author: Van Voorhis, J. Fuld, J.

text:
    Howland S. Davis et al., Appellants, v. George C. Fraser et al., as Trustees of Texas Pacific Land Trust under a Declaration of Trust Made by Charles J. Canda and Others, et al., Respondents.
    Argued May 25, 1954;
    decided July 14, 1954.

      Allen T. Klots, Arthur E. Pettit, Peter H. Kaminer and. M err ell E. Clarh, Jr., for appellants.
    I. The evidence establishes that Blake Brothers & Company is the owner of the 100 shares represented by certificate No. 390. II. The law presumes ownership from record title. (Great Northern Ry. v. Sutherland, 273 U. S. 182; Hoagland v. Bell, 36 Barb. 57; Matter of Hull Copper Co., 46 Ariz. 270.) III. The statutory presumption of ownership in favor of the record owner of corporate stock provides a compelling analogy. IV. The presumption is one of ownership by the person presently registered as owner. V. Passage of time in the absence of adverse claims is also evidence of plaintiffs’ ownership. (Guilford v. Western Union Tel. Co., 59 Minn. 332; Butler v. Glen Cove Starch Mfg. Co., 18 Hun 47; Ganel v. Aleman Planting & Mfg. Co., 160 La. 422; State ex rel. Seaton v. New Orleans & C. R. R., 51 La. Ann. 909; Shore Line Oil Co. v. King, 68 Nev. 183.) VI. The record contains no evidence which rebuts the prima facie case established by plaintiffs. (Ruppert v. Brooklyn Heights R. R. Co., 154 N. Y. 90; People v. Harris, 136 N. Y. 423; Lamb v. Union Ry. Co., 195 N. Y. 260.) VII. Plaintiffs’ right to all dividends declared on certificate No. 390 follows not only from the evidence of their ownership of the shares but also from the special provisions of the declaration of trust. (Brisbane v. Delaware, L. & W. R. R., 94 N. Y. 204.) VIII. The trustees are in no danger of personal liability. (Costello v. Costello, 209 N. Y. 252; Purdy v. Lynch, 145 N. Y. 462; Seger v. Farmers’ Loan & Trust Co., 176 N. Y. 589; Matter of Spitzmuller, 279 App. Div. 233, 304 N. Y. 608.)

      Marcien Jenckes, John L. Hall, Stuart G. Band and Lawrence Howe, Jr., for Jose C. Harris and others, appellants.
    I. In this court of equity, defendant trustees being completely protected by law should be ordered to pay Blake Brothers & Company the dividends withheld by the defendants from that registered owner after 1947. Defendants have admitted liability with respect to prior dividends and in equity should honor the present claim. (Brisbane v. Delaware, L. & W. R. R., 94 N. Y. 204; Hopper v. Sage, 112 N. Y. 530.) II. Defendants cannot justify their refusal to pay dividends to plaintiffs on any claim that they have “ reason to believe ” plaintiffs are not the owners. (Fidelity & Deposit Co. v. Queens Co. Trust Co., 226 N. Y. 225; Turnbull v. Longacre Bank, 249 N. Y. 159; Roberts v. Ely, 113 N. Y. 128; Richards v. Robin, 175 App. Div. 296, 225 N. Y. 719.) III. Defendants should not be permitted to escape liability to plaintiffs by failing to use the recognized and established presumption protecting them. IV. Plaintiffs are entitled to a new certificate for 100 shares of proprietary interest in the defendant trust to replace the lost original certificate No. 390 — upon their furnishing a suitable indemnity bond.

      Francis S. Bensel and Frederick T. Shea for respondents.
    I. Plaintiffs failed to establish that Blake Brothers & Company was and continued to be the actual owner of the shares represented by certificate No. 390. (Matter of Biglin v. Friendship Assn., 46 Hun 223; Matter of Speir, 69 App. Div. 149; Foltis, Inc. v. City of New York, 287 N. Y. 108; Moore v. Rosemond, 238 N. Y. 356; Wellisch v. John Hancock Mut. Life Ins. Co., 293 N. Y. 178.) II. Plaintiffs are not entitled to receive the dividends declared.and payable on the shares represented by certificate No. 390. (Turnbull v. Longacre Bank, 249 N. Y. 159; Tyson v. George’s Creek Coal & Iron Co., 115 Md. 564.)
   Van Voorhis, J.

This is an action for an adjudication that plaintiffs are the owners of 100 shares of proprietary interest in Texas Pacific Land Trust, and directing defendant trustees to pay to plaintiffs $102,500 representing all dividends heretofore declared but not paid with respect to said 100 shares, and directing defendants to issue a new certificate in place of the original lost certificate for these 100 shares in this land trust. The judgment entered upon the decision of the trial court dismisses the complaint “ for failure of proof and without prejudice ”, and this judgment has been affirmed unanimously by the Appellate Division, which granted leave to appeal to this court.

The participation in this trust to which plaintiffs claim to be entitled arose out of the reorganization in 1888 of the Texas and Pacific Railway Company, which owned vast tracts of land in Texas. It had outstanding bonds which were a first lien upon these lands. In order to satisfy the claims of. the bondholders these lands were conveyed to the Texas Pacific Land Trust and shares of beneficial interest in the trust were issued to bondholders upon the surrender of bonds. The holder of a $1,000 bond became entitled to ten shares in the trust and $600 in new second mortgage bonds of the railroad.

In July, 1888, a partnership known as Blake Brothers & Company, hereafter called Blake Brothers No. 1 ”, members of the Boston and New York Stock Exchanges, acquired 500 shares of the trust by presenting in exchange therefor $50,000 of the old railway bonds. (Instead of presenting the bonds themselves, certificates of deposit issued by a reorganization committee were presented representing bonds in this amount.) ’ Blake Brothers also received, in accordance with the reorganization plan, $30,000 in new second mortgage bonds of the railroad.

Four of the five certificates of 100 shares each registered in the name of Blake Brothers were transferred out of their names on the books of the trust, all of them having been indorsed by a member of the firm on October 1, 1888, They were presented for transfer by different persons, several by other stock exchange firms, between March 1, 1893 and February 13, 1902. The remaining certificate (No. 390) has never been presented for transfer and is the one which is now lost. In 1888, when these certificates were issued, the market value of the 100 shares represented by the lost certificate was $1,800. By 1898 it had fallen to $500. By 1952, due to the discovery of oil beneath these lands, the original 100 shares were worth $1,280,000. Of all of the original certificates issued in 1888, this certificate is the only one outstanding. Ever since 1888 they have been listed and traded upon the New York Stock Exchange. .

In 1936 the first dividend was declared by the land trust. It was sent to a then existing firm known as Blake Brothers & Company. The original firm bearing the same name, which had been organized in 1858, went into liquidation in 1930. It is known as Blake Brothers No, 1. Blake Brothers No. 2, which did not succeed to the securities owned by the first firm, lived out its life between 1930 and 1935, and the firm which received the 1936 dividend was Blake Brothers No. 3, which likewise did not succeed to the securities owned by Blake Brothers No. 1. Although the partners of these firms and their successors in interest were not identical, they have composed their differences over this part of the controversy, and the plaintiffs in this action now represent all of the interests of those who were partners of the first firm known as Blake Brothers & Company, to whom, if to any of these partnerships, the shares represented by this lost certificate belong.

In summary, there is no evidence indicating that Blake Brothers No. 1, or any of the other firms by that name, ever did own these 100 shares of the land trust, except the circumstance that they were registered in the firm name in 1888, and that no adverse claim apparently has ever been made since then. Section 178 of the Personal Property Law, authorizing the issuance of a new certificate in place of a lost or destroyed certificate of corporate stock, is not technically applicable inasmuch as these shares were participations in a land trust, and were not stock in a corporation. Nevertheless, while this statutory provision has no direct application, it relates to a similar subject and aids in determining the policy of this jurisdiction as made by the courts and Legislature in connection with this question. In Matter of Speir (69 App. Div. 149, 151), it was held that before a new stock certificate could be issued under the predecessor of this statute it was necessary to prove not only that the certificate had been lost but ‘1 that it had not been transferred or disposed of by the person to whom it was issued or by his legal representatives ”. This fact, the opinion said, “ should be established by direct evidence.” In Matter of Biglin v. Friendship Assn. (46 Hun 223, 224) it was said: “ But to bring the case within the statute the two facts must be maintained, that the petitioner is the owner of the shares, and that such shares have been lost or destroyed and cannot after due diligence be found. These are the jurisdictional facts upon which the court is to act, and without proof of such facts it has no authority to make the direction mentioned in the statute. ’ ’

In order to satisfy this test, plaintiffs contend that the books of the land trust in which these shares are registered in plaintiffs’ name, are presumptive evidence of ownership in the plaintiffs according to analogy with section 10 of the Stock Corporation Law, which states that “ The stock book and books of account of every stock corporation shall be presumptive evidence of the facts therein so stated in favor of the plaintiff, in any action or proceeding against such corporation or any of its officers, directors or stockholders.” Plaintiffs contend, moreover, that the passage of sixty-six years without the assertion of adverse claims is evidence both of the ownership in plaintiffs and of the loss of the certificate, citing Guilford v. Western Union Tel. Co. (59 Minn. 332); Butler v. Glen Cove Starch Mfg. Co. (18 Hun 47); Ganel v. Aleman Planting & Mfg. Co. (160 La. 422); State ex rel. Seaton v. New Orleans & Carrollton R. R. Co. (51 La. Ann. 909).

