Holbrook, Cabot & Rollins Corporation v. City of New York

• Decision Date: 16 July 1921
• Citation: 277 F. 840
• Parties: HOLBROOK, CABOT & ROLLINS CORPORATION v. CITY OF NEW YORK.
• Court: U.S. District Court — Southern District of New York

277 F. 840

HOLBROOK, CABOT & ROLLINS CORPORATION v. CITY OF NEW YORK.

United States District Court, S.D. New York.

July 16, 1921

[Copyrighted Material Omitted] [Copyrighted Material Omitted]

Thomas F. Conway, of New York City, for plaintiff.

John P O'Brien, Corp. Counsel, Clarence J. Shearn, John F. Collins, and Charles C. Smith, all of New York City, for defendant.

AUGUSTUS N. HAND, District Judge.

I can find little in plaintiff's reargument, outside of the so-called Lusk Amendment (Laws 1921, c. 711), which I have not already considered to the best of my ability. A few new decisions are referred to, but they fall within the general principles heretofore discussed. The case of Admiral Realty Co. v. Gaynor, 147 A.D. 720, 132 N.Y.Supp. 220 does not obviate the necessity of compliance with subdivision 2, Sec. 37, of the Rapid Transit Act (Laws 1891, c. 4, as amended by Laws 1909, c. 498, Sec. 17). There Justice Scott, in referring to changes in plans and specifications in the size of the conduit which affected the cost of same, held that such modifications might be made by the Public Service Commission both by the act and by the terms of the contract as let. That sort of change was, for the reasons I have heretofore stated, different from a change in the rate of compensation. It was in its nature an engineering problem under the control of the Commission which did not fall within the provisions of section 37, supra.

The case of People ex rel. Holbrook v. Mitchell, New York Law Journal, August 24, 1915, is also no authority for holding that the board of estimate and apportionment was not required to prescribe the bonds to be issued for a supplemental contract changing the rate of compensation. That case was discussed in plaintiff's original brief. A condition requiring a lump sum payment for extra work instead of an alternative provision for cost plus ten per cent., or a lump sum as prescribed in article 12 of the general form of city subway contracts, was sought to be inserted by the board of estimate and apportionment in its consent to a contract which had been awarded by the Commission to a successful bidder. This was held to vary the contract which had been advertised and to involve a risk to the contractors which they ought not to be compelled to take. The court decided only that the board of estimate had attached to its consent an illegal condition which interfered with a proposal to bidders lawfully advertised by the Commission and awarded to a successful contractor. It was said in the course of the opinion that--

'There is substantial ground for holding that the board had no discretion in the matter at all as the authorization of the expenditures was made when the general plans were approved at the time the dual contract was decided upon.'

These remarks were a dictum; but even if subject to no valid criticism because contemplating only a general prescription of bonds for the route, rather than a prescription for the special contract, they are inapplicable to this case because it has nowhere been pleaded that the board of estimate and apportionment had prescribed a limit of bonds available for the amended or supplemental contract upon which recovery is here sought. The provision for extra work in the Degnon contract, referred to on page 32 of plaintiff's brief, is not in point, for the cost plus clause there in issue was one of the terms of the contract which like any other provision for compensation for extra work while it might affect considerably the cost of the contract was something which might reasonably be roughly taken into consideration by the board of estimate and apportionment and was quite different from a different rate of payment for the contractor on the entire contract.

The case of McGovern v. City of New York was strongly relied upon in the original brief, and was one of the principal cases in the New York courts which I considered. The changes there came within the terms of the contract and did not involve modifications of the rate of compensation of the most fundamental sort.

The case of Bradley Contracting Co. v. City of New York, also referred to by plaintiff's counsel, is an unreported decision, and the work apparently related to restoration of a street affected by subway construction. Exactly what was the theory of recovery has not been made clear, but it is asserted that the recovery allowed for this item was a small part of the total claim, and that the matter was settled and an appeal taken by the city from the judgment was withdrawn. The case as a precedent is too inapplicable for serious consideration.

