author:
Cardozo, J.
      Lehman, J.

text:
    Oscar L. Richard et al., Respondents, v. Credit Suisse, Appellant.
    Banks and banking — foreign credit — contract — rescission — pleading — summary judgment — object of motion for summary judgment — unreal issue raised by denial of allegations of default — action to recover moneys paid for establishment of foreign credits — non-performance being proved, plaintiffs not limited to damages but may demand restitution — notice of rescission for abandonment — no inference of indefinite extension of time for performance may be drawn from absence of notice to contrary.
    1. The very object of a motion for summary judgment is to separate what is formal or pretended in denial or averment from what is genuine and substantial, so that only the latter may subject a suitor to the burden of a trial.

      2. In an action, therefore, to recover back moneys paid defendant for the establishment of foreign credits in favor of plaintiffs, an issue, raised by formal denial of allegations of. default, is unreal, where defendant’s own letters are instinct with the admission that its correspondent was at fault and the affidavit of its attorney states in effect that the denials are merely formal and are to be interpreted and justified as conclusions drawn by the pleader from the affirmative defenses.
    3. The plaintiffs, bankers in New York, contracted by cable with the defendant, a Swiss bank, for the purchase of Polish marks to be paid by the defendant to the plaintiffs or the plaintiffs’ nominee at a bank at Warsaw, Poland, which country was then at war. Aggrieved by unreasonable delay in the execution of the orders, they gave notice of election to treat the contracts as rescinded, and have sued for the recovery of the money paid. The defendant has answered their complaint with denials and defenses. Held, upon examination of the facts that there is nothing of substance to be tried.
    4. Non-performance being proved, plaintiffs are not limited to damages but may properly demand restitution and this right continues unimpaired notwithstanding that the defendant had not repudiated its contracts nor refrained altogether from some effort to perform them.
    5. Upon rescission for abandonment notice may be given at any time within the period of the Statute of Limitations unless delay would be inequitable. Inaction without more is not tantamount to choice.
    6. A buyer’s failure to conform to a custom imposing upon him a duty to inquire whether a credit has been established is not a bar to restitution where the seller has made inquiry for himself and ascertained the truth or would have ascertained the truth if his own duty had been fulfilled.
    7. Nor can an argument be upheld that the defendant, though aware that it was already in default, might reasonably infer from the absence of notice to the contrary that the time for the performance of the contract had been indefinitely extended. From silence without t more, the defendant might have legitimately inferred that the plaintiffs were either unaware of the default, in which event an inference of waiver was excluded, or aware of the default, in which event the inference was that they were standing upon their rights.

      Richard v. Credit Suisse, 214 App. Div. '705, affirmed.
    (Argued February 23, 1926;
    decided May 4, 1926.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered May 1, 1925,t unanimously affirming a judgment in favor of plaintiffs entered upon an order of Special Term granting a motion by plaintiffs for summary judgment under Civil Practice Rule 113.

      Joseph M. Hartfield, James Adam Murphy and Henry Escher for appellant.
    Competent proof of the alleged breach was not made by plaintiffs. (General Investment Co. v. Interborough R. T. Co., 235 N. Y. 133; Curry v. Mackenzie, 239 N. Y. 267; Moe v. Bank of United States, 211 App. Div. 519; Baldwin’s Bank v. Smith, 215 N. Y. 76; Coates v. First Nat. Bank of Emporia, 91 N. Y. 20; Mazukiewicz v. Hanover Nat. Bank, 240 N. Y. 317; Goldmuntz v. Spitzel, 91 Misc. Rep. 148.) Competent proof of the alleged breach is not presented in the moving papers, which show the contract was performed by defendant. (Coates v. First Nat. Bank, 91 N. Y. 20; Baldwin’s Bank v. Smith, 215 N. Y. 76; Risley v. Phœnix Bank, 83 N. Y. 318; Fourth Street Nat. Bank v. Yardley, 165 U. S. 634.) The action fails because plaintiffs are not entitled to rescind. (Schulder v. Ladew Co., Inc., 165 N. Y. Supp. 504; Coff-Garrod Co. v. Dodwell & Co., 170 N. Y. Supp. 615; Mason v. Valentine Souvenir, 168 N. Y. Supp. 159; 180 App. Div. 823; Cohen v. Curtin Co., Inc., 177 N. Y. Supp. 246; 107 Misc. Rep. 622; Taylor v. Goelet, 208 N. Y. 253; Gravenhorst v. Zimmerman, 236 N. Y. 22; Richards v. American Union Bank, 241 N. Y. 163; Trainor Co. v. Amsinck & Co., Inc., 236 N. Y. 392.)

      Walter H. Poliak and J. Charles Weschler for respondents.
    No genuine and substantial issue as to defendant’s failure to perform the contract of May 14, 1920, is raised. Plaintiffs’ proof of non-performance is conclusive and uncontroverted. (Gravenhorst v. Zimmerman, 236 N. Y. 22; Equitable Trust Co. v. Keene, 232 N. Y. 290; Legniti v. Mechanics & Metals Nat. Bank, 230 N. Y. 415; Trainor Co. v. Amsinck & Co., Inc., 236 N. Y. 392.) Defendant cannot vary its contracts by an alleged usage of international banking or rule of the law merchant; nor can it sustain a claim of performance. (Gravenhorst v. Zimmerman, 236 N. Y. 22; Corn Exchange Bank v. Nassau Bank, 91 N. Y. 274; O’Donahue v. Leggett, 134 N. Y. 40.)
   Cardozo, J.

The plaintiffs, bankers in New York, contracted by cable with the defendant, a Swiss bank, for the purchase of Polish marks to be paid by the defendant to the plaintiffs or the plaintiffs’ nominee at a bank at Warsaw, Poland. Aggrieved' by unreasonable delay in the execution of the orders, they have given notice of election to treat the contracts as rescinded, and have sued for the recovery of the money paid with interest. The defendant has answered their complaint with denials and defenses. The question is whether there is anything of substance to be tried (Curry v. Mackenzie, 239 N. Y. 267, 270).

The first of three contracts was made on or about May 14, 1920. Its subject-matter was ten million Polish marks to be paid at Warsaw to one Stanislas Lesser, plaintiffs’ nominee. The defendant gave an order by telegram to its Warsaw correspondent for the creation of the credit, but the order was disregarded. The plaintiffs rescinded in March, 1921, when they learned for the first time that payment had not been made.

The second contract, made on June 1, 1920, was for two million Polish marks to be paid to the plaintiffs at the Commerz Bank at Warsaw. There was failure of performance as late as May, 1921, when restitution was demanded.

The third contract, made on June 29, 1920, Was for the same amount of marks' as the second, the credit to be established in favor of the plaintiffs, once more at Warsaw, Poland. There was failure of performance as late as the following July.

Defendant insists, that the plaintiffs’ allegations of default are placed in issue, at least formally, by the denials of the answer, and that the supporting affidavits upon the motion for summary judgment do not establish the breach with technical precision. We are unanimous in holding that this issue is unreal. There is no need to determine whether the books of the Warsaw bank and the admissions of its officers Would serve without more to charge the defendant with liability. Even if these were to be disregarded, enough would be left. We have the defendant’s own letters which are instinct with the admission that its correspondent was at fault. More than this, we have the affidavit of its attorney which states in effect that the denials are merely formal and are to be interpreted and justified as conclusions drawn by the pleader from the affirmative defenses. The very object of a motion for summary judgment is to separate: what is formal or pretended in denial or averment from what is genuine and substantial, so that only the latter may subject a suitor to the burden of a trial. The defendant is not aggrieved if We take it at its word.

Non-performance being proved, there remains the question of the remedy. The plaintiffs ask for restitution. The defendant would limit them to damages. Rescission, it is said, is inequitable because of silence and inaction. Banking at Warsaw was impeded by a state of war between Soviet Russia and Poland. The defendant did not repudiate its contracts, nor refrain altogether from some effort to perform them. Its plight is due in part to the default of some one else, its chosen correspondent. Out of this predicament, there have emerged in the defendant’s view new equities and duties that might not call for recognition if the default had been intentional. In such a situation, the plaintiffs, it is said, should have investigated for themselves the state of Lesser’s credits and their own within the territory of war, and given warning to the defendant whether they rescinded or affirmed.

We think the right to restitution continues unimpaired.

There is a distinction between rescission for fraud, which goes upon the theory that a contract is to be treated as non-existent for lack of true assent, and rescission for abandonment, which goes upon the theory that a contract is avoided for non-performance though valid in its origin. In the one situation, notice of rescission must follow promptly upon discovery of the fraud. This at least will be assumed, though there may be exceptions even here (cf. Ripley v. Hazelton, 3 Daly, 329; Wolf v. Nat. City Bank, 170 App. Div. 565, 570). “ What promptness of action a court may reasonably exact * * * must depend in large measure upon the effect of lapse of time without disaffirmance upon those whose rights are sought to be divested ” (U. S. Supreme Court, per Stone, J., in Barnette v. Wells-Fargo Nat. Bank, 270 U. S. -). In the other situation, which in the view of learned authors is not properly to be characterized as an instance of rescission at all (Woodward, Quasi-Contracts, § 260; Anson, Contracts [Corbin’s ed.], § 402, p. 465, note), notice maybe given at any time within the period of the Statute of Limitations unless delay would be inequitable (Williston, Contracts, § 1469; Woodward, Quasi-Contracts, §§ 260-267; Richter v. Union Land Co., 129 Cal. 367, 374). Such inequity will result, for instance, if there is property to be returned, or if reliance upon apparent acquiescence will result in hardship or oppression. “Indeed it is probable that some element either of ratification or of estoppel is at the root of most cases, if not all, in which an election of remedies, once made, is viewed as a finality ” (Schenck v. State Line Telephone Co., 238 N. Y. 308, 312). Inaction without more is not tantamount to choice. If the defendant had promised to make delivery of cotton at a designated warehouse within a reasonable time, the plaintiffs would have been under no duty to rescind when first they discovered that delivery had been unreasonably delayed. They might postpone the election until their patience was exhausted by aggravation of the wrong (Trainor Co. v. Amsinck & Co., Inc., 236 N. Y. 392; Murray Co. v. Lidgerwood Mfg. Co., 241 N. Y. 455). In the absence of special circumstances, the right's of the parties are not different where the subject of the contract is a sale of foreign money, or, what is substantially equivalent, the creation of a foreign credit. Rescission is not barred because indulgence has been shown (Rose v. Foord, 96 Cal. 152, 155; Richter v. Union Land Co., supra).