These considerations might move us to the conclusion that a presumption of ownership of these shares in plaintiffs flowed from these circumstances, except for two other factors taken in conjunction with each other. It is not necessary to decide whether either of those factors separately would be enough to defeat plaintiffs’ claim. They are that Blake Brothers No. 1 was a member of the New York Stock Exchange, and that it is and was then customary for member firms to register securities belonging to their customers in their own names for the convenience of all concerned. The evidence established that Blake Brothers followed this custom and practice. One of the partners frankly admitted that, after conducting an extensive investigation, he did not know whether the shares represented by the certificate in question were acquired by the firm for its own account or for the account of one of its customers. The true fact would have been shown upon the firm’s blotter or day book, as well as upon its ledger sheets and the ledger sheets of its customers. Unfortunately these books of plaintiffs were destroyed about every seven years, and diligent search failed to uncover books of the firm prior to 1920. The books for subsequent years contained no mention of certificate No. 390. In 1924, and this leads to the second factor why the presumption of ownership in plaintiffs was properly not applied, an independent audit of Blake Brothers No. 1 was conducted by an accounting firm known as Leslie Banks & Company. The New York Stock Exchange inaugurated a custom of annual audits of stock exchange firms at about that time. The 1924 audit of this firm’s accounts listed the assets of the firm in detail, but without showing any right, title or interest in the Texas Pacific Land Trust.

Shares in this land trust were listed, as has been said, upon the New York Stock Exchange and were traded during all of the years since 1888, when the certificates were originally issued. Although it is argued in appellant’s behalf that this is a circumstance favorable to them, in that one might expect adverse claims to have been made to these shares if they were not owned by Blake Brothers No. 1, it operates also in favor of respondents by tending to indicate that this stock exchange firm would have been sufficiently market conscious to have been aware of the existence of these assets, if they belonged to it, and to have caused them to be listed in the auditor’s statement of 1924. By that time their value had become more than negligible. These shares had a market value in that year which varied from $26,000 to $32,500. Appellants seek to impugn the probative force of their audit made in 1924 as evidence that these shares were not then owned by Blake Brothers, by calling attention to the circumstance that the auditors criticized the bookkeeping methods of this firm. For example, the auditors called attention to failure to keep a stock book in the New York office, the showing of overages and shortages in shares of stock held for the account of customers, and mentioned the circumstance that in two instances at least (one of them in the Boston office), employees had embezzled funds of the partnership. Although these criticisms probably indicate that the bookkeeping and clerical work were not of the best according to present day standards, this attack upon their accuracy is scarcely sufficient to demonstrate that the books and records of Blake Brothers should be disregarded insofar as they display this omission among the assets of the firm. The circumstance that these 100 shares represented by certificate 390 of the Texas Pacific Land Trust nowhere appear to have been listed as assets in 1924, is certainly some evidence having probative force to show that they were not then owned by the firm. Coupled with the fact that they were accustomed to carry shares of their customers in their own name, the inference is as strong that the certificate was surrendered to a customer to whom it belonged as it is that the registration in the street name indicated ownership by Blake Brothers. Even if Blake Brothers No. 1 had been the beneficial owner in 1888, the absence of any record of these shares as part of the assets in 1924 tends to establish that they had then been sold to others.

The evidence indicates that it was customary for Blake Brothers, like other stock exchange firms, to take regular inventories of the securities on hand to determine whether the assets listed on the books actually were in the firm’s possession. Annual reports of the trustees were sent to the certificate holders, and a considerable number of meetings of the trustees were held of which notice was given during this interval of time. These are circumstances which cut both ways since, as by the trading of Texas Pacific Land Trust shares on the stock exchange, both the members of Blake Brothers and any adverse claimants would have been likely to have been alerted by these notices. The fact appears to be that no one was alerted until dividends commenced to be paid to Blake Brothers No. 3 in 1936. This reasoning operates to the advantage of respondents, and calls for affirmance rather than reversal of the judgment inasmuch as the burden of proving that the shares belonged to them rested upon plaintiffs-appellants, The circumstance that none of the members of the firm of Blake Brothers No. 1 called attention to the oversight in failing to carry these shares upon their books, if oversight it was, notwithstanding the constant prodding which reading the financial pages of the newspapers and receiving these notices must have given to them, indicates at least as strongly that they did not then belong to the partnership as it does the reverse. Therefore the parties having the burden of proof should fail rather than their adversaries.

The circumstances which appellants set forth which are alleged to confirm their title are really without force or effect in the absence of further evidence. Plainly these shares traveled around the street from one firm or private owner to another without transfer on the books of the Texas Pacific Land Trust. That is indicated by the failure to present the other four certificates for transfer, before the lapse of a number of years after they had been indorsed by Blake Brothers. Likewise, the presentation of two of them by two other stock exchange firms (Robert Groodbody & Co,, and Rolston & Hooley) is of some significance in that connection. The mere circumstance that the other four certificates in Blake Brothers’ name were presented for transfer whereas certificate No. 390 was not presented proves nothing. Neither is appellants’ contention substantial that the railroad bonds presented by Blake Brothers to obtain these 500 shares of proprietary interest in the trust were registered in other names and added up to exactly $50,000 face amount. It is contended that this is the sort of speculative professional ” transaction which a brokerage house typically engages in for its own account, yet that conclusion is speculative. It might have been engaged in for the account of a customer. (Exhibits 5 and 6 show the denominations, and names of former owners, of these railroad bonds which were presented by Blake Brothers; the fact fails to establish the point at issue that as much as $10,000 was not previously registered in any one name. Any customer of Blake Brothers could just as well have paid for assembling them in sufficient quantities to enable the acquisition of 100 share certificates in the land trust, and it does not follow with any degree of cogency that this was done by Blake Brothers for their own account.) Neither is it particularly significant that the original owners of these railroad bonds (or certificates of deposit, to be exact), had caused to be issued to themselves in their own names other certificates for other shares of the trust. No greater significance seems to attach to the striking out of the address of Blake Brothers on the books of the trust from 5 Nassau Street to 25 Broad Street (cf. plaintiffs’ Exhibit 2). That merely tends to indicate that this lost certificate continued to be registered in Blake Brothers’ name when they moved to 25 Broad Street on September 1,1901. It is of no particular consequence whether the other 400 shares were sold before or after that date, and does not tend to establish present ownership of certificate No. 390 in Blake .Brothers No. 1.

The language of article Second of the declaration of trust does not materially aid appellants. It states that ‘ ‘ In the event of a certificate being lost the trustees, upon being satisfied thereof and indemnified, may under such reasonable regulations as they may prescribe, issue a duplicate certificate in the place of the one that has been lost and the said Trust Company shall countersign the same when presented for that purpose ”. No more important is the statement on the face of the certificates themselves that they are transferable only on the books of the said Trust on the surrender of this certificate ”. These clauses merely empower the trustees to replace lost certificates, but do not compel them to do so in the absence of proof that the claimant is the owner.

Neither do the provisions of section 10 of the Stock Corporation Law, even if regarded as controlling by analogy, require the issuance of a new certificate to plaintiffs. The trial court stated that “ The situation might be different if the plaintiff were a private person.” Whether or not section 10 of the Stock Corporation Law applies, there could be no presumption of title in Blake Brothers if the certificates were registered in its name as a street name for the account of customers. The evidence indicates that to have been the situation with respect to a large number of shares of stock in various corporations which were registered in the name of Blake Brothers. Moreover, presumptions fail when the facts appear, and the trial court was at liberty to credit and be' governed by the evidence of'Blake Brothers’ books in 1924 which omitted to list this item of property as an asset of the firm. Whatever importance be given to section 10, or to its cognate provision in article Second of the articles of the declaration of trust, as bearing upon the ownership of these shares in 1888 when they were first registered in Blake Brothers’ name, Matter of Speir (69 App. Div. 149, supra) holds that this must be followed by proof of ownership at the time of the loss. Such proof was lacking.

