author: Kellogg, J.

text:
    Morrill Realty Corporation, Appellant, v. Rayon Holding Corporation, Respondent.

      (Argued June 10, 1930;
    decided July 8, 1930.)

      Morris Hillquit for appellant.
    The premises to be conveyed under the contract of sale between the parties hereto are subject to the restrictions created by the Murray Hill agreement. (Schoonmaker v. Heckscher, 171 App. Div. 149; 218 N. Y. 722; People ex rel. McLaughlin v. Police Commrs., 174 N. Y. 450; Campbell v. New York Evening Post, 219 App. Div. 169; Wilson v. Ford, 209 N. Y. 186; French v. Carhart, 1 N. Y. 96; McLean v. Woolworth Co., 204 App. Div. 118; Porter v. Denny, 170 App. Div. 546; Deeves v. Constable, 87 App. Div. 352.) The effect of the references to the Murray Hill agreement in the numerous deeds in the chain of defendant’s title was to charge the property with the restrictions set forth in the said agreement. (Goodhue v. Cameron, 142 App. Div. 470; Williams v. Hewitt, 57 Wash. 62; Korn v. Campbell, 119 App. Div. 401; Title Guarantee & Trust Co. v. Fallon, 101 App. Div. 187; Matter of Oakes, 248 N. Y. 280.) The property in question is still legally included within the residence district as established by the building zone resolution adopted by the Board of Estimate and Apportionment of the city of New York on July 25, 1916. The attempted inclusion of the said property in the retail district established by the Board of Estimate and Apportionment by resolution of April 18, 1929, is illegal and void. (Melita v. Nolan, 126 Misc. Rep. 345; Palmer v. Mann, 206 App. Div. 484; Village of Carthage v. Frederick, 122 N. Y. 268; Rochester v. Simpson, 133 N. Y. 414; Buffalo v. New York, L. E. & W. R. R. Co., 152 N. Y. 27; Crayton v. Larrabe, 220 N. Y. 493; New York v. Hyatt, 3 E. D. Smith, 156; Matter of Snowdown, 12 Cal. App. 521; Muther v. Capps, 38 Cal. App. 721; St. Louis v. Union Dairy, 213 Mo. 148; St. Louis v. Klausmeyer, 213 Mo. 119; Polinsky v. People, 11 Hun, 390; 73 N. Y. 65; Brooklyn v. Toynbee, 31 Barb. 282; Erie R. R. Co. v. Paterson, 79 N. J. L. 512; N. Y. R. R. Co. v. Paterson, 79 N. J. L. 601; Hicks v. Long Branch, 69 N. J. L. 300; Baker v. Courts, 194 Ky. 260; Armatage v. Fisher, 74 Hun, 167.)

      Edwin DeT. Bechtel and Leslie D. Dawson for Murray Hill Association, Inc., amicus curice.

    The protests filed with the Board of Estimate and Apportionment were sufficient to defeat the resolution of April 18, 1929. (Matter of Melita v. Nolan, 126 Misc. Rep. 345; Matter of 40th St. & Park Ave., Inc., v. Walker, 133 Misc. Rep. 907; Lincoln Trust Co. v. Williams Building Corp., 229 N. Y. 313; Matter of Wulfsohn v. Burden, 241 N. Y. 288.) The premises on the westerly side of Madison avenue between Thirty-sixth and Thirty-seventh streets are subject to the Murray Hill restrictive agreement. (Schoonmaker v. Heckscher, 218 N. Y. 722; Goodhue v. Cameron, 142 App. Div. 470; Trustees v. Lynch, 70 N. Y. 440; Cromwell v. American Bible Society, 202 App. Div. 625.)

      David Vorhaus, Moses H. Grossman, Louis J. Vorhaus, George L. Allin, Philip S. Dean and Joshua Bernstein for respondent.
    The premises were neither originally subject to, nor have they since had imposed upon them, the Murray Hill covenant. (Schoonmaker v. Heckscher, 171 App. Div. 149; Van Duyn v. Chase & Co., 149 Iowa, 222; Korn v. Campbell, 119 App. Div. 401; 192 N. Y. 490; Percival v. Williams, 82 Vt. 531; Matter of Oakes, 248 N. Y. 280; Title Guarantee & Trust Co. v. Fallon, 101 App. Div. 187; Goodhue v. Cameron, 142 App. Div. 470.) The covenants imposed by Murray in his deed to Paine, and referred to in various deeds in the chain of title, have been extinguished and merged by the common ownership of the defendant of all premises burdened or benefited by such covenants. The objection of the purchaser that the property is still subject to such covenants is untenable. (Korn v. Campbell, 192 N. Y. 490; Schoonmaker v. Heckscher, 171 App. Div. 151; 218 N. Y. 722.) The retail zone resolution is a valid enactment. (Smith v. Helmar, 7 Barb. 416; People v. Calder, 153 Misc. Rep. 724; Day v. Stetson, 8 Me. 365; Pechner v. Phœnix Ins. Co., 65 N. Y. 195; Solomon v. Vallette, 152 N. Y. 147; Beatty v. Guggenheim Exploration Co., 225 N. Y. 380.) , Unanimous vote of the Board of Estimate and Apportionment was unnecessary. (Beach v. Jenkins, 174 App. Div. 813; Des Moines v. Dorr, 31 Iowa, 89; Justices of Bedfordshire v. Commissioners of Bedford, 7 Exch. 658.)

      Arthur J. W. Hilly, Corporation Counsel (William T. Kennedy of counsel), for City of New York, amicus curice.

      Louis I. Beichner for Thirty-fourth Street Midtown Association et al., amici curice.

    The Board of Estimate and Apportionment complied with section 242-b of the charter of the city of New York as amended by the Legislature. (Lincoln Trust Co. v. Williams Building Corp., 229 N. Y. 313; Matter of Stubbs v. Adamson, 220 N. Y. 459.)

      Jeremiah T. Mahoney, Herbert H. Maass, Vincent L. Leibell and Monroe L. Friedman for 40th St. & Park Ave., Inc., amicus curice.

   Kellogg, J.

The plaintiff contracted to buy and the defendant agreed to sell the block frontage on the westerly side of Madison avenue, between East Thirty-sixth and East Thirty-seventh streets in New York city, having a width of 197 feet and six inches on Madison, 143 feet on Thirty-seventh street and 95 feet on Thirty-sixth street. The contract expressed the understanding of the parties to be that the purchase was made by the plaintiff for the purpose of erecting a business building upon the premises. It contained a covenant by the seller that the premises might be used for business purposes, subject to restrictions provided for retail business districts by an amendment to the Zoning Resolution adopted by the Board of Estimate and Apportionment on April 18, 1929. The plaintiff refused to accept a conveyance of the premises on three grounds: (1) That the premises were subject to the restrictions of a covenant known as the Murray Hill covenant; (2) that they were subject to the restrictions of a covenant known as the Paine covenant; (3) that the premises might not be used for retail business purposes under the original Zoning Resolution, and that the redistricting of the premises under the amendment, to constitute a part of a newly created retail district, was illegal. In this action, which the plaintiff brings to recover the down payment made, it urges that the title offered was defective for the three reasons stated when it rejected the tendered conveyance.

(1) The Murray Hill covenant was contained in an agreement executed on the 22d of February, 1847, by the owners of several contiguous parcels of land in New York city, and bound the owners and all subsequent grantees not to erect other than dwelling houses of brick or stone, private stables of brick or stone, or churches on premises owned by the parties within an area described. The premises were in part described as divers lots and parcels of ground situate in the 18th Ward of the City of New York, lying on each side of 34, 35, 36 and 37th Streets and on the south side of 38th Street lying between Madison Avenue on the westerly side and Lexington Avenue on the easterly * * Manifestly, a description of lots between Madison and Lexington having a frontage on certain named streets is not inclusive of lots on the same streets to the west of Madison or to the east of Lexington. Equally clear is it that a description of lots on the cross streets is not comprehensive of lots not touching the streets which are situate on the avenues. Hence to the descriptive words quoted there were appended the following: 11 and also on said Madison Avenue, Lexington and Fourth Avenue as the same are particularly laid down on a map in the Office of the Register in and for the City and County of New York, entitled Map of the Murray Hill Estate, made by Joseph F. Bridges, City Surveyor, February 25, 1839.” It has been held that the added clause was qualified by the words of the precedent clause bounding the premises on the east and west, so that the covenant was tied to those lots only which lay between the east fine of Madison and the west line of Lexington. (Schoonmaker v. Heckscher, 171 App. Div. 148; affd., 218 N. Y. 722.) We see no reason now to doubt the correctness of that decision. Indeed, independently of the decision, we are presently of the opinion that the Murray Hill covenant imposed no restrictions upon premises situate on the west side of Madison avenue, as are the premises constituting the subject of this action.

In the year 1853 the property now in litigation was owned by John R. Murray. In that year he conveyed lots, constituting a major portion of the premises, to John Paine. The deed contained the following clause: subject nevertheless to the covenants and provisions contained in a certain instrument in writing * * * recorded * * * in Liber 485 of Conveyances, page 594, March 2, 1847.” The instrument referred to was the Murray Hill agreement. In 1855 Murray conveyed to Robert M. Oliphant the lot adjoining the Paine lots on the south. In 1856 Murray conveyed to the trustees of St. Patrick’s Cathedral the remaining lot on the corner of Thirty-sixth street. The last two conveyances contained subject ” clauses similar to that contained in the Paine conveyance. In the defendant’s chain of title, whereby its ownership of the entire frontage is linked up with the ownership of these several grantees, there are many deeds containing similar clauses. It is urged that the defendant is thereby estopped from claiming that the Murray Hill covenant does not extend to the lands in suit.

In Bennett v. Bates (94 N. Y. 354, 370) it was said: The authorities hold where a grantee takes a conveyance of land, subject to the payment of a mortgage existing thereon, although he comes, under no personal liability to pay the same, is not at liberty to contest the existence or validity of such mortgage.” In that case the question was whether a grantee might dispute the existence of a debt expressly acknowledged to be owing by a mortgage securing its payment, “ subject ” to which the grantee took his conveyance. In terms the obligation was admitted by the mortgage; in terms the lien of the mortgage was made to attach to the identical lands accepted by the grantee. The principle stated is expressly based upon the postulate that the grantee takes the lands subject to the payment of a mortgage existing thereon.” Of the principle enunciated it was said in Purdy v. Coar (109 N. Y. 448, 453): The pith of the doctrine is that the circumstances of the purchase amount to an admission of the validity and lien of the outstanding incumbrance.” Now, the principle of estoppel merely forbids that a claimed right, admitted to be valid by act or word of the person against whom or whose property it runs, shall by that person be disputed. In other words, an estoppel does not originate a legal right; it merely forbids the denial of a right claimed otherwise to have arisen. If, in the Bennett case, the mortgage to which the grant was expressed to be made subject, had failed to describe the granted property, the assertion of an existing lien, which the grantee might not deny, would not have been made, so that no estoppel would have arisen. In the instance before us the Murray Hill covenant, by its terms excluded from its operation the premises in litigation. Consequently, if the subject ” clauses, contained in conveyances made subsequently to the agreement, operated to bind the granted property to restrictions such as were contained therein, they could not so have operated through estoppel; they must have been effectual, if at all, as new impositions of like restrictions upon lands not originally bound by the covenant. Self-evidently there was no thought in the mind of any grantor or grantee to impose new restrictions by covenants presently made.

