City of New York v. Seely-Taylor Co.

defendant Seely-Taylor Company submitted- a bid, accompanying which was a bond executed in the form required by the respondent surety company. This bond recited that in consideration of $1 paid by the city, the receipt of which was acknowledged, the surety company agreed, if a contract were -awarded to the Seely-Taylor Company, it would become bound as its surety for the faithful performance of the same; and “if the said person or persons shall omit or refuse to execute such contract and give the proper security within five days after written notice that the same is ready for execution, if so awarded, we will pay, without proof of notice or demand to the said, the city of New York, or its successors, any difference between the sum to which such person or persons would be entitled upon the completion of such contract and the sum which the city of New York may be obliged to pay to the person or persons to whom the contract shall be awarded at any subsequent letting.”

At the time the bid and bond were submitted and accompanying the same, the Seely-Taylor Company delivered a certified check drawn on a National Bank of the city of New York, payable to the order of the comptroller, for $4,500. There were several other bidders, and, when all of the proposals were opened, it was found that -the Seely-Taylor Company’s bid was the lowest by upwards of $100,000. On the 14th of March, the day following when the bids were opened, the Seely-Taylor Company notified the commissioner of docks and the comptroller of the city, in writing, that it withdrew its bid. On the following day the commissioner of docks acknowledged, in writing, the receipt of the notice, and at the same time notified the SeelyTaylor Company that it had no right to withdraw its bid, and “that, if the contract be hereafter awarded to you, the department will look to you and to your súrety to carry out the terms of your bid and-to execute the contract accordingly;” Some time thereafter the contract was awarded to the Seely-Taylor Company, which it refused to execute, though requested to do so. The city then readvertised for bids, and subsequently let a contract to the lowest bidder on such readvertisement, which was about $144,000 in excess of the bid made by the Seely-Taylor Company. Some two years thereafter this action was brought to recover this difference from the Seely-Taylor Company and its surety, the city in the meantime having, on demand of the Seely-Taylor Company, returned to it the check for $4,500.

There was no dispute at the trial between the parties as to the facts above, stated, and, in addition thereto, it appeared from the testimony of the president of the Seely-Taylor Company, which was uncontradicted, that he submitted the bid for his company and in doing so made an unintentional error of $93,000; that this error occurred in transferring figures from a paper upon which he had made his estimate to the formal bid; that on the formal bid he put down the amount as $10,000, and it should have been $103,000; that the error was discovered the morning after the bids were opened, when he immediately communicated with the commissioner of docks, and at the same time gave notice that the Seely-Taylor Company withdrew its bid. At the conclusion of the evidence, and after both parties had rested, the trial court dismissed the complaint. The city appeals from

the judgment to that effect and the Seely-Taylor Company appeals’ from an order denying its motion for an extra allowance of costs.

[1] If it be true, as testified by the president of the Seely-Taylor Company, that it made an unintentional mistake of $93,000 in its bid, then undoubtedly, before the bid was acted upon, it could be withdrawn, and the court in equity could relieve it from executing a contract which it never intended to make. Moffet v. City of Rochester, 178 U. S. 375 , 20 Sup. Ct. 957 , 44 L. Ed. 1108 ; City of New York v. Dowd Lumber Co., 140 App. Div. 358 , 125 N. Y. Supp. 394 . The conclusion at which I have arrived, however, renders it unnecessary to consider whether such a defense were pleaded, or, if so, whether the testimony of the president of the Seely-Taylor Company bearing on that subject should have been submitted to the jury.

