author: Crane, J. Lehman, J. (dissenting).

text:
    American Surety Company of New York, Appellant, v. Philippine National Bank, Respondent.
    Banks and banking — guaranty — ultra vires — open and running accounts — payments thereon payments in fact and not affected by new loans — mere giving of guaranty not beyond corporate powers of bank unless specifically prohibited by its charter — defense of ultra vires not available to bank in action on its guaranty given in order to procure bond — bank cannot repudiate transaction induced by its representation that it was beneficially interested.
    1. All business transactions and all relations between debtor and creditor need not be stopped in order to make payments received on open and running accounts payments in fact. The continuance of business either by loaning more money or selling more goods does not take from previous payments their nature as real payments. The money thereafter loaned is the creditor’s money, and not the mere handing back to the debtor of his payment. Every credit is a new transaction the same as every sale is a new transaction.
    2. The mere giving of a guaranty or of an undertaking is not in and of itself a wrong, illegal, or beyond the corporate powers of a bank not specifically prohibited by its charter from giving any kind of a bond or undertaking. It depends upon the nature of the transaction and the bank’s interest in the property.
    3. Where p customer of defendant bank, in order to vacate an attachment against a shipment of goods, deposited with the sheriff a large sum of money, and, thereafter, the bank, to which its customer was largely indebted on daily balances, applied to plaintiff, surety company, for a bond to release the money, "which the latter refused to issue unless the bank would join in guaranteeing it against any loss arising therefrom; whereupon the bank, through its officers, made "written application for the bond, agreeing therein that it would indemnify and save the surety harmless from any loss and representing that it was specially and beneficially interested in obtaining the money deposited with the sheriff, and the surety issued its bond accordingly, thereby releasing the money which was transmitted to the bank and passed to the credit of its customer, reducing by so much the customer’s indebtedness; in a subsequent action by the surety company against the bank to recover on the guaranty the amount of a judgment it had been compelled to pay by reason of its bond, the bank cannot defend upon any theory of ultra vires. Having represented that it was interested in procuring the money of its customer and induced the plaintiff to act on that representation, whereby it procured the money, the bank cannot repudiate the transaction. (Game. v. Commonwealth Trust Co., 196 N. Y. 134, distinguished.)
    (Argued April 6, 1927;
    decided May 3, 1927.)

      American Surety Co. v. Philippine Nat. Bank, 217 App. Div. 732, reversed.
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 24, 1926, unanimously affirming a judgment in favor of defendant entered upon a verdict directed by the court.

      Frank C. Laughlin, Joseph W. Kirkpatrick and Henry C. Willcox for appellant.
    The plaintiff is entitled to recover from the defendant under the terms of the indemnity agreement, for there is no proof that the defendant did not have power to enter into this agreement with the plaintiff, and the presumption is that the contract is not ultra vires. (Jacobs v. Monaton R. I. Corp., 212 N. Y. 48; Gordon Malting Co. v. Bartels Brewing Co., 206 N. Y. 528; Patterson v. Robinson, 116 N. Y. 193; Rider Life Raft Co. v. Roach, 97 N. Y. 378; Chautauqua County Bank v. Risley, 19 N. Y. 369; Nelson v. Eaton, 26 N. Y. 410; Gaul v. Kiel & Arthe Co., 199 N. Y. 472; Kent v. Quicksilver Mining Co., 78 N. Y. 159.) Even if it be assumed that the indemnity contract is ultra vires still the plaintiff is entitled to recover from the defendant the amount of its loss. (Bath Gas Light Co. v. Claffy, 151 N. Y. 24; Whitney Arms Co. v. Barlow, 63 N. Y. 62; Bissell v. Michigan Southern Ry., 22 N. Y. 258; Central Transportation Co. v. Pullman Co., 139 U. S. 24; Logan County Bank v. Townsend, 139 U. S. 67; First Nat. Bank of Aiken v. Mott Iron Works, 258 U. S. 240; Ellis v. Citizens’ Nat. Bank, 25 N. M. 319; U. S. Fidelity & Guaranty Co. v. First State Bank, 116 Miss. 239; Southworth v. Morgan, 205 N. Y. 293; Strodl v. Farish-Stafford Co., 145 App. Div. 406.) The defendant benefited by its agreement of indemnity and the bond discharging the attachment to the extent of $127,000. (Matter of Holmes, 37 App. Div. 15; 159 N. Y. 532; Blair v. Hill, 50 App. Div. 33; 165 N. Y. 672; Portuguese Fraternity v. Liberty Trust Co., 215 Mass. 27; Newport v. Hatton, 195 Cal. 132; Pollack v. Leonard & Brainiff, 112 Okla. 276; Pearce v. Dill, 149 Ind. 136; Appleton v. Citizens’ Central Nat. Bank of New York, 190 N. Y. 417; Marks v. Kellogg, 170 App. Div. 464; 220 N. Y. 615; Leask v. Hoagland, 205 N. Y. 171; Koehler v. Adler, 78 N. Y. 287; Matter of Baldwin, 11 App. Div. 551; Poucher v. Scott, 33 Hun, 223.)

      John W. Hannon and John T. Loughran for respondent.
    The alleged indemnity agreement was in fact not the act of defendant bank. (People’s Bank v. St. Anthony’s R. C. Church, 109 N. Y. 512; Wilson v. Kings Co. E. R. R. Co., 114 N. Y. 487; Jacobus v. Jamestown Mantel Co., 211 N. Y. 154; Quackenboss v. Globe & R. F. Ins. Co., 177 N. Y. 71; Gause v. Commonwealth Trust Co., 124 App. Div. 438; 196 N. Y. 134.) The alleged indemnity agreement was ultra vires defendant bank. (Nassau Bank v. Jones, 95 N. Y. 115; Nat. Park Bank v. G. A. M. W. & S. Co., 116 N. Y. 281; Jemison v. Citizens’ Savings Bank, 122 N. Y. 135; Gause v. Commonwealth Trust Co., 196 N. Y. 134; Jacobs v. Monaton R. I. Corp., 212 N. Y. 48; Gordon Malting Co. v. Bartels Brewing Co., 206 N. Y. 528; Patterson v. Robinson, 116 N. Y. 193; Rider Life Raft Co. v. Roach, 97 N. Y. 378; Chautauqua County Bank v. Risley, 19 N. Y. 369; Yerkes v. Nat. Bank of Port Jervis, 69 N. Y. 382.)
   Crane, J.

The defendant, Philippine National Bank, is a foreign banking corporation duly created and existing under an act of the Legislature of the government of the Philippine Islands.

The Philippine Vegetable Oil Co., Inc., was a foreign corporation, duly organized under .the laws of the Philippine Islands, having its principal office at Manila, and a branch office in the city of New York, in charge of one Herbert Hellis as its general manager. The business of the corporation was trading in, and exporting vegetable oils to the United States and elsewhere. The company had a plant in San Francisco, Tacoma and New York; it had its own ships and tank cars and tank receiving stations, and did. a banking business not only with the defendant, but with the Hong-Kong and Shanghai Banking Corporation, the Chartered Bank of India, Australia and China, and the International Bank, and the Bank of the Philippine Islands. It was one of the defendant’s largest customers, transacting business with it in two ways: on its exports, it cashed drafts at the defendant bank, turning over to it the bill of lading which the defendant in turn transferred to the consignee when the drafts were paid; the other way of doing business was to borrow money from the defendant by overdrawing its account. It had the privilege, or was given credit by the defendant to overdraw its account up to about 1,000,000 pesos, or $500,000. This was a running account in which deposits were made nearly every day, and credited to the oil company, and moneys drawn out daily generally in excess of the deposits. Interest was charged on the daily balances, which were always in favor of the bank. In other words, during the times here in question, the oil company was always in debt to the bank, having continually exercised the privilege of overdrawing its account. Its credit was kept good by the daily payments on account; that is, by the deposits made to its credit. The bank was loaning its money to the oil company in this way, receiving every day payments on .the loan, or deposits, which kept down the total of the indebtedness to somewhere within the limit of the oral arrangement'. While the moneys advanced by the bank amounted to millions, the payment and deposits made by the «oil company kept the balance of the debt, or advance, to $500,000, or thereabouts. The bank kept but one account with the oil company, and this was the account, copies of which were received in evidence, showing the moneys drawn out by the oil company, the moneys deposited, and the daily and monthly balance. The account is in the form of a debit and credit account, so that the balance due can be ascertained for any one day. On June 30, 1918, the debt due the defendant was 751,612 pesos; on July 31 it was 752,189 pesos; on August 5, 1918, the oil company had overdrawn to the extent of 1,107,746.37 pesos, or $553,873.18. As shown by the books, the balance on July 31 was the figure above given, 752,189.63 pesos; on the next day, August 1, the oil company had drawn out five separate items aggregating 533,362.04 pesos, and had deposited 227,849.78 pesos. On August 2 it drew out 30,000 pesos, and deposited 1,409.02 pesos. On August 3 it drew out four items aggregating 206,585.54 pesos, and deposited two items, 186,221.78 pesos. On August 5 it drew out 99,009.90 pesos, and deposited four items aggregating 351,920.16 pesos, one of which items was a deposit of 254,000 pesos. This item we must bear in mind, as it is all important to this case. Thus we see that the daily balance of the depositor continually fluctuated. Its credit necessarily depended upon its payments. It was always in debt, but kept the balance of its debt down by making daily- payments, as above indicated. It drew out and paid back, the bank receiving as above stated, the interest on the daily balance. If the debtor, the oil company, had paid the balance due in full, the amount would have been entered as a credit, balancing the account the same as was entered this item of 254,000 pesos. Every deposit, therefore, to the account of the oil company was a reduction of its debt; money received by the bank in part payment of the balance due. Delaney, the bank’s manager in Manila, testified that all the deposits operated to reduce the oil company’s indebtedness and- the daily interest charges. This item of 254,000 pesos he said was applied by the bank no differently than any other item of deposit. At no time was the bank obliged to loan the oil company any more money. The overdrafts were an extension of credit voluntarily given.

On the fifth day of August, as the above account shows, and as I have stated, the oil company owed the bank 1,107,746.37 pesos, or $553,873'. 18. On that day it received, with other deposits, this item of 254,000 pesos, or $127,000. If the bank had shut down the loan account on that day, and stopped further credit, .the balance due would have been reduced by this amount deposited. The fact is that on that day the bank only loaned out to the defendant 99,009 pesos, or $45,500. As the interest stopped on the $127,000, or on the balance deposited over and above the amount paid out this day, the deposit must have been considered a payment. However we look at this account, all the deposits made by the oil company were in part payment of its debt, and applied by the bank on the indebtedness.

