text:
    National Surety Company, Appellant, v. President and Directors of The Manhattan Company, Respondent and Appellant, and The Bank of America, Respondent.

      (Argued October 9, 1929;
    decided November 19, 1929.)

      Stewart Maurice and Margaret O’Connor for appellant.
    Under the conceded facts the defendant cannot avail itself of the matters pleaded as affirmative defenses. (Weisser v. Denison, 10 N. Y. 68; Nat. Bank of Commerce v. Nat. Mechanics Banking Assn., 55 N. Y. 211; White v. Continental Nat. Bank, 64 N. Y. 316; Crawford v. West Side Bank, 100 N. Y. 50; Shipman v. Bank of State of New York, 126 N. Y. 318; Critten v. Chemical Nat. Bank, 171 N. Y. 219; Gutfreund v. East River Nat. Bank, 251 N. Y. 58; Kearney v. Metropolitan Trust Co., 110 App. Div. 236; 186 N. Y. 611; Metallurgical Sec. Co. v. Mechanics & M. Nat. Bank, 171 App. Div. 321; Spiegel Realty Corp. v. Gotham Nat. Bank, 121 Misc. Rep. 547; 208 App. Div. 843; American Exchange Nat. Bank v. Yorkville Bank, 122 Misc. Rep. 616; 210 App. Div. 885; Connors Car. Co., Inc., v. Manufacturers & T. Nat. Bank, 124 Misc. Rep. 584; 214 App. Div. 811.) The defendant failed to prove its alleged affirmative defenses of negligence, and estoppel by account stated. (Ehrich v. Guaranty Trust Co., 194 App. Div. 658; 233 N. Y. 637; Spiegel Realty Corp. v. Gotham Nat. Bank, 208 App. Div. 843; Critten v. Chemical Nat. Bank, 171 N. Y. 219; Gutfreund v. East River Nat. Bank, 251 N. Y. 58; Lockwood v. Thorne, 18 N. Y. 285; Stenton v. Jerome, 54 N. Y. 480; Newburger-Morris Co. v. Talcott, 219 N. Y. 505; Hughes v. Smither, 23 App. Div. 590; 163 N. Y. 553; Spain v. Talcott, 165 App. Div. 815; 223 N. Y. 693; Watson v. Gillespie, 205 App. Div. 613; 237 N. Y. 522; Carpenter v. Stillwell, 11 N. Y. 61; N. Y. Rubber Co. v. Rothery, 107 N. Y. 310; Hanna v. Florence Iron Co., 222 N. Y. 290; Crocker v. Page, 210 App. Div. 735; 240 N. Y. 638.)

      Henry Newton Arnold, John Tilney Carpenter and George N. Hamlin for respondents.
    The contention that the drawee bank may not assert its defenses because it has recourse against a collecting bank- is without merit.
      (Critten v. Chemical Nat. Bank, 171 N. Y. 219; Gulfreund v. East River Nat. Bank, 251 N. Y. 58; North British & M. Ins. Co. v. Merchants Nat. Bank, 161 App. Div. 341; Annett v. Chase Nat. Bank, 196 App. Div. 632; McNeely Co. v. Bank of North America, 221 Penn. St. 588; Morgan v. U. S. Mortgage & Trust Co., 208 N. Y. 218; American Exchange Nat. Bank v. Yorkville Bank, 122 Misc. Rep. 616; 210 App. Div. 885.) The failure of the appellant and its assignor to notify and make claim against respondent, Bank of the Manhattan Company, for nine months after they had actual knowledge of the forgeries, was unreasonable as a matter of law. (Prudential Ins. Co. v. Nat. Bank of Commerce, 227 N. Y. 510; Gulfreund v. East River Nat. Bank, 251 N. Y. 58; North British & M. Insurance Co. v. Merchants Nat. Bank, 161 App. Div. 341; Annett v. Chase Nat. Bank, 196 App. Div. 632; Leather Manfrs. Bank v. Morgan, 117 U. S. 96; U. S. v. National Exchange Bank, 45 Fed. Rep. 167; McNeeley Co. v. Bank of North America, 221 Penn. St. 588; Connors v. Old Forge D. & D. Bank, 245 Penn. St. 97.) The written approvals of account rendered by plaintiff’s assignor to the respondent, Bank of the Manhattan Company, constituted a ratification of the payment of the checks and a waiver of claims against the bank. (Harley v. Eleventh Ward Bank, 76 N. Y. 618; Morgan v. U. S. Mortgage & Trust Co., 208 N. Y. 218; North British & Merc. Ins. Co. v. Merchants Nat. Bank, 161 App. Div. 341; Hammerschlag Mfg. Co. v. Importers’ & Traders’ Nat. Bank, 262 Fed. Rep. 266.) The failure of the depositor to discover the forgeries committed by its employee and to notify the drawee bank thereof, was negligence which precludes a recovery. (Prudential Ins. Co. v. Nat. Bank of Commerce, 227 N. Y. 510.)
   Kellogg, J.

This action was brought by the National Surety Company, as assignee of Tucker, Anthony & Company, to recover from the defendant, President and Directors of the Manhattan Company, a banking corporation with which Tucker, Anthony & Company maintained an account, the sum of $14,682.59, with interest. That sum had been debited to the account of the depositor, Tucker, Anthony & Company, because of payments made by the defendant, the Manhattan Bank, upon checks drawn by the depositor in favor of certain payees, whose apparent indorsements on the checks had been forged.

Tucker, Anthony & Company was a firm of stockbrokers. It had in its employ, from the year 1918 to the year 1924, a bookkeeper named Gyory. This clerk had charge of books which recorded the accounts of customers of the firm, whose names began with letters of the alphabet between the letters A and L. In January, 1921, Gyory entered upon a course of dealing which involved the manipulation of these accounts and the forging of the names of depositors to checks drawn by the firm to their order. This was his practice: He would first enter false credits in depositors’ accounts under his control. He would then notify the appropriate officer of the company that these depositors desired checks for amounts identical with the amounts falsely credited. He would obtain checks to be written and signed for the sums named, payable to the order of the depositors, and would receive the same ostensibly for the purpose of making delivery to them. Instead of making delivery, Gyory would forge the names of the payees, place his own indorsements on the checks and deposit them in his bank of deposit, the Bank of America, for credit to his own account. Between January 18, 1921, and June 19, 1923, Gyory, by this method, obtained-possession of thirty-nine checks, drawn by his firm to the order of twenty different customers, and, forging their indorsements thereto, deposited the same to his credit in the Bank of America. The Bank of America, guaranteeing the indorsements, presented these checks to the defendant Manhattan Bank and obtained payment thereof. The amounts paid were charged by the Manhattan Bank to Tucker, Anthony & Company. Discovery of the forgeries was not made by that firm until January, 1924. Thereafter the firm assigned to the plaintiff its cause of action against the defendant bank to recover the sum of $14,682.59, the aggregate of the amounts so charged.

