Andrew J. Robinson Co. v. Security Mutual Life Insurance

Majority

p. 880

Andrew J. Robinson Company, Respondent, v. Security Mutual Life Insurance Company, Appellant.

First Department,

June 4, 1915.

Headnote

Contract — agreement appointing plaintiff to superintend erection of building — reserved right of owner to terminate subcontracts — payment of judgment recovered by subcontractor after termination of subcontract — principal and agent — unauthorized oral agreement made by agent with subcontractor — agent liable to principal for loss caused by unauthorized or negligent acts — evidence—judicial notice — cost of union labor.

Action brought by a building contractor to recover a balance alleged to be due for work-and materials furnished under the contract; the defendant, for whom the building was erected, claiming an offset on account of expenditures it was obliged to make owing to acts of the plaintiff alleged to be in violation of its contract obligations. The agreement between the parties, although embodying terms appropriate to an agreement with an independent contractor, in effect merely, appointed the plaintiff superintendent of construction for the defendant, for the latter agreed to reimburse the plaintiff for the total necessary actual cost of labor and material and to pay as compensation for services a certain percentage, excluding, however, percentages on the price of any material which the owner might itself furnish for the building. All subcontracts made for labor or material were subject to approval by the defendant, and it was provided that it should .retain portions of the payments due to indemnify it against any lien or claim chargeable to the contractor for which, if established, the owner might be liable. Acting under the agreement aforesaid the plaintiff sublet a portion of the work, reserving in the subcontract the right to terminate it if the work was not prosecuted with due diligence. The defendant owner, being dissatisfied with the manner in which the subcontract was being prosecuted, notified the plaintiff of the fact and ordered it to terminate

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the subcontract and to hold the subcontractor liable for the cost of doing the work, which rights were reserved by the subcontract. Pursuant to these instructions the plaintiff terminated the subcontract and completed the work itself by day labor, the cost of completion being in excess of the amount named in the subcontract. Thereupon the subcontractor filed a mechanic’s lien against the premises and brought suit to foreclose it, making the present plaintiff and defendant parties, in which suit the subcontractor recovered, although if the contract had been rightfully terminated such recovery could not have been had and on the contrary the subcontractor would have been liable for the excess cost of completing the work.

In the foreclosure suit it was found as a fact that the present plaintiff had induced the contractor to abandon the contract on an oral agreement to pay it the cost and expenses of labor and materials already furnished and a percentage in addition thereto, but there was no finding that the oral agreement was made with the consent and approval of the owner, and it was determined that the present plaintiff had waived the right to terminate the written contract by its parol agreement. The present defendant, as owner, paid said judgment and in this action asserts the amount thereof as an offset to the plaintiff’s claim, and to that end put the judgment roll in the former action in evidence.

Held, that the defendant in ordering the plaintiff to terminate the subcontract was merely asserting its rights under'the contract with the plaintiff, and conferred upon the latter no implied authority to make the oral contract with the subcontractor, nor did the defendant ratify the same;

That the decision in the prior suit of foreclosure is not open to review or collateral attack in this action, and as that judgment in favor of the subcontractor was not limited to the actual value of the work performed by it, but included ten per cent on said cost, the prior decision was conclusive as to the existence of the oral contract;

That as it was also found in the prior suit that the present plaintiff had failed to perform work essential to enable the subcontractor to complete, that finding is fatal to a recovery by the plaintiff in this action, there being no proof that the present defendant was in any manner responsible for the plaintiff’s failure.

It follows, therefore, that the defendant is entitled to the offset claimed by it in that its obligation to pay the judgment of the subcontractor was due to the unauthorized or negligent acts of the present plaintiff.

As it is admitted by the pleadings in the present action that the defendant was obliged to and did complete plastering work covered by the subcontract, it cannot be asserted that the subcontract covered only plain plastering and excluded ornamental work, when the latter was included in the cost of completing the work by the defendant.

The court will not take judicial notice of the alleged fact that union labor is more expensive than non-union labor.

