author: Hubbs, J.

text:
    Svenska Taendsticks Fabrik Aktiebolaget et al., Plaintiffs, v. Bankers Trust Company of New York et al., Respondents, and Irving Trust Company, as Trustee in Bankruptcy of International Match Corporation, Appellant, Impleaded with Others.

      (Argued May 2, 1935;
    decided May 28, 1935.)

      George K. Hourwich and Louis Fabricant for appellant.
    The amended bills in the nature of bills of interpleader fail to state a cause of action and are insufficient as a matter of law, since it appears that a prerequisite of such bills, viz., “ an independent ground for equitable relief,” is not present. (Dorn v. Fox, 61 N. Y. 264; Mohawk R. R. Co. v. Clute, 4 Paige, 384; Roberson v. Rochester Folding Box Co., 171 N. Y. 538; Empire Engineering Corp. v. Mack, 217 N. Y. 85; McClellan v. Carland, 217 S. 268; Leavitt v. Dabney, 30 N. Y. Super. Ct. 350; Manning v. Manning, 1 Johns. Ch. 527; Johnson v. Crook, 12 Ch. Div. 639; Pouch v. Prudential Ins. Co., 204 N.Y. 281; Baumann v. Baumann, 250 N. Y. 382; Mirizio v. Mirizio, 242 N. Y. 74.) A trustee in bankruptcy may not be sued without the permission of the bankruptcy court. The pleadings herein exceed the permission granted and the court is, therefore, without jurisdiction. (Foss v. Conron Bros. Co., 59 Fed. Rep. [2d] 969; Barton v. Barbour, 104 U. S. 126; McClellan v. Carland, 217 U. S. 268.) The pleadings herein would raise issues triable without a jury; since the appellant trustee is entitled to a trial by jury the pleadings fail to state a cause of action. (Fass v. Conron Bros. Co., 59 Fed. Rep. [2d] 969; Schoenthal v. Irving Trust Co., 287 U. S. 92; Clark v. Mosher, 107 N. Y. 118; Strauss & Co. v. American Credit Indemnity Co., 203 App. Div. 361; Epstein v. Rockville Center Improvement Co., 164 App. Div. 177; Harrison v. Loeser & Co., 164 App. Div. 115; Empire Engineering Corp. v. Mack, 217 N. Y. 85.) The situation in which respondents find themselves results from their own actions, and a court of equity should not assist them to escape the consequences of their acts. (Cromwell v. American Loan & Trust Co., 57 Hun, 149; Irving Trust Co. v. Marine Midland Bank, 47 Fed. Rep. [2d] 907; Sherman Nat. Bank v. Shubert Theatrical Co., 247 Fed. Rep. 256.)

      Clarence J. Shearn, B. B. Fensterstock and George H. Jaffin for respondents.
    The fact that the stock, title to which was in dispute, was converted into cash pursuant to appellant’s written agreement that the sale was “ without prejudice ” cannot operate to destroy respondents’ right to equitable relief conceded to exist but for the sale. (Hanna v. Stedman, 230 N. Y. 326; Sherman Nat. Bank v. Shubert ■ Theatrical Co., 247 Fed. Rep. 256.) The facts stated in the amended pleading, which are identical with the facts upon which interpleader was allowed, are sufficient to authorize the maintenance of a bill in the nature of interpleader within the broad equity jurisdiction of the Supreme Court. (Sherman Nat. Bank v. Shubert Theatrical Co., 247 Fed. Rep. 256; Irving Trust Co. v. Marine Midland Bank, 47 Fed. Rep. [2d] 907; Board of Supervisors v. Deyoe, 77 N. Y. 219;
      .Pouch v. Prudential Ins. Go., 204 N. Y. 281; Burns v. Lopez, 256 N. Y. 123; North Chicago Rolling Mill Co. v. St. Louis Ore & Steel Co., 152 U. S. 596; Schwarz v. Harris, 206 Fed. Rep. 936; Brown v. Pegram, 149 Fed. Rep. 515; Harris y. Be Paulina, 40 Ohio App. 57; Foss y. First Nat. Bank, 3 Fed. Rep. 185; Bissell y. Foss, 114 TJ. S. 252; Croshy y. Sproul, 17 Fed. Rep. [2d] 325; 22 Fed. Rep. [2d] 611; Royal Trust Co. y. Gardiner, 44 App. D. C. 570.) The amended pleading discloses an independent ground for equitable relief in addition to jeopardy of treble recovery and multiplicity of suits. (North Chicago Rolling Mill Co. y. St. Louis Ore & Steel Co., 152 TJ. S. 596; Peering y. Schreyer, 171 N. Y. 451; Lovett y. City of New York, 128 App. Div. 157.)
   Hubbs, J.

The respondents, Bankers Trust Company and The National City Bank, and two other banks owned a note of the International Match Corporation for $4,000,000. In February, 1932, the maker paid on the note $257,250, and executed a new note for the unpaid balance and as collateral security transferred to the banks 350,000 shares of the common stock of the Diamond Match Company. In April, 1932, the International Match Company was adjudged a bankrupt and thereafter the appellant Irving Trust Company was appointed trustee in bankruptcy. It demanded of respondent banks the surrender to it of the collateral stock on the ground that the International was insolvent at the time it pledged the stock with the respondent banks and that such transfer preferred the banks over other creditors. The demand was refused. It then commenced a suit in equity in the United States District Court against the banks to recover such stock. Thereafter, Svenska Taend-sticks Fabrik Aktiebolaget, one of the plaintiffs herein, hereinafter referred to as the Swedish Match Company, a Swedish corporation, Aktiebolaget Kreuger & Toll, hereinafter referred to as Kreuger & Toll, also a Swedish corporation, one of the plaintiffs herein, and Lyberg, Fehr and Browaldh, official court liquidators of Kreuger & Toll, each immune from service of process in this State, commenced this action in the Supreme Court of this State against the banks to recover for conversion of such collateral stock. The defendant Edward S. Greenbaum is trustee in bankruptcy of the estate of Kreuger & Toll, adjudged a bankrupt in the United States District Court for the Southern District of New York.

On June 23d, 1932, the loan evidenced by the note of the International Company having become due, an agreement was entered into, with the approval of the United States District Court, between the respondent banks, the plaintiffs in this action and the Irving Trust Company as trustee in bankruptcy of the International Company. The agreement recites that the 350,000 shares of stock of the Diamond Match Company pledged to the banks were subject to conflicting claims — the claim of the banks as pledgees, the claim of the Irving Trust Company as trustee of the International Company that the pledge was preferential, the claim of the Swedish Match Company that it owned such collateral stock or a part thereof, and the claim of Kreuger & Toll that it owned the stock or a part thereof. The agreement recited, for reasons therein stated, the desire of the parties to convert the stock into money without prejudice to any of the conflicting claims to the stock or its proceeds and thus to preserve the status quo regardless of the change in form of the pledged collateral. The pledged stock was sold and the banks acting under the agreement retained the amount due and turned over to the Irving Trust Company as trustee the balance of over $1,000,000 to be held it “ in separate fund ” until the final determination of all rights to the fund, interest to be allowed thereon “ at the New York Clearing House rate on demand deposits.”

action by the Swedish Match Company in the Supreme Court is to recover from the respondent banks and certain other defendants $13,000,000 for the alleged conversion of the pledged stock of the Diamond Match Company. The defendant Greenbaum, as trustee in bankruptcy of Kreuger & Toll, also commenced an action in the Supreme Court to recover $13,000,000 from the respondent banks for the conversion of the pledged stock. The action by Greenbaum as trustee was commenced while the interpleader motion here in question was pending.

On July 17, 1933, the referee in bankruptcy made an order, thereafter modified by the United States District Court, granting permission to the respondent banks to apply to the Supreme Court of New York to join the Irving Trust Company as trustee as a party defendant in this action on certain conditions stated in the order as modified. Thereafter, the Appellate Division made an order permitting the respondent banks “ to serve a pleading in the nature of a bill of interpleader in accordance with the opinion of this court [Appellate Division, 239 App. Div. 467] rendered December 8, 1933,” against the plaintiffs and the Irving Trust Company as trustee. The order contained the restrictions provided in the order of the United States District Court.

Thereafter the action brought by the defendant Green-baum as trustee was consolidated with this action by order of the Supreme Court and leave was given to respondent banks to serve an amended pleading in the nature of a bill of interpleader in the consolidated action.

Such amended pleadings having been served by the respondent banks, the Irving Trust Company as trustee moved at Special Term to dismiss such amended pleadings in the nature of bills of interpleader upon the ground that the pleadings failed to state facts sufficient to constitute a cause of action against appellant, and from the order of the Special Term denying such motion an appeal was taken by the Irving Trust Company as trustee.

The order of the Special Term was affirmed by the Appellate Division which has certified to this court the question whether such pleadings state facts sufficient to constitute a cause of action against appellant.

The main ground for reversal urged by appellant is that the pleadings in the nature of a bill of interpleader do not disclose an independent ground of equitable jurisdiction in addition to the threat of double jeopardy.

It is conceded by appellant that if respondent still retained the pledged stock and claims were being made by the various parties to this action to the stock, such independent ground of equitable jurisdiction would exist. Such is undoubtedly the law. (Irving Trust Co. v. Marine Midland Trust Co., 47 Fed. Rep. [2d] 907; Sherman Nat. Bank v. Shubert Theatrical Co., 247 Fed. Rep. 256.)

It is urged by respondent banks that the Appellate Division was perfectly justified in writing that “ upon the ground that from all the peculiar facts and circumstances of the case equity should grant the relief requested ” (239 App. Div. 467, 469), also that a particular ground of equitable relief in addition to the facts set forth is unnecessary. We do not find it necessary to deal with such contention, as we are satisfied that an independent equitable ground of jurisdiction exists under the facts alleged.

In the stipulation referred to the parties state that in their opinion that it is in their respective interests that such stock be sold at public auction * * * without prejudice to the rights or obligations of any of the parties,” except as stated.

The parties reserved the right to sue the banks for the conversion of the pledged stock “or an amount equal thereto,” with interest at the New York Clearing House rate on demand deposits. If the stipulation means anything, it clearly constitutes an agreement that the proceeds of the sale of the stock shall stand and remain in the place and stead of the stock itself, and that the rights of the parties shall be determined exactly the same as though the banks continued to hold the identical shares of stock in their possession.

Under the stipulation, the parties each benefited or believed that they did. A stock which might fluctuate in value was reduced to cash, the banks, in the event that they lost in the action, remaining subject to the' liability of paying over the amount retained, not with legal interest, as in case of a conversion, but at the New York Clearing House rate. The appellant Irving Trust Company received as trustee over $1,000,000, the balance over and above the amount retained by the banks as the .amount unpaid on the note, with interest and expenses.

