
    John J. McGrath, Appellant, v. William G. Horgan and Others, Respondents.
    
      Bemedy of a contractor who in good faith abandons work before it is entirely finished — where he abandons it because an intermediate payment is not made by the owner ■ — where the owner completes the work—general damages recoverable by the contractor in the last case.
    
    Where a building contractor, acting in good faith, quits work in the belief that he has fully completed his contract, when, in fact, slight omissions exist therein which may be readily supplied or remedied, the rule of substantial performance-obtains in equity and the contractor may recover from the owner the contract price less a proper deduction for the omissions.
    Where, however, the contractor deliberately abandons the work without any pretense of having, fully completed his contract, solely on account of the failure of the owner to pay an intermediate installment of the contract price, tie must, in order to recover, be prepared to show full performance of all thé conditions precedent to his right to receive the payment in question.
    Where, in such a case, the owner completes the work under a provision in the contract authorizing him, in case the contractor should default, to finish the work and deduct the cost from the contract price, the fact that such provision is the only provision in the contract bearing upon the question of damages, does not preclude the owner from recovering from the contractor the general damages resulting from the latter’s breach of the contract. The measure of such damages is compensation for the loss reasonably and proximately resulting from the breach of the contract.
    
      Semble, that where an owner, in accordance with the terms of the contract, completes the work after default by the contractor, the latter is ordinarily entitled to recover the difference between the cost of completion and the balance unpaid oil the contract.
    O’Brien, J., dissented.
    Appeal by thé plaintiff, John J. McGrath, from so much of a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Mew York on the 30th day of August, 1901^ upon the decision of the court, rendered after a trial at the Mew York Special Term, as adjudges a mechanic’s lien filed by the plaintiff to be invalid, and cancels a bond given on the discharge thereof and awards an affirmative judgment in favor of the defendant Horgan against the plaintiff.
    
      Louis F. Foyle, for the appellant.
    
      George Haas, for the respondents.
   Latohlin, J.:

This is an action to foreclose a mechanic’s lien on premises Hos. 226 and 228 West Seventy-eighth street, owned by the defendant Horgan, who was erecting thereon a double six-story and basement apartment house. On the 15th day of August, 1899, the plaintiff contracted in writing with the owner to do the plumbing and gas-fitting work and furnish the materials therefor for the gross sum of $4,200, payable in five installments as follows: Fvrst, when all cast iron sewer, soil and vent lines are in and brown mortar, $850; second, when gasfitting and water supply lines are in and white mortar, $800; third, when all lead roughing is done and job tested and water test passed and standing trim, $700; fourth, when half of fixtures are set and doors hung, $900; fifth, when all fixtures are set and job completed, $950 ; making total amount of contract $4,200. The time for the completion of the work was left blank. The contract, however, provided that if the contractor refused or neglected to supply sufficient material or workmen the owner might, on three days’ notice, declare the work abandoned, and complete it at the cost of the contractor. On the 7th day of April, 1900, the plaintiff abandoned the work upon the theory that the owner was in default in refusing to make the fourth payment. The plaintiff claims that he had performed all work and furnished all materials required by the contract as a condition precedent to the fourth payment, and that he thereafter demanded such payment, and upon the owner’s default abandoned the work.

The owner claims that the plaintiff had not earned such payment at the time he abandoned the work, and the trial court has so found. The plaintiff gave evidence tending to show that he made a demand and that the owner was unable to pay but did not deny the plaintiff’s right to payment. The owner testified that no demand was made, and gave evidence tending to show that with reference to some of the items of work upon which it is now claimed that the plaintiff was in default, he had previously drawn the attention of the plaintiff thereto, who promised to complete or remedy the same. The trial court has either expressly or by necessary implication found these facts also in favor of the owner.

The trial court has found on sufficient evidence that it cost the owner the sum of $1,433.54 to complete the contract, and that this was the reasonable value of the work. It will be observed that this is nearly $500 in excess of the final payment, and is some indication that the fourth payment had not been earned.

There was evidence tending to show, and I -think it. fairly preponderates in that direction, that the plaintiff failed to perform .many items of work and to furnish many items of material required by the contract before he was entitled to the fourth payment. He failed to complete the work of furnishing and connecting fourteen lines of vent pipes to extend beyond the roof, work required before he was entitled to the first payment, and it cost the owner seventy-six dollars to complete this work. The contract required the plaintiff to furnish and set eighty-nine fixtures. • Forty-seven of these were upon the premises on the seventh of April, but according to the evidence adduced by respondent those on the third floor were not set, and it appears that many items in connection with the fixtures that were set had not been either supplied or. attached, viz., the rubber aprons and shampoo connections were wanting ; the gas logs were not connected ; pipes were not painted; covers to tubs ■were not screwed on ; waste pipes and strainers were not supplied, ■and other similar items of work and materials were not performed or furnished, and there were other items for defective work and damages done, and not remedied, by plaintiff’s workmen.

