text:
    Brian J. Kelly et al., Respondents, v. C. Lester Merry et al., as Trustees of the Village of Frankfort, et al., Respondents, and McIntosh & Seymour Corporation, Appellant

      (Argued May 25, 1933;
    decided June 6, 1933.)

      Charles Dickerman Williams and Sidney J. Kaplan for appellant.

      Thomas Shannon for Village of Bath, amicus curise.

      Francis G. Hooley for Village of Rockville Centre, amicus curise.

      Herbert Johnson for Village of Freeport, amicus curise.

      Edward H. O’Connor for Village of Sherburne, amicus curise.

      S. W. Brennan for plaintiffs-respondents.

      James W. Bennison for defendants-respondents.

      Bernon K. Tourtelot and J. Theodore Cross for Utica Gas and Electric Company, amicus curise.

   Pound, Ch. J.

This is a taxpayers’ action brought under section 51 of the General Municipal Law (Cons. Laws, ch. 24) to prevent an alleged illegal official act on the part of the village of Frankfort, N. Y., in carrying out the terms of a contract between the defendant McIntosh & Seymour Corporation and the village of Frankfort for the purchase and sale of three Diesel engines and other equipment for the purpose of manufacturing electric current for the electric lighting plant of the village. The contract is a conditional sales contract. It provided for the payment of the contract price of $63,000 from the revenues of the fighting system in sixty monthly installments of $1,050 each, evidenced by pledge orders ” given to the contractor, which provide that they are not general obligations of the village but are payable only from such revenues. The village agrees to maintain and collect rates for such service. In case of default debtor may operate the plant as agent for the village and collect the revenues therefrom. Property remains in the seller until the purchase price is paid.

The Appellate Division has certified the following question to this court under the Civil Practice Act, section 588, subdivision 5: “ Had the board of trustees of the village of Frankfort power to enter into the contract with the McIntosh & Seymour Corporation, of the 4th day of October, 1932, for the purchase of Diesel engines and apparatus? ”

The litigation involves a controversy between the Utica Gas and Electric Company and the defendant McIntosh & Seymour Corporation. Although the village has had, since 1901, its own electric light and power system, the gas company has since 1907 furnished the current. The gas company claims to have a valid renewal contract with the village to furnish electric current. The village purposed to develop and distribute its own current.

Under section 89 of the Village Law (Cons. Laws, ch. 64):

“ The board of trustees of a village
(Subd. 1) Has the management and control of the finances and property of the village * * *.
(Subd. 37) * * * May pledge the faith and credit of the village for the payment of principal and interest thereof [village obligations] or may make the same payable out of or a charge or lien upon specific property or revenues. * * *
(Subd. 59) May take all measures, do all acts and enact any ordinances, not inconsistent with existing law which shall be deemed expedient or desirable for the good government of the village, its management and business * * * and may generally exercise all the powers granted to the village.”
“ § 128-a. Contracts involving an expenditure. No contract shall be made involving an expenditure by the village unless the money therefor has previously been estimated by the board of trustees as necessary to be raised during the then fiscal year, or unless a resolution to borrow money on bonds or other obligations of the village has been adopted by the board of trustees as provided in this chapter or if required by this chapter that the action or resolution of the board of trustees be approved by the electors, then by such approval or if such action or resolution is subject to a permissive referendum as provided for in this chapter then not until thirty days after its adoption nor until approved by the affirmative vote of a majority of the qualified electors of such village voting on a proposition for its approval if within thirty days after its adoption there be filed with the village clerk a petition as provided for in article five-a of this chapter, or if authorized by an affirmative vote of the electors of said village in accordance with the provisions of this chapter, or unless otherwise available or specifically provided for by this chapter.”

The contract in question is a standard form used by the Diesel engine manufacturers, known as the net revenue ” form. The courts of several States have had it under consideration. While it, or similar forms of contract, has been upheld in several States (Lang v. City of Cavalier, 59 N. D. 75; Mississippi Valley Power Co. v. Board of Improvement of Waterworks Dist. No. 1 of Van Buren, 185 Ark. 76; Barnes v. Lehi City, 74 Utah, 321), it has been condemned in Indiana Service Corp. v. Town of Warren ([Ind.] 180 N. E. Rep. 14); Van Eaton v. Town of Sidney (211 Iowa, 986); Hesse v. City of Watertown (57 S. D. 325) and elsewhere on the ground that it goes beyond the scope of the powers granted to villages by the laws of those States. Local statutes vary as well as the grounds for judicial decision.

Beginning with the rule that the municipality can do no act, make no contract and incur no liability not permitted by legislative act, either specifically or by fair and reasonable implication, to accomplish the purposes of the corporation, we turn to the contract in suit in order to test it by this rule. The primary objection made to it and upheld below is that it provides that the purchase price of $63,000 shall be paid out of the net earnings of the plant only, after the payment of all operating expenses, and not from taxes or money raised by taxation. It has been held that this is a contract involving an expenditure of money by the village and, therefore, it is an illegal expenditure because (a) the money has not been previously estimated by the board of trustees as necessary to be raised during the then fiscal year; (b) no resolution to borrow money on bonds or other obligations of the village has been adopted by the board of trustees, and (c) the money is not otherwise available or specially provided for in the Village Law. (Village Law, § 128-a.) These are the only limitations on the powers of villages to make contracts for the expenditure of moneys for village purposes. (N. Y. Const, art. VIII, § 10.) The establishment and maintenance of a village lighting system is unquestionably a village purpose and the power to make contracts for the purchase of such equipment on credit necessarily follows, in the absence of a prohibition. (Ketchum v. City of Buffalo, 14 N. Y. 356.) The board of trustees may do all acts expedient or desirable for the management of the business of the village, including the payment of money out of specific property or revenues (Village Law, § 89, subds. 37, 59, supra), so long as they are not inconsistent with law. Section 128-a (supra) contains nothing inconsistent with the purchase of equipment for a lighting system on credit without recourse to taxation or borrowing if the money is “ otherwise available,” and it is otherwise available if it is payable out of specific revenues.

The policy of the law is said to be that village charges shall be met by annual recurring taxation and not by the creation of a debt (Wells v. Town of Salina, 119 N. Y. 280, 290), and that the contract in question creates a debt of the village. (Newell v. People, 7 N. Y. 9.)

The policy of the law is to be found in the law itself. A policy of home rule for cities has been engrafted onto the Constitution itself. Precepts of cautious administration and municipal economy which should influence village officers are of slight legal consequence when contrasted with the powers granted to them by the Legislature. The question is whether the contract involves an expenditure of village moneys available without taxation or borrowing. Obviously it does so provide by providing for payment from the net earnings of the lighting plant only. This is not a debt of the village in the ordinary sense. Although an obligation is created on the part of the village to collect the light rents and apply them to the payments due on the contract, the moneys thus raised are not a part of the general income of the village for they are pledged to the payment of the special contract indebtedness. The debt was not a general indebtedness of the village. No action is maintainable against the village thereon except for breach of contract on its part. The village does not obligate itself to pay the contract price. Where a way of payment is prescribed by statute or by contract that is the way which must be strictly pursued. Contracts for local improvements, payable from special assessments, have been generally held to create no indebtedness against the municipality unless its credit is primarily pledged. If a conditional sales contract creates no indebtedness against the municipality the same principle may apply to such contracts. (Ketchum v. City of Buffalo, supra; Baldwin v. City of Oswego, 1 Abb. Dec. 62; Hunt v. City of Utica, 18 N. Y. 442; Weston v. City of Syracuse, 158 N. Y. 274, 283; Kronsbein v. City of Rochester, 76 App. Div. 494.)

The case of Newell v. People (7 N. Y. 9), relied on below, dealt with the constitutionality of an act providing for the application of the revenues of the Erie canal and does not turn on the definition of debt except as a moral obligation may be regarded as a debt which the State must feel bound to recognize; while here the question is one of municipal power which the Legislature may grant or withhold as it sees fit.

The operation on default ” clause in the contract which permits the contractor in case of default in payment to take over and operate the plant as the agent of the village would not render the entire contract invalid even if it were unenforceable. The contract itself provides that partial invalidity shall not affect the balance of the contract. If the village is in default in collecting light rates or refuses to collect and apply the same, the contractor might proceed by mandamus. (Weston v. City of Syracuse, supra.) This may be the exclusive remedy. Calling the contractor the agent of the village would not- make it such agent when it is acting in its own behalf. The contract would not be vitiated if the remedial measure were stricken out. We may well withhold our deciáion on this point until the question arises.

In brief, it makes no difference what else Village Law, section- 128-a (supra), prohibits or permits. If it does not prohibit the village from making this contract, it is ineffectual to check the exercise of judgment by the village board in contracting to make expenditures which. the section permits. Village authorities are given power to be exercised according to their own ideas of policy. The distinction between moral obligation and legal obligation is clearly drawn. (Weston v. State, 262 N. Y. 46.). The Village Law gives the widest discretion to the village board to make contracts for the expenditure of money for village purposes so long as it does not add to the burdens of taxation or borrow money on obligations of the village, provided always that money is “ otherwise available to meet the obligations of the village. ■ The board might have done more wisely. We have nothing to say as to that. In fact it seems to have repented by a belated change in the village board. The possible lack of wisdom is not the lack of authority. We cannot run the affairs of the village for it. The village board is responsible to the electors for the exercise of powers granted.

No constitutional limitation applies. The duty imposed by article XII, section 1, to restrict the power of taxation by villages to prevent abuses in contracting debts, is exhortatory and the exhortation has not gone unheeded in the enactment of the Village Law. If an evil exists the remedy is with the Legislature, which may further limit the power of villages to make contracts involving expenditures for village purposes.

