text:
    In the Matter of the Estate of Jane Rosenberg, Deceased. Stanley S. Groggins, Appellant; Rose L. Schwobel, Individually and as Administratrix, et al., Respondents.
    (Argued January 17, 1934;
    decided February 27, 1934.)

      David L. Weissman for appellant.
    The Surrogate did not have the power summarily to direct the repayment of moneys voluntarily paid to an attorney as his fee pursuant to an express retainer. (Schell v. Mayor, 128 N. Y. 67; Bowling Green Sav. Bank v. Todd, 52 N. Y. 489; Matter of Minnesota Phonograph Co., 148 App. Div. 56; 212 N. Y. 574; Matter of Bailey v. Rutherford, 242 N. Y. 220; Matter of Jeffries, 219 N. Y. 573; Matter of Hess, 133 App. Div. 654.)

      Reginald S. Hardy and Gardiner Conroy for Rose L. Schwobel, individually and as administratrix of Jane Rosenberg, deceased, respondent.
    The Surrogate had jurisdiction to make the order appealed, from. (Matter of Tillman, 259 N. Y. 133; Matter of Krooks, 257 N. Y. 329; Matter of McNalty v. Youngs, 237 App. Div. 787; Matter of City of New York, 219 N. Y. 192; Martin v. Camp, 219 N. Y. 170; Andrewes v. Haas, 214 N. Y. 255; Phillips v. Hodgson, 227 App. Div. 754; Boehm v. United Power Laundries, Inc., 132 Misc. Rep. 1; Johnson v. Ravitch, 113 App. Div. 810; Tenney v. Berger, 93 N. Y. 524; Matter of Anderson, 257 N. Y. 592; Matter of Dollar, 103 Misc. Rep. 137; 194 App. Div. 948; 231 N. Y. 545.) A proper case was presented for the granting by the Surrogate of summary relief. (Schell v. Mayor, 128 N. Y. 67; Nann v. Raimist, 255 N. Y. 307; Middleton v. Boardman, 240 N. Y. 552; White v. Benjamin, 150 N. Y. 258; Cohn v. Baldwin, 141 N. Y. 563; Feiber v. Copeland, 232 App. Div. 504; Matter of Babcock, 230 App. Div. 323; Matter of Flannery, 150 App. Div. 369; People v. Peoples Trust

      Co., 180 App. Div. 494; Matter of Strandburg, 138 Misc. Rep. 732; Ransom v. Ransom, 147 App. Div. 835.)

      Paul G. Gravenhorst, as special guardian for Kate Lang, an incompetent person, respondent.
    The Surrogate’s Court had jurisdiction to fix and determine the fee of the appellant. (Matter of Balazs, 147 Misc. Rep. 95; Matter of Anderson, 136 Misc. Rep. 110; Matter of Morris, 134 Misc. Rep. 374; Matter of Bucken v. Busch, 203 App. Div. 717; Matter of Liell, 148 Misc. Rep. 279; Matter of Keeney v. Tredwell, 71 App. Div. 521; Matter of Strandburg, 138 Misc. Rep. 732; Bowling Green Sav. Bank v. Todd, 52 N. Y. 489; Matter of Warth, 225 App. Div. 811.)
   Pound, Ch. J.

Jane Rosenberg, the decedent, died possessed of a miscellaneous estate, consisting of mortgages, bank accounts, etc., with a value of something over $60,000. Rose L. Schwobel was appointed administratrix of the estate. She employed the appellant Stanley S. Groggins, an attorney at law, to advise and act for her in matters of the estate. She paid him $7,750 in the course of the administration. This fee was fixed by agreement for his services and disbursements, without regard to the amount of the estate. Before the services were completed she instituted a proceeding under section 231-a of the Surrogate’s Court Act. The Surrogate not only reduced the compensation of Groggins as attorney for the administratrix as such, to $4,000, but also directed the attorney to return the sum of $2,750.

The only question here is whether the Surrogate had power to make an order for reimbursement. The Appellate Division has so held, one justice dissenting on the ground that the proper remedy of the administratrix was by action and that the Surrogate’s Court had no jurisdiction to compel the return of moneys paid pursuant to contract.

