
    SIDNEY DILLON, and Others, Plaintiffs and Respondents, v. JOHN S. MASTERSON, Defendant and Appellant.
    i. oohtraot, hon-performahoe bt the time limited.
    
    1. WAIVER OF.
    («.) What is.—Permitting the continuance of work under the contract after the time limited, is.
    (5.) Effect of.—The contract continues open for performance until another limit is fixed, either by the service of a notice requiring performance by a reasonable time therein specified, and notifying the party on whom it is served, that in case of default in so performing his rights would be deemed abandoned, or in some other manner.
    
    1. Effect of such a notice.—In case of default in complying with it, the party giving it may rescind the contract and retain the benefits of a partial performance, but in such case he would waive his claim for damages.
    (c.) Notice, what not sufficient to limit the time for PERFORMANCE.
    1. One to the effect that the party serving it. would take the further execution of the contract into his own hands, and complete the same for account of the party on whom it is served and hold him responsible in damages, is not.
    1. Effect of such a notice.
    
    1. It is an act of the party giving it, which prevents full performance by the other.
    2. Consequently the party on whom it is served is entitled to recover the value of what he had done under the contract.
    3. The party giving it is entitled, there being no unperformed condition on his part, to recover the damages sustained by him in consequence of the delay in performance.
    
      3. DAMAGES.
    
      (a.) Collateral contracts, damages sustained under,
    WHEN RECOVERABLE.
    1. When one, on making a contract with another, knows that that other party has an existing contract with a third party for the same work, and that such other party is making with him a sub-contract to the principal one, and he by his sub-contract agrees to supply the work necessary to fill the principal contract, any damage to the principal contractor, which would naturally flow from a breach by Mm of his principal contract in consequence of the default of the sub-contractor may be recovered of, or recouped against the sub-contractor.
    1. What damage does not so naturally flow.
    
    1. The damages, if such there are, arising from the refusal of the third party to give other contracts to the principal contractor, by reason of his being in default in his existing contract, which default was caused by the default of the subcontractor, do not.
    Before Curtis, Ch. J., Sanford and Freedman, JJ.
    
      Decided March 5, 1877.
    Tkis action arose out of a written contract, by which the plaintiffs agreed to furnish the necessary materials for filling up, and to complete the filling of Seventy-sixth street, in the city of New York, and have the ■ same completed on or before June 1, 1873, and by which the defendant agreed to pay for such work, upon the completion thereof, at the rate of twenty cents per cubic yard.
    The plaintiffs failed to complete the contract at the time agreed upon, but at the request of the defendant proceeded from time to time with the work until the month of December following, when the defendant terminated the contract by the following notice:
    “In consequence of your violation of your contract dated February 13, 1873, for filling of Seventy-sixth street, between Lexington and Madison avenues, in this city, and in consequence of the loss and damage caused to me by your non-fulfillment of the same; I hereby notify you that I shall now proceed to have the same completed and hold you personally responsible for the damages caused to me by your delay and action in the premises.”
    The plaintiffs thereupon brought this action to recover for the work done up to the time of the notice.
    On the first trial, before a referee, the defendant had judgment, which was afterwards reversed by the general term (39 N. Y. Super. Ct. 133).
    The case was re-tried before the court and a jury, and the plaintiffs had a verdict for the full amount of the work done.
    The appeal is by the defendant from the judgment entered upon such verdict, and from the order denying his motion for' a new trial.
    
