author: Crouch, J. Lehman, J. (dissenting).

text:
    The City of New York, Plaintiff, v. Bronx County Trust Company, Respondent, and Central Hanover Bank and Trust Company et al., Appellants.

      (Argued November 22, 1932;
    decided January 17, 1933.)

      Oscar JR. Houston, Donald A. Gray, Felix A. Fishman and T. R. Iserman for Central Hanover Bank and Trust Company et al., appellants.
    The appellants obtained good title to the checks. (Sullivan v. Knauth, 161 App. Div. 148; 220 N. Y. 216; New York & New Haven R. R. Co. v. Schuyler, 34 N. Y. 30; Fifth Ave. Bank v. Forty-second St. & Grand St. Ferry R. R. Co., 137 N. Y. 231; Gleason v. Seaboard Ry., 278 U. S. 349; Lloyd v. Grace-Smith & Co., [1912] A. C. 716.) The city of New York in effecting recoveries from the wrongdoers, with knowledge of the facts, elected to pursue a remedy inconsistent with plaintiff’s cause of action, thereby ratifying the payment of the checks by the appellants and the respondent. (Fowler v. Bowery Sav. Bank, 113 N. Y. 450; American Defense Society v. Sherman Nat. Bank, 225 N. Y. 506.)

      Wolfgang S. Schwabacher and Hyman N. Glickstein for Interstate Trust Company, appellant.
    The issuance of the checks and their payment by the appellants were directly brought about by the negligence and dishonesty of the city’s own officials in not exposing the frauds and preventing their continuance long before any one of the said checks was ever issued. The genuineness of the indorsements on the checks cannot be controverted. (Critten v. Chemical Nat. Bank, 171 N. Y. 219; Leather Manufacturers Bank v. Morgan, 117 U. S. 96; North British & M. Ins. Co. v. Merchants’ Nat. Bank, 161 App. Div. 341; Coggill v. American Exchange Bank, 1 N. Y. 113; Howard v. Duncan, 3 Lans. 174; Prudential Ins. Co. v.
      National Bank of Commerce, 227 N. Y. 510; Morgan v. U. S. Mortgage & Trust Co., 208 N. Y. 218; National Surety Co. v. Bank of Manhattan Co., 252 N. Y. 247; Gutfreund v. East River Nat. Bank, 251 N. Y. 58; American Surety Co. v. Empire Trust Co., 228 App. Div. 572; Municipal Service Real Estate Co. v. D. B. & M. Holding Corp., 257 N. Y. 423.)

      Charles L. Woody and Joshua D. Jones for respondent.
    The checks were not valid obligations of the city of New York. No rights were acquired under the forged indorsements and the banks are liable on their indorsements. (Shipman v. Bank of State of New York, 126 N. Y. 318; City of St. Paul v. Merchants Nat. Bank, 151 Minn. 485; National Surety Co. v. National City Bank, 184 App. Div. 771; Second Nat. Bank v. New First Nat. Bank, 7 Ohio App. 68; Egner v. Corn Exchange Bank, 42 Misc. Rep. 552; Caledonia Ins. Co. v. National City Bank, 120 Misc. Rep. 804; 208 App. Div. 83; Ulmann v. Central Union Trust Co., 257 N. Y. 563; Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26; Strang v. Westchester Co. Nat. Bank, 235 N. Y. 68.) The arrangement made by the city with its depositaries to facilitate the cashing of pay checks by city employees does not affect the liability of the indorsing banks to the respondent. (Gutfreund v. East River Nat. Bank, 251 N. Y. 58; Shipman v. Bank of State of New York, 126 N. Y. 318; Leather Manufacturers’ Bank v. Merchants’ Bank, 128 U. S. 26; People v. Bank of North America, 75 N. Y. 547.) The employees of the city were not acting within the scope of their duties and the city is not hable for their acts in putting these checks in circulation. (Henry v. Allen, 151 N. Y. 1; Seaboard Nat. Bank v. Bank of America, 193 N. Y. 26; Shipman v. Bank of State of New York, 126 N. Y. 318; People v. Journal Co., 213 N. Y. 1; Village of Ft. Edward v. Fish, 156 N. Y. 363; People ex rel. Smith v. Clarke, 174 N. Y. 259; People ex rel. Coughlin v. Gleason, 121 N. Y. 631; Bd. of Supervisors v. Ellis, 59 N. Y. 620; Haswell v.
      Mayor, 81 N. Y. 255; People’s Trust Co. v. Smith, 215 N. Y. 488; National Surety Co. v. Manhattan Co., 252 N. Y. 247; Nelson v. Mayor, 131 N. Y. 4; Miller v. Mayor, 3 Hun, 35; Keane v. City of New York, 88 App. Div. 542; Lyddy v. Long Island City, 104 N. Y. 218; People ex rel. Sweet v. Bd. of Supervisors, 101 App. Div. 327.) There was no ratification by the city or election to pursue another remedy. (Ramsay v. Miller, 202 N. Y. 72.)
   Crouch, J.

The action was originally commenced by the city of New York against the Bronx County Trust Company, one of the city depositaries, to recover the aggregate amount paid out by the trust company and charged to the city on 652 checks upon which the indorsements were forged. The checks had been cashed or deposited by the forgers at other banks, and when received by the trust company all bore the indorsement of the banks presenting them, under the legend Prior indorsements guaranteed.” After the commencement of the action the trust company paid the city the sum sued for, impleaded the indorsing banks on their indorsement and guaranty, and served each of them with a supplemental summons and answer. The Bronx County Trust Company may, therefore, be referred to as the plaintiff and the impleaded banks as the defendants. The trial court dismissed the plaintiff’s cause of action. The judgment was reversed on facts and law by the Appellate Division, and judgment given pro tanto against the defendants.

The checks had been drawn to the order of fictitious city employees whose names had been fraudulently placed upon the records and payrolls of the Cromwell Avenue Garage, operated by the Department of Street Cleaning of the City of New York. The weekly payrolls were made up from the garage records under the direction of the garage manager by a clerk, and included the names of the men actually employed, as well as the fictitious names which had been added. Opposite the name of each employee was a statement of the hours worked and of the amount payable. The payrolls thus prepared were certified as correct by the garage manager, and also by the superintendent of the district in which the garage was located, and were then forwarded to the Department of Finance. There the pay checks were made out, and the payroll returned to the garage with a pay check for each name shown on the payroll, including the checks payable to the fictitious names. Each check upon its face was drawn upon the Bronx County Trust Company, followed by the words, “ Payable Upon Identification at Other City Depositaries.” At the lower left-hand corner was a blank line, above which were the printed words, “ Signature of Payee — For Identification Only,” and underneath the line were the printed words, “Not an Endorsement.” It was the duty of the manager of the garage before delivering the checks to require the payee to sign for identification in his presence upon the face of the check, and to sign also a receipt on the payroll. The checks payable to fictitious names were segregated by the manager and the clerk and receipted for on the payroll by the one or the other. Then one or the other would sign the payee’s name on the identification fine on the face of the check and at the same time indorse the payee’s name on the back of the check, so that the fictitious name appeared in the same handwriting on the payroll, on the face and on the back of the check. The checks in bunches were then either cashed or deposited at the defendant banks under an assumed name, or cashed by a confederate. In every case the check bore the further indorsement of the name or assumed name of the person presenting it for payment or deposit.

Except for the identification feature of these checks they differed not at all from the usual and customary form of check. The indorsement of the fictitious names was, therefore, a forgery. (Shipman v. Bank of State of New York, 126 N. Y. 318; National Surety Co. v. National City Bank, 184 App. Div. 771.) The forgers, though city employees, were not acting within the scope of their duties, and their knowledge was not the knowledge of the city. (Shipman v. Bank of State of New York, supra; Henry v. Allen, 151 N. Y. 1; Critten v. Chemical Nat. Bank, 171 N. Y. 219, 230; Prudential Ins. Co. v. National Bank of Commerce, 227 N. Y. 510.) The checks, therefore, were not payable to bearer under Negotiable Instruments Law, section 28; nor could they pass by indorsement. (Neg. Inst. Law; Cons. Laws, ch. 38, § 42.) The plaintiff, by reason of the foregoing facts, was bound to reimburse the city for the moneys paid out by it, unless it could claim full protection upon some principle of estoppel or full or partial protection by way of set-off for some negligence chargeable to the city.

The plaintiff paid the city without contesting the claim. It says it did so because there was no defense available to it since (a) it had a remedy against the indorsing banks and, therefore, suffered no damage; and (b) it did not rely upon the forged signatures, but upon the indorsement and guaranty by the indorsing banks. It is not necessary to consider the validity of the assigned reasons further than to say that National Surety Co. v. Manhattan Co. (252 N. Y. 247) is not, upon the facts here, an authority for proposition (a).