The defendant Manhattan Bank does not dispute that, in proving these facts, the plaintiff made a prima facie case of liability, on the part of the bank, for the recovery of the amounts charged against the depositor. It has defended on the grounds, (1) that an account stated between the bank and its depositor bars a recovery, (2) that the depositor’s negligence estops it from making the claim, and (3) that the depositor’s negligence caused damage to the defendant bank.

The account stated between the parties: At the close of each month, from January, 1921, to June, 1923, the Manhattan Bank returned to its depositor, Tucker, Anthony & Company, all the checks drawn by that firm which had been presented and paid by it during the month. This was accompanied by a statement of account showing the amounts deposited and the checks paid. At the request of the bank, Tucker, Anthony & Company each month returned to it a writing acknowledging the receipt of the vouchers and statement and the correctness of the statement. In Harley v. Eleventh Ward Bank (76 N. Y. 618) it was held that an account rendered by a banker to a depositor, and acquiescence therein by the depositor, with full knowledge of the facts, made out an account stated which was conclusive. The same principle was under discussion in Shipman v. Bank of State of N. Y. (126 N. Y. 318). It was there said, however: “ The statement of the account made by the defendant to the plaintiffs from time to time, the balancing of the bank pass-book and the return of the same to the plaintiffs -with the vouchers, including, as they did, the checks in controversy, with the forged indorsements thereon, constitute no obstacle to the maintenance of this action by the plaintiffs as they were ignorant of the facts and circumstances under which the checks were issued and put in circulation.” In Mclntire v. National Nassau Bank (215 N. Y. 662) a depositor had signed a statement acknowledging the correctness of an account, which debited to the plaintiff a check to which the name of the plaintiff as maker had been forged. It was held that the plaintiff might have a recovery for the amount of the check which had been improperly charged against his account. When the statements, itemizing the accounts for the months between January, 1921, and June, 1923, were rendered to Tucker, Anthony & Company, it was ignorant of the fact that checks, upon which the names of the payees had been forged, were included therein. Consequently, the defense of account stated cannot prevail.

The depositor’s negligence: It is urged that the depositor, Tucker, Anthony & Company, was negligent in not making prompt discovery of the forged indorsement upon its check of January 18, 1921, immediately upon the return by the defendant bank of the canceled vourchers for January and the rendering of its statement of account for that month. The clerk, Gyory, who forged the indorsement, although possessed of no assets, was then indebted to his employer in the sum of $26,000. In placing a forged indorsement of the payee’s name upon the back of the January check, as well as in making all forged indorsements upon subsequent checks, Gyory made no attempt to simulate the handwriting of the payee. In the instance of every check forged by him he placed his own indorsement beneath the forged indorsement. Clearly, if Tucker, Anthony & Company had on some occasion, either upon the receipt of the bank’s statement for January or upon the receipt of some subsequent monthly statement, examined the indorsements on the returned checks, its suspicions would have been aroused. If it had then examined the accounts kept by Gyory, the falsity of the entries made would have been detected and the story of the forgeries would have been revealed. The difficulty is that no duty rested upon the depositor, upon the return of its vouchers by the bank of deposit, to examine the indorsements upon the checks in order to discover whether the signatures indorsed were genuine. (Welsh v. German American Bank, 73 N. Y. 424; Shipman v. Bank of State of N. Y., supra.) In Welsh v. German American Bank (supra) the decision is correctly expressed in the headnote, as follows: “A depositor owes no duty to a bank requiring him to examine his pass-book or returned checks, with a view to the detection of forgeries in the indorsements; he has a right to assume that the bank before paying his checks will ascertain the genuineness of the indorsements.” In the respect charged, therefore, the conduct of Tucker, Anthony & Company was in no wise negligent. It is also urged that Tucker, Anthony & Company was guilty of negligence in not giving prompt notice to the Manhattan Bank of its discovery of the forgeries. As the record stands, discovery was made in January, 1924; the forgeries were not reported to the bank until October, 1924. We agree that the conduct of the depositor, in this respect, was negligent. (Critten v. Chemical Nat. Bank, 171 N. Y. 219; Leather Manufacturers’ Bank v. Morgan, 117 U. S. 96; Murphy v. Metropolitan Nat. Bank, 191 Mass. 159; Pratt v. Union Nat. Bank, 79 N. J. L. 117.)

Estoppel by negligence: Of an estoppel arising from negligence, it has been said by Mr. Bigelow: “ It is clear, however, that cases of estoppel arising out of negligence without a representation must be uncommon ” (Bigelow on Estoppel [5th ed.], 653); and by Mr. Cababe: “It may be going too far to say that, in the nature of things, there can be no such cases; if so it will suffice to say that negligence can only have any specific efficacy in giving rise to an estoppel, in those rare cases in which it proximately causes another to believe in the existence of facts, although it [the negligence] does not amount to a representation of those facts.” (Quoted in Ewart on Estoppel, 111.) On the other hand, Mr. Ewart has said that Cases of estoppel by carelessness are not at present uncommon,” and that people guilty of negligence are “ punished sometimes by damages, and sometimes by estoppel.” (Ewart on Estoppel, 122.) The same author has said that there can be no estoppel without misrepresentation; that there can be no estoppel by carelessness where the misrepresentation is chargeable to the careless party, since an estoppel would ensue from the misrepresentation alone; that estoppel by negligence arises only where the carelessness is by one person and the misrepresentation by another; that is, in cases of assisted misrepresentation ” (p. 121).

The principle of estoppel by carelessness has recently received recognition by this court in Gutfreund v. East River Nat. Bank (251 N. Y. 58). In that case a depositor facilitated a forgery by a clerk, named Hunold, through signing checks so written by the clerk that false initials might be inserted in blank spaces left before the names of payees, designated in the checks by their surnames alone. The spaces left in the check facilitated the forgery by Hunold. They were left by him for the purpose of enabling him to accomplish the fraud.” In stating the grounds of the decision in Young v. Grote ([1827] 4 Bing. 253), Judge Pound said that they resolved themselves into “ the principle that if the negligence of the depositor is the cause of the payment by the bank of a forged check he may not set up the invalidity of the paper which he has induced the bank to act on as genuine. This principle rests primarily on the doctrine of estoppel.” It is true that in the particular instance the doctrine of estoppel by negligence was not applied to defeat a recovery by the depositor. It was not applied for the reason that the bank was itself negligent and could not have been misled by the negligence of the depositor, the court remarking: “ Mere negligence on the part of the depositor ought not to reheve the bank unless the bank has been misled by the negligent act.” Otherwise, the case would have presented a typical instance for the application of the doctrine of estoppel by carelessness. The depositor, by his negligence, assisted a forger to make to the bank of deposit a forged representation of genuineness and thereby caused the payments of the forged checks to be made. There was thus before the court a true example of what Mr. Ewart has termed an assisted misrepresentation,” from which, had the bank been misled, an estoppel might have resulted, and the case was so treated by the court.