      L. A. Gould, attorney, and of counsel for appellant, upon the points discussed by the court, urged:
    I. The complaint should have been dismissed as requested. The plaintiffs had abandoned the work before the service of the notice; the plaintiffs say they worked “till sometime in the fall, can’t state the date exactly;” another says they quit the work some time in December; there is no denial of the .defendant’s testimony, that they had quit the work before he served the notice ; they never offered, and there is no evidence that they ever intended to complete the contract. Even admitting that plaintiffs have a claim-for work done, it could not become due till the contract was finished, which was long after the bringing of this suit, because defendant did nothing to hinder and used due diligence to complete the work, and plaintiffs do not show that they could or would have completed it at an earlier day (Champlin v. Rowley, 18 Wend. 187; Wallman v. Society of Concord, 45 N. Y. 
      485; Cunningham. v. Jones, 20 Id. 486; Mead v. Degolyer, 16 Wend. 632).
    II. The defendant suffered great damage from the plaintiff’s delay and failure to complete the contract, all evidence of which the court rejected and excluded. The defendant did not waive his right to damages by excusing plaintiff’s failure to perform within the time agreed upon (Ruff v. Rinaldo, 55 N. Y. 664; Beebe v. Johnson, 19 Wend. 500). This testimony was excluded on the theory that the damages were too remote, and did not flow directly from plaintiffs’ breach of the contract. But defendant offered, to show that the plaintiffs knew before entering into this agreement with the defendant that this was a sub-contract, that their failure to complete at the time fixed must of necessity put defendant in default and must cause him the very damages which he now sets up. The exclusion of this testimony was manifest error (Messmore v. N. Y. Shot & Lead Co., 40 N. Y. 422; Griffin v. Colver, 16 Id. 493).
    
      Alex. Thain, attorney, and of counsel, for respondent, on the points discussed by the court, urged:
    I. Defendant’s counter-claim is made up of damages for losses peculiar to a contract collateral to the one alleged to have been broken, and to which the plaintiffs were not parties: for such damages there can, therefore, be no recovery against them (Masterton v. Mayor, &c. of Brooklyn, 7 Hill, 61-68). Such damages are not fairly to be supposed to have entered into the contemplation of the parties at the time the contract between them was made, and are also disallowed as too remote and contingent (Masterton v. Mayor, &c. [supra], per Nelson, J., 68; Griffin v. Colver, 16 N. Y. 489-495). The questions, therefore, tending to show knowledge on the part of the plaintiffs that defendant had a contract with the city involving this and other work, were wholly immaterial. Had the parties intended that plaintiffs should be bound by the terms of such collateral contract, or had it been contemplated that they were to be answerable for damages so remote they would have made it so in the contract, and not left so important a question in doubt. The reference to the contract between the defendant and the city in the one between the plaintiffs and defendant could have had no other object than the identification of the work.
    II. The motions to dismiss the complaint were properly denied. The plaintiffs had shown that they had furnished upwards of 20,000 yards of materials under their contract with defendant, and had failed to entirely complete the work because defendant assumed to complete it himself.
    
      
       Compare Kemple v. Darrow, 39 N. Y. Sup’r Ct. 447.
    
   By the Court.—Freedman, J.

On the former appeal which had been taken by the plaintiffs, the general term of this court held, and the point actually decided was, in substance, that inasmuch as the contract had been kept alive by the acts of the parties after the expiration of the time limited for the performance thereof, if the defendant had wished to annul the rights of the plaintiffs under the same, he should have given them a notice requiring performance within some reasonable time specified, and further notifying them, that in case of default their rights would be deemed abandoned ; and that no such notice having been given plaintiff’s action for the price should have been sustained.

On the trial which is now the subject of review, the plaintiffs obtained a verdict, but the defendant was not permitted to recover any damages suffered in consequence of plaintiffs’ delay in completing the work, and the principal question involved in the present appeal is, whether the defendant has a right to recoup such damages, and, if so, to what extent he may do so.

Upon plaintiffs’ failure to complete, at the time designated in the contract for the completion thereof, defendant might have rescinded.

He elected not to do so, but from time to time he called upon the plaintiffs to proceed with it, which they did to some extent up to the month of December following, when they again ceased work. Both parties, therefore, departed from the provision of the contract as to time, and hence plaintiffs’ rights could not be annulled without another time being'fixed and a new default being made.

In the month of December following, on becoming tired of plaintiffs’ dilatoriness and apparent abandonment of the contract, the defendant did serve a notice. But instead of serving one which called upon the plaintiffs to complete within some reasonable time therein specified, and which notified them that in case of default their rights would be deemed abandoned, he served a notice to the effect that he would take the further execution of the contract into his own hands and complete the same for account of the plaintiffs and hold them responsible in damages.