Other questions have been raised. We have examined them and find them to require no discussion.

The orders should be reversed, the complaint dismissed, with costs in all courts, and the question certified answered in the affirmative.

Crane, Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Orders reversed, etc.


source: Caselaw Access Project

author: Crane, J.

license: Public Domain

text:
    John Tymon, Jr., an Infant, by John Tymon, His Guardian ad Litem, et al., Respondents, v. M. L. S. Construction Co., Inc., Appellant.

      (Argued April 12, 1933;
    decided June 6, 1933.)

      Alvin R. Cowan and Harold M. Phillips for appellant.

      Charles S. Scholnicoff for respondents.
   Crane, J.

The. plaintiff, a four-year old child, has recovered a judgment for personal injuries received in the areaway of premises 1985 Crotona avenue, New York city, and the appeal requires the review of the respective rights of property owners having areas, stoops or courtyards in front of their premises, and persons passing along the adjoining sidewalk.

• Nineteen hundred and eighty-five Crotona avenue is an apartment house with an areaway, located in front, extending five feet beyond the building line into the street. It was thirty-seven feet, six inches in length, five feet in width, and went down five feet below the level of the street. A picket fence sufficiently high and extending its full length guarded it from the street. At the extreme right of the fence, as you face the building, there was a gateway through which persons passed down a flight of stairs and into the lower apartment. There was no occasion for any of the public to use any other part of the areaway to the left, into which the windows of the building opened from the lower apartment. The' sidewalk proper, from the fence to the gutter, was thirteen feet wide. This areaway, although extending out from the building fine, was not an unlawful or illegal use of the street. The city was authorized to permit such reasonable and moderate use of the street for areas, stoops, courtyards, vaults and like purposes found necessary and convenient at times for adjoining property owners. As this construction had existed for a period of twenty-five years and more, there is a presumption that it was constructed and maintained with the consent of the public authorities. (Deshong v. City of New York, 176 N. Y. 475.) The license or consent might be revoked by the city at any time. This reasonable appropriation of part of the street for private user did not, therefore, constitute a nuisance, and no such claim is made in this case. (Matter of Green v. Miller, 249 N. Y. 88; Bradley v. Degnon Contracting Co., 224 N. Y. 60.) The very nature of these areaways, like stoops and vaults, indicates that to an extent they are for the use of the adjoining property owner, to the exclusion of the general public. The defendant had fenced the areaway and put a gate in the fence to exclude the public as he had a right to do, and this right is not questioned. It would, indeed, be a novel idea, that the stoop leading up to a man’s front door could be used by the public with the same freedom as the sidewalk, and that the owner had no right to exclude idlers and loafers. One’s courtyard, licensed by the city, which he has fenced off, affords such privacy that strangers cannot enter for the mere purpose of walking or standing in it. The license gives the owner a certain amount of privacy and control over the stoop, the area, the courtyard and the vault. (Donnelly v. City of Rochester, 166 N. Y. 315, 318; Strobel v. Liebmann, 197 N. Y. 348.) As to courtyards see City of New York v. Masten (174 App. Div. 661; affd., 223 N. Y. 638).

Cullen, J., in the Donnelly case, said: “ While the right to excavate areaways or construct stoops in the highway is not an incident to the ownership of the adjacent land, a long usage of the highway for such purposes justifies the inference that the municipal authorities have consented to the presence of such structures on the highway, and ‘ it is competent for the legislature to authorize a limited use of sidewalks in front of buildings in cities and villages for stoops or cellar openings, or underground vaults, for the more convenient and beneficial enjoyment of the adjacent premises.’ ” The Appellate Division, therefore, is in error in stating that the permission to maintain this areaway in no way changed the essential character of this space as a part of the public highway or operated to diminish or destroy the right of the plaintiff to use it in common with the general public ” (237 App. Div. 98), and the authorities cited do not sustain such a proposition. The areaway is and remains a part of the highway and the city at any time may revoke its license and restore the space thus used to sidewalk purposes. As long, however, as the city permits its use, a certain amount of privacy is given to the adjoining owner.

This privilege or license, however, does not relieve the owner from all duty or responsibility to the public or those using the adjoining sidewalk. He must, for instance, maintain a reasonably sized and secure fence to protect the public from falling into the areaway. This was the Donnelly case. So, too, he must exercise care to maintain the stairways leading to the entrance in a reasonably safe condition for those having occasion to go in and out of the building. This was Fagan v. Bishop (176 App. Div. 777). And we may go further and say that the defendant in this case was under the duty to keep all of the areaway in a reasonably safe condition for those who he could reasonably anticipate might have occasion to enter it. He probably could and should anticipate that a person might accidentally(^drop something over the railing into the areaway, or that the hat of a passer-by might blow off. Under such circumstances the loser would have the implied right or permission to go into the areaway to recover the lost article. The likelihood of such an occurrence would require mutual regard for' the safety of one for the other. The person entering would be obliged to use care and cautioii, and the owner would be obliged to maintain the areaway free from hidden and known dangers. The proximity of the sidewalk, the likelihood of necessary entry by the pedestrian and his special license would make his duty an active, not a passive, one verging on something more than his duty to a mere licensee. (Am. Law Inst.; Restatement of the Law of Torts, §§ 205, 209, 215.) With this relative duty in mind, we may pass to the facts in this case, and determine whether the judgment which the plaintiff has recovered against the defendant can be sustained.

The janitress of this apartment, some time prior to the accident, had placed an old radiator in the dead end of the areaway, about twenty-nine feet from the stairs leading from the street to the apartment. To reach it a person would walk down the few steps from the street and then, instead of entering the doorway at the foot of the steps, would be obliged to proceed to the left thirty feet along the pavement of the areaway. In going to the point he would pass in front of three or more windows opening from the areaway into the basement. The radiator was leaning against the wall and, if left untouched, was apparently in a safe and secure place. The plaintiff, a young child four years of age, dropped a penny on the sidewalk which rolled through the railing down into the areaway. He thereupon walked to the gate, proceeded down the stairs and along the areaway without meeting any danger. All was safe. In looking for the penny the boy attempted to move the radiator, which fell over on his foot, causing the injury. Under these circumstances was the owner hable? Recognizing his obligation to the public as above stated, can we, or should we say that he was bound to anticipate any danger arising from standing this radiator in his areaway? We think not. The radiator did not fall of its own weight; neither was there anything unreasonable in using this vault or railed off areaway for the temporary storing of material taken out of the building, especially when it was removed some thirty feet or more from the stairway and the building entrance. Even then, when placed against the wall, the radiator was in no sense dangerous to persons using the areaway unless force was applied to it. That any outsider would have occasion to enter the areaway for its entire length and attempt to move the radiator was not such a happening as a reasonably prudent man could or would anticipate. These words cannot be used to hide an insurer’s risk or an absolute liability for any and all accidents. While it is true that children sometimes come into this areaway to play, the evidence shows that they were repeatedly cautioned and told to keep out; that the janitress at all times prohibited them from coming there. The owner had never acquiesced or permitted children to use this areaway as a playground, and the accident did not happen from such use.

Under the facts we find no failure of duty upon the part of the defendant to maintain this areaway in a reasonably safe and proper condition for all the uses which he had reason to anticipate, and for this reason we must reverse the judgment below, and dismiss the complaint.

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

Lehman, O’Brien and Hubbs, JJ., concur; Pound, Ch. J., Kellogg and Crouch, JJ., dissent on the ground that the question of fact was properly submitted to the jury.

Judgments reversed, etc.


text:
    In the Matter of the Accounting of John T. G. Finn et al., as Trustees under the Will of Daniel K. De Beixedon, Deceased. John T. G. Finn et al., Appellants; Bennett De Beixedon, Individually and as Trustee, Respondent.

      (Argued May 22, 1933;
    decided June 6, 1933.)

      Henry F. Miller and Robert M. Miller for John T. G. Finn et al., appellants.

      Henry F. Miller' and Joseph C. Burrows for Miriam De B. Penfield, appellant.

      Robert P. Griffing, as special guardian for Madeleine De B. Penfield et al., infants, appellants.

      C. Lansing Hays and Joshua D. Jones for respondent.
   Crane, J.

Daniel K. De Beixedon died a resident of Suffolk county, and by Ms will appomted JoMi T. G. Finn and Bennett De Beixedon trustees for Ms widow and five cMldren. Letters testamentary were issued to these executors-trustees on September 30, 1919. By Ms will the testator directed Ms residuary estate to be divided mto as many equal shares as would make one share for each of Ms five cMldren who survived Mm, each of said shares to be held in trust for each, of such children and to be transferred and set over to such child when he or she should attain the age of forty years. The trusts were established and thereafter two of the cMldren, Edith De Beixedon Barnes and the said Bennett De Beixedon, having attained the age of forty years, their trusts terminated and the prmcipal was paid to them respectively. The trusts for the other three cMldren still remam m existence. The last accountmg was settled by a decree on the 28th day of October, 1929, wherein it appeared that two pieces of real property left by the testator had been sold at a large profit. The Manhattan property gave to each trust a profit of $70,750, while the Atlantic avenue (Brooklyn) property showed a profit of $14,452.23 to each trust. The total profit to each trust on sales of real estate, as shown m this 1929 accountmg and on wMch trustees’ commissions were computed, was, therefore, $85,202.23. The profit was figured by the difference between the value of the real estate as taken for tax purposes in 1919 and the amount for wMch it was sold.