It has been held that a depositor owes the duty to his bank of deposit to examine the paid checks periodically returned to him by the bank with a statement of the account between the parties; that he must verify the writings upon the face of the vouchers by a reference to his notations made upon the stubs in his check book; that, if such an examination and reference would reveal a previous forgery, the neglect of the depositor to make it known might result in relieving the bank from making restoration of ■ unauthorized payments, charged to his account, upon checks similarly forged and subsequently presented. (Leather Manufacturers’ Bank v. Morgan, supra; Critten v. Chemical Nat. Bank, supra.) The Supreme Court of the United States, in the first of the two cases, and this court, in the second case, while holding that a depositor owes a duty to make such an investigation and is negligent if he fails therein, differed as to the consequences which might follow from the negligence. The Supreme Court held that such a depositor would be estopped by his carelessness from asserting a right of recovery; this court said that the bank of deposit might offset against the recovery the damage done to it by the depositor’s negligence. In the first case the Supreme Court said: In other words, parties to a stated account may be. estopped by their conduct from questioning its conclusiveness.” In the second case this court said: “ While we hold that this duty rests upon the depositor, we are not disposed to accept the doctrine asserted in some of the cases that by negligence in its discharge or by failure to discover and notify the bank, the depositor either adopts the checks as genuine and ratifies their payment or estops himself from asserting that they are forgeries.” Again it said: Nor, if the question were an open one in this State, would we deem the rule of estoppel or that of ratification a just one.”

In the Critten case there was no estoppel, although the negligence of the depositor related to previous forgeries, a discovery of which, reported to the bank of deposit, might well have prevented loss, by causing the bank to withhold payments upon forged checks subsequently presented. In the case now before us all the forged checks paid by the bank were presented and paid before the depositor had been guilty of neglect. The depositor neither made misrepresentations as to the genuineness of the checks nor assisted the forger to make misrepresentations. It is clear, therefore, that if the depositor must suffer, the punishment to be inflicted cannot rest in a total defeat of its claim through estoppel. For the application of the doctrine of estoppel by carelessness there is here no room.

Damages through negligence: Although the defense of estoppel is not available, it may well be that the defendant bank of deposit has a cause of action in negligence to offset a recovery by the plaintiff depositor. Thus, in the Critten case it was said: “ If the depositor has by his negligence in failing to detect forgeries in his checks and give notice thereof caused loss to his bank, either by enabling the forger to repeat his fraud or by depriving the bank of an opportunity to obtain restitution, he should be responsible for the damage caused by his default, but beyond this his liability should not extend.”

In our case the depositor was negligent in that it failed to malee prompt disclosure to the bank of the forgeries after their discovery. It does not follow from this that the bank has a cause of action against the depositor. To the extent only that the bank has been,damaged can it have relief. Moreover, we see no reason why the bank should be entitled to anything more than indemnity for the loss the depositor’s negligence has caused it.” (Critten v. Chemical Nat. Bank, supra.) Damage may not be presumed and the burden of establishing it rests upon the bank. (Critten v. Chemical Nat. Bank, supra; Murphy v. Metropolitan Nat. Bank, supra; Pratt v. Union Nat. Bank, supra; Janin v. London & S. F. Bank, 92 Cal. 14; Houseman-Spitzley Carp. v. American State Bank, 205 Mich. 268;. Kenneth Investment Co. v. National Bank of Republic, 96 Mo. App. 125.) There is no presumption of disadvantage to the bank; that must be affirmatively shown.” (Pratt v. Union Nat. Bank, supra.)

It is true that in Leather Manufacturers’ Bank v. Morgan (supra) it was said that a bank of deposit need not show specific damage resulting from a depositor’s delay in reporting forgeries; that it was enough that it might be prejudiced thereby in its pursuit of the forger to secure restitution. It must be remembered, however, that the court was applying to the case in hand the principle of estoppel and not of negligence. The court itself remarked that its ruling would be otherwise were the bank seeking to recover damages in negligence; that in such case “ an inquiry as to the damages in money actually sustained by the bank ” would be proper. As we have seen, the doctrine of estoppel may not be applied to a case of this character, so that the statements made by the court, in the case referred to, are not appropriate.

In the Critten case the forged writings were upon the faces of the checks, and the forgeries would have been discovered by a comparison of the returned checks with the check book stubs. It was a case, therefore, where the depositor should have known of the forgeries when the account was first balanced and the checks returned. In so far as the bank was induced by the silence of the depositor to make payment of forged checks subsequently presented, the damage resulting from the depositor’s negligence was definite and certain, for it was measurable by the payments so made. The depositor did not report the forgeries for many months after they should have been discovered. By this delay the bank may have been prejudiced in its right to proceed against the wrongdoer to obtain restitution of payments made upon the forged checks presented before the account was rendered. Yet the court held that the bank was not entitled to credit for the two checks paid by it before the account was balanced and vouchers returned.” This holding cannot be explained except upon the ground that there was no proof that the bank had been injured by the negligence of the depositor in not giving prompt notice of the forgeries.

Promptly upon its discovery of the forgeries, Tucker, Anthony & Company caused the forger, Gyory, to be taken into custody. He was indicted and, upon a plea of guilty, was sentenced to confinement in State’s prison. Gyory was without financial resources. He had no money, or property of any kind. Moreover, as we have stated he was then indebted to his employer in the sum of $26,000. It does not appear that the bank, if promptly notified, could have taken other or more effective proceedings to obtain restitution than were taken by its depositor. It does appear that Gyory, prior to the imposition of sentence upon him, offered to make a payment of $2,000 in part restitution, and that the offer was refused. It may be that, upon a new trial, proof might be forthcoming that the defendant bank, to this extent, might have obtained reimbursement, if promptly notified of its rights to proceed against Gyory. However, we think it otherwise appears that no injury befell the bank through the default of the depositor.

In the Critten case it was said: “ In the present case, a check altered by Davis from the sum of $22 to $622 was paid by the defendant to the Colonial Bank, in which Davis had deposited it. Against that bank the defendant has ample recourse.” The court then proceeded to state that if, because of their negligence, the plaintiffs might not recover from the bank of deposit, that bank could not' recover from the Colonial Bank, which had guaranteed the genuineness of the check; that the Colonial Bank, to which the plaintiffs owed no duty, would thus be relieved because the plaintiffs had neglected a duty owed to a third party, the bank of deposit. The court said: “A rule which might operate to relieve that bank from the liability it assumed when it collected an altered check merely because the plaintiffs failed in their duty, not to it, but to a third party, should not be upheld.”