Election presupposes knowledge, or at least the omission to fulfill some duty of inquiry from which knowledge would have followed. There is no claim by the defendant that the plaintiffs failed to rescind promptly after knowledge of the breach. The claim is merely that diligent inquiry Would have brought knowledge to them sooner. The duty to make inquiry has a foundation, it is said, in custom. The answer pleads a custom whereby the purchaser of the foreign credit inquires within a reasonable time whether the credit has been established in accordance with the contract. Inquiry, is addressed not only to the bank that is to open the account, but also to the beneficiary for whose benefit it should be opened. A supporting affidavit informs us that by the exactions of the custom a duty of inquiry rests upon the seller of the credit as well as upon the buyer, though the receipt of a debit note from the correspondent bank may dispense with further inquiry where there is no reason to suspect that performance has been withheld. The custom is. assailed as unreasonable and in other respects invalid. We leave that question open. For the purpose of this appeal, we assume in favor of the defendant that in possible situations the failure of the buyer to make the prescribed inquiry will be a bar to restitution. We cannot doubt, however, that it fails of that effect where the seller has made inquiry for himself and ascertained the truth, o’’ would have ascertained the truth if his own duty had been fulfilled. In the light of these principles, the three causes of action will be successively considered.

The first cause of action is based upon the plaintiff’s order of May 14, 1920, for ten million Polish marks to be paid to Mr. Lesser at Warsaw, Poland. In execution of that order, the defendant telegraphed its Warsaw correspondent, the Commerz Bank, on May 17, and on May 21 wrote a confirmatory letter. The letter reached its destination, but the telegram miscarried, and so the defendant was advised. Apparently this advice was delayed until July 16, for the defendant states that on that day, and at once upon being informed of the miscarriage of the first telegram, it telegraphed the Commerz Bank again to set up the credit, valued as of May 19. To this on July 20 it received an answer to the effect that since Lesser had no account with the bank, the order could not be executed, beyond the value at the date of payment. There was a request at the same time for instructions as to the disposition of the interest. A few days afterwards (August 1) a moratorium was declared, and the credit was no longer available except for ten per cent monthly of the previous balance. On July 20, if not before, the defendant knew that the credit had not been established within a reasonable time after May 14. Then, if not before, it knew itself in default. With that knowledge, it gave no notice to the plaintiffs to inform them of its belated action. What was done even at that late day was ineffective and imperfect, but such as it was, the plaintiffs were not told of it. The defense is built upon the theory that the plaintiffs were subject to a continuing duty to inform themselves of what was going on, and that the defendant, admittedly in default, might rest on the assumption that this duty had been fulfilled. We think the theory will not hold.

If the plaintiffs ought to have inquired about the execution of their order within a reasonable time after May 14, 1920, the defendant, on its own statement of the custom, was charged with an equal duty. Perhaps it might fairly have been satisfied with a debit note from its correspondent, but the record makes it clear that this it did not get. When its correspondent gave notice that, the telegram had miscarried, the defendant evidently understood that another telegram was necessary, but this it did not send till July 16. Assume, however, that the plaintiffs were delinquent in not informing the defendant of acts or omissions which the latter was under a duty to learn for itself. The fact still remains that on July 20, if not before, the defendant knew that the credit had not been set up as originally ordered, and that a reasonable time had long ago expired. It could not at this belated time attempt performance of its contract, and still rely upon a continued duty of inquiry on the part of the customers, as to whom it was already in default. If it wished the benefit of such inquiry thereafter, it should have told them what it was doing. The supposed custom did not mean that the plaintiffs must investigate continuously, within a reasonable time at first and again repeatedly thereafter. In particular it did not call upon them to inquire between July 16 and August 1, though if they had inquired even then they would have learned that part of the credit bargained for had been withheld to the defendant’s knowledge. On August 1 came the moratorium, with prompt notice to the defendant that payment had been suspended. Nothing that could have been done by the plaintiffs thereafter would have made it any wiser. Neither for principal nor for interest was any credit tendered or established by the defendant’s correspondent till April, 1921, or later. At that time restitution had already been demanded.-

The argument is made that the defendant, though aware in July, 1920, that it was already in default, might reasonably infer from the absence of notice to the contrary that the time for the performance of the contract had been indefinitely extended. We find no basis for such an inference. The plaintiffs’ order for the marks begins with the word urgent,” which in itself was notice to the defendant that prompt action was important. The conditions of the market, the rapid and violent fluctuations of exchange, gave notice to the same effect. Assent to an indefinite extension would have been precarious and extraordinary. There are cases in which such assent has been gathered from the acceptance, express or tacit, of acts of part performance from a party in default (Gen. Supply & Construction Co. v. Goelet, 241 N. Y. 28). There are none where assent has been inferred as the result of acts of part performance unknown to the party wronged. From silence without more, the defendant might legitimately infer that the plaintiffs were either unaware of the default, in which event an inference of waiver was excluded, or aware of the default, in which event the inference was that they were standing upon their rights. As the sequel has developed, the inference of ignorance was the true one. The default was yet unknown. If, however, the defendant preferred to draw the inference of knowledge, there was nothing in the situation to inform it what the choice of rights would be. The alternative remedial rights appropriate to a breach were still in equilibrium. There was, indeed, an obvious expedient by which the defendant could have forced the plaintiffs to an election, if an election had been deemed important. It could have tendered payment of the marks, in which event choice would have been necessary between acceptance and rejection. Nothing of the kind was done. The mere transmission of the instructions to the Polish correspondent was not performance of the contract. Performance was not effected until payment had been made. The instructions were transmitted without notice to the plaintiffs, and transmitted at a time when the period of default was still measured by weeks. The defendant would have us hold that by this act without more it so altered its position as to impose upon the plaintiffs a duty of acceptance when payment was tendered at the end of a year. Condonation does not follow so easily at the will of the wrongdoer. Much is made of the argument that if rescission is permitted, the defendant will be a loser because of the depreciation of the mark. This is no concern of the plaintiffs unless they have induced the loss. It does not follow, however, that the loss would be any less if restitution were denied. Even in that view, there might still be reparation to the plaintiffs for any damages resulting from the postponement of performance. Richard v. American Union Bank (241 N. Y. 163) did not hold that upon sales of foreign money there cannot in any circumstances be a recovery of damages occasioned by delay. The case went upon the narrow ground that the pleader by the form of his complaint had excluded the conclusion that damage had been suffered. At all events, if depreciation of the mark involves a loss to be taken account of in determining whether rescission is inequitable because prejudicial to the seller, it is not to be disregarded as unreal in determining whether the denial of rescission is inequitable to the buyer. The defendant’s plight is not due to the rejection by the plaintiffs of the tardy tender of performance. It is due to a default which the defendant should have known, and, knowing, have avoided.

In this situation, the remedies available to the buyer are not affected by the supposed custom of diligent inquiry. The remedies are what they would be if the custom were expunged. So viewed, they include the privilege to elect between restitution on the one hand and damages on the other. The plaintiffs’ situation may be no better, than it would have been if they had learned at once of the default, but also it can be no worse. Postponement of election has no greater element of hardship where the subject of the sale is Polish marks than it has where the subject is any other article of commerce. In the one case as in the other, the buyer may believe that performanee, even though it has been unduly postponed, will follow without much delay, and may be reluctant, while that belief persists, to crowd the seller harshly by announcing a rescission. The party in default rather than the one that is innocent, should bear the burden of any loss that is incidental to indulgence. There may be justice in a holding that will throw the loss upon the buyer where the seller has good reason to believe that his performance has been in order, if usage lays upon the buyer the duty of inquiry. There is none where a seller, knowing himself in default, makes a feint of performance after a reasonable time has gone by, and then washes his hands of the transaction without even an acknowledgment by his correspondent that the order has been filled, and indeed with notice through the moratorium that to fill it is impossible. Such aloofness and indifference do not comply with banking usages as the defendant has itself described them. Rescission is not inequitable against a seller so delinquent.

The second cause of action is based upon the order of June 1, 1920, for two million Polish marks. The defendant admits that it waited till July 30, substantially two months, before ordering the Commerz Bank to credit to the plaintiffs the marks called for by this order. There Would have been no good in the plaintiffs’ making an inquiry before that time. The defendant knew from its own records that the credit had not been made. Rescission was not barred by its belated effort to perform, made without notice to the plaintiffs after it was already in default. If, however, the time for inquiry were to be computed from July 30, the result would not be changed. In that view the plaintiffs had a reasonable time thereafter to investigate and report. Long before the time Was by, the defendant knew from the admissions of its own correspondent that the credit was ineffective. On August 3, 1920, the Commerz Bank had telegraphed the defendant that by reason of a moratorium, drawings were limited to ten per cent monthly of the previous credit balance. The defendant had full knowledge within a few days after telegraphing the transfer that its order would not be executed, and that the plaintiffs could not get the money. It telegraphed a protest to the Polish bank, and there it let the matter rest. It did not notify the plaintiffs, whose money it had received and held, that the credit was abortive. It did not take any steps to establish a larger credit. It was silent and inactive. Not till July, 1921, did it receive from its correspondent the debit note that' should have been transmitted to it more than a year before. Its order was executed then for the first time, if ever executed at all. Now it comes forward with the plea that the plaintiffs, who knew nothing of these happenings, might by diligence have learned of them, and with such knowledge might have reported to the defendant what the defendant knew already. We see nothing inequitable in a holding that the plaintiffs were at liberty to rescind against a defendant so circumstanced when knowledge was thereafter gained. The inequity would be wrought if rescission were denied.

