author: Conway, J.

text:
    Edward Schroeder, Appellant and Respondent, v. City and County Savings Bank of Albany, Appellant; M. Gerber Construction Company, Inc., et al., Respondents, et al., Defendants.
    Argued June 9, 1944;
    decided July 19, 1944.

      Morris Simon for defendant-appellant.
    I. Plaintiff did not undertake to establish any negligence. He failed to prove any, and, therefore, cannot sustain the verdict. The doctrine of res ipso loquitur has no application to the facts established upon the trial. (Mullen v. St. John et al., 57 N. Y. 567; Salomone v. Yellow Taxi Corp., 242 N. Y. 251; Griffen v. Manice, 166 N. Y. 188; Lane v. City of Buffalo, 232 App. Div. 334; White v. Lehigh Valley R. R. Co., 220 N. Y. 131; Hart v. Hudson River Bridge Company, 84 N. Y. 56; Foltis, Inc., v. City of New York, 287 N. Y. 108; Guttman v. Woodworth Co., 159 Misc. 821; Sandler v. Garrison, 249 N. Y. 236; Stasiukiewicz v. Marcus Contracting Co., Inc., 225 App. Div. 57; Miller v. Steinfeld, 174 App. Div. 337; Hardie v. Boland Co., 205 N. Y. 336; Ferrick v. Eidlitz, 195 N. Y. 248.) II. Plaintiff’s injury was brought about by his own conduct. (Davenport v. Oceanic Amusement Co., 132 App. Div. 368; Zurich G. A. & L. Ins. Co. v. Childs Co., 253 N. Y. 324; Fredendall v. Abraham & Strauss, Inc., 279 N. Y. 146; Dougherty v. Pratt Institute, 244 N. Y. 111; Buguero v. United States Shipping Board E. F. Corp., 218 App. Div. 553, 246 N. Y. 643; Louisville N. R. Co. v. Gross, 272 S. W. 57; Monongahela West Penn. Public Service Co. v. Albey, 31 F. 2d 85; Butler v. Frazee, 211 U. S. 459; Kowalsky v. Conreco Company, 264 N. Y. 125; Storm v. New York Telephone Co., 270 N. Y. 103.) III. The proximate cause of the injury was plaintiff’s own carelessness and conduct, and was not due to any act of defendant. '(Hartman v. Berlin & Jones Envelope Co., 71 Misc. 30, 146 App. Div. 926; W. A. Hover & Co. v. Denver & R. G. W. R. Co., 17 F. 2d 881; Owens v. Southern Ry. Co., 33 F. 2d 870; Cashin v. City of New Rochelle, 256 N. Y. 190; Sann v. Johns Manufacturing Co., 16 App. Div. 252.)

      Frank L. Wiswall, Carl O. Olson and Láveme Orvis for plaintiff-appellant and respondent.
    I. Proof of the collapse of the temporary enclosure created a prima facie case of negligence. (Foltis, Inc., v. City of New York, 174 Misc. 967, 287 N. Y. 108; Neuhoff v. Retlaw Realty Corp., 289 N. Y. 293; Mullen v. St. John et al., 57 N. Y. 567; Marceau v. Rutland R. R.

      Co., 211 N. Y. 203; Volkmar v. M. R. Co., 134 N. Y. 418; Goldfarb v. City of New York, 108 Misc. 505; Hogan v. Manhattan R. Co., 149 N. Y. 23; Rock v. Radice Electric Co., 129 Misc. 423 ; Reynolds v. Van Beuren, 10 Misc. 703; Pearson v. Ehrich, 148 App. Div. 680; Hooey v. Airport Construction Co., 253 N. Y. 486; Wrighter v. Adam Stores, Inc., 232 App. Div. 351; Storms v. Lane, 223 App. Div. 79; Griffen v. Manice, 166 N. Y. 188; Goldstein v. Pullman Co., 220 N. Y. 549.) II. On the evidence, the appellant bank certainly had possession and control as to make this a proper case for the invocation of the doctrine of res ipso loquitur. The fact that there is more than one defendant here does not prevent the application of the rule. (Duerr v. Consolidated Gas Co., 86 App. Div. 14; Bishof v. Leahy, 54 App. Div. 619;. Briggs, Inc., v. N. Y. Public Library, etc., Foundations, 260 App. Div. 218.) III. A prima facie case was made out against the bank as owner of the premises. (Boylhart v. Di-Marco & Reimann, Inc., 270 N. Y. 217; O’Neil v. City of Port Jervis, 253 N. Y. 423; Schwartz v. Merola Bros. Construction Corp., 290 N. Y. 145; Bardel v. Standard Oil Co., 218 App. Div. 145; Appel v. Muller, 262 N. Y. 278; Klepper v. Seymour House Corp., 246 N. Y. 85.) IV. The liability of the defendants does not shift in proportion of the degree of temporary possession or immediate interest. (McNulty v. Ludwig & Co., 153 App. Div. 206; Wilks v. New York Telephone Co., 208 App. Div. 542; Wrighter v. Adams Stores, Inc., 232 App. Div. 351; Simmons v. Everson, 124 N. Y. 319; Hine v. Aird-Don Co., 232 App. Div. 359; Klepper v. Seymour House Corp., 246 N. Y. 85; De Haen v. Rockwood Sprinkler Co., 258 N. Y. 350; Schwartz v. Merola Bros. Construction Corp., 290 N. Y. 145; Simon v. Lowenthal, 169 Misc. 718.)

      John J. Conners, Jr., for M. Gerber Construction Company, Inc., defendant-respondent.
    The verdict against defendant M. Gerber Construction Company, Inc., was properly set aside and complaint dismissed as to it.

      John J. Scully for Benedetto Sano and others, doing business under the name of Sano-Rubin Construction Company, defendants-respondents.
    The doctrine of res ipso loquitur does not apply to the defendant, Sano-Rubin Construction Company. (Foltis, Inc., v. City of New York, 287 N. Y. 108; Griffen v.
      Manice, 166 N. Y. 188; Wolf v. American Tract Society, 164 N. Y. 30; Stasiukiewicz v. Marcus Contracting Co., Inc., 225 App. Div. 54; Hardie v. Roland Co., 205 N. Y. 336; Curtis v. New York, New Haven & H. R. R. Co., 159 App. Div. 757.)
   Conway, J.

This is an action for personal injuries. Defend- - ant City and County Savings Bank of Albany (hereinafter called the Bank) owned premises located at the corner of South Pearl Street and Norton Street in Albany. It leased the ground floor and basement of the premises, “ together with right to the tenant to construct and maintain a facade along the outside of the building up to the bottom of the windows on the third floor thereof ”. The Bank agreed to make certain alterations in accordance with plans attached to the lease and the tenant agreed to construct a new front on the demised premises. The Bank engaged Sano-Bubin Construction Company (hereinafter called Sano-Bubin) to make the alterations required of it. Sano-Bubin applied for a permit to occupy one half of the sidewalk and one third of the street to the trolley tracks. That permit was granted. Thereafter the Bank wrote to the tenant that it had completed its part except for the electrical work which was in turn dependent upon work to be done by the tenant and except for the painting which the tenant had instructed it to postpone. Under a written contract the defendant M. Gerber Construction Company, Inc. (hereinafter called Gerber), undertook to do certain work for the tenant., A barricade was built in front of the building on Pearl Street and on Norton Street. It was made of two by fours and some heavier pieces: It was between twenty and twenty-five feet high. On the morning of February 28th the barricade collapsed. The plaintiff was injured when he attempted at the request of the police to aid in making secure that portion of the barricade which had not then collapsed but which was swaying in the wind. While so doing, he sustained the injuries for which this action has been brought.

The trial court correctly charged the jury after the defendants had rested at the close of plaintiff’s case without putting in any evidence, that the doctrine of res ipso loquitur was applicable. (Galbraith v. Busch, 267 N. Y. 230, 234; Foltis, Inc., v. City of New York, 287 N. Y. 108, 116.) After the jury had returned a verdict against the defendants Bank, Sano-Bubin and M. Gerber Construction Company, Inc., the trial court set aside the verdict as against the latter two defendants. We think that was error. The three defendants either simultaneously or in necessary rotation, with nondelegable supervision always remaining in the Bank, were in possession of the instrumentality which caused the injuries to plaintiff. None of the three defendants put in any defense. They were the ones who knew the cause of the collapse. It is not necessary for the applicability of the res ipso loquitur doctrine that there be but a single person in control of.that which caused the damage. Where, as here, one or some or all of three interdependent defendants are in control and burdened with supervision of a street barricade, it is for them to explain their action and conduct when it collapses with resultant damage to another. (Bishof v. Leahy, 54 App. Div. 619; Duerr v. Consolidated Gas Co., 86 App. Div. 14; Boylhart v. Di Marco and Reimann, Inc., 270 N. Y. 217, 221; Schwartz v. Merola Bros. Construction Corp., 290 N. Y. 145; Mullen v. St. John et al., 57 N. Y. 567; Wrighter v. Adam Stores, Inc.., 232 App. Div. 351; Hooey v. Airport Construction Co., 253 N. Y. 486.)

As to City and County Savings Bank of Albany the judgment should be affirmed, with costs. As to the defendants M. Gerber Construction Co., Inc., and Benedetto Sano, Louis Rubin and Angelo Sano, individually and as copartners, doing business under the assumed business name of Sano-Rubin Construction Company the judgments should be reversed and a new trial granted, with costs to the plaintiff-appellant to abide the event.

Loitghban, Rippey, Lewis and Desmond, JJ., concur; Lehman, Ch. J. and Thacheb, J., dissent and vote to reverse the judgment against the defendant-appellant, and to affirm the judgment in other respects,- on the ground that plaintiff was guilty of contributory negligence as matter of law.

Judgment accordingly, (gee 293 N. Y. 764.)


source: Caselaw Access Project

author: Lehman, Ch. J.

license: Public Domain

text:
    Anastasia Carbulon, Respondent, v. John R. Carbulon, Appellant.
    Argued May 15, 1944;
    decided July 19, 1944.

