author: Loughbak, Ch. J. Thacher, J.

text:
    In the Matter of John Broderick et al., Respondents, against City of New York et al., Appellants, et al., Defendants.
    Reargued January 15, 1946;
    decided June 13, 1946.

      Ignatius M. Wilkinson, Corporation Counsel (Seymour B. Quel and Harry Hollander of counsel), for City of New York and others, appellants.
    I. The modifications of the budgets for the fiscal years 1942-43 and 1943-44 so as to provide for ten additional deputy chief§ were validly made by the budget director and the comptroller in accordance with the terms and conditions of the budgets. (Matter of Rushford v. La Guardia, 280 N. Y. 217, 280 N. Y. 707; Matter of Daly v. McGoldrick, 280 N. Y. 210; Matter of Staudt v. McGoldrick, 280 N. Y. 675; People ex rel. Plancon v. Prendergast, 219 N. Y. 252; Matter of Dobrovolny v. Prendergast, 219 N. Y. 280; French v. Weeks, 259 U. S. 326; Hannibal Bridge Co. v. United States, 221 U. S. 194; Lloyd Royal Belge Societe Anonyme v. Elting, 61 F. 2d 745; The City of Harvard, 52 F. 2d 461.) II. The Board of Estimate may transfer appropriations within the budget -during the fiscal year. The power of the Board of Estimate to make such transfers is a valid basis for the limited power of the budget director and the comptroller to transfer appropriations from one line to another within a code in the budget at the-request of a department head. (Matter of Weldon v. Rheinstein, 101 N. Y. L. J. 2606, June 6, 1939, 259 App. Div: 860, 283 N. Y: 753; Matter of Lange v. McGoldrick, 103 N. Y. L. J. 456, Jan. 29, 1940; Matter of O’Connor v. Kern, 103 N. Y. L. J. 1213, March 16, 1940; Matter of Divisich v. Marshall, 257 App. Div. 294, 281 N. Y. 170.)

      Edward G. Bathon and Charles B. Barrett for James W. 0. Wood and others, appellants.
    I. The Board of Estimate is vested with the power to abolish and create positions during the course of the budgetary year. (Matter of Weldon v. Rheinstein, 259 App; Div. 860, 283 N. Y. 753; Matter of Lange v. McGoldrick, 103 N. Y. L. J. 456, Jan. 29, 1940; Lederer v. Wise Shoe Co., 276 N. Y. 459; Matter of Rouss, 221 N. Y. 81.) II. The Board of Estimate may by inclusion of appropriate terms and conditions in the budget validly delegate to the budget director the power to modify the budget by transfer of appropriations between codes. (Matter of W. S. A. & P. R. R. Co., 115 N. Y. 442; People ex rel. Plancon v. Prendergast, 219 N. Y. 252; Matter of Dobrovolny v. Prendergast, 219 N. Y. 280; Matter of Daly v. McGoldrick, 280 N. Y. 210.)

      Albert De Roode for respondents.
    I. The purported establishment by the budget director of these additional offices of deputy chief was invalid because contrary to the restrictions of sections 127 and 128 of the New- York City Charter. II. The ten new offices of deputy chief in» the Fire Department were not validly created even under the ‘ ‘ terms and conditions ’ ’ of the budget because the comptroller did not approve of such “ modification ” of the budget nor countersign the certificate of the budget director purporting to modify the budget. (Matter of Hines v. La Guardia, 293 N. Y. 207; Ontario Knitting Co. v. State, 205 N. Y. 409.) III. The Board of Estimate was impotent through the mechanism of “ terms and conditions ” to assign to the budget director or the comptroller any power in respect of modifying the budget after it was adopted because these two officials were ineligible to exercise such power sought to be imposed upon them by the terms and conditions. (Matter of Natilson v. Hodson, 264 App. Div. 384, 289 N. Y. 842.; Matter of Hines v. La Guardia, 293 N. Y. 207.) IV. The Board of Estimate could not delegate to others its duties and powers in respect to modification of the budget or the creation of additional offices or the fixing of salaries. (Matter of Rushford v. La Guardia, 280 N. Y. 217, 280 N. Y. 846; Ontario Knitting Co. v. State, 205 N. Y. 409; Birdsall v. Clark, 73 N. Y. 73; Matter of Pet. of Emigrant Ind. Sav. Bank, 75 N. Y. 388; Phelps v. Mayor, 112 N. Y. 216.) V. The Board of Estimate was without power at budget-making time or any other time to establish positions for an “ unlimited number ” of positions. (Schechter Corp. v. United States, 295 U. S. 495.) VI. The additional ten offices of deputy chief could be created by the Board of Estimate, or the budget director, only at budget-making time. (Matter of Rushford v. La Guardia, 280 N. Y. 217, 280 N. Y. 846.)

      H. H. Nordlinger and J. M. Dinnes for Citizens Budget Commission, Inc., amicus curies, in support of respondents’ position.
    I. The power of creating positions is vested by section 68 of the Charter in the Board of Estimate. This power could not lawfully be delegated by that body to a subordinate administrative officer, appointed by the Mayor. ■ (People v. Klinck Packing Co., 214 N. Y. 121; Ontario Knitting Co. v. State, 205 N. Y. 409; Matter of Rushford v. La Guardia, 280 N. Y. 217; Carlton v. City of Marshalltown, 212 Iowa 373, 380.) II. Section 123 of the Charter, which in prescribing the form of the budget, authorizes the Board of Estimate to “ set forth the terms and conditions under which such appropriations shall be administered ” does not by implication authorize the Board of Estimate to delegate to the budget director,, with the countersignature of the comptroller, a power to create new offices. Accordingly, so much of the “ terms and conditions ” of the budget as purports to delegate this power is invalid. (Matter of Natilson v. Hodson, 264 App. Div. 384; People ex rel. Collins v. Ahearn, 120 App. Div. 95; Lyons v. City of New York, 82 App. Div. 306, 176 N. Y. 609; Matter of Collins v. City of Schenectady, 256 App. Div. 389; Matter of Wingate v. McGoldrick, 279 N. Y. 246.) III. Authority cannot be found for the budget director’s action in section 128 of the Charter. IV. The practice sought to be justified cannot be sustained on the alleged ground of convenience or of administrative construction. (Matter of Hines v. La Guardia, 293 N. Y. 207; Neuberger v. Commissioner, 311 U. S. 83; United States v. San Francisco, 310 U. S. 16; Estate of Sanford v. Commissioner, 308 U. S. 39; City of New York v. New York City Ry. Co., 193 N. Y. 543; People ex rel. W. S. El. Co. v. C. T. & E. S. Co., 187 N. Y. 58; Burns v. Weber, 171 Misc. 808; Matter of Davison, 137 Misc. 852, 236 App. Div. 684; Matter of Naughton v. Boyle, 129 Misc. 867.) V. The action of the budget director, which has been held illegal by the courts below, is not saved by the provision in the budget purporting to create “ an unlimited number ” of positions in every department.
   Loughbak, Ch. J.

In June, 1943, the Budget Director of the City of New York with the concurrence of the Comptroller modified the expense budget of the city for the fiscal year 1942-1943 by eliminating ten positions of battalion chief in the Fire Department and by creating therein ten additional positions in the next higher rank of deputy chief. The ten additional positions were then filled by-way of promotion thereto of ten battalion chiefs. A battalion chief was paid $5,300 and a deputy chief $6,300 annually. The fiscal year 1942-1943 ended on June 30, 1943. On the following day the Budget Director and the Comptroller issued a further order directing the continuance of the ten additional positions under the expense budget for the fiscal year 1943-1944.

In so reconstructing the budgets in question, the director supposed that he was acting by the authority of the Board of Estimate of the city. His profession of such jurisdiction has been rejected by the courts below. By leave of the Appellate Division, the city is the appellant here.

(1) Fundamental in its argument is an insistence that the controversy is ruled by section 68 of its municipal charter (New York City Charter [1938]). The text of that section is as follows: “The board of estimate may at any time, subject to the provisions of this charter and of the civil service law and except as otherwise provided by statute, create, abolish or modify positions and grades of persons paid from the city treasury.” These words were construed by this court in Matter of Rushford v. LaGuardia (280 N. Y. 217). We there held: First: The phrase “ create, abolish or modify positions and grades of persons ” does not mean “ reduce the salary of any person.” Second: The power conferred by section 68 can be exercised by the Board of Estimate only when it adopts a budget.

Since the first of those two propositions was enough to dispose of the Rushford case, the city now maintains that the second proposition was a mere obiter dictum. This is a misconception. Indeed, when two or more points arise and are argued and the appellate court passes upon them all, no branch of the decision is merely incidental, but all the grounds thereof must be taken to be equal in force and together constitute the judgment (O’Brien v. Union Central Life Ins. Co., 207 N. Y. 180, 187; Matter of Fay, 291 N. Y. 198, 215. See United States v. Title Ins. Co., 265 U. S. 472, 484; Richmond Co. v. United States, 275 U. S. 331, 340; Cheater v. Cater, [1918] 1 K. B. 247, 252-253; London Jewellers, Ld., v. Attenborough, [1934] 2 K. B. 206, 222).

Though the second basis of our decision of the Rushford case was plainly stated (280 N. Y. at p. 232), the reasons given therefor seemingly need a new emphasis and so we shall here go over the same ground once more. The present charter of . the City of New York was drafted by a Charter Revision Commission and was adopted by the electors of the city at the polls, after the commission had published a report in respect of the design and range of the instrument (see L. 1934, ch. 867). In that address, the commission said: “ The annual expense budget is to be prepared by the Budget Director and presented by the Mayor for adoption by the Board of Estimate and the Council, very much as this is now done. * * * In addition to the law-making power, which will constitute its chief function, the Council will also retain the important power of adopting the expense budget * * *. The Board of Estimate remains as at present, composed of the Mayor, the Comptroller, the President of the Council, each with three votes, the Borough Presidents of Manhattan and Brooklyn, with two votes each, and the presidents of the boroughs of The Bronx, Queens and Richmond with one vote each.- The Board of Estimate * * * passes upon the Mayor’s budget and is free to amend it by adding, increasing, decreasing or omitting items. After the Board of Estimate has passed the budget, it goes to the Council, which may reduce or strike out the amounts appropriated for particular items. The Board of Estimate holds hearings so that it is before this small body of elected officers that the people have an opportunity to criticize the budget or any item in it.” Thus the charter was designed to give effect to the historic principle that any tax measure ought to have its origin in the public will. When section 68 is read against that background, the limits thereof are scarcely open to misapprehension. But however this may be, at least that section cannot be taken to be a license to the Board of Estimate at its pleasure to set at naught the budget-making machinery elsewhere so carefully dictated by the same document. We reaffirm, therefore, the second ground of our decision in the Rushford case, viz.: Section 68 empowers the Board of Estimate to create, abolish or modify positions only when it adopts a budget (280 N. Y. at p. 222).