The third cause of action is based upon the order of June 29, 1920. By telegram of June 29, 1920, confirmed by letter of July 2, the defendant notified the Commerz Bank to credit the plaintiffs with the marks called for by this order. No acknowledgment of this order was ever received or given. The defendant’s witness as to custom informs us that in default of some acknowledgment the duty to inquire is on the seller as much as on the buyer. Inquiry, if made, would have disclosed the fact that no credit was ever entered. The defendant ignored its duty in that regard, though it had taken the plaintiffs’ money for the service to be rendered. The consideration has failed, and it should pay the money back.

The judgment should be affirmed with costs.

Lehman, J.

(dissenting). The defendant’s obligations under its contracts must be measured by the terms of the contracts themselves. I agree that the affidavits presented upon this motion conclusively show that the defendant did not make full or timely performance of these obligations. Question still remains whether the affidavits show conclusively that because of the defendant’s breach the plaintiffs may avail themselves of this default, rescind the contract and recover the consideration paid. The contracts were made in May and June, 1920; performance was required within a reasonable time thereafter. The plaintiffs had the right to rescind for defendant’s failure to perform within a reasonable time, though notice to perform within a stated time was not previously given. (Trainor Co. v. Amsinck & Co., 236 N. Y. 392.) The plaintiffs did not avail themselves of this right till March, 1921, many months after reasonable time for performance was over. They say that until about that time they did not know that defendant was in default. That may be true, but they must have known that the time for performance by defendant was long past and yet apparently they neither inquired whether performance was made, nor sought to avail themselves of assumed performance by defendant by using the credits which should have been established. If rescission must be made within a reasonable time, it seems clear that there is at least a question of fact whether it was so made in this case.

My conclusion that in the present case the affidavits still leave open a question of fact as.to whether the attempted rescission by the plaintiff is effectual is not based upon any difference of opinion as to the general rules of law which must govern attempted election to rescind. I concur in the statement of the general rules of law in the prevailing opinion. I do not agree with the application made of these rules to the particular facts in this case.

Although the plaintiffs have received no benefit from performance by the defendant, yet the defendant has not repudiated the contract nor wholly failed to perform. On the contrary, the defendant has notified the Warsaw bank, though perhaps tardily, to transfer credits or pay-over'money in accordance with defendant’s agreement. Both parties understood that performance of the contract after such notification must be made by the Warsaw bank. The defendant was responsible for non-performance by the Warsaw bank, but the relation between the defendant and that bank was not simply that of principal and agent. The defendant was a creditor of that bank and the contracts contemplated transfer or payment of its credit or part thereof to the plaintiffs. When defendant notified the Warsaw bank to make such transfers and payment, it parted with its control of the moneys it had in the bank. It assumed that the Warsaw bank would carry out instructions. The plaintiffs made no inquiry. So far as the record shows, they too assumed that the credits or moneys had been paid or transferred. They learned thereafter that the Warsaw bank had not followed defendant’s instructions. It does not appear that until that time non-performance by the defendant had caused any change in the plaintiff’s position. They seem to have proceeded in all respects upon the assumption that the transfers were made. Non-performance by the defendant did not, so far as it appears, prevent the plaintiffs from using the foreign moneys for their intended purpose. The effect upon them of non-performance was that at the time of discovery they had 4,000,000 marks less in their bank account than they expected. Transfer of 4,000,000 marks at that time would have put them in the same position they would have been in if the transfer had been made at the stipulated time. If they are permitted to rescind the contract now they profit by the defendant’s breach, for they could purchase performance now at one-quarter of the amount paid originally.

On the other hand, by such rescission the defendant would find itself again in control of the moneys or credit which it had attempted to transfer and which it is still willing to transfer. It may not do so but by this judgment is compelled to pay back the amount it has received, though that amount is four times as much as the foreign money or credit is now worth. Of that it may not complain if the plaintiffs’ gain and the defendant’s loss are due solely to defendant’s fault. Instances are not infrequent where in a falling market a buyer is permitted to refuse goods because they have not been tendered in compliance with the contract, though the buyer gains by the seller’s breach. The buyer has the right to insist upon performance, or in the alternative restitution of the consideration paid for the promise to perform. If, however, he waives the default, if by his own actions the buyer causes the seller to change his position in justified reliance upon indicated intention on the part of the buyer to accept belated performance, then the buyer may not thereafter change his attitude to the consequent damage of the seller. Failure to make prompt election to rescind may in some cases create an estoppel.

Whether or not the plaintiffs’ failure to rescind the contracts promptly after reasonable time for performance had passed bars right to rescind thereafter depends upon two questions: First, were the plaintiffs under any duty to the defendant to give notice to it that they would not accept belated performance? Second, did the defendant change its position because of failure to receive such notice? As I have already stated, we are not dealing now with a case where the defendant had done nothing in performance of its promise; where in effect the defendant had disregarded its contracts. Here, though belatedly, it had notified the Warsaw bank of its assignment of part of its deposits to the plaintiffs, and it had directed the Warsaw bank to make the transfer effective. Failure on the part of the plaintiffs to notify the defendant after reasonable time for performance had passed that it would, not accept belated performance, caused the defendant to relinquish control of its bank credit until after the credit had lost most of its value; and at the same time it placed the plaintiffs in the position where they could have demanded of the Warsaw bank that the transfer of credit should be completed. Concededly the value of these credits was fluctuating rapidly. If the plaintiffs’ failure to notify the defendant of election'to rescind and not to accept belated performance had been due to an intention to speculate at defendant’s risk and with knowledge that performance by the defendant at that time was not complete, though directions for performance had been given or were about to be given, it would seem clear that the plaintiffs would have been guilty of bad faith and by their own actions would have misled the defendant. I ascribe no such intention, or even knowledge of non-performance, to the plaintiffs. On the contrary, the evidence seems undisputed that the plaintiffs did not have knowledge of defendant’s nonperformance at that time and made no inquiries about it. I point out merely that if plaintiffs’ failure to demand restitution when time for performance had passed had been deliberate and due to intention-to postpone election of whether to stand upon the contract or to disregard it until they could decide which would be the more profitable course, then they would have lost the right to a remedy which is based upon equitable considerations. If election to disregard the contract need not in all cases be made promptly after breach, at least it may not be postponed beyond the time when there was duty to speak and silence has naturally and reasonably led the other party to a change of position which causes additional loss. The contract may not be kept alive and thereafter disregarded for breach that was waived.

It is here that we find the question of fact which in my opinion can be decided only after a .trial. Concededly the plaintiffs have given no notice that they regarded the contract as breached or demanded return of the consideration paid, until long after time for performance had passed. Prompt notice would have put the defendant in control of foreign moneys or credit which it could presumably have disposed of at the then prevailing rate of exchange or value. Delay has to that extent caused loss to defendant and placed the plaintiffs in a position where they can obtain a similar contract for correspondingly smaller consideration. If there was duty upon the plaintiffs to give notice promptly that they would not accept belated performance thereafter, and if the defendant had the right without inquiry to remain quiescent thereafter, then the plaintiffs may not profit by their wrong. Whether such duty rested on the plaintiffs and whether the defendant could rely upon the plaintiffs performing that duty, depends on all the circumstances of the case, and especially upon the usual course and practice of this kind of business. Ordinarily when a contract is made for foreign exchange the so-called buyer intends to use it for a particular purpose, the so-called seller anticipates that the transfer will be made by the foreign bank in accordance with directions given to it. If the foreign money or credit is not available when the buyer attempts to use it, ordinarily the seller will expect to be called to account for non-performance. It is said that by custom 'the duty is placed upon the buyer to inquire whether the transfer is made. Perhaps similar duty is laid upon the seller; yet if such custom exists we cannot say that the defendant could not reasonably under all the circumstances of the case and the conditions existing in Warsaw at the time, rely upon the plaintiffs notifying it that because of its non-performance they would regard the contract as terminated. We cannot say that the plaintiffs in failing to inquire did not assume the risk that performance had not been made fully, if at all, or that the defendant was not under the circumstances justified in proceeding upon the assumption either that performanee had been completed and accepted or if not completed, that belated performance would be accepted.

It is said that even a custom which placed upon the plaintiffs duty of inquiry whether transfer was made at the bank cannot avail the defendant since the defendant was likewise under duty of inquiry and indeed knew that it had not itself promptly complied with the contract and had no reason to assume that the plaintiffs would accept belated performance. It does not seem to me that this conclusion follows as matter of law from undisputed facts. The determining factor in regard to the plaintiffs’ right to rescind, more than, six months after the time has expired for performance by the defendant, in strict accord with its contractual obligation, is • not whether the plaintiffs’ firm or the defendant has been guilty of negligence for which either should be penalized but whether the plaintiffs’ conduct in failing to notify the defendant of intention to rescind was calculated to and did mislead the defendant to its injury. It is true that the defendant not only should have known but in fact must have known that at the time when the contracts or at least some of them should have been performed, it had failed to take steps to carry them out. Notice by the plaintiffs of failure to perform when the defendant knew that it had not performed would serve no purpose. Notice by the plaintiffs that because of failure to perform by the defendant they would not accept performance thereafter may well have resulted in defendant giving the bank subsequent directions to make the transfer and in parting with control of its moneys in the bank. If the defendant had the right to assume from plaintiffs’ failure to give notice of rescission that the plaintiffs would accept performance thereafter, even if incomplete at the time and it acted upon that assumption to its loss, then I think that the plaintiffs may not thereafter insist upon the breach as a ground of rescission. By their silence they may have extended the time for performance if they remained silent when under a duty to speak. Whether in spite of extension of time to perform they might still recover damages for failure to perform at the stipulated time is not a question which we may decide in this action. Such right to recover damages may depend upon whether the plaintiffs waived proven default not merely as ground for rescission but as ground for damages; whether in other words they merely waived default or whether they extended the stipulated time. I point out merely that in the case of Richard v. American Union Bank (241 N. Y. 163) the circumstances were not analogous.’ There the plaintiffs who are also the plaintiffs here, apparently failed as in this case to notify the seller of foreign credit that transfer had not been made until long after time for performance of the contract had passed and the foreign money had declined to a fraction of its value *at the time the contract was made, but so far as shown, the defendant had not been misled or injured by this failure. It did not change its position in any way, to its detriment. It attempted performance only when it could do so at a large profit.