      Abraham J. Halprvn and Sidney R. Rossiter for appellant.
    L Section 1171-b of the Civil Practice Act enacted in 1939 (L. 1939, ch. 431) not being retroactive, the court had no power to enter a judgment for temporary alimony accruing from October 20, 1932, to January 1Ó, 1938. (Jacobus v. Colgate, 217 N. Y. 235; Waddey v. Waddey, 290 N. Y. 251; Metropolitan Cas. Ins. Co. v. Barr Wrecking Corp., 180 Misc. 200; Querze v. Querze, 290 N. Y. 13; Jacobson v. Jacobson, 85 Misc. 253, 168 App. Div. 900; Doncourt v. Doncourt, 245 App. Div. 91, 275 N. Y. 470; Livingston v. Livingston, 173 N. Y. 377; Dowling v. Hastings, 211 N. Y. 199.) II. The plaintiff’s remarriage following the divorce decree branded her as the guilty party and the court therefore erred when it granted her application. The Connecticut decree was conclusive on the courts of this State and the plaintiff. (Gehring v. Cehring, 262 App. Div. 1065; Viall v. Viall, 263 App. Div. 548; Probst v. Probst, 259 App. Div. 1090, 259 App. Div. 1091; Bannon v. Bannon, 270 N. Y. 484; Matter of Bingham, 178 Misc. 801, 265 App. Div. 463, 290 N. Y. 929; Kelsey v. Kelsey, 204 App. Div. 116, 237 N. Y. 520; Matter of Briggs, 138 Misc. 136, 232 App. Div. 666; Williams v. North Carolina, 317 U. S. 287; Matter of Holmes, 291 N. Y. 261.) ITT. Since temporary alimony and counsel fees are provisional remedies dependent upon the pendency of the action, the right to enter a judgment therefor fell with the dismissal of the action. (Bannon v. Bannon, 270 N. Y. 484; Matter of Thrall, 12 App. Div. 235, 153 N. Y. 644; Hayes v. Hayes, 150 App. Div. 842, 208 N. Y. 600; DiBenedetto v. DiBenedetto, 248 App. Div. 604.)

      Levi R. Chase for respondent.
    I. There is authority for the application made by plaintiff for a judgment for unpaid, earned alimony and counsel fees. (Civ. Prac. Act, § 1171-1); Preston Co., v. Funkhouser, 261 N. Y. 140.) II. The judgment of divorce in Connecticut and subsequent remarriage of plaintiff in Vermont had no effect on plaintiff’s right to make this application. (Kelsey v. Kelsey, 204 App. Div. 116, 237 N. Y. 520; Doncourt v. Doncourt, 275 N. Y. 470.)
   Lehman, Ch. J.

The plaintiff in August, 1932, commenced an action against the defendant, her husand, for a separation." After issue was joined the plaintiff made a motion for temporary alimony and counsel fee. An ordér was entered in October, 1932, directing the defendant to cause to be paid to the plaintiff pending litigation as a temporary order, alimony to the amount of ten dollars ($10.00) per week ”, and further directing that the question of the defendant’s ability to pay alimony and counsel fee be referred to an official referee. The pendency of an action brought by the defendant against the plaintiff for annulment of the marriage on the ground of fraud, and the ill health of the Official Referee, delayed the hearing. In September, 1936, after the complaint in the action for annulment had been dismissed on the merits, the court made an order directing that the defendant pay to the plaintiff “ the sum of Twenty ($20.00) dollars per week from the 20th day of October, 1932 ”, and the sum of $1,000 to her counsel as counsel fees pending this litigation. ’ ’ The defendant has made no payments in accordance with that order.

Defeated in the action for annulment of the marriage and in an attempt to induce the government to deport the plaintiff on the ground that she was an alien who had entered the country illegally, the defendant moved to Connecticut where, in May 1937, he obtained a decree of divorce from the plaintiff on findings that she had willfully deserted her husband. The wife did not appear in the Connecticut divorce action and was not personally served in the State of Connecticut. If, at that time, the plaintiff had prosecuted her pending action for separation, the courts of this State Avould have refused to give any effect to the foreign divorce and it could not have been urged successfully as a defense to the separation action. This plaintiff could not, however, assert that the marriage relation with the defendant remained unaffected by the foreign decree and at the same time assert that she had legal capacity to marry another. In January 1938, she married another in Vermont. Then she could no longer challenge the foreign decree dissolving her marriage to the defendant or prosecute her action for separation and support. .

When the plaintiff chose to abandon her right to prosecute her action for separation she lost the right to enforce payment of alimony or counsel fee. Past due installments of alimony which a husband was directed to pay during the pendency of an action, did not at that time constitute a debt upon which judgment could be entered. The power-of the court to direct such payment is conferred by statute as incidental relief that may be granted in the action, and under the statute the only remedy available for failure of a husband to pay the sums directed was an application in the action for an order of sequestration or an order punishing the defendant for contempt. The right to the unpaid alimony and the remedies for the enforcement of that right are inextricably intertwined. The right could not survive the extinction of the statutory remedies. (Doncourt v. Doncourt, 245 App. Div. 91, affd. 275 N. Y. 470.)

After the plaintiff had abandoned her right to prosecute hei action for separation and to enforce the payment of alimony the Legislature in 1939 (L. 1939, ch. 431) enacted section 1171-b of the Civil Practice Act providing that when the husband in an action for divorce or separation makes default in the payment of any sum of money as required by an order of the court directing the payment thereof, the court may direct the entry of a judgment for such arrears. The plaintiff has moved for an order directing the entry of a judgment for unpaid alimony and counsel fees as provided in the new section. The defendant has moved for judgment dismissing the complaint in the separation action. The Appellate Division has held that the defendant is entitled to judgment dismissing the complaint and that the plaintiff is entitled to judgment for the unpaid counsel fee — though the plaintiff has abandoned her right of action — and for the unpaid alimony to the date of her remarriage. The plaintiff has not appealed from the judgment dismissing the complaint in the separation action. The defendant has appealed from the money judgment entered against him in accordance with the provisions of section 1171-b.

We think that the remedy created by that section is not available to the plaintiff. Remedial procedural statutes are frequently intended to apply to existing rights then enforcible by other remedies. In this case the statute expressly so provides: “ The relief herein provided for is in addition to any and every other remedy to which the wife may he entitled under the law.” The statute cannot reasonably he construed in manner which would provide a new remedy after the time had expired during which the wife could have - 'forced her right to alimony by other remedies. The statute is not intended to revive rights which no longer were enforcible by any existing remedy.

The judgment of the Appellate Division should be reversed and that of the Special Term affirmed, without costs.

Loughran, Rippey, Lewis, Conway, Desmond and Thachee, JJ., concur.

Judgment accordingly.


author: Desmond, J. Conway, J.

text:
    Norman Johnson, Suing on Behalf of Himself and All Other Stockholders of Cold and Stock Telegraph Company Similarly Situated, Appellant, v. Western Union Telegraph Company et al., Respondents.
    Argued June 6, 1944;
    decided October 12, 1944.

      Arthur Garfield Hays and Alan 8. Hays for appellant.
    I. The terms of the lease require Western Union to assume and pay all Federal income taxes duly assessed against Gold & Stock Company. (Gold & Stock Telegraph Co. v. Commissioner of Int. Rev., 83 F. 2d 465; Filipowicz v. Rothensies, 31 F. Supp. 716; United States v. Canfield, 29 F. Supp. 734; Matter of Rosenberg, 269 N. Y. 247; United States v. Taft, 44 F. Supp. 564; In re Gerry, 112 F. 958; Outlet Embroidery Co. v. Derwent Mills, 254 N. Y. 179; Georgia Ry. v. R. R. Comm., 262 U. S. 625; Galveston Elec. Co. v. Galveston, 258 U. S 388; Pittsfield N. A. R. Corp. v. Boston & A. R. Co., 260 Mass. 390; Whitlock v. Boston & M. R. R., 29 F. 2d 351.) II. The judgment should he reversed because the courts below failed to order Western Union to segregate moneys belonging to Gold & Stock Company. (Cabaniss v. Ponder, 65 Ga. 134; Frier v. J. W. Sales Corp., 261 App. Div. 388; Fur & Wool Trading Co., Ltd. v. Fox, Inc., 245 N. Y. 215; In re Leavitt d Grant, 215 F. 901; In re Hollins & Arrousez Electric & Engineering Co., 31 F. 2d 50.) III. The affirmative defenses are invalid. (Pollitz v. Wabash Railroad Co., 150 App. Div. 715, 207 N. Y. 113; Runcie v. Corn Exchange Bank, 6 N. Y. S. 2d 616; Dickerman v. Northern Trust Company, 176 U. S. 181; Zebley v. F. L. & T. Co., 139 N. Y. 461; Hutton v. Smith, 74 App. Div. 284, 175 N. Y. 375; Marcus v. Village of Mamaroneck, 258 App. Div. 328, 283 N. Y. 325; Feldman v. Metropolitan Life Insurance Co., 259 App. Div. 123.)

      John F. MacLane and Benjamin C. Milner for respondent.
    I. The sale of securities by Western Union was proper and lawful' in all respects. II. Western Union is not required to segregate the proceeds of the sale of securities in trust or otherwise account for their use before the termination of the agreement, or on earlier default. (Kennedy v. Porter et al., 109 N. Y. 526; Manson v. Curtis, 223 N. Y. 313; Bovin v. Galitzka, 250 N. Y. 228; Wendel Foundation v. Moredall Realty Corp., 282 N. Y. 239.) III. Western Union is under no obligation or liability to pay Federal income taxes assessed against Gold & Stock. (United States v. Warren R. Co., 127 F. 2d 134; Brainard v. N. Y. C. R. R. Co., 242 N. Y. 125; Woodruff v. Oswego Starch Factory, 177 N. Y. 23; Wendel Foundation v. Moredall Realty Corp., 282 N. Y. 239; Hopwood Plays, Inc., v. Kemper, 263 N. Y. 380.) IV. In any event the action is barred by the Statute of Limitations, loches, ratification, acquiescence and estoppel.
      (Corash v. Texas Co., 264 App. Div. 292; Chance v. Guaranty Trust Co., 282 N. Y. 656; Potter v. Walker, 276 N. Y. 15; Pollack v. Warner Bros. Pictures, Inc., 266 App. Div. 118; Calhoun et al. v. Millard et al., 121 N. Y. 69; Kent v. Quicksilver Mining Co., 78 N. Y. 159.)
   Desmond, J.

On December 14, 1881, Gold and Stock Telegraph Company, on whose behalf plaintiff brings this suit, leased all its assets, tangible and intangible, to defendant for a term of ninety-nine years from January 1, 1882. The agreed rental was a sum equal to 6% per year (i. e., $300,000 per year) on the par value of the lessor’s outstanding stock. That sum was to be paid quarter-annually, direct to the stockholders of the lessor. The lessee assumed and agreed to pay the whole of the lessor’s outstanding bonded indebtedness, with interest. As part of the transaction, defendant-lessee indorsed on lessor’s stock certificates a guarantee of payment of 6% annual dividends thereon. The lessor agreed to preserve its corporate existence and franchise and the lessee agreed to pay, in addition to rent, $2,500 per year to cover the expense of keeping lessor alive as a corporation. The scheme of the lease, as further described in subsequent paragraphs hereof, left the lessor with no property of any sort in its possession, no income except the agreed rental, and no actual money receipts from any source, since the rental installments were to go, for the whole ninety-nine years, direct to lessor’s stockholders. It is plain beyond controversy that the intent was that the lessor corporation, thus left without any funds, property or actual income, was to have all its obligations, of every sort, discharged during the term of the lease, by defendant as lessee. In 1913, a Federal income tax law was passed. Who, under this lease, is obligated to pay the Federal income taxes now being assessed annually against the lessor?