The Surrogate’s Court Act, section 231-a, reads as follows:

“ Compensation of attorneys. At any time during the administration of an estate, and irrespective of the pend-ency of a particular proceeding, the surrogate shall have power to hear an application for and to fix and determine the compensation of an attorney for services rendered to an estate or to its representative, or to a devisee, legatee, distributee or any person interested therein; or in proceedings to compel the delivery of papers or funds in the hands of such attorney.

“ Such proceeding shall be instituted by petition of a representative of the estate, or a person interested, or an attorney who has rendered services. Notice of the application shall be given in such manner as the surrogate may direct. The surrogate may direct payment therefor from the estate generally or from the funds in the hands of the representative belonging to any legatee, devisee distributee or person interested therein.”

This section means that the application to fix the compensation of the attorney may be made at any time during the administration of an estate, without waiting for the final accounting when the amount paid the attorney by the personal representative for compensation might be questioned and she might be surcharged with any amount paid in excess of the reasonable value of the services rendered. Here, however, the administratrix did not seek to protect herself by making an application for an order under section 231-a before paying the attorney, but retained him and paid him in advance an amount which she now deems excessive and as to part of which the court has summarily ordered reimbursement.

The attorney, Groggins, did not receive money for his client, as in Matter of Anderson (136 Misc. Rep. 110; 232 App. Div. 704; 257 N. Y. 592). In such a case the power of the courts to make summary orders directing attorneys to turn over moneys received by them for their clients is unquestioned. (Schell v. Mayor, 128 N. Y. 67; Matter of Bailey v. Rutherford, 242 N. Y. 220, 223, 224.) A voluntary payment by a client for legal services is not a case in which such peremptory order should be made. The rights of the parties should be litigated in the ordinary way. (Matter of Jeffries, 219 N. Y. 573.)

As was recently said in Matter of Fromberg (260 N. Y. 430, 432): “ Judicial power relates to the protection of the estate and not to supervision of personal contracts made by an individual who is not a ward of the court and who is individually hable upon them.”

An attorney has the right to have claims against him established by action, except only in the case where he withholds money or property from his client which he is in duty bound to turn over to such client. There he may be dealt with summarily as an officer of the court..

The orders should be modified by striking out so much thereof as direct the return of $2,750, and as so modified affirmed, with costs against the respondent Schwobel personally in this court and in the Appellate Division.

Crane, J.

(dissenting). This application to the Surrogate is in essence an application to recover and get back assets of the estate in the hands of an attorney. It has taken the form of a motion under section 231-a of the Surrogate’s Court Act:

Compensation of attorneys. At any time during the administration of an estate, and irrespective of the pendency of a particular proceeding, the surrogate shall have power to hear an application for and to fix and determine the compensation of an attorney for services rendered to an estate or to its representative, or to a devisee, legatee, distributee or any person interested therein; or in proceedings to compel the delivery of papers or funds in the hands of such attorney.

“ Such proceeding shall be instituted by petition of a representative of the estate, or a person interested, or an attorney who has rendered services. Notice of the application shall be given in such manner as the surrogate may direct. The surrogate may direct payment therefor from the estate generally or from the funds in the hands of the representative belonging to any legatee, devisee, distributee or person interested therein.”

The petition of Rose L. Schwobel, as administratrix of Jane Rosenberg, asked for an order of the Surrogate directing one Stanley S. Groggins to return to the estate the sum of $7,750 paid to him for counsel fee and disbursements, or such part of it as was over and above the fee fixed by the Surrogate. After a hearing the Surrogate fixed the fee at the sum of $5,000 and directed the attorney to repay the balance, $2,750. The decree was affirmed by the Appellate Division.

Right at this point before we go further we must seize upon'the fact that these moneys belonged to the estate and not to the administratrix individually. In law the employment of counsel by an executor or an administrator is a personal affair and the executor or administrator is personally liable for services rendered. On an accounting, however, these fees are generally allowed out of the estate. In this instance, however, the moneys paid by Mrs. Schwobel to Groggins were moneys of the estate, checks drawn on the funds of the estate, deposited in the Title Guarantee and Trust Company of New York.

That the Surrogate has power over the administration of estates and plenary power over the collection and preservation of their assets cannot be doubted. (Surr. Ct. Act, § 40.) Neither should there be any disposition to restrict the Surrogate’s power over attorneys who have taken the assets of an estate for fees. Section 231-a is full and complete and gives the Surrogate the power to fix the fees at any time. An attorney taking the assets of an estate for a fee does so with full knowledge that he may have to return them, if excessive.