Here the defendant was apparently misled to its detriment by the plaintiffs’ silence; it did part with control of its moneys in the Warsaw bank. It did make some attempt at performance before decline in value of the money. If the plaintiffs by failure to act gave the defendant the right to assume that subsequent performance would be accepted as compliance with contract obligation, then the plaintiffs may not now rescind. That is the ultimate question presented here and the affidavits presented upon the motion are insufficient in my opinion to justify its answer without a trial.

The court cannot take judicial notice of customs of the business in foreign exchange. It cannot weigh the effect of action or non-action of the parties nor determine the relative duties of the parties without proof of such customs and of all the conditions surrounding the transaction. The obligations of the defendant under its contracts are in general clearly and unambiguously expressed; the question of whether breach of those obligations was waived, and whether the right to restitution because of that breach was lost, depends on equitable considerations outside of the contract. There may in fact be difference in regard to the separate contracts, but these are matters which must await trial. Regardless of whether the burden rests upon the plaintiffs to show that rescission was prompt or upon the defendant to show that there was unjustified delay which placed an undue burden and loss upon it, the affidavits before us show that defendant is under the rule entitled to defend.

The orders should be reversed, with costs, and the motion denied.

His cock, Ch. J., Pound and Crane, JJ., concur with Cakdozo, J.; Lehman, J., writes dissenting opinion, in which Andrews, J., concurs; McLaughlin, J., absent.

Judgment affirmed.


source: Caselaw Access Project

author: Cardozo, J.

license: Public Domain

text:
    103 Park Avenue Company, Appellant, v. Exchange Buffet Corporation, Appellant, and The City of New York et al., Respondents.
    New York city — change of grade — constitutional law — award properly made to lessee of portion of building for damage from change of grade of street — no denial of “ due process ” in that by legislative enactment a vested claim for damages is taken from owner and given to tenant.
    1. By force of chapter 786 of the Laws of 1920, the board of assessors of the city of New York has jurisdiction to make an award for damages from change of grade of a street, to one who is a lessee of a portion of a building.
    2. It is the duty of the court to search out the intention of the Legislature and to give effect to it when discovered though the expression be imperfect.
    3. A contention that the act of 1920 (L. 1920, eh. 786) involves a denial of “ due process ” in that by force of its provisions a vested claim for damages is taken from the owner and given to the tenant cannot be sustained. The argument misconceives the operation of the statute. The owner still recovers the damages, and all the damages, occasioned to the value of his interest, i. ethe value of the reversion. The only effect of the amendment is to give a remedy to the tenant for the impairment of the value of the leaso. The tenant thereby gains, but the owner does not lose.

      103 Park Ave. Co. v. Exchange Bv.jjet Corp., 214 App. Div. 785, reversed.
    (Argued March 1, 1926;
    decided May 4, 1926.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered December 18, 1925, affirming a judgment in favor of defendants, respondents, entered upon a dismissal of the complaint and of the counterclaim of defendant, appellant, by the court on trial at Special Term.

      James R. Peering for plaintiff, appellant.
    The board of assessors had no jurisdiction to award or certify the estimate of damage to any one but the owner. (103 Park Ave. Co. v. Exchange Buffet Corp., 200 App. Div. 111; 2 Lewis on Em. Dom. [3d ed.] 1253; Matter of Delancey Street, 120 App. Div. 700; People v. Common Council, 140 N. Y. 300; People v. O’Brien, 111 N. Y. 1; People ex rel. Crane v. Hahlo, 228 N. Y. 309; Johnson v. Pettit, 120 App. Div. 774; King v. Mayor, etc., 102 N. Y. 172.) The plaintiff had a vested right to have the damages to its property awarded in accordance with the law as it existed at the time the damage accrued (Laws of 1918, chap. 619), and according to the proceedings thus taken by the city under said law. Such right was an easement in the street. (103 Park Ave. Co. v. Exchange Buffet Corp., 200 App. Div. 111; Torge v. Salamanca, 176 N. Y. 324; Matter of Grade Crossing Comrs., 209 N. Y. 139; People ex rel. Janes v. Dickey, 206 N. Y. 581; Matter of Leist, 189 App. Div. 155; Mayer v. City of New York, 193 N. Y. 535; Matter of Southern Boulevard, R. R. Co., 58 Hun, 497; Matter of Crane v. Craig, 230 N. Y. 452; Matter of the Evergreens, 47 N. Y. 216; Matter of City of

      New York [Higgins], 222 N. Y. 370.) If section 951 of the charter, as amended by chapter 786 of the. Laws of 1920, allows in some cases damages to lessees of a part of the premises, it cannot be applied to take away from the owner his right to full and all damages as provided by the law as it existed at the time the injury was inflicted and the right to the damage accrued. (103 Park Ave. Co. v. Exchange Buffet Corp., 200 App. Div. 111; Cooley’s Const. Lim. [7th ed.] 517; Cooper-Snell Co. v. State of N. Y., 230 N. Y. 249; Matter of the Evergreens, 47 N. Y. 216.)

      Maurice L. Bippe and Henry Best for defendant, appellant.
    In no event can plaintiff obtain this award, as the statute authorizes the award to an abutting owner of actual compensatory damages only. (Radcliff’s Exrs. v. Mayor, etc., 4 N. Y. 195; Matter of Park Ave., 118 App. Div. 874; Matter of Crane v. Craig, 230 N. Y. 452; Matter of Grade Crossing Comrs., 154 N. Y. 550; People ex rel. City of New York v. Stillings, 134 App. Div. 480; 200 N. Y. 525; Fargo v. Browning, 40 App. Div. 507.) The board of assessors was authorized to make an award to the Exchange Buffet Corporation on the claim filed by it. (Ely v. Holton, 15 N. Y. 595; Matter of Borup, 182 N. Y. 222; People ex rel. Huntington v. Crennan, 141 N. Y. 239; People ex rel. Central Trust Co. v. Prendergast, 202 N. Y. 188; Cooper-Snell Co. v. State of New York, 230 N. Y. 249; Torge v. Salamanca, 176 N. Y. 324; Maus v. Logansport, P. & B. R. R. Co., 27 Ill. 77; Wiley v. Solvay Process Co., 215 N. Y. 584; Martin v. Goldstein, 20 App. Div. 203.)

      George P. Nicholson, Corporation Counsel {John F. O’Brien of counsel), for defendants, respondents.
    Neither section 951 of the New York charter (as amended by Laws of 1920, chap. 786), nor any other statute confers jurisdiction upon the board of assessors to make an award for any amount to Exchange Buffet Corporation, as lessee of only part of the property. The purpose of the amendment to section 951 by chapter 786 of the Laws of 1920 was to vest a three-year lessee of the entire property with the remedy formerly vested in a ten-year lessee of the entire property. (Radcliff’s Exrs. v. Mayor, etc., 4 N. Y. 195; Matter of Crane, 230 N. Y. 452; 103 Park Avenue Co. v. Exchange Buffet Corp., 200 App. Div. 111; People ex rel. Flatbush Gas Co. v. Coler, 190 N. Y. 268; P. R. T. Co. v. Dash, 125 N. Y. 93; Palmer v. Van Santvoord, 153 N. Y. 612; Smith v. B. & A. R. R. Co., 99 App. Div. 94; 181 N. Y. 132; Lewis’ Suth. Stat. Const. [2d ed.] § 573; Fitzgerald v. Quann, 109 N. Y. 441; Bennett v. Bennet, 116 N. Y. 584; Shotwell v. Dixon, 163 N. Y. 43; Tompkins v. Hunter, 149 N. Y. 117.) Since $12,000 represents the total damage to plaintiff, it may not obtain the additional $36,000 which, as damage, was suffered by Exchange Buffet Corporation and which the board of assessors was without jurisdiction to award to any one. (Matter of Borup, 182 N. Y. 222; People ex rel. Dady v. Prendergast, 203 N. Y. 1.)
   Cardozo, J.

Plaintiff has owned for many years a twelve-story office building, No. 103 Park avenue, at the southeast corner of Park avenue and Forty-first street in the city of New York. In January, 1913, it leased to the defendant Exchange Buffet Corporation the corner stores on the ground floor and also part of the basement for a term of twenty-one years. In September, 1918, the city of New York adopted a plan for the change of grade of Park avenue by the erection of a viaduct between Fortieth and Forty-second streets. The work was completed and accepted by the city authorities in October, 1919. Claims for damages were filed with the board of assessors by owner and lessee. In February, 1921, the board of assessors made an award of $12,000 with interest in favor of the owner, which award was confirmed by the board of revision. At the same time it made an award of $36,000 with interest in favor of the lessee, which also was confirmed.

Plaintiff, having collected the award of $12,000 made to it as owner, brings this action to establish its ownership of the award made to the lessee. The lessee, Exchange Buffet Corporation, has answered demanding judgment by way of counterclaim that its title be confirmed, and that payment be made accordingly. The city and the comptroller asserb that the award to the lessee was made without jurisdiction, that the lessee is not entitled to anything, and that the plaintiff has been paid in full, The Special Term gave judgment to that effect. The Appellate Division unanimously affirmed.

The first question to be considered is whether the board of assessors has jurisdiction to make an award for damage to one who is a lessee of a portion of a building.