Scott, J., dissented.

p. 882

Appeal by the defendant, Security Mutual Life Insurance Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 18th day of April, 1914, upon a decision of the court after a trial at the New York Trial Term, a jury having been waived.

Harvey D. Hinman, for the appellant.

Edward S. Clinch, for the respondent.

This action was brought to recover a balance alleged to be due and owing to the plaintiff under and by virtue of the provisions of a contract in writing made by the parties to this action on the 1st day of March, 1904, by which the plaintiff, therein designated as the contractor, agreed to furnish and provide all materials and perform all the work necessary for the erection of an office building on premises owned by defendant, likewise designated owner, in the city of Binghamton, N. Y., according to plans, drawings and specifications to be furnished by the architects of the owner, the building to be completed on or about the 1st day of March, 1905, or within such additional time after that date as would equal the period that the contractor might be delayed by the owner in commencing the excavation after the 1st of April, 1904. The contract was construed by the parties as constituting the plaintiff superintendent of construction for defendant, notwithstanding certain general provisions designed to insure completion within the time specified, and such it was in effect, at least as between the parties, for the owner agreed to reimburse the contractor for “the total necessary actual cost of all labor and material,” and to pay it, evidently as compensation for its services, five per cent in addition thereto, it being provided that the contractor should not receive a percentage on the cost price of any material which the owner might have and which might be used in the building, but only upon the expense in laying and using the same, and that in no event should the five per cent exceed the sum of $25,000; and it was provided that the materials should be purchased pursuant to competitive bidding, and

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from vendors and at prices approved by the owner, and that unless otherwise agreed by the owner, all labor and services should also be employed pursuant to competitive bidding approved by the owner. The contract contained other provisions to the effect that the owner should pay the contractor monthly for the actual cost of labor and materials and the five per cent in addition thereto, upon statements and vouchers to be submitted to the owner by the contractor; that the owner should have the right to retain out of any payments due an amount sufficient to indemnify it against any lien or claim chargeable to the contractor, for which, if established, the owner might become liable, and that if after final payment the owner should be obliged to discharge any such lien the contractor should reimburse it therefor, and that the owner should be at liberty to terminate the employment of the contractor and to take possession of the work if the contractor should at any time refuse or neglect to supply a sufficiency of properly skilled workmen, or materials of proper quality, or fail in any respect to prosecute the work with promptness and diligence, or fail in the performance of any of its agreements, and such refusal, neglect or failure should be certified by the architects as therein provided, and it was provided that the contractor should pay as liquidated damages the sum of $100 per day for each and every day after March 15, 1905, until the building should be completed; but it was provided, among other things, that the contractor was to be allowed for delays caused by the owner or its architects, or by any other contractor, or by strikes or lockouts caused by acts of employees.

There is no controversy with respect to the cost of the work, or the amount of plaintiff’s percentage thereon or the balance unpaid on either item. The only questions arise with respect to a claim made by the defendant to an offset against the amount claimed by the plaintiff, on account of two items of expenditure which it claims it was obliged to make, owing to acts of the plaintiff in violation of its duty under the contract.

On the 15th day of October, 1901, the plaintiff, pursuant to the provisions of the contract, let the work “ mentioned in the specifications and shown on the drawings ” for the “ Plain and Ornamental Plastering ” to McNulty Brothers, who agreed to

