Court Opinion

ID: 5251666
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:15:23.334195+00
Date Added: 2024-06-11T08:27:57.478269
License: Public Domain

Laughlin, J.:
The ground of the demurrer is that the defense is insufficient in law. The plaintiffs, on allegations contained in six separate counts, on an assignment from Patrick McGovern, seek to recover the sum of $284,920.84, together with interest, on-a contract made by him with the defendant through the Public Service Commission for the First District on the 13th day of February, 1912.
The defense to which the demurrer was interposed is, in substance, that the liability of the city on the contract was limited to the amount for which the board of estimate and apportionment had authorized the issuance of bonds, and that the amount so authorized, with the exception of the sum of $51,400.56, has already been paid. The defense is pleaded as a complete defense, which manifestly it is not; but that point, although referred to, is not taken by the learned counsel for the respondents, and both parties apparently are desirous of having the case decided as if the defense were pleaded as a partial defense. It being a matter of public importance, we deem it proper to express our views on the sufficiency of the defense so regarded.
On the 12th day of May, 1905, the board of rapid transit railroad commissioners of the city of New York, pursuant to authority conferred by chapter 4 of the Laws of 1891 and of the acts amendatory thereof and supplementary thereto, duly adopted a rapid transit route to be constructed, which as modified became known as the Lexington Avenue route, or route No. 5, extending from Battery Park to East One Hundred and Fifty-seventh street, in the city of New York. The Public Service Commission, the successor of said board (Laws of 1907, chap. 429), thereafter caused plans and specifications for the construction of the railroad to be prepared, thereby subdividing the work into sixteen sections, with a *611view to advertising for proposals on each section separately, and caused contracts to be prepared in blank for execution by the successful bidders and the Commission. The proposed contracts contemplated that the construction work on each section should not be let for a gross sum, but wholly on a unit basis, and the bidders were required to submit proposals specifying the price per cubic yard of earth excavation and likewise specify the unit price with respect to about 100 items of work without any guaranty as to the quantities and with merely a statement based on an estimate by the engineer with respect to the quantities of the various classes of work, which were expressly stated to be approximate only and not binding on the city. The contracts thus required obliged the contractors not only to perform the work on the sections awarded to them of the character specified on the unit basis but to complete the construction of the entire railroad, with the exception of “ the station finish work,” and the ballasting and providing and laying the ties and rails on that part of the railroad embraced in the particular section as soon as practicable, and in any event within forty months; and also to do any other work ordered by the engineer, even though not specified in the contract or indicated by the plans, and if such work should not be subject to classification under the specified units, then the contractor was to do the same for the cost price plus ten per cent, and the Commission reserved the right, during the progress of the work, to amplify the plans and to add explanatory specifications and to furnish additional specifications and drawings, and to change the location, and to alter, in whole or in part, in any way deemed necessary for the public interest, the drawings without relieving the contractor from performance at the unit price specified, or cost plus ten per cent if not specified. These reservations and modifications were expressly authorized by the statute. (Rapid Transit Act, § 6, subd. 2, as amd. by Laws of 1909, chap. 498; Id. § 38, added by Laws of 1894, chap. 752, as amd. by Laws of 1909, chap. 498;* Id. § 26, subd. 3, as renumbered from § 34, added by Laws of 1894, chap. 752, and amd. by Laws of 1909, chap. 498.) Proposals were invited *612on this basis separately for section 9, consisting of a four-track subway extending from East Sixty-seventh street under Lexington avenue to East' Seventy-ninth street, with two stations, and with the express approval of the board of estimate and apportionment, which is recited in the contract, the contract was duly awarded to the assignor of the plaintiffs by the Commission, and it was also approved as to form by the corporation counsel.
The learned counsel for the city state in their points that the contract was awarded to McGovern “ for $1,961,997,” which is quite inaccurate and -with respect to a very material point, as I view the case. I find no provision of the contract indicating'that it was awarded for a gross sum, and fail to find these figures therein in any form. I infer from the resolution of the board of estimate and apportionment that on the estimated quantities of the different work and the price bid therefor by the plaintiffs’ assignor, if there had been no error in the estimates and no extra work required, the figures specified would have constituted the contract price of the work; but there was no agreement on the part of the city to pay the contractor that precise amount, and no agreement on his part to do the work for that amount. By the terms of the contract payments were to be made on monthly estimates according to the engineer's estimates of the amount and value of the work done, but fifteen per cent of the amount so certified by the engineer was to be deducted as security for performance until the amount so withheld aggregated $225,000, and thereafter ten per cent of the monthly estimates was to be deducted. The contractor was at liberty to make a cash deposit instead of giving a bond as security for performance; and by the terms of the contract it was expressly stated that he was not entitled to the return of the cash deposit or to the percentages so deducted from the monthly estimates until the engineer and Commission certified that all the work to be done had been fully completed. I emphasize this, for to my mind it has a very material bearing on the question of law presented, since' if the contention of the corporation should prevail, the contractor might be obliged to forfeit the amount of the percentages deducted monthly and would be without redress for any work *613performed after the bond limit authorized by the board of estimate and apportionment was exhausted.