In point of fact the bank of deposit was held liable for the amount of the check paid to the Colonial Bank on other grounds than those suggested in the words which we have quoted. The bank, under the doctrine explicitly laid down in the case, was responding to the cause of action of the plaintiffs, with a claim for damages occasioned by their negligence. This claim, like that of any plaintiff in a negligence action, was not maintainable if the bank itself had been contributorily negligent. It had thus been negligent since, prior to its payment of the Colonial Bank check, it had cashed a forged check of the depositor, upon which erasures and alterations, apparent to any beholder, had been made. As this was the point decided, the quoted remarks were undoubtedly obiter dicta.

When a depositor fails to warn his bank of forgeries committed, after discovery thereof should have been made by him, his neglect is a primary cause contributing to the loss incurred by the bank, when it pays out moneys upon checks similarly forged which are subsequently presented. A cause of action, to recover damages from the depositor, for the original wrong thus done, accrues to the bank immediately upon its payment of the fraudulent checks. We are not disposed to think that the fact that the bank of deposit has a secondary remedy, against a bank presenting the checks and obtaining their payment, upon a guaranty written subsequently to the commission of the primary wrong, ought to defeat the cause of action and acquit the wrongdoer of liability for the tort, originally contributing to the loss. On the other hand, the depositor’s failure to give prompt notice of discovered forgeries, as to checks paid prior to the discovery, self-evidently is not the cause of the damage done the bank by their payment. There the default may have occasioned, not the loss of the moneys, but an impairment of the remedy to procure restitution from the forger of the amounts paid. This wrong is committed subsequently to the perpetration of the forgeries, to the writing of the guaranties, and to the incurrence of loss through payment of the checks. At the moment of the commission of the wrong, the bank is already possessed of two causes of action to secure it against loss arising from the payments made. One is the slender reed of a cause of action against the forger to procure restitution; the other an all-sufficient remedy against a responsible bank upon its express guaranty of the genuineness of the writings. The failure of the depositor may have impaired the bank’s remedy against the forger; it can in no way have impaired or in the least affected its remedy against the guarantor. In such case, since the bank of deposit has not paid out moneys through a fault of the depositor; since it retains, unimpaired by any neglect of the depositor, an ample remedy to obtain full reimbursement for the payments made; since, for these reasons, the bank has suffered no damage from the depositor’s neglect; therefore, the bank has no cause of action against the depositor, with which it may offset the damage incurred by him through its unauthorized act in making the payments. To this extent the dicta of the Critten case should receive application.

In our case, since the defendant, the Manhattan Bank, has a remedy over against its guarantor, the Bank of America, whereby it will be reimbursed for all the moneys which it has paid out upon the forged indorsements, we think it cannot justly maintain that it has been injured by the negligence of its depositor in delaying to report the forgeries after actual discovery thereof. Therefore, the plaintiff should have a recovery in full for the unauthorized payments.

The judgments should be reversed and judgment directed for the plaintiff in full for its claim, with interest and costs in all the courts.

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

Judgment accordingly.


source: Caselaw Access Project

author: O’Brien, J.

license: Public Domain

text:
    Ferdinand L. Cross, Respondent, v. Elsa P. Beguelin, as Executrix of Henry R. Beguelin, Deceased, Appellant, and William T. Cross et al., Respondents.

      (Argued October 16, 1929;
    decided November 19, 1929.)

      Charles Furnald Smith, Otis S. Carroll and Burchard Dutcher for appellant.
    The law imposes as a condition essential to the validity of a contract of this kind, the proviso that payment is to be made only out of surplus, and this proviso is equally binding on both parties to the contract. (Richards v. Wiener Co., 145 App. Div. 353; 207 N. Y. 59; Topken, Loring & Schwarts, Inc., v. Schwartz, 249 N. Y. 206; Matter of Fechheimer Fishel Co., 212 Fed. Rep. 357; Crandall v. Lincoln, 52 Conn. 73.) The defendants, as officers of the corporation, could not have been estopped to assert the legal nature of the contract they made in its behalf. (Richards v. Wiener Co., 207 N. Y. 59.)

      Bertha Rembaugh for plaintiff-respondent.
    The contract for the purchase of the plaintiff’s stock was at all times a valid and enforceable contract. (Richards v. Wiener Co., 207 N. Y. 59; First Trust Co. v. Illinois Central R. R. Co., 256 Fed. Rep. 830; Trotter v. Lisman, 209 N. Y. 174; Matter of Fechheimer Fishel Co., 212 Fed. Rep. 357.)
   O’Brien, J.

The parties have submitted this controversy upon an agreed statement of facts. Henry R. Beguelin owned all the shares of preferred stock in Cross & Beguelin, Inc. Of the 2,545 outstanding shares of the common, he held 1,115 shares, William T. Cross 705 shares and Ferdinand L. Cross 690 shares. The remainder stood in the names of seven other persons to the extent of five shares each. One of these blocks of five shares was held for the benefit of Ferdinand L. Cross. William T. Cross was president and a director and Mr. Beguelin was treasurer and also a director. June 14, 1920, upon the authority of a resolution adopted by the board of directors, for which Messrs. Beguelin and W. T. Cross voted, the corporation, by its president, executed a contract with Ferdinand whereby it agreed to purchase all his holdings for $55,000. At the date of the execution of this contract the corporate surplus was in excess of that sum. Pursuant to the agreement Ferdinand delivered his certificates to the corporation and, until July 17, 1928, he received the stipulated payments. On that date they amounted to $29,800. Then the corporation, instead of a surplus, had a deficit, and shortly thereafter a creditors’ committee took over the management and control of its business. All the assets, with the exception of cash on hand, notes, accounts receivable and one other item, were sold to Alfred O. Seeler and all the outstanding stock, including the shares formerly owned by Ferdinand, was with the consent of all the parties to this controversy, also transferred to Seeler. When the contract of sale to Seeler was made, plaintiff and defendants agreed that their consent to that contract should affect neither the merits of plaintiff’s claim for the balance of the purchase price of his stock nor defendants’ right to dispute it. In accordance with the agreement of all the parties, the creditors’ committee disbursed the corporate assets which had been retained and out of such assets satisfied the claims of all creditors, except that of plaintiff for $21,609, as unpaid installments on the purchase of his stock and those of W. T. Cross for $6,110.20 and Mr. Beguelin for $12,561.25 as salaries which had accrued subsequent to the date of the contract for the purchase of plaintiff’s stock. All the parties to this controversy further agreed that any funds remaining thereafter should be applied to the payment of salary claims of William T. Cross and the Estate of Henry K Beguelin and that the validity of the claim of Ferdinand L. Cross on account of the agreement made by the corporation for the purchase of its own stock owned by Ferdinand L. Cross should be legally determined, and if the said claim were adjudicated valid, he should receive the same proportionate share of the surplus as the two salary claims, and if the said claim of Ferdinand L. Cross were adjudicated invalid then the surplus should be applied first to the payment of the two salary claims and if any funds then remained, they should be paid to the Estate of Henry R. Beguelin as the former owner of the 625 shares of preferred stock of the corporation.” The funds in possession of the creditors’ committee are insufficient to pay in full these three claims. The parties submit; that this controversy is whether or not plaintiff’s claim is valid and should participate pro rata with W. T. Cross and the Beguelin estate as creditors for salary or whether his claim should be declared invalid.

