
    Cranford Company, Plaintiff, v. The City of New York, Defendant.
    First Department,
    April 4, 1912.
    Contract — failure to make payments —reasonable time —rescission — action on quantum meruit — damages.
    A contract, entered into by the plaintiff with the defendant, the city of Hew York, through its board of water supply, for the sinking of two test shafts for the purpose of determining the suitability of rock for corn taming the Catskill aqueduct tunnel, provided that the engineer should, from time to time, as the work progressed, but not oftener than once in each month, make an estimate of the work done and the materials furnished since the last preceding estimate, and that the defendant should pay to the plaintiff ninety-five per cent of each estimate; that partial payments may be at any time withheld if work is not proceeding in accordance with this agreement, and that speed is of great importance. Ho time was specified within which the city should pay the ninety-five per cent of each monthly estimate. The plaintiff received seven monthly estimates, the first dated May 18,1907, and the last Hovember 13, 1907. Bach estimate was made and signed shortly after ■ the tenth of the month and no complaint was made of any delay. The estimates for May and June were paid on September 17, 1907, and those for July and August were paid on September 26, 1907. On December 4, 1907, the estimates for September, October and November not having been paid, the plaintiff notified the board of water supply that unless the three estimates were paid on or before December 7, 1907, it would discontinue the Work. The three estimates were not paid and on December 9, 1907, the plaintiff discontinued the work and thereafter brought an action upon a quantum meruit, the- theory of the action being that the defendant committed a breach of the contract in failing to promptly pay the last three estimates; that this breach justified the plaintiff in rescinding the contract, and that it is entitled to recover the fan value of the work performed and the cost of the plant, without regard to the contract prices.
    
      Held, that as to the "November payment as matter of law the delay was not unreasonable;
    That since the defendant was only bound to make payment within a reasonable time, and since the plaintiff had acquiesced in delay in payment of previous estimates, which established a course of dealing from which it could not depart without reasonable notice to the defendant, the delay in the present case was not unreasonable so as to justify the plaintiff in rescinding the contract-;
    That, since the plaintiff was behind in its work, it was not entitled to demand payment tinder the contract, and that the complaint should be dismissed.
    
      It seems, that if the plaintiff had been justified in its attempted rescission, it could not in any event recover more than the Contract price of the work performed, the city not being guilty of wanton or willful default.
    As a general rule, the failure of one party to a contract to pay an installment when due is such a breach of the contract as will absolve the other party from all obligations to perform on Ms part while the default continues.
    Motion "by' the plaintiff, the Cranford Company, for a new trial upon a case containing exceptions, ordered to he heard at the Appellate Division iin the first instance upon the dismissal of the complaint by direction of the court at the close of plaintiff’s case on a trial at the New York Trial Term in May, 1909,
    
      Alton B. Parker, for the plaintiff.
    
      Loyal Leale, for the defendant.
   Scott, J.:

In February, 1907, the city of New York, by the board of water supply j entered into a contract with plaintiff for the sinking of two test or exploration shafts on either side of the Hudson river for the purpose of determining the elevation at which solid rock might be found, and the suitability of this rock for containing the Catskill aqueduct tunnel. The work to be done and the rate of payment for each item of work was specifically defined by the contract. Inasmuch as speed in completion was deemed to be of great importance, each bidder was requested to name in his proposal the speed which he was willing to guarantee, and a bonus of $400 per day was agreed to be paid to the contractor in case the work should be completed earlier than the bid time, and in case guaranteed progress was not made, $100 per day, not including the first twenty-five days, it was stipulated should be exacted as liquidated damages.

As to payments, the contract provided that the engineer should, from time to time, as .the work progressed, but not oftener than once in each month, make in writing an estimate of the work done and the materials furnished since the last preceding estimate, and that the city should pay to the contractor ninety-five per cent of each estimate, a final adjustment of accounts and a final estimate to be made when the work should be completed. No time was specified in the contract within which the city should pay the ninety-five per cent of each monthly estimate after the same should have been made and signed by the engineer.

