KINGSLEY v. THE CITY OF BROOKLYN

KINGSLEY v. THE CITY OF BROOKLYN. Brooklyn City Court; Special Term, 1876. Reference. A compulsory reference may be ordered in an action on • contract (difficult questions of law not being involved), if the ascertainment of the amount recoverable will necessarily involve a great number • of items, requiring the statement of an account, notwithstanding the defense is that the contract itself is void ab initio for fraud. Contractors, employed to construct a public work for a municipal • corporation, brought suit to recover compensation under clauses of the contract, which specified twenty-nine different classes of work, the amount of work of each class to be determined by the city engineer as the work progressed, to be paid for at specified rates. The defendants set up that the contract was made by fraud, and without authority, and was void. Held, that the.case was proper to be referred. Motion by plaintiff for an order of reference. This action was brought by William C. Kingsley and Abner C. Keeney against the City of Brooklyn to recover a balance of one hundred and seventy-eight thousand dollars, claimed to be due for work done upon, and materials furnished for the Hempstead Reservoir by the plaintiffs, under a contract made between the city of Brooklyn, by the Permanent Board of Water and Sewerage Commissioners for said city, and the plaintiff. The complaint alleged the contract, of which it set forth a copy. The clauses as to compensation provided that for performance “there shall be paid to the contractors the following prices, viz.: “For every cubic yard of excavation from within the waterlines, .... fifty-five cents. “For every hundred feet of haul .... three cents. “For every acre of grubbing and clearing .... twenty-five dollars.” And so on, making about thirty different classes of work. The complaint further alleged that in pursuance of said contract, and in accordance with the terms thereof, the plaintiffs, in the years 1872,1873,1874 and 1875, performed for the defendant a large amount of work and labor, and supplied and furnished a large quantity of material, of value together of over one hundred and seventy-eight thousand dollars. The answer admitted the making of a contract in terms as set forth in the complaint, but alleged: First. That said contract was not in fact the act of said city, but was in truth and fact void and of no effect as against said city, for the reason that it was not made in good faith by the persons composing said ' Permanent Board, but was in fact a corrupt and fraudulent scheme between the persons composing the board and plaintiffs, wrongfully to obtain from the defendant large sums of money which the said city, of right and in good conscience, and by fair dealing, ought not to pay; that in order to carry out the scheme, the plaintiffs and the persons composing said board, had fraudulently confederated together to procure and cause to passed by the legislature of this state, the various acts and laws by which they claimed the power purported to be given to do and perform, as stated in said contract ; and also falsely represented to the people of the City of Brooklyn, and to the public at large, that there was great danger of a deficiency in the supply of water for said city, when in truth such supply was ample and sufficient; they had caused great waste of water then available for such supply, so as to make it appear that such supply was insufficient and inadequate ; that though specifications had been made for such work, they caused that such specifications should be kept secret and should not be published, and that no general or proper invitation to bid for such work should be given, as required by the laws of this State; that they caused that only certain selected persons were invited to make any bid or proposal for such work, with the intention, unlawful agreement and understanding, that they should offer to do said work only at such prices somewhat larger than those at which it was then understood the plaintiffs would offer, and in fact did offer to do the work, and that the plaintiffs proposed to do the work only for an excessive and fraudulent price; that when certain of said selected persons (in violation of their unlawful scheme and agreement), had offered to do said work for a sum or price less than that for which plaintiffs, pursuant to such understanding and agreement, had offered to do the same, the persons composing said board, and the plaintiffs, unlawfully arranged together that the plaintiffs might change and reduce their bid or offer so as to make the same lower than the price or sum for which said persons, violating said understanding, had offered to do the same; and that, pursuant to said scheme, the contract was awarded to plaintiffs, at such reduced or modified price or sum; that the ground where such work was to be done was covered, in great part, by shallow water, which could be easily and properly drawn off by said board, whereby the cost of said work would be very greatly diminished, but that the plaintiffs and said board caused that such water should not be drawn off, with intent to prevent any of said selected persons, or other persons, from being led to make a bid to do said work for a reasonable price; and that, after the making of said contract, the said water was secretly drawn off by said