Insofar as concerns plaintiffs-appellants ’ claim to accrued dividends, the language of section 10 of the Stock Corporation Law and of article Seventh of the Declaration of Trust — “ Dividends shall be payable only to the persons who are by the books of the trustees shown to be the certificate holders at the time the dividends shall be payable ” — is solely for the benefit and protection of the corporation or of the trust. The corporation, or, in this instance, the trust, could not be held liable at the instance of the actual owner if, in good faith, it had previously paid dividends to the record owner. (Brisbane v. Delaware, L. & W. R. R., 94 N. Y. 204, 207; Turnbull v. Longacre Bank, 249 N. Y. 159.) There can be no valid argument that a corporation or trust can be compelled to pay dividends to a registered owner in the face of notice of facts and circumstances which destroy any presumption that he is the owner. Clauses of this nature would hardly protect a corporation or trust, let alone compel it to make the payments, if with knowledge that the shares belonged to somebody else, it insisted upon payment to the registered owner. This is indicated by the language in the Brisbane case at page 207 that “ The administrator was clearly authorized to receive the dividends as the stock stood upon the hooks, and the defendant was bound to pay the same unless it had some notice of a change of the title, or of a transfer of the stock, or such knowledge or information as would put it upon inquiry as to the ownership thereof.” In order to be consistent we must hold that neither the accrued dividends nor a new certificate are to be delivered to plaintiffs-appellants. If they have failed to sustain the burden of proving their ownership of the shares, they are not entitled to receive the dividends. The Utah case of Lindner v. Utah Southern Oil Co. (2 Utah 2d 74), does not aid appellants. There the actual owner of unregistered stock sued the corporation to recover dividends which had been paid to the record owner without notice of the actual ownership. A judgment for the plaintiff was reversed, and the claim dismissed upon the ground that the corporation was protected in the payment of dividends to the registered owner where it was uninformed that he was not the owner. That is different from holding that a corporation can be compelled to pay dividends to the record owner, if he has failed to prove that he is the owner when his title to the stock has been challenged.

We do not need to determine what may become of this substantial interest in the Texas Pacific Land Trust if plaintiffs are never able to succeed in establishing their ownership. The judgment appealed from dismisses the complaint without prejudice. If plaintiffs are subsequently able to discover new evidence, the judgment does not prevent them from making another attempt to assert their title successfully.

In this view of the case, we do not reach the question whether or to what extent these trustees might be personally liable in event of the issuance of a new certificate.

The judgment appealed from should be affirmed, with costs.

Fuld, J.

(dissenting). Only conjecture and guesswork exist to refute plaintiffs’ proof that Blake Brothers & Company is the owner of the 100 shares of Texas Pacific Land Trust, represented by lost certificate No. 390.

In 1888, that certificate was issued to, and in the name of, Blake Brothers, was delivered to it, has never been transferred on the hooks of the Land Trust and remains today, after all these sixty-six years, registered in the name of that firm. The certificate has been lost, but there is no evidence that it was ever indorsed or transferred or that it ever belonged to any one but Blake. Despite the passage of the many years since the issuance of the certificate — which is now worth almost $2,000,000 — no one, other than Blake, has ever made a claim of ownership and no one is even now making such a claim. In short, there is not an iota of evidence of ownership in any one except Blake, beneficial or otherwise. Indeed, during the last eighteen years, dividends have been regularly paid and no one, other than Blake, has appeared to claim those dividends, which up to the time of trial amounted to over $131,000. Nor may it be thought that this was an obscure or an unknown security, for it has at all times been listed on the New York Stock Exchange.

Such evidence as I have briefly set forth, and there is more, establishes, in my judgment, as a matter of law, proof of ownership in Blake. It is true, as urged by defendants, that Blake, as stockbroker, might have purchased the 100 shares in question for some customer or customers, but it may just as well have bought them for its own account. Since there is no evidence that it did not — in other words, since there is no evidence that it acquired the shares for some third party — the proof of record title, persisting for almost seventy years, without the assertion, or even the suggestion, of an adverse claim creates a presumption of ownership which has neither been impugned nor weakened in any way. (Cf. Stock Corporation Law, § 10; also Butler v. Glen Cove Starch Mfg. Co., 18 Hun 47, 49; Ganel v. Aleman Planting & Mfg. Co., 160 La. 422, 423; Guilford v. Western Union Tel. Co., 59 Minn. 332, 344, 346; Shore Line Oil Co. v. King, 68 Nev. 183, 194.) Opposed to such proof is nothing more than unsupported speculation that some third party had an interest in the certificate.

The judgment should be reversed and a judgment entered directing defendants (1) to pay plaintiffs the dividends declared and unpaid with respect to the shares in question, and (2) to issue and deliver to plaintiffs a new certificate for 100 shares in place of the one lost, upon plaintiffs’ furnishing to defendants an appropriate surety company bond to indemnify them against any damages that might result from the issuance of such new certificate.

Conway, Desmond, Dye and Froessel, JJ., concur with Van Voorhis, J.; Fuld, J., dissents in an opinion in which Lewis, Ch. J., concurs.

Judgment affirmed.

       It is not possible to trace the ownership through what became of these second mortgage bonds. All of those which were issued to Blake Brothers were presented for transfer, but the railroad’s books do not indicate by whom.


source: Caselaw Access Project

author: Dye, J. Desmond, J.

license: Public Domain

text:
    In the Matter of the City of New York, Relative to Acquiring Title to Real Property Required for Harlem River Drive from West 155th Street to 8th Avenue, etc., in the Borough of Manhattan. Jay Coogan et al., Appellants; Alfred J. Bohlinger, Superintendent of Insurance of the State of New York, as Liquidator of New York Title and Mortgage Company, Respondent.
    Argued June 2, 1954;
    decided July 14, 1954.

      Samuel Ross Ballin and Timothy N. Pfeiffer for appellants.
    I. Respondent did not acquire the fee title by adverse possession. (Heard v. City of Brooklyn, 60 N. Y. 242; Roby v. New York Central & H. R. R. R. Co., 142 N. Y. 176; Hudson & Manhattan R. R. Co. v. Wendel, 193 N. Y. 166; Miner v. New York Central & H. R. R. R. Co., 123 N. Y. 242; Lewis v. New York & Harlem R. R. Co., 162 N. Y. 202; Treadwell v. Inslee, 120 N. Y. 458; Kip v. New York Central R. R. Co., 140 Misc. 62, 236 App. Div. 654, 260 N. Y. 692; City of New York v. Coney Is. Fire Dept., 259 App. Div. 286, 285 N. Y. 535; Becker v. McCrea, 193 N. Y. 423; Arents v. Long Is. R. R. Co., 156 N. Y. 1; Long Is. R. R. Co. v. Mulry, 212 N. Y. 108.) II. Respondent’s foreclosure of the tax lien on the upland (damage parcels Nos. 2 and 3) did not cut off Mrs. Coogan’s fee title. (Ten Eyck v. Craig, 62 N. Y. 406; Cornell v. Woodruff, 77 N. Y. 203; Tax Lien Co. v. Schultze, 213 N. Y. 9.)

      Julius B. Sucker for respondent.
    I. As of the date of vesting of title in the city, the Superintendent was the fee owner of all of the property in question by virtue of adverse possession. (Heard v. City of Brooklyn, 60 N. Y. 242; Roby v. New York Central & H. R. R. R. Co., 142 N. Y. 176; Miner v. New York Central & H. R. R. R. Co., 123 N. Y. 242; Crouch v. State of New York, 218 App. Div. 356; Kip v. New York Central R. R. Co., 140 Misc. 62, 236 App. Div. 654; Klin Co. v. New York R. T. Corp., 271 N. Y. 376; Timpson v. Mayor of City of N. Y., 5 App. Div. 424; Knapp v. City of New York, 140 App. Div. 289; Becker v. McCrea, 193 N. Y. 423; Madison Ave. Baptist Church v. Baptist Church in Oliver St., 73 N. Y. 82; City of New York v. Coney Is. Fire Dept., 259 App. Div. 286, 285 N. Y. 535; Lewis v. New York & Harlem R. R. Co., 162 N. Y. 202; Upington v. Corrigan, 151 N. Y. 143; Nicoll v. New York & Erie R. R. Co., 12 N. Y. 121.) II. Further and independent of his title by adverse possession, the Superintendent acquired a valid fee title to the properties in question by the foreclosure of the tax lien and the mortgage foreclosure. (Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304; Goebel v. Iffla, 111 N. Y. 170; Cromwell v. MacLean, 123 N. Y. 474; Helck v. Reinheimer, 105 N. Y. 470; Jordan v. Van Epps, 85 N. Y. 427; Cornell v. Woodruff, 77 N. Y. 203; Ten Eyck v. Craig, 62 N. Y. 406; 579 Flatbush Ave. Realty Corp. v. Rosruth Realty Corp., 250 App. Div. 781.) III. The railroad company obtained a title in fee simple absolute to the properties in question by virtue of the 1919 condemnation and the Superintendent succeeded to that title by foreclosure of a valid first mortgage thereon. (Thompson v. Orange & Rockland Elec. Co., 254 N. Y. 366; Kip v. New York Central R. R. Co., 140 Misc. 62, 236 App. Div. 654, 260 N. Y. 692, 290 U. S. 636; Matter of City of Buffalo, 206 N. Y. 319.)
   Dye, J.