We have very recently held in Matter of Anderson (257 N. Y. 592) that an attorney under a contract of retainer by an executrix was obliged to return a portion of his fee which he had retained out of assets of the estate collected by him. The court fixed his fee and found that he had retained too much. No distinction should be drawn between the lawyer who retains an excessive fee out of assets collected and the lawyer who persuades an administratrix to give him the assets of an estate in excess of a reasonable fee. No such distinction is made in the section of the Surrogate’s Court Act and none such is made in the cases.

We must remember that we are here dealing with a question of power and not with a question of discretion. No abuse of discretion is before us; no such point is made. The Supreme Court and the Surrogate’s Court alike have the power to compel an attorney to pay back money improperly obtained or retained by him, even if the money has been voluntarily paid. Where, however, the money has been paid voluntarily by a client other than in the administration of an estate, the Supreme Court will seldom exercise its discretion and will leave the parties to an action. This is the way I read all of the cases referred to in the briefs and in the opinion of the chief judge.

In Matter of Bucken v. Busch (203 App. Div. 717, 718) the Appellate Division, first department, in dealing with fees already paid to an attorney, said: While ordinarily the court will not entertain a summary proceeding to test the fairness of a contract but will remit the petitioner to his remedy at law (Matter of Jeffries, 219 N. Y. 573), yet this power unquestionably does exist in the court, and the facts in the case at bar would seem to require its exercise.”

On the other hand, in Matter of Hess (133 App. Div. 654, 656) the Appellate Division, first department, relegated the attorney and client to a law action, where an application had been made by the client to compel an attorney to pay back a thousand-dollar fee. While the court denied the application the power to compel the repayment was recognized. Mr. Justice Clarke, with whom the entire court concurred, said: While the supervisory and disciplinary power of the court over its officers exists we do not think that it should be exercised to the extent attempted by the order appealed from.”

We find the same expression of the law in Schell v. Mayor (128 N. Y. 67), although the matter there related to moneys collected by the attorney. The underlying principle, however, is, that the court has power to control its officers, the lawyers, and to compel them to turn over moneys collected or retained. I have already given two instances in the above cases where the power was held to apply to retainers voluntarily paid, although in one of them the discretion was not exercised.

Anderson v. New York & Harlem R. R. Co. (150 App. Div. 432) is another instance where fees paid were directed to be restored or applied to the costs and disbursements of the case.

Matter of Jeffries (219 N. Y. 573) merely holds that the case is one in which the order should not be made. This court did not determine that the Supreme Court had no summary power over an attorney who had received as fees the assets of an estate or any other property of his clients. Very slow indeed is the Supreme Court to exercise this power, but that it exists for a proper case has to my mind never been questioned.

What I have here said regarding the Anderson Case (supra) applies equally to Matter of Dollar (231 N. Y. 545). The fact that a lawyer had collected assets out of which he took his fee and for which he had bargained is no different in effect or in principle from the lawyer who takes the assets of an estate in excess of all reason, from an administrator and seeks to appropriate them to his own use. The only thing under the law he is entitled to, a matter of which he must be cognizant, is the fee fixed by the Surrogate under section 231-a of the Surrogate’s Court Act. When he grasps out and takes the assets of an estate beyond this amount he may be compelled, and should be, to return it just the same as when he keeps such an amount out of sums collected and turns over too little. In either instance he has in his possession the funds of the estate to which he is not entitled. This court should be very slow in weakening the salutary effect of this power given to the Surrogates by section 231-a. Recognizing the necessity for exercising the power carefully and in a wise discretion, we should not determine that the Surrogate has no power where an executor or administrator, in the flush of expectation or the generosity of gilded hopes, has parted with the assets of the estate to a lawyer far in excess of anything he might be entitled to.

Therefore, I am for affirmance of the orders in this case.

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

Ordered accordingly.


source: Caselaw Access Project

author: O’Brien, J.

license: Public Domain

text:
    Barnett M. Kaplan, Respondent, v. Maryland Casualty Company, Appellant.

      (Argued January 9, 1934;
    decided February 27, 1934.)

