Soviero Bros. Contracting Corp. v. City of New York

Rabin, J.

(dissenting). I agree with the statement in the majority opinion that the contractor did not rescind, but proceeded with the contract under protest, and also agree with the majority view that the contractor had the right to affirm the contract by performance and later claim damages resulting from misrepresentations.

The majority holds, however, that an action for damages based on those misrepresentations is barred by the one-year limitation of action clause contained in the contract. That clause refers only to an action arising out of the contract. The majority holding therefore would seem to require a reading into the contract of a provision that an action for damages based upon misrepresentation must also be commenced within one year. Assuming that the contract may be so read and that it was intended to limit an action for misrepresentation, then I think it would still be unenforcible against the plaintiff, for the city may not be permitted to absolve itself in advance from liability for misrepresentation. (Jackson v. State of New York, 210 App. Div. 115 , affd. 241 N. Y. 563 ; Jandous Elec. Equipment Co. v. State of New York, 158 Misc. 238 ; Jarcho Bros. v. State of New York, 179 Misc. 795 ; Nordone Contr. Co. v. City of New York, 295 N. Y. 985 ).

And it makes no difference that the misrepresentation may have been made without any deliberate intent to mislead the contractor. With or without such intent the municipality is nevertheless liable for damages to the contractor resulting from misrepresentation (Young Fehlhaber Pile Co. v. State of New York, 177 Misc. 204 , affd. 265 App. Div. 61 ). In that case the State, to the damage of the contractor, represented a physical condition as to the bed of a creek which was not true. In so doing it relied upon a survey that had been made six years earlier, but which was no longer accurate due to the fact that *445 subsequently the creek had been dredged. In holding the State not excused by its error the court said (p. 207): “ The detailed contour map furnished by the State constituted a material representation, which was relied upon by the bidder (and had in fact been relied upon by the State in its preparation of plans and engineer’s preliminary estimates) and such misrepresentation takes on the legal complexion of active fraud. * * * It represented to the bidder and successful contractor a clearly defined physical condition and must be bound by the consequences, however costly and unpleasant they may be. * * *

“ Ignorance of facts peculiarly within its knowledge cannot excuse the State any more than were it an individual and it must be bound by the same rules applicable to an individual in similar circumstances.”

The contract in the Young Fehlhaber case (p. 205) contained a clause wherein the contractor agreed that ‘ ‘ he will make no claim against the State by reason of the estimates, tests or representations of any officer or agent of the State.” But it was held that defendant could not thus relieve itself from liability for material misrepresentation.

The majority opinion does not overlook that and the other cases referred to herein, but holds them inapplicable because they contained a “ total immunity ” clause as distinguished from the “ limitation ” provision in the contract in this case. The difference, however, would seem to be merely one of degree, for if the contractor is limited to one year in which to bring an action for misrepresentation then it is obvious that to some extent at least he is being deprived of his right to recover damages based on misrepresentation. Whether the immunity is total or partial should make no difference for in either case it is a violation of the principle stressed in the decisions that one may not by contract relieve himself from liability for material misrepresentation. It should be noted too that the contractor claims it did not discover, until long after the expiration of the one-year-limitation period, that the city had in its own records all the true facts which it misrepresented to the plaintiff and on which it based its bids. Yet even in these circumstances if the limitation clause is held binding the contractor is deprived of his right of action.

There would seem to be little doubt as to the seriousness and materiality of the misrepresentations that were made to plaintiff by the city. From its own records the city could have known and we think should have known — with respect to the first contract — that it did not own the fourteen-foot strip. Never *446 theless it undertook to represent that it did own that strip and as a result of that misrepresentation the job cost the contractor much more than was anticipated. As to the second contract the city represented to the contractor that the pavement of New York Boulevard consisted only of asphalt concrete on macadam, whereas from its own records, it should have known that that was not true. Thus the contractor at considerable additional cost was compelled to remove from the bed of the street, old abandoned railroad tracks and ties which the city itself had covered over sometime previously. It is clear therefore that with respect to both contracts defendant misrepresented material facts which the contractor relied upon to its detriment.

The claim in this case does not appear to be one ‘ ‘ arising out of or based upon ” the contract so as to make the one-year limitation applicable. Bather it is for misrepresentation inducing the contract and in that respect is something apart from the contract itself. But even if, as the majority holds, the limitation clause includes actions for misrepresentations, the clause is not enforcible in view of the decisions referred to above.

I accordingly dissent and vote for affirmance of the order of the Appellate Term.

Callahan, J. P., Bastow and Botein, JJ., concur with Breitel, J.; Babin, J., dissents in opinion.

Order of the Appellate Term reversed and the order and judgment of Special Term at the City Court, dismissing the complaint in favor of defendant, reinstated. Settle order on notice. [See post, p. 962.]