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complete it by the 28th day of November, 1904. By the provisions of the contract with McNulty Brothers the plaintiff was at liberty to terminate it for, among other things, their failure to prosecute the work with due diligence. On the 1st day of November, 1904, the architects employed by the owner wrote the plaintiff complaining of the manner in which the plastering work was being done; and on the twenty-third day of the same month the architects made a certificate in writing to the effect that McNulty Brothers had ‘ ‘ failed to prosecute the work provided for under and hy the terms of their contract, with sufficient promptness and diligence to enable them to complete said work within the time and according to the terms of their contract, to wit, November 28th, 1904, and that they have failed in the performance of the agreements contained in. their said contract,” and that with the force of men employed by them it would be impossible to finish their work in less than six weeks, and that such failure “to furnish the necessary number of men and quantity of materials to finish said job within time agreed upon, is sufficient ground to terminate the employment of the said sub-contractors on said job,” and on that day the defendant notified the plaintiff that it had, on the certificate of the architects, elected to terminate McNulty Brothers’ contract and directed the plaintiff to terminate it by a formal notice inclosed, and to finish the work in accordance with the provisions of article Y of the contract with McNulty Brothers, which in such case authorized the plaintiff to take over the work and finish it for the account of McNulty Brothers, accounting to them for any difference between the cost of completion and the balance unpaid on the contract and holding them liable for any excess of such costs. On the twenty-fifth day of that month the plaintiff delivered a notice to McNulty Brothers, under date of the twenty-third, to the effect that it would on the twenty-ninth, which was the day after the day on which McNulty Brothers were required to complete their work, take possession and finish the plastering pursuant to article Y of the contract, and also delivered therewith the architects’ certificate and the defendant’s notice of its election to terminate the contract. The plaintiff took possession of the work covered by the McNulty Brothers’ contract on or about the 29th

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day of November, 1904, and completed the same by day labor. The actual and necessary cost of completion was duly certified by the architects to be the sum of $2,376.17 in excess of the amount for which McNulty Brothers agreed to perform the work, which was $14,856, no part of which had been paid, " thus making the cost of completion $17,232.17. It thus appears that if the contract was rightfully terminated, McNulty Brothers could not have recovered for any work done by them and would have been liable for the excess of the cost of completion over and above the amount for which they agreed to do the work; and it was admitted by the pleadings that they were financially responsible. This item of $2,376.17 is one of the offsets claimed by defendant.

On the 27th day of February, 1905, McNulty Brothers filed a mechanic’s lien against the premises for $11,000.93 on the agreed price and value of the labor and materials performed and furnished by them. They brought an action in the Supreme Court in Broome county to foreclose the lien, and made the plaintiff and defendant herein parties defendant, and in their complaint alleged that they were induced to abandon their contract under an agreement by the plaintiff herein to pay them the cost and expenses of the labor and materials performed and furnished and'ten per cent in addition thereto, and alleged that the work was performed and the materials furnished with the knowledge, consent and approval of the owner. Both defendants denied the making of the agreement and pleaded the facts herein stated in justification for the termination of the contract. Qn the trial of the issues in that action the court found that an oral agreement was made as alleged between the plaintiff herein and McNulty Brothers on the 26th day of November, 1904, and that any rights the defendants or either of them had -or might have had to terminate the written contract were waived, surrendered and superseded by the oral agreement ” between McNulty Brothers and the Andrew J. Robinson Company, and that the cost of the work and materials with ten per cent added was $10,522.63, which was also the reasonable value thereof, and a foreclosure was accordingly decreed. Both defendants appealed, but the judgment foreclosing the lien was affirmed without opinion. (See 130 App.

p. 886

Div. 892 .) The judgment roll in that action was introduced in evidence on the trial of the issues herein by the plaintiff, and it is conceded that the findings so far as material to the issues are binding upon both parties. The defendant herein on March 3, 1909, paid that judgment, which with costs, disbursements and interest aggregated the sum of $14,346.02; and that is the basis of the other offset claimed by it. The court on the trial of the mechanic’s lien action also found that at the time the oral agreement was made certain work necessary to be performed by the plaintiff herein before McNulty Brothers could complete their contract had not been performed and that the conditions and the amount and quantity of said work were such that the plaintiff herein was and would be unable to perform it on or before the date McNulty Brothers were required to complete their work and that the non-performance thereof did and would prevent McNulty Brothers from performing the contract on their part within the time specified therefor; that by reason of the action of certain labor unions prior to the time of the making of the oral contract, the plaintiff herein was and would be unable to complete the work required of it under its contract with the defendant herein, and would be unable to proceed therewith until McNulty Brothers removed their employees from the building and ceased all efforts to perform their contract, and that by reason thereof neither McNulty Brothers nor the plaintiff herein would be able to perform their contracts within the time required, and that for this reason both the plaintiff and the defendant herein “were desirous of making some arrangement” with McNulty Brothers whereby they would surrender their right to complete their contract and would remove their employees, and that such action was necessary to enable the plaintiff and defendant herein to procure labor to work upon the building and to perform labor necessary to be done before McNulty Brothers could “ proceed to the completion of their contract, and also other work necessary for the completion of said building’; ” that the defendant herein did not promise or agree to pay McNulty Brothers for the work performed and labor furnished; and refused, on thé ground that it was immaterial, a request duly made by the defendant herein to find that the oral agreement was not authorized by it,

