text:
    George S. Storm, as Administrator of the Estate of Thomas S. Storm, Deceased, Respondent, v. The New York Telephone Company, Appellant.

      (Argued January 14, 1936;
    decided March 3, 1936.)

      Irving W. Young, Jr., N. H. Egleston, E. F. Snydstrup, H. N. Wells and Charles T. Russell for appellant.
    Appellant was guilty of no negligent act or omission which was either the sole or a concurrent proximate cause of the death of respondent’s intestate. Appellant was under no duty to provide respondent’s intestate with a safe place to work. (Kowalsky v. Conreco Co., 264 N. Y. 125; Citrone v. O’Rourke Engineering Constr. Co., 188 N. Y. 339; Mullin v. Genesee County El. L., P. & G. Co., 202 N. Y. 275.) Appellant performed its full duty to respondent’s intestate by expressly warning all of his immediate supervisors of the unsound condition of the poles. (Palsgraff v. Long Island R. R. Co., 248 N. Y. 339; McInerney v. Delaware & Hudson Canal Co., 151 N. Y. 411; Rosebrock v. General Electric Co., 236 N. Y. 227; Sider v. General Electric Co., 203 App. Div. 443; 238 N. Y. 64; Genesee County Patrons Fire Relief Assn. v. Sonneborn Sons, Inc., 263 N. Y. 463; Moch Co. v. Rensselaer Water Co., 247 N. Y. 160.)

      Thomas J. O’ Neill and L. Daniel Danziger for respondent,
    The defendant was guilty of concurrent negligence proximately causing the death of plaintiff’s intestate. (Maher v. Buffalo, R. & P. Ry. Co., 217 App. Div. 532; DeHaen v. Rockwood Sprinkler Co., 258 N. Y. 350; Aaron v. Missouri & K. Tel. Co., 131 Pac. Rep. 582; Murphy v. Rochester Tel. Co., 208 App. Div. 392; 240 N. Y. 629; Rose v. Missouri Dist. Tel. Co., 328 Mo. 1009; Ring v. City of Cohoes, 77 N. Y. 83; Ivory v. Town of Deerpark, 116 N. Y. 476; O’ Neill v. City of Port Jervis, 253 N. Y. 423; Carlock v. Westchester Lighting Co., 268 N. Y. 345; Sweet v. Perkins, 196 N. Y. 482; Speich v. International Ry. Co., 219 App. Div. 620; Anastasio v. Hedges, 207 App. Div. 406.) Notice to the lighting company, its superintendent and foreman was not notice to plaintiff’s intestate of the condition of the pole. O’Connor v. Ebling Brewing Co., 102 Misc. Rep. 234; Anastasio v. Hedges, 207 App. Div. 406; Casualty Co. v. Swett El. L. & P. Co., 230 N. Y. 199; Lechman v. Hooper, 52 N. J. L. 253; Ramsey v. Raritan Copper Co., 78 N. J. L. 474; Riley v. Jersey Leather Co., 100 N. J. L. 300; Brewer v. New York, L. E. & W. R. R. Co., 124 N. Y. 59; County Comrs. v. Timmons, 133 Atl. Rep. 322.)
   Finch, J.

There is no dispute concerning the material facts in this statutory death action.

The plaintiff’s intestate died as a result of injuries received when a telephone pole on which he was working fell. At the time of the accident the deceased, Thomas S. Storm, was in the employ of the Westchester Lighting Company and was engaged in removing from the pole certain cross arms and braces owned by his employer, the lighting company. The pole was owned by the defendant, the New York Telephone Company, and was one of several situated on the southerly side of Westchester avenue in or near the village of Port Chester in Westchester county. The poles were used by the defendant to carry its own wires but it also leased to the West-Chester Lighting Company the right to string certain of its wires on the poles and the lighting company’s employees had a right to be upon the poles.

The defendant inspected the poles along the line and discovered that some of the poles, including the one in question, were in a defective condition as a result of the existence of dry rot in the butts of the poles. The poles were replaced by the defendant in 1928 and it transferred its attachments from the old pole fine to the new pole line, with the exception of one cable, together with its messenger strand or support wire. Under the rule and practice existing between the companies each removed its own wires and attachments from the poles. In December, 1928, the telephone company notified the lighting company in writing to remove its attachments lrom the old poles. The fighting company thereupon erected its own fine of poles on the opposite side of the street for the purpose of transferring its attachments to these new poles.

Several days prior to the accident the district supervisor of the defendant went to the place where the fighting company’s men were working. There he met the assistant district superintendent and the foreman in direct charge of the work of the Westchester Lighting Company and warned them concerning the defective and deteriorated condition of the poles. Frost, the assistant district superintendent of the fighting company, in turn notified the gang foreman of the fighting company to be sure to pike or rope the poles.” Not content with this the defendant notified also the district superintendent of the fighting company. The employees who were thus given personal notice at the very place of the work told the district supervisor of the defendant not to worry, and that they would assume the care. At the trial they admitted that they were warned and that they understood that the poles were in bad condition and that precautions should be taken in doing the work. The exact language used to the assistant district superintendent and foreman of the lighting company before the attachments were removed was, “ For God’s sake be careful because we know and you know that those poles are not sound. They are old and deteriorated.” To which the foreman replied, O. K., Fitz. Don’t worry about it. I will take care of it.”

Nevertheless no precautionary measures were employed by the fighting company. The customary practice of piking or guying defective poles, a practice which admittedly is very effective in preventing the falling of poles and would have prevented the fall of this pole, was completely disregarded. Several of the linemen of the fighting company climbed the pole in question on the day of and the day before the accident. The lineman on the pole before the deceased cut all the fighting company wires and when the last wire was cut it was noticed that the pole swayed a bit. It is not disputed that if the fighting company had not by its own act cut its wire the pole would have remained safe to climb. The deceased, Storm, was then ordered to climb the pole to remove the cross arms and other remaining attachments of the fighting company. While he was engaged in doing this work the pole fell, fatally injuring him.

The jury rendered a verdict in favor of the plaintiff. It made two special findings. It found that notice of the defective condition of the pole was given by the defendant to the Westchester Lighting Company. Nevertheless it also found that the accident was due to the concurring negligence of the defendant and the Westchester Lighting Company. The Appellate Division has unanimously affirmed the judgment rendered on this verdict.

What was the duty owing by the defendant to the deceased lineman, Storm? Was this duty violated? A proper determination of this cause depends upon the answers to these two questions.

The employer of the deceased was a lessee of the right to maintain cross arms, attachments and wires on the pole. The relationship, however, was not one where the defendant leased exclusive possession of the pole. Although the fighting company obtained certain fixed rights the defendant owned and continued to use the pole for its own wires. The defendant, therefore, cannot claim that the duty owed by it to Storm was only that which a landlord normally owes to the employees of its tenants. The defendant, in giving the right to the fighting company to maintain wires on the poles, knew that this would necessitate the presence of linemen on the poles for repair and removal purposes.

Under ordinary circumstances the defendant is required to use reasonable care to provide safe poles. (Murphy v. Rochester Telephone Co., 208 App. Div. 392; affd., 240 N. Y. 629.) Obviously where the unsafe condition of a pole necessitates removal of wires in order to replace the pole the owner cannot be required to furnish a safe pole. (See Mullin v. Genesee County Electric L. P. & G. Co., 202 N. Y. 275; Kowalsky v. Conreco Co., 264 N. Y. 125.) Under such circumstances the duty imposed is to use reasonable care to give warning to the linemen.

Did the defendant exercise reasonable care to warn the deceased lineman? The defendant notified the assistant district superintendent and the foreman of the fighting company, present at the place where the work was being performed, that the pole was in a dangerous condition and that commensurate care should be taken. A similar warning was given to the district superintendent of the fighting company. Warning of danger was thus given to all men in charge of the work and to all supervisory officials of tne decedent. Frequently work is done on telegraph or telephone poles that are in a dangerous condition. It is customary for the workers to pike or guy such poles, thereby eliminating the danger. It was reasonable for the defendant to expect that the Westchester Lighting Company would employ such safety measures after it had been warned of the danger. The risk reasonably to be perceived defines the duty to be obeyed.” (Palsgraf v. Long Island R. R. Co., 248 N. Y. 339, 344.) In Mclnerney v. D. & H. Canal Co. (151 N. Y. 411, 416) the question presented was whether the defendant railroad company discharged its full duty by notifying the proprietor of a lumber yard that it was sending its engine and crew into the yard on a siding for the purpose of switching cars. The proprietor failed to notify one of his employees who was injured between two cars when the engine backed into one of them. This court in affirming the judgment of nonsuit said: It would, doubtless, have been a careless and negligent act for the engine crew, upon being sent for, to have entered the yard of the plaintiff and begun the work of coupling and moving cars without notice to Willard or his representative, but they discharged their whole duty to plaintiff and to all the regular employees in the lumber yard when they notified Willard on the day of the accident of their readiness to proceed with his work, and thereupon entered the yard with the engine and coupled and moved the cars in obedience to his orders.”

To require the defendant to bring notice home to every employee of the lighting company who might possibly be involved on this job on penalty of otherwise failing in duty would result in imposing a standard of duty exceeding reasonable bounds. The defendant, to insure the giving of such notice, would probably find it necessary to station a man at every dangerous pole at all times that it was likely that the lighting company’s employees might come to remove its wires. The Appellate Division has said that the defendant should have placed placards on the poles or taken similar precautions. The poles were on a public street and the placing of warning placards on the poles where they would be plainly visible to the linemen about to climb the pole would also make the placards accessible to those who might remove them long before the linemen arrived. The warning given the foreman at the place the work was being done and to all the supervisory officials was much more likely to protect the deceased than the placing of the placard on the pole.

There is a clear line of demarcation between a wayfarer on a highway who is injured by the falling of a pole with which he has no connection at all and an employee, injured in the same manner, of one who is a lessee of rights and property in and upon the pole and whose acts helped to create the very situation out of which the accident occurred. (Cf. Heilback v. Consumers’ Brewery, 207 N. Y. 133.) In the former case the wayfarer cannot be expected to possess any notice or knowledge at all, whereas in the latter case the employee has placed himself in a relationship whereby it may be reasonably assumed that notice to his supervisory officials will be communicated in the ordinary course to all employees on the work. Any duty on the part of defendant to warn of the condition of the pole would ordinarily be discharged when defendant notified all supervisory officials of the decedent. They knew what employees of theirs had assumed such relationships to them that they would be put to work on this job. Defendant and all the world, except these supervisory officials were ignorant of this knowledge. To require the defendant to attempt to learn the identity of each and every employee of the lighting company, who was and would be involved on this job, would not only be wholly unreasonable but it would in all probability prove both futile and impossible since the supervisory officials of the lighting company might shift at any time, or be compelled to shift, the employees assigned to this work.

