General Contracting Co. v. Jones

Spring, J.: On the 1st day of July, 1898, Henry P. Burgard entered- into a written agreement with the city of Buffalo to clean its streets fop the term of five years. On the seventh day of October thereafter — 550 — ■ an agreement was executed, by Burgard and the plaintiff whereby the latter agreed to perform this work, and to receive therefor thirty-one and three-fourths cents per great square of ten thousand feet of stone pavement and twenty-one and three-fourths cents for the like space of brick and asphalt pavements. Burgard retained out of his compensation from the city one and three-fourths cents for each of said squares, and that sum represented his profits during the performance of the work by the plaintiff. • In January, 1899, negotiations by letter were had between the plaintiff, and the defendants, who were then copartners engaged in business in Indianapolis, Ind.,' with reference to the transfer of its rights under its agreement and the purchase of its property used in cleaning the streets. This correspondence culminated in a letter from the defendants bearing date January 31, 1899, in which they made a specific offer to the plaintiff for the plant and street cleaning business which was accepted by the plaintiff by letter dated February 1, 1899. The property and plant were transferred to the defendants February twentieth and a written agreement was entered into between the parties February 28, 1899. This agreement provided for the cancellation of the contract between' Burgard and the plaintiff and the substitution of a new one substantially like it between the defendants and Burgard. The defendants were to receive for their compensation thirty-one cents per great square of stone pavement and twenty-one cents for brick and asphalt, and payments were to, be made on the twentieth of each month as stipulated in the old agreement. This was stated to be 44 in consideration of the giving up and surrender ” by the plaintiff 41 of its said contract with said Henry P. Burgard and of the other considerations hereinabove expressed; ” and it made payment by the city a prerequisite to the liability of the plaintiff to the defendants, and the contract in form and in its provisions for the performance of the work and the manner of payment was intended to conform to the one made between the city and Burgard. It further provided that 44 Burgard is assenting to the proposed arrangement as aforesaid and * * * has accepted a cancellation and surrender of the contract between him and the party of the first part herein (the plaintiff) and at the same time has entered into a new contract of the same or similar character with the parties of — 551 — the second part (the defendants) * * * for the unexpired period of the term of five years from August 1st, 1898.” This statement was incorrect in that there had been no formal surrender of the contract by Burgard and no new agreement had been consummated between him and the defendants. He had, however, been cognizant-of the negotiations and had participated and acquiesced in them. The contract also provided that, in case of the default in the payment of any installment, and, in the event of such default continuing for sixty days, then defendants “ promise and agree, presently and immediately, without notice or demand, to pay to the party of the first part a sum and amount of money equal to twenty-seven hundred and fifty dollars per year for the then unexpired time up to August 1st, 1903, which shall be in full of and in lieu of the sums and amounts which said party of the first part would otherwise be entitled to receive during said unexpired period.” As already stated, at the time of the execution of the agreement the defendants were in possession of the plant and property enumerated in it and were at work daily in cleaning the streets. They paid the stipulated sum of $6,000 for the plant and equipment and carried on their work acceptably and without interruption until March twenty-ninth. In the meantime they, were endeavoring to induce Burgard to execute the new agreement and cancel the old one as was contemplated by the parties. This Burgard persistently refused to do. • The reason he assigned for his change of front was that he learned that the plaintiff was to receive out of the moneys which he paid for doing this work three-fourths of a cent for each great square cleaned. Although the plaintiff was released from all liability to him, it still would have an interest to the extent of the three-fourths of a cent per square. ■ It is not contended that he was informed of this proposed retention until after the execution of the agreement. He was responsible to. the city for the faithful performance of the work in conformity to the specifications which formed a part of his agreement with it. He had given a bond in the penalty of $125,000 to insure to the city the fulfillment of his contract. Complaints for inefficient work were made to him, and, in fact, the major part of the transactions and communications by the city officials pertaining to the cleaning of the streets was carried on with him. His contract with the city continued in force, and it was — 552 — of the highest consequence to him that the parties to whom he farmed out the work should be capable financially and otherwise of. meeting every exigency which could be imposed upon him by the municipality. He had been advised that the reason for the plaintiff’s discontinuance of the work was that it could not be done profitably at the stipulated price, and he assented, as he claims, to the new contract upon the assumption that the plaintiff was to part with its entire interest to the defendants. He was not, therefore, wholly without excuse in declining to make a new contract with the defendants which carried with it a diminution in rate of three-fourths of a cent per square to the men who were actually charged with doing the work and to whom he must look for any indemnity for delinquencies which the city might charge up to him. He was satisfied both with the ability and the responsibility of the defendants and assented to the sale and