author: O’Brien, J. Lehman, J. Hubbs, J.

text:
    In the Matter of Fred W. Silberkraus et al., Appellants. Schaffer Stores Company, Inc., Respondent.
    (Argued January 7, 1929;
    decided February 13, 1929.)

      Chatfield T. Bates for appellants.
    The amended certificate of incorporation alters the preferential rights of the second preferred stockholders. (Campbell v. American Zylonite Co., 122 N. Y. 455; Page v. American & British Manufacturing Co., 129 App. Div. 346; Kent v. Quicksilver Mining Co., 78 N. Y. 159.)

      Harry M. Schaffer for respondent.
    The amended certificate of the corporation does not alter the preferential right of the petitioners’ stock. (Matter of Dresser v. Donner Steel Co., 247 N. Y. 553.)
   O’Brien, J.

Appellants are the holders of a small minority of shares of the second preferred stock of Schaffer Stores Company, Inc. They claim that the preferential right of such shares has been altered by the amended certificate of incorporation which, on March 31, 1926, over their objection, was authorized by a majority of more than two-thirds. They assert a right to an appraisal of the value of their shares and payment therefor by the corporation. The application of section 38, subdivision 12, of the Stock Corporation Law (Cons. Laws, ch. 59) is directly involved.

By the original certificate, the stock of this corporation was classified as first preferred authorized at $125,000, second preferred authorized also at $125,000, and some common. The preferences of the first preferred consisted in its right to seven per cent cumulative dividends and to payment at par on distribution of assets at dissolution. The only preference of the second preferred consisted in a right, equal with the first preferred, to payment at par upon distribution of assets. By the amended certificate, both preferred stocks were retired. Such retirement was effected by virtue of section 36 of the Stock Corporation Law. Instead of the old first and second preferred with an authorized combined capital of $250,000, only one class of preferred is now authorized with a capital of $500,000. It is designated as convertible preferred seven per cent cumulative and its preferential rights are similar to those of the old first preferred. A holder of the old second preferred, exchanging his stock for the new convertible, will acquire shares possessing the preferential right to distribution of assets at par similar to the right that attached to his old shares. To that is added a right to a preferred dividend which his old shares did not possess. The question is whether the preferential right of the outstanding shares of the old second preferred has been altered by the amended certificate of incorporation. It must be answered by the interpretation placed upon section 38, subdivision 12, of the Stock Corporation Law which reads as follows: If the certificate alters the preferential rights of any outstanding shares, any holder of such shares not voting in favor or such alteration, within twenty days after the meeting at which such alteration was authorized, may object thereto and demand payment for his shares, and thereupon such stockholder or the corporation may have his shares appraised as provided in section twenty-one, all of the provisions of which section shall in all respects be applicable.”

A preference is a superiority either in the receipt of dividends or in the distribution of assets upon dissolution. Preferential rights are such rights as attach to shares possessing a preference. On the retirement of a class of stock all rights adhering to the shares of that class are destroyed. When a class ceases to exist every preferential right attached to it falls. Neither a preference nor a preferential right can survive the thing to which it is appended. The right itself is distinct from the value of the right. For example, a class of stock with priority in the receipt of dividends restricted to one per cent possesses a preference and consequently a preferential right over another class of stock which is entitled to dividends only after payment to the superior class. Yet in the case of a corporation earning large profits, such a preferential right obviously is less valuable than a practical right to dividends of twenty per cent belonging to the common stock. So viewing the right as separate from value, it may be either beneficially or disadvantageously changed. Whenever it is changed in either way, it is altered, and when the change is effected by the amended certificate, a preferential right is altered by that certificate. In Matter of Dresser (247 N. Y. 553) this court decided that the authorization of new shares having preference superior to those of the old ones does not alter the preferential rights of the outstanding shares. There, a new class of preferred stock was superimposed upon an existing preferred class. The old preferred was not retired nor, in principle at least, were its preferential rights displaced. They remained the same, subject only to the preferences of the new class. The value of the old stock’s preferences may or may not have been affected. The rights themselves were not changed. In theory, they remained constant. So within the intent of section 38, subdivision 12, as we held, no alteration occurred. Here, a different state of facts is present. Neither the preferential right of the old stock nor even the old stock itself persists. Both disappear. The stock is retired and, with its retirement, its preferential right falls. A right to participation at par in the distribution of assets is attached to the new stock but the fact that that right is similar to the old ones belonging to the two classes of stock which have been abolished does not prevent an alteration of the abolished right. Abolition is alteration. The right incidental to the new convertible is different from the rights similar in their nature which attached to the old classes. When those stocks were retired, each right was detached from the stock to which it belonged and each was transferred to the new class. There they commingled and lost their identity. The new right which sprang in part from each of the old is no more the one that belonged to the second preferred than a child is the same person as either parent. An edifice built from timbers of two demolished structures is different from both. The severance of the preferential right from the old stock and the destruction of that stock constitute an alteration of the preferential right of the outstanding shares of the extinguished stock.

After the conclusion has been reached that preferential rights of outstanding shares have been altered by the certificate, the value of those shares immediately prior to the alteration becomes the central point for consideration. A right may be altered without inflicting damage. Often a benefit may accrue. When, as matter of law, the conclusion cannot be avoided that the alteration has produced advantages to the outstanding shares, the holder might not become entitled to purely theoretical and. technical relief. When, however, the result of the alteration is not entirely clear, the wishes of the stockholder rather than the conception of the courts should prevail. Let him be the one to decide whether he shall avail himself of the opportunity to acquire new stock which he deems of lesser worth or whether he shall take the appraised value of his outstanding shares. Here a serious question arises whether appellants are benefited by the change. The majority stockholders think they are, but these appellants take a different view. The stock which they now own paid dividends of ten per cent. The new stock is limited to seven per cent. The old shares might acquire a market value far in excess of par. The new shares are callable at 110. Under the old certificate, only $250,000 of stock was entitled to par on the distribution of assets, while under the new one twice that amount can participate. Since the question of benefit is arguable, the better result can be attained by intrusting the stockholder with power to decide. That, we think, is the purpose of the statute. (Matter of Timmis, 200 N. Y. 177.)

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.

Lehman, J.

(concurring). I concur in Judge O’Brien’s opinion. The new certificate entirely eliminates from the corporate structure the class of second preferred stock. It substitutes for both first and second preferred stock a new class of preferred stock. So long as the new preferred stock remains outstanding, it possesses the same preferential right to payment at par upon the distribution of the assets, which inhered in the retired second preferred stock, but other provisions in the new preferred stock completely alter its position in the corporate structure. The stock may be retired at 110, and a new preferential right to dividends at the rate of seven per cent is coupled with a restriction that the stock is entitled to no other dividends. In effect, the new stock cannot share in increase of corporate earnings or capital value.

The statute in terms provides a remedy where a new certificate alters the preferential rights of any outstanding shares. It has no application where the preferential rights of one class of outstanding stock over another class are left unchanged, though both classes of outstanding stock are made subject to new preferential rights of classes of stock to be issued thereafter. The statute was not intended to hamper a corporation in obtaining additional capital through the issue of new securities with superior preferential rights. So we held in Matter of Dresser (247 N. Y. 553). In that case the new certificate expressly provided that the preferential rights of the outstanding shares remained unchanged except as they became subject to the superior preferential rights of the new stock.

There is nothing in the statute that suggests that it does not apply where the new certificate completely alters the relative rights of different classes of outstanding stock. Here the new certificate has created a new class of preferred stock in place of a class of outstanding stock, with new preferential rights and new restrictions upon the rights which previously inhered in the stock of the eliminated class. Certainly the preferential rights of the new class of stock are not the same as the preferential rights of the eliminated class. Though the old preferential right has been retained, it becomes merely a part of a broader scheme of preferential rights as well as disabilities.

A decision that, though a new certificate completely changes the corporate structure, eliminates one class of preferred stock and substitutes a new preferred stock in its place, with new preferential rights and new disabilities, there has been no alteration of the preferential rights of any outstanding stock,” ignores, in my opinion, the language of the statute and defeats its purpose.

Hubbs, J.

(dissenting). 'The right which the appellants seek to enforce is purely a statutory right under subdivision 12 of section 38 of the Stock Corporation Law, which provides that “ if the certificate alters the preferential rights of any outstanding shares, any holder of such shares not voting in favor of such alteration ” may, upon objecting and demanding payment for his shares, have them appraised. It is, therefore, only when preferential rights are altered that the holders of stock not consenting may lawfully demand an appraisal of their stock. The preferential rights of petitioners are only such as are given in the certificate of incorporation, that is, that their stock shall be paid at par upon the distribution of the assets of the corporation before anything shall be paid on the common stock.

Petitioners, by instituting this proceeding, necessarily concede the legality of the amendments to the certificate and of the procedure by which it was amended. They are in the position of asserting that the certificate has been legally amended and because of such amendment the preferential rights of this stock to share in the assets of the corporation upon distribution have been altered, and that, therefore, they are entitled to an appraisal of such stock. The new stock which they are to receive under the amended certificate gives them the same right to share in the assets of the corporation which their old stock gave.

In Matter of Dresser (247 N. Y. 553) it was held that the amendment of a certificate of incorporation, which provided for a new issue of preferred stock that should be ahead of and superior to the old issue of preferred stock, did not have the effect of altering the preferential rights of the old stock to be first paid out of the assets of he corporation upon distribution. I can see no difference in principal between creating a new issue of preferred stock which shall be ahead of an outstanding issue, and consolidating an outstanding issue with a new issue, making them equal in preferential rights and preserving the preferential rights of the old stock the same as they existed before the new issue. In fact, it seems to me that the Dresser case went farther than it is necessary to go in this case, in holding that petitioners have not lost any preferential rights given them through the ownership of the stock in question. The fact that the old certificates are to be taken up and canceled and new certificates issued in their place called “ cumulative 7% preferred callable at 110 ” does not, it seems to me, alter their preferential rights to be first paid par for their stock upon dissolution of the corporation, because the new certificates preserve that right. They had no preferential right to have their certificates of stock remain unaltered or to be non-callable. Such right, if it existed, was a common right which all stockholders had. The exercise of the right to change the rate of dividend on the stock did not alter any preferential right possessed by petitioners. Their stock was not a preferred stock having a fixed rate of dividend. It was only entitled to receive such dividends as were voted by the board of directors.