This amount of 254,000 pesos, or $127,000, deposited to the credit of the oil company on August 5, 1918, was money received by the bank from the oil company, and applied by it, as I have just stated, to the oil company’s indebtedness. It received this money in the same way in which it would have received the entire balance due, if it were to close out the account. Such a final payment would have been credited in the same way. Therefore, this deposit was received by the bank and credited as payment on its debit and credit account in the same way as any other creditor would receive payment for money loaned or goods sold and delivered on an open and running account. People do not have to stop all business transactions and end all relations in order to make payments received on open and running accounts payments in fact. The continuance of business either by loaning more money or selling more goods does not take from previous payments their nature as real payments. The money thereafter loaned is the creditor’s money, and not the mere handing back to the debtor of his payment. The credit is the thing, and this is kept alive by payments in whole or in part. Every credit, however, is a new transaction the same as every sale is a new transaction.

This rather lengthy, and perhaps unnecessary, explanation of the relationship between the Philippine National Bank and the Philippine Vegetable Oil Co., Inc., is due to the view which the bank has presented through counsel and counsel only, regarding this payment of 254,000 pesos, or $127,000, on August 5, 1918. As this case centers around this deposit, it is necessary to understand the facts and circumstances which enabled the bank to get it.

Prior to July 27, 1917, a cargo of vegetable oil had been shipped by the Philippine Vegetable Oil Co., Inc., to New York city and was there attached by virtue of a writ of attachment in an action in the Supreme Court, New York county, brought by Fels & Co. against the oil company. Thereafter, the oil company, in order to release the oil and vacate the attachment, deposited with the sheriff of Richmond county the sum of $127,000, which remained in his hands until the giving of the undertaking hereinafter mentioned. In June and July of 1918 the oil company had heavily overdrawn its account with the Philippine National Bank. Whether the deposits were not coming in fast enough to suit the bank we do not know, as the officers of the' bank have kept silent upon this matter. However, we do know that the oil company, or the bank, or both of them, wanted this cash deposit lying idle with the sheriff of Richmond county. The first one to propose getting it was the Philippine National Bank. In June of 1918 it communicated with the plaintiff, the American Surety Company of New York, a bonding company, and attempted to get that company to give a bond to the sheriff of Richmond county in place of the money. Naturally, the bonding company wanted security for such an undertaking, and the defendant bank offered the bond of the Philippine Vegetable Oil Co., Inc. This the American Surety Company refused to take, but stated that it would accept the undertaking or guaranty of the oil company and the Philippine National Bank. C. C. Robinson was vice-president of the bank and general manager of its New York city branch. He was the one who started and finished all negotiations with the American Surety Company. The transactions were with the bank through Robinson, and not with the surety company. Robinson stated that the bank had loaned the Philippine Vegetable Oil Co., Inc., $1,400,000, and thought very well of the company. However, he could not furnish the security required without communicating with the home office at Manila. Thereupon, he cabled to the defendant, the Philippine National Bank, at its home office, for instructions, in the following words:

Relative Pels Bond, unable obtain without our guaranty shall we do this.
“ PHILIPPINE NATIONAL BANK,
New York Agency.”

Unless the bank was interested in procuring this Eels money, so called, of $127,000, it is impossible to understand why the agent in New York should notify the home office that it, the New York branch, was unable to obtain the money. It is quite apparent that for some reason the bank wanted this money, as fully indicated in its reply, which came by cable, July 15:

“ Provide Guaranty for Eels Bond have Hellis remit fund here when received.
“ PHILIPPINE NATIONAL BANK,
“ Manila
(Signed) Delaney, Vice Pres. & Gen’l. Man.”

Hellis was an officer and manager of the oil company. The money, when received after the giving of the guaranty, was to be remitted to Manila, as was done in full compliance with these instructions from the home bank.

After receiving this authority from Manila, Robinson, as an officer of the bank, made an application in writing to the American Surety Company for a court bond to discharge the attachment and get the $127,000; that is, made application to the surety company to have it give a bond to the sheriff of Richmond county in place of the money. The bank, in this written application, agreed that it would at all times indemnify and save the surety harmless from and against every claim, demand, liability, cost, charge, counsel fee, expense, suit, order, judgment and adjudication whatsoever, and also stated that this suretyship or bond to be given by the surety company was for the special benefit of the bank, its property and income. The bank’s statement was further set forth in these words: and the indemnitor (the bank) represents that it is specially and beneficially interested therein.” This application was executed by the Philippine National Bank, New York agency, by C. C. Robinson, agent, and acknowledged by him on the 17th day of July, 1918. The truth of these representations has never been denied. The application was also signed and executed by the Philippine Vegetable Oil Co., Inc., by Herbert Hellis, local manager.

Relying upon these cablegrams, which were shown to the officers of the American Surety Company, and this written application with its representations and undertakings, the American Surety Company gave the bond required; the sheriff released the $127,000 cash, paid it to Hellis of the Philippine Vegetable Oil Co., Inc., who in turn paid it over by check to the Philippine National Bank, New York branch. The check was made payable to the Philippine National Bank: Thereupon, the money was cabled to the home bank in Manila, according to the instruction which had been received, and was passed to the credit of the Philippine Vegetable Oil Company’s account on August 5, 1918, as the 254,000 pesos above mentioned. In all the communications the money was referred to as the $127,000 from the Pels attachment. On the day in which the deposit was made with the home bank at Manila, and credited in the books as above shown, that bank delivered to the Philippine Vegetable Oil Co., its debtor, at Manila, the following memorandum:

“ Philippine National Bank,
“ Manila, P. I.
“ Official Depository of the Philippine Government
August 5th, 1918.
“ Philippine Vegetable Oil Co.,
“Manila, P.I.:
“We — CREDIT — Your Account P 254,000.00 Being amount released by bond in Eels case, per cable instructions of our New York Agency dated August 3rd.’’

Some years later, in the Eels action, a judgment was recovered which the American Surety Company was obliged to pay. This action has been commenced against the Philippine National Bank upon its guaranty or undertaking to recover the amount of this payment with counsel fees and expenses. The bank has repudiated its acts under the plea of ultra vires, and has so far succeeded.

The motion to dismiss and for a direction of a verdict for the defendant was made solely on the ground that the guaranty or written undertaking given to the American Surety Company was beyond the corporate powers of the bank, and invalid for this reason. The motion was granted by the court solely on the ground that it was a case of ultra vires. The decision and authority of C. C. Robinson, as vice-president and general manager of the defendant in New York city, was conceded. Jason E. Delaney, the vice-president and general manager of the defendant bank in Manila, Philippine Islands, gave the authority in behalf of the bank to Robinson to execute the agreement with the American Surety Company. His position with the bank and the fact that he gave such authority is conceded. Delaney appeared and testified at the trial. His authority to act for the bank in this particular was not questioned. He did not deny having such authority to act for the bank. If a resolution of the board of directors were necessary to give him authority in such a case, the defendant could easily have proyed that no such resolution was ever passed or action taken. The defendant not only failed to prove such omission, but never questioned Delaney regarding his authority to send the cablegram to Robinson. However, resolutions of boards of directors for daily transactions in large banking houses are not usual or expected. Officers conduct the business of making loans and procuring payments without direct authority for every transaction. Besides, the .bank having received the money as the result of this promise made to the plaintiff, cannot deny the authority of its officers in the matter. They are presumed to have acted with authority until the contrary appears. (Oakes v. Cattaraugus Water Co., 143 N. Y. 430, 436; Nelson v. Eaton, 26 N. Y. 410; Hess v. Sloane, 66 App. Div. 522; affd., on opinion below, 173 N. Y. 616; Seymour v. Spring Forest Cemetery Assn., 144 N. Y. 333, 341; Black River Ins. Co. v. New York State Loan & Trust Co., 73 N. Y. 282; Lumber Co. v. Telephone Co., 127 Iowa, 350, 355; Hastings v. Brooklyn Life Ins. Co., 138 N. Y. 473, 479.).

The defendant rested its motion for the direction of a verdict entirely upon the powers of the bank appearing from its charter, the act of incorporation. This gave it power to make contracts and to carry on the banking business and to further exercise the general powers given by the corporation law of the Philippine Islands, so far as not inconsistent with the act of incorporation. This was not a National bank of the United States government, whose powers are defined by Federal law. It is a bank created by a law of the Philippine Islands, a foreign State. To know what powers were given by the corporation law referred to in the charter, it was necessary for the defendant to prove the law. This it did not do. We have not been informed what the banking business is as carried on under the law of the Philippine Islands. This also the defendant failed to prove. We cannot assume that the banking business of to-day is the same as it was a decade ago, or that the banking business is limited in all jurisdictions alike. We know how the Federal banking system of this country has increased its powers and undertaken enterprises heretofore prohibited. (People ex rel. Pratt v. Goldfogle, 242 N. Y. 277; State of Minnesota v. First National Bank of St. Paul, 273 U. S. 561.) The charter of this Philippine bank gave it very wide scope of activity. How can we say that the banking business in Manila or in Hong-Kong is conducted in the same way as in New York State? There is some intimation in the brief of the appellant, supported by authority, that the law of the Philippine Islands, being part of the civil law, does not recognize the doctrine of ultra vires.

However this may be, we shall not consider these points, as the defendant, in our opinion, cannot defend the plaintiff’s claim upon any theory of ultra vires applicable in this or in any other State. In Appleton v. Citizens’ Central Nat. Bank (190 N. Y. 417) Chief Judge Cullen said: “ Whatever the difference of view there may be as to the effect of ultra vires on corporate contracts, in no jurisdiction can a party retain what it has received under such a contract and refuse to perform the contract.”

In that case a National bank, in order to obtain a payment on a loan which it had made, guaranteed the loan of a larger amount made by another bank to the debtor, out of which money the debt due the guaranteeing bank was to be paid. When sued on its guaranty, it pleaded ultra vires, and this court said:

“ We may assume that the contract was ultra vires. We may further assume that in transactions by national banks we should adopt the law of ultra vires as it prevails in the Federal courts, and not the local law on the subject. Yet the defendant, in our opinion, became plainly liable for the amount which it received under the ultra vires contract. The law which obtains in this State and in several other jurisdictions is that where one party has received the full benefit of an ultra vires contract it cannot plead the invalidity of the contract to defeat an action upon it by the other party.”