The plaintiff entered upon the performance of the contract and received seven monthly estimates from the engineer, the first being dated May 18, 1907, and the last November 13,1907. In each month the engineer made and signed the estimate within a few days after the tenth of the month, and no complaint is made of any delay on this score. The estimates for May and June were paid on September 17, 1907, and those for July and August were paid on September 26, 1907. The evidence recalls the fact, which has passed into history, that the autumn of 1907 was a period of severe financial stringency, when money was scarce and difficult to be had even by the most solvent, and it is, perhaps* for this reason that the city was dilatory in paying the September, October and November estimates. At all events it had not paid them by December 4, 1907, on which date plaintiff, by letter, notified the board of water supply that unless the three last-mentioned estimates, aggregating about $25,000, were paid within three days from date, that is to say on or before December 7, 1907, it would discontinue the work. The amount of the estimates was not paid within the time specified, and on December 9, 1907, plaintiff did discontinue work, and so notified the board of water supply on December twelfth.

It appears in evidence that plaintiff had made serious mistakes in estimating upon the work to be done, and the rate of progress which it could make, so that, as was testified by one of its officers, they were glad to get out of the contract.

The plaintiff now sues, as upon a quantum, meruit, for the fair value of all the work done by it, including the cost of its plant, less the sums which it was paid, at contract rates, under the first four monthly estimates. In consequence of its erroneous estimate of the cost of doing the work, it now claims upwards of $200,000, • although the unpaid estimates barely exceeded $25,000.

The theory of the action is that the defendant committed a breach of the contract in having failed to promptly pay the September, October and November estimates; that this breach justified the plaintiff in rescinding the contract, and that having so rescinded it for just cause, it is entitled to recover the . fair value of the work performed and the cost of plant, without regard to the contract prices.

