text:
    Jane Zendman, Appellant, v. Harry Winston, Inc., Respondent.
    Argued November 20, 1952;
    decided April 9, 1953.

      A. Aaron Raphael and Kenneth Carroad for appellant.
    I. The evidence introduced before Special Term clearly established that the ring was delivered by defendant to Brand for the purpose of sale by Brand and that Brand had an unqualified power to sell. II. Defendant is precluded by its conduct from denying plaintiff’s title. (Barnard v. Campbell, 55 N. Y. 456; Island Trading Co. v. Berg Bros., 239 N. Y. 229.) III. The Factor’s Act (Personal Property Law, § 43) validates the sale to plaintiff. (Cartwright v. Wilmerding, 24 N. Y. 521; Freudenheim v. Gutter, 201 N. Y. 94.) IV. The Utica Trust & Deposit Co. v. Decker case (244 N. Y. 340), relied upon by the Appellate Division as authority for its reversal of the judgment for plaintiff at Special Term, is wholly inapplicable. (Smith v. Clews, 114 N. Y. 190; Biggs v. Evans, [1894] 1 Q. B. 88.) V. The decision of Special Term was fully supported by the laws of New Jersey. (Leatherbury v. Connor, 54 N. J. L. 172; Campbell Mfg. Co. v. Rockaway Pub. Co., 56 N. J. L. 678.)

      Abraham Lillienthal and Leon Finley for respondent.
    I. Defendant was not estopped, by entrusting the ring to a dealer in jewelry, from asserting title to the ring, either under the law of New York or New Jersey. (Utica Trust & Deposit Co. v. Decker, 244 N. Y. 340; Smith v. Clews, 114 N. Y. 190; Soltau v. Gerdau, 119 N. Y. 380; Barnard v. Campbell, 55 N. Y. 456; Nelson v. Wolf, 4 N. J. 76; Biggs v. Evans, [1894] 1 Q. B. 88; Island Trading Co. v. Berg Bros., 239 N. Y. 229; Dows v. Kidder, 84 N. Y. 121; Parker v. Baxter, 86 N. Y. 586; Hutchison v. Ross, 262 N. Y. 381.) II. No conduct of defendant misled plaintiff into purchasing the ring. Both plaintiff and defendant placed their trust in Brand and misplaced confidence does not act as a conduit of title. (People v. Bank of North America, 75 N. Y. 547.) III. Defendant’s title to the ring is not impeached and there is no evidence that Brand had unqualified power to sell. (Green v. Wachs, 254 N. Y. 437.)
   Fuld, J.

On November 28, 1947, plaintiff Jane Zendman iQught a diamond ring for $12,500 at an auction held at the ;allery of Brand, Inc., on the Boardwalk in Atlantic City, New "ersey. Harry Winston, Inc., a diamond merchant located in lew York City, claims ownership of the ring.

Brand and Winston had done business together for years. It vas the custom of Harold Brand, the owner and proprietor of Brand, Inc., to visit Winston’s premises in New York several imes a month and select articles that were later sold at the 'allery in Atlantic City. In October of 1947, Brand chose the ing — later purchased by Miss Zendman — advising that he vished to show it to a customer, and, at his request, that one tern was mailed to the gallery in New Jersey. Accompanying t was a memorandum, reciting that11 the goods ’ ’ were only for Brand’s examination and that no title was to pass until you xave made your selection, notified us of your agreement to pay ;he indicated price [$11,000] and we have indicated our acceptmce thereof by sending to you a bill of sale.”

Upon the receipt of the ring, Brand placed it in one of its public show windows, such display being with the knowledge md acquiescence of the owner Winston. And there the ring remained on display until, more than a month later, it was put up at auction and, after some bidding, knocked down ” md sold to plaintiff for $12,500. She received a bill of sale from Brand and knew nothing about the written memorandum or the circumstances under which Brand had obtained possession. Sometime in January, 1948, Winston discovered that Brand had sold the ring to plaintiff and, on February 2d, lemanded its return. On the following day, an involuntary petition in bankruptcy was filed against Brand.

The record established that delivery of merchandise on nemorandum ” similar to that here involved, had been the regular course of dealing between Winston and Brand for some years, and hundreds ” of such memoranda were found in Brand’s files. Every week or so — evidence, admitted without objection, disclosed — one of Winston’s salesmen and officers, Raticoff, would visit Brand’s gallery, and, after checking items ¡hat had been sent to Brand, would settle Winston’s account, collecting either cash or Brand’s check or the checks of those customers who had bought Winston articles.

The court at Special Term, in the exercise of . its discretion declined to grant a declaratory judgment (Buies Civ. Prac. rule 212), but rendered judgment in favor of plaintiff on defend ant Winston’s counterclaim for replevin. Finding, that plaintif had purchased the ring for full value and in entire good faitb the court proceeded to hold — in reliance upon the sales ac provisions of New Jersey (N. J. Stat. Ann., § 46:30-29) — tho Winston had, by its conduct, precluded ” itself from deny ing the seller’s authority to sell.” Upon appeal, the Appellati Division, deciding that there was no basis for an “ estoppel,’ reversed and directed judgment for defendant.

It is the law of New Jersey — the place where the sale t< plaintiff occurred and where the ring was then located — tho governs our decision (see Hutchison v. Ross, 262 N. Y. 381 389-390; see, also, Weissman v. Banque De Bruxelles, 254 N. Y. 488, 492; Goodrich on Conflict of Laws [3d ed.], p. 470), and t( the law of that state we turn.

It is our judgment that, by reason of the pertinent New Jersey provision (N. J. Stat. Ann., § 46:30-29) —identical in wording with section 23 of the Uniform Sales Act, as well as section 104 oi the New York Personal Property Law — defendant is precluded on the principle “ of estoppel or something akin to estoppel ’ (2 Williston on Sales [Bey. ed., 1948], § 311, p. 242), from claiming that Brand was not authorized to sell the ring to plaintiff Subject to the provision of this chapter,” the statute recites “ where goods are sold by the person not the owner thereof and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell.” (Emphasis supplied.)

Only recently, the Supreme Court of New Jersey, in Nelson v. Wolf (4 N. J. 76), for the first time had occasion to consider that provision, and, strangely enough, in a case also involving Brand. The defendant had consigned a diamond ring to Brand upon a memorandum similar to the one employed by Winston. Some time later, Brand borrowed $4,000 from plaintiff, delivering the ring and other pieces of jewelry as collateral security. Some time later, plaintiff purchased the ring from Brand in consideration of the cancellation of the loan, but, as the court explicitly pointed out,£ £ no bill of sale was ever given him for the ring nor was the transaction otherwise evidenced in writing ” (4 N. J., at p. 78). The plaintiff subsequently redelivered the ring to Brand, likewise upon memorandum. A few months later, Brand, upon defendant’s demand, turned the ring over to him. In the action thereupon brought by plaintiff against defendant for conversion, the court held that plaintiff could not succeed, since Brand had neither title to the ring nor authority to sell it and defendant was not prevented from setting up his own title.

Observing that there were ‘6 no decisions in New Jersey construing this particular section of the Uniform Sales Act,” the court remarked that ££ it has become well established in other jurisdictions that have adopted the Act that, although possession alone is not enough to create an estoppel, the owner may be estopped from setting up his own title and the lack of title in the vendor as against a bona fide purchaser for value where the owner has clothed the vendor with possession and other indicia of title, 46 Am. Jur., Sales, § 463.” (4 N. J., at pp. 79-80.) In holding that defendant in the case before it was not precluded from denying the seller’s authority to sell, the New Jersey court explicitly noted (1) that Brand had ££ no apparent authority to sell unless it be to an innocent purchaser in. the regular course of business ”, and the ££ plaintiff in the instant case is clearly not such a bona fide purchaser in the regular course of business (2) that ££ plaintiff never received any bill of sale or other written evidence of the purchase of the ring by him (3) that he was not the type of customer who came into the shop of Brand, Inc., in the ordinary course of business ” (4 N. J., at pp. 80-81); and (4) that plaintiff had had dealings with Brand that were ‘ unsatisfactory * * * and accordingly he was put on notice that * * * [Brand’s] title * * * might be questionable ” (4 N. J., at p. 81).

The factors stressed by the New Jersey court as decisive go far toward demonstrating that, in the case at hand, defendant Winston is precluded, under that state’s law, from denying Brand’s authority to sell. In sharp contrast with the facts of the Nelson case, plaintiff Zendman was an innocent purchaser at an auction sale conducted by Brand in the regular course of its business of auctioneering; she paid full value and received a written bill of sale acknowledging purchase of the ring; and there was nothing to put her on notice that Brand’s title or authority to sell might be questionable. But, even more important than such differences, there are here operative facts — not present in Nelson v. Wolf — beyond the mere entrusting of possession. And, since the New Jersey court indicated its adoption of the current of authority in other jurisdictions, these added facts, so established case law indicates, serve as cogent predicate for estoppel.

