City of Bridgeport v. Aetna Indemnity Co.

105 A. 680, 93 Conn. 277, 1919 Conn. LEXIS 13

• Court: Supreme Court of Connecticut
• Decided: February 19, 1919
• Status: Published

Opinion

Prentice, C. J.

All of the reasons of appeal relate to the action of the court below in accepting, against remonstrance, the report of its committee to whom was referred the duty of hearing the evidence touching the extent to which the city had been damaged by reason of the By-Products Company’s breach of its contract, and of reporting its conclusions thereon. The complaints, made in somewhat varying forms, are, in substance, that the committee acted improperly and harmfully to the Indemnity Company in using in any way the Fischer contract as a factor or guide in the determination of the extent to which the city had been damaged, and that the manner of its use by the committee amounted to a misuse of it.

The Indemnity Company’s obligation as surety on the bond guaranteeing the By-Products Company’s faithful performance of its contract is measured by the loss, up to $10,000, which the city suffered from the By-Products Company’s failure in performance. When the breach occurred by the By-Products Company’s cessation of service, the ten-year contract had four years to run. The lowest price at which the city could have procured the reduction and disposition of its garbage and dead animals, as undertaken by the ByProducts Company under its contract commonly known as the Winton contract, for a four-year period would have been $2 a ton. Under the circumstances it was the city’s moral and legal duty to take such action as it could, reasonably and with due regard for its own interests, to the end that the damage to it resulting from the breach might be kept down to the minimum. Hamilton v. McPherson, 28 N. Y. 72, 76; 13 Cyc. 72.

Acting in conformity with the duty thus resting upon it, the city, immediately following the breach, advertised for bids for the disposal of its garbage for varying periods. As the ultimate result a contract was entered into, upon the best available bid, with one Fischer for a ten-year period beginning January 7th, 1911, and at a price of $1 per ton. Under this contract the city’s garbage and dead animals were disposed of until the expiration of the time period of the Winton contract and afterward. The Fischer contract called for the performance of the same service as did the Winton and by the same method, to wit, reduction, and was similar to the latter contract in all material particulars save for the incorporation of four additional provisions.

When the contract was entered into with Fischer, the city was faced by certain conditions. Its duty was to minimize as far as it reasonably could its loss by reason of the By-Products Company’s breach. It could not secure a contract limited to the remaining period of the Winton contract which would not entail a heavy and inordinate burden of loss. It could not contract for a more extended period than the balance of the Winton period, upon the Winton terms unchanged, without imposing upon itself for the whole period of the new contract what it might regard as burdensome conditions contained in the Winton contract, and at the same time depriving itself of desired provisions. It was placed in the position where it was impossible for it to reduce its loss below one of $1.50 a ton and at the same time retain its freedom to contract for the time beyond the expiration of the Winton term as should meet its wishes. If the Winton contract was not altogether satisfactory, as apparently it was not, the city was driven to one of three alternative courses. It could either enter into a contract for the remaining years of the Winton term, in which case the resulting damage would remain at an inordinately high figure, or it could execute one for a longer, period containing such modification as it desired for its protection in the years to come after the Winton contract had run its ten-year course, or it could, unmindful of its own interests, contract for a long period upon the Winton terms.

The second of these courses was pursued, with the result that the cost of reduction and disposal was reduced one half and the desired protection of the city’s interest at the same time secured. As the new contract was obtained after open and public competition and upon what were apparently the best available terms, and the loss to the city resulting from the breach of the Winton contract was thereby reduced at least from $1.50 to 50 cents a ton while at the same time the modifications made in the new contract were only minor ones affording the city desired protection in its execution after May 27th, 1914, there would seem to be slight ground indeed for a claim that the city had not acted fairly and reasonably in the matter and had not performed its full duty of taking reasonable action to minimize its loss from the By-Products Company’s breach. It was under no obligation to enter into a long term of contract for the defaulting company’s protection entirely regardless of the former’s interest covering the years which would follow the termination of the contract broken. Its duty to the defaulting company was to do what was reasonable under the circumstances, that the damages suffered by it might be kept down, and that only. It was under no obligation to do its utmost to that end without regard to its own interests, thereby exalting the company’s interests above its own. The test of reasonableness was one which had a broader outlook and took into account all the circumstances of the situation.

These considerations effectually dispose of the receiver’s contention that the Indemnity Company was discharged and released from liability upon its bond, in excess of nominal damages, by the execution of the Fischer contract. The fact that the By-Products Company, by its letter of July 14th, 1910, and before the Fischer contract was executed, made the conditional offer it did to resume work under its contract, does not change the situation. Bridgeport v. Aetna Indemnity Co., 91 Conn. 197, 209, 99 Atl. 566.

