Case ID: ad_92/html/0338-01.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

Fenwick B. Small, as Trustee in Bankruptcy of the Property and Effects of William M. Dean & Company, Bankrupt, Plaintiff, v. Luke A. Burke, Appellant, Impleaded with George Peabody Wetmore, Respondent, and Others, Defendants.
    
      Oontract to complete a building within a specified time ‘‘under a penalty of twentyr five dollars per day"—when it is a penalty and. when liquidated damages — the owner should show the rental value—allowance for time spent in making alterations and in complying with sanitary and building laws.
    
    Where a building contract provides for the completion of the work “on or before the expiration of seventy-two working days * * * under a penalty of twenty-five dollars per day for every day thereafter,” the presumption is that the amount was intended to represent a penalty or security for the actual damages and not liquidated damages.
    If the loss of the use or rental value of the premises approximates the amount specified in the contract, it is fair to assume that, although specified as a pen-. . alty, it was intended as liquidated damages.
    The burden of showing that it was intended as liquidated damages rests upon the owner, and it is, therefore, incumbent upon him to show the rental value of the premises.
    The following provision in such contract, “ Should the owner at any time during the progress of the 'said buildings request any alterations, deviations, additions, or omission from the said contract he shall be- at liberty to dó so, and the same shall in no way affect or make void the contract, but will be added to or deducted, from the amount of the contract, as the same may be, by a fair and reasonable valuation,” does not contemplate that, in determining the time which the-contractor took to complete the work, he shall not receive any allowance for the time that he was delayed by changes, alterations dr omissions ordered by the owner.
    A provision in the contract inquiring the contractor, at his own expense, to “ comply with all sanitary laws, ordinances and rules, and all other orders of the Board of Health or other authorities affecting the cleanliness, safety, occupation and use of the said premises, and the sidewalk and the street in front of the same,” does not impose upon the contractor the risk of delays arising from the fact that the plans, and specifications violated the building laws and ordinances.
    This provision of the contract must be limited to the work which the contractor undertakes to perform, and as between him and the owner he does not become an insurer of the sufficiency of the plans or assume any responsibility for delays caused by the interference of the authorities, owing to the fact that the plans and specifications had not been prepared in accordance with law or in conformity to the lawful requirements of the local authorities.
    
      Appeal by the defendant, Luke A. Burke, from so much of a judgment of the Supreme Court, entered in the office of the clerk of the county of New York on the 13th day of April, 1903, upon the decision of the court, rendered after a trial at the New York Special Term, as holds that the mechanic’s lien filed by the appellant against the property of the respondent is a good and valid lien only to the extent of $226, and directs the foreclosure of the said lien for that amount.
    
      William F. Kimber, for the appellant.
    
      William Mam,, for the respondent.
   Laughlin, J.:

The action was brought to foreclose a mechanic’s lien. The controversy on the appeal is between defendants. The appellant was the general contractor, and the respondent Wetmore is the owner of the premises. The appellant filed a lien which has been sustained to the extent of $211.66 with interest. In arriving at this balance the court has deducted from the contract price of the work and the value of extra work the sum of $363.20 for defective work, and the further sum of $1,550 as a penalty for failure to complete the work within the stipulated time. The appellant contends that these deductions should not have been made, and these are the only questions presented by the appeal.

The contract was in writing and it was executed on the 13th day of August in the year 1900. The contractor agreed to erect, pursuant to drawings and specifications thereto annexed, three buildings to be known as Nos. 314, 316 and 318 West Forty-second street, “ on or before the expiration of seventy-two working days * * * under a penalty of twenty-five dollars per day for every day thereafter.” On the 19th of February, 1901, the owner through the architect at the suggestion of the appellant acbepted the buildings without prejudice to his rights under the contract, the contractor agreeing on demand to do any further work requested'“tomeet the requirements of the specification and contract.” The trial court found that between the expiration of the seventy-two working days allowed by the contract for the completion of the work and the nineteenth day of February when it was conditionally accepted, there elapsed sixty-two additional working days ; that the delay of these sixty-two days was unexcused, and that the owner was entitled to the penalty prescribed in the contract therefor. The appellant contended-upon the trial and gave evidence tending to show that the owner was responsible for a considerable part if not all of this delay ; and that for the most part it was caused by extra work and alterations ordered by the owner pursuant to a provision of the contract reserving to him that right. Counsel for the owner contended upon the appeal, and evidently claimed upon the tidal, that the entire work, including any extra work that might be ordered under the contract, was required to be performed within the time specified, and that the penalty clause of the contract applied to any additional time required for completion. This claim is based on paragraph 3 of the contract which is as follows: “ Should the owner at any time during the progress of the said. buildings request any alterations, deviations, additions, or omission from the said contract he shall be at liberty to do so, and the same shall in no way affect or make void the contract, but will be added to or deducted from ■ the amount of the contract, as the same may be, by a fair and reasonable valuation.” We are of opinion that the clause to the effect that omissions, alterations or additional work shall in no way affect or make void the contract ” does not require and should not receive the con-. struction for which the respondent contends. Clearly the • parties intended that changes and alterations should not annul the remaining part of the contract; but it was not contemplated that the owner was to be at liberty to require a substitution of material or other change in the work which would necessarily delay the remaining work covered by the original contract, and that the contractor was to take the risk of such delay and be obligated, notwithstanding it, to perform the contract work within seventy-two working days. The rule in such case is that the contractor is to be allowed for the time that the final completion of the contract worls is necessarily delayed by any changes, alterations or omissions ordered by the owner. This construction of the contract was not adopted on the trial.