Bennett De Beixedon, a son of the testator, a beneficiary under tMs will, and one of the executor-trustees, undertook to prepare the mcome tax returns after October of 1929, the date of the last accounting. He conceived the idea that the return need not be made for all of tMs profit as the estate would be justified in fixing the value of the real estate at a higher figure than that given for the estate tax. In other words, that it would be permissible to show that the actual value of the real estate at the time of the testator’s death was greater than the amount fixed for the estate tax. This of course would reduce the actual profit received upon the sale. He consulted tax experts and procured an appraisal. He and his associate co-trustee, Finn, each consulted lawyers who apparently worked together in arriving at some such result as was proposed by De Beixedon. The United States government not only refused to accept a reduced profit but imposed a penalty for delay in making the return and the payment of the tax, which penalty however was subsequently revoked. Finn, the co-trustee, became justifiably anxious over these actions upon the part of De Beixedon and questioned his authority to incur expenses for lawyers and experts in thus seeking to reduce the income tax. His anxiety resulted in this present proceeding wherein Finn, as co-trustee, calls to account De Beixedon, the other trustee, and asks in his petition that the expenses thus incurred be disallowed.

The issue upon this accounting is over the necessity or legality of these expenses and disbursements incurred for this purpose by De Beixedon. They are challenged by Finn and answered by De Beixedon. The evidence in the case bears upon the efforts made to reduce the income tax and the employment of appraisers, experts and lawyers for this purpose or in connection with the removal of the penalty. The petition sets forth the preparation of the income tax returns by Bennett De Beixedon and states: “ In the matter of said income tax returns the said Bennett De Beixedon incurred expense for an appraisal over the objection of your petitioner, and afterwards, without the consent of your petitioner employed an attorney named James H. Hickey in relation to such income tax matters, after complications had developed, with the result that your petitioner was constrained for the protection of the trust estates to employ an attorney, to wit, Thomas J. Evers, in order to safeguard the interests of said trust estates.” The petition then states that both Hickey and Evers have rendered bills which the petitioner questions and further sets forth the penalty of twenty-five per cent incurred by the delay of De Beixedon in filing the return which necessitated the petitioner’s employment of Henry F. Miller, an attorney, to reopen the matter and to procure a remission of the penalties. The errors and delays,” concludes the petition, as above referred to in the matter of said income tax returns have resulted in loss and damage to the trust estates, and your-petitioner desires that his co-trustee, the said Bennett De Beixedon, should make an accounting of his acts and proceedings with respect to said income tax returns.”

De Beixedon answered this petition by filing an account stating that he believed the appraisal of 1919 to be erroneous and did not reflect the true value of the real estate as of that time and that he believed it was possible to have the appraised valuation changed and amended by raising the same which would materially lessen the amount of the profit and of the tax which the trustees would have to pay. He further alleges that bis co-trustee was fully cognizant of these efforts and acquiesced therein. He sets forth the employment of Hickey and of the attorneys of his co-trustee and their conferences at the United States Tax Department in Brooklyn and the New York State Tax Department in Albany and furthermore sets forth the payment of $500 to one J. N. Kalley for the appraisal made of the real estate. The hearings before the Surrogate bear directly upon the issue thus framed.

Were these expenses and fees incurred by the two trustees due to the negligence and carelessness or wrong doing or improper conduct of De Beixedon? If they were they could not legally be charged against the estate and should have been charged personally to De Beixedon. (Jessup’s Surrogate’s Practice [8th ed.], §§ 1173 and 1174; Surrogate’s Court Act, §§ 222 and 285; O’Reilly v. Meyer, 4 Dem. 161; Matter of Frazer, 92 N. Y. 239, 247; Matter of Maxwell, 218 N. Y. 88.) The Surrogate allowed all these expenses and directed that they be paid, out of the estate, fixing the allowances for all the lawyers and for the guardian. At the same time on motion of the special guardian he removed De Beixedon as trustee, stating, “As a result of his negligence in not making returns on time and incorrect when made, undue expense has been caused the Trusts and this contest. Lawyers had to be employed and were employed to correct the situation.”

The findings necessarily are inconsistent. If De Beixedon’s negligence had caused unnecessary expense to the estate he should pay it, not the estate. The Surrogate in charging all these matters to the estate must have found them to be proper charges. This seems to be the fair and reasonable inference to be drawn from his decree. Executors and trustees are liable individually for the debts incurred in behalf of the estate, but when they are proper and legal charges the Surrogate will order them paid out of the estate on the accounting. (Austin v. Munro, 47 N. Y. 360, 366.) Executors and trustees are supposed to be surcharged with illegal and unjustifiable expenditures. The Surrogate probably considered that ^o money was misappropriated by De Beixedon and that/his acts at most were in behalf of the trusts to reduce the income tax if possible. While perhaps ill-advised and unwise, the attempt may not in the eyes of the Surrogate have amounted to such negligence as to justify mulcting De Beixedon with this indebtedness. The fact remains that the Surrogate must have come to this conclusion in order to make these allowances payable out of the estate.

The findings, therefore, of the Surrogate regarding these items of the account are at least inconsistent with the finding of such negligence upon the part of De Beixedon as justified removal. The Appellate Division in the face of inconsistent findings apparently followed the rule which requires the court to accept as true the findings most favorable to the appellant (Parsons v. Parker, 159 N. Y. 16), and reinstated the trustee.

That court, however, was of the opinion that the co-trustee could not be removed in this accounting proceeding as no petition had been filed for that purpose under sections 99 and 100 of the Surrogate’s Court Act. As the cause assigned for removal did not come under section 104, the Appellate Division was of the opinion that a petition must be filed in every case for the removal of an executor or trustee and that it must take the form specified in section 100. This we think is too narrow a view to take of the Surrogate’s Court procedure or of the Surrogate’s powers. Where all the facts which could be alleged in a petition under section 100 pertaining to causes for removal as embodied in section 99 are alleged and set forth in a petition for an accounting, and being put in issue, are tried out in that proceeding, all parties in interest being before the court, the Surrogate has power under section 40 of the Surrogate’s Court Act to make a decree removing an executor or trustee as the case may be. The misconduct specified in section 99 appearing in the accounting proceeding and being tried as an issue of fact can and may result in a decree of removal without the unnecessary formality of starting a new proceeding by petition solely directed to the removal for misconduct. In other words, an accounting and removal proceeding may be embodied in the same petition as in this case although the prayer for relief may not specifically refer to removal. Sections 99 and 100 have reference in the main to proceedings taken solely for the removal of an executor or trustee but do not in any way limit the equity powers of the Surrogate under section 40 to reach the same result where the petition in an accounting proceeding and the accounting itself show the misconduct upon the part of the executor or trustee for which he should be removed, and which has been litigated in that proceeding. (Gould v. Gould, 203 App. Div. 807; Perry on Trusts [3d ed.], § 280.)

While we do not agree, therefore, with the reasons assigned by the Appellate Division, we affirm the result reached by that court. The Surrogate having found that the expenses incurred by the executor in an attempt to reduce the income tax were properly chargeable to the estate, he could not remove the executor upon contrary findings that he wasted or improperly applied the assets of the estate or improperly managed or injured the property committed to his charge.

The order should be affirmed, with costs to all parties filing briefs payable out of the, estate. (See 262 N. Y. 638.)

Pound, Ch. J., Lehman, O’Brien and Crouch, JJ., concur; Kellogg and Hubbs, JJ., not sitting.

Order affirmed, etc.


text:
    In the Matter of the Claim of Anna Pisko, Respondent, against David N. Mintz et al., Appellants. The State Industrial Board, Respondent.
    (Submitted May 23, 1933;
    decided June 6, 1933.)

      H. Dudley Bierun for appellants.

      John J. Bennett, Jr., Attorney-General {Roy Wiedersum of counsel), for State Industrial Board, respondent.
   Crane, J.

Michael Pisko and his wife, Anna, were janitors or superintendents of an apartment house at 536 East Fifth street, New York city. In addition to cash wages paid by the employer to this couple, they were allowed an apartment on the first floor of the building. On January 1, 1931, at about five o’clock in the morning, a fire broke out in the apartment occupied by these people in which the husband, Michael Pisko, lost bis life through suffocation. At the time the wife and the children were upstairs in another apartment out of danger. The only person in the apartment at the time of the fire was the janitor himself, and he was found partially clothed near a window. The fire originated in the bed, and the mattress was burning at the time the firemen arrived. The fire captain testified that the only thing burning was the mattress, the bedding and the paint on the walls. The deceased was burned on one foot. All the evidence is positive upon this point that the fire in the janitor’s apartment originated in the bed, that the mattress was on fire when the firemen arrived.

What happened will probably never be known except as we are permitted to infer it from this evidence, but from what we do know are we permitted to hold the owner and his insurance carrier hable under the Workmen’s Compensation Law (Cons. Laws, ch. 67) on the ground that the death of Pisko arose out of and in the course of his employment? We recognized in Matter of Giliotti v. Hoffman Catering Co. (246 N. Y. 279) and Matter of Underhill v. Keener (258 N. Y. 543) that some workmen are obliged through the nature of their employment to remain upon premises or in buildings all of the twenty-four hours of the day. Giliotti was a cook and was suffocated to death by a fire which occurred in the hotel where he had sleeping accommodations. He was in his room on the night of the fire. We held that the destruction of the building by fire was a risk arising out of and in the course of his employment the same as if the building had collapsed while he slept. The cook’s presence at all times was required by the nature of his work and the risk was one incurred from being in the particular building or hotel where he was paid to be. Giliotti had nothing to do with the fire which originated outside of his own quarters.