      Thomas J. Meehan, Jr., for appellant.
    Reversible error was committed by the trial court in excluding competent evidence offered by the defendant as to the value of the stock at the time the injunction was granted. (Matter of Crary, 31 Misc. Rep. 72; Matter of Chambers, 155 N. Y. Supp. 153; Matter of Proctor, 41 Misc. Rep. 79; Matter of Curtice, 111 App. Div. 230; 185 N. Y. 543; Matter of Chappell, 151 App. Div. 774; People ex rel. Knickerbocker Fire Ins. Co. v. Coleman, 107 N. Y. 541; People ex rel. U. T. Co. v. Coleman, 126 N. Y. 433; Matter of Dupignac, 123 Misc. Rep. 21 211 App. Div. 862; Matter of Colt, 125 Misc. Rep. 373; Matter of Jackson, 125 Misc. Rep. 787; Matter of Smith, 71 App. Div. 602; Pett v. Spiegel, 202 N. Y. Supp. 650; Matter of Roos, 90 Misc. Rep. 521; Matter of Ball, 161 App. Div. 79; Matter of Ottman, 166 N. Y. Supp. 1078.)

      Michael Halperin for respondent.
    The trial court did not commit reversible error in the admission or exclusion of the evidence of the value of the stock submitted to the jury. (Joseph v. Sulzberger, 136 App. Div. 499; Page v. Clark, 119 Misc. Rep. 110; Cabble v. Cabble, 111 App. Div. 426; von Au v. Magenheimer, 115 App. Div. 84.)
   O’Brien, J.

In February, 1930, an action in replevin was begun by John Carnesale against Barnett M. Kaplan and Maurice D. Friedman to recover possession of one hundred and fifteen shares of the capital stock of the Nicholas Cloak and Suit Company. In that action Carnesale, the plaintiff, obtained an order restraining the defendants from transferring the stock or exercising any authority over it during the pendency of the action and filed a surety bond for $4,500 executed by the Maryland Casualty Company to indemnify Kaplan and Friedman for any damage caused by the injunction. In May, 1931, the corporation discontinued business and disposed of all its assets. In February, 1932, judgment was entered dismissing the complaint. At the time of the entry of that judgment, the stock was valueless and was purchased at auction for one dollar by Kaplan.

The present action is brought against the surety by Kaplan in his own right and as assignee of Friedman for the difference in value of the stock at the date of filing the bond and the date of vacating the injunction. The only issue of fact submitted to the jury was the damage sustained-by Kaplan based upon the value of the stock February 28, 1930. The court charged that the verdict could be for any amount from six cents up to $4,500, depending upon the jury’s appraisal of the value of the stock. The verdict was $4,499, which denotes that the jury appraised the value as of that date at $4,500.

There is no evidence of any sale of the stock of this corporation, except the sale of the one hundred and fifteen shares to Kaplan at auction for a nominal sum, nor any evidence of the existence of a market for it nor any evidence of the number of outstanding shares. A statement by counsel for plaintiff during the trial indicates that some shares in excess of one hundred and fifteen were then outstanding. The surety bond recites that, on the date of the execution of that instrument, $4,500 represented the assumed value of the one hundred and fifteen shares. Various witnesses, by subtracting liabilities from assets at the date of the filing of the bond, estimate the net worth of the corporation at amounts ranging from $8,225.80 to $972.60.

In order to arrive at a fair approximation of the value of the one hundred and fifteen shares, the jury should have had before it information not only in respect to the assets and liabilities as shown by the books but also the number of outstanding shares, the amount of capital paid in, the earnings, if any, at the time or within a reasonable preceding or subsequent time, the proceeds obtained, at the time of liquidation in May, 1931, from the sale of the inventoried merchandise and of the plant and equipment and the amount collected on the accounts receivable. Plaintiff failed to prove any of these items, and defendant, protecting itself by exceptions to the rulings, was not allowed to prove them. We think it had the right to prove intrinsic value. (James v. Cowing, 82 N. Y. 449, 455, 456; People ex rel. Knickerbocker Fire Ins. Co. v. Coleman, 107 N. Y. 541; People ex rel. Union Trust Co. v. Coleman, 126 N. Y. 433, 447; Industrial & General Trust Co. v. Tod, 180 N. Y. 215, 232; Virginia v. West Virginia, 238 U. S. 202, 213; Matter of Foster, 263 N. Y. 639.)

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

Pound, Ch. J., Crane, Lehman, Hubbs and Crouch, JJ., concur; Kellogg, J., not voting.

