Case Name: O'BRIEN et al. v. MAYOR, ETC., OF CITY OF NEW YORK; BROWN v. SAME
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1899-05-05
Citations: 57 N.Y.S. 1039
Docket Number: 
Parties: O’BRIEN et al. v. MAYOR, ETC., OF CITY OF NEW YORK. BROWN v. SAME.
Judges: 
Reporter: West's New York Supplement
Volume: 57
Pages: 1039–1047

Head Matter:
O’BRIEN et al. v. MAYOR, ETC., OF CITY OF NEW YORK. BROWN v. SAME.
(Supreme Court, Appellate Division, First Department.
May 5, 1899.)
1. Compromise—Consideration.
Actions -were - pending against a city on improvement contracts aggregating $8,000,000. The city had won one action, but plaintiffs claimed they could' amend as to the others or bring new actions and establish claims exceeding $3,000,000, despite the decision in the first case. Many of the city’s witnesses had died or gone beyond seas, and the outcome of the other cases was in doubt. The corporation counsel after several months of negotiation, and with the advice and approval of every city official connected with the controversy, and of the eminent special counsel employed by the city, compromised the claims, and offered judgment for $700,000. Held, that the settlement was based on a sufficient consideration.
:2. Same—Power of Citv to Make.
The settlement by the corporation counsel, with the advice and approval of the corporate authorities, was valid.
McLaughlin and Patterson, JJ., dissenting.
Appeals from special term, New York county.
Actions by John O’Brien and Hernán Clark, and by Walston H. Brown, as receiver, etc., of Brown, Howard & Co., against the mayor, aldermen, and commonalty of the city of New York. There were judgments for plaintiffs, and from an order denying' a motion to set them aside (55 N. Y. Supp. 50) defendants appeal.
Affirmed.
Argued before VAN BRUNT, P. J., and McLAUGHHN, PATTERSON, O’BRIEN, and INGRAHAM, JJ.
Charles Blandy, for appellants.
L. Laflin Kellogg, for respondents.

Opinion:
O'BRIEN, J.
Judgments in these several actions were entered,
amounting to $700,000, by the offer of the then corporation counsel after a series of negotiations - looking "to a settlement. This motion was made* by the present corporation counsel, with the aid and concurrence of- the present comptroller, to vacate the-judgments upon the ground that .the then corporation counsel did not possess authority to offer judgments, which motion was denied.
The learned judge below correctly stated that "the decision of the motion depends upon three considerations: Was the settlement effected in good faith? Was it effected in exercise of competent authority? Was it supported by sufficient consideration?" It is conceded that in "this adjustment and in the carrying of it out all parties concerned were actuated by the best of good faith, and sincerely believed that the best interests of the city would be subserved in getting rid of these claims upon the basis of these offers." But it is said that to permit such a compromise would give the corporate authorities great powers, which are likely to be abused to the detriment of the municipality. The' answer to this claim, as stated by the learned judge below in the case of Bush v. Coler, 24 Misc. Rep. 371, 53 N. Y. Supp. 682, is:
"Authority to compromise a claim against the city is liable undoubtédly to-great abuse, and in its exercise by a careless or corrupt official might inflict severe loss upon the community. But all power is susceptible of prostitution, and the most that can be done to intercept the evil is by the selection of' competent and faithful functionaries and by the condign punishment of delinquents. These safeguards against an incapable or dishonest corporation counsel the law abundantly provides."
And |t may further be said that in the transaction of the business-of a municipal corporation, just as in the administration of the affairs-of a private corporation, there must be power delegated to some officers to act for the corporation. Although such authority may be abused, and the municipality suffer in consequence, the city is just as-likely to -be injured by a neglect to confide to some responsible officers authority to act in a particular case. Unless something is left to the judgment and discretion of officials, and the responsibility placed upon them to determine under what circumstances the power shall be used, it were idle to confer it. Here the zeal, integrity, and judgment of the corporate officials are not questioned, and their honesty and perfect good faith are not only conceded, but the expediency and wisdom of their action are not criticised. And it would be difficult to-have a case in which the successive steps in the matter of settlement were taken with so much care and deliberation. The assent, approval,, or acquiescence was first obtained of every municipal officer and department having to do with the subject or knowledge of the questions-involved, or who were competent to aid the city in reaching a conclusion as to whether it was wise to make a compromise and for what amount. Extending over a period of months we have the correspondence of the different officials upon the subject of the expediency and. the amount, and there is a final unanimity of sentiment in favor of a settlement on some just basis. And before the settlement was made there were resolutions of the aqueduct commissioners (of which the mayor and comptroller were ex officio members), based on the report of their chief engineer approving the terms of settlement, which, in addition, we find were recommended and advised by these able lawyers who were the special counsel of the city in charge of these litigations. In opposition to this array of men equipped with knowledge of the facts and having the ability to advise what was -for the best interests of the city, there is the suggestion or argument made that, however wise or expedient, there was no consideration for the settlement, because, in one of the actions brought, the contractors were unsuccessful; and therefore that, no legal liability having been established in that one action, the result in all the other actions, brought on different contracts and possibly under changed conditions, would be the same.