In Korn v. Campbell (119 App. Div. 401) the court considered the question whether a conveyance to one Coburn, subject to ” certain restrictions contained in a prior deed, operated to reimpose restrictions which had been extinguished. Scott, J., writing for the court, said: The insertion of this clause in the deed to Coburn did not, however, necessarily amount to the reimposition of the restrictions upon the property, or imply an agreement on Coburn’s part that he would observe the covenant.” The decision was affirmed by this court in 192 New York, 490. In Percival v. Williams (82 Vt. 531, 547) there was considered a case where reservations of easements, to which a grant was made subject,” had been extinguished when the grant was executed. The court said of the parties: They did not intend to give the reservation, subject to which the conveyance was made, any force or meaning beyond that given by the deed containing it, whatever such force or meaning might be (see Wolveridge v. Steward, 1 Cr. & M. 644, 30 E. C. L. 521; Johnson v. Webster, 4 D. G. M. & G. 474; 53 Eng. Ch. 371), and the various grantees including the orator were bound by that deed only to the extent of its obligation.” In Goodhue v. Cameron (142 App. Div. 470) the precise question now presented was under consideration. Within the area, to various properties in which the Murray Hill covenant was tied, there was a lot, numbered 53, at the southwest corner of Thirty-fourth street and Madison avenue, which was not owned by any party to the agreement creating the covenant. It was part of an abandoned highway known as Middle Road,” title to which was then in the city of New York. A portion of this lot was conveyed to Mary Murray in August, 1847, six months after tbe execution of the Murray Hill covenant. In the year 1851 Mary Murray conveyed to John R. Murray the premises thus conveyed to her and in addition a lot immediately adjoining on the east which had a frontage on Thirty-fourth street of twenty feet one inch in width. In 1853 John R. Murray conveyed the land thus granted to Martin Zabriskie, “ subject, nevertheless, to the covenants and provisions ” contained in the Murray Hill agreement. The opinion of Charles F. Brown, referee, who decided the case in the first instance, is printed in the Appellate Division reports. He found as follows: I, therefore, find that the part of the defendant’s property which is subject to the restriction is a lot in the rear thereof twenty feet one inch wide on 34th Street and thirty-four feet six inches wide on the north line of the defendants’ property.” It thus appears that the lot conveyed by the city to Mary Murray, by her to John R. Murray, and by him to Martin Zabrisbie subject to ” the covenant, was held to be free from the restrictions imposed thereby. The decision was affirmed by the Appellate Division. Although the case was not brought to this court, we feel that the rule of property which it enunciated was correct, and should not be disturbed.

We hold that the restrictions created by tbe Murray Hill agreement do not bind the premises in litigation.

(2) In the year 1853 John R. Murray, being the owner of all the premises in litigation, as we have noted, conveyed a large part of the Madison avenue frontage to John Paine. The deed contained the following: And it is hereby mutually covenanted and agreed that neither of the parties hereto, their heirs or assigns, owning the several lots of land on the west side of Madison Avenue between Thirty-sixth and Thirty-seventh Street shall or will erect upon such lots within forty feet of the Westerly line of said Avenue any buildings, except first class dwelling houses of brick or stone of not less than Twenty-five feet in width on the Avenue. And further that not less than five feet off the front of each of the said lots of land last mentioned shall forever be and remain an open space or court and shall not at any time hereafter be appropriated for or occupied by any edifice, building or wall nor be in any manner built upon or obstructed otherwise than by the necessary steps for entrance, platforms, pedestals, and iron fences or railings connected therewith and enclosing the same and the foundations and copings upon which such iron fences or railings may be placed.” This is the so-called Paine covenant. All the lands on Madison avenue between Thirty-sixth and Thirty-seventh streets, then owned by the parties to the conveyance, are now owned by this defendant. The single ownership has extinguished the restrictions imposed by the covenant contained in the grant. (Korn v. Campbell, supra.)

We hold that the Paine covenant does not incumber the title to the premises in question.

(3) In the year 1916 the Board of Estimate and Apportionment of New York city, acting under the authority of section 242-b of the Greater New York Charter, added by chapter 470 of the Laws of 1914, adopted a Building Zone Resolution, providing for the division of the city into three use districts, to wit: (1) Residence districts; (2) business districts, and (3) unrestricted districts. In residence districts no buildings might be erected other than those to be occupied as dwellings, hotels, clubs, churches, libraries, museums, charitable institutions, hospitals and the like. In business districts buildings might be used for business purposes of a certain character, including manufacturing, provided that not more than twenty-five per cent of the total floor space of a building were so employed, except that a space equal to the area of the lot might in every case be thus used. Unrestricted districts were to be what the name implies. Upon the passage of the resolution the Board adopted a use district map, which divided the city into the three use districts, and apportioned to each district certain city territory. The property in litigation, i. e., the westerly side of Madison avenue, between East Thirty-sixth and East Thirty-seventh streets, to a depth of 100 feet west of the westerly fine of the avenue, was included in a residence district. Until April, 1929, the property continued to be in such a district.

When section 242-b was originally added to the charter in the year 1914, it contained no provision for the redistricting of the city to accord with its changing needs. The omission was supplied in the year 1916 by chapter 497 of the laws of that year which added to section 242-b the following: “ The board may from time to time after public notice and hearing amend, supplement or change said regulations or districts but in case a protest against a proposed amendment, supplement or change be presented, duly signed and acknowledged by the owners of twenty per centum or more of the frontage proposed to be altered, or by the owners of twenty per centum of the frontage immediately in the rear thereof, or by the owners of twenty per centum of the frontage directly opposite the frontage proposed to be altered, such amendment shall not be passed except by a unanimous vote of the board.”

The original Zoning Resolution, as we have noted, permitted manufacturing up to twenty-five per cent of the total floor space of any building in a business district. In factories so much space is required for offices, showrooms, storage, shipping, halls, stairways and the like that more than twenty-five per cent of the floor space is seldom required for strictly manufacturing purposes. Therefore, manufacturing might be extensively done in a business district. As time went on factories began to encroach upon the territory previously devoted to retail business. The need of new districting to protect stores and shops in a district set apart for strictly retail business was increasingly felt. Finally, on April 18,1929, the Board of Estimate and Apportionment provided for the creation of a new form of district, to be known as the Retail District,” by adding to the Zoning Resolution a new section as follows: “ In a retail district the same regulations and restrictions shall apply as are provided for business districts except that no manufacturing or treatment of products shall be carried on other than such as are incidental to the conduct of a retail business conducted on the premises, or Such other manufacturing as is now permitted in a business district, provided that in such other manufacturing no more than five per cent (5%) of the total floor space of the building is so used.”

On the same day the Board, by a non-unanimous vote, passed a resolution assigning to the new retail district a substantial area of the city, extending from Twenty-third street on the south to the center line of the blocks between Fiftieth and Fifty-first streets on the north, and including some sixty city blocks. All of the block bounded west by Fifth avenue, east by Madison avenue, north by Thirty-seventh street and south by Thirty-sixth was thus assigned. This, of course, included the premises now in litigation. The resolution, if effective, accomplished two things. It removed premises, formerly in a practically unrestricted business district, to a district wholly restricted to retail business. It assigned premises, formerly in a residence district, to a less restricted retail business district. It is urged that the protests filed required a unanimous vote for the adoption of the resolution, and, therefore, that the premises in suit were never lawfully assigned to the new retail district.

It is apparent that the power of the Board of Estimate and Apportionment, conferred by the amendatory provisions, added in 1916 to section 242-b of the Greater New York Charter by the Legislature of the State, to make alterations in the districting of the city, could in no wise have been impaired by any self-denying resolution which the Board might itself have adopted. For the power of the Board we must look to the statute and not glance elsewhere. The Board is empowered to amend, supplement and change said regulations or districts,” but this must be “ after public notice and hearing.” It is not denied that the notice was given and the hearing afforded. However, the Board’s action must be by unanimous vote, in case there has been filed a protest against a proposed amendment, supplement or change ” which is signed by the owners of twenty per centum or more of the frontage proposed to be altered,” or the owners of twenty per centum of the frontage immediately in the rear thereof ” or the owners of twenty per centum of the frontage directly opposite the frontage proposed to be altered.” No distinction is made in the statute between an alteration proposed ” by the Board itself or one “ proposed ” by an interested petitioner. An “ amendment, supplement or change,” therefore, is proposed ” when a resolution to that end is offered by a member of the Board for passage by it. In this instance, the resolution proposed and passed, provided for the inclusion in a retail district, of a large area, consisting of many city blocks. There is no pretense that twenty per cent of the frontage included in this area, of the frontage opposite thereto or of the frontage in the rear thereof, made a protest against the adoption of the resolution. On the face of things, therefore, no need of a unanimous vote was present, and the resolution was lawfully adopted.

It is said that a frontage proposed to be altered ” is the front which any block presents to a particular street or avenue; that a frontage directly opposite ” or a frontage immediately in the rear thereof ” must be determined accordingly. From this it is argued either that the resolution was illegal in that the consideration of separate frontages,” in the sense attributed to the word, was not thereby presented to the Board; or, that the resolution, although omnibus in character, must be regarded as a composite of numberless propositions severally presented and adopted. If the former be regarded as correct, then the whole resolution is void; if the latter, then it is void in so far as the property involved herein is concerned, since all the owners of the frontage opposite, to wit, the frontage on the east side of Madison avenue between Thirty-sixth and Thirty-seventh streets protested against the alteration. Now, every property fronting upon an avenue, which is inclusive of corner lots, such as the property in suit, or every property on a street similarly inclusive, must have a frontage both upon the avenue and upon the street. Therefore, the argument, in part drawn from the use of the singular noun frontage,” that all districting must be done severally by the block frontage upon a particular avenue or street, since any frontage upon the one necessarily includes a frontage upon the other, utterly fails. If the argument be modified, to present the proposition that districting must be done severally with an entire block as. the largest unit, we think that the application of such a principle might prove unfortunate. The owners of twenty per centum of city block frontage might prevent the passage of a proposed districting resolution. Thus, there might result a districting of the city, with business, retail, residence and unrestricted districts scattered about in the pattern of a checkerboard. Besides, the principal reason advanced against the districting .of large areas, containing many blocks, is, that there is no frontage immediately in the rear,” the owners of which may file a protest as provided by the section. The same argument runs against a districting by separate blocks, since one block, like an aggregate of many, is unattended by such a frontage. There is nothing contained in section 242-b of the City Charter which in words or by implication limits the power of the Board, either in districting or redistricting the city, so that it must proceed by separate resolution to zone block by block, or otherwise by areas of restricted size. We think that the Legislature never intended thus to limit the powers of the Board; that, on the contrary, it was the legislative intent that the Board should have power to redistrict substantial and unrestricted areas, so that a proper readjustment of the district lines as originally laid down by it might be achieved.