Generally, we seek a proper balance between the competing interests of an owner who has entrusted his property to another for purposes other than sale, and of an innocent purchaser who has in good faith bought that property from the latter without notice of the seller’s lack of title or authority to sell. In resolving this conflict, the courts have evolved certain principles akin to estoppel ” (2 Williston, op. cit., § 311, p. 242), based on the maxim that As between two innocent victims of the fraud, the one who made possible the fraud on the other should suffer.” (Island Trading Co. v. Berg Bros., 239 N. Y. 229, 233.)

Thus, on the one hand, it is settled that simply delivering possession of an article of property to another as depository, pledgee or agent “ is clearly insufficient to preclude the real owner from reclaiming his property, in case of an unauthorized disposition of it by the person so intrusted. (Ballard v. Burgett, 40 N. Y. R., 314.) ” (McNeil v. Tenth Nat. Bank, 46 N. Y. 325, 330.) Neither is it sufficient, to work an estoppel, that the person to whose possession the owner intrusts chattels is a dealer in similar merchandise.” (Utica Trust & Deposit Co. v. Decker, 244 N. Y. 340, 348; see, also, 2 Williston, op cit., §§ 310-316.) Nor, finally, is an estoppel created merely by the addition of the circumstance “ that the possessor of the chattel is authorized by the owner to exhibit the same for the purpose of obtaining offers of purchase.” (Utica Trust & Deposit Co. v. Decker, supra, 244 N. Y. 340, 349; see, also, 2 Williston, op. cit., § 315.)

On the other hand, it is equally settled that ‘ ‘ but slight additional circumstances may turn the scale ” against the true owner (2 Williston, op. cit., § 315, p. 249) and estop him from asserting title against one who has purchased the property in good faith. (See, e.g., Calais Steamboat Co. v. Van Pelt’s Admr., 2 Black. [U. S.] 372; Kirsch v. Provident Loan Soc. of N. Y., 189 Misc. 898, 914-915; Heath v. Stoddard, 91 Me. 499; O’Connor v. Clark, 170 Pa. 318.) As this court noted, some eighty years ago, in McNeil v. Tenth Nat. Bank (supra, 46 N. Y. 325, 329), the rule that a vendor can convey no greater title to property than he possesses “ is a truism, predicable of a simple transfer from one party to another where nó other element intervenes.” However, continued the court, It does not interfere with the well-established principle, that where the true owner holds out another, or allows him to appear, as the owner of, or as having full power of disposition over the property, and innocent third parties are thus led into dealing with such apparent owner, they will be protected. Their rights in such cases do not depend upon the actual title or authority of the party with whom they deal directly, but are derived from the act of the real owner, which precludes him from disputing, as against them, the existence of the title or power which, through negligence or mistaken confidence he caused or allowed to appear to be vested in the party making the conveyance. (Pickering v. Busk, 15 East, 38; Gregg v. Wells, 10 Adol. & El., 90; Saltus v. Everett, 20 Wend., 268, 284; Mowrey v. Walsh, 8 Cow., 238; Root v. French, 13 Wend., 570.) ”

Adopting that principle, the courts have generally acknowledged that “ The rightful owner may be estopped by his own acts from asserting his title. If he has invested another with the usual evidence of title, or an apparent authority to dispose of it, he will not be allowed to make claim against an innocent purchaser dealing on the faith of such apparent ownership.” (Smith v. Clews, 114 N. Y. 190,194; emphasis supplied. See, also, 46 Am. Jur., Sales, § 463, cited in Nelson v. Wolf, supra, 4 N. J. 76, 80.) And, as was observed in Saltus v. Everett (20 Wend. 267, 281), decided by the old Court for Correction of Errors, the owner may lose the right of recovering his goods against purchasers, by exhibiting to the world a third person as having power to sell and dispose of them; and this, not only by giving a direct authority to him, but by conferring an implied authority. Such an authority may be implied by the assent to and ratification of prior similar dealings, so as to hold such person out to those with whom he is in the habit of trading, as authorized to buy or sell. It may be inferred from the nature of the business of the agent, with fit accompanying circumstances.” Such “ fit accompanying circumstances ” are here present; the trial court was fully justified in holding that defendant was precluded from denying Brand’s authority to sell. For more than a month, defendant acquiesced in Brand’s public display of the ring unsegregated from other wares properly up for sale. Defendant’s officer, Raticoff, knew of the ring’s display, and yet no effort was made to inform the public that it was exhibited only to solicit offers and not for immediate sale. Moreover, as noted above, the evidence revealed a regular course of dealing between Brand and Winston regarding jewelry received ‘ ‘ on memorandum ’ ’, under which Winston appears to have accepted either Brand’s check or money or customers’ checks for sales made by Brand, without insisting on compliance with the limitations of the memoranda. Winston was thus responsible for the appearance of a general, unrestricted authority in Brand to sell items received on such memoranda. And, relying on Brand’s apparent authority to sell the diamond, plaintiff bid at the auction sale and bought the ring.

Nor can there be any question that such reliance on plaintiff’s part was reasonable, if not, indeed, inevitable. In the eyes of the public, auction galleries exist solely to sell merchandise, and the public thus regards the entrusting of goods to an auction house as tantamount to the entrusting of the power to sell such goods. In the words of Lord Ellenbobough, uttered more than a century ago, if one send goods to an auction-room, can it be supposed that he sent them thither merely for safe custody? ” (Pickering v. Busk, 15 East 38, 43.) Accordingly, he concluded, Where the commodity is sent in such a way and to such a place as to exhibit an apparent purpose of sale, the principal will be bound, and the purchaser safe ” (15 East, at p. 43). Even if, as Williston observes (op. cit., § 314, pp. 245-246), there are implications in Lord Ellenbobough’s remarks that‘ go beyond the law ’ ’, it is enough to note that the additional facts and circumstances here present furnish firm support for our conclusion.

Further confirmation, if needed, is found in analogous cases from other states. They involve the rights of a purchaser, from an automobile dealer, of a car, subject to a trust receipt or a contract of conditional sale or a chattel mortgage held by a bank or finance company. The operative document materially limited the dealer’s authority to sell, usually by prohibiting a sale unless the written consent of the bank or finance company was first obtained. Despite that limitation, the latter was held estopped from asserting its title or lien as against a bona fide purchaser, if it had in past transactions acquiesced in the dealer’s making sales, without complying with the prescribed restriction. The estoppel was largely predicated on the act of the owner or mortgagee which, the courts ruled, cloaked the dealer — so far as the public was concerned — with authority to sell the property. (See, e.g., Jones v. Commercial Investment Trust, 64 Utah 151; Gramm-Bernstein Motor Truck Co. v. Todd, 121 Wash. 145; Denno v. Standard Acceptance Corp., 277 Mass. 251; Daas v. Contract Purchase Corp., 318 Mich. 348; Atlantic Discount Corp. v. Young, 224 N. C. 89; see, also, 2 Williston, op. cit., § 316, pp. 251-252; cf. Coffman v. Citizens’ Loan & Investment Co., 172 Ark. 889; Finance Corp. of N. J. v. Jones, 98 N. J. L. 165; Commercial Motors Mtge. Corp. v. Waters, 280 Pa. 177.)

The Appellate Division in the present case regarded Utica Trust & Deposit Co. v. Decker (supra, 244 N. Y. 340) as decisive against plaintiff’s claim of estoppel. That case, however, is distinguishable. Several automobile dealers gave a chattel mortgage to plaintiff bank as security for the financing of four cars which they had purchased. There had been similar prior transactions between the parties, and in each instance the mortgage prohibited the dealer from selling or transferring any car — though on exhibition in their premises — until it was released from the mortgage. The defendant Decker purchased one of the cars in the regular course of business and without knowledge of plaintiff’s mortgage. We did no more than hold that plaintiff, having duly recorded its mortgage, could recover the car from Decker and was not estopped by allowing exhibition of the car for the purpose of obtaining offers of purchase. Apart from the fact that it dealt, not with a secret agreement as here, but with an instrument publicly recorded in accordance with statute, the case is further distinguishable upon the ground, there emphasized (p. 345), that “ It was not conceded or proven that any cars so covered by mortgages had been sold by O’Donoghue and Wetzel [the dealers] without their first having obtained releases from the mortgagee, as provided in the mortgages.” Quite evidently, therefore, our decision in Decker does not deny operative effect to evidence of prior dealings between the parties, clearly manifesting a past disregard for limitations contained in the pertinent instrument. (Cf., also, Smith v. Clews, 105 N. Y. 283; id., supra, 114 N. Y. 190,195-196.)

We realize, of course, that u The law takes into account not simply the deception of the subsequent buyer by the appearance of title in the possessor of the goods, but also whether this appearance of title was created by the original owner for a purpose so essential and proper that the original title must be protected irrespective of the injury to the subsequent buyer ” (2 Williston, op. cit., § 312, p. 243). The task in each case is, therefore, to balance the probability of deception with the necessity for adopting the particular mode of entrusting chosen. In this ease, we fail to see how defendant’s mode of operation is so essential ” to the conduct of its business as to warrant placing upon an innocent purchaser the burden and consequences of the very fraud which defendant made possible.

An owner must be fully aware of the potentialities for fraud created when, for purposes of sale, he entrusts merchandise to a retail dealer, regularly engaged in selling such goods, and the dangers are many times multiplied if that dealer happens to be an auctioneer. It ill behooves the owner to complain if he is not permitted to rely upon his private and secret agreement, when he himself has failed to require adherence to its terms and has thus become responsible for the dealer’s apparent authority to sell.