As correctly urged by the appellants, it is beyond the power of municipal officers to make a gift of the moneys or the property of the corporation; and if, upon the facts here appearing, this large amount of money was a mere gift, based on no consideration, the action taken could not, and should not, receive the sanction of the court. In support of the argument that the settlement lacked consideration, our attention is called to the fact that the court of appeals (139 N. Y. 544, 35 N. E. 323) in one of the several actions brought by these plaintiffs, all of which relate to different sections of the aqueduct, decided, as to section 6, in favor of the city. The court held in that case that upon the plans were lines designated by letters "limiting the cross section of the tunnel excavation," and that such lines were the true limit by which to measure the amount of excavation, and that the excavation claimed for, being outside of such lines, could not be allowed; and, secondly, that the action, so far as it sought to recover for extra cost, "was an action, under the contract, within the meaning of the-Laws of 1883, c. 490; and therefore recovery for such extra cost was-prohibited."
The respondents claim that on a trial as to the other sections' they could show by additional plans and by the opinion of experts that the excavation claimed for was within the limiting lines, which, in section 6, were determined by the court without such aid' and by mere inspection of the plans. And it appears that for sometime prior to the final certificate given by the chief engineer, which, under the construction of the contract, was to be binding, payments were claimed in accordance with the construction given-by the defendants to the contract; and that such payments for the excavation were allowed. The fact is not disputed that tunnel excavation actually done by the contractors, amounting to-more than the judgments offered, was allowed by the engineer-in charge of the work during its performance, although taken out. of the final certificate as made up by the engineer on the completion of the work.
Although the appellants insist that the actions in reference to-the other sections are for claims similar to the one involved' in the action tried in reference to section 6, the respondents- are- equally as persistent in claiming that, as the amounts are based upon- different contracts containing different provisions and concerning: different portions of the work, a recovery could be had without disturbing the rules and principles laid down -in that decision; and that the action on section' 6 was based on the unreasonable refusal of a certificate, while the other claims are based on the- right to recover by attacking the certificate as fraudulent. To clearly show this distinction, a change was proposed in the pleadings, and a motion to be allowed to amend was made and denied; and an appeal therefrom is still pending. But, even though the city were successful on that motion, the issue would not be determined; for, as the statute of limitations has not yet run, new actions, upon the theory which the plaintiffs insist that the evidence would support, could be commenced. The various considerations and motives which actuated the city authorities were thus summarized in the affidavit of the corporation counsel:
"It was stated and claimed by the plaintiffs' attorney that he felt confident that he could recover in these actions against the city of New York a sum without interest amounting to between two and three million dollars upon a trial not in conflict with the rules laid down in the decision of the court of •appeals in the action brought upon section 6. That, with that end in view, in the summer of 1896 steps were taken by the said attorney in one of the above-•entitled actions to amend the complaint under which the final certificate of the •chief engineer would be attacked as fraudulent, and a recovery had upon that-theory for the work actually done but uncertified. This form of action, if said complaint had been so amended, would have been entirely different from the form of action under which the decision of the court of appeals, under section 6, was rendered. That, while the city was successful in the first instance in defeating the amendment, deponent feared that in the end the plaintiffs might be successful in securing the amendment, and, even if they did not, they would still be in a position to commence new actions upon the new basis; the time for -commencing same not having expired. That deponent believed that, upon this new form of action and upon this new issue, a question might be presented for the jury upon which it would be necessary to call as witnesses for the city the engineers who had been employed by the city during the building of the aqueduct. That to deponent's knowledge some of the most important of these witnesses had died or gone to foreign lands, or for other reasons had become unavailable as witnesses for the city. If the trial of the actions still remain-untried should assume this phase, it was quite possible that such actions might be decided in favor of the plaintiffs, and a recovery had therein much larger than the amount settled for. In any event, the new situation made the matter of the city's ultimate success at least doubtful, and seemed to warrant a settlement. That it was also claimed by plaintiffs' attorney that all the plans of the work had not been before the court in the case on section 6, so that they could be properly examined and passed upon by the court, and 'that all the plans, when taken together, were susceptible of the construction sought to be put upon them by him as counsel for the plaintiffs. That all -of these conditions, and especially the possibility of recovery in the new form of action, were taken into consideration by deponent, and formed a strong incentive to induce deponent to advise the making of a settlement in addition the special grounds covered in the correspondence."