We think that the premises in question were properly assigned to the new retail district, and that retail business may be conducted thereupon as covenanted.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


source: Caselaw Access Project

license: Public Domain

text:
    In the Matter of the Probate of the Will of Sarah H. Smith, Deceased. Cora D. Reeves et al., Appellants; City Bank Farmers Trust Company et al., Respondents.

      (Argued June 5, 1930;
    decided July 8, 1930.)

      Stanley W. Jones for appellants.
    A will is ambulatory until death, and may be revoked at will and in any manner in conformity with the statutes at any time by a testatrix, and when a testatrix uses clear, unambiguous words of revocation in a will which in itself contains no ambiguity, these words are to be held to mean exactly what testatrix has said, and extraneous evidence is not admissible to show a contrary intent; and her intention must be ascertained from her last will, alone, its language being clear and unambiguous. (Lasier v. Wright, 304 Ill. 130; Matter of Gloucester's Est., 11 N. Y. Supp. 899; Matter of Forbes, 24 N. Y. Supp. 841; Matter of Barnes, 70 App. Div. 523; Matter of Williams, 70 N. Y. Supp. 1055; Matter of Horton, 163 App. Div. 213; Brown v. Quintard, 177 N. Y. 75; Matter of Miner, 146 N. Y. 121; Wadsworth v. Murray, 161 N. Y. 274; Baylies v. Hamilton, 36 App. Div. 133; 165 N. Y. 641; Osburn v. Rochester Trust & Safe Deposit Co., 209 N. Y. 54; Matter of Cunnion, 201 N. Y. 123; Matter of Thompson, 11 Paige, 453; Matter of Bump, 234 N. Y. 60; Matter of Kennedy, 167 N. Y. 163; Throckmorton v. Holt, 180 U. S. 552; Matter of Keleman, 126 N. Y. 73; Dwight v. Fancher, 245 N. Y. 71.)

      C. Alexander Capron, George N. Whittlesey and Edward M. Cameron, Jr., for City Bank Farmers Trust Company et al., respondents.
    The surrogate and the Appellate Division correctly determined that the revocation clause contained in the Florida will of 1924, was not imperative, but should be construed so as to effectuate the intention of the testatrix. (Schouler on Wills [6th ed.], § 615; Jarman on Wills [6th ed.], 170; Van Wert v. Benedict, 1 Bradf. 114; 1 Williams on Executors [10th ed.], 122; Denny v. Barton, 2 Phill. 575; Owens v. Fahnestock, 110 S. C. 130; David’s New York Law of Wills, § 367; Matter of Purdy’s Will, 20 N. Y. Supp. 307; Matter of Pilsbury, 50 Misc. Rep. 367; 113 App. Div. 893; 186 N. Y. 545; Canfield v. Crandall, 4 Dem. 111; Osburn v. Rochester Trust & Safe Deposit Co., 209 N. Y. 54.) The determination that it was not the intention of the testatrix by her 1924 Florida will to revoke her New York will is correct. (Waterman v. N. Y. Life Ins. & Trust Co., 237 N. Y. 293; Matter of Ossman v. Von Roemer, 221 N. Y. 381.) Evidence of extrinsic facts and circumstances was properly received by the surrogate. (Matter of Neil, 238 N. Y. 138; Morris v. Sickley, 133 N. Y. 456; McGoldrick v. Bodkin, 140 App. Div. 196; 1 Jarman on Wills [6th ed.], 431; Ely v. Megie, 219 N. Y. 112; Carley v. Harper, 219 N. Y. 295; Matter of Phipps. 214 N. Y. 378; Matter of Turner, 206 N. Y. 93; Matter of Lummis, 101 Misc. Rep. 258; Matter of North, 52 Misc. Rep. 429; Matter of Kavanagh, 133 Misc. Rep. 399; Matter of Miner, 146 N. Y. 121; Young v. Valentine, 177 N. Y. 347.)

      Herbert S. Schoonmaker for Young Men’s Christian Association, respondent.
    There was no intention to revoke the New York will of 1911 by the revoking clause in the Florida will of 1924. (Matter of Purdy’s Will, 20 N. Y. Supp. 307; Brown v. Quintard, 177 N. Y. 75; Matter of Oswold, 3 P. & D. 162.) The introduction of extrinsic evidence at the trial was not prejudicial to the contestants and was properly admitted. (Schouler on Wills [3d ed.], § 579; David’s New York Law of Wills, 784; Thompson on Const, of Wills, 69; Matter of Neil, 238 N. Y. 138; Morris v. Sickley, 133 N. Y. 456; Ely v. Megie, 219 N. Y. 112; Surrogate’s Court Act, § 294; Matter of Miner, 146 N. Y. 121; Young v. Valentine, 177 N. Y. 347; 1 Jarman on Wills, 430.)
   Kellogg, J.

The question is whether or not a printed clause contained in a will, executed by the testatrix in the State of Florida on the 22d day of March, 1924, reading hereby revoking all former Wills by me made,” had the effect of revoking a prior will, made in the State of New York on August 28, 1911, which has been offered for probate.

The New York will, made in 1911, makes disposition of no assets of the testatrix other than those situate in the State of New York, for the testatrix expressly provides therein that every provision of this will is to be satisfied out of the property located at my death in said State of New York.” The testatrix further expresses it to be “ my intention to make a separate will disposing of my property situated in Florida and elsewhere outside of the State of New York, in which will I shall direct the payment of my debts and funeral expenses from the proceeds of my Florida property.” The New York properties are not to be subject to the payment of her debts; none of her assets there situate are to be transmitted at her death to any other State for purposes of administration. All former wills, “ so far as the same may in any way affect any property situated at the time of my death in the State of New York ” are revoked. The will also contains this clause: It is my will that no other or later testamentary instrument executed by me shall be deemed to affect in any way the terms and provisions of this instrument unless it is so specified in said other or later instrument.” In the year 1912 the testatrix, in Florida, executed a second will. Its execution was in apparent compliance with the purpose announced in her prior will. The instrument states that she executed it “ for the purpose of disposing of property which I have, and which I may hereafter be possessed of, which is not disposed of by my former will.” She then makes disposition of all such property which is not disposed of by my former will.” S. A. Wood, is appointed executor by the will. The will, made in Florida on the 22d of March, 1924, was on a printed form, the blanks of which were filled in with typewriting. This clause appears in the will: “ Likewise I make, constitute and appoint R. H. Boyd, of De Land, Fla., without bond, to be my executor of this my last will and testament, hereby revoking all former wills by me made.”

The testatrix was possessed of an estate, at the time of her death, of the approximate value of $50,000. Forming part of her estate were securities of the value of $23,000. These securities, or other securities, which they replaced, had been physically present in New York city, in the custody of the City Bank Farmers Trust Company ever since the year 1909, when the testatrix delivered them to that bank for safekeeping. Frequently, during the intervening years, the testatrix expressed her intention to maintain this fund in New York city, apart from all other funds by her owned. Often she said she desired these funds to be disposed of at her death through the New York courts. These were the securities of which the testatrix made disposition by the New York will of 1911.

When the testatrix executed the New York will her nearest relatives were May and Anna Peats, daughters of a sister, and Cora Reeves, a daughter of another sister. She also had a connection by marriage, Mabel Bloodgood, whom she called a niece. By the New York will she bequeathed the life use of a fund of $5,000 to May Peats and the principal to Mabel Bloodgood; the life use of another fund of $5,000 to Anna Peats and the principal to Cora Reeves; the sum of $4,500 to various charities; all the rest and residue to the Young Men’s Christian Association and the Children’s Aid Society, both of New York city. By her 1912 Florida will she devised certain real estate to certain persons named, and gave all the residue of her property, other than her New York securities, to Cora Reeves. Soon afterwards the testatrix sold all the devised real estate, so that, under that will, Cora Reeves would receive all her property other than the New York properties. By her 1924 will the testatrix made legacies to charities, totaling $900, left to her cousin Amelia Bordeaux a. government bond for $1,000, and to Cora Reeves a similar bond for the same amount. At this time May Peats was dead, but Anna, although insane, was hving. No residuary clause appeared in the will. Thus, the testatrix from an estate of $50,000, made gifts of $2,900 only.

If the two prior wills were intended to be revoked by the clause to which we have referred, the testatrix must have desired that her entire estate, less $2,900 bequeathed, should pass by intestacy to Anna Peats, an insane person, and Cora Reeves, in equal shares. Before her death the testatrix sold the two bonds bequeathed by her will of 1924, and Anna Peats had died. If the revocation be deemed universal, therefore, Cora Reeves will receive the entire estate less legacies of $900. On the other hand, if the New York will of 1911 survives, Mabel Bloodgood will receive $5,000, the various charities $5,400, the Young Men’s Christian Association and the Children’s Aid Society about $4,250 each, and the balance of the estate will pass to Cora Beeves.

It is the modern rule that “ with the exception of direct statements of intention, no extrinsic fact relevant to any legitimate question arising in the interpretation of writings and admissible under the general rules of evidence,” can be shut out. (Thayer’s Preliminary Treatise on Evidence, 445; Wigmore on Evidence, vol. 5, § 2470; Matter of Neil, 238 N. Y. 138; Dobbins v. Pratt Chuck Co., 242 N. Y. 106.) Sometimes the rule has been stated with the proviso that extrinsic facts may be shown in cases only “ where the language alone is of doubtful import.” (Morris v. Sickly, 133 N. Y. 456.) We take this to mean merely that the probable intention of the writer, as indicated by extrinsic facts, may not prevail over the plain meaning of the written word, nor have any force whatever, unless the words incorporated in the writing are susceptible of a meaning which expresses the intent thus disclosed. It has been said by Professor Wigmore: “ The truth had finally to be recognized that words always need interpretation; that the process of interpretation inherently and invariably means the ascertainment of the association between words and external objects; and that this makes inevitable a free resort to extrinsic matters for applying and enforcing the document.” (Wigmore on Evidence, § 2470, subd. 3.) The process of interpreting a legal document has been defined as follows: “To interpret a legal writing is, therefore, first to collect the intent, to discover the writer’s meaning; secondly, to ascertain that that meaning is expressed sufficiently. ’ ’ (On the Principles of Legal Interpretation by F. Vaughan Hawkins, Esq., see Appendix C to Thayer’s Treatise, p. 581.)