transfer, but that was before he knew they were receiving less than the plaintiff claimed made the contract unremunerative. Even after this information he offered to enter into the contract with the defendants if the plaintiff would “ guarantee the fulfillment of it under these circumstances. If they retained an interest in the contract, they must retain a responsibility in the contract; that is all I asked.” This the plaintiff did not do. Burgard is- not a party to this action. The only _ question is whether his refusal to execute a new agreement with the defendants and annul the one with the plaintiff is any defense or justification for the defendants’ alleged breach of its agreement in omitting to pay the plaintiff as stipulated. It will shed a little light on this aspect of the case to follow along the narrative of the transactions. Up to the twenty-ninth of March the defendants had been paid nothing for the work they had done, and, in fact, nothing has yet been paid to them for this five weeks’ labor. Burgard refused to recognize his liability to them in any way. They then suspended work and did nothing more until April tenth. They had their plant, machinery, horses and equipment all lying idle, and for which- they had paid $6,000. They had expended five weeks apparently in gratuitous labor. The plaintiff was a foreign corporation and doing nothing to effectuate the agreement with Burgard. With matters in that precarious situation they offered to do the work for Burgard for twenty-one cents and thirty-one cents per great square respectively — 553 — which were the exact prices they were to receive pursuant to their agreement with the plaintiff. Burgard accepted this offer and while this arrangement was an oral one, under it they have since been performing the work and have been paid by Mr. Burgard. There was no feasible course open to them except the one adopted. If they abandoned the work, a heavy loss would ensue to them and there would then be no greater immunity from liability to the plaintiff than now exists. The plaintiff claims that they should have required Burgard to execute the agreement. That claim could have been pressed with equal plausibility had they relinquished the work. They chose the plan which enabled them to receive their pay and still left untouched the sum which was the measure of the plaintiffs’ profit. It is urged that because the agreement recited Burgard’s assent it is binding upon him and the defendants as well and the latter are estopped to shield themselves behind Burgard’s declination. Both parties to the agreement knew at the time of its execution that Burgard had not surrendered the old agreement or entered into the substituted one. They also knew it was essential to the vitality of their contract that it should receive the approval of Burgard. That was the marrow of their bargain. If he declined to recognize the defendants’ right to claim pay from him, if he withheld assent to the agreement, its supporting prop was removed. The burden was no more upon the defendants than upon the plaintiff to obtain its ratification by Burgard. The parties made their contract in good faith expecting Burgard would join in the plan. Its failure was due to the fact that Burgard was not clinched to it by written agreement before any transfer was made. The responsibility for this failure falls upon both parties. The doctrine of estoppel is ordinarily based upon deception practiced by one party upon another. There can be no application of the principle where both parties possess equal information and are fully aware of the real situation. Among the elementary rules, where an estoppel prevails, given in Pomeroy’s Equity Jurisprudence, section 805, are a representation or concealment of a material fact and also when the facts known to the party estopped are unknown to the one claiming its benefit. As is said in Baker v. Union Mutual Life Insurance Company (43 N. Y. 283, 289): “ There can be no estoppel in behalf of one having full knowledge — 554 — of all the facts.” We should not expect to find any other rule elucidating a doctrine which had its origin in equity. As already stated, so far as the evidence shows there is no estoppel against .Burgard. He based his refusal upon an important fact which it is conceded was not made known to him. In any event the defendants cannot be held responsible for his refusal to carry out the plan contemplated in their agreement for- they could not compel him to act. The nature of this action shows the hardship sought to be visited upon the defendants. The plaintiff, while invoking principles of equity, desires the inflexible enforcement of its agreement. It never tendered the price paid for its property and demanded a restoration of the plant and machinery with a view to a renewal of the work by it. It does not now endeavor to recover for the actual damages sustained by it, but its recovery is based upon the sum stipulated in the agreement and for its entire life. That is, the defendants, who have vainly attempted to secure the acquiescence of Burgard to the agreement, must, because of his refusal, be responsible to the plaintiff upon whom the burden is equally cast, and who was willing to accept his verbal promise as sufficient approval, and that responsibility is to be measured by the gross sum claimed to be liquidated by the agreement. The complaint alleges fraud and collusion between the defendants and Burgard. The case was not tried on that issue and the proof fails to support the charge. If true, of course, an entirely different phase would be presented for our consideration. That Burgard should pay the three-fourths of a cent per square to some one -is evident. If his refusal to execute the agreement was for the purpose of enabling him to extort this additional sum from these parties, his conduct is without justification. If he is retaining it awaiting an adjustment of their difficulties it may be extenuated. The judgment should be reversed and a new trial ordered, with costs to the appellants to abide the event. McLennan and Williams, JJ., concurred; .Adams, P. J., dissented ; Rtjmbet, J., not sitting.