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

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

Judgment accordingly.

      . The trial court also opined that, if the law of New York applied, plaintif was further protected by the New York Factor’s Act (Personal Property Law § 43), which provides that an agent “intrusted with the possession of an; merchandise for the purpose of sale * * * shall be deemed to be the true owner thereof, so far as to give validity to any contract made by such- ageni with any other person, for the sale or disposition of the whole or any part oi such merchandise”. Since New Jersey has no comparable provision, it is unnecessary to determine whether the facts support the trial court’s conclusior that, despite the language in the memorandum, Brand was, within the meaning of the Factor’s Act, an agent of Winston “intrusted with the possession” oi the ring “ for the purpose of sale ” so as to give validity to Brand’s subsequeni sale pf it to plaintiff.

      . As Williston has observed, “ It is enough to put the typical case of sending a watch for repair to a jeweler who habitually sells watches, to make it clear that such an intrusting will not, without more, prevent the owner from asserting his title against a purchaser”. (2 Williston, op. cit., § 314, p. 246.)

      . We note that the Official Draft of the Proposed Uniform Commercial Code, representing the judgment of leading experts in the field of sales law, goes far beyond the case under consideration. It provides in blanket terms that “Any entrusting of possession of goods to a merchant who deals in goods of that kind gives him power to transfer all rights of the entruster to a buyer in ordinary course of business.” (Proposed Uniform Commercial Code, Official Draft [1952], § 2-403, subd. [2]; see, also. Comment to said section, pp. 147-148.)


source: Caselaw Access Project

author: Conway, J.

license: Public Domain

text:
    Francis W. Ruzicka et al., Copartners Doing Business as “ Ruzicka’s ”, Respondents, v. Edward Rager, Appellant. Edward Rager, Appellant, v. Francis W. Ruzicka et al., Respondents, et al., Defendants.
    Argued January 12, 1953;
    decided April 9, 1953.

      Lloyd Paul Stryker, Edward Rager, in person, and Harold W. Wolfram for Edward Rager, appellant.
    The third counterclaim has been properly interposed in this action since it raises questions between defendant and plaintiffs along with other persons. (Caplan v. Caplan, 268 N. Y. 445; Matter of Schwartzman [Miller], 288 N. Y. 568; Williams v. Hartshorn, 296 N. Y. 49; Schubert v. Schubert Wagon Co., 249 N. Y. 253.)

      David Haar for Francis W. Ruzicka and another, respondents, and Bernard H. Sandler for David Haar, respondent.
    I. The complaint clearly shows that plaintiffs, as members of a limited partnership, seek a judgment for the entity “ Ruzicka’s ”, a partnership, and not in their individual capacity. (Yeager v. Transvision, Inc., 277 App. Div. 986; Hartigan v. Casualty Co. of America, 227 N. Y. 175; Matter of Ardolino v. lerna, 225 App. Div. 439; Curtis v. Hollingshead, 14 N. J. L. 402; Finston v. Unemployment Compensation Comm., 132 N. J. L. 278; Baron v. Lakow, 121 App. Div. 544; Kirschbaum v. Merchants Bank of N. Y., 272 App. Div. 336; Lanier v. Bowdoin, 282 N. Y. 32.) II. The judgment dismissing the third counterclaim as against plaintiff partnership is correct as a matter of law. (Matter of Peck, 206 N. Y. 55.) III. The judgment dismissing the third counterclaim alleged against David Haar as one of defendants is correct as a matter of law. (Kelvin Eng. Co. v. Knott, 212 App. Div. 413; Hillary Holding Corp. v. Brooklyn Jockey Club, 273 App. Div. 538; Sport-Craft v. Garment Center Capital, 167 Misc. 425, 254 App. Div. 669; Williams v. Edward De V. Tompkins, Inc., 208 App. Div. 574.)
   Conway, J.

The question presented for our determination is whether in an action to enforce a partnership claim, a counterclaim (here denominated “ Third ”), may be set up by which the appellant seeks to impose a nonpartnership ” liability against the partners (one of them a limited one) individually. There is a “ Second ” counterclaim, involving legal fees, which has been sustained as against the partnership but dismissed as against the partners as individuals. While no point was made during the argument as to that dismissal, appellant does argue in his brief that the Second ” counterclaim was directed only against the plaintiff partnership and not against the partners Ruzicka and Widney individually at all and, therefore, they as individuals had no standing in court permitting them to move for its dismissal as to them. Appellant concedes that in his prayer for relief he asked for judgment on the Second ” counterclaim against them as individuals but urges that the demand for relief formed no part of the statement of the cause; of action. Since the “ Second ” counterclaim has been permitted to stand against the partnership — which appellant asserts was his purpose in drafting it — he is not aggrieved. (See Matter of Croker v. Sturgis, 175 N. Y. 158,163; Williams v. Montgomery, 148 N. Y. 519, 523-524.)

The gist of the complaint is as follows: In December, 1946, 1 ‘ Ruzicka’s ” which was then composed of Ruzicka, Widney and two other partners (two general and two limited partners), retained appellant Rager as attorney for the year 1947 at the agreed fee of $9,000. In January, 1947, appellant procured a $15,000 loan for Ruzicka’s ” and deducted therefrom his agreed retainer, remitting to the partnership the balance of $6,000. In July, 1947, the partnership discharged appellant for cause. The partnership now seeks to recover the sum deducted by the appellant, less $1,000 which, it is alleged, is the reasonable value of services rendered by him prior to his discharge. It appears from the complaint that Ruzicka’s ” presently consists of Francis Ruzicka, a general partner, and Cecil Widney, a limited partner, that one of the former general partners has assigned to Francis Ruzicka all her interest in the partnership and in the cause of action embodied in the present complaint and that the other person, formerly a limited partner, has released the partnership of all claims including any which she might have had in the cause of action set forth in the complaint.

The Third ” counterclaim alleges, in substance, that Francis Ruzicka and Cecil Widney along with several others, including respondent Haar, engaged in a conspiracy to destroy the professional standing and law practice of the appellant, that they have contacted appellant’s clients and brought pressure to bear upon them to cease his employment and that defendants on this counterclaim, who include Ruzicka and Widney, have, as part of the conspiracy, instituted baseless lawsuits, of which the present action is one, against the appellant. Damages totaling $1,000,000 are sought and in his prayer for relief appellant seeks judgment against the individual defendants to the counterclaim in varying specific amounts totaling $1,000,000. Thus, the sums sought against Ruzicka and Widney are $5,000 as to each. Judgment is sought against them as individuals and in naming them as defendants to the counterclaim appellant neither designated them as copartners nor alleged facts which would constitute a cause of action against the plaintiff partnership.

Appellant’s position is that the. counterclaim is proper for the reason that a distinction cannot be drawn between Ruzicka and Widney as copartners and as individuals — that a partnership is not an entity apart from those who compose it and hence in an action by a partnership upon a partnership claim it is proper to set up a counterclaim against its individual members. Respondents, on the other hand, are of the view that the limited partnership is a separate entity; that in a suit by the partnership the partners as individuals are not the party plaintiff and a counterclaim seeking to enforce individual, nonpartnership liabilities is therefor improper.

Section 266 of the Civil Practice Act provides as follows: “ Counterclaim defined. A counterclaim may be any cause of action in favor of the defendants or some of them against the plaintiffs or some of them, a person whom a plaintiff represents or a plaintiff and another person or persons alleged to be liable.”

Section 271 of the Civil Practice Act, insofar as pertinent here, provides: “ New parties set up in counterclaim. Where a defendant sets up any counterclaim which raises questions between himself and the plaintiff along with any other persons, he shall set forth the names of all the persons who, if such counterclaim were to be enforced by cross action, would be defendants to such cross action. Where any such person is not a party to the action he shall be summoned to appear by being served with a copy of the answer. * * * ”

It is clear from those sections that the counterclaim must assert a cause of action against the party plaintiff and that if the counterclaim be not properly interposed against the plaintiff, it is not proper as to the others — Haar, et al. (See 3 Carmody on New York Practice [2d ed.], § 1007, pp. 2123-2124.)

It has long been the rule in this and many other jurisdictions that a partnership is not in the eyes of the law an entity separate from its members. However, the Legislature and businessmen do so regard a partnership for various purposes. (See Williams v. Hartshorn, 296 N. Y. 49, 51; Matter of Schwartzman [Miller], 288 N. Y. 568; Hartigan v. Casualty Co. of America, 227 N. Y. 175, 179.)

It is to be noted that there was recently enacted section 222-a of the Civil Practice Act (L. 1945, ch. 842) which provides'that' Two or more persons carrying on business as partners may sue or be sued in their partnership name whether or not such name comprises the names of the persons. * * * ” Provisions similar to that have been construed by some courts to be a recognition of partnerships as legal entities for procedural purposes (68 C. J. S., Partnership, § 67, p. 498).