The only defenses theoretically open to the plaintiff against the claim of the city were estoppel and negligence by way of set-off. (National Surety Co. v. Manhattan Co., supra.) Under the peculiar facts of this case, the defense of estoppel is equally available to the defendants and will be considered below. The defense of negligence in cases of this sort is ordinarily, available only to the drawee bank, to which alone, it has been said, the depositor owes a duty of care. (Corn Exchange Bank v. Nassau Bank, 91 N. Y. 74, 80; Critten v. Chemical Nat. Bank, 171 N. Y. 219, 229.) The doctrine of privity, however, is not so conclusive as it once was. Whether there may be negligence under circumstances which would carry the tort liability of a depositor beyond his contract undertaking (Cf. Ultramares Corp. v. Touche, 225 N. Y. 170), we do not stop to inquire, for the question is not here. The broad charges of negligence are not made out. While it is true that there had been similar forgeries for two years before the earliest one involved here, the forgeries were in the indorsements. So far as the evidence shows, no facts came to the city’s knowledge as in Prudential Ins. Co. v. National Bank of Commerce (supra), to put it upon inquiry. Lacking such warning it had a right to rely upon the vigilance of the banks in detecting forged indorsements. Nor can it be justly said that there was negligence in the issuance and delivery of the checks. No fault is or can be found with the system of payment used by the city. It provided for careful and detailed records of the work done by all employees at the garage, and it required the payrolls made up from those records to be separately certified by two responsible officials. The old satiric query, Quis custodiet ipsos custodes, is no reply to this. True it is perhaps, that if there had been other officials to watch those whose duty it was to watch, discovery might sooner have been made. But the city was not bound to anticipate a criminal conspiracy among its trusted employees (Peoples Trust Co. v. Smith, 215 N. Y. 488); nor did it, as a depositor, owe the duty of such extraordinary vigilance even to the plaintiff drawee, much less to the defendants. (Paton Co. v. Guaranty Trust Co., 227 App. Div. 545; affd., 254 N. Y. 621.)

We come, then, to the one substantial question. This system of payroll payment was first put in use by the city of New York in 1915. There were at that time 135 depositary banks with which the city had accounts. To each of those banks, including all the parties to this action, was sent a letter which referred to the pay plan as having been devised for making pay checks of the city of New York as good as currency;” and stated, among other things, that the plan included “ the use of a self-identifying check,” and further that “ the circular which I am enclosing describes the way employees make out checks so as to make the signature, in effect, certified by the city.” There was inclosed a fist of the banks which had assented to the plan. The circular to which reference was thus made was a copy of one which had been distributed to all city employees, describing the new pay check and giving directions for its use. Among other things, the employees were told that li the banks listed below have assured the comptroller that they will cash all checks presented by city employees when properly identified.”

The contention of the defendants is that out of that arrangement and the subsequent course of dealing thereunder there arose between the city and its 135 depositary banks a contractual relationship, or at least an understanding, by virtue of which, either contractually or by estoppel, any bank taking one of the city’s pay checks would acquire good title thereto, if the indorsement of the payee on the back corresponded with the identification signature on the face

Contract there was not. There is no indication that the banks’ assurance ” that they would cash all checks presented by city employees when properly identified was anything more than an assurance. The letter with its accompanying circular merely described the new plan of payment with expressions of expectation as to how it would operate. So far as the evidence shows there was nothing to prevent the defendants from refusing to cash a check even when the payee was properly identified.

It seems equally clear that the doctrine of estoppel has no application. It is matter of common knowledge that a bank in cashing a check or in accepting it for deposit ordinarily relies only upon the responsibility of the party, usually its own customer, with whom it deals. It pays no attention to indorsements. other than his. Upon no other basis could the banking business be carried on. Moreover, the evidence of the defendant bank chiefly interested here shows that it took the checks in question solely upon the indorsement of its own customer. It did not look beyond that.” The defendants as matter of fact were not misled by any act or omission of the city nor by any understanding with it. If, however, we pass over what was actually done and look only to the face of the letter and circular, no warrant will be found for saying that the defendants, had they chosen so to do, were at liberty to identify the payee solely by a comparison of the two signatures, or that they had been led to believe that they were. The circular,” says that letter, “ describes the way employees make out checks so as to make the signatures, in effect, certified by the city.” The way the employees were directed to make out checks to the end mentioned is stated thus in the circular: “ When you take the check to the bank for payment you should endorse it in the presence of the paying officer, unless the bank waives this obligation.” So far as the city was concerned that act by the paying party was obligatory as part of the identification. Somewhere along the line between the issuance of the check and its payment by the drawee bank identification by that method was essential, unless the paying party chose to waive it; and clearly any waiver was at the risk of that party, and of subsequent parties. In the case of none of the questioned checks was there an indorsement in the presence of the person paying.

There is a further contention that a ratification of the payment of the checks by the banks arose from the act of the police authorities in taking certain moneys found in the possession of the forgers. This, it is said, amounted to the election of an inconsistent remedy. Even if the police can be said to have been acting as agents of the city, there seems to be no good reason why the city was not at liberty to pursue both the forgers and the banks in civil actions for the recovery of its loss without surrendering its rights against either until it had been paid. Election of remedies is a defense only when a choice is exercised between remedies which proceed upon irreconcilable claims of right ” (Metropolitan Life Ins. Co. v. Childs Co., 230 N. Y. 285, 291), and has no application to the pursuit of remedies against parties concurrently liable, short of payment and satisfaction. (Sciaballa v. Illinois Surety Co., 166 App. Div. 677; affd., 215 N. Y. 692.)

The judgment should be affirmed, with costs.

Lehman, J. (dissenting).

The city of New York pays its employees by checks made out to their order. The checks have some unusual features. Though drawn on a particular depositary, they state upon their face: Payable upon identification at other city depositaries.” Printed upon their face are also the words: “ Signature of Payee — For Identification Only.” Below these words is a blank space for the signature of the payee and below the blank the words: Not ‘ an endorsement.” Six hundred fifty-two checks, signed by a duly authorized officer of the city, purporting to be payable to the order of a named payee and to be indorsed by that payee, were received from other depositary banks by the defendant Bronx County Trust Company, upon which these checks had been drawn. The checks so received were paid by the Bronx County Trust Company and charged to the deposit account of the city. The blank left for the identification signature, on the face of the checks, had been filled in and the indorsements were in the same handwriting as the identification signature. The Bronx County Trust Company, in paying these checks, probably did not examine the identification signature in order to discover whether the indorsements were in fact made by the payees. All prior indorsements were guaranteed by the banks which presented the checks and the evidence establishes that the Bronx County Trust Company relied on this guaranty rather than on an examination of the prior indorsements.

Ordinarily, a bank upon which a check is drawn to the order of a named payee, can charge such payment against the drawer of the check only if the check is, in fact, indorsed by the payee. Otherwise the check is not paid in accordance with its tenor. The bank usually does not know the payee or his signature. Nevertheless, it is bound, at its peril, to identify the payee and his signature before payment. Here, however, the drawee has himself provided the means for such identification by the use of a check bearing a blank for an identification signature. Without other explanation for the use of such a form of check, the inference would be clear that the check itself contained an invitation, to the bank on which it was drawn, or to third parties dealing with the apparent holder of the check, to rely on the identification signature for the identification of the payee and the validity of the indorsement of the payee. True, no person would, in the absence of a promise to the drawer, be bound to accept such invitation. Though a depositary bank is usually bound, by contract with its depositors, to pay, according to their tenor, checks drawn by a depositor on his account, a payee has no right of action against the bank for failure to make such payment. Before such checks are paid, a careful bank will usually, for its own protection, require identification of the payee or the guaranty of his indorsement by another bank or responsible party. In the same way even if a depositary bank has assumed a contractual obligation to a depositor to pay checks when presented to it indorsed by a payee whose indorsement is identified by an “ identification signature,” it might still, for its own protection, require the indorsement to be made in its presence in order to avoid the risk of deception through a forgery made possible by tracing the identification signature or other trick. Nevertheless, when the drawer of a check has directed a depositary bank to pay a check when indorsed by the party whose signature has been placed upon the face of the check for purposes of identification, or has invited third parties to act upon such indorsement, the drawer should be estopped from denying that the check was, in fact, not indorsed by the payee to whose order the check was drawn.

I have said that the form of the check alone might well justify an inference that the drawer of the check invites both the depositary bank and third parties to accept the identification signature ” as an identification of the payee’s indorsement. In this case, however, the invitation, at least as to the defendant banks, to act upon the identification signature ” is not a matter of inference from the form of the check. It is expressed in letters and circulars, sent to the defendant banks, and its extent is defined by the same letters and circulars. When the city devised this form of check it prepared a circular to be distributed to each employee with his check. In a letter addressed to all its depositary banks, including all the defendant banks in - this case, the city enclosed a copy of this circular and stated: The Comptroller has received from the President of your institution his assent to a plan recently devised by this department for making pay checks of the City of New York as good as currency. The plan includes the use of a self-identifying check which does away entirely with the necessity for a certificate of identification as submitted to you last month * * *. The circular which I am enclosing describes the way employees make out checks so as to make the signatures, in effect, certified by the city.” The circular, enclosed in the letter, stated, amongst other things: Pay checks of the City of New York should be good for their face value anywhere. City employees ought not to be obliged to pay discounts to storekeepers or others for having checks cashed, nor should they have trouble getting them honored at any city depositary. The new style of pay check, the use of which is being extended to all departments as rapidly as possible, can be cashed at more than 135 banks in the five Boroughs, and undoubtedly will be accepted at full value by many hundreds of merchants. * * * The new check is so designed as to be self-identifying. In the lower left hand corner is a space left for a specimen signature. Each employee must sign his name in that space as a condition of the delivery to him of the check. The check should be signed before the receipt is signed on the payroll. Under this plan your signature on the face of the check makes your identification automatic through your second signature when you endorse it on the back for payment. When you take the check to the bank for payment you should endorse it in the presence of the paying officer unless the bank waives this obligation.”