Judgments reversed, etc.


author: Hubbs, J.

text:
    The Vladikavkazsky Railway Company, Respondent, v. The New York Trust Company, Appellant.

      (Argued January 11, 1934;
    decided February 27, 1934.)

      Vermont Hatch, Adrian L. Foley and William G. Mulligan, Jr., for appellant.
    The affirmative allegations in paragraph first of the answer should not be stricken out, and the third certified question should be answered in the negative. (Salimoff & Co. v. Standard Oil Co., 262 N. Y. 220; United States v. Schooner Peggy, 1 Cranch, 103; People ex rel. Clark v. Gilchrist, 243 N. Y. 173; Robinson v. Robins Dry Dock & Repair Co., 238 N. Y. 271.) The first separate and partial defense is sufficient in law. (Wright v. Austin, 56 Barb. 13; Sheppard v. Conley, 9 N. Y. Supp. 777; Smith v. First Nat. Bank, 151 App. Div. 317; Des Moines Bridge & Iron Works v. Plane, 163 Iowa, 18; Matthews v. Matthews, 128 Me. 495; Mandigo v. Mandigo, 26 Mich. 349; Vail v. Foster, 4 N. Y. 312; Merchants & Mfrs. Nat. Bank v. Cumings, 149 N. Y. 360; Sexton v. Fensterer, 154 App. Div. 542; 213 N. Y. 641; Grandison v. National Bank of Commerce, 231 Fed. Rep. 800; Haggarty v. Pittman, 1 Paige Ch. 298; Wright v. Austin, 56 Barb. 13; Jones v. Quinnipiack Bank, 29 Conn. 25; Crosby v. Crafts, 5 Hun, 327; 69 N. Y. 607; Osborn v. Noble, 46 Miss. 449.) The second separate and equitable defense should not have been stricken out. (Petrogradsky M. K. Bank v. National City Bank, 253 N. Y. 23; Matter of People [Russian Reinsurance Co.], 255 N. Y. 415; Matter of People [Northern Ins. Co.], 255 N. Y. 433.)

      Walter H. Poliak, Murray I. Gurfein and Thomas I. Emerson for respondent.
    The court below correctly struck out the first partial defense. The former Russian government had no specific interest in the deposit; and the assertion of an interest in the Russian government is not available to the bank as an excuse for failure to pay its depositor. No interest by the Soviet government in the deposit is asserted — or can be asserted. That government has repudiated the guaranty. (Lewine v. National City Bank, 248 N. Y. 365; Erb v. Banco di Napoli, 243 N. Y. 45; Staten Island C. & B. B. Club v. Fanners Loan & Trust Co., 41 App, Div. 321; Title Guarantee & Trust Co. v. Haven, 214 N. Y. 468; Noyes v. First Nat. Bank, 180 App. Div. 162; 224 N. Y. 542; Gledhill v. Schiff, 224 N. Y. 593; Matter of Interborough Consolidated Corp., 288 Fed. Rep. 334.) The second complete equitable defense is insufficient in law. (James & Co. v. Rossia Ins. Co., 247 N. Y. 262; Petrogradsky M. K. Bank v. National City Bank, 253 N. Y. 23; Matter of People [Russian Reinsurance Co.], 255 N. Y. 415; Matter of People [Northern Ins. Co.], 255 N. Y. 433; Severnoe Securities Corp. v. London & Lancashire Ins. Co., 255 N. Y. 120; 255 N. Y. 631.) The denial of corporate existence is insufficient. The Soviet decree will not be given extraterritorial force. (Petrogradsky M. K. Bank v. National City Bank, 253 N. Y. 23; Matter of People [Russian Reinsurance Co.], 255 N. Y. 415; Severnoe Securities Corp. v. London & Lancashire Ins. Co., 255 N. Y. 120; Sokoloff v. National City Bank, 239 N. Y. 158; Huntington v. Attrill, 146 U. S. 657; McDonald v. Mabee, 243 U. S. 90; Joint Stock Co. of Volgakama v. National City Bank, 240 N. Y. 377; Russian Reinsurance Co. v. Stoddard, 240 N. Y. 149; James & Co. v. Rossia Ins. Co., 247 N. Y. 262; R. S. F. S. R. v. Cibrario, 235 N. Y. 255.)
   Hubbs, J.