p. 887

and also refused to award a judgment against McNulty Brothers in favor of the defendant on its counterclaim duly pleaded for said sum of $2,376.17.

No testimony was offered on the trial of this action. The evidence is wholly documentary and consists of the decision and judgment roll in the mechanic’s lien action, the certificates of the architects, notices from defendant to plaintiff and from plaintiff to McNulty Brothers, and of admissions contained in the pleadings and made on the trial. With respect, therefore, to the matters concerning which findings were made in the other action, neither party offered any further evidence. Counsel for plaintiff, however, concedes that plaintiff had no “ direction ” from defendant to make the oral contract with McNulty Brothers, by which it was found in the other action they were induced to surrender the work to plaintiff in an uncompleted condition. In view of that admission and of documentary evidence clearly showing that defendant in authorizing plaintiff to terminate the contract with McNulty Brothers contemplated that such termination should be had and that the work should be completed under and in accordance with the terms of the contract, it must be assumed that such oral contract was not authorized by the defendant. On the 28th of November, 1904, the defendant by letter gave plaintiff specific instructions with respect to completing the work in a manner to hold McNulty Brothers for any deficiency and, so far as appears, plaintiff assumed to acquiesce without informing defendant with respect to the oral contract made two days before. If the court in the other action considered that the defendant authorized the oral contract, then it would have held defendant liable for any deficiency judgment, but plaintiff only was so held liable. Doubtless defendant was interested in having the work speedily finished, and in taking over the work for that purpose, but it was asserting that as a matter of right under the contract. Its attitude conferred no implied authority on plaintiff to make the oral contract, and there is nothing to indicate that plaintiff ever claimed to have received authority to make the oral contract or that defendant ratified it. The learned counsel for the respondent contends that the finding in the other action with respect to the oral contract was not material

p. 888

to the issues, and, therefore, is not binding. It is quite clear that it was deemed material and that the decision was based thereon, at least in part, for the oral agreement afforded the only basis for the recovery in that action of ten per cent more than the value of the work performed by McNulty Brothers. It fairly appears, I think, by that decision that the court determined the amount for which the lien was sustained and the right to a lien by the oral agreement made after the work had been performed. The correctness of the decision is not open to review or collateral attack in this action. If the recovery in that action had been limited to the actual value of the work performed, then in view of the other findings to the effect that plaintiff was in default for having delayed McNulty Brothers by failing to perform other, work required to be done before they could complete their contract, it might be argued that McNulty Brothers were entitled tó enforce their lien regardless of the oral contract, but, notwithstanding the fact that the court found that the $10,522.63 for which the lien was sustained was the reasonable value of the work, and also was the cost thereof plus ten per cent, it found in effect that the oral contract precluded the defenses pleaded, and the amount of the lien was, I think, determined by the oral contract on account of which the lien was sustained for ten per cent more than the value of the work performed. If that were not so, it was incumbent upon the plaintiff, who claims that the finding is immaterial, to show the contrary by the evidence and proceedings on the trial, which it did not do. Moreover, it would seem that the finding that plaintiff’s failure to perform the other work essential to enable McNulty Brothers to complete their work is equally fatal to the judgment recovered in this action, for it has not been shown that the defendant was in any manner responsible foi plaintiff’s failure in that regard. If it was caused by a strike or lockout the plaintiff should have shown it. These findings precluded the defendant from, availing itself of its defense of justification for terminating the contract with McNulty Brothers. It was not a party to the contract, and could terminate the contract only through the plaintiff as it attempted to do, and could only assert such defense in the right of the