Parties cannot accept benefits under a contract fairly made and at the same time question its validity. (City of Buffalo v. Balcom, 134 N. Y. 532, 535.) The words without prejudice ” to lawyers (and the stipulation was prepared by lawyers) have a well-known, definite meaning. They meant that as between the parties to the stipulation, the sale of the pledged stock and the disposition of the proceeds should not, because of the sale and surrender of the physical possession thereof by the banks, have any legal effect upon the rights of the parties; that such rights and liability should remain the same as though the pledged stock had not been sold, and that the proceeds of the sale, should stand in the place of and represent the stock in any subsequent legal proceeding.

It is unbelievable that, in a case where the res consists of perishable property or property depreciating in value, the parties cannot by express agreement provide that the property be sold and the proceeds stand in place of the property without depriving a court of equity of jurisdiction. (Genet v. Delaware & Hudson Canal Co., 170 N. Y. 278, 282; 69 C. J. p. 1318.)

The appellant has, therefore, barred itself from urging that the respondents’ pleadings do not disclose independent equities.

A trustee in bankruptcy cannot be sued without the permission of the bankruptcy court. (Vass v. Conron Bros. Co., 59 Fed. Rep. [2d] 969; Barton v. Barbour, 104 U. S. 126.)

Such permission was duly granted by the referee in bankruptcy and his order was modified and affirmed by the United States District Court. The order as modified in broad terms grants permission to the respondent banks to apply to the Supreme Court to make the appellant Irving Trust Company a party defendant in this action, and, if a party, that pursuant to the order making it a party, title or the right to possession of the pledged stock, as of the date of the pledge allegedly made by the bankrupt to the banks, may be adjudicated as against all parties to the action. The clear meaning of the order was to grant permission to litigate in the State court the title to the pledged stock at the time it was pledged. That necessarily involved an adjudication by the State court as to the ownership of the stock at the time and made necessary the litigation of all questions bearing upon that issue. The order does not contain any limitation or condition to the contrary. All conditions imposed in the order have been complied with by respondents in their pleadings.

Appellant urges that the pleadings raise issues triable without a jury and as the appellant is entitled to a trial by jury the pleadings fail to state a cause of action. The pleadings do, however, expressly state that respondents are acting under and by virtue of the order granting permission to make the appellant a party defendant in this action. By acting the order they have accepted all of its limitations and conditions and thereby bound themselves to consent to a jury trial of the issues.

If the appellant for any reason should be refused a jury trial it would, have a remedy by motion to be relieved from the order.

It is also urged that respondents are in the position which they now occupy, or did occupy when the motion was made for permission to serve a pleading in the nature of an interpleader, because of their own actions; it is said that they created the condition from which they are now trying to escape and that, therefore, equity should refuse relief. The statement is hardly true. The situation was not created by the banks. They did not induce the plaintiffs to commence this action or the trustee to commence its action. The actions having been commenced, it was apparently to the interest of all parties (and the stipulation so recites) to enter into the stipulation for the sale of the pledged stock and to provide that its proceeds should be retained in place of the stock.

The defendant Greenbaum urges that the pleading on its face shows that the applicants for interpleader deny that the adverse claimants have any interest in the stock, and, therefore, that it fails to state a cause of action. Such contention is based on the theory that there is not in existence a res concerning the title to which there are adverse contentions. If we are right in our conclusion that there is such res in existence, the contention is without force. The complainant is not required, as in strict inter-pleader, to be an indifferent stakeholder, without interest in the subject-matter.” (4 Pomeroy’s Equity Jurisprudence [4th ed.], § 1481; Mohawk & Hudson R. R. Co. v. Clute, 4 Paige Ch. 384; Groves v. Sentell, 153 U. S. 465, 485, 486; Hayward & Clark v. McDonald, 192 Fed. Rep. 890.)

Furthermore, there is in existence a surplus fund of over $1,000,000 in the possession of the appellant to which respondents make no claim of title.

The order should be affirmed, with costs, and the question certified answered in the affirmative.

Crane, Ch. J., Lehman, O’Brien, Crouch and Loughran, JJ., concur; Finch, J., not sitting.

Order affirmed, etc.


source: Caselaw Access Project

license: Public Domain

text:
    In the Matter of the Board of Supervisors of the County of Rockland, Appellant, Relative to Acquiring Title to Real Property Required for Highway Purposes. (Proceeding No. 2.) Fenton Sherwood, Respondent.

      (Argued May 20, 1935;
    decided May 28, 1935.)

      Walter A. McDermott and Ernest W. Hofstatter for appellant.
    The taken by the county to acquire the property for highway purposes was in conformity with statutory requirements. (Cons. Laws, ch. 25, §§ 148-150; Matter of Public Service Comm., 217 N. Y. 61; People v. Adirondack By. Co., 160 N. Y. 225; Matter of City of Buffalo, 189 N. Y. 163; People ex rel. Herrick v. Smith, 21 N. Y. 595; Matter of Fowler, 53 N. Y. 60; People ex rel. Horten v. Prendergast, 248 N. Y. 215; Matter of City of Utica, 134 Mise. Rep. 60; Matter of Sherman, 76 Mise. Rep. 45; Matter of City of Rochester v. Holden, 224 N. Y. 386; Bamapo Mountains Water Power & Service Co. v. Commissioners of Palisades Park, 177 App. Div. 700; County of Jefferson v. Horbiger, 229 App. Div. 381.) There was no necessity upon the trial for the petitioner to prove the other allegations contained in the petition. (County of Jefferson v. Horbiger, 229 App. Div. 381; Matter of City of Utica, 134 Mise. Rep. 60; People v. Carpenter, 24 N. Y. 86; Matter of Church, 92 N. Y. 4; Matter of City of Buffalo, 189 N. Y. 163.)

      Irving G. Kennedy for respondent.
    There was a complete failure of proof to support the judgment of condemnation. (City of Long Beach v. Long Beach Water Co., 209 App. Div. 902; Matter of Bronx Parkway Comm,., 176 App. Div. 717; Matter of N. Y., W. & B. R. R. Co., 161 App. Div. 50; New York T. Co. v. Wood, 145 Mise. Rep. 481; Bell Tel. Co. v. Parker, 187 N. Y. 299; Matter of Central H. G. & El. Corp. v. Morgenthau, 234 App. Div. 530; County of Jefferson v. Horbiger, 229 App. Div. 381; Matter of South Market St., 76 Hun, 85.)
   Hubbs, J.

This is a condemnation proceeding brought by a Board of Supervisors to condemn land required for the reconstruction of a State highway. Acquisition of such land is provided for under sections 148 to 150, inclusive, of the Highway Law (Cons. Laws, ch. 25), which sections provide in substance that where a State highway proposed to be constructed or improved shall deviate from the line of a highway already existing, the Board of Supervisors of the county shall provide the requisite right-of-way (§ 148), that the Board may by resolution authorize a committee to purchase the land, the purchase price to be a county charge (§ 149), and that if the Board of Supervisors “ is unable to acquire land by purchase as provided for in section one hundred forty-nine of this chapter (§ 150), the Board may present a petition to the Supreme Court for the appointment of appraisers to ascertain and determine the compensation to be paid. The petition is required to contain the following information: a description of the land to be acquired with a reference to a map upon which the same is shown which shall be annexed to such petition (§150). Section 149 does not specify any particular procedure to be followed in purchasing the land. The section reads in part as follows: “ The board of supervisors may, by resolution, authorize its chairman, a member, or a committee to purchase the lands to be acquired for the purposes specified in the preceding section. ⅜ ⅜ ⅝ q'kg purchase price of such lands shall be a county charge * *

On July 7, 1933, the Board of Supervisors adopted a resolution appointing two supervisors to act with the County Attorney to purchase the land necessary for right-of-way for the Suffern-Mt. Ivy County Highway 1448 as shown on * * * map No. 13 (r-4) Fenton Sherwood * *

Under date of July 10, Hoffstater, as County Attorney, wrote a letter to respondent Sherwood inclosing revised State highway department map No. 13 (r-4) showing the property necessary to be taken from you for the improvement and reconstruction of the Suffern-Mt. Ivy highway,” and stating that he was authorized by the committee of the Board of Supervisors to offer the sum of $1,200 for the property taken as shown on the map.

Under date of July 17, the committee reported that it had been “ unable to purchase or procure such parcels of land for said right-of-way.”

Under date of July 18, the Board of Supervisors adopted a resolution authorizing condemnation of respondent’s land. At the hearing at Special Term the resolution of the Board of Supervisors, dated July 7, 1933, a certificate of the County Clerk showing the filing of the petition and right-of-way maps, and the letter from the County Attorney to respondent were offered and received in evidence without objection on the part of respondent and it was stipulated on the part of respondent that the letter was received by him and never replied to either in person or by attorney. There was also received in evidence, over the objection of respondent, the resolution of the Board of Supervisors dated July 18, 1933, authoiiz-ing condemnation, the report of the committee as to inability to purchase and certain affidavits not material upon the question here involved. The respondent, at the trial, declined the offer of $1,200, but in doing so stated that the time to negotiate was prior to the institution of the proceeding and that whether or not respondent would take $1,200 was considered incompetent on the trial.

The Special Term granted judgment, decreeing that public use required the condemnation of the property described in the petition and appointing appraisers to ascertain and determine the compensation to be made to respondent. The Appellate Division reversed on the law and facts and stated that in its opinion there had not been a substantial compliance by the petitioner with the statutory provisions in respect to a showing that there was necessity for the improvement and that a fair and reasonable effort had been made to purchase the property by agreement with the respondent. It is respondent’s contention that there was a complete failure of proof to support the judgment of condemnation.

No detailed procedure to be followed by the Board in its efforts to purchase the land is prescribed by statute and there is no requirement as to what must be contained in the petition other than as stated above. It cannot be said that the petition fails to comply with the statute. The petition does state that the Department of Public Works had duly determined upon apd laid out the highway upon the lands described in the petition, and that such lands were essential for the proposed construction. It does not seem that there is any point to respondent’s contention that the necessity for the acquisition of the land in question is not shown. The duty is placed upon the Board of Supervisors to acquire the lands shown on the maps prepared by the State Highway Department and while the maps themselves do not indicate by whom they were made, the respondent was advised in the letter from the County Attorney that the map in question was State Highway Department map No. 13 (r-4). Certainly there is a presumption of regularity in the proceedings of the Board of Supervisors with reference to the condemnation of these lands. In all the proceedings the highway is referred to as Suffern-Mt. Ivy County highway 1448. The map was received in evidence without objection. It is plainly marked map No. 13 (r-4) highway No. 1448, Rockland county, and it is that map to which reference is made in the letter from the County Attorney to respondent as State Highway Department map No. 13 (r-4).”