We have here a will made in 1911, providing that no later will shall affect the terms of the instrument “ unless it is so specified in said other or later instrument,” coupled with a later will, made in 1924, containing the printed clause, hereby revoking all former wills by me made.” No one supposes that the testatrix by the cited phrase of the earlier will deprived herself of the power of making a subsequent revocation of its terms. Nor can it be supposed that the earlier statement, made in 1911, is a declaration defining the testator’s meaning, attempted to be expressed in a written utterance made in 1924. (Brown v. Quintard, 177 N. Y. 75.) We have not a case, therefore, where there is proposed a violation of the settled rule that express declarations of intention, not contained in a will, except in cases of equivocation as to the subject or object of a gift, may never be shown. (Wigmore on Evidence, § 2471.) The question is whether certain facts, extrinsic to the writing, indicate that the literal meaning of the language employed is not in accord with the meaning which the testatrix intended to give it, and whether, when the real intent is shown, the words are adequate to express such intent.

We know that in 1909 the testatrix separated from her assets securities of the value of $23,000; that she sent these securities to a bank in New York city for safe keeping as a separate fund apart from all other funds; that she.made a disposition of these securities and no others in a will made in New York city in 1911; that in this will she expressed her desire that the instrument should be irrevocable except by a revoking clause expressly dealing therewith; that she maintained the securities in New York as a separate fund until 1924; that she frequently expressed her wish that these securities be administered by the New York rather than the Florida courts; that in 1912 she made a will in Florida disposing of her properties in Florida and elsewhere, except that no disposition was made of the New York properties; that in 1924, although she possessed assets valued at $50,000, she made a will without a residuary clause, disposing of no more than $2,900. It' is thus made apparent that the testatrix, throughout a long period, from the date of her earliest to that of her latest will, cherished the thought that her New York properties, and her properties elsewhere situate, were things apart which should be managed independently and be disposed of separately. Such having been her state of mind and persistent thought, it is highly probable that the testatrix, in executing the Florida will of 1924, wherein an omission to mention the New York properties and the New York will is made, had no intention to revoke the testamentary disposition thereof previously provided for. We think that an intent thus limited finds sufficient expression in the revoking clause employed by her. The testatrix revokes all former wills by me made ” whereby properties other than those situate in New York State were made the subject of disposition. For this view we find authority in the following: Denny v. Barton (2 Phillim. 575); Jarman on Wills ([6th Am. ed.], vol. 1, p. 170); Williams on Executors ([5th Am. ed.], vol. 1, p. 122).

The order should be affirmed, with costs. • '

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

Order affirmed.


author: Lehman, J.

text:
    In the Matter of the Accounting of Robert L. Beeckman et al., as Trustees under the Will of Samuel Thomas, Deceased, Respondents. Joseph H. Dodshon, Appellant; Robert F. Wagner, as Special Guardian, et al., Respondents.
    (Argued June 6, 1930;
    decided July 8, 1930.)

      Robert G. Starr, William, W. Blatchford, Jr., and Henry Woilman for appellant.
    A trust of personal property created under a will or instrument that directs that upon the death of the life beneficiary the principal of the trust fund should be divided into parts and paid over by the trustees, remains in full force until the final distribution is made by the trustees. (Perry on Trusts, § 311; Yates v. Thomas, 35 Misc. Rep. 552; Farmers Loan & Trust Co. v. Pendleton, 115 App. Div. 506; Deering v. Pierce, 149 App. Div. 10; Husted v. Thomson, 158 N. Y. 328; Bank of New York & Trust Co. v. Hamersley, 210 App. Div. 57; Matter of Laing, 59 App. Div. 612; Matter of Frech, 220 App. Div. 126; Matter of Meehan, 104 Misc. Rep. 219; Matter of Vernon, 77 Misc. Rep. 425; Matter of McCormack, 46 Misc. Rep. 386.) Appellant is entitled to receive commissions, as substituted trustee for receiving and paying out the principal and the income of the trust. (Matter of Silliman, 67 Misc. Rep. 27; Matter of Baldwin, 209 N. Y. 601; Matter of Naylor's Estate, 164 N. Y. Supp. 462; Matter of Affleck, 163 App. Div. 876; 1 Heaton on Surrogates’ Courts [4th ed.], 657.)

      John Me Kim Minton, Jr., and George F. Mara for Robert L. Beeckman, respondent.
    Appellant was not entitled to any commissions upon either the principal or income of the trust as upon the death of the life beneficiary this trust terminated and appellant was never a trustee. (Matter of Ziegler, 168 App. Div. 735; Weeks v. Cornwell, 104 N. Y. 325; Robinson v. Martin, 200 N. Y. 159; Matter of Zerega, 81 Misc. Rep. 113; Real Property Law, § 109; Watkins v. Reynolds, 123 N. Y. 211; Cussack v. Tweedy, 126 N. Y. 81; Embury v. Sheldon, 68 N. Y. 227; Matter of Finck, 103 Misc. Rep. 526; Matter of Baldwin, 120 Misc. Rep. 226; Matter of Van Kleeck, 95 Misc. Rep. 40; 177 App. Div. 917.)

      Simon H. Rifkind and Robert F. Wagner for special guardian, respondent.
    The will did not confer upon surviving trustees the power to appoint a successor trustee for a trust the term of which had expired. (Matter of

      Frech, 220 App. Div. 126; 246 N. Y. 552; Matter of Finck; 103 Misc. Rep. 526; Matter of Post, 30 Misc. Rep. 551, Bayer v. Decker, 5 App. Div. 623; Matter of Foster’s Estate, 135 Misc. Rep. 423; Matter of Zerega, 81 Misc. Rep. 113; Husted v. Thomson, 158 N. Y. 328; Matter of Laing, 59 App. Div. 612; 170 N. Y. 621; Watkins v. Reynolds, 123 N. Y. 211; Bank of New York & Trust Co. v. Hamersley, 121 Misc. Rep. 730; 210 App. Div. 57; 240 N. Y. 558.) Had the surviving trustees attempted to appoint appellant trustee of the expired trust, their act would have been invalid and ineffectual. (Matter of Zerega, 81 Misc. Rep. 113; 160 App. Div. 878; Olmstead v. Dodd, 144 App. Div. 809; Spallholz v. Sheldon, 216 N. Y. 205; Bush v. Halsted, 121 App. Div. 538; De Voe v. Lutz, 133 App. Div. 356; Finnegan v. McGuffog, 203 N. Y. 342; Matter of Bernuth’s Estate, 127 Misc. Rep. 705.)

      John F. Gouts for Elisabeth R. Thomas, individually and as trustee, respondent.
    Upon the death of the life beneficiary the trust terminated; and after his death the time had passed when the trustees of this trust could perform acts of discretionary nature, such as appointing appellant a trustee of this trust. (Farmers Loan & Trust Co. v. Pendleton, 115 App. Div. 506; Matter of Van Kleeck, 158 N. Y. Supp. 539; Matter of United States Trust Co., 138 N. Y. Supp. 150; Losey v. Stanley, 147 N. Y. 560; Matter of Finck’s Estate, 170 N. Y. Supp. 510; Matter of Baldwin’s Estate, 198 N. Y. Supp. 86; Matter of Easterly, 202 N. Y. 466; Phœnix v. Livingston, 101 N. Y. 451; Matter of Marshall, 80 Misc. Rep. 1; Frech v. Frech, 220 App. Div. 126; 246 N. Y. 552; Watkins v. Reynolds, 123 N. Y. 211; Matter of Kittinger’s Estate, 77 Atl. Rep. 24.)
   Lehman, J.

Samuel Thomas, by his last will and testament, created trusts of varying duration in parts of his estate and appointed four trustees. In imperative terms he directed that vacancies in the number of trustees caused by death, resignation or failure to qualify of any trustee must be filled by the remaining trustees, “ by selecting or naming by an instrument in writing another Executor or trustee to fill such vacancy.” Edward R. Thomas, a son of the testator, served as an executor and trustee under the will during his life. The remaining trustees, in compliance with the provisions of the will, selected and named Joseph H. Dodshon to fill the vacancy caused by the death of Edward R. Thomas. No choice was left open to the remaining trustees whether to fill the vacancy or not. If they failed to act, then the will expressly directed that application for the appointment of a trustee to fill the vacancy must be made to the court, and the trustee appointed was endowed by the will “ with all the powers and authority of any of said Executors and Trustees named herein and appointed hereunder, including the power to appoint another executor and trustee to fill a vacancy.”

Joseph H. Dodshon qualified as trustee, and thereafter performed the same duties as the other trustees. He shared in the administration of the trust funds set apart under the will. One of these funds had been created for the benefit of Edward R. Thomas as life beneficiary. At his death the trustees were directed “ to divide and set apart such share so held for my said son into as many equal parts or shares as my said son shall leave a child or children and issue of a deceased child him surviving and to pay over one of such parts or shares to each of such children and to the issue of any deceased child.” After the death of Edward R. Thomas and the appointment of Dodshon as his successor as trustee, the trustees have carried out this direction, reserving only a sum sufficient in their opinion to pay possible charges against the fund. In this division and payment Dodshon took an active part, and he joined with the trustees in accounting for this fund. Upon that accounting his right to any commissions upon the fund set apart for Edward R. Thomas was challenged on the ground that this trust terminated at the death of the life tenant and that the subsequent appointment of Dodshon as substituted trustee under the will of Samuel Thomas included only those trusts which had not terminated. The surrogate overruled that contention and allowed commissions to Dodshon for services performed in paying out the Edward R. Thomas trust fund, as well as for his services as trustee of the other trust funds. "Upon appeal, the Appellate Division held that he was entitled to no commissions upon the Edward R. Thomas trust fund.

No question has been raised as to the amount of the commissions allowed if Dodshon is entitled to any commissions as trustee of the Edward R. Thomas fund, and upon this appeal we consider only Dodshon’s right to commissions, not their amount. In the courts below there has been a division of opinion as to whether on the death of Edward R. Thomas, title to the personal property held in trust for his life vested in those who were entitled to share in the division of the fund. That question is not decisive of the right of Dodshon to share in the commissions. Regardless of whether or not title to the trust fund remained in the trustees after the death of the life beneficiary, the fund itself was still in their possession as trustees, and they were still required to exercise their power and perform their duty as trustees to divide the trust fund and to pay it over to those' entitled thereto, before the administration of their trust was complete. We are not now concerned with technical questions of trusts in personal property. We are concerned only with the question whether under the terms of the will a trustee appointed upon the death of Edward R. Thomas was intended to share the powers and duties of his fellow trustees in the division and payment over of the trust fund created for the life of the deceased trustee. If he shared in the powers and duties of the other trustees, he was entitled to commissions allowed by law for the performance of his duties.

