer as to changes, extent of work to be done and the forces needed for doing it. Nor does it appear that the failure to have and maintain the systems, methods and plans which the pleader had in miind caused, or to what extent they caused, the wrongs and injury complained of; e. g., admitting the absence of systems, methods and plans alleged in subdivision (f), non constat their omission caused the things seemingly attributed to them, for take (8) under subdivision (f), from a failure to make provision to insure that materials and equipment delivered to various parts of the work would be used in the manner and for the purposes for which they were intended, it does not follow that materials and equipment were not delivered promptly and used at the places and for the purposes for which they were purchased and intended; and so throughout paragraph 6 of count I, by reference made a part of count II, many other allegations of the same import are found. An allegation that one failed to make provision to insure against the happening of an event is not an averment that the thing to be insured against happened, nor how many times it happened, nor that it happened because no provision had been made to insure that it would not happen. Subdivisions (b) and (c) are of the same type. The burden of complaint in paragraph 6 is the failure of defendant to exercise due care and skill in organizing, planning and superintending the work. No standard of organization with which defendant was bound to comply, nor the extent to which it was to exercise superintendence, is stated; nor does it appear how it was that these alleged failures operated to the injury of plaintiff. On the whole the paragraph seems to be based on a theoretical standard in the mind of the pleader. The defendant is certainly not advised as to just what it should have done in those respects. It is not a statement of facts tending to show a breach of contract but conclusions. The contract did not require defendant to do things of which plaintiff now complains. It would have been idle and futile, without the acquiescence and co-operation of the Contracting Officer, for the Contractor to have formulated systems, methods and plans to be carried out by him in executing the work; for Article I of the contract gave to the Contracting Officer superior power and authority in every detail over the direction and supervision of the work as it progressed. The Contractor might to-day put twenty men at work here. To-morrow the Contracting Officer could say they must go yonder. The Contractor might make ready to deliver material for a certain building or buildings, but the Contracting Officer could direct that it be taken elsewhere. Paragraph 6 flies in the face of the contract in assuming that the Contractor could formulate and carry out its own plans and methods in doing the work. Facts constituting alleged negligence or fraud claimed as breaches of contract must be stated, thus giving the defendant opportunity to meet them in answer and proof. And it must reasonably appear that the facts thus relied on were in violation of the contract and wrought an injury to plaintiff; if not so stated the petition should be held bad on demurrer. We think this petition insufficient in those respects.

The petition fairly interpreted shows that the contract was performed by the parties. That is, the defendant constructed the cantonment and received pay therefor. It is argued that there is no express allegation that the payments made, amounting in the aggregate to $8,766,985.12, were ascertained in the manner provided by the contract. There is no allegation that the contract was ever changed, modified or annulled, or that the sums paid were paid because of any obligation of the plaintiff to the defendant other than on the contract. Paragraph 4 of Count II alleges "that the plaintiff duly performed all of the conditions of the said agreement on its part to be performed." An ascertainment by the Contracting Officer of the monthly payments to be made to the Contractor as provided in Article IV was a condition precedent to the payments, and but for statutory provision the pleader would have been required to set up the facts in that respect. The plea as made, in accordance with the statute, embodies by necessary implication *827 those facts. Thus the petition shows that defendant constructed the cantonment and was paid therefor from time to time, as the contract provides, the gross named sum. Even without this paragraph 4 it could not be doubted that the payments were made on monthly statements as the contract provides. For there is no allegation that they were not so made, and to presume that they were, without a showing of some other liability therefor, would rest on an assumption of criminal conduct on the part of Government officials. In that view of the effect of the pleading, which we take, plaintiff was under the necessity of charging the Contracting Officer, or his representative with unfaithfulness; and having failed to make any charge of that kind whatsoever the petition omitted an averment necessary to the establishment of a legal wrong. The rule on that subject cannot be doubted. When parties to a contract agree on an umpire or arbitrator and give him power and authority to make settlement of the amount due from one to the other in performance, and expressly provide in the contract that his determination shall be final and binding upon both parties, neither of them can maintain an action against the other for acts or transactions based on and growing out of the contractual relation without avoiding the settlement so made for fraudulent conduct on the part of the arbitrator, or for gross mistake implying bad faith on his part or for his failure to exercise his honest judgment. Kihlberg v. United States, 97 U.S. 398, 24 L. Ed. 1106; United States v. Shrewsbury, 90 U. S. (23 Wall.) 508, 23 L. Ed. 78; Chicago, S. F. & C. Railroad Co. v. Price, 138 U.S. 185, 11 S. Ct. 290, 34 L. Ed. 917; Ripley v. United States, 223 U.S. 695, 750, 32 S. Ct. 352, 56 L. Ed. 614; Martinsburg & P. Railroad Co. v. March, 114 U.S. 549, 5 S. Ct. 1035, 29 L. Ed. 255; United States v. Mason & Hanger Co., 260 U.S. 323, 43 S. Ct. 128, 67 L. Ed. 286; Cook v. Foley, 152 F. 41, 81 Cow. C. A. 237; United States v. Hurley, 182 F. 776, 105 Cow. C. A. 208; Missouri, K. & T. Railroad Co. v. Elliott (C. C.) 56 F. 772.

These were the principles applied by the learned district judge in ruling on the demurrer; and his action did not surprise counsel, because he considered the same principles in memorandum opinions in ruling on the prior petitions, each of which disclosed the same defects in pleading.

Finally, it is said the judgment of dismissal should be reversed because it ordered the costs taxed against plaintiff. But if, as claimed, the court was without power to tax plaintiff with the costs, its order in that respect is void. 27 Stat. 252, U. S. Comp. Stat. § 1630. There can be no prejudice on that ground.

Affirmed.