author: Finch, J.

text:
    Green Bus Lines, Inc., Appellant, v. Ocean Accident and Guaranty Corporation, Ltd., Respondent.

      Submitted November 17, 1941;
    decided January 15, 1942.

      Daniel A. Dorsey and Walter R. Hart for appellant.
    The negligence alleged in the complaint, if proved, imposed on plaintiff, as a matter of law, a liability to respond in-damages for the injuries received. (Gillespie ,v. Brooklyn Heights R. R., 178 N. Y. 347; Putnam v. Broadway & Seventh Ave. R. R. Co., 55 N. Y. 108.) Defendant’s policy covered all of plaintiff’s public liability at common law and under our statutes as operator and as owner of the insured vehicle and as a common carrier that might be incurred by reason of the ownership, operation, maintenance and use of the insured’s motor vehicles. (Cons. Laws, ch. 71, §§ 17, 59; Cons. Laws, ch. 28, § 109 [now § 167]; Bakker v. Ætna Life Ins. Co., 264 N. Y. 150.) The alleged injuries resulted from and were connected with the ownership, operation, maintenance and use of the insured vehicle. (Greco v. Kresge Co., 277 N. Y. 26; Shaw v. Citizens Casualty Co., 241 App. Div. 399.)

      Milton Kunen for respondent.
    The policy does not cover a claim resulting from an unprovoked assault upon a passenger by a fellow passenger. (Baron v. Auto Mutual Ind. Co., 247 App. Div. 731; Witherstine v. Employers Liability Assur. Corp., 235 N. Y. 168; O’Tier v. Sell, 252 N. Y. 400; Wolcott v. Renault Selling Branch, Inc., 175 App. Div. 858; Grant v. Knepper, 245 N. Y. 158; Arcara v. Moresse, 258 N. Y. 211; Mills v. Gabriel, 259 App. Div. 60; 284 N. Y. 755; Davis Holding Corp. v. Willcox, 112 Conn. 543; City of New York v. Dry Dock, E. B. & B. R. R. Co., 135 Misc. Rep. 678; Steir v. London Guaranty & Accident Co., 227 App. Div. 37; 254 N. Y. 576; Tulchinsky v. Public Service Mut. Cas. Ins. Corp., 245 App. Div. 382.)
   Finch, J.

Plaintiff appeals from a judgment entered upon an order of the Appellate Division affirming, with one justice dissenting, the judgment of Special Term upon a motion dismissing the complaint upon the ground that it did not state facts sufficient to constitute a cause of action.

The plaintiff, a corporation engaged in the business of transporting passengers for hire, sues the defendant insurance company to recover under an insurance policy for moneys paid out by plaintiff with the consent of the insurance carrier to settle an action brought against the bus company by a passenger. The passenger sought damages for personal injuries alleged to have been sustained by her when she was assaulted by a fellow passenger. She alleged in her complaint as the ground for the liability of the bus company that the driver of the bus, having knowledge of a prolonged disturbance by unruly passengers, took no steps to insure her safety, although he was appealed to for help by her and by other passengers and had ample opportunity to protect her by demanding that the unruly passengers leave the bus. The bus company has annexed the policy of insurance to its complaint.

This is the second time this case has appeared in this court. In the first action we were obliged to dismiss the complaint because the plaintiff had failed to allege therein that it was under any legal obligation to pay damages to the injured passenger (Green Bus Lines, Inc., v. Ocean Accident & Guaranty Corp., 282 N. Y. 104). Thereafter plaintiff instituted this action in which the insufficiency in the first complaint has been remedied and the only question remaining for decision is whether the action is within the coverage of the policy.

Defendant has issued a policy of insurance to the plaintiff in which it has agreed to pay any sums which the Insured may become obligated to pay by reason of the liability imposed by law upon the Insured for damages f0r * * * injuries to persons * * * resulting from the ownership, operation, maintenance, use of defective construction of ” plaintiffs buses.

The liability of the bus company to its passengers for injuries sustained as the result of the failure of the company to protect its passengers from assaults by fellow passengers after due notice, is comprised within the terms liability imposed by law.” This court has recently, in connection with a claim for indemnity under a policy of insurance, construed these same words in a broad sense. (DiMarco & Ciccone, Inc., v. Travelers Indemnity Co., 287 N. Y. 601.) It is settled that a common carrier has a legal duty, after due notice, to protect its passengers from the assaults of fellow passengers. (Gillespie v. Brooklyn Heights R. R. Co., 178 N. Y. 347; Hutchinson on The Law of Carriers, §§ 595, 596.) Whether the liability of the plaintiff to the third party arises ex contractu or ex delicto by reason of its negligence by failing to protect the passengers from assault by a fellow passenger makes no difference so far as the liability of the plaintiff to the third party is concerned. (Greco v. Kresge Co., 277 N. Y. 26.) In the case at bar the allegations of the complaint in the third party action fall within the legal principles above stated and if proved would obligate plaintiff to compensate the third party for her injuries.

The insurance policy in the case at bar was a statutory policy. At the very beginning of the printed policy appears the notice: This policy conforms to the policy form approved by the Commissioner of Motor Vehicles * * * for use in compliance with Section 17 of the Vehicle and Traffic Law * * *.”

We turn then to find the meaning and intent embodied in section 17 of the Vehicle and Traffic Law (Cons. Laws, ch. 71). That section provides that every corporation engaged in the business of carrying passengers for hire in any motor vehicle, with certain exceptions not here material, operated upon any public highway of the State, shall file with the .Commissioner of Motor Vehicles for each motor vehicle so operated a policy of insurance approved as to form by the Commissioner, in a company authorized to do business in the State, and approved by the Superintendent of Insurance as to company solvency and responsibility, conditioned for the payment of a minimum sum on any one judgment and a maximum sum on all judgments recovered against the bus corporation for damage or injury caused in the operation, maintenance, use or defective construction of such motor vehicle, in the following amounts for damages incident to death or injuries to persons: according to the seating capacity varying from seven to thirty or more passengers, with a minimum liability of $2,500 and a maximum liability of $5,000 to $50,000; and for damages incident to injury or destruction of property for each motor vehicle, a minimum liability of $1,000 and a maximum of $5,000. In addition, it is provided therein that a motor vehicle owned by a non-resident of this State shall not be subject to the provisions of this section upon entering this State provided no passengers are received or discharged in this State.

It would, therefore, appear that section 17 of the Vehicle and Traffic Law was enacted, among other things, from the viewpoint of the protection of the passengers using the common carrier and not primarily for the protection of the owner of the bus. Not only do the maximum and minimum liabilities increase with the number of passengers to be accommodated, but also there is the provision that the bus owned by a non-resident of this State shall not be subject to the provisions of section 17 upon entering the State provided no passengers are received or discharged in the State. Reading section 17 as a whole, it is reasonable to say that the furnishing of this bond was required in large measure to safeguard the person and property of passengers from injury or damage caused by the negligence of a public motor vehicle carrier. (Shaw v. Citizens Casualty Co., 241 App. Div. 399.)

It is urged, however, that the broad language of the policy whereby the defendant insurance company has undertaken to pay all judgments for liability imposed by law for damages for injuries to persons has been limited by the words caused in the operation, maintenance, use or the defective construction of such motor vehicle * * (Vehicle & Traffic Law, § 17, subd. 1.) The words operation ” and “ use ” are broad terms. Moreover, the purpose of section 17 would seem to indicate that these words have been used in a sense sufficiently broad to cover this kind of accident. If there were any doubt as to whether these terms were sufficiently broad to cover this kind of accident, we turn to the words of the policy in the form approved by the Commissioner of Motor Vehicles for the purpose of carrying out this statute, and which in that form has been accepted and used by this defendant. The broad sense in which these words were used in section 17 has been carried out in the policy by the addition of the word ownership,” so that the phrase reads resulting from the ownership, operation, maintenance, use or defective construction of ” plaintiff’s buses. If this defendant was not in accord with the construction placed upon section 17,' in the form of policy approved, it need not have written the' policy in suit. Having written the policy the defendant is liable for such injury as that in the case at bar, since, as pointed out above, liability of a bus company to its passengers for injuries sustained from assaults by fellow passengers after due notice is a liability imposed by law ” and is one of the incidents of ownership and operation of a motor vehicle for hire in this State.

It is urged by defendant, however, that the insured should not read the words used in the policy and in section 17, pursuant to which the policy specifically states that it was issued, in their ordinary sense, but that the insured should read section 17 in conjunction with section 59 of the Vehicle and Traffic Law and section 109 (see now § 167) of the Insurance Law (Cons. Laws, ch. 28). By this argument defendant seeks to restrict the meaning of the words ownership, operation ” and use ” to apply to accidents occurring upon the streets and highways. It points to' section 59 of the Vehicle and Traffic Law as having been enacted for the purpose of the protection of the public from the point of view of ownership of a motor vehicle, as an instrument which, if not owned and used with care, is likely to produce injuries resulting from such accidents, and thereby seeks to restrict the meaning of the above quoted phrase to accidents happening outside of the automobile. As already noted, one of the primary purposes of section 17 of the Vehicle and Traffic Law was the protection of the passengers using the common carrier. Moreover, the word “ operation ” as used in section 59 has been held to have been used in a sense sufficiently broad to cover not only injury to persons outside the bus, but also a guest passenger (Cohen v. Neustadter, 247 N. Y. 207). Had the Legislature intended to limit the liability to such as resulted from accident or collision, it would have been easy so to have specified in the policy.

