text:
    Libbie Traktman, Appellant and Respondent, v. The City of New York, Respondent and Appellant.
    Limitation of actions — tax — Brooklyn (city of) — purchaser at tax sale in city of Brooklyn may recover amount paid if tax void or illegal but action must be brought within six years after delivery of deed (L. 1883, ch. 114, § 4, amd. L. 1885, ch. 163) — action brought nearly forty years after delivery of deed barred — notice to purchaser or proof in court of illegality of tax not necessary to set statute running — action also barred under sections 381 and 382 of Code of Civil Procedure — limitation applicable to all actions to recover such amounts.
    1. Under the provisions of section 4 of chapter 114 of the Laws of 1883, as amended by chapter 163 of the Laws of 1885, a purchaser at a tax sale in the city of Brooklyn is permitted to recover the amount paid whenever his title proves defective because of a void or illegal tax, but the action to recover the amount must be commenced within at least six years after the delivery of the deed to the purchaser.
    2. An action, therefore, to recover money paid upon a tax sale in the city of Brooklyn for taxes which were illegal and void, brought nearly forty years after delivery of the deed, is barred. Notice to the purchaser or proof in court of the illegality of the tax was not necessary to set the statute in operation. The levy was illegal and void the day it was made and the duty to repay the taxes existed as soon as they were collected. The Legislature by the acts referred to provided the Statute of Limitations which is applicable and the said statute commenced to run from the delivery of the deed.
    3. The action is also barred under section 382 of the Code of Civil Procedure, in force and effect when this money was paid, which required an action to recover upon a liability created by statute, except for a penalty or forfeiture, to be commenced within six years. Chapter 114 of the Laws of 1883 provides that the certificate of purchase shall contain a covenant to refund the money f the title prove invalid, and as the purchaser, under the statute of 1883, could have brought his action on the agreement contained in his certificate of purchase on the day that he received it, because of the invalidity of the title purchased, this six years’ Statute of Limitations applied, or, if the covenant is contained in a sealed instrument, then the twenty-year statute. (§ 381.) In either event the action is barred.
    4. A contention that the acts of 1883 and 1885 apply only to taxes that are void upon the face of the tax records, or to such invalidities as appeared upon the face of the assessment rolls, cannot be sustained. There is nothing in the acts which makes the distinction or even suggests that they only apply to' certain classes of illegal taxes. The act of 1885 applies the six-year limitation to all actions brought to recover the amount paid where the title conveyed proves invalid.

      Traktman v. City of New York, 213 App. Div. 836, reversed.
    (Argued October 20, 1925;
    decided November 24, 1925.)
    Cross-appeals from a judgment, entered April 16, 1925, upon an order of the Appellate Division of the Supreme Court in the second judicial department, which reversed a judgment in favor of defendant entered upon an order of Special Term, denying a motion by plaintiff for summary judgment and directing a dismissal of the complaint, and granted the motion of the said plaintiff.

      William Seward Shanahan for plaintiff, appellant and respondent.
    The cause of action set forth in the complaint has always caused a liability to arise at common law on common-law principles, irrespective of any statute or any liability created by statute. (Brevoort v. City of Brooklyn, 89 N. Y. 128; Black on Tax Titles [2d ed.], § 463; Cooley on Taxation [4th ed.], § 1553; Chapman v. City of Brooklyn, 40 N. Y. 372; Matter of N. Y. Catholic

      Protectory, 77 N. Y. 342; Diefenthaler v. Mayor, 111 N. Y. 331; Ætna Ins. Co. v. Mayor, 153 N. Y. 331.) The cause of action herein accrued when the Supreme Court adjudicated in the Pines and Wattach actions that the grantee of the Roosevelt Hospital was the owner of the real property involved and when, as a result, judgments were entered ousting the plaintiff in the instant case from the possession of said real property, namely, March 11, 1918. (Ford v. Clendinin, 215 N. Y. 10; Joslyn v. Rockwell, 128 N. Y. 334; People ex rel. McGinnis v. Lewis, 127 App. Div. 107; Perrior v. Peck, 39 App. Div. 390; Finton v. Egelston, 61 Hun, 246.) The portion of chapter 114 of the Laws of 1883, as amended by chapter 163 of the Laws of 1885, which contains one of the Statutes of. Limitation urged by the defendant, does not affect the cause of action set forth in the complaint nor apply thereto in any respect. (Black on Tax Titles [2d ed.], § 464.) Chapter 163 of the Laws of 1885 does not apply, in whole or in any part, to the cause of action set forth in the complaint. (Wallace v. Int. Paper Co., 53 App. Div. 41; Matter of City of New York, 212 N. Y. 538.) Even assuming for the purpose of argument that chapter 114 of the Laws of 1883, as amended by chapter 163 of the Laws of 1885, applied in whole and in every part to the cause of action set forth in the complaint, still the limitation of six years contained in chapter 163 of the Laws of 1885 is not a bar to the bringing of this action at this time. (Reid v. Supervisors of Albany County, 128 N. Y. 364.) The limitation contained in section 382, subdivision 2, of the Code of Civil Procedure does not apply or in any way affect the instant cause of action. (Shepard Co. v. Taylor Pub. Co., 234 N. Y. 465.)

      George P. Nicholson, Corporation Counsel (William H. King and Isaac Phillips of counsel), for defendant, respondent and appellant.
    The alleged cause of action herein is barred by the six years’ Statute of Limitations as provided by subdivision 2 of section 382 of the Code of Civil Procedure, and by the Statute of Limitations contained in chapter 163 of the Laws of 1885, amending chapter 114 of the Laws of 1883. (Reid v. Supervisors of Albany County, 128 N. Y. 364; Remsen v. Wheeler, 105 N. Y. 573; Brevoort v. Brooklyn, 89 N. Y. 135; Coffin v. Brooklyn, 116 N. Y. 159; Lynde v. Melrose, 10 Allen, 49; Mulvey v. City of Boston, 197 Mass. 178; Terry v. Anderson, 95 U. S. 628; Matter of Warner, 39 App. Div. 91; Tipton v. Smythe, 78 Ark. 392; People v. Turner, 117 N. Y. 227; Matter of Moench’s Estate, 39 Misc. Rep. 480; Acker v. Acker, 81 N. Y. 143; Meigs v. Roberts, 162 N. Y. 371.)
   Crane, J.

The Roosevelt Hospital, incorporated by chapter 4 of the Laws of 1864, was the owner in 1882 of certain real property in the city of Brooklyn, county of Kings, situated on the westerly side of Hudson avenue, near to its intersection with Willoughby street. This property was assessed for taxes, which became a lien on the first day of July, 1882. The tax levy was illegal and void, as the Roosevelt Hospital under its charter was exempt from taxation, and entitled to the benefit of the provisions of law relating to charitable institutions.

In 1883 the Legislature of the State passed an act (Laws of 1883, chap. 114) concerning the settlement and collection of unpaid taxes, assessments and water rates in the city of Brooklyn. Section 4 read as follows:

“ The registrar of arrears shall, on the receipt of the purchase-money on any sale as provided by this act, deliver to the purchaser a certificate of such sale, which shall contain a covenant on the part of the city of Brooklyn to refund the amount paid for said lands, with interest at the rate of four per centum per annum from the date of sale, in case the said title conveyed by said sale shall prove invalid. Upon presentation of said certificate of sale and proof of the service of the notice of such sale, as hereinafter provided, upon the owner and mortgagee of the said lands and premises, the registrar of arrears shall, after the expiration of one year from the date of such service, execute and deliver to the purchaser on such sale, his legal representatives or assigns, a deed for said lands and premises, and such purchaser, his legal representatives or assigns, shall take a good and sufficient title in fee simple absolute to the property sold, of which the said deed shall be presumptive evidence.”

Thereafter, and on March 31, 1885, following the procedure set forth in this act of 1883, the registrar of arrears of the city of Brooklyn sold the premises for unpaid taxes to Frank J. Munson for the sum of $2,187.63, and executed and delivered to him the required certificate of sale. After obtaining this certificate, Munson served the notice required by law upon the Roosevelt Hospital, which notice provided for redemption. The hospital did not redeem or make any attempt to oust Munson from possession of the property, and he thereafter on the 29th day of June, 1887, received from the registrar of arrears, a deed in fee simple of the premises, which was recorded in the office of the register of Kings county on June 19, 1887.

A few days after the sale of this property to Munson, which was on March 31, 1885, and two years before the delivery of the deed to him, the Legislature passed chapter 163 of the Laws of 1885, amending chapter 114 of the Laws of 1883. The act was passed April 21, 1885. Section 4 thereof, so far as applicable, was amended to read as follows:

The registrar of arrears shall, on the receipt of the purchase money on any sale as provided by this act, deliver to the purchaser a certificate of such sale, which shall contain a covenant on the part of the city of Brooklyn to refund the amount paid for said lands, with interest at the rate of four per centum per annum from the date of sale, and all sums paid by him for taxes, assessments and water rates as hereinafter authorized, with interest at the rate of four per centum per annum from the dates of such payments respectively, in case the said title conveyed by said sale shall prove invalid; provided, however, that no claim can be made nor any action maintained against the city of Brooklyn upon or under said covenant or otherwise to recover the amount paid to the city of Brooklyn for any lands sold under the provisions of this act, unless an action to recover the same shall be commenced within six years after the delivery to the purchaser, his legal representatives or assigns, of the deed for said lands and premises as hereinafter in this section provided.”

Frank J. Munson, the purchaser, willed the property to his mother, from whom through many mesne conveyances, the plaintiff, Libbie Traktman, received the tax title on August 14, 1914.

Claiming to be entitled to the moneys paid by Munson in 1885 for void taxes, the plaintiff has brought this action to recover $2,187.63, with interest thereon from the thirty-first day of March, 1885, a period of forty years. The city in its answer pleaded the Statute of Limitations, and on motion made on the pleadings, the Special Term dismissed the complaint. On appeal, the Appellate Division has reversed, and given judgment for the plaintiff for the full amount, with interest from March 11, 1918, which date apparently was fixed by reference to the judgment in another action determining the invalidity of subsequent taxes.