Prior to the leasing, Gold and Stock Telegraph Company had carried on á “ telegraph ticker service ”. The lease here under .scrutiny went beyond a mere letting of the physical properties theretofore used in that enterprise. The indenture listed, also, as leased assets, “ the telegraph lines and business ” of the lessor. Defendant was to have for itself all the revenues thereof. It agreed, at its own cost and expense, thereafter to “ operate the said lines and appurtenant facilities for business ” and to keep them in condition suitable for the transaction of the kind of business theretofore conducted by the lessor. Besides the rental provisions above alluded to, and covenants to which we shall refer hereafter, for keeping the property clear of taxes, incumbrances and liens, defendant promised in the lease to assume and pay “ all costs and expenses incurred in the operation and maintenance of the lines and business of the G. & S. T. Co. * * * ”. It was a complete, functioning business enterprise that was leased. At the end of the term, lessor was to have its properties back not only intact ánd in good condition, but as free from * * * encumbrance thereon as they were, when received ’ ’. In so many words, defendant covenanted to keep the whole property and business of Gold and Stock Telegraph Company “ clear from all incumbrances arising from tax, assessment or judgment liens ”.

Federal income taxes are now being assessed annually against this lessor and remain unpaid. Those delinquencies result in liens on the leased property. (U. S. Internal Revenue Code, § 3670; U. S. Code, tit. 26, § 3670.) Those liens may attach only to the lessor’s interest in the leased assets and may, as a practical matter, be enforcible by the Government only by a sale of the lessor’s reversionary interest, but they are liens just the same. (See 45 Yale Law Journal, pp. 183, 184.) As has been authoritatively determined in respect to this very lease, those income taxes on the rents cannot be collected by the United States from lessor’s stockholders nor can the lessee be required by the United States to withhold the taxes out of the rents. (Western Union Tel. Co. v. Commissioner of Int. Rev., 68 F. 2d 16; Gold & Stock Telegraph Co. v. Commissioner of Int. Rev., 83 F. 2d 465, certiorari denied 299 U. S. 564; see United States v. Western Union Telegraph Co., 50 F. 2d 102.) Furthermore, it is held that, under this form of lease, each of the lessor’s stockholders has an individual, direct claim against the lessee for his full and undiminished share of the annual rents; that share must be paid to the individual stockholder without interference by the lessor, the tax-collecting agency, or anyone else. (Western Union Tel. Co. v. Commissioner of Int. Rev., supra; United States v. Northwestern Telegraph Co., 83 F. 2d 468, 469, certiorari denied 299 U. S. 565; see Peabody v. Inter- borough Rapid Transit Co., 124 Misc. 801, affd. 213 App. Div. 857, affd. 240 N. Y. 708, also Rensselaer & S. R. Co. v. Irwin, 249 F. 726.) The guarantee indorsed on the stock certificates has the same effect. Since the agreed rent must go direct to lessor’s stockholders without deductions, how can lessee possibly fulfill its promise to keep the leased assets unaffected by liens or incumbrances, unless it pays these income taxes from its own funds?

Defendant’s reliance is on the first part of the Sixth paragraph of the lease. Therein it bound itself to pay all taxes and assessments which may be lawfully imposed .upon said property of the GL & S. T. Co., or any part thereof, by any state or municipal authorities ”. That language, says defendant, marks out the limit of its tax burden under the lease. If that were so, and if the lease said nothing else on the subject, the lessor’s Federal income taxes could not be charged against the lessee. Those income taxes are not taxes on “ property ” but are a levy in personam and they are of course, not imposed by “ state or municipal authorities ” (Brainard v. N. Y. C. R. R. Co., 242 N. Y. 125; Van Rensselaer v. Dennison, 8 Barb. 23). But the same Sixth paragraph of the lease contains also an explicit promise by defendant to keep the same [leased property] clear from all incumbrances arising from tax, assessment or judgment liens ’ ’. If State and municipal taxes alone had been under consideration, they would have been covered adequately by the express provision at the beginning of the Sixth paragraph, for the payment by the lessee, of such imposts. The later provision, in the same paragraph, as to keeping the property free from all tax or judgment liens must have been meant to be all-inclusive (see Schlafly v. D’Arcy, 1 F. 2d 297). Applicable here is the language of this court in a different situation: “ these words are sufficient to cover, and must have been-intended to cover, all possible forms of taxation ” (Ward v. Union Trust Co., 224 N. Y. 73, 79, quoting from Walker v. Whittemore, 112 Mass. 187).

We are mindful of the. general rule that a lessor must ordinarily pay his own income taxes on his rents. We have not overlooked the long line of cases rejecting demands of lessors for payment of such taxes by their lessees. But those were cases where the taxes which the lessee promised to pay were in one way or another specified in the lease, in terms" which excluded the idea of income taxes. (See, for instance, Boston & Providence R. R. v. Old Colony R. R., 269 Mass. 190; Stony Brook R. R. v. Boston & Maine R. R., 260 Mass. 379; Catawissa R. R. Co. v. Phila. & R. Ry. Co., 255 Penn. St. 269; Sharon Railway Co. v. Erie R. R. Co., 268 Penn. St. 396; Woodruff v. Oswego Starch Factory, 177 N. Y. 23.) All of the decisions just above cited turn on limiting language in the leases themselves. In each of those cases the lessee’s promise was not to pay all taxes or to remove all tax incumbrances but only to pay taxes specified. Likewise inapplicable here are the decisions which pass on language which amounts to specific promises to pay lessors’ income taxes or taxes imposed on the rents (e. g., Peart v. Phipps [1807], 4 Yeates 386 [Penn.] ; Suter v. Jordan Marsh Co., 225 Mass. 34; Phila. C. P. Ry. Co. v. Phila. R. T. Co., 263 Penn. St. 561; Wendel Foundation v. Moredall Realty Corp., 282 N. Y. 239). We are here enforcing covenants which with utter clarity and positiveness bind the lessee to keep the property free from all tax liens and to return it to the lessor in that unblemished state.

Defendant cites Brainard v. N. Y. C. R. R. Co. (supra), as holding that, to impose on a lessee liability for his lessor’s income taxes, the lease itself must refer to “ income taxes ”, in so many words. The Brainard decision goes to no such extreme. Under construction in that lawsuit was a contract of lease (or management) quite unlike the one we are construing here. The lessee in the Brainard case had covenanted to pay all taxes “ on the said road or property, or upon the said Mahoning Company [the lessor], by reason of its ownership thereof”, (p. 129-130.) This court held that the quoted language described only property taxes, not income taxes. There was in that lease no general, all-inclusive promise to take care of all tax liens. This court in the Brainard case did “ adopt ” from a Federal decision the rule that imposition On a lessee of a lessor’s income taxes is not justified unless the lease expressly provides for the payment of taxes on the income from rentals received under the lease”, (p. 132.) But the Brainard opinion does not say or mean that the income tax had to be mentioned by name. The holding of the case is that words which are commonly used only to describe property taxes cannot fairly be construed to include income taxes. If the very words “ income taxes ” had to be used, then it would be impossible to draw a covenant as to the payment of all taxes, now or in the future to be imposed. Taxes, like death, are certain, but no one knew in 1881, when this lease was drawn, what forms of taxation would be popular ninety-nine years thence. There was no legal impediment to an assumption by the parties of all the risks of changes in the tax laws. (See Ward v. Union Trust Co., 224 N. Y. 73, at p. 79, supra.) The lessee assumed the risk of new and larger taxes, the lessor took the chance that taxes would be reduced.

Our close examination of the particular language of this instrument does not mean that we are picking out words or phrases from a whole text. The very same result is reached when we seek out the general plan of the contract. That plan contemplated the turning over free and clear of liens, to the lessee, of all lessor’s property and its return in the same condition. It contemplated the constructive payment of the rent to the lessor but actual payment thereof in undiminished amount to lessor’s stockholders, with an absolute guarantee thereof running from the lessee to the stockholders and, finally, a stripping from the lessor of all funds, principal or income, and the assumption by the lessee of responsibility for all costs and expenses which ordinarily would be charged to the lessor and for the removal from the property of every tax or other lien and incumbrance. To say that such a scheme left the matter of possible income taxes suspended in the air till the long distant day of the lease’s end, is to accuse the parties of folly.

Argument is made, however, that the parties should not be held to have had Federal income taxes in contemplation, since no such taxes were being imposed in 1881. We do not see what difference it makes whether or not the parties had in mind that specific kind of governmental exaction, so long as the lease imposed on the lessee all. risk and burden of any and every kind of tax levy. Nor. can it fairly be said that income taxes were totally outside the range of vision of these contracting parties in 1881. Our present form of Federal income tax dates only from 1913, but income taxes were imposed by our national government as early as 1861. One of our own decisions tells us of a lease drawn in 1871 wherein the draftsman specifically excluded income taxes from the taxes to be borne by the lessee. (Rensselaer & Saratoga R. R. Co. v. D. & H. Co., 168 App. Div. 699, affd. 217 N. Y. 692, see discussion of the same lease in Rensselaer & S. R. Co. v. Irwin, 249 F. 726, supra.) There were income tax laws in the American colonies, in Great Britain beginning in 1798 and in various States of the Union long before this lease was signed. (See The Income Tax, by Seligman [The Macmillan Co., 1914].) New York State had a tax on rents as early as 1846. (See Woodruff v. Oswego Starch Factory, 177 N. Y. 23, supra, and Van Rensselaer v. Dennison, 8 Barb. 23, supra.) A prudent lessor and a careful lessee, scanning the horizon in 1881 for possible future taxes, could have descried an income tax among the shapes of things to come.

We do not here analyze the opinion of the Second Circuit Court of Appeals in United States v. Warren R. Co., 127 F. 2d 134, since the court itself, in its mandate in that case, was at .pains to point out that the decision was not res adjudícala ” as between lessors and lessee on the question of whether or not the lessee is obligated to bear and pay income taxes of such lessors ”. The holding of that case went only so far as to relieve the lessee from direct liability to the Federal government for the lessor’s income taxes.

This is not a case where the meaning of doubtful language has been conclusively determined, as a question of fact, by the two courts below. Here, as in the Brainard case (supra), the language of the tax covenant is so clear and definite as to admit, as matter of law, of one construction only. As Judge Pound wrote in the Brainard case (242 N. Y. at p. 133): “ the construction of a plain contract is for the court.”

Besides his demand that the lessee be required to pay the income taxes, plaintiff asks that defendant be required to segregate a certain sum derived from the sale by defendant of securities which are part of the leased assets. We are in agreement with the courts below, that defendant is under no duty so to segregate those funds.

The answer sets up alleged defenses as to the Statute of Limitations and as to ratification by lessor’s stockholders, etc. Since those defenses were not passed upon by the courts below, they cannot be passed on by us now. The case must, accordingly, go back for a new trial.

The judgments should be.reversed and a new trial granted, with costs to abide the event.

Conway, J.