[2] When the Seely-Taylor Company made its bid, it complied with section 420 of the Greater New York charter by delivering a check as therein required. This section of the charter provides, among other things, that:

“If the said bidder, whose bid has been accepted, shall refuse or neglect within five days after due notice that the contract has been awarded, to execute" the same, or to furnish the required bond, the amount of deposit made by him shall be forfeited to and retained by the said city as liquidated damages for such neglect or refusal and shall.be paid into the sinking fund of the city. * * * ”

If it be assumed that the Seely-Taylor Company’s bid were a valid and binding one, notwithstanding the mistake alleged, it could thereafter refuse to enter into a contract, and, if it did so, the only damage to which it was subjected was that provided in the section of the charter referred to. Its refusal forfeited to the city the amount of the deposit as “liquidated damages.” Where a statute provides for liquidated damages, or where there is a stipulation in a contract as to the amount of damages that is to be paid to either party for a breach, then, in the absence of fraud or mistake, the only question which arises is as, to the breach. In that case the actual damage is not involved. One cannot recover both. The recovery of one precludes the recovery of the other. Cotheal v. Talmage, 9 N. Y. 551 , 61 Am. Dec. 716 ; Darrow v. Cornell, 12 App. Div. 604 , 42 N. Y. Supp. 1081 ; Dunn v. Morganthau, 73 App. Div. 147 , 76 N. Y. Supp. 827 , affirmed 175 N. Y. 518 , 67 N. E. 1081 ; Shiell v. M’Nitt, 9 Paige, 101; Wood v. Niagara Falls Paper Co., 121 Fed. 818 , 58 C. C. A. 256 ; United States v. Alcorn (C. C.) 145 Fed. 995 ; Morrison v. Richardson, 194 Mass. 370 , 80 N. E. 468 . To permit a recovery of actual damage, where liquidated damages have been provided for, is to nullify the statute or destroy a contract with reference thereto. The sole purpose of providing for liquidated damages is to prevent, in case of a breach, any question being raised as to the amount that shall be paid or recovered therefor.

The city, when it advertised for bids, informed prospective bidders that they would have to deliver at the time bids were submitted a check or money, as provided in section 420 of the charter. The purpose of requiring such deposit to be made was not only to insure good faith on the part of bidders, but to indemnify the city against the ex

pense of readvertising (Erving v. Mayor, 131 N. Y. 133 , 29 N. E. 1101 ), and also to notify bidders, if the contract were awarded to them, and they refused to enter into it, the precise amount of damage they would have to pay. If this" be so, then the only damage to which the Seely-Taylor Company could be subjected for refusing to execute the contract after the same had been awarded to it was the forfeiture of its deposit.

[3] The fact that the deposit was returned after the city had requested the Seely-Taylor Company to enter into a contract and it had refused does not seem to me to be at all pertinent or germane to the question presented on this appeal. The rights of the parties had previously been fixed. It may be assumed there was no authority on the part of the city officials to return the deposit, or the SeelyTaylor Company to receive it, and that the city has a cause of action therefor against one or both, but this action is not brought to recover that sum. It is not even suggested in the complaint, the proof, or brief of counsel that this sum can be recovered in this action, or the action can be treated as one to recover that damage. It cannot be here recovered unless pleadings, proof, the theory upon which the action was tried, and the views of counsel are to be entirely disregarded.

[4] If the foregoing views be correct, then it follows that the complaint was properly dismissed as to the Seely-Taylor Company; and the sole question remaining is whether it was properly dismissed as to the other defendant, the Empire State Surety Company. The condition of its bond, in terms, made it liable, the Seely-Taylor Company having been awarded the contract and refused to execute it, for the damages here sought to be recovered. The Seely-Taylor Company was the principal and the surety company its surety. The bond was to indemnify the city against damage by the failure of the principal to do what it was legally obligated to. There was a legal obligation resting upon the Seely-Taylor Company, its bid having been accepted, to execute a contract. It refused to do this and by reason of such refusal became liable to pay whatever damage the city sustained. This damage had been agreed upon in advance, which sum was paid by forfeiting to the city the amount of the deposit. The principal having paid all the damage sustained by the city, the surety was thereby discharged. When a principal discharges his full obligation, then his surety is also discharged.