The facts about that judgment are these: Later taxes having been levied on this property, the tax lien was sold and assigned to the Rudolph Wallach Company, which began an action to foreclose the tax lien, making Libbie Traktman, the plaintiff herein, and the city of New York parties defendant. Judgment entered in that action, on the eleventh day of March, 1918, determined that all taxes on the property were void, as the Roosevelt Hospital, the owner, was exempt from taxation. It is by reason of this judgment that the plaintiff claims to have received the first notice of the invalidity of the taxes assessed in 1882, and in consequence, the invalidity of her deed, coming as it does, through Munson, the purchaser, at the tax sale.

The Statute of Limitations is the only question presented by the record in this case.

We find nothing in the laws relating to notice to the plaintiff. In the action resulting in the judgment, above referred to, it was determined, in effect, that the taxes levied upon this property in 1882 were void. The levy, however, was illegal and void the day it was made, and has always remained such. The judgment in 1918 merely declared that to be which existed as a fact. The plaintiff, or anybody else interested, could have had the tax declared illegal at any time after July 1, 1882. The cause of action, therefore, arose at the time the alleged taxes became a lien.

The act of 1883 provided that the certificate given to the purchaser on the sale of the taxes should contain a covenant on the part of the city of Brooklyn to refund the amount paid in case the title “ shall prove invalid.” The word prove ” as used here does not refer to proof in court upon which judgment is to be entered. It is rather used in the sense given by Webster’s International Dictionary, as meaning “ to turn out to be; to be in fact.” The money was to be returned, therefore, if the taxes were illegal and void. As a matter of fact the duty to repay them existed as soon as they were collected. The duty was not postponed, nor was the right to recover them delayed until proof of illegality was made in court. The judgment, therefore, of March 11, 1918, has no bearing on the question of time in this case. (Reid v. Board of Supervisors of Albany County, 128 N. Y. 364.) A demand for the return of money paid on a void assessment is unnecessary before the commencing of an action to recover it. (Ætna Ins. Co. v. Mayor, etc., of the City of New York, 153 N. Y. 331.)

The Legislature, by the act of 1885, above referred to, provided the Statute of Limitations, which is applicable to this case. “ No claim,” says the law, can be made nor any action maintained against the city of Brooklyn upon or under said covenant or otherwise to recover the amount paid to the city of Brooklyn for any lands sold under the provisions of this act, unless an action to recover the same shall be commenced within six years after the delivery to the purchaser, his legal representatives or assigns, of the deed for said lands and premises as hereinafter in this section provided.”

This six-year Statute of Limitations commenced to run from the delivery of the deed to the purchaser. Whether or not it ran from the delivery of deeds prior to its enactment, April 21, 1885, we are not called upon to determine. Any deed given after that date would furnish the purchaser with a full six years within which to commence his action. The delivery of the deed in this case was made June 29, 1887, so that Munson and his grantees had more than eight years in which to recover back the money. By this application of the Laws of 1885, it is apparent that a reasonable time is allowed for commencement of all actions after the delivery of the deed. (Gilbert v. Ackerman, 159 N. Y. 118; People v. Turner, 117 N. Y. 227.)

No legitimate reasons have been advanced why this limitation of the Laws of 1885 should not apply. The very purpose of the act was to put a limit to the right of recovery on the covenant contained in the tax certificate. The act of 1883 said nothing about it. Reading the two acts together, it is quite evident that the intention was to permit a purchaser to recover the amount paid whenever his title proved defective because of a void or illegal tax, but the action to recover the amount must be commenced a.t least within six years after the delivery of the deed.

Even if this be not so, we are of the opinion that the provisions of the Code of Civil Procedure would apply in any case. Section 382, in force and effect when this money was paid, required an action to recover upon a liability created by statute, except for a penalty or forfeiture to be commenced within six years. As the purchaser, under the statute of 1883, could have brought his action on the agreement contained in his certificate of purchase on the day that he received it, because of the invalidity of the title purchased, this six-year Statute of Limitations applied. The statute (L. 1883, ch. 114) says the certificate shall contain a “ covenant ” to refund the money if the title prove invalid. We have not a copy of the certificate before us. It is not in the record. Should this covenant be contained in a sealed instrument, then the twenty-year Statute of Limitations would apply. (Section 381 of the Code of Civil Procedure.) Even then, however, this action would be barred, as it was not commenced until nearly forty years had elapsed after the cause of action had accrued.

The respondent, plaintiff, makes the point that these acts of 1883 and of 1885, referring to the city of Brooklyn, ■only apply to those taxes which were void upon the face of the tax records, or to such invalidities as appeared upon the face of the assessment rolls. As to such taxes, the purchaser at common law bought at his peril, and could not recover the amount paid, even although his purchase were valueless. He came strictly and rigidly within the rule of caveat emptor. And she cites Black on Tax Titles (2d ed. sec. 463) and Cooley on Taxation (4th ed. sec. 1553). In order to have a remedy in such cases, it must be given by legislation. The plaintiff, therefore, argues that this was the intent and purpose of these tax laws, and that she always had a remedy at common law without the aid of statute to recover back her money paid on a void tax sale where the invalidity, as here, was dehors the record. (Chapman v. City of Brooklyn, 40 N. Y. 372.) If these laws gave a remedy only for such illegal taxes, the six-year limitation would only apply to cases where the tax was void on its face. Such is the plaintiff’s conclusion from her assumed premises. In other words, these provisions would not affect an action to recover, as in this case, where the levy was regular on the face of the records, but illegal because of the nature of the ownership.

Without reconsidering the Chapman case, we can find nothing in the acts of 1883 or 1885 which makes the distinction the plaintiff claims, or which even suggests that they only apply to certain classes of illegal taxes. To hold that the limitation provided in the act of 1885 relates to taxes illegal upon the face of the assessment roll, and not to the tax here in question, where the illegality appeared from the nature of the ownership, and not in the process of levying the tax, would be making a distinction which the Legislature did not make, and which this court should not consider unless there be something in the act itself which indicates that such must have been the intention of the lawmakers. The courts must take the laws as they find them, and this act of 1885 applies the six-year Statute of Limitations to all actions brought to recover the amount paid where the title conveyed proves invalid. The title here was invalid, and that is sufficient for the limitation.

Arriving at this conclusion, it is unnecessary for us to consider the appeal taken by the plaintiff regarding the question of interest.

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

His cock, Ch. J., Cardozo, Pound, McLaughlin, Andrews and Lehman, JJ., concur.

Judgment accordingly.


source: Caselaw Access Project

author: Pound, J.

license: Public Domain

text:
    Lawrence Atterbury et al., as Executors of Annie T. L. Atterbury, Deceased, Appellants, v. The Bank of Washington Heights of the City of New York, Respondent.
    Contract— landlord and tenant — lease — banks and banking —■ ultra vires — trade acceptance — distinction between trade acceptance and bankers’ acceptance — courts will not make agreement for parties but circumstances may be resorted to to determine their standpoint — inconsistent provisions of lease under one of which lessor is permitted to apply deposit given as security for payment of rent to deficiency accruing after summary proceedings — language of other paragraph which had been altered at instance of lessee will not be extended or given effect beyond its fair significance — acceptance by bank of trade acceptance not an ultra vires contract of surety-ship — section 106 of Banking Law prohibiting banks from accepting draft payable at future date exceeding one year not applicable — obligation of negotiable instrument representing between bank and drawer a transaction without consideration or ultra vires not defeated when taken by third party before maturity without notice of defect.
    1. The courts will not make an agreement for parties but will ascertain what their agreement was. Although a written agreement cannot be varied by the circumstances out of which it grew and which attended its adoption, the circumstances may be resorted to for the purpose of ascertaining the standpoint of the parties in regard thereto.
    2. A trade acceptance is a draft or bill of exchange drawn by the seller on the purchaser of goods sold and accepted by such purchaser, while a bankers’ acceptance is a draft or bill of exchange of which the acceptor is a bank or banker engaged generally in the business of granting bankers’ acceptance credits.
    3. Where, in an action to compel payment of a trade acceptance, given as security for the payment of rent and accepted by defendant, it is recognized that, under a paragraph of the lease, the lessor is permitted to apply the amount of the deposit to rent deficiency accruing after summary proceedings, but certain words therein, inconsistent with a prior paragraph, are seized upon as a basis for a holding that the security is not applicable to the deficiency, and there is evidence to show that the prior paragraph was altered at the instance of the lessee, and where, in the light of the circumstances, by a fair and reasonable reading of the terms of the lease, which stands as the contract of the parties, there being no claim of mistake, it is clear that the intention of the parties as expressed therein was to relieve the lessee of personal liability only and thus to limit his liability to the amount of the security, the alterations are not to be extended and given effect beyond their fair significance.
    4. A contention that defendant in accepting the trade acceptance entered into an ultra vires contract of suretyship cannot prevail. The trade acceptance was deposited as security for the lease but the defendant did not deposit it as security, and in no sense became a surety on the lease.
    5. Nor .may defendant escape liability on the ground that the acceptance in question was payable at a future time exceeding one year from its date and that by section 106 of the Banking Law (Cons. Laws, ch. 2) banks are prohibited from accepting a draft payable at a future date exceeding one year. The provision of the statute is not applicable where the bank is the purchaser of goods sold. The trade acceptance recites that “ the obligation of the acceptor hereof [the bank] arises out of the purchase of goods from the drawer.” The transaction at its face value is a purchase on time evidenced by an instrument for the payment of money and is not the establishment of a credit by the acceptance of a draft drawn on the bank by its customer.
    6. As the trade acceptance was, on its face, a negotiable instrument, a regular and proper obligation of the bank taken from the lessee by the lessor before maturity without notice of any defect, the enforcement of its obligation cannot be defeated by the claim that as between the bank and the drawer it represented a transaction without consideration or ultra vires. (Neg. Inst. Law [Cons. Laws, ch. 38], § 91.)

