George W. Crouch et al., Respondents, v. Max L. Gutmann, Appellant

George W. Crouch et al., Respondents, v. Max L. Gutmann, Appellant. "Where a building contract provides that in case the contractor refuses or neglects to supply a sufficiency of materials or workmen, the owner may finish the work and deduct the expense so incurred from the contract price, and the owner avails himself of this privilege, in determining in an action to recover a balance alleged to be due, as to whether there has been a substantial performance, the contractor is entitled to the benefit of the work so done; the owner may not assert a forfeiture in respect to the deficiency so supplied by him, but is simply entitled to deduct the expense incurred. To constitute a substantial performance of such a contract, it must appear that the contractor, in good faith, intended to comply with the contract; that defects, if any, are not pervasive and do not constitute a deviation from the general plan, and are not so essential that they may not be remedied without difficulty. Slight defects, caused by inadvertence or unintentional omissions, are not necessarily in the way of a recovery of the contract price, less the amount by way of damages requisite to indemnify the owner for the expense of conforming the work to that the contract calls for. As to whether there has been a substantial performance is usually a question of fact. Where by the terms of the contract, the architect’s certificate is a condition precedent to a right of recovery, and after the work has been substantially completed by the owner, the architect refuses to give a certificate, the refusal is unreasonable, and the non-production of the certificate is excused. It seems, that if the architect gives a certificate that the work is substantially performed, the right of the owner to abate recovery for defects in the work is not necessarily defeated. Plaintiffs assignors contracted to do the carpenter work on a building being erected by defendant for §6,000. When the contractor ceased work thereon, defendant, pursuant to a provision of the contract, authorizing him so to do, gave notice to the contractor that unless, within three days, he supplied a sufficiency of workmen and material to proceed with and complete the work, he (defendant) would do this and charge the exp ense to the contractor. After waiting the time sp ecified, defendant employed another carpenter, who furnished work and material. In an action to recover a balance alleged to be due, the referee found that the fair value of the labor and material so furnished was §439.29; that aside from this the cost of repairing defects in the work was §205, and of work omitted, §12. The referee found that, although in some particulars the work was not first class and did not conform to the contract, there was no willful or intentional departure from its terms; that such defects did not iiervade the whole work, and that they were “not so essential that the object which the parties intended to accomplish was not accomplished.” Held (Follett, Ch. J., Vahn" and Laudon, JJ., dissenting), that the facts so found justified the conclusion that the contract was substantially performed. (Argued April 27, 1892; decided May 31, 1892.) Appeal from judgment of the General Term of the Supreme Court in the fifth judicial department, entered upon an order made the first Tuesday of June, 1890, which affirmed a judgment in favor of plaintiffs entered upon the report of a referee. The action- was brought to recover money alleged to be due from the defendant for work on his building, performed by John Wadsworth and son, and to which the plaintiff had by transfer become entitled. It appears that on September 28, 1886, the defendant entered into contract in writing with John E. Stauchen, whereby the latter agreed to furnish the materials for and erect and by the first day of April, 1887, to finish a brick block and apartment house for the defendant in the city of Eochester, in the manner and according to the specifications referred to, for the sum of $16,500, payable in installments of eighty per cent of the value of the work as it progressed, and the balance on the satisfactory completion of the entire work. “ Payments made only on the architect’s certificate, and such certificate shall be a condition precedent to the right of recovery under this agreement.” The defendant reserved the right to make at any time during the progress of the work “ any alterations, deviations, additions or omissions in the work or materials,” and it was provided that in such case the value should be added or deducted accordingly. And should the contractor at any time during the progress of the work refuse or neglect to supply sufficiency of materials or workmen, the defendant should have the power, after three days’ notice in writing to do so, finish the work, and the expense thus incurred by him should be deducted from the amount of the contract price. It was also agreed that for each and every day’s delay in the performance of the agreement after the term there specified, there should be allowed and paid by the contractor to the defendant ten dollars damages for such delay if it should arise from any act or default on the part of the former. ' Afterwards, and by contract of the same date, Stauchen sublet the carpentry work of the building to John Wads-worth & Son at the price of six thousand dollars, with the knowledge and assent of the defendant. This contract was also in writing, and contained the same provisions as did that first mentioned. And upon it Stauchen indorsed the following order: “ M. L. Gotha.