At common law an owner was without remedy against a municipality for the damage to his property through the change of an established grade (Radcliff’s Exrs. v. Mayor of Brooklyn, 4 N. Y. 195). As early as 1816 the Legislature acted to mitigate the harshness of this rule in its application to street opening proceedings in the city of New York (L. 1816, ch. 160). The preamble to that act recites that the Mayor, Aldermen and Commonalty of the city of New York, have by their memorial represented to the Legislature, that the opening and improving of streets in the compactly built part of the said city will not unfrequently render it necessary that a new regulation- should take .place in the elevation or depression of streets already regulated previous to such improvement, that by such new regulation, the buildings erected upon such streets in conformity with the previous regulation thereof, may be essentially damaged; and that no provision is made by the existing laws to afford indemnity to the owners of property thus injured, for the loss and damage which may be sustained by them in the premises, and have prayed legislative aid for the purpose of such indemnity.” The Legislature accordingly enacted that “ if the said commissioners of estimate and assessment shall judge that such intended regulations will injure any building or buildings, not required to be taken for the purpose of opening, extending, enlarging, straightening, altering or improving such street or part of a street, or public place they shall proceed to make * * * a just and equitable estimate and assessment of the loss and damage which will accrue by and in consequence of such intended regulation, to the respective owners, lessees, parties and persons respectively entitled unto or interested in the said building or buildings so to be injured by the said intended regulation.” No distinction was drawn between lessees of a part of a building and lessees of the whole (Matter of William Street, 19 Wend. 678, 683, 684; 2 Lewis on Eminent Domain, §§ 719, 750).

Section 978 of the New York City Consolidation Act of 1882 (L. 1882, ch. 410) continued chapter 160 of the Laws of 1816 without substantial change. The section as re-enacted forms part of title 5 of chapter XVI of the act, which is headed Opening streets, avenues, and public places.” Lessees as well as owners were protected as before.-

Upon the adoption of the charter of Greater New York in 1897, section 978 of the Consolidation Act became section 980 of the charter. It was included within title 4 of chapter XVII, which dealt with " opening streets and parks.” There was no modification of the remedies accorded to lessees.

At this point there is need to go back to the Consolidation Act and trace another title downward. Title 2 of chapter XVI is headed " Assessments for improvements other than opening and closing streets, etc.” Included in this title are sections 873 and S74, which are substantially re-enactments of an act of 1852 (L. 1852, ch. 52; Peo. ex rel. Tytler v. Green, 64 N. Y. 606.) These sections provide in effect that where grades previously established shall after-wards be changed, the board of assessors are to estimate the “ loss and damage which each owner of land fronting on such street or avenue will sustain by reason of such change to such lands, or to any improvements thereon.” Unlike section 978, they do not touch a case where the grade is established for the first time, nor do they give a remedy for the damage to any one except the owner.

Sections 873 and 874 of the Consolidation Act were continued with slight changes in section 951 of the charter, which is part of title 2 of chapter XVII, dealing with assessments for local improvements other than those confirmed by a court of record.” The courts have held that the limitations of section 951 are without application to street opening proceedings conducted under section 980 of chapter XVII, title 4, of the charter of 1897 or under the corresponding provisions of the earlier Consolidation Act (Matter of Mayor [Perry Avenue], 118 App. Div. 874). For nearly a century there had been a remedy in such proceedings in favor of lessees as well as owners, and this whether an original grade or a new grade was the occasion of the damage. Section 951 as first enacted left that remedy intact.

The year 1915 brought radical changes of procedure. The whole of chapter XVII, title 4, of the charter was repealed (L. 1915, ch. 606), and there was substituted a new title which omitted the provisions of section 980 carried down without change since the act of 1816. As a partial offset to this omission, another act, adopted at the same session, amended and broadened the remedy under section 951 (L. 1915, ch. 537). Till then, an owner had been without a remedy under that section unless he had built upon his land at some time intermediate between the establishment of the grade by act of law and the change thereof (Triest v. City of New York, 193 N. Y. 525). Thereafter a remedy was to exist in favor of an owner who had built upon Iris property or otherwise improved it before a legal grade had been established. No provision was made, however, in favor of lessees, though till then their remedies in street opening proceedings had been the same as those accorded to the owners of the fee.

An amendment adopted in 1918 brought back to lessees a portion, but only a portion, of the rights formerly enjoyed. By chapter 619 of the Laws of that y^ar the remedy under section 951 was no longer to be confined to owners. The “ owner who has built upon or otherwise improved his property ” prior to the change, “ and the lessee thereof ” shall have compensation for the damage. This provision without more might not unreasonably have been interpreted as restoring, not only to lessees of the whole building, but also to lessees of a part, the compensation that had been theirs for nearly a century before. The Legislature was not yet willing to be so generous, and to guard against misconstruction laid down its own definition. The word lessee as used in this section shall include only such parties or persons whose lease covers the entire real property and the term of which does not expire in less than ten years from the date of the completion and acceptance of the grading by the city authorities and who are obligated under their lease to make repairs and alterations made necessary by the grading.”

Once more in 1920 the remedy was broadened. An amendment of that year (L. 1920, ch. 786) changed the definition of a lessee by substituting a term of three years for the one of ten, by omitting the provision that the lessee must be obligated under the lease to make the repairs and alterations required by the grading, and by omitting the provision that he must be a lessee of the entire building. “ The word lessee as used in this section shall include only such parties or persons whose lease does not expire in less than three years from the date of the completion and acceptance of the grading by the city authorities.”

We find in this amendment persuasive disclosure of the intention of the Legislature to extend the statutory remedy to a lessee of a portion of the building whenever three years of the term are unexpired at the acceptance of the grade. Standing alone, the statement that there shall be a remedy for the owner who has built upon “ his property ” and also for the lessee thereof ” is lacking in precision. A tenant who occupies an entire building is a lessee of property belonging to bis landlord, but so also, it may not unreasonably be said, is a tenant who occupies a part. The Legislature of 1918 recognizing this ambiguity coupled the remedy with a definition which restricted the award to the lessee of the whole. If the Legislature of 1920 had been willing to maintain this restriction, we may presume it would have said so. Instead, it continued to give a definition of lessees, but dropped from that definition the phrase whereby the apparent generality of the remedy had been made subject to restrictions. We think the inference is legitimate that the restrictions were abandoned, and that the word was thereafter to be read, not narrowly, but broadly. Our duty is to search out the intention of the Legislature and to give effect to it when' discovered though the expression be imperfect (Smith v. People, 47 N. Y. 330, 337). Other changes wrought by the: same act make for greater liberality. We think a like spirit dictated the omission of the requirement that only the lessee of the whole building was to have the benefit of the remedy. The Legislature did not mean to be less liberal in that regard than its predecessors in 1816 and for a century thereafter.

What it did was no untried and thoughtless innovation. The background of history supplies the setting and perspective.

Such a holding is reinforced when we view the mischief to be remedied. A lessee of part of a building may suffer loss from change of grade as surely and as gravely as a lessee of the whole. The statute reasonably requires that the unexpired term shall be substantial. The city ought not to be vexed with claims for petty losses. If this condition is satisfied, reparation ought to follow. The equity of such relief has illustration in the case before us. The lessee of the ground floor became bound to the payment of heavy rent in reliance on the existing grade. Its damage is far in excess of any that has been suffered by the owner of the fee. It must bear its loss without requital if this judgment is to stand. A like result would follow though the unexpired term were ninety-nine years or more. So also, the omission from the lease of any portion of the building, a floor or even a room, would leave the tenant helpless. One may suppose a case where a tenant is in possession under a lease to expire in a century with an exception from the demise of the basement or the cellar. In such a situation, the owner of the property would have a remedy, if a change of grade should follow, though his damage in all likelihood would be slight or even nominal. The real burden of the loss would be borne by the tenant. Indubitably a tenant so situated would be a lessee of property belonging to the landlord-owner. We cannot bring ourselves to believe that he would not be a “ lessee thereof within the meaning of the statute.

The plaintiff makes the point that the act of 1920 (L. 1920, ch. 786) involves a denial of due process ” in that by force of its provisions a vested claim for damages is taken from the owner and given to the tenant. The argument misconceives the operation of the statute. The owner still recovers the damages, and all the damages, occasioned to the value of his interest, i. e., the value of the reversion. The only effect of the amendment is to give a remedy to the tenant for the impairment of the value of the lease (Fries v. N. Y. & H. R. R. Co., 169 N. Y. 270, 280). The tenant thereby gains, but the owner does not lose.

The judgment of the Appellate Division and that of the Special Term should be reversed, and judgment granted in favor of the defendant Exchange Buffet Corporation as prayed for in its counterclaim with costs in all courts.

Pound, McLaughlin and Crane, JJ., concur; His cock, Ch. J., Andrews and Lehman, JJ., dissent. Judgment accordingly.


author: Crane, J.

text:
    Adolph Kaempfer, Respondent, v. Tompkins-Kiel Marble Co., Inc., Appellant.
    Contract — principal and agent — written agreement construed as appointing sales agent rather than as contract of sale — action thereon for refusal to take and pay for certain grade of merchandise cannot be maintained.
    A written contract whereby the plaintiff’s assignor appointed the defendant “ sole sales agent of their Jura Yellow Light and Jura Yellow Dark [marble] in the United States, Dominion of Canada and Cuba,” for a period of five years with the privilege of renewal for an additional five years, the agreement specifying a quantity to be taken each year “ as required,” and that in the event that the amount specified was not taken in any one year, the assignor had the right to cancel the contract, and giving the defendant the exclusive sale of the product in the territory mentioned, indicates that the defendant was constituted sales agent of the assignor, with the right to take specified amounts of marble during any one of the five years, and the privilege of exclusive sale within them territory and that the assignor had the right to cancel the agency in case a sufficient amount of marble was not taken. An action on the contract, therefore, for refusal and failure, by defendant, to take and pay for, during a period of years, a certain grade of marble, cannot be maintained.