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plaintiff, which had precluded itself by its default and by the oral contract from so doing, notwithstanding the fact that but for such default the certificates of the architects and notices to McNulty Brothers presumptively established the right of the defendant through the plaintiff to have the contract terminated. The judgment in the other action is conclusive on both parties that McNulty Brothers are not further liable on the contract. Therefore, the making of the oral agreement with them by the plaintiff and plaintiff’s failure to perform work which it was incumbent upon it to do as a condition precedent to the completion of the work by McNulty Brothers, forfeited plaintiff’s right and also defendant’s right through plaintiff to hold McNulty Brothers for any excess of the cost of completion over and above the amount for which McNulty Brothers were to do the work; and such excess has been lost to defendant either by the unauthorized or negligent act of the plaintiff, or both, and for like reason the defendant was deprived of the defense to the mechanic’s lien action and obliged to pay the judgment recovered therein.

It is claimed that the ornamental plastering was not embraced in the contract with McNulty Brothers, but that it is included in the amount claimed by defendant as the cost of completing that contract. The sole basis for that claim is an assertion made on the trial by counsel for plaintiff to the effect that the ornamental plastering, although expressly specified in the contract, was not included in the specifications, to which counsel for the defendant assented by saying that he would accept the statement of counsel for the plaintiff with respect thereto. We are unable to say from an examination of the specifications, which it is recited in the contract are for plain and ornamantal plastering, whether they cover both or only the plain plaster. That is not material, however, for it was alleged in the answer and expressly admitted by the reply that the defendant “ was obliged to and did finish and complete said plastering work contracted to be done by said McNulty Bros, as aforesaid, for which it was obliged to and did pay under the direction and with the approval of the plaintiff, the sum of $11,232.11.” The architects also duly certified under the contract, with a view to

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charging McNulty Brothers therefor, that this was the amount “actually and necessarily paid”by the owners for finishing the work covered by the contract, and it was found in the other action that this was the amount of expenses incurred by the owner in finishing the work. It, therefore, is too late for respondent to contend that the cost of completion as shown included other work.

It appears that owing to labor conditions the defendant directed plaintiff, after the termination of the contract with McNulty Brothers, to complete the contract by day labor, employing only union men, and that it was so completed. The claim is made by counsel for respondent that the cost of completion in such circumstances would not have been the measure of damages against McNulty Brothers and cannot be as against plaintiff. It appears, however, that the defendant expressly required that plaintiff pay no higher rate of wages than McNulty Brothers paid, and it must be assumed that plaintiff observed this requirement. On terminating the work for cause under the contract with McNulty Brothers plaintiff was not required to relet it by contract, but was unrestricted with respect to the manner in which the work should be finished. Unless, therefore, we are able to say by judicial notice that union labor is more expensive at the same rate than non-union labor, which manifestly we cannot do, there is no basis for this contention.

We are, therefore, of opinion that the defendant should have been allowed the two offsets claimed by it, viz., $14,346.02, the amount of the McNulty Brothers judgment, which was paid on the 3d day of March, 1909, together with interest thereon to the date of the judgment, together aggregating $18,757.42, and the additional cost of completion over and above McNulty Brothers’ contract price, and five per cent thereon, and five per cent on said amount of $10,522.63, erroneously allowed to plaintiff by the judgment, and interest on these three items from the 10th day of August, 1905, which is the last date from which plaintiff was allowed interest to the date of the judgment, which three items and interest aggregate $4,596.10.

It follows, therefore, that the judgment should be modified accordingly, and as modified affirmed, without costs, and all

p. 891

findings of fact inconsistent with the views herein expressed are reversed and findings in accordance with these views will be made, and on the settlement of the order any question with respect to the computation of interest may be determined.

Ingraham, P. J., McLaughlin and Clarke, JJ., concurred; Scott, J., dissented.

Judgment modified as directed in opinion, and as modified, affirmed, without costs. • Order to be settled on notice.

p. 893

CASES REPORTED WITH BRIEF SYLLABI AND DECISIONS HANDED DOWN WITHOUT OPINION.