The commentary of the Judicial Council in proposing the enactment of section 222-a lends support to the view that for purposes of pleading, a partnership is to be regarded as a legal entity (Eleventh Annual Report of N. Y. Judicial Council, 1945, pp. 221, 224-225):

“ * * * Under existing law, a partnership may not sue or be sued in the partnership name, but may sue or be sued only in the respective names of its individual members. The rule that a partnership may not sue or he sued in its partnership name is merely a useless relic of the strict procedural rules at common law with nothing, apparently, to justify its continued existence. The common law rule derives from the legal conception of the partnership as simply a group of individuals. It is particularly undesirable in actions against partnerships because it places upon the plaintiff, the burden of ascertaining the individual members of a partnership and naming them as defendants.
The authority granted by recommended section 222-a would be in accord with the provisions already in section 223 of the Civil Practice Act permitting prosecution of an action in the partnership name where the business is conducted in the name of a deceased person. The Partnership Law similarly permits a partnership to acquire and convey real property in the partnership name.” (Italics supplied.)

It is true that section 222-a is permissive and not mandatory but even before its enactment it was necessary for suits on partnership claims tó be brought by or on behalf of the partnership — a member of a partnership may not recover upon a partnership obligation individually.

It is to be remembered that we are here concerned with a limited partnership. There is good reason for regarding such a partnership as a distinct entity for the purposes of pleading. Limited partnerships were unknown to the common law and, like corporations, are 11 creature [s] of statute ” (Lanier v. Bowdoin, 282 N. Y. 32, 38). Statutes permitting limited partnerships are intended to encourage investment in business enterprise by affording to a limited partner a position analogous to that of a corporate shareholder. Due to the quasi-corporate aspects of a limited partnership and the quasi-shareholdei status of a limited partner in that his liability is restricted tc the amount of his investment and his voice in partnership affairs is negligible, it seems proper that in a suit by a limited partnership, the individual partners, whether general or limited, ouglrl not to be subect to counterclaims against them upon causes oi action unrelated to partnership affairs. The fact that a limited partner is not a proper party to actions by or against the partnership except where the action is brought to enforce a limited partner’s rights against or liability to the partnership, gives added weight to that view. (Partnership Law, § 115 [Limited Partnerships].)

It would appear that the intent of the Legislature in adopting the new section 266 of the Civil Practice Act was to rid oui procedure of the restrictive niceties, grounded in early common-law pleading, which needlessly caused a multiplicity of suits between the same litigants. But the fact remains, and it is cleai from section 266, that the claim and counterclaim must be between the same parties. And if a partnership, for purposes of pleading, be considered a separate entity — certainly a limited partnership, as here, must be such an entity — appellant’s “ Third ” counterclaim was properly dismissed by the Appellate Division.

There are other reasons for reaching the same conclusion We took the view in Binon v. Boel (297 N. Y. 528) that new section 266 did not alter the rule that a claim and counterclaim musí be by and against the same party in the same capacity. Select Theatres Corp. v. Harms, Inc. (273 App. Div. 505) is to the same effect.

The two foregoing cases are, to be sure, to some extenl distinguishable — for the plaintiffs, against whom counterclaims on individual liabilities were asserted and dismissed, were shareholders who had instituted derivative actions on behalf oi corporations which are, without doubt, legal entities. But all that we have said above toward establishing that the plaintiff partnership is to be regarded, for purposes of pleading, as a legal entity, goes to establish that where an action on a partnership claim is brought, as it should be, in either the firm name oi in the names of the individual members as copartners, the firm members sue in a capacity different from their capacity as individuals. As disclosed by the Binon and Select Theatres cases (supra) the test is whether claim and counterclaim are by and against the same person or persons in the same capacity. Moreover, the Legislature has been careful by other statutes, in addition to those commented on herein, to continue the general rule that a plaintiff who sues in one capacity shall not be subject to setoffs or counterclaims asserted against him in a different capacity. (United States Trust Co. of N. Y. v. Stanton, 139 N. Y. 531, 534, as to a trustee [Code Civ. Pro., § 502, subd. 3, now Civ. Prac. Act, § 267, subd. 3]; York-Buffalo Motor Express v. National Fire & Marine Ins. Co., 294 N. Y. 467, 472, as to a trustee of an express trust [Civ. Prac. Act, §§ 210, 267, subd. 3]; Central New York Coach Lines v. Syracuse Herald Co., 277 N. Y. 110, as to an executor or administrator [Civ. Prac. Act, § 269].)

To some degree the individual liability of a partner is not the ordinary individual lability of one who obligates himself as an individual. Rather, the individual liability of a partner is merely an incident of the partnership liability. Judge Pound writing for the court in Hartigan v. Casualty Co. of America (227 N. Y. 175, 178, supra) phrased the conception clearly and concisely as follows: “ When a partnership is established, the liability of the individual partners is an incident of the partnership, merely, not a separate and independent liability.” We think the Hartigan case and Geitner v. United States Fidelity & Guar. Co. (251 N. Y. 205) point this up very clearly.

The difference in the relationship of a partner as such and as an individual to creditors, e.g., the unavailability of partnership assets for execution on individual claims and the priorities of firm and individual creditors upon insolvency, further illustrate the general principle that a person who holds membership in a partnership acts, serves and is obligated in two distinct and differing capacities. (See Partnership Law, §§ 51, 71; Debtor and Creditor Law, § 277.)

The record does not disclose which justices of the Supreme Court sat during the argument of the appeal in the Appellate Division. The decision of the Appellate Division was by four

justices, three of whom, according to appellant’s brief, sat during the argument. The order of the Appellate Division and the judgment entered thereon were valid. (See N. Y. Const., art. VI, § 2; Judiciary Law, §§ 21, 82; Wittleder v. Citizens’ Elec. Illuminating Co., 47 App. Div. 543.)

The judgment should be affirmed, with costs.

' Loughran, Ch. J., Lewis, Desmond, Dye, Fuld and Froessel, JJ., concur.

Judgment affirmed. [See 305 N. Y. 798.]


author: Fuld, J. Desmond, J.

text:
    In the Matter of the Estate of Max Faber, Deceased. Sandra D. Faber, by Joseph Scirto, Her Special Guardian, Appellant; Helen Faber et al., as Executrices of Max Faber, Deceased, et al., Respondents.
    Argued January 12, 1953;
    decided April 9, 1953.

      Joseph F. Scirto, special guardian for Sandra D. Faber, an infant, appellant.
    I. The simple act of changing beneficiaries of certain insurance policies, while still reserving the privilege of other changes either in beneficiary or mode of payment, does not constitute a “ settlement ” within the meaning of section 26 of the Decedent Estate Law. (Matter of Stern, 189 Misc. 639; Sorrell v. Sorrell, 193 N. C. 439; Williamson v. Williamson, 232 N. C. 54; Meares v. Meares, 26 N. C. 192.) II. In determining the issue here presented, only a provision for a child made in a written agreement contemporaneous with or prior in date to the will may be considered. (Matter of Stern, 189 Misc. 639; Matter of Robinson, 188 Misc. 720; Matter of Del Genovese, 169 App. Div. 140.) III. The Court of Appeals is not bound to follow the decisions that executrices contend support their claim, especially since they are not sustained by appellate authority, and further because they may be distinguished from the pending case. (Matter of Brant, 121 Misc. 102; Matter of Froeb, 143 Misc. 660; Matter of Backer, 148 Misc. 318; Matter of Snopek, 149 Misc. 665; Matter of Kelly, 182 Misc. 481.)

      Ellsworth Storrs for Helen Faber and another, executrices, respondents, and Daniel P. Falsioni, special guardian for Adell Faber, an infant, respondent.
    Testator, by changing life insurance policies in force prior to the birth of Sandra to make her equal beneficiary thereon with her sister, made a settlement upon her recognized by section 26 of the Decedent Estate Law, so that she cannot elect to take against the will. (McLean v. McLean, 207 N. Y. 365; Matter of Brant, 121 Misc. 102; Matter of Stone, 200 Misc. 639; Matter of Kelly, 182 Misc. 481; Matter of Kraston, 58 N. Y. S. 2d 364; Matter of Froeb, 143 Misc. 660; Matter of Backer, 148 Misc. 318; Matter of Hagendorn, 41 N. Y. S. 2d 491.)
   Fuld, J.

In the summer of 1946, Max Faber executed his last will and testament. At that time, he had but one child, Adell, a girl of about two. He died four years later, but, in the interval, another daughter, Sandra, was born. The will made provision for his wife and Adell, but not for the after-born child. However, about a month after her birth, the father took out a $5,000 policy of insurance for her benefit. A little later, he altered that policy to include Adell as co-beneficiary and changed $24,000 worth of other insurance — taken out over the years — likewise to designate both Sandra and Adell as co-beneficiaries.

When some months later Faber died, he left a net estate, after taxes, of about $54,000. By his will, he directed that it be held in trust during the lives of his wife and father, and that the trustees pay from income $10 a week to his father and $50 a week to his wife. He further provided that, if the trust income was insufficient to pay the wife that amount, the difference was to be made up out of principal, and that, if both income and principal payments proved inadequate for her comfort and support,” the trustees were to invade the corpus and pay her such additional sums as they deemed necessary. Upon termination of the trust, the balance of the estate was to he turned over to Adell.