In the first count plaintiffs allege that from the time the contract was made until the 18th day of August, 1915, they were continuously engaged in the performance of the work and that at the last named date the work was fully completed, with the exception of minor matters; that the engineer of the Commission made forty-two certificates estimating the amount due the contractor for work performed on the unit basis, aggregating $2,277,096.05, the last estimate having been made on the 15th of January, 1916, and also made eight estimates and certificates in writing of work done and materials furnished by plaintiffs which could not be classified according to the unit basis, in the aggregate amounting to $38,943.73; that in order to protect and safeguard buildings adjacent to the subway and the subway itself, it became and was necessary to do a large amount of underpinning of buildings less than seven stories in height, and plaintiffs did the work, “ in many cases having been ordered to do So by the Public Service Commission and its engineers,” and that all of such work done by them was necessary and the major part was required in carrying out the original plans called for by the contract, and the balance was required by changes made in the original plans calling for additional and different work; that the unit price of such work prescribed by the contract was $82 per lineal foot, and that plaintiffs were obliged to underpin 1,824.71 lineal feet, the contract price of which was $149,626.22, and that the engineer wrongfully and unreasonably neglected and refused to make any estimate for this work, and that such refusal was in violation of the contract and owing to an erroneous construction thereof, and the Public Service Commission also declined to allow or to pay or to certify to the board of estimate and apportionment any amounts due plaintiffs for the underpinning; that a detailed statement of the amount claimed for that item was duly delivered to and left with the Public Service Commission and the finance department of the city prior to the commencement of the action; that on the 18th day of August, 1915, plaintiffs had substantially completed the contract and then demanded that defendant obtain a final certificate from the chief engineer *614and make final payment under the contract, but defendant disputed plaintiffs’ right to the certificate on the ground that a small amount of work remained to be done, and thereafter and on the 25th day of January, 1916, the parties made an arrangement whereby for a good and valuable consideration defendant agreed to and later did pay plaintiffs the greater part of certain retained percentages, and that by the agreement so made the requirement that plaintiffs obtain the final certificate of the engineer was waived with regard to each of the claims made in the complaint, all of which had theretofore been rejected, disallowed and repudiated by the defendant and by the Public Service Commission and its chief engineer, and it was stipulated in said agreement and understood that the plaintiffs must bring suit or take other proceedings to recover on said claim without reference to the final certificate, which defendant asserted would not include or allow such claim, and that more than thirty days prior to the commencement of the action each of the claims sued upon was duly presented to the comptroller for adjustment, and that he neglected and refused to adjust the same.
It is unnecessary to consider in detail the allegations of the various counts of the complaint. Suffice it to say that the second count was for 4,751 cubic yards of tunnel excavation, the unit price of which was $8.25 per yard, which was only allowed as for rock excavation at $4.65 per cubic yard, owing to an erroneous classification thereof; the third is to recover $51,831.74, for extra work and material; the fourth is for the other extra work aggregating $7,313.69; the fifth is for $44,514.39, the' extra cost of the work owing to errors in borings made by defendant and exhibited to bidders with respect to the nature of the material, and the sixth is for extra work and material required by the Public Service Commission and its engineers amounting to $64,326.32, but the claim for this item was reduced by the agreement referred to after the alleged substantial completion of the work to $25,000. The defense contains no denial, and, therefore, for the purpose of determining the demurrer, all the facts pleaded in the complaint are deemed admitted. (Douglass v. Phenix Ins. Co., 138 N. Y. 209; Devoe v. Lutz, 133 App. Div. 356.)