The assent ” by the depositary banks to this plan might well, I think, be regarded as establishing a contract between all such banks and the city of New York that in consideration of such assent the city would, on its part, agree that as a condition of the delivery to an employee of any check, the employee must sign his name in the space left for a specimen signature “ so as to make the signatures, in effect, certified by the city.” We need not, however, decide such question for, at least, the circular shows a representation by the city that the specimen signatures ” will be, in fact, the signatures of the payees and it shows, further, an intent that not only the depositary banks, but hundreds of merchants ” should rely on that representation and accept the checks at their full value without requiring any discount. By reason of the failure of the city’s employees to carry out the city’s promissory representation, the city has made it possible for a dishonest employee to appropriate to his own use pay checks to which he was not entitled and to obtain payment of such pay checks. The loss must fall upon some person and that loss should not, on well-established principles of estoppel, be shifted by the city to the shoulders of any party which has acted to its detriment on the representation of the city that the specimen signature ” is the signature of the employee to whose order the check is made out. It is said that this rule does not apply here for two reasons: (1) That the evidence shows that none of the parties to this action, either the payee bank or the banks to which the drawee bank made payment, accepted the checks on the faith of the specimen signatures ” and (2) that the effect of the statement in the circular that When you take the check to the bank for payment you should endorse it in the presence of the paying officer unless the bank waives this obligation ” made indorsement in the presence of a paying officer of a bank obligatory as part of the identification. It seems to me that neither of these reasons present any basis for the denial of the right of a party to assert an estoppel against the city.

As I have pointed out, any party, including a depositary bank under a contractual obligation to the depositor to pay a check when indorsed by the party who has inserted the identification signature in the blank left for that purpose, might still, for his own protection, require that the indorsement be made in its presence. To give that provision a construction that made exercise of this right obligatory on any person relying on the specimen signature, we must, I think, distort the plain meaning of the circular and letter. The obligation referred to is evidently the obligation of a payee who demands payment at a depositary bank and, by the terms of the circular itself, may be waived even by such bank. It could have no application to the “ hundreds of merchants ” who were expected to accept the checks in reliance on the “ specimen signatures ” at their full value. To them the city had extended an unqualified invitation to rely on the specimen signature. It could have no application to a bank which thereafter received the checks from such merchants. The very purpose of the plan would be destroyed, at least in part, if a depositary bank refused to pay to a merchant who had become a holder of the check unless the merchant produced the indorser to make the indorsement in the presence of the paying officer of the bank.

Nor do I find more substance in the contention that there can be no estoppel as against any party who did not compare the indorsement with the specimen signature and, therefore, did not rely upon the specimen signature. Certainly no such contention could be validly made if after the indorsement by the payee, any intermediate indorser did make such comparison and did rely upon it. By such reliance such an intermediate indorser would obtain title by estoppel to the check. He would be a holder in due course and any subsequent holder who derives his title through a holder in due course, and who is not himself a party to any fraud or illegality affecting the instrument, has all the rights of such former holder in respect of all parties prior to the latter.” (Neg. Inst. Law, § 97.) An intermediate indorser, when sued upon his indorsement, could defend on that ground. Otherwise, again the purpose of the plan would be, in part, defeated. True, in this case there were no intermediate indorsers who were themselves holders in due course. The paying bank relied on the indorsement of the other banks and those banks, in turn, relied upon indorsements of parties to the forgery. None of the defendants, however, had knowledge or notice of the forgery. They were imposed upon by the wrongdoers.' If the city had carried out its representation or assurance that the employee to whose order the check was made would place his signature in the blank left for a specimen signature, then the forgers could not have perpetrated their crime and no one would have suffered a loss. Thus, the failure of the city to do the very thing which it had said it would do was the direct cause of the loss which Some party must bear.

The form of check devised by the city was intended to convey assurance that the specimen signature was the signature of the payee, to all parties who dealt' with the apparent holder. To all such parties the city owed a duty to see that the assurance did not fail. That assurance could not fail except through the crime or negligence of the city’s own agents, intrusted by the city with the duty of seeing that the city’s assurance would not fail. Because the city did give that assurance and its agents failed in that duty, persons acquired possession of the checks, which after insertion of the specimen signature, clothed them with the appearance of being holders in due course. The fact that those who dealt with the apparent holders relied rather on the guaranty of the wrongdoers than on the appearance of the checks is immaterial where it is shown that the wrongdoers would not have been able to give such guaranty or obtain its acceptance unless they had possessed an instrument to which apparently they could transfer a good title. Though the Bronx County Trust Company, in paying the checks to the indorsing banks, relied upon their indorsements, none the less it would have been justified in paying the checks upon a comparison of the specimen signature with the signature on the back of the checks. Upon such payment the plaintiff would have been estopped from claiming that the checks were forged. So, in this case, even though the indorsing banks relied upon the prior indorsements of the wrongdoers, they would have been justified in paying the checks to the wrongdoers by the appearance of the checks and then would have become holders in due course with the right to transfer their title to any person not a party to the wrong. A holding that the banks acquired, through reliance upon prior indorsements, less rights than they would have acquired if they had acted solely upon the appearance of the checks would create an intolerable confusion in the law of negotiable instruments. Both the Bronx County Trust Company and the indorsing banks acquired title to the instrument from parties who had apparent title to the instrument or who had been clothed by the city with apparent authority to transfer good title. That apparent title or the apparent authority was conferred by the instrument itself and appeared on the face of the instrument. The defendants dealing with such parties had no notice, actual or constructive, of any defect in the title of prior parties. The right of a purchaser for value of a negotiable instrument must be determined from the instrument itself unless there is notice of defect in the instrument or in the title of a prior holder. Here, concededly, there was none.

We have said that if the negligence of the depositor is the cause of the payment by the bank of a forged check he may not set up the invalidity of the paper which he has induced the bank to act on as genuine. This principle rests primarily on the doctrine of estoppel.” (Gutfreund v. East River Nat. Bank, 251 N. Y. 58, 63; Cf. National Surety Co. v. Manhattan Co., 252 N. Y. 247.) In such case, too, the bank almost invariably has acted in reliance primarily upon a prior indorsement, but where the negligence of the depositor gave appearance of validity it has never been suggested that the bank paying the forged check has not been induced by the negligence of the depositor to act on the check as genuine. The bank relies upon the prior indorsement but only upon the assumption that such indorser has good title to the instrument and all the rights conferred upon a holder by the instrument itself and it acquires those rights — neither more nor less.

Though the defendants relied upon the representation or guaranty of their intermediate indorsers that prior indorsements were valid, it was the fault of the city that made the representation or guaranty of the prior indorsers possible. If the city had, in terms, certified the specimen signature of the payee, it could not have escaped the obligation to make that certification good by any claim that the check was paid not in reliance of the certification, but in reliance on a subsequent indorsement. It gave written assurance to the defendants that “ The circular * * * describes the way employees make out checks so as to make the signatures, in effect, certified by the city.” That is the way in which any business man would interpret the circular, and the city, in good faith and fairness, should be held to such interpretation.

The judgment of the Appellate Division and that of the Special Term should be reversed so far as appealed from and judgment entered in favor of the defendant-appellants.

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

Judgment affirmed. (See 261 N. Y. 622.)


source: Caselaw Access Project

author: Pound, Ch. J.

license: Public Domain

text:
    City Bank Farmers Trust Company, Individually and as Trustee, Plaintiff, v. Anna F. Ernst et al., Appellants, and City Bank Farmers Trust Company, as Executor of Wood Fosdick, Deceased, et al., Respondents, Impleaded with Another.
    (Argued January 12, 1933;
    decided January 24, 1933.)

      WindsorB. Putnam and Fitzhugh McGrew for appellants.

      E. J. Dimock and Lewis L. Delafield for respondents.
   Pound, Ch. J.

The judgment appealed from is interlocutory and the appeal must be dismissed. (Civ. Pr. Act, § 588, subd. 1; Van Arsdale v. King, 155 N. Y. 325.) The action is for an accounting and a judicial construction of a deed of trust. The judgment construes the deed and directs an accounting. The appellants are entitled to the net income from two funds respectively during life. These funds consist of shares of the common stock of the General Electric Company. The question decided had to do with the meaning of the words “ net income.” Appellants contend that it includes not only cash dividends declared on the stock but also certain dividends, in form stock dividends, declared in stock of one of its subsidiary companies. Unquestionably the plaintiff must account to the beneficiaries for all cash dividends received on the two funds.

The deed of trust provided: “Anything hereinabove contained to the contrary notwithstanding, said Trustee shall transfer to said Donor, or if he is dead, to his executor or administrator, free of all trusts hereby created, any and all stock dividends which it may from time to time receive on any stocks held by it hereunder.” The cotut below has held that the stock dividends so declared belong to the residuary estate. This is a question of law arising in the course of the trial on the proper construction of the deed of trust but the judgment so holding does no more than decide that incidental question. The appellants remain in the action for all the purposes of the accounting.