[,5] The agreement on the part of the surety to pay any sum for which the principal was not liable was without consideration. That was not the purpose of the bond, and to this extent it cannot be enforced. It is suggested that the bond was in the nature of a separate undertaking on the part of the surety, and was authorized by section 349 of the Revised Ordinances of the city.

[6,7] This ordinance was not offered in evidence, and the court cannot take judicial notice of it. Porter v. Waring, 69 N. Y. 250 ; People ex rel. Cross Co. v. Ahearn, 124 App. Div. 840 , 109 N. Y. Supp. 249 ; City of New York v. Knickerbocker T. Co., 104 App. Div. 223 , 93 N. Y. Supp. 937 . But, if considered as in evidence, it would not aid the city, because so far as it relates 'to the payment of damages

for the refusal of the principal to enter into a contract awarded it is inconsistent with section 420 of the charter. The power on the part of the city to pass an ordinance is derived from its charter, and an ordinance, in so far as inconsistent with the charter, is void. Phelps v. Mayor, 112 N. Y. 216 , 19 N. E. 408 , 2 L. R. A. 626 ; City of Rochester v. West, 29 App. Div. 125 , 51 N. Y. Supp. 482 , affirmed 164 N. Y. 510 , 58 N. E. 673 , 53 L. R. A. 548 , 79 Am. St. Rep. 659 ; Broadway R. R. Co. v. Mayor, 49 Hun, 126 , 1 N. Y. Supp. 646 ; Cowen v. Village of West Troy, 43 Barb. 48 ; Dillon on Municipal Corporations (5th Ed.) 587. Section 420 of the charter provides what damages shall be paid by a bidder whose bid has been accepted for refusing to enter into a contract. Any attempt on the part of the city by an ordinance to impose any greater damage is ineffectual and cannot be enforced.

My conclusion, therefore, is that the complaint was also properly dismissed as to the surety company.

[8] As to the appeal by the Seely-Taylor Company, I do not think' the court erred in denying its motion for an extra allowance of costs. The trial was not a long one, nor were there in my view difficult questions of law involved. The case was not difficult and extraordinary within the meaning of the statute for which an extra allowance of costs may be awarded.

The judgment and order appealed from, therefore, should be affirmed, without costs to either party.

CLARICE and'SCOTT, JJ., concur.

(concurring). Under the form of the bid submitted by the Seely-Taylor Company, I think that company became obligated to execute the contract which was annexed to and a part of the bid if the contract was awarded to it, and was not authorized to withdraw a bid after it- was submitted. The defendant was therefore liable for the damages sustained by the plaintiff in consequence of its failure or refusal to execute the contract. Under section 420 of the New York charter (chapter 466 of the Laws of 1901), however, the extent of this liability is fixed by the provision which required that the deposit made by the bidder with the comptroller at the time of making his bid should be the liquidated damages .to which the plaintiff would be entitled if the accepted bidder refused to execute the contract. The plaintiff is therefore limited to the amount of such deposit as the damages to which it would be entitled for a breach of the obligation to execute the contract by the bidder. It appears by the record that that deposit has been returned to the bidder, but the effect of such return is not presented on this appeal. The only doubt I have is as to whether that amount could be recovered in this action, but I am inclined to think the court was right in view of the pleadings in dismissing the complaint. I have no doubt but that the liability of the defendant the Empire State Surety Company was limited to the obligation of the bidder, and that, therefore, the complaint was also properly dismissed as to it.

For these reasons, I concur in the conclusion of Mr. Justice MCLAUGHLIN that the judgment should be affirmed.

