author: Thacher, J. Ftjld, J.

text:
    In the Matter of New York World-Telegram Corporation, Appellant, against Joseph D. McGoldrick, as Comptroller of the City of New York, et al., Respondents.
    Argued January 8, 1948;
    decided May 21, 1948.

      William E. Bemis and George B. Broohs for appellant.
    I. The installment payments made by petitioner and credited to its purchase option for the period from Decembe'r 10, 1934, to July 1, 1940, are not subject to tax. An agreement which imposes an unconditional obligation to pay for tangible personal property with the right or option in the obligor to become the owner of such property upon full compliance with the terms of the contract is a conditional sale agreement. (Uniform Laws Annotated, Vol. 2A, p. 23; Williston on Sales [2d ed.], Vol. I, § 336; Central Union Gas Go. v. Browning, 210 N. Y. 10.) II. The payments made on account of interest, dividends, taxes and other like charges are not subject to tax. III. Where a lease imposes an unconditional obligation to pay for the tangible personal property involved, with the right or option in the lessee to become the owner upon full compliance with the terms of the agreement, the transaction is in essence a sale; and respondents’ contention that in this case the parties did not intend a sale is merely to argue that the parties did not intend to make the contract actually entered into. (Gardner v. Town of Cameron, 155 App. Div. 750; Bramhall, Beane Co. v. McDonald,
      172 App. 780; Arter v. Jacobs, 226 App. Div. 343; Kimball v. Cooper, 134 Neb. 536; Bradley v. Arnold, 16 Vt. 382; Vette v. J. 8. Merrell Drug Co., 137 Mo. App. 229; C'oors v. Beagan, 44 Colo. 126.)

      Charles E. Murphy, Corporation Counsel (Seymour B. Quel, Isaac C. Bonner and Harry Kats of for respondents.
    I. The agreement of October 1, 1931, between petitioner and the equipment corporation was a lease by virtue of which petitioner had a “ license to use ” the tangible personal property covered by the agreement during the period embraced by the tax assessed. This license to use was a “ sale ” within the express terms of the city sales tax laws in effect during the period involved and petitioner is liable for sales tax on the consideration, i.e., the rental, paid for that license to use. The agreement was not a contract for the conditional sale to petitioner of the property covered. (Matter of Mounting Finishing Co. v. McOoldricJc, 294 N. Y. 104; Cutler Mail Chute Co. v. Crawford, 167 App. Div. 246; Lambert Hoisting Engine Co. v. Carmody, 79 Conn. 419.) II. The purpose sought to be achieved by the parties proves the contract was intended to be and is a lease. (Bogert on Conditional Sales, in U. L. A., Yol. 2A, p. 22; Gardner v. Town of Cameron, 155 App. Div. 750, 215 N. Y. 682; Stern v. Brew, 285 F. 925.) III. The provisions of the option clause show there. was no intention to make a conditional sale and prove the contract to be1 a lease. (Cutler Mail Chute Co. v. Crawford, 167 App. Div. 246.) XY. The contract doés not fall within the definition of conditional sale in the Uniform Conditional Sales Law (Personal Property Law, § 61). V. Other provisions of the lease agreement- indicate that it was intended to be a lease, not a conditional sale. VI. The practical construction placed upon the contract by the parties proves it to be a lease. (Nicoll v. Sands, 131 N. Y. 19; Woolsey v. Funlce, 121 N. Y. 87; Zimmer-mann v. Boessler & Hasslacher Chemical Co., 246 App. Div. 306; Insurance Co. v. Butcher, 95 U. S. 269.) VII. The tax was properly assessed upon the portion of the total rent payments determined by the comptroller to be attributable to the license to use the tangible personal property covered by the lease. (United States v. Joliet é Chicago B. B. Co., 315 U. S. 44; United States v. Morris & Essex By. Go., 135 F. 2d 711; Gold & Stock Tel. Go. v. Commissioner of Internal Revenue, 83 F. 2d 465; West End Street Ry. Go. v. Malley, 246 F. 625.)
   Thacher, J.

In January, 1931, the organization became interested in acquiring the New York World and the New York Telegram and this was accomplished by acquiring through various corporations the names, good will and intangible assets of the morning and evening World and all the assets, tangible and intangible, of the Nevo York Telegram. As the result of various changes of corporate names and intercorporate transactions the properties were vested in two companies: World-Telegram Building and Equipment Corporation (which will be referred to as the Equipment Company) and New York World-Telegram Corporation (which will be referred to as the Publishing Company).

The Equipment Company had acquired possession of the premises at the northeasterly corner of West and Barclay Streets under lease from Ehinelander Real Estate Company and was obligated to pay the rentals reserved in the lease. It had acquired all of the equipment used in the business of publishing the New York World-Telegram from the Publishing Company, for which it had given its 6% notes to the Publishing Company to cover the cost of the equipment. The Equipment Company had also borrowed from the Publishing Company sums required for rent under the Ehinelander lease and additional sums to meet the building costs of a new ten-story building, which were also evidenced by its 6% notes.

The purpose of thus vesting all of the physical property in the Equipment Company, which was not engaged in the conduct of the newspapers, was to make available as security for an issue of preferred stock assets costing some three and a half million dollars plus the obligations of the Publishing Company as lessee of the building and equipment. Accordingly, the Equipment Company entered into a lease of the real estate and all of the equipment to the Publishing Company, which owned all of its stock. This lease was executed as of October 1, 1931.

There was no sales tax in the city of New York when these transactions occurred. Pursuant to the enabling act (L. 1934, ch. 873), both branches of the municipal assembly of the Gitj

The law itself and the comptroller’s regulations disclose the legislative purpose to exclude such sales. The law (§ 2) imposed a tax of 2% upon the amount of the receipts from every taxable sale in the city of New York for the period beginning December 10, 1934, to and including December 31, 1935, and it was provided (Local Laws, 193.4, No. 24 of City of New York [published as No. 25], p. 167): “ The tax imposed by this local law shall be paid upon all sales made and services rendered on and after December tenth, nineteen hundred and thirty-four, although made or rendered under a contract dated prior to December tenth, nineteen hundred and thirty-four. * * * The comptroller may provide by regulation that the tax upon receipts from sales on the installment plan may be paid on the amount of each installment and upon the date when such installment is due.”

The word “ sale ” or “ selling ” was defined in subdivision (e) of section 1, as follows (Local Laws, 1934, p. 165): (e) The word sale ’ or ‘ selling ’ means any transfer of title or possession or both, exchange or barter, license to use or consume, conditional or otherwise, in any manner or by any means whatsoever for a consideration, or any agreement therefor, and may include the rendering of any service specified in section two of this local law

Subdivision (a) of section 11 of Local Law No. 20, as amended (published as No. 21), authorized and empowered the comptroller to make, adopt and amend rules and regulations appropriate to the carrying out of this local law and the purposes thereof, and on February 11,1935, the comptroller promulgated the official regulations provided for in subdivision (a) of section 11 (N. Y. City Sales Tax Eules and Eegulations —1935). Among other problems, the comptroller’s regulation^ dealt with the taxability of receipts from sales made before December 10, 1934, and in this connection provided:

“ Article 29.— The tax is imposed upon the receipts of every sale of tangible personal property (except such property as is specifically exempted therefrom) at retail in the city of New York on and after December 10, 1934. * * *
“ Where tangible personal property was sold and delivered to the purchaser thereof prior to December 10, 1934, no tax is imposed upon the amount of the receipts therefrom even though all or any part of the purchase price was paid after December 10, 1934.
“ Where a contract for the sale of tangible personal property was made prior to December 10, 1934, and such property was sold to the purchaser on and after December 10, 1934, the purchaser is required to pay the- tax to his vendor on the total selling price thereof. If at the time the contract was made, the purchaser made a down payment, he is required to pay the tax on the unpaid balance due on and after December 10, 1934.
Where tangible personal property was sold on the installment plan and delivered to the purchaser before December 10, 1934, the tax does not apply to the receipts therefrom even though payment therefor is made on and after December 10, 1934.”

The incidence of the tax is sale after December 10,1934. The statute and the regulations leave no doubt that sales made before its effective date are not to be taxed. By express statutory definition conditional sales are sales within the meaning of the statute. Therefore, a conditional sale of tangible personal property is not taxable if tbe goods were delivered to tbe conditional vendee before tbe tax became' effective. All of tbe tangible personal property was delivered to tbe appellant under tbe agreement on or about October 1, 1931. If that delivery was upon a contract of conditional sale or upon an unconditional obligation to pay for it in installments, tbe comptroller’s assessments are without validity.

Tbe agreement is cast in tbe form, style and language of a lease, but we must look to tbe rights it confers and tbe obligations it imposes to determine whether it has tbe essential attributes of a contract of conditional sale or of an installment sale (Central Union Gas Co. v. Browning, 210 N. Y. 10). If tbe conditional vendee has possession of tbe chattel, is obligated to pay for it and, having paid, becomes or has an option to become tbe owner of it, tbe vendor retaining tbe right to retake tbe goods if tbe conditional vendee defaults in bis obligation to pay for them, there is a conditional sale (Central Union Gas Co. v. Browning, supra; Gardner v. Town of Cameron, 155 App. Div. 750, affd. 215 N. Y. 682; Ohl & Co. v. Standard Steel Sections, Inc., 179 App. Div. 637; Equitable General Providing Co. v. Eisentrager, 34 Misc. 179).