In arriving at the number of days for which the contractor was liable for the penalty no deduction was made for delays for which the owner was responsible, and it appears by uncontradicted evidence that the owner was responsible for a great number of days delay. The only deductions made were for Sundays, holidays and days upon which storms required the suspension of work.

During the progress of the work the owner determined to wire the building for electric light. According to the testimony of the contractor he was ready to proceed with the plastering on the seventeenth day of November but deferred doing so at ■ the instance of the architect to enable the owner to determine whether he wished to wire the premises for electric light; that subsequently the owner determined in the affirmative and that this delayed the work of plastering for “ three or four weeks ” or from the 17th day of November until after Christmas.” This testimony is not expi*essly controverted. The architect concedes that wiring the building for electric light took eleven days but he does not say whether this delayed the plastering or how long. . The architect, also during the progress of the work, determined to substitute iron girders for certain wooden posts specified in the contract at the agreed extra compensation of $150. ' The contractor testified that this delayed the entire work ten days, and the architect concedes that it delayed it three days. The contractor was also directed to depart from the requirements of the contract with reference to the arrangement of the front steps descending into the area or basement. He says that this delayed the work three or four" days but the architect admits that the delay was six days. There was certain rock excavation which the parties agreed was extra work. The contractor testified that this caused a delay of twelve days and the architect concedes a delay of three days. The contractor testified that the work was delayed three weeks on account of the failure of the owner to decide on the color of paint to be used on the buildings, and the architect concedes a delay of four days through this cause. The contractor testified that according to the original plans with reference to which the contract was made, the foundation wall at one side was not to be constructed as low as the bottom of the cellar, but that the building department required a further excavation and that the foundation wall be carried down to the level of the bottom of the cellar and that the wall upon adjacent premises be underpinned, and that this caused a delay of one month. The owner’s architect testified concerning this that on September twentieth a violation was filed by the building department which “ it took nine days to get rid of.”

The respondent claims- that, by paragraph 12 of the contract, which provides that the contractor shall, at his own expense, “ comply with all sanitary laws, ordinances and rules, and all other orders of the Board of Health or other authorities affecting the cleanliness, safety, occupation and use of the said premises, and the sidewalk and the street in front of the same,” the appellant assumed . the risk of delays arising from violations of the building laws and ordinances. We are of opinion that this provision of the contract must be limited to the work which the contractor undertook to perform, and that as between him and the owner he did not become an insurer of the sufficiency of the plans or assume any responsibility for delays caused by the interference of the authorities owing to the fact that the plans and specifications had not been prepared in accordance with law or in conformity to the lawful requirements of the local authorities. These delays all occurred before the conditional acceptance of the buildings by the owner, and many of them occurred during the first seventy-two working days after the contract was executed.

According to the undisputed evidence the contractor was entitled to have deducted a large part of, if not the entire sixtydwo days, for which he has been charged with the penalty. We cannot, however, make findings of fact, and, therefore, a new trial must be granted.

It was evidently assumed on the trial that the twenty-five dollars for each day’s delay in completing the work, designated in the contract as a penalty,” was intended as liquidated damagesj There is no provision of the contract other than those quoted which sheds any light on this question. Equity does not enforce penalties. This was, undoubtedly^ a proper case for the parties, by an appropriate liquidated damage clause, to stipulate the damages that should be paid upon a failure to complete the work within the time specified. ( Ward v. Hudson River Building Co., 125 N. Y. 230; Curtis v. Van Bergh, 161 id. 47.) Presumptively, however, where the parties unqualifiedly specify a forfeiture as a penalty it was their intention that the amount specified should be a penalty or security for the actual damages and not liquidated damages. (Colwell v. Lawrence, 38 N. Y. 71; 3 Pars. Cont. [9th ed.] * 157-159; Caesar v. Rubinson, 174 N. Y. 492.) The fact that the amount is specified as a penalty for each day’s delay is some evidence, perhaps, that it was intended as damages. (Tayloe v. Sandiford, 7 Wheat. 13.) If there had been no delay for which the owner was responsible the contractor should have completed these buildings early in December. It is to be inferred from the evidence that they were constructed for the purpose of renting. In these circumstances the damages would ordinarily be the loss of the use or rental value of the premises. We cannot take judicial notice as to what that rental value is, or that it would amount approximately to the sum specified as a penalty. If it approximated the amount of the penalty it would be fair to assume that, although specified as a penalty, it was intended as damages, but the burden of showing this was on the owner. (Tayloe v. Sandiford, supra; Richards v. Edick, 17 Barb. 260, 266; Laurea v. Bernauer, 33 Hun, 307.) We think, therefore, the owner, if he expects to have the amount specified as a penalty treated as liquidated damages, should have shown the rental value of the premises and that this would have been competent evidence. The case in . this regard is distinguishable from Liotta v. Abruzzo (82 App. Div. 429), where, although the amount wras specified as a penalty, it was clear that it was intended as liquidated damages, and in that case but for such construction only nominal damages could have been recovered, whereas here substantial damages could be shown and recovered for the breach of the contract without any liquidated damage agreement. (Caesar v. Rubinson, supra.)

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

Yaw Brunt, P. J., Patterson, O’Brien and McLaughlin, JJ., concurred.

Judgment reversed, new trial ordered, costs to appellant to abide event.