text:
    In the Matter of the Accounting of Guisippina Tarascandola, as Administratrix with the Will Annexed of the Estate of Joseph Auditore, Deceased. John J. Kean et al., Appellants; Jennie Parascandola et al., Respondents.

      Argued April 12, 1938;
    decided May 24, 1938.

      Edward H. Wilson and John J. Kean, appellants in person.
    The Surrogate’s Court had no jurisdiction of the counterclaims asserted by the respondents. (Matter of Connell, 196 App. Div. 639; Matter of Thompson, 184 N. Y. 36; Klein v. Board of Supervisors, 282 U. S. 19; Pagel, Horton & Co. v. Harmon Paper Co., 236 App. Div. 47; Matter of Dollar, 103 Misc. Rep. 137; 231 N. Y. 545; Schell v. Mayor, 128 N. Y. 67; Matter of Langslow, 167 N. Y. 314; Matter of Bailey v. Rutherford, 242 N. Y. 220; Matter of Proctor, 267 N. Y. 109; Matter of Hammer, 237 App. Div. 497; 261 N. Y. 677; Matter of O’Brien, 146 Misc. Rep. 555; Matter of Wilson, 252 N. Y. 155.) Assuming that there was jurisdiction in the Surrogate’s Court to make a determination as to the respondents’ counterclaims, the trial and the result were replete with reversible errors. (Sokoloff v. National City Bank, 130 Misc. Rep. 66; 223 App. Div. 754; Kingston Bank v. Gay, 19 Barb. 459; Persons v. Gardner, 122 App. Div. 167; Luckenbach v. McCann Sugar Co., 248 U. S. 139; Matter of Sheldon, 118 App. Div. 488; Tennant v. Dudley, 144 N. Y. 504; Merkling v. Ford Motor Co., 251 App. Div. 89; Matter of Hopson, 213 App. Div. 395; Hartley v. Eagle Ins. Co., 222 N. Y. 178; Matter of Montgomery, 158 Misc. Rep. 412; 248 App. Div. 809; 272 N. Y. 323; Gallin v. National City Bank, 152 Misc. Rep. 679; Seitz v. Union Brass & Mutual Mfg. Co., 152 Minn. 460; Robertson v. Schoonmaker, 158 Misc. Rep. 627; People v. Equitable Life Assur. Society, 124 App. Div. 714.) The Surrogate and the Appellate Division failed to consider properly the value of the services rendered by the petitioners specified in the petitions. (Matter of Steinberg, 153 Misc. Rep. 339; Matter of Starbuck, 221 App. Div. 702; 248 N. Y. 555; Morehouse v. Brooklyn Heights R. R. Co., 123 App. Div. 680; 195 N. Y. 537; Grant v. Fletcher, 283 Fed. Rep. 243; Hutchinson Box Board & Paper Co. v. Van Horn, 299 Fed. Rep. 424; Bandall v. Packard, 142 N. Y. 47; People v. Bond St. Sav. Bank, 10 Abb. N. C. 15; Glidden v. Cowen, 123 Fed. Rep. 48; Prager v. New Jersey Fidelity & Plate Glass Ins. Co., 245 N. Y. 1; Preston Co. v. Funkhouser, 261 N. Y. 140.)

      Peter A. McCabe and Robert E. Lee for Jennie Parascandola et al., respondents.
    The Surrogate had jurisdiction. (Matter of Rosenberg, 263 N. Y. 357; Matter of Anderson, 257 N. Y. 592; Matter of Bucken v. Busch, 203 App. Div. 717; Matter of Hess, 133 App. Div. 654; Schell v. Mayor, 128 N. Y. 67; Anderson v. New York & Harlem R. R. Co., 150 App. Div. 432; Matter of Dollar, 231 N. Y. 545; Matter of Morris, 134 Misc. Rep. 374; Matter of Raymond v. Davis, 248 N. Y. 67.) All moneys received by appellants for services were properly considered in applying the principle of quantum meruit. (Bandall v. Packard, 142 N. Y. 47; Hubbard v. Hubbard, 242 App. Div. 749; People v. Knickerbocker Trust Co., 127 App. Div. 215.) The appellants are answerable for their conduct as attorneys and fiduciaries. (Matter of Langdon, 139 Misc. Rep. 379; Keating v. Hammerstein, 125 Misc. Rep. 334; Quaid v. Ratkowsky, 183 App. Div. 428; Page v. Arkansas National Gas Corp., 53 Fed. Rep. [2d] 27; Finch Co. v. Robie, 12 Fed. Rep. [2d] 360; Meinhard v. Salmon, 249 N. Y. 458; Matter of Dollar, 103 Misc. Rep. 137; Matter of Hulett, 231 N. Y. 545.)

      Thomas Cradock Hughes, as special guardian for Carmelo Auditore, respondent.
    The services rendered by the appellants to the estate corporations and the moneys which were taken from the corporate treasuries by appellants are properly cognizable in the instant proceeding. (.Matter of Auditore, 249 N. Y. 335.) The Surrogate had power to direct the appellants to refund to the estate the excess received over the sum due them. (Matter of Anderson, 257 N. Y. 592.)
   Lehman, J.

The testator, Joseph Auditore, died in May, 1920. His widow, Guisippina Auditore, now Guisippina Tarascándola, and Frank Auditore, his brother, were appointed administrators with the will annexed of the goods, chattels and credits of the decedent. Frank Auditore violated the trust confided in him. He was removed as administrator. He and the surety upon his bond, as administrator, were held responsible for the loss caused to the estate by his breach of trust. (Matter of Auditore, 249 N. Y. 335.) The appellants John J. Kean and Edward H. Wilson acted as attorneys for the administratrix in the proceedings to recover for the estate the loss caused to it by the wrongful acts and neglect of Frank Auditore. As a result of their skill and work, the surety on the administrator’s bond was compelled to pay to the estate the sum of $254,148.72 in October, 1931. Then the appellants filed a petition in the Surrogate’s Court asking that their compensation for services rendered to the estate be fixed and determined in accordance with the provisions of section 231-a of the Surrogate’s Court Act. The proceeding to fix the compensation of the appellants was consolidated with a proceeding instituted by the administratrix for the settlement of her account and on December 30, 1931, upon the consent of, or, at least, without objections from, the persons interested in the estate, an order was made by the Surrogate which provided that the sum of $50,000 be paid to the appellants “ on account of compensation for their services rendered to the estate of Joseph Auditore.” Objections to any payment of compensation beyond that amount were filed by the legatees.

The appellants filed a supplementary petition for compensation for additional services. The legatees, contend-mg that the appellants had been overpaid, asked the court to compel the appellants to refund to the estate such alleged overpayment. The controversy was referred to a referee to hear and determine. He found that there has been an overpayment to the attorneys in the amount of $29,305.29, and that they should be directed to refund to the estate such excess sum.” His report was confirmed by the Surrogate and the order confirming the report was unanimously affirmed by the Appellate Division.

The testator, during his lifetime, was associated in the business of stevedoring and shipping with his brother Frank. The business was conducted in corporate form. For that purpose a number of corporations were formed to conduct the enterprises of the two brothers. The testator and Frank Auditore each owned half the stock in these corporations, and, during the lifetime of the testator, they together conducted the corporate business. After Frank Auditore was appointed administrator with the will annexed of his brother’s estate, he held all the stock of these corporations — one-half in his own right and one-half as administrator — and he controlled and managed the corporations. In his management of the affairs of the corporations, after the death of his brother, Frank Auditore misappropriated the funds of the corporation. In 1923 Mrs. Parascandola, as administratrix with the will annexed of the estate of her husband, brought a stockholder’s action in behalf of the corporations against Frank Auditore, individually and as her co-administrator, to recover for the corporations the amount which Frank Auditore had taken from the corporations. The appellants were retained by Mrs. Parascandola to bring that action and, thereafter, to avoid the appointment of a receiver in that action, the parties agreed that the appellants should become officers and directors of the corporations. Since November, 1923, the appellants have controlled and managed the affairs of the corporations.

For the services rendered to the corporations the appellants should receive reasonable compensation from the corporations. Benefit to the corporations would, of course, indirectly benefit the testator’s estate. Indeed, the stock of the corporations was the only asset of substantial value in the estate, and the estate would, upon the liquidation of each corporation, be entitled to half the surplus remaining after the creditors of each of the corporations were paid. When the appellants were placed in control of the corporations, a duty towards the corporations arose to exercise that control faithfully and for the benefit of the corporations. They were, however, placed in control of the corporations only because they had been retained by the estate for the protection of the interests of the estate. In the exercise of that control they owed a duty to the estate as well as to the corporations. Thus, the duty of the appellants to the corporations and the services which they rendered to the corporations arose out of and are inextricably tied up with their duty to the testator’s estate and their services to the estate. Nevertheless, even if it were possible to disregard the corporate form of the business in which the testator and his brother Frank were jointly interested, it would still be true that the estate could profit only indirectly from services rendered in the conduct of the joint business, through its right to a share in the surplus remaining after the business was liquidated, and that compensation for services rendered to the business must be deducted before that surplus can be fixed.

The stockholder’s action brought by the appellants resulted in a large judgment against Frank Auditore in favor of the corporations. A judgment for a sum of money is only a trophy of an empty victory unless it is collected and it was impossible to collect the judgment from Frank Auditore, for he was insolvent. Until that point, the appellants had sought recovery from Frank Auditore only for damages caused to the corporations by breach of duty which Frank Auditore owed to the corporations which he controlled. Indirectly that breach of duty to the corporations had, of course, damaged the estate of which Frank Auditore was administrator, and which owned half the stock of the corporations, and constituted a wrong to the estate. The appellants, thwarted in their attempts to collect damages for wrong to the corporations, successfully asserted the claim that Frank Auditore as administrator and the surety on his bond were responsible for the loss caused to the estate by his misappropriation of the funds of corporations in which the estate was a stockholder. The surety was compelled to pay to the estate the amount of that loss. (Matter of Auditore, 249 N. Y. 335.) The estate was made whole. A fund of $250,000, after deducting therefrom the reasonable cost of collection, became available for distribution among the creditors and legatees of the testator. The corporations did not share in the recovery. The appellants, through whose skill and labor the estate was enriched, are entitled to compensation from the estate for sendees rendered exclusively for the benefit of the estate.