The United States Supreme Court affirmed this decision (Citizens’ Central Nat. Bank v. Appleton, 216 U. S. 196).

Chief Judge Andrews, writing in Bath Gas Light Co. v. Claffy (151 N. Y. 24), reviewed the law upon this subject of ultra vires, and said:

“ The modern and reasonable doctrine that contracts into which corporations may lawfully enter are such only as are expressly or impliedly authorized by their charters, is nevertheless frequently disregarded in practice, and when this is done and a corporation enters into a contract beyond its chartered powers, the question arises which has been the-subject of debate and of much difference of opinion, how shall such a contract be treated by the courts, and whether the contract can create any rights as between the parties which the courts will enforce.”

And speaking for this court, he then declared, after citing numerous authorities: Public policy is promoted by the discouragement of fraud and the maintenance of the obligation of contracts. * * * The courts in this State from an early day, commencing as far back as the Utica Insurance cases, have sought to regulate and restrict the defense of ultra vires so as to make it consistent with the obligations of justice.”

And going back to Whitney Arms Co. v. Barlow (63 N. Y. 62), Judge Allen, writing for the court, said: “ The plea of ultra vires should not as a general rule prevail, whether interposed for or against a corporation, when it would not advance justice, but on the contrary would accomplish a legal wrong.”

The same view has been taken of this doctrine by the United States Supreme Court in Railway Co. v. McCarthy (96 U. S. 258, 267), which it expressed in these words:

When a contract is not on its face necessarily beyond the scope of the power of the corporation by which it was made, it will, in the absence of proof to the contrary, be presumed to be valid. Corporations are .presumed to contract within their powers. The doctrine of ultra vires when invoked for or against a corporation, should not be allowed to prevail where it would defeat the ends of justice or work a legal wrong.”

Applying this rule to a National bank, the United States Supreme Court decided that it could not hold on to securities and at the same time refuse to comply with an ultra vires agreement. (Logan County Nat. Bank v. Townsend, 139 U. S. 67.)

The method adopted by the United States courts for carrying out these views is expressed in Central Transportation Co. v. Pullman’s Car Co. (139 U. S. 24, 60):

“A contract ultra vires being unlawful and void, not because it is in itself immoral, but because the corporation, by the law of its creation, is incapable of making it, the courts, while refusing to maintain any action upon the unlawful contract, have always striven to do justice between the parties, so far as could be done consistently with adherence to law, by permitting property or money, parted with on the faith of the unlawful contract, to be recovered back, or compensation to be made for it.” (See, also, People’s Bank v. National Bank, 101 U. S. 181, 183; Rankin, Receiver of Berlin National Bank, v. Emigh, 218 U. S. 27; Seeber v. Commercial Nat. Bank of Ogden, 77 Fed. Rep. 957.)

One of the latest cases is that of First National Bank of Aiken v. Mott Iron Works (258 U. S. 240), wherein Mr. Justice Holmes tersely holds the bank liable on a written guaranty of a contract for goods sold and delivered to third parties assuming apparently that the law has been well settled that a bank cannot hold proceeds arising from such a contract and plead illegality. He states: The bank is in the position of having realized the benefit to acquire which the guaranty was made, and of having realized it out of the proceeds of the goods that it induced the Iron Company to sell.”

He also refers to the distinction between holding the bank on its guaranty and recovering for the benefits received as purely formal.

With these authorities confronting us, what shall we say about this case? The bank was not specifically prohibited by its charter from giving any. kind of a bond or undertaking. I take it that if in the course of its banking business it were necessary to bring suit to recover moneys loaned, it could give the security required by any particular forum or the undertakings necessary for attachment process. In my opinion, it might also in a proper case give a bond or undertaking to obtain cash or property as part payment on account of an indebtedness agreeing therein to return the. cash or the property if it should subsequently be determined that the bank was not entitled to it. (Holmes & Griggs Mfg. Co. v. Holmes & Wessell Metal Co., 127 N. Y. 252, 257.) The mere giving of a guaranty or of an undertaking is not in and of itself a wrong, illegal, or beyond the corporate powers of a bank. It all depends upon the nature of the transaction, and the bank’s interest in the property. The contract with the plaintiff on its face was not necessarily beyond the scope of the power of the bank. (Railway Co. v. McCarthy, supra.) The bank stated in its agreement with the American Surety Company that it was interested in obtaining the $127,000 deposited with the sheriff of Richmond county. It said that it had a special benefit in the property. To use its words: The indemnitor represents that it is specially and beneficially interested therein.” This has never been denied by the defendant. The officers of the bank were called on the trial of this case and did not deny this statement. Who would know better of the interest of the bank in obtaining this money than its vice-president and general manager who authorized the giving of this undertaking to the plaintiff? He does not say that the statement of interest is false; neither does he deny that the bank was interested in obtaining the money. The record is barren of any explanation for such a carefully prepared and deliberate statement. On the strength of this statement and of the written guaranty or promise to make good any liability, the plaintiff surety company gave its bond to the sheriff and released the $127,000 which immediately went to the defendant bank in Manila by its own order and direction, and was credited on a debt owed to it by the Philippine Vegetable Oil Co., Inc. How this was done I have explained at the beginning of this opinion. Personally, I do not consider the transaction ultra vires, nor do I think that the defendant has proved the transaction to be without the scope of the defendant’s banking powers. However, the bank cannot represent that it is interested in obtaining money, and then having induced the plaintiff to act on that representation and having thereby procured the money, repudiate the transaction.

Gause v. Commonwealth Trust Co. (196 N. Y. 134), much relied upon by the respondent, related to an agreement from which the trust company received no benefit, as was stated in the opinion.

For the reasons here stated, the judgment of the Appellate Division and that of the Trial Term should be reversed. In response to a question put by the trial court both counsel conceded that there was no question of fact to be submitted to the jury; that the only question was that of corporate power under the bank’s charter/ As we have determined this question against the defendant, judgment should be directed in favor of the plaintiff for the relief demanded in the complaint, with costs in all courts.

Lehman, J. (dissenting).

The defendant was incorporated by special act of the Philippine Legislature. Its charter provides that it shall have power:

“ (a) to prescribe its by-laws.
“ (b) to adopt and use a seal.
“ (c) to make contracts.
“ (d) to sue and be sued.
(e) to exercise the powers granted in this Act and such incidental powers as may be necessary to carry out the business of banking, within the limitations prescribed by this Act, and
(f) to exercise further the general powers mentioned in the Corporation Law so far as they are not inconsistent with or incompatible with the provisions of this Act.”

The defendant may “ carry out the business of hanking,” but only “ within the limitations prescribed by this Act.” We are not relegated for definition of what constitutes the “ business of banking ” to usage or custom, either in Manila or elsewhere. The statute itself carefully, prescribes the limits of the banking business which this defendant may carry on. Under no possible construction do these prescribed limitations include the giving of bond or indemnity for the benefit of a client, or depositor. Though the charter does give to the defendant the “general powers mentioned in the Corporation Law,” the exercise of such general powers may not be incompatible with the provisions of this Act.” The Corporation Law of the Philippine Islands was not introduced in evidence. We do not know what “ general powers ” are mentioned therein, but it seems clear to me that no general power ” however broadly defined in the Corporation Law could remove the limitations in regard to the transaction of banking business by this defendant contained in its own charter. If in terms such a general power ” were sufficient to include the giving of an indemnity agreement, the exercise of such power beyond the prescribed limits of the banking business which the defendant was permitted to carry on by its charter would be incompatible with the provisions of the charter.

The defendant had no power to make a contract of suretyship for the benefit of a depositor. It might do so to further its own business conducted within the limitations of its charter. (Williston on Contracts, sec. 1212.) Banks have been held upon contracts of suretyship either on the ground that they received the benefit of the transaction or that it was within its corporate powers, in Appleton v. Citizens’ Central National Bank (190 N.Y. 417; affd., 216 U. S. 196); Oklahoma City National Bank v. Ezzard (58 Oklahoma, 251); First National Bank of Aiken v. Mott Iron Works (258 U. S. 240); U. S. Fidelity Co. v. First State Bank (116 Miss. 239); Norton v. Derry National Bank (61 N. H. 589); People’s Bank v. Manufacturers National Bank (101 U. S. 181); Thomas v. City National Bank (40 Neb. 501). In all these cases the banks had a direct interest in obtaining the bond. They sought Benefit in connection with a transaction within their corporate power, and they received from the other party to the contract the benefit they sought. Here, it seems to me, the case is different. The bank made the indemnity agreement to induce the plaintiff to execute its bond intended to secure the release of the sum of $127,000 deposited with the sheriff and -subject to the hen of an • attachment issued against the oil company. The plaintiff had notice and knowledge of the purpose of the bond. So far there is nothing to show that the defendant’s indemnity agreement was for its own benefit and within its corporate powers. The money was, so far as the evidence shows, in fact the property of the oil company. When the bond made by the plaintiff was filed, the oil company received the moneys. If there were nothing else in the case, contention could hardly be made that the defendant’s contract of suretyship was other than a contract for the accommodation of the oil company, the defendant’s depositor. It appears, however, that when the defendant by cable from Manila authorized its New York agent to sign the indemnity contract, it also directed him to have the oil company’s representative remit to Manila the fund when released. This was done. The money received by the oil company was remitted to the defendant bank at Manila and credited in the oil company’s bank account. That bank account was at that time overdrawn by much more than the amount of the remittance. It is said that these circumstances are sufficient to require the trier of the facts to hold that the defendant’s contract was made for its own benefit and that it received for its own benefit the moneys released from attachment as the result of the indemnity agreement.