Everything, however, which happens to an employee occupying rooms in a building, the rental of which he receives as part of his compensation, is not attributable to the dangers or risks of bis employment. If in this case Pisko had been injured by a falling ceiling or a beam, the collapse of the building or a fire originating outside of his apartment, the risk would have been one connected with the place he was bound to occupy under the terms of his employment. Injuries received under such circumstances would have arisen out of and in the course of his employment. On the other hand, we may take the extreme case by way of illustration of a cut received by the employee while shaving himself, or the slipping in a bath tub while taking a bath, or the pulling over upon himself of a piece of furniture while attempting to move it, or burning himself while cooking his meals; all these and like occurrences would arise out of no risk of the employment and would not be occasioned because the employee was obliged to stay upon the premises or in a particular room or apartment. They would be such personal acts, disassociated from his employment, as would be likely to occur anywhere and in any place that the employee happened to five. The distinction is drawn in the Giliotti case.

We approach the application of this distinction, the difficulty arising as in so many cases over the application of a principle to the facts of the case. ' The difficulty lies in drawing the line between that which is a risk growing out of the employment and that which is solely personal to the employee. Pisko was in his apartment alone from about midnight to five o’clock in the morning. He evidently was lying on the bed as one foot was burned. The fire originated in the bed and mattress. These facts are not disputed. The danger was in no way connected with the particular apartment or place that Pisko was. obliged to occupy under the terms of his employment. The fire was not occasioned by reason of the place or any danger surrounding the apartment. Something ignited the bedding but there is no claim and no proof that the nature or condition of the apartment had anything to do with causing the fire. The only reasonable inference to be drawn is that Pisko, the only person present, through some act of carelessness or negligence of his own not connected with or arising out of his employment, set fire to his bedding, an act for which the employer would not be liable under the Workmen’s Compensation Law. There is a clear distinction between these facts and the case where an employee while asleep in his room is burned up because of a fire originating outside of his apartment which renders the place he is compelled to occupy unsafe and dangerous. The risk is at once connected with the place of his employment. When the place is rendered dangerous by some act or condition due to his occupancy and not due to the place itself, the injury or death does not come within the intent or purpose of the law. (Matter of Davidson v. Pansy Waist Co., 240 N. Y. 584.)

Our conclusion is reached solely upon these uncontradicted facts without considering the testimony of the assistant fire marshal that Mrs. Pisko told him that night that she thought her husband while smoking must have dropped a cigarette down on the bed and set fire to it. This was a mere surmise on her part. She did state to the patrolman, however, that at two o’clock that morning, her husband, who had been drinking, forced her from the apartment to a neighbor’s where she stayed until after the fire. This strengthens the only reasonable presumption which can be drawn from the conceded facts which is that the fire originated through some act of Pisko.

At about eight o’clock the night of December thirty-first there had been a fire in the cellar underneath this apartment occupied by the janitors, but as the evidence shows conclusively that this had nothing to do with the fire occasioned in the bed at five o’clock the next morning, it is not necessary to discuss the matter other than to say that we have not overlooked the evidence in connection therewith.

For the reasons here stated, the order of the Appellate Division should be reversed and the claim dismissed, with costs against the State Industrial Board in this court and in the Appellate Division.

Pound, Ch. J., Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Order reversed, etc.


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

text:
    American Surety Company of New York, Appellant, v. Empire Trust Company et al., Appellants and Respondents, and Wyandotte Savings Bank, Respondent.

      (Argued March 1, 1933;
    decided June 6, 1933.)

      Ray M. Stanley for appellant.

      A. Bruce Hopkins for Empire Trust Company, appellant and respondent.

      Franklin R. Brown for American Exchange-Pacific National Bank, appellant and respondent.

      Fritz Fernow and H. Kenneth Haller for Detroit Savings Bank, appellant and respondent.

      Fritz Fernow and H. Kenneth Haller for respondent.
   Lehman, J.

The Farmers and Mechanics Savings Bank of Lockport received a letter purporting to be signed by Lukas Szmytki, a depositor, inclosing two bank books of the depositor. The writer requested that checks be mailed to him at an address in Wyandotte, Michigan, for sums aggregating almost nine thousand dollars, closing out one account and leaving only a small balance in the second account. The bank sent drafts as requested and returned the one bank book which still showed a small deposit. It wrote the inclosing letter upon its own stationery. The drafts when presented to the drawee, Empire Trust Company, bore the forged indorsement of the depositor and the genuine indorsements of Wyandotte Savings Bank, Detroit Savings Bank and American Exchange-Pacific National Bank. Relying upon these indorsements, Empire Trust Company paid the draft and charged the amount so paid against the account of Farmers and Mechanics Savings Bank of Lockport. Subsequently that savings bank learned that its depositor’s pass books had been stolen, and that the depositor had never requested that any checks be sent to him and had not indorsed the drafts made out to his order. The American Surety Company reimbursed Farmers and Mechanics Savings Bank of Lockport for the amount which had been charged by Empire Trust Company against its account and took an assignment of the Lockport bank’s cause of action. Then it brought this action against Empire Trust Company, which has impleaded the "prior indorsees of the checks.

It is clear that the drafts were made out to the order of the named payee and not to a fictitious person. The drawee could not charge against the drawer the amount paid upon those drafts unless such payment was made in accordance with the tenor of the drafts. The fact that the drafts were obtained from the drawer by fraud and the indorsement forged by the fraudulent holder would not justify such payment. (Ulmann Co. v. Central Union Trust Co., 257 N. Y. 563.) The drawee is bound at its peril to determine the identity of the payee. (Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26; Gallo v. Brooklyn Sav. Bank, 199 N. Y. 222.) Only where by express representation or by negligence the drawer has enabled a wrongdoer to impose upon the drawee bank does the bank acquire rights against the drawer, through unauthorized payment of a check or draft. (National Surety Co. v. Manhattan Co., 252 N. Y. 247; Gutfreund v. East River Nat. Bank, 251 N. Y. 58.)

Here there was no express misrepresentation by the drawer. Nevertheless recovery of the amount paid by the drawee upon the forged indorsement has been denied to the assignee of the drawer on the ground that its assignor is estopped “ from holding the paying banks to the usual rule of liability for paying upon an indorsement that was forged.” (228 App. Div. 572, 577.)

The good faith of the plaintiff’s assignor in issuing the drafts is not impugned. It was duped by a cheat. If it had not been duped, the cheat could not have successfully consummated the forgery. By greater vigilance the plaintiff’s assignee might perhaps have defeated at the outset the scheme of the cheat to obtain payment of genuine drafts by forged indorsements. Its officers and agents, by failure to exercise such vigilance, may have been remiss in a duty they owed to it. None the less their neglect cannot defeat the plaintiff’s cause of action, unless the plaintiff’s assignor owed to the drawee of the drafts or to a person who might discount them a duty to exercise such vigilance.

Farmers and Mechanics Savings Bank of Lockport drew the drafts for the purpose of meeting its own obligations to a known depositor. When it sent the drafts to a person not properly identified as the depositor, or the authorized agent of the depositor, it assumed the risk that its obligation to the depositor might remain unsatisfied. It did not assume the risk that the drafts would be paid upon the order of any person other than the payee named in the drafts. The drawee owed to the drawer the duty of paying the draft only to the payee named. The drawer owed to the drawee the duty only that it would not by act or misrepresentation facilitate a fraud upon it. Alleged negligence in delivering a draft or check to a person not authorized by the payee to receive it is “ immaterial ” where a party discounts or pays a draft without sufficient identification of the payee and upon a forged indorsement. (Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26.) Negligent failure by the drawer to protect itself against fraud in procuring the making of the drafts does not cast upon the drawer the risk that they will be paid upon a forged indorsement. In an analogous case it was said: “ There are many cases that illustrate the rule that negligence of the maker is immaterial unless it is of a kind that directly and proximately affects the conduct of the banker in the performance of his duties. (Citing cases.)” (Jordan Marsh Co. v. National Shawmut Bank, 201 Mass. 397.)

If the plaintiff’s assignor were chargeable with knowledge that it was delivering the drafts to a person who intended to forge the payee’s name, or in a form which would facilitate a forgery, a different question would arise. Here the drawer is charged only with failure to make a more careful investigation to determine whether the party claiming payment was the party entitled to such payment. Even if the drawer had actually doubted the identity of the person claiming such payment, it would not follow that delivery of the drafts was negligent. “ I am not prepared to admit the proposition that when a bank or individual, not being satisfied of the rights or identity of the party claiming payment from it or him, declines to pay the party in money, but gives a check to the order of the known creditor, it or he is thereby necessarily guilty of negligence or fraud. It is the general rule of law in this country, and such is the common law, that the drawee of a bill or check or persons purchasing it ‘ take the paper relying solely on the reputed responsibility of their transferers, and the other parties to it, and its apparent genuineness, and they, therefore, deal in it at their peril.’ (Crawford v. West Side Bank, 100 N. Y. 50.) * * * It is on the faith of this rule that business in this country is conducted.” (Gallo v. Brooklyn Sav. Bank, supra, at p. 226.) (Cf. City of New York v. Bronx County Trust Co., 261 N. Y. 64.)

It follows that the judgment should be reversed and a new trial granted, with costs to abide the event.

Crane, J. (dissenting).

The law, which my associate, Judge Lehman, has correctly stated, when applied to the facts in this case leads rather to an affirmance than to a reversal. The negligence of the Farmers and Mechanics Savings Bank of Lockport consisted in acts which identified the thief as the payee of the checks which the Wyandotte Savings Bank cashed.