(dissenting). The facts are sufficiently stated in the opinion of Mr. Justice McLAUGHLIN I think, with the exception that the proposed contract and specifications upon which proposals were invited contained express references to certain sections of the ordinances of the city as authority for requiring certain things, and, among others, that the proposals should be accompanied by an undertaking in the form thereby required, which is the form of undertaking executed by the respondent surety company. It would have been more satisfactory had the city proved the ordinance, but I think that we may fairly assume that the undertaking was required thereby. I concur in the view that the surety company is not liable if the bidder is not; but I am of opinion that, although the bidder did not execute the undertaking, it became bound to the same extent as the surety, for its proposal could be regular and received only in the event that it submitted it in writing with such an undertaking. The liability of the principal, therefore, is to be read into the undertaking. I am of opinion that the provisions of section 420 of the charter are not exclusive, and that it was competent for the municipality to require, as it evidently has required by ordinance, that the bidder shall accompany his proposal by an undertaking to the effect that if the contract shall be awarded to him, and he fails to execute it, he and his surety shall be liable to the city for the difference between his proposal and the proposal upon which the city is obliged to award the contract at a subsequent letting. This is a provision for additional protection to the city over and above the protection which section 420 of the charter was designed to give. Doubtless the liquidated damages over and above the expense of readvertising would have to be applied in reduction of the liability of the bidder and his surety. We are not now concerned with the return of the check deposited with the bid for manifestly the action of the comptroller and of the sinking fund commissioners in returning the check does not constitute an adjudication that the defendants are not liable on the undertaking. The Legislature, I think, did not intend that the forfeiture of the check would in all cases make the city whole for the damages it sustained. Such a construction would leave it open to bidders, by collusion, to withdraw all of their bids one after another, and to submit higher proposals on a reletting of the work, and would open the door to collusion and fraud between them and public officials. A person submitting a proposal for public work under the Greater New York charter is, of course, not entitled to have the work awarded to him, even though he be the lowest bidder, and he cannot recover damages against the city for the wrongful letting of the work to a higher bidder without readvertising (Molloy v. City of New Rochelle, 198 N. Y. 402 , 92 N. E. 94 , 30 L. R. A. [N. S.] 126); but I agree with the views expressed by Judge Gray in Molloy v. City of New Rochelle, supra, that, if the bidder should proceed with diligence, he would be entitled, in the event that the contract is awarded without reletting, to a mandamus ■ commanding that it be

let to him. The proposal, however, submitted pursuant to the provisions of the charter and the ordinance and plans and specifications and proposed contract obligated the bidder to enter into a formal contract if the contract should be awarded to him, and he cannot in my opinion withdraw his proposal at will, or even for a mistake made by himself in calculating the items upon which he based it. When, therefore, the contract was awarded to the respondent Seely-Taylor Company and it refused to execute the same, both it and the surety company became liable pursuant to the provisions of the undertaking. Thereby the record discloses a legal contract obligation by which the bidder and its surety are held. It is, however, competent for a court of equity to relieve it from its obligations and to cancel its and the surety company’s liability, or to enjoin the municipality from enforcing the liability. This, however, is an action at law to recover on the legal liability of the contractor and the surety company, and, if they wish to avoid their apparent legal liability, they must plead by way of counterclaim the facts entitling them to a cancellation of the proposal and the undertaking, or to an injunction against the enforcement of the undertaking. Born v. Schrenkeisen, 110 N. Y. 55 , 17 N. E. 339 ; Moffett, Hodgins & Clarke Co. v. Rochester, 178 U. S. 375 , 20 Sup. Ct. 957 , 44 L. Ed. 1108 ; City v. Dowd Lumber Co., 135 App. Div. 244 , 120 N. Y. Supp. 370 . The equitable counterclaim should be first tried at Special Term. Of course, this regular method might be waived by consent, and the defendants might in that event be relieved by proof of the facts. Born v. Schrenkeisen, supra; City of New York v. Dowd Lumber Co., 140 App. Div. 358 , 125 N. Y. Supp. 394 . The court, however, in the case at bar was not at liberty to dismiss the complaint, for a question of fact was presented as to whether or not there was an error in the proposal which resulted from an excusable mistake on the part of the bidder, and the testimony of its president was not conclusive on that point, and, even if the trial of that issue by the court was waived, it presented a question to be determined by the jury.

It follows, therefore, that the judgment should be reversed and a new trial granted, with costs to appellant to abide the event.