When made, the agreement with Ferdinand Cross was valid. Then a surplus existed. After the corporation became financially embarrassed and the surplus shrank to a deficit, the agreement became unenforceable as against the corporation. (Penal Law, § 664; Richards v. Wiener Co., 207 N. Y. 59, 65; Topken, Loring & Schwartz, Inc., v. Schwartz, 249 N. Y. 206; In re Fechheimer Fishel Co., 212 Fed. Rep. 357.) The assets constitute a trust * fund for creditors. (Trotter v. Lisman, 209 N. Y. 174; First Trust Co. v. Ill. Cent. R. R. Co., 256 Fed. Rep. 830.) Y If plaintiff had pressed his claim against the corporation, it would have been bound to resist it. However, this claim is not against the corporation. It is directed against assets in possession of a creditors’ committee. The corporation, for all that the submission shows, is still a going concern with the ownership of all the stock in the possession of Seeler. ■ The corporation appears to have no interest in this controversy. ' Inasmuch as W. T. Cross has not appealed, the'real issue now is between Ferdinand Cross, as a prior creditor, and the Beguelin estate, as a subsequent creditor for salary arrears and also as a holder of preferred stock. The rights of creditors are, of course, superior to those of stockholders. (Trotter v. Lisman, supra.) The rights of the seller of the stock appear to be superior to those of subsequent creditors of the corporation who became such with notice of the purchase by the corporation of its own stock. (First Trust Co. v. Ill. Cent. R. Co., supra.)

The judgment should be affirmed, with costs.

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

Judgment affirmed.


author: Hubbs, J.

text:
    Arthur Garfield Hays, Respondent, v. American Defense Society, Inc., et al., Appellants.

      (Argued September 30, 1929;
    decided November 26, 1929.)

      Clarence W. McKay and Merton E. Lewis for appellants.
    The complaint is defective in that it fails to allege any special damages. (Chrashley v. Press Publishing Co., 179 N. Y. 27; Sumner v. Buel, 12 Johns. 475; O’Connell v. Press Pub. Co., 214 N. Y. 352; Van Gerichten v. Seitz, 94 App. Div. 130; Fleischman v. Bennett, 87 N. Y. 231; Merlin v. Shields, 171 N. Y. 384; La Massena v.
      Storm, 62 App. Div. 150; Philip Co. v. New YorkerStaats-Zeitung, 165 App. Div. 377; Bosi v. New York Herald, 33 Misc. Rep. 622; 58 App. Div. 619; Hehmeyer v. Harpers Weekly, 170 App. Div. 459.)

      Sidney Newborg for respondent.
    The pamphlet is libelous per se. (Penal Law, §§ 161, 162; People v. Gitlow, 234 N. Y. 132; 268 U. S. 652; Matter of Lithuanian Workers’ Literature Soc., 196 App. Div. 262; Van Gerichten v. Sitz, 94 App. Div. 130; Gilmartin v. Day, 214 App. Div. 231; Hearsts v. Slaats Zeitung, 71 Misc. Rep. 7; 144 App. Div. 896; Triggs v. Sun Publishing Co., 179 N. Y. 144; Woodhouse v. New York Evening Post, 211 App. Div. 75; Bennett v. Commercial Advertiser Assn., 230 N. Y. 125.) The libel is imputed to plaintiff. Individuals and not a class are libeled. (Corrigan v. Bobbs-Merrill Co., 228 N. Y. 63; Weston v. Commercial Advertiser Assn., 184 N. Y. 479; Ryckman v. Delavan, 25 Wend. 186; Weiterhausen v. Croatian Printing, Inc., 151 Fed. Rep. 947; Children v. Shinn, 168 Iowa, 531; Reilly v. Curtiss, 83 N. J. L. 77; Wofford v. Meeks, 129 Ala. 349; Maybee v. Fish, 42 Barb. 324; Macphail v. MacLeod, 3 Sc. L. T. 91.) As the publication is libelous per se, the complaint is good although it fails to, allege special damage. (Davis v. Kelly, 172 App. Div. 171; MacDonald v. Sun Publishing Co., 111 App. Div. 465; Morrison v. Smith, 177 N. Y. 366.)
   Hubbs, J.

The complaint alleges that the defendants, in the fall of 1924, prepared, printed and published a pamphlet entitled LaFollette-Socialism-Communism and that said pamphlet contained false and defamatory-matter about the plaintiff, that it was published maliciously with intent to injure him and to hold him up to public' hatred, ridicule and scorn, and that it has damaged him. The complaint does not allege special damage. By innuendo the complaint alleges that the defendants, in said pamphlet, charged that the plaintiff was a believer in and advocate of the principles of revolution; that he believed in the same principles as the Communists, the Workers Party of America, the Trade Union Educational League, the Federated Farmer-Labor Party, the ' I. W. W.,’ the Soviet Government of Russia, and others; that the plaintiff advocated, promoted and excited revolt against the institutions of our country; that he was engaged in revolutionary and seditious activities with the purpose of overthrowing by force and violence the institutions and Government of the United States; that the plaintiff was guilty of a crime, to wit, conspiring to overthrow the Government of the United States by force and violence; that the plaintiff was the dupe and tool of the aforementioned parties and their leaders.” A copy of the pamphlet is annexed to the complaint and by reference made a part of it.

If in fact the pamphlet does charge the plaintiff with the things set forth in the innuendo, a good cause of action is stated and the complaint must be sustained. If, on the other hand, a fair reading of the pamphlet discloses that it does not charge the plaintiff with the things alleged in the innuendo, the complaint must be dismissed.

The plaintiff cannot enlarge or change the language used in the pamphlet by innuendo. The purpose of the innuendo is to explain the application of the words used. Words which are not libelous in themselves cannot be made so by innuendo. (Fleischmann v. Bennett, 87 N. Y. 231; O’Connell v. Press Pub. Co., 214 N. Y. 352, at 360.)

