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First Department, November, 1911.

[Vol. 146.


OF NEW YORK, Respondent. (Action No. 2.)

First Department, November 3, 1911. Municipal corporations — municipal contract, city of New York —

contract for work less than $1,000 in value - conditions precedent to recovery – audit of claim - pleading - failure to allege value of work - contract itself not evidence.

The validity of a municipal contract must be determined under the city

charter as it existed at the time the contract was made. A contractor suing the city of New York on a contract for work of a value

less than $1,000 awarded to him without public bidding in 1903 when section 419 of the charter of 1901 permitted such contract to be made, must in order to recover show that his claim was audited by an auditor of accounts, or the fair value of his work and materials, as required by

section 149 of the said charter As section 149 of said charter provides that on the question of reasonable

value of work done, no testimony shall be admitted to show an agree ment by any of the municipal authorities to pay a larger sum than the amount audited by the department of finance, an allegation in the complaint that the city agreed to pay a certain sum is no proof that the sum agreed to be paid was the fair value of the work and materials.

APPEAL by the plaintiff, the F. V. Smith Contracting Com. pany, from an order of the Supreme Court, made at the New York Trial Term and entered in the office of the clerk of the county of New York on the 24th day of December, 1910.

Charles J. Hardy, for the appellant.

Terence Farley, for the respondent.


Plaintiff appeals from an order of the Trial Term granting defendant's motion to set aside the verdict and for a new trial.

The complaint alleges that on or about July 28, 1903, the defendant, by its department of water supply, gas and electricity, made a contract with plaintiff to do work and furnish materials for a particular job, and promised to pay therefor the price or sum of $900; that plaintiff has performed the work required, which has been accepted by the department making the contract, and plaintiff's charge therefor has been certified

App. Div.]

First Department, November, 1911.

to as correct by said department. Then follow allegations of the filing of a claim with the comptroller and of non-payment. There is no allegation that the claim has been audited by the department of finance, or as to the fair value of the work done and materials furnished. Since the contract was executed in 1903 its validity must be tested, and the amount done under it determined by the provisions of the Greater New York charter of 1901, in force at the time. (Laws of 1901, chap. 466.) The estimated cost of the work to be done was less than $1,000, and the contract was, therefore, one which, by section 419 of the charter, the commissioner of water supply, gas and electricity was authorized to enter into without public letting upon sealed bids and proposals. The contract, therefore, appears to have been a valid one, lawfully made. The serious question in the case is as to the amount that may be recovered thereunder. Section 119 of the charter of 1901 introduced a new and most salutary rule respecting recoveries upon such contracts. So far as relevant to the case under consideration, that section reads as follows: “No claim against the city or against any of the counties contained within its territorial limits, or payable in the first instance from moneys in the city treasury for services rendered or work done or materials or supplies furnished except (1) claims reduced to judgment, or (2) awards, costs, charges and expenses duly taxed or ordered paid in judicial proceedings, or (3) claims arising under the provisions of contracts made at public letting in the manner provided by section four hundred and nineteen of this act, or (1) claims settled and adjusted by the comptroller, pursuant to the authority of this section, shall be paid unless an auditor of accounts shall certify that the charges therefor are just and reasonable; and, except as hereinabove otherwise provided, all contracts with the city or any of such counties or with any public officer acting in its or their behalf, shall be subject to such audit and revision by the department of finance.

If in any action at law against The City of New York to recover upon a claim not embraced within the exceptions hereinabove numerically specified, the amount claimed by the plaintiff is in excess of the amount as audited and settled by the department of finance, the plaintiff must establish his claim by competent

First Department, November, 1911.

[Vol. 146. evidence of value, and no testimony shall be admitted to show a promise or agreement by any officer or employe of the city or of any of the counties contained within its territorial limits, to pay any larger sum than the amount so audited or allowed by the department of finance.