The language of the will seems to us entirely clear upon the point. The testator provided that at all times there must be four executors and trustees to share in the administration of the estate. Others might think that at times a lesser number might be sufficient; the testator directed otherwise. Neither the remaining trustees nor the court might exercise any discretion as to the number of trustees or as to their powers. As long as executors or trustees had not completed their duties and retained any powers under the will, vacancies in the number of trustees must be filled. No implication can be found in the language of the will that there might be an appointment limited to particular portions of the estate or that no appointment need be made where exact compliance with the directions of the will would subject the estate to unnecessary expense. The testator chose to command that the duties and responsibilities of trustees must at all times be shared by four. So long as any trust duties remained unperformed, a vacancy in the number of trustees must be filled. No limitations upon the command are implied in the language of the will, and none may be imposed by the court in order to save the estate from the expense inevitably resulting from the command.

The order of the Appellate Division should be reversed and the decree of the Surrogate’s Court affirmed, with costs in the Appellate Division and in this court.

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

Ordered accordingly.


text:
    Jacob A. Jacobs, Appellant, v. Nathan E. Newman, Respondent.

      (Argued June 12, 1930;
    decided July 8, 1930.)

      Alexander Rose for appellant.
    The defendant received exactly what be contracted for inasmuch as within the six-year period plaintiff tendered to him one-half of the stock in question. (Markham v. Jaudon, 41 N. Y. 235; Brown v. Bronson, 87 N. Y. Supp. 872; Smith v. Becker, 192 Mo. App. 597; Wilfand v. Zwerner, 168 N. Y. Supp. 564; Vogelstein v. Pope Metals Co., 155 N. Y. Supp. 128; Bullard v. Eames, 219 Mass. 49.) The Jacobs-Kelsey contract was not merged in the judgment as far as defendant was concerned. (Spratt v. Reid, 3 Green [Iowa], 489; Gould v. Svendssgaard, 141 Minn. 437; Murphy v. Manning, 134 Mass. 488; Owens v. Bowie, 2 Md. 457.)

      Allan Deutsch, Samuel Hart and Chauncey E. Tread-well for respondent.
    Plaintiff’s default in the performance of the Kelsey contract and his conduct subsequent thereto clearly evidenced an abandonment and repudiation of the said contract, and an intention not to perform same. This constituted an anticipatory breach of the Newman contract, relieving defendant of all liability thereunder. (Jungman & Co. v. Atterbury Bros., Inc., 249 N. Y. 119; Williston on Contracts, § 675; Portuguese-American Bank v. Weller, 242 U. S. 7; Wood v. Fisk, 156 App. Div. 497; Giarrantano v. McIlwain, 215 App. Div. 644; James v. Burchell, 82 N. Y. 108; Stern v. Mayer, 166 Minn. 346; Matter of Pettingill, 137 Fed. Rep. 143; Moffat v. Davitt, 200 Mass. 452; New Iberia Sugar Co. v. Lagarde, 130 La. 387; Fort Payne v. Webster, 163 Mass. 134; Meyers v. Markham, 90 Minn. 230; Gruen v. Ohl, 81 N. J. L. 626; Brodhead v. Reinbold, 200 Penn. St. 618; Gray v. Smith, 83 Fed. Rep. 824.) The judgment merged the Kelsey contract. After judgment, the Kelsey contract could have no independent vitality. Payments made by plaintiff were on the judgment and not on the contract. (2 Black on Judgments [2d ed.], § 677; 2 Freeman on Judgments [5th ed.], § 546; Gutta Percha & R. Mfg. Co. v. Mayor, 108 N. Y. 276; Lowell v. Lane, 33 Barb. 292; Knight v. Rothschild, 132 App. Div. 274; Lucas v. East Stroudsburg Glass Co., 38 Hun, 581; Silver v. Krellman, 89 App. Div. 363; Rosenfeld & Co. v. Solomon, 61 Misc. Rep. 238; Shepard v. Mayor, 13 How. Pr. 286; Taylor v. Simpkins, 38 Misc. Rep. 246; Daily Realty Co., Inc., v. Schmuck, 90 Misc. Rep. 631.)
   Lehman, J.

On January 31, 1922, the plaintiff entered into a contract whereby he purchased from S. G. Kelsey of London, England, 4,000 shares of preferred stock and 4,000 shares of common stock of Asbestos Mines, Ltd. The purchase price was $40,000, payable six years from the date of the contract, but the buyer received the option, during that period, of paying the purchase price in full at any one time or of making partial payments in any amount from time to time.” Interest upon the balance due was payable semi-annually, and provision was made that in the event of thirty days’ default in the payment of interest, the total unpaid balance of the purchase price should become due and payable. The contract provided that upon the signing of the contract, delivery of the stock certificates, indorsed by the seller to the buyer, should be made to a bank which should hold the same “ in escrow as collateral security subject to the ternas of the agreement,” and should deliver the securities to the buyer upon payment in full of the purchase price. It was expressly stated in the agreement that Title to said securities shall become vested in the Buyer upon receipt of said securities by the Depositary; and all dividends, whether in cash, or in shares, or otherwise, and all other increase, profit or benefit accrued or accruing on said securities from the date hereof, shall become the property of the Buyer.”

On the same date the plaintiff made a contract with the defendant by which he sold, assigned and transferred to the defendant one-half the securities purchased by the plaintiff under his contract with Kelsey, which is expressly incorporated, by reference, into the contract with the defendant. The buyer agreed to pay to the seller- one-half of the consideration price named in the Kelsey contract, together with one-half of the interest and other charges reserved or referred to in said Kelsey contract “ within ten days after the Seller has notified the Buyer that the Seller, pursuant to the said Kelsey contract, has made such payments on account of principal, or interest, or charges.” (Italics are ours.)

The stock was deposited by Kelsey with the bank, and interest charges were paid for two years. Though the plaintiff’s contract with the defendant provided that the defendant should pay his half share of the purchase price and interest charges reserved in the Kelsey contract within ten days after the seller notified the buyer that the seller pursuant to the said Kelsey contract has made such payment,” the parties did not adhere to the letter of the contract in meeting the first four semi-annual payments of $1,200 interest. As these came due, the plaintiff would send the defendant his check for $600. The defendant then added his check for the same amount and sent the full sum of $1,200 to Kelsey. When the fifth semi-annual payment of $1,200 was about to become due the defendant refused to make any payment not called for by his contract. The plaintiff failed to meet that interest payment. Kelsey declared the full purchase price due and brought suit against the plaintiff in a Canadian court to recover the sums due under the con- ' tract. Judgment was entered in that action for $40,425, and execution issued against the plaintiff. He paid $10,000 on account of the judgment, then a settlement was effected upon the total payment by plaintiff of $36,834.60.

Pending this settlement and payment, the stock remained in the possession of the bank as collateral security for the payment of the purchase price. Thereafter the plaintiff obtained the stock, tendered one-half of the certificates to the defendant, and demanded from him one-half of the sum paid by him to Kelsey in settlement of the judgment and of his obligation under the Kelsey contract. The defendant refused to accept the certificates or to pay to the plaintiff any further sums under his contract. Then the plaintiff brought this action.

We have stated the facts as they appear in the plaintiff’s testimony. At the close of that testimony the complaint was dismissed on the ground that under the defendant’s contract, he was obligated to pay to the plaintiff only one-half the payments made by plaintiff to Kelsey pursuant to the said Kelsey contract,” and that the plaintiff defaulted under that contract and subsequent payments were made not “ pursuant to that contract ” but in settlement of a judgment obtained against the plaintiff.

We think that the dismissal rests upon too narrow a construction of the defendant’s obligation. The plaintiff transferred to the defendant one-half the shares of stock which he had bought from Kelsey. Title to Kelsey’s stock passed to the plaintiff at the time of delivery to the bank. The bank held the stock only as collateral security for the payment of the contract price and charges. On the same day title to one-half of the pledged stock passed to the defendant under his contract of purchase from the plaintiff. For that half the defendant agreed to pay to the plaintiff one-half of the purchase price which the plaintiff must pay to Kelsey to obtain possession of the stock. The plaintiff did not expressly agree with defendant to perform his contract with Kelsey, but the plaintiff did agree that the obligation of the defendant was limited to payment of one-half the amount which plaintiff paid “ pursuant to the said Kelsey contract.” We find no implication in that language that strict performance of the plaintiff’s obligation to Kelsey was to be a condition precedent to recovery against the defendant. The defendant was interested in obtaining a release of his stock from the lien of its pledge as collateral security for payment of the agreed purchase price to Kelsey. All payments provided for in the Kelsey contract and made and accepted by Kelsey on account of the contract price fixed by the agreement, are payments made pursuant to the contract ” even though because of previous defaults, Kelsey might possibly have attempted to rescind the contract with him. The test is whether plaintiff’s contract with Kelsey was at the time of such payment still in existence, so that the payments accepted by Kelsey served pro tanto to release the stock held as security for the payments called for by the contract.

Here the plaintiff’s previous default under the contract with Kelsey had resulted in Kelsey declaring the full purchase price due and bringing an action to recover that price. That action did not terminate the contract of sale. On the contrary, it was based upon the existence of the contract and was brought to enforce the obligation of the contract. (D’Aprile v. Turner-Looker Co., 239 N. Y. 427.) Title to the stock still remained in the plaintiff or plaintiff’s assignee, and the stock was still held as security for the purchase price. Even though in a sense the original obligation of plaintiff to Kelsey was merged in the judgment, the “ judgment does not obliterate the essential features of the obligation on which it is rendered.” (Murphy v. Manning, 134 Mass. 488.)

We are concerned not with the juristic result of a merger of a contractual obligation in the judgment obtained to enforce the obligation, but with the intent of the plaintiff and defendant as embodied in the language of their contract. Here the intent seems clear. The plaintiff’s payment in satisfaction of the judgment operated also as a satisfaction of the purchase price which he had agreed to pay under the contract with Kelsey and for which the stock was held as security. Under the terms of that contract the plaintiff had the option to pay the full purchase price at that time. If without prior default, the plaintiff had chosen to avail himself of that option, the defendant would have had no right to complain, and the payment by plaintiff would, beyond possibility of dispute, have constituted a payment pursuant, to his contract. Its character was not changed because it was made under compulsion of a judgment. Kelsey accepted a smaller sum in satisfaction of a larger contractual obligation, but the payment operated to discharge the obligation created by the contract, was made pursuant to the terms of the contract, and operated to release the stock from Kelsey’s lien. The defendant has received exactly what the plaintiff agreed to give him, and must pay exactly what he agreed to pay the plaintiff. The plaintiff made out a prima facie case for the recovery of one-half the purchase price he paid to Kelsey.

The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.

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

Judgments reversed, etc.


text:
    In the Matter of The Dry Dock, East Broadway and Battery Railroad Company, Appellant; Transit Commission of the State of New York et al., Respondents. In the Matter of Third Avenue Railway Company, Appellant; Transit Commission of the State of New York et al., Respondents.
    (Argued June 4, 1930;
    decided July 8, 1930.)