      Atterbury v. Bank of Washington Heights, 211 App. Div. 90, reversed.
    (Argued October 20, 1925;
    decided November 24, 1925.)
    Appeal from a judgment, entered December 8, 1924, upon an order of the Appellate Division of the Supreme Court in the first judicial department, reversing a judgment in favor of plaintiffs entered upon a verdict directed by the court and directing a dismissal of the complaint,

      Herman S. Hertwig for appellants.
    Only the personal liability of the tenant for rent deficiency was limited, in the event of dispossess proceedings, to the time preceding the annulment of the lease; the security continued liable for any deficiency “ whether such rent deficiency accrued before or after summary proceedings.” (Michaels v. Fishel, 169 N. Y. 381; Baylies v. Ingram, 84 App. Div. 360; Anzolone v. Paskusz, 96 App. Div. 188.) Aside from the question of rent deficiency, the landlord had the right to enforce the trade acceptance and hold the proceeds as security under the lease against any loss resulting from breach of other covenants by the tenant. (Halpern v. Manhattan Avenue Theatre Corporation, 173 App. Div. 610; 220 N. Y. 655.) The trade acceptance was, on its face, a regular and proper obligation of the bank; it was accepted by Mrs. Atterbury before maturity and without notice of any defect, and the enforcement of St cannot be defeated by the claim that, as between the bank and the drawer, it represented a transaction in realty without consideration, ultra vires and void. (Farmers & Mechanics Bank v. Butchers & Drovers Bank, 16 N. Y. 125; Genesee Bank v. Patchin Bank, 19 N. Y. 312; Armour v. Michigan Central Railroad Co., 65 N. Y. 111; Cheever v. P., S. & L. E. R. R. Co., 150 N. Y. 59; Moch v. Bryant Park Bank, 197 App. Div. 78.)
    • Isaac N. Jacobson and Warren C. Fielding for respondent.
    The lease having been canceled and the relation of landlord and tenant annulled by the issuance of the warrant in summary proceedings, the lessee was entitled to the return of the security, and the lessor having in her possession, exclusive of the instrument sued on, a greater sum than then due, the complaint was properly dismissed. (Civ. Pr. Act, § 1434; Hoffman Brewing Co. v. Wuttge, 234 N. Y. 469; Caesar v. Rubinson, 174 N. Y. 492; Michaels v. Fishel, 169 N. Y. 381; Chaude v. Shepard, 122 N. Y. 397; Hall v. Gould, 13 N. Y. 127, 134.) The respondent’s acceptance for payment was merely its guaranty, for the lessee’s accommodation, of performance by the lessee, and was unauthorized, without consideration, and is ultra vires and void. (Gause v. Commonwealth Trust Co., 124 App. Div. 438; 196 N. Y. 134; Appleton v. Citizens’ Cen. Nat. Bank, 190 N. Y. 417.) The instrument sued upon is a draft, payable at a stated time exceeding one year from its acceptance for payment, and is prohibited by the Banking Law, and void. (Pratt v. Short, 79 N. Y. 437; Nassau Bank v. Jones, 95 N. Y. 115; Hinneman v. Rosenbeck, 39 N. Y. 98; Newman v. Frost, 52 N. Y. 422; Munger v. Shannon, 61 N. Y. 251.)
   Pound, J.

The instrument sued on reads as follows:

“ No.— December 29, 1920. $6000.00.

“ On December 31, 1921, Pay to the Order of Ourselves, Six thousand 00 /000 Dollars.

“ The obligation of the acceptor hereof arises out of the purchase of goods from the drawer. The acceptor may make this acceptance payable at any bank, banker or trust company in the United States which he may designate.

“ To Bank of Washington Heights,

New York City, ÍST. Y.

“ Due Dec. 31, 1921.

" ALGIN REALTY CORPORATION,

“ By Alfred J. Higgins, Pres.

L. S. Rough, Treas.”

(Indorsed upon the face thereof)

“ Trade Acceptance

“ Accepted.

“ Date Dec. 29th — 20.

“ Bank The Bank of Washington Heights of the City of New York

“Sig. JAMES J. O’SHAUGHNESSY,

“By Vice Prest.”

By stipulation of the parties the action was tried without a jury the verdict to be directed to have the same force and effect as if a jury were present.

On October 24, 1919, a lease for twenty-one years covering premises 614-618 West One Hundred and Thirty-first street was executed by Annie T. L. Atterbury as lessor and Alfred J. Higgins as lessee. The lease provided for a graduated rental running from $20,000 to $25,000 per annum. The average yearly rental was $22,500. In the twenty-ninth article of the lease it was provided that the lessee should deposit the sum of $11,250 as security for performance of the covenants of the lease. This stipulation was subsequently modified at the .lessee’s request to permit him to deposit in lieu of cash an accepted instrument for the payment of $11,250.”

This instrument was a trade acceptance drawn by Alfred J. Higgins on the defendant bank for the sum of $11,250 payable December 31, 1920, to the order of Mrs. Atterbury. It was accepted by the defendant bank under date of October 27, 1919, and was subsequently indorsed by'Mrs. Atterbury for collection.

When it was about to fall due Mr. Higgins, who had assigned his lease in the meantime to the Algin Realty Corporation, a company incorporated by him, sought the consent of Mrs. Atterbury to the substitution of $5,250 in cash and a new trade acceptance for $6,000, payable one year from the due date of the old acceptance, that is, December 31, 1921. This arrangement was accepted and the first trade acceptance, drawn by Mr. Higgins personally and accepted by the bank, was surrendered and canceled and, in lieu thereof, there were delivered to Mrs. Atterbury $5,250 in, cash and a new trade acceptance for $6,000 drawn by the Algin Realty Corporation and accepted by the defendant bank. The action is prosecuted to compel payment of this acceptance.. Defendant contends that as the lease was terminated in December, 1921, by summary proceedings and all payments then due on the lease were satisfied, the landlord was no longer entitled to hold, or enforce the security.

The provisions of the lease which are relevant to this point are as follows:

“ Ninth. In case of any default in the performance of any of the covenants and agreements herein contained, or in case the lessee abandons the premises or the same shall become vacant, or if the lessee shall become dispossessed or ejected, then the lessor may re-enter and re-occupy the said premises and remove all persons therefrom, and the goods and chattels of said persons without any liability in law or equity for any damage caused by such removal. In case the premises become so vacant by abandonment during said term, but not by dispossess or ejectment, then the lessor may re-let the demised premises as the agent of the lessee for the remainder of the term for the account of the said lessee, and the lessee shall remain liable for the rent and to the payments reserved hereunder, less the avails of re-letting, if any there be, and shall pay the same as herein-before provided for the payment of rent. If the lessor shall acquire possession of the said premises, or any part thereof, by summary proceedings, or by any other action or judicial proceedings, or in any other lawful manner without judicial proceedings it shall be deemed a re-entry within the meaning of that word as used in this lease.”

Twenty-ninth. The said lessee has deposited with the said lessor an accepted instrument for the payment of the sum of Eleven thousand two hundred fifty Dollars, * * * the receipt of which is hereby acknowledged, as security for the payment of rent and the prompt performance of the covenants and conditions of this lease, * * * it being * * * understood and agreed that in the event of the non-payment of rent or default in performance of any of the covenants and conditions herein contained, the said lessor may apply the amount so deposited to the payment of any rent in default and to the payment of any deficiency in re-letting as hereinbefore mentioned, whether such rent deficiency accrue before or after summary proceedings or other re-entry by the lessor. * * * ”

It is conceded that the premises remained vacant for a year after re-entry. No question arises as to the personal liability of the tenant after re-entry of the premises by summary proceedings. The lessee, by the terms of the ninth paragraph of the lease, ceased thereon to be hable for the rent. Plaintiffs assert their right to resort to the security under the twenty-ninth paragraph. The Appellate Division, recognizing that paragraph 29 of the lease permits the lessor to apply the amount of the deposit to rent deficiency accruing after summary proceedings, seizes on the words “in re-letting as hereinbefore mentioned ” and concludes that, as there may be no reletting after summary proceedings by the lessor as agent of the lessee, the security is not apphcable to the deficiency.

As to what the parties did, or what words they used, no dispute arises. The question is what was the meaning and intention of the parties? The courts will not make an agreement for the parties but will ascertain what their agreement was. Although a written agreement cannot be varied by the circumstances out of which it grew and which attended its adoption, the circumstances may be resorted to for the purpose of ascertaining the standpoint of the parties in regard thereto. (Reed v. Ins. Co., 95 U. S. 23.) The evidence throws some light on the seeming inconsistency between the ninth and the twenty-ninth paragraphs. The attorney for Mr. Higgins, the lessee, in connection with the execution of the lease, gives an explanation of the discrepancy between the two clauses of the lease. As first drafted, the lease provided for personal liability. The attorney would not permit Mr. Higgins to consent to a clause which made him hable on a long term lease for the rent after summary proceedings. To this eminently fair and reasonable objection the lessor .yielded. Interpolations were thereupon made in the ninth paragraph hmiting the lessee’s personal liability to reletting after abandonment only. No question arose as to whether the security should remain liable for the deficiency. The subject was not discussed. It is a familiar rule of the construction of contracts that words are construed most strongly against the person using them. The alterations in paragraph nine are not to be extended and given effect beyond their fair significance.

The lessee does not claim to be the victim of a mistake which might lead to reformation. It stands on the contract as written. The lease stands as the contract of the parties. By a fair and reasonable reading of its terms in the fight of the circumstances, it is clear that the intention of the parties as expressed therein was to relieve the lessee of personal liability only and thus to limit his liability to the amount of the security.

The defendant further contends that the trade acceptance is ultra vires and unenforc'ble, first, because it thereby became a surety on the lease and, secondly, because it has accepted a draft for payment at a future date exceeding one year from its date.