Lukas Szmytki had been a depositor in the Farmers and Mechanics Savings Bank of Lockport for many years. His deposits had accumulated without withdrawals. He lived in the neighborhood of the bank all of the time. A thief stole his bank books and sent them from Wyandotte, Michigan, to the bank with a request for the deposits and the return of the bank books. The fact that their longtime depositor had left Lockport and gone to Michigan and that he desired his savings in one lump sum aroused no suspicion in the minds of the bank officials. They did not send to Szmytki’s home address in Lockport or attempt to communicate with him at his last-known place of residence in any way. They did not attempt to verify his removal. Neither did they carefully compare or investigate the signature of the thief with that of their depositor. The bank not only sent on a check drawn to the name of Lukas Szmytki, but returned the bank book with a letter to the thief in the name of Lukas Szmytki, by means of which he identified himself as the genuine Szmytki to the Wyandotte Savings Bank.

The negligent acts of the Lockport bank, whereby the thief was furnished by it with the means of identifying himself as Szmytki, the payee, estops the Lockport bank and its assignee from maintaining this action. Giving to a thief a depositor’s pass book and a letter addressed to him by the name of the depositor would be sufficient identification for any bank in the ordinary course of business. The negligence commenced with the Lockport bank in failing to make any inquiry, through extreme carelessness, about the person to whom they were giving checks and a depositor’s pass book, and to whom they were writing letters in the name of a depositor.

There is much more in this case than the mere giving of a check drawn to the order of a genuine depositor; there are the additional facts of identification furnished to the drawee, whereby he could readily deceive innocent purchasers for value.

For these reasons I am for affirmance:

Pound, Ch. J., Kellogg and Hubbs, JJ., concur with Lehman, J.; Crane, J., dissents in memorandum in which O’Brien, J., concurs; not. sitting, Crouch, J.

Judgment reversed, etc. (See 262 N. Y. 635.)


author: Lehman, J.

text:
    Hessian Hills Country Club, Inc., Plaintiff, and Abe Fischer, Respondent, v. The Home Insurance Company, Appellant. Hessian Hills Country Club, Inc., Plaintiff, and Abe Fischer, Respondent, v. Hartford Fire Insurance Company et al., Appellants.

      (Submitted April 25, 1933;
    decided June 6, 1933.)

      Almond D. Fish and Charles A. Taussig for appellants.

      Alfred B. Nathan and A. J. Asche for respondent.
   Lehman, J.

In November, 1930, the buildings, together with their contents, owned by the Hessian Hills Country Club, Inc., were damaged or destroyed by fire. The property was insured by the ■ defendant insurance companies. By an indorsement upon the policies it was provided: “ Loss, if any, payable to Abe Fischer, mortgagee, as interest may appear.” At the time of the fire Abe Fischer owned a mortgage in the sum of $55,000 covering the property. Proofs of loss were filed by the mortgagor. Two actions were brought against the defendant insurance companies to recover the loss caused by the fire. In both actions the mortgagor and mortgagee joined as plaintiffs. Each of the answers of the defendant insurance companies, in addition to denials, set up three affirmative defenses. In the first affirmative defense it is alleged that the mortgagor’s proof of loss contained a false and fraudulent statement that the cause of the fire was unknown to the assured though the affiant well knew that the fire was set willfully and with the connivance and knowledge and by the direct act of an agent of the mortgagor for the purpose of defrauding the defendants. In the second affirmative defense it is alleged that the mortgagor willfully and maliciously set or caused to be set on fire the insured property. In the third affirmative defense it is alleged that the mortgagor falsely and fraudulently stated that certain articles of personal property were located in the premises at the time of the fire.

There can be no doubt that the affirmative defenses, if established by proof, would defeat any cause of action under the policies in favor of the mortgagor; but if the mortgage had contained the standard mortgagee clause providing that as to the interests of the mortgagee the insurance shall not be invalidated by any act or neglect of the mortgagor,” there could also be no doubt that the affirmative allegations contained in the answer would constitute no defense to an action brought by the mortgagee. These insurance policies do not contain that clause; but the mortgagee, claiming that this clause must be read into the policies by implication, moved for summary judgment against the defendants. The Appellate Division reversed the order of Special Term, which denied the motion of the plaintiff, and granted the motion. The orders of the Appellate Division provide that the answers of the defendants be stricken out as against the mortgagee; that the case be placed upon the day calendar for assessment of damages and that the action be severed as to the plaintiff Hessian Hills Country Club.

The jury has assessed the damages caused by the fire at the sum of $50,000, and final judgment accordingly has been entered in favor of the mortgagee. The defendants have appealed directly to this court from that final judgment. That appeal brings up for review only the determination of the Appellate Division upon the motion for summary judgment. (Civ. Pr. Act, § 590.) The defendants upon the motion for final judgment made no attempt to sustain their denials of any of the allegations of the complaint. Concededly these denials were merely formal, and there is no dispute that the policies were valid at their inception and covered the property damaged by fire. The affidavit of the plaintiff mortgagee verified the cause of action and sufficiently stated the plaintiff’s belief that there was no defense to the action, as required by rule 113 of the Rules of Civil Practice.

The defendant insurance companies’ opposition to the motion was based on the grounds: First, that the mortgagee has no right to recover, when under the terms of the policy the insurance is invalidated by the fraud and wrong of the mortgagor; and second, that in any event the mortgagor is a necessary party to any cause of action to recover under the policy, even if brought by the mortgageee, and that the action, therefore, could not be severed. No affidavit or proof was submitted to show that the allegations of the affirmative defense were true in fact, or even that there was any ground for belief that the mortgagor has been guilty of the wrongful acts charged in the affirmative defenses. The decision of the Appellate Division rests both upon its conclusion that the mortgagee’s right to recover could not be defeated by the alleged fraud and wrong of the mortgagor, and that the defendant has not shown any facts implicating either the mortgagee or the mortgagor in any of the wrongs set out in the answer and pleaded as defenses.” (236 App. Div. 615.) Before we consider the sufficiency of the affirmative allegations of the answer to constitute a defense to the mortgagee’s cause of action, the question arises whether upon this motion any burden was placed upon the defendants to show that there was any substantial basis for the allegations contained in the answer.

The defendants were required by the rule to show facts sufficient to entitle them to defend.” Doubtless if the mortgagor had joined the motion for summary judgment attacking the sufficiency of the defenses both on the law and the facts, a burden would have been placed upon the defendants to show at least that the allegations contained in the affirmative defenses were not sham. Here the attack upon the defenses was based only on their legal sufficiency. True, the mortgagee in his affidavit did allege certain facts which might cast doubt upon the good faith of the defendants in interposing said affirmative defenses even against the mortgagor, but the affidavit itself states: Deponent merely points to these facts as indicative of the sham nature of the affirmative defenses in this action, even though, as has been pointed out, these defenses whether valid or invalid do not apply to your deponent.” An affidavit made by the president of the mortgagor was also presented in support of the motion, though the mortgagor was not a party to the motion. In that affidavit the mortgagor’s president states, in persuasive manner, facts which might raise grave doubts as to the good faith of the defendant insurance companies, but that affidavit proceeds expressly upon the assumption that “ the question of the merits of the affirmative defenses is wholly immaterial as far as the mortgagee is concerned under the Standard Mortgagee Clause of the State of New York. However, your deponent, as a member of the Bar for thirty years cannot leave unanswered the libellous statements which are interposed as defenses by the defendant.” It is clear from a reading of the affidavits that the real purpose of the motion itself was to disassociate the right of the mortgagee to recover from any question of law or fact which might cast doubt upon the mortgagor’s right to recover under the policy. Indeed, in an affidavit submitted by the mortgagee, in reply to the affidavit presented by the defendants, it is stated: “ There is really only one issue presented concerning the right of Abe Fischer to succeed upon this motion, and that is whether the standard mortgagee clause, which gives the mortgagee immunity from any act or neglect on the part of the mortgagor, shall be deemed attached to this policy.” Upon a motion for summary judgment a defendant is under no burden to show that affirmative allegations in the defense are not sham when the attack on such allegations is made solely on the ground that they are insufficient in law.

The obligation of an insurance company under a policy of fire insurance is limited and defined by the terms of the policy itself. It may, if it chooses, make an independent contract with the mortgagee whereby insurance payable to the mortgagee shall not be invalidated by any act or neglect of the mortgagor. It makes such contract when the standard mortgagee clause is incorporated in the policy. (Goldstein v. National Liberty Ins. Co., 256 N. Y. 26; Savarese v. Ohio Farmers Ins. Co., 260 N. Y. 45.) Where, however, the contract of insurance is with the mortgagor and the undertaking to pay the loss to the mortgagee is collateral and dependent upon the principal undertaking, the mortgagee cannot recover if there has been a breach of condition of the policy by the mortgagor. (Moore v. Hanover Fire Ins. Co., 141 N. Y. 219.) Since here the allegations of the affirmative defense are unquestionably sufficient to defeat any cause of action under the policy by the mortgagor, the mortgagee’s motion for summary judgment should, on the mortgagee’s own theory, be granted, only if the policy contains, expressly or by fair implication, an independent promise to pay the loss to the mortgagee even though there is no liability under the policy to the mortgagor.