In the case at bar the assured is entitled to rely upon the wording of its policy construed in accordance with the wording of section 17 of the Vehicle and Traffic Law. In neither the policy nor section 17 does there appear an intention to use these words in a sense so as to exclude this class of liability from the general phrase “ liability imposed by law.” The words any sums which the insured may become obligated to pay by reason of the liability imposed by law * * * for damages * * * to persons * * * resulting from the ownership, [and] operation * * * ” are words of very broad significance and as used in their ordinary sense, would include the total liability imposed by law upon the plaintiff as a common motor carrier no matter whether such liability arose from a street accident or otherwise. It would not seem reasonable to place so restrictive an interpretation upon these words as to segregate from all liabilities imposed by law liability arising as in the case at bar, and thus leave unprotected a passenger injured in this manner. It is submitted that such an interpretation was never, intended by the Legislature in the enactment of section 17 of the Vehicle and Traffic Law, by the Commissioner in approving the form of policy to carry out such section, or by the parties in contracting for this insurance thereunder.

It follows that the judgments should be reversed and the motion to dismiss the complaint denied, with costs in all courts.

Lehman, Ch. J., Loughran, Rippey and Desmond, JJ., concur; Lewis and Conway, JJ., dissent upon the ground that an unprovoked assault upon a public bus passenger by a fellow passenger is not within the coverage of the policy in suit; nor were the injuries resulting from such an assault within the scope of the indemnity required by section 17 of the Vehicle and Traffic Law.

Judgments reversed, etc.


source: Caselaw Access Project

author: Loughran, J.

license: Public Domain

text:
    The People of the State of New York ex rel. Lewis McC. Herzog, Appellant and Respondent, against Angela S. Morgan, Respondent and Appellant.
    Argued November 24, 1941;
    decided January 15, 1942.

      Frederick Evan Crane, Milton Zwisohn and Nicholas P. Nanos for relator, appellant and respondent.
    The order of the court below denies full faith and credit to the Nevada decree. The determination of the Appellate Division was not based upon a finding of change of circumstances since the entry of that decree. (Ansorge v. Armour, 267 N. Y. 492; Westchester F. Ins. Co. v. Syracuse, B. & N. Y. R. R. Co., 192 App. Div. 463; 233 N. Y. 600.) The Court of Appeals has the power and it is its duty to review the facts. Due weight must be accorded to the original findings of the Special Term. (Matter of Flagler, 248 N. Y. 415; People v. Parkin, 263 N. Y. 428; Karlin v. Karlin, 280 N. Y. 32; Baird v. Mayor, 96 N. Y. 567; Boyd v. Boyd, 252 N. Y. 422; York Mortgage Corp. v. Clotar Const. Corp., 254 N. Y. 128; Smith v. Smith, 273 N. Y. 380; McKee v. McKee, 267 N. Y. 96.) The weight of evidence lies with the findings that relator is a fit custodian for his children and that it is to their best welfare that his limited custody be continued. The modifications of the Appellate Division are not supported by the evidence. (Lester v. Lester, 178 App. Div. 205; 222 N. Y. 546; Matter of Knowack, 158 N. Y. 482; People ex rel. Sisson v. Sisson, 271 N. Y. 285.) The provisions of the Nevada decree relating to the custody of the children were binding upon the parties. (May v. May, 233 App. Div. 519; Robinson v. Robinson, 254 App. Div. 696; Finlay v. Finlay, 240 N. Y. 429; Matter of Kernan, 247 App. Div. 664; 272 N. Y. 560; Kennedy v. Ryall, 67 N. Y. 379.)

      William L. Hanaway and Thornton C. Land for defendant, respondent and appellant.
    The matter is for the Appellate Division and for its independent and unswayed discretion. (People ex rel. McCanliss v. McCanliss, 255 N. Y. 456; People ex rel. Sternberger v. Sternberger, 153 N. Y. 684; Osterhoudt v. Osterhoudt, 168 N. Y. 358; Waring v. Waring, 100 N. Y. 570; Price v. Price, 55 N. Y. 656.) The Nevada .’decree is no bar to the order of the Appellate Division even though that decree is entitled to full faith and credit. (Matter of Flagler, 248 N. Y. 415.) The defendant in the capacity of guardian was not a party to the Nevada divorce proceedings and, consequently, in that capacity she was a stranger to them and is not bound thereby. (Rathbone v. Hooney, 58 N. Y. 463; First Nat. Bank v. Shuler, 153 N. Y. 163; Gerstein v. Fisher, 12 Misc. Rep. 211; Furlong v. Banta, 80 Hun, 248; City Bank Farmers Trust Co. v. Silberberg, 280 N. Y. 424; Hellstern v. Hellstern, 279 N. Y. 327; Matter of Auditors, 249 N. Y. 335; Leonard v. Pierce, 182 N. Y. 431; Landon v. Townshend, 112 N. Y. 93; Collins v. Hydorn, 135 N. Y. 320.)
   Loughran, J.

This is a habeas corpus proceeding brought by the father of two children for an apportionment of their custody between him and their mother.

On June 28, 1933, the parties entered into an agreement of separation whereby the custody of the children was granted to the father during July and August and the Easter vacation of each year and to the mother at other times but with the privilege to the father of daily visitation. Pursuant to this agreement the father set up trust funds from which the mother has received for the support of the children $416 each month.

In May, 1935, the mother was granted a divorce from the father by a Nevada decree that is valid under our own law. Thereby the Nevada court adjudged “ that the written agreement made and entered into by the plaintiff and the defendant herein on the 28th day of June, 1933, settling the property rights of the plaintiff and the defendant and all matters concerning the care, custody and support of the minor children of said parties * * * be and the same hereby is * * * ratified, adopted and approved in all respects, and with the same force and effect as if said agreement were annexed hereto and set out in full in hsec verba as a part hereof; and said agreement is hereby declared to be fair, just and equitable to the plaintiff, to the defendant, and to the said minor children; and the plaintiff and the defendant are both ordered and directed to comply with all of the terms and conditions of said agreement.”

Citing Ansorge v. Armour (267 N. Y. 492), the Special Term ruled that the foregoing provisions of the Nevada decree were binding upon the mother, since (as the court found) there had been no change in conditions and circumstances since the rendering of the decree that makes it necessary for the children’s best interests that the provisions for custody thereby made, be altered.” The mother, dissatisfied with this result, appealed to the Appellate Division where the order of Special Term was modified so as to direct that the father (1) shall have the custody of the children each year for a period of two weeks during either July or August, but on condition that the children be accompanied by their nurse or governess,” and (2) “ shall have the right to visit the children between the hours of three and six p. m. on one Sunday each month, provided he gives reasonable notice to * * * [the mother] of his intention so to do.” (262 App. Div. 763.) The case comes here on cross-appeals by the parties from the order of the Appellate Division.

Conformably to the separation agreement of June 28, 1933, the mother was appointed general guardian of the persons of the children by the Surrogate’s Court of the County of New York on April 25, 1934. She makes the argument that the Nevada decree does not bind her as such guardian, since she was never before the Nevada court in that status. This argument, we are sure, falls short of the heart of the issue. Neither the letters of guardianship nor the Nevada decree diminished the prerogative of the New York Supreme Court as parens patrise. By means of that paternal jurisdiction the court was to provide for the best interests of the children after the manner of a wise, affectionate and prudent parent. (Finlay v. Finlay, 240 N. Y. 429.) From that same standpoint we must now say where in our judgment the weight of the evidence lies in respect of the conflict between the findings of the Special Term and the implied contrary findings of the Appellate Division. (People ex rel. McCanliss v. McCanliss, 255 N. Y. 456; 257 N. Y. 520. See Matter of Flagler, 248 N. Y. 415.)

No discontent has been expressed by the mother respecting her agreement that the father might see the children daily if he chose. In her pleading she demanded no more than the right of custody. We see no reason for so much of the order of the Appellate Division as would deny to the father for the most part even the opportunity which the mother left open to him for communication with the children.

The memorandum decision of the Appellate Division says: In view of the tender years of the children and under all the circumstances, in our opinion the children should not be separated from their mother for a longer period than two weeks.” (262 App. Div. 763.) The years of one of- the children — a boy — are nine. The years of-the other — a girl — are eleven. It is plain enough, we think, that these ages did not without more call for the undoing of the division of custody which the father and the mother had themselves jointly confirmed when the children were five years younger. We go along, then, to the other circumstances referred to by the Appellate Division.

There is evidence that the father had at one time been of intemperate habits. The record exhibits nothing else against him. There is no claim,” as the Special Term said, that the father was ever cruel to the children or neglectful or unmindful of them, and on the other hand, it is well established that he has great love for them which they reciprocate in full.”

