Court Opinion

ID: 3620466
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:02:23.562565+00
Date Added: 2024-06-11T14:25:08.109833
License: Public Domain

This is a new case, to which we are to apply, after ascertaining the contract between the parties, principles of law well settled.
It is well settled law in this State that he who undertakes to build a house for another, or to perform any work, to be paid for when the house is completed, or the other work done, cannot recover any portion of the stipulated price or value of the work until he has substantially performed the contract on his part. (Smith v. Brady, 17 N.Y., 873, and cases therein cited.) It is also well settled law that when one contracts with another to build for him a house, or do other work, and agrees to pay portions of the consideration in installments as the work progresses, and does so pay, or pays the whole consideration in advance of the performance of the work, he can maintain no action for money had and received, though the contract has been broken and remains unperformed, unless the contract has been wholly rescinded. His action must be upon the contract, and his damages must be for the breach or breaches of the contract. The amount of damages will not depend upon the amount of money he had paid, but the damages will be the amount of loss sustained by a failure to perform the contract. In other words, what it will cost to procure a full completion of the contract, including, if the case calls for it, any special loss by reason of delays, c. In the present case, the first of the above principles has been applied, and the defendant has been placed in the position of one who has contracted to construct a building in a certain manner, and for which he is to be paid after the work is done, and who claims that he has performed *Page 448 
the contract, and seeks, by action, to recover the consideration, and is met with the issue that he had not performed the condition precedent upon the performance of which his right of action depends. This issue being decided against the defendant, it is held that he is to have nothing on account of the house actually built, but is to pay to the plaintiff the entire sum specified in the policy as indemnity to the plaintiff for the loss of his building.
I am not satisfied that this rule should be applied to the case.
It is important to determine, with some precision, what the case is — what the contract was between the parties. It is said that the contract was on the part of the defendant, that in consideration of a sum presently paid, it would indemnify (the contract is insure) the plaintiff to the amount of $3,000 for any loss he should sustain by fire on a certain building; and the defendant promised and agreed to make good to the plaintiff, c., all such loss or damage, not exceeding in amount the sum insured, as shall happen by fire to the property specified. But this was not the entire contract. One of its terms and conditions was that in case of any loss or damage to the property insured, it should be optional with the company to rebuild or repair the building within a reasonable time, giving notice to do so within twenty days after receiving the preliminary proofs of loss. What construction should be given to this provision? What relation was established by it between the parties? The agreement is not exactly that the defendant shall do one of two things, one of which being performed satisfied the contract. There is no absolute contract that the defendant, upon the happening of a certain event, should pay a sum of money or rebuild the house. But the agreement was that the defendant should pay an amount of money equal to the loss, not exceeding $3,000. Call it an indemnity for the loss, and the question will not be changed, for the company might, within twenty days after proof of the loss, elect or decide to rebuild the building, and give notice of such election or decision. In other words, the defendant had the *Page 449 
right by the contract to elect to rebuild, and in that way indemnify the plaintiff by rebuilding. When the election to rebuild was made and notified to the plaintiff, what was the relation between the parties? The building had been destroyed by fire. The amount of the loss may or it may not have been known. There may have been dispute between the parties touching the amount of the loss. The insured could only claim $3,000, though the loss may have been greater. He could only recover his actual loss as an indemnity, but the actual amount of the loss may have been, and often is, a matter of dispute and difficulty, requiring a lawsuit to settle it. The insured may claim a much greater sum than the insurer is willing to pay, and for the purpose of avoiding the difficulties and litigation likely to arise from such disputes, the insurer secures, by the contract, a right to indemnify the insured by rebuilding the destroyed building instead of paying money, the amount of which is uncertain, and the insured agrees to accept indemnity in this way in lieu of any amount of money. All necessity for ascertaining the amount of the loss ceases when the insurer undertakes the restoration of the property. It seems to me that when the insurer elects to rebuild, and gives notice of such election, the contract at once is that the insurer will rebuild absolutely in consideration of the premises, and the defendant's agreement is that the insurer may do so, in satisfaction of the demand, uncertain in amount, which he claims of the insurer. This becomes the absolute agreement between the parties, by virtue of the agreement originally made, and which, prior to the election, was subject to certain contingencies, terms and conditions; and it seems to me that after such election and notice, the relation between the parties is simply that of a contractor to build, who had received the entire consideration in advance, and a party for whom the building is to be erected and who has made full payment, therefor, in advance of the work. Such, I think, is the fair construction of the contract. This provision was intended to obviate difficulties, some of which have been suggested. In this view no action could be maintained for the purpose *Page 450 
of recovering the $3,000, or such portion of it as should be equivalent to the loss. There can be no inquiry as to the amount of the loss. The action will be upon the contract to rebuild, and the amount of the damages to be recovered upon a breach of the contract will be determined as in other actions for the breach of building contracts, and such amount may exceed the $3,000. The defendant agreed that it would build the house, and it has been paid for its agreement and must perform the agreement or pay the damages.