Section 61 of tbe Personal Property Law, which is taken from section 1 of tbe Uniform Conditional Sales Act, is a statement declaratory of tbe law generally prevalent throughout tbe United States. See 2 Uniform Laws Annotated, section 1, Commissioner’s Note, citing many cases in which leases have been construed to be conditional sales contracts where tbe buyer upon payment of rentals became or bad tbe option to become tbe owner of tbe goods. Additional authorities are collected in Uniform Laws Annotated (Yol. 2A, § 13, p. 21). Section 61 of tbe Personal Property Law reads as follows:

“ § 61. Definitions. In this article ‘ conditional sale ’ means (1) any contract for tbe sale of goods under which possession is delivered to tbe buyer and tbe property in tbe goods is to vest in tbe buyer at a subsequent time upon tbe payment of part or all of tbe price, or upon tbe performance of any other condition or tbe happening of any contingency; or (2) any contract for tbe bailment or leasing of goods by which tbe bailee or lessee contracts to pay as compensation a sum substantially equivalent to tbe value of tbe goods, and by which it is agreed that tbe bailee or lessee is bound to become, or bas the option of becoming the owner of such goods upon full compliance with the terms of the contract,”

All of the essential attributes of a conditional sale will be found in the provisions of the agreement and lease under the terms of which the Publishing Company regained possession of the equipment which it had transferred to the Equipment Company in exchange for its notes; the use of the land which the Equipment Company had acquired under the Rhinelander lease upon which the Publishing Company paid the rent, and and also the use of the building on this land the cost of which it had advanced to the Equipment Company. The Publishing Company owning all of the stock of the Equipment Company, its apparent purpose was to take advantage of a separate corporate structure to insulate valuable assets against the risks of the publishing business, but both the building and the equipment had been acquired for use in that business, and so the lease was made giving the Publishing Company possession and control of these properties but requiring the Publishing Company to make payments, called installments of rent, which would cover all costs and expense which it would have been,required to if there had been no Equipment Company. It was even required to pay as “rental ” the interest on the Equipment Company’s notes which the Equipment Company was obligated to pay to it — no doubt to give these notes security which might make them attractive investments. Under these circumstances it is not surprising to find that the lease carefully provided that the Publishing Company upon performance of its obligations under the lease should become, or have the option to become, the owner of all of the leased property. It is quite obvious from the relation of the parties, the character of the transaction, the properties involved and the frame and structure of the documents used that the instrument was much more than a lease upon the termination of which the real and personal property would revert to the lessor, and that it had all the attributes of a conditional sale under which the lessee upon performance of its obligations would become the owner of all the leased property.

The agreement is called an agreement and lease. In terms it is a lease to the lessee and a hiring from the lessor of real estate in New York City, together with the buildings and improvements thereon, and of:

“ (c) Personal Property: The following-described goods and chattels, to wit:
“ Presses, type, typesetting and stereotyping machinery, desks, filing cabinets, and all other machinery, equipment, furniture and fixtures belonging to the Lessor and located or contained in the building situated on the above-described tract of land and in premises occupied by the Lessee at 305 East 45th Street, 460 West 34th Street and elsewhere in the City of New York or State of New York, together with all other machinery and equipment hereafter acquired by the Lessor; it being the intent and purpose of this instrument to sublease to the Lessee all rights of the Lessor herein and in and to said real estate, and all buildings, improvements and appurtenances upon the said premises covered by said Rhinelander lease, and to lease all tangible personal property of the Lessor wherever located.”

The term of the lease is for twenty years, with three further terms of twenty-one years each at the lessee’s option. The lease required the lessee to pay rent beginning October 1, 1931:

(a) the equivalent of the rentals payable by the Equipment Company under the Rhinelander lease;

(b) one-half per cent per month on the par value of all shares of preferred stock of the Equipment Company issued and outstanding, being the amount required to pay dividends upon this stock;

(c) an additional amount, payable quarterly through a sinking fund or otherwise, sufficient to redeem the Equipment Company’s preferred stock in accordance with its certificate of incorporation;

(d) all taxes upon the assets, earnings and business of the Equipment Company;

(e) all other obligations assumed and undertaken by the Equipment Company under the Rhinelander lease; other expenses of the Equipment Company, “ including a reasonable charge for or on account of depreciation on said building, machinery, equipment and all Leased Property above specified.”

It should be noted that all these obligations are definite except “ a reasonable charge for or on account of depreciation on said building, machinery, equipment and all Leased Property above specified.” However, the parties, in the performance of their agreement, adopted straight line rates of depreciation which they regarded as reasonable — 2% annually on the cost of the building and 10% annually on the cost of the personal property. Thus the tenant became obligated to pay for the entire cost of the personal property within ten years and well within the first term of the lease.

It was further provided that the agreement and lease should continue in full force and effect during the term of any renewal or renewals of said Rhinelander lease (whether or not made at the request of the Lessee herein) so long as (a) any Preferred stock of the Lessor shall remain outstanding and/or (b) any of the notes of the Lessor outstanding on October 1, 1931, shall remain unpaid; unless and until the Lessee herein shall sooner exercise its option as provided in Paragraph (11) hereof and shall have paid the price therein specified. ’ ’

Thus, except by mutual consent, the agreement and lease contemplated by the parties was to continue until all of the lessor’s preferred stock had been redeemed and all of its notes, representing the cost of the building, had been paid, unless the tenant (the lessee) exercised its option under paragraph (11) of the lease to purchase all the right, title and interest of the lessor in the Rhinelander lease and the described premises with the buildings thereon, together with all machinery, equipment and other property covered by the lease and owned by the lessor at any time after October 1, 1937. The price to be paid in the exercise of this option was the cost of the machinery and equipment, less depreciation paid, and the cost of the buildings and improvements thereon, less depreciation paid thereon, and in this connection the lessor agreed that all moneys paid to it under this option should be used to redeem its outstanding preferred stock and to pay its said notes before said moneys were used for any other purpose, and further agreed to apply the proceeds from all sales of its preferred stock, first, to pay outstanding notes of the lessor representing the costs of buildiqg, machinery and equipment, and thereafter as its board of directors might deem best.

The option clause in paragraph (11) of the agreement and lease reads as follows: “ (11) The Lessor agrees that, all the covenants and conditions of this lease being fully performed by the Lessee, the Lessee shall have an option to purchase all the right, title and interest of the Lessor in said Rhinelander Lease and the above-described premises with all the buildings thereon and appurtenances thereunto belonging, together with all machinery and equipment and other property covered by this lease and owned by the Lessor, at any time after October 1, 1937, on giving the Lessor ninety (90) days’ written notice of the election of the Lessee to exercise said option. The price to be paid shall be the sum of (a) the cost of said machinery and equipment less amounts paid by Lessee to Lessor on account of depreciation of said machinery and equipment up to the date of expiration of said ninety (90) days’ notice, plus (b) the cost of said buildings, appurtenances and improvements less amounts -paid by Lessee to Lessor on account of depreciation of said buildings, appurtenances and improvements up to the date of expiration of said ninety (90) days’ notice. The Lessor hereby agrees that all monies paid to Lessor under this Paragraph shall be used by Lessor to redeem its outstanding Preferred stock and to pay its said notes before any of said monies are used for any other purpose. Lessor also agrees to apply the proceeds from all sales of its Preferred stock first to pay outstanding notes of the Lessor representing cost plus carrying charges for erection and purchase of the building, machinery, and equipment referred to above, and thereafter for such other corporate purposes as its Board- of Directors may deem best. Upon the Lessee paying the said sums in cash to the Lessor on or before the date of expiration of said ninety (90) days’ written notice, the Lessee shall be entitled to receive from the Lessor such instrument or instruments, duly executed and delivered, as will convey all right, title and interest of the Lessor (herein) in and to said Rhinelander lease and said land, buildings, appurtenances, improvements, machinery and equipment, to the Lessee, free and clear of all incumbrances whatsoever. In event the Lessee does not so pay for said land, building, appurtenances, improvements, machinery and equipment in cash on or before five (5) days after the date specified in said notice then the Lessee’s right to purchase said land, buildings, appurtenances, improvements, machinery and equipment as herein stated shall be forfeited.”

The phrase “ at any time after October 1, 1937/’ refers to the date on which under its charter the Equipment Company was given the right to call its preferred stock for redemption. The option price was to he the cost of the machinery, equipment, buildings, appurtenances and improvements, less the depreciation paid thereon under the provisions of the lease. All these costs, including depreciation at the reasonable rates fixed by the parties, were required to be paid as part of the rent. If such payments were not made when due, the Equipment Company was to be entitled to terminate the lease and retake the leased property, but if the Publishing Company did not default in its payments it was to have the option of becoming the owner of all the leased property, and this was bound to happen before the termination of the lease. Before that could happen, the entire option price (namely, the cost of leased property less depreciation paid) would have necessarily been paid, and the lessee, within the definition of a conditional sale, would have had the option to become the owner without further payments. This event was anticipated by voluntary action upon the part of the Publishing Company in 1941, when it contributed to the Equipment Company $1,100,000 which then retired its outstanding preferred stock, transferred all of its property to the Publishing Company and was dissolved. The fact that the two corporations thus liquidated the situation in anticipation of the liquidation which was required by the agreement and lease does not in the slightest degree change or impair the character of the transaction, which was not merely a lease but a conditional sale, nontaxable because it occurred prior to the enactment of the taxing statute.

The order of the Appellate Division should be reversed, with costs in this court and in the Appellate Division, and the determination of the comptroller annulled.

Ftjld, J.