It is true that at the time the money was remitted to the defendant bank, the account of the oil company was overdrawn. Automatically the deposit in the bank account reduced the amount of the overdraft. Here, it is urged, was benefit received by the bank. If that constituted a benefit it was so slight as to be illusory. It was not the direct result of the release of the attachment. That placed the. moneys, which had been held by the sheriff, in the control of the oil company. The defendant knew that the moneys, after release by the sheriff, would be within the control of the oil company. The defendant’s cable from Manila contains a direction “ have Helles ” (the manager of the oil company) “ remit fund here when received.” That is a direction to remit to Manila; it is not an express direction that the money must be remitted to the defendant bank in Manila. The oil company’s manager sent the check for the moneys received to the branch of the defendant bank in New York with directions to “ remit by cable immediately to the Philippine Vegetable Oil Co., Inc., Manila, Philippine Islands.” For all that appears, the oil company merely used the defendant bank as the instrument by which the money of the oil company in New York could be made available to that company at its principal office in Manila. The bank received it because the oil company deposited it when it received it, in the defendant bank. While thereby the oil company’s overdraft was reduced, by contract previously made with the bank the oil company had a right to overdraw its account with the defendant bank for a large amount. That, it appears, is the form in which credit is by custom extended in the Philippine Islands by banks to those who desire loans. As soon as the moneys were placed in the oil company’s deposit account, a credit for similar amount thereby became available to the oil company. It did avail itself of this new credit. At the end of the month the overdrafts were larger than before the moneys were remitted to the bank. The overdrafts were still larger when the oil company became insolvent.

For many purposes the relationship between bank and depositor is that of debtor and creditor. Theoretically, the depositor owns no money, but must rely upon the bank’s paying its debt. If we apply the theory consistently and for all purposes, it might be said that the remittance of moneys placed to the credit of the oil company to the same extent reduced the indebtedness of the depositor to the bank upon its overdraft, and that the indebtedness of the bank to the depositor was offset against the larger debt of the depositor to the bank. The theory may not, however, blind us to the actual facts. The practical similarity between money in bank and actual money in pocket more or less has obliterated legal difference.” (Blachstone v. Miller, 188 U. S. 189.) Here the bank did noth in fact offset against the overdraft the amount of the deposit. By contract it had precluded itself from doing so. The benefit of the deposit inured to the depositor. Through the remittance the depositor gained the right to draw for similar amount, and the interest that was due from the depositor on overdrafts was correspondingly reduced during the short interval that elapsed before the depositor availed itself of its right to increase the overdraft.

In all cases which have been cited or which I have been able to find, an indemnity by a bank which has been held to come within the corporate powers of the" bank has been primarily for the benefit of the bank, and in all cases in which a bank has been held hable for benefit received, the benefit has been the direct result of the ultra vires act and has been real and not illusory. No use would be served by analysing again the cases relied upon to sustain the conclusion reached in the opinion of Judge Crane. In most respects I agree with the analysis he has made.1 I desire to point out only that in the case of Central Transportation Co. v. Pullman’s Car Co. (139 U. S. 24) the court while allowing recovery in that case stated that In such case, however, the action is not maintained upon the unlawful contract, nor according to its terms; but on an implied contract of the defendant to return, or, failing to do that, to make compensation for, property or money which it has no right to retain.” Here, in fact, the defendant bank has not received or retained for its own benefit any money or property. In the latest case referred to in Judge Crane’s opinion (First National Bank of Aiken v. Mott Iron Works, 258 U. S. 240) the written guaranty of the contract for goods sold and delivered to third parties was made because such goods were required by the third parties in order to enable these parties to perform a building contract and to secure payments thereunder. This building contract and all payments due thereunder had previously been assigned to the bank. The bank was held liable, not for the value of the goods received by the third party, but for the payments which it secured by virtue of its assignment of the contract to it. The court pointed out, as Judge Crane shows, that the bank is in the position of having realized the benefit to acquire which the guaranty was made, and of having realized it out of the proceeds of the goods that it induced the iron company to sell. Here it seems to me that we should be closing our eyes to the real facts if we were to hold that as matter of law the guaranty was made in order to enable the bank to acquire the more or less accidental and illusory benefit of an addition to the depositor’s bank account. It is the denositor who in fact has realized the benefit.

It is also urged that since want of power on the part of the bank to execute this contract of indemnity is not apparent upon comparing the act done with the terms of the charter, but depends upon the extrinsic fact of whether it was made to secure an interest on the part of the bank or an interest of a depositor or other third party, the defense of ultra vires cannot prevail in the light of assertions made by the bank in executing the contract of indemnity. (See opinion of Judge Selden in Bissell v. M. S. & N. I. R. Companies, 22 N. Y. 258.) A contract of indemnity was signed and executed by both the oil company and the bank upon a printed bank form of the plaintiff company. It recites: “ That the suretyship is for the special benefit of the indemnitor, its property, ■ income and earnings now owned or hereafter acquired, to which the Surety looks for its indemnity, and which the Indemnitor represents that it is specifically and beneficially interested therein.”

That clause refers to indemnitor in the singular, though two parties signed as indemnitors. It is open to the construction that it refers to only, one of the indemnitors. Before the indemnity agreement was made the defendant had requested the plaintiff to give the bond, not for itself, but for its depositor. It had informed the plaintiff of the fact that it was loaning large sums of money to the depositor, and it had asked the plaintiff to give the bond in reliance solely on the depositor’s financial responsibility. I can find no intimation in the record that the plaintiff was in any way led to believe, except possibly through the provision of the agreement hereinbefore quoted, that the defendant bank was giving the indemnity agreement in connection with its own banking business, except in the sense that it was coming to the aid of a good customer. In view of these circumstances, I do not think that we should hold that the plaintiff might rely without further question on the ambiguous representation contained in its own printed form of contract. (Wilson v. Metropolitan Elev. Ry. Co., 120 N. Y. 145.) At least it seems to me that the trier of the fact might reach contrary conclusion.

For these reasons the judgment should be affirmed.

Pound, Andrews, Kellogg and O’Brien, JJ., concur with Crane, J.; Lehman, J., dissents in opinion in which Cardozo, Ch. J., concurs.

Judgment accordingly.


source: Caselaw Access Project

author: Cardozo, Ch. J.

license: Public Domain

text:
    In the Matter of the Claim of Miriam B. Field et al., Appellants, against Charmette Knitted Fabric Company et al., Respondents. State Industrial Board, Appellant.
    (Argued March 29, 1927;
    decided May 3, 1927.)
    Workmen’s compensation — -master and servant — -death of superintendent of mill through blow of discharged employee as he left the building after close of work — injury arose out of and in course of employment where quarrel outside mill was merely continuation of one begun within.
    An award, under the Workmen’s Compensation Law, is properly made to dependents of the superintendent of a mill, who, having discharged an employee and finding him in the building after the closing hour, ordered him to leave, whereupon angry words followed and, a few minutes later, when he went down stairs and out of the building, the employee, waiting for him on the sidewalk a few feet from the door, challenged him to fight and upon his trying to walk away struck him in the face, causing him to.fall backward, fracturing his skull, from which he died. The injury was one that might fairly be found to have arisen “.out of ” the employment and an argument that it did not arise “ in the course of employment ’’ for the reason that, after finishing the work of the day, the assaulted man had left the mill and was out upon the public sidewalk, cannot be sustained.

      Matter of Field v. Charmette Knitted Fabric Co., 219 App. Div. 753, reversed.
    Appeal from an order of the Appellate Division of the Supreme Court in the third judicial department, entered February 16, 1927, reversing an award of the State Industrial Board made under the Workmen’s Compensation Law and dismissing the claim.

      H. H Nordlinger and Samuel H. Hofstadter for claimants, appellants.
    The accident arose out of and in the course of the decedent’s employment. The award of the State Industrial Board was well within the authority of the adjudicated cases, and should be reinstated. (Matter of Fried v. Quinlan, Inc., 242 N. Y. 496; Matter of Rydeen v. Monarch Furniture Co., 240 N. Y. 295; Matter of Knocks v. Metal Packing Corp., 231 N. Y. 78; Matter of Verschleiser v. Stern & Son, 229 N. Y. 192; Matter of Leonbruno v. Champlain Silk Mills, 229 N. Y. 470; Matter of Carbone v. Loft, 219 N. Y. 579; Matter of Heitz v. Ruppert, 218 N. Y. 148; Bandassi v. Molla, 200 App. Div. 266; 234 N. Y. 554.)

      Albert Ottinger, Attorney-General (E. C. Aiken of counsel), for State Industrial Board, appellant.
    The accident arose out of the employment. (Matter of Heitz v. Ruppert, 218 N. Y. 148; Matter of Leonbruno v. Champlain Silk Mills, 229 N. Y. 470; Matter of Verschleiser v. Stern & Son, 229 N. Y. 192; Matter of Carbone v. Loft, 219 N. Y. 579; Matter of Fried v. Quinlan, Inc., 242 N. Y. 496.) The accident arose in the course of the employment. (Ross v. Howieson, 198 App. Div. 674; 232 N. Y. 604; Martin v. Metropolitan Life Ins. Co., 197 App. Div. 382; 233 N. Y. 653; Cudahy Packing Co. v. Parramore, 263 U. S. 418; Carter v. Gordinier & Warring Co., 194 App. Div. 925; 230 N. Y. 597.)

      William Warren Dimmick for respondents.
    The accident and the death of the deceased, Isaac Field, did not arise out of and in the course of his employment, within the meaning of section 2 of subdivisions 7 and 8 of the Workmen’s Compensation Law. (Lampert v. Siemons, 235 N. Y. 313; Scholtzhauer v. C. & L. Lunch Co., 233 N. Y. 12; Griffin v. Robertson & Son, 176 App. Div. 6; Stillwagon v. Callon Bros., 183 App. Div. 141; 224 N. Y. 714; Stein v. Williams Printing Co., 195 App. Div. 336; Swanson v. Tefft, 211 App. Div. 821; De Fillippis v. Falkenberg, 170 App. Div. 153; De Salvo v. Menihan Bros., 225 N. Y. 123; Matter of Heitz v. Ruppert, 218 N. Y. 148; Coope v. Loew’s Gates Theatre, 215 App. Div. 260; Saenger
      v. Locke, 220 N. Y. 556; Matter of Rydeen v. Monarch Furniture Co., 240 N. Y. 295.)
   Cardozo, Ch. J.

One Field was general manager and superintendent of a mill. Magid, a knitter in the mill, was doing unsatisfactory work, and Field ordered him discharged. The message giving word of the discharge was brought to Magid about 5.15 p. m. He kept on working, however, till 5.30, the closing hour for the factory. Field, finding him in the building, ordered him to leave. Angry words followed, Magid asking whether Field was strong enough to put him out, and Field retaliating by raising a bobbin in the air. Other workmen who were by, pulled Magid away. A few minutes later, Field went downstairs and out of the building. Magid, waiting for him on the sidewalk, three or four feet from the door, challenged him to fight. Field tried to walk away, but Magid struck him in the face: He fell backward, fracturing his skull, and died. An award in favor of dependent relatives was reversed upon appeal.