(dissenting). This is a stockholder’s derivative action in which it is sought to so construe a contract made more than 60 years ago that the lessee thereunder may be directed to assume and pay the Federal income taxes of the lessor upon the rent received by it. There is no mention of Federal taxes in the lease and no one came forward to testify that it was the intention of the contracting parties that such taxes should be paid by the lessee. The plaintiff, however, in pleadings and proof went beyond the terms of the contract in an attempt to establish factually such intention. He pleaded and proved a guarantee by the Western Union Telegraph Company (hereinafter referred to as W. U.).to the stockholders of Gold and Stock Telegraph Company (hereinafter referred to as G. & S.) to pay quarterly upon the par value of the stock represented by the certificates, which guarantee was not provided for in the contract of lease. The plaintiff also showed by the minutes of the annual meeting of G. & S. on October 12,1881 (two months before the contract of lease was executed) the capital stock, bonded indebtedness, net profits for the preceding year, the dividends and interest paid, the amount paid for construction of lines and purchase of patents and the amount and manner of the investment of surplus for the year.

G. & S. then proved the care with which the contract of lease had been negotiated. There had been a committee of three from W. U. and one from G. &. S. Originally W. U. had sought a lease in perpetuity of all the property and possessions of G. & S. at an annual rental of 6% upon the outstanding stock of $5,000,000. That apparently was changed at the first meeting of the two committees to an offer to lease at a rental of “ 6% per annum payable quarterly, guaranteed, for the term of 99 years ” upon the capital stock. That offer was rejected but the door left open for further negotiations and attention called to the dividend-paying assets of G. & S. Thereafter W. U. made a new offer in these words: Lease at 6 per cent. For 99 years with option of Western Union Telegraph Company to terminate at end of 15 years — Gold & Stock to pay all liabilities and be entitled to divide all cash assets accruing as earned and on sale and transfer of telephones and royalties thereon to January 1st, 1882. Stock assets and franchises all to be turned over.” Later W. U. added a provision that the G. & S. treasury stock, amounting to par value of $105,600, be distributed to G. & S. stockholders as part of the cash assets.

Thereafter at a meeting of the board of directors of G. & S. the modified offer of W. U. was spread upon the minutes as we have just set it out and accepted on condition that W. U. eliminate the provision for termination of the agreement at the end of 15 years at the option of W. U. and provided W. U. assumed the payment of the outstanding bonded debt of G. & S. amounting to $434,700 with interest from January 1, 1882. Those modifications were accepted by W. U. and a contract in conformity drawn, ratified and executed on December 14, 1881. Two weeks later on December 27,1881, the minutes of the board of directors of G. & S. show that W. U. was requested to indorse the obligation for the rental on the stock certificates of G. & S. and that was later done.

On that proof it was clear to the point of demonstration that no one on either committee and none of the counsel drafting the contract mentioned or had in mind Federal income taxes. The contract followed the lines of the negotiations and so clear is it that there was no intention of the parties which was undisclosed by the words of the agreement and that there was no mistake made therein, that plaintiff has here sought no reformation of it.

' On that state of the record as to what was in the minds of the parties, this court may not reverse the construction of the contract by the trial court and the Appellate Division unless we can say that no reasonable man could adopt it.

The contract is simple in its provisions. There was leased to W. U. the telegraph lines and business of G. & S. including franchises, easements, stock in other telegraph and telephone companies, inventions and patents with possession thereof from January 1, 1882, for 99 years with “ full right and authority to use, operate and enjoy the same and all and every part thereof as fully as the G. & S. T. Co. might have done had this Agreement not been executed; * * *.” G. & S. covenanted and agreed that the property leased and conveyed was “ free, from all debts or encumbrance (except its bonded debt as hereinafter mentioned).” W. U. agreed to pay as rental “ for said-lines, business and other property hereby leased, a sum equal to six (6) per centum per annum on said capital stock of Five millions of dollars ($5,000,000) to wit, the sum of Three hundred thousand dollars during each and every'year of the term of this agreement; payments thereof to be made in equal quarterly installments * * *; the Gr. & S. T. Co. hereby authorizing and requesting the W. F. T. Co. to make the said quarterly payments of rental during the term of this agreement; so fast as the same shall accrue and become payable; by distribution pro rata among the several stockholders of the Gr. & S. T. Co., as they may appear upon the books of the Gr. & S. T. Co., at the date of payment; the G. S 8. T. Go., hereby agreeing to accept such distribution among its said stockholders as full payment by the W. U. T. Co., * * * And the W. U. T. Co. further agrees to pay to the Gr. & S. T. Co., as an addition to the said rental, the further sum of Two thousand five hundred dollars ($2,500) per annum, during the term hereof, the same to be used by the officers of the Gr. & S. T. Co. as and for an administration fund for the purpose of defraying the necessary expenses of maintaining the organization of the Gr. & S. T. Co. as a corporation, and the payment of the same to be made in such manner and at such times as the officers of the G-. & S. T. Co. may desire.”

Gr. & S. had- the option of terminating the agreement and resuming possession of the lines, business and property on default but W. U. remained liable nevertheless upon all of its covenants including the payment of rent. It was further covenanted and agreed that, upon any such surrender and restoration to Gr. & S., the lines and property should be in as good condition as when received by W. U. “ and as free from bonded debt or other encumbrance

Then we come to the Sixth paragraph which is the one construed by the trial court after the taking of the testimony to which reference has been made: Sixth: The W. U. T. Co. will also assume and pay all taxes and assessments which may be lawfully imposed upon said property of the Gr. & S. T. Co., or any part thereof, by any state or municipal authorities during the continuance hereof, and also all costs and expenses incurred in the operation and maintenance of the lines and business of the Gr. & S. T. Co., and will keep the same clear from all incumbrances arising from tax, assessment or judgment liens or from any act of the W. U. T. Co. during the term hereof, and will also institute and,maintain such proceedings if any, as may be necessary to protect and preserve said property and any franchises of the Gr. & S. T. Co.”

It is apparent that this was a one sentence paragraph in which the parties had in mind the payment of taxes and assessments imposed by State or municipal authorities. A break-down of the sentence into parts, only confirms that fact. It will aid us in that break-down if we remember that this is not an action upon a guarantee to an individual stockholder by W. U., for the contract said nothing about any guarantee. Such an action would not be a derivative one but by an individual stockholder and subject to defenses as to him. We may not construe paragraph Sixth ” in one fashion because there was a guarantee not mentioned in the contract and yet indicate that we would not so construe it had there been no guarantee, for it is the language of the contract we are construing and the contract did not provide for a guarantee. With that in mind we now take paragraph “ Sixth ” in detail.

By it W. U. assumed to pay taxes and assessments upon what? Upon the property or any part thereof of Gf-. & S. imposed by any State or municipal authorities during the term of the agreement of lease. There was there nothing said about judgment liens. This was the substantive assurance of payment. What else? “ And also ” all costs and expenses incurred in operating and maintaining the lines and business of Gr. & S. The additive clause beginning with the words “ and also ” clearly related only to operating expenses of the business. What else? To keep the lines and business clear from all incumbrances. How were those incumbrances to arise? From taxes, assessments, judgment liens or any act of W. U. upon or respecting the lines and business of G. & S. Finally, W. U. as a matter of adjective assurance, agreed to institute and maintain any proceedings necessary to protect and preserve what? The lines, business and franchises of Gr. & S.

By paragraph “.Tenth ” W. U. covenanted to make such reports “ to public municipal or state authorities as may be required by law to be made by or on behalf ” of G. & S.

Each and every provision of paragraph “ Sixth ” referred clearly to the property leased to W. U. This action seeks to write into the agreement the assumption and payment of Federal income taxes not upon the property leas,ed or its operation but upon the rental paid by W. U. and received by G. & S. as lessor. The applicable law has been very recently stated in Commissioner of Internal Revenue v. Western Union Telegraph Co. (A. N. Hand, J., N. Y. L; J., June 17, 1944, p. 2333, col. 1, certiorari denied, May 29,1944; 141 F. 2d, 774), as follows: “ It has been settled by recent decisions that a corporation is taxable upon income constructively received by it when rentals due to it as lessor are paid directly to its stockholders. (United States v. Joliet & Chicago RR., 315 U. S. 44). It is also settled that this rule is applicable in respect of rentals accruing upon stock of the lessor owned by the lessee (Gold & Stock Tel. Co. v. Commissioner, 83 F., 2d, 465, cert, denied 299 U. S. 564; Pacific & Atlantic Tel. Co. v. Commissioner, 83 F., 2d, 469, cert, denied 299 U. S. 564). We have heretofore held that taxes found to be due by the lessor under such circumstances, when it has no property with which to pay its income tax obligations, may be collected by means of an application by the government for an order enjoining the payment of the rental dividends to the lessor’s stockholders until the collector shall have been able to satisfy the lessor’s delinquent taxes therefrom (United States v. Warren R. Co., 127 F., 2d, 134, C.C.A., 2; United States v. Morris & Essex RR., 135 F., 2d, 711, C.C.A., 2).”

It is argued that the agreement in paragraph Sixth by W. U. to keep the properties leased clear “ from all incumbrances arising from tax, assessment or judgment liens or from any act of the W. U. T. Co.” indicates that Federal income taxes must have been intended because failure to pay the Federal income taxes by G. & S. results in liens upon the leased property under U. S. Internal Revenue Code, section 3670 (U. S. Code, tit. 26, § 3670). But that is not the fact and thus it is a complete non sequitur to say that since the lease provided that the lessee should keep the leased property free from judgment liens that the contracting parties must have had a lien such as is provided in section 3670 in mind. No such lien is permitted or provided by section 3670. By the express language of section 3670 the Hen falls upon the property and rights to property of the person neglecting and refusing to pay it. No Hen, judgment or otherwise, may be imposed upon the property leased to W. U. during the 99 year term of the lease. Such a Hen is imposed upon the reversionary interest of G. & S. Were it otherwise and the lessor could cause a Hen to be imposed upon the property leased by reason of his own failure to pay income taxes upon the rental received by him, leases would be of little value.

We shall assume, however, despite the complete absence of testimony to support it, that the directors in 1881 did foresee the passage of a constitutional amendment and Federal income tax laws decades later. That assumption only weakens plaintiff’s position. There can be no question but that parties may contract, if they wish, subject to legislative prohibition, that a lessee shall pay income taxes upon rental paid to the lessor. In this case it is clear that there was no such intention. If the parties had in mind that there had been income taxes in the American colonies, in the nation and in other States prior to . 1881 and that there might be sometime during the term a Federal income tax, and then wrote into the contract provisions relating only to State and municipal taxes, upon the property leased, they clearly intended to exclude Federal income taxes on the rent money received by the lessor. If the parties had not in mind Federal income taxes, they, of course,' did not intend to include in the lease a provision for the payment of them by the lessee. If they had in mind the payment of all taxes of whatever kind and description upon the leased property and upon the rental paid to the lessor and then wrote in provisions for the payment only of State and municipal taxes upon the leased property by the lessee, they quite evidently intended to exclude payment of Federal income taxes upon rent received by the lessee. There seem to be no other alternative intentions and under each of those, plaintiff’s action fails. We cannot rewrite the contract.