      Alfred T. Davison and Addison B. Scoville for appellants.
    The State having granted the franchises to the appellants, has, by sections 26 and 29 of the Public Service Commission Law, given them the right to initiate an increase in their fares to an amount which is just and reasonable. Therefore, the amended tariff schedules initiating such increase in fare were lawful and lawfully filed. (People ex rel. City of New York v. Nixon, 229 N. Y. 356; Public Service Comm. v. Pavilion Nat. Gas Co., 232 N. Y. 146.) The provisions of section 29 of the Public Service Commission Law providing that certain things may not be done unless a certain procedure is complied with, are equivalent to an affirmative grant of power to do the act itself after the procedure prescribed in the statute is followed, and provide a complete procedure for initiating an increase in fare. (Schieffelin v. Hylan, 236 N. Y. 254; Manning, Bowman & Co. v. Keenan, 73 N. Y. 45.) The appellants had a right to file their tariffs under section 29 of the Public Service Commission Law notwithstanding the provisions of section 49 of the same law. (People ex. rel. N. Y., W. & B. R. Co. v. Pub. Serv. Comm., 193 App. Div. 445 ; 230 N. Y. 604; Town of North Hempstead v. Public Service Corp., 231 N. Y. 447; Pub. Serv. Comm. v. Pavilion Nat. Gas Co., 232 N. Y. 146.)

      George H. Stover and Edward M. Deegan for Transit Commission, respondent.
    The order of the Transit Commission, rejecting the new tariff schedules as unlawful, was proper, since the rate fixed in the franchise had

      not been increased by order of the Commission and could not be increased by the carrier itself, and the proposed rate was, therefore, in excess of that allowed by law. (People ex rel. New York, Westchester & Boston Ry. Co. v. Pub. Sew. Comm., 193 App. Div. 445; 230 N. Y. 604; People ex rel. Vil. of Brownville v. Pub. Sew. Comm., 198 App. Div. 391; Gilchrist v. Interborough R. T. Co., 279 U. S. 159; Murphy v. N. Y. C. R. R. Co., 225 N. Y. 548; Interstate Commerce Comm. v. Railway Co., 167 U. S. 479; Munn v. Illinois, 94 U. S. 113; People v. Budd, 117 N. Y. 1; Prentice v. Atlantic Coast Line, 211 U. S. 210; Smyth v. Ames, 169 U. S. 466; Vandalia R. R. Co. v. Schnull, 255 U. S. 113; Columbus Ry. & P. Co. v. Columbus, 249 U. S. 399; Henderson Water Co. v. Corporation Comm., 269 U. S. 278; City of New York v. Brooklyn City R. R. Co., 232 N. Y. 463; People ex rel. Vil. of S. Glens Falls v. Pub. Serv. Comm., 225 N. Y. 216; Matter of Quinby v. Pub. Serv. Comm., 223 N. Y. 244; People ex rel. City of New York v. Nixon, 229 N. Y. 356; People ex rel. U. & D. R. R. Co. v. Pub. Serv. Comm., 171 App. Div. 607; 218 N. Y. 643.)
    Section 29 does not confer on the carrier power to increase its fixed rates, without having secured from the Commission, under section 49, an order increasing the maximum rate. (Manhattan Co. v. Kaldenberg, 165 N. Y. 1; People ex rel. Wood v. Lacombe, 99 N. Y. 43; Matter of Livingston, 121 N. Y. 94; Wills v. Eastern Trust & Banking Co., 169 U. S. 295; Wichita R. R. Co. v. Pub. Util. Comm., 260 U. S. 48; Attleboro Steam & E. Co. v. Narragansett El. Light Co., 295 Fed. Rep. 895.)

      Arthur J. W. Hilly, Corporation Counsel (Edgar J. Kohler of counsel), for City of New York, respondent.
    Section 29 of the Public Service Commission Law was not intended to empower a street railroad corporation by the mere filing of amended tariff schedules and without the permission of the Commission, obtained as provided in section 49, to initiate and effect an increase over the rate allowed or prescribed as the maximum in the special or general laws or in a constitutional consent of local authorities by virtue of which the corporation acquired its franchises. (Metzger v. New York State Rys., 168 App. Div. 187; Murphy v. N. Y. C. R. R. Co., 170 App. Div. 788; New York C. & H. R. R. R. Co. v. Smith, 62 Misc. Rep. 526; People ex rel. New York C. & H. R. R. R. Co. v. Public Service Comm., 215 N. Y. 241; Interstate Commerce Comm. v. B. & O. R. Co., 145 U. S. 263; Interstate Commerce Comm. v. Cincinnati Ry. Co., 167 U. S. 479; C., N. O. & Tex. Pac. Ry. Co. v. Commission, 162 U. S. 184; People ex rel. Richmond, etc., R. R. Co. v. Willcox, 142 App. Div. 44; 202 N. Y. 515; Public Service Comm. v. Westchester Street R. R. Co., 206 N. Y. 209; City of New York v. New York Tel. Co., 115 Misc. Rep. 262; People ex rel. Ulster & Delaware R. R. Co. v. Public Service Comm., 171 App. Div. 607.) The Legislature in empowering increase of maximum rates in section 49, provides a procedure that carefully preserves both the judicial and the legislative functions of rate regulation. This procedure is wholly absent in section 29. (Interstate Commerce Comm. v. Cincinnati, N. O. & T. P. Ry. Co., 167 U. S. 479; People ex rel. Joline v. Willcox, 129 App. Div. 267; Village of Saratoga Springs v. Saratoga Gas Co., 191 N. Y. 123; People ex rel. C. P. R. R. Co. v. Willcox, 194 N. Y. 383; Prentis v. Atlantic Coast Line Co., 211 U. S. 210; People ex rel. Municipal Gas Co. v. Pub. Serv. Comm., 224 N. Y. 156.) A street railroad corporation or other carrier cannot itself increase a maximum rate of fare fixed by statute or constitutional consent theretofore granted by municipalities. (People ex rel. Ulster & Delaware R. R. Co. v. Pub. Serv. Comm., 171 App. Div. 607; Matter of Quinby v. Pub. Serv. Comm., 223 N. Y. 261; Matter of International Ry. Co. v. Rann, 224 N. Y. 83; Matter of International Ry. Co. v. Pub. Serv. Comm., 226 N. Y. 474; People ex rel. City of New York v. Nixon, 229 N. Y. 356; Matter of Evens v. Pub. Serv. Comm., 246 N. Y. 224.)
   Lehman, J.

The Dry Dock, East Broadway and Battery Railroad Company, commonly known as the Dry Dock Company, is a street railroad corporation which owns and operates lines of railroads on the streets of the city of New York. Franchises for these lines were granted by the Legislature by special statutes (Laws 1860, ch. 512; Laws 1866, chs. 866, 868 and 883). The Legislature has enacted that the railroad company shall receive not to exceed the sum of five cents ” for the carriage of a pasenger on its lines. In 1913 the street railroad company obtained a franchise from the city of New York to construct single track extension of its railroad. Like the original franchise granted by the Legislature, the franchise from the city was subject to the restriction that the rate of fare for any passenger should not exceed five cents.

Prior to June 22nd, 1928, a local and joint passenger tariff was on file with the Transit Commission, stating the rate of fare on the lines operated by the Dry Dock Company to be five cents, with free transfers between the lines of the Dry Dock Company and the Third Avenue Railroad Company. On that date the street railroad companies filed a new tariff schedule to become effective on July 24, 1928, changing the rate of fares from five cents to seven cents for the passengers on the lines operated by the Dry Dock Company, including transfers to and from the lines operated by the Third Avenue Railroad Company. The extension fine for which the Dry Dock Company received a franchise in 1913 is no longer in operation, and is not included in the tariff schedule filed by the railroad companies.

Section 29 of the Public Service Commission Law (Cons. Laws, ch. 48) provides that unless the commission otherwise orders no change shall be made in any rate, fare or charge, or joint rate, fare or charge which shall have been filed and published by a common carrier * * * except after thirty days’ notice to the commission * * * and all proposed changes shall be shown by printing, filing and publishing new schedules,” etc. The street railroad companies have complied with all the provisions of this section of the law. They maintain that these provisions were intended by the Legislature to create the machinery by which a street railroad company may in proper case obtain an increase in the rate of fare it may charge, even though such rate of fare is more than it is allowed to charge under the terms of the statute or contract which granted the railroad franchise.

We have said in People ex rel. City of New York v. Nixon (229 N. Y. 356) that “ the public service commission was empowered by statute to increase ' the maximum rates, fares, or charges chargeable by any * * * street railroad corporation ’ when found to be inadequate to yield a fair return (section 49, Public Service Commissions Law; Consol. Laws, chap. 48). That power came to the Commission through the amendment of the Public Service Commissions Law in June, 1911 (L. 1911, chap. 546; People ex rel. Ulster & Del. R. R. Co. v. Public Service Commission, 171 App. Div. 607; 218 N. Y. 643), if it did not already exist under the law as first enacted in 1907. (L. 1907, chap. 429, § 49.) ” In construing the language of the Public Service Commission Law and determining the limits of its scope, we have, at times, held that the Legislature did not intend that the Public Service Commission should have power to increase the maximum rates chargeable under certain forms of franchises. (Matter of Quinby v. Public Service Commission, 223 N. Y. 244; Matter of City of Niagara Falls v. Public Service Commission, 229 N. Y. 333; People ex rel. Garrison v. Nixon, 229 N. Y. 575.) In the case now under review the Transit Commission did not decide that , it does not possess the power where its exercise is properly , invoked. It rejected the schedules for increased rates solely on the ground that increase of rates beyond the maximum rates chargeable by a street railroad may not be initiated by the voluntary act of the street railroad in filing a new tariff schedule, but, under the express language of section 49 of the Public Service Commission Law, must be preceded by a determination and order of the Commission, made after a hearing upon its own motion or upon complaint that the maximum rates chargeable are insufficient to yield reasonable compensation for the service rendered, and are unjust and unreasonable.” The correctness of that ruling depends solely upon the proper construction and scope of section 29 of the Public Service Commission Law. We pass in this case upon no other question.

That section does not in express terms confer upon a common carrier any power to increase its rates beyond the maximum rates otherwise chargeable by it. On the contrary, its language is restrictive. At common law, a carrier might in the absence of statutory regulation or contractual limitation, fix its rates at will provided that in each particular case it charged a reasonable compensation for the carriage or service rendered and no more. (Murphy v. New York Central R. R. Co., 225 N. Y. 548.) Under the Public Service Commission Law that right was limited. Section 26 provides that “ all charges made or demanded by any such * * * common carrier for the transportation of passengers or property or for any service rendered or to be rendered in connection therewith * * * shall be just and reasonable and not more than allowed by law or by order of the commission having jurisdiction.” We have said that such provision is (a) merely declaratory of the common law, and (b) mandatory that a rate or charge fixed by a law or an order of the commission should not be exceeded.” (Murphy v. New York Central R. R. Co., 225 N. Y. 548.) Both sections 29 and 49 of the Public Service Commission Law must be read in the light of that provision. Together they formulate a new public policy in regard to the rates which a common carrier may charge, and provide machinery for giving effect to that policy.