The plaintiff-respondent was a railroad corporation under the old regime in Russia. This action was brought to recover a deposit in the defendant-appellant, a bank in New York city.

The bank interposed the defenses, so far as this appeal is concerned, that a government director has not signed an order for the withdrawal of the deposit and that the surviving directors now residing in Paris, France, have no authority to withdraw the funds. It also denies that the corporation is continuing in existence. Those defenses and the denial have been stricken from the answer and the Appellate Division has certified to this court the question of the sufficiency of the defenses and the effect of the denial. The questions certified are as follows:

“1. Is the first separate and partial defense to the first cause of action set forth in the complaint sufficient in law upon the face thereof?

“ 2. Does the matter set forth in the second complete equitable defense constitute a defense?

“3. Was the affirmative allegation in paragraph first of the answer properly stricken out?

The bank does not assert in the answer that it owns the fund on deposit with it or that it has a hen upon it. It does assert in its first separate and partial defense that an interest exists in the fund in favor of a former Russian government, a third party, not a party to this action. As a basis of such partial defense, it alleges that in 1900 the Wladikawkas Railway Company issued interest-bearing bonds which were unconditionally guaranteed by the Imperial Russian government and that certain of those bonds were sold to and are now owned by citizens and residents of this State; that from time to time, money was deposited with the defendant bank, in an account denominated “Wladikawkas Railway Company Account ” for the express purpose of paying specified coupons on those bonds; that on January 20, 1915, there remained a balance in such account of three dollars; that prior to September, 1918, other remittances were .received by defendant through and by order of the Minister of Finance of the Russian government so that there remained thereafter in that account $46,584.18; that in April, 1915, a signature card was filed with the defendant bank bearing the signatures of the persons authorized to withdraw the funds from that account and providing that for the withdrawal of funds the signature of three directors and a government director were required. It is also alleged that the Russian government has never through a director appointed by it requested the Withdrawal of the fund and that the Russian government has such an interest in the fund that the defendant is prohibited from making any payment therefrom without its order and consent.

It' is also alleged that in 1918, under the ordinances and decree of the sovereign government of Russia, said Vladikavkazsky Railway Company was liquidated and nationalized, its property confiscated or taken over by said government, and it has continued since said time, and is now, wholly insolvent.”

It is not alleged in the complaint that the money deposited in the account was the money of the railroad company. The allegation is that the money was deposited “ in the name and to the account and order of plaintiff.” It is not disputed that the money was deposited in the name of and to the order of plaintiff. The answer does not allege that the money deposited was that of the Russian government. We cannot assume that it was money of the Russian government, as it appears from other allegations of the answer in referring to other deposits, that when the defendant desired to do so it specifically denied that certain funds (not here involved), deposited with it, was the money of the railroad company and alleged specifically that such other deposit was made from government funds.

This is an action at law. In such an action the mere assertion by a defendant bank that a deposit was made in an account of a plaintiff by a third party does not justify a bank in refusing to pay over to the party in whose name the fund is deposited. (Petrogradsky M. K. Bank v. National City Bank, 253 N. Y. 23; Lewine v. National City Bank, 248 N. Y. 365; Parks v. Knickerbocker Trust Co., 137 App. Div. 719, 722.)

Stripped of the conclusion of law that the Russian government has an interest in the fund, the only allegations of fact to sustain the defense are that the fund was deposited through and by order of the Minister of Finance; that the Russian government was guarantor of the bonds and interest coupons and that a signature card required the signature of the government director for the withdrawal of funds.

The fact that the Imperial Russian government guaranteed the payment of the bonds with interest did not give it any legal interest in the money deposited in the defendant bank, especially as the answer does not allege that the money deposited was the money of the Russian government. The deposit, made with the intent and for the purpose of paying the interest coupons, did not vest a legal interest in the funds deposited in any one except the railroad corporation in whose name the bank account stood. The deposit created the relation of debtor and creditor between the railroad company and the defendant bank. The account remained subject to the control of the railroad company and it had the legal right, as against the bank, to withdraw the funds at its pleasure' to be used for any purpose which it desired. The answer does not assert that a trust was imposed by the Imperial Russian government or that any agreement was entered

into between that government and the bank. (Staten Island C. & B. B. Club v. Farmers Loan & Trust Co., 41 App. Div. 321; approved in Title Guarantee & Trust Co. v. Haven, 214 N. Y. 468, and in Erb v. Banco di Napoli, 243 N. Y. 45; Noyes v. First Nat. Bank, 180 App. Div. 162; affd., 224 N. Y. 542; Gledhill v. Schiff, 224 N. Y. 593; Matter of Interborough Consolidated Corp., 288 Fed. Rep. 334; certiorari denied, sub nom. Porges v. Sheffield, 262 U. S. 752.)