A customary practice or general usage may be admitted in evidence as tending to show what is reasonable care. (Garthe v. Ruppert, 264 N. Y. 290, 296.) . Thus if it were customary among companies that maintain telephone poles to place placards on poles that are dangerous, or to blaze or chip them, evidence of the failure to comply with the custom might be admitted as evidence of negligence. The record contains no evidence of the existence of any such custom.

The defendant, by warning all supervisory officials of the lighting company, complied with the requirement that it exercise reasonable care to warn of the danger.

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

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


source: Caselaw Access Project

author: Finch, J.

license: Public Domain

text:
    New York Telephone Company, Respondent, v. Board of Education of the City of Elmira, Appellant.

      (Argued January 21, 1936;
    decided March 3, 1936.)

      Philip E. Lonergan, Corporation Counsel (Halsey Sayles of counsel), for appellant.
    The defendant Board of Education was a department of the city of Elmira within the scope of the franchise, which franchise was made in part for its benefit. (Board of Education v. Van Zandt, 119 Misc. Rep. 124; 204 App. Div. 856; 234 N. Y. 644; Matter of College of City of New York v. Hylan, 205 App. Div. 372; 236 N. Y. 594; United States Shipping Board Corp. v. Western Union Tel. Co., 275 U. S. 415; Lewis v. Board of Education, 258 N. Y. 117; Metzger v. Swift, 258 N. Y. 440; Matter of Hirshfield v. Cook, 227 N. Y. 297; Matter of DeAngelis v. Laino, 235 App. Div. 390.) The interpretation placed by the parties during the first thirty years of the contract shows that it was made in behalf of the school system. (Board of Education v. Van Zandt, 119 Misc. Rep. 124; United States Shipping Board Corp. v. Western Union Tel. Co., 275 U. S. 415.) The board had no power to waive its rights under the franchise. (Lewis v. Board of Education, 258 N. Y. 117; Carpenter v. Taylor, 164 N. Y. 171.)

      Fred H. Jeffers for respondent.
    The telephone service furnished to the defendant was not furnished to a city department for municipal services. (Beveridge v. N. Y. E. R. R. Co., 112 N. Y. 1; Moch Co. v. Rensselaer Water Co., 247 N. Y. 160; Skinner Bros. Mfg. Co. v. Shevlin Engineering Co., 231 App. Div. 656; 257 N. Y. 562; Brainard v. N. Y. C. R. R. Co., 242 N. Y. 125; Codman v. American Piano Co., 229 Mass. 285; Gunnison v. Board of Education, 176 N. Y. 11; Matter of Hirshfield v. Cook, 227 N. Y. 297; People ex rel. Wells & Newton Co.
      v. Craig, 232 N. Y. 125; Matter of Fuhrmann v. Graves, 235 N. Y. 77; Matter of Brennan v. Board of Education, 245 N. Y. 8; Merry v. Board of Education, 126 Atl. Rep. 215; Farmer v. Haley, 135 Atl. Rep. 12.) The defendant did not bring itself under the agreement by any practical construction of the contract. (Board of Supervisors v. Burleson, 19 S. D. Rep. 126; N. Y. Tel. Co. v. Siegel-Cooper Co., 202 N. Y. 502; Brainard v. N. Y. C. R. R. Co., 242 N. Y. 125; DeRemer v. Brown, 165 N. Y. 410; Gans v. Ætna Life Ins. Co., 214 N. Y. 326; Hartigan v. Casualty Co., 227 N. Y. 175; Citizens’ Tel. Co. v. City of Newport, 224 S. W. Rep. 187; City of New York v. New York City Ry. Co., 193 N. Y. 543; Brooklyn Public Library v. City of New York, 250 N. Y. 495; Syms v. Mayor, 105 N. Y. 153; Woolsey v. Funke, 121 N. Y. 87; Carthage Tissue Paper Mills v. Village of Carthage, 200 N. Y. 1.) If the defendant had any rights under the agreement between the city of Elmira and plaintiff’s predecessor, it parted with them when it entered into contracts to pay standard tariff rates for its telephone service. (Schwartzreich v. Bauman-Basch, Inc., 231 N. Y. 196; Wiley v. Dixie Oil Co., 43 Fed. Rep. [2d] 51; Housekeeper Pub. Co. v. Swift, 97 Fed. Rep. 290; United States ex rel. International Contracting Co. v. Lamont, 155 U. S. 303; Gilbert v. United States, 8 Wall. 358; Parish v. United States, 75 U. S. 489; St. Croix Co. v. Seacoast Canning Co., 114 Me. 521; Meech v. City of Buffalo, 29 N. Y. 198; Weston v. City of Syracuse, 158 N. Y. 274; Voght v. City of Buffalo, 133 N. Y. 463; Atlantic City v. Warren Bros. Co., 226 Fed. Rep. 372; Village of Carthage v. Central New York Tel. Co., 185 N. Y. 448; People ex rel. Wells & Newton Co. v. Craig, 232 N. Y. 125.)
   Finch, J.

This action was brought by the New York Telephone Company against the Board of Education of the city of Elmira to recover $4,015.98 for telephone services rendered between March 21, 1930, and June 1, 1932. The answer set up that in 1894 a franchise was granted to the plaintiff’s predecessor in title by the Common Council of the city of Elmira which provided that the departments of that city would be furnished telephone services at one-half the standard rates. The Board of Education also entered a counterclaim for 11,704.79 on the ground that it had wrongfully been charged full rates from January 10, 1924, to March 21, 1930. Special Term granted a judgment for the full amount in favor of the plaintiff and dismissed the counterclaim. The Appellate Division has affirmed. (245 App. Div. 788.)

There is no dispute concerning the facts and the question before us, therefore, is one of law involving the proper construction of the provision in the franchise. The franchise which granted the plaintiff’s predecessor permission to place some of its wires under ground was granted in 1894. It contains the following:

9. That as an additional consideration for the permission hereby granted, the said company, its successors and assigns, shall furnish and maintain for the city within one-half mile of its central office in said city and at such places as its Common Council shall direct, three free exchange telephone connections; and for all other exchange service for municipal services, shall furnish the city departments with telephones at one-half the standard rates in said city for similar services.”

The defendant, the Board of Education, maintains that it is a “ city department ” within the meaning of that term as used in the franchise and that it is entitled to telephone service at one-half the standard rates. The record shows that from April 30, 1894, immediately following the grant of the franchise, until January 10, 1924' — a period of about thirty years — the plaintiff furnished the defendant telephone service at one-half the standard rates. In October, 1923, the plaintiff informed the defendant that it intended to discontinue the reduced rate. The defendant referred the matter to its finance committee and in 1924 adopted a report of that committee which found the defendant not entitled to the reduced rates. The plaintiff was notified and from January 10, 1924, to March 21, 1930, it charged the defendant for telephone service at the standard rates. In March of 1930 the Board of Education refused to pay for telephone service except at the rates prescribed in the franchise and has not paid for telephone service since that time.

If the phrase “ city departments ” occurred apart from its setting there would be much force to the argument that the Board of Education was excluded from its scope. The phrase, however, must be given the meaning intended by the contracting parties in so far as such intention is ascertainable. At the time the franchise was granted the charter of the city of Elmira (Laws of 1875, ch. 370) provided for only one branch of the city government called a department and that was the police department. From this it is obvious that the phrase “ city departments ” was used in a broad sense. It was equivalent to providing half rates for " city purposes.” That this is the proper construction is shown by the fact that for thirty years after the adoption of the franchise, commencing immediately after its adoption and at a time when the matter was fresh in the minds of the men by whom it had been negotiated and drafted, the Board of Education was granted half rates, both parties clearly construing the phraseology as including the Board of Education as a “ city department.” Contrary action was not taken by the men who made the contract, nor even by men who were in the Board of Education at the time of the making of the contract, but by new members of the Board. The men who actually made the contract interpreted the language used as covering the Board of Education as a city department within the meaning of the franchise.

In Board of Education of City of Rochester v. Van Zandt (119 Misc. Rep. 124, 126; affd., 204 App. Div. 856; affd., 234 N. Y. 644) it was said: The adoption in the final sentence of the meaning of the phrase f city purposes ’ as used in the first sentence is supported by the practical construction that has been put upon it in its actual application. For nearly forty years the cities of the state have construed the section to include taxes levied for educational as well as for other state functions.”

Similarly in Emergency Fleet Corp. v. Western Union Tel. Co. (275 U. S. 415, 417, 421, 422) Mr. Justice Brandéis said: “ For the construction given to the act by the United States and acquiesced in by the Western Union, having been both contemporaneous, and thereafter consistently and widely applied, is not only persuasive but, in our opinion, decisive of the case.”

Even in the letter sent by the plaintiff in 1923, requesting the discontinuance of half rates, the plaintiff does not entirely disclaim being bound by the franchise but makes the request “ except in event the educational system is maintained by the city from city funds.” In that letter the plaintiff wrote as follows: “It is our understanding that your department, in common with other municipalities, is maintained by a separate fund and discount should not apply. The discount your department has been enjoying is the same as given to municipal offices proper, as provided for them by franchise granted this Company.”

In this connection we find that the Common Council of the city of Elmira raises taxes in the school district which has the same boundaries as the city and supports the Board of Education by city funds. Section 12 of chapter 370 of the Laws of 1895 provides as follows: “ The common council of the city of Elmira shall have power, and it shall be their duty, to raise, from time to time, by tax, to be levied upon all the real and personal estate in said school district [having the same boundaries as the city] which shall be liable to taxation for town or county charges, such sums as may be determined upon, and certified by the board of education, to be necessary and proper, for any or all the following purposes, for the current year: * * *.”

Thus it would seem that the defendant comes within the exception which the plaintiff apparently admitted would entitle it to half rates. The plaintiff in its letter said that the defendant would have to pay full rates unless it is maintained by the city from city funds.” In the sense that the city must raise the necessary moneys, the city does maintain the defendant from city funds. Responsibility rests upon the city to find the necessary funds. (Matter of Emerson v. Buck, 230 N. Y. 380.) At the time of the awarding of the franchise any amount by which the expenses of the Board of Education could be decreased would by .just so much lighten the burden laid on the city to provide the funds. Even under the construction given the franchise by the plaintiff, we find the defendant is entitled to half rates.

The plaintiff urges that even if the construction of the language of the franchise as contended for by the defendant is accepted, nevertheless, it had the right to place its wires under the city streets without the consent of the city and hence the agreement to grant half rates was without consideration. It relies upon the case of Village of Carthage v. Central N. Y. Tel. Co. (185 N. Y. 448), which held that a village could not force a telephone company to place its wires in conduits instead of on poles on the ground that section 102 of the Transportation Corporations Law (Laws of 1890, ch. 566, art. 8, § 102) gave telephone companies full power to place lines upon, over or under public roads and streets. Three years after the Carthage case, however, the Appellate Division in the first department reached a contrary result in Matter of N. Y. Independent Tel. Co. (133 App. Div. 635). Mr. Justice Clarke writing the opinion pointed out that in the Carthage case a statute requiring telephone companies seeking to lay wires under ground in any city, village or town to obtain the permission of the Common Council of the city, etc., was not brought to the attention of the court. This court affirmed the judgment of the Appellate Division on the opinion of Clarke, J. (200 N. Y. 527). We find that at the time the franchise involved in the case at bar was granted the telephone company lacked the right to lay wires without the permission of the city (Laws of 1881, ch. 483) and that this permission was ample consideration for an agreement to charge for services.