In this condemnation proceeding instituted by the City of New York to acquire title to certain lands necessary for Harlem Eiver Drive, so-called, the claimants, Jay Coogan, Gardiner Coogan and Sarah Jessie Coogan appeal by permission of this court from an order of the Appellate Division, First Department, which unanimously affirmed an order of the Supreme Court, New York County, adjudicating that claimant-respondent, Alfred J. Bohlinger, Superintendent of Insurance of the State of New York, as Liquidator of the New York Title and Mortgage Company, is the owner in fee simple absolute of certain damage parcels involved in the proceeding and therefore entitled to the condemnation award therein.

The appellant, Jay Coogan, appeals from the aforesaid order insofar as it determines the ownership of damage parcels 2, 3 and 6 while the appellants, Gardiner Coogan and Sarah Jessie Coogan appeal from the order only insofar as it determines the title to damage parcel 6. The damage parcels in question are shown on the City’s Exhibit 10 as damage parcels 2, 3 and 6 and consist of property lying in the block between West 155th Street and West 156th Street, Eight Avenue and Harlem Eiver Drive — ■ damage parcel 6 being the bulkhead rights along the river.

When the proceeding was instituted both the Superintendent of Insurance and the Coogans made claim to ownership of the property in question, the Superintendent claiming damage parcels 2, 3 and 6 among others not involved in this proceeding, the appellants, Jay Coogan, Gardiner Coogan and Sarah Jessie Coogan claiming title to damage parcel 6 and appellant Jay Coogan also claiming title to damage parcels 2 and 3.

The claim of Jay Coogan originally included damage parcels 4 and 5 as well, title to which is claimed by the city. At the trial, however, it was agreed to leave the determination of title to damage parcels 4 and 5 to the time of fixation of the award.

Up to 1919, Harriet J. Coogan, the mother of the appellants, Avas the undisputed owner of damage parcels 2, 3 and 6 and of adjoining property. In 1919, the Eighth Avenue Eailroad Company (hereinafter “ Eailroad ”) instituted a condemnation proceeding to obtain title to damage parcels 2, 3 and 6 for use as a power plant and a car barn. An order was entered granting Mrs. Coogan the sum of $439,762.20 for the property. The Railroad then entered into possession of the premises and used them for railway purposes until May 31, 1935, when it ceased operations by order of the Federal District Court.

While in possession the Railroad executed certain instruments affecting the property as follows:

At the time of the condemnation order it gave a mortgage; for the sum of $280,000 to the Columbia Trust Company, purporting to cover the fee of the property. Thereafter, in December, 1926, the Railroad attempted to convey the fee by full covenant and warranty deed to Railways Realty Corporation.. Railways Realty at this time executed a $150,000 purchase-money second mortgage of the fee to the Railroad and the entire premises were then leased by Railways Realty to the Railroad.

In May, 1932, the Irving Trust Company, successor to the Columbia Trust Company, assigned the $280,000 original mortgage to the New York Title and Mortgage Company and in August, 1933, the title company was placed in rehabilitation by order of the Supreme Court. A subsequent order dated July 15, 1935, directed the Superintendent of Insurance to liquidate it.

As previously noted, the Railroad ceased operations on May 31, 1935. Thereafter, on June 10, 1936, the Superintendent of Insurance entered into possession on an assignment of rents and profits, so-called, from Railways Realty and on December 18, 1936, the Superintendent, for $52,002.95, purchased a tax lien from the City of New York covering, among others, the: present damage parcels 2 and 3 but not damage parcel 6, the bulkhead rights along the Harlem River. The taxes covered, by the lien had, we assume, accrued prior to the Superintendent’s entry.

In 1939, the Superintendent commenced an action to foreclose (1) the original mortgage made by the Railroad to the Columbia Trust Company, and (2) the tax lien purchased from the city. Mrs. Coogan was named a party defendant and appeared therein by her attorneys but filed no answer. Judgment of foreclosure and sale was executed and a referee’s deed given to the Superintendent on March 5, 1941.

The Superintendent’s present claim to a valid fee title is based upon: (1) the 1919 condemnation as successor in interest to the Railroad; (2) the foreclosure of the mortgage made by the Railroad to Columbia Trust Company; (3) the foreclosure of the tax lien, and (4) adverse possession.

The present appellants are the heirs of Mrs. Coogan. Their claim of title is based upon the following contentions: (1) that the condemnation in 1919 granted the Railroad only an easement; (2) that the mortgages given thereon were only on an easement and could not affect the fee title; (3) that the foreclosure of the tax lien did not cut off Mrs. Coogan’s title because the Superintendent, as mortgagee in possession, had no right to purchase the tax lien, and (4) that the Superintendent was not in possession adversely for the period required by section 37 of the Civil Practice Act.

Special Term sustained appellants’ first two contentions but held that (a) the foreclosure of the tax lien cut off Mrs. Coogan’s title as to damage parcels 2 and 3; and (b) that, in any event, the Superintendent of Insurance and his predecessors in title had been in adverse possession for longer than the statutory period. An order determining title to be in the Superintendent was accordingly entered and, as previously noted, has been affirmed in the court below.-

Under subdivision 2 of section 8 of the Railroad Law, in substance in effect at the time of the condemnation proceeding in 1919, the land acquired by the Railroad in that proceeding was to be “ held and used only for the purposes of the corporation during the continuance of the corporate existence ”. This has been construed as granting a railroad only an easement in property taken by condemnation which terminates when the railroad ceases operation and abandons the use of the property (Miner v. New York Central & H. R. R. R. Co., 123 N. Y. 242; Roby v. New York Central & H. R. R. R. Co., 142 N. Y. 176; Hudson & Manhattan R. R. Co. v. Wendel, 193 N. Y. 166), and the Railroad could accordingly convey or mortgage only its interest in the property.

In 1939, however, the Superintendent foreclosed the tax lien on parcels 2 and 3 which he had acquired in 1936, six months after entering into possession. Mrs. Coogan was served in that action and appeared therein by competent counsel but did not answer or move with respect to the rights she now asserts in the property. Under ordinary principles of res judicata, the heirs of Mrs. Coogan are barred from asserting a claim their predecessor in title could have made then regarding the validity of the tax foreclosure and their interest in the property (Goebel v. Iffla, 111 N. Y. 170; Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304).

On the merits as well, Coogan’s present claim in respect to the tax foreclosure does not appear to be well taken. It is contended that the Superintendent, as a mortgagee in possession, was under a fiduciary obligation to pay the taxes and could not therefore purchase a tax lien or foreclose thereon. To this there are two answers.

Under Ten Eyck v. Craig (62 N. Y. 406), relied on by the appellants, the most a mortgagee in possession is required to do is to pay taxes out of the income of the property. He need advance no money of his own. Here the proof shows that the Superintendent did not go into possession until June, 1936. Less than seven months after that and while the income derived from the property was negligible, the city auctioned off the unpaid tax lien. The Superintendent thus was forced to purchase the tax lien out of other moneys in order to protect his interest in the property. While appellants argue that the Superintendent eventually received sufficient income from the property to pay off this amount, the record indicates that, from 1936 when the Superintendent took possession until 1952 when the city took title, the property had a net deficit of $98,138.71.

Furthermore, according to appellant’s own theory, the mortgage was — at most — a mortgage upon an easement. Under such a view, the Superintendent’s fiduciary obligation, if any, would, as we see it, extend only to the mortgagor and not to the owner of the reversion, the Coogans, strangers to the mortgage.

Finally, if the mortgage became a nullity in 1935 when the railroad ceased operations, then the Superintendent was not a mortgagee in possession when he purchased the tax lien and he accordingly had every right to purchase the lien on foreclosure.

This brings us to the question of the effect of the railroad’s ceasing operations in 1935 and the Superintendent’s claim to title by adverse possession. This claim affects all three parcels of land while the tax lien foreclosure determination only affects title to parcels 2 and 3. Accordingly, the Superintendent’s claim to title to damage parcel 6, the bulkhead rights, must depend on this ground alone.

As previously noted, the fee title remained in Mrs. Coogan after the 1919 condemnation, the Railroad acquiring only an easement therein which, by statute, was good only while the land was held and used * * * for the purposes of the corporation during the continuance of the corporate existence (Railroad Law, § 8, subd. 2). Accordingly, as long as the Railroad was in existence and continued to use the property for railway purposes, it was in possession in subordination to Mrs. Coogan’s title and could not be adverse even though it was mistakenly claiming title to the fee in hostility to the Coogans (Lewis v. New York & Harlem R. R. Co., 162 N. Y. 202; Kip v. New York Central R. R. Co., 260 N. Y. 692, affg. 236 App. Div. 654, affg. 140 Misc. 62).