The trade acceptance was deposited as security for the lease but the defendant did not deposit it as security and in no sense became a surety on the lease. Its contention that it entered into an ultra vires contract of suretyship cannot prevail.

Section 106 of the Banking Law (Cons. Laws, ch. 2), so far as relevant,reads as follows: In addition to the powers conferred by the general and stock corporation laws, every bank shall, subject to the restrictions and limitations contained in this article, have the following powers: * * * 2. To accept for payment at a future date, drafts drawn upon it by its customers and to issue letters of credit authorizing the holders thereof to draw drafts upon it or its correspondents at sight or on time not exceeding one year.” The. instrument in suit was accepted December 29, 1920, and was payable December 31, 1921. It is agreed by both parties that it is in the form of a trade acceptance. A trade acceptance is a form of obligation revived in this country in recent years under the regulations of the Federal Reserve Bank Board. (Trade Acceptances, by R. H. Treman, p. 8.) It is defined as a draft or bill of exchange drawn by the seller on the purchaser of goods sold, and accepted by such purchaser ” (Regulations Federal Reserve Board Relating to Acceptances, section A, paragraph V, subd. [a]), while a bankers’ acceptance is a draft or bill of exchange of which the acceptor is a bank or banker engaged generally in the business of granting bankers’ acceptance credits. (Regulation B, subd. a.) Without deciding whether section 106 prohibits defendant from accepting a draft payable at a future date exceeding one year, we reach the conclusion that its provisions are not applicable where the bank is the purchaser of the goods sold. The transaction at its face value is a purchase on time evidenced by an instrument for the payment of money and is not the establishment of a credit by the acceptance of a draft drawn on the bank by its customers. The trade acceptance recites that “ the obligation of the acceptor hereof [the bank] arises out of the purchase of goods from the drawer.”

As the trade acceptance was, on its face, a negotiable instrument, a regular and proper obligation of the bank taken from the lessee by the lessor before maturity without notice of any defect, it follows that the enforcement of its obligation cannot be defeated by the claim that as between the bank and the drawer it represented a transaction without consideration or ultra vires. (Neg. Inst. Law [Cons. Laws, ch. 38], § 91.)

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

His cock, Ch. J., Cardozo, McLaughlin, Crane and Andrews, JJ., concur; Lehman, J., not voting.

Judgment accordingly.


author: Crane, J. Cardozo, J. Lehman, J.

text:
    Amelia F. Dean, Respondent, v. Robert J. Dean, Appellant.
    Constitutional law — jurisdiction—comity — husband and wife — divorce — divorce obtained by husband in another State, the courts of which had obtained no jurisdiction over wife who resided in foreign country — remarriage of husband and removal to this State —• wife who has also removed here may maintain action in our courts for divorce — divorce of husband no defense — full faith and credit clause of Federal Constitution does not require recognition of such judgment.
    1. Where a husband and wife are domiciled in Canada and the husband, abandoning his wife and children, goes to Pennsylvania and falsely stating that he does not know the place of residence of his wife, obtains an order for the service of a summons upon her by publication in an action brought by him in that State for divorce, and thereafter obtains a decree, without, however, the Pennsylvania courts acquiring jurisdiction of the wife, and, remarrying, removes to this State, the wife, who has also removed here, may maintain an action in our courts for divorce and support for herself and children, and the divorce obtained by the husband in Pennsylvania is no defense thereto. {Ball v. Cross, 231 N. Y. 329, followed.)
    2. The full faith and credit clause of the Federal Constitution does not command the courts of this State to accord recognition to a judgment so procured.

      Dean v. Dean, 213 App. Div. 360, affirmed.
    (Argued October 23, 1925;
    decided November 24, 1925.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered July 29, 1925, affirming an interlocutory judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term.

      Ray M. Stanley and 0. Clyde Joslin for appellant.
    The judgment upon the undisputed facts is contrary to the settled law of the State. (Kaufman v. Kaufman, 160 N. Y. Supp. 19; 177 App. Div. 162; 163 N. Y. 566; Percival v. Percival, 94 N. Y. Supp. 909; Powell v.
      Powell, 211 App. Div. 750; Hubbard v. Hubbard, 228 N. Y. 81; Ball v. Cross, 231 N. Y. 329; De Meli v. De Meli, 120 N. Y. 485; Katz v. Katz, 203 App. Div. 672; 197 N. Y. Supp. 307; Barber v. Barber, 151 N. Y. Supp. 1064.) The judgment violates the full faith and credit clause of the Constitution of the United States. (Atherton v. Atherton, 181 U. S. 155; Bell v. Bell, 181 U. S. 175; Streitwolf v. Streitwolf, 181 U. S. 179; Haddock v. Haddock, 201 U. S. 564; Andrews v. Andrews, 188 U. S. 15.)

      Alfred L. Harrison and J. H. Madden for respondent.
    The State of New York recognizes the status of a party in the country of which said party is a citizen. (Ball v. Cross, 231 N. Y. 329.)
   Crane, J.

The plaintiff and the defendant were residents and citizens of Ontario, Canada. Three children were born of the marriage, two now living. The husband left his wife and went to Pennsylvania. He failed and refused to support his family. Later he came to Buffalo. Thereupon, the wife with her two children came to that city and sued him for divorce and support for herself and children. They were his children, and he was as much bound to support them in New York as he was in Canada. Stepping across the St. Lawrence river into the States did not change his obligations as a father. Our courts were open to the wife. She could maintain her action here in this State. (Civil Practice Act, sect. 1147.)

The husband set up as a defense that he had been divorced in the State of Pennsylvania. It is conceded that the Pennsylvania courts had no jurisdiction over the wife. She did not know of the action, and was not served by any process known to the law. In order to get the Pennsylvania courts to act, the husband falsified, stating that he did not know the whereabouts of the wife. The Pennsylvania decree of divorce would not be recognized in Canada, the domicile of the wife. (King v. Brinkley, 14 Ontario Rep. 434.) The husband could not go to Canada without being hable to support his wife and children. The wife comes to the State of New York, as it is the only place where she can get relief. The husband is here; he has kept out of Canada. It is conceded that if the wife had been domiciled here, our courts would afford her relief; that we would not recognize the Pennsylvania decree obtained under the circumstances stated. Why should the fact that she was domiciled in Canada make any difference? The wife is still the wife of the defendant in Canada, and he is still her husband. His children remain his offspring here in New York, requiring food and shelter, just as they would in Canada. The policy of the State of New York, I venture to assert, is in the maintenance of marriage and morality. These will be aided by affording the wife relief in our courts, rather than by turning her out, when we know that she can get help nowhere else. I know of no authority which holds that the general policy of this State limits its aid to its own citizens. In fact, I consider the case of Ball v. Cross (231 N. Y. 329) as having settled the law for this case in favor of the maintenance of this action.

If there are any complications growing out of the husband’s remarriage, he has brought them upon himself, and has not the law to blame.

The judgment should be affirmed, with costs.

Cardozo, J.

Plaintiff and defendant were married in Ontario, Canada, and lived there together till February, 1919. The husband then left the matrimonial domicile, and abandoned bis wife and children. He lived for a time in Buffalo, and later in Erie, Pennsylvania. While domiciled in Pennsylvania, he brought suit against his wife for divorce in the courts of that State, charging her with desertion. Upon the false statement that he did not know her whereabouts, he obtained an order for the service of process by publication. He was granted a judgment of divorce on November 5, 1923. Soon afterwards he came back to Buffalo after having married again. The present plaintiff, his first wife, did not appear in the Pennsylvania divorce suit, and did not know that it was pending. She remained in Ontario until March, 1924, when she took up her home in Buffalo. She found her husband living with another woman, and sued him for divorce.

We have said that the husband abandoned his wife and children when he left the matrimonial domicile. There is evidence for the conclusion, and against it. The husband on his side maintained that the wife refused to follow him. The trial judge, weighing the probabilities, gave credence to the wife. It is true that in his decision he did not find the fact of abandonment in so many words. He stated it, however, in his opinion as his inference from the evidence. He found, moreover, in his decision that on November 5, 1923, the date of the Pennsylvania judgment, the wife was domiciled in Ontario. If the husband had not abandoned her, her domicile would have followed his. Reading the opinion and the decision together, we cannot doubt that in the view of the trier of the facts the husband was at fault. A finding of abandonment will, therefore, be implied (Ogden v. Alexander, 140 N. Y. 356, 362).

The situation then is this: The husband after deserting his wife in the matrimonial domicile in Ontario, obtained upon constructive service of process a divorce in Pennsylvania. The full faith and credit clause of the Constitution of the United States (Art. 4, § 1) does not command us to accord recognition to a judgment so procured (Haddock v. Haddock, 201 U. S. 562). The only question is whether comity or public policy, or, to put it differently, our own interpretation of the conflict of laws, should prompt us to concede a recognition that we are at liberty to refuse. We do not need to inquire what our conclusion would be if the issue of abandonment had been resolved in favor of the husband. In that event, the wife, though she remained in Ontario, would have been under a duty to live with her husband wherever he offered her a home. In the view of the law, his domicile would have been hers. A different problem would be before us for solution if it thus appeared that the Pennsylvania court, in decreeing a divorce, was adjudicating the status of parties whose domicile was there (cf. Cheely v. Clayton, 110 U. S. 701, 705; Franklin v. Franklin, 190 Mass. 349; Loker v. Gerald, 157 Mass. 42, 45; and O’Dea v. O’Dea, 101 N. Y. 23, explained in Ball v. Cross, 231 N. Y. 329). We do not even have to forecast the decision that would be made if they had’ been living separate by consent (cf. Winston v. Winston, 165 N. Y. 553, 555). We confine ourselves to the facts as found. The wife having been deserted by her husband, might maintain a domicile of her own (Williamson v. Osenton, 232 U. S. 619; Perkins v. Perkins, 225 Mass. 82), and she chose to maintain one in Ontario, till later she changed it to New York. She has never consented that her husband acquire a home apart from her, nor barred herself by misconduct from objecting to his doing so. In these circumstances, the incapacity of the divorce decree of Pennsylvania to affect the status of the abandoned wife, does not depend upon some local policy established by New York for the protection of citizens or residents. It does not have its origin in the need of preserving the domestic law against evasion by one spouse to the prejudice of the other. It results from the general principles that govern the extraterritorial recognition of jurisdiction in actions of divorce (Perkins v. Perkins, supra; Haddock v. Haddock, supra, at p. 570; Ball v. Cross, supra).