board, and the cost and expense of doing said work was thereby greatly reduced; that thereby all bids made were greatly increased, and many persons deterred from bidding; that they concealed such plans and specifications from many competent persons who would have been bidders. Second. That the persons composing said board, and said city, the defendant, had no authority or right to make any contract of the kind, because due and formal plans and specifications had not first been publicly prepared, and advertisement made, for proposals-in certain designated newspapers, and that the contract was unauthorized, and not the contract of defendants. Third. That the appropriation of said work had been already expended prior to the time that the work-referred to in the complaint was done. Fourth. That neither the defendant nor any-officer or-agent thereof had any authority to contract to have any work done, except as provided in a certain plan referred to in and by section 1 of chapter 47 of the Laws of 1870, and that the work and material referred to in- the-complaint, were not a part of the work referred to in such plan, and were not in any manner called for or-allowed by such plan; and that the persons composing said board had allowed plaintiffs to do work outside of the original plans and specifications,, for - the- purpose-of increasing their profits and pursuant to their fraudulent scheme. Fifth. That under the contract and agreement mentioned in the complaint, the plaintiffs had done certain work, and furnished certain material, of the value in the aggregate of more than two hundred thousand dollars, but that they have been fully paid for all such work, all that was the fair value of the same, and all that in and by said contract was stated to be agreed to be paid. Then follows a general denial of allegations not admitted. The plaintiffs moved for a reference of the cause ¡upon an affidavit, which, after stating the nature of the action, states that by the terms of said contract, and for the purpose of ascertaining the amount of work ¡done, and of fixing the compensation to be paid to these plaintiffs therefor, the work to be done under ¡said contract was classified and divided into thirty-one ¡different classes, and a price which plaintiffs were to be paid for said work under said contract, was fixed to ¡each class and description of work; that there is now due plaintiffs for such work, one hundred and seventy-eight thousand dollars and upwards, over and ¡above all payments made under said contract; that the rendering of said work, labor, and service, and the ¡amount due therefor, is put in issue by defendant’s ¡answer, and that the trial of the issue of fact therein will necessarily require the examination of a long ac■count, which is directly involved in said issue; that to ■establish the defendant’s demand, it will require an •examination of an account for the amount of work ■done by plaintiffs under each of thirty-one classes of work into which said contract was divided, each constituting a separate account, and each of said separate ¡accounts consisting of many separate and distinct items for work performed at different times. That the defense set up by defendants in said answer, that the one million four hundred thousand dollars appropriated for the building of said reservoir had been exhausted prior to the performing of the work for which payment is claimed, will necessarily require the examination of a long account which is directly involved in said issue; that it will be necessary to determine whether said appropriation had been exhausted at the time of performing said work, to ascertain by evidence different objects and purposes to which said money has been applied by the defendant, and the amounts which have been applied to each several object, and whether said money has been applied by the defendant to the contractor of said reservoir, or diverted to other purposes ; that plaintiffs claim that upwards of two hundred thousand dollars of said appropriation has been illegally and unlawfully diverted by the’ defendants, and applied to other and different purposes than those for which it was appropriated; that said investigation will require the examination of a long account; that said account consists of more than fifty different items, upon each of which proof will have to be taken on said trial. And deponent is further informed that it is the intention of the defendants on said trial, to litigate the issue raised by the pleadings therein, as to the amount of labor performed under said contract in excavating the bottom and sides of said reservoir, and to dispute the correctness and accuracy of the measurements and estimates made by the engineers of the city as to the amount of work done under said contract in said excavation ; that for the purposes of measurement, the bed of said reservoir was divided into not less than fifty thousand cross-sections or squares of fifty square feet each; that each cross section did and will constitute a distinct and separate subject of measurement and estimate under said contract, in ascertaining the amount of compensation due to the plaintiffs, each of which separate measurement and estimate will constitute a distinct item in plaintiff’s claim, to be tried and determined on said trial, mating at least one hundred thousand separate and distinct items involved