      Kaempfer v. Tompkins-Kiel Marble Co., 215 App. Div. 758, reversed.
    (Submitted March 29, 1926;
    decided May 4, 1926.)

      Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the first judicial department, entered December 31, 1925, which affirmed an order of Special Term denying a motion by defendant for a dismissal of the complaint.
    The following question was certified:
    “ Does the complaint state facts sufficient to constitute a cause of action? ”

      Maxwell C. Katz and Otto C. Sommerich for appellant.
    The object of the agreement being the appointment of the defendant as sales agent of plaintiff’s assignor, and the action not being based upon a failure on the part of the defendant to use its best efforts, the clause “ quantity to be taken each year as required ” is not to be interpreted as obligating the defendant to order the said quantity but is to be construed with the previous clauses as merely a ground of cancellation. (Moran v. Standard Oil Co., 211 N. Y. 187; Wood v. Duff-Gordon, 222 N. Y. 88; Champion Spark Plug Co. v. Automobile Sundries Co., 273 Fed. Rep. 74.) The purpose .of the agreement being to create the defendant sole agent, in the absence of language expressly imposing the obligation on the defendant to take a minimum quantity, the defendant is not hable. (First Nat. Bank of Litchfield v. Jones, 219 N. Y. 312; Poel v. Brunswick-Balke-Collender Co. of N. Y., 216 N. Y. 310; Woodruff v. Woodruff, 52 N. Y. 53.) The expression “ To be taken each year as required ” is not to be construed as an obligation to take a minimum quantity. (Schlegel Mfg. Co. v. Cooper’s Glue Factory, 231 N. Y. 459; Vellie Motor Car Co. v. Kopmeier, 194 Fed. Rep. 324; Bailey v. Austrian, 19 Minn. 535; Higbie v. Rust, 211 Ill. 33; American Refrigerator Transit Co. v. Chilton, 94 Ill. App. 6; American Cotton Oil Co. v. Kirk, 68 Fed. Rep. 791.)

      Charles S. Rosenschein for respondent.
    The contract as a whole is “ instinct with an obligation ” on the part of the defendant not merely to be an agent of the seller, but to purchase the minimum quantities per year. (Hargraves v. Gordon, 137 App. Div. 695; Moran v. Standard Oil Co., 211 N. Y. 187; Benedict v. Pincus, 191 N. Y. 377; Dixie v. Woods, 168 App. Div. 337; Fellows v. Fairbanks, 205 App. Div. 271; Wood v. Duff-Gordun, 322 N. Y. 88; Edison El. Ill. Co. v. Thacher, 229 N. Y. 172.) The contract in so many words provides for the purchase by the defendant of the quantities of marble stated. (Moran v. Standard Oil Co., 211 N. Y. 196.) The provision for exclusive agency does not impair the obligation to purchase. (St. Regis Paper Co. v. Hubbs, 235 N. Y. 30; Champion Spark Plug Co. v. Automobile Sundries Co., 273 Fed. Rep. 74.) The provision for cancellation in the event of defendant’s default does not destroy plaintiff’s right to an action for damages. (Bernard v. Golden Date Mfg. Co., 187 App. Div. 542; 231 N. Y. 591; White Furnace Co. v. Miller, 131 App. Div. 559; Bezer v. Hall Signal Co., 22 App. Div. 489; Fairchild v. City & County Contract Co., 153 App. Div. 277; Eyers v. Haddern, 70 Fed. Rep. 648; Diamond Match Co. v. Roever, 106 N. Y. 473; Feinstein v. Jacobson, 161 App. Div. 121.)
   Crane, J.

This action is upon a written contract which the plaintiff, respondent, interprets as a contract of sale. He, therefore, demands from the defendant $40,000 for refusal and failure to take and pay for during a period of years a certain grade of marble known as jura yellow. The defendant, appellant, construes the contract as one of agency with no obligation to purchase the quantities stated therein.

The motion upon the pleadings to dismiss the complaint brings up for consideration the meaning of this contract. It is, therefore, necessary to set forth the contract in full, to determine what the parties intended by it.

New York, Nov. 25th, 1921.

“ Agreement

Between

“ Dr. Kaempfer & Company, Gliesmarode-Braunschweig, Germany

“ and

“ Tompkins-Kiel Marble Company, New York City, N. Y.

In consideration of one dollars ($1.00) in hand paid receipt of which is hereby acknowledged, an agreement is entered into between the Dr. Kaempfer, Gliesmarode-Braunschweig, Germany, or his successors, and the Tompkins-Kiel Marble Company, New York City, N. Y. Whereby Dr. Kaempfer & Company appoint the Tompkins-Kiel Marble Company sole sales agents of their Jura Yellow Light and Jura Yellow Dark, which is quarried in Weissenburg, Bavaria, in the United States, Dominion of Canada and Cuba.

“ price:

Rough quarried blocks $42.50 per cubic meter, including German export duty, FOB S/S Hamburg or Rotterdam.

“ duration:

This Contract to be in force for a period of five (5) years with the privilege of renewal if agreeable to both parties for an additional five (5) years.

“ quantity:

In the event that the Tompkins-Kiel Marble Company do not order material as below mentioned the Dr. Kaempfer & Company have the right to cancel said contract at the end of each year in which this quantity is not taken.

“ QUANTITY TO BE TAKEN EACH YEAR AS REQUIRED:

1st year 750 cubic meters

2nd (( 1,000 “

3rd c( 1,250 “

4th c< 1,500 “

5th ec 1,750 “

terms:

Four (4) months Trade Acceptance upon presentation of Bill of Lading and invoice.

“ conditions :

“ It is understood and agreed that the Tompkins-Kiel Marble Company will have the exclusive sale of this product in the above mentioned territory and the Dr. Kaempfer & Company will not sell directly or indirectly to anyone in the above mentioned territory.

“ TOMPKINS-KIEL MARBLE COMPANY

“ (sgd.) Christian Georges, Jr.,

“ Vice-Pres.

Accepted:

Morris Kaempfer

“ Authorized Representative

Witness to

“ Bohunnl W. Sudlo.”

There would, of course, be no appeal and no dissents in the Appellate Division unless there were forceful reasons to sustain both contentions. Our decision, therefore, that the contract is one of agency means solely that the reasons for this view appear the more convincing to us. The plaintiff’s assignor, Dr. Kaempfer & Co., appointed the defendant “ sole sales agents of their Jura Yellow Light and Jura Yellow Dark in the United States, Dominion of Canada and Cuba.” The contract is for a period of five years with the privilege of renewal for an additional five years. The agreement does more than specify the quantity which is to be taken each year; it refers to the quantity each year “ as required.” In the event that the number of cubic meters specified is not taken in any one particular year, the other party has the right to cancel the contract. The defendant was also given the exclusive sale of this product in the territory mentioned. All these facts indicate in our judgment that the defendant was constituted sales agent of the Dr. Kaempfer & Co., with the right to take specified amounts of marble during any one of the five years, with the privilege of exclusive sale within their territory. The Kaempfer Co. had the right to cancel the agency in case a sufficient amount of marble was not taken.

This meaning of the agreement seems to us more reasonable than to suppose that the defendant absolutely bound itself for a period of five years to take the increasing number of cubic meters specified for delivery each year, With the privilege of renewal for five years longer.

The orders below should be reversed, with costs in all lourts, and motion granted, with costs and ten dollars costs of motion.

The question certified should be answered in the negative.

His cock, Ch. J., Cardozo, Pound, McLaughlin, Andrews and Lehman, JJ., concur.

Ordered accordingly.


author: Pound, J..

text:
    Robert D. Johnston, as Surviving Partner of the Firm of James Risk et al., Respondent, v. Compagnie Generale Transatlantique, Appellant.
    Comity — former adjudication — stare decisis — carriers — action against carrier to recover for wrongful delivery of goods — conclusiveness of former adjudication by French court — courts of this State not bound to follow ruling of United States Supreme Court that judgments rendered in France are not conclusive in the United States.
    1. The complaint in an action to recover for an alleged wrongful delivery of goods by a steamship carrier should have been dismissed where defendant set up as a defense an adjudication of the Tribunal of Commerce at Paris in favor of defendant upon the same cause of action, in an action brought by plaintiff thereon, established on the trial that the French judgment was the final judgment on the merits of a court of competent jurisdiction, and no attempt was made to impeach it for fraud.

      2. It cannot be successfully argued that questions of international relations and the comity of nations are to be determined by the Supreme Court of the United States; that there is no such thing as comity of nations between the State of New York and the Republic of France and that, therefore, this court is bound by a former decision of the Supreme Court laying down the collateral and qualifying rule that in principles of comity judgments rendered in France, by whose laws judgments of the -United States courts are reviewable on their merits, are not conclusive when sued upon in the United States and are only prima facie evidence of the justice of plaintiff’s claim. The question is one of private rather than public international law, of private right rather than public relations and our courts will recognize private rights acquired under foreign laws and the sufficiency of the evidence establishing such rights. A right acquired under a foreign judgment may be established in this State without reference to the rules of evidence laid down by the courts of the United States. (Dunstan v. Higgins, 138 N. Y. 70, followed; Hilton v. Guyot, 159 U. S. 113, limited and distinguished.)

      Johnston v. Compagnie Generate Transatlantique, 214 App. Div. 775, reversed.
    (Argued March 30, 1926;
    decided May 4, 1926.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered June 23, 1925, unanimously affirming a judgment in favor of plaintiff entered upon a verdict directed by the court.

      Joseph P. Nolan, Edward J. Garity and Arthur K. Kuhn for appellant.
    A party may not successfully contest the terms of a judgment of a French court, rendered in an action in a French court which such party initiated. (Hilton v. Guyot, 159 U. S. 170; Ricardo v. Garcias, 12 Cl. & F. 368; The Griefswald, Swabey, 430; Barber v. Lamb, 8 C. B. [N. S.] 95; Lea v. Deakin, 11 Biss. 23; Gould v. Gould, 235 N. Y. 14; Dunstan v. Higgins, 138 N. Y. 70; Bigelow on Estoppel [5th ed.], 307; Story’s Conflict of Laws, § 607; Konitzky v. Meyer, 49 N. Y. 571.) The judgment of the French court is conclusive of the merits of this action. (Hubbard v.
      Hubbard, 228 N. Y. 81; Gould v. Gould, 235 N. Y. 14; Lazier v. Westcott, 26 N. Y. 146; Dunstan v. Higgins, 138 N. Y. 70.)

