Richard Deeves & Son v. Manhattan Life Insurance

88 N.E. 395, 195 N.Y. 324, 1909 N.Y. LEXIS 1021

• Court: New York Court of Appeals
• Decided: May 11, 1909
• Status: Published

Opinions

Chase, J.

The parties to this action entered into a written contract January 2, 1902, upon which this action is brought. The party of the first part in said contract is the defendant appellant, and the party of the second part therein is the plaintiff respondent. The contract is too long to justify our quoting it in full, but the questions discussed on this appeal depend to such an extent upon its construction that it .is necessary to refer to many of its terms and to quote several of its provisions, which we do in the order in which they are contained in the contract.

It provides: “First. The said party of the second part agrees to tear down and remove the building upon the premises (Ho. 70 Broadway and extending from Broadway to Hew street) of the party of the first part, to make all the excavations for cellar and foundations for the new proposed building on said premises, shore up or otherwise properly protect all adjacent property, sink the caissons and build the foundations and erect, complete and furnish the proposed new building for the party of the first part upon said premises Ho. 70 Broadway, and extending from Broadway to Hew street, and make all the proposed alterations and additions in the building of the party of the first part hi os. 64, 66 and 68 Broadway and the connections between said last-named building and the proposed new building and to provide on the said premises all the materials for the foregoing; all of the foregoing shall be done by the party of the second part in the best workmanlike manner and to the best of their ability and in every respect both as to work and materials in accordance with the plans and drawings and the specifications.”

It further provides that all of the work, labor and materials except the mason work and certain subsidiary work and the supplying of materials for said mason work shall be sublet by the party of the second part to responsible sub-contractors selected by competition in a manner satisfactory and subject to the approval of the party of the first part and that the party of the second part “ guarantees the proper performance in all respects of the contracts so made by them with each and all of said sub-contractors in accordance with the specifications.”

It further provides the time when payments shall be made to the party of the second part on account of work performed and materials furnished under said sub-contracts and on account of said mason work and materials. It further contains the ordinary provisions found in building contracts relating to alterations and extra work. It further provides that the party of the second part guarantees to hold the party of the first part harmless against any damages, costs and claims occasioned by any negligence “ of the party of the second part or their employees, or of the sub-contractors or their employees ; ” and it also provides that the party of the second part shall “ guarantee the party of the first part in case it makes payments in accordance with the terms of this contract against all mechanics’ liens and liens for labor, services or materials on the part of the sub-contractors, their employees or the employees of the party of the second part or any person or corporation performing labor or supplying materials in the prosecution of the work hereunder.

It further provides: “ The party of the second part agrees that said building and alterations shall be erected, completed and furnished according to the terms of this contract and ready for acceptance by the party of the first part on or before the first day of March, 1903, provided the party of the second part is allowed to enter upon the premises on or before the first day of May, 1902, except for delay caused by fire or strikes not occasioned by the fault of the party of the second part or its sub-contractors. The party of the second part hereby agrees and guarantees that said building shall be practically so completed on or before said first day of March, 1903, except the tower, which shall be completed on or before March 15, 1903; and in case said building and tower be not practically completed on said days respectively the party of the second part will relinquish to the party of the first pari as stipulated damages which are hereby agreed to, the sum of ten thousand dollars ($10,000) of the twenty thousand dollars ($20,000) compensation payable to the party of the second part as hereinafter mentioned.”

It further provides: “ The party of the second part hereby further expressly guarantees to the party of the first part that the total cost to the party of the first part of the said new building and the alterations of the present building shall not exceed in all the sum of five hundred and fifty-five thousand nine hundred and sixty eight dollars-($555,968).”

It further provides that mason work shall include “ Bridges and sidewalk coverings. Common brick work. Face brick work. Fire proofing. Concreting, &c.” and that the said $20,000 is included in the guaranteed maximum total cost of the building.

It further provides: “ All saving of expense below present estimate and below said guaranteed amount of cost to inure to the benefit of the party of the first part; all cost above said guaranteed amount to be paid by the party of the second part.”