in said issue, and that it will require many weeks for an engineer to make such calculation ; that in addition to the calculation involved in determining the quantity of earth removed from the bed of said reservoir, there will also remain the calculation and estimate of the quantity of earth excavated and removed in constructing a conduit from said work ; also the amount of labor performed in building a certain highway on said work ; also the quantity of excavation for the puddle wall in constructing the dam, and so for the work done under each class into which said contract was divided. That the corporation counsel, in answer to a question proposed in open court, on a motion made by the defense to postpone the trial of this case, announced that it was the intention of the defense to dispute the accuracy of said measurements and estimates. Benj. F. Tracy, for the motion. W.C.De Witt and J. E. Parsons, for defendant. I. An action against a municipal corporation, the pleadings in which charge fraud, rendering void the contract, and mating the public officers connected therewith, guilty of a misdemeanor, cannot be compulsorily referred. Actions directly involving fraud were not referable prior to the constitution of 1846 (Levy v. Brooklyn Fire Ins. Co., 25 Wend. 687). Nor actions for non-feasance of public officers (Beardsley v. Dygert, 3 Den. 380). Nor actions sounding in tort (Dederick v. Rickley, 19 Wend. 108; Gilmser v. Redfield, Id. 21; Green v. Patchen, 13 Id. 294; Yates v. Russell, 17 Johns. 461). Upon these pleadings, all those elements are presented. 2. Section 2, article 1, of the constitution of 1846, and section 2, of article 7, in the constitution of 1822, and section 41 of 1777, perpetuate the right of trial by a jury, in an action like the present by an authority superior to either the legislature or the courts Townsend v. Hendricks, 40 How. Pr. 143, Ct. of Appeals). The law has been thus laid down and applied since the constitution of 1846 (Freeman v. Atlantic Fire Ins. Co., 13 Abb. Pr. 124; McLean v. East River Ins. Co., 8 Bosw. 700; Ross v. Mayor of N. Y., 32 How. Pr. 164; McMasters v. Booth, 4 Id. 427; Dewey v. Field, 13 Id. 437). 3. Welsh v. Darragh, 52 N. Y. 590, does not change the rule. It arose upon a contract conceded to be valid. In the answer the contract was admitted to be valid, but it was alleged that in the. delivery of the merchandise, false representations were made, and it was sought to counter-claim the damages sustained by this deceit, in the execution of the contract against the plaintiff’s claim. This was a style of defense tolerable under the Code, which permits the joining of causes of action on contract and in tort arising out of the same transaction, and hence unknown to the law prior to the constitution. Hence, it was separable. The complaint determining the character of the action. Such, however, is not the present case upon the pleadings. The charge of fraud herein goes to the making of the contract itself. In effect it is claimed that there is no contract. There is only a fraudulent contrivance, utterly void. And again, the elements of tort, and of official non-feasance are involved. If the charge of fraud in the making of the contract be maintained, no account, long or short, is to be examined. In the case of Welsh r. Darragh, such an examination was not disposed of by the charge of fraud, even if true. In Welsh v. Darragh, the character of the action was one of pure contract, fraud being introduced only upon a remote and collateral branch. In this case the issue of fraud goes to the whole cause of action. 4. The remark in decision of the court of appeals in Welsh v. Darragh, that the complaint is to determine the character of the action for the purposes of a motion to refer is to be limited to that action, and was intended only to declare that that particular action was solely upon contract. II. If, however, Welsh v. Darragh is to have the wide construction sought, still in this action a long account is not involved. The answer, apart from fraud, admits the work, and pleads payment. Here, then, no long account is presented for examination. III. That an examination of a long account may or will become necessary collaterally, is not' sufficient to compel a reference (Cameron v. Freeman, 18 How. Pr. 310; Kain v. Delano, 11 Abb. Pr. N. S. 29, Ct. of Appeals). This disposes of the point as to the condition of the fund applicable to the Hempstead Reservoir, if that point can be considered on this motion at all. IV. Where there is but one subject matter the cáse is not referable, into however many different items of detail this subject may run (Brink v. Republic Fire Ins. Co., 2 N. Y. S. C. 550, 551; Swift v. Wells, 2 How. Pr. 79; Miller v. Hooker, Id. 171; People v. Supervisors of Schoharie, 6 Wend. 506). The subject matter here is the validity and scope of the contract, and this in law and fact is only triable upon compulsion before a jury. V. Cases involving the examination of a long account wherein a court may compel a reference are confined to cases involving an account between the parties,—such as partnership accounts and the like (Van Rensselaer v. Jewett, 6 Hill, 373; Graham v. Golding, 7 How. Pr. 260). YI. The accuracy of measurements is not involved in any protracted sense. If it were, it is not a matter of accounting. It is merely the measurement of the work done or the excavation made, by scientific experts and the taking of their testimony. Experts as to the legitimate cost or value of any public structure or the material used therein may estimate from minutes or their general estimates, may require, for confirmation or refutation, the investigation of multifarious details ; yet to pretend that such testimony presents the case of a long account contemplated by the section of the Code invoked would be absurd. VII. There are difficult questions of law to be decided (De Hart v. Covenhoven, 2 Johns. Ch. 402; Ives v. Vandewater, 1 How. Pr. 168; Adams v. Bayles, 2 Johns. 