The case is like Webster v. Webster (243 N. Y. 520). In that case, which was for the partition of several parcels of real estate, appellant Libbie Traktman, who claimed title from Henrietta Sarah Webster, was found to be entitled to a one-seventh interest in ten or more separate parcels of real estate. As to one parcel only she claimed to be the owner in fee. The courts below found against her but she was not held to have no interest therein. The judgment had no element of finality as to her. (Brown v. Feek, 204 N. Y. 238; Albany Hospital v. Albany Guardian Society, 214 N. Y. 435; Sinclair v. Purdy, 235 N. Y. 245; Matter of City of New York [Staten Island], 237 N. Y. 275.)

The case is not like Maggi v. Sabatini (250 N. Y. 296). There the interlocutory judgment put defendants out of the case by directing the execution of a deed and an assignment of a mortgage as well as an accounting. In that case the appeal from so much of the judgment as directed an accounting was dismissed but the appeal as to the other part of the judgment was entertained. Here the judgment construes a deed of trust and directs an accounting, but it does not put the appellant out of the case. It merely lays down a rule governing the accounting.

The appeal should be dismissed, with costs.

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

Appeal dismissed.


author: Lehman, J. Crane, J. (concurring). Hubbs, J. (dissenting).

text:
    I. Tanenbaum Son & Company, Respondent, v. C. Ludwig Baumann & Company, Appellant.

      (Argued November 22, 1932;
    decided January 27, 1933.)

      Edward S. Greenbaum and Jonas J. Shapiro for appellant.
    The- subject-matter of the action is not personalty, and replevin does not he. (Scharfman v. May-Claire Costume Co., 133 Misc. Rep. 482; Roach v. Curtis, 50 Misc. Rep. 122; 115 App. Div. 765; 191 N. Y. 387; Fryatt v. Sullivan Co., 5 Hill, 116; 7 Hill, 529; Cresson v. Stout, 17 Johns. 116; Automatic Sprinkler Corp. v. Rosen, 259 Mass. 319; U. S. Construction Co. v. Hamilton Nat. Bank, 73 Ind. App. 149; Madfes v. Beverly Development Corp., 251 N. Y. 12; East N. Y. El. Co. v. Petmaland Realty Co., 243 N. Y. 477; DeBevoise v. Maple Ave. Const.

      Co., 228 N. Y. 496; Tifft v. Horton, 53 N. Y. 377; Ford v. Cobb, 20 N. Y. 344; Voorhees v. McGinnis, 48 N. Y. 278; Gould v. Springer, 206 N. Y. 641.) The trial court erred in valuing the equipment as an installed system instead of valuing it as equipment removed from the premises. (Reno v. Bull, 226 N. Y. 546; Allen v. Fox, 51 N. Y. 562; Boston Chamber of Commerce v. Boston, 217 U. S. 187; Johnston v. Albany Dry Goods Co., 12 App. Div. 608; Moore v. Wood, 12 Abb. Pr. 393; Pennybecker v. McDouglas, 48 Cal. 160; Gosliner v. Briones, 187 Cal. 557; Matter of City of New York [Manhattan Ry. Co.], 229 App. Div. 617.) The trial court erroneously included moneys expended for work, labor and services. (Roth v. Felt, 60 Misc. Rep. 116.)

      Charles A. Houston and Mayer L. Half for respondent.
    The property, by agreement, retains its character as personalty, especially as it can be removed without substantial injury to the freehold and without destruction of the property. (Tifft v. Horton, 53 N. Y. 377; Duntz v. Granger Brewing Co., 41 Misc. Rep. 177; 96 App. Div. 631; 184 N. Y. 595; Davis v. Bliss, 187 N. Y. 77; Fitzgibbons Boiler Co. v. Manhasset Realty Co., 198 N. Y. 517; Madfes v. Beverly Development Corp., 251 N. Y. 12.) The value of the property, according to statute, must be fixed as of the time of the trial; to measure the value as though the sprinkler system had been actually removed while as a matter of fact it remains a working system would be tantamount to giving the system to the defendant, a wrongdoer, for nothing. (Civ. Prac. Act, § 1120; Suydam v. Jenkins, 3 Sandf. 614; Silsbury v. McCoon, 3 N. Y. 379; Worrall v. Munn, 53 N. Y. 185; Allen v. Fox, 51 N. Y. 562.) The item of money, representing labor expended in the erection of the sprinkler system, was properly considered in estimating its present value. (Starkey v. Kelly, 50 N. Y. 676.)
   Lehman, J.

The plaintiff installed a sprinkler system in premises, which were leased to the Brooklyn Furniture Company, under a contract made with that company and with the consent of the landlord. The contract provided that title should remain in the plaintiff and at the termination of the contract or breach or repudiation thereof by the Brooklyn Furniture Company, the plaintiff might, at its own cost and expense, enter upon the premises and remove any or all of the equipment. Though the sprinkler system remained the personal property of the plaintiff, its rights were qualified by the necessity of an actual severance of the chattels and their removal from the real property before it could obtain exclusive possession thereof. So long as the contract continued in existence the plaintiff obtained the benefit of the use of the sprinkler system in connection with those premises. Under the terms of the contract any reduction in the insurance rates upon the property of the Brooklyn Furniture Company, through the protection afforded to the premises by the sprinkler system, inured to the benefit of the plaintiff. The defendant thereafter entered into possession of the premises and purchased and acquired all of the assets of the Brooklyn Furniture Company with notice that the plaintiff had title to the equipment. Then the plaintiff demanded possession of the sprinkler system, and upon the refusal of that demand brought this replevin action. Final judgment was entered in favor of the plaintiff awarding to it possession of the chattels, recovered by it, with its damages and also awarding to the plaintiff the sum fixed as the value of the chattels to be paid to the plaintiff if possession is not delivered to it. The value of the chattels was fixed at the sum of $8,000. The evidence shows that this amount represents the value of the sprinkler system as a whole when affixed to and used in connection with the premises in the possession of the defendant. After removal of the sprinkler system from the premises its value would be much less. Thus, if possession is not delivered to the plaintiff and the defendant is compelled to pay to the plaintiff the amount contingently awarded against the defendant, the plaintiff will be in a much better position than if the defendant had complied with the plaintiff’s demand and permitted the plaintiff to remove the sprinkler system.

If any person had wrongfully taken the chattels from the premises while the contract was still in force, the wrongdoer would have interfered not only with the plaintiff’s right to remove the chattels at the termination of the lease, but also with the plaintiff’s right to enjoy the benefit of the chattels while affixed to the real estate. For damages caused to the plaintiff by such wrong, the plaintiff would have had a right of action against the wrongdoer. The measure of damages would then have been the value of the chattels at the time when affixed to the real property. Those damages could not be measured by the market price which could be obtained for the chattels in a dismembered state when removed from the real property, for such measure would represent merely the gain of the defendant caused by its wrongdoing and not the loss of the plaintiff. The plaintiff’s loss could be measured only by the value of the chattels in the place where the plaintiff had a right to maintain them and from which they were removed. Obviously there could be no market price for a sprinkler system in such position. There the value of the property would be estimated with reference to the most remunerative use by the owner, for which it is adapted. (1 Sedgwick on Damages, § 252; 4 Sutherland on Damages [4th ed.], § 1117; Washington Ice Co. v. Webster, 68 Me. 449; Stickney v. Allen, 10 Gray, 352.)

In such case the real wrong consists in the severance of the chattels and the only reasonable measure of damages must be the value of the property before severance. It is the possession of the plaintiff and not merely its right of possession which has been invaded. That rule has been applied in England where the action was brought in trespass. (Moore v. Drinkwater, 1 F. & F. 134; McGregor v. High, 21 L. T. Rep. 803; Thompson v. Pettit, 11 Jur. 748.) It has been applied in this State where carpets were wrongfully removed from a house occupied by the owner of the carpets. (Starkey v. Kelly, 50 N. Y. 676.) That rule has no application in this case.

It has no application because the defendant’s wrong consisted, not in severing and removing chattels from the place where they were affixed, but merely in refusing to allow the plaintiff to take possession of the property for the purpose of removal. For that purpose they must be severed by the plaintiff from the realty. “ In an action for the unlawful taking and conversion of a quantity of household goods, including carpets, upon the question of damages as to the latter, a charge was approved which directed the jury to inquire what would be the value * * * of the labor in cutting, making and putting them down ” (citing Starkey v. Kelly, 50 N. Y. 676), " but when the property so in place can no longer be there used by the owner and he is subject to summary removal its value will be estimated in case of conversion with reference to these facts; it will be estimated with reference to * * * the obligation or necessity of removal.” (4 Sutherland on Damages [4th ed.], § 1114, citing Moore v. Wood, 12 Abb. Pr. 393.) That distinction applies with peculiar force in this case. By transferring possession of the premises to this defendant, the Brooklyn Furniture Company breached its contract with the plaintiff. The plaintiff sued the Brooklyn Furniture Company for the damages caused by that breach and recovered a judgment for stipulated damages of $1,000 a year for each year during the term of the contract between it and the Brooklyn Furniture Company. These damages necessarily included the benefit which the plaintiff would have derived during that term from the use of the sprinkler system through reduction of the insurance rate on the property of the occupant of the premises. Though title to the sprinkler system still remained in the plaintiff and the plaintiff might maintain a replevin action against the Brooklyn Furniture Company or any other person, standing in the same position, who thereafter wrongfully detained the plaintiff’s property, an award fixing the value of the chattels as measured by their use as a sprinkler system would result pro tanto in double compensation to the plaintiff and a double liability on the part of the Brooklyn Furniture Company and any other wrongdoer. The defendant occupies the same position under the agreement that the Brooklyn Furniture Company would occupy if defendant, and the rights of the plaintiff as against this defendant are neither greater nor less than its rights would be if the Brooklyn Furniture Company were the defendant.