The fourth defense sets forth the provision of section 37 of *615chapter 4 of the Laws of 1891, as amended, which prescribes the manner in which the fund for rapid transit construction shall be obtained. It is therein provided in subdivision 1, among other things, that the board of estimate and apportionment, or other local authority in the city in which the road is to be constructed having power to make appropriations of moneys to be raised by taxation, shall “ from time to time, and as the same shall be necessary, and upon the requisition of said Public Service Commission,” direct the comptroller or other chief fiscal officer of the city, and it shall thereupon become his duty, tó issue the necessary bonds; and subdivision 2 provides that the amount of bonds authorized to be issued and sold by that section “ shall not exceed the limit of amount which shall be prescribed by the board of estimate and apportionment or such other local authority having power to make appropriations of moneys to be raised by taxation; and no contract for the construction of such road or roads shall be made unless and until such board of estimate and apportionment or such other local authority shall have consented thereto and prescribed a limit to the amount of bonds available for the purposes of this section which shall be sufficient to meet the requirements of such contract in addition to all obligations theretofore incurred and to be satisfied from such bond.” (See Rapid Transit Act, § 37, subds. 1, 2, added by Laws of 1894, chap. 752, as amd. by Laws of 1909, chap. 498, and Laws of 1911, chap. 888.)* It will be observed that it is the duty of the board of estimate to make a sufficient appropriation for the work and the statute does not declare that the contract shall be void if it falls so to do before it authorizes the contract nor is the payment of any further amount prohibited. It is further alleged in this defense that on the 1st of February, 1912, the board of estimate and apportionment adopted a resolution, which is pleaded in full, the substance of which, however, is that it consented to the making of the contract between McGovern and the city through the Public Service Commission for the construction of said section 9, which is described, *616“at a cost not to exceed one million nine hundred and sixty-one thousand nine hundred and ninety-seven dollars ($1,961,997),” and prescribed said amount as the limit to the amount of the proceeds of corporate stock available for the contract and authorized the comptroller to issue corporate stock in that amount for such purpose. The plaintiffs allege, and as already observed it is not denied,'that the board of estimate and apportionment unqualifiedly consented to the execution of the contract between McGovern and the city, and that the comptroller indorsed the contract as required by section 45 of the charter (Laws of 1901, chap. 466, as amd. by Laws of 1907, chap. 439) to the effect that funds were available for the contract. Since those allegations stand admitted by this defense the defendant is not entitled to have the defense construed as showing that the consent of the board of estimate and apportionment was limited to the cost stated in the resolution, which,, as already observed, would have been the cost according to the estimated quantities if there had been no deviation and no extra work or material. This-defense also pleads a resolution adopted by the' board of estimate and apportionment July 1, 1915, reciting that said amount of $1,961,997, was the estimated cost of the work, and that the Public Service Commission had made a requisition for the further sum of $413,000 to meet the requirements of the contract, and it was, therefore, resolved that the former resolution be amended by adding thereto said additional amount, and authorizing the comptroller to issue corporate stock accordingly. It is then pleaded that by these resolutions the board of estimate and apportionment prescribed a'limit of $2,374,997 as the amount of bonds available for this contract work, and never thereafter authorized the issuance of corporate stock therefor in any greater amount, and that the Public Service Commission never made a requisition for a further amount on account of this contract, and that there has been paid on account the sum of $2,323,596.44.
The learned counsel for the city strenuously argues that the liability of the city is limited by the limit prescribed by the board of estimate and apportionment with respect to the bonds. I think not, for there is no question of power here involved. It is not claimed that the constitutional *617limitation with respect to raising municipal funds has been reached or that the statute does not authorize the issuance of further corporate stock. The position taken by the city is that notwithstanding the fact that this contract was entered into, not for a gross sum but on a unit basis, and the contractor was obliged to complete it and could not recover any money deposited in lieu of a bond or for the deductions from the monthly estimates until final completion — that the city’s liability may end long before completion; and that notwithstanding the fact that it intended to have the subway constructed and reserved the right to make changes and alterations in the contract work and to call upon the contractor to perform extra work and to furnish additional material, merely because the board of estimate and apportionment in the first instance only provided for the issue of bonds for the estimated cost of the work — there can be no recovery in excess of that amount. Such, I think, would be an unreasonable construction of the statute. It will be observed that while the Legislature contemplated that the board of estimate and apportionment should prescribe a limit with respect to the amount of bonds to be issued, at the same time it expressly enjoined upon said board the duty before authorizing a contract, to prescribe a limitation that would be sufficient to meet the requirements of the contract. It is not to be inferred that the municipal authorities intended or undertook to mislead the contractor. It does not appear that they drew his attention to the fact that they were attempting to modify or change the provisions of the contract by the resolution adopted by the board of estimate and apportionment in limiting the amount of the bonds to be issued. It is evident that the Commission did not so understand or they would not have executed the contract without inserting a provision that the work was only to be done to the extent of the bond issue authorized.