However, on May 31, 1935, the Railroad ceased operations by court order and its physical property was sold. The parties have, in fact, stipulated that damage parcels 2, 3 and 6 ceased being used for railroad purposes on that date. The Coogans were thus entitled on that date to take possession of the property (Heard v. City of Brooklyn, 60 N. Y. 242; Miner v. New York Central & H. R. R. R. Co., 123 N. Y. 242, supra; Roby v. New York Central & H. R. R. R. Co., 142 N. Y. 176, supra). Having failed to do so for longer than the statutory period of fifteen years (Civ. Prac. Act, §§ 37, 39), it follows that they are bound by the adverse possession of the Superintendent and his predecessors in title.

Appellants rely on Roby v. New York Central & H. R. R. R. Co. (supra) in support of their claim that their right to re-enter did not accrue until they had actual notice that the railroad had ceased using the property. That case is not, however, authority for that proposition and the holding there is only that in that case there was no showing that the railroad had abandoned its use of the property for a public purpose. Here, however, the proof shows that the Railroad ceased operations and its assets were ordered sold on May 31, 1935. „

Finally, it appears that the Superintendent himself occupied the property adversely to the Coogans for more than fifteen years after the railroad ceased operations. The Superintendent came into possession in June, 1936, and operated and rented it. While his possession was originally with consent of Railways Realty which claimed a fee title to the premises, it was hostile to the claim of the appellants as the Superintendent claimed possession as a mortgagee of the fee. While it was probably true that the Railroad could not properly give such a mortgage, this did not affect the right of the Superintendent, who claimed, under a written instrument, to hold adversely to the Coogans (Civ. Prac. Act, § 37). To hold otherwise would, in effect, make it impossible to establish adverse possession upon the basis of a written instrument if it developed that the grantor’s title was less than a fee. Here the Superintendent and his predecessors in title, Railways Realty, had been in open, notorious, continuous and exclusive possession of the property since 1935, when the railroad ceased operations, claiming an absolute right thereto based upon written instruments.

The order appealed from should be affirmed, with costs.

Desmond, J.

(dissenting). This proceeding was brought by the City of New York to condemn several parcels of land on and near the Harlem River, and the question is as to whether the awards made for three of those parcels belong to respondent Superintendent of Insurance, as liquidator of a mortgage company, or to appellants Coogan. The same parcels had been, in about 1920 (when owned by Harriet Gr. Coogan, who died intestate in 1947, and was the mother of, and predecessor in title of, appellants) the subject of an earlier condemnation suit brought by Eighth Avenue Railroad Company. Since that earlier acquisition by condemnation was for railroad purposes, it is certain that the interest which passed to the railroad company by that condemnation decree was not a fee title but an easement in the lands for railroad purposes, and that the fee title remained in appellants’ predecessors with the right to re-enter if the railroad use should be permanently abandoned, as it was, some years later (Miner v. New York Central & H. R. R. R. Co., 123 N. Y. 242; Roby v. New York Central & H. R. R. R. Co., 142 N. Y. 176 ; Hudson & Manhattan R. R. Co. v. Wendel, 193 N. Y. 166; Harris v. Elliott, 35 Pet. [U. S.] 25).

In 1935, Eighth Avenue Railroad Company, owner of that easement, being then in receivership, discontinued its railroad operations, and in 1936, pursuant to court order, permanently abandoned its railroad franchise. Mrs. Coogan then had a right to re-enter, but never did so. Other pertinent facts will be mentioned later, when we discuss the respective positions of the rival claimants. What is undisputable is that in 1935 or 1936, the easement ended and Mrs. Coogan’s right to re-enter became absolute. The claim of her children, as her heirs, to this condemnation award is resisted, however, by respondent Superintendent, whose own claim thereto, upheld below, is based: first, on alleged adverse possession; and, second, on his purchase of the parcels at a judicial sale following the foreclosure, at the Superintendent’s suit, of a mortgage and a tax lien. We will take up, in that order, those contentions of the Superintendent of Insurance.

But, first, we need some background facts as to how the Superintendent came into the picture. In 1921, Eighth Avenue Bail-ways Company, owner as aforesaid of a railroad use easement in the premises, gave to a bank a $280,000 mortgage purporting to (but obviously not) incumbering the fee of all three parcels. Later, and again seemingly describing a nonexistent fee title, Eighth Avenue gave a deed of the lands to its wholly-owned subsidiary corporation. Meanwhile, and until the 1935 receivership above mentioned, Eighth Avenue, or its subsidiary, continued to apply the property to railroad uses. In June, 1936, the mortgage having meanwhile become the property of New York Title and Mortgage Company, and respondent Superintendent of Insurance being that company’s official liquidator, and the mortgage being in default, the Superintendent, under an assignment of rents, took possession (at least to the extent of collecting the rents) of the parcels described in the mortgage. Later in 1936, the Superintendent purchased, for about $52,000, a New York City tax lien covering two of the three parcels described in the mortgage. It sufficiently appears that part, at least, of that $52,000, came not from rents collected by the Superintendent, but from other sources. In 1939, the Superintendent brought an action to foreclose both the mortgage and the tax lien. Mrs. Coogan, predecessor of appellants and then the owner of the rights which appellants are now asserting, was named as a defendant and appeared by attorneys but filed no answer. The suit went to judgment and sale, and the Superintendent, as purchaser at the referee’s sale, tooka referee’s deed to the parcels.

The Superintendent’s claim of adverse possession is untenable as to any of the parcels, since neither he, nor the railroad company or its subsidiary corporation, ever had a possession which was hostile to the fee title of appellants and their predecessors. An unescapable requirement of law is that possession, to be adverse, must be hostile to the true holders of the title (Belotti v. Bickhardt, 228 N. Y. 296, 302). Accordingly, adverse possession can never be based on possession or use under a license or permit from the owner of the fee (Matter of City of N. Y. [Piers Old Nos. 8-11], 228 N. Y. 140, 155; New York Central & H. R. R. R. Co. v. City of Buffalo, 85 Misc. 78, 90; Hinkley v. State of New York, 234 N. Y. 309, 316). Possession and use begun with consent are presumed so to continue (Harrison v. New York Central R. R. Co., 255 App. Div. 183, 186, affd. 281 N. Y. 653; Treadwell v. Inslee, 120 N. Y. 458; Lewis v. New York & Harlem R. R. Co., 162 N. Y. 202, 221). Adverse possession must be exclusive, under no permission or license or favor upon the part of the owner; the claim must be under color of independent title, exclusive of any right derived from the actual owner * * * When the entry upon land has been by permission or under some right or authority derived from the owner, adverse possession does not commence until such permission or authority has been repudiated and renounced and the possessor thereafter has assumed the attitude of hostility to any right in the real owner * * * ‘if the first possession is by permission it is presumed to so continue until the contrary appears [Lewis v. New York & Harlem R. R. Co., 162 N. Y. 202, 220] ” (Hinkley v. State of New York, supra, pp. 316-317). That rule, apparently universal throughout the United States, has been properly applied to railroad use easements, the holdings being that possession after the railroad use ends is not adverse possession ” unless and until there has been direct notice, to the title owner, of the hostile claim (Branch v. Central Trust Co., 320 Ill. 432; City of Grand Rapids v. Pere Marquette Ry. Co., 248 Mich. 686). Miner v. New York Central & H. R. R. R. Co. (123 N. Y. 242, 250, supra) is not to the contrary, since, so far as pertinent at all, that decision depends on its special facts, including an actually adverse possession by an entirely different corporation. How far our own courts go in enforcing the rule itself is vividly illustrated by City of New York v. Coney Is. Fire Dept. (259 App. Div. 286, affd. 285 N. Y. 535). There a volunteer fire department, in 1893, took land under a deed from a predecessor of the City of New York, which deed imposed the condition that it be used for fire purpose ” only; in 1898 such use was permanently abandoned but the volunteer fire company remained in "possession for about forty years longer. Notwithstanding all that, the courts held, in the Coney Island case, that there was no adverse possession by the company and the right of the city to effect a re-entry continued. There was no real question of adverse possession ”, held the Appellate Division (p. 289), since, after the fire use had been openly abandoned, the city had the right to re-enter at any time it chose. In the present case, the railway use began and continued with the permission of the true owner, the Superintendent’s later possession was subordinate to the railroad company’s (see Becker v. McCrae, 193 N. Y. 423, 427) and there never was notice to appellants or to their predecessor that a new and hostile right was being asserted. Thus, adverse possession could not have commenced to run until the Superintendent took the referee’s deed in 1941, thereby asserting a new title. But the necessary fifteen years (Civ. Prac. Act, § 35) did not lapse from the time of the delivery of that deed till, in 1952, the city took title to, and possession of, all the parcels, in the course of this present condemnation proceeding. We conclude that there is no basis for the Superintendent’s claim of title by adverse possession. ‘ ‘ It would shock that sense of right which must be felt equally by legislators and by Judges, if a possession which was permissive, and entirely consistent with the title of another, should silently bar that title ” (Marshall, Ch. J., in Kirk v. Smith, 9 Wheat. [U. S.] 241, 288).