It is clear that the resolutions of the Board of Supervisors and the letter of the County Attorney constituted some evidence of the fact that the lands of respondent were necessary to be taken in the construction of the highway and that in the absence of any proof to the contrary the court was justified in finding as a fact that the lands were necessary.

No method to be adopted by the Board in its efforts to purchase the land is specified by the statute. What efforts are required to be made is a matter for the determination of the Board and what price should be paid is likewise left open for the determination of the Board. It is shown in this instance that the Board appointed a committee, that the committee offered SI,200, that it reported that it could not purchase the land and that the Board accepted its report and approved it by ordering condemnation proceedings recommended in the committee’s report. Since the Board is by statute authorized to act in its efforts to purchase through a committee and since the respondent by failing to accept the offer made by the committee and by refusal to accept at the trial the amount offered, indicated that the price was not satisfactory, there is sufficient evidence of the fact that the Board of Supervisors was unable to acquire land by purchase.”

The whole theory of respondent is that the statute contemplates personal negotiations with respect to the price to be paid. We have here an offer in writing, proof of its receipt and competent evidence of non-acceptance. There is nothing in the record to indicate that the offer was inadequate in amount. The conclusion of the Appellate Division that there was no substantial compliance with the statutory provisions in respect of a showing that there was necessity for the improvement and that a fair and reasonable effort was made to purchase the property by agreement is highly technical. There are no statutory provisions in so many words requiring any such showing and both the necessity for the acquisition of the lands and that an effort was made to purchase has been shown by some competent proof. Until the Legislature prescribes a more exact method of procedure to be followed in the efforts to purchase the land and more definite provisions as to what must be shown in the petition, it does not seem that the court in the absence of proof of inadequacy of price offered should disapprove the procedure here followed by the Board.

The judgment of the Appellate Division should be reversed and that of the Special Term affirmed, with costs in this court and in the Appellate Division.

Crane, Ch. J., Lehman, O’Brien, Crouch, Loughran and Finch, JJ., concur.

Judgment accordingly.


author: Per Curiam.

text:
    Grace E. Stone, as Administratrix of the Estate of Bernice B. Stone, Deceased, Respondent, v. The Prudential Insurance Company of America, Appellant.
    (Argued April 30, 1935;
    decided May 28, 1935.)

      Nicholas J. Weldgen for appellant.
    The statements in the applications, being warranties, and having been shown on plaintiff’s proof to be false, the plaintiff cannot recover. (King v. Tioga County, 35 App. Div. 58; Satz v. Massachusetts Bonding & Ins. Co., 243 N. Y. 385; Foot v. Mtna Life Ins. Co., 61 N. Y. 571; Barteau v. Phoenix Mut. Life Ins. Co., 67 N. Y. 595; Kenyon v. K. T. & M. M. A. Assn., 122 N. Y. 247; Clemans v. Supreme Assembly, 131 N. Y. 485; Enthoven v. American Fidelity Co., 128 N. Y. Supp. 805; 150 App. Div. 928; 211 N. Y. 561; Keck v. Metropolitan Life Ins. Co., 238 App. Div. 538; 264 N. Y. 422; Travelers Ins. Co. v. Pomerantz, 246 N. Y. 63; Anderson v. Mtna Life Ins. Co., 265 N. Y. 376; Saad v. N. Y. Ufe Ins. Co., 201 App. Div. 544; 235 N. Y. 550; Minsker v. John Hancock Mut. Ufe Ins. Co., 254 N. Y. 333.)

      Seymour Bernstein and Charles B. Bechtold for respondent.
    The statements in the applications are immaterial except as they affect the provisions of sound health at the date of the applications. (Silverstein v. Metropolitan Ufe Ins. Co., 254 N. Y. 81.)
   Per Curiam.

Some of the answers in the applications for insurance being palpably false, and such answers being a part of the applications which would have been incorporated in due course in the policies, it follows that the judgments in favor of the plaintiff should be reversed and the complaint dismissed, with costs in all courts. (See Axelroad v. Metropolitan Life Ins. Co., 267 N. Y. 437, decided May 21, 1935.)

Crane, Ch. J., Lehman, O’Brien and Loughran, JJ., concur; Hubbs, Crouch and Finch, JJ., dissent.

Judgments reversed, etc. (See 268 N. Y. 630.)


author: Crane, Ch. J.

text:
    In the Matter of Morris Friedman, Respondent, against James E. Finegan et al., Constituting the Municipal Civil Service Commission of the City of New York et al., Appellants.
    (Argued May 22, 1935;
    decided June 4, 1935.)

      Kenneth M. Spence and George Rosier for Municipal Civil Service Commission of the City of New York, appellant.
    The Municipal Court of the City of New York is a single court and under section 13 of the Civil Service Law (Cons. Laws, ch. 7) only “ one clerk and one deputy clerk ” of each court is in the statutory exempt class. (Matter of Meahl v. Ordway, 98 Mise. Rep. 394; Worthington v. London G. & A. Co., 164 N. Y. 81; Matter of Levy, 192 App. Div. 550; Degnon v. Cook & Wilson, 98 Mise. Rep. 251; Ress v. Gurinsky, 80 Mise. Rep. 231; Krulewitch v. 159 N. Y. Supp. 827.)

      John J. Bennett, Jr., Attorney-General (Patrick H. Clune of counsel), for State Civil Service Commission, appellant.
    The positions in question are capable of being filled by competitive examination and, therefore, should not be in the exempt class. (Matter of Seeley v. Stevens, 190 N. Y. 158; People ex rel. Schau v. McWilliams, 185 N. Y. 92; People ex rel. Sweet v. Lyman, 30 App. Div. 135; 157 N. Y. 368; Rogers v. Common Council of Buffalo, 123 N. Y. 173; Hale v. Worstell, 107 App. Div. 624; 185 N. Y. 247; Kelty v. Kaplan, 205 App. Div. 487; Matter of Meahl v. Ordway, 98 Mise. Rep. 394.) The action of the Municipal Civil Service Commission and of the State Civil Service Commission was proper and legal. It is final and cannot be set aside. (People ex rel. Moriarty v. Creelman, 206 N. Y. 570; People ex rel. Schau v.
      McWilliams, 185 N. Y. 92; Matter of Simons v. McGuire, 204 N. Y. 253; Matter of Gluck v. Bice, 265 N. Y. 132; Murray v. Kaplan, 206 App. Div. 202; Matter of Barthel-mess v. Cukor, 231 N. Y. 435; Matter of Ottinger v. State Civil Service Comm., 240 N. Y. 435; Hale v. Worstell, 185 N. Y. 247; Matter of Medhl v. Ordway, 98 Mise. Rep. 394; Kelty v. Kaplan, 205 App. Div. 487.) The Municipal Court of the City of New York is no different from any other court of the State, for the purpose of classification and filling positions by competitive examinations. (.Matter of O’ Keefe v. Clark, 238 App. Div. 175.)

      H. Eliot Kaplan and Albert Be Roode for Martin F. Heneghan et ah, intervening defendants-appellants, and the Civil Service Reform Association, amicus curias.

    The Municipal Court of the City of New York is a single court. It is not composed of a number of separate courts. (Haggerty v. City of New York, 267 N. Y. 252; Worthington v. London G. & A. Co., 164 N. Y. 81; Bouten-berg v. Schweitzer, 165 N. Y. 175; Matter of Levy, 192 App. Div. 550; 229 N. Y. 637; Bess v. Gurinsky, 80 Mise. Rep. 231; Degnon v. Cook & Wilson, 98 Mise. Rep. 251; Krulewitch v. Percarsky, 159 N. Y. Supp. 827.) The positions of clerk and deputy clerk in each district are not exempt under subdivision 3 of section 13 of the Civil Service Law, or section 1373 of the New York City Charter. (Matter of Ottinger v. State Civil Service Comm., 240 N. Y. 435; Barlow v. Berry, 245 N. Y. 500; Hale v. Worstell, 185 N. Y. 247; Matter of Medhl v. Ordway, 98 Mise. Rep. 394; Matter of 0’ Keefe v. Clark, 238 App. Div. 175; Matter of Nammack, 145 App. Div. 289; 206 N. Y. 630; Matter of Phillips, 139 App. Div. 365; 200 N. Y. 521.) The action of the Commission in classifying the positions of clerk and deputy clerk as competitive is not subject to review by mandamus. (People ex rel. Schau v. McWilliams, 185 N. Y. 92; Matter of Gluck v. Bice, 265 N. Y. 132.)

      Samuel M. Ostroff for respondent.
    The determination granting the peremptory order of mandamus directing that one' clerk and one deputy clerk of each Municipal Court of the City of New York be in the exempt class is correct. (Matter of Gluck v. Rice, 265 N .Y. 132; People ex rel. Schau v. McWilliams, 185 N. Y. 92; Matter of Kilcoyne v. Lohr, 226 App. Div. 218; 252 N. Y. 526; Matter of O’ Keefe v. Clark, 238 App. Div. 175; Welling v. Kaplan, 242 App. Div. 605.) The Municipal Court system is not one court but is a continuation of the several District Courts and Justices Courts under a new name, and each of the District Courts is a court within the contemplation of subdivision 3 of section 13 of the Civil Service Law. (Worthington v. London G. & A. Co., 164 N. Y. 81.)
   Crane, Ch. J.

Since 1894 the Constitution of this State, by article Y, section 9 (now § 6), has provided as follows: “Appointments and promotions in the civil service of the State, and of all the civil divisions thereof, including cities and villages, shall be made according to merit and fitness to be ascertained, so far as practicable, by examinations, which, so far as practicable, shall be competitive; ⅜ * The fundamental underlying will of the People as expressed here is that there shall be competitive examinations for all civil service appointments. Exemption is the exception, not the rule. Wherever it is practicable to do so, the Legislature and the commissions, appointed by it, shall provide for competitive examination.

In People ex rel. McClelland v. Roberts (148 N. Y. 360, 366) this court, through O’Brien, J., said: “ If the legislature should repeal all the statutes and regulations on the subject of appointments in the civil service the mandate of the Constitution would still remain, and would so far execute itself as to require the courts, in a proper case, to pronounce appointments made without compliance with its requirements illegal.”

One of the leading cases in this State upon the civil service is Chittenden v. Wurster (152 N. Y. 345, 354, 358, 363), wherein this court through Haight, J., said: Appointments and promotions ‘ shall be made according to merit and fitness.’ This provision is doubtless mandatory.”