There is ample- authority for the proposition that the failure of one party to a contract to pay an installment when due, is such a breach of the contract as will absolve the other party from all obligations to perform on his part while the default continues. (Wharton & Co. v. Winch, 140 N. Y. 287, 293.) The first question to be considered, therefore, is whether there was such a breach by the city in the present case. As has already been said the contract does not provide within what time after a monthly estimate has been made the city must pay the ninety-five per cent thereof. The obligation, therefore, is to pay it within a reasonable time. What constitutes a reasonable time under a city contract has been the subject of consideration on more than one occasion. In Jones v. City of New York (47 App. Div. 39) this court said: What would be inexcusable or unreasonable delay, however, on the part of an individual or a partnership, or even a business corporation, might not be such in the case of a municipal corporation, with its complete system operated through independent official agencies. The contractor who deals with such a public corporation should not look for the same promptitude of payment as though he were dealing with private, parties. He must expect occasional delay and inconvenience as the natural result of the necessary formalities prescribed by law, and also from unforeseen contingencies such as the exhaustion of the fund applicable to the' work.” In Williams v. City of New York (130 App. Div. 182), which arose under a contract executed by the board of aqueduct commissioners, the plaintiffs claimed a breach of the contract by the city in consequence of its neglect to promptly pay a monthly estimate. The estimate had been made on January 12, 1904, but at that time a lien against the contractor was on file in the comptroller’s office, which was not removed until February 8, 1904. On February twenty-fourth the contractor served notice of rescission of the contract. “The defendant had a reasonable time within which to pay to the plaintiffs the amount due, and a mere delay in payment for a reasonable time to enable it to make the necessary arrangements for that purpose was not upon any possible construction of the contract a breach thereof. The comptroller of the city of New York cannot be expected to have the money ready or warrants drawn for the payment of claims against the city immediately upon presentation. The fiscal officer of a large municipal corporation is entitled to a reasonable time after the claim is presented to make • payments. There is nothing to show that the liability of the city to pay this amount was ever repudiated by the comptroller; there was a simple delay in making the payments. The necessity of time to make payment is recognized by the charter, which requires a claim to be presented for payment to the comptroller "of the city of New York, and that he has neglected to pay it for thirty days before an action can be maintained upon it against the city. (Greater N. Y. Charter [Laws of 1901, chap. 466], § 261, as since amd. by Laws of 1906, chap. 550, and Laws of 1907, chap. 677.) This is to give the comptroller the necessary time to make the proper investigation and provide for the payment of the claim, and the charter fixes thirty days as a reasonable time for that purpose. * * * The charter has fixed thirty days as such a reasonable time before an action can be commenced against the .city on a claim, but on February twenty-fourth, but sixteen days after this lien was discharged, so that plaintiffs became entitled to the payment, the plaintiffs served upon the aqueduct commissioners a notice that by reason of the failure of the city of New York to make montnly payments in the manner and form provided and called for in the contract, and for other reasons mentioned, they elected to treat the action of the aqueduct commissioners as a breach of the contract, to stop all work thereunder, and to hold the city of New York responsible for not only the amount already earned under and in connection with the contract, but also for the damages sustained by the plaintiffs by reason of the matter stated. ” In the present case the plaintiff peremptorily demanded the payment of all of these monthly estimates, announcing that if they were not all immediately paid it would elect to rescind the contract. If payment of any one of these estimates was not at that time unreasonably delayed, the plaintiff was not entitled to rescind. Its right to do so must, therefore, be tested with reference to the latest estimate, that of November 13, 1907. The demand for its payment was made on December fourth, and was that it should be paid within three days, or not.later than December seventh, which would have been only twenty-four days after the estimate was signed,' and doubtless a less time 'after its receipt by the comptroller. If the plaintiff’s right to rescind had rested upon the non-payment of the September and October estimates we think that there would have been a question for the jury as to whether or not the delay was unreasonable, but as to the • November estimate we are of opinion that, as matter of law, the delay was not unreasonable, and that a finding to the contrary could not have been sustained. Furthermore, we are of the opinion that the plaintiff’s demand, on December fourth, for what amounted to instant payment of the three estimates was unreasonable. As has been said, the plaintiff had accepted, apparently without protest as to the delay, payment of the May and June estimates on September seventeenth, and of the July and August estimates on September twenty-sixth. This established a course of dealing, from which indeed the plaintiff might at any time depart, but not without a reasonable notice of its intention to do so. Until it had received such a notice the city was entitled to rely upon a continuance of similar forbearance. To quote again from the Williams Case (supra): “The course of dealing between the parties thus clearly indicates that a reasonable delay after the certification of these estimates to enable the city officials to make the payments was recognized, and the continuance of this established custom, in the absence of any express, repudiation of liability on the part of the city by its responsible officers, was not a breach of the contract which justified a contractor in abandoning it and suing the city for damages as for a breach.” But apart from any question as to the reasonableness of the delay, the fact is that the plaintiff when it undertook to rescind, was not entitled to be paid. The contract provided in clear and definite terms that “ partial payments may be at any time withheld if work is not proceeding in accordance with this agreement.” The reference, of course, is to the speed which in another part of the contract is declared to be of great importance in the work. The evidence from the plaintiff’s own officer was that it had never accomplished the speed contracted for and guaranteed up to the time that the work was discontinued. This, of itself, was quite sufficient to justify the non-payment of the estimates.

These considerations justified the dismissal of the complaint, and it is unnecessary to discuss the measure of damages that would have been applicable if the plaintiff had been justified in its attempted rescission, further than to say that in our opinion the plaintiff could not in any event recover more than the contract price of the work actually performed. It is not contended that the city was guilty of wanton or willful default, or that the cost of performing the work was enhanced by any act of the city or its officers. Under these circumstances the contract prices would determine the damages. (Koon v. Greenman, 7 Wend. 121; Nason Mfg. Co. v. Stephens, 127 N. Y. 602; Doolittle v. McCullough, 12 Ohio St. 360.)

It follows that the exceptions must be overruled and judgment directed for defendant upon the dismissal of the complaint, with costs and disbursements.

Ingraham, P. J., McLaughlin, Clarke and Dowling, JJ., concurred.

Exceptions overruled and judgment directed for defendant dismissing complaint, with costs. Order to he settled on notice.  