Case Name: Thomas A. Reilly, Respondent, v. The City of New York, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1915-12-30
Citations: 170 A.D. 754
Docket Number: 
Parties: Thomas A. Reilly, Respondent, v. The City of New York, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 170
Pages: 754–761

Head Matter:
Thomas A. Reilly, Respondent, v. The City of New York, Appellant.
First Department,
December 30, 1915.
Contract — municipal contract for construction of sewer construed — provision that city may withhold moneys due on contract to meet claims arising through negligence of contractor—injury caused by explosion of dynamite — refusal of contractor to continue work until payment of installment due — breach by contractor.
Where a municipal contract for alterations to a sewer required the contractor to guard all property in the vicinity of the work from injury and made him liable for all damages, direct or indirect, caused to any private property through his negligence and authorized the city to retain from the moneys due a sum necessary to cover such damages, or reimburse parties injured, and by a further clause required the contractor to save the city harmless from all liability for injury arising through his negligence and empowered the city to retain moneys due the contrator until all claims for damages should have been disposed of to the satisfaction of the comptroller, the city had a right to withhold moneys due the contractor for a reasonable time where persons were killed and neighboring property damaged by an explosion of dynamite stored by the contractor. Under the circumstances the city was entitled to a reasonable time within which to determine whether it could safely pay the contractor sums due on the contract.
Hence, where, pursuant to the terms of the contract the city directed the contractor to resume work and complete the contract, but he refused to do so because the city retained sums due while investigating as to the results of the explosion and the possibility of claims, there was a breach of the contract on the part of the contractor and he cannot recover the moneys withheld by the city.
Appeal by the defendant, The City of New York, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 26th day of June, 1915, upon the verdict of a jury rendered by direction of the court, and also from an order entered in said clerk’s office on the 6th day of July, 1915, denying defendant’s motion for a new trial made upon the minutes.
E. Crosby Kindleberger, for the appellant.
Woolsey A. Shepard, for the respondent.

Opinion:
Dowling, J.:
On July 1, 1911, the defendant entered into a contract in writing for alterations and improvements to a sewer and its appurtenances in Seventy-second street, between Amsterdam and Columbus avenues, together with the work incidental thereto. The plaintiff entered upon the performance of this contract and proceeded therewith, receiving payments from time to time on the usual certificates. On November 20, 1911, a "fourth progress certificate" reached the finance department of the city of New York, the amount thereof being $1,229.90. The contract provided that if the amount payable thereunder exceeded $5,000 (which was the case here) then payments were to be made to the contractor as the work progressed (in conformity with the terms of the Greater New York charter) by progress payments of seventy per cent of the amount of work performed under the contract, provided the amount of work done on each installment should amount to $1,500. On November 23, 1911, an explosion took place in a tool house along the line of the work under the control of the plaintiff, by reason whereof a passerby was killed, and damage done both to city and to private property. An engineer of the department of finance arrived on the work at ten o'clock on that morning, and finding all operations stopped because of the explosion, on the following day, November twenty-fourth, reported the situation to the examiner in charge of the division of inspection, in connection with the voucher for $1,229.90 heretofore referred to, stating as follows: " The sewer built exceeds the measurement allowed in the esti mate, and the amount is therefore due. It was on this contract that the explosion occurred yesterday, November 23rd, 1911, causing extensive damages to property and the injury of several persons. In view of the possibility of suits being brought against the City and the contractor, I deem it advisable to call your attention to these facts." Upon this report a' notation was made: "Do not make any- payments upon this work until the matter of the explosion has been settled. C. S. Hervey. Nov. 24th, 1911." (Meantime the attention of the city officials had been brought to the explosion and damage by publications in the city newspapers.) On November 23, 1911, J. 0. Weir wrote to the president of the borough of Manhattan as follows: "An explosion of dynamite this morning in the work of a sewer construction in front of my residence, 123 West 72nd St. has caused material damage, and I desire to know if I can present my claim to the City for adjudication. Thanking you for your prompt reply, I am, Yours Very Truly." This letter was not received in evidence, but only marked for identification; however, the fact was referred to in the testimony of the deputy comptroller, Matthewson, that such a claim had been filed by Weir, and the letter should have been received in evidence. Plaintiff, on a date which he fixes