The measure of the value of the chattel when affixed to the real property does not apply for the further reason that the action of replevin, like the old action of trover, is founded not upon a claim that there is a wrongful taking of, or antecedent interference with, the plaintiff’s title or right of possession, but solely upon the claim that the defendant wrongfully withholds the property. “ The whole had been placed in the building by, the voluntary act of the appellee, and though they remained his property, it is clear that he could not have the right to possess them, except in the condition they would be in when severed. If he had instituted replevin to recover them, or if the appellant had permitted him to take them, he could possess them only as they would be when severed and removed from the building. It follows that the only measure of damages to which he is entitled, is the value of the articles when so severed, and the jury ought to have been so instructed.” (Walker v. Schindel, 58 Md. 360, citing Ewell on Fixtures, 441.) It is anomalous to base the right to maintain an action for a chattel upon a constructive severance of the chattel from the real property or a right to remove the chattel from the real property and at the same time to give to the chattel a special value which it would have only if it remained on the real property. (Cf. Pennybecker v. McDougal, 48 Cal. 160.) “ In the case of fixtures, however, the mode of valuation may differ materially, according to the form in which the action is brought. In trover, as we have seen, the plaintiff can only recover their value as chattels. But in trespass their actual value as fixtures may be given.” (Mayne on Damages [10th ed.], 399, 400.)

Apparently all the members of the court are agreed that these principles would ordinarily determine the measure of the value of a chattel, but a distinction is urged, based on some vague theory of justice such as is embodied in the doctrine that a wrongdoer may not profit by his own wrong. The final judgment is enforcible by execution and “ where the judgment awards a sum of money, if possession of the chattel is not delivered to the prevailing party, the execution must require the sheriff, if the chattel cannot be found within his county, to satisfy the sum so awarded * * * out of the property of the party against whom the judgment is rendered.” (Civ. Pr. Act, § 1126.) If the chattel can be found within the county then the sheriff “ must replevy it forthwith by taking it into his possession ” (Civ. Pr. Act, § 1100), at least if the plaintiff furnishes the required undertaking. The defendant is not given the option of delivering the chattel or paying the award. The plaintiff is entitled to the possession of the chattel if the sheriff can find it in the county and take it into his possession. Only if the defendant can successfully obstruct the plaintiff or the sheriff in taking the chattel into his possession would the plaintiff be entitled to enforce the contingent award of its value, but we are told that in such event, however improbable, the plaintiff should receive the value of the chattels as measured by the most profitable use to which the defendant could put them. That was the situation also in the cases above cited. The owner in each case was entitled to the possession of a chattel detached from real property and removed from that property. The judgment awards the owner possession of that chattel only, and the value fixed by the jury is the value of that chattel and nothing else. In this case we have, in addition, the fact that the plaintiff has already recovered a judgment in an action against the Brooklyn Furniture Company which includes damages for deprivation of any right it may have had to maintain the chattels in the position in which they were at the time of the plaintiff’s demand as well as at the time of the trial.

The doctrine that a wrongdoer may not profit by his wrong has been applied where the wrongdoer’s profits might have been enjoyed by the plaintiff except for such wrong. In Allen v. Fox (51 N. Y. 562) the court referred to a rule of damages which worked out that result. There the plaintiff in a replevin action obtained possession of a horse which the defendant claimed belonged to him, and retained that possession for a year and three months until the trial of the action. At the trial the jury found the title to the horse to be in the defendant and assessed its value at $175 and damages for its detention by the plaintiff at $75. The value of the horse was, of course, fixed at the time of the trial. The horse may have and probably did depreciate in value while detained and used by the plaintiff. The court held that six per,cent on the value of the horse did not measure the loss suffered by the defendant during the period of its detention by the plaintiff. By the wrongful detention of the plaintiff, the defendant had been deprived of the usable value of the horse and that constituted the measure of damages which the court held should be applied. Again in Suydam v. Jenkins (3 Sandf. 614) the court said that the value of a chattel which is wrongfully detained includes the profits which the wrongdoer has obtained by the sale of the chattel, or has in his power to obtain by a sale thereafter; for the same profits which the wrongdoer has realized or can realize could have been obtained by the plaintiff but for the wrong for which the plaintiff is entitled to damages. A careful search has disclosed no case in which the rule that a wrongdoer may not profit by his own wrong has been applied where such profits have no relation to the value of the chattel to the plaintiff or to the profits which the plaintiff might have obtained if the plaintiff had not wrongfully been deprived of title and possession to the chattels.

It is said that courts of other jurisdictions have adopted the principle applied by the trial court in this case. (Blake-McFall Co. v. Wilson, 98 Ore. 626; Smyth v. Stoddard, 203 Ill. 424.) Those cases present, however, a different problem. There title to chattels affixed to real property passed as fixtures to a purchaser for value of the real property, though they were installed under an agreement with a previous owner of the property that title should remain in the plaintiff. As between the plaintiffs and the previous owners there was a conversion of the chattels when they were sold as part of the real estate. The plaintiffs had no remedy against the purchasers, and could not bring actions for replevin. They sued the previous owners in conversion for the value of the chattels at the time of such sale. Though for the purposes of the conversion action the chattels were personal property, the owners, of the real property in converting those chattels had obtained their value as real property through an increase of the purchase price of the real property to which they were annexed. Otherwise the plaintiffs might have sold the fixtures to the purchaser of the real property at the same price. In principle, the cases are not different from one where value is shown by an actual sale instead of by market value, and the owner was deprived of an opportunity to use his chattels in the manner most profitable to him. That is a very different situation from the one presented here, where the plaintiff has brought an action to compel the delivery of chattels but claims a value for those chattels which the chattels could not have by reason of any use to which the plaintiff could put them if actually delivered to it.

It follows that 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.

Crane, J. (concurring).

The difference between the two opinions in this case appears to rest upon the determination of who has the right to take or keep physical possession of the property. Can the plaintiff insist that the sheriff seize the sprinkler system and remove it even if the defendant resists or is willing to pay the assessed value, or, on the other hand, does a choice exist in the defendant to let the property go, or keep it and pay the assessed value? If the latter alternative is the law, then the injustice of Judge Lehman’s result readily appears. Fixing the value of the system as removed reduces it to junk or to little value. Should the defendant be given the privilege to pay this small amount or detached value and keep the property as installed? He would thus profit by his own wrong, reaping the benefit of the labor entering into installation when only paying for the material.

However, on the other hand, if this action of replevin be solely a possessory action then the election of what to do rests with the plaintiff, not the defendant. The plaintiff can insist upon taking the property over all obstructions and objections raised by the defendant and may refuse the offer of the defendant to pay the assessed value. If he wants his property he can have it. The law then would fix the value as a chattel severed from the realty. In other words, the value which a judgment fixes is to be recovered or resorted to as a substitute for the property only when the property cannot be given to the plaintiff; it is not a substitute for the property merely because the defendant will not give it up. If this were not the meaning of sections 1124 and 1126 of the Civil Practice Act every action in replevin might take the form and become an action for conversion without the benefit of the rule of damage applicable to conversion.

There must be a remedy at law for the recovery of the actual possession of property when the owner desires it; forced sales cannot be accomplished through wrongful possession culminating in conversion. Let me illustrate. I may have a famous painting which has a commercial value, but which to me is worth much more than the money because of association and family connections. Having loaned this to another, as for instance, an art exhibitor, he refuses to return it. Can he keep it by electing to pay the commercial value as fixed by the judgment of the court in the action of replevin, under section 1124 of the Civil Practice Act? Certainly not. I may insist upon getting my picture back and demand that the sheriff seize it if it be in existence and capable of being repossessed. Nothing but destruction or lack of jurisdiction would amount to an obstacle to the sheriff’s authority.

These questions seldom have arisen and, I take it, seldom will arise, as in most of the cases of replevin the value, when fixed, is a sum which the plaintiff is willing to accept if the defendant desires to keep the property. Such no doubt is the result in all the conditional bill of sale cases and matters of commercial transaction or bargain and sale. However, then the acceptance of the money in place of the property is by agreement or the consent of the parties and not by the judgment of the court in replevin.

For these reasons I concur in the result reached in Judge Lehman’s opinion. The plaintiff is entitled to get his sprinkler system. He has been given the right to possess it and the value therefor is fixed as a chattel severed from the realty which will be given to him when he cannot obtain possession or retake it. The defendant has no election to keep the property and pay its value. If he could do this he then should pay the value of the property as a fixture or one installed upon the property, in other words, the Cost of installing it.