In order to constitute a libel, the words used in the alleged libelous article must refer to the plaintiff. Rule 96 of the Rules of Civil Practice, formerly section 535 of the Code of Civil Procedure, provides that “ The plaintiff may state in general terms that such matter was published or spoken concerning him.” And it is unnecessary to state in detail the facts which show that the plaintiff is a person intended to be designated in the pamphlet as a Red, a criminal or otherwise, as charged in the innuendo. Still, if the pamphlet does not in fact charge the plaintiff with the things set forth in the innuendo, and when fairly read it appears that the plaintiff is not so charged, its meaning cannot be extended by innuendo to make it constitute a libel against him. (Fleischmann v. Bennett, supra; Barringer v. Sun Printing & Publishing Assn., 160 App. Div. 691.) If it appears upon the face of the complaint that the libel was not published of and concerning the plaintiff the complaint fails to state a cause of action. (Corr v. Sun Printing & Publishing Assn., 177 N. Y. 131.)

The purpose of the pamphlet was political. It was written to aid and published for the purpose of assisting in the defeat of LaFollette, a candidate for President in 1924; also, to stimulate in the minds of its readers an active interest in combating the growth of radicalism in this country.

The pamphlet in substance states that various radicals and radical organizations in different parts of the United States working in harmony under different names have as their purpose the precipitation of an armed revolution in the United States and the overthrow of the government of the,United States by force and arms; the establishing of a dictatorship of the proletariat in the United States; and the subservience of the welfare of the United States and of its government to the communist Soviet government of Russia; further, that various radical groups with the above purpose of sedition and revolution are operated under various names and that among said radical groups are three classes of organizations:

First, the Communists, who are endeavoring to overthrow the government by force.

Second, the Workers Party of America, Trade Union Educational League, Federated Farmer-Labor party,

Friends of Soviet Russia, Young Workers League of America and the I. W. W.,” and that all of said organizations clearly understand the line of march on which they aré moving and understand and appreciate that their purpose and activities are in aid of the Communist party.

Third, American Civil Liberties Union, consisting of 124 members, and Committee of 48, consisting of 33 members, of which organizations the plaintiff is a member. The pamphlet also refers to certain other organizations in this third class.

It states that the American Civil Liberties Union (of which plaintiff is a member) is aiding the Trade Union Educational League (of the second class) by means of interlocking directorates, and that listed with the Federated Farmer-Labor party (of the second class) is the Committee of 48 (of which plaintiff is a member). It does not state that the plaintiff is a member of the Communist party, or of any organization of the second class which clearly understands the line of march. Nowhere in the pamphlet is it stated that the plaintiff is a Red; that he is a criminal; that he is engaged in a movement to overthrow the ■ government, or in any of the things set forth in the innuendo. It does state: “ Beyond question many of the member's of the organizations shackled by the interlocking directorates have no- appreciation of their destination. Many of the organizations were doubtless founded by people actuated by feeling a real need for improved conditions or by humanitarian impulses.” It does not state whether the plaintiff is a person actuated by feeling a real need for improved conditions or by humanitarian impulses ” or otherwise. The pamphlet further states that the best way to discover ‘ useful workers ’ and skilled leadership ’ in well articulated associations, societies and leagues which relate themselves to revolution indirectly by interest in similar activities is to observe the cross-beam directorates (see chart of directorates).”

The complaint alleges that the chart to directorates referred to is contained in said pamphlet under the title Index to Directorates; ” that this index contains a list of 396 names to which are attached key numbers and key letters through which under a so-called “ Index to Organizations” there may be traced the alleged interlocking relationship through the so-called interlocking directorates; and that the plaintiff’s name is listed in said Index to Directorates ” with symbols attached thereto indicating that the plaintiff is a director of the Committee of 48 and of the American Civil Liberties Union. It further alleges that the plaintiff is a member of the executive committee of the Committee of 48 and of the American Civil Liberties Union; that the purpose of the Committee of 48 is to organize into a political party voters who have lost faith in the Republican and Democratic parties and who desire political and economic changes in accordance with the spirit of our institutions; that the success of said committee depends largely upon the good will of the public and a fair representation of its program; that the plaintiff is an attorney at law actively engaged in practice in the city of New York and has devoted a large part of' his time and energy to the furtherance of the work of said committee. It refers to charts at the end of the pamphlet, the first of which is entitled “ Index to Directorates ” and the second of which is entitled “ Index to Organizations.”

A careful reading of the pamphlet shows that the plaintiff is nowhere named therein except that his name is contained in the list entitled Index to Directorates ” with symbols indicating connection with the Committee of 48 and the American Civil Liberties Union. In order to find any reference to the plaintiff in the text of the pamphlet, it must be held that the aforementioned “ Index to Directorates ” is intended to identify the persons mentioned in said fist as directors of the organizations indicated by the symbols following their names. If the plaintiff’s name in the index with the symbols following it does not show that he is charged with being a director of the two organizations of which he is a member, then he is not in any way referred to in the text of the pamphlet as a person engaged in the unlawful purposes criticised by the author of the pamphlet. Plaintiff is not referred to in the pamphlet as a director of any of the organizations named therein. A reference to the so-called 11 Index to Directorates ” and Index to Organizations ” discloses that the only indication to plaintiff therein is that he is connected with certain of the organizations named. The note immediately following the title of said “ Index to Directorates ” says: To secure names of organizations of any person listed below, take the letters following same and then turn to the following table, 'Index to Organizations.’ For example: Miss Jane Addams is found to be connected with A. B. L. etc.” The note immediately following the title of said “ Index to Organizations ” says: “ To secure the names of the individuals connected with the organizations below listed, take the numbers following and refer to like numbers in preceding table of Index to Directorates.” The reference in each case is to persons “ connected with ” and not to “ directors of ” the listed organizations.

It is nowhere stated that the persons named in the so-called “ Index to Directorates ” are each members of the board of directors of the organizations referred to. On the other hand, there are many references in the pamphlet to individuals in the index which indicate an intention to charge those named as being members of the named organizations and not directors thereof.

The pamphlet in effect states that the Communists claim that the realization of socialism is the first step toward a Communist commonwealth; that in the United States are certain organizations including the Workers Party of America, the “I. W. W.” the Friends of Soviet Russia, and others, clearly understanding the line of march on which they are moving deliberately toward world revolution and that directly or indirectly associated with these organizations are many others classed as useful . workers ” along the line of march, organizations connected with the open and avowed revolutionary business through the system of interlocking directorates; that among these last mentioned organizations are the American Civil Liberties Union and the Committee of 48 of which plaintiff is a member, but many of these organizations were doubtless founded by people actuated by feeling a real need for improved social conditions or by humanitarian impulses; that beyond question many of the members of organizations shackled by the interlocking directorates have no appreciation of their destination; that to further and extend the united front desired by clever conspirators of Moscow before launching a revolution in this country, the ring leaders in the interlocking directorates are devoting their energies and that Red Radicals, near Reds and Pinks of various hues are numbered in the interlocking directorates of organizations which are moving, though by devious paths, in the direction of armed revolution in the United States.