Under the standard fire insurance policies in use in this State prior to 1918, the insurer, even without the standard mortgagee clause, did enter into an independent obligation towards the mortgagee to whom the loss was payable which was not, in all respects, collateral to the insurer’s obligation to the mortgagor. The standard insurance policy then contained, in lines numbered 56 to 59, inclusive, this provision: If, with the consent of this company, an interest under this policy shall exist in favor of a mortgagee or of any person or corporation having an interest in the subject of insurance other than the interest of the insured as described herein, the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of such insurance relating to such interest as shall be written upon, attached, or appended hereto.” The conditions herein-before contained ” related to matters affecting the risk, either when incurred or while subsisting. The later provisions related in the main to conditions to be complied with by the insured ” after a loss has occurred. Construing this form of policy, this court decided that the later conditions applied only to the mortgagor, not to the mortgagee (McDowell v. St. Paul F. & M. Ins. Co., 207 N. Y. 482, 486), but that in the absence of any other provision in the policy affecting the insurance of the mortgagee, the earlier conditions relating in terms to the insured or mortgagor ” applied to the mortgagee as well as to the mortgagor. (Heilbrunn v. German Alliance Ins. Co., 202 N. Y. 610.) A different construction was reached in some other jurisdictions. There it was held that even the conditions contained in the policy before lines 56 to 59 did not apply except as expressed in other provisions “ written upon, attached or appended to ” the policy. (Cf. Senor & Muntz v. Western Millers' Mut. Fire Ins. Co., 181 Mo. 104; Richards on Law of Insurance [4th ed.], p. 474.)

In 1918, by the enactment of section 121 of the Insurance Law (Cons. Laws, ch. 28), the form of the standard fire insurance policy was changed. The new policy eliminated lines 56 to 59 of the earlier standard policy. It added lines 116 to 125: On payment to such mortgagee of any sum for loss or damage hereunder, if this company shall claim that as to the mortgagor or owner no liability existed, it shall to the extent of such payment be subrogated to the mortgagee’s right of recovery and claim upon the collateral to the mortgage debt but without impairing the mortgagee’s right to sue, or it may pay the mortgage debt and acquire an assignment thereof and of the mortgage. Other provisions relating to the interests and obligations of such mortgagee may be added hereto by agreement in writing.”

It is said that it was the intention of the Legislature by this change to eliminate distinctions between those provisions of the contract which had preceded lines 56 to 59 in the earlier standard form, and those which followed those lines and thus to provide that none of the conditions applicable to the mortgagor or insured shall apply to the interest of the mortgagee. That the Legislature intended to eliminate the distinction .between the provisions is clear, but under the language both of the statute and the policy, the effect of such elimination is, in the absence of other agreement, to make all provisions applicable to the interests of the mortgagor and mortgagee alike unless other provisions, relating to the interests and obligations of such mortgagee ” are added hereto by agreement in writing.” Under the earlier standard form of policy we had held that in spite of the provision that the conditions hereinbefore contained shall apply in the manner expressed in such provisions and conditions of insurance relating to such interest as shall be written upon, attached, or appended hereto,” these conditions applied in the absence of any contrary provision “ written upon, attached or appended ” to the policy (Heilbrunn v. German Alliance Ins. Co., supra), and we there pointed out that though this construction might place undue hardship upon the insurance companies, the remedy of the companies is to apply to the Legislature for leave to modify, as to the matters indicated, the standard fire insurance policy of the State of New York.” So it would seem clear that the conditions of the new form of policy applied to the mortgagee’s interest, unless other provisions relating to the interests and obligations of such mortgagee ” are added thereto by agreement in writing. (Orenstein v. Star Ins. Co., 10 Fed. Rep. [2d] 754; Richards on Law of Insurance, p. 472.) Otherwise the standard mortgagee clause would be a mere tautological superfluity. The argument is advanced that the provision in the policy providing for subrogation by the insurer where payment is made to the mortgagee, though no liability existed as to the mortgagor, shows that the insurance of the mortgagee was not intended to be invalidated by any act or neglect of the mortgagor, but that argument loses force by reason of the fact that immediately preceding that clause, provision is expressly made for liability, in some specified instances, to a mortgagee, though none exists to the mortgagor.

The question remains whether the standard mortgagee clause must be read into the policies by implication, though not contained in the body of the policies nor in any rider attached to the policies. That question has not yet been passed upon by this court. In Greenwich Bank v. Hartford Fire Ins. Co. (222 App. Div. 219) the Appellate Division of the first department reached the conclusion that where loss under a policy is payable to a mortgagee the standard mortgagee clause must be read into the policy though not attached thereto. Though we affirmed the decision of the Appellate Division (250 N. Y. 116), the affirmance by this court was on other grounds, and that question was not decided. It must be decided now.

Section 121 of the Insurance Law provides for a standard blank form of policy of fire insurance, and that “ no other or different provision, agreement, condition or clause shall be in any manner made a part of such contract,” except as provided by that section. The standard form of policy does not contain the standard mortgagee clause, but subdivision 3 of that section provides that: “ in the case of a mortgagee not named in the policy as the insured, such provisions may be added as shall not be inconsistent with or a waiver of any of the provisions of the said standard policy relating to mortgage interests but if so added shall include the provisions of a standard rider or indorsement relating to such interest the form of which shall have been approved by the Superintendent of Insurance and filed in his office as hereinafter provided.” By subdivision 10 of the same section it is provided that the Superintendent is empowered to make examinations in order to determine whether any particular agreement ought to be standarized and “ he shall thereupon prepare and file in his office such standard form of rider, indorsement, clause, permit, form or other memoranda, and thereafter no fire insurance corporation shall attach to any such standard policy of insurance, any rider, * * * covering substantially the same agreement provided for by such standard rider * * * except it be in the precise language of the form so filed by the Superintendent of Insurance.” Here there is no limitation of "the power of the insurance companies to make such agreements as they see fit except that such agreement may not nullify the provisions of the standard policy or vary the form of a standard rider which may be approved by the Superintendent of Insurance.

We are told that a standard rider embodying the standard mortgagee clause has been approved by the Superintendent of Insurance and filed in his office, though no such rider is set forth in the affidavits. Assuming that we may take judicial notice of the form of riders which have been approved by the Superintendent of Insurance and filed in his office, it would appear that the Superintendent of Insurance has approved riders embodying the standard mortgagee clause, but such riders are headed with the words New York Standard Mortgage Clause for Use in Connection with First Mortgage Interest on Real Estate,” and in this case the mortgage of the plaintiff Fischer is a second mortgage.

Possible distinction under the circumstances between first and second mortgages was not called to the attention of the courts below, and at least for the present we may disregard such distinction. Even so, there is nothing in the statute which would make it obligatory upon a fire insurance company to use the standard form of mortgagee clause in every case where loss is payable to a mortgagee as interest may appear. Insurance companies are forbidden by the statute to attach any rider covering substantially the same agreement provided for by the standard mortgagee rider filed in the office of the Superintendent of Insurance,, but by no construction of the language of the statute is an insurance company required to incorporate into the policy the agreement provided for by such standard rider where the insurance company does not desire to enter into substantially the same agreement.” The conditions contained in the standard form of fire insurance policy are applicable alike to mortgagee and mortgagor, except as other provisions relating to the interest and obligations of such mortgagee are added by agreement in writing. The only agreement in writing which has been added is the agreement that loss should be payable to the mortgagee as interest may appear. The parties are free to determine whether other agreement should be made. They have not done so in this case, and, therefore, the standard mortgagee rider cannot be read by implication into the policy.

The contention of the mortgagee that as to the Home Insurance Company there has already been a conclusive adjudication that the allegations contained in the affirmative defenses are untrue, is without substance. The earlier action was based upon a different policy, and no such defense was interposed in that action. (See Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304.) In view of these conclusions, it is unnecessary to consider whether in any event an action brought by mortgagee and mortgagor together may be severed and separate judgment awarded.

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

Pound, Ch. J., Crane, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Judgment accordingly.


author: Pound, Ch. J.

text:
    The People of the State of New York ex rel. Wedgewood Realty Co., Inc., Appellant, against Thomas M. Lynch et al., Constituting the State Tax Commission, Respondents.
    (Argued June 5, 1933;
    decided July 11, 1933.)

      Isidor Sack and A. Loeb Salkin for appellant.

      John J. Bennett, Jr., Attorney-General (Wendell P. Brown of counsel) for respondents.
   Pound, Ch. J.

This is a certiorari proceeding to review a determination of the State Tax Commission upon the relator’s application for a revision and resettlement of its assessment of an annual franchise tax under section 182 of the Tax Law (Cons. Laws, ch. 60) for the year 1927, measured by the dividends declared upon capital stock during the calendar year 1926.

Section 182 of the Tax Law, as amended by chapter 674 of the Laws of 1926, provided in part: For the privilege of exercising its corporate franchise or of holding property in this state every domestic corporation, joint stock company or association shall pay annually, in advance, an annual tax to be computed upon the basis of the amount of its capital stock within this state during the preceding year, and upon each dollar of such amount. The measure of the amount of capital stock in this state shall be such a portion of the issued capital stock as the gross assets employed in any business within this state bear to the gross assets wherever employed in business. Provided, however, that in the case of a corporation taxable hereunder only for the privilege of holding property, the measure shall be such a portion of the issued capital stock as the gross assets located within this state bear to the gross assets wherever located. For the purposes of taxation, the capital of a corporation invested in the stock of another corporation shall be deemed to be assets located where the property represented by such stock is located.