Reading sections 419 and 149 together the result is that while a head of department may make a contract for a particular job, of which the estimated cost is not more than $1,000, without public letting, the contractor may recover thereon only the sum at which the claim is audited by an auditor of accounts, or, if the contractor is dissatisfied with the audit, then the fair value thereof to be established by the contractor by competent evidence, and the amount which the officer of the city making the contract has promised to pay is expressly excluded as evidence of value. Since the contract in suit was made after the enactment of the provisions quoted from section 149, the plaintiff's rights were controlled thereby. It was, therefore, incumbent upon the plaintiff, in order to recover anything at all, to show either an audit of his claim, or the fair value of his work and materials. The plaintiff insists that defendant has not properly pleaded a defense based upon the provisions of section 149. Whether it has or not is unimportant, because the complaint itself is defective in that it does not contain the necessary allegations to justify a recov. ery by plaintiff. As has been pointed out, section 149 permits the plaintiff to recover only the amount at which his claim has been audited, or the fair value of its work and materials. What it must prove, it must allege, and, hence, a complaint .upon a contract like the present, which contains no allegation of audit or value, fails to allege the necessary facts to justify any recovery. True, it alleges that the department making the contract agreed the plaintiff should be paid $900, and that allegation was probably necessary, or at least relevant, in order to establish the original validity of the contract, but the express provision of the statute is that the promise of the officer making the contract shall not be admitted as testimony of the value of the work. Therefore, the allegation that the department agreed to pay a certain sum furnishes no proof, even prima facie, that the sum agreed App. Div.) First Department, November, 1911. to be paid is the fair value or is the amount which plaintiff is entitled to recover. The defendant is not, therefore, in the position of relying upon an affirmative defense, which needs to be specially pleaded. It does not claim that the contract is ultra vires or otherwise illegal, or that payment may not be enforced for lack of an appropriation to meet it. Its position is that, even admitting all that plaintiff has alleged, no cause of action for an ascertainable sum has been pleaded or can be proven under the complaint as it stands. This contention we find entirely tenable, and it is, therefore, unnecessary to consider whether or not the answer contains effectual denials.

The order appealed from must be affirmed, with costs.


Order affirmed, with costs.

JACOB PASKUSZ and GASA PASKUSZ, Copartners, Composing

the Firm of J. PASKUSZ & Son, Respondents, v. THE PHILADELPHIA CASUALTY COMPANY, Appellant.

First Department, November 3, 1911, Insurance - credit insurance - rating customers — when policy does not

cover loss - contract construction – substitution of “or” for “and.”

Where a credit insurance policy provided that the policy covered risks as

to old customers of the indemnified, “possessing one of the capital and credit ratings as specified” in an annexed schedule, there can be no recovery for a loss occasioned through an old customer who under the

schedule was rated only as to credit and not as to capital. While the court in order to carry into effect the evident intention of

parties may substitute the word “or” for the word “and,” or vice versa, there must be something to indicate clearly that such was the meaning of the parties. Such substitution of words cannot be made in the policy aforesaid as the change would in effect make a new contract

for the parties. Nor can the indemnified recover under such policy for a loss occasioned

by a customer which was less than the initial loss stipulated by the policy.

APPEAL by the defendant, The Philadelphia Casualty Company, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of First Department, November, 1911.

(Vol. 146. New York on the 23d day of January, 1911, upon the decision of the court rendered after a trial at the New York Trial Term, a jury having been waived.

Frank H. Platt, for the appellant.

Edward Petigor, for the respondents. SCOTT, J.:

Defendant appeals from a judgment rendered by the court without a jury.

The action is upon a credit insurance bond or policy. The plaintiff seeks to recover two losses occasioned by the bank. ruptcy of one Annie Scheinberg, who owed plaintiff $4,990.82, and by the failure of the Sanders Manufacturing Company, which owed plaintiff $195.30. The controversy is as to the Scheinberg loss, and the question presented is whether or not that loss is covered by the terms of the bond or policy. On July 20, 1907, defendant issued a bond or policy to plaintiff to run until September 19, 1907. On September 27, 1907, defendant issued a renewal policy to run from September 20, 1907, to September 20, 1908. On October 21, 1907, Annie Scheinberg was adjudged a bankrupt. The first policy above mentioned limited defendant's liability solely by what is termed “experience,” which confined the insurance to indebtedness incurred by “old” customers of plaintiff. The second policy (upon which this action is brought) was designed to extend the insurance so as to cover indebtedness incurred by “new” customers as well as “old.” Of course the test of "experience” would be inapplicable to “new” customers, and consequently the new policy established a different standard whereby to determine the risk which defendant assumed. Attached to the policy and made a part of it is a schedule called “A,” indicating the risk which the defendant assumed.

This schedule contained a list of letters and figures indicating the ratings published by a specified mercantile agency. Those ratings ran from Aa-A1 to G-372, and to the list was appended the following statement: “Customers of the indemnified, possessing one of the capital and credit ratings as specified in the above schedule, shall be covered for an amount not exceeding the sum set opposite such customer's rating thereon." Then

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