Opinion
Argued November 15, 1900
Decided December 11, 1900
L. Laflin Kellogg and Alfred C. Pette for appellant. John Whalen, Corporation Counsel ( Theodore Connoly and Terence Farley of counsel), for respondent.
We think this judgment should be affirmed. There is no allegation in the answer of the appellant, which is practically his complaint, that the city was primarily liable for the damages for which judgment was directed against the contractor, either as the author of his acts, his master, or joint wrongdoer with him, or as his surety. No such issue was tendered or has been tried. The city, pursuant to its ordinance and in order to protect itself, if by possibility it should be cast in damages because of the negligence of the contractor, agreed with him for indemnity against such contingent liability, and to that end withheld the balance otherwise due upon his contract, because meantime this appellant had presented to it a notice of the claim upon which he has now recovered a judgment in this action against the contractor. By the contract the city has a right to retain this money until proof is presented to it that the claim is satisfied. The contract did not provide that the city might pay the claim and charge the contractor with the amount. It can only charge the contractor with it in case it shall, because of its relations with him, be cast in damages for his wrong to the appellant, and thus be compelled to pay what, as between the contractor and itself, the contractor should pay. No attempt has been made to fix an original liability upon the city for the injuries done by the contractor to the appellant; it has had no day in court upon that question; and hence it has the right to retain the fund until that stage of the case is reached, if meantime the contractor does not satisfy the appellant's judgment. The city holds no money for the appellant, but simply to protect itself against the contingency contemplated by its contract with the contractor. It could take this indemnity without incurring any obligation to the appellant. ( French v. Vix, 143 N.Y. 90.)
The appellant's contention, that he is entitled to be subrogated to the rights of the city in and to the fund it retains, fails, because of the reasons already stated. Subrogation is the substitution in place of the creditor of one, usually a surety, who under the compulsion of necessity, or for the protection of his own interests, has discharged a debt for which as between himself and another, the latter is primarily liable. In such case the surety or party paying is entitled to the security, benefits and advantages held by the creditor. (2 Beach Modern Eq. Juris. section 798.)
If the appellant had tendered the city the issue of its liability for the contractor's acts, and had recovered judgment against it upon that ground, then the city upon payment or the judgment might ask, under its contract with him, if it should need to do so, to be subrogated to the appellant's judgment against the contractor, so that it could assert the judgment against the contractor's demand for payment of the unpaid balance upon his contract. But as the case stands, the contractor is the indemnitor, but not yet the surety or debtor of the city, having only agreed to save it harmless in case the latter should be made liable for his defaults. When that event happens; the city, upon discharging its liability to the appellant, will at the same time pro tanto discharge its liability to the contractor.
The case is clearly distinguishable from Merchants and Traders' Bank v. Mayor ( 97 N.Y. 362). That action was to determine the conflicting claims of the assignee of the contractor, and parties who had filed notices of claims for labor and materials, to the unpaid part of the contract price retained by the city. There was no lien law at that time, and thus the city had not retained the money to indemnify or protect itself against liens for labor and materials. But the ordinance of the city, passed pursuant to law, required that all contracts for work done for the city should provide that the last installment of the contract price should be retained by the city until certain prescribed evidence should be given that all persons who had furnished labor or materials to the contractor, and given the proper notice thereof, and also that some balance therefor was unpaid, had been satisfied. It was held that, as the city did not retain the money for its own protection, it must have been the meaning of the ordinance, and of the contract made in compliance with its requirement, that it held the money for the protection of the persons furnishing labor and materials, and as their trustee, to pay it to them. Mechanics and Traders' National Bank v. Winant ( 123 N.Y. 265) is to the same effect. In the case before us the city retained the balance for its own protection, and not for the appellant's benefit. In Bates v. Salt Springs National Bank ( 157 N.Y. 322) a building contract provided that no payment should be made to the contractor until he had obtained a certificate from the county clerk that no unsatisfied liens were on file. This was held to be for the benefit of the owner, and not as creating any obligation in favor of third parties furnishing labor or materials.
That the city is a public municipality does not enlarge the scope of its contract obligation. That fact might have been important if the issue had been tendered it that the contractor was solely chargeable because he had assumed to discharge a public duty and was liable because through him the public duty had been mal-performed or not performed at all, to the appellant's injury, as in Robinson v. Chamberlain ( 34 N.Y. 389) and cases of its class.
The appellant insists that it was error for the Appellate Division to direct absolute judgment against him, upon its reversal, instead of awarding a new trial. We think that it does appear that the appellant would certainly be defeated upon a new trial. ( New v. Village of New Rochelle, 158 N.Y. 43.) The city is not the trustee of a fund in dispute. The contractor sued for an alleged balance due him, and the appellant has no assignment lien or interest in it. The city may, under the powers conferred and duties enjoined upon it by law, either express or implied, incur obligations either in performance or neglect of performance, and in some cases in mal-performance of its powers and duties. But before it can be charged with the obligations which one individual owes to another, the grounds for that charge should be clear. It is not enough that in the particular case it can do so without harm to itself, or that it has been indemnified against such harm, or even that the individual owing the duty does not object. It must appear that it is its duty to do so. We think it was not error to direct judgment absolute.
The judgment should be affirmed, with costs.
PARKER, Ch. J., GRAY, O'BRIEN, HAIGHT, CULLEN and WERNER, JJ., concur.
Judgment affirmed.