Nor was claim made of any untoward resultant of the boy’s contact with the father. A pediatrician, called as a witness by the mother, gave it as his opinion that the contrary was true in the case of the girl. But that testimony was flatly contradicted by a psychiatrist called as a witness by the father. Such diversity of specialistic viewpoint led the Special Term judge to talk to the girl in the absence of parties and counsel. He reports the result in this way: She impressed me as being an entirely normal child. She answered the questions spontaneously and naturally. She said she had never seen her father under the influence of liquor; she greatly enjoyed her summers [with him] in Maine where she was happy; that she loved him as she did her mother and her mother’s second husband.”

The foregoing is the substance of the case. Our examination of it has been made with some anxiety because of the nature of the issue. The Special Term judge saw and heard the witnesses. He was face to face with the infants whose paramount interests were to be fostered. The factors that made his duty clear to him can at this distance be seen by us only, as it were, through a glass darkly. Our conclusion is that in all human probability the first-made findings of the Special Term are attested by the weight of the evidence.

The order of the Appellate Division should be reversed and that of Special Term affirmed, without costs.

Lehman, Ch. J., Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Ordered accordingly.


author: Per Curiam.

text:
    William C. Rosenkranz, Appellant, v. Schreiber Brewing Co., Inc., Respondent, Impleaded with Others.

      Submitted December 2, 1941;
    decided January 15, 1942.

      Edwin J. Culligan and Stanley H. Montfort for appellant.
    The evidence establishes that the agreement was authorized by the defendant brewing company. (Harvey v. Morgan & Co., 2 N. Y. Supp. [2d] 520; Wen Kroy Realty Co. v. Pub. Nat. Bank & Trust Co., 260 N. Y. 84; Angerosa v. White Co., 248 App. Div. 425; 275 N. Y. 524; Skutt, Inc., v. Goodwin, Ltd., 251 App. Div. 84; Hanover Bank v. American Dock & Trust Co., 148 N. Y. 612; Raabe v. Squier, 148 N. Y. 81; Hastings v. B. L. Ins. Co., 138 N. Y. 473.) The agreement between the plaintiff and the defendant-respondent is valid and enforceable. (White v. Rintoul, 108 N. Y. 222; Raabe v. Squier, 148 N. Y. 81; Voska, Foelsch & Sidlo, Inc., v. Rutland, 172 App. Div. 616; Schwoerer & Sons, Inc., v. Stone, 130 App. Div. 769; 200 N. Y. 560; R. & L. Co. v. Metz, 165 App. Div. 533; 215 N. Y. 695; Almond v. Hart, 46 App. Div. 431; Block v. Galitzka, 114 App. Div. 799; Mannetti v. Doege, 48 App. Div. 567; Desmond v. Schenck, 36 App. Div. 317; Davis v. Patrick, 141 U. S. 479; Emerson v. Slater, 22 How. 28; Pocket v. Almond, 90 Vt. 10; Kaupman v. Pittsburgh Contracting & Engineering Co., 316 Penn. St. 502; Parisi v. Hubbard, 226 App. Div. 280.)

      Joseph Swart, Edward L. Jellinek and C. F. Messinger for respondent.
    There is no evidence of the existence of an agreement between plaintiff and the defendant brewing company. (Blackwell v. Glidden Co., 208 App. Div. 317; 239 N. Y. 545; Emerson Phonograph Co. v. Waterson, 183 App. Div. 386; 228 N. Y. 583; Conley v. Powell Corp., 212 App. Div. 324.) There is no evidence of authority from respondent to make the alleged agreement with the plaintiff. (Wilson v. Kings Co. E. R. R. Co., 114 N. Y. 487; Martin v. Niagara Falls Paper Mfg. Co., 122 N. Y. 165; Berwin & Co. v. Hewitt Realty Co., 199 App. Div. 453; 235 N. Y. 608; Churchill Grain & Seed Co. v. Buchman, 204 App. Div. 30; Jemison v. Citizens Savings Bank, 122 N. Y. 135.) The alleged agreement between plaintiff and respondent, not being in writing, is void. (Brown v. Weber, 38 N. Y. 187; White v. Rintoul, 108 N. Y. 222; Mallory v. Gillett, 21 N. Y. 412; Duffy v. Wunsch, 42 N. Y. 243; Booth v. Eighmie, 60 N. Y. 238; Mechanics & Traders Bank v. Stettheimer, 116 App. Div. 198.) The alleged agreement was ultra vires and contrary to public policy. (Bath Gas Light Co. v. Claffy, 151 N. Y. 24; Jemison v. Citizens Savings Bank, 122 N. Y. 135; Miller v. Ammon, 145 U. S. 421.)
   Per Curiam.

Whether Rudulph had authority to commit the defendant brewing company to the engagement on which plaintiff sued, and whether this engagement was an original undertaking to indemnify the plaintiff against a default of Edgewater Island Park, Inc., or was a special promise to answer for such a default and hence was within the statute of frauds (Pers. Prop. Law, § 31, subd. 2; Cons. Laws, ch. 41), were questions of fact and were properly left to the jury. (See 1 Mechem on The Law of Agency [2d ed.], § 296) Brown v. Weber, 38 N. Y. 187; Tighe v. Morrison, 116 N. Y. 263.) The question whether the agency alleged by the plaintiff was opposed to public policy is not presented by this record.

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

Loughran, Finch, Rippey, Conway and Desmond, JJ., concur; Lehman, Ch. J., dissents and votes to affirm; Lewis, J., taking no part.

Judgment accordingly.


author: Finch, J. Lehman, Ch. J.

text:
    Fitzgibbons Boiler Company, Inc., Appellant, v. National City Bank of New York, Respondent, Impleaded with Others. Fitzgibbons Boiler Company, Inc., Appellant, v. Bankers Trust Company, Respondent, Impleaded with Others.

      Argued December 8, 1941;
    decided January 15, 1942.

      Edward K. Hidalgo and Oleg Peter Petroff for appellant.
    The defense of negligence cannot be sustained because the plaintiff did not neglect to perform any duty which it owed to the banks in failing to conduct an investigation. (Palsgraf v. Long Island R. R. Co., 248 N. Y. 339; Paton Co. v. Guaranty Trust Co., 227 App. Div. 545; 254 N. Y. 621; Knox v. Eden Musee Co., 148 N. Y. 441; People’s Trust Co. v. Smith, 215 N. Y. 488; Spiegel Realty Corp. v. Gotham Nat. Bank, 121 Misc. Rep. 547; 208 App. Div. 843; Welsh v. German American Bank, 73 N. Y. 424; Corrigan v. Bobbs-Merrill Co., 228 N. Y. 58; City of New York v. Bronx County Trust Co., 261 N. Y. 64; Potts & Co. v. Lafayette Nat. Bank, 269 N. Y. 181; Critten v. Chemical Nat. Bank, 171 N. Y. 219; Stumpp v. Bank of New York, 212 App. Div. 608.) The defense of negligence cannot be sustained because even if the plaintiff was negligent, its negligence was not the proximate cause of the loss. (National Surety Co. v. Manhattan Co., 252 N. Y. 247; Frank v. Chemical Nat. Bank, 84 N. Y. 209; Gutfreund v. East

      River Nat. Bank, 251 N. Y. 58; Jordan-Marsh v. National Shawmut Bank, 201 Mass. 397; Kobre v. Corn Exchange Bank, 79 Misc. Rep. 212.)

      David S. Konheim, Samuel Halpern and Anthony J. Wolf for respondents.
    Plaintiff may not recover on the checks because prior to the issuance thereof it had notice of other frauds of its employee. (Kiernan v. Krauth, 242 App. Div. 772; Tousey v. Hastings, 194 N. Y. 79; Fidelity & Deposit Co. v. Queens County Trust Co., 226 N. Y. 225; Rochester & C. T. R. Co. v. Paviour, 164 N. Y. 281; National Surety Co. v. Manhattan Co., 252 N. Y. 247; Hanrahan v. New York Edison Co., 238 N. Y. 194; Frank v. Von Bayer, 236 N. Y. 473; Prudential Ins. Co. v. National Bank of Commerce, 227 N. Y. 510; City of New York v. Bronx County Trust Co., 261 N. Y. 64; McLaughlin v. National City Bank, 228 App. Div. 337; Gutfreund v. East River Nat. Bank, 251 N. Y. 58.) Plaintiff is precluded from, maintaining the suit by reason of the account stated with the defendants. (Potts v. Lafayette Nat. Bank, 269 N. Y. 181.) Plaintiff facilitated the commission of the frauds by executing the checks in blank. (Gutfreund v. East River Nat. Bank, 251 N. Y. 58; National Surety Co. v. Bank of Manhattan, 252 N. Y. 247.)
   Finch, J.