      Sol. Boneparth, Moses Feltenstein, Abraham Bosenstein and Harry A. Dubinsky for respondent.
    Plaintiff may sue in our courts on a claim in personam although his suit on the claim in the French courts resulted in a judgment against him. (Hilton v. Guyot, 42 Fed. Rep. 249; 159 U. S. 113.) The judgment of the French court did not so bind respondent as to prevent him from trying this action upon its merits. (Hilton v. Guyot, 159 U. S. 210; Gould v. Gould, 201 App. Div. 127, 130; Westlake on Private Int. Law [5th ed. 1912], 429; Story’s Conflict of Laws, § 617; Burnham v. Webster, 1 Woodb. & Min. 172; 2 Kent’s Comm. 120; Grubel v. Nassauer, 210 N. Y. 149; McEwan v. Zimmerman, 38 Mich. 765).
   Pound, J..

The controversy arises over an alleged wrongful delivery of goods by the defendant, a steamship carrier, which is a foreign corporation organized under the laws of the Republic of France. Plaintiff is the assignee of triplicate bills of lading issued in New York, under which one Frank E. Webb shipped the goods from New York to Havre. Defendant delivered the goods to other parties upon presentation of a non-negotiable copy of the bill of lading which Webb retained as an office copy not used for presentation to secure the delivery of the goods.

Defendant set up as a defense an adjudication of the Tribunal of Commerce at Paris in favor of defendant upon the same cause of action, in an action brought by plaintiff thereon and established on the trial that the French judgment was the final judgment on the merits of a court of competent jurisdiction. No attempt was made to impeach it for fraud.

The courts below refused to give .effect to the French judgment on the authority of Hilton v. Guyot (159 U. S. 113), decided in 1895, for the reason that by the law of France no foreign judgment can be rendered executory in France without a review of the judgment au fond, that is, of the whole merits of the cause of action on which the judgment rests; that for want of reciprocity the courts of this State are not bound by the judgment but will, in their discretion, examine the rights of the parties as fully and absolutely as if the matter had never been submitted to the French court; and that on the merits the French judgment was contrary to the principles of our law and should be disregarded.

The New York rule was stated in Dunstan v. Higgins (138 N. Y. 70), decided in 1893, as follows:

" It is the settled law of this State that a foreign judgment is conclusive upon the merits. It can be impeached only by proof that the court in which it was rendered had not jurisdiction of the subject matter of the action or of the person of the defendant, or that it was procured by means of fraud. * * * The judgments of the courts of a sister State are entitled to full faith and credit in the courts of the other States under the Constitution of the United States, but effect is given to the judgments of the courts of foreign countries by the comity of nations which is part of our municipal law. The refusal of the foreign court to alíow a commission to examine witnesses here does not affect the conclusive character of the judgment. Such applications are generally within the discretion of the court to which they are addressed and then a refusal to grant them does not constitute even a legal error subject to review. But even if it appeared in this case, as it does not, that some legal right of the defendant was denied in refusing the application that would not affect the validity or conclusive nature of the judgment, so long as it stood unreversed and not set aside. Legal errors committed upon the trial or during the progress of the cause may be corrected by appeal or motion to the proper court, but they furnish no defense to an action upon the judgment itself. Where a party is sued in a foreign country, upon a contract made there, he is subject to the procedure of the court in which the action is pending, and must resort to it for the purpose of his defense, if he has any, and any error committed must be reviewed or corrected in the usual way. So long as he has the benefit of such rules and regulations as have been adopted or are in use for the ordinary administration of justice among the citizens or subjects of the country he cannot complain, and justice is not denied to him. The presumption is that the rights and liability of the defendant have been determined according to the law and procedure of the country where the judgment was rendered.”

This is the modern English doctrine and the doctrine of some, at least, of our State courts. (Lazier v. Westcott, 26 N. Y. 146; Konitzky v. Meyer, 49 N. Y. 571, 576; MacDonald v. Grand Trunk Ry. Co., 71 N. H. 448; Nouvion v. Freeman, 15 App. Cas. 1, 9; Godard v. Gray, L. R. 6 Q. B. 139-148) and has the approval of recent text-book writers. (3 Freeman on Judgments, 3069.)

In Hilton v. Guyot the action was brought on a foreign judgment, rendered by the same court in which the judgment herein was rendered. The opinion of Judge Gray, after an exhaustive review of the subject, while fully recognizing the general rule as stated, lays down the collateral and qualifying rule that on principles of comity judgments rendered in France, by whose laws judgments of the United States courts are reviewable on their merits, are not conclusive when sued upon in the United States and are only prima facie evidence of the justice of plaintiff’s claim. Fuller, Ch. J., wrote a dissenting opinion in which Harlan, Brewer and Jackson, JJ., concurred. He says (p. 233):

In any aspect, it is difficult to see why rights acquired under foreign judgments do not belong to the category of private rights acquired under foreign laws. Now the rule is universal in this country that private rights acquired under the laws of foreign states will be respected and enforced in our courts unless contrary to the policy or prejudicial to the interests of the state where this is sought to be done; and although the source of this rule may have been the comity characterizing the intercourse between nations, it prevails today by its own strength, and the right to the application of the law to which the particular transaction is subject to a juridical right.”

No case has previously arisen in this State which necessarily involved the consideration of Hilton v. Guyot. The question here presented may be regarded as an open one in this court. Cullen, Ch. J., said in Grubel v. Nassauer (210 N. Y. 149, 151) (by way of dictum, for the question was as to the jurisdiction of the foreign court): The judgments of the courts of no country have, necessarily, any extraterritorial effect. When they are enforced in a foreign country, which as a rule they are to a certain extent, it is solely by virtue of comity. The elaborate review of this subject by the Supreme Court of the United States in Hilton v. Guyot renders further discussion unnecessary.” Very recently in Gould v. Gould (235 N. Y. 14) it was said that Hilton v. Guyot did not apply in a matrimonial action where both parties although resident in France were said to be domiciled in the State of New York. Full force and effect was given to the French decree. The court in the end, however, disposed of the case in the exercise of discretion. It seems illogical to leave the effect of a foreign judgment in personam in individual cases to the discretion of the court.

To what extent is this court bound by Hilton v. Guyot ? It is argued with some force that questions of international relations and the comity of nations are to be determined by the Supreme Court of the United States; that there is no such thing as comity of nations between the State of New York and the Republic of France and that the decision in Hilton v. Guyot is controlling as a statement of the law. But the question is one of private rather than public international law, of private right rather than public relations and our courts will recognize private rights acquired under foreign laws and the sufficiency of the evidence establishing such rights. A right acquired under a foreign judgment may be established in this State without reference to the rules of evidence laid down by the courts of the United States. Comity is not a rule of law, but it is a rule of “ practice, convenience and expediency. It is something more than mere courtesy, which implies only deference to the opinion of others, since it has a substántial value in securing uniformity of decision, and discouraging repeated litigation of the same question.” (Brown, J., in Mast, Foos & Co. v. Stover Mfg. Co., 177 U. S. 485, 488.) It, therefore, rests, not on the basis of. recinrocitv^-but rathen-unon the persuasiveness of the foreign judgment. (Loucks v. Standard Oil Co., 224 N. Y. 99, 111.) AWhen the whole of the facts appear to.have been inquired into by the French courts, judicially, honestly and with full jurisdiction and with the intention to arrive at the right conclusion/ and when they have heard the facts and come to a conclusion, it should no longer be open to the party invoking the foreign court against a resident of France to ask the American court to sit as a court of appeal from that which gave the judgment. I reach the conclusion that this court is not bound to follow the Hilton case and reverse its previous rulings.

The reasoning of the learned justice who wrote the prevailing opinion is, however, entitled to most respectful consideration. Nor need we disregard the authority of the Hilton case. We may limit it to the questions actually decided. Mr. Justice Gray says (p. 228): In England, and in the Colonies subject to the law of England, the fraud alleged in its [the French judgment] procurement would be a sufficient ground for disregarding it.” As this State has always permitted foreign judgments to be impeached for fraud, the preceding fifty-four pages of the opinion may be regarded as magnificent dictum, entitled to the utmost respect, but not determinative of the question.

Furthermore, the learned justice limits his discussion (pp. 170-171) to the effect which a judgment, purely executory, rendered in favor of a citizen or resident of France in a suit there brought by him against a citizen of the United States may be entitled to in an action thereon in the United States. Here the plaintiff was the actor in the French court. After having sought the jurisdiction of the foreign tribunal, brought the defendant into that court and litigated the question there, he now seeks to impeach the judgment rendered against him. The principles of comity should give conclusiveness to such a judgment as a bar to the present action. Dicey on Conflict of Laws (3d ed. p. 455) states separately the rule as to foreign judgments pleaded as a defense, as follows: “ A valid foreign judgment in personam if it is final and conclusive on the merits (but not otherwise) is a good defense to an action for the same matter when either (1) the judgment was in favor of defendant or (2) the judgment- in favor of the plaintiff has been satisfied.” The law of the State of New York remains unchanged and the French judgment should be given full faith and credit.

The judgments should be reversed and the complaint dismissed, with costs in all courts.

His cock, Ch. J., Cardozo, McLaughlin, Crane, Andrews and Lehman, JJ., concur.