Section 149 of the charter (as amd. by Laws of 1910, chap. 545)* provides, among other things, that no contract wholly payable out of the general fund should *618be binding or of force unless the comptroller indorsed thereon his certificate that there remained unexpended and unapplied a balance of appropriation or fund applicable thereto sufficient to pay the estimated expense of executing the contract as certified by the officer making it. The comptroller, evidently erroneously deeming these provisions applicable, indorsed on the contract two days after it was made a certificate to the effect that there remained unexpended and unapplied an appropriation or fund applicable to the contract sufficient to pay the entire estimated expense of executing it as shown by a resolution of the Public Service Commission and of the board of estimate and apportionment, viz., $1,961,997. The contract, which had already been executed, could not be affected by this indorsement (Levy v. McClellan, 196 N. Y. 178); but in any event the indorsement was unauthorized, for section 45 of the charter governs exclusively and expressly provides that the certificate of the comptroller mentioned in section 149 shall not be necessary to make a contract entered into pursuant to the provisions of the Rapid Transit Act, so called, binding on the city, and said section 45 of the charter (as amd. supra) provides that upon the execution of a contract made pursuant to chapter 4 of the Laws of 1891, as amended, the Public Service Commission may in their discretion request the board of estimate and apportionment for the authorization of corporate stock either for such amounts from time to time as they shall deem the progress of the work to require “ or for the full amount sufficient to pay the entire estimated expense of executing such contract,” and in case they ask for the entire amount “ the comptroller shall endorse on the contract his certificate that funds are available for the entire contract whenever such stock shall have been authorized to be issued by said board of estimate and apportionment; and in such case such stock may be issued from time to time thereafter in such amounts as may be necessary to meet the requirements of such contract.” It is conceded that the requisition of the Commission was for the entire amount of the contract but it is claimed that by the resolution of the board of estimate and apportionment the defendant’s liability was limited to the estimated cost. I am of opinion that these provisions of the charter, which relate directly to the *619rapid transit contracts, so called, are to be read with the provisions of subdivision 2 of section 37 of chapter 4 of the Laws of 1891 (as amd. supra), with respect to the issuance of bonds, for they seem to clearly contemplate that application for the issuance of stock to meet the amount due on such a contract may be made from time to time during the progress of the work or for the full amount of the estimated expenses at one time, and where the requisition is for the entire amount, which means precisely the same as the preceding expressions, “ estimated expense,” it becomes the duty of the comptroller to indorse on the contract his certificate that funds are available for the entire contract in the language of the statute, “ whenever such stock shall have been authorized to be issued by said board,” and then the stock may be issued from time to time. It was not intended to "authorize a contract for the entire work and then to stop work before completion of the contract if the issuance of bonds authorized originally would prove to be insufficient, which would be the necessary result if the contention made by the appellant should prevail. Authority to provide funds exists. If the municipal authorities were acting in good faith they must at that time have intended to provide funds for the entire work embraced in this contract, the execution of which was expressly authorized by the board of estimate and apportionment. On the facts pleaded the plaintiffs have no other remedy. The city, of •course, in other parts of this answer, denies, or attempts to deny, the material allegations of the complaint with respect to its liability for the amounts claimed by the plaintiffs. Aside from the point of law presented by the defense, it will require a trial of the issues to determine whether or not the plaintiffs are entitled to recover any amount. If they are, they doubtless have no other remedy. Until the facts are determined in their favor, although the engineer’s certificate has been waived, on the allegations of the complaint, the Public Service Commission could not be mandamused to make a requisition on the board of estimate for further funds and the board of estimate and apportionment could not be mandamused to issue further corporate stock. Under the rule by which a demurrer to a defense may be defeated for the insufficiency of the complaint, which is invoked by the *620appellant, I am of opinion, therefore, that the complaint is good, for in the circumstances the defendant cannot take advantage of its own wrong in failing to make the necessary appropriation. (Davidson v. Village of White Plains, 197 N. Y. 266; Van Dolsen v. Board of Education, 162 id. 446. See, also, O’Rourke Engineering Const. Co. v. City of New York, 140 App. Div. 498.)
It follows, therefore, that the order should be affirmed, with ten dollars costs and disbursements.
Clarke, P. J., Smith, Page and Shearn, JJ., concurred.

 Since amd. by Laws of 1912, chap. 226.— [Rep.

 Since amd. by Laws of 1913, chap. 540; Laws of 1915, chap. 544, and Laws of 1917, chap. 625.— [Rep.

 Since amd. by Laws of 1912, chap. 398, and Laws of 1917, chap. 401. — [Rep.