For services rendered in obtaining recovery of the loss caused by the wrongdoing of Frank Auditore and for other services rendered exclusively for the benefit of the estate, the appellants claim that they are entitled to receive much more than the $50,000 which by direction of the Surrogate was paid to them “ on account ” in December, 1931. In addition the appellants have withdrawn from the funds of the corporations in which the estate had a half-interest the sum of $130,305.29 as compensation for services rendered to the corporations from which the estate derived an indirect benefit. Thus, the appellants have received the total sum of $180,305.29 for services rendered directly to the estate, and for services rendered to the corporations, but primarily for the protection of the interests of the estate and which indirectly benefited the estate. The referee reported that the value of the services rendered directly to the estate did not exceed the sum of $50,000, and that “ the value of the services, for which the petitioners have withdrawn from the corporations the sum of $130,305.29 did not exceed the sum of $101,000. Stated in another way I think that payment of $151,000 to petitioners for all their services to the estate and to the corporations will adequately, fairly and, in fact, most liberally compensate them for all their services.” Previously the referee had requested the Surrogate to rule upon the question of whether he had jurisdiction to pass upon the reasonable amount of the compensation for services rendered by the appellants to the corporations and to direct a refund if he should find that the total amount paid to, or retained by them for services rendered as attorneys, exceeds the sum to which they would be entitled upon principles of quantum meruit. Instructed by the Surrogate that he had such jurisdiction, the referee made the finding “ that there has been an overpayment to the attorneys in the amount of $29,305.29 and that they should be directed to refund to the estate such excess sum.”

We have pointed out that the estate owned only half the stock of the corporations and was entitled only to half of the profits of the corporations or, in case of liquidation of the business of the corporations, to one-half of the capital after payment of the creditors. The trustee in bankruptcy of Frank Auditore had the same interest as the administratrix of the estate. The administratrix and the trustee in bankruptcy could, through stock control, choose directors and officers who would manage the corporations. Neither had power, in official capacity, to manage the business of the corporations. It is, therefore, evident that the corporations and the estate were not identical, and the corporate form may not be disregarded as a mere cloak concealing the estate. Though, as we have pointed out, the appellants in the control of the corporations owed a duty to both the corporations and the estate; though the services rendered to the corporations were connected with and arose out of their retainer by the administratrix; yet the corporations were the primary beneficiaries of the services rendered to them; the corporations were primarily liable for such services, and if there has been overpayment from the corporate funds, the corporations primarily are injured by such over-payments. A “refund” cannot be made to the estate of moneys which never belonged to the estate, and the moneys paid to or retained by the appellants for services to the corporations never belonged to the estate.

It is difficult under these circumstances to find any sound basis for the assumption by the Surrogate’s Court of power to determine what would constitute a reasonable compensation for services rendered to the corporations and to direct the “ refund ” to the estate of any overpayment from funds of the corporations. The power of the Surrogate is defined by section 231-a of the Surrogate’s Court Act. Under its provisions the Surrogate has power to fix and determine the compensation of an attorney “ for services rendered to an estate or to its representative, or to a devisee, legatee, distributee or any person interested therein,” and the Surrogate may direct “ payment therefor from the estate generally or from the funds in the hands of the representative belonging to any legatee * * * therein.” By chapter 332 of the Laws of 1934, while the proceedings now under review were pending, the Legislature added to the section a provision that “ in the event that any such attorney has already received or been paid a sum in excess of the fair value of his services as thus determined, the surrogate shall have power to direct him to refund such excess.” The corporations, which are primarily liable for compensation for services rendered to them and from whose moneys the alleged overpayment has been made are, as we have shown, not identical with the estate. They are not in any sense devisees, legatees, distributees or persons interested in the estate. The funds, from which payment has been made for services rendered primarily to the corporations, have never belonged to the estate and have never been “ in the hands of the representative ” of the estate. The corporations are not parties to these proceedings; they are not bound by any adjudication of the Surrogate in these proceedings, and though the Surrogate has held that the appellants have overpaid themselves, the refund ” of such alleged overpayment, if made to the estate, cannot inure to the benefit of the creditors of the corporations whose funds have been used for such overpayment, or to the trustee in bankruptcy who has the same interest in the corporations and the funds of the corporations as the estate.

Various theories have been suggested by the surrogate and urged by the respondents to sustain the direction for a refund ” to the estate. None can successfully withstand analysis when applied to the undisputed facts in this case. For the reasons already stated, the corporate form does not serve merely to mask the fact that the estate owns and manages the business of the corporations. Here there is no identity in ownership or in control. What the court said and decided in Matter of Auditore is misconstrued if relied on as authority for a riding that corporate form may here be disregarded and the assets and business of the corporations treated as the assets and business of the estate. In that case the court held only that an administrator of an estate who misappropriates the funds of a corporation in which the estate is a stockholder, commits a wrong to the corporation, and can be compelled to restore to the corporation the moneys taken, and at the same time commits a wrong to the estate, by diminishing the value of the stock owned by the estate, for which wrong the administrator must respond in damages. In the prevailing opinion by Crane, J., the court pointed out that in reaching that conclusion we do not “ have to ignore the corporation or the corporate form” (p. 342). On the contrary, the rule of the case would apply even where the estate was a small minority stockholder in a great corporation.

Nor can a direction for a refund to the estate of moneys taken from the corporations be justified on any theory of estoppel. Even if the appellants had assumed to treat the assets of the corporations as though they belonged to the estate, the appellants could certainly not thereby confer upon the estate title to the corporate assets. Reasonably construed, section 231-a confers upon the Surrogate a power to direct an attorney who has received or been paid a sum in excess of the fair value of the services as determined, by the Surrogate, to refund such excess only to the estate or person from whose moneys such excess had been paid. The direction here for a refund to the estate can be sustained only if it appears that the alleged overpayment was made from the moneys of the estate.

There is no evidence or finding that the appellants have been paid from moneys of the estate more than the reasonable value of services rendered to the estate and for which the estate is primarily responsible. The evidence, the report of the referee and the opinion of the Surrogate leave no possible room for doubt as to the source of the alleged overpayment. The appellants have taken from the corporations $130,305.29 in payment of services rendered to the corporations. The fair value of these services has been appraised at not over $101,000. The consequent overpayment of $29,305.29 has injured the corporations directly, and any claims the corporations or the corporate creditors may have to a refund of the excess cannot be taken away from them by an order, in a proceeding where the corporations are not represented, to make the refund to the estate which owned half the stock.

The appellants upon this appeal have challenged the decree of the Surrogate not only on the ground that the court exceeded its powers when it directed a refund of alleged overpayment by the corporations for services rendered to the corporations, but also on the ground that the determination that the fair value of the services of the appellants rendered directly to the estate does not exceed the sum of $50,000 already paid to them is erroneous as matter of law. The appellants asked that they be allowed fifty per cent of the sum of $254,000 recovered by the estate through their work, and an additional amount for additional services. They claim that the finding of value of only $50,000 is not based upon an impartial consideration of competent evidence, but upon prejudice and legal error.

The Appellate Division has said in its opinion that, “ in view of the work, skill and good faith of the appellants, and as there is no evidence of fraud, there should be no reflection on the integrity of their conduct.” (253 App. Div. 816.) The fairness of the value placed by the courts upon the services rendered by the appellants must be weighed accordingly. A trier of the fact would have been well justified in valuing the services directly rendered to the estate at more than the sum of $50,000 which has already been paid to them. We cannot say, however, that, as matter of law, that sum is inadequate. Doubtless in fixing the compensation to be paid to the appellants, the courts below did not entirely disregard the large amount retained by them out of the moneys of the corporations for services rendered to the corporations. Many factors at times enter into the determination of what constitutes reasonable compensation for legal services. Though the corporations whose moneys were used to pay for services rendered directly to them may still in appropriate proceedings challenge the amount which the appellants have paid themselves, and though the value of the services for which the corporations are primarily liable cannot be fixed in the proceeding to which the corporations are not parties, yet the fact that the services rendered to the corporations and the right to obtain very substantial compensation from the corporations, arose out of the retainer by the estate, need not be completely ignored in determining the amount which the estate should be called upon to pay. Assurance that the attorneys would receive adequate compensation for services arising out of the retainer by the estate might, at least, induce the attorneys to assume the risk that for services rendered the estate, the estate might not have sufficient assets to pay liberal, or even adequate, compensation. We find no reversible legal error in the decision fixing the value of the appellants’ services for which the appellants have asked compensation at the sum of $50,000.

The order of the Appellate Division and the decree of the Surrogate’s Court should be modified by striking out the direction for a refund, and as so modified affirmed, with costs to all parties payable out of the estate. (See 278 N. Y. 624.)

O’Brien, Hubbs, Loughran, Finch and Bippey, JJ., concur; Crane, Ch. J., taking no part.

Ordered accordingly.


source: Caselaw Access Project

author: Lehman, J.

license: Public Domain

text:
    Neponsit Property Owners’ Association, Inc., Respondent, v. Emigrant Industrial Savings Bank, Appellant.

      Argued January 26, 1938;
    decided May 24, 1938.