Since the will neither mentioned nor provided for any after-born child, the question arose whether, under section 26 of the Decedent Estate Law, Sandra was entitled to share in her father’s estate, despite his will. That section recites that Whenever a testator shall have a child born after the making jf a last will, either in the lifetime or after the death of such ¡estator, and shall die leaving such child, so after-born, unprovided for by any settlement, and neither provided for, nor in any vay mentioned in such will, every such child shall succeed to ¡he same portion of such parent’s real and personal estate, as vould have descended or been distributed to such child, if such parent had died intestate, and shall be entitled to recover the same portion from the devisees and legatees, in proportion to and out of the parts devised and bequeathed to them by such vill. ’ ’ (Emphasis supplied.) Both courts below have found that ¡he provision for the after-born child, Sandra, by way of insurance constituted the requisite statutory settlement ” and jarred her from participating in the estate. That finding is sonclusive, unless we can say, as a matter of law, that a “ settlenent ” requires some element here lacking. Neither the purpose of the statute nor its long-continued construction by the jourts, permits such a decision.

The statute’s earliest forerunner, practically word for word dentical, was enacted in 1830 (Rev. Stat. of N. Y. [1830], pt. II, ch. VI, tit. I, § 49). Its purpose was not to compel, regulate Jr control testamentary provision * * * by a parent for children ” (McLean v. McLean, 207 N. Y. 365, 371), but merely to guard against inadvertent or unintentional disinheritance ’ ’ (Wormser v. Croce, 120 App. Div. 287, 289) or, as the Statutory Revisers who drafted the provision explained, to make “ just provision * * * for a probable oversight ” where a testator las failed to provide for an after-born child. (Revisers’ Note to proposed § 56 [later enacted as § 49], Rev. Stat. of N. Y., pt. II, ch. VI, tit. I, Revisers’ Reports [1828], vol. 3.)

Since there is here nothing to suggest any specific prerequisite to, or any recondite meaning for, a settlement,” we take as jur guide the statute’s purpose and design. The legislature attempted neither to entail estates in favor of after-born children nor to shield them from intentional disinheritance or unequal treatment. Its sole objective was to assure that if, through oversight, they were neglected in the will, other provision ivould be made for them. The legislature did not choose, and has not chosen, to specify the character or content of the essential “ settlement ” or to prescribe any definite yardstick for determining whether one has been effected. Accordingly, it is the fact situation in each case that must be considered and appraised, with a view to determining whether the parent intended a given out-of-will provision to serve the purpose of a settlement ” under section 26. The touchstone is intent, and no court can decree in advance the essential factors upon which a particular testator’s intention may be predicated. Such factors as the character and size of the provision for the after-born child, the circumstances under which it was made, the value of the entire estate and, as here, the nature of the provision made for another child, may undoubtedly serve as signposts to the testator’s intention.

While this court has not hitherto considered the question, surrogate’s courts throughout the state have, with rare exception, agreed that the matter of intent is the all-important issue, that any act of the testator indicating an intention to make future provision ” for the child would fulfill the requirement ” for a settlement. (Matter of Brant, 121 Misc. 102,104; see, also, Matter of Schwabacher, 202 Misc. 15; Matter of Stone, 200 Misc. 639; Matter of Kraston, 58 N. Y. S. 2d 364, 366; Matter of Hartman, 55 N. Y. S. 2d 791; Matter of Kreutz, 49 N. Y. S. 2d 402, 404; Matter of Kelly, 182 Misc. 481, 486; Matter of Hagendorn, 41 N. Y. S. 2d 491; Matter of Curry, 21 N. Y. S. 2d 544; Matter of Griffin, 159 Misc. 12, 15-16; Matter of Backer, 148 Misc. 318, 320; Matter of Froeb, 143 Misc. 660.) If that be so, the settlement ” may be effected at any time; it need not be made before or contemporaneously with the execution of the will. (See Matter of Stone, supra, 200 Misc. 639; Matter of Kraston, supra, 58 N. Y. S. 2d 364, 365; Matter of Hartman, supra, 55 N. Y. S. 2d 791; Matter of Kreutz, supra, 49 N. Y. S. 2d 402, 404; Matter of Kelly, supra, 182 Misc. 481, 486; Matter of Hagendorn, supra, 41 N. Y. S. 2d 491; Matter of Curry, supra, 21 N. Y. S. 2d 544; Matter of Backer, supra, 148 Misc. 318; Matter of Froeb, supra, 143 Misc. 660; Matter of Brant, supra, 121 Misc. 102; but see, contra, Matter of Stern, 189 Misc. 639, 650 et seq.; Matter of Robinson, 188 Misc. 720; Matter of Kirk, 191 Misc. 473.) It need not assume any particular form; t may, for example, be a gift in trust of a savings account (see Matter of Hartman, supra, 55 N. Y. S. 2d 791; Matter of Gurry, supra, 21 N. Y. S. 2d 544; but cf. Matter of Griffin, supra, 159 Misc. 12) or the payment, as in this case, of proceeds from Delicies of life insurance. (See Matter of Schwabacher, supra, 202 Misc. 15; Matter of Stone, supra, 200 Misc. 639; Matter of Kraston, supra, 58 N. Y. S. 2d 364; Matter of Kreutz, supra, 49 N. Y. S. 2d 402; Matter of Kelly, supra, 182 Misc. 481; Matter of Hagendorn, supra, 41 N. Y. S. 2d 491; Matter of Backer, supra, 148 Misc. 318; Matter of Froeb, supra, 143 Misc. 660; Matter of Brant, supra, 121 Misc. 102.) It need not be an irremeable interest, forever placed beyond the control or dominion of the testator (see Matter of Stone, supra, 200 Misc. 639; Matter of Kraston, supra, 58 N. Y. S. 2d 364, 365; Matter of Kelly, supra, 182 Misc. 481, 486; Matter of Hagendorn, supra, 11 N. Y. S. 2d 491; Matter of Backer, supra, 148 Misc. 318; Matter of Froeb, supra, 143 Misc. 660; Matter of Brant, supra, [21 Misc. 102); and it may, indeed, be contingent, payable upon the child’s surviving some one other than the testator. (See Matter of Schwabacher, supra, 202 Misc. 15, 16; Matter of Kirk, supra, 191 Misc. 473, 475; Matter of Kreutz, supra, 49 N. Y. S. 2d 402.)

That the decisive criterion under the statute before us is ntent, rather than form or method, is further confirmed 3y consideration of a related statute. Enacted in 1830 — ilong with the earliest version of section 26 — was the predecessor of present section 35 of the Decedent Estate Law, pre scribing that, absent provision for “ some settlement,” a wil was to be deemed revoked by a subsequent marriage and the birti of issue (Rev. Stat. of N. Y. [1830], pt. II, ch. VI, tit. I, § 43) Rights under that statute, just as under section 26, depended oi the lack of a “ settlement ”. While both sections have been sub jected to periodic legislative review (see, e.g., 1931 Report of the Commission to Investigate Defects in the Laws of Estates [N. Y Legis. Doc., 1931, No. 69], pp. 76-77; 1932 Report [N. Y. Legis Doc., 1933, No. 55], pp. 6, 20), the legislature in 1932 amendec section 35, but not section 26, by replacing the words, “ som< settlement ” — in section 35 — with the term, “ an ante nuptia agreement.” (L. 1932, ch. 459; see, also, L. 1919, ch. 293; L 1931, ch. 562.) Such variant legislative treatment of thes; analogous provisions is significant and enlightening; while thu insisting upon a specific type of settlement under section 35 the legislature took no steps to require any particular type o “ settlement ” under section 26. And, beyond that, it suggest; the legislature’s approval of the long-continued judicial con struction given to the phrase in section 26. (Cf. Rucher v Board of Educ. of City of N. Y., 284 N. Y. 346, 348-349; Matter of Scheftel, 275 N. Y. 135, 141; Matter of Trosk v. Cohen, 262 N. Y. 430, 435-436.)

Having in mind the facts of the case before us, Faber’s desig nation of Sandra as co-beneficiary of insurance policies having ; face value of $29,000 leaves little doubt — or, at least, the court below were justified in so finding — that he intended her shar of the insurance proceeds to constitute her sole receipt a his death. By doing what he did, Faber effected a more or les equal division of his insurance estate between his daughter; and by will provided that the remainder of his assets be held h trust for his wife and father. While he did direct that, upoi their death, the other daughter, Adell, was to receive whateve: remained of the trust corpus, there is no great likelihood — particularly in view of the trustees’ almost unlimited power to invade principal for the wife’s ‘ ‘ comfort and support ’ ’ — tho any sizable share of the estate will eventually accrue to Adell.