374; Anon., 5 Cow. 423; Shaw v. Ayrs, 4 Cow. 52). Even if this court has the power to compel a reference in this action, it is merely a permissive power, and in sound discretion it ought not to be exercised here. See also the next case, Hyatt v. Roach, and the following recent cases. Where the complaint alleged that the defendant had drawn and received from the comptroller of the city of Hew York, a much larger sum of money than “was due for services, labor and materials necessary for, and which had been rendered and furnished in and about the construction” and erection of a court-house; and the answer denied the allegation; Held, a referable cause. Supreme Ct., 1875, opin. by Westbrook, J., Mayor, &c. of N. Y. v. Genet, 4 Hun, 658. In an action on a contract where the defendant, as separate defenses or counter-claims, alleges the advancing and paying out of money, and the performing of labor and services, aggregating a large number of items—Held, that if the answer involves an account the case is' referable, although the cause of action set forth in the complaint is non-referable. N. Y. Superior Ct., 1875, opin. by Monell, Ch. J., Maryott v. Thayer, 39 Super. Ct. (7 J. & S.) 417. In an action by the receiver of a corporation for moneys fraudulently obtained from such corporation, through a contract made by the defendant, at the time its president, and where the complaint alleged that the defendant was enabled to and did keep false accounts on the books of the company, and asked to recover the actual balance due from defendants to the corporation,—Held, a referable cause. Sup'm Ct., 1874, opin. by Talcott, J., Bensel v. Galt, 5 Sup'm Ct. (T. & C.) 186. Where the plaintiff brought an action founded on an account embracing many items, which were admitted by the defendant, but alleged to relate to merchandise which was to be sold by the plaintiff on commission, and that he had violated his duty in selling at improper times, and for less than its value,—Held, that the case was referable. Sup'm Ct., 1876, opin. by Brady, J., Cowden v. Teale, 6 Hun, 532. In an action for the sale and delivery, under a special contract, of an indefinite quantity of beef at a certain price per pound, where a question of fraud was raised by the answer,—Held, that the plaintiff’s cause of action was referable, and that it Could not be made non-referable by the defendant’s answer. N. Y. Superior Ct., 1875, opin. by Monell, Ch. J., Patterson v. Stettauer, 39 Super. Ct. (7 J. & S.) 413. Where an action was brought by an attorney on an account for various services, including many items, and a general denial was interposed,—Held, that the trial of the issues involved a long account, and a compulsory reference might be ordered. N. Y. C. P., 1871, opin. by J. F. Daly, J., Schermerhorn v. Wood, 4 Daly, 158. In an action by an attorney and counsel to recover for services, the performance of which, but not their value, was admitted, except as to two separate and distinct items as to which the statute of limitations was pleaded,—Held, that the trial of the issues did not require the examination of a long account, so as to allow a compulsory reference to be ordered. N. Y. C. P., 1874, opin. by Daly, Ch. J., Dittenhoeffer v. Lewis, 5 Daly, 72. In an action on an account for services and disbursements,—e. g., an attorney’s bill,—where the complaint alleges an agreement to pay a sum certain, if defendant does not contest the items of expenditure, but denies the special agreement and alleged value of the services, a compulsory reference cannot be ordered. Sup'm Ct., 1874, opin. by Tappen, J., Flanders v. Odell, 16 Abb. Pr. N. S. 247; S. C., 2 Hun, 664. In an action against the makers of bills of exchange, which were alleged to have been paid by the proceeds of certain shipments of com, a motion was made for a reference on the ground that the trial would involve the examination of the account of sales of such shipments, but it appeared by affidavit that the gross and net proceeds of the sales was admitted by both parties, and that the only question in dispute was whether the proceeds of the sales had been received-by the agents of the plaintiffs or of the defendants, and involved a difficult question of law. Held, that a compulsory reference should not be granted, both because the trial would not.involve the examination of the account of sales, and also because it should not be ordered where the trial will require the decision of a difficult question of law, even if it would otherwise be proper. The opinion contains a concise history of the origin of the practice of referring causes involving the examination of long accounts. N. Y. C. P., 1874, opin. by Daly, Ch. J., Magown v. Sinclair, 5. Daly, 63. [MAJORITY — Neilson, Ch. J.] Neilson, Ch. J. This action was brought to recover a balance of $178,000, claimed to be due for work done upon, and materials furnished for the Hempstead Reservoir by the plaintiffs, under their contract with the defendant. The answer sets up new matter to impeach the validity of the contract, and the good faith and management of the plaintiffs, and of the persons who acted officially in making that contract, and controverts the claims in the complaint stated. It was drawn with great care, and is broad enough to admit whatever pertinent evidence the defendant may have to offer. The learned counsel for the corporation has thus evinced an earnest desire to protect the rights of the city. But in view of the papers on file, and of the accounts kept in the proper department, he could not, and does not, deny the formal making of the contract, or that the plaintiffs had proceeded to act under it. On the contrary, the answer states that the plaintiffs had done work, and furnished materials of the value of more than $200,000, and have been paid the fair value of the same, and all that in and 'by the pretended contract was agreed to be paid. An observation, made by Mr. Parsons on his argument, was quite in keeping with this aspect of the pleadings : 16 They would not dispute that there was, in form, a contract obtained, but they would try to prove that it was obtained under such circumstances, and by such means, that the court should not require its enforcement.” Under these pleadings, the plaintiffs could put the contract in evidence on the trial. But if the execution of it, and the power of the persons acting officially in respect to it, are to be regarded as fully denied, no special legal difficulty would attach to this branch of the case. The rule common to cases where the defendants sought to be charged on contracts made by agents, put the plaintiffs to the proof not only of the execution by, but of the authority, of the agents would apply. Nor would such difficulty exist if the fraudulent management, which on mere information and belief is set set up in the answer, should be proved. The questions thus presented would be of mere fact, governed by principles simple and of easy application. My appreciation of the case, and of the arguments of the learned counsel for the defendant, has led me to make a careful examination of the numerous authorities cited by them. Mr. De Witt’s brief seemed to demand that special attention. I agree with him that the case of Welsh v. Darragh (52 N. Y. 590), is to be distinguished from this case in one aspect—the fraud set up by the defendant, Darragh, related not to the contract, but to the mode of performance. But the same ruling would have been made had the imputation of fraud reached both branches of the case. The statement of the learned chief justice that “the character of an action is determined by the complaint,” is true in reference to every form of action at law or in equity. There is no other test by which such a question can be determined. The cases, cited at large in the brief, are of two classes, the one for wrongs, the other upon contracts. As to the first class, it it well settled upon principle and under the statute, that a reference can not be ordered. The issue as to the wrong, whether arising from a willful act or from mere negligence, must be tried by the jury. As to the second class,—actions on contract,—the power to refer is limited. There must have been an account, not collaterally, as in some of the cases, but directly between the parties, as for property sold, or services rendered by the plaintiff to or for the defendant. This necessarily excludes insurance cases. One claiming under a fire or marine policy must prove his damages, the amount of his loss, and may have occasion to exhibit an account made up of items. But the property lost or destroyed had not been sold to or received by the insurance company. The contract was not in its nature as for a mere purchase, but to indemnify the assured. So, too, in the case of an alleged partnership, where, by the pleadings in the action, the plaintiff affirms, and the defendant denies the existence of that relation, a reference or accounting will not be ordered until that relation is established. The reason of this rule of practice is, that the subject matter of the action is a fund in the use of which the plaintiff claims to be interested, to a portion of which, as net profits, he asserts title, and that, unless such claim be just, the defendant’s books, accounts, and assets, his sole property, should not be exposed to the scrutiny of the plaintiff, of his attorney, or of a referee. Some merchants in good standing might be ruined by such an inquisition. The questions of law involved in the case, and which may arise on the trial, are, in my judgment, very simple, not likely to be misapprehended by any person of reasonable capacity and intelligence. In view of the cases cited, and of the well known practice, I do not find anything to deter me from entertaining this application. The questions are: first, is the case legally referable % and, if so, secondly, would it be a fair exercise of discretion to grant the order % The contract, made part of the complaint, appears to have divided the work into about thirty different classes, so that the prices of each part could be fixed. Not that the thirty