A new public policy had been initiated. A new right had been declared. Rates were thereafter to be just and reasonable alike for carriers on the one side and for passengers or shippers on the other. . Neither class would be permitted for its own benefit to set the rule at nought. The state through its delegate, the commission, would lower the charges if too high. It would raise them if too low” (citing cases). Rate-making was to be no longer an affair of predominantly private interest, in which the state would interfere without system and with spasmodic and intermittent action. A superintending agency of government had taken the matter in hand.” (People ex rel. City of New York v. Nixon, 229 N. Y. 356.) Where the rate chargeable by the carrier was fixed by law, change could be effected by the State through the exercise of its power of rate regulation. By section 49 of the law, machinery was created by which rates, which previously could be changed only by the action of the Legislature, might thereafter be changed by order of the Commission as superintending agency of the State. To that agency the Legislature delegated the function of exercising the regulatory powers of the State systematically and in accordance with prescribed rules, and imposed the duty upon it of changing rates fixed by law when these rates are shown to be unjust and unreasonable. By section 29 the Legislature restricted the power of the carrier to fix its own rates in the field where previously the State had not chosen to exercise its regulatory power. Provision was made in that section intended to afford the agency of the State opportunity to interdict any change before it became effective if it appeared that the new rate was unreasonable. The two sections are intended to cover separate fields. In the field where change in rates can lawfully be effected only by affirmative action of the State, section 49 makes provision for such action by its agency. In the field where change in rates may lawfully be effected unless the State interposes its veto, section 29 provides opportunity, before the change becomes effective, for determination whether such a veto would be reasonable. No other construction of the statute accords with either the letter or the spirit of the statute.

Section 29 does not in express language confer upon common carriers any power to change the rates or fares which they may charge, but in terms merely restricts such power as they may have in that field. Statutes restricting in terms the exercise of a power are meaningless if in fact no power exists. Therefore, from a statutory restriction upon the exercise of a power, legislative intent to confer the power subject to the defined restrictions may at times be inferred. In such cases a reasonable construction of the statute may require the conclusion that the Legislature has used a bungling and backhanded method of authorizing ” the things enumerated. (Schieffelin v. Hylan, 236 N. Y. 254.) Here there is no room for any inference that the Legislature intended to broaden an existing power by the provision that the power may not be exercised except by a certain method. Indeed, even in a case where we held that a corporation might, by filing new schedules in accordance with the provision of an analogous section of the Public Service Commission Law, increase the rate it might charge private consumers above the maximum rate stated in the consent of the town, we pointed out that “ this method of increasing rates without first obtaining an adjudication as to their reasonableness may appear defective and illogical.” (Town of North Hempstead v. Public Service Corp., 231 N.Y. 447.) Certainly we may not strive, by forced construc•tions of the language of the statute, to find a legislative intent to authorize a method which “ may appear defective and illogical.” Under section 49 of the Public Service Commission Law, the Legislature has delegated to the agency created by it the power, which the Legislature always possessed, to change maximum rates contained in earlier statutes when it appears that these rates are unjust and unreasonable, and the same section provides the method by which the agency may be called upon to act. Until the Commission has by its order made in accordance with that method fixed a higher rate, the earlier statutes remain in full force and effect, and schedules filed containing rates beyond the maximum fixed by the statute are unlawful and may be rejected by the Commission. Section 29 merely gives the Commission power to suspend a proposed increase and after a hearing to make its own order regulating the rate to be charged where, except for such suspension or new order, the proposed increase would be lawful.

It is said that this construction of the scope and purpose of section 29 is in conflict with our decisions in Town of North Hempstead v. Public Service Corp. (supra) and Public Service Comm. v. Pavilion Natural Gas Co. (232 N. Y. 146). In those cases we held that a gas company might by filing its schedules under an analogous section of the Public Service Commission Law, increase the rates it might charge to consumers beyond the rates fixed in the consents of the town or village where the gas mains were laid. The right to annex terms to the consent to use the public streets was derived from article VII, section 61, subdivision 1, of the Transportation Corporations Law (Cons. Laws, ch. 63), which gave the companies power to lay their mains through streets of a city, town or village with the consent of the municipal authorities thereof, and under such reasonable regulations as they may prescribe.” This court in the case of People ex rel. Vil. of S. Glens Falls v. Public Service Comm. (225 N. Y. 216) stated that even if under that statute a municipality, might annex as a condition to its consent regulations regarding rates which the gas company might charge such regulations might at any time be modified by the Legislature. In that case the court reached the conclusion that the Public Service Commissions Law by implication modified the contracts of the municipalities and superseded the attempted regulation of rates, and since “no statute has fixed the price * * * for this community ” the company might thereafter charge rates fixed in accordance with the provisions of the Public Service Commissions Law, regardless of the maximum rates stated in the consent. Since the superseded contractual regulation of rate no longer constituted an obstacle to increase of rates, it followed that increase initiated by filing new schedules was lawful. So this court held in the later cases upon which the appellant relies.

Those cases involved only a construction of the legislative intent as embodied in the Public Service Commissions Law. The court decided that it was the intent of the Legislature that the Public Service Commissions Law embodying a new policy of the State must be construed as superseding all regulations imposed by municipal corporations under a power derived solely by delegation from the Legislature. The question whether regulations imposed by municipalities in franchise grants to street railway companies under authority derived not from the Legislature but from the Constitution was in hke manner superseded by the provisions of the Public Service Commission Law might present different considerations. (See Matter of City of Niagara Falls v. Public Service Comm., 229 N. Y. 333.) That question was not presented to the court or considered by it in the cases involving the rates of gas companies, and it is unnecessary for us to pass upon it now. It is sufficient to point out that in the case now under review, a statute has fixed the price for the community while in the earlier cases, as the court there pointed out, “ no statute has fixed the price * * * for this community.” In the earlier cases regulation was the result of contract subject to alteration by the State; in the present case the regulation is the result of a command of the sovereign. Nothing in the Public Service Commission Law could justify a construction that by implication the sovereign has revoked or altered its command. By that law the sovereign has merely created a new agency which after a hearing may modify the command. Until the new agency has acted, the command remains in full force, and increase of rate beyond the commanded maximum cannot lawfully be initiated by filing schedules under section 29 of the law.

The orders should be affirmed, with costs.

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

Orders affirmed.


author: Per Curiam.

text:
    In the Matter of Slaughter W. Huff et al., as Receivers of the New York and Queens County Railway Company, Appellants. Transit Commission of the State of New York et al., Respondents.
    (Argued June 4, 1930;
    decided July 8, 1930.)

      Alfred T. Damson and Addison B. Scoville for appellants.
    The Transit Commission had no right to reject the tariffs filed by the receivers. (Matter of Evens v. Public

      Service Comm., 246 N. Y. 224; People ex rel. City of New York v. Nixon, 229 N. Y. 356; Town of North Hempstead v. Public Service Corp., 231 N. Y. 447.)

      George H. Stover and Edward M. Deegan for Transit Commission, respondent.
    The tariff schedules were properly rejected as unlawful, since they contained a rate higher than that fixed by the franchise, which had not been altered by order of the Commission and could not be altered by the carrier itself. (Gilchrist v. Interborough Rapid Transit Co., 279 U. S. 159; Okla. Gas Co. v. Russell, 261 U. S. 290; Pac. Tel. Co. v. Kuykendall, 265 U. S. 196; St. Paul Gas Light Co. v. St. Paul, 181 U. S. 142; South Covington Ry. Co. v. Newport, 259 U. S. 97; Willcox v. Richmond Lt. & R. R. Co., 142 App. Div. 44; 202 N. Y. 515; Murphy v. N. Y. C. R. R. Co., 225 N. Y. 548; San Bernardino Board of Trade v. Atchison, Topeka & Santa Fe R. Co., 3 I. C. C. Rep. 138; Matter of Brooklyn R. R. Companies, 12 P. S. C. Rep. 12; Matter of Garrison, 12 P. S. C. Rep. 20; People ex rel. U. & D. R. R. Co. v. Pub. Serv. Comm., 171 App. Div. 607; 218 N. Y. 643; People ex rel. City of New York v. Nixon, 229 N. Y. 356; Matter of Quinby v. Pub. Serv. Comm., 223 N. Y. 244; People ex rel. Vil. of S. Glens Falls v. Pub. Serv. Comm., 225 N. Y. 216; Manhattan Co. v. Kaldenberg, 165 N. Y. 1; People ex rel. Wood v. Lacombe, 99 N. Y. 43; Matter of Livingston, 121 N. Y. 94; Riggs v. Palmer, 115 N. Y. 506; Prentis v. Atlantic Coast Line, 211 U. S. 210; Munn v. Illinois, 94 U. S. 113; People v. Budd, 117 N. Y. 1.)

      Arthur J. W. Hilly, Corporation Counsel {Edgar J. Kohler of counsel), for City of New York, respondent.
    Portions of the street railroad operated by appellants are subject to five-cent fare conditions imposed by local authorities as a condition of their constitutional consent, and consequently are immune from the legislative scheme of rate regulation and increase embodied in the Public Service Commission Law. (People ex rel. Quinby v. Public Service Comm., 223 N. Y. 244; Matter of Village

      of Mamaroneck v. Public Service Comm., 208 App. Div. 330; 238 N. Y. 558; People v. O’Brien, 111 N. Y. 1; Minor v. Erie R. R. Co., 171 N. Y. 566; Coosaw Mining Co. v. South Carolina, 144 U. S. 550; People ex rel. Garrison v. Nixon, 229 N. Y. 645; Guaranty Trust Co. v. N. Y. & Queens County Ry. Co., 253 N. Y. 190; Matter of McCabe v. Voorhis, 243 N. Y. 401.) Section 29 of the Public Service Commission Law was not intended to empower a street railroad corporation by the mere filing of amended tariff schedules and without the permission of the Commission obtained as provided in section 49, to initiate and effect an increase over the rate allowed or prescribed as the maximum in the constitutional consents of local authorities by virtue of which the corporation acquired its franchises. (New York Const, art. 3, § 18; Willcox v. Richmond L. & R. Co., 142 App. Div. 44; 202 N. Y. 515; Public Service Comm. v. Westchester St. R. Co., 206 N. Y. 209; People ex rel. Brooklyn City R. R. Co. v. Nixon, 193 App. Div. 746 ; 230 N. Y. 614.) Appellants are estopped by the franchise contracts from increasing the stipulated fare upon their own initiative, under section 29. (Fletcher v. Peck, 10 Cranch, 87; Pond v. New Rochelle Water Co., 183 N. Y. 330; Buffalo v. Frontier Tel. Co., 203 N. Y. 589; Interstate Commerce Comm. v. Cincinnati, N. O. & T. P. Ry. Co., 167 U. S. 479; Skinner & Edy Corp. v. United States, 249 U. S. 557; Vil. of Saratoga Springs v. Saratoga Gas Co., 191 N. Y. 123; People ex rel. Ulster & Delaware Ry. Co. v. Public Service Comm., 171 App. Div. 607; 218 N. Y. 643; Detroit v. Detroit Citizen Street Ry. Co., 184 U. S. 368; People ex rel. Bridge Operating Co. v. Public Service Comm., 153 App. Div. 129; People ex rel. N. Y., W. & B. Ry. Co. v. Public Service Comm., 193 App. Div. 445 ; 230 N. Y. 604; Attleboro Steam Co. v. Narrangansett Light Co., 295 Fed. Rep. 895.)
   Per Curiam.