The plaintiff is not charged with being a “ ring leader in the interlocking directorates,” and perhaps he is not charged with being a director, but assuming that the plaintiff is charged with being a director of the organizations to which he admits he belongs, the charge made in the pamphlet is no more than that certain of the directors of the organizations to which he belongs and of other organizations are Reds or Radicals. It further charges that certain of the persons interested in these various organizations are adepts and certain are dupes, and that the dupes are being used by being placed actively to work furthering some idea which if put into practice would contribute to the general purpose of the Communists. This is far from charging the plaintiff specifically with being an adept or a dupe. It does not seem to us that the pamphlet contains matter which is libelous to persons not specifically named in the pamphlet other than in the list entitled Index to Directorates.” It is an argument that the two organizations to which plaintiff belongs have a tendency to encourage socialism; that one aids the Trade Union Educational League and one is listed with the Federated Farmer Labor party, which last named organizations support the Communists and clearly understand the line of march. It charges nothing in the way of anarchistic acts as against the organizations to which the plaintiff belongs and it merely calls attention to the fact that the plaintiff is connected with two organizations which are in the line having a tendency by indirection to encourage Socialism. It is a mere expression of opinion by the writer of the article as to the tendency of perfectly legitimate things. It does say that some of the directors of these organizations are members of the associations that are illegal, but it does not say that all of those named are members of the illegal associations.

The article does not charge a violation of the State or of the Federal statutes in regard to criminal anarchy either by the plaintiff or by the associations to which he belongs.

Under the State statute, to charge the members of either the Committee of 48 or the American Civil Liberties Union with the commission of a crime, it would be necessary to charge that such members either organized or helped to organize, became members of or voluntarily assembled with associations formed to teach or advocate criminal anarchy, the doctrine that organized government should be overthrown by violence, by assassination of the executive head or any of the executive officials or by any unlawful means. (Penal Law, §§ 160, 161.) No such purpose is attributed to either of said organizations in the portions of the pamphlet devoted to an exposition of their purposes.

The. Federal statute limits the offense (seditious conspiracy) to an attempt by force to overthrow the government. (Mason’s U. S. Code, Annotated, title 18, ch. 1, § 6; Criminal Code, § 6; R. S. § 5336; Mar. 4, 1909, ch. 321, § 6; 35 Stat. 1089.) There is no charge of such an act on the part of the plaintiff or the organizations to which he belongs.

The pamphlet undertakes to state the platform and purposes of the American Civil Liberties Union and of the Committee of 48, the two organizations of which the plaintiff is a member. So far as appears from the article, the two organizations are perfectly legitimate. They do not advocate Communism, or any other unlawful purpose. The charge that the plaintiff is a member of those organizations clearly does not charge a libel. To charge that the ringleaders of the directorates of those organizations favor Socialism, and thereby promote the ckuse of Communism, does not charge that the plaintiff, who is a member, is a Red, is guilty of crime or engaged in any unlawful or improper undertaking. The pamphlet in effect states that because those organizations advocate free speech and other so-called liberal doctrines, they are, by their attitude, tending to encourage radicalism and Communism. That is a mere expression of the author’s opinion as to the effect of the publication of the principles which the organizations advocate. It falls far short of charging a libel against the plaintiff, a member of such organizations. It does not charge him with any illegal or disgraceful act.

No one, from a reading of the article, would be justified in saying that it charges that the plaintiff is a radical, a Red, engaged in an attempt to overthrow the government, or in any conduct which holds him up to scorn or ridicule. The allegations of the complaint which so charge are limited by the article itself, which is made a part of the complaint. It contains no language which constitutes a libel against the plaintiff.

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

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

Ordered accordingly.


author: Crane, J.

text:
    Nassau Supply Co., Inc., Appellant, v. Ice Service Co., Inc., Respondent.

      (Argued October 25, 1929;
    decided November 26, 1929.)

      Joseph P. Segal and I. Gainsburg for appellant.
    The contract is valid and enforcible. (Moran v. Standard Oil Co., 211 N. Y. 187; Epstein v. Gluckin, 233 N. Y. 490; Hopedale Electric Co. v. Electric Storage Battery Co., 132 App. Div. 348; Ehrenworth v. Stuhmer & Co., 229 N. Y. 210; Edison El. Ill. Co. v. Thatcher, 229 N. Y. 172; Van Woert v. Albany & Susquehanna R. R. Co., 67 N. Y 538; Wales v. Alexander, 130 N. Y. 642; City of New York v. Pelli Paoli, 202 N. Y. 18; Sage v. Hazzard, 6 Barb. 159; Booth v. Cleveland Mill Co., 74 N. Y. 15; Jugla v. Trouttet, 120 N. Y. 21; Seibert v. Dun, 216 N. Y. 237; East v. Cayuga Lake Ice Line, 66 Hun, 636; Texas Co. v. Pensacola Maritime Corp., 279 Fed. Rep. 19.)

      Walter Jeffreys Carlin for respondent.
    The so-called contract was void for lack of mutuality and the complaint was properly dismissed. (Dady v. O’Rourke, 172 N. Y. 453; Booth v. Milliken, 127 App. Div. 525; Renney v. DeCarr, 177 App. Div. 237; Schlegal Mfg. Co. v. Cooper Glue Factory, 231 N. Y: 459; United Press v. New York Press Co., 164 N. Y. 410.)
   Crane, J.

The defendant is a domestic corporation engaged in the business of manufacturing and selling ice in the city of New York and on Long Island. Plaintiff is also a domestic corporation and in 1923 and 1924 was engaged in the coal business.

On the 21st day of March, 1924, these parties entered into a written agreement reading as follows:

“ Ice Service Company, Inc.
“ Coal Department “ 121st St. near Jamaica Avenue “ Richmond Hill, N. Y.
“New York, March 21, 1924.
“ Agreement made this day between Ice Service Co., Inc., and the Nassau Supply Co., Inc., 20 West Seaman Ave., Freeport, Long Island.
“ Witnesseth — that for and in consideration of the mutual agreements herein contained the Ice Service Co., Inc. hereby agrees to sell (strikes and delays from causes beyond our control excepted) to the Nassau Supply Co., Inc. of # 20 West Seaman Ave., Freeport, Long Island, (100) One Hundred tons of ice each day at the Forest Park Plant, 76th St. and Jamaica Ave., Woodhaven, Long Island, at $2.50 per ton, and the said Nassau Supply Co., Inc., hereby agrees to purchase from the said Ice Service Co., Inc., all the ice used by them up to (100) One Hundred tons. Payments for same daily.
“ From May 1st, 1924, to April 30, 1925.
“ ICE SERVICE CO., INC..
“ Wm. H. Dohrmann,
Vice-President.
“ NASSAU SUPPLY CO.,
“ Joseph Rao,
Secty.
“Witness:
“Frank L. Dietz.”