(dissenting). In disregard of settled restrictions on judicial review of a determination by an administrative agency, the majority of the court is upsetting an administrative decision which, depending upon a finding of fact, has reasonable support in the record. (See, e.g., Matter of Miller v. Kling, 291 N. Y. 65; cf. Matter of Mounting & Finishing Co. v. McGoldrick, 294 N. Y. 104, 108.)

The question before the Comptroller of the City of New York was whether the agreement of October 1, 1931 — called a lease by the parties — effected a conditional sale of the personal property to which it related. If it did, certain payments provided for in the agreement were exempt from the city tax, even though made after the effective date of the tax law — December 10, 1934. On the other hand, the payments were taxable if the comptroller was justified in finding that the agreement was a lease, as it purported to be, rather than a conditional sale.

Whether the agreement was one or the other was essentially a question as to the underlying intent of the parties. (See Cutler Mail Chute Co. v. Crawford, 167 App. Div. 246, 253; cf. Gardner v. Town of Cameron, 155 App. Div. 750, 753-757, affd. 215 N. Y. 682.) As the majority itself has observed, that question must be viewed in the light of the nature of the transaction, the situation and relationship of the parties and the purposes sought to be achieved by them. From examination of these circumstances, their intent emerges, for the most part, as a matter of fact and not as a question of law. Principally for that reason, I conceive that, on this record, it is a usurpation of the function of the administrative official to whom determination of the question was committed, for the court to declare, as a matter of law, that the intent of the parties was to accomplish a conditional sale of the personalty.

Indeed, the majority opinion itself goes far to refute the conclusion that a conditional sale was intended. It notes that the apparent purpose of the parties was to take advantage of a separate corporate structure to insulate valuable assets against the risks of the publishing business ” (p. 19). That purpose would have been defeated if the Publishing Company’s present position that the contract was one of conditional sale be accepted, for it does not appear that the contract was filed, as required by the conditional'sales law, and such failure to file would have subjected the property to the claims of creditors of the Publishing Company (Personal Property Law, § 65). In other words, to credit the contention that the parties, in 1931, intended their agreement as a conditional sale, the comptroller would have been required to conclude that they intended to frustrate their principal objective of removing the property from the reach of creditors of the Publishing Company. I believe he was fully justified in rejecting that inference and in finding that the transaction was intended as just the type of transfer the parties styled it, a lease.

It is, indeed, highly doubtful whether the 1931 agreement can be held to have accomplished a conditional sale, even if we view the matter as involving a pure question of law. This was a complex transaction, far removed from the simple situation envisaged by section 61 (2) of the Personal Property Law — a contract for the bailment or leasing of goods by which the bailee or lessee contracts to pay as compensation a sum substantially equivalent to the value of the goods, and by which it is agreed that the bailee or lessee is bound to become, or has the option of becoming the owner of such goods upon full compliance with the terms of the contract.”

Thus, the lease in this case embraced both realty and personalty, and the clause giving the Publishing Company the option to purchase was, by its terms, exercisable only by payment of the agreed price of both the realty and the personalty. A lease of personalty containing an option to purchase is not treated as a conditional sale if the price largely exceeds the aggregate rentals payable thereunder. (See Cutter Mail Chute Co. v. Crawford, supra; see, also, 1 Williston on Sales [2d ed.], § 336, p. 783.) In the present case, the lessee was not entitled to acquire title to the personal property except by paying a substantial additional amount for the real property as well; and the situation was not within the. ambit of section 61 (2) of the Personal Property Law — i.e., where payment of the specified annual rentals for the use of the personalty would per se result in payment of the agreed purchase price.

Moreover, apart from that consideration, the rental payments which, according to the majority, were bound to accomplish full payment of the purchase price, were not definitely fixed in the agreement. The court’s opinion thus proceeds on the assumption that the lessee was obligated to pay the entire agreed cost of the personalty in the form of rental payments within the term of the lease, by reason of the annual payments of depreciation at the rate of 10% of the cost of the personalty and at the rate of 2% of the cost of the realty. The agreement did not, however, specify the rate of depreciation, but provided only for a “ reasonable ” rate; and the record does not conclusively establish that the Publishing Company bound itself, by explicit contract, not to reduce the rate of the depreciation payments actually made by it. Depreciation rates substantially lower than those in fact paid may well have been found by the comptroller to have been the extent of the Publishing Company’s obligations in that regard under the lease, thereby necessitating a period longer than the original and renewal terms of the lease to achieve full payment of the purchase price by means of depreciation payments.

Beyond all this, section 61 (2) of the Personal Property Law appears to be aimed primarily at the evil of attempted evasion of the filing requirements of the conditional sales law to the prejudice of creditors or bona fide purchasers who rely on the apparent title of the party put in possession of the goods, by the device of cloaking in the guise of a bailment or lease a transaction which is in substance a conditional sale. (See Bogert, Commentaries on Conditional Sales, 2A, Uniform Laws Annotated, pp. 22, 23.) But, in the present case, no evidence appears of any aim to disguise the real nature of the transaction, and there is no challenge by any creditor or bona fide purchaser. Nor was the retention of title by the lessor here intended to serve the purpose only of securing payment of the purchase price.

Consideration of all the circumstances of the case, it seems to me, clearly points the conclusion that the determination reached by the comptroller' is not without reasonable support. That being so, the courts may not interfere.

I would affirm the order of the Appellate Division.

LotjghraN, Ch. J., Lewis, CoNway and Dye, JJ., concur with Thachee, J.; Ftjld, J., dissents in opinion in which Desmoud, J., concurs.

Order reversed, etc.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    Melvin Pine & Co., Inc., Respondent, v. George et al., as Copartners under the Firm Name of Desmond-Stephan Mfg. Co., Appellants.
    Argued May 17, 1948;
    decided June 4, 1948.

      Edward K. Hanlon and Quentin J. De Fazio for appellants,

      Hyman D. Lehrich for respondent.
    Defendants have been and are doing business in the State of New York within the meaning of section 229-b of the Civil Practice Act. {Yeckes-Eichenbaum, Inc., v. McCarthy, 290 N. Y. 437; Chaplin v. Selmick, 293 N. Y. 529; Taum v. Susquehanna Goal Co., 220 N. Y. 259; Holser v. Dodge Bros., 233 N. Y. 216; Cochran Box & Mfg. Co. v. Monroe Binder Bd. Co., 197 App. Div. 221, 232 N. Y. 503; Society Milion Athena, Inc., v. National Bank of Greece, 166 Mise. 190, 254 App. Div. 728.)
   Per Curiam.

Personal jurisdiction of defendants was properly obtained by substituted service under section 229-b of tbe Civil Practice Act. Defendants’ local activities amply satisfied tbe long-recognized test of wbat constitutes engaging in business, as laid down in tbe decisions of tbis court. (See, e.g., Chaplin v. Selznick, 293 N. Y. 529, 534; Tauza v. Susquehanna Coal Co., 220 N. Y. 259.) It is unnecessary, at this time, to say whether and to wbat extent that test may be relaxed in reliance upon tbe constitutional principles recently announced by tbe Supreme Court in International Shoe Co. v. Washington (326 U. S. 310).

Tbe order of tbe Appellate Division should be affirmed, with costs, and tbe question certified answered in tbe affirmative.

LoughraN, Cb. J., Lewis, Couway, DesmoND, Thacheb, Dye and Fuld, JJ., concur.

Order affirmed, etc.


author: DesmoND, J.

text:
    In the Matter of Ocean Beach Ferry Corporation, Appellant, against Incorporated Village of Ocean Beach et al., Respondents.
    Argued May 20, 1948;
    decided June 11, 1948.

      Milton Pinkus and Morris Rochman for appellant.
    I. The County Court alone has statutory authority to grant a ferry franchise. The attempted exercise of such jurisdiction by the board of trustees of Ocean Beach is a nullity. (Mayor v. Starin, 106 N. Y. 1; Power v. Village of Athens, 99 N. Y. 592; People v.
      New York & S. I. Ferry Go., 68, N. Y. 71; Holmes Elec. Protective Go. y. Armstrong, 97 Mise. 184; Matter of City of New York [Piers Old Nos. 8-11], 228 N. Y. 140; Benson v. Mayor, 10 Barb. 223; Matter of Pierce, 185 App. Div. 212; American Dock Go. v. City of New York, 174 Mise. 813, 261 App. Div. 1063, 286 N. Y. 658; Village of Fleischmavms v. Hyman, 164 Mise. 175; Milhau v. Sharp, 27 N. Y. 611.) II. The board of trustees has attempted to deprive appellant of its ferry franebise by denying it the right to land its vessels at the municipal dock or elsewhere along the village water front. The board has exceeded its powers and jurisdiction. (Commissioners of Pilots v. Glark, 33 N. Y. 251; Harper v. Williams, 110 N. Y. 260; Thousand Island Steamboat Go. v. Visger, 179 N. Y. 206; People ex rel. Swan v. Doxsee, 136 App. Div. 400,198 N. Y. 605; American Dock Go. v. City of New York, 174 Mise. 813, 261 App. Div. 1063, 286 N. Y. 658; Reid v. City of Fulton, 181 Mise. 711, 269 App. Div. 894; Waterloo Water Go. v. Village of Waterloo, 200 App. Div. 718; Beekman v. Third Ave. Go., 153 N. Y. 144; Knickerbocker Ice Go. v. 42d St. R. R. Go., 39 Mise. 27, 85 App. Div. 530, 176 N. Y. 408; Hesse v. Rath, 249 N. Y. 436; Mills v. Fremd, 213 App. Div. 742; Farrell v. City of Syracuse, 137 Mise. 472.)