Hubbs, J. (dissenting).

This is a replevin action in which the > plaintiff has been awarded possession of a sprinkler system of the value of $8,000 together with damages amounting to $948.67 and costs and disbursements amounting to $162.35, or in the event that possession is not delivered to the plaintiff, the sum of $9,111.02.

The sprinkler system was installed by the plaintiff, an insurance broker, in buildings in the possession of the Brooklyn Furniture Company. The contract provided that title should remain in the plaintiff and that at the termination of the contract or breach or repudiation thereof by the Brooklyn Furniture Company, the plaintiff might, at its own cost and expense, enter upon the premises and remove any or all of the equipment.

The furniture company was a tenant of the building under a lease which would expire in 1946. The landlord consented in writing to the agreement under which the sprinkler system was installed.

The defendant entered into possession of the premises and purchased and acquired all of the assets of the Brooklyn Furniture Company. Prior thereto, defendant was informed of plaintiff’s title to the equipment. At the trial it was agreed that the defendant occupied the same position under the agreement that the furniture company would occupy if defendant.

Before the commencement of the action the plaintiff demanded possession of the sprinkler equipment, which demand was refused. Thereupon this action was brought to recover the possession of the equipment or its value, alleged to be $11,500, with damages for detention and costs and disbursements of the action. The action was tried before the court, a jury having been waived. It found the value of the sprinkler system at the time of the trial to be $8,000. There is evidence to support such finding, which has been unanimously affirmed by the Appellate Division.

The contract provided that the sprinkler'equipment should retain its character as personal property. Such a contract was valid between the parties and fixed the character of the equipment after it was installed. The general rule is that where the contract of sale of personal property which is to be attached to real property evinces conclusively the intent that it shall remain personal property until it is paid for, the intent may control the result which would ordinarily flow from the manner in which the personal property is attached to the real property.

The contract in question clearly evinces an intent that the sprinkler system should remain personal property. Moreover, there is testimony from which a finding could be made that the sprinkler system could be moved without loss of support to the building.

The trial court was justified in deciding that the sprinkler equipment retained its character as personal property. (Pers. Prop. Law, § 67; Brearley v. Cox, 24 N. J. L. 287; Ford v. Rowe, 195 Mass. 216; Detroit Steel Cooperage Co. v. Sistersville Brewing Co., 233 U. S. 712, 716; Gill v. DeArmant, 90 Mich. 425; Atlantic Realty Co. v. Wlodar, 119 App. Div. 850; Madfes v. Beverly Development Corp., 251 N. Y. 12; Goldberg & Sons, Inc., v. Weisberg-Goldman Corp., 260 N. Y. 690.) Being personal property, an action of replevin lies. (Harris Bros. v. Nichols, 247 Mich. 89; Brearley v. Cox, supra; cf. 26 C. J. 736, where many cases are collated in a note.

The principal contention of appellant is that the trial court committed reversible error in fixing the value of the property involved. The evidence was undisputed that the equipment if taken out of the building would be practically worthless; that it would cost as much to take it out as it would be worth when out. It was urged by appellant that the value of the system at the time of the trial should have been fixed at a mere nominal sum.

In approaching the solution of the question presented for determination, it is well to have in mind just what the plaintiff claimed and what the court found.

The complaint alleged that the equipment was personal property by reason of the terms of the contract; that plaintiff had a right to the possession of the same; that defendant was in possession thereof and refused to surrender possession to plaintiff after demand. All those facts were found in favor of the plaintiff. The judgment awarded possession to the plaintiff and fixed the value of the equipment at $8,000. The judgment after awarding possession of the chattels to plaintiff and fixing their value, provided or in the event that possession of the aforementioned chattels is not delivered to the plaintiff herein, the plaintiff * * * recover from the defendant * * * the sum of $8,000.00, the value ” thereof. Briefly, the judgment is that defendant wrongfully had possession; that plaintiff is entitled to possession or in the alternative to $8,000, the value of the chattels. Under the judgment the plaintiff is entitled to retake the chattels, or if it cannot retake them it is entitled to recover from the defendant $8,000, their value. If the defendant desires to purge itself of the wrong which it has committed in refusing to permit the plaintiff to retake its property, all that it has to do is to obey the judgment of the court and say to the defendant “ take your property.” Under the judgment, the defendant is not bound to deliver the equipment taken apart and put outside of the buildings. It did not place it in the buildings. It found it in the buildings when it took over the lease. (Nimon v. Reed, 79 Iowa, 524.)

Boldly stated, its contention is that it may refuse to obey the judgment, wrongfully prevent the plaintiff from taking its property, appropriate it to its own use and escape all liability to the plaintiff for its value except for a nominal sum, that is, what the materials in the system would be worth after removal, less the expense of removal. Manifestly there is something wrong with such contention.

“ A rule of damage [value] which works out such a result cannot have a basis of principle or justice to stand upon.” (Allen v. Fox, 51 N. Y. 562, 566.)

In an action of replevin under the English common law, the only relief which a plaintiff could obtain was a judgment awarding the possession of the property.

In our country the action has gone through a process of evolution by reason of statutory enactments, in most if not all of the States. In this jurisdiction the action may be maintained whenever (with exceptions not material here) personal property of a party has been wrongfully taken from bis possession or wrongfully withheld and the judgment in such action must be in the alternative awarding possession to the party found to be entitled thereto or in the event that possession cannot be obtained by the successful party, then that the prevailing party recover the value of the property to be fixed by the judgment. (Civ. Pr. Act, § 1124.)

The judgment in the case at bar so provides. It is only in the event that plaintiff cannot obtain delivery of the property in satisfaction of the judgment that it may recover its value as fixed in the judgment.

The value of the property must be fixed at the time of the trial.” That is the command of the statute, Civil Practice Act, section 1120. Its value at that time was its value as a sprinkler system, not as junk out on the sidewalk. The owner of the building is not a party to this action.

The same measure of value applies in this action where the defendant retains possession of the chattels, as would apply in an action where a plaintiff had replevied chattels and taken possession thereof and defendant sought a judgment for the return of the chattels or a judgment for their value. (Civ. Pr. Act, § 1119; 2 Sedgwick on Damages [8th ed.], § 529.)

If a defendant desires to retake chattels which have been replevied by a plaintiff, he must deliver to the sheriff an affidavit stating the value of the chattels and deliver an undertaking for twice their value as stated in the affidavit. (Civ. Pr. Act, § 1103.)

It would seem that the value to be stated in such affidavit should be the actual value of the chattels as they are at the time of making the affidavit.

Undoubtedly the general rule for measuring the value of the chattels sought to be recovered in a replevin action is the value of the chattels to the plaintiff. The rule is not inflexible, and courts will not permit an injustice to be done in order to follow a general rule, but will vary the rule in order to work out justice in extraordinary and unusual cases. Strict adherence to the general rule in this case would enable the defendant, a wrongdoer, to profit by a measure of value favorable to itself and unfair to the plaintiff. The defendant would be permitted to profit by its own wrong, in violation of a general principle involved in the law of damages. (Allen v. Fox, supra.)

We believe that the measure of value applicable under the facts of this case was stated by Judge Duer in Suydam v. Jenkins (3 Sandf. 614, 624): Even where the market value of the property, when the right of action accrued, would more than suffice to indemnify the owner, it is not in all cases, that the liability of the wrongdoer should be limited to that amount. It is for the value that he has himself realized, or might realize, that he is bound to account, and for which judgment should be rendered against him. Hence should it appear in evidence upon the trial, that he had in fact obtained upon a sale of the property a larger price than its value when he acquired the possession, or that he still retained the possession, and that an advanced price could then be obtained, in each case the increase upon the original value, (which otherwise would remain as a profit in his hands), ought to be allowed as cumulative damages.

“ We think it follows from the observations that have been made, and the illustrations that have been given, that the principles which we have stated as those which ought to determine the amount of the judgment, will be carried into effect in all cases by adding to the value of the property when the right of action accrued such damages as shall cover, not only every additional loss which the owner has sustained, but every increase of value which the wrongdoer has obtained or has it in his power to obtain; and we are satisfied, after much consideration, that there is no other mode of computation by which as a universal and invariable rule the same result can be obtained.”

Courts of other jurisdictions have adopted the principle applied by the trial court in this case. (Blake-McFall Co. v. Wilson, 98 Ore. 626; Smyth v. Stoddard, 203 Ill. 424.)

The judgment should be affirmed, with costs.

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

Judgments reversed, etc.


text:
    The People of the State of New York, Respondent, v. Nicholas Rutigliano, Appellant, Impleaded with Marcus Blumenthal, Albert Sileo, Theodore Adinolfi and Betty Stewart Green, Defendants.
    (Submitted January 16, 1933;
    decided February 28, 1933.)