I think that the Appellate Division reached the right conclusion and I favor affirmance.

Pound and Crane, JJ., concur with O’Brien, J.; Lehman, J., concurs in opinion with which Pound, Crane and O’Brien, JJ., concur; Hubbs, J., dissents in opinion with which Cardozo, Ch. J., and Kellogg, J., concur.

Order reversed, etc.


source: Caselaw Access Project

author: O’Brien, J.

license: Public Domain

text:
    Karl Nathan, Appellant, v. The Equitable Trust Company of New York, Defendant, and Sidney S. Prince et al., Copartners under the Firm Name of Asiel & Co., Respondents.

      (Submitted January 9, 1929;
    decided February 13, 1929.)

      Borris M. Komar and David L. Sprung for appellant.
    The prevailing opinion below erred in failing to recognize the universal rule that the disability created by war always interrupted the running of the Statute of Limitations. (Bailey v. Jackson, 16 Johns. 210; Perkins v. Rogers, 35 Ind. 157; Wall v. Robson, 2 Nott & McC. [S. C.] 498; Platz v. International Smelting Co., 61 Utah, 342; Hanger v. Abbott, 73 U. S. 532; Farenholtz v. Meinshausen, 181 App. Div. 474; Jackson v. DeLancey, 11 Johns. 365; Bonneau v. Dinsmore, 23 How. Pr. 397; Lightfoot v. Davis, 198 N. Y. 261; House v. Carr, 185 N. Y. 453; Hulbert v. Clark, 128 N. Y. 295; Brown v. Hiatts, 82 U. S. 177.)

      Jonas J. Shapiro and Edward S. Greenbaum for respondents.
    Section 28 of the Civil Practice Act limits section 27 and the existence of a state of war did not toll the Statute of Limitations. (Hamilton v. Royal Ins. Co., 156 N. Y. 327; Matter of Steinway, 159 N. Y. 250; Doe ex dem. Durore v. Jones, 4 D. & E. [T. R.] 300; Scallon v. Manhattan Ry. Co., 185 N. Y. 359; Hall v. Wybourn, 2 Salk. 420; Prideaux v. Webber, 1 Lev. 31; Beckford v. Wade, 17 Ves. Jr. 87; Lee v. Rogers, 1 Lev. Ill; Aubry v. Fortescue, 10 Mod. 205.)

      James M. Down, Blaine F. Sturgis arid Joseph S. Catalano for Hartwell Cabell, amicus curiæ.

    Section 28 of the Civil Practice Act in no way modifies or limits section 27 thereof. (Hanger v. Abbott, 6 Wall. 532; Colorado Fuel Co. v. Industrial Comm., 73 Col. 579; Robson v. Wall, 10 Am. Dec. 623; Wall v. Robson, 2 Nott & McC. [S. C.] 498; United States v. Wiley, 11 Wall. 508; Braun v. Sauerwein, 77 U. S. 218; Amy v. Watertown, 130 U. S. 320; Semmes v. Hartford Ins. Co., 13 Wall. 158; Farenholtz v. Meinshausen, 181 App. Div. 474; Matter of Steinway, 159 N. Y. 250.)

      William C. Cannon and David E. Hudson for Guaranty Trust Company of New York, amicus curiæ.

    The operation of'the Statute of Limitations was not suspended by the existence of a state of war between the United States and Germany. (Matter of Steinway, 159 N. Y. 250; Doe v. Jones, 4 D. & E. [T. R.] 300; Scallon v. Manhattan Ry. Co., 185 N. Y. 359; Aachen & Munich Fire Ins. Co. v. Guaranty Trust Co., 24 Fed. Rep. [2d] 463.)
   O’Brien, J.

Plaintiff’s assignors were German subjects residing at Berlin and on March 17 and March 19, 1917, two causes of action, governed by a six-year Statute of Limitations, accrued in their favor against defendants. On April 7, 1917, the existence of a state of war between the United States and the Imperial German Government was declared by Congress and that status continued until June 2, 1921, when peace was formally proclaimed. The statutory time within which suit could have been brought did not expire until nearly two years after the close of the war, but this action was not begun until January 7, 1927. Does section 27 of the Civil Practice Act now allow the enforcement of a remedy, or is that section modified by section 28? The two sections are cast in these words: “ § 27. Effect of war on right of alien. Where a person is disabled to sue in the courts of the State by reason of either party being an alien subject or citizen of a country at war with the United States, the time of the continuance of the disability is not a part of the time limited for the commencement of the action.

§ 28. Disability must exist when right accrues. A person cannot avail himself of a disability unless it existed when his right of action or of entry accrued.”

No question is before us except one of legislative intent. No other substantial issue was argued in the courts below or decided by them. Constitutional questions cannot for the first time be raised in this court. (Dodge v. Cornelius, 168 N. Y. 242.) Whether sections 27 and 28 could have valid relation to a suitor who might have been deprived of reasonable time within which to press his remedy is not here. On the question of intent, many decisions cited by appellant have been examined. None appears to constitute controlling precedent. Hanger v. Abbott (6 Wall. [U. S.] 532) was decided on grounds of public and international law and without reference to any statute similar to section 27 of our Civil Practice Act. The Protector (9 Wall. [U. S.] 687, 690) and Levy v. Stewart (11 Wall. [U. S.] 244) reiterated the common-law rule which had been applied in Hanger v. Abbott. The Supreme Court in Bauserman v. Blunt (147 U. S. 647, 654) interpreted its decisions in those earlier cases not as involving the construction of the terms of a Statute of Limitations but as implying an exception by reason of the effect of a state of war, and it described those decisions as dealing with that question as one of public and international law. Here we are concerned with extracting intent from the express terms of our statute. Cohen v. N. Y. Mutual Life Ins. Co. (50 N. Y. 610) and Sands v. N. Y. Life Ins. Co. (50 N. Y. 626) are not in point. Decided in 1872 and dealing with events which occurred during the Civil War no mention is made of any statute similar to the present sections 27 and 28. The provisions of these sections would not, however, prevent enforcement of rights by either of those plaintiffs, one of whom resided in Georgia and the other in Alabama, because no cause of action had accrued in behalf of either until after the Southern States had become belligerents. So the intent of sections 27 and 28 must be inferred from their language read in the light of their historical development.

These enactments read by themselves, without reference to their history, warrant only one deduction. On their face they cannot justify different inferences. They compel the conclusion that the pendency of a state of war constitutes a disability to suitors who are citizens or subjects of the hostile powers and that advantage of such disability is not available to either party unless it existed when the cause of action arose. The power of unambiguous language is exhausted in the phrasing of these two sections. Juxtaposition is not necessarily controlling, but location, considered in relation to the use of the words disabled ” and disability ” in both sections, supplies an additionally clear guide to interpretation. Unless plain language be disregarded, section 28 must be held to apply to every disability defined in the Civil Practice Act and necessarily includes the one resulting from a state of war as plainly as those arising from infancy, insanity or imprisonment as provided by sections 43 and 60. Appellants reject this interpretation and contend that, historically, the use of the word disability ” would indicate that such use was made rather for the sake of rhetoric than for statutory intention or purpose and that a disability caused by the existence of a state of war must be treated in a manner similar to a suspended right to sue caused by an injunction as provided in section 24 of the Civil Practice Act. This contention, according to our view, is refuted by the circumstances under which sections 27 and 28 were introduced into statutory form.

Before the adoption of the Revised Statutes, certain principles had been announced in three cases which are cited by the parties to this appeal. In Clarke v. Morey (10 Johns. 69, 74), decided in the year 1813 while war existed, the actual point is no broader than a judgment to the effect that an alien enemy residing in this State whose action was begun before the declaration of war was not foreclosed by rules of the common law from maintaining his action during the war. Chief Justice Kent expressly limited the scope of the decision when he stated: The case before us does not raise the question, nor do we give any opinion in favor of the right of action by aliens who resided in the enemy’s country when war was declared, and when the action was commenced. The cases appear to be against such right. But as to aliens who were residents with us when the war broke out, or who have since come to reside here, by a presumed permission, the authorities seem to be decisive.” In Jackson v. Pierce (10 Johns. 414, 417), also decided in 1813, the court deducted the eight years’ duration of the Revolutionary War in estimating the time within which payment of a mortgage would be presumed, but it observed that “ the 20 years is only a circumstance on which to found the presumption, and is not, in itself, a legal bar.” In Bailey v. Jackson (16 Johns. 210), decided in 1819, the litigation arose out of a lease of real estate, situated in England. When the- lease was made in 1792 both parties resided in England and, for all the record shows, both were British subjects. Defendant removed to this State in 1794 or 1795. The issue was whether by the lapse of time a presumption of payment of rent arose. The court deducted the duration of the War of 1812 for the reason as stated by Chief Justice Spencer that “ the plaintiff was disabled to sue during the war. This is not like a statute bar, which, having once begun to run, will continue, notwithstanding a subsequent disability occurs.” At the time of the rendition of these decisions, no statute existed in this State respecting a right as between citizens and alien enemies to enforce remedies in regard to causes of action which may* have accrued either prior or subsequent to a state of war.