Indeed, if the surrogate had concluded that Sandra had a righ to her intestate share, the corpus of the trust would have bee] ut from $54,000 to about $36,000. Such a diminution of the rust would have seriously frustrated the testator’s intent that ds widow, very obviously the primary object of his affections, ie adequately cared for. Moreover, to rule that Sandra, despite ¡.er insurance proceeds, was left “ unprovided for by any ettlement,” would result in her receiving one third of the -state, about $18,000, in addition to the insurance of $14,500, i total of some $33,000, an amount that might well exceed Vdell’s highly speculative share. It is hard to believe that any other could have intended a distribution so disproportionately avorable to the younger child. Yet such a result — a distribuion patently unfair to an older child or to a spouse mentioned n the will — might frequently ensue, were we to hold, as a natter of law, that a provision such as that here involved ell short of the “ settlement ” contemplated by the statute. Che placid history of this ancient enactment, its long-accepted construction without serious challenge or legislative modification, affords impressive evidence that its objective may best je attained without rigid formalistic requirements. At any irate, the legislature has not seen fit to impose any, and we merely follow its mandate in affirming the challenged determination.

The order of the Appellate Division should be affirmed, with 30sts to all parties appearing herein and filing separate briefs, payable out of the estate.

Desmond, J.

(dissenting). I dissent because the decision about to be announced fails to give complete, affirmative meaning to important statutory language, and, insofar as it attempts definition thereof, arrives at a meaning opposed to that dictated by history and legislative purpose.

Section 26 of the Decedent Estate Law, our “ pretermission ” statute as to after-born children, has not, until now, been up for construction in this court. The statutory language to which a precise meaning should here arid now be given is this: ‘ leaving such child, so after-born, unprovided for by any settlement ”. That plainly says that, to escape the result otherwise dictated— the partial revocation of the will and the “ letting in ” of the after-born child — there must not only be provision for that child, but such provision must be by way of a “ settlement ”. Numerous lower court decisions cited in the majority opinion say that the settlement ” need not be in the form of a writing signed by the parent, need not be in any particular form, need not be absolute, need not be irrevocable and need not be adequate or reasonable in relation to the size of the parent’s estate. It would seem to follow, from all those negatives taker together, that any sort of gift, to an after-born child, unless completely abrogated during the parent’s life, can be held by a surrogate to have “ provided for ” the child by a “ settlement ”.

We are told that it is all a matter of intent, and that, when such a gift or transfer has been made, the intent thereof becomes a question of fact for the surrogate. Examination of the cases cited reveals that in many of them there was no real proof that the parent-donor, making a gift to his child, ever had any idea he was thereby “ providing ” for the child after his own death, or that he ever intended a settlement ” or knew of the existence of that legal term, or of the concept it covers. The present state of the law is, therefore, that if a parent has, for instance, taken out any life insurance policy with his after-born child as a beneficiary, an appropriate finding of intent can be made, and that is the end of the whole matter.

During a parent’s life his children may be “ provided for ” after his death, only by the definite, permanent setting aside of property for that special purpose. The legislative use of the word settlement ” further delimits all that, by requiring that the providing ” be done in a particular way, that is, by a “ settlement ”. A careful historical study of that word’s meaning can be found in Matter of Stern (189 Misc. 639, 650-652). At the very least it requires a writing signed by the parent, and some evidence that the gift or transfer was made for the purpose of after-death support of the beneficiary. That whole idea is set at naught by holdings that the casual purchase of a small life insurance policy, or the impulsive handing over of a small bank account, or securities of small value, is a settlement ” which provides ” for the child-beneficiary after the latter’s death, as a substitute for a testamentary provision.

It seems to me that to give section 26 any useful meaning, it must be held to require; first, that a gift or transfer, to constitute provision for a child by settlement, be in a writing subscribed by the parent; second, that it be absolute, not contingent; and, third, that there be some real, substantial, weighty evidence, inside or outside the writing, that the maker thereof intended it to be a “ settlement ’ ’ by which his child would be ‘ provided for ” after his death. Certainly, the third of those requisite elements is missing in the present case.

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

Order affirmed, etc.

      . Initially, in 1830, the statute covered only a father’s will; its coverage was broadened in 1869 to include the will of either parent (L. 1869, ch. 22).

      . It was not until 1945 — when Matter of Stern {supra, 189 Misc. 639) was leeided —115 years after the statute was first enacted, that any surrogate even suggested that the “ settlement ” denoted or encompassed only a provision made by the testator before or contemporaneously with the execution of the will. Indeed, the very surrogate, who in 1945 so construed it, had, some 12 years earlier, held otherwise (see Matter of Backer, supra, 148 Misc. 318), and, in the years since 1945, only one other judge has chosen to follow the Stern decision. (See Matter of Kirk, supra, 191 Misc. 473; Matter of Robinson, supra, 188 Misc. 720.) Even the Appellate Division justices who dissented below expressly declared that they “ cannot adopt ” the view expressed in Stern. “Aside from being highly legalistic,” they wrote, “this narrow interpretation renders the statute practically meaningless.” (280 App. Div. 394, 398; see, also, Schwartzberg and Lieb, Succession, 1952 Survey of New York Law, 27 N. Y. U. L. Rev. 1127, 1136.)


author: Desmond, J. Conway, J.

text:
    John Cifolo et al., Appellants, v. General Electric Company, Respondent. Fred Cope et al., Appellants, v. General Electric Company, Respondent.
    Argued January 5, 1953;
    decided April 9, 1953.

      Frank J. Donner, David Scribner, Arthur Kinoy and Marshall Perlin for appellants in both actions.
    I. The action may be maintained. (Barrencotto v. Cocker Saw Co., 266 N. Y. 139; 3 Duke Bar Assn. Journal 96; Donnelly v. Minneapolis Mfg. Co., 161 Minn. 240.) II. Plaintiffs may maintain a common-law action against defendant for the injury of partially disabling silicosis resulting from defendant’s negligence and violation of the labor laws of the State of New York, (del Busto v. Du Pont de Nemours & Co., 259 App. Div. 1070; Schwartz v. Bausch & Lomb Opt. Co., 291 N. Y. 765; Scherini v. Titanium Alloy Co., 286 N. Y. 531; Soraci v. Colonial Sand & Stone Co., 276 App. Div. 895.) III. Plaintiffs may institute and maintain this action at law since the Workmen’s Compensation Law is an exclusive remedy only to the extent that it specifically establishes some basic statutory liability covering the particular injury involved. The State Constitution expressly confines the operation of the “ exclusive remedy ” provisions of the Workmen’s Compensation Law to particular injuries for which the statute establishes basic liability. (Matter of Post v. Burger & Gohlke, 216 N. Y. 544; Scherini v. Titanium Alloy Co., 286 N. Y. 531; Shanahan v. Monarch Eng. Co., 172 App. Div. 221, 219 N. Y. 469; Morris v. Muldoon, 190 App. Div. 689, 229 N. Y. 611; Farnum v. Garner Print Works & Bleachery, 184 App. Div. 911, 229 N. Y. 554; Repka v. Fedders Mfg. Co., 239 App. Div. 271, 264 N. Y. 538.) IV. The Workmen’s Compensation Law does not grant compensation coverage or liability for partially disabling silicosis. (Schwartz v. Queensboro Farm Products, 191 Misc. 778; Shinnick v. Clover Farms Co., 169 App. Div. 236; Matter of Nigohosian v. Daub & Co., 275 App. Div. 463.) V. The 1947 amendments to the Workmen’s Compensation Law emphatically reaffirm the authority to bring this action at law for a partial silicotic disability injury, (del Busto v. Du Pont de Nemours & Co., 167 Misc. 920; Soraci v. Colonial Sand & Stone Co., 191 Misc. 1056, 276 App. Div. 895.) VI. The common-law action for damages is properly available to plaintiffs for the entire period during which the Workmen’s Compensation Law failed to provide compensation liability for partial silicotic disability. VII. The causes of action set forth in this complaint are not in any part outlawed by the Statutes of Limitation. The causes of action should be viewed as arising with the discovery of the injury. (Urie v. Thompson, 337 U. S. 163.) VIII. Each period of exposure to the silicotic dust and other impurities resulting from defendant’s continuous and repeated violations of the Labor Law of this State should be viewed as creating a new injury and, correspondingly, a new and separate cause of action. (Baxter v. State of New York, 189 Misc. 525; Sadowski v. Long Island R. R. Co., 292 N. Y. 448.)

      Phil E. Gilbert, Jr., and Harold A. Segall for respondent in both actions.
    I. The Workmen’s Compensation Law bars this action. (Powers v. Porcelain Insulator Corp., 285 N. Y. 54; Scherini v. Titanium Alloy Co., 286 N. Y. 531; Schwartz v. Bausch & Lomb Opt. Co., 263 App. Div. 1065, 291 N. Y. 765; del Busto v. Du Pont de Nemours & Co., 167 Misc. 920, 259 App. Div. 1070; Soraci v. Colonial Sand & Stone Co., 191 Misc. 1056, 276 App. Div. 895; Matter of Jensen v. Southern Pacific Co., 215 N. Y. 514; Repka v. Fedders Mfg. Co., 239 App. Div. 271, 264 N. Y. 538; Matter of Sweeting v. American Knife Co., 226 N. Y. 199, 250 U. S. 596; Morris v. Muldoon, 190 App. Div. 689, 229 N. Y. 611; Farnum v. Garner Print Works & Bleachery, 229 N. Y. 554; Mnich v. American Radiator Co., 263 App. Div. 573, 289 N. Y. 681.) II. The 1947 amendments to the Workmen’s Compensation Law made no substantive change in the provisions relating to partial disability resulting from silicosis. (Powers v. Porcelain Insulator Corp., 285 N. Y. 54; Soraci v. Colonial Sand & Stone Co., 191 Misc. 1056, 276 App. Div. 895.). III. Subdivision 2 of section 48 of the Civil Practice Act bars so much of each cause of action as accrued prior to March 22, 1944.
   Desmond, J.

