
    The City of New York, Respondent, v. William P. Baird and The Fidelity and Deposit Company of Maryland, Appellants.
    First Department,
    February 25, 1907.
    Principal and surety—evidence — good faith of municipality in settling action — when prior statements of principal to city authorities inadmissible.
    "A municipal contract required the contractor to indemnify the city against damages to person or property caused by his negligence. Before the trial of an action against the city and the contractor for personal injuries the contractor, haying finished the work and desiring to be paid gave the city a bond of indemnity for §10,000 to secure it against any judgment that might be obtained in the action. The plaintiff in that action recovered §33,000, and pending an appeal by the city and the contractor the former settled with the plaintiff at a sum §5,000 less than the judgment. In an action by the city against the contractor and the surety on his bond,
    - Held, that as there was evidence by the corporation counsel that he was of the opinion that the plaintiff was entitled to recover and that a new trial might result more unfavorably to the city and there being no evidence of bad faith on the part of the city in making settlement, a finding that the city acted in good faith was sustained by the evidence;.
    That statements made by the contractor to the city comptroller at the time' the bond was given and two years prior to the settlement by the city that the contractor wished to carry the case to the appellate court were properly excluded, being too remote-on the question of good faith on the part of the city authorities.
    Houghton, J., dissented.
    Appeal bv the defendants, William P. Baird and another, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 26th day of Hay, 1904, upon the verdict of a. jury, and .also from an order entered in said clerk’s office on the 24th day of Hay, 1904, denying the defendants’ motion for a new trial made upon the minutes, with notice of an intention to bring up for review upon said appeal an order entered in said clerk’s office on the 24th day of Hay, 1904, directing that there be included in said judgment the interest on the amount of damages awarded from the 10th day of October, 1899, to the 6th day of Hay, 1904.
    The defendant Baird had. a contract with the city of New York to lay water mains, the contract providing that he should indemnify and save harmless, the city against all actions and claims for injury to person or property resulting from his negligence in the performance of the work, etc. A person being injured brought action against Baird and the city. Baird having.completed his contract before the. trial of the action and wishing to be paid the money due under llis contract, gave the city a bond of indemnity to secure it against any judgment obtained in said action. The injured person recovered .judgment for a sum exceeding the amount of the indemnity and thereafter, pending an appeal by Baird and the city, the latter set* tied with the plaintiff in that action for a sum $5,000 less than the judgment. This is an action by the city against Baird and his surety on the bond of indemnity. '
    
      A. Delos Kneeland, for the appellants.
    
      Terence Farley, for the respondent.
   Ingraham, J.:

Upon the former appeal in this case (176 N. Y. 269), which was from a judgment entered, on a verdict directed for the plaintiff, the Court, of Appeals held that the city cotild not deprive the principal and his sureties of his right of .review without taking the chances of loss should such review and a subsequent trial had by reason -of it result favorably to the principal; that midway, between the two extremes claimed by plaintiff and defendants lies the true position,; and the test of it is, Was the action of the municipal authorities-complained of taken in bad faith ? If so, did it operate to the substantial injury of Baird and the surety? If the first question be answered in the affirmative,- then the party indemnified cannot, recover unless it shows that its áption — found by the jury to have been taken in bad faith with the intention of injuring the principal or surety-—did not operate to the disadvantage of either, or if it did to some extent, that after deducting the amount of damage done to them there still remained something due on the bond.” Upon a retrial under, this decision, therefore, the first question that was to be presented was, did the city act in bad faith ? And then if the. jury should find in'the negative, it would seem to follow that the plaintiff was entitled to recover on the bond. On the other hand, if it should be found that the city did act in bad faith, which, I assume, means that the city acted in making the settlement without recognizing the rights of Baird and his surety which it was bound to recognize under the circumstances, then the question pre-. Sented is whether or not the defendants were injured by the bad faith of the city. Here, the city stood in a position of having a^ claim against it for $50,000, based upon the negligence of Baird and for which the city was entitled to hold the amount that was due to Baird under the contract. Baird wanted to get the money. ' If he had consented to allow' the city to retain the money, the city would not have objected to his continuing the action as long as he pleased. He, however,- to get the money, agreed to give to the city a boud for $10,000, which secured it against any judgment that should be obtained in that action, and that bond was given. It was not conditioned upon a final appeal to the Court of Appeals, but upon Baird and the surety paying any judgment that should be obtained against the city in the action. The case was tried and resulted in a judgment against the city for over $22,000, and neither Baird nor the surety paid the judgment, and never have paid it. Thus, the city had a judgment against it for $22,000. If the liability of the city was established, even if a new trial was obtained, a much larger verdict might have been obtained, as the plaintiff’s claim was for $50,000. When an offer was made to the city to settle for $17,000, the question was presented to the law officers of the city, who were bound to protect its interests as to whether or not such a settlement should be made. The attorney for Baird testified that he insisted upon the city continuing the appeal. There is a considerable disagreement between the assistant "corporation counsel and the attorney for Baird as to just what position Baird’s attorney took in relation to it'; but that Baird’s attorney knew of the negotiations pending and that there was a possibility of the case being settled appears beyond dispute by his affidavit, upon which he obtained an order for an extension of time to prepare the case on appeal, and the defendants made no offer to secure the city in the event of an affirmance of the judgment, or in the event of the plaintiff’s obtaining a judgment in éxcess of $10,000 if a new trial was ordered. We have the evidence of the assistant corporation counsel, who tried the case for the city, that in his opinion the plaintiff in the action' against' the city would recover, ■and that even if a new trial was obtained the result of the new trial would not be more favorable to the city and Baird than was the trial that had been had which had resulted iii a. judgment against them. There is nót, to my mind, a particle of evidence to dispute the fact that the law officers of the ■ city did actually and in good faith believe that the settlement was an advantageous one for both the city and Baird. One jury had found the city liable for- the negligence which had resulted in the injury to the plaintiff in that action ; and while it is possible there might have been errors on that 'trial winch would insure, a new trial, there is nothing in the record to show that the final result in the action would not have been a judgi ment in favor of the plaintiff for the injuries that it has sustained, and no one can tell but that Upon a new trial the verdict would have been in'excess of that awarded against the city on the first trial, ■