We do not mean that these principles have validity as law, ex proprio vigore, irrespective of conflicting conceptions of expediency or justice. The policy behind them is always local in the sense that each State, aside from constitutional restrictions, may formulate its own conception for itself. The hke may be said of the conflict of laws generally. The conception of justice prevalent at home will override an opposing conception prevalent abroad, but the conception prevalent at home may exact justice to the stranger as well as justice to the resident. So we think it does. The wife domiciled in Canada and there abandoned by her husband, became by her marriage a party to a relation which the courts of Pennsylvania have attempted to destroy. They have done this, though there has been no submission to the jurisdiction by her, upon the basis of a domicile which the erring husband has wrongfully set up apart from her. We think the judgments of this court leave no escape from the conclusion that according to the standards of justice prevalent among us, injustice would be done if that attempt were to prevail. This being so, the divorce decree of Pennsylvania ought not to be recognized as valid in New York unless it would have been recognized as valid in the country in which the wife was domiciled at the time when the decree was made (Ball v. Cross, supra; Perkins v. Perkins, supra). If the courts of her domicile were satisfied, we might follow where they led (Armitage v. Attorney-General, 1906 P. 135; Ball v. Cross, supra). But Canada does not recognize the binding force of the decree. The law of Ontario to that effect was proved upoii the trial (King v. Brinkley, 14 Ontario L. R 434). We find nothing in our public policy to justify a holding that the wife, who remained a wife while she kept her domicile in Ontario, should be deemed to have ceased to be one when she changed her domicile to New York.

If there is need of other support for this conclusion, it is given by the husband’s fraud. He obtained an order for the publication of the summons in local newspapers of Erie county, Pennsylvania, upon the false suggestion that the wife’s whereabouts were unknown. The purpose as well as the effect of this misstatement was to keep her in ignorance of the suit. We do not need to say that for such a fraud alone the judgment would be disregarded if jurisdiction, as recognized internationally, were otherwise complete. At least the fraud will help us to determine whether a recognition dependent upon conceptions of public policy and justice, shall be granted or withheld. An abandoned and defrauded wife asks us to maintain her status as it was fixed by the law of her domicile at the date of the fraudulent decree. We cannot say that conceptions of public policy and justice require us to change it.

The judgment should be affirmed with costs.

Lehman, J.

(dissenting). I assume, though with some doubt, that the evidence is sufficient to justify the findings that while the defendant was domiciled in Pennsylvania, the plaintiff continued to be domiciled in Ontario, and that both were domiciled in New York at the time of the commission of the alleged adulteries and the commencement of the action. I further assume that we have a right to supplement the findings actually made by a finding that the defendant abandoned the plaintiff when he moved from their home in Ontario. Doubtless if the plaintiff had been domiciled in New York at the time of the alleged abandonment, at the time of the divorce and at the time of the commencement of the action, established public policy of the State as defined and enforced by our courts ■would preclude our courts from giving any force or effect to the Pennsylvania decree. Doubtless too our courts would give full force and effect to the Pennsylvania decree, if at the time the Pennsylvania divorce was granted to the defendant the wife was domiciled either in Pennsylvania or any other State which recognized its validity. Here the question to be determined is whether we should deny force and effect to the decree when the wife at the time it was granted was domiciled in a State which would as against its own residents or citizens refuse it effect.

Our public policy must guide and control our decision in this case. It is said that this court has already indicated in the case of Ball v. Cross (231 N. Y. 329) that the public policy of the State where the wife is domiciled when the divorce is granted determines the force and effect to be given to a foreign divorce. In that case the court was called upon to determino the marital status of a wife domiciled in another State who entered into a second marriage after her first husband had obtained a decree of divorce without personal service upon her in a State where the wife was not domiciled and where the parties had never lived together. We held that since the wife could enter into a second marriage only if she was at that time unmarried and since the law of the State where she was domiciled must determine her marital status, the decisive factor in determining the validity of the second marriage is the effect given to a foreign divorce by the law of the State of her domicile. If there it freed her from her matrimonial bonds she is free everywhere. If there she is still bound by marriage ties then she may enter into valid marriage npwheres. In the case before us the findings establish that the defendant was domiciled in Pennsylvania when the decree was granted. There the decree was valid, and there the defendant had a right to enter into a subsequent marriage. He did so and now we are asked, at the suit of a wife who did not reside in this State at the time of the divorce or during any period before her husband left her, to declare the second marriage invalid. We pass in this case upon the husband’s marital status as affected by the divorce decree in Pennsylvania where he was domiciled at the time. May we say that the decisive factor in such determination is the law of the State where the parties were domiciled while living together and in which the wife’s domicile continued?

I recognize the anomaly involved in a rule that marital status may be divided so that one party to the marriage is free while the other party is bound; that a wife 'may be said to have a living husband, while the husband has no living wife. The anomaly is due to the fact that a State may adjudicate the marital status of one party to a marriage if domiciled there, though such adjudication may have no extraterritorial effect if the other party is domiciled elsewhere. So long as that is the law its results may be disturbing, yet we have recognized that' that is the law. We must and do concede, that a State may adjudge the status of its citizen towards a nonresident; and may authorize to that end such judicial proceedings as it sees fit; and that other States must acquiesce, so long as the operation of the judgment is kept within its own confines. But that judgment cannot push its effect over the borders of another State, to the subversion of its laws and the defeat of its policy; nor seek across its bounds the person of one of its citizens, and fix upon him a status, against his will and without his consent, and in hostility to the laws of the sovereignty of his allegiance.” (People v. Baker, 76 N. Y. 78.)

The rule set forth in People v. Baker (supra) has been consistently followed by our courts. It represents a public policy so well defined that the courts may perhaps not disregard it even though it results at times in anomaly or injustice. As stated above, however, the limitation which our public policy places upon the power of a State to adjudicate the marital status of its own citizen is that the judgment shall not be pushed across the bounds of our State to the subversion of our laws, and the defeat of our policy, nor fix upon one of our citizens a status without his consent in hostility to the laws of this sovereignty. In the present case at the time of the Pennsylvania divorce the plaintiff was not a resident of this State and the question is whether our policy impels us to hold that after she became a resident here we should disregard the judgment of the Pennsylvania courts which dissolved the marriage of its own citizen.

In all cases in which heretofore we have held that our public policy forbids us from giving effect here to a decree of divorce granted by a State where the defendant was not domiciled, the defendant was not only not within the jurisdiction of the court granting the divorce, but was a resident of this State. Our public policy is not directed against all decrees of divorce granted to one party by a court of a State other than the State where the parties were domiciled during the time they lived together, for in some circumstances such decrees are authorized by our own statute. (Civ. Prac. Act, section 1147.) The reason for the stated policy of this State is its statutory adoption of the rule that there may be of right but one sufficient cause, to wit, adultery, for absolute divorce. (People v. Baker, 76 N. Y. 78, 88.) * * * The policy of this State is not embodied in any legislative enactment or is not a rule of universal law. It exists to promote the permanency of the marriage contracts and the morality of the citizens of the State. Whether or not the operation of a foreign decree of divorce in a given case will contravene the policy or wrong or injure citizens of the State is exclusively for its courts to determine.” (Hubbard v. Hubbard, 228 N. Y. 81.) Heretofore we have not held that our public policy requires us to refuse to give effect to a foreign divorce obtained where one party to the marriage was domiciled except where the parties were at some time domiciled here together and the one party has not removed from this State. Logical basis for insisting upon our views of the permanence of the marriage relation and that only one cause should be recognized for its dissolution exists only where this State was at one time the matrimonial domicile of the parties, and the laws of this State fixed the obligations of the marriage. In such case we may say that we will not recognize the right of one party without the consent of the other to remove to a foreign jurisdiction and thereby against the will of the other change the nature and permanence of the marriage relation so fixed and defined, This State to that extent may protect its own citizens. It is not called upon to protect the citizens of another State nor to uphold the policy of another State in regard to marriage.

The validity and effect of the foreign decree of divorce must be determined by the position of the parties at the time it was rendered. At that time the wife was a resident of Ontario. Concededly, if the public policy of that jurisdiction led it to recognize the validity of the divorce, we should recognize it also. A decision that we will not recognize the validity of the divorce must be based upon the view that our public policy requires that its validity should be decided under the law of the State of the wife’s domicile; and that the public policy of that State denies it effect against the wife domiciled there. It has been said that we arrived at our decision in Ball v. Cross (231 N. Y. 329) by similar application of what has become known as the doctrine of “ renvoi,” but though the decision in that case may demonstrate that under unusual circumstances there is room for the application of such doctrine, only rarely are such circumstances found. (See article by Professor Lorenzen, 31 Yale Law Journal, 194.) In a case where the court is called upon to determine the status in a foreign jurisdiction of a person then resident there, the public policy of the foreign jurisdiction may be logically decisive; in a case where such person becomes a resident of this State and asks relief in our courts against another resident of this State, decision whether such relief shall be granted or withheld should rest upon our public policy alone.