The plaintiff contends that the items of material and work omitted 'were of such a character that they could have been furnished as well at the completion of the contract, but, conceding this; the plaintiff was required to put the defendant in default before he was at liberty to abandon the contract, and this, he could not do with 'respect to the fourth payment without showing that he had discharged one-half of his obligation in respect to- furnishing and setting fixtures. In this we think he failed. It appears that-it cost $166 to complete the work which the plaintiff claimed to have done and $191.12 in addition thereto to remedy defects therein. The plaintiff should have remedied these defects, supplied these omissions, and then, if the owner refused to make the payment, he might with propriety have abandoned the work.

Where a contractor, acting in good faith, removes his men and tools believing that he has fully completed his contract* but in fact slight omissions are found which, may be readily supplied or remedied, the liberal and just rule of substantial performance obtains in equity and he may recover, a proper reduction from the contract price being made to indemnify the owner. Even if this rule were •to be applied in the case at bar we think the plaintiff could not recover the fourth payment upon the ground of" substantial performance ; but we are of opinion that the rule should not be applied with the same liberality in a case where, as here, the contractor deliberately abandons the work without any pretense of having fully completed his contract and solely on account of the failure of the owner to pay an installment intermediate the commencement and completion of the work. If the liberal rule of substantial performance is to prevail in such cases, then upon such abandonment it would require an appraisal of the damages to be deducted by. the owner, and this would necessarily delay the work. It is one thing to lay-down a liberal rule to prevent an owner from reaping the benefit of the services of a contractor who, acting in good faith, leaves the premises on the supposition that his work has been fully completed, and it is quite another to announce a doctrine not required by any rule of equity, which will lead to endless confusion, delay and litigation in the execution of building contracts. The summary abandonment of an incomplete contract is likely to prejudice not only the owner, but the rights of other contractors and their employees as well. When a contractor picks up his tools and orders his men to quit work on the ground of a breach of contract on the part of the owner in failing to make an intermediate installment payment, he should be prepared to show full performance of all conditions precedent to his right to such payment. The plaintiff refused to proceed with the execution of his contract, and elected to stand upon his strict legal rights. He must, therefore, in order to recover, bring himself fairly within the terms of the contract by showing performance of the obligations he incurred “ without any omission so substantial in its character as to call for an allowance of damages.” ( Van Clief v. Van Vechten, 130 N. Y. 571; Brainard v. County of Kings, 155 id. 538.) We think that both in law and in equity the owner was justified in withholding the fourth payment even-if a demand therefor was made.

The owner, however, having in accordance with the terms of the agreement completed the contract work, the plaintiff would ordinarily be entitled in equity to recover and enforce his lien for the "difference between the cost of completion and the balance unpaid on the contract. (Edison El. Co. v. Guastavino Co., No. 2,16 App. Div. 358.) In the present case the only provision in the contract bearing on the question of damages is that which authorizes the owner, in case the contractor, shall default, to'finish the work and deduct the cost from the contract price. But the plaintiff was guilty of total breach of the contract in deliberately abandoning the work, and this provision should not be construed as precluding the owner from recovering his general damages. (Murphy v. Buckman, 66 N. Y. 297; McCready v. Lindenborn, 63 App. Div. 106.) The measure of his damages is compensation for the loss reasonably and proximately resulting from the breach of the contract. (Hecla Powder Co., v. Sigua Iron Co., 157 N. Y. 437; Friedland v. Myers, 139 id. 432; Booth v. Spuyten Duyvil Rolling Mill Co., 60 id. 487; Baker v. Drake, 53 id. 211; Wakeman v. Wheeler & Wilson Mfg Co., 101 id. 205.) It is claimed that, owing to the breach of contract on the part of plaintiff, the owner was delayed one month in the completion of the building, and he has shown that the fair rental value of the building was $1,000 per month, and has been allowed that amount by the court in adjusting the claims of the respective parties. "We think that the owner failed to show satisfactorily that the breach of the contract on the- part of the plaintiff either necessarily or reasonably delayed the work for the period of one month and, therefore, he has not established that such breach was the proximate cause of the loss of rentals for so long a period. The recovery in this regard has been allowed on the theory that the rules of the Master Plumbers’ Association, of which plaintiff was a member, would not permit other members to take up the contract until after an investigation by its executive committee for the purpose of ascertaining whether the owner was at fault in refusing to pay the Contractor,.and that this committee did not decide the matter until the thirtieth day of June. It does not appear that so long a time was essential to a decision of the question or that the parties could have contemplated a delay of such great length ; nor does it appear that the respondent made any effort either to engage, other plumbers, not members of the association, to complete the work of to . obtain more prompt ■ action on the part of said committee. Furthermore, the evidence is far from conclusive that the building would have been completed earlier had it not been for the delay on the plumbing contract.