A few other quotations from this decision may be helpful to get the starting point for the consideration of the matter now before us. “ In order to determine whether the examination of a candidate for an office is practicable, we must first ascertain the nature and character of the duties of his position. Having ascertained the facts, the question of exemption then, doubtless, becomes one of law, as was held by the majority of the judges composing the Appellate Division.”

Recognizing that it was not practicable to hold competitive examinations for some positions, especially those of a confidential nature, this court further said that if an improper classification were made there was a remedy — The people are not, however, without a remedy. There is one which is very simple and effective; if the mayor refuses to do his duty, or if he does it improperly, he may be compelled by direct proceeding, as by mandamus, or perhaps in some cases by certiorari, instituted by any resident citizen, to do it in accordance with the requirements of the Constitution and of the statute. The courts have the power to compel the discharge of such duties.”

The Legislature, in giving effect to these constitutional directions, has now embodied in the Civil Service Law (Cons. Laws, ch. 7) certain classifications which, of course, must be reasonable and with the main purpose in view in order to be constitutional. We had occasion to refer to this classification in Matter of Byrnes v. Windels (265 N. Y. 403). Section 13 provides for an exempt class. Deputies of principal executive officers, authorized by law to act generally for and in place of their principals, are exempt from competitive examination. So also is one secretary of each officer, board or commission, authorized by law to appoint a secretary. So, too, one clerk and one deputy clerk, if authorized by law, of each court and one clerk of each elective judicial officer. Subdivision 4 of this section provides for additional exemptions — all other subordinate offices for the filling of which competitive or non-competitive examination may be found to be not practicable.” (As amd. Laws 1927, ch. 440, § 3.)

These exemptions which may be made by the Legislature or by the Civil Service Commission appointed under its authority must have relation to the duties of the office and not simply to the title which is used. In other words, there must be a reasonable exercise of the power given under the Constitution. With liberality in application it must be that competitive examinations are not practicable for the position or office. There must be something, as indicated in the Chittenden case, in the nature of the duties which makes the service either one of confidence or else of such importance that personal selection instead of competitive examination is for the best interests of the public and the fulfillment of the particular duties. In other words, the Legislature cannot act arbitrarily and exempt places from competitive examination at will. The duties must have some relationship to the exemption and the classification must be reasonable.

Difficult it is at all times to place limitations upon power for new circumstances are always arising to extend or restrict the limitations. For the present we may say, bearing in mind the purpose which the Constitution sought to accomplish and to extend the competitive examination principle wherever it can be used, that there must appear to be some fairly good reason to justify an exemption whether made by the Legislature or by the Commission. That the Legislature could not nullify the provisions of the Constitution by exempting all clerks in public service is self evident as intimated in our decision in Matter of Ottinger v. Service Comm. (240 N. Y. 435, 443), where this court, through Cardozo, J., said in reference to extended exemptions, We find no reasonable basis for a belief that in all the positions, present or future, that exist or may exist in connection with this bureau, there can be no place for a test of efficiency by any form of examination, even as a supplement to tests more intimate and personal. If the Legislature may so declare as to this bureau for no better reason than the need of secrecy, it may say as much of the employees of the district attorneys in every county in the State. By a slight and yet inevitable extension, it may make a like declaration as to other bureaus and departments. No such sweeping exemption within the limits of the administrative departments of the government has ever been proclaimed since the Constitution set bounds to the discretion of the Legislature in the formation of the civil service.” And in Matter of Gluck v. Rice (265 N. Y. 132) we had occasion to decide that the placing of assistant clerks in the Municipal Courts of the city of New York by the Municipal Civil Service Commission in the exempt class calls for the exercise of discretion which this court would not interfere with until a clear legal right to a peremptory order of mandamus to change the ruling appeared in the record. Even then there was a strong dissent in this court.

This brief reference to the cases indicates that the question of exemption, as before stated, is not dependent upon a name or title, but must have reference to the duties to be performed and that exemptions must have reasonable basis for existence.

This case comes before us regarding the clerk and deputy clerk in each of the Municipal Courts of the city of New York. There are fifty-six (56) such positions, there being a clerk and a deputy clerk assigned to each of the twenty-eight (28) districts — Municipal districts, in which there is a Municipal Court. They claim to be exempt by the Civil Service Law, not by a ruling of the Commission. In fact, the Commission has placed them in the competitive class after finding that it is practicable to hold a competitive examination for the places.

New York city has had a gradual growth by the annexation of various districts in which there were various courts. These have been consolidated in many instances, and in others, as in the case of the City Court, the jurisdiction of the court has been extended. We have a City Court for the city of New York, and we now have a Municipal Court for the city of New York which has been a consolidation or continuation under a new name and by reorganization of other minor and local courts in the districts annexed to make up the Greater City of New York. (People ex rel. Schau v. McWilliams, 185 N. Y. 92.) The City Court of New York and the Court of Special Sessions are divided into districts or branches; perhaps we should term them parts or terms, and yet the clerk in each of these branches, or his deputy, does not come within section 13 of the Civil Service Law. Each of these courts has one general clerk and a deputy who are exempt because of the nature of their duties and of the importance of their functions to the relationship which they bear to the work of the judges.

So, with the General Sessions of the county of New York, there is a clerk who comes within these provisions. Apparently, there are no clerk and deputy clerk for the Municipal Court of the city of New York, such as is provided for the other courts. Within the meaning of section 13, one clerk and one deputy clerk for the Municipal Court have not yet been authorized by law. No such positions have been created. There is a president justice whose duty it is to assign the various justices to sit in the various districts. The Municipal Court Code refers to the Municipal Court as one court. Section 1 provides that there shall be a president justice of the court. Section 4 provides for the filling of vacancies occurring in the office of justice of this court.” Section 6 states the jurisdiction of “ The municipal court of the city of New York.” Subdivision 1 of section 7 provides: “The president justice and the justices of this court shall constitute the board of justices * * ⅛. The board may by resolution provide * * * for rules of court.” Subdivision 2 reads: “ The president justice * in addition to the exercise of all the other powers of a justice of this court * * * shall exercise general superintendence over the business of the court, and shall establish and supervise a system of keeping records of the court * * *. The president justice shall also designate an attendant of such court to act as attendant of the board of justices.” We find in subdivision 3 the authority of the president justice “ to make * * * rules controlling calendar practice; to classify actions * * * by character or amount * ⅜ *; to designate a district or districts ⅜ * * where special classes of cases shall be tried * * *; to designate a district or districts * * * where * * * special classes of motions shall be noticed and heard * * *; to establish jury parts * * *; to transfer cases from one district to another in the same borough; to "determine or what days and at what hours court shall be held in any district in each borough * ⅝ * and to designate what part or parts shall be held in each district.”

We think it fairly to be inferred from these various acts relating to the Municipal Court that there was an attempt to harmonize and make uniform the judicial system of minor courts throughout the city of New York. Legislation has aimed for New York city, since its annexation of adjoining cities and towns, a unification and symmetry throughout the offices of the greater municipality. We have the city of New York covering the entire territory, although the judges are elected in restricted districts. Magistrates and Special Sessions judges are on a uniform basis. Why should the Municipal Court hold any different position? Of course, when the city of Brooklyn was separate and distinct as a corporate entity, there were separate and distinct courts under the city government or within its territory, and it is also true that these justices' courts were consolidated with the courts in New York, and made the Municipal Court. This was a reorganization and consolidation or, as stated by the respondent, it was a continuation of the courts, but names and titles mean little. The court became the Municipal Court, reorganized by new laws, and we think that it is decidedly evident that the Municipal Court, as such, is one court and that the districts in which there is a Municipal Court have been created for convenience, as has been done with other courts. If there be no head clerk or deputy clerk for this Municipal Court, it is because the law has not created such position. We do not think within the meaning, and this is the point — within the meaning of section 13 of the Civil Service Law, the fifty-six (56) clerks and deputy clerks holding positions under the charter in the various districts constitute the one clerk and one deputy of a court within the meaning of the i'Nvil Service Law creating exemptions.

The charter of the city of New York (Laws of 1901, ch. 466, as amd.), section 1373, reads as follows, and upon this the respondents apparently rest their case:

“ Municipal court of the city of New York; clerks, deputy clerks and assistant clerks. § 1373. The clerks, deputy clerks and assistant clerks, stenographers, interpreters, attendants and other employees of the municipal court of the city of New York in office when this act takes effect shall continue to hold office for the remainder of the respective terms for which they were appointed. There shall be a clerk and a deputy clerk in each district. * * * The successors of any clerks, deputy clerks or assistant clerks at the time this act shall take effect, shall be appointed in each district by the justice or justices thereof for a term of six years from the date of appointment. * ⅛ ⅜ ” (Amd. Laws of 1929, ch. 235.)

The use here of the words “ clerk and deputy clerk in each district ” does not create these offices the clerk and deputy clerk ” of the Municipal Court within the meaning of the Civil Service Law exemption. In fact, there is nothing in this record to show what are the duties of these clerks in the Municipal Court. Reliance is placed entirely upon the name. Nor does it appear that it is not practicable or reasonable to hold competitive examination for the places. We are simply told that because they are called “ clerk and deputy clerk in each district ” they are, therefore, exempt by statute. In Matter of O’ Keefe v. Clark (238 App. Div. 175) assistant clerks in the Municipal Court sought to be classified as exempt. It was held that they had failed to establish that the position is one involving trust and confidence or that it was impracticable to select appointees from the competitive class.

We have been unable to find anything in the record before us, and were unable to learn from the argument wherein the duties of assistant clerk differ from those of a deputy clerk or the clerk in the various districts where the Municipal Court sits. Neither is there anything in the record to show us what the duties are, or that a competitive examination is impracticable.

We are of the opinion, therefore, that the classification made by the Municipal Civil Service Commission in placing these positions in the competitive class must stand and that the courts have been in error in holding that they are exempt under the provisions of section 13 of the Civil Service Law.

The order of the Appellate Division and that of the Special Term should be reversed and the application denied, with costs in all courts.

Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Orders reversed, etc.


author: O’Brien, J.

text:
    In the Matter of Joseph Respondent, against Thomas W. Hammond, as Commissioner of the Sanitation Department of the City of New York, Appellant.

      (Argued May 20, 1935;
    decided June 4, 1935.)