This is a consolidated action by a depositor against two drawee banks to recover "the sums paid out on eleven checks which bore forged endorsements of the names of the respective payees. The forgeries were committed by an employee of the plaintiff corporation. In their separate answers the defendant drawee banks deny the forgeries and allege affirmatively they are not liable for breach of the contract made with the plaintiff depositor that they would not disburse its money on forged endorsements. Their reasons are: First, the checks were bearer instruments and, therefore, payment thereof was in accordance with their tenor. Second, the loss is directly attributable to the negligence of the plaintiff. Third, the checks in dispute are covered by accounts stated between the plaintiff ■ and the banks. Lastly and by way of a partial defense, the banks allege that the employee who committed the forgeries has repaid to the plaintiff the proceeds of six of the eleven checks and, hence, no loss has been sustained by plaintiff with respect to these six checks. The trial court submitted to the jury two specific questions, one dealing with the issue of the negligence of plaintiff, and the other with the issue of accounts stated. The court charged the jury that if they found in favor of the defendants on either issue, their verdict must be for the defendants. The jury found for the defendants on both questions. The trial court set aside the verdict of the jury, granted a motion by plaintiff, theretofore reserved, for a directed verdict and, accordingly, granted judgment. Upon appeal, the Appellate Division reversed the judgment in favor of plaintiff, reinstated the verdict of the jury, and ordered judgment on the verdict in favor of defendants upon the ground that there was evidence to support the verdict and that the latter was sufficient to support the judgment for defendants. The appeal to this court, therefore, presents only questions of law. (Markiewicz v. Thompson, 246 N. Y. 235; Cohen, Powers of the New York Court of Appeals, pp. 137, 341.)

Plaintiff is in the business of manufacturing and selling boilers. In order to encourage sales, plaintiff would undertake to finance the cost of installation as well as to extend credit on the purchase price. A “ finance ” sale would be arranged in the following manner. A prospective purchaser would execute his promissory note to a local dealer to cover the cost of the boiler, installation and credit charges. The dealer in turn would endorse the note without recourse and forward it to plaintiff. If the transaction was approved by plaintiff, then upon completion of the installation, plaintiff would forward its check to the dealer for the face amount of the note less the price of the boiler and credit charges.

An individual named Mian'o was assistant treasurer and also credit manager of the plaintiff corporation. He had come into plaintiff’s employ in 1922 and in 1930 had advanced to the position of assistant treasurer. There is no doubt he was an important officer of the plaintiff corporation and entrusted with the care of confidential matters. Upon the direction of Miaño, the accounting department, headed by another officer of the corporation, would prepare checks for signature by an appropriate officer in accordance with the supporting data submitted by Miaño. Beginning in the latter part of 1935 and continuing through 1936, Miaño caused the issuance of thirty-four checks to several dealers with whom plaintiff had had business contacts, but who were not entitled to the checks in question since they were not based on actual sales. Miano’s course seems to have been to deliver a check to the dealer named as payee and then to obtain to his personal credit a check drawn by the dealer in equal amount. In January and February, 1937, Miaño simplified his procedure by forging the names of the payees of the eleven checks in suit. In September, 1937, the president of plaintiff corporation learned of Miano’s defalcations from the latter’s attorney.

The banks contend they are not liable, at least with respect to some of the checks, because these particular checks were issued as bearer instruments. To support the argument that some of the checks were so payable, defendants assert that there is evidence in the record from which the jury might have found that at the time the president of plaintiff corporation signed such checks the names of the payees had not been inserted and that when Miaño subsequently wrote in the names of the payees, he did not intend them to have any interest in the checks. (Negotiable Instruments Law, § 28, subd. 3; Cons. Laws, ch. 38.) The conclusion sought by defendant banks cannot be sustained for the record contains ho evidence that the checks were signed in blank except for a vague statement that “ the great majority of the checks were signed in blank by Mr. Homer Adams.” This statement is to be found in an affidavit executed by Miaño prior to the trial which defendants introduced solely for the purpose of impeaching Miaño as a witness and, • therefore, the statement cannot serve as affirmative evidence of the truth of .the fact sought to be proved by defendants. (Civ. Prac. Act, § 343-a; Matter of Roge v. Valentine, 280 N. Y. 268, 276.) Therefore, we need' not now consider the effect of signing a check before the name of the payee is inserted by one other than the person issuing the check. (Cf. Cohen v. Lincoln Sav. Bank, 275 N. Y. 399, 402; Brannan, Negotiable Instruments Law [6th ed.], pp. 207, 208.)

Defendants next contend that they are not liable for breach of contract made with their depositor, because the breach was the result of negligence on the part of the depositor. They urge that plaintiff was negligent in failing to discover the fraud of Miaño prior to the issuance of the eleven checks in suit in January and February, 1937. Plaintiff, of course, may not insist on the fulfilment of a contract to which it is a party if it can be said to have brought about the breach of that contract. The negligence of the depositor will bar recovery also where it has lulled the drawee bank into relaxing the vigilance it should have exercised in guarding against forged endorsements. There is no evidence in the record that the failure of the drawee banks to carry out the contract which they had undertaken was the proximate result of any act or failure to act on the part of the plaintiff depositor. (American Surety Co. v. Empire Trust Co., 262 N. Y. 181; City of New York v. Bronx County Trust Co., 261 N. Y. 64; National Surety Co. v. Manhattan Co., 252 N. Y. 247; Gutfreund v. East River Nat. Bank, 251 N. Y. 58; Prudential Ins. Co. v. National Bank of Commerce, 227 N. Y. 510; Shipman v. Bank of State of New York, 126 N. Y. 318; Jordan Marsh Co. v. National Shawmut Bank, 201 Mass. 397.) Thus, in Jordan Marsh Co. v. National Shawmut Bank (supra) a depositor’s employee had forged the endorsements of the payees named in 170 checks over a period of five years and thereby abstracted about $50,000. It was found as a fact by the trial court that the depositor had been negligent in not discovering and preventing the employee’s fraud. It was also found as a fact by the trial court that the negligence of the depositor induced the drawee bank to pay the checks in suit. On appeal, the Supreme Judicial Court of Massachusetts reversed the judgment for the defendant on the ground that the negligence of the depositor in failing to protect itself against fraud did not lead the bank astray in the discharge of its contractual obligation not to pay the checks except in accordance with their tenor. “ The plaintiff had nothing to do with the payment, or with the defendant’s performance or nonperformance of its duty to see that payment was made to the right person.” (201 Mass, at p. 408.) Prudential Ins. Co. v. National Bank of Commerce (227 N. Y. 510, 518) is not to the contrary. In that case, among the other circumstances shown in the record, it appeared that the depositor would transmit checks to its district agent for delivery to various payees. One of the district agents had made it a practice to forge the endorsement of the payee and then collect the proceeds of the checks by adding his own endorsement. The checks bearing the forged endorsements together with the signatures of the agent were returned to the depositor from time to time. Prior to the payment by the drawee bank of the first of two checks on which suit was brought by the depositor, the latter had received a letter from a payee stating that he had not yet received the check which he had been promised. At that time there had already been returned to the depositor a check drawn to the order of the complaining payee which bore the forged endorsement of the name of the payee as well as the endorsement of the agent. As noted by the court in its opinion: The jury could have found that a casual comparison of the indorsements on the Cuzner [the complaining payee] check in its possession with the genuine signature of the Cuzners also in plaintiff’s possession, would have shown that the indorsements were not the genuine signatures of the Cuzners.” (227 N. Y. at p. 518.) Thus the letter of the payee brought home to the depositor clear notice that its checks were being forged and that the agent in question was the forger. In the case at bar, on the other hand, Miaño had forged no endorsements prior to the checks in suit and the plaintiff depositor could not by a comparison of returned checks detect the forged character of the endorsements of the checks in suit. The drawee bank seeks to establish notice of some sort to the depositor by virtue of the fact that one of the dealers who had accommodated Miaño by issuing his own checks to the personal order of Miaño in return for the plaintiff’s checks to which he was not entitled, complained to one of the officers of the plaintiff corporation of the statements of account rendered to him by the plaintiff. A reading of the testimony in this regard shows that the dealer was complaining of being overcharged and there was nothing in the information which he submitted to the plaintiff which reasonably would have indicated that Miaño was diverting the proceeds of checks, much less that he was forging endorsements. In Morgan v. U. S. Mortgage & Trust Co. (208 N. Y. 218) the signatures that were forged were those of the drawer and not of the payees and it is well settled that while a depositor is under a duty of detecting forgeries of his own signatures, ordinarily be is in no position to know the signature of the payees and, therefore, is under no duty to detect forged endorsements of the signatures of payees. (Critten v. Chemical Nat. Bank, 171 N. Y. 219, 227.)

Concerning the relation of the negligence of the depositor, to the contractual undertaking of the banks not to pay out upon forged endorsements, we have said: The drawer owed to the drawee the duty only that it would not by act or misrepresentation facilitate a fraud upon it. * * *

Negligent failure by the drawer to protect itself against fraud in procuring the making of the drafts does not cast upon the drawer the risk that they will' be paid upon a forged endorsement.” (American Surety Co. v. Empire Trust Co., 262 N. Y. at p. 186.)

Defendants have presented no evidence to excuse the banks from fulfilling their contract to the depositor. In so far as the verdict of the jury may purport to find that defendants were misled by the negligence of plaintiff, the verdict is unsupported by any evidence and must fail as a matter of law.