For these reasons that part of the judgment appealed from should be reversed and a new trial granted, with costs to appellant to abide the event.

Yah Brunt, P. J., and McLaughlin, J., concurred; Patterson, J., concurred in result; O’Brien, J., dissented.

O’Brien, J. (dissenting):

I think that not only part but all of the judgment should be reversed, and for the following reasons : The action is to enforce a mechanic’s lien for $900, the fourth payment under a written contract for plumbing and gasfitting, which it is alleged became due on April 6, 1900, at which time, because of its non-payment, the plaintiff discontinued work. The answer admits that the first three payments were made, but denies that the fourth was due, and avers that the third was prematurely paid on condition that plaintiff should forthwith deliver all materials and fixtures, which he never did, abandoning the work before the fourth installment was payable, wherefore defendant procured ■ the remainder of the work to be done at an expense of $1,790.66, and lost in rents by reason of delay incurred through plaintiff’s breach the sum of $1,000, leaving a balance due from the plaintiff.

The defense of a new agreement, whereby the plaintiff was to deliver forthwith ” ail the fixtures, is based upon a letter signed by the plaintiff when he received the third payment that he would “ proceed with all possible dispatch to complete the plumbing work * * * according to my original contract * * * provided that payments are made as the work progresses according to the contract.” This certainly is not an agreement to furnish forthwith all the fixtures, nor anything more than a ratification of the original contract and may be disregarded. It throws a flood of light upon the situation, however, and is, therefore, most helpful in discovering the true relations of the parties.

As testified, its purpose was to enable the defendant to procure more money or advance loans in order to complete the erection of the building and it appears that the entire work hinged upon the defendant’s receiving moneys by way of loans which were made to him as the structure neared completion. Thus, in this very contract under which the plaintiff claims, the installments were made dependent not alone upon the plaintiff’s work being done, but upon the defendant’s receipt of payments. The first '•installment of $850 Was due when iron sewer, soil and vent lines were in and brown mortar payment is due; ” the second of $800, when gasfitting and water supply lines were in and white mortar payment is due; ” the third, of $700, when lead roughing and testing was done and standing trim payment is due; ” the fourth, of $900 (which is sued for), “ when half of fixtures are set and doors hung payment is due,” and the last payment of $950 was to be made when all fixtures are set and job completed.”

The plaintiff testified that he had difficulty in obtaining the third payment from the defendant because the latter was out of funds, and he insisted that the payments should be in accordance with the terms of the contract and this was embodied in the letter he signed; that on the 28th of March, 1900, he sent word to the defendant that half of the fixtures as called for in the fourth payment would be set on April sixth, and that on April seventh, in conversation with defendant’s superintendent, the latter admitted that half of the fixtures were set and promised that payment would be made the fol-owing Monday morning, April ninth. Plaintiff’s workman corroborates this testimony and the superintendent himself says that plaintiff came to see about his payment and he told him if he was-right he would get his money. And by letter dated April seventh, plaintiff- notified defendant that the fourth payment was due. Not having been paid, he discontinued work and he téstifies that the defendant in conversation about April twelfth said he did not have the money to give him and suggested that he put in more fixtures' so a new loan could be had, which he refused to do, although he did write a memorandum to the effect' that “ 90% of the balance of the fixtures . * * * can be delivered in three days after order for same is given .by me.” The payment, however, was never made.

It -thus appears that the real difficulty, which was the one recognized by the parties, was the inability of the -defendant, to get funds with which,to meet, the'demands made upon him in the -erection Of' the building, and the contention that the plaintiff had not strictly performed his contract and was not, therefore, entitled to payment resulted from an afterthought.