Obviously the debt for unpaid income taxes on the rental received may be paid by G. & S. in the manner indicated in United States v. Warren R. Co., 127 F. 2d 134, supra, and United States v. Morris & Essex R. Co., 135 F. 2d 711, supra, or, as was conceded by counsel for W. U. on,the argument before us, by G. & S. requesting the payment to it, instead of to its stockholders, of the rent as it becomes due and then paying the income taxes therefrom. However, those are details which have nothing to do with the construction of an unambiguous contract.

Finally the matter is put beyond all doubt by our own case of Brainard v. N. Y. C. R. R. Co. (242 N. Y. 125). That was an action in which minority stockholders of Mahoning Coal Railroad Company brought a derivative action against N. Y. Central seeking to recover Federal income taxes assessed against the Mahoning Company for the year 1920. The action was predicated upon a lease entered into between the Mahoning Company and a predecessor of N. Y. Central whereby the predecessor company agreed: “ That it [Lake Shore Company] will in due season pay all taxes and assessments which may be levied or become chargeable on the said road or property, or upon the said Mahoning Company, by reason of its ownership thereof ” (pp. 129-130). Prior to the 1920 tax involved, N. Y. Central had been paying those taxes. This court reversed the judgments of the courts below in favor of plaintiff and dismissed the complaint. We held that prior payments by N. Y. Central did not change the clear contract provisions which did not contemplate that the predecessor of N. Y. Central would be liable for Federal income taxes assessed against the Mahoning Company. As will be noted, that case was much stronger for the plaintiff than is the instant one. We laid down there the applicable rule in this State as follows: “ ‘ Unless the lease expressly provides for the payment of taxes on the income from rentals received under the lease, the imposition of such a burden on the lessee is not justified ’ ” (p.' 132). Judge Pound said, further (p. 131): In actions based on leases and working agreements like the one in question (which for convenience may be called a lease), where the lessee agrees to pay all taxes levied and assessed on or in respect to the property, the distinction between taxes on the income of property and taxes on the property itself has been repeatedly pointed out. With monotonous frequency the courts have held in this connection that a tax on the rents or income of real property is not considered a tax on the property itself. When the lessee is to pay all taxes, ordinary and extraordinary which shall be imposed on the demised premises or ‘ in respect thereof,’ the tax on rents is a tax not in relation to the property demised but in relation to the income thereof. (Woodruff v. Oswego Starch Factory, 177 N. Y. 23.) ” In the Woodruff case cited (1903) there was a covenant to pay, in addition to a yearly rent in cash: “ All taxes, charges and assessments, ordinary and extraordinary, which shall be taxed, charged, imposed or assessed on the hereby demised premises and privileges, or any part thereof, or on the said parties of the first part, their heirs and assigns in respect thereof ” (p. 26). As was said in United States v Warren R. Co. (127 F. 2d 134, C.C.A. 2, 1942): “ It has been universally held both by the courts of New York and other States that a covenant by a lessee to pay the income taxes of. a lessor is not within the terms of the contracts unless the obligation is clearly and directly specified ” (p. 136). If there is to be a change in those rules which have been followed for so long, it should come from the Legislature.

It is unnecessary to discuss the other point raised as to the necessity of segregation of the proceeds of the sale of securities by W. U. since we are in accord with the courts below in their disposition of it.

The judgment should be affirmed, with costs.

Lehman, Ch. J., Loughban and Rippey, JJ., concur with Desmond, J.; Conway, J., dissents in opinion in which Lewis, J., concurs; Thacheb, J., taking no part.

Judgments reversed, etc.


text:
    Stephen Callaghan et al., as Trustees of The Prudence Company, Inc., Respondents, v. Frank Bailey et al., Defendants, and Raymond E. Jones et al., Defendants-Appellants.
    Argued February 29, 1944;
    decided October 12, 1944.

      John A. Kelly, Edward K. Hanlon and John Windsor for appellants.
    I. The three-year Statute of Limitations in Civil Practice Act, section 49, subdivision 4, has not been superseded by the two-year provision in the Bankruptcy Act [U. S. Code, tit. 11, § 29, subd. (d)]. (Nairn v. McCarthy, 120 F. 2d 910; Charlesworth v. Hipsh, Inc., 84 F. 2d 834, 299 U. S. 594; Davis v. Willey, 273 F. 397; Meikle v. Drain, 69 F. 2d 290; Silverman v. Christian, 198 A. 832; Bovay v. H. M. Byllesley & Co., 29 A. 2d 801; Dushane v. Beall, 161 U. S. 513; Hammond v. Whittredge, 204 U. S. 538.) II. The trustees in bankruptcy did not succeed to any choses in action in favor of creditors granted by section 58 of the Stock Corporation Law or section 60 of the General Corporation Law. (Assets Realisation Co. v. Howard, 211 N. Y. 430; Granger & Co. v. Allen, 214 App. Div. 367, 244 N. Y. 587; Harrigan v. Bergdoll, 270 U. S. 560; Selig v. Hamilton, 234 U. S. 652; Firestone Tire & Rubber Co. v. Agnew, 194 N. Y. 165.)

      Harold Harper, Joseph Nemerov, Arthur R. Gaetjens and Joseph L. Delaney for respondents.
    I. The causes of action set out in the complaint were preserved from the bar of the State Statute of Limitations (Civ. Prac. Act, § 49, subd. 4) by subdivision d of section 11 of the Bankruptcy Act. The New York statute had not run at the time the bankruptcy proceeding was begun. II. The State statute was superseded by the Bankruptcy Act with respect to causes of action not barred at the time of the filing of the petition. (Hastings v. Byllesby & Co., 265 App. Div. 653; Devoy v. Superior Fire Insurance Co., 239 App. Div. 28; Oppenheimer v. Roberts, 175 App. Div. 424; Fuller v. Rock, 125 Ohio St. 36; Schreck v. Hanlon, 66 Neb. 451; Jenkins v. International Bank, 106 U. S. 571; Avery v.
      Cleary, 132 U. S. 604; Andrews v. Dole, Fed. Cas. No. 373; Gifford v. Helms, 98 U. S. 248; Freelander v. Holloman, Fed. Cas. No. 5081.)
   Lehman, Ch. J.

The plaintiffs, as trustees in bankruptcy of the Prudence Company, Inc., have brought an action against the directors of the debtor corporation to recover moneys of the corporation which, it is alleged, were paid to stockholders in violation of section 58 of the Stock Corporation Law, while the capital of the corporation was impaired; and to recover moneys of the corporation which, it is alleged, were illegally transferred in violation of section 60 of the General Corporation Law. The defendant directors pleaded as a defense that all the causes of action contained in the complaint are barred by the Statute of Limitations. A motion made by the defendants, pursuant to rule 113 of the Rules of Civil Practice, for judgment in their favor on that ground was denied and the order denying the motion was unanimously affirmed by the Appellate Division which granted leave to appeal and certified the following questions:

“1. Did the provision in the Bankruptcy Act (11 U. S. C. A., Sec. 29 [d]) prior to its amendment on June 22, 1938 Supersede or suspend Section 49, subdivision 4, of the Civil Practice Act with respect to the causes of action pleaded in the complaint herein?
‘1 2. Are the causes of action set out in the complaint barred by the Statute of Limitations (Civil Practice Act, Section 49, subd. 4), where the action was brought not earlier than October 27, 1937 by trustees appointed under Section 77B of the Bankruptcy Act, a prior action having been begun on September 24, 1934 by holders of bonds and certificates guaranteed by such corporation against such corporation and some of the defendants involved in the case at bar and in respect of the same "matters involved in the causes of action one to eighteen inclusive of the complaint herein, and the Superintendent of Banks of the State ■ of New York having taken possession of such corporation pursuant to then Section 57 (now Section 606) of the Banking Law on September 29,1934, and the said trustees in bankruptcy having been appointed such trustees on February 1, 1935?
“ 3. Should the - defendants’ motion under Buie 113 of the Buies of Civil Practice for summary judgment have been granted? ”

The Civil Practice Act provides that a three-year period of limitation applies to u an action against a director * * * of a moneyed corporation * * * to enforce a liability created by the common law or by statute. The cause of action is not deemed to have accrued until the discovery by the plaintiff of the facts under which * * * the liability was created ” (§ 49, subd. 4). On September 24, 1934, an action was begun against some of the defendant directors by holders of bonds or certificates guaranteed by the debtor corporation. The complaint in that action alleged substantially the same facts as are now alleged by the trustee in bankruptcy as the basis of the first eighteen causes of action of their complaint. The Superintendent of Banks of the State of New York took possession of the corporation on September 29, 1934, pursuant to the provisions of section 57 (now § 606) of the Banking Law. In February, 1935, temporary trustees were appointed in bankruptcy proceedings brought under section 77B of the Bankruptcy Act (48 U. S. Stat. 912) and their appointment was made permanent in March, 1935. They commenced this action in October, 1937.

Though the defendant directors are charged in the complaint with derelictions committed more than three years before the bankruptcy proceedings were commenced and the trustees in bankruptcy appointed, all parties assumed, for the purposes of the defendants’ motion for judgment, that the alleged facts upon which the liability of the defendants is based were discovered in September, 1934, when the earlier action was brought by creditors of the corporation and when the Superintendent of Banks took possession of the corporation and that the plaintiffs ’ causes of action should be deemed to have accrued at that time. Upon that assumption, concededly, none of the causes of action pleaded in the complaint was barred by the Statute of Limitations when the trustees in bankruptcy were appointed but the defendants contend that all the causes of action were barred in 1937, when the trustees brought this action.

At the time when the bankruptcy proceedings were commenced and at the time when this action was brought, the Bankruptcy Act [U. ¡3. Code, tit. 11, § 29, subd. (d)] provided that “ suits shall not be brought by or against a trustee of a bankrupt estate subsequent to two years after the estate has been closed. ’ ’ The question is here presented whether this provision applies to causes of action “ created by common law or by a statute ” of New York and supersedes the Statute of Limitations of the State. There has been diversity of opinion both in State courts and in the Circuit Courts of the United States in regard to the scope of this provision of the Bankruptcy Act. Some courts have held that the statute applies only to actions hy or against a trustee which arise under the Bankruptcy Act and have held, too, that the provision of the Bankruptcy Act constitutes only an additional Statute of Limitations barring actions brought by or against a trustee subsequent to two years after the estate is closed, though such actions brought by or against a different party would not be barred by any other statute. These courts have rejected the contention that the provision of the Bankruptcy Act constitutes a superseding Statute of Limitations sanctioning suits by or against a trustee brought within the specified period though before a suit is commenced the period during which a similar suit might be brought against other parties may have expired. The Supreme Court of the United States has not authoritatively decided the question, nor has it been directly presented to this court or decided by it. We are persuaded, however, that this provision was intended to constitute a superseding Statute of Limitations fixing the period during which an action — not barred by any statute at the time the trustee in bankruptcy was appointed — may be brought by or against a trustee and the weight of authority in State and Federal courts seems to support that conclusion.