The peculiar language used in this provision has not escaped attention. "It shall be optional with the insurance company to replace and to rebuild," the insurance company "giving notice of their intention to do so." It may be said that the language is not sufficient to make a present contract to rebuild after the election and notice. That although the defendant had the optional right to rebuild, and elected to rebuild, and gave notice of intention to do so, still it was not bound to go on and build, but it might stop and leave the insured to his remedy for a moneyed indemnity. This is not, in my opinion, the fair construction of the provision, nor was such the intention of the parties to the contract. The option was with the defendant, and it was to give notice of its election. The language as to the notice may not have been very happily chosen in using the word "intention" instead of the words election, option, or choice;
but there can be no difficulty about the meaning. The right to rebuild, and the obligation to rebuild, depended upon an election to rebuild, and the notice was simply to inform the other party that such election had been made. The parties so understood the language. The notice actually given in this case said nothing about intention. Its language is: "We hereby give you notice that we are prepared to rebuild said building," and this was treated as sufficient, and both parties acted upon it. It seems to me very clear that, after the election and notice, there existed a contract between the parties for rebuilding of the building destroyed, and the contract to make good in money the loss no longer existed between the parties. If I am right in the view taken of the *Page 451 
contract, the position that the contract for indemnity in money remained in force until the house was actually rebuilt, must fail. This position would seem to regard the provision as anaccord not valid as a satisfaction until executed, whereas, I regard it as a part of the original agreement by which this provision might, upon the happening of a certain contingency, be substituted by the election of one of the parties for and in the place of the provision to indemnify in money, and it is the agreement of both parties, and both are bound by it. It is, I submit, an error to suppose that this was a conditional agreement by which, when performed, the previous agreement to pay in money was satisfied, and if not performed, then such money agreement remained in force. I have read carefully the dissenting opinion of Justice EMOTT in the court below; and though I am not able to concur fully in his construction of the contract; I have no difficulty in adopting his argument against the rule of damages enunciated at the circuit.
Assuming that the agreement to indemnify in money was not entirely superseded by the agreement to rebuild, what would the rights of the parties be upon a failure or partial failure to rebuild? The defendant had the right to satisfy the claim for the loss by rebuilding. Suppose the loss to have been $3,000, and the insurer expends $2,000 judiciously and profitably towards the rebuilding of the house, and then stops, and the insured takes up the work and completes the house by expending $1,000. Has not this claim for damages been partially satisfied? I certainly think so; and this is the position of Justice EMOTT. He applies to the case the same principles applicable to an action against a contractor for a breach of the contract to build, and refuses to apply the strict rule against a contractor who seeks to recover the price, and is met with the objection that the work has not been completed according to the contract. But the learned justice limits the recovery to a sum not exceeding the amount that would have produced indemnity had the agreement to rebuild never existed, and in this we differ. It seems to me that this rule will be very difficult in practice. *Page 452 
The indemnity in money can never exceed the amount of the risk specified in the policy. Suppose the risk taken to be $3,000, and the insurer elects to rebuild, and actually expends, necessarily and properly, $3,000, and the building is not completed, may he stop and leave the building to be completed by the insured at, say the cost of an additional $1,000? This must be so if the insured in such case is only entitled to an indemnity measured by the sum of money specified in the policy; for the $3,000, having been judiciously expended, is worth so much to him. The learned justice, however, lays down the rule that the plaintiff is entitled to recover such an amount, not exceeding the amount of the insurance, as will be necessary to make the building erected equal in all respects, and similar to the one burned. The result of this rule would be, in the case above supposed, that the plaintiff could recover the additional $1,000 expended by him though the defendant had expended already the full amount insured, and this is precisely what I claim. But suppose the insurer expends $1,000, and it costs $3,000 to complete the building, the insured, by the rule laid down, will recover $3,000. Will he not in such a case realize for indemnity $4,000? Certainly he will. Or suppose the insurer expends $2,000, and the insured $3,000, to complete the building, the latter will recover the $3,000 and thus realize $5,000. He is to recover such an amount as will be necessary to complete the building, not, however, exceeding the amount of the insurance. Under such a rule an insurer who has elected to rebuild, and has performed part of the work and discovers that he has a hard bargain and cannot complete the work for the amount of the insurance, will at once abandon the work or he may do so, being liable only for the payment of the amount insured. Under such a rule, the amount of the loss will always come up for litigation and adjustment, and, as I understand, the principal object of the provision we are considering, is to permit the insurer to obviate all disputes and litigation touching the amount of the loss by replacing the articles lost or damaged, or by repairing or rebuilding the building destroyed. By adopting *Page 453 
the construction for which I contend, we have a simple rule which excludes any inquiry as to the amount of the loss, and the inquiry will be, has the insured replaced the article or rebuilt the building in the manner agreed, and if not, the damages will be as in other cases of the breach, by the builder, of his agreement to build.