As the Fischer contract was one which the city might reasonably have entered into, and for aught that appears was entered into fairly and upon the best available terms, it follows that the committee was fully justified in taking cognizance of it and using it as a factor in its determination of the extent of the damages the city suffered by reason of the By-Products Com-any’s breach of its contract, and as a' guide in such determination in so far as it might be helpful. Had it conformed in all respects to the Winton contract, excepting in the matters of dates and price, no exception could be taken to its use as fixing definitely and precisely the extent of the city’s damage. Its four additional paragraphs, apparently embodying provisions favorable to the city, forbid such use to be made of it, at least without further inquiry. Their presence does not, however, forbid its use as a basis of computation, if so be it furnishes a reasonable and helpful one. That it does furnish such basis is clear. The two contracts require of the contractor the doing of the same service and by the same method. The main provisions of the two are alike in all material respects. The variations from the Winton contract embodied in the four additional provisions of the Fischer contract are so far minor and incidental, and so far susceptible of separable consideration and estimate, that appraisal with reasonable accuracy of the additional burden imposed by them upon the contractor presents a by no means difficult problem. Due deductions from the price fixed in the Fischer contract being made for any increased cost by reason of these variations, a result will be arrived at which will approximate more nearly to the precise than would any other method which the circumstances suggest as available. Precision and certainty are not required. Satchwell v. Williams, 40 Conn. 371, 374.

Counsel for the receiver is, of course, quite right in saying that the city is not entitled to obtain, under the guise of the allowance of a claim, reimbursement for what it had expended for a better or variant service. But that is precisely what is not done by the use of the Fischer contract as the basis of determination, with proper allowances made for modifications of the terms of the Winton contract appearing in the former.

This was the course the committee pursued. It.took the price per ton which the city was required to pay under the Fischer contract, and made such deductions therefrom as it found was reasonable on account of the incorporation of the four provisions referred to, and found that 85 cents a ton represented the cost to the city of obtaining the service which the Winton contract required the contractor to render, and under the same incidental conditions which the Winton contract imposed.

It remains to inquire whether the committee, in its employment of that method and its application of it to the circumstances of the case as found, erred. As bearing upon this inquiry it is to be remembered that the questions here at issue are those of fact pure and simple. The conclusions of the committee must, therefore, stand, unless they are such as could not reasonably have been arrived at upon the subordinate facts found.

The first of the additional provisions required the contractor to accept from the city garbage containing as high as ten per cent of foreign and extraneous matter, whereas the Winton contract made no specifications upon that subject. At the time of the former appearance of this case before us we held that notwithstanding the absence of such specification from the Winton contract, the contractor could not complain of the presence of five per cent of foreign matter in the garbage delivered to it, and was in duty bound under its contract to reduce garbage containing that quantity of foreign matter. Bridgeport v. Aetna Indemnity Co., 91 Conn. 197, 208, 99 Atl. 566. The committee has found that the cost of the removal of an additional five per cent of foreign matter, if it were present, would amount to from 15 to 20 cents a ton.

The second, in the order of enumeration of the additional clauses, imposed upon Fischer little, if any, restraint to his freedom of action, or burden of any sort from which the By-Products Company under the Win-ton contract was free. Whether the agreement under which a contractor is operating in the reduction of garbage speaks upon the subject or is silent, he is subject to the reasonable regulations of health authorities and is under the duty to observe the sanitary regulation of such authorities, and to conduct his business in such manner as not to create a nuisance.

The remaining additional clauses relate to matters which, in view of the committee’s finding that a plant erected for the reduction of twenty-five tons of garbage a day is adapted for the reduction of from thirty-five to fifty tons a day by the use of more coal and its operation for longer hours, are manifestly of comparatively small importance as bearing upon the cost per ton of reduction.

Whether this last statement be true or not, the finding of the committee that Fischer’s bid was made without reference to either of the four conditions enumerated, and without knowledge that either of them would be incorporated into the contract when executed, that the contract with him was made in accordance with that bid, that Fischer, in the execution of his contract, did not regard either of them as imposing upon him an extra burden justifying him in asking a figure in excess of that named in his bid, and that he executed a contract which recognized no such additional imposition, suffice to render the court’s refusal to make a greater reduction from the $1 rate, at which the service was undertaken and performed by Fischer, than that of 15 cents, on account of anything contained in the four provisions first appearing in his contract, one which cannot be pronounced unreasonable.

There is no error.

In this opinion the other judges concurred.