      Paul Windels, Corporation Counsel {Seymour B. Quel and Paxton Blair of counsel), for appellant.
    Since the charges against the petitioner were adequate on their face and the procedure prescribed by law for the removal of the petitioner was followed by the defendant, the Appellate Division was without power to review the sufficiency of the evidence or the severity of the punishment prescribed by the defendant. {People ex rél. Kennedy v. Brady, 166 N. Y. 44; Matter of Brandt v. Cheshire, 239 App. Div. 845; Matter of Rosengarten v. Knapp, 236 App. Div. 743; People ex rel. Picceola v. Woodbury, 144 App. Div. 188; People ex rel,

      Lahey v. Woodbury, 112 App. Div. 79; People ex rel. Holden v. Woodbury, 88 App. Div. 693; 179 N. Y. 525; People ex rel. Middleton v. McCartney, 36 App. Div. 39; People ex rel. Hayes v. Waldo, 212 N. Y. 156.) Assuming that the sufficiency of the evidence at the departmental hearing on the charges against the petitioner is subject to judicial review, such evidence was sufficient in any event to justify the petitioner’s removal. (Matter of Hidden, 243 N. Y. 499; People ex rel. Began v. Enright, 240 N. Y. 194; People ex rel. Morrissey v. Waldo, 212 N. Y. 174.)

      Jay 0. Kramer and Vincent A. Marsicano for respondent.
    Section 537 of the New York City Charter (L. 1901, ch. 466) provides for a writ of certiorari on petitioner’s dismissal. (People ex rel. Holden v. Woodbury, 88 App. Div. 593; 179 N. Y. 525.) Section 1304 of the Civil Practice Act provides specifically for the questions to be determined on certiorari. (People ex rel. McAleer v. French, 119 N. Y. 502; People ex rel. Gilson v. Gibbons, 231 N. Y. 171; Matter of Mitchell v. Mulroohey, 242 App. Div. 48; Matter of Kelly v. Morgan, 241 App. Div. 476; Matter of Andes Co-Operative Dairy Co. v. Baldwin, 238 App. Div. 726; 263 N. Y. 578.)
   O’Brien, J.

Petitioner was a driver in the sanitation department of the city of New York. Written charges were served upon him specifying neglect of duty, removing trade waste and failure to obey orders. He was tried, found guilty and dismissed from the force. On review by certiorari the Appellate Division annulled the determination and directed reinstatement.

Section 537 of the Greater New York Charter (Laws of 1901, ch. 466) vests the head of this department with power, in his discretion, on evidence satisfactory to him,” to dismiss a member of the uniformed force for neglect of duty, disobedience of orders, violation of rules and other offenses and confers upon the removed employee the right to review the action of the commissioner by-certiorari.

Under this section of the charter, the courts may inquire on certiorari into the questions whether the employee has been informed of the cause of the proposed removal and has been allowed an opportunity of making an explanation ” and whether “ the true grounds thereof have been entered upon the departmental records. No right to a trial or hearing is accorded, merely an opportunity to make an explanation. The courts are limited to an examination respecting compliance with the procedure directed by section 537 and to an inquiry whether the charges are substantial and are supported by any evidence which ought to satisfy a reasonable official who is vested with power of discretion. On matters of proof, we think, in view of the extensive discretionary power granted by section 537 of the charter, that the question of preponderance of evidence as contemplated by section 1304, subdivision 5, of the Civil Practice Act in respect to certiorari in general is not before the courts. Rather the review on the sufficiency of evidence must be limited to subdivision 4 of section 1304, whether there was any competent proof of the facts; in other words, whether the explanation offered by the person against whom the charges were preferred was so complete as necessarily to satisfy an official who is not ignorant, unfair or prejudiced. The rule, of course, is different where a statutory right to a trial is accorded as in People ex rel. Gilson v. Gibbons (231 N. Y. 171). The opportunity to explain which section 537 confers on members of the force is not a right to a trial but it must be a genuine opportunity and not a verbal sham. When there is evidence to support the charges and the removing officer is not shown to have acted in bad faith nor frivolously and the facts are not so strong as to impose an obligation on an honest and intelligent official to be convinced of the truth of the explanation, his judgment must prevail. Section 537 goes no further than this. There is evidence in this case that petitioner did remove trade waste in violation of rules. The credibility of the explanation was a matter of valuation by the trier of the facts. We cannot hold as matter of law that he was bound to credit it.

The order of the Appellate Division should be reversed and the order of certiorari dismissed, with costs in all courts.

Crane, Ch. J., Lehman, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.


author: Lottghran, J.

text:
    Wynkoop Crawford Company, Respondent, v. The Western Union Telegraph Company, Appellant.

      (Argued March 4, 1935;
    decided June 4, 1935.)

      Francis R. Stark, Denis O’L. Cohalan, Ralph H. Kim-ball and Joseph L. Egan for appellant.
    Assuming that the party to whom the overhead was to be “ satisfactory ” was the other party to the contract, nevertheless this provision of the contract was not illegal but valid, meant precisely what it said, and required that the other party be satisfied in fact as distinguished from what the referee might conclude it should reasonably have been satisfied with. (American Law Institute, Restatement of Law of Contracts, § 265; Smith v. Robson, 148 N. Y. 252; Kramer v. Wien, 92 Mise. Rep. 159; Zahler v. Mann, 97 Mise. Rep. 19; Isbell v. Anderson Carriage Co., 170 Mich. 304; United States v. Mason & Hanger Co., 260 U. S. 323; Goltra v. Weeks, 271 U. S. 536; American Music Stores v. Kussel, 232 Fed. Rep. 306; Duplex Safety .Boiler Co. v. Garden, 101 N. Y. 387; Williams Mfg. Co. v. Standard Brass Co., 173 Mass. 360; Delano v. Columbia M. Works & M. Iron Co., 179 App. Div. 153; 226 N. Y. 660; Studner v. H. & N. Carburetor Co., 185 App. Div. 131; 230 N. Y. 534; Willis v. S. M. H. Carp., 259 N. Y. 144; Gimberg v. Friedman, 146 App. Div. 779; Diamond v. Mendelsohn, 156 App. Div. 636.) The satisfaction of the electric company with the overhead, for which the contract stipulated, was not the satisfaction of the other party but of a third-party arbiter, which means that the third party’s decision is final in the absence of collusion or bad faith. (Neid-linger v. Onward Construction Co., 107 App; Div. 398; 188 N. Y. 572; Granger Co. v. B.-K. Iron Works, 204 N. Y. 218; Condict v. Onward Construction Co., 210 N. Y. 88; Wood & Co. v. Olvord & Swift, 232 App. Div. 603; 258 N. Y. 611; Dixon v. Western Union Tel. Co., 192 App. Div. 908.)

      William Button for respondent.
    Under the contract involved in the counterclaims the electric company could not arbitrarily fix the amount of overhead. (Dimes v. Grand Junction Canal Co., 3 H. L. Cas. 759; Matter of Coombs, 4 Exch. 841.) The telegraph company should be satisfied with such an allowance of overhead as would satisfy a reasonable person. (Van Iderstine Co. v. Barnet Co., 242 N. Y. 425; Mac Knight Flintic Stone Co. v. Mayor, 160 N. Y. 72; Nolan v. Whitney, 88 N. Y. 648; Doll v. Noble, 116 N. Y. 230; Haehnel v. Trostler, 54 Mise. Rep. 262; City of Brooklyn v. Brooklyn City B. R. Co., 47 N. Y. 475; Duplex Safety Boiler Co. v. Garden, 101 N. Y. 387; Russell v. Allerton, 108 N. Y. 288; Silver v. Graves, 210 Mass. 26; Hawkins v. Graham, 149 Mass. 284; Walker v. Cambridgeport Sav. Bank, 186 Mass. 314; Noyes v. Eastern Accident Assn., 190 Mass. 171; Hunt Co. v. Boston Kiev. Ry., 199 Mass. 220; Cushman v. Proctor, 200 Mass. 272; Hands v. Bliss, 204 Mass. 313; MacDonald v. Kavanaugh, 259 Mass. 439; Keeler v. Clifford, 165 Ill. 544; Mullally v. Greenwood, 127 Mo. 138; Richison v. Mead, 11 S. D. 639; Lincoln v. Orthwein, 120 Fed. Rep. 880; Adamson v. Alexander Milburn Co., 275 Fed. Rep. 148.)
   Lottghran, J.

Plaintiff, a printing concern, agreed with Western Electric Company to supply stationery to defendant at fixed prices for a stated period. Defendant was the principal of Western Electric Company and is here its assignee. Caught by the rising cost of labor and material, plaintiff sought and obtained a modification of the contract whereby the measure of its compensation was changed to cost of production ” plus defined percentages of profit. The agreement, as so modified and as renewed from time to time, made this provision: The phrase ‘ cost of production ’ as employed in this agreement shall be understood to mean the Printing Company’s [plaintiff’s] actual cost of labor and material (including an amount of administrative and overhead charges, attributable to the performance of said agreement, satisfactory to the Electric Company, which said sum is to be determined by the Electric Company after an audit and examination of the books and accounts of the Printing Company) and for the purpose of determining such cost of production the Printing Company agrees that ⅞ ⅛ ⅜ representatives of the Electric Company may, as such time as they desire, examine and audit such books and accounts.” The proper construction of this clause is the principal question presented in this action for breach of the contract.

“ Administrative and overhead charges ” attributed by plaintiff to its performance were advanced subject to audit. For these provisional payments defendant demands judgment upon a counterclaim which alleges that the items when audited were not satisfactory to Western Electric Company: Proof of that fact was excluded by the referee who heard and determined the issue, because, as he found, Western Electric Company merely echoed a dissatisfaction asserted by defendant without justification in reason. This ruling having been affirmed by the Appellate Division, defendant appeals from the judgment recovered by plaintiff.

The finding that the dissatisfaction of Western Electric Company was only that of defendant is not without support in the evidence and must be accepted. We are not in accord with the ruling that defendant’s dissatisfaction, though actual, was not conclusive against plaintiff upon the matters embraced in the counterclaim.

The proof' supplies no positive, objective standard of the fairness or correctness of many of the administrative and overhead charges ” that have been allowed to plaintiff as attributable to its performance. Overhead ” cannot be defined with precision. “ It may be said to include broadly the continuous expenses of a business irrespective of the outlay on particular contracts ” (Sears, J., in Dairymen's League Co-operative Assn., Inc., v. Holmes, 207 App. Div. 429, 438.) As the Supreme Court of Pennsylvania has said: There are many uncertain items fluctuating between the administrative and operative ends, partaking somewhat of both.” (Lytle, Campbell & Co. v. Somers, Fitler & Todd Co., 276 Penn. St. 409, 415.) This record bears witness to difficulty encountered at almost every step in the attempt to segregate true overhead ” from other general costs of a business and, when segregated, to departmentalize it.