(2) Section 123 of the city’s charter requires that the code items of an expense budget “ shall set forth the terms and conditions under which such appropriations shall be administered.” Under the caption “ Terms and Conditions,” each of the budgets in question made this provision: “ 3. Modification of Schedules: Any schedule supporting an appropriation for personal service contained in this budget may be modified at any time * * * by adding new positions under new or existing titles * * * but only by resolution of the Board of Estimate, or by the issuance of a certificate by the Director of the Budget, countersigned by the Comptroller, approving such modification * * *. Such modification may be made by the Director of the Budget, countersigned by the Comptroller, upon request or consent of the head of the agency * * The “ Terms and Conditions ” of each of the budgets in question also contained a resolution of the Board of Estimate declaring that positions and wages as they then appeared in the budget were established and fixed “ for an unlimited number of incumbents.”

On the strength of these budget recitals, the city argues that when the director here modified the budgets by adding ten to the number of deputy chiefs originally authorized at $6,300 per annum, he was “ merely making provision for additional incumbents of a position already created at the rate, established therefor by the original budget.” This undoubtedly is true as a matter of form, but is by no means a solution of the case. Any process whereby the expense budget of a city may be thus summarily realigned to the length of “an unlimited number of incumbents ” is surely an affair that calls for a clear warrant of law.

Section 128 of the city’s charter is said to be such a warrant. It is thereby provided: “ The director of the budget, upon request of the head of an agency, shall, with the approval of the board .of estimate, have power during any fiscal year to transfer an appropriation or part thereof from one line to another within the same schedule, provided the total appropriation for the applicable code item is not increased. A copy of the line affected, as amended, shall forthwith be filed by the director of the budget with the treasurer and the comptroller.” But section 128 is silent both as to “ new positions under new or existing titles,” and as to an unlimited number of incumbents.” On the other hand, the section does say that all transfers of appropriations made thereunder by the budget director are conditioned upon the approval ” of the Board of Estimate. To our minds such approval ” means that the board itself must first be satisfied with each separate transfer order made by the budget director. A like question arose in Brown v. Newburyport (209 Mass. 259). In that case a city treasurer was authorized to borrow “ from time to time, with the approval of the' committee on finance ’ ’. Rttgg, J., said for the court (p. 266): “ Approval, in this connection, means that the members of the finance committee, acting upon their official responsibilities and having in view the public welfare, shall investigate and sanction according to their own independent judgment, each separate borrowing made under the order. It implies reflection and sound business discretion as to each loan proposed. It did not confer a mere ministerial function, but imposed active and important prudential obligations.” In that view, which we believe to be sound, the official duty of the Board of Estimate under section 128 — the duty to pass judgment upon actual transfers of appropriations — cannot be delegated. In a word, we are unable to find in section 128 any warrant whatsoever for the course here pursued by the budget director.

Nor can we see any ground upon which the scope of section 128 can be deemed to have been enlarged through administrative construction. The charter was adopted by the voters of the city at the general election of 1937. A preliminary draft thereof was published by the Charter Revision Commission on April 27, 1936. What is now section 128 was in that draft numbered 129. The phrase “ with the approval of the board of estimate ” was not contained therein. At a public hearing held by the commission on May 11, 1936, Mr. Harold Riegelman, on behalf of the Citizens Budget Commission, urged that a number of procedures which were included in the “ Terms and Conditions ” of the 1936 budget should be written into the charter. He went on to say: “ While none of the foregoing provisions of the existing terms and conditions are written into the proposed charter, an objectionable existing provision is found in section 129, which permits the budget director, without the approval of the Board of Estimate, to modify appropriations within codes. This provision, in our opinion, has led to abuses in that it opens the way to surreptitious salary increases by covering up the amounts appropriated for useless positions which have become vacant and which would otherwise accrue to the end of the budget year and then be eliminated.” (See minutes of public hearing held by New York City Charter Revision Commission, May 11, 1936.) The Charter Revision Commission thereafter amended the then section 129 by adding thereto the words “ with the' approval of the board of estimate ”. (See minutes of executive meetings of New York City Charter Revision Commission held June 23 and 25, 1936.) Against such a background, we take section 128 to be a limitation upon the practice that had previously been made use of by the budget director in his handling of appropriations within cod§s, and hence section 128, in our judgment, cannot be controlled by that antecedent practice. Whether section 128 has been subjected to any official interpretation since it became effective in 1938, is, of course, of no significance (Grimmer v. Tenement House Department, 205 N. Y. 549, 550; Lawrence Construction Corp. v. State of New York, 293 N. Y. 634).

(3) Considering the case in the above aspects, we conclude,, that the method of the creation of the ten additional positions of deputy chief in the Fire Department was not authorized by law, as the courts below have held'.

Medalie, J., participated in the decision of this case and voted for affirmance.

The order should be affirmed, with costs.

Thacher, J.

(dissenting). Following the adoption of the three-platoon system, which imposed upon the Fire Department of the City of New York an eight-hour day, the administration of this department required a substantial increase in a number of higher ranking officers; consequently, when a number of vacancies occurred in June, 1943, the Fire Commissioner was confronted with the following situation:

There were five vacancies in the office of deputy chief. Two deputy chiefs were on military leave and one had been appointed a deputy commissioner. On June 26, 1943, the commissioner requested the budget director to approve filling the five existing vacancies in the position of deputy chief and a modification of the budget which would permit the appointment of ten additional deputy chiefs. This request was considered and approved by the budget director and the comptroller through his deputy, whereupon the budget director issued his certificate No. -M-1171 reading as follows:

“June 26, 1943.
Record No. 5038
Certificate No. -M-1171
Hon. Patrick Walsh,
Fire Chief and Commissioner,
Municipal Building,
Manhattan, New York, N. Y.
Dear Sir :
Under date of June 26, 1943, you requested that personal service schedule 5805-001, Budget for 1942-43 be modified by providing for ten (10). additional positions of Deputy Chief at $6300 per annum.
Your request is approved, except that the resulting vacancies of Battalion Chief at $5300 per annum are eliminated, and in order to effect these changes, the personal service schedule pursuant to the provisions of the Terms and Conditions of the Budget for 1942-43, is hereby modified effective June 26, 1943, as follows:
Fire Department
Code 5805-001
.Line Eliminate Substitute
7 Deputy Chief...... 47 @ $6300 $296,100 57 @ $6300 $359,100
8 Battalion Chief.....160 @ 5300 848,000 150 @ 5300 795,000
Schedule Total..... $33,125,831.00 $33,135,831.00
Less Required
Accruals......... 643,700.00 653,700.00
Code Total......... $32,482,131.00 $32,482,131.00
Very truly yours,
T J P 6/26/43
Thomas J. Patterson
Director of the Budget. •
* Concurred in by:
Joseph D. McGoldrick,
Comptroller
L. F. Lang 6/26/43
Secretary to the Department.
RC"

Another certificate authorized the Fire Commissioner to fill fifteen vacancies in the position of deputy chief by appointment from the civil service list. These fifteen vacancies were the five vacancies existing in the position of deputy chief prior to the modification of the budget plus the ten vacancies created as a result of the modification. These positions were continued in the budget for the next fiscal year by the issuance of a similar certificate of authorization dated July 1, 1943.

Although we concur with the statement of the decision in Matter of Rushford v. La Guardia (280 N. Y. 217) which appears in the opinion of the majority of the court, we do not understand that the interpretation of section 68 of the New York City Charter, involved in that case, is pertinent to the interpretation of sections 123 and 128 of the same charter, involved in this case. Section 128 of the charter, under which the appellants claim that the budgetary transfers here in question were authorized, provides: § 128. Transfers of Lines Within Schedules.— The director of the budget, upon request of the head of an agency, shall, with the approval of the board of estimate, have power during any fiscal year to transfer an appropriation or part thereof from one line to another within the same schedule, provided the total appropriation for the applicable code item is not increased. A copy of the line affected, as amended, shall forthwith be filed by the director of the budget with the treasurer and the comptroller.”

Decision turns upon the meaning of the words, “ The director of the budget, * * * shall, with the approval of the board of estimate, have power during any fiscal year to transfer an appropriation ”. A majority of the court have concluded that these words require specific approval by the Board of Estimate of every transfer under section 128, but the approval contemplated by this language is not of any specific act but of the budget director having “ power during any fiscal year to transfer an appropriation ’ Such approval is evidenced by the express grant of such power by resolution of the Board of Estimate fixing the terms and conditions under which the budget for the-City of New York for the fiscal year from July 1,1942, to June 30, 1943, should be administered.

This practice was authorized by section 123 as follows: The budget so adopted shall be in such form as to provide appropriations for code items only, but such code items shall, except where the board of estimate makes a finding that it is impossible, be accompanied by supporting line schedules and shall set forth the terms and conditions under which such appropriations shall be administered.” (Emphasis supplied.)

Section 123 speaks of appropriations ”, “ code items ”, “ line schedules ” and “ terms and conditions under which appropriations shall be administered ’ ’, and section 128 speaks of power during any fiscal year to transfer an appropriation or part thereof from one line to another within the same schedule ” and of “ the total appropriation for the applicable code item ”. These are words of art which take their meaning from the practical. process of budget making in New York City. They can best be understood by looking at the budget itself. For example, we are concerned in this case with transfers of an appropriation from one line to another within one of the personal service schedules of the Fire Department which carry the appropriations for salaries of regular employees. The particular schedule, appearing on page 190 of the budget, is “ 5805-001, Uniformed Force, including Medical Officers, Etc. ” It is made up of twenty lines. The lines we are concerned with in this case are lines 7 and 8 which read as follows:

“7. Deputy Chief ......... 47 at 6,300 296,100.00

8. Battalion Chief ....... 160 at 5,300 848,000.00”

The twenty lines in this schedule carry appropriations aggregating $33,125,831, from which required accruals of $643,700 are deducted, the remaining $32,482,131 representing the code total ”. This is “ the total appropriation for the applicable code item ”. Published with the budget for 1942 to 1943 are two resolutions of the Board of Estimate, one fixing the 11 terms and conditions ” under which the budget should be administered (Budget, p. 1), and the other establishing positions and fixing salaries (Budget, p. 7).