™—Please pay to the order of John Wads-worth & Son the amount of the within contract, when the work is satisfactorily performed, in installments, and charge to the account of JOHN R. STAUOHEN.” The original and sub-contractors proceeded with the work, and the defendant, from time to time, made payments to the sub-contractors amounting in the aggregate to $3,869, and in addition he paid August 25, 1887, on their order drawn upon him for $500 to Ocorr & Co., July 5, 1887, which he accepted, payable out of the architect’s next estimate. The Wadsworths being indebted to the plaintiffs for lumber used in the building on the 27th of June, 1887, gave to them an order of that date on the defendant, as follows: “ Max L. Gutmann — Please pay G.W. & F. P. Crouch sixteen hundred and fifty dollars, and charge the same to our contract. JOHN WADSWORTH & SON.” Which was presented to the defendant and accepted by him July 6, 1887, by indorsement thereon as follows: “ This order is accepted, payable out of the balance which may be due Messrs. Wadsworth & Son when the building is completed, to the extent of such unpaid balance and no more, and on the architect’s certificate only. “MAX L. GHTMANN.” This constitutes, with a formal assignment afterwards made by the Wadsworths to them, the alleged claim of the plaintiffs against the defendant. The Wadsworths continued their work on the building until about July 30, 1887, when they ceased work upon it. And that day the defendant gave to Stauchen notice in writing that unless he supplied a sufficiency of workmen and material to proceed with the work in finishing the building in accordance with the contract within three days, he would employ workmen and furnish material to' complete it and charge the expense to his account. And after waiting that time the defendant employed one Pike, a carpenter, to remedy the defects in the work; and the value of the labor on the building performed by Pike, including materials and of some painting done "by another under Pike’s directions, amounted to $439.29. On August 5, 1887, Stauchen gave the defendant notice to make no further payments to the "Wadsworths on account of the work. And on the eighth of that month Stauchen made a settlement, by which there was deducted from the contract price ($16,500) the amount of the contract with the Wadworths, $6,000, and the payment which had been made to Stauchen during the progress of the work, and the sum of $1,499.55 for stipulated damages, which included $1,300 for 130 days’ delay from April 1 to August 8, 1887, leaving as a balance $4,000, for which the defendant’s check was given to him in full of all demands except as to balance due on the carpenter work embraced in the Wadsworths’ contract. The referee having found that the contracts were substantially performed, presented the following statement applicable to that of the sub-contractors: Gave them credit for the contract price........ $6,000 00 and for extra work......................... 260 00 $6,260 00 And made the deductions for payments made Wadsworths......... $3,869 00 Payment of O’Corr order........... 500 00 For hardware furnished by defendant, 293 64 For tiling furnished by him......... 148 50 For iron pipe furnished by him $14, and register and transom guard $12, omitted by the contractor......... 26 00 For amt. of bills of Pike & Pierpont for the work, etc., done after the three days’ notice................ 439 29 For omissions in work by consent of defendant...................... 145 00 Cost of repairing defects in work.... 205 00 - 5,626 43 $633 57 And he directed judgment against the defendant for $633.57, with interest from October 1, 1887. Further facts, essential to the questions considered, appear in the opinion. S. D. Bentley for appellant. Charles M. Williams for respondents. [MAJORITY — Bradley, J.] Bradley, J. The acceptance of the order given by the Wadsworths to the plaintiffs upon the defendant was in terms conditional, and payment made dependent upon completion of the building and on the architect’s certificate. And by the contract such certificate was made a condition precedent to the right to any payments upon the work. Flo such certificate was obtained by the Wadsworths or. the plaintiffs in support of the demand for payment of the amount of the order or any portion of it, but upon application made to him FTovember 29, 1887, by one of the plaintiffs for a final certificate on the work, the architect put his refusal in writing of that date as follows: “ Mr. F. P. Crouch — Replying to your request for final certificate on the Gutmann contract, I regret that there are so many things which are imperfect, that I am prevented from certifying to the satisfactory completion of the work under the contract. JAMES G. CUTLER, “ Architect.” The parties to the contract, by it made the architect’s certificate essential evidence of performance and of the right to payment founded upon it, and unless its production was in some manner waived, or its necessity otherwise overcome or obviated, the failure to obtain it constituted a bar to recovery by the plaintiffs. (Smith v. Brady, 17 N. Y. 173.) In support of his