“ Every corporation, joint stock company or association, subject to taxation under this section shall, in any event, pay a minimum tax of not less than ten dollars nor less than one mill on each dollar of such a portion of the net value of its capital stock, which net value for the purposes of this section shall be deemed to be not less than five dollars per share, computed upon the portion of the net value of its issued capital stock determined upon such of the bases hereinbefore provided for the measurement thereof as is applicable. The term net value ’ as used in this section shall be construed to mean not less than the difference between a corporation’s assets and liabilities, and not less than the average price at which such stock sold during said year. But if the dividends made or declared on the par value of any kind of capital stock during any year ending with the thirty-first day of December amount to six or more than six per centum, the tax upon such kind of capital stock shall be at the rate of one quarter of a mill for each one per centum of dividends made or declared upon the par value of the capital stock during said year, unless such a tax be less than the minimum tax hereinbefore provided in this section, and the tax commission shall, for such purpose, make a fair and equitable apportionment of the assets of the corporation, joint stock company or association, between the different kinds of stocks.”

The Tax Commission characterizes the transaction before us for review as a scheme of evasion for the distribution of the accumulated surplus of relator, constituting a dividend in fact although not in form. The relator relies on the principle that there is no evasion because there is no law imposing a tax on the transaction. Such is the issue presented.

Prior to the organization of relator, the Wedgewood Realty Co., Inc. (old), was a close corporation engaged in the business of owning and managing real estate. At the close of the year 1926 it had assets of the value of $1,937,806.66, consisting of real estate at assessed value $1,854,200; cash, $15,454.81, and securities, $68,151.85. Its liabilities amounted to $1,038,060, consisting of mortgage indebtedness, $1,038,000, and accounts payable, $60, making its net worth $899,746.66. Its capital stock outstanding was $454,200, of which but $407,808.87 had been issued for cash or property, the difference being a capitalization of good will. The corporation thus had an accumulated surplus over and above the capital contributed by its stockholders of $491,937.79, as found by the Commission although the relator sets the figures at $176,908.78.

On December 28, 1926, the stockholders of the old Wedgewood Eealty Co. organized a corporation under the laws of this State bearing the name of H. F. K., Inc. On the sanie day the stockholders of the old Wedgewood Eealty Co. transferred to H. F. K., Inc., all of the outstanding stock of the old Wedgewood Eealty Co., which thereupon became a subsidiary of H. F. K., Inc. In exchange for the said stock, H. F. K., Inc., issued and delivered to the said stockholders of the old Wedgewood Eealty Co. 475 shares of its own capital stock without par value and $600,000 in amount of its own debenture bonds.

Two days later, on December 30, 1926, H. F. K., Inc., being the owner of all the stock of the old Wedgewood Eealty Co., merged the latter and, by the certificate of merger on that day filed in the office of the Secretary of State, assumed the latter’s name. H. F. K., Inc., under the name so assumed, is the relator in the present proceeding and will be hereafter referred to as the new Wedgewood Eealty Co., or the relator. No new assets were acquired in connection with the reorganization, the stockholders remained identically the same, and no interruption occurred in the transaction of the corporate business.

The State Tax Commission has proceeded on the theory that this distribution of the accumulated surplus by means of the bond issue constituted a dividend in fact on the issued capital stock of $454,200 at the rate of 108.3086%; that as the Tax Law provides a one-quarter of a min rate for each one per centum of dividend made or declared the tax would be based on $454,200 at the rate of .02707715% and the tax would amount to $12,298.44. It assessed a franchise tax accordingly.

We think the principle adopted by the Tax Commission was correct. The direct result of the transaction of December 28-30, 1926, was the exchange of par value stock of the old corporation for bonds of the face value of $600,000 and stock of the new corporation without par value. No change occurred in the business, the assets, the stockholders or even in the corporate name. Each shareholder had in addition to his stock, a gain in the form of bonds in place of his former indivisible and contingent interest in the corporate surplus. It was in substance and effect, not merely in form, [in part] a dividend of profits by the corporation, and individual income to the stockholders.” (Rockefeller v. United States, 257 U. S. 176, 184.) It included in fact a distribution of profits. (People ex rel. Fox Film Corp. v. Loughman, 259 N. Y. 30.)

The relator argues that no dividend was paid because the stockholders were no richer after than before the reorganization (Eisner v. Macomber, 252 U. S. 189), but the bonds of the corporation represent a debt of the corporation rather than an interest in its assets. This was more than a mere splitting of the evidences of stock ownership. The amount which might have been distributed to stockholders in annual dividends was by this scheme of reorganization distributed all at one time.

It may be difficult, if we look at form rather than substance and effect, to regard this as a distribution of earnings by the new corporation, which had not been in business long enough to have any earnings. The answer is obvious. The old corporation earned the money and turned everything over to the new. The new corporation took the assets as they were, i. e., in part undistributed profits. Questions of taxation must be determined by viewing what was actually done, rather than0the declared purpose of the participants.” (Weiss v. Steam, 265 U. S. 242, 254.) The courts should not be deluded by bookkeeping devices. They will deal with the substance of the transaction involved.” (Chicago, M. & St. P. Ry. Co. v. Minneapolis Civic Assn., 247 U. S. 490, 501.) The new corporation, technically a new entity, was a mere continuation of the old. Its organization will not be permitted to become an insurmountable obstacle in the way of collecting the tax. Compliance with forms of law does not amount to absolution for fraud.” (Crane, J., in Small v. Sullivan, 245 N. Y. 343, 354.)

No formal declaration of dividends is necessary to make the distribution of corporate profits income for the purpose of taxation. (People ex rel. Fox Film Corp. v. Loughman, supra.)

The bond issue was not, however, in its entirety a distribution of earnings. So far as it represented a distribution of capital it was not a taxable dividend. The record on this point is not as complete as it should be. The amount of the surplus is not directly shown by the record. Unquestionably it was less than $600,000, the amount of the bond issue. The Tax Commission should restate the financial condition of the old Wedgewood Company at the time of the merger and restate the tax accordingly. (People ex rel. Kohlman & Co. v. Law, 239 N. Y. 346, 352.)

The order of the Appellate Division should be modified by providing that the case be remitted to the State Tax Commission for a further hearing and a restatement of the tax in accordance with this opinion, without costs. (See 262 N. Y. 644.)

Crane, Kellogg, O’Brien and Crouch, JJ., concur; Lehman, J., votes to reverse on the ground that no dividends were declared; Hubbs, J., not sitting.

Ordered accordingly.


text:
    Bernice Leventhal, Respondent, v. Fannie Liberman, Defendant, and Jacob Liberman et al., Appellants.
    (Argued May 31, 1933;
    decided July 11, 1933.)

      Harold B. Medina, Eugene A. Sherpick, John W. Jordan and Abraham H. Sarasohn for appellants.

      Sidney J. Loeb and Leon M. Prince for respondent.
   Crane, J.

Bernice Leventhal and Abraham Liberman were joined together in bonds of matrimony in the city, county and State of New York on the 27th day of June, 1922. The marriage was annulled on the 21st day of July, 1926, because of the fraud of the husband and his parents in procuring the consent of the wife to the marriage. Bernice Leventhal now brings this action against the father of Abraham Liberman and the sister, Rose Altmark, to recover damages for their false and fraudulent representations in inducing her to marry the son and brother. She has been awarded a substantial judgment which has been affirmed unanimously by the Appellate Division.

That there is evidence to sustain the finding of false and fraudulent representations is not disputed upon this appeal. The father and sister were both asked particularly and specifically before the marriage regarding the health and the habits of the young man, and both assured the plaintiff and her family that Abraham had never been sick, was a well boy, and that he had no bad habits known to them; whereas, in fact, they both knew that he was tubercular and had been treated for the disease; that he was a drug addict, and, after treatments and confinement, was unable to give it up. Immediately after the marriage, Abraham was taken sick and during the few years before the annulment was nursed and cared for by his wife, the plaintiff, in various retreats, as well as at the' home of his parents, and soon developed a recurrence of his longing for drugs. On this evidence the decree of annulment was justified, as it did not appear that the parties had voluntarily cohabited as man and wife, with full knowledge of the facts constituting the fraud, before the commencement of the action. This seems to be the only act of ratification barring the action for annulment. (Civ. Prac. Act, § 1139.)

That the plaintiff had suffered damage by reason of the fraud thus established is self-evident, but, under the principle of Schubert v. Schubert Wagon Co. (249 N. Y. 253), she might not be able to recover the damages against her husband for his fraud. A wife may not maintain an action against a husband, nor a husband against a wife, for personal injuries, whether negligent or willful. The decree of annulment, however, destroyed the marriage from the beginning, as a source of rights and duties, but whether this would take the case out of the above rule we do not now decide. What, however, is to prevent her from maintaining an action against the father and the sister who, by their false and fraudulent statements and representations induced her to marry? In rehance upon these false representations she changed her status from a single woman to a married woman, lost the consortium, attentions and support of a well man, and endured mental pain and anguish as well as humiliation from being bound in matrimony to an invalid and a drug addict. That an action of this nature for fraud, in inducing one to marry another, may be maintained we have heretofore written in Piper v. Hoard (107 N. Y. 73); Kujek v. Goldman (150 N. Y. 176); Abrahams v. Abrahams (246 N. Y. 611).