The first statutory enactment on the subject is 1 R. S. sec. 32, art. 4, chap. 4, title 2, part 3 (1st ed. page 298) which provides: ‘‘ § 32. Whenever any person shall be disabled to prosecute in the courts of this State, by reason of his being an alien subject or citizen, of any country at war with the United States, the time of the continuance of such war, shall not have been deemed any part of the respective periods limited in the first and second Articles of this Title, for the making of any entry, or the commencement of any action.” The first article of this title creates limitations of time in respect to actions relating to real property. The second article of the same title deals with limitations respecting actions for the recovery of any debt or' demand or for damages only. The third article of this title, relating to time limitations governing actions for penalties and forfeitures which might be maintained by an individual against another individual, is not included within the protection of section 32. The codifiers of the Revised Statutes referred to Jackson v. Pierce and Bailey v. Jackson in their report made to the Legislature January 2, 1828 (Vol. 4, ch. 4, tit. 2, art. 4, § 35, footnote) in respect to chapter 4, title 2, article 4, and stated: “ As an alien enemy cannot sue during war, it seems unjust to deprive him of all remedy, for not doing what our laws forbid him to do. In 10 J. R. 417, and 16 do 210, the supreme court considered war, in such a case, sufficient to repel the legal presumption of payment. The reason seems equally applicable to the statute of limitations.” The common-law disability which Chief Justice Spencer described in Bailey v. Jackson was thus converted into a statutory disability. The length of time which at common law was taken into consideration in arriving at a presumption is not governed by rules controlling a Statute of Limitations. Wlien the statute once begins to run, it continues to run, notwithstanding any subsequent disability. (Peck v. Randall, 1 Johns. 165, 176; Doe v. Jones, 4 T. R. 300, 310.) This rule is expressed in section 41 of the same chapter of the Revised Statutes in which section 32 appears. The rigor of the ancient law which sanctioned confiscation of an alien enemy’s property was intended to be relaxed by sections 32 and 41 to the extent of allowing such an alien whose cause of action arose during the war to sue in our courts after the cessation of hostilities. The use of the word disabled ” in section 32 cannot be considered as rhetorical. Its. sense is statutory and it must be viewed as descriptive of a condition of inability to sue. The whole section is clearly indicative of an intention to list a state of war in the category with insanity, imprisonment and infancy. This idea is more plainly displayed when consideration is directed to the effect of section 41 which is included within the same title of the Revised Statutes as section 32. This later section provides: “ No person shall avail himself of any disability enumerated in this Title unless such disability existed at the time his right of action, or of entry, accrued.” When the Revised Statutes coupled section 41 with section 32, the effect was in many instances to prevent the subtraction of the continuance of the war from the time of limitation. If the cause of action accrues during belligerency, the later duration of the war is to be deducted. When the right to sue existed before the war, no more extensive privilege is accorded an alien enemy than an infant, a prisoner or an insane person. Sections 27 and 28 of our Civil Practice Act are lineal descendants of sections 32 and 41 of the Revised Statutes and their effect is identical. The legislative intent in both instances seems clear.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


author: Per Curiam.

text:
    Louis A. Cuvillier, Appellant, v. The State of New York, Respondent.
    (Argued January 9, 1929;
    decided February 13, 1929.)

      John D. Lindsay for appellant.
    A wrong, both legal and moral, to claimant’s injury was committed by the officers who occasioned his detention and restraint under the charge preferred against him by the police commissioner. (Civ. Prac. Act, §§ 1230 et seq.; People ex rel. Tweed v. Liscomb, 60 N. Y. 559; Roberts v. State, 160 N. Y. 217; McCarg v. Burr, 186 N. Y. 467; Kilburn v. Thompson, 103 U. S. 168; Rex v. Secretary of State, L. R. [1923] 2 K. B. 361; Secretary of State v. O’Brien, L. R. [1923] A. C. 603.) The enabling act is not violative of the constitutional prohibition against the gift or loan of the money of the State in aid of a private undertaking. (Lewis v. State, 96 N. Y. 71; Splittorf v. State, 108 N. Y. 205; Matter of Borup, 182 N. Y. 222 ; Wheeler v. State, 190 N. Y. 406; Munro v. State, 223 N. Y. 228; Smith v. State, 227 N. Y. 405; Babcock v. State, 190 App. Div. 147; 231 N. Y. 560; Sherlock v. State, 198 App. Div. 494; 235 N. Y. 515; Williamsburgh Savings Bank v. State, 243 N. Y. 231; Farrington v. State, 248 N. Y. 112.)

      Hamilton Ward, Attorney-General (Frederick D. Colson of counsel), for respondent.
    The claim herein does not constitute either a legal claim or a moral obligation against the State of New York. (Williamsburgh Savings Bank v. State of New York, 243 N. Y. 231; People v. Westchester County Nat. Bank, 231 N. Y. 465; Matter of Chapman v. City of New York, 168 N. Y. 80; Matter of Jensen, 28 Misc. Rep. 379; 44 App. Div. 509; Schieffelin v. Henry, 123 Misc. Rep. 792; 215 App. Div. 706; 242 N. Y. 581.) The enabling act under which the claim herein is filed, namely, chapter 711 of the Laws of 1927, is unconstitutional. (Lehigh Valley R. R. Co. v. Canal Board, 204 N. Y. 471; Babcock v. State of New York, 190 App. Div. 147; 231 N. Y. 560;. People v. Westchester County Nat. Bank, 231 N. Y. 465.)
   Per Curiam.

By chapter 711 of the Laws of 1927, jurisdiction is conferred upon the Court of Claims to hear and determine the claim of claimant for expenses incurred in defending himself upon a charge of criminal libel preferred against him before a magistrate of the county of New York. The Court of Claims dismissed the claim upon the ground that the statute is unconstitutional, as it violates article 8, section 9, of the Constitution of the State which prohibits the use of State money for a private undertaking. (Cuvillier v. State, 132 Misc. Rep. 182.)

The judgment was affirmed by the Appellate Division, one justice dissenting. (Cuvillier v. State, 225 App. Div. 707.)

Claimant was charged before the magistrate with publishing a criminal libel in New York county. Claimant sent a telegram from Albany to City Magistrate Corrigan at New York city, which, upon its face, is libelous. At the end of the telegram appears the words: You can publish this telegram if you desire.” City Magistrate Corrigan did publish the telegram. An information was filed charging the claimant and Magistrate Corrigan with criminal libel. Upon the hearing before a judge of the Court of General Sessions sitting as a magistrate, the claimant was held to await the action of the grand jury. He thereafter filed a petition for a writ of habeas corpus. Upon the hearing on the return of the writ of habeas corpus, claimant was discharged upon the ground that the libel was published in Albany county and that, therefore, the magistrate in New York county did not have jurisdiction of the crime charged. The information charged that the claimant published the libel in New York county. That the claimant sent the telegram from Albany to New York and that it was received and published by Magistrate Corrigan was not questioned at the hearing before the magistrate, and is not now questioned.

In this State criminal libel is a misdemeanor. (Penal Law, sec. 1341.) Its publication is deemed malicious. (Id. sec. 1342.) Section 2 of the Penal Law provides: Principal. A person concerned in the commission of a crime, whether he directly commits the act constituting the offense or aids and abets in its commission, and whether present or absent, and a person who directly or indirectly counsels, commands, induces or procures another to commit a crime, is a principal.’ ”

As it appeared upon the hearing that Magistrate Corrigan published .the libel in New York county, and that claimant aided and abetted in its publication, he was a principal in the commission of the crime in New York county, within the meaning of said section 2 of the Penal Law. The magistrate had jurisdiction of the crime charged and of the person of the claimant; he was properly held to await the action of the grand jury and his discharge upon a writ of habeas corpus was without justification in law.

Under such circumstances there was no legal, equitable or moral obligation on the part of the State to reimburse him for the expenses which he incurred.

It has been held that where there is a moral obligation on the part of the State to reimburse one who has suffered loss, an enabling act permitting the Court of Claims to pass upon such a claim is constitutional. (Farrington v. State, 248 N. Y. 112; Williamsburgh Savings Bank v. State, 243 N. Y. 231; Munro v. State, 223 N. Y. 208.)

It is stated in the opinions in those and other cases that, where there is no legal, equitable or moral obligation upon the part of the State, an enabling act which permits a claimant to recover from the State is unconstitutional and void.

Under the facts in this case, the enabling act is unconstitutional, because there was no legal, equitable or moral obligation on the part of the State to reimburse claimant.

We do not find it necessary to determine whether a moral obligation on the part of the State would have been created if, as a matter of law, the magistrate in New York county had acted without jurisdiction.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


text:
    Nathan Cohen, Respondent, v. A. F. A. Realty Corporation, Appellant, and Broadway Magnolia Realty Corporation, Respondent.
    (Argued January 10, 1929;
    decided February 13, 1929.)

      Henry Waldman and Edward B. Thompson for appellant.
    The vendor cannot dispose of the property and at the same time retain the down payment. (Bloomgarden v. Hoffman, 116 App. Div. 719.)

      George Gordon Battle and Pearson E. Neaman for respondent.
   Per Curiam.

In an action by the vendor for the specific performance of a contract for the sale of real estate, the Trial Term dismissed plaintiff's complaint and granted judgment on the counterclaim of defendant A. F. A. Realty Corporation for the return of the down payments on the purchase price. The Appellate Division reversed, ordered judgment for specific performance and dismissed the defendant’s counterclaim.

An appeal was then taken to this court. After the entry of judgment on the order of the Appellate Division, the plaintiff-respondent conveyed the premises in question to a third party. He so states in his brief and the appellant consents that the statement be received as a part of the record. He also seeks on this appeal to abandon his claim for specific performance of the contract, asks that the action therefor be discontinued without costs and the judgment, so far as it affects appellant’s counterclaim, be affirmed.