Our decisions make it plain that the injury to Field was one that might fairly be found by the triers of the facts to have arisen “ out of ” the employment (Workmen’s Comp. Act; Cons. Laws, ch. 67, § 2, subd. 7). Magid was the aggressor in an assault provoked by the discharge and the ensuing war of words (Matter of Rydeen v. Monarch Furniture Co., 240 N. Y. 295; Matter of Knocks v. Metal Packing Corp., 231 N. Y. 78; Matter of Fried v. Quinlan, Inc., 242 N. Y. 496; Matter of Verschleiser v. Stern & Son, 229 N. Y. 192; cf. Zygmuntowicz v. Am. Steel & Wire Co., 240 Mass. 421, 424). The argument is made, however, that the injury did not arise in the course of employment ” (Workmen’s Comp. Act, § 2, subd. 7), for the reason that Field, after finishing the work of the day, had left the premises or plant (§2, subd. 4), and was out upon the public sidewalk. If he had been struck within the threshold, liability would be conceded. Because he was struck without, liability has failed.

We think the line of division is drawn too narrowly and closely when circumstances of place are thus considered to the exclusion of all others. The quarrel outside of the mill was merely a continuation or extension of the quarrel begun within. Magid, pulled away from his enemy indoors, was waiting for his vengeance at the gate, and took it on the instant. The rule is well settled that an employee, even after closing time, is in the course of employment until a suitable opportunity has been given to leave the place of work (Matter of Lynch v. City of New York, 242 N. Y. 115, 118). For that reason,,, claims have been sustained for injuries on stairs or in elevators though the stairs or the elevators were not controlled by the employer, a tenant of a loft above (Matter of Ross v. Howieson, 232 N. Y. 604, reversing 198 App. Div. 674, on the dissenting opinion in that court; Martiny. Met. Life Ins. Co., 197 App. Div. 382; 233 N. Y. 653; Sundine’s Case, 218 Mass. 1). Here, almost in the very act of putting Ms foot without the mill, the employee is confronted by a danger engendered .by Ms work within. The situation would be hardly different if a struggle, begun back of the threshold, had ended in a fatal blow delivered on the walk. No reasonable opportumty had been offered the assaulted man to separate Mmself from the plant, its ammosities and dangers. Continmty of cause has been so combmed with contigmty in time and space that the quarrel from origin to ending must be taken to be one.

The facts being what they are, there is no occasion to consider whether a recovery would be permitted though the umty of the transaction were less apparent than it is (Cudahy Packing Co. v. Parramore, 263 U. S. 418; Matter of Carter v. Gordiner & Warring Co., 230 N. Y. 597; and cf. Matter of Lampert v. Siemons, 235 N. Y. 311; Rourke's Case, 237 Mass. 360).

The order of the Appellate Division should be reversed, and the award confirmed, with costs in the Appellate Division and in this court.

Pound, Crane, Andrews, Lehman and O’Brien, JJ., concur; Kellogg, J., dissents.

Ordered accordingly.


author: Kellogg, J.

text:
    The People of the State of New York, Respondent, v. William Wagner, Appellant.
    Crimes — murder in first degree — erroneous charge that defendant might be convicted of murder in first degree if killing was effected while he was engaged in felonious assault upon victim — verdict that defendant killed while engaged in commission of felony warranted by proof that while he was engaged in felonious assault on third person deceased came to rescue and was assaulted and killed by defendant — error disregarded where both assaults were proved by same uncontradicted evidence.
    1. TJpon trial of an indictment for murder in the first degree it is error for the trial judge to charge that if the jury find the killing to have been effected while defendant was engaged in a felonious assault upon his victim they may find him guilty of murder in the first degree. The precedent felony must constitute an independent crime not included within the resulting homicide to warrant a conviction for murder in the first degree in the absence of proof of deliberation and premeditation.
    2. The trial judge did not err, however, in charging that defendant may have killed while engaged in the commission of a felonious assault upon a third person, where it appears from undisputed evidence that while defendant was strikl. g his landlady with a blackjack the deceased came to her rescue, whereupon defendant began the assault upon him which ended in his death. The homicide had its inception and was committed when the felonious assault upon the landlady was still in progress. It follows that the jury might have found that the defendant killed the deceased while “ engaged in the commission of a felony ” within the meaning of subdivision 2 of section 1044 of the Penal Law.
    3. Under such circumstances and where both assaults were proved by the uneontradicted evidence of the same witnesses, the error may be disregarded. The jury could not in reason have believed that defendant was guilty of an assault upon Ms victim and gmltless of an assault upon the landlady. The verdict, therefore, must be regarded as a finding that defendant tilled the deceased while engaged in a felomous assault upon the landlady and, therefore, the jury correctly found him gmlty of murder in the first degree.
    (Argued April 5, 1927;
    decided May 3, 1927.)
    Appeal from a judgment of the Kings County Court, rendered December 23, 1926, upon a verdict convicting the defendant of the crime of murder in the first degree.

      Gardiner Conroy and Edward J. Reilly for appellant.
    The jury was improperly charged as to the felonies in the case. (People v. Sullivan, 173 N. Y. 122; People v. Marendi, 213 N. Y. 600; People v. Hitter, 184 N. Y. 237; People v. Spohr, 206 N. Y. 516; People v. Nichols, 230 N. Y. 221; People v. Harris, 136 N. Y. 423; People v. Giordano, 213 N. Y. 575.)

      Charles J. Dodd, District Attorney (Henry J. Walsh of counsel), for respondent.
    The court properly instructed the jury upon the law. (People v. Sullivan, 173 N. Y. 122; People v. Smith, 232 N. Y. 239; People v. Hitter, 184 N. Y. 237; People v. Patini, 208 N. Y. 176; People v. Giblin, 115 N. Y. 196.)
   Kellogg, J.

The indictment charged the defendant with the commission of the crime of murder in the first degree in that on November 29th, 1926, he “wilfully, feloniously and with malice aforethought, shot and killed Peter Basto with a revolver.” The defendant was tried, found guilty of the crime as charged, and sentenced to suffer the penalty of death. From the judgment of conviction entered upon the verdict of the jury the defendant now appeals.

The case for the prosecution was rested chiefly upon the testimony of one Lulu Saddlemire. Miss Saddlemire occupied a three-story house in the borough of Brooklyn and rented the rooms therein to various lodgers. Her testimony was substantially as follows: The defendant, on the evening of Saturday, the 27th of November, 1926, called at the Saddlemire house and applied to Miss Saddle-mire for the lease of a room. He was shown a room on the third floor which he engaged for a week. He paid the rental demanded in advance, carried bis satchel to the room and began its occupancy that evening. On the morning of the following Monday, the 29th day of November, Miss Saddlemire stationed herself in a front room upon the first floor of the house. Through the windows of this room, before nine o’clock, she observed each of her lodgers, except the defendant, leave the house. Shortly after their departure Miss Saddlemire heard footsteps overhead. They seemed to be the footfalls of a man walking back and forth between the bedrooms on the second floor and the bathroom on that floor. Suspicions of the defendant thereupon crossed her mind, for the defendant was the only lodger left in the building, and his room was upon the third floor, not upon the second. Accordingly, Miss Saddlemire mounted the stairs to the second floor. As she stepped upon the landing she observed that the bathroom door was partly open and she saw the defendant peeking at her through the opening. The door was closed suddenly, and Miss Saddlemire walked into an adjoining room. As she busied herself with room work in one of the bedrooms she again saw the bathroom door open on a crack. The defendant again peeked out, and, seeing Miss Saddlemire, again closed the door. After the lapse of about fifteen minutes, the defendant opened the door and stood facing Miss Saddlemire with his right hand behind his back. A conversation ensued between the two, during which Miss Saddlemire inquired and the defendant made answer in relation to defendant’s previous place of abode and his present employment. Finally the defendant stepped forward and struck Miss Saddlemire a blow upon the head with an object wrapped in a towel. A struggle between the two followed, in the course of which Miss Saddlemire several times cried out, Papa, Papa,” for her father, and “ Peter ” for Peter Basto. The defendant grabbed Miss Saddlemire by the throat with one hand, while with the other hand he tried to close her mouth. Such was the position of the two when Peter Basto rushed upstairs. When Peter Basto saw the defendant with his hand upon Miss Saddlemire’s throat he struck the defendant a blow upon the head. The defendant released Miss Saddlemire and struck back at Peter Basto. Miss Saddlemire broke away, ran down the stairs, opened the front door and began calling for help. While stationed at the front door she heard two or three pistol shots from the floor above, and thereupon heard Peter Basto cry, “ I am murdered, I am murdered.” The witness, undaunted by the sound of bullets, rushed upstairs. She saw Peter Basto and the defendant lying side by side on the floor. She took off her shoe and with it began to beat the defendant upon the head. The defendant arose, struck Miss Saddlemire a blow on the face and made his escape, apparently through the roof. The defendant shortly afterward was captured by the police. Meanwhile, Peter Basto, suffering wounds from three bullets which had lodged in vital bodily parts, had come to his death.

The story told by Miss Saddlemire was confirmed by the defendant in answers made by him soon after his capture to questions put by the district attorney. He stated that he had purchased the pistol with which he shot Peter Basto about five days before he went to room at the Saddlemire house. He identified a “ black-jack ” as the instrument wrapped in a towel with which he had struck Miss Saddlemire on the head. He said he struck her because she asked for references. He stated; She caught me trying to get out of the house with some clothes I robbed from the rooms up there.” He said he carried the pistol with which he shot Basto in his vest pocket; that after his mix-up with Basto they rolled on the floor; that he was lying underneath Basto when he pulled his pistol from his vest pocket and shot Basto in the body three times. He stated that he had started, on the morning in question, to steal clothes from the various lodgers in the house; tha^the doors of the rooms were unlocked; that all he had to do in order to enter was to turn the knobs of the doors; that he put the things he stole in two bags; that he kept the bags in the bathroom; that he could not make a get-away with his loot because of Miss Saddlemire’s interference. He identified the things which he stole. Among them were two suits of clothes. The owner of one of these suits testified that he had paid sixty dollars for the suit and had used it only twelve times. The owner of the other suit testified that it had cost him thirty dollars. There were, also, among the articles stolen, a photographic camera, and dental bridge-work belonging to a roomer.