It further provides: “ Eighth: In consideration of the performance by the party of the second part of all of the foregoing agreements and conditions by it to be performed and kept, and of the fulfillment of the foregoing guarantees the party of the first part agrees, in addition to the payments under the sub-contracts above mentioned and the costs of materials and mason work below mentioned to' pay to the party of the second part the sum of twenty thousand dollars ($80,000) which shall be in full for the performance of said contract and the completion of said building at whatsoever time completed including all office expenses of the party of the second part mid of such office assistance as it may reguire inperformance of this contract payable as follows, viz. : Fi/oe thousand dollars ($5,000) when the roof is tight; five thousand dollars ($5,000) when the 'work is practically finished / cund the remaining ten thousand dollars ($10,000) when the work is completely finished according to the 'certificate of the architect.”

It further provides that the party of the first part shall pay for the mason work and materials therefor, the actual cost to the party of the second part “of the work, labor and material hot including any allowance for the personal services or time of Mr. Richard Beeves or 1ns son.”

It further provides that “ The party of the second part will keep separate set of books of all accounts for labor, materials and all expenditures relating to the entire work to be done under this contract including said mason work and materials and the accounts of all sub-contractors, which books and accounts shall be at all times subject to the inspection of the party of the first part or its representatives; and shall eventually be the property of the party of the first part.”

It is conceded that the contract was not completed in the time specified in said contract, but it is also further conceded that the contract was otherwise fully completed, and that payments were made thereon from time to time after the expiration of the time specified for the completion thereof. The defendant failed to pay ten thousand dollars of the amount prescribed by the contract, and this action is brought on the contract to recover the ten thousand dollars so unpaid. It is alleged in the complaint that the contract was not performed in the time provided by the contract, but that it was thereafter fully performed, and that the time for the full completion of the contract was waived by the defendant.

Where a building contract provides that the materials shall be furnished and the labor performed for a gross sum and by a day fixed in the contract for the full completion thereof, and the contractor fails to perform by the day so fixed, the owner may insist on his strict legal right and put an end to the contract. (Dunn v. Steubing, 120 N. Y. 232.)

If the owner voluntarily permits the contractor to proceed with such a contract and accepts the materials and labor thereafter furnished and performed, and the contractor fully performs his contract, except as to the time provided for the completion thereof, he is estopped from interposing the delay as a defense to the action for the agreed price. One cannot receive and enjoy the benefit of the labor and materials so furnished under the contract and refuse to pay for them simply because the contract was not completed within the time specified. (Dunn v. Steubing, supra; Kenny v. Monahan, 53 App. Div. 421; affirmed, 169 N. Y. 591; General Electric Co. v. National Contracting Co., 178 N. Y. 369; Granniss & Hurd Lumber Co. v. Deeves, 72 Hun, 171; Crocker-Wheeler Co. v. Varick Realty Co., 104 App. Div. 568.) This does not mean that an owner is without remedy. He may recover his damages by an independent action or by counterclaim in an action brought by the contractor for the contract price. (Kenny v. Monahan, supra; Granniss & Hurd Lumber Co. v. Deeves, supra; Crocker-Wheeler Co. v. Varick Realty Co., supra; Ogden v. Pioneer Iron Works, 91 App. Div. 394.)

The defendant does not deny that the rules of law stated are just and equitable and firmly established by the courts. It insists, however, that they are only applicable to contracts where the consideration thereof is entire and a gross sum to cover all promises and agreements contained therein and that such rules have no application to this action. The defendant construes the contract as containing two independent agree- meats — the first by which the plaintiff promises to furnish the material and labor for the building, the consideration for which is the cost thereof, and the second including the promises therein termed guaranties, the consideration for which is $20,000 if the material and labor are furnished and performed within the time specified, and $10,000 in case the plaintiff fails to furnish and perform the same within such time.

The trial court and the Appellate Bivision have construed the contract as one obligation, including many details, the consideration for all of which is an agreed sum equal to the aggregate amount of the sub-contracts, the cost of mason work and material and an additional lump sum of $20,000.

The word “ guarantee,” used in the contract, is not intended in a technical legal sense, but as a synonym of “ agree ” or “ promise.” The agreements for which the defendant claims that the $20,000 was to be paid include beside the obligation to perform the contract in the time specified the plaintiff’s liability for all damages occurring from negligence and any other contingencies growing out of the contract, the further obligation to pay all cost above the guaranteed maximum amount, the compensation for keeping a separate set of books for this contract involving more than half a million of dollars, and all office expenses and office assistance. It also includes all compensation for the personal services and time of Mr. Richard Beeves and his son, who superintended the erection of the building under the contract.