Since the transfer of appropriations here in question involved a modification of the schedule and the filling of existing vacancies, we must look to these “ terms and conditions ” for the grant of power which was exercised by the budget director. The first resolution reads in part as follows: “ Resolved, By, the Board of Estimate, that the budget for The City of New York for the fiscal year from July 1, 1942 to June 30, 1943 shall be administered under the following terms and conditions set forth pursuant to section 123 of the New York City Charter, and to be changed only by resolution of the Board of Estimate: * * * ” These terms and conditions in large part relate to “ Personal Service ”. Paragraph 2 under this main heading relates to vacancies and provision is made that no vacancy in any schedule supporting appropriations for personal service shall be filled except upon a certificate issued by the Director of the Budget and then only upon the terms contained in such certificate. The procedure for issuing such certificates, filing a copy with the comptroller and furnishing to each member of the Board of Estimate and to the secretary of such board a monthly schedule of certificates issued is outlined and there is no contention that these provisions were not complied with in connection with the filling of vacancies involved in this case.

Paragraph 3 under this main heading reads as follows: 3. Modification of Schedules: Any schedule supporting an appropriation for personal service contained in this budget may be modified at any time by increasing or decreasing the rate of compensation or the number of days or period of time provided for any position, by changing titles, by adding new positions under new or existing titles or by eliminating positions provided in such schedule, but only by resolution of the Board of Estimate, or by the issuance of a certificate by the Director of the Budget, countersigned by the Comptroller, approving such modification, and upon such terms and conditions as may be included in the certificate. Such modification may be made by the Director of the Budget, countersigned by the Comptroller, upon request or consent of the head of the agency * * *.

Modifications involving transfer of funds between appropriations, or the establishment of a position ór grade of position, shall not be approved by the Director of the Budget until such transfer of funds or the establishment of the position or grade of position shall have been approved by resolution of the Board of Estimate, or such establishment has been legally approved.”

Since section 123 of the charter requires the budget to be in such form as to provide appropriations for code items only ”, we must understand the term transfer'of funds between appropriations ” as having no application to the transfer of funds between lines in a supporting line schedule.

The resolution establishing positions and fixing salaries is as' follows:

‘ ‘ Establishment of Positions and Fixation of Salaries

“ Besolved, That the Board of Estimate hereby establishes positions, titles of positions and grades of positions and fixes the salaries of such positions, as follows:

First, That all positions, titles of positions and grades of positions in the budget for the fiscal year 1942-1943 under the classification 1 Personal Service ’ be established in all agencies at all the annual, monthly, weekly, per diem, per entry, per abstract, per hourly, per summons, or per folio rates appearing in the budget for the said fiscal year 1942-1943 for an unlimited number of incumbents in all such agencies, and also at the following rates: * * * ”

Thus the positions of deputy chief and battalion chief were established with relation to titles, grades and rates of pay, and the certificate of the budget director, issued upon request of the head of the department and approved by the comptroller, was an effective exercise of the power granted pursuant to section 128 of the' Charter by the resolution of the Board of Estimate adopted pursuant to section 123 of the Charter. The exercise of such power was conditioned upon a request of the head of the department approved by the comptroller. These conditions were complied with.

Similar transfers of appropriations from one line to another in the same schedule are of daily occurrence throughout the departments of the city government. The volume of such adjustments within a single year is enormous. Positions affected by such modifications in the budget during the year 1943 to 1944 exceeded 68,000. Considering that there were approximately 155,000 positions provided for in the budget of 1942 to 1943, it is not surprising that many changes should be inevitable during any fiscal year The personal service schedules provide for all grades and kinds of employees who are considered necessary to carry on the manifold activities of the city. In this enormous undertaking it is inevitable that the need for more of one group and less of another should frequently change and require adjustment “ during any fiscal year ”. Efficient administration requires that such adjustments be made without delay. Cursory examination of the personal service schedules in the various departments of the city discloses an infinite variety of civil servants trained for special tasks. The demands for such services inevitably vary from the budget estimates. Instead of permitting employment of additional employees to meet unexpected demands, the practice is, as in this case, to transfer appropriations from one line to another in a single schedule but always without increasing the total code appropriation. Under the provisions of section 128 and the terms and conditions prescribed by the Board of Estimate, three responsible executives exercise this responsibility. This flexibility in no sense impairs the principle of budgetary control because the applicable code item is not increased ”, and nothing is to be accomplished except confusion and delay by adding to the limitations imposed upon the grant of power authorized by section. 128 a requirement that each exercise of that power shall be specifically approved by the Board of Estimate before it becomes effective. •

The administrative procedure has imposed no such requirement. Ever since 1929 the budgets of the city in their “ terms and conditions ” have authorized the budget director to modify personal service schedules within code appropriations and to grant permission to fill vacancies in positions occurring during the course of the fiscal year. From that time to this that practice has continued and was in effect when the charter was adopted. It cannot be doubted that the members of the Charter Revision Commission were fully aware of'the existing practice, for the statute under which the commission was constituted imposed upon the commission the duty of making “ a study and analysis of the existing governmental structure of the city of New York and of the several counties therein contained for the purpose of securing such factual data as will enable it to draft, and the commission is hereby, directed to draft a proposed new charter, adapted to the requirements of such city and designed to provide for the people of such city a more efficient and economical form of government.” (L. 1934, ch. 867, § 3; see, also, Report of the New York City Charter Revision Commission, Aug. 17, 1936). There is nothing in the Charter or in the Commission’s report to indicate an intention to change this practice. It is suggested. that a change made in the preliminary draft of the charter published April 27, 1936, before the charter was filed with the City Clerk for submission to the electorate of the City, indicates that the Commission intended to change the prevailing practice with respect to the power of the budget director to transfer lines within schedules. The fact is that the provision of the preliminary draft departed from that practice, and the change which appears in the charter as adopted was made to conform to that practice. The preliminary draft contained a direct grant of power to the budget director and required no approval of such a grant by the board of estimate. The practice had been for the board of estimate to authorize transfers by the budget director during the fiscal year in the resolution setting forth the terms and conditions for the administration of the budget, which was published with the budget. In the preliminary draft the clause read: ‘ ‘ shall have power during any fiscal year to transfer ’ ’; the change was to insert the words with the approval of the board of estimate ” after the wordshall ” so that the clause read: “ shall, with the approval of the board of estimate, have power during any fiscal year to transfer ”. The effect of this change was to require the approval of the grant of power, not of its exercise. That was what had been done since 1929. The preliminary draft was a radical departure from the old practice because it made a direct grant of power which required no approval, either of the grant or of the exercise of the power. The language of section 128 requiring approval by the Board of Estimate, not of specific actions, but of the possession by the director of the budget of “ power during any fiscal year to transfer an appropriation or part thereof from one line to another within the same schedule, provided the total appropriation for the applicable code item is not increased ”, exactly accords with the established practice and safeguards that practice against abuse by the proviso that “ the total appropriation for the applicable code item is not increased.” It should be emphasized that this express proviso not only prevents any expenditure in excess of the appropriation which the Board of Estimate has authorized for the administration of the agency or department, but, by limiting the authority to transfers from one line to another within the same schedule ”, prevents the expenditure of any funds for a purpose not specifically authorized by the Board of Estimate.. The system prescribed by the Charter pursuant to the mandate of the Legislature was designed to afford the flexibility which is necessary to efficient administration without the surrender of responsible budgetary control and of course the Board of Estimate may withdraw the grant of power at any time or change the practice as it sees fit and may prescribe Board of Estimate approval for every transfer if that is considered desirable. This it has never done.

Consistent and continuous administrative practice under the New York City Charter shows that the responsible' city officials charged with the duty of administration of the budget, including the members of the Board of Estimate, have at all times thus understood and construed these Charter provisions. Tinder these circumstances, that settled construction of the law should be accepted. (Bullock v. Cooley, 225 N. Y. 566, 571; Grimmer v. Tenement House Department, 205 N. Y. 549; Kings County Lighting Co. v. City of N. Y., 176 App. Div. 175, 181.)

In Norwegian Nitrogen Co. v. United States (288 U. S. 294) Mr. Justice Cardozo had occasion to say (p. 311): “ The administrative practice before the Act of 1922 might be too. desultory and brief to fix the meaning of the statute if it did not find support, and that unmistakable and ample, in administrative practice afterwards ”, and, further (at p. 315): “ True indeed it is that administrative practice .does not avail to overcome a statute so plain in its commands as to leave nothing for construction. True it also is that administrative practice, consistent and generally unchallenged, will not be overturned except for very cogent reasons if the scope of the command is indefinite and doubtful. [Citing cases.] The practice has peculiar weight when it involves a contemporaneous construction of a statute by the men charged with the responsibility of setting its machinery in motion, of making the parts work efficiently and smoothly while they are yet untried and new. [Citing case.] ” Here we have just such a case.

It is our view that the transfers were authorized and that the orders appealed from should be reversed and the proceedings dismissed, with costs.

Lewis, Conway and Medalie, JJ., concur with Loughran, Ch. J.; Thacher, J., dissents in opinion in which Desmond and Dye, JJ., concur.

Order affirmed.


source: Caselaw Access Project

author: Thacher, J.

license: Public Domain

text:
    A. E. F.’s, Inc., Appellant, v. City of New York et al., Respondents. (2 Cases.)
    Submitted May 22, 1946;
    decided June 13, 1946.

      Charles L. Cusumano for appellant.
    I. The Appellate Division erred in affirming the dismissal of the complaint for insufficiency, since the complaint raised questions of fact which could only be resolved at a trial. (Madison Square Garden Corp. v. Universal P. Co., Inc., 255 App. Div. 459; Scholen v. Guaranty Trust Co., 288 N. Y. 249.) II. The Appellate Division erred in affirming the dismissal of the complaint because the first cause of action is sufficient in that the plaintiff’s stands are not “ docks, piers and wharf properties.” (L. 1945, ch. 314, § 2, subd. [a]; Cooper-Snell Co. v. State of New York, 230 N. Y. 249; Langdon v. Mayor of City of N. Y., 93 N. Y. 129; Fassett v. Smith, 23 N. Y. 252; Matter of Jensen v. Southern Pacific Co., 215 N. Y. 514; Matter of Meyer, 209 N. Y. 386; Pratt v. Short, 79 N. Y. 437; Delaware & Hudson

      Co. v. Utica, C. & R. R. R. Co., 174 Misc. 403, 259 App. Div. 969; American Historical Society v. Glenn, 248 N. Y. 445; Allen v. Stevens, 161 N. Y. 122; People ex reí. B. L. H. & P. Co. v. Stevens, 203 N. Y. 7; Bull v. New York City Ry. Co., 192 N. Y. 361; People v. Ryan, 274 N. Y. 149.) III. The Appellate Division erred in affirming the dismissal of the complaint because the second cause of action is sufficient in that the exemption of docks, piers and wharf properties from chapter 314 of the Laws of 1945 is unconstitutional. (Carder Realty Corp. v. State of New York, 260 App. Div. 459; Liggett Co. v. Baldridge, 278 U. S. 105; People v. Orange County Road Cons. Co., 175 N. Y. 84; Matter of City of New Yorh, 190 N. Y. 350; People ex rel. Duryea v. Wilber, 198 N. Y. 1.) IV. Appellant’s motion for a temporary injunction should have been granted.