      Walter E. Warner, Jr., William E. Grady, Jr., R. O’Gorman and E. J. O’Gorman for appellant.
    The complaint fails to allege that plaintiff has title to the roads, paths, parks, beach and sewers nor to any land for the benefit of which the covenant was created. It follows that there is no privity of estate between plaintiff and its assignor; therefore, plaintiff has no foundation upon which to base the action and its complaint should be dismissed, (Graves v. Deterling, 120 N. Y. 447; Kennilwood Owners’ Assn. v. Jaybro R. & D. Co., 156 Misc. Rep. 604; Lawrence Park Realty Co. v. Crichton, 218 App. Div. 374; Riverview Manor Assn. v. Bruckner, 223 N. Y. 526; Miller v. Clary, 210 N. Y. 127; Neponsit Property Owners’ Assn. v. Mayer, 250 App. Div. 738.) The alleged lien based upon the covenant set forth in the complaint is an interest or estate in land which plaintiff seeks to foreclose. Said alleged lien is not created by any writing signed by defendant’s predecessors in title and is, therefore, unenforceable under section 242 of the Beal Property Law (Cons. Laws, ch. 50). (Kennilwood Owners’ Assn. v. Jaybro Realty & Development Co., 156 Misc. Rep. 604.)

      Ralph S. Hein for respondent.
    Defendant’s motion for judgment on the pleadings was properly denied. (Lawrence Park Realty Co. v. Crichton, 218 App. Div. 374; Neponsit Property Owners’ Assn., Inc., v. Mayer, 250 App. Div. 738; Kennilwood Owners’ Assn. v. Jaybro Realty & Development Co., 156 Misc. Rep. 604; Mygatt v. Coe, 124 N. Y. 212; 142 N. Y. 78; 147 N. Y. 456; 152 N. Y. 457; Korn v. Campbell, 192 N. Y. 490; Trustees of Columbia College v. Lynch, 70 N. Y. 440; Hodge v. Sloan, 107 N. Y. 244; Equitable Life Assur. Soc. v. Brennan, 148 N. Y. 661; Vogeler v. Alwyn Improvement Corp., 247 N. Y. 131; Matter of Public Beach, 269 N. Y. 64.) Plaintiff’s motion to strike out the seven defenses and one counterclaim contained in the answer was properly granted. (Hoffmann Brewing Co. v. Wuttge, 200 App. Div. 357; 234 N. Y. 469; Weseman v. Wingrove, 85 N. Y. 353; Pollitz v. Wabash R. R. Co., 207 N. Y. 113; Newburger v. Lubell, 257 N. Y. 383; James v. Alderton Dock Yards, 256 N. Y. 298; Bareham v. City of Rochester, 246 N. Y. 140; City of New York v. Maltbie, 248 App. Div. 39.)
   Lehman, J.

The plaintiff, as assignee of Neponsit

Realty Company, has brought this action to foreclose a hen upon land which the defendant owns. The lien, it is alleged, arises from a covenant, condition or charge contained in a deed of conveyance of the land from Neponsit Realty Company to a predecessor in title of the defendant. The defendant purchased the land at a judicial sale. The referee’s deed to the defendant and every deed in the defendant’s chain of title since the conveyance of the land by Neponsit Realty Company purports to convey the property subject to the covenant, condition or charge contained in the original deed, j The answer of the defendant contains, in addition to denials of some of the allegations of the complaint, seven separate affirmative defenses and a counterclaim. The defendant moved for judgment on the pleadings, dismissing the complaint pursuant to rule 112 of the Rules of Civil Practice. The plaintiff moved to dismiss the counterclaim pursuant to rule 109, subdivision 6, and to strike out the affirmative defenses contained in the answer pursuant to rule 103, as well as pursuant to rule 109, subdivision 6, of the Rules of Civil Practice. The motion of the plaintiff was granted and the motion of the defendant denied. The Appellate Division unanimously affirmed the order of the Special Term and granted leave to appeal to this court upon certified questions.

Detailed analysis of the allegations contained in the separate defenses ” would serve no useful purpose. In part, they are merely argumentative denials of allegations of the complaint which the court might properly strike out pursuant to rule 103, as redundant, repetitious [and] unnecessary,” for those allegations of the complaint are put in issue by direct denials in the answer. Upon this appeal the defendant contends that the land which it owns is not subject to any hen or charge which the plaintiff may enforce. Its arguments are confined to serious questions of law. Some of these questions are properly raised by the defendant’s challenge of the sufficiency of the complaint; other questions are raised by the plaintiff’s challenge of the sufficiency of the separate defenses. The two motions, indeed, involve, in general, the same questions. The form in which the questions are raised is unimportant. On this appeal we may confine our consideration to the merits of these questions, and, in our statement of facts, we drew indiscriminately from the allegations of the complaint and the allegations of the answer.

It appears that in January, 1911, Neponsit Realty Company, as owner of a tract of land in Queens county, caused to be filed in the office of the clerk of the county a map of the land. The tract was developed for a strictly residential community, and Neponsit Realty Company conveyed lots in the tract to purchasers, describing such lots by reference to the filed map and to roads and streets shown thereon. In 1917, Neponsit Realty Company conveyed the land now owned by the defendant to Robert Oldner Deyer and his wife by deed which contained the covenant upon which the plaintiff’s cause of action is based.

That covenant provides: “ And the party of the second part for the party of the second part and the heirs, successors and assigns of the party of the second part further covenants that the property conveyed by this deed shall be subject to an annual charge in such an amount as will be fixed by the party of the first part, its successors and assigns, not, however exceeding in any year the sum V of four ($4.00) Dollars per lot 20 x 100 feet. The assigns of the party of the first part may include a Property Owners’ Association which may hereafter be organized for the purposes referred to in this paragraph, and in case such association is organized the sums in this paragraph provided for shall be payable to such association. The party of the second part for the party of the second part and the heirs, successors and assigns of the party of the second part covenants that they will pay this charge to the party of the first part, its successors and assigns on the first day of May in each and every year, and further covenants that said charge shall on said date in each year become a lien on the land and shall continue to be such lien until fully paid. Such charge shall be payable to the party of the first part or its successors or assigns, and shall be devoted to the maintenance of the roads, paths, parks, beach, sewers and such other public purposes as shall from time to time be determined by the party of the first part, its successors or assigns. And the party of the second part by the acceptance of this deed hereby expressly vests in the party of the first part, its successors and assigns, the right and power to bring all actions against the owner of the premises hereby conveyed or any part thereof for the collection of such charge and to enforce the aforesaid hen therefor.

“ These covenants shall run with the land and shall be construed as real covenants running with the land until January 31st, 1940, when they shall cease and determine.” —Every subsequent deed of conveyance of the property in the defendant’s chain of title, including the deed from the referee to the defendant, contained, as we have said, a provision that they were made subject to covenants and restrictions of former deeds of record.

'-■There can be no doubt that Neponsit Realty Company intended that the covenant should run with the ’and and should be enforceable by a property owners association against every owner of property in the residential tract which the realty company was then developing. The language of the covenant admits of no other construction. Regardless of the intention of the parties, a covenant will run with the land and will be enforceable against a subsequent purchaser of the land at the suit of one who claims the benefit of the covenant, only if the covenant complies with certain legal requirements. These requirements rest upon ancient rules and precedents. The age-old essentials of a real covenant, aside from the form of the covenant, may be summarily formulated as follows: (1) it must appear that grantor and grantee intended that the covenant should run with the land; (2) it must appear that the covenant is one “ touching ” or “ concerning ” the land with which it runs; (3) it must appear that there is “ privity of estate ” between the promisee or party claiming the benefit of the covenant and the right to enforce it, and the promisor or party who rests under the burden of the covenant. (Clark on Covenants and Interests Running with Land, p. 74.) Although the deeds of Neponsit Realty Company conveying lots in the tract it developed contained a provision to the effect that the covenants ran with the land, such provision in the absence of the other legal requirements is insufficient to accomplish such a purpose.” (Morgan Lake Co. v. N. Y., N. H. & H. R. R. Co., 262 N. Y. 234, 238.) In his opinion in that case, Judge Crane posed but found it unnecessary to decide many of the questions which the court must consider in this case.

''~-,The covenant in this case is intended to create a charge or obligation to pay a fixed sum of money to be “ devoted to the maintenance of the roads, paths, parks, beach, sewers and such other public purposes as shall from time to time be determined by the party of the first part [the grantor], its successors or assigns.” It is an affirmative covenant to pay money for use in connection with, but not upon, the land which it is said is subject to the burden of the covenant. Does such a covenant “touch” or “ concern ” the land? These terms are not part of a statutory definition, a limitation placed by the State upon the power of the courts to enforce covenants intended to run with the land by the parties who entered into the covenants. Rather they are words used by courts in England in old cases to describe a limitation which the courts themselves created or to formulate a test which the courts have devised and which the courts voluntarily apply. (Cf. Spencer’s Case, Coke, vol. 3, part 5, p. 16; Mayor of Congleton v. Pattison, 10 East, 316.) In truth the test so formulated is too vague to be of much assistance and judges and academic scholars alike have struggled, not with entire success, to formulate a test at once more satisfactory and more accurate. It has been found impossible to state any absolute tests to determine what covenants touch and concern land and what do not. The question is one for the court to determine in the exercise of its best judgment upon the facts of each case.” (Clark, op. cit. p. 76.)