Nor is there merit in the argument that the defendant agreed to rescind the franchise agreement and contract anew at a higher rate. The Board of Education had no right to rescind the agreement or waive its rights under the franchise. The telephone company was and is using the rights acquired under the franchise. The consideration was fully received by the plaintiff in 1894 when it was granted the right to place wires under the streets. Even if there was evidence that it subsequently decided not to take advantage of the rights granted by the franchise, it could still be required to carry out its obligations under the franchise. The plaintiff, however, is taking advantage of its rights. Hence the Board of Education could not contract away its rights. Such rights are of value and any attempt at surrender or rescission of the contract would violate that section of the State Constitution forbidding the giving of a gratuity (Canst, art. VIII, § 10).

Relief under the counterclaim cannot be denied on the ground that the overpayments were made pursuant to a new contract. As noted, there could be no new contract. The payments in excess of one-half the standard rates were made in the mistaken belief that the defendant was not entitled to the benefits provided for in the franchise. This court has held that moneys paid under a mistake of law by a municipality, as were the moneys in the case at bar, may be recovered. (New York City Employees’ Retirement System v. Eliott, 267 N. Y. 193; Village of Fort Edward v. Fish, 156 N. Y. 363.) The defendant is not bound by the illegal acts of its former or present members, and the equities found in Cox v. Mayor (103 N. Y. 519) are not present in this case.

The judgment of the Appellate Division and that of the Trial Term should be reversed, the complaint dismissed and judgment directed in favor of defendant upon its counterclaim in the sum of $1,579.82, with costs in all courts.

Crane, Ch. J., Lehman, O’Brien, Hebbs, Croech and Loeghran, JJ., concur.

Judgment accordingly.


author: Hubbs, J.

text:
    M. R. M. Realty Co., Inc., Appellant, v. Title Guarantee and Trust Company, Respondent.

      (Argued January 22, 1936;
    decided March 3, 1936.)

      Henry S. Miller for appellant.
    The water grant from the city vested title in the grantee, subject to the performance of conditions subsequent which gave to the city the right to re-enter and. insist upon forfeiture of the estate upon breach of any condition. (Vail v. Long Island R. R. Co., 106 N. Y. 283; Upington v. Corrigan, 151 N. Y. 143; Fowler v. Coates, 201 N. Y. 257; People v. Wainwright, 237 N. Y. 407; Milan v. Towner, 229 App. Div. 428.) The title is unmarketable. (Monogram Development Co. v. Natben Construction Co., 253 N. Y. 320; Methodist Episcopal Church Home v. Thompson, 108 N. Y. 618; Van Vliet & Place, Inc., v. Gaines, 249 N. Y. 106; Cerf v. Diener, 210 N. Y. 156; Brokaw v. Duffy, 165 N. Y. 391; Greenblatt v. Hermann, 144 N. Y. 13; Stirnweis v. Caciappo, 258 N. Y. 68; Weinstein v. Weber, 178 N. Y. 94; Simon v. Vanderveer, 155 N. Y. 377; Moore v. Williams, 115 N. Y. 586; Fle?ning v. Burnham, 100 N. Y. 1; Vought v. Williams, 120 N. Y. 253; Irving v. Campbell, 121 N. Y. 353; Shriver v. Shriver, 86 N. Y. 575.) The city has not waived or abandoned its rights under the covenants and conditions of the grant; on the contrary, it has repeatedly asserted its rights. (Matter of Green v. Miller, 249 N. Y. 88.) Plaintiff had the right to rely upon the title certificate, to assume that the title policy would contain no wider reservation than that in the title certificate, and to assume that the policy of insurance would conform to the agreement of the defendant to insure a good and marketable title in fee. (Northeastern Shares Corp. v. International Ins. Co., 240 App. Div. 80; 265 N. Y. 574; Grubelich v. New Brunswick Fire Ins. Co., 240 App. Div. 822; 264 N. Y. 554; Albany City Savings Institution v. Burdick, 87 N. Y. 40; Mead v. Bunn, 32 N. Y. 275; Hay v. Star Fire Ins. Co., 77 N. Y. 235; Holly Hotel Co. v. Title Guarantee & Trust Co., 147 Misc. Rep. 861; 239 App. Div. 773; Rosenwasser v. Globe Indemnity Co., 224 N. Y. 561; Farrell v. Merchants’ Mut. Automobile Industry, 203 App. Div. 118; Miller v. Union Indemnity Co., 209 App. Div. 455; Hessler v. North River Ins. Co., 211 App. Div. 595.)

      Henry M. Bellinger and C. Elmer Spedick for respondent.
    The title is marketable. (Schermerhorn v. Niblo, 2 Bosw. 161; Herbert v. Lansing, 6 Lans. 493; Hellreigel v. Manning, 97 N. Y. 56; Post v. Bernheimer, 31 Hun, 247; Hutton v. Webber, 17 N. Y. Supp. 463; Moser v. Cochrane, 107 N. Y. 35; Cambrelleng v. Purton, 125 N. Y. 610; Carroll v. McKaharay, 35 App. Div. 582; Todd v. Union Dime Sav. Bank, 128 N. Y. 636; Ruff v. Gerhardt, 73 App. Div. 245; Hagan v. Drucker, 90 App. Div. 28; Johnston v. Garvey, 139 App. Div. 659; Bardes v. Herman, 144 App. Div. 772; 207 N. Y. 745; Postley v. Kafka, 213 App. Div. 595.) The city is estopped from claiming under the condition subsequent for it has abandoned and waived the method of street improvement contemplated by the grant. (Town of Huntington v. Titus, 50 App. Div. 468; 169 N. Y. 579; Murray v. Harway, 56 N. Y. 337; Devlin v. Mayor, 63 N. Y. 8; Conger v. Duryee, 90 N. Y. 594; Gillette Bros. v. Aristocrat Restaurant, 239 N. Y. 87; Lynch v. Joseph, 228 App. Div. 367; Duryee v. Mayor, 96 N. Y. 477; Wheeler v. Dunning, 33 Hun, 205; Ludlow v. N. Y. & H. R. R. Co., 12 Barb. 440; Birdsall v. Grant, 37 App. Div. 348; Burns Bros. v. City of New York, 178 App. Div. 615; 232 N. Y. 523.)
   Hubbs, J.

The appellant entered into a contract to buy property on Tenth avenue in New York city. It applied to the respondent for an examination of title and . title insurance. Prior to the closing, respondent certified in writing that the title had been examined and approved by it and that the vendor could convey a good and marketable title thereto in fee, clear of all incumbrances and defects except “3. Restrictive Covenants, Easements and Agreements. Covenants and City Grants as to building wharf, road, &c. in L. ‘ G ’ p. 491 and L. 328, op. 91.” Annexed to the report was a typewritten sheet entitled: “ Covenants as to Streets in Liber ' G ’ of City Grants Page 491 and Liber 328 C. P. 91,” which set forth covenants taken from a grant in 1827 from the Mayor of the city of New York to une Boyd in substance requiring the latter, his heirs and assigns, when and if required by the city, to build, erect, make and finish ” certain wharves or streets and a bulkhead, and thereafter to uphold and keep in good order and repair the whole of those parts of the said streets and wharves, and the said bulk-head which he and they have covenanted to build, erect and make, as aforesaid.”

Upon such certificate title was closed, appellant being represented on the closing by an attorney representing respondent.

Later a title policy was issued which excepted objections to title affecting said premises arising under “ Covenants and conditions contained in Grant recorded in Book ‘ G,’ City Grants, New York Comptroller’s Office, at page 491, and in instrument recorded in Liber 328 of Conveyances at page 91, in the Office of the Register of the County of New York.”

The grant referred to is the so-called Boyd grant. The inclusion of the words and conditions ” in the title policy, though not contained in the certificate, was unnoticed, the policy was accepted and no question arose until three and one-half years later, when appellant contracted to sell the premises “ Subject also to covenants and conditions contained in Grant recorded in Book ‘ G,’ City Grants, New York Comptroller’s Office, at page 491, and in instrument recorded in Liber 328 of Conveyances at page 491, in the office of the Register of the County of New York, a copy of said covenants attached to title certificate of the Title Guarantee & Trust Co., was exhibited to the purchaser and read by him.”

The purchaser submitted the title to another company for examination and it declined to insure on the ground that the title was not good. Appellant then found that in addition to the covenants set forth in the certificate, the Boyd grant contained a provision that it should be null and void if there was a failure to perform the covenants on the part of the grantee, his heirs and assigns. Appellant’s vendee refused to complete the purchase and sued to recover the down payments. The matter having been referred to the respondent, it undertook to get a release from the city. Being unsuccessful in that effort, it undertook the defense of the action and subsequently advised a settlement whereby the appellant kept the down payment amounting to $2,000 and both parties were released from the obligations of the contract.

About four years after the first contract was made, appellant again contracted to sell the property, Subject also to covenants and conditions contained in Grant recorded in Book ‘ G,’ City Grants, New York Comptroller’s office, at page 491, and in instrument recorded in Liber 328 of Conveyances at page 491, in the Office of the Register of the County of New York as shown in the report of the Title Guarantee & Trust Co., dated June 29, 1925 and exhibited to the purchaser,” but title was rejected by the second purchaser. Notice of rejection was given to the respondent which declined responsibility. Thereupon, this action was brought to recover of the respondent the loss alleged to have been sustained by the appellant. Four causes of action were set forth:

First. Negligence in the searching of title by defendant as attorney or conveyancer.

Second. Breach of agreement to issue and deliver a policy guaranteeing a good title.

Third. An agreement to insure the title free from incumbrances arising out of the conditions in the Boyd grant.

Fourth. For reformation of the policy to efiminate the exception of conditions in the Boyd grant.

The Special Term dismissed the first and third causes of action but upheld the second and fourth, reformed the policy and awarded judgment for $18,000 and interest from 1925 amounting to about $11,000. The Appellate Division reversed, holding the title marketable, and also that the appellant was put upon notice as to the precise terms of the water grants.

Ordinary knowledge on the part of a purchaser of the existence of an incumbrance is sufficient to put him on notice as to its extent.

" When a purchaser has knowledge of any fact sufficient to put him on inquiry as to the existence of some right or title in conflict with that which he is about to purchase, he is presumed either to have made the inquiry and ascertained the extent of such prior right, or to have been guilty of a degree of negligence fatal to his plea of ignorance.” (Kingsland v. Fuller, 157 N. Y. 507, 511.)