      John J. Bennett, Corporation Counsel (Reuben Levy and Louis M. Weintraub of counsel), for respondent.
    I. Appellant’s permits to occupy city-owned stands in the St. George Terminal of the Staten Island Ferry expired on August 1,1945. Inasmuch as the premises are pier, dock and wharf property and expressly excluded from the operation of the rent control statute, the city may not be compelled to continue appellant in possession. The complaint contains allegations of fact that appellant occupies city-owned stands in the St. George Ferry Terminal. The facts alleged establish that the premises are pier, dock and wharf property, which is expressly excluded from the operation of the rent control statute. (Greeff v. Equitable Life Assur. Society, 160 N. Y. 19; Pletman v. Goldsoll, 264 App. Div. 393; Mayor of N. Y. v. Starin, 106 N. Y. 1; Langdon v. Mayor of City of N. Y., 93 N. Y. 129.) II. In excluding pier, dock and wharf property from the operation of the emergency rent control statutes, the Legislature enacted a constitutionally valid exception. (Matter of Ryan, 291 N. Y. 376; Twentieth Century Associates v. Waldman, 294 N. Y. 571; Redice v. New York, 264 U. S. 292; Marcus Brown Co. v. Feldman, 256 U. S. 170; Chamberlin, Inc., v. Andrews, 271 N. Y. 1; Miller v. Wilson, 236 U. S. 373.) ' III. The exercise of sound discretion required the denial of the motion for a temporary injunction. (McHenry v. Jewett, 90 N. Y. 58; Matter of A. E. F.’s, Inc., v. McKenzie, 269 App. Div. 316.).
   Thacher, J.

Plaintiff appeals from a judgment entered upon an order of the Appellate Division, First Department, which affirmed, two justices dissenting, a judgment of the Supreme Court, New York County, granting a motion to dismiss the complaint under rule 106 of the Buies of Civil Practice for failure to state facts sufficient to constitute a cause of action, and from an order of the Appellate Division in the same action which unanimously affirmed an order at Special Term denying plaintiff’s motion for a temporary injunction. The appeal from this order is by leave of the Appellate Division upon the following certified question: Was the Court’s denial of the motion for a temporary injunction proper? ”

The action was one to restrain defendants from evicting plaintiff from city-owned rental space occupied by plaintiff in the St. George Terminal of the Staten Island Ferry and for a declaratory judgment declaring that the space in question is not pier, dock or wharf property within the exception of the Business Bent Law (L. 1945, ch. 814, § 2, subd. [a]), which law regulates rents covering business space in the city of New York and prohibits the eviction of an occupant of such space so long as he continues to pay rent. Subdivision (a) of section 2 of the Act defines business space as ‘ All rental space in any city other than: (1) * * *; (2) * * *; (3) piers, docks and wharf properties; and (4) * *■ *.”

The complaint alleges that plaintiff, pursuant to temporary permits expiring August 1, 1945, issued by the Department of Marine and Aviation of the City of New York, is presently occupying the following premises:

a. The flower and fruit stand on the concourse at the St. George Terminal of the Staten Island Ferry;

b. The refreshment stand on the concourse of the St. George Terminal of the Staten Island Ferry;

“ c. The refreshment stand within the Terminal Building of said ferry terminal;

“ All three stands being located on the main passenger level of said terminal in the Borough of Bichmond, City and State of New York.”

Allegations follow that plaintiff’s permits are about to expire and that the defendants have declined to renew and intend to oust plaintiff as soon as the permits expire. The following is expressly alleged: “ * * * the said stands covered by said permits are not pier, dock or wharf property, are not built on piers, docks or wharf property, but upon the mainland of the County of Richmond, State of New York, are essentially retail stores and constitute business space entitled to the benefit of said Chapter 314 of the Laws of 1945.” (Emphasis supplied.)

In the face of these allegations the motion to dismiss the complaint for failure to state facts sufficient to constitute a cause of action was ill founded because the allegations in regard to the location and nature of the property occupied by the plaintiff fairly exclude it from the statutory exception.

It is suggested that the affidavits in opposition to the motion for preliminary injunction show that these allegations are not well founded, but that has no relevancy to the sufficiency of the complaint, which is the question raised by the motion under rule 106. These affidavits, however, are sufficient to defeat plaintiff’s motion for a preliminary injunction and we must presume that the facts recited have been determined in favor of the respondents (Civ. Prac. Act, § 603). They disclose a detailed plan, prepared in the Department of Marine and Aviation, showing the layout of the ferry terminal and the location of the plaintiff’s concessions, from which it appears that they are adjacent to the ferry slips and are within the concourse which is within the ferry terminal. Under these circumstances they are wharf properties within the exception of the statute as it was construed below. ■ We concur in that construction.

The exclusion of piers, docks and wharf properties from the benefits of the act in no way deprives plaintiff of its constitutional guarantees of equal protection or due process of law. The Legislature in the exercise of its police power has a wide discretion in determining the extent and nature of the regulations necessary in the enactment of this emergency legislation, and there is no basis for questioning its exclusion of piers, docks and wharf properties as arbitrary or capricious.

Accordingly, the judgments dismissing the complaint should be reversed, without costs, the. order denying a temporary injunction should be affirmed, with costs, and the question certified should be answered in the affirmative.

Loughban, Oh. J., Lewis, Conway, Desmond and Fuld, JJ., concur; Dye, J., taking no part.

Judgments reversed, etc.


author: Loughran, Ch. J.

text:
    John Tooker, Respondent, v. Inter-County Title Guaranty and Mortgage Company, Appellant.
    Argued February 27; 1946;
    decided June 13, 1946.

      Milton Kunen and Morris Permut for appellant.
    I. The agreement sought to be enforced is illegal since it violates sections 116 and 117 of the Banking Law. (People v. Mancuso, 255 N. Y. 463; People v. Marcus, 261 N. Y. 268; C. N. Bank v. Colwell, 132 N. Y. 250; Sinclair v. Fuller, 158 N. Y. 607; Matter of Ringler & Co., 204 N. Y. 30; Molner v. South Chicago Sav. Bank, 138 F. 2d 201; Concord First National Bank v. Hawkins, 174 U. S. 364.) II. The agreement in suit violates the salutary purpose of sections 116 and 117. (Manson v. Curtis, 223 N. Y. 313; Wilbur v. Stoepel, 82 Mich. 344; Gueruse v. Cook, 120 Mass. 501; Noll v. Drake, 28 Kan. 265; Shepherd v. Mount Vernon Trust Co., 269 N. Y. 234; Manson v. Curtis, 223 N. Y. 313; Benintendi v. Kenton Hotel, 294 N. Y. 112.) III. The agreement sued upon circumvents the intent of the statute and as such violates the statute. (Budd v. Monroe, 18 Hun 316; Kardo Co. v. Adams, 231 F. 950; National Liberty Insurance Co. v. Bank of America, 126 Misc. 753.) IV. The fact that section 116 does not prescribe specific consequences, does not mean that the instant agreement should not be declared illegal and void. (Manson v. Curtis, 223 N. Y. 313; Benintendi v. Kenton Hotel, 294 N. Y. 112; Carmine v. Murphy, 285 N. Y. 413; American Store Equipment & Construction Corp. v. Dempsey’s Punch Bowl, Inc., 283 N. Y. 601.)

      Alfred J. Loew, Paxton Blair and Jerome Weinstein for respondent.
    I. The contract requiring plaintiff to sell and defendant (the bank’s majority stockholder) to repurchase plaintiff’s qualifying shares upon Ms resignation as a director, did not so impair his beneficial interest in the stock as to contravene the Banking Law (§ 116). The repurchase agreement does not constitute a “ charge ” on the plaintiff’s qualifying shares within the meaning of section 116. (Broderick v. Aaron, 268 N. Y. 260; Metropolitan Life Ins. Co. v. Union Trust Co., 283 N. Y. 33; Abramson v. Horner, 115 Md. 232;
      Matter of Interborough Consol. Corp., 288 F. 334, certiorari denied sub nom. Porges v. Sheffield, 262 U. S. 752; First Nat. Bank of Anniston v. Elliot, 125 Ala. 646; Nuzum v. Herron, 52 W. Va. 499; Bliss v. Clark, 39 Ill. 591; Frowenfeld v. Hastings, 134 Cal. 128; Clark v. Demers, 78 Mont. 287; Boal v. Metropolitan Museum of Art, 298 F. 894; Matter of Pinkney, 170 Misc. 645, 257 App. Div. 862, 985; Matter of Clark, 179 Misc. 75.) II. The public policy behind the statute, as reflected in the decisions, was not contravened by the repurchase agreement. (C. N. Bank v. Colwell, 132 N. Y. 250; Sinclair v. Fuller, 158 N. Y. 607; Matter of Ringler & Co., 204 N. Y. 30; Matter of Elias, 17 Misc. 718.) III. Section 116 having prescribed specific consequences which should ensue upon its breach, the court should be slow to impose such additional consequences as would penalize an honest man, and confer a gratuitous benefit on a person not within the group for whose benefit the statute was passed. (Matter of Ringler & Co., 204 N. Y. 30; Fosdick v. Investors Syndicate, 266 N. Y. 130; Sajor v. Ampol, Inc., 275 N. Y. 125; Rosasco Creameries, Inc., v. Cohen, 276 N. Y. 274.)
   Loughran, Ch. J.

In January, 1929, the defendant sold ten of its shares of the capital stock of the Floral Park Bank to the plaintiff, who thereupon became one of the directors thereof. The purchase price was $5,000. On the same occasion, the parties made an agreement which in part is in these words:

“ 1. The Stockholder [the plaintiff] promises and agrees that from the day and date hereof he shall remain the owner of ten (10) shares of the stock of the Floral Park Bank, and that he will not sell, assign, encumber, pledge or in any manner dispose of such stock or any part thereof, to any person, firm or corporation, nor in any manner deprive himself of the full right or enjoyment in and to the said shares of stock or any part * * * of them without the consent of the Company [the defendant] in writing; and this agreement shall remain in full force and effect so long as the Stockholder shall remain a Director of the Floral Park Bank.

