Case ID: ad_166/html/0035-01.html
Source: Caselaw Access Project
Author: {"author": "Laughlin, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The City of New York, Appellant, Respondent, v. Celestino De Marco, Respondent, Appellant, Impleaded with Bankers Surety Company of Cleveland, Ohio, Respondent.
    First Department,
    February 5, 1915.
    Contract — settlement of controversy in so far as contract has been executed.—action for subsequent breach — principal and surety — liability of surety — subrogation—appeal—judgment without new trial.
    Where a controversy between the city of New York and a contractor, who paid a weekly sum to the city for the privilege of reclaiming articles found in rubbish collected by the city, was settled by a mutual agreement, whereby the plaintiff paid, and the city received, a less sum than agreed upon; but the settlement was made to cover a certain period only, and it was agreed that it should not affect the right of either party to the contract in so far as it still remained executory, neither party was released from due performance of the original contract subsequent to the date of settlement. Hence, where the city sues to recover on a breach by the contractor, which took place after the execution of the release, neither the contractor, nor his surety, is discharged from liability under the terms of the original contract.
    
      A settlement with respect to accrued claims under a contract, which does not release either party from performance of his obligation under the contract in so far as they remain executory, does not discharge a surety from liability for a future breach.
    It was error to dismiss the complaint against the contractor, for the surety company was entitled to have the judgment run against its principal, so that it may be subrogated to the rights of the city thereunder without bringing another action.
    Where the trial court has found all the material facts in such action, the Appellate Division will not order a new trial, but will render final judgment after reversing erroneous conclusions of law.
    Appeal by the plaintiff, The City of New York, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 14th day of April, 1914, as amended and resettled by an order entered in said clerk’s office on the 13th day of May, 1914.
    The judgment dismissed the complaint and was rendered on the decision of the court after a trial before the court without a jury.
    Appeal by the defendant, Celestino De Marco, from so much of said judgment as dismissed his counterclaim upon the merits.
    
      E. Crosby Kindleberger [Terence Farley with him on the brief], for the plaintiff.
    
      D-Cady Herrick [Frederick P. King with him on the brief], for the defendant De Marco.
    
      J. J. Alexander, for the respondent Bankers Surety Company.
   Laughlin, J.:

On the 24th day of June, 1909, the defendant De Marco entered into a contract with the plaintiff, pursuant to the provisions of which, in consideration of the privilege of the picking over ashes, street sweepings and rubbish delivered at dumps, incinerators and land fills in the boroughs of Manhattan and The Bronx for the period of three years from July 5, 1909, and reclaiming the part thereof of commercial value, he agreed, among other things, to pay to the plaintiff the sum of $1,717 weekly in advance during said period. As a condition of obtaining the contract, he was obliged to execute a bond in the penal sum of $25,000 for faithful performance. He as principal, and defendant company as surety, executed the bond required.

This is an action on the bond, and it is brought against the principal and surety to recover a balance of the weekly payments which the former as the contractor agreed to make to the city. The issues in another action brought by the city against the contractor to recover damages for the same breaches of the contract as this action is predicated upon were by stipulation tried with the issues herein. In both actions the contractor interposed counterclaims, alike in each action, for damages claimed to have been sustained by him through alleged breaches of the contract on the part of the city. The court found in favor of the plaintiff in the other action, and adversely to the contractor on all issues presented by the counterclaim; and that decision has been reviewed concurrently with the one made in this action, and no prejudicial error having been found is to be affirmed, without opinion. (City of New York v. De Marco, 167 App. Div. 898.) The court on the same evidence, having properly decided in the other action that the contractor was not entitled to recover on any of the counterclaims, the disallowance of the same counterclaims in this action followed logically. We are of opinion, however, that the court erred in dismissing the complaint. It was dismissed as to the surety company on the theory that the surety was released by a modification of the agreement between the city and the contractor without its knowledge or consent. The city having recovered in the other action, the trial court was of opinion that there was no necessity of another judgment against the contractor for part of the same amount in this, and, therefore, also dismissed the complaint as to the contractor.