The decree of divorce and the marriage entered into in reliance thereon were valid in Pennsylvania. In most of the States of the Union that marriage was lawful; under the rules of public policy of this State as defined in earlier opinions of this court, it would be recognized in' New York unless one of our citizens was wronged thereby. No citizen was wronged at the time of the decree; no marriage over which this State had jurisdiction was thereby rendered less permanent; therefore, no public policy of our own was contravened. The character of the second marriage cannot be altered by change of residence of the first wife. Under the laws of her place of domicile when the divorce was granted, the plaintiff was still the wife of the defendant; when we are called upon to determine her status there and at that time we must accept the public policy of her place of domicile since that determines its law. (Ball v. Cross, supra.) When she comes into this jurisdiction and asks us to hold that the divorce decree was ineffective and must be given no force here, we stand upon our own public policy, and our public policy places no obstacle to giving force to a decree of divorce of a sister State which purports to dissolve a marriage of one of its own residents when we have at no time had any jurisdiction over that marriage.. When we decided that our public policy compelled our denial of effect to such a decree against one of our own residents, we recognized that it will prove awkward, and worse than that, afflictive and demoralizing, for a man to be a husband in name and under disabilities or ties in one jurisdiction, and single and marriageable in another.” (People v. Baker, supra [p. 86].) It seems to me that we should refrain from making such a situation more difficult by enforcing in this State the public policy of another jurisdiction.

I assume for the purpose of this opinion that the fraud which may well be found to exist in the Pennsylvania proceedings does not affect the jurisdiction of the court or render the decree vulnerable to direct attack. In view of the decision of the court on the more general question, it seems unnecessary to consider further the question of the effect of the fraud in rendering the decree absolutely void.

Judgment should be reversed and complaint dismissed.

Hiscock, Ch. J., Pound, McLaughlin and Andrews, JJ., concur with Crane and Cardozo, JJ.; Lehman, J., dissents in opinion.

Judgment affirmed.


author: Crane, J.

text:
    Hamilton F. Kean et al., Copartners under the Firm Name of Kean, Taylor & Company, Respondents, v. National Surety Company, Appellant.
    Insurance —■ policy insuring against loss through dishonesty of employees and others — insured cannot recover for loss through theft where they have omitted to take precaution explicitly prescribed.
    1. An insurance policy or bond is no different than any other contract, and comes within the same rules of construction. The purpose and attempt of the courts is to give to the language used by the parties its usual and ordinary meaning in the light of all the circumstances and conditions, having in mind, as did the parties, the nature of the transaction.
    2. An action cannot be successfully maintained upon a banker’s blanket bond, insuring the plaintiffs, amongst other things, against loss through robbery of government bonds in transit within twenty miles of plaintiffs’ office but explicitly providing that the bond did not cover a loss, where the par value of the bonds was over $250,000, unless they were in the custody of a partner or regular employee of the insured continuously accompanied by two guards over twenty-one years of age, where, when the robbery for which the claim is made occurred, bonds of more than the par value mentioned were being carried through the street by an employee accompanied only by a boy eighteen years of age. It is entirely immaterial whether the holdup was by an employee of the plaintiffs or by strangers.

      Kean v. National Surety Co., 213 App. Div. 750, reversed.
    (Argued October 27, 1925;
    decided November 24, 1925.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 3, 1925, affirming a judgment in favor of plaintiffs entered upon a verdict directed by the court.

      Henry de Forest Baldwin, Lucius H. Beers and Thaddeus G. Cowell for appellant.
    The provisions of the bond that the defendant is not liable for loss by robbery of government coupon bonds wMIe in transit unless accompanied by guards is a condition precedent. (First Nat. Bank v. National Surety Co., 228 N. Y. 469; O’ Neil v. Buffalo Fire Ins. Co., 3 N. Y. 122; King v. Tioga Co. P. F. R. Association, 35 App. Div. 58; 1 May on Insurance [4th ed.], § 157; Phillips-Jones Co. v. Fidelity & Deposit Co. of Maryland, 200 App. Div. 629; 235 N. Y. 524; Hanna v. C. T. Mutual Acc. Assn., 204 App. Div. 258; 236 N. Y. 571; Fraternal Mystic Circle v. Nat. Surety Co., 114 App. Div. 689; Wilder v. Union S. & G. Co., 42 Misc. Rep. 199; Smith v. Fidelity & Deposit Co. of Maryland, 120 Atl. Rep. 322.) The condition applies to any claim for loss while in transit of government coupon bonds by robbery, hold-up or theft. (Dwight v. Germania Life Ins. Co., 103 N. Y. 341, 352; First Nat. Bank v. Story, 140 N. Y. Supp. 31; 222 N. Y. 562; Houlihan v. P. A. Ins. Co., 196 N. Y. 337; First National Bank v. Nat. Surety Co., 228 N. Y. 469; Rosenthal v. American Bonding Co., 207 N. Y. 162; Dwight v. Germania Life Ins. Co., 103 N. Y. 341; Matson v. Farm Buildings Ins. Co., 73 N. Y. 310; Metzger v. Ætna Ins. Co., 227 N. Y. 411; Auerbach v. Maryland Casualty Co., 236 N. Y. 247; Imperial Fire Ins. Co. v. Coos County, 151 U. S. 452.) Plaintiffs’ failure to comply with the condition of the bond requiring that United States government coupon bonds in excess of $250,000 be in the custody of an employee continuously accompanied by two guards of more than twenty-one years of age bars any recovery in this action. (Allen v. G. A. Ins. Co., 123 N. Y. 6; Rice v. Fidelity & Deposit Co., 103 Fed. Rep. 427; Murdock v. Chenango Co. Mut. Ins. Co., 2 N. Y. 210; Ripley v. Ætna Insurance Co., 30 N. Y. 136; First National Bank v. Insurance Co. of N. A., 50 N. Y. 45; Mack v. Rochester German Ins. Co., 106 N. Y. 560; Quinlan v. Providence-Washington Ins. Co., 133 N. Y. 356; Cary v. Home Insurance Co., 199 App. Div. 122; 235 N. Y. 296; Imperial Fire Insurance Co. v. Coos County, 151 U. S. 452; Kohlmann v. Selvage, 34 App. Div. 380;
      Westfall v. Hudson River Fire Ins. Co., 12 N. Y. 289; Williams v. Peoples’ Fire Ins. Co., 57 N. Y. 274; Mead v. Northwestern Ins. Co., 7 N. Y. 530; Ripley v. Ætna Ins. Co., 30 N. Y. 136.)

      Robert M. McCormick for respondents.
    The provisions of the policy regarding armed guards are expressly limited to losses covered by paragraph C, viz., losses proximately caused by robbery, and are not applicable to losses covered by paragraph A, viz., losses proximately caused by dishonesty of employees. Paragraph A is a wholly independent clause and is not affected by the exceptions contained in subdivision 3 of condition 12. (American Ins. Co. v. Dunham, 15 Wend. 1; Schumacher v. G. E. Casualty & Indemnity Co., 197 N. Y. 58; American Surety Co. v. Pauly, 170 U. S. 133.)
   Crane, J.

On and prior to the thirtieth day of November, 1920, the plaintiffs were copartners, doing business as brokers under the firm name of Kean, Taylor & Company at No. 5 Nassau street, New York city. They had in their employ a bond salesman named Austin A. Young, and a head runner by the name of Tony Di Gregario. The head runner had charge of the men and boys who delivered the securities to customers. Among these delivery boys was Irving Cohen, a lad about eighteen years of age. Igoe Brothers, a corporation, having an office at 29 Metropolitan avenue, in the borough of Brooklyn, was a customer of the plaintiffs, and through the bond salesman, Young, had purchased United States bonds of the face value of $466,000.

These bonds were to be delivered by the plaintiffs to Igoe Brothers on the 30th day of November, 1920. Young had spoken to the head runner, Di Gregario, about the matter the night before. Having this knowledge, Di Gregario, on his way home, on the evening of November twenty-ninth, stopped at a barber shop, No. 500 East Eleventh street, the hang-out of a band of crooks, including his brother, where he revealed to them the possibilities of a hold-up of his firm’s messengers as they were on the way to Brooklyn to deliver these bonds. The next day, about noon time, Young and the boy Cohen started out with over $400,000 worth of government bonds, to deliver them to Igoe Brothers -at 29 Metropolitan avenue, Brooklyn. Cohen had been assigned by Di Gregario, the head runner, to accompany Young in making the delivery. Within a short distance of their destination, they were held up by highwaymen, assaulted, knocked down, the bag containing the securities wrenched from Young’s hand, and the bonds stolen. As previously arranged, Di Gregario had telephoned to these robbers on the morning of the thirtieth all the details of the delivery, a full description of Young and Cohen, the time of their departure, and the place to which they were going. Although absent, he was a participant in the crime, as a principal, and was subsequently convicted in the Supreme Court of Kings county of robbery in the first degree, and sentenced to Sing Sing State Prison for a term of eight to sixteen years.

This actiqn arises on a banker’s blanket bond issued by the defendant to the plaintiffs, to insure them against certain dishonest acts of their employees and others. The plaintiffs claim that the above acts of Di Gregario are covered by the policy, and that the defendant is hable to them for the full amount, as their loss through the robbery has exceeded $100,000. The defendant admits that the bond covered the robbery, but insists that no liability attaches, as the plaintiffs failed to comply with its terms and conditions. For determination, there was presented to the courts below, and to us, merely the interpretation of the contract between the parties as expressed in the bond. Both sides, having submitted the case to the trial justice, a jury having been waived, he directed a judgment for the plaintiffs for the full amount. The Appellate Division, by a divided court, has affirmed that judgment. We are of the opinion that the conceded facts of this occurrence do not fit into the liability clauses of the contract, for the following reasons:

The defendant insured the plaintiffs against loss, not to exceed $100,000, sustained:

(A) Through any dishonest act of any of the Employees, wherever committed, and whether committed directly or by collusion with others;

(C) Through robbery, hold-up or theft, by any person whomsoever, while the Property is in Transit within twenty miles of any of the offices covered hereunder and in the custody of any of the Employees, or through negligence on the part of any of the Employees having custody of the Property while in transit as aforesaid.