as November 24, 1911, called upon Deputy Comptroller Matthewson and demanded payment of the amount of his certificate, and was refused, the deputy saying: " There are going to be claims here; we won't pay it." Plaintiff replied: "You are only anticipating there are going to be claims; there are none filed now, " to which the deputy answered: "Well, that makes no difference; we won't pay you the money." Plaintiff admits that he was first sent to the lien clerk, but he denies that he knew anything about liens having been filed against him, although it does appear that there had been such liens filed which, however, were not for damages due to the explosion, and which are not material to this controversy, as the refusal to pay was not based on that ground. On cross-examination plaintiff admitted that the deputy, when the demand was made for the money, knew of the explosion and inquired about it, and refused to pay on account of claims that would be filed on account thereof. He also admitted receiving a letter on December 4, 1911, from the president of the borough of Manhattan, wherein he was directed to suspend- work on his contract until such time as further notice to proceed with the work should be given him, and was further directed to refill the trenches then open, restore the roadway over the same, and relay a permanent pavement over the 240 feet of the trench already back-filled. The work of repaving was to be done within forty-eight hours of the receipt of the notice. He acknowledged the receipt of the letter in writing, under date of December fifth, and therein wrote to the borough president: " I do not think it is to the best interests of the City that I should suspend work upon this contract until such a time as further notice to proceed with the work shall be given me. I believe it to the best interests of the City to make payments to me to which I am entitled under the contract and for me to continue the work." As a matter of fact, he never did this work which he was called upon to do. Then, on March 18, 1912, he was notified by the city "to resume work April 1, 1912, upon your contract with this Department for the alteration and improvement to sewer and appurtenances in 72nd Street between Amsterdam and Columbus Avenues." To this, on March 21, 1912, he replied in writing, refusing to comply with the notice and standing upon the claim that, the city had defaulted in, and broken, its contract with him by failure to make the payment of $1,229.90, which became due about December 1, 1911, as he contended, and further by suspending his work on the contract in violation of his rights and against the interests of the city. He never did resume the work under his contract. There is no doubt that under the provisions of the contract between the plaintiff and the defendant the city had the right under clause M thereof to suspend the whole or any part of the work contracted to be done if it should deem it for the interest of the city, and, furthermore, during such suspension to cause the trenches to be refilled and the roadway over the same property restored. Nor can there be any question that the city had the right under the contract between it and the plaintiff to direct the plaintiff to resume work and to complete the contract when it deemed the same for the best interest of the city. Therefore, the plaintiff has breached the contract with the defendant, and not only forfeited his right to payment under the contract but rendered himself liable to the city for the cost to which it was put in doing the work which he should have done, unless the city itself was first in default and was guilty of a breach of the contract by failure to pay the amount of the certificate in question to the plaintiff upon his demand. Deputy Comptroller Matthewson fixes the date of the conversation between the plaintiff and himself as December 1,1911, verifying it by reference to his memoranda, and that date has been accepted as the correct one by the trial court. He testified that he knew when plaintiff called upon him that there had been considerable damage done as a result of the explosion on the plaintiff's work, and that although no claim had been filed with the finance department, a claim had been filed with the borough president. He had also learned of the explosion and damage which had followed it from the newspapers, and he told plaintiff in substance that he wanted time to find out what the claims amounted to, and how much it would be necessary to withhold to protect the city, or that in the alternative the plaintiff would have to give the city a bond. He said that claims were anticipated, as they had knowledge that there were damages, and claims followed damages, and insisted that the refusal to pay was only until they had ascertained the amount of the claims or plaintiff gave them a bond. At this time he also knew officially through Hr. Prial, in his office, of the explosion and damages. The court below in directing a verdict for plaintiff in the face of the proof as to the failure of the plaintiff to obey the city's direction to suspend work and to relay the pavement, and his refusal to proceed with the work when directed (necessitating reletting to new contractors), did so because he held as a matter of law that there was a repudiation of the contract by the city in its refusal to pay the amount of the warrant on December first, and that inasmuch as no claims had then actually been filed with the finance department, the city had no right to withhold payment of the certificate or to ask for the bond, even though it knew that damage had followed the explosion on the plaintiff's work. The case, therefore, turns solely on the question of whether, on Decern ber first, when plaintiff demanded payment of the amount of the certificate, the city had a right to refuse to make immediate payment thereof. We think that under the contract between the parties the city had the right to withhold payment for a reasonable time in view of all the circumstances within which to determine whether it could safely pay the plaintiff the amount then certified upon his contract. The clauses of the contract bearing upon this are W and Z, as follows:
" W. The Contractor shall sustain in their places and protect from injury all water or gas mains, conduits, subways or service pipes, steam pipes, and pneumatic pipes, and all sidewalks, curbs, stoops, areas and all other property in the vicinity of his work from direct or indirect injury by caving or otherwise, and he hereby assumes all expenses for direct or indirect damage which may be occasioned by injury to any of them; and the Contractor shall at all times have a sufficient quantity of timber and plank, chains, etc., on the ground, and shall use the same as required for bracing and sheet piling the sides and ends of excavations, and for sustaining and supporting the sides and any and all pipes, conduits, subways or other structures that are undermined, weakened, endangered or threatened; and in case any damage or injury shall or may result to the said pipes, conduits, subways, lamp posts and lamps, and other works or structures of any gas, electric, railroad or other company whatsoever, or to any private property, through or by the reason of any negligence, carelessness or want of skill on the part of the Contractor, his agents or servants, the Contractor shall pay such amount as may be sufficient to cover the expense and damages occasioned by such negligence, carelessness or unskillfulness; and such amount shall be charged against the Contractor, and the President is hereby authorized to deduct and retain from any moneys which may be due, or which shall become due to the Contractor, a sum sufficient, in his judgment, to cover the cost of repairing any such damages, expenses or loss, and to apply said sum so deducted and retained to said repairs or renewals, or to reimburse the parties so damaged or injured."
"Z. The Contractor shall place proper guards for the prevention of accidents, and shall put up and keep up suitable and sufficient lights at night and when necessary, during the delivery of materials or supplies, to prevent accident or injuries to the person or property of another, and he will indemnify and save harmless The City from all suits or actions and damages or costs of every name and description to which The City maybe subjected or put by reason of injury to the person or property of another resulting from negligence or carelessness on the part of the Contractor, his servants or agents, in the delivery of the materials and supplies, or by or on account of any act or omission of the Contractor, his servants or agents, and the whole or so much of the moneys due, or to grow due the Contractor under this agreement as shall or may be considered necessary by the Comptroller of The City shall or may be retained by The City until all such suits or claims for damages shall have been settled or otherwise disposed of, and evidence to that effect furnished to the satisfaction of the Comptroller."
Under these clauses it was not necessary there should be actual claims against the city presented, but it was sufficient if the proper city officials had knowledge of the explosion upon the work, of the fact that plaintiff was claimed to be responsible for its occurrence, of damage done to city or private property, and of the probability or possibility of the presentation of claims therefor. Nor were the city authorities bound to assume that the contractor alone would be sought to be held liable, and not the city as well, until investigation had satisfied them thereof. They were, therefore, entitled to a reasonable time after the happening of the explosion to satisfy themselves as to what, if any, liability was claimed to exist upon the part of the city, before they could be called upon to pay the amount of the outstanding certificate. Nothing in the contract, nor in the course of dealing between the parties, demonstrates that the city was in default on December first, when demand was made for payment; and only eight days having elapsed since the happening of the explosion,, it cannot be said that the determination of the city authorities to take a longer time to satisfy themselves as to what they should do .to protect the city's interests, was unreasonable under the contract. Therefore, the city not being in default, and not hav ing broken the contract, the plaintiff himself breached it by his subsequent refusals to suspend the work and close up the trenches, and again to resume the work, and is not entitled to recover under his contract. The city upon the trial not having asked for affirmative relief against the plaintiff, and not doing so upon this appeal, the judgment and order will be reversed, with costs, and the complaint dismissed, with costs to the appellant.
Ingraham, P. J., McLaughlin, Laughlin and Scott, JJ., concurred.
Judgment reversed, with costs, and complaint dismissed, with costs.