“ 2. When and if the Stockholder shall cease to be a Director of the Floral Park Bank, * * * then the Stockholder on behalf of himself, his heirs, executors, administrators and assigns, agrees to sell and the Company, agrees to buy the said ten (10) shares of capital Stock of the Floral Park Bank, at its book valuation but not, however, to be less than the sum of Five Hundred ($500.00) Dollars per share in any event and the Stockholder agrees to accept in payment of such stock one-half of the value thereof by the issuance or delivery to the Stockholder of shares of capital stock in the Inter-County Title Guaranty and Mortgage Company [the defendant] at a valuation of One Hundred Fifty ($150.00) Dollars per share, and the balance thereof at the option of the Stockholder in cash, guaranteed mortgages or certificates of the said Inter-County Title Guaranty and Mortgage Company; or the said Company may elect to purchase the said stock for cash at the valuation herein stipulated at its option.”

In March, 1942, the bank went into voluntary liquidation. A few months later the plaintiff resigned as a director and, on the defendant’s refusal to repurchase the ten shares it had transferred to him, he brought this action to recover damages for breach of the above contract. After judgment in his favor was affirmed, we allowed this appeal by the defendant, since we had doubt of the validity of the contract in the light of subdivision 4 of section 116 of the Banking Law. It is thereby provided: “ * * * Every director of a bank or trust company shall be a stockholder óf the bank or trust company owning in his own right free from pledge, lien or charge shares of its capital stock at least ten in number and having an aggregate par value of at least one thousand dollars; and every person elected to be a director who, after such election, shall cease to be the owner in his own right .free, unpledged and unencumbered of the amount of stock aforesaid, shall cease to be director of the bank or trust company and his office shall be vacant, and he shall not be eligible for re-election as a director for a period of one year from the date of the next succeeding annual meeting; * * (See, too, § 117.)

The plan that underlies this text of section 116 — and every other provision of the Banking Law — has long been well known. “ The prime object is to protect the public, including depositors, and after that to enable the stockholders to secure a fair return from their investment. Banking institutions are not created for the benefit of the directors. ’ ’ (Vaxn, J., in People v. Knapp, 206 N. Y. 373, 383.) To that end, section • 116 requires every director of a banking institution to share its business risks to the extent of undiluted ownership of the prescribed amount of its stock. (Cf. C. N. Bank v. Colwell, 132 N. Y. 250, 256-257; Sinclair v. Fuller, 158 N. Y. 607; Matter of Fleetwood Bank, 283 N. Y. 157, 163.) It is material, then, to inquire whether that policy was unduly .transgressed by the contract in suit.

Manifestly, the transaction was designed to qualify the plaintiff for election as a director of the bank. Transfer of bank stock for the purpose of so qualifying the transferee is noti obnoxious to the statute (cf. Matter of Ringler & Co., 204 N. Y. 30, 37). But this case does not stop there. The contract in suit inevitably supplied to the plaintiff a means whereby at! any time during his directorship he was equipped to free himself in a substantial degree from the chance of financial loss incident to record ownership of his qualifying shares, with the result that his sense of the character of his duty as a director may well have been reduced in like measure. Such an arrangement inherently tended to thwart the public purpose declared by section 116 and, therefore, no cause of action can be founded thereon. (See Hunt v. Knickerbacker, 5 Johns. 327, 333, 335; Manson v. Curtis, 223 N. Y. 313, 323, 324; Mount Vernon Trust Co. v. Bergoff, 272 N. Y. 192; Flegenheimer v. Brogan, 284 N. Y. 268; Williston on Contracts [rev. ed.], § 1763.)

The judgments should be reversed and the complaint dismissed, with costs in all courts.

Lewis, Conway, Desmond, Thacheb and Dye, JJ., concur; Medalie, J., deceased.

Judgments reversed, etc.


author:
      Per Curiam.
     Lewis, J.

text:
    In the Matter of the Will of William E. Woollard, Deceased. Ernest B. Morris et al., Individually and as Trustees under the Will of William E. Woollard, Deceased, et al., Appellants; Harriet H. Woollard et al., Respondents.
    Argued March 6, 1946;
    decided Juné 13, 1946.

      Stanley H. Fuld, Burr F. Coleman and Edward G. Dillon for Ernest B. Morris and another, appellants.
    I. The life beneficiary does not have an absolute right in her untramméled discretion to demand all of the principal. The will does not grant an absolute gift of the residuary estate to-the widow nor does it grant her “ an absolute right ” to all of the trust corpus upon demand. (Vincent v. Rix, 248 N. Y. 76; Matter of Briggs, 101 Misc. 191, 180 App. Div. 752, 223 N. Y. 677; Matter of Ithaca Trust Co., 220 N. Y. 437; Peck v. Smith, 183 App. Div. 336, 227 N. Y. 228; Terry v. Rector, St. Stephen’s Church, 79 App. Div. 527; Wells v. Seeley, 47 Hun 109; Matter of Hadden, 178 Misc. 939; Matter of Smith, 170 Misc. 556; Bevans v. Murray, 251 Ill. 603; Carpenter v. Lothringer, 224 Iowa 439; Merchants Trust Co. v. Russell, 260 Mass. 162; Quarton v. Barton, 249 Mich. 474; Johnson v. Johnson, 51 Ohio St. 446; Tyson’s Estate, 191 Pa. St. 218; Degenkolv v. Daube, 143 Pa. Supp. 579.) II. The will does not grant the beneficiary an “ absolute ” or unlimited discretion, but contemplates the exercise of good faith and honest judgment in determining the necessity for invasion of the corpus. (Vincent v. Rix, 248 N. Y. 76; Matter of Briggs, 101 Misc. 191, 180 App. Div. 752, 223 N. Y. 677; Peck v. Smith, 183 App. Div. 336, 227 N. Y. 228; Matter of Hadden, 178 Misc. 939; Matter of Smith, 170 Misc. 556; Johnson v. Johnson, 51 Ohio St. 446.) HI. In computing the amount of principal to be paid, the beneficiary’s entire income — from other sources as well as from the trust — must be taken into account. Since respondent receives more than $20,000 a year - — the amount which she asserted she requires for her maintenance, comfort and well being — she is not entitled to any of the principal (Matter of Martin, 269 N. Y. 305; Matter of Gatehouse, 149 Misc. 648 Holden v. Strong, 116 N. Y. 471; Rezzemini v. Brooks, 236 N. Y. 184.) IV. The gift provided for is of income with a conditional right of invasion. (Matter of Martin, 269 N. Y. 305; Matter of Hogeboom, 219 App. Div. 131; Matter of Hoepner, 176 Misc. 47; Matter of Kelly, 166 Misc. 774; Matter of Johnson, 123 Misc. 834; Matter of Niles, 122 Misc. 17, 211 App. Div. 826; Peckham v. Newtown, 15 R I. 321.)

      Eugene G. Eess, as special guardian of infants, appellant.
    Under the language of testator’s will the widow is not entitled to invade the principal. (Matter of Martin, 269 N. Y. 305; Matter of Briggs, 101 Misc. 191, 223 N. Y. 677.)

      J. Stanley Carter for Harriet H. Woollard, respondent.
    I. The intention of the deceased is clearly expressed in unambiguous language. (Matter of Lloyd, 292 N. Y. 280; Cammann v. Bailey, 210 N. Y. 19.) II. This is not a will where the invasion of the principal is dependent upon the determination of whether it is necessary or proper for the support and maintenance of the widow. The will provides that she shall have the right to invade the principal, if in her judgment she deems it necessary for her maintenance, comfort and well being, and she shall not be required to account to anybody. (Lord v. Roberts, 153 Atl. 1; Rock Island Bank and Trust Co. v. Rhoads, 187 N. E. 139; Dana v. Dana, 185 Mass. 156; Nunes v. Roberts, 30 N. E. 259; Matter of Cager, 111 N. Y. 343.) I'll. The contention of appellants that all other income of the widow must be considered in construing the right of the widow under the will to invade the principal is against the weight of judicial authority. (Forman v. Whitney, 2 Abb. Dec. 163; Matter of Clark, 280 N. Y. 155; Rezzemini v. Brooks, 236 N. Y. 184; Matter of Gatehouse, 149 Misc. 648.)
   Per Curiam.

The first decretal paragraph of the decree of the Surrogate’s Court of Albany County construing the will of William E. Woollard, deceased, which has been affirmed by the Appellate Division of the Supreme Court, Third Judicial Department, should be modified to read as follows: “ Ordered, Adjudged and Decreed that the true construction and effect of the Last Will and Testament of William E. Woollard, deceased, and particularly paragraphs * Second ’ and * 3rd ’ thereof, relating to the payment of the income and principal of the residuary estate of said deceased, is construed as giving to Harriet Holland Woollard, widow of said deceased, the right to all of the income and to such part of the corpus and principal of the said trust estate created by said Last Will and Testament of said deceased as she shall deem necessary for her maintenance, comfort or well being, and said Harriet Holland Woollard shall have the right to demand the payment and transfer to her of such part of the principal and corpus of said estate at any time whenever the said Harriet Holland Woollard shall deem it necessary for her maintenance, comfort and well being and shall so determine and state in writing to the Trustees in making any such demand or demands therefor, and the said Trustees are hereby ordered and directed to comply therewith, and it is , * * * Such a statement is all that may be required from the widow, since the statement itself imports the exercise by her of good faith and honest judgment, and under the terms of the particular will no one may question or go behind such a determination and expression by her.

The order of the Appellate Division and the decree of the Surrogate’s Court should be modified in accordance with this opinion, and as so modified, affirmed, without costs.

Lewis, J.

(dissenting). The direction contained in the Surrogate’s decree in this proceeding which this court is about to modify serves to enlarge to an unlimited right the interest of the decedent’s widow in the residuary estate of her deceased husband. The decree and the modification by this court transcend "those limits fixed by the decedent, whose will prescribes that the trustees shall pay to his widow monthly during her lifetime all the income from his residuary estate “ * * * together with as much of the principal or corpus of my estate as she may deem necessary for her maintenance comfort and well being ”. Instead of giving his residuary estate outright to his widow the decedent chose to impress it with a trust. The broad provisions of that trust indicate the decedent’s intent ,to make available to Ms widow sometMng more than a life use of Ms residuary estate but something less than an absolute fee therein. He made provision for a remainder over — which cannot be limited upon an absolute estate in fee. (Matter of Ithaca Trust Co., 220 N. Y. 437, 441.) When the decedent named his widow as the sole judge of the amount, if any, which should be withdrawn from the principal of the trust and paid to her as necessary for her maintenance, comfort and well-being during her lifetime, that grant of the use of principal with remainder over to their daughters and son-in-law imported his confidence in her and in turn called for the exercise by her of honest judgment and good faith which, when challenged, was the proper subject of judicial review. (Swarthout v. Ranier, 143 N. Y. 499, 504; Matter of Wilkin, 183 N. Y. 104, 113; Matter of Briggs, 101 Misc. 191, 202, mod. 180 App. Div. 752, affd. 223 N. Y. 677; Vincent v. Rix, 248 N. Y. 76, 81-82; and see Matter of Smith, 129 Misc. 497, 499 and cases cited; 2 Scott on Trusts, § 187.4.)