      LeRoy B. Iserman for Village of Ocean Beach and others, respondents.
    I. Appellant is not entitled to relief under article 78 of the Civil Practice Act and is not a proper party complainant. (Matter of Dictaphone Gorp. v. O’Leary, 262 App. Div. 359; People ex rel. West Shore Traction Co. v. Bauer, 54 Mise. 28; Ghiapella v. Brown, 14 La. Ann. 185; Matter of Fay, 15 Pick. 243; Matter of Zielinski v. Harding, 177 Mise. 773; Matter of Birch v. Huie, 169 Mise. 1011). II. The Village of Ocean Beach has full authority to grant an exclusive franchise or landing privilege to land and take on passengers and freight within the village limits in consideration of its retention of supervision and control over the type, quality and adequacy of the public ferry service to be supplied. (Macdonnel v. International G. N. R. Go., 60 Tex. 590; Rocky Hill v. Hollister, 59 Conn. 434; Benson v. New York, 10 Barb. 223; Costar v. Brush, 25 Wend. 628; Matter of Union Ferry Go. of Brooklyn, 98 N. Y. 139.) III. The board of trustees of the village has not diverted public property to private use. IV. The Village of Ocean Beach has not in any way attempted to nsnrp the authority of the County Court of Suffolk County. (Combs v. Hogg, 111 Ky. 178.)

      Stanley Fowler and Milton H. Reuben for Fire Island Ferries, Inc., respondent.
    I. In relying upon the powers given the village by subdivision 66 of section 89 of the Village Law, there has been no illegal attempt to usurp the jurisdiction of the County Court, but, on the contrary, the village has recognized the limitations of its powers with respect to providing ferry service. (Robia Holding Corp. v. Walker, 257 N. Y. 431; City of Rochester v. Gutberlett, 211 N. Y. 309.) II. The Village of Ocean Beach clearly had authority to control the use of the village dock and facilities for ferry purposes, and the grant of an exclusive lease thereof for ferry purposes was not a diversion to private use. III. In furtherance of its right to provide, maintain and operate a ferry service, and in accordance with statutory general welfare powers given to it, the village has the absolute right as to ferry service to restrict the use of the water front against outside competition. (Matter of Union Ferry Co. of Brooklyn, 98 N. Y. 139; City of Rochester v. Gut-berlett, 211 N. Y. 309; Gardner v. Michigan, 199 U. S. 325; People v. Weller, 207 App. Div. 337, 237 N. Y. 316.)
   DesmoND, J.

Petitioner, in 1927, obtained by license or grant from the County Judge' of Suffolk County, under section 71 of the Transportation Corporations Law, a franchise or right to establish and operate a ferry for the carriage of persons and baggage, for hire, on the waters of Great South Bay, from the public dock at a place called Bay Shore, New York, on Long Island, to a dock in and owned by, the incorporated village of Ocean Beach, New York, on Fire Island, both Bay Shore and Ocean Beach being in Suffolk County. That 1927 grant, which expired by its terms in 1942, was followed in the latter year by a similar grant from the Suffolk County Judge, to petitioner, which was to continue until September 11, 1947. The County Judge’s 1942 order fixed fares for the ferriage and contained a provision that the franchise was subject, among other things, to the condition “ that permission be obtained from the Village of Ocean Beach to land its boats within the said Village under Section 89 of the Village Law of the State of New York During the pendency of this litigation the County Judge by further order extended petitioner’s franchise to May 1, 1948, but, we are informed, .has declined to make a further temporary grant to petitioner so that it might continue its service. Since 1927, petitioner has, under its grants, operated' the only ferry service to and from Ocean Beach. Petitioner, for some part of that time, has had a contract with the village of Ocean Beach, which contract is not printed or accurately described in the record but which, it is conceded, gave petitioner an exclusive right to use the village’s ferry dock and basin, but which contract ended, by its terms, on April 30, 1948. There is more than a little confusion, in the record and briefs, resulting from failure to distinguish between petitioner’s County Court ferry franchise, and its rights under the agreement with the village, but it is patent that the latter has come to an end, and that the village has not renewed it and has, instead, determined to make a similar pact with a rival ferry corporation, respondent Fire Island Ferries, Inc., which new arrangement is to run for ten years from May 1, 1948.

Respondents, trustees of Ocean Beach, adopted, on.June 29, 1947, a resolution which, after a recital of preliminary proceedings and of reasons for the action, reads as follows: “ That Fire Island Ferries, Incorporated, a corporation organized and existing under and by virtue of the Laws of the State of New York, having its principal office and place of business at Bay Shore, be and it hereby is given and granted the exclusive right or franchise to land and discharge and to accept and take on for passage, passengers, freight and baggage and all other merchandise and transportable matter within the corporate limits of the Village of Ocean Beach, and that said exclusive right or franchise shall commence on the 1st day of May, .1948, and continue for a period of ten years therefrom unless sooner terminated as provided in the franchise agreement to be executed and that the proper officers of the village be and they hereby are authorized and directed to prepare and negotiate a suitable franchise agreement between this village and Fire Island Ferries, Inc.” Thus, respondent Fire Island Ferries, Inc., has gotten, or is about to get, from the village board an exclusive right to land ferryboats and take on and discharge passengers and freight within the limits of the village. Petitioner brought this proceeding to have the June 29, 1947, resolution held illegal, alleging that it amounted to a ferry franchise which, according to petitioners, the village has no power to give, and that it was illegal, for another reason, also, in that it gave Fire Island Ferries, Inc., .the sole use of the ferry dock and the sole right to touch anywhere in the village with a ferryboat. The answers of respondents point out that subdivision 66 of section 89 of the Village Law (to which we shall refer later) authorizes Ocean Beach and certain other villages to “ provide ” a ferry or ferries. • It is the theory of respondents that the resolution does no more than so “ provide ”, and that, having duly advertised for, and received, bids and after due deliberation and for sufficient reasons, having accepted the bid of respondent Fire Island Ferries, Inc., the village was in a position legally to make the contract. The answers and the proof show that petitioner was invited to bid but did not do so till long after the time for receiving bids had passed, at which late date its bid was refused consideration.

Special Term dismissed the petition on the merits, the Appellate Division unanimously affirmed, and we granted petitioner’s motion for leave to appeal to this court.

The Justice at Special Term concluded that authority for the village to make this exclusive grant was found in subdivision 66 of section 89 of the Village Law which is in part as follows: “ Ferries and ferry terminals. Any village which is disconnected geographically by water from the mainland of the state and which is not connected by any bridge or viaduct wholly or partly within its corporate limits with such mainland, may acquire, by purchase, lease, charter, new construction or otherwise, and provide, maintain and operate a ferry or ferries., together with the necessary boats and terminals therefor, for the transportation of passengers, express matter and freight between said village and the adjacent mainland of the state, during the whole or such portion or portions of the year, and may charge such rates therefor, as it may deem advisable, and each such village shall have the right to spend money for said purposes or any of them.”

The use of the word “ provide ”, held Special Term, showed a plain legislative intent to authorize villages like Ocean Beach not only to own and operate ferries, if they so desired, but to arrange and contract for the operation of ferries by others. The court pointed out that the Notice for Bidders ” sent out by Ocean Beach in February, 1947, stated a requirement that the successful bidder “ must procure license to operate from County Court of Suffolk County.” Thus, it was held below, the village, in passing the resolution, did no more than it was empowered to do by subdivision 66 above quoted, and by subdivision 39 of section 89 of the Village Law, which latter subdivision, in general, terms, gives power to village trustees to grant rights and franchises as to the use of public We cannot read either subdivision as empowering this village to make exclusive grants of ferry privileges within the village.

The privilege of establishing and operating a ferry is a franchise, the political power to grant which rests primarily in the State Legislature (3 Kent’s Commentaries [6th ed.], p. 458; Benson v. Mayor of City of N. Y., 10 Barb. 223, 233, 234; Milhau v. Sharp, 27 N. Y. 611, 619; Chenango Bridge Co. v. Paige, 83 N. Y. 178, 186; Mayor of City of N. Y. v. Starin, 106 N. Y. 1, 11; Gloucester Ferry Co. v. Pennsylvania, 114 U. S. 196). The State may delegate that power to other public bodies or officers (see Fanning v. Gregoire, 16 How. [U. S.] 524, 534; Aiken v. Western R. R. Corp., 20 N. Y. 370; Matter of Union Ferry Co., 98 N. Y. 139). In various States, including New York, the practice has been followed of delegating it specifically to the County Court (Transportation Corporations Law, § 71; see Williams v. Wingo, 177 U. S. 601). Where the New York Legislature has seen fit to make other such delegations of the power it has used apt language to make its purpose plain (see Mayor of City of N. Y. v. New York & Staten Island Ferry Co., 8 Jones & Sp., 232, 239, 249; Power v. Village of Athens, 99 N. Y. 592, 599, 600). Such conferrals carry only the powers that are clearly stated therein (Wright v. Nagle, 101 TJ. S. 791). So tested, subdivision 66, which permits this village to “ acquire ” and to “ provide, maintain and operate a ferry or ferries, together with the necessary boats and terminals therefor ” and to “ charge such rates therefor, as it may deem advisable ”, seems to us to describe a "village-operated ferry only, and not to create or enlarge any powers of the village over ferries operated by private corporations. This conclusion is strengthened by the second sentence of subdivision 66, which states the procedures to be taken by a village “ before operating any ferry or ferries ” and says that such a village, to operate a ferry, need not have a license “ from any other body politic or court of the state of New York.” Subdivision 66 gave this village no right to license a ferry, and so the legality of the resolution of June 29, 1947, cannot be supported by anything in that subdivision.