The construction given by the courts to analogous provisions in earlier Bankruptcy Acts casts light upon the purpose of Congress when it enacted the Bankruptcy Act of 1898. These earlier acts provide, it is true, a different period of limitation and are formulated in other language. All provide, however, a period after which an action may not be brought. None provide affirmatively that an action may be brought within the period there specified and none provide in express terms that the limitation should apply to causes of action created by the common law or by statute and existing at the time bankruptcy proceedings are commenced, as well as to causes of action created by and arising under the Bankruptcy Act. Nevertheless the Supreme Court of the United States has said that the limitation contained in an earlier statute ‘ ‘ applies to all judicial contests between the assignee and other persons .touching the property or rights of property of the bankrupt transferable to or vested in the assignee * * (Bailey v. Glover, 21 Wall. [88 U. S.] 342, 346.) In Jenkins v. International Bank (106 U. S. 571), and Avery v. Cleary (132 U. S. 604), the court again so held. It is said that these decisions have been overruled by the later case of Dushane v. Beall (161 U. S. 513), applied and followed in Hammond v. Whittredge (204 U. S. 538.) We do not so read these cases. They do not overrule or even cast doubt upon the earlier decision. (See Bowen v. Delaware, L. & W. R. R. Co., 153 N. Y. 476.) We find that under the established construction placed by the courts upon the analogous provisions of the earlier statutes they superseded other general statutory limitations and applied to actions of every nature brought by or against an assignee in bankruptcy in any court. Any action which the debtor could have brought prior to the date when the debtor’s property, including causes of action belonging to him, was placed in the custody of the bankruptcy court, could be brought thereafter by an appointed officer of that court until the expiration of the period limited by the Bankruptcy Act, though in the interval the period limited by general statute might have expired.

If Congress had intended that the provision of the Bankruptcy Act of 1898, limiting the time when suits might be brought by or against a trustee of a bankrupt estate, should apply within a more restricted field than the analogous provisions of the earlier acts, it could without difficulty have formulated its intention in express terms. We think that its omission of any clear expression of such intention is significant. We -find in the statute no language which indicates that the statutory limitation in the Bankruptcy Act of. 1898 should not be applied to all causes of action to which the statutory limitations in earlier statutes would have applied; — though, as we have said, there is difference of opinion on that point and courts whose opinions we respect have decided otherwise. Thus, in Nairn v. McCarthy (7th Circuit, 120 F. 2d 910, 912), the court said that: “As we read the provision, however, it does not grant an extension of time, but is a prohibition against the institution of actions either by or against the trustee subsequent to the designated time.” Accordingly, the court held that a cause of action created by the law of a State which passed to the trustee in bankruptcy before it was barred by the Statute of Limitations of the State must be commenced within the time specified in that statute.

The court in that case cited the opinion in .Charlesworth v. Hipsh, Inc. (8th Circuit, 84 F. 2d 834, at p. 837), that: “ Time in which the trustee may sue cannot be extended by a provision in the Bankruptcy Act which purports only to limit the time within which a suit may be brought by or against him.” In considering whether “ time in which the trustee may sue cannot be extended ” by the provisions of the Bankruptcy Act which purport to limit the time in which a suit may be brought by or against a trustee, a distinction should be drawn between a limitation on the time in which suit may be brought under a general Statute of Limitations and a limitation contained in the statute creating the liability and which by the statute is made a condition of liability. (See Graybar Elec. Co. v. New Amsterdam Cas. Co., opinion of Lotjghran, J., 292 N. Y. 246.) In Charlesworth v. Hipsh, Inc. (supra), the statute which created the liability annexed a condition that suit must be brought within a specified time and it may well be doubted whether a bankruptcy act could by any provision authorize a trustee to disregard the condition. A very different question is presented where, as here, the only limitation upon the time in which the debtor might have brought the action was contained in the general Statute of Limitations of the Civil Practice Act. In such case this court has held that the analogous provisions of an earlier statute did supersede the Statute of Limitations of the State and extended the time in which the trustee might bring suit. (Von Sachs v. Kretz, 72 N. Y. 549; see Devoy v. Superior Fire Insurance Co., 239 App. Div. 28, and cases there cited.) Whether the Bankruptcy Act of 1898 has the same effect is a question of construction of the statute, not of the power of Congress, The case of Harrigan v. Bergdoll (270 U. S. 560), is not authority in favor of the defendants. The question presented here was not argued or decided in that case. (See Isaacs v. Neece, 5th Circuit, 75 F. 2d 566.) Perhaps the reason why that question was not argued is that the statute of Pennsylvania, referred to in the opinion in that case, is not a pure Statute of Limitations but created a limitation which qualified the right. (See Eiffert v. Central Pennsylvania Brewing Co., 141 Penn. Super. Ct. 543, at 553.) Since the Supreme Court of the United States has not construed the statute, we must choose between conflicting decisions in the Circuit Courts of Appeals.

We apply the statute as .written without reading any limitation into it by implication. We conclude that it is a Statute of Limitations applicable to causes of action existing under the law of the State of New York to which title passed from the bankrupt debtor to the trustee. (Isaacs v. Neece, supra; Devoy v. Superior Fire Insurance Co., supra; Hansen v. California Bank, 17 Cal. App. 2d 80, at p. 97.) In Stephan v. Merchants Collateral Corp. (256 N. Y. 418), we assumed, though we did not decide, that the provisions of the statute applied to “ a claim against directors of a bankrupt corporation for damages due to their misconduct”. We so decide now. In view of this conclusion, the question is academic whether the action would have been barred by the Civil Practice Act if the Bankruptcy Act had not superseded the statutory limitation created by the law of the State.

The order should be affirmed, with costs. The first question certified should be answered in the affirmative and the third question certified in the. negative. The second question certified is not answered.

Loughran, Rippey, Lewis, Conway, Desmond and Thacher, JJ., concur.

Order affirmed, etc.


text:
    Daniel O. Hastings, as Special Trustee of Standard Gas and Electric Company, Appellant, v. H. M. Byllesby and Company et al., Defendants, and Haystone Securities Corporation, Defendant-Respondent.
    Argued February 29, 1944;
    decided October 12, 1944.

      Sidney B. Nussenfeld, Max J. Rubin, Morris Gottlieb, William H. Foulh of the Delaware Bar, William H. Button and Francis J. Quillinan for appellant.
    I. The action did not accrue as against the plaintiff until his appointment as bankruptcy trustee. The Statute of Limitations is therefore no bar to this cause of action. (Hastings v. Byllesby & Co., 286 N. Y. 468; In re Standard Gas & Electric Co., 119 F. 2d 658; Stellwagen v. Clum, 245 U. S. 605; Palmer v. Larchmont Manor Co., 284 N. Y. 288; In re Dalton Electric Co., 7 F. Supp. 465; Whitfield v. Kern, 122 N. J. Eq. 332; Stephan v. Merchants Collateral Corp., 256 N. Y. 418; Rubinstein v. Berch, 261 App. Div. 265; Stratton v. Bertles, 238 App. Div. 87; Buttles v.
      Smith, 281 N. Y. 226; Reynolds Investing Co. v. Reynolds, 256 App. Div. 912, 281 N. Y. 180; P. G. Poultry Farm v. Newtown B.-P. Mfg. Co., 248 N. Y. 293; In re Horton, 31 F. 2d 795; Rosenkranz v. Doran, 264 App. Div. 335; Callaghan v. Bailey, 179 Misc. 673, 266 App. Div. 915.) II. Apart from plaintiff’s status as bankruptcy trustee-judgment creditor, since the fraudulent acts complained of were not discovered until after Standard Gas petitioned for relief under the Bankruptcy Act, subdivision (5) of section 48, of the Civil Practice Act would be the applicable Statute of Limitations. (Bloomquist v. Farson, 222 N. Y. 375; Nasaba Corp. v. Harfred Realty Corp., 287 N. Y. 290; Wechsler v. Bowman, 285 N. Y. 284; Dumbadze v. Lignante, 244 N. Y. 1; Kelly v. Pratt, 41 Misc. 31; Seeley v. Seeley, 164 App. Div. 650.) III. Apart from plaintiff’s status as bankruptcy trustee-judgment creditor, and in the event that subdivision 5 of section 48, of the Civil Practice Act should be deemed inapplicable, section 53 of the Civil Practice Act, the ten-year Statute of Limitations applicable to actions in equity for an accounting should be held to govern this case. (Buttles v Smith, 281 N. Y. 226; Asphalt Construction Co. v. Bouker, 150 App. Div. 691, 210 N. Y. 643; Treadwell v. Clark, 190 N. Y. 51; Falk v. Hoffman, 233 N. Y. 199; Hearn 45 St. Corp. v. Jano, 233 N. Y. 139; Pitcher v. Sutton, 238 App. Div. 291, 264 N. Y. 638; Stephan v. Merchants Collateral Corp., 256 N. Y. 418; Devoy v. Superior Fire Insurance Co., 239 App. Div. 28; Oppenheimer v. Roberts, 175 App. Div. 424; Callaghan v. Bailey, 179 Misc. 673, 266 App. Div. 915; Hastings v. Byllesby & Co., 265 App. Div. 653; Mencher v. Richards, 256 App. Div. 280.) IV. The Appellate Division incorrectly applied the test of correlation of gains and losses. V. The running of the Statute of Limitations was suspended by the provisions of the Bankruptcy Act. Under subdivision d of section 11 of the Bankruptcy Act plaintiff had two years after the estate was closed within which to commence this action.

      Horace G. Hitchcock, Dwight R. Collin and Seth V. Elting for respondent.
    I. The cause of action- of Standard Gas and Electric and therefore the cause of action asserted herein, was barred by the six-year Statute of Limitations, which expired not later than March, 1932. (Potter v. Walker, 276 N. Y. 15; Dunlop’s Sons, Inc., v. Spurr, 285 N. Y. 333; Frank v. Carlisle, 285 N. Y. 586; Cwerdinski v. Bent, 256 App. Div. 612, 281 N. Y. 782; Davis v. Cohn, 256 App. Div. 905; Keys v. Leopold, 241 N. Y. 189.) II. The Appellate Division properly applied the test of correlation of gains and losses. (Dunlap’s Sons, Inc., v. Spurr, 285 N. Y. 333; Frank v. Carlisle, 261 App. Div. 13, 286 N. Y. 586.) III. As the action was barred in 1932, the appointment of plaintiff as trustee did not revive it. (Warthman v. Manufacturers Trust Co., 287 N. Y. 725; In re Underhill’s Estate, 1 Con. Sur. 541, 57 Hun 590, 124 N. Y. 653; Cooley v. Lobdell, 153 N. Y. 596.) IV. Subdivision 5 of section 48 of the Civil Practice Act does not apply. (Dunlop’s Sons, Inc., v. Spurr, 285 N. Y. 333; Adolf Gobel, Inc., v. Hammerslough, 263 App. Div. 1, 288 N. Y. 653; Carr et al. v. Thompson, 87 N. Y. 160; Brick v. Cohn-Hall-Marx Co., 276 N. Y. 259.)
   Lehman, Ch. J.