Accordingly I dissent.

Loughran, Ch. J. Conway, Desmond and Thacher, JJ., concur in Per Curiam opinion; Lewis, J., dissents in opinion in which Dye, J., concurs.

Ordered accordingly.


author:
Per Curiam.
     Desmond, J.

text:
    Western Union Telegraph Company, Respondent, v. Joseph P. Selly, Individually and as President of the American Communications Association, C. I. O., et al., Appellants.
    Argued May 20, 1946;
    decided June 13, 1946.

      Victor Rabinowitz for appellants.
    I. Special Term had no power, acting as an individual, to remove the arbitrator he had appointed. (Oliver v. Collings, 11 East 367; Alliance Insurance Co. v. Williamson, 36 Ga. App. 497; Reynolds v. Gray, 1 Salk. 70; Kedy v. Dawson, 34 S. N. L. R. 233.) II. Special Term had neither power nor discretion upon this record to remove the arbitrator. (Davy’s Executors v. Faw, 8 Cranch. [U. S.] 171; Matter of Friedman, 215 App. Div. 130; Matter of A. E. Fire Ins. Co. v. N. J. Ins. Co., 240 N. Y. 398; United States v. Morgan, 313 U. S. 409; National Labor Relations Board v. Baldwin L. Works, 128 F. 2d 39; North River Steamboat Co. v. Livingston, 3 Cow. 713; People v. Brown, 193 App. Div. 203; Ex parte Hague, 103 N. J. Eq. 505; Landrum v. Cockrell, 230 Ky. 599; Hudspeth v. State, 188 Ark. 323; Matter of Dodge & Stevenson Manufacturing Co., 77 N. Y. 101; People v. Prior, 294 N. Y. 405; Balbo v. People, 80 N. Y. 484; State v. Giudice, 170 Iowa 731.)

      Abraham Unger for New York City Chapter, National Lawyers Guild, amicus enrice, in support of appellañt’s position.

      John H. Waters, Francis R. Stark and Clarence W. Roberts for respondent.
    I. The court at Special Term had the power to declare the individual named disqualified and disabled from acting as arbitrator, and to remove him. (Feuer Transportation, Inc., v. Local Union No. 445, 295 N. Y. 87.) II. Having appointed the arbitrator in the judicial function the court retained jurisdiction and had inherent power on motion made in the proceedings, which were still pending before it, to replace the arbitrator. (Manufacturers’ Mutual Fire Ins. Co. v. Associated Gas & Electric Co., 176 Misc. 220, 262 App. Div. 731, 288 N. Y. 668; Potter v. Rossiter, 109 App. Div. 737; Barry v. Mutual Life Ins. Co. of N. Y., 53 N. Y. 536.) III. The court had power to make the order on motion made in an arbitration proceeding under article 84 of the Civil Practice Act. (Smyth v. Board of Education, 214 App. Div. 735; Matter of Albert v. Spiegelberg, 146 Misc. 811.) IV. The court had power to make the order in a plenary equity action. (Ugovitch v. Ohio Farmers' Ins. Co., 180 App. Div. 905; Burford v. Chambers, 25 Ont. Rep. 663.) V. There was evidence supporting the finding made at Special Term that the individual named is disqualified and disabled from serving as arbitrator, and affording a ground for the exercise of discretion as to his removal. (Anonymous, 59 N. Y. 313.)
   Per Curiam.

The removal of the arbitrator was within the discretion of the Special Term. The exercise of that discretion was approved by the Appellate Division and we are required to presume that all questions of fact were there determined in favor of the respondent (Civ. Prac. Act, § 603). We are not able to say that the courts below abused their discretion.

Our conclusion is that the order of the Appellate Division should be affirmed, with costs, and the third question certified answered in the affirmative, it being unnecessary to answer the other questions.

Desmond, J.

(dissenting). I dissent and vote to reverse and to deny the motion to remove- the arbitrator, Pomerantz. The parties concede his honesty and ability. No charge is made against him of bias, prejudice or interest as to the controversy to be arbitrated. After he had been regularly appointed arbitrator, he was removed, solely because he holds and had expressed certain social, economic and political views. Those views are not vicious, antisocial or unlawful. They are held by great numbers of other good citizens, including judges, high and low. They are not grounds for removing or disqualifying an arbitrator, any more than they would be grounds for removing or disqualifying a judge. The imposition of such tests is to me abhorrent and there is no legal precedent for it. Assuming the court had discretion, that discretion was here abused.

Loughran, Oh. J., Lewis, Conway, Thacher, Dye and Fuld, JJ., concur in Per Curiam opinion; Desmond, J., dissents in memorandum.

Order affirmed, etc.


author: Conway, J. Desmond, J.

text:
    County of Monroe, Appellant and Respondent, v. Town of Brighton, Respondent and Appellant. County of Monroe, Appellant and Respondent, v. Town of Irondequoit, Respondent and Appellant. County of Monroe, Appellant and Respondent, v. Town of Pittsford, Respondent and Appellant.
    Argued January 16, 1946;
    decided July 23, 1946.

      Joseph B. Boyle for plaintiff, appellant and respondent.
    I. Chapter 833 of the Laws of 1933 is constitutional. (Village of Depew v. Town of Cheektowaga, 267 N. Y. 144; Town of Amherst v. County of Erie, 260 N. Y. 361; Matter of Wadhams, 249 App. Div. 271; City of New York v. Village of Lawrence, 250 N. Y. 429; Vroman v. Fish, 181 App. Div. 502, 223 N. Y. 540; People ex rel. Crowell v. Lawrence, 36 Barb. 177, 41 N. Y. 137; Devlin v. Mayor, 63 N. Y. 8; Van Brunt v. Town of Flatbush, 128 N. Y. 50; People ex rel. Commissioners v. Banks, 67 N. Y. 568; Gubner v. McClellan, 130 App. Div. 716; Gardner v. Ginther, 232 App. Div. 296, 257 N. Y. 578; Matter of Fay, 291 N. Y. 198.) II. Chapter 862 of the Laws of 1935 is constitutional. (Matter of Doyle, 257 N. Y. 244; People v. Bowen, 21 N. Y. 517; Matter of City of Long Beach v. Public Service Comm., 249 N. Y. 480; Matter of Koenig v. Flynn, 234 App. Div. 139; Gardner v. Ginther, 232 App. Div. 296, 257 N. Y. 578.) III. Chapter 861 of the Laws of 1935 is constitutional. IV. The Legislature has the power to make retroactive laws affecting the taxing powers anywhere within the State. (Hunter v. Pittsburgh, 207 U. S. 161; East Hartford v. Hartford Bridge Co., 10 How. [U. S.] 511; Connor v. Bent, 1 Mo. 235; Union Free School Dist. v. Town of Rye, 280 N. Y. 469; Gordon v. Cornes, 47 N. Y. 608; Town of Duanesburgh v. Jenkins, 57 N. Y. 177; Town of Guilford v. Supervisors of Chenango County, 13 N. Y. 143; Thomas v. Leland, 24 Wend. 65; Genet v. City of Brooklyn, 99 N. Y. 296; Gautier v. Ditmar, 204 N. Y. 20; Village of Kenmore v. County of Erie, 252 N. Y. 437; Town of Amherst v. County of Erie, 260 N. Y. 361; County of Nassau v. City of Long Beach, 272 N. Y. 260; People ex rel. Clark v. Gilchrist, 243 N. Y. 173.) V. Neither chapter 833 of the Laws of 1933 nor chapter 862 of the Laws of 1935 require the towns in the County of Monroe to incur indebtedness for other than town purposes, nor do either of said statutes require the said towns to give their credit in aid of the County of Monroe. Neither of said statutes require the County of Monroe to lend its credit to any of the towns in the County of Monroe in a manner which violates any provision of the Constitution. (Town of Amherst v. County of Erie, 260 N. Y. 361; Town of Irondeqouit v. County of Monroe, 158 Misc. 123; Village of Kenmore v. County of Erie, 252 N. Y. 437; Union Free School Dist. v. Town of Rye, 280 N. Y. 469; Whaley v. County of Monroe, 235 App. Div. 334; County of Oneida v. City of Utica, 260 App. Div. 363; People ex rel. Alpha P. C. Co. v. Knapp, 230 N. Y. 48; Schieffelin v. Goldsmith, 253 N. Y. 243; City Bank F. T. Co. v. N. Y. C. R. R. Co., 253 N. Y. 49; Bronx Gas & Electric Co. v. Maltbie, 268 N. Y. 278; Matter of McGlone, 258 App. Div. 596.) VI. Chapter 862 of the Laws of 1935 did not repeal chapter 833 of the Laws of 1933 and the Appellate Division was correct in reversing the decision of the Official Referee in this respect. (Ely v. Holton, 15 N. Y. 595; Moore v. Mausert, 49 N. Y. 332; Matter of Prime, 136 N. Y. 347; People v. Supervisors, 67 N. Y. 109; People v. Briggs, 114 N. Y. 56; Matter of Peugnet, 67 N. Y. 441; White v. Inebriates’ Home for Kings County, 141 N. Y. 123; Bank of Metropolis v. Faber, 150 N. Y. 200.) VII. The defendants are not entitled to credit for various items allowed by the Official Referee, as follows: 1. The full sums of unpaid taxes upon lots within the respective towns which were foreclosed by the plaintiff-appellant-respondent. 2. Penalties, fees and disbursements cancelled by resolutions of the Board of Supervisors. 3. Penalties, fees and disbursements collected by the county treasurer. (Miller v. Town of Irondequoit, 243 App. Div. 240, 268 N. Y. 578.)