The defendant does not now contend that the evidence was insufficient to support the verdict. His plea for a reversal is grounded solely upon certain alleged errors in the charge of the trial judge to the jury. The judge charged that the jury might find the defendant guilty of murder in the first degree in that the killing by him of Peter Basto was committed from a deliberate and premeditated design to effect ” his death, within subdivision 1 of section 1044 of the Penal Law, or that the defendant committed the crime named in that “ without a design to effect death ” he killed Peter Basto while “ engaged in the commission of, or in an attempt to commit a felony, either upon or affecting the person killed or otherwise,” within subdivision two of that section. He further instructed the jury that they might find that the killing was effected while the defendant was engaged in the commission of any one of three different felonies, to wit, the felony of (1) burglary, (2) grand larceny, and (3) assault in the second degree. He further stated that the jury might find that the defendant was engaged at the time of the killing in a felonious assault either upon Miss Saddlemire or upon Peter Basto. The defendant finds no fault with the charge in so far as the jury were instructed that they might find him guilty of a deliberate and premeditated killing; nor in so far as they were instructed that they might find that the killing was effected while he was engaged in the commission of the felony of burglary or the felony of grand larceny. His complaint is with that portion of the charge whereby the jury were instructed that they might find the defendant guilty of murder in the first degree in that he killed Peter Basto while engaged either in a felonious assault upon Lulu Saddlemire or in a felonious assault upon Peter Basto.

We think it self-evident that the trial judge committed error when he charged that the killing of Peter Basto may have been effected while the defendant was engaged in a felonious assault upon him, and, basing their conclusion thereupon, might determine that the defendant was guilty of murder in the first degree. If this were not error, then every intentional killing, by means of a dangerous weapon, regardless of deliberation and premeditation, would constitute the crime of murder in the first degree, since every such killing must be preceded by the direction of such a weapon against the body of the person killed, which in itself would constitute a felonious assault. The law is clear, however, that the precedent felony must constitute an independent crime not included within the resulting homicide. (People v. Hüter, 184 N. Y. 237; People v. Spohr, 206 N. Y. 516.) In the Hiiter case it was said: In order, therefore, to constitute murder in the first degree by the unintentional killing of another while engaged in the commission of a felony, we think that while the violence may constitute a part of the homicide, yet the other elements constituting the felony in which he is engaged must be so distinct from that of the homicide as not to. be an ingredient of the homicide, indictable therewith or convictable thereunder.” Again it was said: “ It is apparent, therefore, that the gist of the offense is the assault, and when it is by violence inflicting an injury to the person so assaulted, resulting in death, the act becomes a constituent part of the homicide and is merged in the charge therefor.” Clearly, in the case at bar, the original assault upon Peter Basto was an ingredient of the resulting homicide “ indictable therewith or convictable thereunder.” The charge, in respect to the assault upon Peter Basto, therefore, was palpably erroneous.

It is equally self-evident that the trial judge did not err in charging that the defendant may have killed Peter Basto while engaged in the commission of a felonious assault upon Lulu Saddlemire. One is guilty of the felony of assault in the second degree who “wilfully and wrongfully assaults another by the use of a weapon, or other instrument or thing likely to produce grievous bodily harm.” (Penal Law, § 242.) A “ black-jack ” is such an instrument or thing. (People v. Persce, 204 N. Y. 397.) That the defendant “ wilfully and wrongfully ” assaulted Miss Saddlemire by striking her upon the head with a black-jack was established by undisputed proof. That assault continued and was in full swing when Peter Basto came up the stairs. The defendant then had his hand upon the throat of Miss Saddlemire. He released his hold only when Peter Basto struck him a blow. At that moment the defendant began the assault upon Peter Basto which ended in the latter’s death. Thus the fatal assault began at a moment when the assault upon Lulu Saddlemire was in progress. If it be true, as we have held it to be, that the original assault was an ingredient of the subsequent killing, was included therein and comprehended thereby, then for the very reason that the felonious assault upon Peter Basto was not a crime precedent to a homicide committed upon him, it must be held that the homicide had its inception, and was committed, when the felonious assault upon Lulu Saddle-mire was still in progress. That was an independent felony. (People v. Patini, 208 N. Y. 176.) It follows that the- jury might have found that the defendant killed Peter Basto while “ engaged in the commission of a felony ” within the meaning of subdivision 2 of section 1044 of the Penal Law.

The question arises whether we may disregard the error of the trial judge in charging the jury that they might find the defendant guilty of murder in the first degree and base their finding upon the proof that the defendant was engaged in a felonious assault upon Peter Basto when the killing was effected. Section 542 of the Code of Criminal Procedure requires us to give judgment “without regard to technical errors or defects or to exceptions which do not affect the substantial rights of the parties.” It is conceivable that the jury may have thought that the defendant was not engaged in the commission of the crime of burglary at the time of the killing. That crime was committed provided only that the doors of the rooms, which the defendant entered, were latched at the time and that the defendant unlatched them in order to enter. Upon that question the only proof lay in the confession of the defendant. At one time he stated that the doors were open. At • another time he said that he turned the knobs of the doors and entered. Thus the jury may have thought that burglary was not clearly established. Again the jury may have thought that the crime of grand larceny was not proven. The articles stolen by the defendant may well have seemed to them to be of a less value than fifty dollars. Moreover, the jury may have thought that premeditation and deliberation may not have been sufficiently established. These assumptions are well within range; they are not merely possible; they are not at all improbable. If they are correct, it must follow that the jury based their verdict of murder in the first degree either, correctly, upon the proof that the defendant was engaged in a felonious assault upon Lulu Saddlemire when he killed Peter Basto, or, incorrectly, upon the theory that he was at the time engaged in a precedent felonious assault upon the man slain. Is it possible that the jury believed the latter to have been true and not the former; that there was an assault upon Peter Basto and not an assault upon Lulu Saddlemire? Lulu Saddlemire gave the only testimony offered in relation to either assault. The confession of the defendant confirmed her statement in every particular. No witness was sworn by the defendant and' no evidence was given to contradict the evidence thus given and the confession made. According to both, the attack upon Peter Basto immediately followed the attack upon Lulu Saddlemire. The two assaults were inseparably connected according to the word of both Miss Saddlemire and the defendant. If the jury believed there was an assault upon Peter Basto and not upon Lulu Saddlemire they must have thought ’that, in respect to the former, Miss Saddlemire was a perjurer and the defendant a gratuitous liar; they must then have proceeded to rest their conclusion, as to the latter, upon the testimony of the self-same truthless witnesses. We are not, in order to accord the defendant his full rights, obliged to make the assumption that the jury box was filled with men totally devoid of reasoning power and solely lacking in common sense. In People v. Swersky (216 N. Y. 471, at p. 481) this court, in treating of its power to disregard error in a case of a kindred nature, said: Some cases have said that the error must be one which by no possibility could have affected the result. By this, however, is not meant a strict or literal possibility. We are to consider what may in reason be expected from reasonable men.” Reasonable men upon the jury, in this case, could not in reason have believed that the defendant was guilty of an assault upon Peter Basto, and guiltless of an assault upon Lulu Saddlemire. We conclude that their verdict must in reason be regarded as a finding that the defendant killed Peter Basto while engaged in the commission of a felonious assault upon Lulu Saddlemire. In that event, although incorrectly advised by the trial judge, they correctly found the defendant guilty of the crime of murder in the first degree. The error was, therefore, harmless and should be disregarded.

The judgment of conviction should be affirmed.

Cardozo, Ch. J., Pound, Crane, Andrews, Lehman and O’Brien, JJ., concur.

Judgment affirmed.


author:
      Per Curiam.
     Crane, J. (dissenting).

text:
    William P. Riley, Appellant, v. Pierce Oil Corporation, Respondent.
    (Argued March 31, 1927;
    decided May 3, 1927.)
    Trial —• evidence — appeal — complaint properly dismissed for failure of proof — Court of Appeals may not disturb discretion of trial court as to supply of defects in evidence.
    1. An action wherein plaintiff seeks to recover on the theories that certain merchandise belonging to him, situated in a foreign State, was there converted by defendant and that a certain contract made in the foreign State between himself and a corporation of that State binds the defendant either as an undisclosed principal or because, having complete control of the foreign corporation, the contract was in fact made with it, is properly dismissed for failure of proof, in the absence of evidence as to the law of the foreign State.
    2. The judgment is a final determination on the merits and the discretion exercised below in regard to permitting the defects in the evidence to be supplied may not be disturbed in this court.

      Riley v. Pierce Oil Corporation, 217 App. Div. 744, affirmed.
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 29, 1926, unanimously affirming a judgment in favor of defendant entered upon a dismissal of the complaint by the court on trial at Special Term.

      Arthur B. Hyman, Joseph C. Slaughter and O. M. Fitzhugh for appellant.
    Plaintiff was not required to plead and prove the laws of Mexico. (Cuba R. R. Co. v. Crosby, 222 U. S. 473; Parrot v. Mexican Central Ry. Co., 207 Mass. 184; Silsbury v. McCoon, 3 N. Y. 379; McDonald v. Mallory, 77 N. Y. 546; Whitford v. Panama R. R. Co., 23 N. Y. 465; Metcalf Co., Ltd., v. Mayer, 213 App. Div. 614; Aslanian v. Dostunian, 174 Mass. 328.)