The remaining question is as to whether the resolution, though not within subdivision 66, is nonetheless valid. We do not decide whether or not this village may give to a ferry corporation the sole use of its ferry dock — first, because the character and status of that dock or ferryhouse is not adequately shown by the record; and second, because the resolution goes far beyond a lease of that wharf or waterside structure. Nor do we decide to what extent this village may, under existing laws, for reasons of safety or otherwise to protect itself and its residents and visitors, make rules as to the kind of vessels which may carry passengers to its shore, and as to their management, schedules, etc. We take the June 29, 1947, resolution as we find it. It directs the award to respondent Fire Island Ferries, Inc., of an exclusive right to land ferryboats anywhere on the shores of the village. If the resolution were to stand, the County Judge would be deprived of any real function as to ferries operating to the village. No statute cited to us empowers a village to grant such a monopoly, and statutes such as subdivisions 39 and 59 of section 89 of the Village Law are couched in language much too general to convey so large a grant of power. Finding no legal basis for the passage of the resolution, we hold it invalid.

The orders below should be reversed, with costs to the appellant in all courts, and the proceeding remitted to Special Term for further proceedings not inconsistent with this opinion.

LoughraN, Ch. J., Lewis, Thaghee, Dye and Fuld, JJ., concur.

Orders reversed, etc.


author: Fuld, J.

text:
    H. Kauffman & Sons Saddlery Co., Inc., Appellant, v. Joseph Miller, Doing Business as Miller Harness Co., Respondent.
    Argued May 20, 1948;
    decided June 11, 1948.

      Alfred L. Krasner for appellant.
    I. The pleadings and affidavits read on the motion for summary judgment establish respondent’s liability. (Settle v. Van Evrea, 49 N. Y. 280; Roth-bard v. Aver ell, 59 N. Y. S. 73; Twentieth Century Assn. v. W aid-man, 294 N. Y. 571; American Historical Soc. v. Glenn, 248 N. Y. 445.) II. The courts should not legislate. (Matter of Hering v. Clement, 196 N. Y. 218; Noel Associates v. Merrill, 184 Mise. 646; People ex rel. Doctors Hospital v. Sexton, 295 F. Y. 553; Lawrence Constr. Co. v. State, 293 N. Y. 634; Matter of Erikson v. Cohen, 243 App. Div. 1; Matter of McNerney v. City of Geneva, 290 N. Y. 505; Jablon v. City of New York, 177 Mise. 838.) I'll. On a motion for summary judgment, if the court ascertains that there is a triable issue, it should refuse to determine the issue on affidavits and relegate the parties to a trial.
    To construe the act as sanctioning the reletting of a substantial part of the demised premises during the statutory period of one year following dispossess is to promote the evil and to help unscrupulous landlords defeat the dominant intent of this remedial legislation. (Twentieth Century Associates v. Waid-man, 294 N. Y, 571; A. E. F.’s Inc., v. City of New York, 295 N. Y. 381; People ex rel. Durham R. Corp. v. La Fetra, 230 429.)

      Jerome L. Greene for respondent.
    I. Neither the Emergency Rent Law nor article 83 of the Civil Practice Act permits dispossess of a tenant of a whole building, occupying under a single tenancy, from part of the space. Respondent, having taken possession of and having used the entire building, and thereafter having rented part of the building to third persons, cannot be charged with liability under the Emergency Rent Law. (People v. Ryan, 274 N. Y. 149; Gross v. Libby Properties, Inc., 72 N. Y. S. 2d 918; Matter of Fay, 291 N. Y. 198; Matthews v. Matthews, 240 N. Y. 28.) II. By the very terms of the statute, good faith is not an issue. In any event, good faith must be since respondent has at all times occupied a substantial part of the premises. There are no issues of fact to be determined, it being admitted that respondent at first used and occupied the entire premises and thereafter rented part of the premises, but at all times retained the use and occupancy of two floors of the premises.
   Fuld, J.

This appeal presents another aspect of the emergency rent legislation affecting property in the city of New York.

In 1942, plaintiff rented an entire five-floor building in the borough of Manhattan, for an indefinite term, for the conduct of its business. Four years later, in May of 1946, defendant bought the building. Shortly thereafter, claiming that he needed it for his own commercial use, he began a summary dispossess proceeding in the Municipal Court of the City of New York to remove plaintiff from possession pursuant to subdivision (d) of section 8 of tbe Commercial Kent Law (L. 1945, ch, 3, as amd. by L. 1946, cb. 272). After a precept bad been issued tbe clerk of tbe Municipal Court and after it bad been served upon plaintiff, tbe latter consented to tbe entry of a final order of dispossession and voluntarily vacated tbe premises on August 31, 1946. A surrender under sucb circumstances constitutes a dispossession witbin tbe meaning of tbe rent laws (Sno-Wite, Inc., v. Gerald Operating Corp., 297 N. Y. 1007, decided May 20, 1948, affg. 271 App. Div. 314).

A short time later, defendant took over tbe entire building. He did not, however, continue in sole occupancy; about a month or so thereafter, on November 1, 1946, be rented two of tbe five floors to other parties and three months later, on February 1, 1947, rented a third floor to another tenant. Thus, it appears without dispute that defendant, witbin a short time of plaintiff’s removal from tbe premises, relet to third parties 60% of tbe space vacated by tbe tenant.

Plaintiff, pointing to tbe provisions of subdivision (d) of section 8, maintains that the facts asserted — namely, that tbe landlord dispossessed tbe tenant and then rented part of tbe tenant’s to third parties — establish, without more, tbe tenant’s right to damages. On tbe other band, defendant contends, since be continues in tbe use and occupancy of a portion of tbe space vacated by tbe tenant, be may not be charged with any liability under tbe rent law. Tbe court at Special Term adopted that view and dismissed tbe complaint; tbe Appellate Division, two justices dissenting, affirmed.

Ib tbe clearest of language, tbe Legislature has, in tbe introductory sentence of section 8 of tbe Commercial Rent Law, prohibited a landlord from removing a rent-paying tenant from “ any commercial space ” unless tbe landlord comes witbin one of several enumerated exceptions. One of those exceptions is contained in subdivision (d). Upon tbe strength of that subdivision, a tenant may be dispossessed by a landlord who “ seeks in good faith ” to recover “ tbe [tenant’s] commercial space for bis immediate and personal use ”. However, tbe statute continues, if tbe landlord, having acquired tbe space, (1) shall fail,” witbin thirty days of tbe tenant’s dispossession, “ to occupy such space and actively to conduct such business therein,” or (2) “ shall lease or rent such space to or permit occupancy thereof by a third person within a period of one year ” of such dispossession, “.he shall be liable to the tenant for all damages sustained on account of such removal.”

A landlord may not, we recently held, remove or dispossess a tenant from a portion of his rented premises; a landlord must,- to avail himself of the privilege granted by subdivision (d), dispossess the tenant from all of the space occupied by him. (See Morse & Grossman, Inc., v. Acker & Co., 297 N. Y. 304.) Such a ruling does not, however — as defendant herein urges — justify the tenant’s ouster from all of his space if the landlord has need of but a fraction of it. By forbidding a tenant’s removal from any of his space, the Legislature has made it manifest that the landlord may invoke the provisions of subdivision (d) and dispossess the tenant from his space — whether it be floor, building or other rental area — only if the landlord seeks all of it for his own use. The language of the statute is too clear to permit the argument that a landlord may dispossess and then relet to others. If the result seems to work hardship a landlord who requires but a portion of his tenant’s premises, recourse must be to the Legislature, and, in that connection, we note the current suggestion of a legislative body that the statute be amended to permit the owner “ to repossess part ” of the premises. (See Report of the New York State Joint Legislative Committee to Study Rents, dated March 8, 1948, N. Y. Legis. Doc., 1948, No. 47, p. 14.) As the statute now stands, if a landlord were tó be permitted to dispossess a tenant from all of his space and then to rent the part which he knew he did not need — perhaps at a higher circumvention of the emergency rent legislation would be facilitated, its evasion encouraged.” (Morse & Grossman, Inc., v. Acker & Co., supra, p. 312.)

We are brought, then, to the second and final question posed by this appeal — a question somewhat more difficult of solution. The statute allows the tenant damages if the landlord, haying regained possession, either fails to occupy and carry on his business within thirty days or relets the space to third persons within a year. Does it thereby impose upon the landlord an absolute and inexorable liability — irrespective of good or bad faith — if he disregards the restrictions placed on his use of the vacated space?

A strict and literal reading of the statutory language may suggest an affirmative answer, and' some support is given such a conclusion by the circumstance that the immediately preceding subdivision (c) of section 8 — permitting a landlord to evict a tenant in order to demolish the building — expressly exonerates the landlord from liability if he failed within a specified time to accomplish demolition ** for good cause shown "There is no clue, either in the legislative history or in the scheme of the rent laws, for the variance in the language of the two subdivisions. No operative significance may, however, be attached to the omission from subdivision (d) of a similarly explicit exonerative clause, for in the first sentence of that subdivision the Legislature has indicated that ‘ ‘ good faith ’ ’ is the determinative factor. Removal of a tenant is there sanctioned at the hands of the landlord who1 ‘ seeks in good faith ” the space for his own use. In our view, the landlord complies with the statute’s demands if he brings the eviction proceeding with the intention ‘ ‘ to occupy such space ’ ’ and “ actively to conduct ” his own business therein. He is not, in other words, permitted to oust the tenant for the purpose of reletting the space to others. But the Legislature well knew that a tenant might, at the time of his ouster, find it impossible to disprove the landlord’s claim that he was acting in “ good faith ”, Accordingly, it provided that the tenant might rely upon the landlord’s subsequent conduct to establish his improper motives in dispossessing him. Thus read, reasonable meaning attaches to the provision that the landlord must begin active conduct of his business on the vacated premises within the thirty days following, and must not permit a third person to occupy the space within the year following, under penalty of becoming liable to the tenant in damages. In effect, these conditions were inserted to test, retroactively, the good faith of the landlord in accomplishing the tenant’s dispossession. Their observance would indicate that his motives had been proper and truly represented; their breach would tend to prove that his intentions were, from the outset, improper and ulterior. In the latter event, charging him with the damages sustained by the tenant would be a just and effective sanction.