At the time these actions were commenced, each plaintiff was, and had been for several years, employed by defendant at one of its manufacturing plants. The complaints allege that, during the period of those employments, defendant negligently and in violation of certain provisions of the New York Labor Law, failed to provide and maintain, proper devices to remove dust and other impurities from the air, that conditions dangerous to the health of plaintiffs and other employees were thereby created, and that, as a result thereof, plaintiffs inhaled large quantities of dust and other impurities which created in each of them the condition known as partially disabling silicosis. The complaints further alleged that, although this disease condition from which plaintiffs suffer is an injury or occupational disease listed in and covered by the New York State Workmen’s Compensation Law, the law does not bar these suits, and that, if that statute were to be construed as setting up such a bar, such a result would be violative of those provisions of the New York Constitution (art. I, § 6) and the Federal Constitution (14th Amendt.) which guarantee due process of law.

Each suit was made the subject of a motion by defendant to dismiss under rules 106 and 107 of the Buies of Civil Practice on these grounds: first, that certain parts of the various causes of action were barred by lapse of time; second, that none of the alleged counts in either complaint contained facts sufficient to constitute a cause of action; and, third, that the court has no jurisdiction of any of the causes of action sought to be pleaded. The motions were granted. We agree with the holdings of the courts below that the provisions of the Workmen’s Compensation Law are a complete bar to the maintenance of any of the causes of action in these two complaints, and so it will not be necessary herein to deal with the questions as to the Statute of Limitations.

It is conceded that the employments at which all these plaintiffs worked are included among those “ Hazardous employments ” set forth in section 3 of the act, as to which workmen’s compensation is payable for injuries or death, and that defendant has. provided for payment of such compensation to its employees. It is conceded, too, that silicosis and other dust diseases are on the list of occupational ailments for which compensation is payable under subdivision 2 of section 3 of the act. But, as the complaints themselves point out, the act specifically provides, as it has provided for some years, that compensation is payable for silicosis or other dust diseases only when .they result in total disability or death. Sections 10 and 11 of the act (read with §§ 38 and 39 thereof) make it clear that, for injury or death arising out of and in the course of employment, from occupational diseases, the liability of an employer who, like this employer, has complied with the compensation act, shall be exclusive “ and in place of any other liability whatsoever * * * at common law or otherwise ”. Since 1936 (see chapter 887 of the Laws of that year, being article 4-A of the Workmen’s Compensation Law, since repealed), the Workmen’s Compensation Law has said in plainest terms that compensation, while payable for total disability or death due to silicosis or other dust diseases, shall not be so payable for partial disability from those causes. That such is the meaning and intent of the statute cannot be disputed. That no disability is payable for partial disability due to silicosis and similar dust diseases has been held in every decision in which the matter has been raised, directly or indirectly, beginning with our opinion written in 1941 in Powers v. Porcelain Insulator Corp. (285 N. Y. 54). The Powers case dealt with article 4-A of the act, since repealed, but the present subdivision 2 of section 3 (see “ No. 28 ”), read with sections 10, 11, 38 and 39 of the act, has the same meaning. That these statutes forbid compensation payments for partial silicosis disabilities was expressly recognized by the Governor in 1947 in a memo signed by him in connection with a statute passed in that year (N. Y. Legis. Ann., 1947, p. 211). The history of the legislative treatment of workmen’s compensation benefits for silicosis sufferers reveals that the Legislature had precisely this result in mind, since it first (see L. 1935, ch. 254) put under compensation coverage both total and partial silicosis disabilities, and then, the next year (see L. 1936, ch. 887, supra), cut down that coverage, by this language: Compensation shall not be payable for partial disability due to silicosis or other dust disease.” Not only is this legislative intent unmistakably clear from the language used but any other meaning or intent would be most improbable; no one becomes totally disabled from these diseases before first passing through a partial disability phase, and no Legislature could conceivably intend that, as to the partial phase, the sufferer would have a common-law cause of action with possible heavy damages, but for the subsequent total disablement would be relegated to lesser compensation awards only.

What plaintiffs are really arguing here is that the Workmen’s Compensation Law is unconstitutional in that it purports to leave without any remedy employees partially disabled from silicosis. As we remarked in Scherini v. Titanium Alloy Co. (286 N. Y. 531, 537), that contention, even if correct, would not authorize a common-law suit since it would merely mean that partially disabled claimants would be thrown back onto the 1935 statute which authorized workmen’s compensation for both partial and total disability from silicosis. However, our statement to that effect in Scherini (supra) was, in a sense, “ dictum ”, and none of our subsequent opinions has contained a flat answer to the question here presented: Is restricting workmen’s compensation benefits to totally disabled silicosis sufferers only, constitutional? We now hold expressly what is implicit in our Scherini opinion, and was flatly held by other courts in 1938 in delBusto v. DuPont deNemours & Co. (167 Misc. 920, affd. 259 App. Div. 1070, motion for leave to appeal denied 284 N. Y. 817), that is, that the Legislature acted within its powers in producing that result. In 1934, in Barrencotto v. Crocher Saw Co. (266 N. Y. 139), this court held that silicosis was not one of the occupational diseases dealt with in the Workmen’s Compensation Law and that, accordingly, common-law actions for disabilities due to silicosis were not barred. The next year, as we have pointed out above, the Legislature supplied this omission by extending workmen’s compensation coverage to all occupational diseases ”, and, in 1936, it created a new limitation by denying compensation awards for partial silicosis disabilities. Whatever be the wisdom or justice of such a limitation, its constitutionality is clear. It is of the essence of workmen’s compensation that the benefits therein provided as to any accidental injury or occupational disease are exclusive, and that, once the Legislature has specified those benefits, no damages or remedies against the employer are available elsewhere (see New York Central R. R. Co. v. Whiter 243 U. S. 188; Matter of Jensen v.

Southern Pacific Co., 215 N. Y. 514, revd. on other grounds sub nom. Southern Pacific Co. v. Jensen, 244 U. S. 205; Shanahan v. Monarch Eng. Co., 219 N. Y. 469; Repka v. Fedders Mfg. Co., 264 N. Y. 538). As the Shanahan case pointed out (see 219 N. Y., p. 478, supra) a new system was, by the Workmen’s Compensation Law, substituted in its entirety. In the Barrencotto case a unanimous court assumed that when and if the Legislature should set up compensation benefits for silicosis, those benefits would be exclusive of any other remedy or right of action. In that and other decisions, reference is made to the fact that workmen’s compensation laws designedly take away some of the workman’s prior available remedies, in that, for instance, they deprive him of any recovery for pain and suffering (Matter of Sweeting v. American Knife Co., 226 N. Y. 199), or for injuries or illnesses not industrially disabling (Farnum v. Garner Print Works & Bleachery, 229 N. Y. 554), and limit to comparatively small weekly amounts or small totals, the sums allowable by the board. It has never been doubted that, when an employment is covered into the act and awards are authorized for injuries and diseases arising out of and in the course of such employment, the fixation of the benefits, in dollars and limitations of periods of payment, is solely up to the Legislature. Thus, the New York statute since its original enactment has, in its section 12, forbidden awards, in some cases, for the first seven days (originally fourteen days) of disability (see Matter of Gorle v. Joy Co., 230 N. Y. 595). If failure to award compensation for partial disability resulted in unconstitutionality, then, under plaintiffs’ theory, section 12 would be subject to the same infirmity, and every injured workman would have a common-law suit for the first seven days of his disability. Workmen’s compensation laws balance benefits. The disabled workman loses some of his former rights but gains some new ones. If the particular deprivation with which we are dealing here be harsh or inconsistent with enlightened social policy then it is up to the Legislature to improve the law. There is nothing the courts can do about it. The sum of it all is this: when the act makes a particular injury or disease compensable, then the Legislature has occupied the field, all other remedies are abrogated, and there is no remedy outside the act (see 121 A. L. R. 1143).

Similar statutes of other States denying awards for partial silicosis disability have been upheld in strong and convincing opinions (Masich v. United States Smelting, Refining & Mining Co., 113 Utah 101, appeal dismissed 335 U. S. 866; Moffett v. Harbison-Walker Refractories Co., 339 Pa. 112; see 2 Larson’s Workmen’s Compensation Law, p. 141). In all, there are thirteen States which so restrict awards made on account of dust diseases (see 1 Larson, op. cit., p. 596, n. 88).

No different legal result is brought about by the inclusion in these complaints of accusations that the wrongs complained of were violations of express provisions of the State Labor Law (see §§ 200 and 299 thereof). For the reasons set forth in other parts of this opinion, it must be held that, for the contraction of silicosis, arising out of and in the course of employment, the sufferer’s only recourse is that described in the Workmen’s Compensation Law.

The judgments should be affirmed, with costs.

Conway, J.