The question is whether the plaintiff, having put it out of his power to carry out the judgment, may retain the money paid on account of the purchase. If these facts had appeared on the trial, the complaint would have been dismissed and defendant A. F. A. Realty Corporation would have had judgment on its counterclaim. Plaintiff, instead of curing his title of technical legal defaults, would have made it worse. Inability to perform on his part would have defeated recovery. The same rule should apply when he conveys after obtaining judgment. The plaintiff should not be permitted to convey the land and still retain the payment of the purchase money. When the action is to enforce a contract which the vendor has put it out of his power to perform, the vendee cannot be subjected to damages for not receiving that which the vendor could not convey. (Bigler v. Morgan, 77 N. Y. 312, 319. Cf. Bloomgarden v. Hoffmann, 116 App. Div. 719.)

As nothing remains of plaintiff’s cause of action, it is neither necessary nor proper to pass upon the merits of the original controversy or to grant a new trial. This court should render final judgment upon, the right of the parties according to law. (N. Y. State Cons. art. VI, § 8.)

The judgment of the Appellate Division should be reversed and judgment ordered against plaintiff in favor of defendant A. F. A. Realty Corporation for the sum of eight thousand dollars ($8,000), with interest thereon from August 5, 1925, with costs in this court.

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

Judgment accordingly.


author: Cardozo, Ch. J.

text:
    Peter Bleimeyer, as Administrator of the Estate of Theresa Bleimeyer, Deceased, Appellant and Respondent, v. Public Service Mutual Casualty Insurance Corporation, Respondent and Appellant.

      (Argued January 9, 1929;
    decided February 13, 1929.)

      Alton W. Teak, for plaintiff, appellant and respondent.
    Plaintiff is entitled to recover at this time a judgment for a portion of the principal sum of indemnity covered by the policy of insurance. (Schroeder v. Columbia Casualty Co., 126 Misc. Rep. 205; Schoenfeld v. New Jersey Fidelity & Plate Glass Ins. Co., 203 App. Div. 796; Roth v. National Automobile Casualty Co., 202 App. Div. 667; Juskiewicz v. New Jersey F. & P. G. Ins. Co., 210 App. Div. 675; Buskey & Sons v. American Ins. Co., 237 N. Y. 24; Cary Brick Co. v. Fidelity & Cas. Co., 162 App. Div. 873; 220 N. Y. 744; Foryciarz v. Prudential Co., 95 Misc. Rep. 306; 177 App. Div. 952; Columbia Trust Co. v. Norske Lloyd Co., 100 Misc. Rep. 550; Hammill v. Order of United Comm. Travelers, 178 App. Div. 338; Travellers Ins. Co. v. Pomerantz, 124 Misc. Rep. 250.) Plaintiff is entitled to judgment against the defendant for interest from July 22, 1926, upon his share of the $5,000 referred to in the policy of insurance.
      (Cleghorn v. Ocean Accident Co., 216 App. Div. 342; 244 N. Y. 166.) Plaintiff was entitled to the judgment for costs. (Cleghorn v. Ocean Accident Ins. Co., 216 App. Div. 342; 244 N. Y. 166; Long Island Coach Co. v. Hartford A. & I. Co., 223 App. Div. 331.)

      Sidney R. Lash for defendant, respondent and appellant.
   Cardozo, Ch. J.

Plaintiff, an administrator, recovered a judgment of upwards of ten thousand dollars against one Lastro, the proprietor of a motor omnibus, for the negligent killing of a passenger. Many other persons were killed or injured at the same time.

Lastro was insolvent, and an execution against his property was returned unsatisfied. He had taken out insurance in accordance with the Highway Law (Cons. Laws, ch. 25), § 282-b, which provides in effect that proprietors of motor vehicles for hire, with exceptions not now material, shall file a bond in the sum of two thousand five hundred dollars, conditioned for the payment of any judgment recovered against such person, firm, association or corporation for death or for injury to persons or property caused in the operation, maintenance, use or the defective construction of such motor vehicle, provided that such bond or policy may limit the liability of the surety or insurer on any one judgment to twenty-five hundred dollars for bodily injuries or death, and five hundred dollars for damage to or destruction of property, and on all judgments recovered upon claims arising out of the same transaction or transactions connected with the same subject of action to five thousand dollars for bodily injuries or death and one thousand dollars for damages to or destruction of property, to be apportioned ratably among the judgment creditors according to the amount of their respective judgments.” These limits of liability were adopted in the policy with certain additional obligations in respect of costs and interest.

On the return of the execution against Lastro, plaintiff brought this action against the defendant, the insurer. He stated in his complaint that other claims had been made for damages sustained by others as an outcome of the same disaster, but that none of these had been reduced to judgment, though suits were pending undetermined. He asked that the maximum payable under the statutory bond be paid to him for his own use, and that under other clauses of the policy he be paid in addition the costs of the Lastro action, $107.40, as well as interest included in the judgment and afterwards accruing. The defendant answered in effect that by reason of the insolvency of Lastro, the judgment debtor, the money payable under the bond, $5,000, was a fund for the ratable protection of the victims of the casualty, and that it was ready to pay the money into court, to abide the recovery of judgments by the claimants and the court’s direction in the premises. Upon a motion for judgment on the pleadings, there was an order, unanimously affirmed at the Appellate Division, that the plaintiff’s action was premature in so far as it sought relief upon the statutory bond, but that the costs of the Lastro action, $107.40, might be presently recovered. Both parties appeal here, the plaintiff from the denial of the principal relief, the defendant from the award of costs.

We think the proper form of remedy, where several persons have been killed or injured as the result of a single casualty and the wrongdoer is insolvent, is an equitable action by a judgment creditor suing in his own behalf and in behalf of any others similarly situated, to administer the proceeds of the bond as a fund created by the statute for ratable protection (Guffanti v. Nat. Surety Co., 196 N. Y. 452, 456, 457; Bottlers Seal Co. v. Rainey, 243 N. Y. 333; Mann v. Pentz, 3 N. Y. 415, 423). The statute is explicit to the effect that the moneys due under the bond are “to be apportioned ratably among the judgment creditors according to the amount of their respective judgments.” This scheme will be frustrated if a single claimant may gain a preference over others and appropriate to his own use something more than his proportionate share of the general security (Guffanti v. Nat. Surety Co., supra). The appropriate remedy in such conditions is an action in equity for proportionate division (Mann v. Pentz, supra). We do not hold with the courts below that a claimant must postpone his action on the bond until the rights of other claimants have been barred by limitation. This might result in postponement for twenty-one years or longer, which would make the remedy illusory. The action is not premature, but its form must be adapted to the needs of the occasion. In an action in equity, the court may direct an interlocutory judgment requiring other judgment creditors to prove their claims within a stated time if they wish to share in the security (Brinckerhoff v. Bostwick, 99 N. Y. 185, 194; Hirshfeld v. Fitzgerald, 157 N. Y. 166). If claims are in litigation, but have not yet been reduced to judgment, there may be a reasonable allowance of time, six months, or a year, or whatever other period may be fair in the light of all the circumstances, within which claims may be perfected. When the allotted time shall have elapsed, final judgment may be rendered for the division of the fund among the judgment creditors entitled.

Nothing to the contrary was held in Long Island Coach Co. v. Hartford Accident & Indemnity Co. (223 App. Div. 331; affd., 248 N. Y. 629). What was before us there was not an action by a creditor, but an action by a solvent holder of a policy, who had paid a claim for damages, and was seeking reimbursement from the insurer in accordance with his contract. There can be no basis for a resort to a remedy in equity until the insolvency of the insured brings the fund into being as one presently available for the security of creditors.

The plaintiff, suing at law for himself and no one else, has misconceived the remedy, and the misconception would sustain a dismissal of the action, in so far as it is based upon the bond exacted by the statute, if the defect were not supplied by the admissions of the answer.. The defendant professes its readiness to pay the money into court, and prays for a determination of the rights and interests of claimants. We think the . action should be retained for the entry of an interlocutory judgment upon the admissions of the counterclaim. The fund to be deposited should include interest from the date of service of the counterclaim at the statutory rate (Tuzseo v. Am. Bonding Co., 226 N. Y. 171, 179). The defendant will continue liable, beyond the sum so deposited, for interest previously accruing upon the share ultimately adjudged to be payable to the plaintiff. This liability follows, not from any general rule in respect of interest (Tuzzeo v. Am. Bonding Co., supra), but from special provisions of this policy enlarging to that extent the measure of recovery. The share on which interest is to be computed being incapable of ascertainment in advance of the final judgment, recovery of interest (except as above provided) must be correspondingly postponed.

What has been written has had reference to the appeal prosecuted by the plaintiff. With reference to the defendant’s appeal a statement of our conclusion will suffice without minute analysis. The language of the policy is awkward and obscure. . We read it against the insurer when choice is nicely balanced. So read, we think it charges the defendant with a liability for the costs of the primary litigation in excess of the liability exacted by the statute. Since the liability thus added is not shared by other creditors, there is no occasion for its apportionment. Payment to that extent may be presently made, and made directly to the plaintiff, the holder of the judgment.

Upon the appeal by the plaintiff, the order of the Appellate Division and the judgment of the Special Term should be reversed, without costs, and the cause remitted to the Special Term for the entry of an interlocutory judgment upon the counterclaim in accordance with this opinion, and the questions certified are answered “ No.”

Upon the appeal by the defendant, the order should be affirmed, with costs, and the question certified answered “ Yes.”

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

Ordered accordingly.


author: Hubbs, J.

text:
    William P. Rae Company, Appellant, v. Helen A. Courtney et al., Respondents, and William M. Greve, Appellant.
    (Argued January 11, 1929;
    decided February 13, 1929.)