The drawee banks contend that although they may have been guilty of a breach of contract, nonetheless recovery is barred for the further reason that accounts were stated between the parties for the months of January and February, when the eleven checks in suit were paid by the banks. These statements of account were delivered to plaintiff at the beginning of February and of March for January and February respectively. Included with the statements were the checks bearing the endorsements forged by Miaño. A depositor is not concluded by the bank’s statement where he is ignorant of the facts and cannot reasonably be expected to know them. The statements of account charged the depositor with the knowledge which an examination of the statements themselves would disclose. The basis of this rule is the duty of the depositor to make such an examination. There is no duty upon a depositor to ascertain whether the endorsements are genuine or forged. In Shipman v. Bank of State of New York (126 N. Y. 318, at p. 328) we said: “ The drawer is not presumed to know, and in fact seldom does know, the signature of the payee. The bank must, at its own peril, determine that question. It has the opportunity, by requiring identification when the check is presented, or a responsible guarantee from the party presenting it, of ascertaining whether the indorsement is genuine or not. When it returns the check to the depositor, as evidence of a payment made by his direction, the latter has the right to assume that the bank has ascertained the fact to be that the indorsement is genuine.” (National Surety Co. v. Manhattan Co., 252 N. Y. 247; Potts & Co. v. Lafayette Nat. Bank, 269 N. Y. 181, 189.)

There is nothing is this record to establish that plaintiff at the time the accounts were rendered by the drawee bank knew or was under a duty to investigate the signature of the payees. It follows that the statements of account did not conclude plaintiff, and the verdict of the jury to the contrary is without any support.

It seems that prior to the termination of the employment of Miaño he made partial restitution. This he did by crediting without any agreement with plaintiff the accounts .of the several dealers who had been named by him as payees in six of the eleven checks which he had forged. The obligations of Miaño to plaintiff include not only the forged checks but also the sums paid out by means of thirty-four checks in 1935 and 1936. The amounts repaid by Miaño were less than the sums lost by the plaintiff as the result of the series of thirty-four checks and it appears without dispute that at all times there was due to the plaintiff an amount in excess of the amount sued for herein. The defense of partial restitution, therefore, is not sustained by the record, (Shipman v. Bank of State of New York, 126 N. Y. at pp. 332, 333.)

Defendants also urge that in any event they are entitled to a new trial because of the failure of the trial court to submit as a question of fact for determination by the jury whether the endorsements claimed by the plaintiff as forgeries were in fact signatures authorized by the respective payees. This issue was properly withdrawn by the trial court from the jury for the reason that the only evidence in the record shows the existence of the forgeries. As was said on this issue by the Appellate Division: There is no doubt that the money was wrongfully paid out on the checks.” (262 App. Div. 142, 143.)

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

Lehman, Ch. J.

(dissenting). Upon forged endorsements the drawee banks have paid checks drawn by the plaintiff upon its bank accounts. By fraud of its assistant treasurer the plaintiff was induced to draw the checks to the order of the payees named therein. The guilty officer of the plaintiff then forged the names of the payees and appropriated the proceeds. If the plaintiff had used better methods of bookkeeping and had exercised greater vigilance in guarding against dishonesty of its employees the dishonesty of the assistant treasurer, in whom, it appears, the other officers of the corporation had great confidence, would have been discovered and he could not have obtained the checks and would not have had opportunity to forge the endorsements upon them. Negligence in that respect would not, I agree, constitute a defense to an action brought by the depositor for breach of the bank’s contract to pay out the moneys in the plaintiff’s bank account, in accordance with directions of the depositor. Nor would such negligence give rise to a cause of action in favor of the bank (which the bank might interpose as a counterclaim) for damages consequent upon such negligence.

The cases cited in the opinion of Judge Finch constitute decisive authority for that rule. Here there is more than mere failure by the depositor- to use care in protecting itself against dishonesty of its employees. Here the evidence is sufficient to justify the finding of the jury that the plaintiff had notice that an employee was dishonest and the finger of suspicion pointed directly at the dishonest assistant treasurer. As the Appellate Division has pointed out in its opinion, one of the plaintiff’s customers informed the plaintiff that it would discontinue business relations with the plaintiff because of the suspicious behavior of the delinquent officer in handling his account and manipulation of checks to his order and, as the Appellate Division also points out, other clerks in the accounting department strongly suspected that the depositor’s bookkeeping accounts were seriously wrong. Closing its eyes to such notice, the plaintiff harbored a thief, though investigation would have disclosed previous thefts. The plaintiff, upon the- representations of the thief, continued to issue checks to payees to whom it owed no moneys and then failed to examine the endorsements on the checks so issued to determine whether they were genuine.

In such case elemental principles of fair dealing place upon the depositor a duty to do more than merely examine the signature of the drawer on returned vouchers. Having notice that an employee was manipulating accounts and checks it was bound in its transactions with the bank to exercise care commensurate with the notice of the danger to which the bank would be subjected in carrying out its contract with the depositor. That might require a check-up of returned checks with the entries of such checks in the depositor’s book of account. Such a check-up would have shown that a large proportion of the checks were drawn upon misrepresentations of the depositor’s dishonest officer and diverted by him. It might require, too, examination of the endorsement. (Prudential Ins. Co. v. National Bank of Commerce, 227 N. Y. 510.) The facts in that case are strikingly similar to the facts in the case we are reviewing. There, too, checks to the order of named payees were delivered by a depositor to its agent, to be delivered by him to the payees, and the agent forged the name of the payee to the check and deposited the same to his personal account. There, too, the depositor received a complaint from a payee sufficient to give the plaintiff notice that its agent was dishonest, and the depositor would have discovered the forgery “ if it had made any reasonable investigation of the check and documents in its possession ” (p. 516). In that case a recovery by the depositor from the bank was reversed and a new trial ordered because the court had not submitted to the jury the question of fact whether the depositor was negligent and whether such negligence was a contributory cause of the bank’s payment of the checks without discovery that the endorsement was forged. The court pointed out that under the circumstances of that case the jury might find that it was the duty of the depositor even to examine the endorsement of checks returned by the bank, citing Morgan v. U. S. Mortgage & Trust Co. (208 N. Y. 218). We have not in any later case departed from the rule there stated.

In this case these questions of fact were submitted to the jury. It found in favor of the defendant and, in my opinion, the Appellate Division correctly held that the defendant was entitled to the entry of judgment upon the verdict in its favor. Judgment should be affirmed, with costs.

Loughran, Rippey, Lewis and Conway, JJ., concur with Finch, J.; Lehman, Ch. J., dissents in opinion in which Desmond, J., concurs.

Judgment accordingly.


author: Lehman, Ch. J.

text:
    In the Matter of Catherine D. Curtin, Respondent, against City of New York, Appellant. State Industrial Board, Respondent.
    Argued November 24, 1941;
    decided January 15, 1942.

      William C. Chanler, Corporation Counsel (Paxton Blair, James Hall Prothero and Samuel A. Bloom of counsel), for appellant.
    There is no warrant for not treating reasonable attorney’s fees paid out by, or on behalf of, a claimant for deficiency compensation as part of his recovery for which he received benefit. (Matter of Mohr v. Wiebusch & Hilger, Ltd., 247 App. Div. 679; 272 N. Y. 655; Matter of Mundt v. Spencer & Son Contr. Corp., 250 App. Div. 693; 276 N. Y. 677; Matter of Campbell v. Monteleone, 243 App. Div. 157; Matter of Kabel v. Lane Eng. Co., 196 App. Div. 669; Matter of Solomone v. Degnon Contracting Co., 194 App. Div. 50; Hession v. Sari Corp., 283 N. Y. 262.)

      John J. Bennett, Jr., Attorney-General (Roy Wiedersum of counsel), for State Industrial Board, respondent.
    The reasonable and necessary expenses including attorney’s fees should be deducted from the recovery against the third party and the balance used as the basis for computing deficiency compensation. (Matter of Hobbs v. Dairymen’s League Co-operative Assn., Inc., 258 App. Div. 836; 282 N. Y. 710.)

      Robert E. Hugh for claimant-respondent.
    The decision below is correct and should be affirmed. (Matter of Hobbs v. Dairymen’s League Co-operative Assn., Inc., 258 App. Div. 836; 282 N. Y. 710.)

      Walter A. Fullerton for Beatrice Hobbs, amicus curiæ.

    The attorney’s fee in the third party action should be deducted in computing the widow’s compensation. (Matter of Kabel v. Lane Engineering Co., 196 App. Div. 669; Matter of Mundt v. Spencer & Sons Contr. Corp., 250 App. Div. 693; 276 N. Y. 677; Harbeck v. Pupin, 123 N. Y. 115; Matter of Meyer, 209 N. Y. 386; Matter of Post v. Burger & Gohlke, 216 N. Y. 544; Ward v. Erie R. R. Co., 230 N. Y. 230; People ex rel. Standard Oil Co. v. Saxe, 179 App. Div. 721; People ex rel. Killeen v. Angle, 109 N. Y. 564.)
   Lehman, Ch. J.

The claimant’s husband died on February 2, 1938, as the result of accidental injuries which he had sustained on that day and which arose out of and in the course of his employment. Pursuant to the provisions of section 29 of the Workmen’s Compensation Law (Cons. Laws, ch. 67) the claimant served a notice, dated March 21, 1938, that an action had been commenced against a third party and that the claimant makes “ claim for all benefits due me under the Workmen’s Compensation Act.” An award of compensation to the widow at the weekly rate of $10.39 was filed in the office of the Department of Labor on March 22, 1938, and the employer promptly gave notice that the first payment of compensation had been made.