      Eugene Untermyer and Leonard Acker for respondent.
    The first cause of action was properly dismissed because the appellant failed to allege or prove the law of Mexico sustaining his right to sue for conversion. (McDonald v. Mallory, 77 N. Y. 546; Parrot v. Mexican Central R. R. Co., 207 Mass. 184; Cuba R. R. Co. v. Crosby, 222 U. S. 473; Christie v. Cerro de Pasco Copper Corp., 214 App. Div. 820; 154 N. E. Rep. 603; Oehler v. Hamburg-American Line, 84 Misc. Rep. 272; Aslanian v. Dostunian, 174 Mass. 328; Panama, etc., Ry. Co. v. Mayers, 249 Fed. Rep. 19; Leach v. Pillsbury, 15 N. H. 137; Owen v. Boyle, 15 Maine, 147; Crashley v. Press Pub. Co., 179 N. Y. 27; Dainese v. Hale, 91 U. S. 13; Thompson v. Ketchum, 8 Johns. 189.) The second cause of action was also properly dismissed because the appellant failed to plead or prove the law of Mexico imposing liability upon the defendant, Pierce Oil Corporation. (Union Nat. Bank v. Chapman, 169 N. Y. 538; Parrot v. Mexican Central R. R. Co., 207 Mass. 184; Monroe v. Douglass, 5 N. Y. 447; Savage v. O’ Neil, 44 N. Y. 298; Hynes v. McDermott, 82 N. Y. 41; Schweitzer v. H. A. P. A. G., 149 App. Div. 900; Russian Ins. Co. v. Stoddard, 211 App. Div. 132.)
   Per Curiam.

This judgment should be affirmed, with costs. The plaintiff seeks a recovery on the theory:

1. That certain oil belonging to him situated in Mexico was there converted by the defendant, and

2. That a certain contract made in Mexico between himself and a Mexican corporation binds the defendant, either as an undisclosed principal or because, having complete, control of the Mexican corporation, the contract was in fact made with it. Whatever might be the rule in New York, there is a failure of proof on both branches ■ of the case.

A recovery in conversion is d,pendent upon proof of title in or a right of possession of the goods in question. Whether the plaintiff had either under the facts before us depends upon the law of Mexico. As to what that law may be we are given no information.

For the same reason there may be no recovery on the second theory. Even in our State an undisclosed principal is not always responsible for the acts of its agents — for instance, as to contracts under seal. As to the liability of a corporation holding all the stock and dictating the action of a subsidiary there is uncertainty. At best slight shading of the facts creates possible distinctions. What may be the rule in Mexico we do not know.

Whether had such defects in the evidence been supplied there should have been a dismissal of the complaint we need not decide. As it stands the judgment is a final determination on the merits. (Civ. Prac. Act, sec. 482.) The discretion exercised below in this regard we may not disturb. If the plaintiff has any remedy by motion or otherwise, it is not here.

Crane, J. (dissenting).

Venable by contract granted to Combustible Oil Company his rights to drill for oil in certain properties in Mexico. Combustible Oil Company agreed for these rights to give him seventeen (17%) per cent of the oil taken out. Within a few months after oil came, the Pierce Oil Corporation ran 293,016.33 barrels of the oil through its pipe lines to the coast; then to its refinery and sold it. Venable never received any oil nor any pay for it.

The Combustible Oil Company was a creature of the Pierce Oil Corporation which owned all of its stock. The officers of the Combustible Oil Company were officers or employees of the Pierce Oil Corporation. The Combustible Oil Company had no money. Every dollar was advanced to it by the Pierce Oil Corporation. The contract made with Venable had to be approved by the executive committee of the Pierce Oil Corporation. All matters affecting the acquisition of lands and the production of oil in Mexico by the Combustible Oil Company were referred to the executive committee of the parent company. Officers and employees of the Combustible Oil Company could not be engaged or discharged without the consent of the Pierce Oil Corporation.

The Combustible Oil Company was a mere shell; it was the creature of the Pierce Oil Corporation which dominated and controlled every move it made. Through a contract made in its name, the Pierce Oil Corporation got all the oil. For this purpose was the subsidiary corporation created. Under these circumstances the defendant, the Pierce Oil Corporation, should keep the contract made in the name of its dummy and pay for the oil taken. It should not be permitted to hide behind the mere corporate entity of the Combustible Oil Company which has no existence beyond the corporate name. On such a fundamental proposition as a liability to pay for property taken or purchased, I cannot imagine the law of Mexico being different than the common law of our own country. Referring to Mexico, the Supreme Court of Massachusetts said in Parrot v. Mexican Central Railway Co. (207 Mass. 184):

“ There is every reason why they should be presumed to recognize fundamental principles of right and wrong which he at the foundation of human society," and to hold that" a direct violation of these principles, to the injury of another person, creates a legal liability. If one should sue on a contract for goods sold and delivered in France, upon a promise to pay a certain price for them, it would seem unreasonable that a plaintiff shoúld be obliged to bring evidence from that country that a breach of such a contract there creates a liability. So if one should sue for damages suffered from an assault and battery, or from a larceny committed there. There ought to be a presumption from common knowledge that a liability exists everywhere in such cases.
“ Some courts have gone further, and have held that, in the absence of any proof of the foreign law, the court will administer the law of its own jurisdiction. This is the law in New York, and in the Supreme Court of the United States. Hynes v. McDermott, 82 N. Y. 41. The Scotland, 105 U. S. 24, 29, 30.”

Such conduct as the defendant’s may account in part for the recent attitude of the government of Mexico-toward oil concessions.

For these reasons I vote for reversal.

Cardozo, Ch. J., Andrews, Lehman, Kellogg and O'Brien, JJ., concur in per curiam opinion for affirmance; Crane, J., dissents in opinion in which Pound, J., concurs.

Judgment affirmed, etc.


author: Per Curiam.

text:
    Richard Urband, Respondent, v. Jacob J. Lubell et al., Appellants, Impleaded with Others.
    (Argued March 31, 1927;
    decided May 3, 1927.)
    Practice — trial — verdict — power to amend verdict does not outlast term at which it is rendered.
    Interest may not be added by an order of Special Term to a verdict rendered at a Trial Term which has ended. An amendment of the verdict is in effect an incident of the trial and the power to make it is exhausted when the term is at an end.

      Urband v. Lubell, 218 App. Div. 858, modified.
    Appeal from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered December 29, 1926, affirming a judgment in favor of plaintiff entered upon a verdict.

      Burgess Osterhout for appellants.
    The ease having been tried at the November, 1925, Trial Term, and that term having expired, the court at Special Term was without power thereafter to grant a motion amending the verdict so as to include interest. (Fremd & Jenkins v. Halstead, 184 App. Div. 953; Duerr v. Consolidated Gas Co., 104 App. Div. 465; Fleming v. Jacob, 57 Misc. Rep. 375.)

      Max Shlivek and Saul S. Brin for respondent.
    The court at Special Term had the power to make the order amending the verdict so as to include interest. (Lowenstein v. Lombard, 2 App. Div. 610; Civ. Prac. Act, § 105; Siccardi v. Ajello, 117 Misc. Rep. 118; Burns v. City of Watertown, 126 Misc. Rep. 140.)
   Per Curiam.

The evidence sustains a verdict that the plaintiff fulfilled the conditions of the contract for the payment of a commission, and the exceptions to the rulings upon the defendants’ requests to charge do not point to any errors that call for a reversal.

The verdict was improperly amended by the addition of interest. The cause was tried at Trial Term on November 13, .1925. After this term had ended, an order was made at Special Term whereby interest was added from April 24, 1923, the date of the employment. We think the power to amend did not outlast the term at which the verdict had been rendered (Dalrymple v. Williams, 63 N. Y. 361, 364; Hodgkins v. Mead, 119 N. Y. 166; Duerr v. Consolidated Gas Co., 104 App. Div. 465; Fremd & Jenkins v. Hoisted, 184 App. Div. 953).

The settled practice to that effect is founded upon considerations of the essential nature of the motion. The motion is not heard upon a case prepared and settled. It is made upon the minutes of the judge presiding at the trial, who alone is competent to pass upon it. No other judge would be in a position to know whether interest ought to be added and, if added, in what amount. In this instance, the Special Term referred the motion to the same judge who had listened to the evidence, yet this was comity and nothing more, if jurisdiction to amend survived the ending of the term. We may add that the amount added was erroneous in any event, since interest should have run, not from the date of employment, but from the date of performance, almost a year later. The jury did not depart from the instructions of the court in giving a verdict for the commission without interest, for no instructions on the subject had been given in the charge.. An amendment of the verdict is in effect an incident of the trial, and the power to make it is exhausted when the term is at an end.

The judgment of the Appellate Division and that of the Trial Term should be modified by deducting from the latter judgment the sum of $769.31, and, as modified, •affirmed, without costs to either party.

Cardozo, Ch. J., Pound, Crane, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Judgment accordingly.


text:
    John J. Grant, Respondent, v. Frank Knepper, Appellant.
    Negligence — master and servant —• motor vehicles • — • master liable at common law for injury occasioned through negligent operation of motor truck by inexperienced employee permitted by chauffeur to drive — master not relieved from liability because substitution was unauthorized — common-law liability continued and extended by section 282-e of Highway Law.
    1. Where, in an action to recover damages occasioned through the aheged negligent operation of a motor truck, it appears that the driver permitted a fellow-servant, without an operator’s license, to drive, who ran the truck into plaintiff’s car which had been parked along the roadway, a case was made for submission to the jury under the common-law rule of liability. The jury _ might find the driver was negligent when he placed at the wheel a substitute without skill or experience in the management of cars, or in failing to supervise or control the conduct of his substitute, who ran the ear at a rate of speed presumptively excessive in the operation of a truck.
    (Argued April 4, 1927;
    decided May 3, 1927.)
    2. Even though the substitution was unauthorized, the employer was not relieved of liability at common law for any negligence assignable to the driver, his authorized representative, who remained upon the truck with general power and authority of supervision and control. The negligence of the servant, though it fused with the negligence of the substitute, may none the less be found to have been the cause of the collision. (Engelhart v. Farrant & Co., 1897, 1 Q. B. 240; Ricketts v. Tilling, 1915, 1 K. B. 644, approved.)
    3. By section 282-e of the Highway Law (Cons. Laws, ch. 25) the owner’s common-law liability is not only continued but extended. Under the statute “ use ” as well as “ operation ” may fasten liability upon him. In this case the truck was intrusted to the driver to be “ used ” in the owner’s business, and the “ use ” did not cease while the driver remained upon the truck though the manual operation had been committed to a substitute. (Ceiss v. Twin City Taxicab Co., 120 Minn. 368, approved.)

      Grant v. Knepper, 218 App. Div. 784, affirmed.
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered November 29, 1926, affirming a judgment of the City Court of Yonkers in favor of plaintiff entered upon a verdict.