“ The foregoing agreement is subject to the following conditions and limitations: * * *

“ 12. This bond does not cover any loss resulting from any of the hazards specified in Paragraph C ’ in respect to United States Government Coupons Bonds, or United States Government certificates of indebtedness, or cash, unless such property shall be in transit under the following conditions: * * *

(3) Where the par value of such property is in excess of the sum of Two Hundred and Fifty Thousand Dollars ($250,000) it shall be in the custody of a partner or regular employee of the Insured, who shall be continuously accompanied by two guards of twenty-four (24) years of age or more; provided, however, that if the partner or regular employee is twenty-four (24) years of age or more the guards may be under the age of twenty-four (24) but not under twenty-one (21).”

That Di Gregario was dishonest, and that risk “A,” standing alone and by itself, would cover his acts, may be conceded. The clause, however, does not stand alone and by itself. Another risk was within the contemplation pf the parties; a street hold-up, whether by an employee or anybody else. Government bonds carried through the streets in large amounts increased the risk. The plaintiffs and the defendant must have realized what everybody apparently knows, and which is common knowledge, that highway robberies have been of frequent occurrence in the city of New York. If the plaintiffs were to send their employees through the streets with government securities, the danger was increased, so that by the terms of their contract with the defendant, they were obliged to reduce the danger and the risk at least to the extent therein provided for. The delivery of government bonds in excess of $250,000 was to be made by a regular employee of the insured, continuously accompanied by two guards over twenty-one years of age. What was the principal element the contracting parties must have had in mind by the provision of clause C,” thus conditioned and limited by section 12, subd. 3? It was the risk and danger of carrying government bonds through the streets, the likelihood or possibility of the messenger being held up and the bonds stolen. The defendant was unwilling to assume this risk unless three men, all over twenty-one years of age, made the delivery. The danger and the risk were the hold-up on the highway. It was entirely immaterial to this risk whether the hold-up was by an employee of the plaintiffs or by a stranger. Suppose Di Gregario, instead of planning the hold-up, and sending others to commit it, had himself held up Young and Cohen at the point of a pistol, and taken the satchel containing the bonds. Would the case be any different so far as these conditions apply, than if the hold-up men were strangers? The risk would be lessened if three men accompanied the delivery, whether Di Gregario or the strangers made the assault, and it would be increased in like fashion, if the required guards did not accompany the messenger. In other words, the personality of the criminal was not the important thing; the risk was increased or diminished by the number or personality of the guards.

Therefore, we find clause “C” dealing with robbery while the property is in transit, as a separate and distinct subject of contract. It could hardly be more specific. The defendant insures against a loss occasioned through robbery of United States government bonds while they are in transit within twenty miles of the plaintiffs’ offices. This robbery may be committed by “ any person whomsoever.” This includes an employee as well as a stranger. The insurer, however, requires but one condition, which is absolutely within the control of the insured. It is that government bonds over $250,000 in value shall be delivered by a regular employee of the insured, continuously accompanied by two guards over twenty-one years of age.

This condition the plaintiffs failed to fulfill. They did not perform their part of the contract, a condition precedent to liability. The bonds were carried through the street by Young, an employee, accompanied by a lad eighteen years of age. The risk was materially increased by this fact. It was a vital, an important part of the agreement. And what is more, the omission was known to Young, for he frankly states in his testimony that he knew when he left the plaintiffs’ offices to make delivery of the bonds that he should have taken with him two guards of the required age.

The plaintiffs cannot expect the defendant to keep its part of the obligation when they have omitted a vital prerequisite of their own. We take this bond as we find it, placing upon the parties merely the obligations which they have voluntarily assumed, and holding them to the natural consequences of their defaults. An insurance policy or bond is no different than any other contract, and comes within the same rules of construction. The purpose and attempt of the courts is to give to the language used by the parties its usual and ordinary meaning in the light of all the circumstances and conditions, having in mind, as did the parties, the nature of the transaction.

For the reasons here expressed, the judgments of the courts below should be reversed, and judgment entered dismissing the complaint, with costs in all courts.

His cock, Ch. J., Cardozo, Pound, McLaughlin and Lehman, JJ., concur; Andrews, J., dissents.

Judgments reversed, etc.


author: Cardozo, J.

text:
    Dominick Rivara, Appellant and Respondent, v. James Stewart & Company, Inc., Defendant, and James Stewart & Company, Respondent and Appellant.
    Ships and shipping — contract—conditional sales—vessel a chattel within meaning of provisions of Personal Property Law relating to conditional sales — no pre-emption by Congress, as to vessels, of field of regulation occupied by section 65 prescribing disposition of chattels retaken by seller under contract of conditional sale — buyer may recover installments paid upon failure of vendor to comply with statute after retaking — argument that sales at public auction are inadequate test of value one for Legislature not for courts —■ seller may recover on counterclaim for cost of insurance and repairs that should have been paid by buyer.
    1. A vessel is a chattel within, the purview of sections 60 and 65 of the Personal Property Law relating to conditional sales. (Horton v. Davis, 26 N. Y. 495, 497; Best v. Staple, 61 N. Y. 71, 76, followed; White’s Bank v. Smith, 7 Wall. 646; Aldrich v. Mtna Co., 8 Wall. 491, distinguished.)
    2. In an action to recover installments paid upon the purchase price of a vessel, possession of which had been resumed by defendant for default in payment of later installments, without compliance with the provisions of section 65 of the Personal Property Law, an argument that the statute encroaches upon fields already occupied by Congress in the exercise of national powers, in that sections 62 and 63 prescribe other forms of record for contracts of conditional sale than provided by Congress, is not helpful to the defendant. The provisions of the Personal Property Law (§§62 and 63) are without importance except where the rights of third persons, not parties to the contract, are involved. Between the parties themselves, the contract of conditional sale is valid though it is not filed anywhere, nor even put in writing. By section 65 a conditional vendor is required either to put up for sale the retaken chattels and give credit for the proceeds or restore the payments made to him, and there is nothing in any act of Congress that pre-empts this field of regulation or even touches it remotely.
    3. A further argument that sales at public auction will be an inadequate test of value, for the buyer will take subject to maritime liens which may be secret and unknown, may supply a .reason why the Legislature should háve excepted vessels from the operation of the statute. It is not a reason why the exception should be established by the courts.
    4. Upon defendant’s counterclaim it properly recovered judgment for the cost of insurance premiums and repairs which should have been paid for by the buyer, and an argument that this is forbidden by section 65 is unsound. In providing for the recovery of payments on the subject of the sale, the statute has in view the payments made by the buyer as installments of the purchase price. It has no bearing on payments unrelated to the price, though the obligation to make them is expressed in the same contract.

      Rivara v. Stewart & Co., 214 App. Div. 737, affirmed.
    (Argued October 27, 1925;
    decided November 24, 1925.)
    Cross-appeals, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered July 15, 1925, affirming a judgment in favor of plaintiff entered upon a decision of the court at a Trial Term, a jury having been waived. (See 236 N. Y. 601,)

      James M. Gorman, Pierre M. Brown and Bichard F. Lenahan for plaintiff, appellant and respondent.
    As a matter of law the defendant had no right to recover items of insurance and repairs which it may have paid pursuant to the terms of the contract for the benefit of the tug. (Warren v. Lair, 190 App. Div. 139; 232 N. Y. 626; Glisson v. Heggie, 105 Ga. 34; Ratchford v. Cayuga Co. Cold Storage & W. Co., 217 N. Y. 565; Ohl v. Standard Steel Sections, 179 App. Div. 637; Stewart

      & Holmes Drug Co. v. Ross, 74 Wash. 401; Edmeand v. Anderson, 118 App. Div. 16.) The Conditional Sales Act of New York includes enrolled tugs within its purview.(Crowe v. Liquid Carbonic Co., 208 N. Y. 396; Adler v. Weis & Fisher Co., 218 N. Y. 295; Warren v. Lair, 190 App. Div. 139; 232 N. Y. 626; Ratchford v. Cayuga Co. Cold Storage Co., 217 N. Y. 565; Nordone v. Austin Drainage Excavation Co., 184 App. Div. 309; Tompkins v. Fonda Glove Lining Co., 188 N. Y. 261; Creamery Package Mfg. Co. v. Horton, 178 App. Div. 467; Alexander v. Kellner, 131 App. Div. 809; Bullock v. Dodds, 2 B. & Ald. 276; Chadbourne v. Duncan, 36 Maine, 89; Bixby v. Franklin Ins. Co., 25 Mass. 86; Aguirre v. Maxwell, 3 Blatchf. 140.)

      Harrington Putnam, John M. Woolsey, L. de Grove Potter and Alvah H. Combs for defendant, respondent and appellant.
    The retaking of the tug and defendant’s non-compliance with the Personal Property Law do not extinguish plaintiff’s obligations to pay for insurance and repairs for the lug while in plaintiff’s possession. (Crowe v. Liquid Carbonic Co., 208 N. Y. 396; Adler v. Weis & Fisher Co., 218 N. Y. 295; Rindone v. Hamlin, 161 N. Y. Supp. 858; Siegel v. Riesen, 97 Misc. Rep. 684; Hoffman v. White Sewing Machine Co., 123 App. Div. 166; Goldberg v. Wisner Manufacturing Co., 170 N. Y. Supp. 551; Rivara v. Stewart & Co., 119 Misc. Rep. 73; Warren v. Lair, 190 App. Div. 139.) The question answered by this court on appeal from the order denying the cross-motions for judgment on the pleadings does not determine the present appeal. (People v. Brooklyn, F. & C. I. R. Co., 89 N. Y. 75; Demarest v. Mayor, etc., 147 N. Y. 203; Dodge v. Cornelius, 168 N. Y. 242; Hanrahan v. Terminal Station Commission, 206 N. Y. 494; People ex rel. Carter v. Rice, 135 N. Y. 473.) This Personal Property Law was not intended to affect vessels documented in a United States custom house. (Towne v. Collins, 14 Mass. 500; Schmidt v. Simpson, 204 N. Y. 434; Bissell v. Hopkins, 3 Cow. 166; Coombs v. Beaumont, 5 B. & Ald. 72; Parish v. Wheeler, 22 N. Y. 494; Hooper v. Gumm, L. R. [2 Ch.] 282; Aguirre v. Maxwell, 3 Blatchf. 140; The Conqueror, 166 U. S. 110; Harrison Supply Co. v. United States, 171 Fed. Rep. 406; Tucker v. Alexanderoff, 183 U. S. 424; Palmer’s Shipbuilding Co. v. Chaytor, [1869] 4 L. R. C. B. 209; Shannahan v. Empire Engineering Corp., 204 N. Y. 543.) The records of sales or conveyances of United States vessels are solely regulated by the laws of Congress. (Prigg v. Pennsylvania, 16 Pet. 539; So. Railway v. Reid, 222 U. S. 444; People v. Erie R. R. Co., 233 U. S. 671; Matter of Taylor, 232 U. S. 363; Union Fish Co. v. Erickson, 248 U. S. 308; Railroad Company v. Husen, 95 U. S. 465; Kansas City Railway Co. v. Kaw Valley Drainage Dist., 233 U. S. 75; Missouri v. Kansas Gas Co., 265 U. S. 298; Schuede v. Zenith S. S. Co., 216 Fed. Rep. 566; 244 U. S. 646; Washington v. Dawson & Co., 264 U. S. 219; Robins Dry Dock Co. v. Dahl, 266 U. S. 449; Chelentis v. Luckenbach S. S. Co., Inc., 247 U. S. 372; Ex parte State of New York, 256 U. S. 490; State of Washington v. Dawson, 264 U. S. 219; Panama Railroad Co. v. Johnson, 264 U. S. 375.)
   Cardozo, J.