The signature card filed with the bank by the railroad company requiring the signature of three directors and of a government director was a revocable instrument which it could alter or withdraw. In any event, the Russian government has repudiated the payment of the bonds and interest, and the answer does not allege that there is now any government director but the contrary is readily inferred from the answer. Under those conditions, none of the allegations of fact alleged in the first partial defense constitute a legal reason why the defendant bank should not pay over to the plaintiff the fund on deposit and the first partial defense was properly stricken from the answer.

We are also in agreement with the Appellate Division in its decision that the first complete defense and set-off should be stricken out. That defense alleges that the defendant owns due and -unpaid obligations of the Imperial Russian government or the Kerensky government of Russia and has a lien upon the funds on deposit with it but fails to allege that the Russian government then was, or now is, the owner of the moneys deposited or any part thereof, and it is, therefore, insufficient in law as a complete defense or set-off and was properly stricken out of the answer.

The second equitable defense stricken out alleges in general the fact that since the nationalization of the railroad company, its directors have not functioned in the territorial limits of the Empire of Russia, but that certain individuals claim to have been elected directors before the nationalization of the company and some who claim to have been elected since are refugees from Russia residing in Paris and claim the right to act as directors. It is also alleged that there is owing to citizens of this State upon the unpaid bonds of the railroad company large sums of money and that the persons claiming to act as directors intend to take the proceeds of any recovery into foreign jurisdictions and distribute the same among themselves or to persons claiming to be stockholders; that it would be inequitable and contrary to the law of this State to permit that to be done without first providing for the payment of creditors, within the State. The defendant prays that if it be determined that there is money due from it to the plaintiff, “ such sum shall be marshalled and the court shall make distribution thereof.” Nowhere in the answer does the defendant plead the Russian la,w or make any claim under the law of Russia but expressly bases its defenses upon the law of this State.

We do not have a State liquidator or an officer with like powers. Even if we did, the defendant in this law action could not avail itself of the defense that the assets of the plaintiff should be marshalled and paid to the creditors in this State. (Petrogradsky M. K. Bank v. National City Bank, supra.)

Specifically, the defense pleads that the directors are acting without authority and that if successful, they will make an improper use of the money recovered. For the reasons stated in the case of Petrogradsky M. K. Bank v. National City Bank (supra) we believe that the defense was properly stricken out. The bonds by their terms became void after the expiration of ten years after their due date. Eleven years had expired after the due date of the coupons before this action was commenced and no proceeding had been commenced to recover the fund. The property of the railroad company had been confiscated, the corporation dissolved and the present Russian government had repudiated its obligation on the bonds. Under such circumstances, this court has definitely decided that as between a bank holding such funds and the surviving directors of such a corporation, the funds should be paid over to the corporation, represented by its surviving directors; that while such a corporation had ceased to exist in the home of its creation, it still retained a legal existence in this jurisdiction sufficient to maintain an action to recapture its assets. (Petrogradsky M. K. Bank v. National City Bank, supra.)

It should be borne in mind that this is not an action in equity as was Russian Reinsurance Co. v. Stoddard (240 N. Y. 149).

We would entertain little, if any, doubt as to the correctness of the decision of the Appellate Division were it not for the fact that since that decision was rendered, our Federal government has entered into diplomatic relations with the Russian government and recognized it as a de jure government. In the case at bar, as in the other Russian cases which came to this court before the recognition of the present Russian government, the practical question was and is, shall the law compel a debtor in this State to pay its debt or permit it to hold the property of its creditor indefinitely? This court definitely answered the question by deciding that although the corporation in question was extinguished in its homeland and there dead in the eyes of the law, it continued its existence as a juristic person with capacity to sue ” in this State. (Petrogradsky M. K. Bank v. National City Bank, supra.)