Judgments reversed, etc.


text:
    In the Matter of the Accounting of Joseph T. McNaier, as Trustee under the Will of Georgianna E. Reynolds, Deceased. Shelter for Respectable Girls et al., Appellants; Lillian A. Langford, as Executrix of Joseph T. McNaier, Deceased, et al., Respondents.
    Will — trust — remainders — preferred legacies — when direction for preference as to trust fund applies not merely to life interest but to remainder — erroneous holding that remainder passed into residuary estate.
    Where, by the eighth clause of her will testatrix created a trust for the life of a named beneficiary, with remainder “ to the institutions hereinafter named in clause twelfth,” and, after providing for another trust, directed “ said two above set forth legacies to be paid without abatement and free from all transfer or legacy taxation,” the direction applies not merely to the life interests but to the remainder and upon the death of the life beneficiary under the first trust the remainder passed to the institutions named in the twelfth clause as preferred legatees. A holding, therefore, that the remainder passed into the residuary estate and is applicable to deficiencies due upon other preferred legacies is erroneous. (Matter of Title Guarantee & Trust Co., 195 N. Y. 339, distinguished.)

      Matter of Reynolds, 215 App. Div. 763, reversed.
    (Argued April 6, 1926;
    decided May 4, 1926.)
    Appeal from an order of the Appellate Division of the Supreme Court in the first judicial department, entered December 11, 1925, which affirmed a decree of the New York County Surrogate’s Court settling the accounts of a trustee.

      Fred Francis Weiss and John 0. Pembleton for Shelter for Respectable Girls, appellant.
    The interest of the Shelter for Respectable Girls (now known as Sister Catherine’s Home) in the trust fund is that of a remainder-man, and it is entitled to receive from the trustee one-third of the trust fund in his hands, after allowance and payment of all proper expenses of the trust. (2 Schouler on Wills [6th ed.], § 859; Matter of Buechner, 226 N. Y. 440; Banzer v. Banzer, 156 N. Y. 429.)

      Dana R. Koons and Samuel H. Ordway for Reynolds Memorial Training School for Nurses et al., appellants.
    The intention of the testatrix as plainly expressed in her will is that the institutions named in clause twelfth thereof take the principal of this trust fund absolutely upon the death of the life tenant Mary C. Schulze, together with all income undisposed of by said Mary C. Schulze at the time of her death. (Matter of Miner, 146 N. Y. 121; Matter of Buechner, 226 N. Y. 440; Matter of Bump, 234 N. Y. 60; Matter of Merrill, 208 App. Div. 649, 650; 2 Schouler on Wills [6th ed.], § 859; Matter of Embree, 9 App. Div. 602; 154 N. Y. 778; Campbell v. Stokes, 142 N. Y. 23; Trunkey v. Van Sant, 176 N. Y. 535; Freeman v. Coit, 96 N. Y. 63; Banzer v. Banzer, 156 N. Y. 429; Tillman v. Ogren, 227 N. Y. 495.)

      George Zabriskie and George Gray Zabriskie for Calvary Episcopal Church et al., respondents.
    The gift in the eighth clause of the will was to the appellants in their capacity as residuary legatees, and as such they cannot take until all legacies heretofore abated are paid. (Matter of Title Guarantee & Trust Co., 195 N. Y. 339; Matter of Lyne’s Estate, L. R. [8 Eq.] 482; Bliven v. Seymour, 88 N. Y. 469; Matter of Werner, 125 App. Div. 358; 193 N. Y. 672; Trunkey v. Van Sant, 176 N. Y. 535; Jessup-Redfield on Surr. [2d ed.] § 919; Doughty v. Stilwell, 1 Bradf. 300; Smith v. Lansing, 24 Misc. Rep. 566; Matter of Baer, 147 N. Y. 348; Matter of Paulis, 220 N. Y. 196; Matter of Buechner, 226 N. Y. 440.)

      George B. Brooks for St. Luke’s Home for Aged Women, respondent.
    The construction placed upon the eighth clause of decedent’s will by the court below is in accord with the general scheme thereof and should be followed. (Matter of Title Guarantee & Trust Co., 195 N. Y. 339; United States Trust Co. v. Black, 146 N. Y. 1.)

      William K. Hartpence and Charles A. Runk for Rector, Church Wardens and Vestrymen of All Angels Protestant Episcopal Church, respondents.
    The clear intention of the testatrix as gathered from her entire will, was that the general legatees, preferred or otherwise, should be paid in full before any payments whatever were made to the legatees mentioned in the residuary clause of her will. (Matter of Title Guarantee & Trust Co., 195 N. Y. 339.)
   Crane, J.

In this proceeding to settle the account of Joseph T. McNaier, as sole surviving testamentary trustee of the trust created in the will of Georgianna Emily Reynolds, for the benefit of Mary C. Schulze, it has been necessary to construe certain provisions of that will relating to the remainder of the trust.

Georgianna Emily Reynolds died in the city of New York on or about the ninth day of December, 1917, leaving a last will and testament, dated May 30, 1917, which was duly admitted to probate on the 22d of May, 1918. In and by said will the testatrix made the following disposition:

“Eighth. I give and bequeath to my Executors hereinafter named, their successor or successors, survivor or survivors, the sum Twenty thousand ($20,000) Dollars, to be held by them in trust, to invest the same and to collect and receive the interest and income thereof and after deducting all lawful charges and expenses to pay the net income thereof to said Mary C. Schulze, nee Codington, for and during the term of her natural life, and at and upon her death to convey, transfer and deliver said principal sum of Twenty thousand ($20,000) Dollars, with all interest and income undisposed of by her at the time of her death, to the Institutions hereinafter named in Clause Twelfth of this my said Last Will and Testament.
“Twelfth. All the rest, residue and remainder of my estate, real, personal and mixed, of any and every kind and nature whatsoever, and wheresoever the same may be situate, whether legal or equitable, I give, bequeath and devise to the following named charities, to be equally divided between them, share and share alike, namely, To the said Shelter for Respectable Girls; To the Missionary Work in charge of Archdeacon Spurr at Moundsville, West Virginia, endorsed by the Rt. Rev. George W. Peterkin, Bishop of West Virginia and the Rt. Rev. W. L. Cravatt of Charleston, West Virginia; and to the work among the colored people of Archdeacon Russell. All these charities being under the supervision of the Protestant Episcopal Church in America.”

The Shelter for Respectable Girls is also known as Sister Catherine’s Home.

The missionary work in charge of Archdeacon Spurr of Moundsville, West Virginia, is The Reynolds Memorial Training School for Nurses and The Sheltering Arms Hospital.

The work among the colored people of Archdeacon Russell is the St. Paul Normal and Industrial School of Lawrenceville, Virginia.

The testatrix attempted to give away more property than she had, in consequence of which some of the legacies had to abate. She provided for cash legacies amounting to $60,100. Of these legacies, $50,600, including the trust fund of $20,000 under the above clause of the will, were directed to be paid without abatement, and free from all transfer tax. As to the remaining $9,500 of legacies, the testatrix used no such preferential language.

On a prior accounting of the executors of this will it appeared that all the legacies could not be paid in full, and the decree in that proceeding provided that the legacies in which no preferential language was used should abate entirely, and that the remaining legacies in connection with which the preferential language was used, including the trust fund of $20,000, should share pro rata in the assets. The total amount by which the legacies, other than this trust fund abated, was $15,920. Nothing was distributed under the residuary clause of the will.

The trust fund for Mary C. Schulze on abatement amounted to $15,720, which is now the subject of disposition upon this accounting, as Mary C. Schulze departed this Ufe on June 23, 1924.

The courts below have decided that the remainder of the trust fund for Mary C. Schulze passed into the residuary estate, and that under Matter of Title Guarantee & Trust Co. (Will of Alfred T. Baxter), 195 N. Y. 339, this residuary estate is applicable to the deficiencies due upon the preferred legacies; that the $15,720 must be paid proportionately to the preferred legatees, whose legacies have not been paid in full.

The three legatees mentioned in the “ twelfth ” clause of the will are appellants here from this disposition by the courts below, insisting that they take not as residuary legatees, but as preferred legatees under the “ eighth ” clause of the will, the same as they would have taken if they had been specifically named in the “ eighth ” clause.

We think the appellants are right in this contention. The distinction between this case and the Baxter case in 195 N. Y. is vital and determinative. The gift of the remainder in that case was to the residuary estate. The gift of the principal of the Schulze trust in this case is not to the residuary estate, but to certain specified legatees. The fact that they are specified in the “ twelfth ” clause instead of in the eighth ” clause does not change the result. The will reads: and at and upon her death to convey, transfer and deliver said principal sum of Twenty thousand ($20,000) Dollars, * * * to the Institutions hereinafter named in Clause Twelfth.” This is the same as saying “ To transfer and deliver said principal sum of $20,000 to The Shelter for Respectable Girls, to the Missionary work in charge of Archdeacon Spurr at Moundsville, West Virginia, and to the work among the colored people of Archdeacon Russell.”

■ This gift ot the remainder to these three institutions was also made a preferred legacy, to be treated upon the same terms of equality with the other preferred legacies. It has already been so treated by a reduction from $20,000 to $15,720. In clause eighth,” following the quotation ■above given, there is another trust created for the life of one HenriettaF. DuPont Lyon, and then clause eighth ” ends with this sentence: Said two above set forth legacies to be paid without abatement and free from all transfer or legacy taxation.” This sentence applies not merely to the life interests, but also to the remainders.

We, therefore, conclude that the remainder of the trust for Mary C. Schulze, under the “ eighth ” clause of the will passed to the three institutions named in the twelfth ” clause as preferred legatees, to be treated in the same way as were the other preferred legatees, and that in consequence the $15,720 is payable to the three appellants.

The order of the Appellate Division and the decree of the surrogate should, therefore, be reversed, and the matter remitted to the Surrogate’s Court to proceed in accordance with this opinion, with a separate bill of costs in all courts to each appellant filing a separate brief in this court payable out of the fund.

His cock, Ch. J., Cardozo, Pound, McLaughlin and Lehman, JJ., concur; Andrews, J., not voting.

Ordered accordingly.