It will be seen by the first paragraph of the contract quoted that the plaintiff promised and agreed to perform everything required by the contract and became responsible to the defendant therefor. The other provisions thereof affecting the building relate to detail of performance.

It will be further seen by the eighth provision of the contract quoted that the plaintiff is to be paid the consideration for the performance “Of all of the foregoing agreements and conditions * * * in addition to the payments under the sub-contracts above mentioned and the cost of material and mason work below mentioned * * * the sum of twenty thousand dollars (§20,000) which shall be in full for the performance of said contract and the completion of said building at whatsoever time completed.”

We think, therefore, that the Trial Term and the Appellate Division were right in holding the defendant liable under the contract for the full contract price without dividing it into parts or separate items and attempting to construe the contract accordingly.

Where a building contract imposes upon the contractor the ordinary obligations of furnishing all the materials and doing all the work required therein and of being responsible for the obligations incident to the erection of a building, the rules of law applicable thereto, where the compensation is fixed by the cost of the material and work, and a specified percentage or amount in addition thereto, are the same as where the compensation is a gross sum named in the contract. The office expenses and special superintendence are a necessary and important part of the construction account. All of the promises or guaranties in the contract are common to such contracts and so connected with the other agreements relating to the furnishing of material and the performance of labor that they should not be separated therefrom.

As we construe the contract it does not contain two independent alternate agreements, one requiring the full completion of the contract by March 1, 1903, and the other permitting the completion-of the contract at some undesignated time thereafter. The materials having been furnished and the work having been performed (except as to the time of the performance thereof) as provided by the contract, the complaint stated a cause of action and the defendant was put to its option either to assert its damages,' liquidated or otherwise, in its answer, or reserve its claim for an independent action. (Oases above cited.) When a defendant has an election to set up a cross claim of any kind to diminish or overcome the claim of the plaintiff, or to bring an independent action thereon, it necessarily follows that such claim, if asserted, must be set up as a counterclaim in the action, whether it constitutes what was formerly denominated a recoupment, or it is any other claim coming within the Code definition of a counterclaim. (Gillespie v. Torrance, 25 N. Y. 306, 309; Krom v. Levy 1 Hun, 171, 175.) The right to recoup, which is asserted in cases of this kind, means simply the right to plead a counterclaim under the Code. (Ely v. Spiero, 28 App. Div. 485, 488; Pomeroy’s Remedies and Remedial Rights, section 736.) If a counterclaim is relied upon, it must be alleged in the answer and not left to inference. (Rice v. Grange, 131 N. Y. 149.)

Recoupment always implies that the plaintiff has a cause of action, but the defendant alleges that he, too, has a cause of action growing out of a breach of some other part of the contract upon which the action is founded, or for some other cause connected with the contract, and it is in the nature of a cross action. (Vassear v. Livingston, 13 N. Y. 248, 257.) In the case last cited the defendant claimed that the plaintiff’s assignor had not performed a contract to engrave certain portraits within the time provided thereby, and he further claimed that lie'had put an end to the contract, and that he refused to receive the engravings. The defendant’s answer set forth the facts as claimed by him and asserted that he had been damaged to an amount equal to the amount of the contract, and the facts were held to be a defense and not a recoupment. The facts alleged in the answer in that case would not have sustained an independent cause of action. The claim of the defendant in this case is not at all similar to the claim of the defendant in the Vassear v. Livingston case. A defendant, by omitting to assert a claim to recoup or counterclaim its damages in its answer, must be presumed to have elected not to allow such damages in the reduction or extinguishment of the plaintiff’s claim. The statement of facts made by the defendant in the answer in this case was not intended in recoupment or counterclaim. It was stated and not denied on the argument that the defendant had commenced a cross action for its damages against the plaintiff. The answer as interposed by the defendant contains certain denials and then alleged the failure of the plaintiff to perform its contract within the time provided therefor, and it further alleged: “That the plaintiff had been paid in full for all services rendered and has paid in full all sums due by the terms of-the'contract between the parties.” It did not plead a counterclaim or in any way allege that it had been damaged by reason of the plaintiff’s delay in completing the contract. In its pleading, and at all times since, it has intentionally, consistently and clearly relied upon the plaintiff’s failure to perform in the time agreed upon as a defense to its action upon said contract. It is not a defense. As the question of damages is not before the court it is not necessary to consider what proof, if any, would be required to sustain a claim for liquidated damages if it had been asserted and claimed by the defendant.

The judgment should be affirmed, with costs.