“ The principle of equity is well established that a purchaser of land is chargeable with notice, by implication, of every fact affecting the title, which would be discovered by an examination of the deeds or other muniment of title of his vendor, and of every fact, as to which the purchaser, with reasonable prudence or diligence, ought to become acquainted. If there is sufficient contained in any deed or record which a prudent purchaser ought to examine, to induce an inquiry in the mind of an intelligent person, he is chargeable with knowledge or notice of the facts so contained.” (Cambridge Valley Bank v. Delano, 48 N. Y. 326, 336.)

The covenant to build wharves and streets of itself would suggest the existence of a provision for some penalty for non-compliance. Reference to book and page of the record of the grant was sufficient to put the appellant on notice as to the extent of the grant which was a grant not only subject to covenants but also upon condition. The grant as a whole was a link in, if not the foundation of, the title which appellant was about to purchase.

The appellant contends that it should be excused from the operation of that rule because the covenants were set forth in detail in the certificate and the conditions were not set forth. The respondent while furnishing a copy of the covenants, in no wise represented that it was furnishing a copy of the grant to which it made reference in its certificate. It clearly remained appellant’s duty to inform itself as to the terms of the grant as a whole.

Though we were to reach a contrary conclusion upon the effectiveness of the certificate to inform or put appellant upon notice as to the presence in the grant of the conditions mentioned, there is another and compelling reason why appellant is not entitled to judgment. The grant, containing the covenants and conditions, was made in 1827. Since then, despite the requirement placed upon the grantee and his successors in interest to build streets, wharves and bulkheads, and to maintain the streets, wharves and bulkheads so built, the city itself shortly after the grant built and has since maintained the streets. In the streets so built, over which the city has maintained jurisdiction and control, it has granted easements and rights permitting the erection of a double-track railroad, and the construction of subways for electric, telephone, fire alarm and city department wires, with manhole covers and other equipment. It has permitted the installation of gas mains and has itself built sewers. Likewise, it has exercised control along the water front by giving grants on property in the river, adjacent to the property in question, which has been filled in and outside of which the city has built and maintained a bulkhead.

The grant contained no provision for the maintenance of city-built streets, wharves or bulkheads, but rather for the maintenance of such improvements built pursuant to requirements of the grant.

Only by a restoration of the original water front line could a bulkhead or wharves ever be required or built adjacent to the Boyd tract. Only by abandonment and destruction of streets already built and incumbered with easements and rights, could the city place itself in position to exact fulfillment of the covenant either to build or maintain streets. Under such a state of facts, any rights which the city possessed with respect to the building and maintenance of streets, wharves and bulkheads, have long since been waived and could not now be enforced. While the covenants and conditions of the grant appear on the record as incumbrances upon the title, they are not such defects as to justify rejection of the title as unmarketable. The objection based thereon is without substance and could not be sustained.

The rule that a doubtful title cannot be forced upon a purchaser does not apply.

Had the appellant, in the action on its first contract, not settled but, rather, had it availed itself of its defense of marketability of title, its contract could have been sustained and no cause of action would have arisen against the respondent. It chose not to adopt that course, whether upon its own volition as a result of the opportunity of retaining the deposit and its property as well, or upon the advice of the counsel provided by the respondent. Likewise, on its second sale it could have sustained its claim of marketability of its title through the medium of an action for specific performance. With the clear proof that its title is in fact marketable before us, to permit it to retain the property and recover of this respondent substantial damages upon a claim of mistake and constructive fraud would permit it to enrich itself at respondent’s expense.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


author: Crane, Ch. J.

text:
    The Provident Savings Bank and Trust Company, as Executor of George H. Massey, Deceased, Respondent, v. John A. Steinmetz et al., Appellants.
    (Argued January 29, 1936;
    decided March 3, 1936.)

      Harry H. Chambers for appellants.
    Plaintiff was not entitled to judgment for the full amount, since it must be assumed that the property has some value which must be set off against the amount demanded in the complaint. (Civ. Prac. Act, § 1083-b; Union Trust Co. v. Vetromile, 239 App. Div. 562; Stuyvesant Credit Union v. Manufacturers Tr. Co., 239 App. Div. 187; Brawer v. Mendelson Bros., 262 N. Y. 53; Piedmont Hotel Co. v. Nettleton Co., 263 N. Y. 25; Farnham Realty Corp. v. Posner, 200 App. Div. 827; Currie v. Mackenzie, 239 N. Y. 267; Perlman v, Perlman, 235 App. Div. 313; Wilkins v. Earle, 44 N. Y. 172.)

      William O. Robertson for respondent.
    Section 1083-b of the Civil Practice Act is not applicable. (Porte v. Polachek, 150 Misc. Rep. 891; Harris v. Metrofolitan Casualty Ins. Co., 156 Misc. Rep. 692.)
   Crane, Ch. J.

This action is brought by the respondent as executor of the last will and testament of George H. Massey to recover the amount of two notes made by appellants to the order of the decedent, in the aggregate principal amount of $9,000. The answer alleges by way of affirmative defense that the two notes described in the complaint, and a third note, which has been paid, were given by the appellants to the decedent, simulbaneously with a first and purchase-money mortgage upon real property located in the State of Florida; that the mortgage secured the payment of the notes, and that the fair and reasonable market value of the property, less the amount owing on prior liens or incumbrances, exceeds the amount unpaid upon the two notes. Respondent moved for summary judgment, which was granted by the Special Term and affirmed by the Appellate Division.

The defendants-appellants have attempted to set up a defense, pursuant to section 1083-b of the Civil Practice Act. We are of the opinion that the matter set forth is good as a total or partial defense provided this section of the Civil Practice Act applies to bonds or notes secured by mortgage upon property in foreign States. Did the Legislature by these provisions, known as the Mortgage Moratorium Statute, intend to have them apply to mortgages upon property in other States of the Union?

These sections are found in article 65, entitled, Action to foreclose a mortgage.” It is conceded that such an action can only apply to real property located in this State. That the article also applies to actions which are brought upon the bond secured by the mortgage is evident from reading the very first section of the article, section 1077: “Where final judgment for the plaintiff has been rendeied in an action to recover any part of the mortgage debt, an action shall not be commenced or maintained to foreclose the mortgage, unless an execution against the property of the defendant has been issued upon the judgment to the sheriff of the county where he resides, * * * and has been returned wholly or partly unsatisfied.”

Thus, where an action has been brought on the debt instead of foreclosing the mortgage given to secure the debt, execution must be first issued and returned unsatisfied. This clearly applies to a debt secured by mortgage upon property in this State. The section refers to any part of the mortgage debt and says that any action to foreclose the mortgage shall not be commenced, etc. As no action can be maintained to foreclose a mortgage except upon property in this State, the debt thus sued upon must be one secured by mortgage upon property in this State. This seems to be quite clear. We find similar expressions used in section 1083-b of the article.

First referring to section 1083-a we find a limitation upon deficiency judgments during the emergency period. No judgment shall be granted for any residue of the debt remaining unsatisfied where an action to foreclose a mortgage has been commenced during the emergency except for an amount equal to the sum owing by the party liable, as determined by the judgment of foreclosure, with interest, plus the amount owing on all prior liens and incumbrances with interest, plus costs and the disbursements of the action, including the referee’s fees and disbursements, less the market value as determined by the court. In other words, the deficiency judgment can only be entered for the difference between the fair market value of the property and the amount due even though the sale under foreclosure has been for a much less price than the market value. This section, it is conceded, applies only to mortgaged property in this State.

The corollary to this section is found in section 1083-b, which affords the same relief or limitation, where the action is brought upon the bond or note secured by mortgage before resort has been had to foreclosure. The same language and the same particle of speech is used as in section 1077. This section reads: In any action * * * commenced during the emergency, other than an action to foreclose a mortgage, to recover a judgment for any indebtedness secured by a mortgage on real property * * * against any person * * * liable therefor, any party against whom a money judgment is demanded, shall be entitled to set off the fair and reasonable market value of the mortgaged property less the amounts owing on prior hens and encumbrances. In any action to foreclose the mortgage commenced after the emergency as defined by the law shall have expired, a deficiency judgment may be recovered as though this section had not been enacted but the amount of any money judgment recovered as provided in this section shall be deducted in computing such deficiency judgment.” In this last sentence we find the expression, in any action to foreclose the mortgage.” This must refer to the sentence going before and at the beginning of the section, which says, in any action commenced during the emergency to recover a judgment for any indebtedness secured by a mortgage ■ — a mortgage and the mortgage must be one and the same thing.

As an action to foreclose a mortgage must relate to property in this State it is quite evident that the indebtedness referred to in section 1083-b is an indebtedness secured by a mortgage upon property in this State. These mortgage moratorium provisions as contained in sections 1083-a and 1083-b were limited in time and expire with the expiration of the emergency, which was fixed by chapter 2 of the Laws of 1935, as July 1,1936. This moratorium law regarding foreclosure and deficiency judgments being limited in foreclosure to property within this State, the indebtedness being likewise limited in amount for which judgment may be given, is also an indebtedness secured by a mortgage upon property within this State.

Moreover, the above sentence in section 1083-b shows that the section does not apply to foreign mortgages or to debts secured by such mortgages. This sentence reads as follows: In any action to foreclose the mortgage commenced after the emergency as defined by the law shall have expired [July 1, 1936], a deficiency judgment may be recovered as though this section had not been enacted but the amount of any money judgment recovered as provided in this section shall be deducted in computing such deficiency judgment.” How could this State direct the courts of Florida to deduct the money judgment perhaps uncollected, that is, the judgment on the debt recovered in this State, from the deficiency judgment to be entered in Florida on foreclosure? The whole section clearly applies to the debt secured by mortgages in this State.

For these reasons the defense attempted to be set up in relation to notes secured by mortgage upon property in Florida is not a good defense, as the provisions of section 1083-b have no application to such an action.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


text:
    Van Rensselaer Halsey et al., Individually and as Liquidating Partners of the Firm of C. D. Halsey & Co., Plaintiffs, v. Bank of New York and Trust Company, Respondent, and President and Directors of the Manhattan Company, Appellant, Impleaded with Others.

      (Argued January 29, 1936;
    decided March 3, 1936.)

      Winfred C. Allen and Raymond B. Stringham for appellant.
    The moving papers fail to establish that the payee indorsements were forgeries. (Strang v. Westchester County Nat. Bank, 235 N. Y. 68; American Surety Co. v. Empire Trust Co., 237 App. Div. 522; Mercantile Nat. Bank v. Silverman, 148 App. Div. 1; 210 N. Y. 567; Breedlove v. Nicolet, 7 Pet. 413; City Council v. King, 15 S. C. L. 485; Taylor v. Insley, 7 Colo. App. 175; Tweedy v. Jarvis, 27 Conn. 42; Riley v. Litchfield, 168 Iowa, 187; People v. Reilly, 257 Ill. 538; State v. Cameron, 86 Me. 196; Hinkle v. Collins, 113 Mich. 105.) There is no justification for the order granting summary judgment against appellant. (Tauber v. National Surety Co., 219 App. Div. 253; Nemours-Stevens, Ltd., v. Nemours Trading Corp., 204 App. Div. 38; Hallgarten v. Wolkenstein, 204 App. Div. 487; Gravenhorst v. Zimmerman, 236 N. Y. 22; General Investing Co. v. Interborough P. T. Co., 235 N. Y. 133; United Products Co. v. Standard Textile Products Co., 224 App. Div. 371; Curry v. Mackenzie, 239 N. Y. 267; Tidewater Oil Sales Corp. v. Pierce, 213 App. Div. 796; Rogan v. Consolidated Copper Mines Co., 193 N. Y. Supp. 163; Hurtwitz v. Corn Exchange Bank Trust Co., 253 N. Y. Supp. 851; Abercrombie & Fitch Co. v. Colford, 204 N. Y. Supp. 209; Lonsky v. Bank of United States, 220 App. Div. 194; United States v. Stephanidis, 41 Fed. Rep. [2d] 958; Cardo Drug Co. v. Chatham & Phenix Nat. Bank, 209 App. Div. 167.)