conclusions, the referee found that the contractor Stauchen substantially performed the work on his part, and that on his adjustment with the defendant there was deducted $199.55 for defective mason work, and $1,300 for delay from April 1 to August 8, 1887, in completing the work. And that the Wadsworths substantially performed the agreement on their part, though in some particulars their work was not first class, but there was no willful or intentional departure on their part from the terms of the contract; and that such defects did not pervade the whole work, and were not so essential that the object which the parties intended to accomplish was not accomplished.” He also found that the architect refused to give the plaintiffs a certificate for final estimate, and upon demand refused to give any certificate; and that his refusal to give any certificate was unjust and unreasonable. The latter may have been supj>orted if the finding of substantial performance was warranted. Both propositions are challenged by the defendant’s exceptions. Since the rule of exact or literal performance has been relaxed and recovery may be founded upon substantial performance, that term, in its practical application to building contracts, has perhaps necessarily become somewhat indefinite otherwise than that the builder must have 'in good faith intended to comply with the contract, and shall substantially have done so in the sense that the defects are not pervasive, do not constitute a deviation from the general plan contemplated for the work, and are not so essential that the object of the parties in making the contract and its purpose cannot, without difficulty, be accomplished by remedying them. Then slight defects caused by inadvertence or unintentional omissions are not necessarily in the way of recovery of the contract price, less the amount, by way of damages, requisite to indemnify the owner for the expense of conforming the work to that for which he contracted. And whether', having in view those guiding considerations, the contractor has proceeded in good faith, and the defects are slight in the sense applicable to them in their relation to the work as a whole, are usually questions of fact, and upon their determination is dependent the disposition of that of substantial performance. (Glacius v. Black, 50 N. Y. 145; Phillip v. Gallant, 62 id. 256; Woodward v. Fuller, 80 id. 312; Nolan v. Whitney, 88 id. 648.) In the present case the defective condition of the carpenter work from all causes, as described by the findings of the referee, were that the walls of the building settled to some extent, thereby affecting the carpenter work; that the base boards in many cases parted from the floor, that such shrinkage of the boards was without the fault of the Wadsworths or the material furnished, but was due to the settling of the walls and partially to the steam heat; that the materials furnished by them were according to the terms of the contract, except that of the shelving in closets and the maple flooring for the halls, part of which was second-class material. These facts have some evidence for their support. The referee further found upon the subject of defects in the carpenter work, that when the Wadsworths stopped work in the latter part of July, 1887, there were defects in their work in the following respects: “ In the bath-rooms, in the hardwood floors, pieced casings on windows in rear of building, defective hand-rail on front stairs, moulding in some portions of the building not properly smoothed before oiling, imperfect painting on the front of the building.” And further, that on the defendant’s three days’ notice provided by the contract and given on July 30, 1887, to the contractor to provide materials and workmen to complete the work, the defendant employed to remedy the defects one Pike, a carpenter, whose work upon the building was “ fixing the doors so they would latch and windows so they would slide, fixing covers on wash trays, fixing back stairs, being defects principally due in part to poor workmanship and in part to settling of the building. That the front of the building was repainted by men employed by Pike, thfe original job having been a poor one showing spots, and in some cases when Pike’s repairing made it necessary, additional coats of oil were put on the building in the interior.” And that the fair value of the labor and materials necessary to remedy and make good- the defective and omitted work covered by the specifications performed by Pike and his painter was $439.29. The referee then proceeded by his findings to state that the defective work covered by the specifications and not remedied by Pike consisted of “ maple flooring in the halls in which some cases second-class material was used, and the floors themselves in some cases present an uneven surface caused by settling of the building. The window frames in rooms in the rear of the building were not set to correspond in height with the doors in said rear rooms, and the hand-rail on front stairs was patched, and there was defective work in the bathrooms, window casings and closet shelves, but the said defects do not prevent the use of the building for the purposes intended.” And that the fair value of the labor and materials necessary to remedy such defective work not remedied by Pike and his painter was $205. He also found that the Wadsworths failed to provide