It is urged that the rule to be applied in determining the merits of. this contention is not whether the plaintiff had substantially performed the work required to entitle him to the fourth payment, but whether he had performed his obligations “with-'out any omission so substantial in its character as to call for an allowance of damages,” inasmuch as in this case the plaintiff left the work before the entire contract was- completed and brought suit to recover the installment earned and not paid. The words, which we have quoted form a part of what was said • in the case of Van Clief v. Van Vechten (130 N. Y. 571), which contains an admirable statement of the law on the subject. As therein said: “ The question of substantial performance depends somewhat on the good faith of the contractor. If he has intended and tried to comply with the contract and has succeeded, except as to some slight things omitted by inadvertence, he will be allowed to recover the contract price, less the amount necessary to fully compensate the owner for the damages sustained' by the omission. * * * But when, as in this case, there is a willful refusal by the contractor to perform his contract, and he wholly abandons it, and,, after due notice refuses- to have anything more to do with it, his right to recover depends upon performance of his contract, without any omission so substantial in its character as to call for an allowance of damages if he had acted in good faith” The crucial question, therefore^ which determines which rule shall be applied is whether or not the contractor has acted in good faith and not whether or not he is suing to recover an installment rather than the entire 'or final payment. Here the evidence is that the contractor did act in- good faith and intended and tried to comply with the terms of the contract, whereby he was to receive the fourth installment; and I think, therefore, that the general principle of substantial performance should govern.in determining his rights.

Furthermore, we should give tó the contract under consideration a fair interpretation from the standpoint of those who made it and not according to its literal.phraseology. It was-intended to provide a measure of the work and thus set the time for the partial payments. Certain leading items were specified and the condition was attached that the defendant himself received a stated installment. The. final payment, which was larger than the others, was to be made “ when all fixtures are set and job completed.” Evidently, if each and every implied detail of the work which, under a precise and rigorous construction, would be grouped in one of the earlier payments, was actually intended to constitute a condition precedent to the several payments, then these words, “ and job completed,” would be without meaning. A just and manifest interpretation of them, however, would be that all the various unessential and minor details of the different classes of work should be performed and completed, not before payment was due by earlier installments, but only before the final payment. This interpretation, moreover, is borne out by the actual conduct of the parties, for though it is now insisted that the' plaintiff was not entitled to the fourth payment relating to the setting of fixtures because he had not put in place certain vent pipe extensions, this work belonged, strictly speaking, to the first payment, which together with later payments, was made without such or any objection being made.

It is admitted that the “ doors hung payment ” had been received by the defendant and that there were more than half, or forty-seven of eighty-nine fixtures set, and at least half of each kind, which are the two requisites stated for the fourth payment. Because, however, of the failure of the plaintiff to actually set the vent pipes mentioned, to put in place detachable rubber' aprons and shampoo connections in the bath rooms, to paint the pipes, to screw on covers furnished for tubs, to replace some broken slate, to connect a waste pipe, to supply certain strainers, to rectify a leak in a valve and in a gas pipe, to repatch some plastering necessarily removed to adjust pipe, it is claimed that he forfeited his right to the fourth installment. The deficiencies specified were covered, I think, by the final and not the fourth payment, and, therefore, constituted no reason for the defendant’s failure to pay the sum demanded; but even if they were, matters which should have all been attended to prior to the fourth installment, none of them were of such a character as to preclude plaintiff from payment for. what he had in good faith performed, provided he had substantially completed his work up to that time.

Each of the alleged defects are reasonably explained by the plaintiff. The vent pipes though furnished were hot adjusted at the time as the tin roof was not on and the calking of these pipes was deferred till such work was done. The rubber aprons and connections were obtained, but in order to keep them clean and safe, were not attached and when sent to the premises with some other material after April seventh, they refused by the defendant. Of the remaining items, some were not even mentioned in the specifications as they were so trivial, and all could be most readily and satisfactorily attended to, as for instance the painting of pipes, the repairing of leaks and the patching of plastering, when the final touches were given. Hone amounted to deviations from the contract and all were minor in character. The substantial and real requirement for this payment that half the fixtures, the bath tubs, pipes, faucets, etc., which augmented the value of the building, should be put in, was complied with. What is required, as said in Phillip v. Gallant (62 N. Y. 264), is that “ there must be no willful or intentional departure and the defects must not pervade the whole, or be so essential as that the object which the parties intended to accomplish, to have a specified amount of work performed in a particular manner, is not accomplished.”

I think the plaintiff’s evidence abundantly shows that he has fairly and justly earned the sum for which he sués to recover, and that the judgment, accordingly, should be reversed and a new trial ordered, with costs to the appellant to abide the event.

Judgment so far as appealed from reversed and new trial ordered, with costs to appellant to abide event.  