Plaintiff has a large printing establishment. During the period covered by this contract it served many customers. This litigation began in 1924. It exhibits an extended debate between corps of experts who formulated their respective theses upon thousands of pages of computations and distributions. The controversy involves differences in procedure for ascertaining total overhead,” as well as in methods of distribution of that total over numerous activities in themselves unrelated. Items that have been allowed to plaintiff include interest on investment, depreciation computed on replacement cost, management expense, bad debts, and club dues, gratuities and donations.

We may assume with the referee that in all this there is no element of taste or fancy in a strict sense. It is here demonstrated, however, that the allocation of “ administrative and overhead charges ” to one of many separate undertakings in a single business is in large degree an affair of individual judgment, — an interpretation which is not matter of general agreement in the business community. Under settled principles, therefore, the contract phrase satisfactory to the Electric Company ” is to be read, not as a stipulation for what court or jury would pronounce satisfactory to a reasonable man, but literally as meaning actually satisfactory to defendant personally. (Duplex Safety Boiler Co. v. Garden 101 N. Y. Crawford v. Mail & Express Pub. Co., 163 N. Y. 404; American Law Institute, Restatement of the Law of Contracts, § 265.)

When literal construction is rejected in cases like this the reason is usually some consideration of hardship or of unjust enrichment. In that aspect it is to be noticed that this contract, as we have read it, still leaves to plaintiff in any event a profit which could not have been earned but for the modification of the original agreement by the grace of defendant.

For these reasons we are of opinion that the exclusion of the evidence offered by defendant was material error.

The judgment of the Appellate Division and that of the Trial Term be reversed and a new trial granted, with costs to abide the event.

The appeal taken as of right should be dismissed, without costs, as no substantial constitutional question is involved.

Crane, Ch. J., Lehman, O’Brien, and Crouch, JJ., concur; Finch, J., not sitting.

Judgment accordingly.


author: Crouch, J.

text:
    Moss Estate, on Behalf of Itself and Other Taxpayers, Appellant, v. Town of Ossining, Respondent.
    (Argued May 1, 1935;
    decided June 4, 1935.)

      Ralph W. Crolly and Hubert Rogers for appellant.
    The Town Board had no authority to include the amount of outstanding certificates of indebtedness under “ estimated revenues ” in the 1934 tax levy. (L. 1933, ch. 96.) Paragraph b of subdivision 2 of section 112 of the Town Law (Cons. Laws, ch. 62), as construed by the Appellate Division, is invalid. (Dane v. Jackson, 256 U. S. 589; County of Santa Clara v. Southern Pac. R. Co., 18 Fed. Rep. 385; Van Brocklin v. Tennessee, 117 U. S. 151; Shaffer v. Carter, 252 U. S. 37; Cache County v. Jensen, 21 Utah, 206; People ex rel. Carr v. C. & N. W. Ry. Co., 322 Ill. 150; Wayne County Sav. Bank v. Roscommon Twp., 97 Mich. 630.)

      William A. Davidson and Herbert C. Gerlach for respondent.
    The inclusion by the town in its annual estimate for the fiscal year 1934 of the amount of outstanding certificates of indebtedness due and payable in 1934 less anticipated collections and the subsequent levy of this amount by the Board of Supervisors of the county constituted a valid levy. (Town Law, § 112, subd. 2; Morris, Mather & Co. v. Port of Astoria, 15 Pac. Rep. [2d] 385.)
   Crouch, J.

The plaintiff seeks to recover a portion of the 1934 general town tax paid by it under protest. The payment was not voluntarily made. (Adrico Realty Corp. v. City of New York, 250 N. Y. 29.)

The defendant is a town in Westchester county. Its system of taxation, with the incidental matters of borrowing money against unpaid taxes and repaying the same, is embodied in chapter 105 of the Laws of 1916, a special statute hereinafter referred to as the Westchester Law, and in sections 96 and 96-a of the Tax Law (Cons. Laws, ch. 60).

Under that system, the defendant is required in the first instance to finance the county for the town’s share of the State and county taxes. Accordingly, the town board borrowed $28,264.07 on July 15, 1933, $42,070.26 on September 15, 1933, and $11,858.72 on November 15, 1933, and issued therefor certificates of indebtedness payable on or before July 15, 1934.

In an amended town budget adopted January 29, 1934, there was included an item of $73,892.37, which was the sum required to redeem and pay the amount outstanding December 31, 1933, on the certificates so issued. There was also an item of $12,300, representing an estimated collection from the unpaid taxes applicable to the payment of the certificates. The difference between the two items, $61,592.37, was the net amount to be raised for the payment of the certificates. It was included in the general levy for 1934, and the proportion thereof paid by the plaintiff is the subject of its complaint here. It says there was no statutory warrant for the relevy as and when made.

1. As to that part of the borrowing of July 15, 1933, which was included in the budget and relevied, we think there can be no sustantial complaint. It is true that the certificate as issued stated that it was “ For Temporary Loan in anticipation of Taxes of the year 1933.” That does not conclusively establish that the loan was made under the authority of section 117 of the Town Law (Cons. Laws, ch. 62), as appellant contends. Obviously it was not. The loan appears to have been made against transfers of tax liens and was in substance, if not in form, authorized under section 32 of the Westchester Law.

2. As to the balance of the relevy, however, the appellant is clearly right. The amounts were borrowed and the certificates were issued against the unpaid taxes of 1933. Nominally and actually that was done under the authority of section 31 of the Westchester Law. But that section neither contemplates nor authorizes payment of such certificates by means of a relevy the following year. On the contrary, the mandate of the statute is that the unpaid taxes upon which the certificates are based shall be retained by the supervisor and shall be collected as hereinafter provided.” The reference, beyond doubt, is to the ordinary remedies provided by that statute for the collection of unpaid taxes. (See §§34 et seq.; §§55 and 56.)

But it is said that the inclusion of these items in the budget was not only authorized but was made necessary by section 112, subdivision 2, paragraph (b) of the Town Law. It is unnecessary now to determine whether or not other provisions of that section apply to towns in Westchester county. The Town Law itself leaves intact any existing law applicable to the towns of a particular county. Its provisions are to apply to such a town only when they are not inconsistent with the special law. (Town Law, § 341, subd. 14.) And that is but a statement of the ordinary rule of construction. (Cf. Buffalo Cemetery Assn. v. City of Buffalo, 118 N. Y. 61, 66.) The particular provision of the Town Law here relied upon is clearly inconsistent with the text and the intent of section 31 of the Westchester Law. It, therefore, has no application and affords no authority for what was done.

The judgment should be reversed and judgment directed in accordance with this opinion, without costs.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Lohghran and Finch, JJ., concur.

Judgment accordingly.


author: Crane, Ch, J.

text:
    Edward Naffky, Respondent, v. Nathan Yosovitz, Appellant.
    (Submitted May 29, 1935;
    decided June 11, 1935.)

      Harold J. Adams and Percy B. Smith for appellant.
    There was no evidence of negligence on the part of the defendant. (Hammond v. Hammond, 227 App. Div. 336; Demjanik v. Kultau, 242 App. Div. 255; Burkes v. Lieberman, 218 App. Div. 600; 245 N. Y. 579; Brianzi v. Crane Co., 196 App. Div. 58; White v. Lehigh Valley R. R. Co., 220 N. Y. 131; Wicks v. Cowperthwait Co., 203 App. Div. 705; Ruppert v. Brooklyn Heights R. R. Co., 154 N. Y. 90.)

      Harold J. Tillou and William K. Buscaglia for respondent.
    There was ample evidence of negligence. (Bennett v. Edward, 239 App. Div. 157; Bolton v. Madsen, 205 App. Div. 180; Clark v. Traver, 205 App. Div. 206.)
   Crane, Ch, J.

While the plaintiff was riding on a farm produce truck in the village of West Falls, township of East Aurora, New York, he was thrown out and injured. This action has been brought against the owner, driver of the farm wagon, claiming that he negligently drove over a bump in the road.

The facts are peculiar, in that the roadway was seen to crack and rise at or about the time the defendant was coming along. Lawrence Rehle, an employee of the State in the maintenance of the State highways, testified that there had been other blow-outs on this piece of road at West Falls. The road was constructed of brick, one of the old brick roads which occasionally rose with the heat. This witness testified: Q. What caused it to rise? A. Heat.”

An expert called by the plaintiff, G. S. Hallenbeck, testified: Q. Are you thoroughly familiar with the construction of the ordinary glazed brick public highway, the regular highway brick roads? A. Yes, I think so.

Q. Take a highway like that that isn’t provided with expansion strips such as are used in the more modern highway, what is the tendency on such a highway when it is subjected to very hot sun and weather conditions? * * * A. Expand.”

Edward Nester, a toolmaker of Buffalo, drove through West Falls in the afternoon about two o’clock on this day of the accident, which was June 9, 1933. The road was smooth. When he came back' about an hour and a quarter afterwards, he says, I noticed a rise in the pavement. I should imagine about six inches at the beginning. Well, it started rising there. I imagine about an hour and a half until it attained its full height of a foot.

“ Q. It finally got up a foot high? A. Yes.

Q. It kept swelling up? A. Yes.”

The wife of the blacksmith in West Falls, Catherine Fierle, saw the accident and testified as follows:

“ Q. And it went on up considerably more before the afternoon was over? A. Yes. * ⅜ * It cracked just through the center after that and it didn’t rise any more after it cracked.

Q. Did it crack before Mr. Yosovitz got back? .A. It wasn’t up yet when he got back. It was gradually coming up but not up high.”

Much of this evidence was given by the defendant’s witnesses but is not contradicted by the plaintiff, rather it is corroborated in a vital matter. The plaintiff, a young man out of work, was assisting for a day or two the defendant in his vegetable business delivering fruits and vegetables to various customers. The vehicle was a light one-ton truck with an ordinary platform, stake body, and canvas over the top. It was about 130 inches wheel base, rather a long body. There was a cab in front for the driver and a tail-gate in the back. The defendant asked the boy to get in the cab as they drove towards West Falls, but as it was a hot day, he preferred to sit in the back of the wagon on a box, a foot or two from the tail-gate. Going through West Falls, the plaintiff describes the accident as follows: I was sitting in the back of the truck that way (indicating), going along about 20 miles an hour. There was an awful jolt and the back end of the truck went up and threw me off the truck, threw me out the back end. It was a terrific jolt. Picked me up and threw me right out of the truck. I went out head first. * * * He [the defendant] didn’t slow up any.”

The testimony of the plaintiff, which fits in with the story told by the defendant and his witnesses, is this: The plaintiff did not notice any jolt to the wagon at all before the hind wheels went up, for he says on cross-examination: Q. And all of a sudden you felt the rear end of the truck go up, didn’t you? A. Well, I felt it come up.