Respondent’s other claim to ownership stands on his foreclosure judgment and referee’s deed. As to the foreclosure of the tax lien, we think he must be held to have taken the referee’s deed in trust for appellants. No decision has been found with precisely the same facts as ours, but to the facts of our case there is clearly applicable the settled rule of equity that one in possession of realty whose position is such that he owes some protective or similar duty to the owners of other interests, cannot purchase an outstanding interest and use it to exclude those other persons to whom he has a duty (as to the generality of that rule, see Burhans v. Van Zandt, 7 N. Y. 523, 526, 527, and, particularly, Rothwell v. Dewees, 2 Black [U. S.] 613, 614, 619; see elaborate note and numerous citations, 140 A. L. R. 294). Thus, purchase by a mortgagee in possession, of a tax lien, is regarded as payment of the taxes and a foreclosure of the lien is, in equity, a nullity (Ten Eyck v. Craig, 62 N. Y. 406; Burchard v. Roberts, 70 Wis. 111; Shepard v. Vincent, 38 Wash. 493). Quite recently, in Van Duzer v. Anderson (306 N. Y. 707), we made a similar holding as to the purchase of an outstanding tax lien, by a tenant in common. Here, the Superintendent, not having rent moneys available therefor, may not have been under a duty to buy the old lien, but the question is as to what his position was when he did in fact buy it. He was in possession of the properties in the right of the railroad company, or its subsidiary corporation (Becker v. McCrae, supra). The railroad company had defaulted in its obligation to pay taxes during occupancy. There was of course no such obligation on appellants or their predecessor to pay those very taxes, or any reason for their doing so. Occupying the premises in the alleged right of the easement holder, the Superintendent, buying such a tax lien, could not equitably use that lien to destroy the fee title on which his own possession depended. If that were possible, the owner of an easement, by mortgaging it, defaulting on the mortgage, and arranging for the payment by the mortgagee of taxes payable by the holder of the easement, and having those taxes foreclosed, could use his own default to enlarge his easement into a fee title.

Nor can respondent claim any right from the purported foreclosure of his mortgage, since the easement on which the mortgage was a lien had ended by nonuser, and the mortgage was a lien on nothing.

Full equity will be done to both sides of this dispute by holding that the award belongs to appellants, subject to a lien thereon, to respondent, for the amount paid by him for the tax lien, with appropriate interest.

The order should he reversed, with costs in all courts, and the matter remitted to Special Term for further proceedings consistent herewith.

Lewis, Oh. J., Froessel and Van Yoorhis, JJ., concur with Dye, J.; Desmond, J., dissents in an opinion in which Fuld, J., 'concurs; Conway, J., taking no part.

Order affirmed.


author: Conway, J.

text:
    In the Matter of Reuben Hecht, Appellant, against George P. Monaghan, as Police Commissioner of the City of New York, Respondent.
    Argued March 11, 1954;
    decided July 14, 1954.

      Robert Markewich, Arthur Garfield Hays and Osmond K. Fraenkel for appellant.
    I. Petitioner-appellant was entitled, as a matter of right, not of favor, to a hearing respecting the revocation of his hack driver’s license. II. Where administrative action is judicial rather than legislative, determining liabilities on the basis of past events, due process requires a hearing even if the statute is silent on the question of a hearing. (Prentis v. Atlantic Coast Line, 211 U. S. 210; Philadelphia Co. v. Securities & Exch. Comm., 175 F. 2d 808; People ex rel. Copcutt v. Board of Health of City of Yonkers, 140 N. Y. 1; Interstate Commerce Comm. v. Louisville & Nashville R. R., 227 U. S. 88; Morgan v. United States, 304 U. S. 1; Railroad Comm. v. Pacific Gas Co., 302 U. S. 388; Coe v. Armour Fertilizer Works, 237 U. S. 413; Clarksburg-Columbus Short Route Bridge Co. v. Woodring, 89 F. 2d 788; Bauer v. Acheson, 106 F. Supp. 445.) III. The juridical nature of a license is irrelevant to the issue of whether a holder thereof is entitled to a hearing respecting its revocation. (Matter of Agoglia v. Mulrooney, 259 N. Y. 462; Matter of Wignall v. Fletcher, 303 N. Y. 435; Matter of Katz v. Moss, 184 Misc. 133, 269 App. Div. 854; Garfield v. Goldsby, 211 U. S. 249.) IV. The police commissioner’s reliance upon “ the confidential findings of the Department of Investigation ” and upon other ex parte evidence was a fundamental violation of due process, requiring annulment of the license revocation. (Ohio

      Bell Tel. Co. v. Commission, 301 U. S. 292; Matter of Greenebaum v. Bingham, 201 N. Y. 343; Matter of Heaney v. McGoldrick, 286 N. Y. 38; Lloyd Sabauda Societa v. Elting, 287 U. S. 329; Kwock Jan Fat v. White, 253 U. S. 454; Anti-Fascist Comm. v. McGrath, 341 U. S. 123; West Ohio Gas Co. v. Commission, 294 U. S. 63; Interstate Commerce Comm. v. Louisville & Nashville R. R., 227 U. S. 88.) V. The gratuitous hearing that actually took place failed to meet the minimal requirements of due process. In the eyes of the law, there was no hearing. (Morgan v. United States, 304 U. S. 1; Heaney v. McGoldrick, 286 N. Y. 38; Matter of Greenebaum v. Bingham, 201 N. Y. 343.) VI. The police commissioner charged petitioner-appellant with the offense of short-changing, but received no evidence relative to this charge. He revoked the license on the basis, admittedly, of other considerations. (Matter of Greenebaum v. Bingham, 201 N. Y. 343; Matter of Wignall v. Fletcher, 303 N. Y. 435; Matter of Willie Harmon’s Auto School v. Harnett, 254 App. Div. 707.) VII. The sole words “ Keep change ” on the summons did not constitute adequate notice of the original charge. (Mullane v. Central Hanover Trust Co., 339 U. S. 306; Morgan v. United States, 304 U. S. 1; Matter of Bender v. Board of Regents, 262 App. Div. 627; Matter of 67 Liquor Shop v. O’Connell, 273 App. Div. 68; Silverstein v. Mealey, 259 App. Div. 854; Coe v. Armour Fertilizer Works, 237 U. S. 413.) VIII. Petitioner-appellant was not afforded the opportunity to cross-examine witnesses and to inspect papers received in evidence. Petitioner-appellant was denied the right to defend and refute, and the trial captain was both accuser and judge. He was not impartial, but was searching for a basis to revoke petitioner-appellant’s license. (Matter of Friedel v. Board of Regents, 296 N. Y. 347; Sharkey v. Thurston, 268 N. Y. 123; People ex rel. Hirschberg v. Board of Supervisors, 251 N. Y. 156; Morgan v. United States, 298 U. S. 468; Matter of Grandview Dairy v. Baldwin, 239 App. Div. 640; Matter of Bender v. Board of Regents, 262 App. Div. 627.) IX. The hack bureau regulation, which purports to empower the police commissioner to revoke a hack license for general undefined conduct, is invalid on its face. The powers therein could not even be legislated, much less delegated. (Yick Wo v. Hopkins, 118 U. S. 356; Matter

      of Cherry v. Board of Regents, 289 N. Y. 148; Matter of Seignious v. Rice, 273 N. Y. 44; Matter of Aloe v. Dassler, 303 N. Y. 878; Matter of Picone v. Commissioner of Licenses, 241 N. Y. 157; Matter of Levy v. Valentine, 172 Misc. 130; Matter of A & R Paper & Metals Co. v. Boyle, 202 Misc. 163.) X. The merits of a controversy can never be reached unless the requirements of procedural due process are met.