The contractor entered upon the discharge of his duties under the contract and exercised the privileges thereby granted, and no controversy arose between him and the city with respect to such duties or privileges, or with respect to the obligations of the city, until on or about the 24th day of April, 1911. Prior to that time the city had customarily delivered ashes at the dumps, with some exceptions known by the contractor to exist at the time the contract was let, during the daytime. By order of the commissioner of street cleaning the delivery of ashes at certain dumps where the delivery thereof had theretofore been made in the daytime was after the date last mentioned directed to be made at night; and the contractor was required to perform his services under the contract at that time also. There was a further extension of the night work by like order on or about the 20th day of June, 1911. The city claimed the right to make these changes by virtue of provisions in the contract and specifications requiring the contractor to perform the services at such hours of the day or night as the commissioner of street cleaning might direct; and the contractor protested against the changes on the ground that he was, in effect, invited before making the hid which resulted in the contract to examine the existing conditions, and was, therefore, entitled to rely upon the manner in which the work was then being. done. The contractor, however, continued to perform the contract as required, but asserted a claim for damages and failed to make the weekly payments.

The agreement upon which the trial court based the dismissal of the action against the surety company is a release executed by the contractor to the city, under date of September 30, 1911. It recites the making of the contract and the differences which arose between the parties thereunder as herein stated, and that they had agreed to compromise their respective claims to and including the date thereof by the contractor paying the city the sum of $858.50 per week from April 24, 1911, to June 20, 1911, and $525 per week from the latter date to September 30, 1911, for the privileges exercised by him under the contract “ without prejudice to and saving any further claim for damage which he,” the contractor, might sustain from “any continuance of the alleged breach of contract” by the city “after the first day of October, 1911,” and by the city accepting said sums “ in full settlement of all debts and money obligations claimed ” by it to have become due from the contractor, “ hut without prejudice to any claim ” which it might elect to make against the contractor “for any payment provided for in the said agreement accruing after the first day of October, 1911.” The remaining provisions of the release witnessed, in effect, that the contractor released and discharged the city from any claim which he had or might have against it for any breach of the contract to and including the date of the release; but without prejudice to or waiver of any claim which he might have thereafter for a continuance after the 1st of October, 1911, of the requirements which he claimed constituted breaches of the contract.

There is no force in the contention that, by thus compromising its claims against the contractor, the city acknowledged or admitted that it was guilty of a breach of the contract, and that the surety company was thereby released. The settlement was with respect to the contract in so far as it had been executed, and it was clearly provided that it was in no manner to be construed as affecting the rights of either party under the contract in so far as the contract remained executory. A settlement with respect to accrued claims under a contract, which does not release either party from performance of his obligations under the contract in so far as they remain executory does not discharge a surety from liability for a future breach. (See Cohn v. Spitzer, 145 App. Div. 104; Loos v. McCormack, 107 id. 8.) This action is to recover for alleged breaches of the contract accruing after the execution of the release. The city has made no settlement with the contractor with respect to the period for which it seeks to recover in this action. The surety company could be fully subrogated to the rights of the city against the contractor by satisfying the claim of the city made in this action. The court, therefore, erred in dismissing the complaint against the surety company; and it follows logically that it erred in dismissing the complaint against the principal, for the surety company is entitled to have the judgment run against the principal so that it may be subrogated to the rights of the city thereunder, without bringing another action.

The court, however, found the material facts, and it is unnecessary to order a new trial. Conclusions of law numbered first and third are, therefore, reversed, and conclusions of law to the effect that the plaintiff is entitled to recover $25,000 with interest against both defendants, together with the costs of the action to be taxed, are substituted therefor; and the judgment, in so far as it dismisses the complaint is reversed, with costs to plaintiff, appellant, and judgment awarded in favor of the plaintiff, appellant, in accordance with the conclusions of law as so modified.

Ingraham, P. J., McLaughlin, Dowling and Hotchkiss, JJ., concurred.

Judgment reversed as to defendant surety company and judgment ordered for plaintiff, with costs, as directed in opinion. Order to be settled on notice.