On the face of this paper agreement there appears to be a sufficient consideration for a contract, or, in other words, mutual binding promises, a mutuality of consideration. In fact the agreement itself states that the consideration is the “ mutual agreements.” Promises, however, are not always sufficient; they must be of some value, or at least not merely empty formal words, incapable of performance. (Topken, Loving & Schwartz, Inc., v. Schwartz, 249 N. Y. 206, at p. 210.) The unconflicting evidence in this case shows that .the agreement of the Nassau Supply Company was of this latter nature.

Upon the part of the defendant it agreed and promised to sell to the Nassau Supply Co., Inc., of 20 West Seaman avenue, Freeport, Long Island, one hundred tons of ice each day at the Forest Park plant, Seventy-sixth street and Jamaica avenue, Woodhaven, Long Island. On the part of the Nassau Supply Co., Inc., it agreed to purchase from the said Ice Service Co., Inc., all the ice used by them up to one hundred tons. Contracts of this nature, apparently made in good faith, must reasonably imply certain things. We said in Edison Electric Illuminating Co. v. Thacher (229 N. Y. 172): It is not necessary in all cases that the agreement of a party should be specifically stated. It is sufficient when the wording used clearly indicates the intention. * * * Contracts, unlike deeds and insurance policies, need not take a prescribed form but are spelled out of the phrasing adopted by the parties.”

This contract, therefore, implied certain things. It implied at least that the Nassau Supply Co., Inc., at time of performance would use ice as a going concern, that a supply had to be furnished for its use on or about May 1, 1924, up to April 30,1925. The contract carried with it an implication that the Nassau Supply Co., Inc., would use ice daily. The defendant agreed to sell one hundred tons each day. The plaintiff agreed to purchase all the ice used by it up to one hundred tons, payments for same daily.” We do not mean to say that the failure to take ice every day would be a breach of the contract. What we do say is that these words carry with them the idea of something substantial; convey the meaning that the plaintiff was a business enterprise in existence, using ice which, in the contemplation of the parties, might be required daily. This daily supply the defendant undertook to sell up to one hundred tons.

If these were the facts, there would be an enforcible contract, and such has been the ruling of this court. (Ehrenworth v. Stuhmer & Co.,Inc., 229 N. Y. 210; Schlegel Manufacturing Co. v. Cooper’s Glue Factory, 231 N. Y. 459 (cases cited); Imperial Refining Co. v. Kanotex Refining Co., 29 Fed. Rep. [2d] 193; Williston on Contracts, §§ 103 to 103-e, inclusive.)

What did the evidence show? The undisputed facts are that the Nassau Supply Go., Inc., was not in the ice business but in the coal business; that on March 21, 1924, when it made the contract it had no use for ice and might never have any use for it. It had no place of business at the address given in the contract, 20 West Seaman avenue, Freeport, Long Island. Whatever business its president, Mr. Andrie, had was carried on from his residence, 1299 Sterling place, Brooklyn, N. Y. The plaintiff had no license to engage in the retail ice business in the city of New York in the years 1924 and 1925, and was not engaged in that business in the city of New York. The fact further appears that when the first of May came the Nassau Supply Co., Inc., ordered no ice; it had no use for any ice. June went by and still no ice was ordered. The vice-president of the defendant looked up the Nassau Supply Co., Inc., at its given address and found that there was no such company in Freeport, Long Island. A man named Williams, for a short period consisting of a few weeks or months, carried on the ice business under the name of the Hillcrest Ice Co. He had three or more wagons but the extent of the business does not appear. Hillcrest Ice Co. was a trade name and not a corporation; apparently Williams was the sole owner. He bought ice from the defendant until his supply was stopped because of his failure to pay his bills. The first demand for ice by the plaintiff company was in the latter part of June, when its president asked the defendant to sell ice to Williams and charge it to the Nassau Supply Co., Inc. The Hillcrest Ice Co., so it is said, was taken over by the Nassau Supply Co., Inc., which means that it took the wagons. When credit was refused Williams these wagons were left in the yards of the defendant Ice Service Co., Inc., and never called for. How the purchase of the wagons was made does not appear. The president of the Nassau Supply Co., Inc., cannot remember when he purchased the Hillcrest Ice Co. or whether he obtained a bill of sale for it. All we have is his statement that Williams had a route, a few wagons; that the plaintiff purchased the wagons and the business and that the defendant was asked to give Williams credit or to give Williams a supply of ice and charge it to the plaintiff. The only other bit of evidence in the case showing that the Nassau Supply Co., Inc., had any ice prospects was given by Pasquale Digilio, who says that in March or April he told Mr. Andrie that he would take ice from him, instead of buying it from the Knickerbocker Ice Co. Digilio’s business was in Brooklyn, so far as appears from the evidence, and whatever ice he thereafter got was from the Mittleton branch of the plaintiff. The president of the plaintiff admits that neither he nor his company made any demands for ice until the so-called purchase of the Hillcrest Ice Co. about June 24.

What, may we ask, was the consideration which the Ice Service Co., Inc., received for its agreement to sell one hundred tons of ice a day to the Nassau Supply Co., Inc., of 20 West Seaman avenue, Freeport, Long Island. There was in reality no trade or custom or use or demand or business existing at the time the plaintiff made the contract in March or on the 1st of May when ice was to be taken which would, in any way whatever, measure a supply, a requirement or a need. There was no fact or circumstance by which the use or need of the plaintiff’s requirements could be measured or made reasonably certain. In all the New York cases cited, where a contract has been to supply goods for the needs or requirements of another’s business, there has been a going business with the need of a supply and it was only the uncertainty as to the extent of this need or the amount of the supply required which was left for future determination. (See Wells v. Alexandre, 130 N. Y. 642.)

The law which we are stating has application to this contract, as we construe it. When the first of May came for the performance of the contract the plaintiff had no ice business and so far as the record shows, has never had a demand or need for ice in its business, or made a demand upon the defendant under the terms of the contract. We find that the intention of these parties was that the seller agreed to sell and the buyer to take the buyer’s normal or ordinary needs up to the limit mentioned subject to the variation of its business. This is not a case where the buyer agrees to take all that he may subsequently want or may choose to buy, or the promise of a buyer not to buy except from a particular seller. We would then have a different question. (Williston on Contracts, § 104.)

The Nassau Supply Co., Inc., as before stated, impliedly represented that it was either in the ice business or would be in the ice business with a market for ice in May or June, and would require ice daily, not to exceed one hundred (100) tons. It was not in such business, did not establish such a business and made no bona fide demand for any ice under its contract. In other words, it had no need for ice.

The complaint was properly dismissed.

The judgment should be affirmed, with costs.

Concur: Caedozo, Ch. J., Pound, Lehman, Kellogg, O’Beien and Hubbs, JJ.

Judgment affirmed.