      Adrian P. Burke, Corporation Counsel {Henry J. Shields and Seymour B. Quel of counsel), for respondent.
    I. Petitioner was accorded a fair hearing upon a substantial charge and there was no impairment of his rights in the conduct of the proceedings. (People ex rel. Donovan v. Board of Fire Comrs., 77 N. Y. 153; People ex rel. O’Neill v. Bingham, 132 App. Div. 667; People ex rel. Coughlin v. Webster, 98 App. Div. 581.) II. The statute does not grant the right to a formal hearing of charges against a licensee. The petitioner’s rights were not enlarged by the hearing that was held. (Matter of Romaner v. Williams, 270 App. Div. 948, 270 App. Div. 1025; People ex rel. Ritter v. Wallace, 160 App. Div. 787; People ex rel. Lee v. Waring, 1 App. Div. 594, 149 N. Y. 621; People ex rel. Westray v. Mayor of City of N. Y., 82 N. Y. 491; People ex rel. Peixotto v. Board of Educ. of City of N. Y., 160 App. Div. 557, 212 N. Y. 463; Matter of Skinkle, 249 N. Y. 172; Matter of Mandel v. Board of Regents, 250 N. Y. 173; People ex rel. Keech v. Thompson, 94 N. Y. 451; People ex rel. Kennedy v. Brady, 166 N. Y. 44.) III. Petitioner could not have the restoration of his license merely because there were some jurisdictional defects in the hearing that was held. He was obliged to show that he has a meritorious defense. (People ex rel. O’Neill v. Bingham, 132 App. Div. 667.) IV. Since the trial officer found petitioner guilty on the record of the hearing, the defendant’s consideration of other matters for the purpose of determining the punishment was not error. (People ex rel. Keech v. Thompson, 94 N. Y. 451; Matter of Dunphy v. Kingsbury, 173 App. Div. 49; Matter of Sunshine v. Marsh, 265 App. Div. 927, 290 N. Y. 775; People ex rel. McAleer v. French, 119 N. Y. 502; People ex rel. Clarke v. Roosevelt, 168 N. Y. 488; People ex rel. Walters v. Lewis, 111 App. Div. 375, 186 N. Y. 583.) V. The requirement of due process does not make the holding of a formal hearing an incident to administrative action which involves the exercise of discretion ; whether the requirement has been satisfied must be determined in each instance by the nature of the case. (Philadelphia Co. v. Securities & Exch. Comm., 175 F. 2d 808; Interstate Commerce Comm. v. Louisville & Nashville R. R., 227 U. S. 88; Morgan v. United States, 304 U. S. 1; Railroad Comm. v. Pacific Gas Co., 302 U. S. 388; Coe v. Armour Fertilizer Works, 237 U. S. 413; Stuart v. Palmer, 74 N. Y. 183; Sharkey v. Thurston, 268 N. Y. 123.) VI. The decisions dealing with the taking of property without notice, upon which the petitioner relies, do not apply to this case since a license to operate a taxicab upon the streets, unlike a franchise, is not property. (Metropolitan Bd. of Excise v. Barrie, 34 N. Y. 657.)
   Conway, J.

Petitioner, in this article 78 proceeding, in the nature of certiorari to review, seeks a reversal of the orders of the Appellate Division and of Special Term and an annulment of the determination revoking his hack driver’s license. The appeal is here as of right upon constitutional grounds (305 N. Y. 800).

On August 28,1952, petitioner, who had been a taxicab driver in the city of New York for a considerable period of time, was brought before a captain in the police department of the City of New York charged with having withheld change from a passenger. As a result of that session petitioner’s hack driver’s license was revoked. On this appeal, petitioner contends that in the revocation of his license he was denied due process of law.

The Administrative Code of the City of New York declares that the taxicab industry in the city of New York is vested with a public interest (Administrative Code, § 436-2.0, subd. 1). It goes on to outline the duties of hack drivers (Administrative Code, § 436-2.0, subd. 24), as well as to provide for the enforcement of those duties by a bureau of the police department known as the hack bureau (Administrative Code, § 434a-5.0). That bureau has been empowered to suspend or revoke the license of any hack driver who fails to comply with the conditions of the code (Administrative Code, § 436-2.0, subd. 27).

The New York City Charter (§ 436) states that the commissioner of the police department of the City of New York “ * * * shall in his discretion issue, revoke and suspend licenses for * * * hacks, taxicabs and taxi drivers * * * and make such rules and regulations for the supervision and operation of such * * * hacks, taxicabs and taxi drivers * * * as are not inconsistent with any other provision of law * * The Administrative Code (§ 436-2.0, subds. 40, 42) elaborates upon that power to suspend or revoke in the following manner:

“ 40. The commissioner may suspend or revoke any driver’s license # * * where the holder has failed to comply with any of the provisions hereof or has wilfully or knowingly violated any of the provisions hereof. * * *

" 42. The commissioner may make and promulgate such rules and regulations and prescribe such forms as are necessary to carry out the provisions hereof.”

The statutes do not require that a hearing be held.

In case a hack driver’s license is revoked or suspended, the statute (Administrative Code, § 436-2.0, subd. 43-a, par. [b]) specifies that it is a violation to drive a taxicab for hire, and upon conviction before a city magistrate a penalty of up to $100 fine and/or up to thirty days’ imprisonment may be imposed. It is clear, therefore, that the effect of the revocation of this petitioner’s license is to preclude him from earning his customary livelihood, since without it he may not lawfully continue his occupation.

In a case but recently before this court, we had the opportunity to consider the nature of a person’s interest in a driver’s license (Matter of Wignall v. Fletcher, 303 N. Y. 435). We held that a license to operate an automobile is of great value to the individual and may not be taken away except by due process. What was said there is applicable here. Indeed, it may be stated with greater force here, for it is evident that the license involved in the present case is of far greater value to the hack driver than an operator’s license is to the ordinary person. The hack driver’s license is the hack driver’s permission to lawfully carry on his business or occupation. Such license is very similar to the seamen’s certificates involved in Matter of Merchant Mari ners Documents (91 F. Supp. 426). Similarly, in view of the fact that petitioner’s license is a condition precedent to his continuance in that occupation, this license is comparable to the “ right ” to continue in business which was involved in Duplex Co. v. Deering (254 U. S. 443) and Truax v. Corrigan (257 U. S. 312). In those cases, the United States Supreme Court decided that a person has a property right in the continuation of his business — in the first case, the manufacture and disposal of printing presses, and in the second, conducting a restaurant. (Cf. Monamotor Oil Co. v. Johnson, 292 U. S. 86, 97.)

Although the statutes empowering the hack bureau and the commissioner to grant, suspend or revoke a hack driver’s license do not expressly require that those licenses may be withdrawn only upon notice and an opportunity to be heard, if is not necessary that they do so. Where the exercise of a statutory power adversely affects property rights — as it does in the present case — the courts have implied the requirement of notice and hearing, where the statute was silent (see Wong Yang Sung v. McGrath, 339 U. S. 33; Clarksburg-Columbus Short Route Bridge Co. v. Woodring, 89 F. 2d 788, 790; Anti-Fascist Committee v. McGrath, 341 U. S. 123; Railroad Comm. v. Pacific Gas Co., 302 U. S. 388; Bauer v. Acheson, 106 F. Supp. 445; People ex rel. Copcutt v. Board of Health of City of Yonkers, 140 N. Y. 1, 6-7).

Doubtless when dealing with its own employees, the action of an administrative body in suspending or discharging them is a merely administrative function, and no notice or hearing is necessary unless specifically enjoined by statute (see People ex rel. Kennedy v. Brady, 166 N. Y. 44; People ex rel. Keech v. Thompson, 94 N. Y. 451).

In the present case, however, the petitioner is not the employee of any public body nor is he the appointee of any municipal officer. Rather, he is a private citizen whose livelihood is derived from the fares and gratuities he receives from the persons whom he serves as a licensed hack driver. He is not under the direct supervision of a public official in the performance of his daily routine, but is merely regulated with regard to certain aspects of his business. The rules applicable to the disciplining, suspension and discharge of civil employees should not be extended to include the suspension or revocation of licenses of those whose salaries are not paid from public funds.

When dealing with the public, the functions of an administrative agency fall into two broad categories, legislative and judicial. The Supreme Court of the United States drew the line of demarcation between those distinct functions in Prentis v. Atlantic Coast Line (211 U. S. 210, 226) where it said: “A judicial inquiry investigates, declares and enforces liabilities as they stand on present or past facts and under laws supposed already to exist. That is its purpose and end. Legislation on the other hand looks to the future and changes existing conditions by making a new rule to be applied thereafter to all or some part of those subject to its power.”

Revocation of a license — even where the same rests within the discretion of an administrative official — is not a legislative act (Matter of Mandel v. Board of Regents, 250 N. Y. 173, 177). Where, as in the present case, the statute empowers the agency to revoke a license because of a failure to comply with or because of willful or knowing violation of the regulations of that agency, then the administrative act is of a judicial nature since it depends upon the ascertainment of the existence of certain past or present facts upon which a decision is to be made and rights and liabilities determined. It is clearly not a merely administrative act concerned with the internal functioning of the agency itself, but it is a judicial or quasi-judicial function of the administrative body.

An examination of the record in this case indicates that whatever claim may now be made that petitioner was not entitled to a hearing before the license was revoked, despite the fact that a property right of petitioner was involved, that idea did not guide the functioning of the bureau involved. In the summons which the petitioner received it is stated that You are summoned to appear for a hearing for a violation of the hack regulations * * * ” (emphasis added) and at the foot of that summons appear the words “ You Mat Bring Witnesses With You ”. Manifestly, then, the respondent recognized an obligation imposed upon it by those fundamental principles of basic justice and fair play which underlie our entire system of jurisprudence.

