John P. Cranford and Others, Appellants, v. The City of Brooklyn and Others, Respondents; James J. Moran and Others, Appellants

John P. Cranford and Others, Appellants, v. The City of Brooklyn and Others, Respondents; James J. Moran and Others, Appellants. Mechanic’s lien filed against a city contractor — right of the city to retain moneys due the contractor as an indemnity against claims —failure to object to an unpleaded defense being interposed on the trial. A city contract provided that the contractor should give a bond, conditioned to indemnify the city against claims for injuries arising out of any negligence of the contractor in the execution of the work, and further, that so much of the moneys due to the contractor as should be considered necessary should be retained by the city until all suits and claims for damages should have been settled. In an action brought to foreclose a mechanic’s lien, filed against the contractor, it was Held, that the city was entitled to retain the moneys due to the contractor as security against such claims as were based upon the fault or misconduct of the contractor, but that claims arising from faults in the design or specifications for the work were not chargeable against such moneys. Semble, that the fact that the court allowed the city to amend its pleading upon the trial of the action, and to set up the defense of its right to retain the moneys as an indemnity against claims, is not available on appeal, where no objection is taken on the trial to the reception of the evidence offered to sustain such defense. Appeal by the defendants, James J. Moran and others, from a judgment of the Supreme Court in favor of the defendants, the City of Brooklyn and others, entered in the office of the clerk of the . county of Kings on the 24th day of June, 1896, upon "the decision of the court rendered after a trial at the Kings County Special Term. Also, an appeal by the plaintiffs, John P. Cranford and others, from so much of said judgment as declares that the plaintiffs’ lien is subject to the right of the city of Brooklyn to retain the sum now due to the defendants James J. Moran & Co., as security under the provisions of the contract between said city and said James J„ Moran & Co., and as directs that the payment of the plaintiffs’ lien, be deferred until the claims which are now held against the defendant the City of Brooklyn, on the ground of the alleged negligent construction of the Greene avenue main relief sewer are settled, or until any decision, judgment or verdict is rendered by which it may be decided that said alleged damages were not caused by any negligence on the part of the defendants James J. Moran & Co. in the construction of said sewer. William J. Carr, for the plaintiffs, appellants. William G. Cooke, for the respondent City of Brooklyn. Horace Graves, for the respondent Newman. [MAJORITY — Cullen, J.:] Cullen, J.: The defendants James J. Moran S? Co. entered into a contract with the defendant the City of Brooklyn for the construction of certain sewers. This contract was performed by Moran & Co. The plaintiffs and the defendants, other than the city and Moran & Co.,, are sub-contractors or .materialmen, who performed work or furnished materials in. the execution of the contract. These parties filed mechanics’- liens. The plaintiffs brought this action to fore.close their lien. The defendants answered, setting forth their various claims upon the unpaid portion of the .contract price, which the defendant the City of Brooklyn admitted that it still held. In its answer the city set up no right to retain the fund or the existence of any claims for damages. The action was tried and the court rendered' judgment determining the lights and priorities of the various claimants. These provisions of the judgment, it is unnecessary to recite, as only one question is raised on this appeal. The contract between Moran & Co: and the city contained the following provision: “ And the said party of the second part further agrees that he will exe-. cute a bond in such-sum and with such securities as shall be approved by the commissioner for the faithful performance of this contract, conditioned to indemnify and save harmless the parties of the first part from all suits or actions of any name or description'brought against them or the city of Brooklyn for or on account of any injuries or damages received or sustained by any party or parties by or from the said party of the second part, his servants or agents, in the construction of said work, or by or in consequence of any negligence in guarding the same, or any improper materials used in its construction, or by or on account of any act or omission of the said party of the second part, or his agents, and for the faithful performance of this contract by the party of the second part; and the said party of the second part hereby further agrees that so much of the moneys due to him under and by virtue of this agreement, as shall be considered necessary by the said commissioner, may be retained by the said parties of the first part, until all such suits or claims for damages as aforesaid shall have been settled and evidence to that effect furnished to the satisfaction of said commissioner.” The trial court found that the balance due on the contract, still unpaid by the city, was $53,573.52, and that claims had been filed against the city to the amount of about $100,000 for damages caused by the alleged faulty or improper construction of the sewer. The decree directed “ the city of Brooklyn be and it is hereby directed to pay out and distribute the said sum of $53,573.52, or such a balance thereof as may remain when the claims now held against the defendant, the city of Brooklyn, on the ground of the alleged negligent construction of the said Greene avenue main relief sewer are settled, or when any decision, judgment or verdict is rendered by which it may be decided that such alleged damages were not caused by any negligence on the part of the defendants James J. Moran & Company in the construction of the said sewer as follows,” etc.. The only parties who appeal from the judgment are the plaintiffs and the defendants James J. Moran & Co., and the latter have not appeared before us on the appeal. The plaintiffs contend that the trial court had no power to permit the defendant the City of Brooklyn, after trial, to amend its pleading so as to set up. its right to retain the fund as indemnity against claims or suits. We concede that this was a new defense and that it was beyond the power of the court to allow the defendant, the City of Brooklyn, to set up that 'defense on the trial, had proper objection been made to the reception of the evidence offered to support it. But the record shows that.the plaintiffs made no objection whatever, and the objection of the defendants Moran & Co. that the evidence was immaterial and irrelevant did not fairly apprise the court of the true objection that the defense had not been pleaded. Had proper objection been made, the court would doubtless have suspended the trial and given the defendant, the City of Brooklyn, an opportunity to apply, on notice, for leave to amend its answer. • The objection to the regularity of the proceedings should not now. prevail, when the rights of all parties can be protected by a modification of the judgment, which we shall direct. We agree with the claim of the appellants that the city can retain the funds as security for such claims only as- are based on the fault or misconduct of the contractors, and that claims arising from fault in the design or specifications for the work are not chargeable against tlie fund. We think the fair interpretation of the part of the decree quoted is in accord with this view. As the notices of the-claims are not printed in the record before us, we must assume they are for matters arising from the negligence of the contractors. However, the matter is not of great importance. It is plain that it will be necessary for the parties to have further relief and take further proceedings under the decree. Leave to make such application is provided for by the findings and decision, but not reserved' by the decree itself. The decree should be modified by incorporating in it such provision and by further providing that either party may apply for a reference to determine and state what claims are chargeable against the fund, and to decree the payment from the fund, fro.m time to time, of such sums as may be released from it by the settlement or discharge of the claims as security against which it is held. The judgment appealed from should be modified in accordance with this opinion, and as modified affirmed, without costs to either party. All concurred, except Goodrich, P. J., not sitting. . Judgment modified in accordance with opinion, and as modified affirmed, without costs to either party.