Neither the reason of the statute nor the dictates of good sense and common fairness, however, point the conclusion that the landlord was to be liable, absolutely and inescapably, if he rerented the vacated space within a year. At most, his breach of one or another of the conditions specified casts doubt, on his assertion that he had initially acted in good faith.

To read the provision otherwise, to construe it as rendering the landlord responsible even though he acted properly and in good faith throughout, would be to attribute to the Legislature an intent to accomplish a most unjust and unreasonable result. It could not have been the legislative purpose to charge the landlord with liability if changing and unforeseen circumstances — illness or adverse business conditions — made uneconomical or ill-advised his continued use of all of the space obtained from the tenant. Were this not so, a landlord who became ill or whose business prospects suddenly and unexpectedly deteriorated after he went into possession would be helpless to retrieve his situation in any way. He would be forced either to keep the property uneconomieally and wastefully untenanted —; a result startlingly at odds with the whole scheme of the emergency rent laws — or, upon rerenting it, become liable to the tenant for damages.

from evicting a tenant under the pretense-and guise that he needed the space for himself and from then renting it to others at an increased rental. By permitting a tenant a cause of action only against a landlord who had not acted in good faith, the Legislature has accorded adequate protection to tenant and to public without visiting upon the landlord unfair and oppressive consequences. By reading the provision in this reasonable manner, the design of the statute is effectuated without working injustice upon any one.

In the present case, the landlord claims that, when he instituted the dispossess proceedings, he intended to occupy the entire building for his own use, and was induced to rent several of the doors “ only because of the subsequent change in business conditions ”. The question of fact, thus raised, as to the landlord’s good faith must be determined upon a trial.

In conclusion, then, a landlord may acquire possession of a tenant’s space, in accordance with subdivision (d) of section 8 of the Commercial Bent Law, only if he intends, in good faith, to use all such space for his own immediate and personal use. If, under protestations of good faith, he succeeds in evicting his tenant, he assumes the burden of proving — if the tenant thereafter brings suit — that his subsequent act in renting some of that space within a year was dictated by unforeseen and justifiable circumstances; failing to do so, he is liable in damages to the tenant. Thus, in this case, the motion made by plaintiff for summary judgment was properly denied, but, since a good and valid cause of action was alleged, the complaint should not have been dismissed.

The judgments and orders of the Appellate Division and Special Term should be reversed insofar as they dismiss the complaint, with costs to plaintiff in this court and in the Appellate Division.

Loughran, Ch. J., Lewis, Conway, Desmond, Thacher and Dye, JJ., concur.

Judgment accordingly.


author: Thacher, J. Fuld, J.

text:
    In the Matter of Claim of Guerin et al., Respondents. The New Opera Company, Inc., Appellant; Edward Corsi, as Industrial Commissioner, Respondent.
    Argued March 2, 1948;
    decided June 11, 1948.

      George Link, Jr., and Charles II. Buckley for appellant.
    I. The New Opera Company was organized and operated as an exempt organization — education was its sole purpose. (Matter of Mergentime, 129 App. Div. 367,195 N. Y. 572; Matter of Moses, 138 App. Div. 525; Matter of Hackett, 133 Mise. 768; Matter of Rockefeller, 177 App. Div. 786; Matter of Mendelsohn, 262 App. Div. 605, 295 N. Y. 691; People ex rel. Doctors Hospital, Inc., v. Sexton, 267 App. Div. 736.) II. The decision of the Appellate Division and of the Unemployment Insurance Appeal Board should be reversed and the exemption granted.
    support of appellant’s position.
    I. The legislative and administrative history of the educational ” exemption in the New York Unemployment Insurance Act and in cognate Federal and State statutes demonstrates that a nonprofit organization for the performance of opera is “ educational ”. (Matter of Lazarus [Corsi], 268 App. Div. 547, 294 N. Y. 613; People ex rel. Mosbacher v. Graves, 254 App. Div. 438; Lipstein v. Provident Loan Soc., 154 App. Div. 732; Bellegarde v. Union Bag & Paper Co., 90 App. Div. 577; Matter of Van Wagenen, 170 Mise. 820; Matter of Brief eld, 168 Mise. 370; Matter of Moses, 138 App. Div. 525.) II. The term “ educational ” has been uniformly construed in cognate Federal and State statutes to include the inculcation of music appreciation and the promotion of the musical arts. •(Matter of Mergentime, 129 App. Div. 367, 195 N. Y. 572; Matter of Moses, 138 App. Div. 525; Matter of Arnot, 145 App. Div. 708, 203-N. Y. 627; Matter ’of Abbe, 135 Mise. 22;
      Matter of Eastman School of Music, 31 New York St. Dept. Rep. 91; Pouch v. Prudential Ins. Go., 204 N. Y. 281; Lipstein v. Provident Loan Soc., 154 App. Div. 732.) III. Administrative and legislative action in New York since the passage of Unemployment Insurance Law established and reaffirmed the proposition that the nonprofit presentation of opera is “ educational ” within the meaning of that act. (Orinoco Realty Go. v. Bandler, 233 N. Y. 24; Matter of Gilmore v. Preferred Accident Ins. Go., 283 N. Y. 92; Boehm v. Commissioner of Internal Revenue, 326 U. S. 287; Eelvering v. Winmill, 305 U. S. 79.) IY. The constricted scope given to the term “ educational ” by the Appellate Division and the Appeal Board contravenes the established meaning of the term and thwarts the legislative purpose the educational exemption. (Matter of Mergentime, 129 App. Div. 367,195 N. Y. 572; Matter of Moses, 138 App. Div. 525; Matter of Arnot, 145 App. Div. 708, 203 N.. Y. 627; Matter of Packard, 223 App. Div. 491, 251 N. Y. 543; Matter of Buffalo Turn Verein v. Reuling, 155 Mise. 797.) V. The exemption should be construed to carry out its liberal purpose. (United States v. Proprietors of Social Law Library, 102 F. 2d 481; Roche’s Beach, Inc., v. Commissioner of Internal Revenue, 96 P. 2d 776; Bohemian Gymnastic Assn. Sohol of City of.N. Y. v. Higgins, 147 P. 2d 774.)

      Nathaniel L. Goldstein, Attorney-General (Francis R. Curran and Wendell P. Brown of counsel), for respondent.
    I. Appellant was not organized for exclusively educational purposes. (Matter of De Peyster, 210 N. Y. 216; Matter of Beekman, 232 N. Y. 365; Matter of Mohawk Mills Assn., Inc., 260 App. Div. 433.) II. Appellant is not operated for exclusively educational purposes. (Matter of Peoples Theatres, Inc., 266 App. Div. 694; Matter of Smith [Brooklyn Bar Assn.], 266 App. Div. 1038, 292 N. Y. 593; Matter of Henry [American Kennel Club], 269 App. Div. 1; Matter of Mohawk Mills Assn., Inc., 260 App. Div. 433.)
   Thacher, J.

The claimants, employed by The New Opera Company, Inc., one as a singer and the other as a violinist, claimed benefits under the Unemployment Insurance Law (Labor Law, art. 18). Their claims were allowed by the Unemployment Insurance Appeal Board and confirmed in the Appellate Division. The question presented is whether the employer is a corporation organized and operated exclusively for literary or educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual. If it is such a corporation it is not an employer within the meaning of the law (Labor Law, § 560, subd. 4, which before amendment was § 502, subd. 3, par. [d], the language claimed to be applicable in this case appearing in both the original and amended sections).

The New Opera Company was organized in 1941, under the Membership Corporations Law. Its powers and purposes are defined in its certificate of incorporation as follows: The purposes for which it is to be formed are to cultivate, promote, foster, sponsor and develop the understanding, taste and love of the musical arts, and to lawfully do all and everything necessary, suitable and proper for the attainment of any of the ■.purposes, the accomplishment of any of the objects or the furtherance of any of the powers hereinabove set forth, and to have, enjoy and exercise any and all rights, powers, privileges and exemptions which are now or which may hereafter be conferred upon corporations organized pursuant to the Membership Corporations Law of the State of New York as it now exists or 'may be amended or supplemented.” There is no provision in the certificate for the issuance of any capital stock or the distribution of any profits.

The facts found by the board disclose that The New Opera Company was founded by a group of devotees of music who were concerned with the future of light opera and the plight of young artists in this country. It maintains itself, among other things, by box-office receipts, gifts and contributions, from its sponsors and patrons. On its list of contributors appear the names of well-known patrons of the arts. One of its objects was to give employment to young American artists who were unemployed and to present operas in English at low prices. In view of the fact that this country had only one permanent opera company, the Metropolitan, in New York City, opportunities for graduates of American music schools to further their careers in this country were limited. The employer, attempted to develop thdpe potential American artists (particularly during a period when opera was blacked out in Europe because of the late war) and to popularize opera itself, and to enlarge the repertoire ordinarily available to devotees of opera. During its first season it presented Mozart’s “ Cosi Fan Tutte ”, Offenbach’s “La Vie Parisienne ”, Tchaikowsky’s “Pique Dame ” and Verdi’s “ Macbeth ”, the latter being presented in Italian.