In September 1935, Standard Gas and Electric Company filed a petition in bankruptcy seeking reorganization under section 77B of the Bankruptcy Act (48 U. S. Stat. 912). The plaintiff was appointed “ Special Trustee ” of the debtor corporation and was authorized- to bring suit upon causes of action belonging to the debtor corporation and referred to in the order appointing the trustee. As special trustee he commenced an action to recover moneys and property of the debtor corporation which, it is alleged in the complaint, the defendants wasted, disposed of or took unlawfully and fraudulently, and to recover profits which, it is alleged, the defendants wrongfully appropriated. The capacity of the plaintiff to sue was challenged by motion to dismiss but was sustained by this court upon a previous appeal from a judgment dismissing the complaint on that ground. (Hastings v. Byllesly & Co., 286 N. Y. 468.) Thereafter the defendant, Haystone Securities Corporation, moved to dismiss the complaint against it on11 the ground that the cause or causes of action alleged in said complaint against the defendant Haystone Securities Corporation did not accrue within the time limited by law for the commencement of an action thereon.” An order denying the motion was unanimously reversed by the Appellate Division and the motion granted. The plaintiff now appeals from the judgment of dismissal.

The separately-stated caiises of action charge wrongs to the corporation in different transactions. These separate causes of action are connected in the complaint by an introductory allegation applicable to all, that in each of the transactions hereinafter described the defendants therein acted in pursuance of corrupt conspiracies entered into by them to waste the assets of Standard and to secure to themselves unlawful and fraudulent profits; and each such transaction was undertaken unlawfully and without authority and in fraud of Standard and without its knowledge or consent; and in each of such transactions the officers and directors of Standard acted in violation of their duty and trust to Standard, and the acts and conduct of the defendants herein complained of were and are unlawful taking and disposition by defendants herein of property and property rights lawfully belonging to and property of Standard and unlawful waste and dissipation thereof, and causing loss and damage to Standard in a total amount which plaintiff, without accounting by defendants, is unable precisely to state. ’ ’ The defendant "Haystone Securities Corporation is named only in the sixteenth cause of action stated in the complaint. Upon this appeal we are concerned only with that cause of action. Haystone Securities- Corporation is not charged with any part in a corrupt conspiracy in connection with any transaction described in other causes of action.

The sixteenth cause of action alleges that the firm of Laden-burg, Thalmann & Co., together with other defendants including Haystone Securities Corporation, who in the complaint are referred to “ jointly and severally as ' defendant Ladénburg ’,” entered into “ a corrupt and fraudulent conspiracy ” in June, 1925, with the defendant Byllesby ” to obtain large profits and substantial personal benefits at the expense of the debtor corporation. The objects of the conspiracy were, it is alleged, successfully carried out by “ defendants Byllesby and Ladenburg ” by means of several transactions, each being a “ step in said conspiracy.” On or before March 26, 1926, these defendants had received from the debtor valuable stock in subsidiary corporations and large sums of money in exchange for stock which had cost Ladenburg and Byllesby much less, and in January 1930, the defendant Ladenburg sold some of the stock thus received for $25,000,000. The Appellate Pivision has held that the last act alleged in the complaint, relevant to a cause of action against Haystone Securities Corporation for a wrong done to the debtor corporation, took place in March, 1926; that the six-year Statute of Limitations applies to that cause of action and began to run from that date, and that the cause of action was barred when the petition in bankruptcy was filed in 1935. The plaintiff challenges these conclusions but contends that even if the cause of action in favor of the debtor was barred by the Statute of Limitations at the time when the bankruptcy proceedings were initiated, a new cause of action in behalf of creditors accrued to the trustee upon his appointment, and was not barred in 1939 when the action was commenced.

The plaintiff relies heavily upon our decision in Buttles v. Smith (281 N. Y. 226). In that case we held that no cause of action to set aside transfers of corporate property made in violation of section 15 of the Stock Corporation Law or of subdivision 5 of section 60 of the General Corporation Law accrues to a creditor until the creditor has obtained a judgment and execution has been returned unsatisfied. The Statute of Limitations, we there said, does not commence to run against such a cause of action, asserted by a receiver appointed in a suit brought by a judgment creditor in aid of execution, until the cause of action accrues to the creditor. The gist of the creditor’s cause, of action, asserted in that case by a receiver appointed in an action brought by the judgment creditor for the sequestration of the property of a corporate debtor, was the illegal transfer of corporate assets which other-wise would have been available for the satisfaction of a judgment obtained by the creditor. No wrong is done by such a transfer to a creditor whose debt can be satisfied out of other assets of the debtor, and ordinarily a creditor may appeal to the courts to set aside an illegal transfer of the debtor only after he has obtained a judgment which he has been unable to enforce by execution. The wrong to the creditor by such a transfer of corporate assets is independent and distinct from any wrong to the corporate debtor, and in Buttles v. Smith (supra), the receiver, suing in behalf of a creditor, sought a remedy solely for the wrong done to the creditor. No wrong to the debtor was alleged in the complaint.

The cause of action asserted in the instant case by the trustee in bankruptcy against Haystone Securities Corporation and the other defendants named in the complaint is based upon a wrong done to the corporate debtor. When the capacity of the trustee to sue upon that cause of action was challenged upon the earlier appeal this court pointed out that the cause of action existed “ in favor of the debtor ” and that upon the bankruptcy of the debtor, title to the cause of action, as part of the debtor’s property, vested in the trustee. The General Corporation Law provides in section 60 that “ an action may be brought against one or more of the directors or officers of a corporation to, procure judgment for the following relief or any part thereof: 1. To compel the defendants to account for their official conduct, including any neglect of or failure to perform their duties, in the management and disposition of the funds and property, committed to their charge. 2. To compel them to pay to the corporation, or to its creditors, any money and the value of any property, which they have acquired to themselves, or transferred to others, or lost, or wasted, by or through any neglect of or failure to perform or other violation of their duties. * * * 5. To set aside a transfer of property, made by one or more directors or officers of a corporation, contrary to a provision of law, where the.transferee knew the purpose of the transfer.” For the relief specified in these subdivisions of section 60 an action may be brought “ by the corporation or a creditor, receiver or trustee in bankruptcy thereof, or by a director or officer of the corporation ” (§ 61). " The plaintiff maintains that here the trustee in bankruptcy is clothed with all the rights of a creditor with execution returned unsatisfied and is asserting in behalf of creditors a cause of-action for the relief specified in subdivisions 1 and 2 of section 60, just as in Buttles v. Smith the receiver asserted a cause of action in behalf of a creditor for the relief specified in subdivision 5 of the same section, and that the same rules fixing the time when the cause of action accrues and the statutory limitation begins to run must be applied to all actions brought in behalf of a creditor or creditors pursuant to the provisions of sections 60 and 61 of the General Corporation Law. We assume arguendo that the action against Haystone Securities Corporation and its codefendants is brought in behalf of creditors for the relief specified in subdivisions 1 and 2 of section 60, though there may be little in the complaint to support that assumption. Even so the fact remains that the cause of action is based upon a wrong to the debtor. The cause of action accrued to the debtor when the wrong occurred and though the statute permits a creditor or stockholder to bring an action for the wrong done to the corporation, the damage or injury to a creditor, like the damage or injury to a stockholder, arises only indirectly from the damage or injury to the corporation and is repaired when the damage or injury to the corporation is repaired. That, as we have pointed out, was not true of the cause of action asserted in Buttles v. Smith (281 lí. Y. 226, supra), under a different subdivision of the same section of the statute. The reasons which in that case required the conclusion that the cause of action there asserted accrued when execution was returned unsatisfied do not apply here — or perhaps even point to a different conclusion.

There would, indeed, be serious doubt whether a trustee in bankruptcy would have capacity to sue upon a cause of action which did not belong to the debtor other than a cause of action to set aside illegal transfers of property and unlawful preferences. (See In re Jacoby, 138 F. 2d 42; Sanford v. Boland, 287 N. Y. 431; Courtney v. Georger, 228 F. 859, certiorari denied 241 U. S. 660; Morris v. Sampsell, 224 Wis. 560; 4 Collier on Bankruptcy [14th ed.], pp. 1182-1183.) We need not attempt to resolve that doubt in this case since we hold that under the law of the State the cause of action here asserted is based upon a wrong to the corporate debtor and accrued when the wrong to the debtor corporation was complete.

The Appellate Division in its opinion has carefully anaylzed the allegations of the complaint and has concluded that the wrong to the corporation was complete not later than March 1926; that the cause of action then arose and that the six-year Statute of Limitations applied and the action was barred in 1932. We agree with these conclusions. An independent analysis and extended discussion by us of the allegations of the complaint would serve no purpose. The allegations of the complaint that the defendants conspired to secure “ fraudulent ” profits and acted “ in fraud ” of the corporation are mere conclusions and even if accepted as allegations of fact they are only incidental to the cause of action brought against the defendants on the ground that they have disregarded their duty to the corporation. Such allegations do not constitute a cause.of action “to procure a judgment on the ground of fraud ” which, under- the provisions of section 48, subdivision 5, of the Civil Practice Act, “ is not deemed to have accrued until the discovery * * * of the facts constituting the fraud.” (Gobel, Inc., v. Hammerslough, 263 App. Div. 1, affd. 288 N. Y. 653; Dunlop’s Sons, Inc., v. Spurr, 285 N. Y. 333.) As alleged in the complaint, the profits made by the defendants through abuse of their powers or disregard of their duty were paid them from the moneys of the corporation and cannot exceed the loss to the corporation. No equitable action for an accounting is necessary. An action at law to recover these profits furnishes a complete remedy. The complaint contains no allegations that under the agreement made in 1926 the defendants Byllesby and Ladenburg derived additional profit as bankers and the action is not brought to recover such profits. Perhaps the plaintiff could allege facts sufficient to constitute a cause of action in equity against some or all the defendants named in the sixteenth cause of action for an accounting of such profits. That question is not presented upon this appeal.

The judgment should be affirmed, with costs.

Lotjghkan-, Rippey, Lewis, Conway, Desmond and Thachek, JJ., concur.

Judgment affirmed.


text:
    Daniel O. Hastings, as Special Trustee of Standard Gas and Electric Company, Respondent, v. H. M. Byllesby and Company et al., Defendants, and E. Carleton Granbery et al., Defendants-Appellants.
    Argued February 29, 1944;
    decided October 12, 1944.

      H. Preston Coursen for appellants.
    I. Former section 11, subdivision d, of the Bankruptcy Act [U. S. Code, tit. 11.' § 29, subd. (d)] even if applicable, did not toll the limitation. (Hastings v. Byllesby & Co., 265 App. Div. 643; Nairn v. McCarthy, 120 F. 2d 910; Charlesworth v. Hipsh, Inc., 84 F. 2d 834, 299 U. S. 594; Davis v. Willey, 273 F. 397; Silverman v. Christian, 198 A. 832.) II. If the Bankruptcy Act has any application, it is section 11, subdivision e, and not former section 11, subdivision d. (Smith v. The People, 47 N. Y. 330; Bovay v. Byllesby and Company, 30 A. 2d 865.) III. The eighteenth cause of action is barred by the five-year Statute of Limitations of Illinois. (Bunker Hill Country Club v. McElhattan, 282 Ill. App. 221; Jackson v. Anderson, 355 Ill. 550; Woolverton v. Taylor, 132 Ill. 197; Walz v. Mansfield, 144 Misc. 304; National Surety Co. v. Ruffin, 242 N. Y. 413; Klotz v. Angle, 220 N. Y. 347.)