(dissenting). A number of employees of defendant commenced these actions at law against their employer to recover damages for injuries which they allege have been caused by a violation of the defendant’s common-law duty to furnish to them a safe place in which to work as rewritten and enlarged by the statutory duties imposed by sections 200 and 299 of the Labor Law. Such common-law duty had been imposed upon an employer since we became a nation in 1776 and adopted the common law of England both in our nation and in our State. Subsequently our Legislature from time to time has substituted increased statutory obligations which made the original common-law duty more stringent and onerous. (See, e.g., L. 1897, ch. 415, § 86, under which the owner, agent or lessee of a factory was required to ventilate properly and sufficiently each workroom; L. 1909, ch. 36, § 86, as amd., requiring one such as defendant here who operates a factory to provide suction devices and exhaust fans to remove dust, gases, fumes, vapors, fibers and other impurities as may be generated or released in the course of the business carried on in such a factory.) From time to time our Legislature has amended such statutes for workers, the latest amendment to section 299 of the Labor Law having been enacted in 1941.

Present Labor Law (§ 200) reads as follows: “ General duty to protect health and safety of employees. All places to which this chapter applies shall be so constructed, equipped, arranged, operated and conducted as to provide reasonable and adequate protection to the lives, health and safety of all persons employed therein. The board shall make rules to carry into effect the provisions of this section.”

Labor Law (§ 299), insofar as applicable, reads as follows: ‘ ‘ Ventilation, heating and humidity. 1. Every work room in a factory shall be provided with proper and sufficient means of ventilation, natural or mechanical or both, as may be necessary, and there shall be maintained therein proper and sufficient ventilation and proper degrees of temperature and humidity at all times during the working hours. If owing to the nature of the manufacturing process carried on in the factory work room excessive heat be created therein, there shall be provided, maintained and operated such special means or appliances as may be required to reduce such excessive heat.

“ 2. All machinery creating dust or impurities in quantities tending to injure the health of employees shall be equipped with proper hoods and pipes connected to an exhaust fan of sufficient capacity and power to remove such dusts or impurities; such fan shall be kept running constantly while such machinery is in use. If the board decides that such apparatus is unnecessary ¡ for the health and welfare of the employees, or that other means of protection may be provided to safeguard the health and welfare of the employees against such injurious dusts or impurities, it may adopt rules excepting such machinery from the operation of this subdivision, or prescribing such requirements as will effectuate the intent of this subdivision.

“3. If dust, gases, fumes, vapors, fibers or other impurities are generated or released in the course of the business carried on in any workroom of a factory, in quantities tending to injure the health of the employees, suction devices shall be provided which shall remove such impurities from the workroom, at their point of. origin where practicable, by means of proper hoods connected to conduits and exhaust fans. Such fans shall be kept running constantly while the impurities are being generated or released.” (See, also, Employers’ Liability Law, §§ 2, 4.)

We now turn to the allegations of the complaint. Plaintiffs allege that defendant has failed to comply with and has violated the quoted sections of our Labor Law in that it has failed to maintain its factory in accordance with the requirements of sections 200 and 299 of the Labor Law by reason of the fact that (a) it has not provided each workroom with sufficient means of ventilation, natural or mechanical; (b) it has not maintained in the workroom of its afore-mentioned factory proper and sufficient ventilation and proper degrees of temperature and humidity at all times during working hours; (c) it has not maintained the special means and appliances in its workrooms required to reduce their excessive heat; (d) it has not equipped its machinery with proper hoods and pipes connected to exhaust fans of sufficient capacity and power to remove dust, gases, fumes, vapors, fibers and other impurities; (e) its exhaust fans have not been kept running continuously while machinery which releases and generates dust, gases, fumes, vapors, fibers and other impurities is in use, and (f) it has not provided suction devices which remove dust, gases, fumes, vapors, fibers and other impurities from the workrooms of said factory at their point of origin by means of proper hoods connected to conduits and exhaust fans, and has not kept its fans running constantly while such impurities are being generated or released.

The plaintiffs then allege that by reason of the failure of defendant to comply with the quoted sections of the Labor Law, dust, gases, fumes, vapors, fibers and other impurities have been released in the workrooms of defendant’s factory and excessive heat has been created therein; that such dust, gases, etc., have been concentrated in the air of the workrooms and have created a danger to the lives, health and safety of plaintiffs ; that the excessive heat created in the workrooms has also constituted such danger; that plaintiffs have as a result inhaled large amounts of dust, gases, fumes, vapors, fibers and other impurities and as a result they have lodged in the lungs of plaintiffs and have created a condition known as silicosis, pneumonoconiosis or chalitis; that as a result the life expectancies of plaintiffs have been lessened, their resistance to numerous diseases have been wholly or partially destroyed and that they have been required to undergo extensive medical treatment and will require further treatment and hospitalization.

The defendant without answering the complaint moved (1) for judgment, pursuant to rule 106 of the Buies of Civil Practice, dismissing the complaint and each cause of action therein, upon the ground that the complaint and each cause of action alleged therein do not state facts sufficient to constitute a cause of action, and (2) for judgment, pursuant to rule 107, dismissing the complaint and each cause of action alleged therein, upon the ground that it appears from the complaint and the moving affidavit that the court lacks jurisdiction of the subject of the action and of each cause of action alleged in the complaint.

It thus appears that, for the purpose of these motions made as to each of the complaints, the allegations therein must be taken to be true.

The motions so made were granted upon the theory that whatever injuries the plaintiffs had suffered were compensable, if at all, only under the Workmen’s Compensation Law regardless of the fact that the defendant had failed to comply with the command of our Legislature that workmen be protected by definite mechanical means so as to avoid the injuries from which plaintiffs are suffering. The Workmen’s Compensation Law was primarily adopted in order to provide payment of compensation to those who were injured by accident or through occupational disease while employed although the employer was without common-law or statutory fault. This court has never held that an employer may disregard or violate the provisions of our Labor Law with impunity and be subject only to the penalty of paying workmen’s compensation for his wrongdoing. That would be to license the violation of statutes designed to protect workmen and to set at naught the legislative will.

There are other allegations in the complaint which were added so as to raise constitutional questions under both our State and Federal Constitutions. The complaints specify New York Constitution (art. I, §§ 6, 11, 18) and the Fourteenth Amendment to the United States Constitution. Such allegations are to the effect that no remedy under the Workmen’s Compensation Law has been given the plaintiffs because, although injured by their employer’s disregard and violation of our Labor Law sections enacted for their specific protection, they are not totally disabled and that it is only for total disablement through the diseases from which plaintiffs are suffering that workmen’s compensation is granted by our State. These plaintiffs are seeking redress for injuries from which they are suffering. “ Disability ” whether “ partial ” or “ total ” are words of art under definitions supplied in Workmen’s Compensation Law vocabulary. It is true that where workmen’s compensation is properly payable for “ disability ” our State statute provides no payment for partial disability suffered from dust disease but only for total disability suffered from dust disease. Plaintiffs accept that statutory situation. Years ago our court in an opinion written by Lehman, J., before he became Chief Judge, in Barrencotto v. Cocker Saw Co. (266 N. Y. 139), decided that no workmen’s compensation payments had been provided for sufferers from dust diseases acquired while working in industry and that, therefore, such sufferers had remedy by action at law since it would be violative of our State Constitution to take away a common-law and statutory action without substituting another remedy. For a period of approximately one year thereafter our Legislature provided compensation payments for both partial and total disability from dust diseases but then withdrew compensation unless the sufferer had become totally disabled (see L. 1935, ch. 254; L. 1936, ch. 887). That is still the decisional law of our State. Subsequently, Per Curiam opinions and memoranda of our court have been misinterpreted by some members of the Bar but generally courts and judges have realized that we have never held that those injured by dust disease incurred in industry either (a) because of disregard and violation of common-law or statutory duties imposed to safeguard workers in industry, or (b) because of injuries sustained constituting less than total disability as defined in the Workmen’s Compensation Law, although sustained without fault by the employer, were without remedy until the diseases had run their course to the point where the workers were totally disabled. (Scherini v. Titanium Alloy Co., 286 N. Y. 531, 541, Rippey, J., dissenting; Schwartz v. Queensboro Farm Products, 191 Misc. 778, 782, Walter, J.; Soraci v. Colonial Sand & Stone Co., 191 Misc. 1056, 1057, Pecora, J.; Cifolo v. General Elec. Co., 279 App. Div. 884, 885 [present case], Dore, J., dissenting.) The mere statement of the thought is its refutation for it would be monstrous to say that such sufferers were to be economic derelicts and without aid from any source as they coughed their way to total disablement. To so hold would be violative of sections 6 and 18 of article I of our State Constitution and the Fourteenth Amendment to the United States Constitution.

We agree with the decision below insofar as it relates to the applicability of the Statute of Limitations.

The judgment of the Appellate Division, insofar as it affirmed the dismissal of such parts of the causes of action as are based upon liability accruing prior to March 22, 1944, should be affirmed. The judgment appealed from should otherwise be reversed and the motions to dismiss the complaints be denied, with costs in all courts.

Loughran, Ch. J., Dye, Field and Froessel, JJ., concur with Desmond, J.; Conway, J., dissents in opinion in which Lewis, J., concurs.

Judgments affirmed.