      Alfred T. Davison and Addison B. Scoville for plaintiff-appellant.
    There should be deducted from the market value of the property an amount representing the burden of the unexpired term of the lease upon the fee. (Sweet v. Henry, 175 N. Y. 268.)

      Lynn G. Goodnough for defendant-appellant.

      Peter P. Smith and Joseph J. Reiher for respondents.
    The lease is not a burden on the fee and, therefore, the purchase price to be paid to the defendants-respondents should be fixed free and clear of any consideration thereof. (Lewis v. Bollinger, 115 Misc. Rep. 221.) When the option to purchase was exercised in the case at bar by an election to pinchase, the relation of landlord and tenant ceased and that of vendor and purchaser in possession arose, since the leasehold estate became merged in the fee, having been extinguished by the superior title. (Bostwick v. Frankfield, 74 N. Y. 207; Asche v. Asche, 113 N. Y. 232.)
   Hubbs, J.

The plaintiff is the owner by mesne assignments of a lease and an option to purchase contained therein. The defendants, excepting William M. Greve, are the owners of the real property leased. He was the original lessee, and his interest in this action is the same as that of the plaintiff.

The lease was for twenty-one years at an annual rental of two thousand dollars, the lessee to pay the taxes and fire insurance premiums. The lease also provided that the lessee should alter and improve the building on the premises, in accordance with plans and specifications to be approved by the landlords, and pay the cost thereof which should not be less than ten thousand dollars. The fourteenth paragraph of the lease reads:

At any time subsequent to five years from the date hereof, the Tenant or his assigns, may at his option purchase said premises for a consideration to be agreed upon with the Landlords. Should the parties hereto, in such a case, fail to agree upon such consideration, the Landlords and Tenants shall each name one arbiter who shall in turn choose one umpire; the three thus named shall act with promptness; the decision of any two as to a proper consideration for the purchase of said premises shall be binding upon all the parties hereto.”

The plaintiff and its assignor made alterations and improvements in the building in accordance with plans and specifications therefor which were approved by the landlords, and paid the cost thereof to the sum of $41,348.71, which was the reasonable value thereof.

Thereafter the plaintiff duly accepted the option to purchase contained in the lease. The parties were unable to agree upon a proper consideration for the purchase of said premises.” An attempt was made to arbitrate the question of a proper consideration ” as provided in the lease. The attempted arbitration failed and the plaintiff commenced this action for specific performance, and asked that the court fix the proper consideration ” to be paid by the plaintiff.

The trial court found that the market value of the premises was $100,000; that the burden of the lease which had sixteen years to run was $30,000, and that the proper consideration ” to be paid by the plaintiff for the premises was $70,000, and judgment was entered accordingly. The Appellate Division found that the proper consideration ” to be paid by plaintiff was $100,000, the market value of the premises without any reduction on account of the burden of the lease, and modified the judgment to that extent. Whether the modification was justified is the only question before this court.

Whether a lease is a burden and an encumbrance of such a nature as to diminish the value of the fee depends upon whether the rent reserved is more or less than the annual value of the premises. It appears from the testimony of real estate experts in this case that the rent reserved in the lease, $2,000 a year, was $4,000 a year less than a fair return on the market value of the property, which was $100,000, and that the burden and incumbrance of the lease was, therefore, more than $30,000, as the lease had sixteen years to run. The expenditure of $41,348.71 by the plaintiff and its assignor on improvements had increased the rental value of the premises. The plaintiff had a valuable interest in the premises which it could have sold and transferred. If the lessors had desired to sell the premises subject to the lease, they would have been obliged to deduct from the market value of the property the amount of the encumbrance of the lease. (Clarkson v. Skidmore, 46 N. Y. 297; Larkin v. Misland, 100 N. Y. 212.)

The acceptance of the option by the plaintiff and its attempt to have the “ proper consideration fixed by agreement or arbitration, did not merge the leasehold estate in the fee.

Whether in equity there is a merger of a lesser estate in a greater, or an equitable in a legal estate, is largely a question of the intention of the parties to be gathered to a great extent from the situation of the parties and the surrounding circumstances. Equity looks at the real intent of the parties and not at the mere external form. (Sheldon v. Edwards, 35 N. Y. 279; Bostwick v. Frankfield, 74 N. Y. 207.)

In the absence of an expressed intent, equity will look for and ascertain it from all the circumstances surrounding the parties and the transaction. If it appears to be against the interest of the party acquiring both estates to have a merger take place, then equity will presume that it was his intention that there should not be a merger. (Smith v. Roberts, 91 N. Y. 470; Sweet v. Henry, 175 N. Y. 268.)

To permit a merger of the plaintiff’s leasehold estate would result in a loss to it of $30,000, the value of the unexpired term of the lease of sixteen years. ■ To permit a merger under such circumstances would be contrary to justice and equity. It would require the plaintiff to lose the value of its lease and pay as much for the premises as a third party would have to pay. Its option would be worthless and the improvements which it had made in reliance thereon would be lost.

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

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

Judgment reversed, etc.


author: Crane, J. Pound, J.

text:
    In the Matter of Buffalo and Erie Railway Company, Respondent. Amalgamated Association of Street and Electric Railway Employees of America, Division No. 592 of Fredonia, and Division No. 624 of Buffalo, Appellant.
    (Submitted January 11, 1929;
    decided February 13, 1929.)

      Bernard Swartz for appellant.
    The controversy between the parties is not the subject of statutory arbitration. (Williams v. Hamilton Fire Ins. Co., 118 Misc. Rep. 799; Matter of Webster v. Van Allen, 217 App. Div. 219; Berizzi v. Krausz, 239 N. Y. 315; Matter of Fletcher, 237 N. Y. 440; Ryan v. Daugherty, 30 Cal. 218; Richards v. Holt, 61 Iowa, 529; Anderson v. Beebe, 22 Kans. 768; Osborn v. Fall River, 140 Mass. 508; Torey v. Munroe, 119 Mass. 490.)

      Fritz Fernon for respondent.
    The provisions of section 4 of the Arbitration Law apply to this controversy, and that section provides for the appointment of a third arbitrator by the court or a judge when for any reason there is a lapse in the naming of such third arbitrator. (Matter of Amalgamated Association of Railway Employees, 196 App. Div. 206; Matter of Webster v. Van Allen, 207 App. Div. 219.)
   Crane, J.

The Special Term of the Supreme Court for the county of Erie on the 29th day of June, 1927, designated an arbitrator or umpire, pursuant to section 4 of the Arbitration Law (Cons. Laws, ch. 72), under an agreement or contract between the Buffalo and Erie Railway Company and the Amalgamated Association of Street and Electric Railway Employees of America, Division No. 592 of Fredonia, N. Y., and Division No. 624 of Buffalo, N. Y. The Appellate Division has unanimously affirmed the order and has certified that in its opinion a question of law is involved which ought to be reviewed by this court.

The question, briefly stated, is whether the matter in controversy comes within the provisions of the Arbitration Law of this State.

The agreement made between the railway and the Amalgamated Association in May of 1926, provided for the hours of work of the men, and for their rate, of wages and many other details which are usually contained in this class of agreement between a railroad and its operatives. Article XII and article XVI are the only two provisions necessary to state here. Article XVI I will quote first:

This agreement and the provisions thereof shall continue in force and be binding upon the respective parties hereunto until the first day of May, 1927, and from year to year thereafter unless changed by parties hereunto. Either of the parties hereunto desiring a change in any section or sections of this Agreement, shall notify the other party in writing of the desired change, thirty days prior to the end of each year, which is the first day of April. After such notice, the agreement shall be opened up and the change or changes shall be considered. Upon the failure to reach a mutual agreement upon any changes desired by the parties hereunto, the same shall be arbitrated as provided in this agreement, and this agreement shall be modified to conform to the decision of the arbitration.”

The provision relating to arbitration is article XII.

“ All matters that cannot be adjusted between the Company and the Association shall be submitted to a temporary Board of Arbitration. Either party to this agreement shall, upon being notified in writing by the other party that arbitration is desired, name its arbitrator, within forty-eight, hours from the date of receiving such notice. The Board of Arbitration shall be composed of three persons, the Company to select one, the Association to select one, and the two thus selected shall within-five days from the date of their appointment, select a third arbitrator. At the Hearing before the Board of Arbitration, either side may be represented by anyone whom they may desire, and after all evidence and arguments have been heard by the Board, they shall, within fifteen days, formulate their award in writing and submit the same to both parties of this agreement. The findings of the majority of the Board shall be final and binding upon both parties of this agreement.”

Prior to May 1, 1927, the railroad found it necessary in view of reduction in the volume of business carried over its line, compared with the volume of business carried by it in preceding years, to make a ten per cent reduction in the compensation of substantially all its employees of whatever kind and character, and announced such proposed reduction in wages as effective on May 1, 1927. The railway desired a change in the contract. The Amalgamated Association objected to said reduction and demanded arbitration. To this the railroad company acceded, and arbitrators were appointed by the respective parties, pursuant to article XII of the agreement. The two arbitrators, however, were unable to agree upon a third. Thereupon, application was made to the Special Term by the railroad company for the appointment of the third arbitrator or umpire, pursuant to section 4 of the Arbitration Law.