The third party action was settled thereafter, with the written consent of the employer, for the sum of $14,000. The widow’s share in the recovery, after deduction of disbursements and attorney’s fees, was the sum of $3,551.70. Without deduction of attorney’s fees, the widow’s share in the recovery would have been the sum of $4,368.37. Where an injured employee, or in case of death, his dependents, proceeds against a third party, the employer or carrier must contribute only the deficiency, if any, between the amount of the recovery against such other person actually collected, and the compensation provided or estimated by this chapter for such case.” (Workmen’s Compensation Law, § 29, subd. 4, as amd. by L. 1937, ch. 684.) The State Industrial Board has decided that the words the amount of the recovery * * * actually collected ” as used in the statute mean the amount of the recovery collected after deduction of the reasonable and necessary expenditures, including attorneys’ fees, incurred in effecting such recovery.” The Appellate Division has affirmed the decision of the Board.

Prior to its amendment in 1937, section 29 provided that an injured employee or his dependents must elect whether to take compensation as provided in the statute or to pursue his remedy against a third party. If the injured employee or his dependents elected to take compensation under the statute, then the statute provided that the awarding of compensation should operate as an assignment of the cause of action against the third party. If the injured employee or his dependents elected to proceed against the third party, then the original statute contained the same provision as the amended statute now contains, that the employer or carrier shall “ contribute only the deficiency, if any, between the amount of the recovery against such other person actually collected, and the compensation provided or estimated by this chapter for such case;”

Since the amendment of 1937 the injured employee or his dependents need not elect whether to take compensation or to pursue his remedy against a third party. He may take compensation and at any time prior thereto or within six months thereafter pursue his remedy against the third party, but' in such case, it is provided that the employer or carrier liable for the payment of such compensation shall have a lien on the proceeds of any recovery from such other, whether by judgment, settlement or otherwise, after the deduction of the reasonable and necessary expenditures, including attorneys’ fees, incurred in effecting such recovery, to the extent of the total amount of compensation awarded under or provided or estimated by this chapter for such case and the expenses for medical treatment paid by it and to such extent such recovery shall be deemed for the benefit of such fund, person, association, corporation or carrier.” (§ 29, subd. 1.)

Under the construction placed by the Appellate Division, prior to the amendment of 1937, upon the words, the amount of the recovery * * * actually collected,” no deduction could be made for the expenses incurred in obtaining the recovery. A claimant who elected to pursue his remedy against a third party was compelled to bear the full burden of the expense of obtaining a recovery even where the benefit of the recovery inured solely to the person or corporation liable under the statute for compensation. (Matter of Solomone v. Degnon Contracting Co., 194 App. Div. 50; Matter of Kabel v. Lane Engineering Co., 196 App. Div. 669; Matter of Mohr v. Wiebusch & Helger, Ltd., 247 App. Div. 679; affd., 272 N. Y. 655; Matter of Mundt v. Spencer & Son Contg. Corp., 250 App. Div. 693; mod., 276 N. Y. 677.) In the cited cases in which an appeal was taken to this court, the construction placed upon the statute by the Appellate Division was not challenged in this court by the claimant. For that reason, the question has never been presented or decided by this court. The practice which the Appellate Division had approved was, nevertheless, generally accepted as correct and became the settled practice. In construing the amended statute we may reasonably assume that the Legislature when it amended the statute knew the interpretation which had been previously placed upon these words, and we should not give a different construction to the same words in the statute as amended, unless by the amendment the Legislature has clearly indicated that it intended to give to the words a different meaning.

We think that here the Legislature has so indicated. The same words which had been judicially construed before the section was amended assume a different aspect in their new setting in the amended section. The construction which the court held gave effect to the legislative intent as indicated in the original section might thwart the enlarged legislative purpose as indicated in the amended section.

The Workmen’s Compensation Law was enacted as indicated in the title of the statute (L. 1913, ch. 816) for the purpose of “ assuring compensation for injuries or death of certain employees in the course of their employment.” The statute did not take away existing remedies against third parties, nor did it confer upon an employee or his dependents a right to receive compensation from an employer or carrier where the full amount of the statutory compensation assured to the employee or his dependents was actually collected by him or them from such third party. The provisions of section 29 of the Workmen’s Compensation Law, as originally enacted, requiring an election whether to take the statutory compensation or to proceed against a third party, effectually prevented the assertion of any claim against the employer or carrier for more than the deficiency between the amount of damages for the injury actually collected from a third party and the amount of the compensation assured ” under the statute. When the Legislature amended section 29 to give a person entitled to compensation under the statute a right to take such compensation and at the same time to pursue his remedy against a third party without need of making, an election, the Legislature did not abandon the rule that to the extent that damages for an injury were actually collected from third parties, the obligation of the employer or carrier to pay the statutory compensation should be reduced.

To accomplish that end, the Legislature, in the same subdivision of section 29 in which it provided that a claimant should have the right previously denied to him to take the compensation assured by the statute without relinquishing any right of action against a third party, also provided, as we have said, that the person or corporation liable for the payment of such compensation should have a lien on the proceeds of any recovery from such third party “ after the deduction of the reasonable and necessary expenditures, including attorneys’ fees, incurred in effecting such recovery.” In that provision the Legislature has, in plain words, given recognition to the principle that where one person without fault incurs expenses in creating a fund which inures to the benefit of another, he should be reimbursed from that fund for the expenses so incurred. In the application of that principle, there is no ground for distinction between a case where recovery has been had by a claimant after he has made claim for statutory compensation and a case where the proceeds of a recovery have been collected before the claim is made. The provision of the section that a person or corporation liable for payment of compensation shall have a lien upon the proceeds of a recovery and the provision of the same section that such a person or corporation must contribute only the deficiency, if any, between the amount of the recovery “ actually collected and the compensation provided, are intended to carry out the same purpose in differing circumstances. They must be read together and each must be given the construction which will effectuate the legislative intent. So read, there can be no reasonable doubt that the words “ amount of the recovery * * * actually collected are intended to mean “ actually collected after the claimant has paid the expenses reasonably and necessarily incurred in obtaining any recovery. No artificial rule or canon of construction requires the court to disregard an intent so clearly indicated. The Industrial Board, which has power to decide what amount has been “ actually collected,” must decide as an incident what expenditures have been “ reasonably and necessarily incurred.”

The order should be affirmed, with costs.

Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Order affirmed.


text:
    The People of the State of New York, Respondent, v. Morris Mardavich, Appellant.
    Argued November 28, 1941;
    decided January 15, 1942.

      Nicholas Pecora, Newman Levy, J. Michael Solomon and William Goffen for appellant.
    The trial court committed error in refusing to charge as to the burden of proof concerning a recommendation of life imprisonment. (People v. Krauser, 315 Ill. 485; People v. Elmore, 277 N. Y. 397; People v. Ray, 172 Misc. Rep. 1004; 282 N. Y. 680; People v. Ertel, 283 N. Y. 519; McClatchey v. State, 152 Pac. Rep. 1136; Commonwealth v. Morgenthau, 249 Penn. St. 139.)

      Thomas E. Dewey, District Attorney (Stanley H. Fuld and Isabel A. Basanta of counsel), for respondent.
    The trial court’s refusal to charge that the prosecution has the burden of proving that a defendant is not entitled to a recommendation of life imprisonment was proper. In any event, the appellant was not prejudiced. (People v. Ertel, 283 N. Y. 519; People v. Ross, 134 Cal. 256; People v. Krauser, 315 Ill. 485; Bryant v. State, 13 Ala. App. 206; People v. Pryor, 283 N. Y. 623; People v. Thingstead, 282 N. Y. 577; People v. Lunse, 278 N. Y. 303; People v. Gati, 279 N. Y. 631; People v. Cole, 285 N. Y. 838.)
   Lehman, Ch. J.

Morris Mardavich was indicted for murder in the first degree jointly with two other defendants. By the overwhelming weight of evidence the People proved that the homicide was committed while all the defendants were engaged in the commission of a felony. The jury found them guilty of murder in the first degree. It did not recommend fife imprisonment as part of its verdict that the defendant Mardavich was guilty of murder in the first degree. It did so recommend as part of its verdict finding the other defendants guilty. Only the defendant Mardavich has been sentenced to death and he is the only defendant here.

In People v. Hicks (287 N. Y. 165), decided December 4, 1941, this court has laid down the rule that must be applied where a jury, finding a defendant guilty of murder in the first degree, is unable to agree whether it should recommend imprisonment for life as part of its verdict. Here the court refused a request to charge the rule substantially as it was formulated thereafter in the Hicks case. That is the only substantial ground that might be urged for a reversal of the judgment of conviction. We are of the opinion that other circumstances require us to disregard the error in this case.

After the trial judge had refused the request to charge to which the defendant was entitled he granted the following request: I ask the Court to charge the jury that if they entertain a reasonable doubt as to whether or not the defendant Mardavich is entitled to a recommendation of life imprisonment, they must resolve such reasonable doubt in the defendant’s favor, and make such a recommendation.”

The statute does not put upon the People the burden of proving that a defendant is not entitled to a recommendation of life imprisonment. The doctrine of reasonable doubt has no application to the determination of the punishment for crime where complete discretion is conferred upon the jury without definition, express or implied, of any measure or standard to be used by the jury. (People v. Krauser, 315 Ill. 485; People v. Ross, 134 Cal. 256; People v. Ertel, 283 N. Y. 519.) The charge so given is logically inconsistent with the refusal of the court to charge that there can be no verdict of guilty of murder in the first degree without a recommendation of life imprisonment where the jury has been unable to agree whether or not such a recommendation should be made. The charge given removes much of the possible harm which the refusal to charge may have caused.