Even though that be true, a determination by a court in one case upon particular facts will often serve to point the way to correct decision in other cases upon analogous facts. Such guideposts may not be disregarded. It has been often said that a covenant* o pay a sum of money is a personal affirmative covenant which usually does not concern or touch the land. Such statements are based upon English decisions which hold in effect that only covenants, which compel the covenanter to submit to some restriction on the use of his property, touch or concern the land, and that the burden of a covenant which requires the covenanter to do an affirmative act, even on his own land, for the benefit of the owner of a “ dominant ” estate, does not run with his land. (Miller v. Clary, 210 N. Y. 127.) In that case the court pointed out that in many jurisdictions of this country the narrow English rule has been criticized and a more liberal and flexible rule has been substituted. In this State the courts have not gone so far. We have not abandoned the historic distinction drawn by the English courts. So this court has recently said: “ Subject to a few exceptions not important at this time, there is now in this State a settled rule of law that a covenant to do an affirmative act, as distinguished from a covenant merely negative in effect, does not run with the land so as to charge the burden of performance on a subsequent grantee [citing cases]. This is so though the burden of such a covenant is laid upon the very parcel which is the subject-matter of the conveyance.” (Guaranty Trust Co. v. N. Y. & Queens County Ry. Co., 253 N. Y. 190, 204, opinion by Cardozo, Ch. J.)

Both in that case and in the case of Miller v. Clary (supra) the court pointed out that there were some exceptions or limitations in the application of the general rule. Some promises to pay money have been enforced, as covenants running with the land, against subsequent holders of the land who took with notice of the covenant. (Cf. Greenfarb v. R. S. K. Realty Corp., 256 N. Y. 130; '' Morgan Lake Co. v. N. Y., N. H. & H. R. R. Co., supra.) It may be difficult to classify these exceptions or to formulate a test of whether a particular covenant to pay money or to|perform some other act falls within the general rule that ordinarily an affirmative covenant is a personal and not a real covenant, or falls outside the limitations placed upon the general rule. At least it must touch ” or “ concern ” the land in a substantial degree, and though it may be inexpedient and perhaps impossible to formulate a rigid test or definition which will be entirely satisfactory or which can be applied mechanically in all cases, we should at least be able to state the problem and find a reasonable method of approach to it. It has been suggested that a covenant which runs with the land must affect the legal relations — the advantages and the burdens — of the parties to the covenant, as owners of particular parcels of land and not merely as members of the community in general, such as taxpayers or owners of other land. (Clark, op. cit. p. 76. Cf. Professor Bigelow’s article on The Contents of Covenants in Leases, 12 Mich. L. Rev. 639; 30 Law Quarterly Review, 319.) That method of approach has the merit of realism. The test is based on the effect of the covenant rather than on technical distinctions. Does the covenant impose, on the one hand, a burden upon an interest in land, which on the other hand increases the value of a different interest in the same or related land?

Even though we accept that approach and test, it still remains true that whether a particular covenant is sufficiently connected with the use of land to ran with the land, must be in many cases a question of degree.)/ A promise to pay for something to be done in connection with the promisor’s land does not differ essentially'from a promise by the promisor to do the thing himself, and both promises constitute, in a substantial sense, a restriction upon the owner’s right to use the land, and a burden upon the legal interest of the owner. On the other hand, a covenant to perform or pay for the performance of an Affirmative act disconnected with the use of the land cannot ordinarily touch or concern the land in any substantial degree. Thus, unless we exalt technical form over substance, the distinction between covenants which run with land and covenants which are personal, must depend upon the effect of the covenant on the legal rights which otherwise would flow from ownership of land and which are connected with the land. The problem then is: Does the covenant in purpose and effect substantially alter these rights?

The opinion in Morgan Lake Co. v. N. Y., N. H. & H. R. R. Co. (supra) foreshadowed a classification based upon substance rather than upon form. It was not the first case, however, in which this court has based its decision on the substantial effect of a covenant upon legal relations of the parties as owners of land. Perhaps the most illuminating illustration of such an approach to the problem may be drawn from the “ party wall ” cases in this State which are reviewed in the opinion of the court in Sebald v. Mulholland (155 N. Y. 455). The court there pointed out that in cases, cited in the opinion, where by covenant between owners of adjoining parcels of land, a designated party was authorized to build a party wall, the other agreeing to pay a portion of its value when it should be used by him,” the court was constrained to hold that “ the agreement was a present one, the party who was to build and the one who was to pay were expressly designated, and the covenant to pay was clearly a personal one ” (p. 464). At the same time, the court also pointed out that such covenants must be distinguished from the covenants (passed upon by the court in the earlier case of Mott v. Oppenheimer, 135 N. Y. 312), “ by which the parties conferred, each upon the other, the authority to erect such [party] wall, and dedicated to that use a portion of each of their lots, with an agreement that if either should build the other might have the right to use it by paying his share of the expense ” (p. 463). In such a case, it was said by the court, “ It was not and could not then be known who would build, or who was to pay when the wall was used. The agreement was wholly prospective, and its purpose was to impose upon the land of each, and not upon either personally, the burden of a future party wall, and to secure to the land and, thus, to its subsequent owners, a corresponding right to the use of the wall by paying one-half of its value * * *. In that case the character of the agreement, its obvious purpose, its prospective provisions, and the situation of the lands when the agreement was made, all concurred in showing an intent that its covenants should run with the land, and clearly justified the court in so holding ” (pp. 463-4).

Looking.at the problem presented in this case from the same point of view and stressing the intent and substantial effect of the covenant rather than its form, it seems clear that the covenant.may properly be said to touch and concern the land of the defendant and its burden should run with the land. True, it calls for payment of a sum of money to be expended for “ public purposes ” upon land other than the land conveyed by Neponsit Realty Company to plaintiff’s predecessor in title. By that conveyance the-grantee, however, obtained not only title to particular lots, but an easement or right of common enjoyment with other property owners in roads, beaches, public parks or spaces and improvements in the same tract. For full enjoyment in common by the defendant and other property owners of these easements or rights, the roads and public places must be maintained. In order that the burden of maintaining public improvements should rest upon the land benefited by the improvements, the grantor exacted from the grantee of the land with its appurtenant easement or right of enjoyment a covenant that the burden of paying the cost should be inseparably attached to the land which enjoys the benefit. It is plain that any distinction or definition which would exclude such a covenant from the classification of covenants which touch ” or “ concern ” the land would be based on form and not on substance.

Another difficulty remains. Though between the grantor and the grantee there was privity of estate, the covenant provides that its benefit shall run to the assigns of the grantor who may include a Property Owners’ Association which may hereafter be organized for the purposes referred to in this paragraph.” The plaintiff has been organized to receive the .sums payable by the property owners and to expend them for the benefit of such owners. Various definitions have been formulated of “ privity of estate ” in connection with covenants that run with the land, but none of such definitions seems to cover the relationship between the plaintiff and the defendant in this case. The plaintiff has not succeeded to the ownership of any property of the grantor. It does not appear that it ever had title to the streets or public places upon which charges which are payable to it must be expended. It does not 'appear that it owns any other property in the residential tract to which any easement or right of enjoyment in such property is appurtenant. It is created solely to act as the assignee of the benefit of the covenant, and it has no interest of its own in the enforcement of the covenant.

The arguments that under such circumstances the plaintiff has no right of action to enforce a covenant running with the land are all based upon a distinction between the corporate property owners association and the property owners for whose benefit the association has been formed. If that distinction may be ignored, then the basis of the arguments is destroyed. How far privity of estate in technical form is necessary to enforce in equity a restrictive covenant upon the use of land, presents an interesting question. Enforcement of such covenants rests upon equitable principles (Tulk v. Moxhay, 2 Phillips, 774; Trustees of Columbia College v. Lynch, 70 N. Y. 440; Korn v. Campbell, 192 N. Y. 490), and at times, at least, the violation of the restrictive covenant may be restrained at the suit of one who owns property, or for whose benefit the restriction was established, irrespective of whether there were privity either of estate or of contract between the parties, or whether an action at law were maintainable.” (Cheseboro v. Moers, 233 N. Y. 75, 80.) The covenant in this case does not fall exactly within any classification of restrictive ” covenants, which have been enforced in this State (Cf. Korn v. Campbell, 192 N. Y. 490), and no right to enforce even a restrictive covenant has been sustained in this State where the plaintiff did not own property which would benefit by such enforcement so that some of the elements of an equitable servitude are^present. In some jurisdictions it has been held that no action may be maintained without such elements. (But cf. Van Sant v. Rose, 260 Ill. 401.) We do not attempt to decide now how far the rule of Trustees of Columbia College v. Lynch (supra) will be carried, or to formulate a definite rule as to when, or even whether, covenants in a deed will be enforced, upon equitable principles, against subsequent purchasers with notice, at the suit of a party without privity of contract or estate. (Cf. “ Equitable Bights and Liabilities of Strangers to a Contract,” by Harlan F. Stone, 18 Columbia Law Review, 291.) There is no need to resort to such a rule if the courts may look behind the corporate form of the plaintiff.

The corporate plaintiff has been formed as a convenient instrument by which the property owners may advance their common interests. We do not ignore the corporate form when we recognize that the Neponsit Property Owners Association, Inc., is acting as the agent or representative of the Neponsit property owners. As we have said in another case: when Neponsit Property Owners Association, Inc., was formed, the property owners were expected to, and have looked to that organization as the medium through which enjoyment of their common right might be preserved equally for all.” (Matter of City of New York [Public Beach], 269 N. Y. 64, 75.) Under the conditions thus presented we said: it may be difficult, or even impossible, to classify into recognized categories the nature of the interest of the membership corporation and its members in the land. The corporate entity cannot be disregarded, nor can the separate interests of the members of the corporation” (p. 73). Only blind adherence to an ancient formula* devised to meet entirely different conditions could constrain the court to hold that a corporation formed as a medium for the enjoyment of common rights of property owners owns no property which would benefit by enforcement of common rights and has no cause of action in equity to enforce the covenant upon which such common rights depend. Every reason which in other circumstances may justify the ancient formula may be urged in support of the conclusion that the formula should not be applied in this case. In substance if not in form the covenant is a restrictive covenant which touches and concerns the defendant’s land, and in substance, if not in form, there is privity of estate between the plaintiff and the defendant.