Attention is immediately directed to the fact that no dispute has arisen between the parties to the contract over the terms or provisions of the contract, or any difficulty arising thereunder. The men have been paid the wages agreed upon, and they have worked for and accepted those wages. The railroad company desires to make a new contract. It desires to reduce wages ten per cent and seeks arbitration under the Arbitration. Law for the purpose of arriving at new terms and agreements as to the rate of wages. No power exists in the courts to make contracts for people. They must make the'r own contracts. The courts reach their limit of power when they enforce contracts which parties have made. A contract that the court shall determine what an agreement shall be for the future is unenforcible, unless the lines of the agreement have been laid out by the parties. The most a court may do is to determine some incidental fact, as for example the reasonable value of property or services, and thereupon enforce the agreement, by judgment for damages, if not specifically, with such value written into it. Such is not the nature of the question that has been left open for decision here. The rate of wages to be fixed is not the fair or market value, the value measured by an objective standard, as in action on a quantum meruit, but such compromise value as may be chosen as a substitute. Indeed the contract is not limited to a change in the rate of wages, but extends to any provision that has become distasteful to one or other of the parties. Whenever one or other desires a change in some respect and agreement is impossible, there may be a reference to third parties who are to say what the agreement ought to be. Arbitrators under the Arbitration Law deal with the same kinds of controversies that are dealt with by the courts. This was decided in Matter of Fletcher (237 N. Y. 440). The controversy between this employer and its men is not of such an order. Whether or not it is possible for the Legislature to provide for the arbitration of such differences hereafter, fixing the rate of wages which an employer ought to pay, is not the question we are called upon to decide. Arbitration upon these matters has been attempted to a certain extent by Congress in dealing with interstate commerce. (U. S. Compiled Statutes, 1916, Annotated, No. 8, §§ 8666-8676.) Conceivably the class of justiciable controversies may be enlarged by legislation. The arbitration statute now in force is confined to controversies that are justiciable under the law as it exists today.

No power is given to the courts to change or modify existing contracts or to make new ones for the parties.

The order of the Appellate Division should, therefore, be reversed and the petition dismissed, with costs in all courts.

Pound, J.

(dissenting). We have a written contract ” and a provision therein “ to settle by arbitration a controversy arising between the parties to the contract.” We have such a controversy. The agreement to arbitrate is a valid one under the language of Arbitration Law, § 2.

The decision of Matter of Fletcher (237 N. Y. 440) is not controlling. While the language of the opinion may be unnecessarily broad for general application, the decision rests wholly on the distinction between a valuation and an arbitration. The agreement for valuation was inserted in the contract in that case to prevent a controversy, not to settle one. The distinction is pointed out by Esher, M. R., in Matter of Carus-Wilson and Greene (18 Q. B. D. 7, at p. 9) as follows:

If it appears from the terms of the agreement by which a matter is submitted to a person’s decision, that the intention of the parties was that he should hold an enquiry in the nature of a judicial enquiry, and hear the respective cases of the parties, arid decide upon evidence laid before him, then the case is one of an arbitration. The intention in such cases is that there shall be a judicial enquiry worked out in a judicial manner. On the other hand, there are cases in which a person is appointed to ascertain some matter for the purpose of preventing differences from arising, not of settling them when they have arisen, and where the case is not one of arbitration but of a mere valuation There may be cases of an intermediate kind, where, though a person is appointed to settle disputes that have arisen, still it is not intended that he shall be bound to hear evidence or arguments. In such cases it may be often difficult to say whether he is intended to be an arbitrator or to exercise some function other than that of an arbitrator. Such cases must be determined each according to its particular circumstances.”

The arbitrators in this case are to proceed judicially and reach a determination based on evidence. The controversy is made arbitrable by the agreement of the parties. It is not a compulsory arbitration. The court makes no contract for the parties. It enforces one already in existence. The court should enforce true arbitration contracts rather than permit the parties to disregard them.

It by no means follows that the findings of the arbitrators may be enforced by the court by the remedy of specific performance. No man may be compelled to work for another or to continue another in his employment. I hold merely that industrial disputes as to future wages may be submitted to arbitration where the parties so agree. The incapacity of a court of law to effectuate justice by enforcing the agreements of parties should not be readily admitted. The court should be keen to enable the parties to ascertain their rights in the mode prescribed by them for that purpose.

The order should be affirmed, with costs.

Cardozo, Ch. J., Lehman, Kellogg and O’Brien, JJ., concur with Crane, J.; Pound, J., dissents in opinion; Hubbs, J., not sitting.

Order reversed, etc.


text:
    Ella M. Weatherwax, Respondent, v. Royal Indemnity Company, Appellant. Edgar H. Weatherwax, Respondent, v. Royal Indemnity Company, Appellant.

      (Argued January 14, 1929;
    decided February 13, 1929.)

      Frederick E. Draper and Frank J. O’ Neill for appellant.
    The charge of the trial court that the notice of the accident claimed to have been given by Gainor, the insured, to Wager, the local agent, was, if given, sufficient notice under the terms of the policy, and the refusal of the court to charge that the notice claimed to have been given was not sufficient notice constituted reversible error. (Miller v. Ætna Casualty & Surety Co., 208 App. Div. 245; Hass Tobacco Co. v. American Fidelity Co., 226 N. Y. 343; Taylor v. Mayor, etc., N. Y., 82 N. Y. 10; Paul v. Travelers Ins. Co., 112 N. Y. 472; Wehle v. U. S. Mutual Accident Assn., 153 N. Y. 116; Whiteside v. North American Accident Ins. Co., 200 N. Y. 320.) It was reversible error for the trial court to charge the jury that if they found defendant did not receive notice of the accident from the insured they could not find against defendant unless they found that defendant had waived the right to this notice. And also in summarizing the issues, to charge that the question was if defendant had had proper notice, and if it had not had such notice whether it had waived notice. (La Chicotte v. Richmond R. & El. Co., 15 App. Div. 380; Elting v. Dayton, 144 N. Y. 644; Black v. London Guarantee & Accident Co., 190 App. Div. 218; 232 N. Y. 535; Schnaier v. Nathan, 31 App. Div. 225; Todd v. Union Casualty & Surety Co., 70 App. Div. 52; Claffins, Inc., v. Gerber, 214 App. Div. 245; Ohlbaum v. Ohlbaum, 218 App. Div. 842; Hermance v. Globe Indemnity Co., 221 App. Div. 394; Holmes v. Moffat, 120 N. Y. 159; Loomis v. N. Y. C. R. R. Co., 203 N. Y. 359; Lennox v. Interurban Street Ry. Co., 104 App. Div. 110; Michally v. 301 Madison Ave. Corporation, 213 App. Div. 616.) It was reversible error for the court to refuse defendants’ request to charge that if the jury found that insured did not give the notice to the local agent, Wager, he claims to have given, then by insured’s failure to reply or object to the reservations contained in defendant’s letters of December 5 and 14, 1925, he acquiesced in and consented to the course taken by defendant and there was, therefore, no waiver of the immediate notice condition of the policy. (Gordan v. Mass. Bonding & Ins. Co., 229 N. Y. 424; Mason Henry Press v. Ætna L. Ins. Co., 211 N. Y. 499; Miller v. Union Indemnity Co., 209 App. Div. 455; Weiss v. N. J. Fidelity & Plate Glass Ins. Co., 131 Misc. Rep. 836; Farrell v. Merchants Mut. Auto Liability Ins. Co., 203 App. Div. 118.)

      Harold W. Turner for respondent.
    The charge relating to waiver constitutes no reversible error. (Farrell v. Merchants Mut. Auto Liability Ins. Co., 203 App. Div. 118; Miller v. Union Indemnity Co., 209 App. Div. 455.)
   Cardozo, Ch. J.

Plaintiffs recovered judgments against Gainor upon claims for personal injuries. Execution being returned unsatisfied, they brought these actions under Insurance Law, § 109 (Cons. Laws, ch. 28), upon a policy of insurance issued by the defendant, whereby Gainor was indemnified against loss- from liability for negligence. The rule is settled that a creditor, enforcing such a policy, stands in the shoes of the insured, and forfeits the insurance if there has been a breach of its conditions (Coleman v. New Amsterdam Cas. Co., 247 N. Y. 271). The question is whether such a breach should have been found.

The defendant is an insurance company with its principal office in New York city and with a branch office in Troy where Gainor, the insured, resided. One of the conditions of its policy is that upon the occurrence of any accident covered ” thereby, “ the insured shall give immediate written notice thereof to the company at its head office, or to the agent who has countersigned this policy,” and forward any process or pleadings after-wards received. Insurance Law, § 109, as amended in 1923, provides that no such policy shall be issued unless there shall be contained within such policy a provision that notice given, by or on behalf of the insured to any authorized, agent of the insurer within this State, with particulars sufficient to identify the insured, shall be deemed to be notice to the insurer.” A rider added to the policy in suit incorporates this provision in the language of the statute.

The insurer did not receive immediate written notice of the accident, which occurred on October 16, 1925. There is testimony by the insured, however, that a day or two later, he sent a message over the telephone to the local agent in Troy, stating what had happened. The message was to the effect that a collision had occurred at a stated place, but that no one apparently had been injured. To this the agent made answer, it is said, that he would take care of the matter, and in substance that nothing more was necessary. The agent was dead when the testimony was given. Against it must be set, however, a written admission by the insured that he had failed to give notice, and this in the belief that no one had been injured. His explanation of the admission is that he signed without reading. The credit to be given to his testimony was matter for the jury.

On December 2, 1925, actions for damages were begun by the victims of the accident, and the papers served on the insured were sent on to the insurer. On December 5 the defendant wrote that it would investigate the circumstances surrounding the accident with the understanding that neither such investigation nor any other act in connection with the defense should be deemed a waiver of any of the provisions of the policy or of any of its rights thereunder. On December 14 it wrote: We will put in the answers of these cases, subject to a reservation of our rights,” and if upon investigating we find that we have been prejudiced by the delayed notice we will then be obliged to return the suit papers to you.” To this the insured made no objection or response. The insurer served the answers, and noticed the actions for two successive terms of court. In the meantime it investigated the claims, and found that there were witnesses to the collision (though the written statement by the insured was to the effect that there were none) and also that injuries had resulted (though again the written statement by the insured was to the contrary). Thereupon the insurer withdrew from the defense. In its letter to the insured, dated February 8, 1926, it disclaims all liability to defend the actions or

to satisfy any recovery, for the reason that there had been a failure to make prompt report of the accident in accordance with the policy. At the same time the pleadings and other papers were returned with a request that the insured retain some other counsel. This he failed to do though afforded ample opportunity, and three months later there were judgments by default.