One of its aims was to enlarge the audience for operas by presenting opera in a modern manner, freed from the dullness of tradition, with dramatic zest and freshness, so that its qualities as entertainment should be enhanced. It sought to provide a fertile soil for the growth of native singers in operatic works, and maintained a “ workshop ” to train its singers in stage techniques. All singers who applied were auditioned. A competition was sponsored by the employer for an American one-act opera. Free admissions were given to school children, servicemen, student nurses and the blind. Many of the singers aided by the employer subsequently found employment with outstanding opera companies of this country.

In July, 1943, the employer borrowed money from various persons to produce “ The Merry Widow ” and agreed to repay these loans out of net profits, the agreement providing that after establishing a reserve fund of $15,000, and after repayment of the amounts advanced to the employer, the profits were to be divided equally between the employer and those who had made the advances.

A similar agreement was made in February, 1944, in connection with the production of “ Helen Goes to Troy

The board and the Appellate Division, feeling constrained by the decision in Matter of Peoples Theatres, Inc. (Miller) (266 App. Div. 694), held that the activities of an organization in aiding singers and sponsoring operatic productions are not ordinarily viewed as exclusively educational or charitable.

The law which we are to construe, exempting corporations organized and operated exclusively for educational purposes was first enacted as subdivision 1 of section 502 of the Labor Law (L. 1935, ch. 468, enacted April 25, 1935). The language appears to have been derived from section 360 of the Tax Law, which then provided — and now provides — for deduction from individual net incomes of contributions made to such corporations. The same language then appeared in the Federal income tax laws, providing for deduction of similar contributions (U. S. Code, tit. 26, § 23, subds. [o], [q]), and exempting such corporations from taxation (U. S. Code, tit. 26, § 101, subd. [6]), and was incorporated in the Social Security Act (enacted Aug. 14,1935, 49 IJ. S. Stat. 620, 625, 639, 643; now in IT. S. Code, tit. 42, § 409, subd. [b], par. [8]; § 1011, subd. [b], par. [8]; § 1107, subd. [c], par. [7]).

A comparable provision (Tax Law, § 4, subd. 6) exempts from taxation “ real property of a corporation or association organized exclusively for the moral or mental improvement of men and women, or for * * * educational * * * purposes * * * used exclusively for carrying out thereupon one or more of such purposes.” Construing this statute in 1924, prior to the enactment of the statute with which we are here concerned, the State Tax Commission held exempt real property of the Eastman School of Music, a college of the University of Rochester, although the property was used for daily public concerts and motion pictures for which admission was charged. (Matter of Eastman School of Music, 31 N. Y. St. Dept. Rep. 91.)

Section 221 of the Tax Law exempts from transfer tax “ property devised or. bequeathed * * * to any * * * educational * * * corporation ”, In Matter of Mergentime (129 App. Div. 397, affd. on opinion below 195 N. Y. 572) the Metropolitan Museum of Art was held to be such an exempt corporation. The opinion of the Appellate Division in that case clearly indicated that it was not essential to constitute an educational corporation that regular corps of teachers with regular classes of students should he furnished, hut, on the contrary, that a corporation organized for the purpose of supplying instruction to those who were willing to accept the facilities or opportunities afforded was an educational corporation, and it was held that the Metropolitan Museum of Art, having been incorporated by the Legislature “ for the purpose of * * * encouraging and developing the study of the fine arts * * * and to that end * * * of furnishing popular instruction and recreation ”, was a corporation the whole object of which was directly connected with higher education.

Similarly in Matter of Moses (138 App. Div. 525) the Y.M.C.A. and the Y.W.C.A. were held to be educational corporations within the meaning of the same statute, and in Matter of Arnot (145 App. Div. 708, affd. 203 N. Y. 627) it was held that a free art gallery and reference library, directed to be incorporated by a will, was such a corporation. The court rejected the comptroller’s contention that the corporation, not being connected with any educational system or school, could not be exempt as an educational institution.

The trend of decisions in other jurisdictions is the same. (Royal Choral Soc. v. Inland Revenue Comrs., 169 L. T. 100 [Court of Appeal, 1943]; Bohemian Gymnastic Assn. Bohol of City of N. Y. v. Higgins, 147 F. 2d 774 [C. C. A. 2d, 1945]; Oklahoma State Fair and Exposition v. Jones, 44 F. Supp. 630 [W. D. Okla., 1942]; City Club of Milwaukee v. United States, 46 F. Supp. 673 [E. D. Wis., 1942].) Federal department rulings are in accord with these decisions.

In the light of the authorities, and upon principle as well, we think the Appellate Division was wrong in holding that its own decision in Matter of Peoples Theatres, Inc. (Miller) (supra) required a ruling in this case that the purposes of the corporate employer were not exclusively educational. The fact that Peoples Theatres, Inc., acted as an employment agency for its members is perhaps enough to distinguish the case. But, whether or not distinguishable, we are satisfied that in this case the employer was exempt. We agree, however, with the opinion in the court below that there was no proof that The New Opera Company distributed any of its net earnings to private individuals. The payment to the manager of a

The order of the Appellate Division and the decisions of the Unemployment Insurance Appeal Board should be reversed, with costs in all courts and with directions to the Unemployment Insurance Appeal Board to dismiss the claims.

Fuld, J.

(dissenting). I believe that the claimants, who are employees of The New Opera Company, are entitled to the benefits generally accorded employees by the Unemployment Insurance Daw (Labor Law, art. 18, §§ 500-643). I cannot agree with the court’s decision that the employer herein is beyond the coverage of that statute.

An employer is exempted from liability for contributions to the State unemployment insurance fund only if “ organized and operated exclusively for * * * educational purposes, no part of the net earnings of which inures to the benefit of any private shareholder or individual ” (Labor Law, § 560, subd. 4). The record before us establishes that The New Opera Company, competing with indisputably commercial theatrical enterprises, produced operettas and musical comedies for Broadway and on-the-road showing, to which the public were invited upon payment of'the usual box-office prices. Profits were realized from two of the company’s shows and those profits were divided between the company and individuals who backed the productions. It may well be that this sharing of net earnings, in and of itself, precludes the employer from claiming an exemption.

With those general considerations noted, I turn to the facts, to consider, in the first place, whether The New Opera Company was, within the meaning of the Unemployment Insurance Law, organized and operated for educational ” purposes. I would not insist that, in order to qualify under that term, a corporation must dedicate itself to disseminating technical learning by formal means or that “ educational ” denotes only teacher-pupil systems and classroom methods of instruction. Unless, however, the statutory requirement is to be entirely stripped of meaning, the activities upon which exemption is predicated must partake of the aspects and methods of education, as these are commonly understood; and entertainment, no matter how artistically or even unprofitably presented, is not thereby rendered educational.

The New Opera Company was formed, the record discloses, under the Membership Corporations Law to “ cultivate, promote, foster, sponsor and develop the understanding, taste and love of the musical arts ”. These commendable purposes, properly effectuated, might accomplish educational ends.

' In the beginning, serious musical works, including some operas which theretofore .had been only infrequently heard, were presented. However, as its officers testified, they were not sufficiently income producing and failed to satisfy the company’s financial needs. A new policy was adopted. Under the sponsorship of the company, and in joint venture with profit-seeking investors active in the commercial theatre, operettas such as “ The Merry Widow ” and Helen Goes to Troy ” were produced. Well-known musical comedy stars filled leading roles — concededly as box-office attractions — at prices scaled according to commercial theatre rates. Typical advertising and press agent promotion were employed, in direct competition with commercial theatres. There was at no time any general reduction of admission prices to make the performances more available to the public. Whether or no the company’s other activities could be regarded as educational under the statute — and I am of the opinion they were not — these two presentations were concededly not educational.' The company itself recognized that they would “ not be educational for school children ” because of the ideas contained in them.

Even as to the more serious operas, available only to small numbers of the public on payment of commercial theatre admission fees, it seems clear that they were in the field of entertainment rather than in that of education. (See Boston Symphony Orchestra, Inc., v. Board of Assessors of City of Boston, 294 Mass. 248, 256.) In the Boston Symphony Orchestra case {supra), the Massachusetts Supreme Judicial Court rejected the claim of the Boston Symphony to exemption from city property taxes, though there the statutory exemption was couched in broader language than the provisions here involved. Pointing out that the “ way in which the appellant [the corporation] carried out its purpose ” — by sale of season subscriptions “ to insure a more stable revenue and the charging of “ a substantial admission fee ” made “ it doubtful whether the benefits are extended to the poor as well as to the rich ”, the court went on to say that it is at least doubtful whether the method of instruction through the rendering of concerts, and especially of the ‘ Pop ’ concerts, is such that the property is used primarily for educational purposes, rather than for the purposes of entertainment of listeners, even though it be entertainment of the highest and most beneficial type ” (294 Mass., at pp. 255, 256).