Full performance on the part of the plaintiffs having been thus prevented by the deliberate act of the defendant, plaintiffs were entitled to recover for what they had done up to that time, and the defendant was bound to make the compensation. This liability on the part of the defendant, however, is coupled with his right to insist upon a deduction for the damages sustained by him in consequence of the delay.

Had he first notified the plaintiffs to complete within a reasonable time specified, he might, on their default, have rescinded and retained the benefit accruing to him from a partial performance. In such case he would have waived his claim for damages.

But having adopted the other course, which was in affirmance of the contract, and which rendered him liable to pay for such partial performance, and there being no condition of the contract unperformed on his part at the time of such election, he is not estopped from claiming damages (Ruff v. Rinaldo, 55 N. Y. 664; Cassidy v. Le Fevre, 45 Id. 562; Dibble v. Corbett, 5 Bosw. 203 ; Sinclair v. Tallmadge, 35 Barb. 602).

The question therefore remains, what damages the defendant is entitled to.

No effort was made to show, and indeed it is not claimed, that the defendant incurred a larger expense in doing the work which he did himself subsequent to the notice given, than he would have incurred if he had permitted the plaintiffs to finish their contract.

It appears, however, that the whole work to be done by the plaintiffs for the defendant under the contract in question, was embraced in a prior contract between the defendant and the corporation of the city of New York, and the contract between the parties to this action recites such fact.

At the trial the defendant offered his contract with the city in evidence, for the purpose of thereby laying the foundation for the proof of damages which he alleged he sustained under that contract by reason of plaintiffs’ delay, and it was excluded.

He also offered to show that the plaintiffs had examined the said contract of the defendant with the city, that they knew its terms and conditions, and that defendant’s liability under the same was dependent upon the performance of plaintiffs’ contract, before plaintiffs entered into the' contract in suit, and that the former constituted the basis upon which the latter was made. This testimony was excluded.

I am of the opinion that these rulings constituted error.

True, in ordinary cases and under the operation of the rule applicable to that class of cases, that damages, in order to be recoverable, must not only be such as might naturally be expected to flow from the violation of the contract in suit, and such as are certain both in their nature and in respect to the cause from which they proceed, but must also be such as may fairly be supposed to have entered into the contemplation of the parties at the time of the execution of the contract, in settling the amount of damages to be recovered for the breach of the principal contract, damages sustained on collateral contracts entered into as subsidiary to the fulfillment of the principal one, cannot be considered (Masterton v. Mayor, &c. of Brooklyn, 7 Hill, 61).

But when the sub-contractor, at the time of making his contract, knows that the principal contractor has an existing contract for the same work, and that the sub-contract is made to fulfill the principal contract, and the sub-contractor agrees to supply the work to enable the principal contractor to fulfill his contract, any damage which the principal contractor might naturally be expected to sustain under his contract in consequence of the default of the sub-contractor, may justly be said to have entered into the contemplation of the parties to the sub-contract, and may be recovered for that reason, if subsequently sustained and capable of being ascertained with certainty (Messmore v. N. Y. Shot and Lead Co., 40 N. Y. 422).

The evidence should, therefore, have been received, and then the duty would have devolved upon the court to see to it, that the defendant recovered no damages except such as clearly and naturally flowed from the breach of the contract with the city, as necessitated by plaintiffs’ breach of their contract with him. Defendant’s claim for damages in being kept from obtaining other contracts, can under no circumstances be sustained ; but as to his right to recover any of the other items set forth in his bill of particulars, in respect to which he ineffectually sought to give testimony, I am unable to form an opinion without having the excluded contract before me.

Inasmuch as it sufficiently appears, however, that the excluded testimony above referred to, together with other proof subsequently offered and likewise rejected, might have entitled the defendant to some recoupment, the judgment and order appealed from should be reversed, and a new trial ordered, with costs to appellant to abide the event.

Curtis, Ch. J., and Sanford, J., concurred.  