True, if the court had expressly charged the jury in manner which we held error in the Hicks case, argument might be made that the error was not completely erased by the request to charge thereafter granted. Here there was no error in the charge as given. It was in accord with our ruling in People v. Ertel (supra). The error was in the refusal to charge the rule in the Hicks case and thus to amplify the charge previously given. Perhaps the refusal to charge may have been given in the presence of the jury and within its hearing, but it is conceded that it was not called to the attention of the jury. So little importance was ascribed to the refusal by the trial counsel that error there has not been asserted by counsel as a ground of reversal. Under these circumstances we conclude that it could not have affected the determination of the jury and should be disregarded under section 542 of the Code of Criminal Procedure.

The judgment of conviction should be affirmed.

Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgment of conviction affirmed.


author: Conway, J.

text:
    In the Matter of the Will of Marguerite Lindewall, Deceased. Louis Lorence, as Executor, Appellant; John P. Bathelt, Jr., Respondent.

      Submitted October 8, 1941;
    decided January 15, 1942.

      Bernard Cahn for appellant.
    A life felon is civilly dead and as a consequence his pre-existing marriage is ipso facto dissolved by virtue of his sentence. (Avery v. Everett, 110 N. Y. 317; Matter of Gargan v. Sculley, 82 Misc. Rep. 667; Bond v. Bond, 162 Misc. Rep. 449; Jones v. Jones, 249 App. Div. 470; 274 N. Y. 574; Brookman v. Brookman, 161 Misc. Rep. 741; Matter of Donnelly, 125 Cal. 417.) The imposition of the life sentence in Massachusetts is of no moment; the New York law applies and it prescribes civil death on such a state of facts. (Atherton v. Atherton, 181 U. S. 155; Haddock v. Haddock, 201 U. S. 562; Matthews v. Matthews, 247 N. Y. 32; May v. May, 233 App. Div. 519; Coler v. Corn Exchange Bank, 250 N. Y. 136; Jones v. Jones, 249 App. Div. 470 ; 274 N. Y. 574; Panko v. Endicott Johnson Corp., 24 Fed. Supp. 678.)

      Eugene B. Winett for respondent.
    The respondent is not civilly dead, and his marriage to the decedent was not dissolved ipso facto by virtue of his life sentence. (Panko v. Endicott Johnson Corp., 24 Fed. Supp. 678; Logan v. United States, 144 U. S. 263; People v. Gutterson, 244 N. Y. 243; Hine v. Simon, 95 Okla. 86; State Board v. Hays, 190 Ky. 147; Hall v. Crook, 144 Minn. 82; Grooms v. Thomas, 93 Okla. 87; Haynes v. Peterson, 125 Va. 730.) The Penal Law of the State of New York does not work a forfeiture of the respondent’s rights. (Avery v. Everett, 110 N. Y. 317.) The marriage of the appellant and the decedent was not dissolved and continued in force until her death. (Matter of Gargan v. Sculley, 82 Misc. Rep. 667; Brookman v. Brookman, 161 Misc. Rep. 741.)
   Conway, J.

There have been certified to us by the Appellate Division two questions. The first is:

1. Should the answer be stricken out and the objection to probate dismissed upon the ground that, upon the facts contained in the record, the respondent as matter of law was not the husband of the deceased at the time of her death? ”

On June 27, 1937, the decedent, Marguerite Lindewall, married the objectant, John Paul Bathelt, Jr., in the State of New York and they lived in New York city until June, 1938. Decedent had always been and continued to be until her death on March 6,1939, a resident of and domiciled in this State. In the latter part of June, 1938, a cement-encased body was found in the Connecticut river at South Hadley, Massachusetts, and was identified as the body of one said to be a New York gambler. Investigation disclosed that he had been murdered a few days before Bathelt married the decedent. Further investigation by the Massachusetts authorities resulted in an indictment of Bathelt for murder in the first degree on July 12, 1938. On the following day he pleaded guilty to murder in the second degree and was sentenced to imprisonment in the State prison in Boston for the term of his natural life. He is still confined under that sentence.

In November, 1938, the decedent made a will in which she set up two trusts. After directing that her estate be divided into two equal shares she directed that the income from one share be paid to a friend during fife and that the principal be paid over at death to a charitable institution. Income from the other share she directed to be paid as follows: Fifteen dollars monthly to Bathelt, whom she described as her former husband, during his life or so long as he should be confined in prison, for the purchase of conveniences and luxuries. The balance of the income she directed to be paid to the same charitable institution. The decedent also provided that, in order that the fifteen dollars per month might be paid, the principal of the second trust might be invaded. Upon Bathelt’s death or upon his release from prison, the principal of that trust also passed to the same charitable institution.

The petition for probate of the will alleged that the deceased left no surviving spouse. Bathelt appeared by counsel and filed an answer asserting a statutory interest in the estate under section 83 of the Decedent Estate Law (Cons. Laws, ch. 13) and objecting to the probate of the will.

Although the decedent, in the paper offered for probate, referred repeatedly to Bathelt as her former husband, used her maiden name in subscribing her signature and initialed the document in five places with the initials of her maiden name, she corresponded affectionately with Bathelt and there have been produced, as evidencing that fact, a New Year’s da;*" telegram, a birthday card, a post-card, two other cards containing poems and the printed words “ To my Husband ” and a letter, dictated to and written by another during her illness.

Section 511 of the Penal Law reads as follows: Consequence of sentence to imprisonment for life. A person sentenced to imprisonment for life is thereafter deemed civilly dead.”

There is presented for our determination the question of the effect of imprisonment for life upon the marital relation theretofore existing between the one so sentenced and his wife. It is urged by the respondent Bathelt that it has no effect but that the marital relation continues unless and until the innocent spouse remarries. The learned Appellate Division has agreed with him in that contention and has said that if the Legislature had wished it might have provided by statute that, under the circumstances outlined herein, a marriage might be dissolved.” (259 App. Div. 196, 198.)

It is true that the Legislature has not provided a remedy under these circumstances either by way of divorce or annulment but it has made other provisions which quite clearly indicate that it considered that for certain purposes a life sentence of the husband ipso facto terminated the marriage. For instance, Domestic Relations Law (Cons. Laws, ch. 14), section 6, subdivision 2, provides in substance that a marriage is void if contracted by a person whose husband or wife by a former marriage is living unless such husband or wife has been finally sentenced to imprisonment for life. A similar provision is found in the Penal Law with reference to the crime of bigamy. Penal Law, section 340, defines the crime of bigamy. Section 341, subdivision 4, provides: “ The last section does not extend: * * * 4. To a person whose former husband or wife has been sentenced to imprisonment for life.” The Legislature by failing to provide a remedy and by these provisions of the Domestic Relations Law and the Penal Law quite evidently intended that civil death, at least so far as the instance where the exceptions were applicable, terminated the marriage.

Historically, however, it seems equally clear that there is not a dissolution of the marriage for all purposes by reason of civil death. Originally civil death commenced, if any man was banished or abjured the realm by the process of the common law, or entered into religion; * * (Chase’s Blackstone [4th ed.], p. 71.) Banishment, which was afterward merged in transportation, was inflicted at common law (1 Coke on Lyttleton, p. 155 [133a]) by act of Parliament and later, by statute, by direct sentence of a court in punishment for crime. (See Rex v. Lewis, [1832] 1 Moody’s Crown Cases, 372; 168 Eng. Reprint, 1308.) If the husband were exiled by act of Parliament “ but for a time, which some call a relegation, that is no civil death.” (1 Coke on Lyttleton, p. 157 [136].) Abjuration of the realm was voluntarily accepted, with an accompanying oath to abjure the kingdom forever, to escape the heavier penalty of death and was later entirely abolished. (1 Bishop on Marriage, Divorce and Separation, § 1323; Newsome v. Bowyer, 3 P. Wms. 37, 38, note B.) Civil death also followed as a consequence of attainder for treason or commission of felony. (Avery v. Everett, 110 N. Y. 317, 323; Jones v. Jones, 249 App. Div. 470; affd., 274 N. Y. 574.) The common law consequences of a conviction for felony attached in this State and continued until abrogated by Constitution or statute. (2 Kent’s Commentaries, p. 386.)

Prior to the Norman Conquest there had been no distinction between lay and ecclesiastical jurisdiction. Thereafter common law and ecclesiastical courts were separated. (Short v. Stotts, 58 Ind. 29, 35; 28 C. J. S. Ecclesiastical, p. 827, Historical note.) Ecclesiastical courts had sole and exclusive jurisdiction over matrimonial causes. That jurisdiction continued until after the establishment of the United States as a nation and the adoption of the common law of England by the separate states. (McHie v. McHie, 106 Ind. App. 152; 27 C. J. S. Divorce, § 69.) As a consequence, the maxims, doctrines and practices of the ecclesiastical law of England have never become a part of our system of jurisprudence.” (Hutchinson Land Co. v. Whitehead Brothers Co., 127 Misc. Rep. 558, 562; affd., 218 App. Div. 682; Short v. Stotts, supra.) With us, dissolution of the marriage bond is permitted only by reason of statute law. Common law courts and courts of equity, however, apart from statute exercised jurisdiction over property rights which resulted from the marriage relation despite their lack of jurisdiction to dissolve or annul a marriage. Therefore, we find those courts declaring the law affecting rights of property following civil death although without power to determine whether civil death dissolved the marriage and without attempting so to do. Cases so decided are helpful by analogy in reaching a conclusion here.