We have considered the other contentions of the defendant and especially the defense that the alleged lien based upon the covenant set forth in the complaint constitutes an interest in land and is unenforceable under the provisions of sections 242 and 259 of the Real Property Law (Cons. Laws, ch. 50). We find the defense insufficient.

The order should be affirmed, with costs, and the certified questions answered in the affirmative. (See 278 N. Y. 704.)

Crane, Ch. J., O’Brien, Loughran, Finch and Rippey, JJ., concur; Hubbs, J., taking no part.

Order affirmed, etc.


author: Hubbs, J.

text:
    Louis Ferkin, Appellant, v. Board of Education of Union Free School District No. 25, Town of Hempstead, Respondent.

      Argued April 20, 1938;
    decided May 31, 1938.

      Samuel M. Ostroff, Harold L. Berkson and Charles L. Raskin for appellant.
    Appellant having been discharged as attorney in August, 1933, he thereupon became entitled to recover the reasonable value of the services rendered by him up to the time of his discharge. (Matter of Krooks, 257 N. Y. 329; Matter of Tillman, 259 N. Y. 133; Matter of Montgomery, 272 N. Y. 323; Pierce v. Rilovitch, 136 Cal. App. 611; Nelson v. Hatch, 70 App. Div. 206; 174 N. Y. 546.) Under quantum meruit appellant is entitled to the reasonable value of his entire services. (Nelson v. Hatch, 70 App. Div. 206; 174 N. Y. 546; Tillman v. Komar, 259 N. Y. 133; Matter of Montgomery, 272 N. Y. 323,) Assuming, but not conceding, that the extension agreement of July 5, 1933, was invalid, the original prior agreements, nevertheless, remained valid. (Central New York T. & T. Co. v. Averill, 199 N. Y. 128; Saratoga State Waters Corp. v. Pratt, 227 N. Y. 429; Messersmith v. American Fidelity Co., 187 App. Div. 35; 232 N. Y. 161; Utica Ins. Co. v. Kipp, 8 Cow. 20; Utica Ins. Co. v. Scott, 19 Johns. 1; Cook v. Barnes, 36 N. Y. 520; Leary v. Miller, 61 N. Y. 488; Philadelphia Loan Co. v. Towner, 13 Conn. 249; Mancourt-Winters Coal Co. v. Ohio & Michigan Coal Co., 218 Mich. 449; Tearney v. Marmiom, 103 W. Va. 394; Gerwig v. Sitterly, 56 N. Y. 214; E. T. C. Corp. v. Title Guarantee & Trust Co., 271 N. Y. 124; Thompson v. Thompson, 232 App. Div. 488; 258 N. Y. 626.) The extension agreement of July 5, 1933, was valid. (Wait v. Ray, 67 N. Y. 36; Lorenz v. Board of Education, 264 N. Y. 591; Williams v. Keech, 4 Hill. 168; Gillis v. Space, 63 Barb. 177; Potter v. City of New York, 59 App. Div. 70; Bell v. City of New York, 46 App. Div. 195.)

      James F. Mulcahy and William H. Daly for respondent.
    The act of the outgoing board in selecting counsel for future boards in respect of future construction and future land acquisition, not yet authorized by the electorate of the school district, was a usurpation of power. (Connelly v. Kingston, 32 Misc. Rep. 489; Vacheron v. City of New York, 34 Misc. Rep. 420; Mack v. Mayor, 37 Misc. Rep. 371; 82 App. Div. 637; 176 N. Y. 573; Abrams v. Horton, 18 App. Div. 208; Beers v. New York Life Ins. Co., 66 Hun. 75; Clifford v. Firemen’s Mut. Benefit Assn., 232 App. Div. 260; 259 N. Y. 547; Carney v. New York Life Ins. Co., 162 N. Y. 453; Jay County v. Taylor, 123 Ind. 148; McCormick v. Hanover Township, 246 Penn. St. 169; Willett & Willett v. Calhoun County, 217 Ala. 687.) The duration of the plaintiff’s appointment must be determined from the illegal contract of July 5, 1933. As to the length of his term of office the contract is complete upon its face, it merged all prior negotiations, and the plaintiff cannot now invoke the prior superseded contracts. (Newburger v. American Surety Co., 242 N. Y. 134.) The plaintiff cannot recover on quantum meruit. (McDonald v. Mayor, 68 N. Y. 23; Matter of Kandel v. Greene, 236 App. Div. 607; Matter of Wiedersum, 242 App. Div. 653; .New York Inter-Urban Water Co. v. City of Mount Vernon, 185 App. Div. 305.) The 1931 contracts are also void because illegal and contrary to public policy. (Barry v. Mulhall, 162 App. Div. 749; Doucet v. Massachusetts B. & I. Co., 180 App. Div. 599; Westchester v. Harrison, 249 App. Div. 828; Massachusetts Bank v. Shinn, 163 N. Y. 360; Parthey v. Beyer, 228 App. Div. 308.)
   Hubbs, J.

On February 7, 1931, the appellant, an attorney, entered into a contract with the respondent, a board of education, for services in connection with the submission to the voters of the school district of a proposition for construction of an addition to the district school house and the carrying out of the proposition, if approved, upon the basis of a fee of one per cent upon the gross amount of any bond issue involved.

On April 30, 1931, the original agreement was modified by a supplemental contract providing that if the original proposal should be rejected by the voters, any alternative proposal approved within two years from the date of rejection of the original proposal should be deemed within the provisions of the agreement.

On August 3, 1931, a third contract was made which provided for a like compensation, contingent upon adoption by the voters of a proposition for acquisition of an" additional school site or sites, or any alternative proposition for the acquisition of any other site or sites submitted and approved within two years of the time of rejection of the original. The subject-matter covered by this contract differed from the subject-matter of the first two contracts. , ^

On December 15, 1931, original propositions covering sites and construction were submitted to the voters and disapproved. Thereafter the board continued to consider and plan for a resubmission of the matter to the voters.

Undoubtedly the contracts entered into prior to July 5, 1933, were valid and within the power of the board to make. (6 McQuillin on The Law of Municipal Corporations, p. 220; People ex rel. Kiehm v. Board of Education, 198 App. Div. 476.)

' On July 15, 1933, avowedly for the purpose of protecting appellant as to services already rendered, and in anticipation of a change in the personnel of the board, a further contract- was entered into extending the aforementioned contracts to cover alternative propositions which might be submitted and approved within two years from July 5, 1933.

At the August, 1933, meeting of the district, four new members were elected to the board. The new board selected another attorney. Appellant, in October, learning that consideration was being given to the matter of preparing for submission a new proposition, appeared before the board and tendered his services, which tender was acknowledged in writing by the board, and his offer rejected. At the time appellant tendered his services the 1931 contracts were in full force and effect. The new proposition was not submitted to the voters until 1934, subsequent to the expiration date provided for in the 1931 contracts, but within the time provided for under the 1933 contract. In January, 1934, the appellant commenced this action to recover for the fair and reasonable value of services rendered prior to the 1st day of August, 1933. That amount the trial court found to be $3,000 and rendered judgment, accordingly. The Appellate Division unanimously reversed on the law, holding the contract of July, 1933, to have been beyond the authority of the outgoing board to make.

Assuming, without deciding, that the Appellate Division was right in so holding, the question remains whether the so-called illegal contract had the effect of nullifying the previous legal contracts. There is nothing in the supplemental agreement which evidences an intent that the agreement should be substituted for or operate to nullify the original agreements. True it is that in stating the extended time applicable, it measures the time from the date of the supplemental agreement rather than from the expiration date provided for under the original agreement, but the effect is the same. If the extension cannot be upheld it is unnecessary to say that the original agreements are for that reason made null and void. The original agreements were supported by consideration and are not dependent upon the new agreement for support. (Cook v. Barnes, 36 N. Y. 520; McCurdy v. Dillon, 135 Mich. 678; 12 Am. Jurisprudence, pp. 737, 1013; 6 Ruling Case Law, p. 923.)

Even if the supplemental agreement were to be held invalid, what was said in Messersmith v. American Fidelity Co. (187 App. Div. 35, 37; affd., 232 N. Y. 161) is applicable: An obligation will be enforced, though indirectly connected with an illegal transaction, if it is supported by an independent consideration, so that the plaintiff does not require the aid of the illegal transaction to make out his case.” (Anson on The Law of Contracts [Am. ed. by Huff cut], § 261, p. 253; Salmond & Winfield on The Law of Contracts, p. 156.)

As to the original contracts, it cannot be said that they were made with intent to limit the power of a future board. They were made by a board which had a definite purpose in mind, namely, to avoid a duplication of charges should a first proposition be rejected and a new one prepared for presentation. True it is that, through delay in submission of the first proposition, the time limited chanced to extend over into a period in which the board had a different personnel. No intent to effect that result is suggested.

■ Neither was there anything in the original contracts which required the new board to continue the services of the appellant. It could terminate his employment, as it did, and procure other counsel. Likewise, it could continue his services and take advantage of the benefits secured by the contracts. The board could not, however, terminate his employment and deprive him in a manner not provided for in the contract of just compensation for services actually rendered. By terminating his employment it fixed his right to recover upon a quantum meruit basis. (Matter of Weitling, 266 N. Y. 184; Matter of Krooks, 257 N. Y. 329; Matter of Montgomery, 272 N. Y. 323.)

It should be borne in mind that appellant seeks nothing for services rendered for the new board — merely for those rendered during continuance in office of the board for which the work was done and by which he was hired. His right of action accrued, not on expiration of the time limited by either contract, but rather at the time of his discharge. (Matter of Tillman, 259 N. Y. 133.)