iron transom guards for rear doors and iron registers for front, for which deduction of $12 should be made. And he added that when Pike had completed his work before mentioned and on or about September 21, 1887, the defendant took and has since remained in possession of the building and has rented portions of it to tenants. Although there is a conflict in the evidence in respect to some of such findings, there is in the record some evidence tending to support all of them, and for the purposes of this review they must, therefore, be deemed conclusive of the facts so found by him. ■ While the condition of the carpenter work when the Wadsworths left it in July, was such as to indicate defects and omissions, the correction of which would cost $656.29, it may be observed that such defects upon such estimate of the cost to the amount of $439.29 were remedied through the action of the defendant taken pursuant to his right reserved by the contract, to furnish materials and workmen to proceed with the work and charge the expense to the contractor upon the failure of the latter to do it on -three days’ notice to him to that effect. This work having been done by the defendant in the exercise, by his election, of such right, he cannot effectually assert forfeiture in respect to the deficiency so supplied, but the Wadsworths were entitled to the benefit of the work thus produced and were chargeable to the defendant for the amount of the expense incurred by him in doing it. (Murphy v. Buchman, 66 N. Y. 297.) When the application for the architect’s certificate was made, this work had been done and the defects in the work to that extent removed, and in other respects the work could then have been made to. conform to the specifications by the appropriation to that purpose of the sum of $216.71. This was the situation when the architect was requested by the plaintiffs to make certificate for payment of final estimate. If the work was then substantially performed as found by the referee, the conclusion was warranted that the refusal of the architect to give any certificate was unreasonable in the legal sense applicable to it for the purposes of relief. (Nolan v. Whitney, 88 N. Y. 648.) The amount of damages.for want of strict performance was not such as to necessarily defeat the claim of substantial performance. (Phillip v. Gallant, 62 N. Y. 256.) The cost of completion of work by remedying defects or supplying omissions in it to meet the requirement of a contract may be so great as to preclude the conclusion of substantial performance. In Flaherty v. Miner (123 N. Y. 382), where the damages allowed were upwards of seventeen per cent of the contract price, the court suggested (without deciding) that if it had appeared “ without dispute that such a substantial portion of the work remained undone and objection had been properly taken, it may well be that the plaintiff could not have recovered upon the theory of a substantial performance.” It is suggested that if was not within the province of the architect’s duty to make deductions for defective work, or to determine what less than exact or full completion of the work, according to the contract, was such substantial performance as to permit recovery. That may be true in such sense that the refusal of a certificate may, on his part, have been without purpose to deny to the contractor that which he may have been entitled, and yet it may be determined on trial that the ' certificate was unreasonably withheld. The considerations of good faith on the part of the contractor bearing upon the question whether the defective work was willful or unintentional and inadvertent the architect may not be willing to determine. But if he gives a certificate founded upon final estimate that the work is substantially performed, the right to abate recoverv for defects in the work is not necessarily defeated. In Phillip v. Gallant (62 N. Y. 257), where the contract price of the work was §865.11 and the damages allowed for defective work was §75, the question of substantial performance was held to be one of fact, and the amount of damages was not treated as inconsistent with the conclusion to that effect. And see Van Clief v. Van Vechten (42 N. Y. S. R. 736). The rule of substantial performance should not be extended beyond the purpose in view when the relaxation of the strict performance was adopted, which was founded upon equitable considerations in furtherance of justice, and made applicable to cases of honest intention of contractors to fairly perform their contracts, and who shall in the main have done so, with only slight defects or omissions inadvertently and unintentionally caused and appearing in the work. The present is a case not free from difficulty in that respect. Hot less so in the extent of the deficiencies than in the character of some of them. The fact that the windows in the rear of the building were not in align with the doors and were differently cased, were features not in accordance with the specifications, and would seem to have been apparent to observation reasonably diligent. Yet the Wadsworths testify to the effect that they supposed that they had completed the carpentry work according to the contract. The inference was permitted, as the result showed, that they may have placed too much reliance upon the care and skill of their employes. And it does not appear that their attention