The appellant presses upon our attention the difference between this case and the Abrahams case, in that the plaintiff here had full and complete remedy when she elected to annul the marriage. We do not find the doctrine of election of remedies, as defined in Clark v. Kirby (243 N. Y. 295), applicable to this case. The plaintiff annulled her marriage because of the husband’s fraud and deceit in the particulars mentioned, but the decree did not wipe out the past effects upon her. The injury was very real, and those causing it should be made to pay the damages. Their acts have the same legal result when inducing marriage as when inducing any other change in position through fraud and fraudulent representations. The result is to make the third party liable for the damage sustained, whether, as in the Abrahams case, there has been no annulment of marriage, or whether, as in this case, such partial relief has been afforded. The annulment decree, while relieving the plaintiff for the future, did not and could not make up for past suffering and affliction. She had become a married woman, no longer a virgin; she had suffered the pain and humiliation following the discovery of her husband’s real condition; she had felt the disgrace of her situation: all of which are matters which the law takes into consideration when trying in this rather crude way to measure the damages in money. The defendants, father and sister, therefore, are liable for their acts, even though the plaintiff has obtained a decree annulling the marriage with the son Abraham. (American Surety Co. v. Conner, 251 N. Y. 1; Powers v. Benedict, 88 N. Y. 605; Bowen v. Mandeville, 95 N. Y. 237; Frey v. Torrey, 175 N. Y. 501.)

This-ruling leaves great latitude for the praise of children, which is quite natural to parents, and by no means indicates that relatives are called upon to state any or all imperfections or unhappy traits which may exist in one about to be married. Opinions vary, and every one is entitled to his own. Strange indeed would it be if a father or mother did not see the best in their offspring. Praise is comely, and expected from those who love us, and at no time is it more appropriate than when a partner is to be selected for life. Praise, adulation, commendation, admiration, everything that exalts and uplifts is of the essence of parenthood. Never do we expect that a father or mother will see the child in the same light as others. Recognizing all this, however, there comes a time when the truth must be spoken. In this case, the father and the sister were asked specifically about a condition which had aroused some suspicion in the minds of the bride’s family. They answered, deliberately stating that which they knew to be false. This finds no defense in the natural instincts/7

The judge in this case, however, charged the wrong measure of damages. He said to the jury, She is entitled to such damages as will fairly compensate her for such deprivation of what she had a right to expect from her husband who was not what she claims the father and sister represented him to be. * * * The principle underlying all rules for the measurement of damages in an action such as this is indemnity for the actual pecuniary loss sustained as the direct result of the wrong done.” Again, he charged request No. 13, which was: “ The plaintiff may only recover as damages any pecuniary loss sustained by her as a result of the alleged false representations.” This is error, to which no exception was taken by the defendants for the reason, apparently, that the charge was more favorable to them than the law justifies. The pecuniary loss is by no means the limit of damage in such a case as this. The plaintiff, beside any direct pecuniary- loss, may have the jury consider as bearing upon the question of damage the fact that she has changed her status as a single woman, has suffered humiliation, disgrace and mental anguish, and that she has also been deprived of the society, comfort and attention of a well man. What these damages are, or should be, must rest very largely in the discretion of the jury, but these are elements which they may consider in arriving at the amount. (Chellis v. Chapman, 125 N. Y. 214; Coolidge v. Neat, 129 Mass. 146; Vanderpool v. Richardson, 52 Mich. 336, and 2 Sedgwick on Damages [9th ed.], §§ 473, 480-b; Mayne on Damages, p. 481; 5 Sutherland on Damages [4th ed.], § 1285, p. 4973.) The defendants, therefore, have no reason to complain in this case that the award was made upon the basis of the direct financial loss, and no more, which the- plaintiff had sustained.

That part of the judge’s charge, above quoted, wherein he said the plaintiff was' entitled to damages which will compensate her for such deprivation of what she had a right to expect from her husband,” or, in other words, the difference between what he was and what he was represented to be, apparently was taken from the Abrahams case. The point was not raised by proper exception in that case. This is not the rule, or measure of damage in these cases. The rule, as we have given it, is similar to that in libel, breach of promise, seduction, criminal conversations and other cases of like nature.

The judgment, therefore, should be affirmed, with costs.

Pound, Ch. J., Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Judgment affirmed.


text:
    Richard Fay, Appellant, v. Harry C. Witte, Respondent.
    (Argued May 24, 1933;
    decided July 11, 1933.)

      Werner H. Pigors for appellant.

      J. Vanderbilt Straub for respondent.
   Crane, J.

The following promissory note was executed and delivered on the date mentioned:

“Albany, New York, Jan. 13th, 1931.
“ November 1st, after date We promise to pay to the order of Harry C. Witte, Two Thousand Five Hundred Dollars, ($2,500.00) at the Central Bank of Albany, New York, with interest.
“ Value received.
“ HARRY C. WITTE, INC.
“ By: Harry C. Witte, Pres.”

On the 14th day of February, 1931, which was long before maturity, the said payee, Harry C. Witte, for a good and valuable consideration, indorsed the note in the following manner:

“ I hereby assign all my right and interest in this note to Richard Fay in full,
“ HARRY C. WITTE.”

Fay became the holder upon delivery and brings this action against Witte as an unqualified indorser, the note having been protested for non-payment, and due notice thereof having been given to the defendant, as indorser. The Appellate Division, by a divided court, has held that Witte, by the assignment of the note, had rendered himself an indorser without recourse. He was, therefore, not liable as an unqualified indorser. The reason assigned for this conclusion in the opinion of the Appellate Division was that an indorsement implies two things: one, a transfer of the note; second, a promise to pay if a maker fails to do so. Witte, it was said, by having assigned the note transferring title, impliedly excluded the second condition or implication — the promise to pay upon default. We can find no justification in the Negotiable Instruments Law (Cons. Laws, ch. 38) for an implied qualified indorsement. Either the words, without recourse,” must be used, or other words of similar import. The exclusion of liability must be expressed by appropriate words, and not implied from the transaction. “A person placing his signature upon an instrument otherwise than as maker, drawer or acceptor is deemed to be an indorser, unless he clearly indicates by appropriate words his intention to be bound in some other capacity.” (Neg. Inst. Law, § 113.)

The placing of this assignment and his name upon the note constituted Witte an indorser unless the words indicate a different intention. The signing on the back of the note has a different effect than would such signing under the same words on a separate paper not attached to the note. This would not be an indorsement at all. It would be a mere assignment transferring title. It is the writing on the back of the instrument itself which constitutes the indorsement with the effect given to it by the Negotiable Instruments Law. Where a signature is so placed upon the instrument that it is not clear in what capacity the person making the same intended to sign, he is to be deemed an indorser.” (Neg. Inst. Law, § 36, subd. 6.) The payee’s name being upon the back of the note, he is presumed to be an unqualified indorser, unless there are words which express a different intention. The Negotiable Instruments Law, section 68, reads: “ A qualified indorsement constitutes the indorser a mere assignor of the title to the instrument. It 'may be made by adding to the indorser’s signature the words ‘ without recourse ’ or any words of similar import. Such an indorsement does not impair the negotiable character of the instrument.”

We find no words in this indorsement which state expressly that the payee or indorser assigns or transfers the note, but is not to be held liable over in case of default. We have a clear expression of an assignment and transfer. This is what the words used mean. The note and title to the note were passed to Richard Fay, the plaintiff. However, we" find nothing else. The words, “ without recourse,” are not used, nor any other words of “ similar import.” We may imply by the use of the word assign,” as did the Appellate Division, that the payee considered himself no longer liable, but implication is not permitted by the statute. The denial of recourse to a prior indorser must be found in the express words, without recourse,” or words of similar import. This indorsement contains no such words. Witte, the defendant, became an unqualified indorser liable as such upon nonpayment and notice of protest. ■ This is the law as stated in most of the authorities, text-books arid treatises. Daniel on Negotiable Instruments (Yol. 1, § 688-c) states fhe law as follows: “ Does the writing over a signature on express assignment which the law imports from the signature per se exclude and negative the idea of coriditional liability which the law also imports if such assignment were not expressed in full? We think not. It is from the fact that a payee assigns a bill or negotiable note by indorsement of his name on the back of it, that the law implies his liability as an indorser. His relation to the instrument creates the implication, and the circumstance that he sets forth that relation in express terms does not change it, for the maxim applies,. Expressio eorum quce tacita insunt nihil operatur. Did the payee intend merely to pass the title he should use the words ‘ without recourse ’ or some phrase of equal import. His liability is implied without words expressly creating it. To be negatived, words should be used which negate the implication.” (See, also, Bigelow on Bills, Notes and Checks [3d ed.], § 256, pp. 184, 185; The Written Aspect of Indorsement, 34 Yale Law Journal, 144, 151.)

A like holding has been made in the following cases: Farnsworth v. Burdick (94 Kans. 749); Copeland v. Burk (59 Okla. 219); Jones County Trust & Sav. Bank v. Kurt (192 Iowa, 965); Markey v. Corey (108 Mich. 184); Adams v. Blethen (66 Me. 19); Davidson v. Powell (114 N. C. 575); Maine Trust & Banking Co. v. Butler (45 Minn. 506); Citizens Nat. Bank v. Walton (96 Va. 435); Behrens v. Kirkgard ([Tex. Civ. App.] 143 S. W. Rep. 698).

There are authorities the other way: Hailey v. Falconer (32 Ala. 536); Spencer v. Halpern (62 Ark. 595); Ellsworth v. Varney (83 Ill. App. 94); Marion Nat. Bank v. Harden (83 W. Va. 119); Hammond Lumber Co. v. Kearsley (36 Cal. App. 431); but we are of the opinion that the law is as we have here expressed it.

The judgment of the Appellate Division should be reversed and that of the County Court affirmed, with costs in this court and in the Appellate Division.

Pound, Ch. J., Lehman, Kellogg, O’Brien and Crouch, JJ., concur; Hubbs, J., not sitting.

Judgment accordingly.