The trial judge left it to the jury to say whether notice of the accident had been given over the telephone, and instructed them in effect that if given as stated, they might find it to be adequate. In this'there was no error. The provision of the statute (Insurance Law, § 109) that notice to any authorized agent within the State, with particulars sufficient to identify the insured, shall be deemed to be notice to the insurer, does not exempt the insured from compliance with the provision of the policy that notice shall be in writing and immediate. Its only effect is to enlarge the class of agents to whom such notice may be given. The local agent in Troy was competent by force of the statute, if not otherwise, to accept service of the notice, but he was free to insist that it be given hm in writing. This he failed to do. Instead of insisting that it be written, he accepted it as sufficient, if the testimony for the plaintiff is to be credited, and promised the insured to give his attention to the matter. A different question would be here if the policy contained provisions limiting the authority of agents to waive compliance with its conditions, and requiring that any waiver be indorsed upon the instrument (Quinlan v. Providence Washington. Ins. Co., 133 N. Y. 356, 364). Nothing of the kind is in the policy before us. In such conditions the rule is that in the absence of notice of restriction, a general agent of an insurance company has apparent authority to waive a provision that notice shall be written, and to substitute an oral notice by words or conduct signifying that he accepts it as sufficient (Pechner v. Phœnix Ins. Co., 65 N. Y. 195, 204, 205; Beatty v. Guggenheim Exploration Co., 225 N. Y. 380 388).

The trial judge did not limit the jury, however, to the single quest'on of the transmission of an oral notice. He told them that even though notice had been omitted altogether, a waiver of that condition might be inferred from the conduct of the insurer in serving answers to the complaints and thus assuming the defense. In that ruling there was error. No doubt a waiver may often be inferred from the assumption of the defense of such a claim without reservations or conditions. Here reservations or conditions were imposed by the insurer, and assented to by the insured through tacit acquiescence (Hermance v. Globe Ind. Co., 221 App. Div. 394; Farrell v. Merc. Auto L. Ins. Co., 203 App. Div. 118, 121; Gordon v. Mass. Bonding & Ins. Co., 229 N. Y. 424). This was done at successive stages. The papers in the lawsuit were accepted with a reservation of all rights, and the answers were interposed with a warning, prompt and unequivocal, that the insurer would withdraw if it found that it had-been prejudiced by the dilatory notice. We think it meant to make itself the judge whether prejudice had in fact resulted, and not to proceed or to retire as prejudice or no prejudice might be determined by a jury. Even if honest judgment be the test, we may not say upon this record that its inference of prejudice was dishonest or capricious (Matter of Bloomfield v. November, 223 N. Y. 265). Seasonably and with ample notice to the insured, it withdrew from the defense and stood upon its rights. There was error in the ruling that they might be found to have been waived.

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

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

Judgments reversed, etc.


author: O’Bbien, J.

text:
    Julia L. Friede et al., as Executors of M. Sergey Friede, Deceased, et al., Appellants, v. The National City Bank of New York, Respondent.

      (Argued January 14, 1929;
    decided February 13, 1929.)

      Alan Fox, Samson Selig and I. Bernard Halpern for appellants.
    The deposit with the City Bank became a general asset of the Azoff Bank subject to attachment by its creditors and not a special trust fund for the Cahns. (Wilson v. Randell, 67 N. Y. 238; Nicoll v. Sands, 131 N. Y. 19; Carthage Tissue Paper Mills v. Village of Carthage, 200 N. Y. 1; Equitable Trust Co. v. Rochling, 48 Sup. Ct. Rep. 59.) No act of acceptance of the credit by the Azoff Bank was necessary to perfect the credit. (Schell v. Schell, 192 App. Div. 419; Ten Eyck v. Whitbeck, 156 N. Y. 341; Beaver v. Beaver, 117 N. Y. 421; Goels v. Peoples Savings Bank, 31 Ind. App. 67.) The Cahns are not entitled to recover the deposit on any analogy to the rule that a deposit in an insolvent bank after its insolvency can be recovered by the depositor. (Metropolitan Nat. Bank v. Loyd, 90 N. Y. 530; Equitable Trust Co. v. Rochling, 48 Sup. Ct. Rep. 59; Cragie v. Hadley, 99 N. Y. 131; Legniti v. Mechanics & Metals Bank, 230 N. Y. 415; Ætna Nat. Bank v. Fourth Nat. Bank, 45 N. Y. 32; Baldwin’s Bank v. Smith, 215 N. Y. 76; Michie, Banks and Banking, § 75; People v. St. Nicholas Bank, 77 Hun, 165; Quin v. Earle, 95 Fed. Rep. 728; Terhune v. Bank, 34 N. J. Eq. 367; Williams v. Cox, 97 Tenn. 555.) Interest should be allowed on the moneys from the date of the attachment at six per cent. (McNab v. Morton Adver

      tising Co., 164 App. Div. 435; Greenley v. Hopkins, 10 Wend. 96; Shaul v. Board of Education, 108 App. Div. 19; Brainard v. Jones, 18 N. Y. 35; Matter of Carnegie Trust Co., 161 App. Div. 280.)

      Carl A. Mead, William Harvey Reeves and W. Deering Howe for respondent.
    The plaintiffs have no better right to the money than the Azoff Don Bank. (Lamont v. Cheshire, 65 N. Y. 30; Williams v. Ingersoll, 89 N. Y. 508; McAllaster v. Bailey, 127 N. Y. 583; Courtney v. Eighth Ward Bank, 154 N. Y. 688; Fredrick v. Chicago Metal Bearing Co., 221 App. Div. 588.) The credit balance in current account belonged to H. & J. Cahn on October 21, 1919, when the warrant of attachment was levied. (Bank of America v. Waydell, 187 N. Y. 115; Van Allen v. American Nat. Bank, 52 N. Y. 1; Viets v. Union Nat. Bank, 101 N. Y. 563; Roca v. Byrne, 145 N. Y. 182; Parks v. Knickerbocker Trust Co., 137 App. Div. 719; Morse, Banks & Banking [6th ed.], 804, § 346; Farmers’, etc., Bank v. Kings, 57 Penn. St. 202; Naser v. First Nat. Bank, 116 N. Y. 492; Castriatis v. Guaranty Trust Co., 229 N. Y. 74; Cutler v. American Exchange Nat. Bank, 113 N. Y. 593; Erb v. Banco di Napoli, 243 N. Y. 45; Williams v. Everett, 14 East, 592; Wedlake v. Hurley, 1 C. & J. 83; Drovers Nat. Bank v. O’Hare, 119 Ill. 646.) Title to the credit did not vest in Azoff Don Bank without acceptance. (Metropolitan National Bank v. Loyd, 90 N. Y. 530; Kirkman v. Bank of America, 165 N. Y. 132; Baldwin’s Bank v. Smith, 215 N. Y. 76; Commercial Bank of Pa. v. Armstrong, 148 U. S. 50; Simson v. Ingham, 2 B. & C. 65; Whitehouse v. Bank of Cooperstown, 48 N. Y. 239; Kingston Bank v. Gay, 19 Barb. 459; Persons v. Gardner, 122 App. Div. 167; Commercial Bank of Australia v. Official Assignee, L. R. [1893] A. C. 181; Reynolds v. St. Paul Trust Co., 51 Minn. 236.) Acceptance of the credit by the Azoff Don Bank cannot be presumed, in view of the situation in Russia. (Cutler v. Am. Ex. Nat. Bank, 113 N. Y. 593; Nat. Butchers & Drovers’ Bank v. Hubbell, 117 N. Y. 384; Commercial Bank of Pennsylvania v. Armstrong, 148 U. S. 50; Evansville Bank v. German American Bank, 155 U. S. 556; Manufacturers’ Nat. Bank v. Continental Bank, 148 Mass. 553; Drovers’ Nat. Bank v. O’Hare, 119 Ill. 646; American Exchange Nat. Bank v. Loretta, etc., Mining Co., 165 Ill. 103; Anonymous, 67 N. Y. 598; Cragie v. Hadley, 99 N. Y. 131; Cassidy v. Uhlmann, 170 N. Y. 505; St. Louis & S. F. Ry. Co. v. Johnston, 133 U. S. 566.) The plaintiffs were not entitled to interest at a higher rate than two per cent, as customarily allowed by the City Bank to the Azof! Don Bank. 1 Morse on Banks & Banking [6th ed.], § 309; Edison Electric Company v. Guastabino Co., 16 App. Div. 350; Columbia Bank v. Equitable Life Assurance Society, 79 App. Div. 601; Matter of Trustees, 137 N. Y. 95; Matter of Board of Water Commissioners, 132 App. Div. 75; Warner v. Fourth Nat. Bank, 115 N. Y. 251; Simson v. Jersey City Contracting Co., 165 N. Y. 193.)

      Joseph M. Hartfield and Vermont Hatch for Hirsch Cohn et al., amici curiæ.