      Herbert G. Roleke for respondent.
    The appellant is liable to the respondent because of the collection of the checks upon forged or unauthorized indorsements. (Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26; American Surety Co. v. Empire Trust Co., 262 N.Y. 181; Mercantile Nat. Bank v. Silverman, 148 App. Div. 1; 210 N. Y. 567.) No triable issue is presented for the determination of the court. (Shipman v. Bank of State of New York, 126 N. Y. 318; Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26.)
   Finch, J.

The plaintiffs brought this action against the original defendant, Bank of New York and Trust Company, to recover the sum of $2,652.12 which it was alleged the bank had improperly charged against the account of the plaintiffs. This sum was the aggregate of certain checks made payable to the order of D. P. McAlindin. It is alleged that the depository did not pay the amount of any of the checks to the named payee. The defendant Bank of New York and Trust Company impleaded the other defendants and alleged as against them that the plaintiffs drew certain checks payable to the order of D. P. McAlindin; that the impleaded defendants indorsed and presented these checks to the Bank of New York and Trust Company for payment bearing the purported indorsements of the payee, D. P. McAlindin; and that these checks were paid. Apparently the plaintiffs have recovered a judgment for the full amount against the Bank of New York and Trust Company. There is nothing in the record regarding this but a copy of the judgment has been forwarded to the court subsequent to the argument. The defendant Bank of New York and Trust Company made a motion for summary judgment against the impleaded defendants which was denied at Special Term. The Appellate Division reversed and granted the motion. The President and Directors of the Manhattan Company alone appeal.

The affidavits relied upon by the moving party may be briefly summarized. An affidavit of Charles D. Halsey, one of the plaintiffs, sets forth that the plaintiffs were stockbrokers, that the checks in question were drawn upon the defendant to the order of D. P. McAlindin and were duly signed by a partner or employee of the plaintiff firm authorized to sign said checks and that the checks were paid by the defendant Bank of New York and Trust Company, and debited by it to the account of the plaintiffs. It goes on to state that the checks bear the purported indorsement of D. P. McAlindin, the payee, but that D. P. McAlindin did not indorse the checks nor authorize any one else to do so nor receive the proceeds of any of the checks. There are several affidavits of employees and partners of the plaintiffs, who signed the checks, stating that they believed the firm owed the amounts to D. P. McAlindin and that they signed the checks for the purpose of paying him. There is a deposition of one David Peter McAlindin, in which he denies having signed the checks, authorized another to sign them or received the proceeds of the checks. Finally there is an affidavit of a vice-president of the Bank of New York and Trust Company which alleges that in reliance upon the indorsements of the collecting banks it paid them the amounts of the checks; that it is an intermediate, innocent party, and that if it is obliged to repay the plaintiffs it is entitled to recover from the collecting banks.

The answer of the Manhattan Company alleges that the plaintiffs intended to require the drawee bank to pay these checks to the person to whom they were delivered and who indorsed them as the payee thereof. The affidavits submitted in opposition to the motion allege that the indorsements on the checks were not forged, that it does not appear that the David Peter McAlindin who signed the deposition submitted by the moving party was connected in any way with the plaintiffs or that he was intended as the payee of the checks; that one Arthur Rush, an employee of the plaintiff, maintained an account in the name of “ D. P. McAlindin;” that the checks were indorsed by Arthur Rush who had a right to indorse and collect the checks, and that the checks did not result in an overdrawal of the account held by Arthur Rush in the name of “ D. P. McAlindin.” The affidavits also allege that David Peter McAlindin is a brother-in-law of Arthur Rush.

We have already noted that the record on appeal does not contain a judgment obtained by the plaintiffs against the Bank of New York and Trust Company. Since the Bank of New York and Trust Company can have no claim over against the impleaded defendants in the absence of such a judgment against it there is a patent deficiency in this record alone sufficient to require a reversal. Nevertheless we examine the record on the merits to ascertain whether there is a triable issue of fact.

The Manhattan Company cannot be held liable unless the indorsements on the checks were forgeries. In determining whether there was a forgery the true test is whether or not the indorsement of the name of the payee was made by the person who was intended by the drawer to be the payee. If such person indorsed, there is no forgery. (McKeehan, The Negotiable Instruments Law, 41 Am. Law Reg. [N. S.] 437, 499, 561; Brannan on The Negotiable Instruments Law [2d ed.], pp. 220, 248.) Normally the person intended as payee is identified by his name and only a person bearing the designated name can properly indorse the check. (Mercantile Nat. Bank v. Silverman, 148 App. Div. 1; affd., 210 N. Y. 567; United Cigar Stores Co. v. American Raw Silk Co., 184 App. Div. 217; affd., 229 N. Y. 532; Strang v. Westchester County Nat. Bank, 235 N. Y. 68.) The name, however, is not always controlling. Physical presence often is a surer means of identification. Although one may be deceived as to the name of the man with whom he is dealing, if he dealt with and intended to deal with the visible person before him the check may properly be indorsed by the impostor. (First Nat. Bank v. American Exchange Nat. Bank, 49 App. Div. 349; affd., 170 N. Y. 88.) The attempt at all times is to effectuate the intent of the drawer, and where the impostor, although never physically present, is clearly shown to be the person to whom payment was intended his indorsement on the check is not invalid as a forgery. (Sherman v. Corn Exchange Bank, 91 App. Div. 84; Holub-Dusha Co. v. Germania Bank, 164 App. Div. 279.)

The Manhattan Company claims that the case at bar falls within the latter classification. It is their contention that there was an account with the Bank of New York and Trust Company in the name of “ D. P. McAlindin ” held by a person not of that name, and the drawer of the checks intended them to be paid to the holder of the account regardless of whether his name was D. P. McAlindin or not and that, therefore, the holder of the account could indorse the checks with the name of D. P. McAlindin without being guilty of forgery. Such a situation, of course, is to be distinguished from a situation where the check is held payable to bearer for the reason that the name adopted as that of the payee was wholly fictitious and this was known to the drawer of the check. (Neg. Inst. Law, § 28; Cons. Laws, ch. 38.) The issue here being whether the checks have been duly indorsed, the cases where the forgery is conceded and a defense of estoppel based on representations or negligence is set up by the drawee bank against the drawer or in so far as available by the collecting bank against the drawee bank are not applicable. (American Surety Co. v. Empire Trust Co., 262 N. Y. 181; National Surety Co. v. President, etc., of Manhattan Co., 252 N. Y. 247.) If the Manhattan Company can establish its contention at the trial it will be entitled to judgment in its favor. The affidavits raise a triable issue of fact as to the identity of the payee intended which in turn will show whether a forgery has been committed.

Judgment of the Appellate Division should be reversed and the order of the Special Term affirmed, with costs in this court and in the Appellate Division.

Lehman, O’Brien, Hubbs, Crouch and Loughran, JJ., concur; Crane, Ch. J., taking no part.

Judgment accordingly.


author: Per Curiam.

text:
    Erma Forsythe, an Infant, by Ray Forsythe, Her Guardian ad Litem, Respondent, v. Harold F. Durham, Appellant.
    (Argued January 29, 1936;
    decided March 3, 1936.)

      Lewis E. Mosher and Sherman Moreland for appellant.
    There is no evidence to support the finding that the defendant acted maliciously. (Hemmens v. Nelson, 138 N. Y. 517; Ashcroft v. Hammond, 197 N. Y. 488; Haft v. First Nat. Bank, 19 App. Div. 423; Decker v. Gaylord, 35 Hun, 584; Long v. Peters, 47 Iowa, 239; Dickinson v. Hathaway, 122 La. 644; Pecue v. West, 233 N. Y. 316.)

      John D. O’Loughlin and J. Laning Taylor for respondent.
    The.question of malice was properly submitted to the jury. (Tim v. Hawes, 97 Misc. Rep. 30; Pecue v. West, 233 N. Y. 316; Sewell v. Catlin, 2 Wend. 296; Jarvis v. Hathaway, 3 Johns. 178; Fowles v. Brown, 30 N. Y. 20;
      Lally v. Emery, 59 Hun, 237; Bernstein v. Singer, 1 App. Div. 64; Bassell v. Elmore, 48 N. Y. 561; Thorn v. Moser, 1 Den. 488; Lindsey v. Smith, 7 Johns. 359; Demarest v. Harring, 6 Cow. 87; Harwood v. Keech, 4 Hun, 89.)
   Per Curiam.

In this action for slander defendant is principal of a high school and plaintiff was a student therein. Defendant’s duty required him to communicate to the Board of Education the fact that rumors concerning plaintiff were circulated among the students and teachers. In so acting he was protected by a qualified privilege and is free from liability unless his conduct resulted from malice. That there was no actual malice is conceded. There is no evidence that defendant acted with a wanton and reckless disregard of plaintiff’s rights or otherwise than in good faith. (Pecue v. West, 233 N. Y. 316, 322, 323.)

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

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

Judgments reversed, etc.


text:
    Ethelbert I. Low et al., as Executors and Trustees under the Will of Lyman N. Hine, Deceased, Respondents, v. Bankers Trust Company, as Trustee of Francis L. Hine et al., Respondents, and Francis L. Hine, 2d, et al., Infants, by Sibyl Y. Hine, Their Guardian ad Litem, Appellants.

      (Argued January 28, 1936;
    decided March 3, 1936.)