There was, therefore, an actual controversy in which the plainitiffs sought to recover for work actually done, and the outcome of 'which was considered doubtful. The cases cited in the court bellow and many referred to upon the argument establish the principie that a compromise of a doubtful claim is a good consideration for;a promise to pay money; and, when an action is brought upon ¡such a promise, it is no answer to show that the claim is not a valid one. Crans v. Hunter, 28 N. Y. 389, 394. It is insisted, however, by the appellants, that, while this rule should be recognized as applying to individuals, a different principle applies to municipal corporations; and to answer these objections and the further one that, under the facts here appearing, what was sought to be done was to make a gift without consideration, we cannot do better than refer to the language of the court in Board v. Bowen, 4 Lans. 24, 32:
"It is claimed in behalf of the plaintiffs that what they undertook to do was to give away the corporate property, and that this was wholly -beyond their power. But here was no 'gift,' in any just or proper sense of the term. It was a gift in the same sense that every party to a controversy gives when he relinquishes a portion of a claim he makes against his adversary to effect a settlement and avoid further litigation, and no other. It is a sacrifice of a portion of a claim which may never be fully sustained upon the altar of peace. Such settlements have always commended themselves to the favor of courts and of the law. What the plaintiffs did in this case was to throw off the interest and costs upon their claim in order to get rid of the defendants' appeal, and avoid the expense and delay of further litigation. It is of no avail to say that the defendants could not have succeeded on their appeal in reversing the judgment. The court will never inquire in such cases whether the claim relinquished was in reality just or unjust. It is enough that it was disputed and relinquished in order to effect a settlement and end litigation."
This subject of a compromise t>y a municipal corporation is ably treated in the case of Prout v. Pittsfield Fire Dist., 154 Mass. 450, 28 N. E. 679, where many of the authorities are examined and reviewed, and where it was held that the plaintiff's claim, "whether on a final determination it might or might not be found to be valid, was sufficiently substantial to furnish a good consideration for the compromise."
The claims of these plaintiffs aggregated between $7,000,000 and $8,000,000, which, with several years of interest, amount to nearly, if not quite, $12,000,000 at the present time; and of this sum the plaintiffs' counsel expresses confidence of being able to secure, as the -result of litigation, more than $3,000,000. Upon such a showing, coupled with the advice of eminent counsel specially charged with the litigation, and with the further fact appearing that many of the witnesses who secured the victory for the city upon the first trial had. died, gone away, or were no longer available, can it be said that the action taken was without justification or authority, or so lacking in consideration that it was simply a gift of a large amount of the city's money? • In the letter of the special counsel upon the subject, they write:
"Under these circumstances, we are of the opinion that a full and final settlement of all the controversies relating to payments to be made by the city under the contracts for the construction of the new aqueduct, provided the same should not substantially exceed the sum mentioned by you, would be to the best interest of the city; and, if you have good reasons to suppose that a proposition made by yourself would result in bringing about such a settlement, we are- of the opinion that it is your duty to make one."
As the result, therefore, of the advice and approval of all those familiar with the subject and with the knowledge which the corporation counsel himself had gained as. an aqueduct commissioner as to the merits of the claims of the contractors, he pursued the ner gotiations through many months, and finally secured the settlement. As the corporate authorities had reached a conclusion (in which we cannot say they erred) that a very considerable liability might be fixed upon the city if the settlement were not made, the learned court below was right in refusing to set aside the judgments.
. Order' accordingly affirmed, with costs. All concur, except MCLAUGHLIN and PATTERSON, JJ., dissenting.