One of the earlier cases was Countess of Portland v. Prodgers (1689) (2 Vernon’s Ch. Rep. 104). The report states: “ The question was touching the validity of the will of the Lady Sandys, her husband being by act of Parliament banished during life, she made a will and bequeathed several legacies, and whether she might so do or not was the question * * *. The court were of opinion that the husband being by act of Parliament banished for life, the wife might in all things act as a Feme Sole, and as if her husband was. dead, and that the necessity of the case required she should have such power, and therefore decreed for the plaintiff.” (Emphasis supplied.) (See, also, Newsome v. Bowyer, [1729] 3 P. Wms. 37.)

In North Carolina in 1777, during the Revolutionary War, one McNeil was called upon to take the oath of allegiance to the state or to depart. He refused so to do and was compelled to leave the state under the penalty established by law of incurring the crime of high treason if he returned. His wife remarried and conveyed by deed all her property arid rights to property to her second husband. An action was then brought on behalf of the latter against one alleged to be accountable to the wife for money and property due from the estates of her father and mother. Upon demurrer, the court said: “ * * * we must take the facts stated in the bill; and although possibly the answer might vary the case so as to shew the plaintiff could not recover, yet as the bill states that M’Neil was perpetually banished, it follows that except as to the objection of the marriage, M’Neil is' to" be considered as to all purposes to be actually dead; and she as to all purposes as a feme sole, she may sue and be sued, acquire and transfer property: if she may do so by will, as stated in 2 Vern. [104], there is no reason why she may not also do so by deed.” (Emphasis supplied.) (Troughton’s Admrs. v. Hill’s Exrs., 3 N. C. 475.)

In South Carolina, in an action for an accounting, the court said: “Two questions were agitated in this case, which occupied a great deal of the time of the court unnecessarily. 1st, with respect to the light in which a woman is to be considered, whose husband is banished, and estate confiscated; and 2d, as to the husband’s right to claim a life estate in property settled on marriage, he having survived his wife but is still in banishment. Both these points are extremely clear: the first, that she is considered as a feme sole, in every point of view; may contract debts, and acquire property, which she may again dispose of by deed or will. 2d, that the husband being banished, is considered as civiliter mortuus, and such rights as would have survived to him on the death of his wife, are extinct and gone with him; and the estate must consequently go to thosejto whom it is limited over.” (Wright v. Wright, [1804] 2 Desaussure’s Eq. Rep. [S. C.] 242, 244.)

In our own State in Osborn v. Nelson (1871) (59 Barb. 375, 381), in an action for work and labor, it was held that where .a husband had many years before abandoned his wife and family, had ceased wholly to provide for them, had gone beyond the jurisdiction of our state and had ever since the abandonment remained in California, such aótion was equivalent to abjuring the realm at common law “ so as to enable the wife to sue and be sued as a feme sole. (Chapman v. Lemon, 11 How. Pr. 235; Abbot v. Bayley, 6 Pick. 89; Gregory v. Pierce, 4 Metc. 478.) ”

These cases lead to the conclusion that civil death was given the same effect as actual death at common law and in equity only in so far as was required for the protection of wife or child. This would appear also to be the present legislative attitude since Correction Law (Cons. Laws, ch. 43), sections 320, 322, assumes the continuance of the marriage despite civil death so as to permit the husband or wife to apply to the Supreme Court for the appointment of a committee of the estate, both real and personal, of one sentenced to imprisonment in this State for life and for the payment of income or principal of such property for the support, education and maintenance of such persons as the convicted one would be legally liable to support if he had not been convicted. Correction Law, section 325, provides for the restoration of the felon’s property upon pardon or commutation of sentence and discharge, the husband, of course, remaining responsible for the support of his wife and child subject, in so far as the wife is concerned, to her remarriage. A pardon granted to one sentenced to life imprisonment within this State does not restore that person to the rights of a previous marriage. (Dom. Relations Law, § 58.)

We shall now consider the statute law upon the subject. Our Revised Statutes (2 R. S. p. 701, § 20), afterward re-enacted in the Penal Code (§ 708), declared that a person sentenced to imprisonment for life shall thereafter be deemed civilly dead.” His political rights were taken from him, his wife and children owed him no fealty or obedience. (Avery v. Everett, 110 N. Y. 317, 333.) There was at common law no imprisonment for life. That punishment was first prescribed by statute in 1796 (Chap. 30) and the attribute of civil death was attached thereto by specific and separate.enactment, (Laws of 1799, chap. 57), to conform the new penalty to the common-law rule with reference to the punishment of other felonies, but only 'for greater caution.’ (Troup v. Wood, supra [4 Johns. Ch. 228], page 248.) Civil death, at common law, followed as a consequence of conviction of felony punishable by death, and in that particular the common law has not been altered by statute, but remains the same.” (Jones v. Jones, 249 App. Div. 470, 471; affd., 274 N. Y. 574.) The common law still holds one to be civilly dead who has been sentenced to death for felony. In other words, life imprisonment not being a common-law penalty, but a statutory one, it was originally thought, for greater caution, that those upon whom this punishment was imposed should be formally classified eiviliter mortuus.” (Jones v. Jones, supra, p. 471.)

Some authorities have indicated that the marriage continues until the election of the innocent spouse to terminate it. (Jones v. Jones, supra, p. 472; Matter of Gargan v. Sculley, 82 Misc. Rep. 667; Brookman v. Brookman, 161 Misc. Rep. 741.) The meaning of the word election as so used is not entirely clear. It is urged that an election would be evidenced by the bringing of an action seeking a declaratory judgment. Certainly it would be disclosed by remarriage. It is also argued that it could be shown by acts which reached neither the dignity of court action nor the finality of remarriage. Let us then consider these methods.

An action seeking a declaratory judgment entails expense which it might not be within the power of many wives to meet. More important, however, seems the uselessness of the provisions of the judgment to be sought. What should it declare? That the husband is in prison for life? A certificate would show that. That he is civilly dead? The Legislature has declared that. What then? There can be nothing more. The life imprisonment is ground for neither divorce nor annulment. (Civ. Prac. Act, arts. 67 and 68.)

Shall we say that an election may be shown by other acts of the wife? What form would that election take? In one of the affidavits submitted here, counsel deposes that the decedent consulted him as to whether she should obtain a divorce and that he told her that it was not necessary for her to bring any action or legal proceedings against Bathelt but that she was free to remarry at any time she chose. She asked me what papers were necessary and I said that all she had to do was to present a certified copy of the certificate of conviction and sentencing to the marriage license bureau.” Would that be considered an election despite her continued correspondence? Would the fact that she referred, in the paper offered for probate, to Bathelt as her former husband and that she signed and initialed it with her maiden name be considered an election?

If not, must we say that the only election she could make would be by a remarriage? If that were so, then a sensitive woman who had married one who had committed murder a few days before their marriage might shrink with horror from remarriage and, consequently, at her death would leave a spouse entitled to a portion of her estate, whereas another woman, less sensitive, by remarriage would cease to have a murderer as a husband. Again, no suitor might present himself under the circumstances or religious tenets might forbid remarriage. The termination of rights of property succession should not depend upon questions of fact or varying circumstances such as these.

We think there are many reasons why it is more logical to hold that it is the sentence of life imprisonment, with consequent civil death, which ipso facto acts upon and affects the marital relation at least to the extent of liberating the husband or wife of the one sentenced and the property of such husband or wife from all the property obligations and restrictions arising from the relation, rather than to have such liberation depend upon some subsequent act of the innocent spouse.

Two other questions remain to be considered. It is urged by Bathelt that the rejection of his answer works a forfeiture of his property. That is not so. Property passes at death only by reason of the Decedent Estate Law (§ 83). There are thus two applicable statutes: the Decedent Estate Law and the Penal Law. The former gives a right of succession to a surviving spouse but the latter provides that one is not a surviving spouse who has been sentenced to life imprisonment. Such an one is dead civilly. There is no conflict and no forfeiture.

The other matter to be considered is that Bathelt was convicted in Massachusetts and that there is no provision in the statutes there similar to section 511 of our Penal Law. The answer is that the marriage between Bathelt and the decedent was performed in this State and that the decedent was a resident and domiciled here. This State possesses the right to fix, dissolve, terminate and regulate the marital relations of its citizens. (Atherton v. Atherton, 181 U. S. 155; Haddock v. Haddock, 201 U. S. 562, 569; May v. May, 233 App. Div. 519, 520.) We have held that life imprisonment in another state dissolves the felon’s marriage in the eyes of our courts so as to permit remarriage by his wife. (Jones v. Jones, supra.)

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

The first question certified is answered in the affirmative. The second question is not answered.

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis and Desmond, JJ., concur.

Ordered accordingly.