was by the defendant or his architect called during the progress of the work to those defects in such windows and casings, although payments were from time to time made upon the certificates of the latter to those contractors The referee, however, was by stipulation of the parties given the opportunity, which he made available, of viewing the premises and making personal inspection of the work, and he may have acquired such aid in considering the evidence of the witnesses as might thus be afforded him. And it cannot now, in view of the evidence and against his findings, be held as matter of law that the defects, or any of them, were willfully caused or permitted by the contractors. Whatever view we may have taken of the weight of evidence on the questions of fact upon the subject, those findings in that respect approved by the court below, must be deemed conclusive on this review. The time within which the contractor undertook to pérform the work was an essential element in the contract, which provided for stipulated damages at- the rate of ten dollars per day for the period of delay in that respect arising from his act or default, subject, however, to the right to such extension of time as might be rendered reasonable by strike of workmen, to whose demands the contractor was not required to yield. In the settlement made by the defendant, through his architect, with the original contractor, damages at such rate were allowed to defendant for delay for the entire time from April 1 to August 8, 1887, when such settlement was .made. And no.claim of that character, up to that time, arises in this action. It seems that the carpenter work which the subcontractors undertook to perform, was not made the subject of that settlement, but was eliminated from it. And assuming that any delay in such work subsequent to that time and prior to the time the possession -of the building was made available to the defendant,, was properly the subject of consideration in the present action, the question arises whether any and what amount of damages for that cause are chargeable by way of abatement of the alleged claim of the plaintiff. The work which the defendant, following the three days’ notice before mentioned, caused to be performed, was not completed until about the 21st of September, 1887, when he took possession of the building. Thus, intervened a period of upwards of forty days after the time up to which the matter of delay had been adjusted with the original contractor. The referee has found that the subcontractors were delayed in the work two or three weeks by a strike of workmen, four or five days awaiting the decision of the defendant in respect to certain specified work, and that they were hindered and delayed by the plumbers at various times covering a period of thirty days. He also found that they performed some extra work amounting to $260, the time occupied in doing which does not appear. The plumbers did their work under a contract with defendant independent of his contract with Stauclien. In view of those facts taken as true, and which there is some evidence tending to prove, it would seem that delay in the carpenter work for a time at least equal to that from August eighth to September twenty-first did not “ arise from any act or default on the part of the ” contractors; and the conclusion was permitted that the defendant in such settlement was allowed all he became entitled to on account of the delay in the work. We have for the purposes of this question of delay treated the work before referred to, which the defendant caused to be done, the same as if the subcontractors had performed it themselves and taken the same time that was occupied in its performance by the person employed by the defendant for that purpose. There were some other matters made the subject of controversy, and to which the defendant’s exceptions call attention, but upon careful examination of the record it is found that none of the findings or refusal to find of the referee are wholly unsupported by evidence. Hone of the exceptions seem to have been well taken. The judgment should be affirmed. [DISSENT — Follett, Ch. J.] Follett, Ch. J. (dissenting). The prevailing opinion goes further than any previous judgment has gone in the direction of holding that the question of “ substantial performance ” is always one of fact. Generally the question -is one of fact, but so called performance may be so partial or defective that it is the duty of the court to decide, as a matter of law, that the contract has not been so far 'performed as to entitle the plaintiff to recover upon it. In my opinion the defective performance found by the referee, is sufficient to defeat a recovery on this contract, and besides the undisputed evidence does not tend to support the finding or conclusion of substantial performance. The tendency, called equitable, of courts to relieve persons , from the performance of engagements deliberately entered < into, and in legal effect to make for litigants new contracts which they never entered into, and which it cannot be supposed they ever would have entered into, has been and is being carried to a length which cannot be justified in reason. I think the judgment should be reversed and a new trial granted, with costs to abide the event. All concur with Bradley, J., except Follett, Oh. J., Yank and Lakdon, JJ., dissenting. Judgment affirmed.