“ Q. Well, there was just one jolt, the one that threw you out? A. The one that threw me out, yes.

“ Q. Well, I will ask you if there was any other jolt just before the one that threw you out or did you feel two or one, or just how many? A. Just the one.

“ Q. And that was the one that came like a flash, just bing (illustrating), and you went out, and that is all there was to it? A. Yes.”

On re-direct examination Naffky testified, “ Q. Edward, can you state whether or not the front wheels went up before the hind wheels as it passed over that, or don’t you know? A. I couldn’t tell you that.”

The defendant says that he was driving about fifteen miles an hour and found the road perfectly smooth and level; that all of a sudden he felt his hind wheels go up and jolt. “ When I passed, the first wheels passed and then there was a bump.

Q. Well, did you strike any bumps at all with your front wheels? A. No.”

He went a short distance and then came back and found that the road had blown up or cracked in the middle and that it kept rising while he was there.

The plaintiff’s case rests of course upon the failure of the defendant to notice dangers in the road and drive accordingly. He must show that the defendant failed to exercise reasonable and ordinary care in driving; that there was a dangerous condition which the defendant could or should have seen in the exercise of care. I think he has failed to do this. It appears that with the heat the bricks buckled or blew; that by the expansion they continued to rise until they reached an elevation of six inches to a foot. When did this happen? The bricks were in the process of rising, had not reached the full height after the accident. Was there a break or blow before the defendant reached the spot, and had it occurred so long before that the defendant should have seen the rise and guarded against it? As to this there can be not even a guess or a surmise. Evidence is totally lacking. There is nothing in the case to contradict the evidence of the witnesses as to the buckling and rising of the road at about the time of the accident, and there is no evidence to show that it had occurred before the defendant reached the spot. Neither is there any evidence to show that if the bricks had started to rise before the defendant came to the place it would have been possible for him in the exercise of ordinary care in driving to have seen or noticed the rise at a sufficient distance from it to avoid going over it.

This appears to be one of those accidents which occurs without anybody’s fault amounting to negligence, and for which the loss unfortunately must rest where it falls. The law does not provide recovery for every accident. There is a large field of non-liability for injury. This case comes within that field.

The judgment of the Appellate Division and that of the Trial Term should be reversed, and the complaint dismissed, with costs in all courts.

Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Judgments reversed, etc.


author: Lehman, J.

text:
    Robert J. Sharkey et al., as Police Commissioners for the City of Lockport, Respondents, v. Henry F. Thurston, as Mayor of the City of Lockport, Appellant.

      (Argued May 24, 1935;
    decided June 11, 1935.)

      James J. Sullivan, Corporation Counsel, for appellant.
    The Mayor is given express statutory power of removal and a court is without authority to interfere with that power. (People ex rel. Jones v. Sherman, 66 App. Div. 235; People ex rel. Nichols v. Mayor, 19 Hun, 442; People ex rel. Burby v. Common Council, 85 Hun, 601; People ex rel. Shannon v. Magee, 55 App. Div. 195; People ex rel. Miller v. Ehnendorf, 57 App. Div. 340; People ex rel. Mayor v. Nichols, 79 N. Y. 582; People ex rel. Deal v. Williams, 51 App. Div. 102.) The Mayor’s jurisdiction is exclusive and there is no legal provision for calling in a substitute so that by his not acting it would prevent absolutely a determination of the proceeding. (Philadelphia v. Fox, 64 Penn. St. 170; Matter of Leefe, 2 Barb. Ch. 39; People ex rel. Shannon v. Magee, 55 App. Div. 195; Matter of Dunphy v. Kingsbury, 173 App. Div. 49.) The power of appointment carries with it the power of removal. (Myers v. United States, 272 U. S. 52; Matter of Shatter v. Moses, 266 N. Y. 413.) The President of the Common Council is without jurisdiction or authority to hear the charges and any determination made by him would be a nullity. (People ex rel. Liberty v. Cooke, 188 App. Div. 351; 229 N. Y. 613.)

      J. Carl Fogle for respondents.
    Section 20 of the city charter (L. 1911, ch. 870) clearly provides for a trial. (People ex rel. Mayor v. Nichols, 79 N. Y. 582.) The city charter provides for a hearing before the President of the Common Council. (People ex rel. Liberty v. Cooke, 188 App. Div. 351; 229 N. Y. 613.) The order of prohibition was proper. (People ex rel. 'Childs v. Extraordinary Trial Term, 228 1ST. Y. 463.) The rule that the Mayor has the sole power of removal only applies where there is no other person or officer qualified to act. (People ex rel. Hayes v. Waldo, 212 N. Y. 156; People ex rel. Pond v. Trustees, 4 App. Div. 399; People ex rel. Miller v. Ehnendorf, 57 App. Div. 340; 168 N. Y. 675; Wilcox v. Supreme Council of Royal Arcanum, 210 N. Y. 370.)
   Lehman, J.

The Board of Police Commissioners of the city of Lockport consists of four members. It has power to appoint a chief of police. It may, by the affirmative vote of at least three members, remove the chief of police where he is found to be incompetent, negligent or guilty of misconduct. (Charter of the City of Lockport, § 114; Laws of 1911, ch. 870.) The Mayor of the city has power to appoint the members of the Board of Police Commissioners. The city charter (§ 20) provides that “ the mayor shall have power to remove any officer appointed under this act, for incompetency, neglect of duty, misconduct or inability to perform the duties of his office * * * but such removal must be founded on specific charges in writing, whereof a copy shall be furnished to such officer, and before such removal he shall have an opportunity to appear in person, or by counsel, and be heard in his defense.” The Mayor has filed charges against these plaintiffs, three of the members of the Board, appointed by him. He has caused them to be served with notice that the charges will be publicly examined and heard before the Mayor in the Common Council chambers, upon a date specified in the notice. Before that date the plaintiffs brought an action to restrain the Mayor from hearing the charges. The action has been transformed, by consent of all parties, into a proceeding for an order of prohibition. The order has been granted and affirmed.

The charges are based upon the conduct of the plaintiffs in dismissing charges of misconduct which the Mayor had preferred against the chief of police. We assume that it. conclusively appears upon the record that the Mayor has prejudged the guilt of the plaintiffs before he hears the plaintiffs in their defense. We assume further that the Mayor has determined that the chief of police should be removed and that he has stated, privately and publicly, that if the plaintiffs do not remove the chief of police, he will remove them. The question which the parties have sought to bring up for review is whether under these circumstances, the Mayor is disabled from hearing and passing upon the charges which he has himself preferred.

It is a fundamental rule of our common law, embodied in the Constitutions of our State and Nation, that no person may be adjudged guilty and punished upon a charge of wrongful conduct without a hearing. Decision must await the hearing of the defense. The cause may not be prejudged, and no man may be both accuser and judge. Otherwise a hearing becomes a fiction, and no fiction can destroy constitutional guaranties.

It is said that necessity, at times, dictates a relaxation of the rule. (Matter of Ryers, 72 N. Y. 1; People ex rel. Hayes v. Waldo, 212 N. Y. 156.) That is not entirely accurate. Necessity, whether actual or can never be a Valid ground for depriving any person of a right guaranteed by the Constitution, or impose upon any person the consequences of guilt upon which a fair hearing has not been accorded.

Examination, of the cases where argument of necessity, based upon the common welfare, has been given show that they are confined to a narrow field. The right to a hearing before a judge who has not determined the issue in advance has in no case been denied on such ground where determination of guilt may result in the deprivation of liberty or property. Here the plaintiffs were appointed by the Mayor. The power to remove is inherent in the power to appoint, except as restricted by statute. The charter of the city of Lockport has restricted the Mayor’s power of removal by provision that removal must be preceded by specific charges and by a hearing of such charges. The plaintiffs’ right to a hearing is not based upon common law principles. It is not guaranteed by the Constitution. They cannot be punished for misconduct. Their right to a hearing is derived solely from the statute and is defined by the statute. It follows from the limitation of the Mayor’s power of removal. Unless there is implicit in that statutory limitation, a condition that the Mayor may not conduct the hearing, unless he has an open mind, the plaintiffs have not shown any ground of complaint. Thus the question of whether prejudice by the Mayor disables him from hearing the charges he has preferred depends upon the proper construction of the statute.

In statutory construction the courts endeavor to give effect to the legislative intent. In the absence of language so clear that it allows no room for construction, the courts will not ascribe to the Legislature an intention which is contrary to general and well-established rules of justice and fairness, nor will they ascribe to the Legislature an intent to confer an illusory right. Thus when the Legislature grants to an individual a right to a hearing before administrative action may be taken, the courts will ordinarily give effect to the statute by requiring a hearing before an unprejudiced official, where such hearing can be had without disregard of the terms of the statute and without defeating its purpose. None the less, when the statute' clearly requires the hearing to be held before a designated administrative officer, and no other officer can hold the hearing, then the language of the statute may not be disregarded, nor the legislative intent defeated by holding that the officer is disqualified. (People ex rel. Hayes v. Waldo, supra.)

We apply these general, well-established principles to the facts in this case. The Mayor, under the charter of the city of Loekport, is the chief executive of the city. By virtue of his office he has the power and the duty to supervise its proper administration. He alone has power to appoint the chief officers of the city. That power is unrestricted. His power of removal is limited, however, to the extent that the removal must be for cause upon specified charges, and after a hearing which it is his duty to conduct. If he properly performs his duty of supervision of the administration of the affairs of the city, then he must be in a position to determine whether that administration is efficient, and his power of removal, even though limited, is the instrument by which he can remove those officers who, in his opinion, are lax in the performance of their own dirties. Quite evidently he is not to close his eyes to evidence of inefficiency or misconduct disclosed to him in the performance of his duty of supervision. His power of removal is not to be confined to matters upon which he has no personal knowledge, or after charges not made or instigated by him. Here the language of the statute and its obvious purpose leaves no room for construction. He may make charges based upon his own knowledge and remove an officer if, after a hearing, he believes those charges are sustained. He must hear and weigh the defense, not as a judge, but as an administrative officer acting in the light of his personal knowledge. Removal from office follows not as punishment for misconduct, to be determined by a judicial officer, but is an administrative act of the Mayor who, like other administrators, is expected to act fairly, but whose acts will often be dictated by his personal knowledge. To that extent he must often act both as accuser and judge, and to that extent he must often prejudge the case before formal hearing. Even then the hearing is not futile. It requires formulation of the charge, and a public record of the defense presented. If the charge is substantial and the defense is not a conclusive proof of innocence, the statutory restrictions upon the power of removal are not overstepped.