The hearing held by an administrative tribunal acting in a judicial or quasi-judicial capacity may be more or less informal. Technical legal rules of evidence and procedure may be disregarded. Nevertheless, no essential element of a fair trial can be dispensed with unless waived. That means, among other things, that the party whose rights are being determined must be fully apprised of the claims of the opposing party and of the evidence to be considered, and must be given the opportunity to cross-examine witnesses, to inspect documents and to offer evidence in explanation or rebuttal (see Matter of Friedel v. Board of Regents, 296 N. Y. 347, 352-353; Matter of Heaney v. McGoldrick, 286 N. Y. 38, 45; People ex rel. Hirschberg v. Board of Supervisors, 251 N. Y. 156, 172; Matter of Greenebaum v. Bingham, 201 N. Y. 343, 347; Morgan v. United States, 304 U. S. 1, 18-19; West Ohio Gas Co. v. Commission [No. 1], 294 U. S. 63, 70-71; Lloyd Sabaudo Societa v. Elting, 287 U. S. 329, 339-340; Kwock Jan Fat v. White, 253 U. S. 454, 463-464; Interstate Commerce Comm. v. Louisville & Nashville R. R., 227 U. S. 88, 93-94).

The issue before this court is whether the hearing accorded petitioner prior to the revocation of his hack driver’s license met the minimal constitutional requirements.

Respondent has claimed that before petitioner is entitled to the restoration of his license, he must show that he has a meritorious defense ”. That is not, however, the case when it is alleged that due process of law has been denied; for, as was said in Coe v. Armour Fertilizer Works (237 U. S. 413, 424) : To one who protests against the taking of his property without due process of law, it is no answer to say that in his particular case due process of law would have led to the same result because he had no adequate defense upon the merits ” (citing case).

Turning to the matter of this hearing, the following salient facts appear from the record on appeal. The alleged act of misconduct —- giving change for $1 instead of for $5 on a fifty-five-cent fare — took place at about 12:45 a.m. just past midnight on May 10, 1952. About ten hours later that same morning, the complaining witness telephoned the hack bureau, and on May 19, 1952, the petitioner was interviewed by a patrolman, who informed petitioner of the nature of the charge. Thereafter, on or about August 22, 1952, a summons was mailed to the petitioner. That summons read as follows:

“ No. 220031
SUMMONS
POLICE DEPARTMENT
DIVISION OF LICENSES
Aug 22 1952
To Reuben Hecht 1240 Walton Ave
Officer serving Summons will enter Details of Charge or Complaint against Holder of Licenses on back of second summons stub.
You are summoned to appear for a hearing for a violation of the hack regulations governing Public Hacks and Public Hack Drivers, at the Division of Licenses, 156 Greenwich Street, Manhattan, at 1 p.m. Aug 28 1952.
Bring Your Card and Badge With You
Charge Keep change
Hack Driver No. 49449 Hack No.........
State Registration No. 028-614
Patrolman John L. McDermott
Shield No. 16912 Command HB
George P. Mitchell
Fourth Deputy Police Commissioner
You Mat Bring Witnesses With You ”

The petitioner appeared at the hearing, without counsel. The hearing seemingly commenced with a reading of what was apparently a hack bureau memorandum which recites that the complainant phoned this office and stated that on May 10, 1952, at 12:45 a.m. she had engaged a cab operated by Reuben Hecht at 133d Street and Amsterdam Ave. and requested to be driven to 133d St., between 7th and Lenox Ave. Upon arriving at destination driver was given a $5.00 bill, she received change of $1.00 bill, the fare being $.55.” The petitioner was then asked how he pleaded; and — after looking through a record book he had with him — petitioner answered “ Not guilty, I didn’t work that day ”. The trial captain, then, instead of questioning the complaining witness concerning the charge contained in the aforementioned memorandum that the petitioner had withheld change, simply asked the complaining witness 6 ‘ Is there anything further you want to say ”? (Up to that moment according to the record that witness had said nothing.) The witness replied that “ This doesn’t look like the same man who was operating the cab ”. The trial captain then asked another woman who had also been in the cab: “ Is this the driver? ” She answered: “ What little I saw of him he does look like the man. His actions are certainly that of the man who was operating the cab at the time. ’ ’ Thus, at this point of time there was no positive identification of petitioner as the offending hack driver. Petitioner was then asked whether he had been interviewed concerning the complaint, and he replied: “ No, it was a sort of a screening ’’. The patrolman who had interviewed or screened petitioner was then asked whether he had interviewed the petitioner and his answer was: “ I did, and you were working on the night in question.” At that point the captain presiding at the hearing stated that the payroll sheets of the taxicab company had been checked, and they showed that the petitioner had been operating the taxicab named in the summons on the night of the alleged misconduct. Petitioner was asked for his trip records, but he replied that the hack bureau had not requested them. The trial captain next tried to obtain the summons, but petitioner refused to surrender it, and he was then told that he would be held accountable for his conduct at the hearing. The two witnesses against the petitioner volunteered the statements at this point that they could now identify him as the hack driver concerned because, as one of them put it, “ * * * his actions that night were the same as those of this driver. The reason I make that statement is because he was continually heckling and arguing ’ ’. The affidavit of one of the witnesses recited that the driver’s name had been obtained from the identification card posted inside the cab. There followed a brief exchange between the trial captain and the petitioner, and then the hearing concluded with these words of the hearing officer: “On the basis of your' record here and your actions in this case today I am going to revoke your license. Revoked ”. (Emphasis supplied.)

That summary is almost the same length as the actual transcript of the hearing. In the record here, that transcript covers but four single sides of pages, and the actual testimony is even less, running from folios 72 to 81.

In our opinion at least two errors were committed at the hearing which necessitate a new hearing.

First: There was no actual testimony by the complaining* or other witness that petitioner had withheld change as charged. If the reading of the hack bureau memorandum was to be considered a substitute for testimony as to the facts contained therein, at the very least the trial captain should have so informed petitioner and should have told him that he had the right to cross-examine the witnesses with regard to such proof. This he failed to do.

Second: The revocation of the petitioner’s license was expressly based upon his record here ” and his “ actions in this case today ”. What this “ record ” was does not appear anywhere in the minutes of the hearing, nor had it been mentioned previously either during the hearing, or in the summons. The first time that the petitioner knew or could have known that his previous conduct was to be considered in passing upon his purported offense here was when — at the very close of the hearing — the trial captain mentioned it immediately before revoking the license. Inasmuch as it was a substantial basis upon which the license was revoked, petitioner had a constitutionally guaranteed right to know in advance of the hearing that that evidence would be considered. That he did not have, and that is sufficient reason to set aside the determination of the administrative body (see Lloyd Sabaudo Societa v. Elting, 287 U. S. 329, 339-340, supra).

It may be true, as the respondent argues, that a person’s prior record may be used to determine the amount or the type of penalty; but no matter how long or how carefully we scrutinize the minutes of the hearing in this case, as well as the trial captain’s departmental memorandum to the fourth deputy police commissioner and the affidavit of the acting police commissioner of New York City, it is clear that that was not the case here. There was no separate finding on the charge and then an imposition of the penalty; it was "all one and the same act. Just exactly what part the previous record played in influencing the decision of the hearing officer is not apparent, although the fact that it was mentioned before the reference was made to the petitioner’s “ actions in this case today ” may be indicative of its importance. It may be that the hack driver’s license could have been revoked solely on the basis of the accumulation of prior violations, but that was not the ground of which the petitioner had been informed and it is the complaint which defines and limits the charge and the license may not be suspended or revoked for some reason or upon some ground other than that specified in the charge, as was done here.

In our judgment the above errors resulted in denying petitioner a fair hearing and call for a new hearing.

We also note — although petitioner had not raised the issue and it is unnecessary for us to pass upon it — that the record discloses that none of the witnesses was sworn, which means that at this hearing the traditional safeguards to truthfulness developed in our common-law procedure were absent, viz., (1) cross-examination through which an opponent is enabled to expose intentionally false swearing and also to bring to light circumstances bearing upon inaccuracies of the witnesses in observation, recollection and narration, and to lay the foundation for impeachment of the witnesses, and (2) the judicial oath administered to witnesses with the attendant penalties for willful and deliberate perjury (see Matter of Greenebaum v. Bingham, 201 N. Y. 343, 347, supra; People ex rel. Hart v. York, 169 N. Y. 452; People ex rel. Kasschau v. Police Comrs., 155 N. Y. 40; Napiearlski v. Pickering, 278 App. Div. 456, 457; People v. Hartnett, 124 Misc. 418).

The order of the Appellate Division and that of the Special Term insofar as they denied the motion for an order annulling the determination revoking the petitioner’s hack driver’s license should be reversed, without costs, and the matter remitted to the hack bureau of the New York City police department for further proceedings not inconsistent with this opinion. The appeal from so much of the order of the Appellate Division as affirmed the order of Special Term denying the petitioner’s motion for an order requiring the respondent to serve and file certain “ confidential findings of the Department of Investigation of the City or New York ”, and for reargument, should be dismissed, without costs.

Lewis, Ch. J., Desmond, Dye, Fuld and Froessel, JJ., concur; Van Voorhis, J., taking no part.

Orders reversed, etc.