      Jacob A. Segal for appellant.
    The court committed error affecting the substantial rights of the defendant in permitting the introduction and use against the defendant of evidence which was illegal and prejudicial. (People v. Smith, 172 N. Y. 210; People v. Marendi, 213 N. Y. 600; People v. De Paulo, 235 N. Y. 39; People v. Conrow, 200 N. Y. 356; People v. Sobieskoda, 235 N. Y. 411; People v. Collins, 235 N. Y. 355; People v. Sanacory, 234 App. Div. 628; People v. Infantino, 224 App. Div. 193; People v. Frasco, 187 App. Div. 299; People v. Purtell, 243 N. Y. 273.) The court committed error affecting the substantial rights of the defendant in refusing to charge the jury as requested. (People v. Montesanto, 236 N. Y. 396; People v. Odell, 230 N. Y. 481.)

      Thomas C. T. Crain, District Attorney (Felix C. Benvenga and Leroy Mandle of counsel), for respondent.
    Testimony as to the silence of defendant-appellant was admissible against him as conduct warranting the inference of an implied acquiescence in the truth of the statements made by a co-defendant. (Kelley v. People, 55 N. Y. 565.) If the preliminary statements were not admissible, the error, if any, in their reception, was cured by the subsequent introduction of competent testimony. (People v. Trybus, 219 N. Y. 18; People v. Mather, 4 Wend. 229.)
   Pound, Ch. J.

The indictment charges the kidnapping of Charles M. Rosenthal on August 11, 1931, and accuses four persons besides the appellant, namely: Marcus Blumenthal, alias John Markham, Albert Sileo, alias John Rocco, Theodore Adinolfi, alias Teddy,” alias Harry,” Betty Stewart Green, alias Selma Gross. All the defendants were tried together and, with the exception of Betty Green, were convicted.

The principal question involved on this appeal relates to the admissibility and effect of statements made by defendant Blumenthal in the presence of the appellant.

There is no question of the sufficiency of the evidence against appellant. He confessed to a substantial participation in the crime. He, however, remained silent when Blumenthal made statements, when both were in custody at police headquarters, which statements implicated appellant as the leader and instigator and master mind of the plot to kidnap Rosenthal. The admissibility of these statements against appellant was objected to but the objection was overruled and the court substantially charged the jury that such statements in connection with appellant’s silence were evidence against him which might be considered by it as tending to show guilty participation in the crime.

The learned court in holding that the silence of appellant in such circumstances was evidence against him, permitting the inference of an implied acquiescence in the truth of Blumenthal’s statements, seems to have followed the rule laid down in Kelley v. People (55 N. Y. 565, 571, 572) where the court said broadly that: Where an individual is charged with an offence, or declarations are made, in his presence and hearing, touching or affecting his guilt or innocence of an alleged crime, and he remains silent when it would be proper for him to speak, it is the province of a jury to interpret such silence, and determine whether his silence was, under the circumstances, excused or explained. * * * It is no objection to the admission of the declarations of the accused, as evidence, that they are made while he is under arrest, and his admission, either express or implied, of the truth of a statement made by others under the same circumstances is equally admissible. His conduct and acts, as well when in custody as when at large, may be given in evidence against him, and their cogency as evidence will be determined by the jury.”

The question when it would be proper for one accused to remain silent arose later. It was held that defendant’s silence could constitute no admission when he was accused in a language he did not understand and he did not know he was being accused (People v. Cascone, 185 N. Y. 317; People v. Lewis, 238 N. Y. 1, 5); or when statements were made in the course of judicial proceedings (People v. Willett, 92 N. Y. 29); or when accused was unconscious or shamming unconsciousness (People v. Koerner, 154 N. Y. 355); or when the district attorney sought to examine him and he refused to answer by advice of counsel (People v. Conrow, 200 N. Y. 356, 367); or when silence was enjoined. (People v. Kennedy, 164 N. Y. 449.) These cases and others hold that proof of such declarations made in the presence of the accused, even when competent, is dangerous evidence which should always be received with caution and only under such circumstances as would justify an inference of assent from the fact that the accused remained silent.

In People v. Smith (172 N. Y. 210, 234) and in People v. Marendi (213 N. Y. 600, 613) the court said that silence could not be construed as an admission when accused was under arrest and that he was not then called upon to speak or deny an accusation, thus adopting the law as laid down in the Massachusetts case of Commonwealth v. McDermott (123 Mass. 440) and in other jurisdictions (McCarthy v. United States, 25 Fed. Rep. [2d] 298; Wigmore on Evidence [2d ed.], § 1072) as authority for the rule.

The Massachusetts rule is stated as follows: A person who is held in custody on a charge of crime, jointly with another person is not called upon to contradict statements prejudicial to him, made in his presence by the other person, in answer to inquiries made by an officer; and such statements, though not contradicted by him, are not admissible as evidence against him.” (Commonwealth v. McDermott, supra.)

This is not in accord with the rule as broadly stated in the Kelley Case (supra). The statement made in the later New York cases is dictum, but well-considered dictum. Although these cases do not in terms reject the rule laid down in the Kelley case they are inconsistent with it. To avoid confusion we must take it that New York has adopted the Massachusetts rule as stated above. It is a wise rule. Although Wigmore (supra, p. 560) calls it a rule of thumb ” it is at least simple and certain. No cautious person, when in custody, accused of crime would care to enter into a discussion of his guilt or innocence with his captors and co-defendants, when what he said might be used against him. It cannot be said that “ the declaration was [in such circumstance s] in substance a challenge to [him] to assert [his] innocence if [he] were not guilty.” (Kelley v. People, supra, at p. 573.) He is then under no duty to speak and his silence should not be counted as giving assent to what he hears. • If he had counsel, he would doubtless be advised not to talk. If he had not, he should not be prejudiced thereby.

It does not follow that the judgment of conviction must be reversed. The error was cured by the subsequent introduction of competent evidence (People v. Trybus, 219 N. Y. 18, 23) of voluntary confessions, so that no substantial right of defendant was prejudiced. In this case such error should be disregarded. (Code Crim. Pro. § 542.)

Requests to charge in the language of judicial opinions as to the weight of statements of accused when under arrest were properly refused. The idea that the language of a judicial opinion in one case has any peculiar sanctity as applied to another case is quite without foundation. Judicial opinions are written to guide the judge as to the law, not to standardize the language to be used in instructions to the jury.

The judgment should be affirmed.

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

Judgment affirmed.


author: Per Curiam.

text:
    The People of the State of New York, Respondent, v. Emil Dolce, Appellant, Impleaded with Louis Gallo and William Russo, Defendants.
    (Argued January 24, 1933;
    decided February 28, 1933.)

      Louis J. Barrish and Robert D. Fleming for appellant.
    Error was committed, in the ruling that the statement or confession, alleged to have been made by a co-defendant, after the arrest of the three defendants, was admissible against the appellant. (People v. McQuade, 110 N. Y. 284; People v. Kief, 126 N. Y. 661; People v. Peckens, 153 N. Y. 576; People v. Kennedy, 164 N. Y. 456; Spencer v. Read, 217 Fed. Rep. 508; Kelley v. People, 55 N. Y. 565; People v. Smith, 172 N. Y. 234; People v. Marendi, 213 N. Y. 613.)

      William, F. X. Geoghan, District Attorney (Henry J. Walsh of counsel), for respondent.
    The co-defendant’s accusations against the appellant were competent testimony from which the appellant’s guilty participation in the conspiracy might be inferred from his failure to deny them. (Kelley v. People, 55 N. Y. 565; People v. Cascia, 191 App. Div. 376.)
   Per Curiam.

Evidence of appellant’s silence while under arrest when incriminating statements were made in his presence by his co-defendant Russo in reply to a police officer was received in reliance on Kelley v. People (55 N. Y. 565, 572-574) as admissions of the truth of such statements sufficient to establish appellant’s guilty participation in the conspiracy.

While the objection was not directed specifically to this point, the exception to the ruling under which the statements were received was sufficient to raise the question.

In People v. Rutigliano (261 N. Y. 103) we have held that a person in custody on a charge of crime jointly with another person is not called upon to contradict statements prejudicial to him, made in his presence by the other person, in answer to inquiries made by an officer; and that such statements, though not contradicted by him, are not admissible in evidence against him.

This evidence was relied on to secure a conviction and its reception was material error.

The judgment should be reversed and a new trial ordered.

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

Judgment reversed, etc.


author: Hubbs, J.

text:
    In the Matter of the Claim of Thomas Hall, Respondent, against The Salvation Army, Appellant, and Liberty Mutual Insurance Company, Respondent. The State Industrial Board, Respondent.
    (Argued January 10, 1933;
    decided February 28, 1933.)

      Francis Smyth and J. Delafield DuBois for appellant.
    The claimant was not employed within the meaning of the Workmen’s Compensation Law. (Brooklyn Children’s Aid Society v. Industrial Board, 136 Misc. Rep. 379; 231 App. Div. 845; 256 N. Y. 651; Burns v. Manchester Mission, 99 L. T. 579; Matter of Bernstein v. Beth Israel Hospital, 236 N. Y. 268.) The Salvation Army and claimant did not enter into a contract of hire. (Ferro v. Sinsheimer Estate, Inc., 256 N. Y. 398; Opinions of Attorney-General (1928), pp. 224, 225; Burns v. Manchester Mission, 99 L. T. 579; Matter of Nilsen v. Trustees of Sailors Snug Harbor, 230 App. Div. 797; Rugg v. Norwich Hospital, 205 App. Div. 174; Dillon v. Trustees of St. Patrick’s Cathedral, 234 N. Y. 225; Loveland v. Parish of St. Thomas’ Church, 1 Conn. W. C. Com. Dig. 14.)