It is supposed that, in a case like the present, difficulties exist touching the parties in the action. I think that the supposed difficulties will disappear upon a brief examination of the law applicable to such cases. The plaintiff held two policies upon the same building, one issued by the defendant, taking a risk of $3,000, the other issued by the Excelsior Fire Insurance Company, taking a risk of $2,000. Each policy contained the same provisions or condition touching the optional right to rebuild. In this case both the companies elected to rebuild, and they united in one notice that they were prepared to rebuild. The case does not contain, as it should, the policies. But they were, of course, both valid, and, in contemplation of law, constituted one policy, so far as the amount of loss was concerned. That is to say, the insured could not recover the amount of his loss of each insurer, supposing it had been less than the smallest risk. All he is entitled to from all the insurers is one indemnity. If he recovers this of one of the insurers, such insurer may recover of the other, by way of contribution, his proper proportion. It is very common in this country to provide in fire policies, that in case of two or more insurances upon the same property, each insurer shall be liable only for a ratable proportion of the loss. (See Par. Mer. L., 516, 517.)
Whether it was provided in the present case that each company should only be liable for its ratable proportion of the loss does not appear, but I think this will be seen not to be material. Though the plaintiff could not have maintained a joint action against the companies upon these policies if there had been no election to rebuild, but could have maintained separate actions, recovering from the defendant three-fifths of the loss, not exceeding $3,000, and from the other company two-fifths, not exceeding $2,000, it does not *Page 454 
follow that, upon an election by both companies to rebuild, he could not maintain a joint action against both upon the agreement to rebuild. I think he could maintain such action, and that the action in this case should properly have been against both companies. When they jointly elected to rebuild, they jointly agreed to rebuild, and were jointly liable in an action for a breach of their agreement. I have no doubt the action would have been well brought against both companies. They would not be permitted to allege that they had not jointly contracted with the plaintiff. I am not prepared to say that the action was not well brought against the defendant alone. I think the plaintiff might well treat the election to rebuild as the election of each insurer, and for a breach of the building agreement maintain his action against either company, and recover full damages, or perhaps a separate action against each for full damages, collecting the damages, however, but once. I think these positions follow from the legal relations and rights of all the parties. The two companies were bound to pay the loss ratably if so stipulated in the policies, and if not so stipulated, the whole loss should be paid by one, then the other would be liable for contribution. When one of the companies should elect to rebuild, it would come under obligation to the insured to make full indemnity by rebuilding, and if there were a provision in the policy that it should only be liable to pay a ratable proportion of the loss, such provision would be superseded by the agreement to rebuild. If only one of the insurers should elect to rebuild and should perform the building contract, it would be entitled to contribution from the other company, not a proportion of the amount expended in building, but a ratable proportion in money of the actual loss. So, also, if the party undertaking to rebuild should fail to perform the contract, and the insured should recover and collect damages for the breach of the agreement, such party could recover of the other insurer a ratable proportion of the loss. Such insurer would, by the payment of the damages recovered by the insured, have satisfied the demand for the loss. The insured would be fully indemnified, and *Page 455 
the insurer who paid nothing and did nothing would be liable for contribution. In my opinion, the insured, in a case like the present, may have his action against both insurers jointly, or against either separately, and recover his full damages for the breach of the building contract, and leave the two insurers to an adjustment of their rights between themselves according to well settled rules of law applicable to different insurers of the same property. The judgment should be reversed, and there should be a new trial.
DAVIES, WRIGHT, ROSEKRANS, and BALCOM, JJ., concurred; SELDEN and EMOTT, JJ., dissented.