Plaintiff bought from defendant a tugboat, the James B. Stewart, under a contract of conditional sale. Payments aggregating $23,518.87 were made from time to time upon account of the price. As to later installments, the buyer made default. Following such default, the defendant resumed possession. It failed, however, to comply with section 65 of the Personal Property Law (L. 1909, ch. 45; now § 79, L. 1922, ch. 642 [Cons. Laws, ch. 4]). That section provides in substance that when goods and chattels are retaken by a conditional vendor, they shall be held for thirty days, during which time the vendee may redeem. If he does not redeem, the vendor may sell at public auction. Unless he does this within the time prescribed, the vendee * * * may recover of the vendor the amount paid on such articles by such vendee * * * under the contract for the conditional sale thereof.”

Plaintiff, invoking the statute, brings this action to recover $23,518.87, with interest, the installments of the purchase price. Defendant counterclaims for moneys paid by it for insurance and repairs, which under the terms of the contract should have been paid by the buyer. Both parties appeal. The seller is dissatisfied because the buyer has been reimbursed for part payments of the price. The buyer is dissatisfied because the reimbursement has been reduced by the allowance of the counterclaim.

The seller argues that a conditional sale of vessels is not one of goods and chattels within the purview of the statute (Pers. Prop. Law, §§ 60, 65). Authoritative precedents commit us to a different ruling. We held in Horton v. Davis (26 N. Y. 495, 497, decided in 1863) that under the act of 1833 (L. 1833, ch. 279) a mortgage on a vessel is a mortgage on a chattel. We were advised by later judgments of the United States Supreme Court that the act in some of its requirements must yield to an act of Congress which covered the same field (White’s Bank v. Smith, [1868] 7 Wall. 646; Aldrich v. Ætna Co., [1869] 8 Wall. 491, reversing 26 N. Y. 92). Congress had said that “ no bill of sale, mortgage, hypothecation or conveyance of any vessel or part of any vessel of the United States ” should “ be valid against any person other than the grantor or mortgagor, his heirs and devisees, and persons having actual notice thereof,” unless the instrument was recorded in the office of the Collector of Customs where such vessel was registered and enrolled (Act of June 29, 1850; U. S. Rev. Stat. § 4192). The States could not add to these exactions in respect of enrolled vessels by a requirement that mortgages to be valid as to third parties must also be recorded elsewhere. The Supreme Court did not deny that a mortgage on a vessel was within the terms of the State statute. Upon any question of construction, the judgment of the State court was to be accepted as conclusive. The reversal was based upon considerations of defect of power.

The question of construction came to us again in 1874, and we decided it as we had done before (Best v. Staple, 61 N. Y. 71, 76). We held that the ruling of the Supreme Court was confined to vessels enrolled and registered as vessels of the United States. If the vessel was not so enrolled and registered, the local act was to be followed. In so holding, we held again that a mortgage on a vessel was a mortgage on a chattel. The ruling then made has been unquestioned ever since (cf. Witherbee v. Taft, 51 App. Div. 87; The Independence, 9 Ben. 395).

The Chattel Mortgage Act is cognate to the act for the regulation of conditional sales. A vessel, if a chattel within the one, is plainly a chattel within the other. We can think of no distinction that would not condemn itself as arbitrary. Indeed, the definitions of the Sales Act instead of weakening the holding under the mortgage act, tend to reinforce it. “‘Goods,’” we are*there told, “ include all chattels personal other than things in action and money ” (Pers. Prop. Law, § 156; cf. § 61, L. 1922, ch. 642). A vessel is not within the exception of “ things.in action and money.” It is either a chattel personal, or else there must be a tertium quid which the statute does not classify. The description may seem inept in its application to an ocean liner. We are to remember that a vessel may be a motor boat or a skiff. Without more elaboration, we think the question is no longer open. The content of the statute may have been doubtful once. It is now settled by authority.

The seller argues that thus construed, the statute encroaches upon fields already occupied by Congress in the exercise of national power. The tugboat was enrolled and registered in the office of the Collector of Customs. After the conditional sale, it was used in interstate commerce, though whether it had been so used before that time the record does not tell us. Congress has said that bills of sale, conveyances and mortgages shall be invalid against purchasers without notice unless recorded in a certain place. The provisions of Personal Property Law (§§62 and 63) are invalid, it is said, when they prescribe other forms of record for contracts of conditional sale. We pass over the question whether contracts of conditional sale are to be so identified with bills of sale as to lead to a holding that State regulation of the one subject is excluded by national regulation of the other (cf. The Oceana, 233 Fed. Rep. 139, 143; 244 id. 80, 83). Even if such identity be assumed, the defendant does not gain by the assumption. The provisions of Personal Property Law (§§ 62 and 63) are without importance except where the rights of third persons, not parties to the contract, are involved. Between the parties themselves, the contract of conditional sale is valid though it is not filed anywhere, nor even put in writing. If a controversy shall some day arise in which a mortgagee or buyer from a conditional vendee shall invoke sections 62 and 63 of the statute against a conditional vendor, the question will have to be determined whether those sections in their application to vessels of the United States are in conflict with the act of Congress. No question of the effect of a record or the lack of it in any public office, State or national, is before us at this time. What concerns us now is section 65, which fixes the implied terms of the contract between the parties to the sale. Its underlying thought is that a conditional vendor shall be made to do the fair. thing' by his conditional vendee. To avoid hardship and oppression, he must either put up for sale the retaken chattels, and give credit for the proceeds, or restore the payments made to him. He knows when he enters into the contract of conditional sale that this obligation is attached to it, and he must be taken to have contemplated performance as much as if the obligation had been stated in the writing. In effect, a conditional sale is assimilated to a mortgage (2 Williston on Sales, § 579, at p. 1427). We find nothing in any act of Congress that pre-empts this field of regulation or even touches it remotely (The J. E. Rumbell, 148 U. S. 1, 16). The contract is not maritime (Bogart v. S. S. John Jay, 17 How. [U. S.] 399, 401, 402; The Ada, 250 Fed. Rep. 194, 198). The regulation of its incidents does not involve interference, unless indeed the most remote and indirect, with interstate commerce (Heisler v. Thomas Colliery Co., 260 U. S. 245; Lanston Monotype Machine Co. v. Curtis, 224 Fed. Rep. 403). The standards of conscionable conduct are established by the State for those contracting within its borders. The defendant argues that sale at public auction will be an inadequate test of value, for the buyer will take subject to maritime liens which may be secret and unknown (Piedmont & Georges Creek Coal Co. v. Seaboard Fisheries Co., 254 U. S. 1, 12; Moran v. Sturges, 154 U. S. 256). This may supply a reason why the Legislature should have excepted vessels from the operation of the statute. It is not a reason why the exception should be established by the courts. Statutes are not invalid for failure to cure completely the ills they aim to remedy.

This case was before us on an earlier appeal, and questions were then certified to bring up an intermediate order (236 N. Y. 601). The questions certified were these: 1. Do the provisions of sections 63, 65 and 66 of the Personal Property Law of the State of New York (Consol. Laws, ch. 41) apply to ships and vessels enrolled in a United States Chstoms House? 2. Did the New York Legislature have power to require the filing with local officials, such as registers and county clerks, of contracts for conditional sale of vessels enrolled in a United States Customs House? 3. Does the complaint herein state facts sufficient to constitute a cause of action? ” We answered the third question “ yes,” though without opinion, and did not answer the others. We could not have upheld the complaint without construing section 65 of the statute and1 applying it to vessels. The decision then made became the law of the case. We have been moved by the earnest and able argument of defendant’s counsel to state in an opinion the reasons that controlled our judgment when the case was here before.

The plaintiff’s appeal brings up the allowance of the counterclaim. The seller has had judgment for the cost of insurance premiums and repairs which should have been paid for by the buyer. The plaintiff argues that this is forbidden by section 65 which gives the buyer-restitution for the amount paid on such articles * * * under the contract for the "conditional sale thereof.” We read the statute otherwise. In providing for the recovery of payments on the subject of the sale, the statute has in view the payments made by the buyer as installments of the purchase price. It has no bearing on payments unrelated to the price, though the obligation to make them is expressed in the same contract. If the plaintiff himself had caused the tug to be repaired or procured the policies of insurance, he would have no remedy against the defendant for expenses thus incurred. His position is no better when sued by the defendant for payments made in his behalf.

The judgment should be affirmed without costs to either party.

His cock, Ch. J., Pound, McLaughlin, Crane, Andrews and Lehman, JJ., concur.

Judgment affirmed.