I cannot see hbw it is possible to say that upon tifie evidence the finding that the city did act in good faith was not'sustainedi by. the evidence. The Court of Appeals in reversing the former judgment held that the question of the good faith of the city officials in making the settlement was a question of fact for the jury; and the ■question as to the plaintiff’s good faith has been submitted to the jury and I do not think' that we should interfere with the verdict. The defendants strenuously insist that-the ruling of thé trial court in excluding conversation between the comptroller and Baii;d at the time the bond was executed was erroneous and that the conversation was competent evidence" as against the defendants. The attorney for the defendant. Baird' was on the stand -and was asked: “ Did you have any conversation with the Comptroller or with Mr. Blandy about the time this bond was given with reference to the attitude of Baird, the defendant, with reference to the Kelly-claim and the action proposed to be brought thereon?'”' That question was excluded and the. defendant excepted. He was then asked what that conversation was, which was" also excluded ; and the same question' was asked -to any conversation with Mr. Blandy at about the time of- giving the bond. This conversation was at the time the bond was given. It certainly could not be reler ,van't in. an attempt to vary the condition of the bond, or for the purpose of affecting the construction to be given to it. : The bond was dated February 2, 1898. The action against the city by Kelly was commenced on February 28,1898. The judgment was obtained on May 5, 1899, and the judgment was satisfied on March 19,1900. This conversation, therefore, was more than two years prior to the time of the satisfaction of the judgment, and at the time it was offered there was no evidence bearing on the good faith of the city officials in making the settlement. In making the ruling, however, the court did not finally hold the evidence not admissible, but stated that he would exclude it at that juncture of the case ; that it was necessary first for the defendants to attack the good faith of the plaintiff's officials; to show the circumstances attending the conduct of the defendant after the rendition of the verdict; show what the defendants wanted the city to do, and; that the court could-then see whether it was material on the question of good faith. The objection was then sustained with leave to ask the question again if the defendants were disposed to. Subsequently, after the defendant Baird’s attorney had been examined, he was asked by counsel for the plaintiff to state what else was said by the comptroller and himself prior to the execution of the bond when the comptroller stated that the amount of the balance due the defendant Baird would not be paid unless the bond was given. At first the court seemed to overrule the objection, but subsequently, upon counsel for the plaintiff stating that he meant to show that he wanted to carry the case to the appellate court, the court sustained the objection, to which the plaintiff excepted.

It seems to me that a statement to the comptroller some time before the bond was executed and before the trial of the action against the city that the defendant Baird wanted to carry the Kelly case to the appellate court was quite immaterial as to the good faith of the law officers for the plaintiff in settling the case after the verdict had been obtained against the city. Assuming that any, statement as to what was said to the corporation counsel or his assistant at that time would have been material as bearing upon the act of the law officers for the plaintiff in determining upon the settlement, the ’mere statement of Baird’s intention before the bond was executed to the comptroller seems to be too. remote as not bearing upon the good faith of the law officers of the plaintiff who made the settlement. A casual statement of this kind to the comptroller, over two years before the case was settled, would not certainly be notice to- the city of any -fact which could bear upon the good faith of counsel for the corporation in -making the settlement. -

There is no other questipn which, I think, requires discussion. The case was submitted to the jury exactly as the Court of Appeals • said it should be and. the jury has found a verdict that, in my view,' .is sustained by the evidence, and the judgment appealed from should, therefore,-be affirmed, wi£h costs. -

Patterson, ■ P. J., and Lambert, J., concurred ; Laughlin, J., concurred in result; Houghton,. J., “dissented.

Judgment affirmed, with costs.  