The argument to the contrary which apparently has persuaded the courts below is that the Legislature has provided that the President of the Common Council has been directed by the Legislature to hold the hearings when the Mayor is disabled from holding an impartial hearing by interest or prejudgment of the cause. The Legislature has not said so in express ternas, but it is urged that such direction is implied in the provision of the charter that in case of the inability of the mayor to attend to his duties, either by absence from the city or other cause, the president of the common council shall act in his stead and be vested with all the authority, duties and powers of the mayor, excepting that of appointment.” (§ 57.) The Mayor here is not unable to attend to his duties. He is not even disqualified from performing his duty to hold a hearing upon charges presented by him and which he has prejudged, at least unless there is some other officer designated by the Legislature to act in such case in his place. The statute is not open to the construction that by the designation of another officer, who becomes vested with the powers and duties of the Mayor, when the Mayor is unable ” to perform his duties, the Legislature intended to disqualify the Mayor from holding a hearing which otherwise he would be qualified to hold. The statute, in clear terms, conferred the power of removal and the duty of holding a hearing solely upon the Mayor. He may make the charges. He alone may pass upon them, so long as lie is not unable ” to perform his duties.

In view of our conclusion that the Mayor is under a duty to hold the hearing himself, we do not pass upon the question whether an order of prohibition could issue against him even if he were disqualified from action.

The orders should be reversed, without costs, and the proceeding dismissed.

Crane, Ch. J., O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Orders reversed, etc.


text:
    Morris A. Jacobowitz et al., Appellants, v. Charles J. Herson, Defendant, and Sander Metselaar, Respondent.
    (Submitted May 22, 1935;
    decided July 11, 1935.)

      Harry Kwestel for appellants.
    The counterclaim, also pleaded as the second defense in defendant-respondent’s amended answer, does not state facts sufficient to constitute a cause of action. (Matter of Burke, 191 N. Y. 437; Moore v. Eadie, 245 N. Y. 166.)

      Charles J. Herson and Harry K. Ehenstein for respondent.
    The counterclaim as pleaded sets forth a good cause of action. (Flanson Realty Cory. v. Workers’ Unity House, Inc., 229 App. Div. 179; Matter of Burke, 191 N. Y. 437; Moore v. Eadie, 245 N. Y. 166; Matter of Fenster, 234 App. Div. 868.) The counterclaim was properly interposed in this action. (Heyward v. Maynard, 119 App. Div. 66.)
   Crane, Ch. J.

On the 4th day of April, 1930, the plaintiff and defendant entered into a written agreement to submit to arbitration a claim regarding an advance made to the Spring Valley Butter and Egg Company of $3,300, the arbitration to be before the Arbitration Society of New York. Pending the decision of the arbitrators the defendant was to leave with Charles J. Herson, an attorney at law, in escrow certain promissory notes for the said sum of $3,300 which were to be returned to Leon Spilky, one of the plaintiffs, if the decision was in his favor.

Thereafter, and pursuant to the terms of said agreement. the matters therein referred to were submitted for arbitration to the American Arbitration Association, ■which, after the taking of testimony and other evidence on behalf of each of the parties, made an award upholding and sustaining the claim of Leon Spilky, and disallowing the claim of the defendant Metselaar, the decision reading as follows:

The claim of Leon Spilky is sustained and the claim of Sander Metselaar is disallowed.
Therefore, under the terms of the contract dated April 4th, 1930, Exhibit 1 in these proceedings, Leon Spilky is entitled to the return of the promissory notes in the sum of $3,300.00 deposited with Charles J. Herson, attorney at law, and said Leon Spilky shall issue two notes to Sander Metselaar amounting to $550.00, in accordance with said contract.”

This award was duly confirmed by order of the Supreme Court, and judgment thereon entered in the office of the clerk of the county of New York.

These three plaintiffs, because of interests unnecessary to recite, immediately became entitled to the return of these promissory notes, and this action has been brought to obtain possession thereof. The complaint sets forth these facts and annexes a copy of the arbitration agreement made between the defendant Metselaar and the three plaintiffs.

The answer of the defendant Metselaar sets up as an affirmative defense that at said arbitration hearing the plaintiff Leon Spilky testified falsely and perjuriously and in corroboration thereof produced one Charles L. Schreiber as a witness, who also testified falsely; that pursuant to said perjurious testimony the arbitrators decided in favor of said plaintiff, Leon Spilky. The same matter is set up in the way of a counterclaim asking for affirmative relief setting aside the award in arbitration and all proceedings thereunder. The plaintiffs have moved to strike out this defense and counterclaim as insufficient at law. The motion was denied and the order affirmed by the Appellate Division, which, however, certified the following questions in allowing appeal to this court:

1. Does the counterclaim alleged in the amended answer of the defendant, Sander Metselaar, also pleaded as a second and separate defense, state facts sufficient to constitute a cause of action?

Article 84 of the Civil Practice Act provides the procedure in matters of arbitration, all of which was followed in this case. Section 1456 reads: “At any time within one year after the award is made, as prescribed in the last section, any party to the submission may apply to the court specified in the submission for an order confirming the award; and thereupon the court must grant such an order unless the award is vacated, modified or corrected, as prescribed in the next two sections.”

Section 1457 specifies that the award may be vacated: “ 1. Where the award was procured by corruption, fraud or other undue means.” If the award be confirmed, sections 1461 and 1462 provide for the entry of judgment thereon and what shall constitute the judgment roll. “ The judgment may be docketed as if it was rendered in an action.” (§ 1462.) An appeal may be taken from a judgment entered upon an award, as from an order or judgment in an action. (§ 1464.)

The authorities are uniform in holding.that an action in equity will not he to set aside a judgment in an action for intrinsic fraud, that is, for perjury or false swearing on the trial. Pomeroy states in his Equity Jurisprudence (Yol. V, § 2077, p. 4683) the rule as follows: “ The courts hold that perjury is intrinsic fraud and that therefore it is not ground for equitable relief against a judgment resulting from it. We have seen that the fraud which warrants equity in interfering with such a solemn thing as a judgment must be fraud in obtaining tbe judgment, and must be sucb as prevents tbe losing party from having an adversary trial of tbe issue. Perjury is a fraud in obtaining the judgment, but it does not prevent an adversary trial. * * ⅜ However, pubbc pobcy seems to demand that there be an end to litigation. If perjury were accepted as a ground for relief, litigation might be endless; the same issues would have to be tried repeatedly.”

This State is committed to the rule that the perjured testimony of the successful party or his witnesses at the trial, even where the false testimony was procured by a conspiracy, is not sufficient ground for vacating a domestic judgment or enjoining its enforcement. (Ross v. Wood, 70 N. Y. 8; Gitler v. Russian Co., 124 App. Div. 273; Standard Fashion Co. v. Thompson, 137 App. Div. 588; Crouse v. McVickar, 207 N. Y. 213.) As before stated, the weight of authority in this country is to the same effect. (Freeman on the Law of Judgments [Vols. 1 and 3, 5th eel], §§ 235, 1241, 1242.) (See, also, Metcalf v. Gilmore, 59 N. H. 417; Mahoney v. State Ins. Co., 133 Iowa, 570; Riley v. Murray, 8 Ind. 354; El Capitan Land & Cattle Co. v. Lees, 13 N. M. 407.)

Does a different rule apply to a judgment entered upon an award? On this question the authorities are divided. Cases like Chambers v. Crook (42 Ala. 171); Johnson v. Wells (72 Fla. 290); Craft v. Thompson (51 N. H. 536); Fire Association v. Allesina (49 Oreg. 316), and Beam v. Macomber (33 Mich. 127) seem to hold that equity will set aside an award and enjoin its enforcement where it was based on false evidence. However, the Alabama case seems to apply the same rule to judgments in actions, and the Oregon case said that an award is not entitled to that degree of respect accorded to a judgment or decree .regularly rendered. How these courts might have decided upon a judgment regularly entered on an award under a statute similar to our Civil Practice Act is uncertain. Other States take the contrary view, such as French v. Raymond (82 Vt, 156); Black v. Harper (63 Ga. 752). The Supreme Court of Vermont in the French case held that the only fraudulent acts for which a court of equity will set aside a judgment or decree rendered by a court of competent jurisdiction are those involving fraud, extrinsic or collateral to the matter on which the judgment or decree was rendered; and that it will not set aside a judgment because founded on the fraudulent instrument or perjured testimony or for any other matter that was actually presented and considered in the judgment assailed. Where, therefore, a matter has been duly determined by arbitrators, both parties having been fully heard, a court of equity will not set aside the award and reopen the controversy because of perjury which deceived the arbitrators. Rowell, C. J., writing for the court, said: “It makes no difference whether the perjury is suborned by the successful party or not, unless you call the subornation the fraud and not the introduction of the perjured testimony, nor whether the successful party himself commits it, in which case it is clearly intrinsic and direct; for when a matter has been actually tried and determined by a tribunal of competent jurisdiction, both parties having been fully heard, as here, a court of equity will not, according to most of the cases, reopen the controversy because of perjury, and throw the whole matter at large again, for that would be sowing dragons’ teeth, and disregarding the maxims that it is for the public good that litigation should end, and that a man shall not be twice vexed for the same thing, which maxims are the very foundation of the law of this subject.”

We see no reason for treating judgments entered upon an award of arbitration differently from those entered after trial in an action. The Civil Practice Act, as above quoted, permits an award to be set aside where it has been procured by corruption, fraud or other undue means which would include the fraudulent or improper conduct of a party as well as misconduct of the arbitrators. Matter of Burke (191 N. Y. 437) and Moore v. Eadie (245 N. Y. 166) referred only to the misconduct of arbitrators. Furthermore, our act specifically states that the judgment entered upon an award is to be treated like a judgment in an action. The parties have notice of the motion to confirm, and any of the objections specified in section 1457 can be raised by the defeated party upon that motion; in fact, he can move himself to set aside the award for misconduct of party or arbitrator. We see no reason at this advanced stage of arbitration proceedings for treating the judgments entered upon the award of the arbitrators in any different way than judgments in actions are dealt with. Arbitration has been encouraged for the purpose of avoiding litigation and the costs and delay of trials at law or in equity. To permit a second trial upon the alleged ground of perjury would accomplish the reverse result and make arbitration more costly and the results subject to more delay. Our statutes have given to arbitration much of the formality of judicial proceedings and require at the hearings the same impartiality and fairness as those before referees or commissions.

We, therefore, are of the opinion that where equity will not set aside a judgment at law for intrinsic fraud it should not do so where judgment has been entered upon an award made at arbitration.

The order of the Appellate Division and that of the Special Term should be reversed and the motion granted, with costs in all courts. The certified questions are answered in the negative. (See 268 N. Y. 630.)

Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.