      H. H. Brown and E. C. Sherwood for appellant.
    The uncontradicted evidence showed that the defendant was not in control of the car at the time of the accident, and the motion to dismiss the complaint made at the close of the plaintiff’s case should, therefore, have been granted. (Potts v. Pardee, 220 N. Y. 431; Rose v. Balfe, 223 N. Y. 481; Powers v. Wilson, 203 App. Div. 232; Maher v. Benedict, 123 App. Div. 579; Boettcher v. Best & Co., Inc., 203 App. Div. 574; 237 N. Y. 506.) Section 282-e of the Highway Law is not applicable to this case. (Cons. Laws, ch. 25.)

      Joseph A. Corbalis for respondent.
    At the time of the accident and damage to plaintiff’s car the defendant’s car was engaged in the business of the owner and was being legally used and operated. (Altohorf v. Wolfe, 22 N. Y. 355; Owen v. Gruntz, 216 App. Div. 19; Plaumbo v. Ryan, 213 App. Div. 517; Fluegel v. Coudert, 244 N. Y. 393.)
   Cardozo, Ch. J.

Defendant sent out his motor truck with a driver and a salesman to deliver merchandise. On the way back the salesman asked to be allowed to run the car, though he was without an operator’s license. Permission being granted, he slipped into the seat behind the wheel while the driver stood upon the running board beside. After going about a mile and a half, the salesman ran the truck into a car which had been parked along the roadway. The truck, after strildng and damaging the car, went on about forty feet till it collided with a telephone pole, which it threw to the ground. The owner of the car sues the owner of the truck.

(1) We think a case was made for submission to the jury, though liability were to be tested by the rule at common law. The driver was negligent, or so the triers of the facts might find, when he placed at the wheel a substitute without skill or experience in the management of cars. The. substitute did not even have such presumptive evidence of competence as may be supplied by an operator’s license (Pigeon v. Mass. N. E. Ry. Co., 230 Mass. 392, 395; Bourne v. Whitman, 209 Mass. 155, 171), and his lack of skill is apparent in the very nature of the accident. The driver was negligent again, or so the triers of the facts might find, in failing to supervise or control the conduct of his substitute, who ran the car at a rate of speed presumptively excessive in the operation of a truck (Highway Law; Cons. Laws, ch. 25, §§ 287,288; cf. Yonkers Code of Ordinances, art. IV, § 67, as amended by General Ordinance No. 4 of Oct. 15, 1916). We do not ignore the fact that the substitution was itself unauthorized, and so a wrong to the employer. Even so, the employer was not relieved of liability for any negligence assignable to the driver, his authorized representative, who still remained upon the truck with general power and authority of supervision and control (cf. Lloyd v. Grace, Smith & Co., 1912 A. C. 716, quoting Barwick v. Eng. Joint Stock Bank, L. it. 2 Ex. 259). If the driver had left the seat and let the car proceed without any one at the wheel, the defendant would have been liable for any damage caused thereby. He is not less liable when the driver places at the wheel an incompetent substitute (Pollock on Torts, p. 87), or fails to intervene thereafter with protest or command when protest or command would be timely to avert the loss (Dowler v. Johnson, 225 N. Y. 39). “ Co-operation may be inferred from acquiescence where there is power to restrain ” (Dowler v. Johnson, supra). The duty rests upon the servant with continuing obligation to “ keep control and exclude incompetent meddling” (Pollock, supra) while he remains upon the car.

Two cases in the English Court of Appeal state the applicable principle with clearness and precision. In one (Engelhart v. Farrant & Co, 1897,1 Q. B. 240), a delivery wagon was sent out with a man and a boy. The man’s duty was to drive; the boy’s duty was to deliver parcels. The boy had nothing to do with the horses. The man’s instructions were not to leave the cart. The driver did in fact leave the cart, and while he was absent the lad drove on and came into collision with the plaintiff’s carriage and injured it. The court held that the negligence of the driver in leaving the cart in the custody of the boy might be found to be the effective cause of the collision and the damage. “ If a stranger interferes,” said Lord Esher, M. R, “it does not follow that the defendant is liable; but equally it does not follow that because a stranger interferes the defendant is not liable if the negligence of a servant of his is an effective cause of the accident.” In the other and later case, this ruling was approved and followed (Ricketts v. Tilling, 19.15, 1 K. B. 644). The driver of a motor omnibus, sitting on the box, gave the wheel to the conductor who was not authorized to drive. The conductor being inexperienced and incompetent, the omnibus mounted the pavement and injured passers-by. The court held that there was a question of fact whether the effective cause of the accident was that the driver committed a breach of his duty (which was either to prevent another person from driving, or, if he allowed him to drive, to see that he drove properly), or whether the driver had discharged that duty ” (cf. Pollock on Torts, pp. 46, 93, 492). In brief, the basis of liability is always the negligence of the servant. If such negligence exists, and is found to be an effective cause, it does not lose its significance as a basis of liability because it may be found to have combined with the negligence of the substitute.

Cases may indeed be found where the master has been subjected to a liability even broader (Geiss v. Taxicab Co., 120 Minn. 368; Kayser v. Van Nest, 125 Minn. 277; Bamberg v. Int. Ry. Co., 53 Misc. Rep. 403; Hill v. Sheehan, 20 N. Y. Supp. 529; James v. Muehlebach, 34 Mo. App. 512; Ulman v. Lindeman, 44 N. D. 36; 44 A. L. R. p. 1385, note, and cases there cited). There are holdings or at least dicta to the effect that if the servant is present, the act of his substitute will be taken as his own, though there was neither negligence in the selection of one inexperienced or incompetent, nor failure of supervision in circumstances where supervision could be found to be effective. We are not prepared to go so far if liability is to be measured by the rule at common law (cf. Mechem on Agency, vol. 2, § 1867; Mechem, Master’s Liability for Stranger’s Negligence, 3 Mich. L. Rev. 198, 216; Labatt, Master & Servant, vol. 7, p. 7732 el seq.). In saying this, we exclude situations of emergency or danger (Mechem, Agency, vol. 1, § 321; Hoolidge v. Duncan, 199 Mass. 121). There may be need, too, of other exceptions by force of some special relation, as that of carrier and passenger (Leavenworth Elec. R. R. Co. v. Cusick, 60 Kan. 590, 597). The selection of any substitute is a wrong to the employer where delegation is unauthorized, but it is not negligence toward the public if the substitute is competent, perhaps more competent than the servant, and there is no failure thereafter of fitting supervision." Most of the cases upholding a broader liability go back to Althorf v. Wolfe (22 N. Y. 355), where a servant employed to shovel snow and ice from a roof brought an assistant to help him, who injured some one on the street. One of the two opinions lays stress upon the fact that there was no limitation upon the authority of the servant to provide such help as he might choose (p. 361). Here the character of the service imports trust in the servant and a consequent restriction upon the employment of a substitute. The other of the two opinions fairly sustains the inference, when we read it in connection with the preliminary statement of the facts, that the substitute was negligently casting snow upon the street with the servant standing by and approving of the act (cf. Haluptzok v. G. N. Ry. Co., 55 Minn. 446). If the act was so directed, the substitute was a mere instrument or agent — a longer arm which the servant or agent wields or controls ” (Mechem, 3 Mich. L. Rev. at p. 216; Ulman v. Lindeman, supra, at p. 41; Simons v. Monier, 29 Barb. 419). Althorf v. Wolfe is thus consistent with the view that there must be something more than the act of an intermeddling stranger before the wrong will be imputed to the master or the owner. In holding that the defendant would be liable at common law upon the record now before us, we place our judgment upon the ground that the negligence of the servant, though it fused with the negligence of the substitute, may none the less be found to have been the cause of the collision. A different situation would be here if a competent substitute had been inattentive or remiss at a time when intervention by the servant would have been of no avail. The act of negligence may be “ so sudden or unexpected ” (Ricketts v. Tilling, supra, p. 651) that there is no reason to foresee it nor opportunity to avoid it. This may happen oftener to-day in the management of automobiles than in the days of horse-drawn vehicles when Lord Abingeb, was able to say that the substitute who held the reins was the mere instrument of the driver who sat beside him on the box (Booth v. Mister, 7 C. & P. 66). Here the inference is legitimate, first, that the substitute was incompetent, and again that supervision, if vigilant, would also have been effective.

(2) Passing from common law to statute, we' find the owner’s liability not merely. continued, but extended. By Highway Law (§ 282-e) every owner of a motor vehicle operated upon a public highway shall be liable and responsible for death or injuries to person or property resulting from negligence in the operation of such motor vehicle, in the business of such owner or otherwise, by any person legally using or operating the same with the permission, express or implied, of such owner.” Use ” as well as operation ” may thus fasten liability upon the owner under the provisions, of the statute (Fluegel v. Coudert, 244 N. Y. 393). This truck was intrusted by the defendant to Carucei, his driver, to be used ” in the transportation of persons and property to and from a stated point. It was in use for that purpose and no other when the accident occurred. The defendant expected, to be sure, that Carucci would operate the truck as well as use it. None the less, use without more would entail liability for negligence. The statute may be said in a general Way to have brought about the same results as had been attained in some other jurisdictions without reference to any statute by the so-called doctrine of the family automobile ” (Fluegel v. Coudert, supra; Ferris v. Sterling, 214 N. Y. 249, at p. 252). Only a narrow construction would permit us now to say that an owner placing a car in the care of members of his family to be used for their pleasure or for the family business would escape liability if wife or son or daughter should give over the wheel to the management of a friend. The ruling has been more liberal whenever the question has come up (Kayser v. Van Nest, 125 Minn. 277; Thixton v. Palmer, 210 Ky. 838; Ulman v. Lindeman, 44 N. D. 36, 41). Carucci did not abandon the car or its use when he surrendered to another the guidance of the wheel. He was still in charge of the truck, and was using it with the permission of the master, and even in the master’s business. He did not cease to use it, and use it with permission, though the method of operation may have been illegal or forbidden. We think the effect of the statute is to read into our law the rule of liability laid down in Geiss v. Twin City Taxicab Co. (120 Minn. 368). The owner is now hable, though the negligence of the substitute may have been “ sudden and unexpected ” (Ricketts v. Tilling, supra) if the act of negligence occurs during the life of the permitted use. Carucci was delinquent, but he was still the director of the enterprise, still the custodian of the instrumentality confided to his keeping, still the master of the ship.

(3) Errors were committed in disposing o.f some of the requests to charge. In a closer case they would be important. Upon the record before us, they did not determine the result.

The judgment should be affirmed with costs.

Pound, Crane, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Judgment affirmed, etc.