      George W. Whiteside, Leonard P. Moore and David S. Hecht for appellants.
    The doctrine of marshaling was not properly invoked to divert the principal of the trust fund to the payment of the debts, administration expenses, taxes and legacies of the estate. (Farmers Loan & Trust Co. v. Kip, 192 N. Y. 266.) Section 18 of the Personal Property Law (Cons. Laws, ch. 41) did not effectuate an execution of the power in favor of the executors. (Standen v. Standen, 2 Ves. Jr. 589; Walker v. Mackie, 4 Russ. 76; Davis v. Williams, 1 Adolph. & Ell. 1332; Hughes v. Turner, 3 Myl. & Keen, 666; Jones v. Curry, 1 Swanst. 66; Millard v. Roberts, 202 U. S. 429; The Delaware, 161 U. S. 459; United States v. New York, 160 U. S. 598; Coosaw Mining Co. v. South Carolina, 144 U. S. 550; Holy Trinity Church v. United States, 143 U. S. 457; Matter of Flew

      wellin, 122 Misc. Rep. 256; Lockwood v. Mildeberger, 159 N. Y. 181; N. Y. Life Ins. & Trust Co. v. Livingston, 133 N. Y. 126; Mott v. Ackerman, 92 N. Y. 539; Hirsch v. Bucki, 162 App. Div. 659; Hollister v. Hollister, 85 Ore. 316; McLean v. McLean, 174 App. Div. 152; Stewart v. Keating, 15 Misc. Rep. 44.) In no event were the executors entitled to the trust fund. (Guaranty Trust Co. v. Hoisted, 245 N. Y. 447; Farmers Loan & Trust Co. v. Mortimer, 219 N. Y. 290; Herzog v. Title Guaranty & Trust Co., 210 N. Y. 531; Cutting v. Cutting, 86 N. Y. 522; Matter of Hayman, 134 Misc. Rep. 803; Matter of Terwilligar, 142 Misc. Rep. 249; Matter of Palmer, 127 Misc. Rep. 782; Rhode Island Hospital Trust Co. v. Anthony, 142 Atl. Rep. 531; McMurtry v. State, 151 Atl. Rep. 252.)

      M’Cready Sykes and James J. Mennis for plaintiffs, respondents.
    The power of appointment was duly-exercised by the will and its application properly directed by the court below. (Fargo v. Squiers, 154 N. Y. 250; Lockwood v. Mildeberger, 159 N. Y. 181.) To confine the execution of a power to a residuary clause would conflict with section 18 of the Personal Property Law. (Bolton v. De Peyster, 25 Barb. 539; Matter of Piffard, 42 Hun, 34; 111 N. Y. 410; Thomas v. Synder, 43 Hun, 14; Matter of New York Life Ins. & Trust Co., 139 N. Y. Supp. 693; 157 App. Div. 916; 209 N. Y. 585.)

      Frank Sowers for Bankers Trust Company, as trustee, respondent.
    The deed of trust itself suspended the power of alienation for two lives and the children of plaintiffs’ testator, for whose lives the will suspends the power of alienation, were not in being at the date of the trust deed. (Matter of Hayman, 134 Misc. Rep. 803; 229 App. Div. 853; 256 N. Y. 557; Genet v. Hunt, 113 N. Y. 158; Fargo v. Squiers, 154 N. Y. 250.)

      John A. Mullen, as guardian ad litem, and Jerome Heffer for John Doe et al., respondents.
    The power of appointment conferred on the testator was exercised by his will. (Hutton v. Benkard, 92 N. Y. 295; Lockwood v. Mildeberger, 159 N. Y. 181; McLean v. McLean, 174 App. Div. 152; Matter of Flewwellin, 122 Misc. Rep. 256; Maynard v. Maynard, 108 Misc. Rep. 362; Matter of Dodge, 129 Misc. Rep. 390; Speir v. Benvenuti, 197 App. Div. 209; Matter of Mann, 138 Misc. Rep. 42; Neumann v. City of New York, 137 App. Div. 55; People v. Willett, 164 App. Div. 1; People v. Fegelli, 163 App. Div. 576.) The appointive funds may and should be used to pay the specific legacy, debts and funeral expenses, administration expenses and taxes. (Cons. Laws, ch. 41, §§ 178, 179; Matter of Hayman, 134 Misc. Rep. 803; Duff v. Bodenkirchen, 110 Misc. Rep. 575; Duff v. Fox, 193 App. Div. 898; Matter of Rooker, 248 N. Y. 361; Beardsley v. Hotchkiss, 96 N. Y. 201; Matter of Bankers Trust Co., 82 Misc. Rep. 375; Farmers’ Loan & Trust Co. v. Shaw, 56 Misc. Rep. 201; Furniss v. Cruikshank, 230 N. Y. 495; Fargo v. Squiers, 154 N. Y. 250; Matter of Terwilligar, 142 Misc. Rep. 249; Cheever v. Cheever, 172 App. Div. 353; Farmers Loan & Trust Co. v. Kip, 192 N. Y. 266; Hirsch v. Bucki, 162 App. Div. 659; Maynard v. Maynard, 108 Misc. Rep. 362.)
   Crane, Ch. J.

This is an action for an accounting brought by the plaintiffs, as executors of the will of Lyman N. Hine, to secure possession for the estate of the principal of a trust fund set up by Francis L. Hine, and over which Lyman N. Hine was given power of appointment. The courts below have held that the appointment was illegal in effect and have charged the entire principal with the debts, legacies and taxes primarily chargeable to the estate of the testator. We do not agree with this disposition of the property for the following reasons, to state which requires an examination of the will and the estate disposed of.

On March 13,1914, Francis L. Hine executed a deed of trust for the following purposes:

(a) To pay the income therefrom to his wife, Mary I. Hine, for life;

(b) Upon her death, to pay the income therefrom to her son, Lyman N. Hine, for life; and

(c) Upon the death of Lyman N. Hine, to pay over and transfer the principal to “ such person, persons or corporations, and in such shares and proportions as the said Lyman N. Hine shall, in and by his duly executed and probated Last Will and Testament direct and appoint; or in default of such appointment, or in so far as the same, if made, shall not be effectual, to the issue of said Lyman N. Hine, per stirpes and not per capita.”

Mary I. Hine, the first fife beneficiary, died May 11, 1927; Lyman N. Hine, the second fife beneficiary, died March 5, 1930, leaving a last will and testament wherein he sought to execute his power of appointment and naming the respondents as his executors and trustees. The will was executed by Lyman N. Hine on May 22, 1929, at which time be had a personal net estate, exclusive of the power of appointment in the Francis L. Hine trust, of the value of at least $8,189,933.64. On this same date the value of the Francis L. Hine trust was $786,011.37.

On the date of his death, March 5, 1930, Lyman N. Hine’s net personal estate, after deducting all expenses, amounted approximately to $5,200,000, and the Francis L. Hine trust to $675,264.49.

Upon his death, Lyman N. Hine left as surviving his issue, the appellants herein, neither of whom was in being on March 13, 1914, the date of the creation of the trust by Francis L. Hine. The son, Francis L. Hine, 2d, was fourteen years old, and the daughter, Sibyl Young Hine, under fourteen when this action was begun on December 26, 1930.

The will of Lyman N. Hine, admitted to probate on the 21st day of April, 1930, makes no specific mention of the power of appointment given to the testator by the deed of Francis L. Hine. As, however, the will passes all the personal property of the testator, it is, by reason of section 18 of the Personal Property Law (Cons. Laws, ch. 41), a proper execution of the power, or a proper attempt at execution.

Without quoting this will in full, let us state the point which has arisen in this litigation. Lyman N. Hine passed all his residuary estate to his trustees for the benefit of his two children during their lives. Although no reference was made to the power of appointment, or any expression showing an intent to exercise the power, yet, as the testator disposed of all his personal property, it included an exercise of the power. In other words, the method of exercising the power was legal and proper according to this section 18 of the Personal Property Law, but the effect of its exercise was illegal, as it violated section 11 of the Personal Property Law, which provides that the absolute ownership of personal property shall not be suspended by any limitation or condition for a longer period than during the continuance and until the termination of not more than two lives in being at the date óf the instrument containing such limitation or condition, or, if such instrument be a last will and testament, for not more than two lives in being at the death of the testator. This power of appointment relates back to. the deed of Francis L. Hine and, for the purpose of measuring fives, becomes a part thereof. (Fargo v. Squiers, 154 N. Y. 250, 260.) These trusts, therefore, created by Lyman N. Hine were illegal, as suspending the alienation of personal property or the principal of the trust for an additional two fives after the power of suspension had been exhausted by tfie fife of his mother and himself. We, therefore, have a will executing a power of appointment by transferring the property to trustees for an illegal purpose.

A given power of appointment exercised in proper form and by legal method does not become an executed appointment according to the intent of the original trustor when its purpose is illegal. An illegal appointment is no appointment. (Guaranty Trust Co. v. Harris, 267 N. Y. 1.) The deed of trust provided that the principal should pass in default of such appointment “ or in so far as the same, if made, shall not be effectual, to the issue of said Lyman L. Hiñe, per stirpes and not per capita.” It may make little difference in this case whether the issue of Lyman take for failure of legal appointment or under the appointment as made wiping out the trusts and considering them as remaindermen, taking the principal as at the termination of the trusts. Lyman, as aforesaid, by his will gave the residue of his estate, including (by operation of law) the principal of the trust to trustees to hold one-half in trust for the life of Francis L. Hine, 2d, his son, and the other half for the life of Sibyl Young Hine, his daughter. Upon the death of either, without issue, the other took absolutely. Thus the trust, having fallen in, terminated, as it would at death; these two children having no issue would take the remainders absolutely, one-half going to each. Such we may say was the intention of the testator according to the principle of acceleration. (United States Trust Co. v. Hogencamp, 191 N. Y. 281; Matter of Fordham, 235 N. Y. 384.)

We start, therefore, with the further consideration of this case by concluding that, the trust provision of the appointment being illegal, the two infant appellants are entitled absolutely to the principal of the trust, unless it is to be disposed of as directed by the judgment herein. Taking Fargo v. Squiers (154 N. Y. 250) as stating a rule to be applied in cases like this, rather than an indication that equity must try to determine the intent of a testator and do equity, the courts below have charged up all costs and expenses to the trust principal and relieved the testator’s own estate.

Whafc did he direct by his will? He had two estates to dispose of — his own, which amounted to over five million dollars, and that which he had received from Francis L. Hine, and could give under a power of appointment. His will first directs Ms executors to pay his just debts and funeral expenses as soon as practicable. After disposing of Ms personal effects he bequeaths $100,000 to his wife, Sibyl Y. Hine, wMch she is to take in lieu of dower or any other interest m my estate.” All the rest of Ms property he gives in trust as aforestated for the benefit of Ms two cMldren. He directs bis'executors to pay out of this residuary estate any and all inheritance or transfer taxes.

We can read this will from beginning to end without receiving a suggestion or intimation that the testator had a power of appointment under the deed of Francis L. Hine. The will does not indicate that he even had the power of appointment in mind or that he actually or in fact intended to exercise the power of appointment. It is section 18 of the Personal Property Law, read into this will, which makes it obligatory upon the courts to consider the passing of all personal property as including the power of appointment. This section, however, does not prevent us from seeking the testator’s intention as to other matters from the reading of Ms will, having in mind the situation and condition of his property. (Lockwood v. Mildeberger, 159 N. Y. 181, 187, 188.)

Surely the testator, when he gave a legacy of $100,000 to Ms wife in lieu of other interests in my estate,” did not intend that the legacy should be paid out of the estate of Francis L. Hine.