The court below, having rested its decision on the assumed illegality of the 1933 contract, a question we deem unnecessary to determine, and having assumed that the 1933 contract was a substitute for the prior contracts, failed to give consideration to the fact that the appellant’s right of action accrued when his services were terminated by the board. Whether the 1933 contract be deemed legal or illegal, it was not of such a nature that its illegality would render null and void the 1931 contracts. The 1931 contracts, either as originally made, or as modified by the 1933 agreement, were in effect when he was discharged. It matters not that his contract but for the extension would have terminated in December, 1933, or that a proposition was or was not subsequently approved. What happened after the termination of his employment is unimportant. His right had then become fixed and that right was to recover on a quantum meruit basis. {Matter of Tillman, supra.)

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

Crane, Ch. J., O’Brien, Loughran, Pinch and Rippey, JJ., concur; Lehman, J., dissents on the ground that there has been no discharge under the valid contract but a refusal to accept services under the second and concededly invalid contract.

Judgment accordingly.


author: Per Curiam.

text:
    Greater New York Coal and Oil Corporation, Respondent, v. Philadelphia and Reading Coal and Iron Company, Defendant, and Greater New York Coal Distribution Co., Inc., Appellant.
    Argued May 16, 1938;
    decided May 31, 1938.

      Benjamin Lewis and Alfred B. Nathan for appellant.
    Fairly construed, section 480 of the Civil Practice Act requires that an award of interest for the period antedating the verdict be made by the trier of the facts. (Simon v.
      Etgen, 213 N. Y. 589; Isbell-Porter Co. v. Broker, 120 App. Div. 384; Faber v. City of New York, 222 N. Y. 255; Klausner v. Queens Fur Dressing Co., 130 Misc. Rep. 579; Preston Co. v. Funkhouser, 261 N. Y. 140; 290 U. S. 163; Shea v. National Surety Co., 144 Misc. Rep. 613; Ketcham v. Wilbur, 256 N. Y. 525; Porret v. City of New York, 252 N. Y. 208; Duerr v. Consolidated Gas Co., 104 App. Div. 465; Herpe v. Herpe, 225 N. Y. 323.)

      Norman Winer for respondent.
    Where plaintiff is entitled to interest as a matter of law the court may add that interest to the verdict of the jury. (Preston Co. v. Funkhouser, 261 N. Y. 140; Funkhouser v. Preston Co., 290 U. S. 163; Prager v. New Jersey Fidelity & Plate Glass Ins. Co., 245 N. Y. 1; Hodgkins v. Mead, 119 N. Y. 166; Urband v. Lubell, 245 N. Y. 156; Lowenstein v. Lombard, Ayres & Co., 2 App. Div. 610; M’Afee v. Dix. 101 App. Div. 69; Mayaguez Drug Co. v. Globe & Rutgers Fire Ins. Co., 260 N. Y. 356; McLaughlin v. Brinckerhoff, 222 App. Div. 458; Joannes Bros. Co. v. Lamborn, 226 App. Div. 777; Newburgh Dress Co. v. Nadler & Nadler, Inc., 251 App. Div. 330; Distillator & Son, Inc., v. Smith, 140 Misc. Rep. 34; Eff-Ess, Inc., v. New York Edison Co., 144 Misc. Rep. 724; Demms v. Blanchard, 150 Misc. Rep. 867; United States v. Stephanidis, 41 Fed. Rep. [2d] 960; Hollwedel v. Duffy-Mott Co., 263 N. Y. 95; Hart v. United Artists Corp., 252 App. Div. 133; Miller v. Foltis-Fischer, Inc., 152 Misc. Rep. 24.)
   Per Curiam.

In a case covered by section 480 of the Civil Practice Act where there is no question of fact as to the amount, it is the duty of the court to add to the verdict of the jury interest from the date of the breach of the contract.

The order should be affirmed, with costs, and the question certified answered in the affirmative.

Lehman, O’Brien, Hubbs, Loughran, Finch and Bippey, JJ., concur; Crane, Ch. J., taking no part.

Order affirmed, etc.


text:
    General Valuations Co., Inc., Appellant, v. City of Niagara Falls, Respondent.
    Argued May 20, 1938;
    decided June 3, 1938.

      George E. Carrie for appellant.
    The Appellate Division erred in dismissing the first cause of action of the complaint as a matter of law. (Faber v. City of New York, 213 N. Y. 411; Isaac v. Town of Queensbury, 277 N. Y. 37.)

      J. William O’Brien, Corporation Counsel (John F. McNulty of counsel), for respondent.
    The plaintiff failed to establish ratification by the defendant of the alleged agreement by the city manager to pay for the alleged extra services under its contract. (Abells v. City of Syracuse, 7 App. Div. 501; Town of Durango v. Pennington, 8 Col. 257.)
   Per Curiam.

We find that there is evidence sufficient to sustain a finding that the plaintiff has performed extra services as alleged in the second and third causes of action which were not included in the written contract.

The judgment of the Appellate Division dismissing the first cause of action should be affirmed, without costs. The order of the Appellate Division granting a new trial as to the second and third causes of action should be reversed, and the judgment of the Trial Term as to the second and third causes of action affirmed, without costs.

Crane, Ch. J., Lehman, O’Brien, Hubbs, Loughran, Finch and Bippey, JJ., concur.

Judgment accordingly.


author: Finch, J.

text:
    In the Matter of the City of New York, Appellant, Relative to Acquiring Title to Real Property Required for the Opening and Extending of Whitlock Avenue, in the Borough of the Bronx. 430 East 59th Street Corporation et al., Respondents.

      Argued May 19, 1938;
    decided July 7, 1938.

      William C. Chanler, Corporation Counsel (Lems Orgel and Julius Isaacs of counsel), for appellant.
    The decree forces the city to pay for chattels whose movability and definite character as personalty were proved by the fact that the claimants had bought them second hand and moved them from place to place as they changed the location of their businesses. (Matter of Culver Contracting Corp. v. Humphrey, 268 N. Y. 26; Matter of City of New York [Allen St.], 256 N. Y. 236; Matter of People v. Johnson & Co., 219 App. Div. 285; 245 N. Y. 627; 275 U. S. 571; McRea v. Central Nat. Bank, 66 N. Y. 489; New York Central & Hudson River R. R. Co. v. Albany Steam Trap Co., 161 App. Div. 329; Potter v. Cromwell, 40 N. Y. 287; Murdock v. Gifford, 18 N. Y. 28; Matter of City of New York [North River Waterfront], 118 App. Div. 865; 189 N. Y. 508; Madfes v. Beverly Development Corp., 251 N. Y. 12; Futrovsky v. United States, 62 App. D. C. 235; 66 Fed. Rep. [2d] 215; Ford v. Cobb, 20 N. Y. 344.) The decree forces the city to pay for machinery located in the portions of the building not taken. (Matter of City of New York [Sixth Avenue Extension], 256 N. Y. 598.) The trial court’s failure to specify the articles which it deemed part of the realty and for which it made compensation was reversible error. (Matter of City of New York [Woolhiser], 250 App. Div. 197; Matter of City of New York [North River Waterfront], 118 App. Div. 865; 189 N. Y. 508.)

      Henry Hers, Isaac E. Bermant and Bernard L. Bermant for 430 East 59th Street Corporation, respondent.
    The evidence supports the award. (Beckrich v. City of North Tonawanda, 171 N. Y. 292; Commercial Bank v. Sherwood, 162 N. Y. 310; Amherst College v. Ritch, 151 N. Y. 282; Matter of City of New York [Fourth Ave.], 255 N. Y. 25.) The damages to the remainder of claimant’s plant are recoverable. (Matter of City of New York [Blackwell’s Island Bridge], 198 N. Y. 84; People ex rel. Ward v. Sutton, 186 App. Div. 550; Matter of City of New York [Chrystie & Forsyth Sts.], 236 App. Div. 321; 260 N. Y. 583; Matter of City of New York [Allen St.], 256 N. Y. 236; Banner Milling Co. v. State, 240 N. Y. 533; Matter of City of New York, 125 App. Div. 393; 193 N. Y. 117; Matter of City of New York, 213 App. Div. 187; Matter of 89th Street Ferry, 76 Misc. Rep. 358; 150 App. Div. 908; Matter of City of New York, 143 App. Div. 515; Matter of City of New York [North River Waterfront], 120 App. Div. 849; Matter of Mayor, 39 App. Div. 589.) Where the fixtures and fee are in one ownership and there is no provision in the petition of the condemnor qualifying the taking as to the fixtures, then the owner is entitled to be paid whatever value such fixtures as are affixed to the realty, and would as between vendor and vendee be fixtures and pass with a conveyance, adds to the value of the fee-. (Jackson v. State, 213 N. Y. 34; Banner Milling Co. v. State, 117 Misc. Rep. 33; 210 App. Div. 812; 240 N. Y. 533; Matter of City of New York [Sixth Ave.], 229 App. Div. 851; 256 N. Y. 598; Matter of City of New York [Allen St.], 256 N. Y. 236; Matter of People v. Johnson & Co., 219 App. Div. 285; 245 N. Y. 627; Matter of City of New York, 193 N. Y. 117; Matter of City of New York [Conron v. Glass], 122 App. Div. 890; 192 N. Y. 295; Matter of City of New York [North River Waterfront], 118 App. Div. 865; 189 N. Y. 508; Matter of City of New York [North River Waterfront], 219 App. Div. 27; Poillon v. Gerry, 179 N. Y. 14; McRea v. Central Nat. Bank, 66 N. Y. 489.) The court was under no duty to explain the awards. (Matter of City of New York [North River Waterfront], 118 App. Div. 865; 189 N. Y. 508.)