      John J. Bennett, Jr., Attorney-General {Roy Wiedersum, Joseph A. McLaughlin and Hector A. Robichon of counsel), for State Industrial Board, respondent.
    The Industrial Board properly held the appellant liable as an employer of the claimant under the Workmen’s Compensation Law. (Matter of Nilsen v. Trustees of Sailors Snug Harbor, 230 App. Div. 797.)
   Hubbs, J.

Claimant has been awarded compensation on account of injuries received while working in the industrial home ” maintained by the Salvation Army at 535 West Forty-eighth street, New York city.

We agree with the Appellate Division that workmen employed in carrying on work in the home ” come within the provisions of the Workmen’s Compensation Law and are covered by it provided they are employed- under any contract of hire, express or implied, oral or written,” unless they fall within excepted classes not material here. (Workmen’s Compensation Law; Cons. Laws, ch. 67, § 3, group 18, as amd. by Laws of 1928, ch. 755; Laws of 1929, chs. 304 and 702.)

The question here for determination is whether the claimant was at the time of the injury employed under a contract of hire, expressed or implied. The Industrial Board has found as a fact that he was and that decision has been affirmed by the Appellate Division. If the record contains evidence upon which that finding was based, we are bound by it. (Workmen’s Compensation Law, § 20; Matter of Dale v. Saunders Bros., 218 N. Y. 59.)

We are satisfied that there is evidence in the record which sustains such finding.

Claimant, who had been a cook, came to the “ home ” as a charity inmate. He testified that after he had been there a few days he was put to work serving meals and served three meals a day. He was told that he would be put on the payroll and would receive his board, room and three dollars a week.

The work which he did was of the same nature as the work which he performed before he came to the “ home ” and was necessary to the carrying on of the activities of the home.”

It is clear that claimant was under the control and direction of appellant, doing its regular work for its benefit and could be discharged by it. The relationship which existed was, therefore, that of employer and employee.

It is earnestly urged by appellant that the statute should not be held to cover inmates of the home ” who are taken in as a matter of charity, furnished with board and lodging, and sometimes given clothing and small sums of money, even though such persons are required to perform slight manual services for the purpose of maintaining their health and building up their morale.

We do not intend this decision to cover such cases. We are merely deciding that the findings of the “ Board ” in the case at bar are sustained by some evidence.

It may well be that inmates of the “ home ” who are taken in as a matter of charity, and permitted to remain upon condition that they perform some labor in and about the “ home ” are not retained therein “ under any contract of hire, express or implied.” (Ferro v. Sinsheimer Estate, Inc., 256 N. Y. 398.)

The order should be affirmed, with costs.

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

Order affirmed.


author: Crouch, J.

text:
    Wellington Kenwell, Appellant, v. Clarence F. Lee, as Supervisor of the Town of Inlet, et al., Respondents.
    (Argued December 13, 1932;
    decided February 28, 1933.)

      Charles E. Snyder for appellant.
    Defendants have no constitutional right to take and appropriate Bug lake on State-owned land in the Forest Preserve, and issue bonds of the town of Inlet to pay for so doing. (Association v. MacDonald, 253 N. Y. 234; People v. Santa Clara Lumber Co., 213 N. Y. 61; People v. Witherbee, 178 App. Div. 368; People v. Baldwin, 197 App. Div. 285; People v. Gaylord, 139 App. Div. 814; Pashley v. Bennett, 108 App. Div. 102; Adirondack R. R. Co. v. Indian River Co., 27 App. Div. 326; 160 N. Y. 225.)

      James C. Tormey and Alton C. O’Hara for respondents.
    The Inlet water district was legally and properly organized. (Eastman Kodak v. Richards, 123 Misc. Rep. 83; O’Donoghue v. Boies, 159 N. Y. 87; Matter of Doey v. Howland Co., 224 N. Y. 30; Laws 1926, ch. 470, § 7; Matter of Syracuse, B. & N. Y. R. R. Co. v. Van Amburgh, 223 App. Div. 485; 251 N. Y. 548.)
   Crouch, J.

Inlet is a town in Hamilton county, N. Y. It is entirely within the Forest Preserve of the State. Its area is 40,546 acres, all of which except 1,500 acres at most is wild forest land. About one-half of it is owned by the State. The permanent population, according to the last census, is 257. There is a transient summer population of perhaps 3,000. The center of the population both permanent and transient is the hamlet of Inlet.

In 1930 the town board, purporting to act pursuant to the provisions of the Town Law (Cons. Laws, ch. 62), sections 282 et seq., and of the General District Law (L. 1926, ch. 470), established a water district, the boundaries of which were coterminous with the boundaries of the town, and appointed a board of water commissioners. The project contemplated Bug lake as a source of water supply and $110,000 as the maximum expense of construction. .As Bug lake is on lands owned by the State in the Forest Preserve, its use as a reservoir could be had only upon compliance with the provisions of and subject to the limitations imposed by article VII, section 7, of the State Constitution, and article XIII of the Conservation Law (Cons. Laws, ch. 65). Accordingly, the board of water commissioners of the Inlet water district applied to the State Water Power and Control Commission for the approval of the plans and for consent to use Bug lake as a reservoir with incidental land necessary for the project. After a hearing modified plans were approved and the consent asked for was granted. Thereafter at a meeting of the town board of the town of Inlet, the issuance of bonds aggregating $110,000 for the construction of the water system was authorized, with a provision that there should be levied, assessed and collected annually upon the taxable property of the town a sum sufficient to pay the principal and interest as the same became due and payable. This action was brought by plaintiff as .a taxpayer under section 51 of the General Municipal Law (Cons. Laws, ch. 24), to enjoin the issuance of the bonds. The complaint was dismissed by the trial court and the judgment was affirmed by the Appellate Division.

The case is here upon the principal contention that the judgment is in direct violation of article VII, section 7, of the State Constitution, in that the expense of the improvement, instead of being apportioned on the. public and private property and municipalities benefited to the extent of the benefits received,” has been made a charge upon the taxable property of the town,” without an apportionment of benefits. The effect of this, it is said, is not only to deprive plaintiff of a constitutional right and adversely to affect his property and injure him, but also to burden the State with a heavy tax on its wild forest lands — one-half of the town’s entire area — which are doubtfully, if at all, benefited. The view which we take of the matter renders it unnecessary to discuss either that contention or the many other alleged errors and defects, both of form and substance, which are pressed to our attention.

We are disposed to doubt the legality of creating a water district which covers the entire area of a town. Section 282 of the Town Law relates only to the establishment of “ a water district outside of an incorporated city or village and wholly within such town.” Article 13 of the Town LaW will be searched in vain for any authority in a town as such to construct a water works system. Considering the wide range of legislation on the general subject of water supply for the various communities of the State, the omission of such authority may not be deemed inadvertent. What may not be done directly may not ordinarily be done by indirection. The desirability for financial reasons of including the State’s wild forest lands in the project here, is not an adequate ground for varying the general rule.

The fundamental difficulty with the entire proceeding lies in the fact that the town which is a municipality is not authorized to establish a water supply system; and that the water supply district, even assuming that it has been legally created, is not a municipality within the meaning of article VII, section 7, of the Constitution. It is there provided that: “ The lands of the State, now owned or hereafter acquired, constituting the forest preserve as now fixed by law, shall be forever kept as wild forest lands. * * * The Legislature may by general laws provide for the use of not exceeding three percentum of such lands for the construction and maintenance of reservoirs for municipal water supply, for the canals of the State and to regulate the flow of streams.”

The first sentence sounds the original and dominant note of the State’s policy with reference to the Forest Preserve. The subsequent amendments but serve to accentuate it. In view of that policy the courts have adhered to a strict and literal construction of the entire section. (People v. Adirondack Ry. Co., 160 N. Y. 225; Assn. Protection Adirondacks v. MacDonald, 253 N. Y. 234.) We think the words municipal water supply ” mean supply of Water to a municipality,” and not to a water district.

''A' municipal corporation ’ includes a county, town, school district, village and city and any other territorial division of the state established by law with powers of local government.” (General Corp. Law; Cons. Laws, ch. 23, § 3, subd. 1.) While a water district, for the special objects of certain statutes, has been included as a matter of convenient reference within the terms “ municipal corporation,” or municipality ” (e. g., Gen. Mun. Law, § 29; L. 1927, ch. 654, § 2), it is essentially and only “ a special administrative area.” (Holroyd v. Town of Indian Lake, 180 N. Y. 318; People ex rel. Farley v. Winkler, 203 N. Y. 445; People ex rel. Hon Yost v. Becker, 203 N. Y. 201; People ex rel. Desiderio v. Conolly, 238 N. Y. 326, 331, 332.)

So far as section 540 of the Conservation Law purports to authorize a water district to make application for the construction and maintenance of a water supply reservoir on lands owned by the State in the Forest Preserve, it is without warrant in the Constitution. The Water Power and Control Commission, therefore, had no jurisdiction to entertain the.application and to grant approval and consent.

The judgments should be reversed and judgment in favor of the plaintiff granted, with costs in all courts.

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

Judgments reversed, etc.