    The credit arising from the collection from Blumenthal at all times remained the property of the Cahns and was held by the National City Bank for their account and at their disposal. (Williams v. Ingersol, 89 N. Y. 508; Cutler v. American Exchange Nat. Bank, 113 N. Y. 593; Legniti v. Mechanics & Metals Nat. Bank, 230 N. Y. 415; People ex rel. Zotti v. Flynn, 135 App. Div. 276; American Exchange Nat. Bank v. Loretta Gold, etc., Mining Co., 165 Ill. 103; Commercial Nat. Bank v. Hamilton Nat. Bank, 42 Fed. Rep. 880; Armstrong v. National Bank, 90 Ky. 431; Drovers Bank v. O’Hare, 119 Ill. 646; 2 Michie on Banks & Banking, 988.) If the Cahns be not regarded as the owners of the deposit at all times, they certainly became the owners of the deposit and entitled to dispose of the same after the City Bank received the cable of March 14, 1918, long before the levy of plaintiff’s attachment. (Baldwin’s Bank v. Smith, 215 N. Y. 76; Russian Re-Insurance Co. v. Stoddard, 240 N. Y. 149.)
   O’Bbien, J.

F. Blumenthal Company of New York owed H. & J. Cahn of Petrograd a sum in excess of $83,000. The Cahns had an account with the Azoff Don Bank of Petrograd but none with defendant. The two banks were correspondents and the Azoff had a debit balance approximately of $20,000 with the National City. In November, 1917, after the Soviet revolution had been accomplished, Cahn Brothers cabled defendant to collect from Blumenthal and credit Azowdon Bank Petrograd our account.” On December 26 Blumenthal deposited $83,716.43 with defendant on instruction received from Messrs. H. & J. Cahn, Petrograd for account of the Banque de l’Azoff Don Petrograd.” On the same day defendant cabled the Azoff, “ received Eighty three thousand seven hundred sixteen 43 H. & J. Cahn,” and on the following day made this entry to the credit of that bank, Dec. 27 pay’t F. Blumenthal Co. order H. Cahn $83,716.43.” The cable sent December 26 from New York could not by any possibility have passed the British and Soviet censors and have been delivered in Petrograd as early as ten o’clock the next morning. December 27 is the date upon which the Soviet decree abolishing private banking property rights, creating a State monopoly and taking over all bank assets and liabilities was issued. Before ten o’clock in the morning of that day a detachment of the revolutionary Red Guard took possession of the Azoff Don Bank and a commissar representing the Soviet government assumed charge. Neither the building nor the assets have ever been restored to the former bank officials and no credit for the $83,716.43 has ever been entered upon the books of the Azoff. In January, 1918, its capital was confiscated and the shares declared null and void. In February II. & J. Cahn cabled defendant to cancel the credit, if already entered, and to return the money to Blumenthal. Three days later they sent another message requesting the bank in New York to notify the Azoff of the cancellation and to return the money to Blumenthal. On February 26 defendant informed the Azoff, Cahn instructs us pay Blumenthal Eighty three thousand seven hundred sixteen dollars 43. Authorize us to debit your account,” and ten days later it notified the Cahns that it had cabled the bank in Petrograd for authority to refund. After the receipt of this message one of the Cahn brothers visited the bank. It was then under the control of the Soviet government and, pursuant to the decree of December 27, was in process of liquidation. The manager of the foreign department of that bank who had been retained in its service by the revolutionary government sent on March 14, at the request of Cahn and with the commissar’s approval, the following message to defendant: “ Your cables December 26, February 28, information payment account' Cahn $83,716.43 dollars we consider cancelled. Banque Azoff Don.” Defendant debited the $20,000, which the Russian bank owed, leaving an approximate balance of $63,000 which, however, it did not return to Blumenthal but retained in its own possession. This sum with accrued interest amounted approximately to $71,000 on October 21, 1919, when M. Sergey Friede commenced an action against the Azoff Don Bank. In that action he caused a warrant of attachment to be served upon the National City Bank for the purpose of reaching this deposit. In July, 1920, H. & J. Cahn sued defendant for the $83,000 and recovered a judgment exceeding $98,000. That judgment was satisfied by payment of the $71,000, with interest, to the Cahns. They indemnified defendant against liability to the present plaintiffs. This action by Friede’s representatives in aid of the attachment was begun in April, 1922.

Before possession of the $71,000 can be obtained in this action proof must be made that it was the property of the Azoff Don. The attaching creditors have no better right than had the Russian bank. The National City never regarded this balance as a trust fund for the benefit of the Cahns. It treated the credit as one establishing the relation of debtor and creditor between itself and the Azoff. No such relationship, however, was thereby created. A credit cannot be forced upon a bank or an individual. Before it can become effective, it must be accepted. (Whitehouse v. Bank of Cooperstown, 48 N. Y. 239; Cutler v. Am. Ex. Nat. Bank, 113 N. Y. 593; Baldwin’s Bank v. Smith, 215 N. Y. 76, 84, 85.) Acceptance depends upon the intent of both parties (Marine Bank v. Fulton Bank, 2 Wall. [U. S.] 252; Comm. Bank v. Armstrong, 148 U. S. 50, 58, 59), but mutual intent obviously cannot exist when the facts are known to only one. Knowledge by the Azoff of the credit to it in New York could have been acquired only by some kind of communication received from defendant. (Simson v. Ingham, 2 B. & C. 65, 73.) Before such information could be imparted, the Soviet decree of nationalization became effective. Among its purposes were the resolute eradication of banking,” liberation from “ exploitation by banking capital ” and the establishment of a single State bank. It directed the liquidation of private banks and the temporary management of their business by a council of the State bank. The offices and assets of the Azoff were seized by the military forces of the Commune and that bank’s voluntary functions were paralyzed. As long as it remained capable of transacting its business it never accepted this credit. No act indicating an intent to accept was ever performed either by the bank’s officers or by any representative of the Soviet. In the face of proof that no entry of this credit was ever made on the books of the Azoff and that even defendant’s messages of December 26 and February 26 were ignored until March 14, when they were answered by a rejection of the credit, no acceptance can be implied. The relations existing between the two banks were disrupted by the upheaval of December 27. In the turbulent condition of affairs in Petrograd, with soldiery hostile to private banking interests occupying the Azoff Don offices, with liquidation confronting the bank, every presumption of acceptance is overborne. Acceptance followed by confiscation surely would create no benefit to the bank and, in the absence of some benefit, acceptance will not be presumed. (Jackson v. Tallmadge, 246 N. Y. 133, 138.)

A subordinate question is in the case. It affects the rate of interest payable by defendant on an item of $7,885.72, which is unrelated to the Cahn deposit and which was properly credited by defendant to the Azoff. This credit was not transferred to the sheriff when the warrant of attachment was served and demand made. Plaintiffs claim six per cent interest but only the current bank rate of two per cent has been awarded. We agree that only two per cent is recoverable. If the warrant had been honored and the property delivered to the sheriff, the amount of this credit would have been kept by him to answer a judgment which might be obtained against defendant (Civ. Prac. Act, § 940) until such a time as execution might be issued on such a judgment (Civ. Prac. Act, § 969). Plaintiffs are not entitled to interest against the sheriff and they possess no right to interest against defendant in excess of the usual increment to the fund on deposit.

The judgment of the Appellate Division should be affirmed, with costs.

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

Judgment affirmed.


text:
    Rose Maggi, Respondent, v. Guiseppi A. Sabatini et al., Appellants.
    (Argued January 14, 1929;
    decided February 13, 1929.)

      Morris E. Gossett for appellants.
    The judgment is appealable to this court. (Moulton v. Carnish, 138 N. Y. 133; Produce Bank v. Morton, 67 N. Y. 199; Albany Hospital v. Albany Guardian Society, 214 N. Y. 435; Brown v. Feek, 234 N. Y. 38; Trust Co. of America v. Boxboard Co., 213 N. Y. 334.)

      Ralph Stout and Charles H. Levy for respondent.
    The appeal should be dismissed. (McKeown v. Officer, 127 N. Y. 687; Anderson v. Daley, 159 N. Y. 146; King v.
      Barnes, 107 N. Y. 645; Walker v. Spencer, 86 N. Y. 162; Melenky v. Melen, 206 App. Div. 46; Victory v. Blood, 93 N. Y. 650; Clarke v. Brooks, 1 Abb. Ct. App. Dec. 355; Cambridge Valley National Bank v. Lynch, 76 N. Y. 516.)
   Per Curiam.

We would be content to affirm this judgment without opinion were it not that a question has been raised as to the jurisdiction of this court to entertain the appeal. The Special Term dismissed the complaint upon the merits. The Appellate Division reversed the findings made by the Special Term and made new findings. Upon such new findings it directed judgment in favor of the plaintiff, awarding her a one-half interest in two city lots and in a real property mortgage, and directed the defendants to execute and deliver to her a deed of a one-half interest in the lots and an assignment of one-half interest in the mortgage within ten days after the service of a certified copy of the judgment. It also directed an accounting before a referee of certain moneys paid by the plaintiff to the defendants and directed that the referee determine the purpose of a certain bank account.

The judgment entered upon the order of the Appellate Division was denominated an interlocutory, judgment. We think it was a final judgment in regard to the two lots and the real property mortgage. Nothing remained to be done except to make the transfers as directed. In effect, the Appellate Division severed two causes of action, finally disposed of the appeal as to the lots and real property mortgage and awarded immediate execution, and remitted the matter of an accounting.

Under the facts in this case we think this court should treat the judgment of the Appellate Division as final as regards the two city lots and the real property mortgage, and, therefore, appealable as a matter of right under section 589, subdivision 2, of the Civil Practice Act and article 6, section 7, of the Constitution. (Forgay v. Conrad, 6 How. [U. S.] 201; American Brake Shoe & Foundry Co. v. New York Rys. Co., 282 Fed. Rep. 523; Carondelet Canal & Navigation Co. v. State of Louisiana, 233 U. S. 362; Thomson v. Dean, 7 Wall. [U. S.] 342.)

The judgment of the Appellate Division in so far as it directs the execution of a deed and an assignment of a mortgage should be affirmed, with costs, and the appeal from that part of the judgment of the Appellate Division which directs an accounting before a referee dismissed.

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

Judgment accordingly.