      Sidney R. Nussenfeld, Max J. Rubin, Morris Gottlieb, William H. Foulk of the Delaware Bar, William H. Button and Francis J. Quillinan for respondent.
    I. The action did not accrue as respects the plaintiff until his appointment as bankruptcy trustee. The Statute of Limitations is therefore no bar to this cause of action. (Buttles v. Smith, 281 N. Y. 226.) II. The Appellate Division correctly held that former section 11, subdivision d, of the Bankruptcy Act and not section 11, subdivision e, of the amendatory Act is applicable to the instant case. Plaintiff had two years after the estate was closed within which to commence this action. This cause of action having been commenced within that period of time, it is therefore not barred by the Statute of Limitations. (People v. Cohen, 245 N. Y. 419; Shevlin v. La Guardia, 166 Misc. 473, 254 App. Div. 922, 279 N. Y. 649; Gilbert v. Ackerman, 159 N. Y. 118; Matter of Malossi v. McElligott, 166 Misc. 513; Stephan v. Merchants Collateral Corp., 256 N. Y. 418; Oppenheimer v. Roberts, 175 App. Div. 424; Devoy v. Superior Fire Insurance Co., 239 App. Div. 28; Callaghan v. Bailey, 179 Misc. 673, 266 App. Div. 915; Rice v. Chapman, 234 App. Div. 279; Isaacs v. Neece, 75 F. 2d 566.) III. . The eighteenth cause of action is not barred by the five-year Statute of Limitations of Illinois. (Gray v. Heinze, 144 N. Y. S. 1045, 160 N. Y. S. 1131, 225 N. Y. 646; People v. Miles, 123 App. Div. 862, 192 N. Y. 541; National Drama Corporation v. Burns, 183 N. Y. S. 739, 194 App. Div. 959; Nevada Nickel

      Syndicate v. National Nickel Co., 96 F. 133; Globe Gas Light Co. v. Met. Investment Co. of New York, 10 App. Div. 342; Henry v. Colorado Land & Water Co., 51 P. 90; Scott v. Pacific Superior Sunset Oil Co., 77 P. 817.)
   Lehman, Ch. J.

Upon a companion appeal [Hastings v. Byllesby (Haystone) 293 N. Y. 404] decided herewith, we have held that the sixteenth cause of action against Hay-stone Securities Co., contained in the complaint in the above-entitled action, is barred by the Statute of Limitations of the State of New York. Upon this appeal the question presented is whether the eighteenth cause of action against the defendants-appellants, contained in the same complaint, is also barred. A motion made by the defendants-appellants to dismiss that cause of action against them on the ground that it was barred by the Statute of Limitations was denied at Special Term and the order denying the motion was unanimously affirmed by the Appellate Division. Leave to appeal was granted upon the certified question: Did the eighteenth cause of action set forth in the complaint herein accrue within the time limited by law for the commencement of an action thereon? ”

The eighteenth cause of action alleges that the defendants named therein, including the appellants, entered into “ a corrupt and illegal conspiracy ” to cause the dismissal of litigation which had been brought by stockholders of Standard Gas & Electric Company against that corporation, its directors and other parties to set aside certain corporate transactions and to compel an accounting of profits wrongfully obtained by some of the parties to these transactions and of losses suffered by the corporation; and that “ in pursuance of said illegal conspiracy and for their own individual benefits and not to serve any corporate purpose of Standard,' the said defendants herein caused Standard to pay to the complainants therein a large sum of money ”. The purpose of the alleged conspiracy was consummated in 1930 and the courts below have held that the six-year Statute of Limitations applied to the cause of action which then accrued to the corporate debtor.

In our opinion upon the companion appeal in this case from the judgment dismissing the sixteenth cause of action against Haystone Securities Company, we held that no new cause of action to recover corporate moneys wasted by corporate officers or directors or to recover damages suffered by the corporation through their malfeasance or neglect or to recover profits wrongfully secured by them, accrues to a trustee in bankruptcy upon his appointment. The defendants-appellants named in the eighteenth cause of action were elected directors of the debtor corporation in the year 1930 and they are charged with dereliction in that year. The cause of action against them, like the cause of action against Haystone Securities Company, pleaded in the same complaint, is based upon a wrong done to the debtor corporation. It belonged to the debtor. Title to that cause of action vested in the trustee upon his appointment and no new cause of'action accrued to the trustee upon which the Statute of Limitations then began to run.

The defendants-appellants submitted upon the motion to dismiss a certified copy of the minutes of the meeting of the directors of the debtor corporation, held in the State of Illinois in September, 1930, at which they voted to ratify an agreement which had been theretofore made by officers of the corporation to settle litigation brought by stockholders of the debtor corporation to redress alleged wrongs done to the corporation and voted also to ratify the use of $200,000 of corporate moneys in settlement of that litigation. They claim that otherwise they had no part in the transaction upon which the cause of action against them is based. They are now, it is said, residents of this State and they urge that the alleged cause of action arose in the State of Illinois and, under the statutes of that State, was barred before September 27, 1935, when the petition in bankruptcy was filed. The question where the cause of action arose and whether the Statute of Limitations of the State of Illinois applies must await the trial of the action. It does not conclusively appear that the Illinois Statute applies.

The debtor corporation could have obtained complete relief by an action at law, in which the six-year Statute of Limitations would apply. No equitable accounting was necessary. The six-year period had elapsed before December 1939 when this action was commenced. It had not elapsed in 1935 when the petition in bankruptcy was filed and approved. At that time the’Bankruptcy Act, section 11 (subd. d), provided that: “ Suits shall not be brought by or against a trustee of a bankrupt estate subsequent to two years after the estate has been closed.” [Act July 1,1898,30 U. S. Stat. 549, U. S. Code, tit. 11, § 29, subd. (d).] In the case of Callaghan v. Bailey (293 N. Y. 396), decided herewith, we held that this provision of the Bankruptcy Act of 1898 was a true Statute' of Limitations superseding other Statutes of Limitations and applying to all causes of action which were not barred at the time of the filing of the petition and of the appointment of trustees, whether arising at common law or created by statute enacted by the Legislature of the State or arising under the Bankruptcy Act. The Bankruptcy Act was revised by the Chandler Act in 1938 (52 U. S. Stat. 840) and section 11 (subd. e) now provides: “ A receiver or trustee may, within two years subsequent to the date of adjudication or within such further period of time as the Federal or State law may permit, institute proceedings in behalf of the estate upon any claim against which the period of limitation fixed by Federal or State law had not expired at the time of the filing of the petition in bankruptcy.” [U. S. Code, tit. 11, § 29, subd. (e) ]. Section 102 of the Bankruptcy Act, as revised by the Chandler Act, provides that “ the date of adjudication shall be taken to be the date of approval ” of the petition. (52 U. S. Stat. 883, ch. X, § 102; U. S. Code, tit. 11, § 502.) In Callaghan v. Bailey (supra) the action was instituted in 1937 before the revision of the Bankruptcy Act and the action was brought within the period within which the action might be instituted in accordance with the Bankruptcy Act then in effect. In the case we are now considering the action was brought after the revision of the Bankruptcy Act went into effect and not within two years subsequent to the date of adjudication or the approval of the petition or within six years after the cause of action accrued.

The amendatory act provides in section 4 that: “ Except to the extent necessary to give effect to the provisions of section 6 of this amendatory Act, all Acts or parts of Acts inconsistent with any provisions of this amendatory' Act are hereby repealed.” Section 6 provides in part: “ Except as otherwise provided in this amendatory Act, the provisions of this amendatory Act shall govern proceedings so far as practicable in cases pending when it takes effect; but proceedings in cases then pending to which the provisions of this amendatory Act are not applicable shall be disposed of conformably to the provisions of said Act approved July 1, 1898, and the Acts amendatory thereof and supplementary thereto.” (Italics are supplied.) We think that the words11 proceedings in cases then pending,” as used in section 6, were intended to mean proceedings in bankruptcy “ cases ” then pending, and include proceedings of a trustee in bankruptcy in connection with actions which the trustee is authorized to bring in any court. In such proceedings the provisions of the Bankruptcy Act in effect when the bankruptcy petition was filed are applicable where it would not be “ practicable ” to apply inconsistent provisions of the revised statute. Perhaps, however, the result would be the same if a narrower construction were given to section 6. Even without an express provision in a statute that inconsistent provisions contained in earlier statutes are repealed, such inconsistent provisions would be repealed by necessary implication where the provisions in the earlier statutes cover the same field as the later statute and there is no room for reconciliation. On the other hand, the courts will not give retrospective operation to a statute which interferes with antecedent rights in the absence of an unequivocal expression in the statute that the Legislature intended that the statute should have such effect. Certainly the courts must hesitate to find implied in a statute an unexpressed legislative intent that its provisions should apply to antecedent rights beyond the point where that is practicable.” Sections 4 and 6 of the amendatory act are hardly more than a statutory reformulation of long-established rules of statutory construction.

This court has said that a Statute of Limitations may not be given retrospective effect where it does not give a person reasonable time to enforce a remedy available to him before the bar of the statute will apply.” (Halsted v. Silberstein, 196 N. Y. 1, 15.) Here, at the time when the amendatory statute went into effect, more than two years had passed since the approval of the petition. If the limitation contained in the amendatory act applies to causes of action to which title was at the date of approval vested in the trustee, such causes of action would be barred at the moment when the amendatory act took effect. The Supreme Court of the United States has said: “ It is essential that such statutes allow a reasonable time after they take effect for the commencement of suits upon existing causes of action”. (Wilson v. Iseminger, 185 U. S. 55, 62.) If the amendatory act had gone into effect immediately after it was enacted, and the new limitations in it applied to existing causes of action, then in a case such as this a receiver or trustee in bankruptcy would have no opportunity to commence suit upon them. Here the statute (§7) provides that it shall take effect only three months after its enactment. In some other jurisdictions it has been held that by postponement of the date when a Statute of Limitation takes effect the holder of a cause of action may be allowed the reasonable time ” to enforce his remedy which is ‘ ‘ essential ’ ’ even though no time be allowed after the statute has taken effect. That is not the rule in this State. We have said that ‘ ‘ the fact that the act affords a reasonable' interval between its passage, dr becoming a law, and its taking effect is not enough ” to remove doubts as to the validity of a statute if applied to causes of action which would be barred at the moment the statute takes effect. (People v. Cohen, 245 N. Y. 419, 422; Gilbert v. Ackerman, 159 N. Y. 118.) We think the rule applied in this State is sound and should be followed in construing the Federal statute.

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

Loughean, Bippey, Lewis, Conway, Desmond and Thacheb, JJ., concur.

Order affirmed, etc.