      James C. O’Brien for Town of Brighton, respondent and appellant.
    I. Foreclosure by the county of tax lien certificates and subsequent cancellation of taxes was equivalent to the collection of the taxes in cash. (Town of Amherst v. County of Erie, 260 N. Y. 361.) II. The town is entitled to credit for penalties and interest collected by the county. (Power v. Allen, 70 Cal. App. 663; State v. Hitsman, 99 Mont. 521; Matter of

      City of New York [Chrystie St.], 264 N. Y. 319; Ely v. Pearlman, 103 N. J. Eq. 425.) III. Chapter 833 of Laws of 1933 was repealed by chapters 861 and 862 of the Laws of 1935. (Heckmann v. Pinkney, 81 N. Y. 211; City of Buffalo v. Lewis, 192 N. Y. 193; Morrall v. County of Monroe, 271 N. Y. 48; People ex rel. Johnson v. Hegeman, 51 Hun 644, 115 N. Y. 653; Matter of New York Institution, 121 N. Y. 234; McDermott v. Nassau Electric Railroad Co., 85 Hun 422, 147 N. Y. 700; Pratt Institute v. City of New York, 183 N. Y. 151; Peterson v. Martino, 210 N. Y. 412; Matter of Brigham v. City of New York, 227 N. Y. 575.) IV. Chapter 833 of the Laws of 1933 is unconstitutional because it violates article IH, section 16 (formerly § 15) of the State Constitution. (People v. Supervisors of Chautauqua, 43 N. Y. 10; Gaynor v. Village of Port Chester, 231 N. Y. 451; People ex rel. McConvill v. Hills, 35 N. Y. 449; Economic P. & C. Co. v. City of Buffalo, 195 N. Y. 286; Matter of Paul, 94 N. Y. 497; People ex rel. Corscadden v. Howe, 177 N. Y. 499.) V. Chapter 833 of the Laws of 1933 and chapter 862 of the Laws of 1935 are both invalid because they compel the defendant town to give its money in aid of the County of Monroe and to contract indebtedness for a purpose other than a town purpose. (Whaley v. County of Monroe, 235 App. Div. 334; Village of Kenmore v. County of Erie, 252 N. Y. 437; Union Free School Dist. v. Town of Rye, 280 N. Y. 469; Mount Sinai Hospital v. Hyman, 92 App. Div. 270.) VI. The retroactive features of chapter 833 of the Laws of 1933 and chapter 862 of the Laws of 1935 violate both the Federal and State Constitutions. (Town of Amherst v. County of Erie, 260 N. Y. 361; Town of Irondequoit v. County of Monroe, 158 Misc. 123; Matter of County of Oswego v. Foster, 262 N. Y. 439; County of Oneida v. City of Utica, 260 App. Div. 363, 285 N. Y. 788; County of Nassau v. City of Long Beach, 272 N. Y. 260; Town of Walton v. Adair, 111 App. Div. 817, 191 N. Y. 509.) VII. Chapter 862 of the Laws of 1935 is invalid because it is not a proper exercise of the legislative power. (People ex rel. Unger v. Kennedy, 207 N. Y. 533; Burke v. Kern, 287 N. Y. 203; People ex rel. Percival v. Cram, 164 N. Y. 166; Kibbee v. Lyons, 202 App. Div. 562, 235 N. Y. 546; People v. Klinck Packing Co., 214 N. Y. 121; Darweger v. Staats, 267 N. Y. 290.) VEIL Chapter 861 of the Laws of 1935 is invalid because it violates article III, sections 15 and 16 of the State Constitution. (People ex rel. Commissioners v. Banks, 67 X. Y. 568; People ex rel. N. Y. Elec. Lines Co. v. Squire, 107 N. Y. 593; People ex rel. Everson v. Lorillard, 135 N. Y. 285; Darweger v. Staats, 267 N. Y. 290.) IX. The provisions of chapter 861 of the Laws of 1935 requiring the County of Monroe to guarantee refunding bonds of the town renders the special acts invalid. (Town of Amherst v. County of Erie, 260 N. Y. 361; Town of Irondequoit v. County of Monroe, 158 Misc. 123; Union Free. School Dist. v. Town of Rye, 280 N. Y. 469.)

      Robert W. Lochner for Town of Irondequoit, respondent and appellant.
    I. The statutes are unconstitutional. (Town of Amherst v. County of Erie, 260 N. Y. 361; Matter of County of Oswego v. Foster, 262 N. Y. 439; Lorillard v. Town of Monroe, 11 N. Y. 392.) II. Chapter 833 of the Laws of 1933 is unconstitutional under article III, section 15 of the State Constitution. (People v. Ireland Realty Co., 96 Misc. 18; People v. Hills, 35 N. Y. 449, 451; People ex rel. City of Rochester v. Briggs, 50 N. Y. 553; People v. Supervisors of Chautauqua, 43 N. Y. 10; Economic P. & C. Co. v. City of Buffalo, 195 N. Y. 286; Gaskin v. Meek, 42 N. Y. 186.) III. Chapter 862 of the Laws of 1935 is unconstitutional in that it is not a proper exercise of the legislative power. (Barto v. Himrod, 8 N. Y. 483; People ex rel. Unger v. Kennedy, 207 N. Y. 533; Starin v. Town of Genoa, 23 N. Y. 439; Cleveland v. City of Watertown, 222 N. Y. 159; Darweger v. Staats, 267 N. Y. 290.) IV. Chapter 861 of the Laws of 1935 is unconstitutional for the same reason as chapter 833 of the Laws of 1933, and because it purports to carry into effect chapter 862 of the Laws of 1935 violates article III, section 17 of the State Constitution. (People ex rel. Commissioners v. Banks, 67 N. Y. 568; People ex rel. N. Y. Elec. Lines Co. v. Squire, 107 N. Y. 593; People ex rel. Everson v. Lorillard, 135 N. Y. 285; Darweger v. Staats, 267 N. Y. 290; Choate v. City of Buffalo, 39 App. Div. 379.) V. Chapter 833 of the Laws of 1933 is unconstitutional in that it provides for the incurring of indebtededness for other than town purposes and the giving of the town’s credit in aid of the county. (Deady v. Village of Lyons, 39 App. Div. 139; Whaley v. County of Monroe, 235 App. Div. 334; Village of Kenmore v. County of Erie, 252 N. Y. 437;
      O’Reilly v. City of Kingston, 175 App. Div. 207.) VI. Chapter 862 of the Laws of 1935 is unconstitutional under article VIII, section 1 in that it provides for the incurring of indebtedness for other than town purposes and the giving of the town’s credit in aid of the county. VII. The provisions relating to refunding outstanding town bonds invalidate the special acts. (Town of Amherst v. County of Erie, 260 N. Y. 361; People ex rel. Alpha P. C. Co. v. Knapp, 230 N. Y. 48; Union Free School Dist. v. Town of Rye, 280 X. Y. 469.) VIII. The retroactive features of both statutes are unconstitutional. (County of Nassau v. City of Long Beach, 272 N. Y. 260; Town of Walton v. Adair, 111 App. Div. 817,191 N. Y. 509.) IX. The county may not recover under the special act. (Matter of Ueck, 286 N. Y. 1.) X. The towns are entitled to credit for taxes, penalties and interest cancelled by the county. XI. The towns are entitled to the benefit of collections of interest and penalties prior to the foreclosure of the tax liens. (Getman v. Niferopulos, 276 N. Y. 161.)

      Franklin H. Smith for Town of Pittsford, respondent and appellant.
    I. The amount which the warrant of the board of supervisors directed to be paid to the supervisor of the Town of Pittsford became the debt of the county to the town on the annual levy of taxes in the Pittsford tax district. (Village of Depew v. Town of Cheektowaga, 267 N. Y. 144; Town of Amherst v. County of Erie, 260 N. Y. 361; Matter of County of Oswego v. Foster, 262 N. Y. 439; County of Nassau v. City of Long Beach, 272 N. Y. 260, 274 N. Y. 458; Union Free School Dist. v. Town of Rye, 280 N. Y. 469; County of Oneida v. City of Utica, 260 App. Div. 363.) II. Chapter 862 of the Laws of 1935 repealed those sections of chapter 833 of the Laws of 1933 involved in this action. (Morrall v. County of Monroe, 271 N. Y. 48; People ex rel. Bronx Pkwy. Camm. v. Common Council, 229 N. Y. 1; Matter of Brigham v. New York, 227 N. Y. 575; People v. Metropolitan Surety Co., 211 N. Y. 107; Peterson v. Martino, 210 N. Y. 412; City of Buffalo v. Lewis, 192 N. Y. 193; Matter of Brooklyn Q. C. & S. R. R. Co., 185 X. Y. 171; Matter of Prime, 136 N. Y. 347.) III. Chapter 862 of the Laws of 1935 violated section 10, article 8 of the 1894 State Constitution in its retroactive operation on the tax levies in suit. (County of Nassau v. City of Long Beach, 272 N. Y. 260; People ex rel. Rodgers v. Coler, 166 N. Y. 1; People v. Ingersoll, 58 N. Y. 1;
      Town of Walton v. Adair, 96 App. Div. 75, 111 App. Div. 817, 191 N. Y. 509; Williams v. Village of Port Chester, 72 App. Div. 505; Deady v. Village of Lyons, 39 App. Div. 139; Danks v. Quackenbush, 1 N. Y. 129; Livingston v. Livingston, 173 N. Y. 377.) IV. Chapter 862 of the Laws of 1935 and chapter 833 of the Laws of 1933 were unconstitutional "both retrospectively and prospectively because each compelled the defendant to give its money or property to the plaintiff or incur an indebtedness to the plaintiff for the sums the defendant paid the fire districts, which the collector’s warrant dirécted to be paid to its supervisor in contravention of section 10, of article VIII of the 1894 Constitution. (Hellawell v. Grafeld, 22 F. Supp. 765; Matter of Buffalo F. A. Corp. v. Mountaindale F. Dist., 138 Misc. 285; Fabric Fire Hose Co. v. Town of Whitestown, 187 App. Div. 118; Village of Depew v. Town, of Cheektowaga, 267 N. Y. 144; Town of Amherst v. County of Erie, 260 N. Y. 361.) V. The referee was warranted in treating (a) tax liens cancelled by foreclosure as the equivalent of the receipt of cash by the county, and likewise (b) interest or penalties and other charges' collected by the county on the delayed payment of tax liens. VI. Defendant was entitled to recover interest on the balance due on the several debts of the plaintiff to it, as alleged in the five counterclaims. (Town of Irondequoit v. County of Monroe, 158 Misc. 123; County of Nassau v. City of Long Beach, 274 N. Y. 458; Davison v. Klaess, 280 N. Y. 252; Village of Depew v. Town of Cheektowaga, 267 N. Y. 144.)
   Conway, J.

In Town of Amherst v. County of Erie (260 N. Y. 361) we held that the county was obligated to reimburse a town for the amount of uncollected taxes as returned by the town collector. Such return disclosed the difference between the total amount levied for .town and special district purposes and the amount received by the town collector and paid over to the town supervisor. We said at p. 368: “ The defendant contends that the law does, not require the county to make up such deficit or permit it to do so. It is urged that the town has been extravagant and reckless; that all of the improvements and the organization of special districts for local improvement purposes was done by the town without the knowledge or consent of the county and without participation by the county in any way therein and it is contended that it would be unjust and inequitable to compel the county to make up the deficit caused by the unwise action of the town.

“ If the expenditures made by the town and the liabilities incurred by it are for governmental purposes and were made in accordance with the terms of the statute, the fact that they were unwisely and recklessly incurred does not create a legal question. Solution of that problem presents a political question which must be solved by the voters of the town or, if checks are needed, they must be supplied by the Legislature.”