The general rule is that the testator’s personal estate, which the will does not otherwise dispose of or exempt, constitutes the natural and primary fund for the payment of legacies as well as of debts. TMs rule is controlling unless the will either in express terms or by necessary implication discloses a different intention on the part of the testator. (Farmers' Loan & Trust Co. v. Kip, 192 N. Y. 266, at p. 283.) We find notMng in tMs wifi of Lyman N. Hine to change tMs fundamental rule. His estate was amply able to pay all Ms debts and the trifling legacy, in comparison, left to his wife. Why should all the cost and expenses of administering his personal estate of over five to six million dollars be taken out of the Francis L. Hine estate? We have nothing to show us that such was the intention of Lyman. The size of his estate and the fact that he never even mentioned his power of appointment indicate clearly to our minds that he expected his own estate to pay his debts, the meager legacy, the cost and expenses of administration and the taxes. At least we can be sine of this, that there is nothing in the surroundings or the circumstances or the will itself which indicates in the slightest degree that the testator intended to modify the general rule that his personal estate pay these charges.

And it may be said, in fairness to the courts below and to counsel for the respondents, that the only reason why all these expenses have been charged up to the principal of the trust is to prevent the children from getting that principal now before they have arrived at full age. The testator intended that his two children should not have the principal of his own estate which he placed in trust until they arrived at the ages of thirty and forty, when parts of the principal were to be paid to them. This intention is clear, for it is stated in black and white. In order to carry out this intention which the testator had regarding his own estate, the respondent justifies taking from the children the principal of the trust under Francis L. Hine’s deed in order to accomplish the same purpose. The courts below have done indirectly what the statute says cannot be done directly; as the testator could not continue the Francis Hine trust for his two children, the courts have accomplished the same result by using all the principal to pay Lyman’s debts and charges, thus increasing the legal trust for his children in his own estate by just so much more. In other words, the principal of the Francis Hine trust has been turned into the property of Lyman by using it instead of Lyman’s property to pay debts. As the principal was the absolute property of the children, it could not thus be shifted to accomplish an intent which the father expressed but failed legally to execute.

As the testator intended his personal property to pay his debts and legacies, we do not see how this intent is to be overcome or set aside because of something the testator might have done if he had thought about it, but in reality failed to do. Admitting that the testator did not want his children to have any large amount of money under their control before thirty, we do not see how the courts can take from them that which the law gives simply because the father has failed legally to execute his intent as to this trust property. Our law is very liberal in permitting people to make wills as they please, but in the absence of a legally expressed will, property passes according to our statutes and decisions, and we have no power to override these in the absence of a properly worded and constructed will. Intent is not sufficient; the intent must be expressed according to law.

We find nothing in the Fargo v. Squiers case (154 N. Y. 250, 261) conflicting with anything that we have here stated. In the first place, the testator there specifically referred to the power of appointment given her by the will of her father, so that it was clearly in her mind to make this part of her residuary estate chargeable with certain expenses. The court, moreover, found that her personal property was relatively so small in amount that if the trust fund was relieved of all expenses the intent of the testator could not be effectuated. The point of the case is well summed up in the opinion, which we quote, in order to distinguish: A will in which a trust is created for the benefit of infant children; an estate in which there are two funds, one of which can lawfully be devoted to the purposes of the trust and the other not, and specific legacies in regard to which there has been no direction as to the fund out of which they should be paid. There is no question respecting her intention. She intended the whole of her residuary estate, including that of which she had the power of appointment, to be held for the use of the Squiers children. In so far as her will is in violation of the statute her intention cannot be carried out, but a court of equity, in the exercise of its discretion, has the power to carry out the intention of the testatrix, as disclosed by her will, so far as it is not violative of the provisions of the statute. It cannot devote the trust estate created by the will of William G. Fargo to the making up of the trust created by the will of Georgia Fargo; but it can, for the purpose of carrying out her wishes and intention, require the specific bequests to be paid out of the estate of which she had the power of appointment, thus saving her individual estate unimpaired to constitute the trust provided for by her will. Ordinarily, perhaps, the individual estate would first be exhausted in payment of the specific bequests; but in this case to so pay the specific bequests would not only defeat the main object and purposes of the will, but the intention of the testatrix. The situation is not an uncommon one in principle; it is analogous to the marshaling of the estates of a deceased person. The rule is that the personal estate must be first exhausted in the payment of the debts to the relief of the real estate; but courts of equity will not enforce this rule where it is in apparent hostility to the purpose and intent of the will, and will defeat the bequests made therein.”

As we have stated above, in the case before us we find no expressed intention in the will regarding the power or the execution of the power of appointment. Neither can the intent and purpose of the testator regarding his legacies and legal trusts be in any way affected or weakened by following the general rule regarding the payment of debts and expenses. We can spell out from the circumstances no wish or inclination that these should not be paid by his estate. We may say that the Fargo case was limited to the facts, to the equities of the situation, all of which were changed in Farmers’ Loan & Trust Co. v. Kip (192 N. Y. 266), where a different result was reached without in any way changing the law; the general rule was unmodified by any equities because there were none.

By this process of reasoning we have reached the conclusion that the judgments below must be reversed, and judgment entered for the infant appellants, the issue of Lyman N. Hine, giving them the principal of the Francis L. Hine trust, or so much of it as remains, without deduction for the debts of Lyman N. Hine, the legacy under his will, the payment of inheritance taxes or the cost and expenses of administration. Costs in all courts are to go to the appellants, payable out of the estate.

The judgments should be reversed and judgment directed in accordance with this opinion, with costs to appellants payable out of the fund.

O’Brien, Hubbs, Crouch and Loughran, JJ., concur; Lehman, J., concurs in result; Finch, J., not sitting.

Judgment accordingly.


text:
    The Prudential Insurance Company of America, Respondent, v. Dorothy Stone, Individually and as Administratrix of the Estate of William Stone, Deceased, Appellant.

      (Argued January 28, 1936;
    decided March 3, 1936.)

      Irwin N. Wilpon and Burton B. Turkus for appellant.
    The Statute of Limitations is a complete defense to this action which was not commenced within the contestable period and is barred by the incontestability provision contained in the policy. The service of process upon the beneficiary was not a commencement of the action against the insured since the revocable beneficiary was not united in interest with the insured. (Killian v. Metropolitan Life Ins. Co., 251 N. Y. 44; Jensen v. Metropolitan Life Ins. Co., 251 N. Y. 336; Travelers Ins. Co. v. Snydecker, 127 Misc. Rep. 66; Hamilton v. Royal Ins. Co., 156 N. Y. 327; New York Life Ins. Co. v. Dickler, 135 Misc. Rep. 594; 229 App. Div. 775; Metropolitan Life Ins. Co. v. Di Novi, 139 Misc. Rep. 1; Cohoes Bronze Co. v. Georgia Home Ins. Co., 243 App. Div. 224.) The types of interest which may be termed “ united ” under section 16 of the Civil Practice Act are joint interests only. (Howell v. Dimock, 15 App. Div. 102; Natter v. Blanchard Co., 153 App. Div. 814;Finch v. Wells, 66 Misc. Rep. 384; McKenzie v. L’Amoureux, 11 Barb. 516; Fountain v. Carter, 2 Dem. 313; Jones v. Fetch, 3 Bosw. 63; Van Horne v. France, 32 Hun, 504; Clark v. McClain Fire Brick Co., 100 Ohio St. 110; Smith v. N. B. Society, 123 N. Y. 85; Dunn v. New Amsterdam Casualty Co., 141 App. Div. 478; Jackson v. Tallmadge, 246 N. Y. 133; Germini v. N. Y. C. R. R. Co., 209 App. Div. 442.) The revocable beneficiary had no vested interest in the policy herein. The interest of the beneficiary was so unsubstantial as to amount in reality to no interest at all but a mere expectancy. The beneficiary was not, therefore, united in interest with the insured. (Bradshaw v. Mutual Life Ins. Co., 187 N. Y. 347; Smith v. N. B. Society, 123 N. Y. 85; Dunn v. New Amsterdam Casualty Co., 141 App. Div. 478; McGowin v. Menken, 223 N. Y. 509; Barbour v. Equitable Life Assur. Soc., 174 App. Div. 759; 225 N. Y. 675; Schoenholz v. New York Life Ins. Co., 234 N. Y. 24; Travelers Ins. Co. v. Healey, 25 App. Div. 53; 164 N. Y. 607; Mutual Ben. Life Ins. Co. v. Clark, 254 Pac. Rep. 306; Sabin v. Phinney, 134 N. Y. 423.) The revocable beneficiary is not a necessary party to the action. (Illinois Bankers’ Life Assn. v. Rhodes, 147 Ark. 191; Equitable Life Assur. Soc. v. Stough, 45 Ind. App. 411; Prichard v. Security Mut. Life Ins. Co., 140 App. Div. 879; Ball v. N. Y. Life Ins. Co., 3 Tenn. App. 102; San Diego Water Co. v. Flume Co., 41 Pac. Rep. 495; Jackson v. Tallmadge, 246 N. Y. 133; Morgan v. Mut. Ben. Life Ins. Co., 119 App. Div. 645; 189 N. Y. 447; Spalding v. Equitable Life Assur. Soc., 22 N. Y. Wkly. Dig. 18; Roberts v. N. Y. Elev. Ry. Co., 155 N. Y. 31; Higgins v. Exchange Nat. Bank, 142 Misc. Rep. 69.)

      Merwin F. Le Vine, Howard S. Levie and Solon Weit for respondent.
    The insured and the revocable beneficiary are " otherwise united in interest ” within the meaning of section 16 of the Civil Practice Act and this action was, therefore, commenced within the contestable period. (New York Life Ins. Co. v. Dickler, 135 Misc. Rep. 594; 229 App. Div. 775; Hamilton v. Royal Ins. Co., 156 N. Y. 328; Metropolitan Life Ins. Co. v. Di Novi, 139 Misc. Rep. 1; Cohoes Bronze Co. v. Georgia Home Ins. Co., 243 App. Div. 224; Penn v. Bahnson, 89 Va. 253; Barbin v. Moore, 85 N. H. 362; Wagner v. Thieriot, 203 App. Div. 757; 236 N. Y. 588; Maurice v. Travelers Ins. Co., 121 Misc. Rep. 427; Grems v. Traver, 87 Misc. Rep. 644; 164 App. Div. 968; Matter of Pastore, 155 Misc. Rep. 247.) To be otherwise “ united in interest ” within the meaning of section 16 of the Civil Practice Act, it is sufficient that the beneficiary have such an interest in the policy that an action which would result in a judgment of rescission and cancellation of the policy, would affect the interests of the insured and beneficiary in a similar manner, or, in other words, that such interests would stand or fall together. (Croker v. Williamson, 208 N. Y. 480; Barbin v. Moore, 85 N. H. 362; Wagner v. Thieriot, 203 App. Div. 757; 236 N. Y. 588; Maurice v. Travelers Ins. Co., 121 Misc. Rep. 427; Grems v. Traver, 87 Misc. Rep. 644; 164 App. Div. 968; Matter of Messinger, 29 Fed. Rep. [2d] 158; 279 U. S. 855; Mutual Life Ins. Co. v. Hurni, 263 U. S. 167; Equitable Life Assur. Soc. v. Patterson, 1 Fed. Rep. 126.) Whether or not the revocable beneficiary is a necessary party in an action to rescind a life insurance policy is immaterial, although no complete determination could be reached in such equitable action without the presence of such beneficiary, and she would, accordingly, be a necessary party thereto. (Equitable Life Assur. Soc. v. Patterson, 1 Fed. Rep. 126; Mahr v. Norwich Union Fire Ins. Soc., 127 N. Y. 452; Mc Knight v. Bank of N. Y. & Trust Co., 254 N. Y. 417; Bayer v. Bayer, 215 App. Div. 454; Metropolitan Life Ins. Co. v. Di Novi, 139 Misc. Rep. 1.)
   Finch, J.