or more classes of work are so many mere items of an account; each class is made up of more or less items. It cannot be said how many items the account would contain if presented in form, but they would be several hundred, it may be several thousand, in number. To establish their claim under these pleadings the plaintiffs would be required to prove the measurement or quantity of each class of work and of the materials. That proof the defendants could controvert. The inquiry would be, how many cubic yards of earth were excavated, and how many were hauled, how many piles were driven, how many yards of clay were supplied, and of puddle and of concrete were prepared, of brick and of stone work were built, and so on throughout the work alleged to have been performed in the years 1872, 1873, 1874 and 1875. It would be utterly impossible for a jury to pass upon those and the like questions intelligently; to get at the extent of each branch of the work, according to the weight and balance of the testimony; affix the price, and so determine the claim, whether in the aggregate exceeding what has been paid or not. Most counsel of much experience will be able to recall cases much less complicated than this, where, after proceeding before the jury, the presiding judge, from mere necessity, stopped the trial and ordered a reference. In one case of this character, before Judge Edmoítos, an intelligent juror, as if in the agony of apprehension, arose, and declared his inability to hold in mind the particulars of the case. Our system of references was devised, and is well adapted, to relieve the jury from such intolerable burdens, and to secure the rights of parties from the errors or blunders unavoidably incident to the enforced submission of such cases to a jury. This case, in its nature and in its details, has all the elements required by the practice, to justify a compulsory reference; it is on a contract—a mere money demand—and the trial will involve the examination of a long account, arising directly between the parties. It is apparent that I would not be justified in denying this application on the plea of the discretion which in some cases may be properly appealed to. That would be treating as naught the statute and a well settled and well sustained system of practice. The discretion to be exercised is that which is governed by settled rules and principles of law. I know of none other. Can or should I hold that issues which cannot be tried before a jury, may not be tried before referees, and thus in effect determine that a suitor shall not have his cause tried at all ? Why should not this case take the course necessarily taken in other actions where accounts are involved ? Each of these litigants thus will ■ have the benefit of the only method by which their rights can be determined with clearness and certainty. It is proper to observe that the circumstance that the attorney-general, represented by Mr. Parsons, has brought an action against these plaintiffs, under a recent and special statute, is of no interest to us. We cannot shape the business of this court, or dispose of cases which, in the due and regular course, we are bound to hear, upon any such ground. Nor would the attorney-general or the learned counsel, acting with him, think well of any evasion of duty on our part, if we were disposed to indulge in it. It is sufficient that the other suit is not, could not be, pleaded in bar of this action. It is proper also to observe that, in the view of the learned corporation counsel, “this court is limited to the consideration of the complaint and answer for the purposes of this motion” and of the affidavits. That view is correct. No offer to so stipulate as to involve less inquiry into the state of the accounts, or to fix upon a special mode of trial, or to qualify the pleadings, was made. Mr. De Witt does, however, in his affidavit, make some intimations of a pacific character; “He is not able now to say positively that any questions of measurement of excavation, upon which plaintiffs received large sums of money, will be raised on the trial of this case, as such question is now undergoing an examination,” &c. He also thinks that the charge of about $100,000, for what is called the “extra haul, is not put in dispute, so as to require minute examination,” &c., a concession that some examination will be required. Why % Simply because the amount of the work, and the distance each load was hauled, are in dispute. But I appreciate the learned counsel’s sense of duty, his conviction that it might not be wise or proper to abandon any part of the case made by the answer put in on the authority of the chief magistrate of the city. He has preferred, and, I think, very properly, to stand on what may be his legal rights. No intimation has been made as to the referees to be appointed. I am thus left to make the selection. The persons appointed should be of such standing, character, experience and capacity, such known industry and thoroughness in the discharge of duty, as to command general and unqualified respect. With these views, and passing over some citizens to whom, as I infer, the labor might not be agreeable, I appoint Hon. John A. Lott, G-eorge H. Fisher and Thomas H. Rod-man, Esquires, as the referees. The order will be settled on notice. ¡No appeal was taken. But see Schermerhorn v. Wood, 4 Daly, 158.