      Nathan L. Goldstein and Abe Wagman for Acme Ribbon Mills, Inc., respondent.
    The decision of the trial court that the machinery and fixtures constituted real property is amply supported by the evidence. (Matter of City of New York [North River Waterfront], 118 App. Div. 865; 189 N. Y. 508.) The machines and fixtures for which an award has been made are real property for which compensation must be made in a condemnation proceeding. (Matter of City of New York [Allen St.], 256 N. Y. 236; Matter of City of New York [Cypress Ave.], 249 App. Div. 579; Madfes v. Beverly Development Corp., 251 N. Y. 12; Matter of City of New York [Sixth Avenue Extension], 256 N. Y. 598; Matter of City of New York [Fulton St.], 250 App. Div. 197; McRea v. Central Nat. Bank, 66 N. Y. 489; Jackson v. State, 213 N. Y. 34; Matter of Park Commissioners, 17 N. Y. St. Repr. 371; Matter of Board of Transportation [Houston St.], 236 App. Div. 660; Potter v. Cromwell, 40 N. Y. 287; Matter of City of New York [Consolidated Gas Co.], 39 App. Div. 589; People ex rel. National Starch Mfg. Co. v. Waldron, 26 App. Div. 527; Diamond v. Art Contracting Co., 147 Misc. Rep. 88.) Awards have been made to tenants for machines used in the conduct of their business, although they were removable without injury either to the machines or to the freehold. (Matter of City of

      New York [Sixth Avenue Extension], 256 N. Y. 598; Matter of City of New York [Allen St.], 256 N. Y. 236; Matter of City of New York [Fulton St.], 250 App. Div. 197; Matter of Board of Transportation [Houston St.], 236 App. Div. 660; Jackson v. State, 213 N. Y. 34; Matter of City of New York [North River Waterfront], 192 N. Y. 295; Matter of City of New York [Avenue A], 66 Misc. Rep. 488; Matter of Willcox, 165 App. Div. 197; Matter of City of New York [Consolidated Gas Co], 39 App. Div. 589; Matter of Rockaway Boulevard, 201 App. Div. 862; Matter of Park Commissioners, 17 N. Y. St. Repr. 371; Banner Milling Co. v. State, 240 N. Y. 533. )
   Finch, J.

This is a condemnation proceeding instituted to acquire title in fee to real property required for the opening and extending of Whitlock avenue in the borough of the Bronx, New York city. Two awards are involved on this appeal.

The Acme Ribbon Mills, Inc., as a lessee, maintained and operated a silk ribbon manufacturing business in a factory building located on the condemned property. In other words, this lessee rented space in a completed building and brought to it its own machinery. The city petitioned to condemn the real property, and the Acme made claim for compensation for the taking of machinery which it had installed in the premises. On behalf of Acme there was testimony that the value of the machinery and other property which as lessee it owned was approximately $65,000. The court made an award of $45,000.

The 430 East 59th Street Corporation owned a one-story brick building and a one-story and basement brick building which were connected and equipped as a laundry. It operated the laundry through the Regent Laundry Service Corporation, its wholly owned subsidiary. The taking involved the one-story brick building, and a small portion of the one-story and basement brick building. In addition to the award of $45,000 for the land and building, it was awarded $134,000 for the laundry equipment in the portion of the property not taken. The Appellate Division has unanimously affirmed the decree granting these awards. The appeal is by permission of this court.

We are to determine whether the machinery and the other articles for which the awards have been made are part of the real property taken by the city in the condemnation'proceeding.

(1) The Acme Ribbon Mills, Inc., received an award of $45,000 for machinery, looms, harnesses, and loose extra parts used in connection with the looms. The spare parts were standard articles bought from dealers. The harnesses were interchangeable on these looms and were not affixed to the building. The looms themselves were attached to the floor by screws and bolts, but this was only to keep them from vibrating or shifting, and they could be removed without any injury to themselves or to the freehold. Looms of this type are completely erected by the manufacturer in his plant, are then dismantled by the manufacturer before shipment to the purchaser, and re-erected after delivery. They can be dismantled and re-erected as often as necessary. In fact, the looms of the claimant had been purchased second hand, and had been moved several times as the claimant moved its business.

\ A tenant is entitled to compensation in condemnation proceedings for such fixtures as would have become part ' of the realty if they had been installed permanently by the owner of the fee. (Matter of City of New York [Allen St.], 256 N. Y. 236.)

The mere fact that the articles involved herein are attached to the floor does not render them fixtures. (McRea v. Central Nat. Bank, 66 N. Y. 489, 495.) Machinery normally is personal property and is not deemed a fixture except where it is installed in such manner that its removal will result in material injury to it or the realty, or where the building in which it is placed was specially designed to house it, or where there is other evidence that its installation was of a permanent nature. In the absence of such proof the machinery does not become a fixture and a part of the realty, but remains personal property and is removable by the person who installed it. There is no such evidence of permanent installation concerning the looms involved in the case at bar. They were affixed to the floor merely for the purpose of maintaining their stability, and they were readily removable. There is no reason why such looms or the harness or the other parts used in connection with them should be held to be a part of the realty. In Murdock v. Gifford (18 N. Y. 28), substantially similar looms, although_attached to the building, were held to be personal property.

Of the award, about $3,800 was granted to the Acme Ribbon Mills, Inc., for machines, including a motor and winding, warping and quilling machines. All of these were readily removable, and could be used elsewhere. There was no evidence of permanent affixation. Thus like the looms, their use on the premises did not transform them from personal property to realty. For such personal property the claimant is not entitled to an award.

As to the office partitions and the electric wiring, the evidence supports the finding that they are fixtures for which an award should be made.

(2) As noted, the 430 East 59th Street Corporation was granted an award in addition to that given for the land and building actually taken. This was on the basis of the rule that where part of a larger tract used for a single purpose is taken, the owner is entitled not only to the value of the land actually taken, but to the difference between the value of the remaining real property as it was before the land was taken, and its value after the taking. (Banner Milling Co. v. State, 240 N. Y. 533. Cf. Matter of City of New York [West 10th St.], 267 N. Y. 212.) In determining the value of this remaining real property for the purposes of making the award, there were included, however, machinery and other laundry equipment for which an award of $134,000 was made. This machinery and equipment should be included only if they are fixtures and, therefore, part of the realty.

The claimant’s inventory and appraisal of these articles includes many items which were not attached to the realty, such as steel lockers, cabinets, trucks, racks, tables, sewing machines, and the like. Included also are many items which were bolted to the floor merely to maintain their stability, such as ironers, sorting tables, washers, extractors and similar machinery. Although some of these machines had steam and water connections, they could be readily removed by disconnecting the unions which were attached to the piping. Concerning these items there can be no doubt that they did not constitute fixtures.

The question is more difficult when we consider the substantial machinery. There is evidence, however, that much of this, despite its size and weight, was readily removable and was not installed in a permanent manner. Most, if not all, of this machinery, had been removed from the claimant’s earlier place of business. Only such machinery as cannot be removed without injury to it or the freehold, or concerning which there may be other evidence of an installation of a permanent nature, should be held to constitute fixtures.

There is no definite statement of just what property was included in the award, or of the amount awarded for each item. For this reason a new trial should be granted. (Matter of City of New York [Woolhiser], 250 App. Div. 197. Cf. Matter of City of New York [North River Water Front], 118 App. Div. 865; affd., 189 N. Y. 508.)

The orders should be reversed and the matter remitted to the Special Term for further proceedings in accordance with this opinion, with costs to abide the event. (See 278 N. Y. 714.)

Crane, Ch. J., Lehman, O’Brien, Hubbs, Loughran and Bjppey, JJ., concur.

Orders reversed, etc.


text:
    In the Matter of Lillian Buoneto, Appellant, against Michael Buoneto, Respondent.
    Argued May 31, 1938;
    decided July 7, 1938.

      William C. Chanler, Corporation Counsel (Alan M. Stroock, Paxton Blair and Irving Leavitt of counsel), for appellant.
    There is nothing in section 18 of article 6 of the State Constitution which prohibits the Legislature from conferring upon local courts jurisdiction over nonresident defendants found within the territorial limits of their locality. (Worthington v. London G. & A. Co., 164 N. Y. 81; Routenberg v. Schweitzer, 165 N. Y. 175; Degnon v. Cook & Wilson, 98 Misc. Rep. 251; Landers v. Staten Island R. R. Co., 53 N. Y. 450; Irwin v. Metropolitan Street Ry. Co., 38 App. Div. 253; People ex rel. Townsend v. Porter, 90 N. Y. 68; Hoag v. Lamont, 60 N. Y. 96; American Historical Society v. Glenn, 248 N. Y. 445.)

      John Kochendorfer and Howard A. Kochendorfer for respondent.
    The Appellate Division correctly held that section 103, subdivision (b), of the Domestic Relations Court Act (L. 1933, ch. 482) violates section 18 of article 6 of the State Constitution. (Worthington v. London G. & A. Co., 164 N. Y. 81; Kane v. Need, 269 N. Y. 13; Handshaw v. Arthur, 9 App. Div. 175; 161 N. Y. 664; Sever v. Zueca, 106 Misc. Rep. 620; Copperfretti v. Shephard, 241 App. Div. 872; Friedberger v. Stulpnagel, 59 Misc. Rep. 498.)
   Hubbs, J.

The petitioner, a resident of the city of New York, sought in this proceeding in the Family Court to compel her husband, the respondent, to support her. Respondent, a non-resident of the city, was served with process in the proceeding within the city where he came daily to engage in bis work. He appeared specially in the proceeding and challenged the jurisdiction of the court on the ground that he was a non-resident of the city and, therefore, that the court had no jurisdiction. His objection was overruled, and the court found that petitioner was “ about to become a public charge and made an order directing him to pay nine dollars per week for her support. The Appellate Division reversed the order upon the law on the ground that the trial court did not acquire jurisdiction by service upon the respondent within the city as he was at the time a nonresident thereof.