I believe it even more clear here than in the Boston Symphony Orchestra case {supra) that whatever educational benefits may present are realized only as a by-product of entertainment. Thus, it appeared at the hearing that there was no organized schooling, instruction or training for performers other than the usual coaching incidental to preparation of any dramatic or musical performance. There were no “students ” in the company; most of the” performers selected for parts were music school graduates, and many of them were professionals. I perceive no great distinction between the type of program presented and the activities conducted by The New Opera Company, and the programs and the activities of innumerable ballet, theatre and motion-picture groups. In my judgment, the company was not organized or operated for “ educational ” purposes.

Even if I could persuade myself that the production of operettas and musical comedies in competition with the commercial theatre is educational ” under the Unemployment Insurance Law, I find no possible escape from the conclusion that the producer, The New Opera Company, is not operated “ exclusively ” for such educational purposes.

Tfie statute demands — as a prerequisite to exemption — not simply, that the company’s activities be for educational purposes, but that they be exclusively ” So By the provision in question, the Legislature undoubtedly sought to guard against abuses which might arise if a charitable or educational corporation were tempted and permitted to undertake commercial, nonexempt ventures in the hope of increasing its funds for promotion of its exempt purposes. (See People ex rel. Young Men’s Assn. v. Sayles, 32 App. Div. 197, affd. on opinion below 157 N. Y. 677; Board of Foreign Missions v. Board of Assessors, 244 N. Y. 42, 46.)

It cannot be said tbat such fears are unfounded. Tbe record before us, for instance, demonstrates tbat Tbe New Opera Company did not operate exclusively ” for educational ends. First, conceded tbat two of its productions — Merry Widow ” and “ Helen Groes to Troy ” — did not effectuate tbe avowed educational objectives. Second, tbe company itself recognized tbat these productions were not entitled to exemption as educational by actually paying statutory contributions to tbe Unemployment Insurance Fund on tbeir proceeds, without claiming exemption. Here was clear acknowledgment tbat tbe company engaged in nonexempt activities and earned profits from nonexempt productions. Tbe mere circumstance tbat it made insurance fund contributions on such proceeds cannot be utilized and does not serve to insulate tbe rest of its operations and preserve tbe exempt status. If anything is clear, it is tbat tbe statute requires tbat, if the corporation is to escape liability for unemployment insurance contributions, all of its activities must be of tbe exempt class.

A contrary contention — in a case where exemption was sought from liability for real property taxes — was rejected in tbe Sayles case {supra). There, tbe Appellate Division, in an opinion adopted by this court, declared, “ we are asked to bold tbat, because the rentals of tbe commercial portions of this building are applied to tbe expenses of tbe benevolent objects promoted in tbe other portion, therefore, in effect, tbe whole building is exclusively used for benevolent purposes, and for none other. In our view tbe statute does not permit us pleasure ” (32 App. Div., at p. 200). No more does tbe Unemployment Insurance Law permit us here to say tbat a company which carries on concededly noneducational and nonexempt operations in competition with tbe commercial theatre is, nevertheless, “ exclusively ” operated for educational purposes.

In reaching this conclusion, I have put aside tbe circumstance tbat tbe determination made by tbe Unemployment Insurance Appeal Board, based upon questions of fact and having reasonable and substantial support in tbe record, is not subject to court review. (See Matter of Miller v. Kling, 291 N. Y. 65; cf. Matter of Mounting & Finishing Co. v. McGoldrick, 294 N. Y. 104, 108.)

The order of the Appellate Division should he affirmed.

LougheaN, Ch. J., Lewis and CoNway, JJ., concur with Thacher, J.; Fuld, J., dissents in opinion in which Desmond and Dye, JJ., concur.

Order reversed, etc.


author: LoughbaN, Ch. J.

text:
    Erie Railroad Company, Respondent, v. Charles H. Sells, Appellant, et al., Defendants.
    Argued March 9, 1948;
    decided June 11, 1948.

      Nathaniel L. Goldstein, Attorney-General (Wortley B. Paul and Wendell P. Brown of counsel), for appellant.
    Action against defendant Sells as an individual could only be maintained because of an affirmative act done by him outside the scope of his authority causing injury to the plaintiff. No such act is alleged directly or inferentially. The complaint fails to state a cause of action against him. (Gould v. Booth, 66 N. Y. 62; Greco v. Levy, 282 N. Y. 575; Murray v. Usher, 117 N. Y. 542; Christianson v. Breen, 288 N. Y. 435.)
   LoughbaN, Ch. J.

The action is one for an injunction against alleged nuisances. The plaintiff is a domestic railroad corporation. The defendants are the County of Rockland and Charles H. Sells. At all the times in issue, Mr. Sells was and is now Superintendent of Public Works of the State of New York (Public Works Law, Cons. Laws, ch. 75). He is here sued, however, in his individual capacity and not as such superintendent.

A motion made by Mm for dismissal of the complaint on the grounds of insufficiency and lack of jurisdiction was granted by the court at Special Term. The Appellate Division reversed on the law, denied the motion to dismiss, and then passed the case on to us by way of the following question certified: “ Was the order of Special Term properly made? ” We interpret this question as posing the issues of law raised by the motion to dismiss. (See Hession v. Sari Corp., 283 N. Y. 262, 264.)

As against the defendant Sells, the complaint makes the following allegations: In the county of Eockland, a State highway known as route 9-W, which is under the control and supervision of the defendant Charles H. Sells ”, runs parallel to and at an elevation higher than that of other built-up lands upon which a railroad line is maintained by the plaintiff railroad company; this highway, “ by reason of the manner of construction thereof with its lateral ditches and culverts, collects all the surface waters flowing down from the slopes above * * * and concentrates and discharges such surface waters * * * upon plaintiff’s said lands, causing damage thereto this condition of things is and has long been known to the defendant, Charles H. Sells, “ individually and as Superintendent of Public Works of the State of New York ”, but he has nevertheless disregarded repeated requests that he cease and desist from so damaging the plaintiff; and, since such intermittent wrongs occur quite often, recoveries of damages therefor in successive actions at law will afford no adequate relief for the irreparable harm thereby inflicted upon the plaintiff railroad company. On the foregoing allegations, a judgment is demanded which would enjoin the defendant Sells “ from so constructing, repairing and maintaining ” the New York State highway known as route 9-W as to bring about recurrences of the mischief of which the plaintiff complains.

The defendant Sells became Superintendent of Public Works of the State of New York on May 20,1943. In an unchallenged affidavit' submitted in support of his motion for dismissal of the complaint, he says: York State Eoute 9-W is a public highway of the State of New York. That portion of the highway described in the complaint * * * was constructed in 1925 * * *. Prom 1925 until the commencement of the instant action, there has been no structural change in New York State Eoute 9-W in the location described, and at all the times mentioned in the complaint, the highway was, and still is, in the same condition as of the date of its completion in 1925.”

As authority for its reversal of the Special Term order dismissing the complaint on the motion of the defendant Sells, the Appellate Division cited Wright v. Shanahan (61 Hun 264; 83 Hun 615, mod. 149 N. Y. 495) and Pauchogue Land Corp. v. State Park Comm. (243 N. Y. 15).

In Wright v. Shanahan (supra), a judgment was granted which enjoined the defendant, as the then Superintendent of Public Works of the State of New York, from keeping flush boards upon the crest of a State-owned dam in times of high water and thereby flooding lands of the plaintiff. The wrong thus redressed was held by this court to he a breach by the defendant of a ministerial duty which the State had imposed upon him as a public officer. (Cf. Houston v. Ormes, 252 U. S. 469, 472-473; Mine Safety Co. v. Forrestal, 326 U. S. 371, 374.) No relief, however, was granted against the defendant individually, though demand therefor had been made. Hence the decision in Wright v. Shanahan (supra) —whatever its utmost extent may have been — is certainly no precedent for the liability here sought to be fastened upon the present defendant, Sells, as an individual.

In Pauchogue Land Corp. v. State Park Comm. (supra), the defendant commissioners, claiming to act in their official capacity, had unwarrantably seized real property of the plaintiff and had commenced a destruction thereof. Such a fact situation, as viewed by this court, did not constitute a cause of action against either the State Park Commission or its members as such. “ As against them [we said] the suit is against the State itself and cannot be maintained ” (243 N. Y. at p. 28). None the less for that, however, this court in the Pauchogue Land Corp. case granted an injunction, not against the defendant commissioners qua commissioners, but against them as individuals, to restrain further waste of the lands which they had unjustifiably expropriated (243 N. Y. at p. 28). For such personal misconduct, a public -officer is responsible in his individual character. (See Ottmann v. Village of Rockville Centre, 275 N. Y. 270; Litchfield v. Bond, 186 N. Y. 66.)

But no offense of that bind is here imputed to the defendant Sells (cf. Gould v. Booth, 66 N. Y. 62; Mine Safety Co. v. Forrestal, 326 U. S. 371, supra). Nor does the present plaintiff demand a judgment which would merely require of Sells a ceasing of some sort of active wrongdoing on liis part. (Cf. Niagara Falls Power Co. v. White, 292 N. Y. 472, 478.) On the contrary, the judgment here demanded would command him as an individual to take upon himself a substantial rebuilding of one of the public highways of the State. We have been unable to find any warrant for so extreme a decree. Indeed the relevant statute plainly precludes the idea of interference by any individual with the essential governmental control of the form and mode of construction of our State highways (Highway Law, art. II, passim). As against the defendant Sells, then, the present complaint — as we believe — does not state facts sufficient to constitute a cause of action.

The order of the Appellate Division should be reversed and that of Special Term affirmed, with costs to the defendant-appellant in this court and in the Appellate Division. The question certified should be answered in the affirmative.

Lewis, CoNway, DesmoND, Thacher, Dye and Fuld, JJ., concur.

Ordered accordingly.