The original franchises covering some of the lines operated by the appellants, as receivers, were granted by the Legislature prior to 1875. They fix the maximum fares which might be charged for the carriage of passengers. As new lines were built thereafter, additional franchises were granted by the municipal authorities. We do not analyse or construe the clauses, contained in such franchises, which purport to limit or regulate rates of fare. Regulation of rates by the Legislature cannot be superseded or modified by any agreement or franchise contract between a municipality and a carrier. Such cases as Matter of Evens v. Public Service Comm. (246 N. Y. 224) have no application to such a situation. Schedules showing increase of fares on the lines for which the Legislature granted franchises beyond the maximum fares fixed by the Legislature are unlawful regardless of the language or intent of later contract franchises. (Matter of Dry Dock, E. B. & B. R. R. Co., 254 N. Y., 305.) We pass on no other question.

The order should be affirmed, with costs.

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

Order affirmed.


text:
    John F. Jenkins, Respondent, v. Joseph L. Moyse et al., Appellants, Impleaded with Another.

      (Argued June 6, 1930;
    decided July 8, 1930.)

      Joseph M. Proskauer, J. Alvin Van Bergh, Avel B. Silverman and Benedict A. Leerburger for appellants.
    There is no evidence to support a finding essential to this judgment that the lender procured or participated in the formation of a dummy corporation to cover and cloak a usurious loan to plaintiff individually. (Union Dime Sav. Inst. v. Wilmot, 94 N. Y. 221; Dunham v. Cudlipp, 94 N. Y. 129; Smith v. Cross, 90 N. Y. 549.)

      Florence J. Sullivan for respondent.
    The loan and the bond and mortgage were usurious, null and void. (Anam Realty Co. v. Delancey Garage, Inc., 190 App. Div. 747; General Business Law, § 373; Sabine v. Paine, 223 N. Y. 404.) The dummy corporate entity and corporate fiction, the use of the name of “ John F. Jenkins, Inc.,” that never existed, in the application for the loan, and the sham corporate entity of “ John F. Jenkins Company, Inc.,” incorporated for a day to execute the $45,000 usurious bond and mortgage as mortgagor on plaintiff’s property, were cloaks and subterfuges used by the defendants to cover the usury and defeat the Usury Law. The plaintiff as an individual was throughout the usurious transaction the true owner of the real estate so mortgaged, the true borrower and mortgagor in said loan and bond and mortgage. (Anam Realty Co. v. Delancey Garage Inc., 190 App. Div. 747; Booth v. Bunce, 3 N. Y. 157;
      Hall v. Eagle Ins. Co., 151 App. Div. 826; Quaid v. Ratknowsky, 183 App. Div. 428; 224 N. Y. 624; Goss & Co. v. Goss, 147 App. Div. 703; Tyng v. Commercial Warehouse Co., 58 N. Y. 308; United States v. Lehigh Valley R. R. Co., 220 U. S. 257; Bressman, Inc., v. Masson, 127 Misc. Rep. 283; Garrigues Co. v. Int. Agricultural Corp., 159 App. Div. 880; Sanchez v. Sotscheck, 160 App. Div. 801; Fort v. 415 Central Park West Corp., 133 Misc. Rep. 777; Friend v. Friedman, 126 Misc. Rep. 654; Beckwith S. Agency v. Orange C. Herald Pub. Co., 214 App. Div. 215; Silverstein v. Taubenkimmel, 209 App. Div. 711; Railway Co. v. Miller, 51 N. W. Rep. 981; Gas Co. v. West, 50 Iowa, 16; State ex rel. Atty.-Gen. v. Standard Oil Co., 49 Ohio St. 137; Bennett v. Minott, 28 Oreg. 339.)
   Lehman, J.

In May, 1926, the plaintiff was the owner of a parcel of real estate in Westchester county. He desired to borrow the sum of $52,000 to meet pressing obligations, including a mortgage debt upon his real estate. He requested George Leerburger, a broker, to obtain a mortgage loan. The plaintiff testified: “ I was told I would have to be incorporated or I could not get this loan.” The rate of six per cent, which might be exacted lawfully from an individual borrower, would apparently not satisfy a prospective lender, so the broker “ said a corporation could not plead usury and they would not make the loan unless I was incorporated.” The plaintiff acceded to the broker’s suggestion and, in behalf of a corporation which should be formed to take title to the property, he authorized the broker to obtain a loan and agreed to pay a very large bonus in addition to interest. The defendant Joseph L. Moyse agreed to make a loan of $27,000, receiving a second mortgage of $45,000 with interest at six per cent. The plaintiff in a writing addressed to Joseph L. Moyse and signed “ John F. Jenkins, Inc., by John F. Jenkins, President,” confirmed the arrangement. In accordance with that arrangement, “ John F. Jenkins Company, Inc.,” was incorporated. Plaintiff transferred to the new corporation his real estate. The corporation executed a second mortgage for $45,000 and received the sum of $27,000 in July, 1926.

About a year later the defendant Lawrence Blum Realty Company, Inc., which held title to the mortgage, began an action to foreclose the mortgage. John F. Jenkins Company, Inc., still held title to the property covered by the mortgage. The plaintiff John F. Jenkins owned the corporate stock and controlled the corporation. The summons was served on him as president of the corporation. The defense of usury was not available to the corporation. (General Business Law, § 374; Cons. Laws, ch. 20.) Judgment of foreclosure followed, and a sale was had. Then the plaintiff made a motion to vacate the sale and for leave to intervene in order to obtain an adjudication that the loan transactions were personal transactions between Joseph L. Moyse and the said John F. Jenkins ” and, as such, were usurious. That motion was denied. The judgment of foreclosure is unreversed and binding upon the parties thereto and their privies, though on other grounds the sale held under that judgment was vacated.

Then the plaintiff brought this action in equity, seeking a judgment that the mortgage is usurious and void and should be canceled and discharged of record. In the courts below he has been granted that relief. Findings have been made and affirmed that the form of a corporate form was used merely for the purpose of concealing and covering up a corrupt, unlawful and usurious loan made to the plaintiff. ■

To sustain the judgment there must be evidence from which the inference can be drawn that the defendants agreed to loan money to the plaintiff, and did in fact make the loan to him. Before any inference can be drawn that the corporate form was used to conceal an unlawful transaction with the plaintiff as an individual, there must be proof, at least, that there was an individual transaction which the parties might desire to conceal. The plaintiff desired to raise money on mortgage upon his real estate. The defendants could not lawfully make a loan to the plaintiff individually at a greater rate of interest than six per cent. They never offered or agreed to make a loan to the plaintiff, for the rate of interest which they could lawfully exact from an individual was not attractive to them. The defendants were willing to loan money upon the real estate owned by the plaintiff, provided they could lawfully exact a higher rate of interest. The statute left one way open to accomplish a result desired by both sides. The loan was needed to take care of a mortgage upon the property and to relieve the property from the lien of taxes and of judgments against the plaintiff. If the property were transferred to a corporation, the corporation could borrow the money upon mortgage given by it without limitation as to the interest it might agree to pay for the loan. So the transaction was consummated, and it was consummated in full compliance with the law of this State. Indirectly through his ownership of the stock of the corporation the plaintiff continued to control the real estate and received substantially the full benefit of the loan. Indirectly, too, the plaintiff suffers loss by the enforcement of the defendant’s right to foreclose the mortgage upon the corporate property; but the loan was made to the corporation and was payable only by the corporation and out of property which the corporation had the right to mortgage.

Now we are asked to disregard the corporate entity and to declare that a loan made in a form which is legal is merely an evasion of the law, a cloak for a loan made not to the corporation but to the individual who owns its stock. That we may not do. As we have said in Union Dime Savings Institution v. Wilmot (94 N. Y. 221): The parties had a perfect right to deal with each other with the usury laws before their eyes, and to so shape the transaction as to avoid the condemnation of those laws.” As in that case, there is no evidence whatever that the transaction took the form it did as a cover for usury. In one sense it took this form for the purpose of escaping usury.”

The transaction here had its inception in a loan which the defendants would not make to the plaintiff because it would have been usurious but which they agreed to make to a corporation which the plaintiff formed because a loan to a corporation is not usurious. The corporate mortgage when executed had a valid inception and was free from the taint of usury. It does not become invalid because, perhaps, the corporation was formed as part of a plan whereby the defendants might keep outside of the statute and still obtain a return from the investment greater than the rates allowed by the statute under other circumstances. (Dunham v. Cudlipp, 94 N. Y. 129.)

The corporate entity may be disregarded where it is used as a cloak or cover for fraud or illegality. For that there is ample authority. Here the corporate entity has been created because the statute permits a corporate entity to make a contract which would be illegal if made by an individual. The law has not been evaded but has been followed meticulously in order to accomplish a result which all parties desired and which the law does not forbid.

Corporations aie, ordinarily, created because through the corporate form some advantage is obtained which would be denied to an individual or a group of individuals. That has been done here, and no ground has been shown for disregarding the corporate entity, though that entity has been ■ formed for the purpose of doing something permitted to a corporation but forbidden to an individual.

The test of whether this loan is usurious is whether it was in fact made to the plaintiff. Doubtless at times loans aie made in fact to an individual though in form they are made to a corporation to hide the fact that the lender has exacted an illegal rate of interest from the real borrower. We do not now deal with such a situation. Here the corporation was formed and the loan made to it, rather than to the individual who owned the corporate stock, because the parties sought to avail themselves of the rights the law accords to those who do business in corporate form under a franchise from the State. The fact that the sole owner of the stock of the corporation is an individual does not change those rights. He did not in his individual capacity borrow any money or agree to repay any money. The defendants have obtained a judgment against the corporation enforceable against property owned by the corporation at the time the action was brought. That judgment is based upon a valid contract. We do not now decide whether the plaintiff would be bound by the judgment if the contract had been tainted with usury.

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

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

Judgments reversed, etc.