In 1933 and 1935 the Legislature adopted tax statutes affecting the county of Monroe and the towns situate therein. Generally, they provided that while the county was obligated to pay the difference between the total amount levied and the amount collected, such “ difference ” must thereafter be repaid by the town to the county less “ any and all collections made by such treasurer of such taxes including interest paid thereon ”. The statutes so enacted were Laws of 1933, chapter 833, and Laws of 1935, chapters 861 and 862.

The county has brought these three actions to recover under those statutes moneys advanced to the defendant towns, repayment of which is alleged to be due.

The learned Official Referee upheld the constitutionality of the statutes. He also answered specific questions propounded by the parties as to the effect of the statutes. Two. of the answers defined the word “ collections ” as including foreclosures by the county and cancellations of penalties and interest by resolution of the County Board of Supervisors. Another answer reached the same conclusion as to penalties collected by the county.

We are in accord with the views of the Official Referee, as modified by the Appellate Division, except as to the matter of penalties, to which reference will now be made.

The Official Referee found that the Board of Supervisors of the county by resolution had cancelled certain interest and penalties which had been added to unpaid taxes, and that the county had also collected certain penalties. No question is raised as to the board’s power to make the cancellations. The towns argue that such cancellation, like the. foreclosure of tax liens, deprived them of possible collection of those penalties, and that such penalties, whether collected or cancelled, should be credited to them. The county argues that the penalties are pot for the benefit of the town, but for the benefit of the purchaser. Laws of 1884, chapter 107, section 6, provides for a 10% penalty “ for the benefit of * * * purchasers ”. The testimony of the Deputy County Treasurer describes the county practice in adding interest charges, penalties and fees to the amount of the unpaid tax. While the statutes provide for crediting the towns with collections of taxes “ including interest paid thereon ”, no mention is made of fees or penalties. The Official Referee wrote that “ penalties, in a broad sense, are nothing more than interest at an increased rate ” and that all items collected by the treasurer should be credited to the towns. He cited Getman v. Niferopulos (276 N. Y. 161), where it was said at p. 171: “ * * * where interest and penalties are allowable by statute, they constitute a part of the tax lien against the property originally charged if they are for the benefit of the unit imposing the tax.” Here it would be the county that was the unit. The county levies the tax (Town Law, § 116, formerly, § 148), collects it (since the town tax collector is the agent of the county), and adds charges (penalties, fees, and interest) to unpaid taxes which go to make up the tax lien. We think that as between the county and the town, the fees certainly belong to the county. The fees, are for advertising, for tax certificates, and for the tax sale. Since the burden of collecting taxes rests on the county, there is no reason to suppose that the Legislature intended the collection of disbursements which the county has presumably made in its attempt to collect the taxes, to be deemed a “ collection of * * * such taxes.” As affecting the penalties, the following are the applicable portions of the statutes relating to cancellation:

(L. 1933, ch. 468):

“ Notwithstanding the provisions of any other law, if the board of supervisors of any county shall determine that it is for the best interests of such county, such board may, by resolution, authorize the county treasurer to reduce the rates of interest or of penalties now imposed by law, for failure to pay any real property tax * * *, which shall have been returned as unpaid by a town collector or city treasurer to such county treasurer and for the collection of which no sale of the property shall have been made. If the board of supervisors of any county shall determine that it is for the best interests of such county, such hoard shall have like power to authorize, by resolution, the county treasurer to permit the redemption of any piece of property sold at a tax sale and bid in by such county on such terms as the board of supervisors may make and may remit in whole or in part any penalties and interest imposed by law to which the county or any other municipality shall be lawfully entitled upon' such redemption. Provided, however, that in cases where such interest and penalties, if collected by the county, belong to a municipality therein, no reduction or remission in whole or in part of such interest and penalties shall be made without the consent of the municipality affected * *

(L. 1934, ch. 917):

“ Notwithstanding any other general, special or local law, all penalties on any unpaid taxes and assessments heretofore levied on real property by any municipal corporation, as defined by section 2 of the general municipal law, and for the collection of which no sale of the property shall have been made, may be cancelled and revoked, provided such unpaid taxes and assessments are paid, together with interest thereon at a rate not to exceed six per centum per annum from the time such taxes become due and payable, upon resolution duly adopted by the governing body of any municipal corporation.

In the event such property shall have been sold at tax sale and bid in by such municipal corporation, redemption of any piece of such property may be permitted without penalties, by payment of the unpaid taxes * * * together with interest at a rate not to exceed six per centum per annum from the time such taxes become due and payable * * *.”

The county asserts that it never imposed interest charges as such, but imposed only penalties. However, the Deputy County Treasurer mentioned both in his testimony. The statutes which give the county the power to add interest and penalties to delinquent taxes are not cited by the county, except Laws of 1884, chapter 107, which does not mention any interest rates, but does provide for “ penalties ”. The towns argue that “ penalties ” and “ interest ” cannot be differentiated. However, various provisions of the Tax Law refer to penalties, interest and fees as separate charges. Both the testimony and the county’s exhibits show that it has been the county practice to impose separate penalty and interest charges, and that practice, of course, has weight in determining what amounts are “ penalties ” and what amounts constitute “ interest.”

We do not think that cancellation or reduction of penalties carries the same consequence as foreclosure of tax liens. In hath cases the county has discretion, but in the case of foreclosure it holds the property in lieu of collecting the taxes. In the case of cancellation or reduction of penalties, it has not received the equivalent in cash, but has in effect discounted a debt for the sake of quick collection. As a matter of fact, the penalties, at first 5% and later 3%, added to the amount of the tax upon return of the tax roll to the. County Treasurer, were less than the interest rates charged upon the tax lien up to the time of the sale, which were at first 8%, but later reduced to 6%. After the annual sale at which the county was required to purchase, and at which a 10% penalty was added, the interest rate was 10% per year for two years, and after that 35% of the tax sale price. An illustrative portion of the testimony of the Deputy County Treasurer is as follows: Q. Will you state what rate of interest is charged and what penalties have been added in connection with the tax rolls from 1928 to and including 1935 ? A. In the years 1928 and 1929, five per cent when the tax rolls are returned to the county treasurer by the town collector, together with eight per cent per annum computed from February 1st. On August 1st, in addition to the above, a dollar for advertising. On August 20th, the date of the tax sale, varying additional tax penalties were added: Ten per cent tax sale penalty, fifty cents tax sale charge, twenty-five cents tax sale certificate, and interest on the combined total at the rate of ten per cent per annum from August 20th to the date of payment, if paid within two years from the date of sale. At the expiration of two years from the date of sale, the total interest rate becomes thirty-five per cent of the sale price and does not increase beyond that rate. In the years 1931 and 1932 the same as years 1928 and 1929 except that advertising was advanced to a dollar and a half. In the years 1933 to 1935, inclusive, a three per cent penalty after the tax rolls are returned to the county treasurer’s office by the town collector, plus interest at the rate of eight per cent per annum from April 1st, the balance of the penalties being the same as the years of 1930 to 1932. The Referee: That applies to all three towns, Irondequoit, Pittsford and Brighton? The Referee [sic]: The whole county.”

***** * *

“ Q. Does the next column headed * Penalty * represent a varying arbitrary per cent added to the amount of the tax bill subsequent to the tax sale? A. That is a ten per cent penalty added on after the tax sale. Q. Does that penalty increase? A. No, that is a flat penalty of ten per cent. Q. Ten per cent per annum, isn’t it? A. No, it is a penalty. That is not an interest rate. That is a penalty. In other words, you have on the original tax six per cent interest prior to sale, a dollar and a half for advertising, fifty cents for the sale charge, and a ten per cent penalty on top of that plus the quarter for the certificate. Q. That is an arbitrary penalty that is added to every item? A. Yes, sir. Q. "Whether sold to individuals or bid in by the county? A. That is right. Q. In the next column headed ‘ Interest after tax sale ’ that represents what? A. That is interest at the rate of ten per cent a year for two years. Q. At the expiration of two years what is the rate? A. Thirty-five per cent. Q. Is that included only upon the tax items upon collections by the county treasurer? A. That is right.”

As a result, we reach the following conclusions with reference to the matter of interest, fees and penalties. (1) The fees collected by the County Treasurer belong to the county, and there is no statute permitting their cancellation. (2) The interest collected by the County Treasurer should be credited to the towns, under the express provisions of Laws of 1933, chapter 833, and Laws of 1935, chapter 862, and the interest cancelled or reduced (without consent of the towns) should be credited to the towns, under the provisions of Laws of 1933, chapter 468, and Laws of 1934, chapter 917. (3) The penalties, whether collected or can-celled, belong to the county, since they are a type of tax imposed by the county on delinquent taxpayers, for the benefit of the county or other tax purchaser. (4) The towns should be credited with tax lien foreclosures by the county, to the extent of the original tax and interest thereon, but not to the extent of penalties and fees added to the original tax and included in the foreclosure judgments.

How much each class of charges (interest, penalties and fees) amounted to cannot be determined accurately from the record. and exhibits. The matter must be remitted to the Supreme Court for such finding, if a finding be necessary. It would seem that the county has collected more than it has paid to the town defendants.

The judgment should be modified in accordance with this opinion, and as so modified affirmed, without costs.

Desmond, J.

(dissenting in part). 1 agree with Judge Conway’s opinion save in one respect. It seems to me that, as both courts below held, the county, when it makes collections of these returned taxes, should credit the towns with the amounts collected by the county for “ penalties ”. As the referee said: penalties, in a broad sense, are nothing more than interest at an increased rate ”. A penalty is, indeed, only interest at a higher rate, and, like all other interest on taxes, it is collected from the taxpayer as damages for delay in payment.

Before the special Monroe County tax statutes here in question were enacted, the county, under the Amherst decision (260 N. Y. 361) had to make up to the towns the difference between the total tax levy and the part thereof actually collected by the town collectors — and that was the end of the matter, so far as the towns were concerned. "Under the new Monroe County statutes, although the county makes up such deficits to the towns, the towns must in the end pay those amounts back to the county, the towns meanwhile getting credit from. the county for all collections made by the county of the delinquent taxes in question. Thus the finally determined loss on uncollected taxes in the towns, which losses formerly fell on the county, now must be borne by the towns themselves. The county thus gets a great advantage from the change in the statutes and, this being so, it seems to me that doubtfnl provisions of the new statutes should be construed in favor of the towns to alleviate as much as possible their greatly increased financial burden. If the county credits the towns with “ interest ” but not with “ penalties ” collected, the county will be making a profit in the amount of the “ penalties ”.

The judgment should be affirmed without costs.

Loughban, Ch. J., Lewis and Thacheb, JJ., concur with .Conway, J.; Desmond, J., dissents in opinion; Dye, J., taking no part; Medalie, J., deceased.

Judgment accordingly.