The recent decision of Justice Finch in the case of Moore v. City of New York, reported in New York Law Journal December 2, 1919, and affirmed at 192 A.D. 902, 182 N.Y.Supp. 938, where a consent and provision for payment of work under a subway contract by the board of estimate and apportionment was held to be a condition of validity, seems to bear out the city's contention.

The cases of Meech v. City of Buffalo, 29 N.Y. 198, Moore v. Mayor, 73 N.Y. 238, 29 Am.Rep. 134, Van Dolsen v. Board of Education, 162 N.Y. 446, 56 N.E. 990, and the well-known decision of Hitchcock v. Galveston, 96 U.S. 341, 24 L.Ed. 659, were all urged on the original argument. They differ from the present case because here there is a lack of power on the part of the Commission to make a contract which shall bind the city unless the board of estimate and apportionment, which has control of the finances of the city, has taken the necessary steps. I think this limitation of power extends to a modification involving such a fundamental change of cost as the present, not provided for in the original contract. The situation may be different where the same official or board has the power both to make the contract and to appropriate the funds. In the latter case, the failure to comply with statutory regulations which ought to be observed has sometimes been regarded as only an irregularity. Under familiar decisions an ultra vires act of a private corporation is treated quite differently from that of a municipal corporation where the whole power to act rests upon a special statute. Edison Electric Co. v. City, 178 F. 425, 102 C.C.A. 401.

It is said that section 37 of the Rapid Transit Act does not specifically require bonds to be prescribed for the particular contract or amended contract, but only requires the board of estimate and apportionment to prescribe a limit to the amount of bonds 'available for the purposes of this section which shall be sufficient to meet the requirements of such contract in addition to all obligations theretofore incurred and to be satisfied from such bonds. ' In other words, it is contended that sufficient bonds were made available when the dual subway contract was decided upon and the discretion of the board in refusing any available funds after it had consented to the amendment was exhausted. If this contention be sound, the plaintiff should not rely upon arguments based upon the financial transactions of the board, but should plead that the board of estimate and apportionment had prescribed bonds, or had available funds to meet the expenditures involved in the amended or supplemental contract which it had consented to.

The recent case in the New York Supreme Court, Appellate Division, of People ex rel. Connors v. Board of Education, 197 A.D. 5, 188 N.Y.Supp. 686, which held that a general appropriation for the construction of school buildings satisfied the charter provisions that no expense should be incurred by a city department unless a previous appropriation had been made and was sufficient to render a contract valid though no express appropriation had been made for the particular contract, is not in point. It is not here pleaded that the board of estimate had 'prescribed a limit to the amount of bonds available ' which were sufficient to meet the requirements of the amended contract in addition to all obligations theretofore incurred and to be satisfied from such bonds.

I may add at this point that no practical construction of contracts can be valid which does not meet the requirements of the Rapid Transit Act. It is true that departmental interpretations of statutes are evidence of their proper construction to which courts should give weight, but this doctrine is chiefly applied to formal rulings and not to cases where claims in process of adjustment have been recognized in spite of possible question as to their validity.

The point is made that the plaintiff need not plead that bonds or funds are available for extra cost, but if my conclusion is correct, there can be no valid contract by reason of the provisions of the Rapid Transit Act unless such funds have been made available. It would hardly be contended that a mere allegation that the city duly entered into a contract to build a section of the subway would be a sufficient allegation to sustain recovery. If it would not be, such a vital condition of a contract that is itself made a part of the complaint by reference required by a statute that is referred to must be pleaded. Indeed, the plaintiff has carefully thus pleaded as to the original contract.

The difficulty with the argument is that without prescription of bonds or available funds which were a condition precedent to the making of the supplemental contract, it was not good on its face. In the case of McNulty v. City of New York, 168 N.Y. 117, 61 N.E. 111, relied upon by the plaintiff, the contract was good on its face. The highway cases cited in the McNulty decision were similar. The statute did not so much prescribe what should be done before any contract could be entered into as barred recovery if there were not sufficient funds available. As I...