This is an action to rescind a contract of life insurance on the ground of misrepresentation by the insured in the application for the policy.

On May 25,1930, William Stone applied to the plaintiff for a policy of life insurance, naming his wife, Dorothy Stone, as beneficiary. The application was accepted and on June 13, 1930, a policy was issued. By the terms of the policy the insured reserved the right to change the beneficiary. The premiums on the policy were paid by William Stone.

The policy contained the following clause: Incontestability. This Policy shall be incontestable after one year from its date of issue, except for non-payment of premium, but if the age of the insured be misstated the amount or amounts payable under this Policy shall be such as the premium would have purchased at the correct age.”

On April 24, 1931, the plaintiff brought this action to rescind the policy, naming as defendants Dorothy Stone and William Stone. On that date service of the summons and complaint was made on Dorothy Stone. The plaintiff was unable to effect service upon the insured, William Stone, before his death, which occurred July 14, 1931. Thereafter letters- of administration were issued on the estate of William Stone to Dorothy Stone. The action was predicated upon certain misrepresentations contained in the application for the policy concerning the health of William Stone, his prior medical treatment, his hospitalization, and the rejection of his application by another insurance company. The trial court found and the appellants do not question that said misrepresentations were overwhelmingly established. The trial court further found that the action was commenced within the period of contestability. The Appellate Division unanimously affirmed the judgment of the trial court.

The chief problem is whether the Statute of Limitations bars the action. This depends on whether the plaintiff commenced the action within the year fixed by the aforesaid incontestability clause. This in turn depends upon the interpretation of the language of section 16 of the Civil Practice Act, which governs the commencement of an action both as to contractual and statutory limitations. Section 16 of the Civil Practice Act reads as follows: § 16. When action deemed to be commenced. An action is commenced against a defendant, within the meaning of any provision of this act which limits the time for commencing an action, when the summons is served on him or on a co-defendant who is a joint contractor or otherwise united in interest with him.”

The words of the section with which we are here particularly concerned are, “or on a co-defendant who is a joint contractor or otherwise united in interest with him.” The language in this section must receive a liberal construction. (Civ. Prac. Act, §§ 2, 3.)

To be “ united in interest ” it is not necessary to be joint contractors or to have a joint interest. If the interest of the parties in the subject-matter is such that they stand or fall together and that judgment against one will similarly affect the other then they are “ otherwise united in interest.”

In Croker v. Williamson (208 N. Y. 480, 484) this court held that in an action brought to determine the validity of a will and its probate, all the legatees were united in interest. The court said: “ Their interests [referring to the various legatees] under the will must stand or fall together, and it would seem to be pretty clear that they are, therefore, ‘ united.’ ” These words were used in construing section 398 of the Code of Civil Procedure which was in the language of the present section 16 of the Civil Practice Act.

In Wait’s New York Practice (Vol. 1 [3d ed.], p. 88) it is said: “ If a judgment * * * will substantially affect the other defendant in a similar manner service on one will be regarded as service on the other.”

The derivation of section 16 of the Civil Practice Act supports the construction generally accorded to it. Section 16 of the Civil Practice Act is in the language of section 398 of the Code of Civil Procedure. This latter section was taken from, similar language contained in section 99 of the old Code of Procedure. This section 99 of the old Code of Procedure was substituted in 1851 for an earlier section 99 of the Code which had provided that an action was deemed commenced when process was duly served upon the defendants, or one of them.”

We are thus brought to a consideration of the questions whether in a suit of this nature brought by an insurance company the plaintiff may successfully join the beneficiary as a party defendant and whether such beneficiary is “ united in interest ” with the insured.

In Mutual Life Ins. Co. v. Hurni Packing Co. (263 U. S. 167,177) the Supreme Court, quoting with approval from Monahan v. Metropolitan Life Ins. Co. (283 Ill. 136, 141), said: The beneficiary has an interest in the contract, and as between the insurer and the beneficiary all the rights and obligations of the parties are not determined as of the date of the death of the insured.”

In a suit brought under the terms of an incontestability clause such as that in this policy where the suit must be begun within the year, the plaintiff may well urge that if it commenced suit against the insured as the sole party defendant and during such suit and after the expiration of the contestable period the insured died, the beneficiary might claim that the Statute of Limitations had run as against her. In other words, if the action was commenced against William Stone, only, and the contestable period had expired during the pendency of the action, how would the insurance company thereafter overcome the plea which Dorothy Stone unquestionably would have made, that any contest as against her was then barred by the running of the period of limitations imposed by the contract and which the courts have held rims in favor of the beneficiary as well as the insured? (Mutual Life Ins. Co. v. Hurni Packing Co., supra. See Equitable Life Assur. Soc. v. Patterson, 1 Fed. Rep. 126.)

The case at bar presents a situation where the interests of the defendants in preventing the plaintiff from obtaining the relief sought are so inseparably intertwined that the presumption is warranted that they will both be desirous of reaching the same result. The interests of the parties in the subject-matter of the action are such that they stand or fall together and judgment against one will similarly affect the other.

If we hold otherwise we reach this anomalous situation. Dorothy Stone, the beneficiary named in the policy and the only person who might have been entitled to make claim for the death benefits, was concededly served with process in an action brought against her and her husband to rescind the policy for false representations which were overwhelmingly established within the contestable period, yet she joins with herself as administratrix of the estate of her husband in a claim that she was not united in interest with her husband in the policy and that the action which seeks to abrogate the rights of both of them was not commenced within the contestable period. If such claim were successful, Dorothy Stone would be the only person to profit, despite the unquestioned findings against her on the merits and the fact that she was personally served within the contestable period.

It is clear, therefore, that both the insured and the beneficiary have a real, substantial and united interest in sustaining the validity of the policy, and a decree canceling the policy will substantially affect the insured and the beneficiary in a similar derogatory manner.

The judgment appealed from should be affirmed, with costs.

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

Judgment affirmed.


text:
    Doris Swift, an Infant, by Sarah Swift, Her Guardian ad Litem, et al., Respondents, v. The City of New York et al., Defendants, and Bronx Water Works Corporation, Appellant.
    (Argued January 23, 1936;
    decided March 3, 1936.)

      Robert G. Shelter and Desmond T. Barry for appellant.
    The appellant violated no duty and no negligence was established and the motions to dismiss the complaint should have been granted. (McDonald v. DegnonMcLean Co., 140 App. Div. 411; 205 N. Y. 602; Johnson v. City of New York, 208 N. Y. 77; Mendelowitz v. Neisner, 258 N. Y. 181; Walsh v. Fitchburg R. R. Co., 145 N. Y. 301; Hockstein v. Congregation Talmud Torah, 144 Misc. Rep. 207; Maginnis v. City of Brooklyn, 16 N. Y. St. Repr. 760; 126 N. Y. 644; Powers v. Creem, 22 App. Div. 480;
      Kowalchick v. Reshin, 146 Misc. Rep. 770; Andrews v. City of Elmira, 128 App. Div. 699; Mackie v. Central Ry., 54 Iowa, 540; Kimball v. Carter, 95 Va. 77; Di Caprio v. N. Y. C. R. R. Co., 231 N. Y. 94; Olsen v. Fennia Realty Co., 246 N. Y. 641.)

      Myron Wisoff and William S. Butler for respondents.
    The conditions at the scene of the accident constituted a nuisance as well as negligence. In creating and maintaining them unnecessarily, appellant violated a common law and statutory duty to the infant plaintiff. (Rogers v. City, 101 App. Div. 352; 186 N. Y. 595; Fritz v. Fried-land, 209 App. Div. 889; 239 N. Y. 580; Glenn v. Oakland Contracting Co., 257 N. Y. 497; Tuomey v. O’Reilly, 142 N. Y. 678; Lee v. Van Buren, 190 App. Div. 742; Garder v. Christopher, 124 Mo. 347; Vallo v. U. S. Express, 147 Penn. St. 404; Kane v. Simons, 149 App. Div. 50; Hine v. Aird-Don Co., 232 App. Div. 359; Brusso v. City of Buffalo, 90 N. Y. 679; Blakeslee v. City of Geneva, 61 App. Div. 42; Giglio v. N. Y. Tel. Co., 238 App. Div. 503; Carlock v. Westchester Lighting Co., 268 N. Y. 345; Racine v. Morris, 201 N. Y. 240; Schumer v. Caplin, 241 N. Y. 346; Storrs v. City, 17 N. Y. 104; Bullock v. City, 99 N. Y. 654; Murnane v. Third Ave. Ry. Co., 172 N. Y. Supp. 188.) Appellant’s negligence was the proximate cause of plaintiff’s injuries. The issue was for the jury. (Ehrgott v. Mayor, 96 N. Y. 264; Martin v. Herzog, 228 N. Y. 164; Graves v. Rudman, 235 App. Div. 380; 260 N. Y. 628; Niagara Ferry & T. Co. v. Eagle S. & B. D. Ins. Co., 229 App. Div. 433; Hirschberg v. Bertal Textile Co., 238 App. Div. 338; Fritsch v. N. Y. & Queens Co. Ry. Co., 93 App. Div. 554; Gillespie v. City of Newburgh, 54 N. Y. 468; Kiernan v. Mayor, 14 App. Div. 156; Hewett v. Town of Thurman, 41 App. Div. 6; Porcella v. Mutual Reserve Fund Life Assn., 50 App. Div. 158; McFarlane v. City of Niagara Falls, 247 N. Y. 340; Erie R. R. Co. v. International Ry. Co., 209 App. Div. 380; 239 N. Y. 598; Moore v. Gadsen, 87 N. Y. 84.)
   Per Curiam.

There is no evidence that defendant was chargeable with notice of special danger to children from existing conditions. (Johnson v. City of New York, 208 N. Y. 77; McDonald v. Degnon-McLean Cont. Co., 124 App. Div. 824; affd., 205 N. Y. 502.) The ordinance was intended for the protection of persons traveling on the highway in the usual manner, and even, if applicable to the facts in this case, its violation is not shown to have been the proximate cause of plaintiff’s injury. No causal connection is shown.

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

Crane, Ch. J., Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur. Judgments reversed, etc.