Section 103 of the Domestic Relations Court Act (L. 1933, ch. 482) provides:

“ A husband or father may be required to furnish support or may be found guilty of non-support, as provided in the two preceding sections, if, at the time of the filing of the petition for support, * * *
“ (b) he is not residing or domiciled in the city but is found therein at such time, provided that the petitioner is so residing or domiciled at such time.”
The petitioner being a resident of the city and the respondent having been found and served therein, the court acquired jurisdiction unless subdivision (b) is unconstitutional. The presumption is that the section is constitutional and the burden rests upon the respondent to establish that it is not. The question is whether the Legislature transcended its authority in enacting section 103, subdivision (b), of the Domestic Relations Court Act. The contention of the respondent is that section 103, subdivision (b), in attempting to confer jurisdiction in the Family Court over a non-resident by service within the territorial jurisdiction violated article VI, section 18, of the State Constitution, by granting jurisdiction over non-resident defendants not allowed to County Courts (See Art. VI, § 11.) Article VI, section 18, of the State Constitution, reads:
Inferior local courts of civil and criminal jurisdiction may be established by the Legislature, but no such inferior local court which has been created since the first day of January, one thousand eight hundred and ninety five, or is hereafter created shall be a court of record. All inferior local courts now or hereafter established may be regulated or discontinued by the Legislature. The Legislature shall not hereafter confer upon any inferior or local court of its creation, any equity jurisdiction or any greater jurisdiction in other respects than is conferred upon county courts by or under this article; but it may provide that the territorial jurisdiction in civil-cases of any inferior or local court now existing or hereafter established in any city or of justices of the peace in cities shall extend throughout the county or counties in which such city may be located * * *
“ The Legislature may establish children’s courts, and courts of domestic relations, as separate courts * * * and may confer upon them such jurisdiction as may be necessary * * * to compel the support of a wife * *

The Appellate Division has decided that the quoted provision of the Constitution required it to hold the provision of the statute in question (§ 103, subd. b) unconstitutional. We are unable to concur in such holding. We have reached the conclusion that article VI, section 18, of the Constitution does not prohibit the Legislature from granting to local courts jurisdiction over nonresident defendants who are served with process within the territorial limits of their jurisdiction.

The Appellate Division held the controlling clause of article VI, section 18, to be: “ The Legislature shall not hereafter confer upon any inferior or local court of its creation, any equity jurisdiction or any greater jurisdiction in other respects than is conferred upon County Courts by or under this article.” The same language was contained in article VI, section 18, of the Constitution of 1894. In a case arising under that Constitution this court decided, in Worthington v. London Guarantee & Accident Co. (164 N. Y. 81), that the language did not prevent the Legislature from granting to any local court jurisdiction over non-resident defendants served within the territorial limits of its jurisdiction. The words “ any greater jurisdiction in other respects than is conferred upon County Courts by or under this article ” were construed to mean that “ The framers of the Constitution, in contemplating the creation of inferior local tribunals by the legislature and limiting its power, were not dealing with the jurisdiction of these future courts as to territory, non-resident parties defendant or foreign corporations, but as to subject-matter; they were not to have, in a general way, greater powers, importance and dignity than a County Court ” (pp. 83, 91). (Cf. Landers v. Staten Island R. R. Co., 53 N. Y. 450; People ex rel. Townsend v. Porter, 90 N. Y. 68, 75.) It, therefore, seems clear that under the Constitution of 1894 local courts could acquire jurisdiction by service upon a non-resident defendant within the territorial limits of the court. (Routenberg v. Schweitzer, 165 N. Y. 175; Degnon v. Cook & Wilson’s, 98 Misc. Rep. 251.) Exactly the same language is contained in the present Constitution and under a well-established rule of construction should be given the same meaning.

The amendment of the Constitution in 1921 which authorized the Legislature to establish courts of domestic relations and the amendment of 1925 which permitted the Legislature to extend the territorial jurisdiction in civil cases of local city courts throughout the county or counties in which such city may be located, were drafted for the purpose of permitting the Legislature to extend the jurisdiction, not to curtail it, and to make clear that the limitation upon the power of the Legislature imposed by the cases of Landers v. Staten Island R. R. Co. (supra) and People ex rel. Townsend v. Porter (supra), in regard to local city courts no longer existed.

We do not deem it necessary to discuss the other questions raised.

The order of the Appellate Division should be reversed and that of the Court of Domestic Relations affirmed without costs.

Lehman, O’Brien, Loughran, Finch and Rippey, JJ., concur; Crane, Ch. J., taking no part.

Ordered accordingly.


author: Rippey, J.

text:
    Mary Ferlazzo, Appellant, v. Peter Riley, Respondent, Impleaded with Others.
    Argued May 18, 1938;
    decided July 7, 1938.

      George G. Lake for appellant.
    Plaintiff was not required to give notice of the due date of the interest, but if plaintiff was required to give notice, such notice was duly given. (Albertina Realty Co. v. Rosboro Realty Corp., 258 N. Y. 472.) It was improper to dismiss the complaint upon the theory that the installment of interest was paid before the action was commenced. (Albertina Realty Co. v. Rosbro Realty Corp., 258 N. Y. 472; Pizer v. Herzig, 120 App. Div. 102.) In the absence of fraud, bad faith or unconscionable conduct on the part of plaintiff, the court had no power to dismiss the complaint. (Graf v. Hope Building Corp., 254 N. Y. 1.) Even if there were allegations of fraud, bad faith or unconscionable conduct, the issues should have been raised by answer and left for the trial. (Cole v. Hinch, 120 App. Div. 355; Bennett v. Stevenson, 53 N. Y. 508.)

      Harold J. O’Keeffe for respondent.
    No action was commenced before the interest was tendered and in fact received by appellant. (Mentz v. Efficient Bldg. Corp., 145 Misc. Rep. 505.)
   Rippey, J.

At three-thirty-three p. m. on November 3, 1937, plaintiff filed in the office of the clerk of Albany county a verified complaint in which she sets up a cause of action for the foreclosure of a mortgage, executed and delivered to her by defendant Riley on September 29, 1936, together with a notice of pendency of the action as authorized by section 120 of the Civil Practice Act. It is alleged that the mortgage on the real property therein described was given as security for the payment of the sum of four thousand dollars on September 29, 1938, and semi-annual interest on that sum on each March 29th and September 29th after its date. Foreclosure was asserted to be authorized by virtue of an alleged default of the mortgagor arising from his failure to pay the installment of interest due on September 29, 1937, or within thirty days thereafter. Because of that default, plaintiff alleged, she had exercised her option to declare the whole amount due. On November 3, 1937, the amount of the interest due was mailed to a representative of plaintiff, who returned it on the following day on the ground that it was tendered too late, whereupon the mortgagor, prior to the service of the summons upon him, procured an ex parte order permitting him to pay the money into court to the credit of the action. The mortgagor thereupon moved, on notice and before answer, for an order dismissing the complaint, canceling the notice of lis pendens and discharging the receiver who had, in the interim, been appointed, on the ground that the interest item had been paid prior to the commencement of the action. There was no evidence that the summons and complaint had been served on him before the motion was made. The motion was granted. From the order entered thereon an appeal was taken by plaintiff to the Appellate Division, where affirmance was had by a divided court. From the judgment of affirmance entered on the order of the Appellate Division, plaintiff has appealed to this court.

The order of the Special Term was based upon facts found from conflicting allegations contained in the complaint, the affidavit of the mortgagor and the affidavits of the attorneys for the respective parties. The default clause in the mortgage as set up in the complaint appears to be in the statutory form (Real Property Law [Cons. Laws, ch. 50], § 258, schedule N, subd. 4), under which no notice of default or demand for payment of the interest installment would be required as a prerequisite to the right of the mortgagee to declare the entire amount due and to commence the action for foreclosure and sale (Albertina Realty Co. v. Rosbro Realty Corp., 258 N. Y. 472, 475), whereas the mortgagor avers that the clause is so worded that the whole of the principal sum should become due only after default in the payment of any installment of interest for thirty days after notice and demand. The mortgage is not before the court. There is a dispute as to the time when the mortgagor tendered payment of the interest installment, as to whether notice of default and demand for payment was given by the mortgagee, as to whether the mortgagee, expressly or by her previous conduct, had waived the provision of the mortgage making the default absolute on failure to pay the interest installment on the date due or within thirty days thereafter without notice or demand if the mortgage should be construed to so read. Among those and other questions which arose on the motion upon conflicting allegations of fact requiring decision was whether the court had power to relieve the mortgagor of a technical default, if one such existed, being neither willful nor in bad faith (Noyes v. Anderson, 124 N. Y. 175). We are not required to express any opinion on any of those questions here. We need only say that a mortgagor is bound by the terms of his contract as made and cannot be relieved from his default, if one exists, in the absence of waiver by the mortgagee, or estoppel, or bad faith, fraud, oppressive or unconscionable conduct on the latter’s part (Malcolm v. Allen, 49 N. Y. 448; Graf v. Hope Building Corp., 254 N. Y. 1).

No statute or rule has been called to our attention authorizing such procedure as has been here followed. We cannot agree with respondent that we are faced with a mere error in technical procedure where the same result would have been reached if another route had been followed and the error therefore should be overlooked (Bonachea v. Westchester Park County Comm., 243 App. Div. 789; Gucker v. Town of Huntington, 268 N. Y. 43). Issues are here raised a determination of which affects the substantial rights of both parties. Those issues, when the facts are in dispute, should not be settled on affidavits. If the mortgagor has available defenses they should be raised by answer where they may be decided after trial and full hearing of all the evidence by the trial court.

The judgment of the Appellate Division and the order of the Special Term should be reversed, with costs in all courts, and the motion denied.

Lehman, O’Bbien, Htjbbs, Lotjghban and Finch, JJ., concur; Crane, Ch. J., taking no part.

Judgment reversed, etc.