The deposit was made in New York city, the home of the bank; that is where the contract obligation was created and where it is by its terms to be performed, entirely outside Russian jurisdiction. Laws of foreign governments have extraterritorial jurisdiction only by comity. (Huntington v. Attrill, 146 U. S. 657, 669.)

The principle which determines whether we shall give effect to foreign legislation is that of public policy. (Russian Reinsurance Co. v. Stoddard, supra; Joint Stock Co. v. National City Bank, 240 N. Y. 368, 377; Russian Socialist Federated Soviet Republic v. Cibrario, 235 N. Y. 255, 263.)

Where there is confliction between our public policy and comity, our own sense of justice and equity as embodied in our public policy must prevail. (Russian Socialist Federated Soviet Republic v. Cibrario, supra.)

It is hardly necessary to state that the arbitrary dissolution of a corporation, the confiscation of its assets and the repudiation of its obligations by decrees, is contrary to our public policy and shocking to our sense of justice and equity. That the confiscation decree in question, clearly contrary to our public policy, was enacted by a government recognized by us, affords no controlling reason why it should be enforced in our courts. (Baglin v. Cusenier, 221 U. S. 580.)

We enforce the same principle even in regard to statutes of sister States. (Barth v. Backus, 140 N. Y. 230, 239.)

The fact that the present Russian government was not recognized was not the basis of our refusal to give effect to its decrees nationalizing corporations and confiscating their property. During the period when those decisions were made, we recognized and enforced mere ordinary legislation ” relating to “ every day transactions of business or domestic fife.” (Petrogradsky M. K. Bank v. National City Bank, supra; Matter of People [First Russian Ins. Co.], 255 N. Y. 428, 432.)

Prior to recognition we clearly intimated that our decision would have been the same if at the time recognition had been granted. (James & Co. v. Second Russian Insurance Co., 239 N. Y. 248, 257.)

The general statement contained in the opinion in Salimoff & Co. v. Standard Oil Co. (262 N. Y. 220) to the effect that recognition of a de facto government as a de jure government is retroactive in effect and validates all the acts of the government so recognized from the commencement of its existence, must be read in connection with its context and as so read it did not refer to acts sought to be given effect extraterritorially.

The order of the Appellate Division should be affirmed, with costs; the first and second of the questions certified answered in the negative and the third in the affirmative.

Pound, Ch. J., Crane, Lehman, O'Brien and Crouch, JJ., concur; Kellogg, J., not voting.

Ordered accordingly.


author: Pound, Ch. J.

text:
    Hopwood Plays, Inc., Appellant, v. Collin Kemper, as Surviving Partner of the Firm of Wagenhals & Kemper et al., Respondents.
    (Argued January 15, 1934;
    decided February 27, 1934.)

      I. Maurice Wormser and Jacob J. Schwebel for appellant.
    Defendants failed to prove any of the defenses pleaded in their answer. (Hudson v. Yonkers Fruit Co., 258 N. Y. 168; Farmers’ Loan & Trust Co. v. Park & Tilford, 127 Misc. Rep. 59; Ufa Films, Inc., v. Ufa Eastern Division Distribution, Inc., 134 Misc. Rep. 129.) The accounts rendered did not become accounts stated, and plaintiff was not bound by them. (Rishel v. Weil, 31 Misc. Rep. 70; Rodkinson v. Haecker, 248 N. Y. 480.)

      Arthur F. Driscoll, George D. Bradford and Sidney G. Rosenbloom for respondents.
    The defendants were entitled to deduct the expenses that appeared in the statements. (Hill v. Curtis, 154 App. Div. 662; Forman v. Lamm, 214 App. Div. 579; Hayden v. Eagleson, 47 Hun, 639; Matter of Raymond v. Davis, 248 N. Y. 67; Vernon Metal & Produce Co. v. Joseph, 241 N. Y. 544; Underhill v. Schenck, 238 N. Y. 7.) The accounts rendered became accounts stated, and plaintiff was bound by them. (Rodkinson v. Haecker, 248 N. Y. 480; Spellman v. Muehlfeld, 166 N. Y. 245; Stenton v. Jerome, 54 N. Y. 480; Bruen v. Hone, 2 Barb. 586; Little v. McClain, 134 App. Div. 197; Carlisle v. Norris, 144 App. Div. 690.)
   Pound, Ch. J.

Plaintiff is the successor in interest to Mary Roberts Rinehart and Avery Hopwood, who were joint authors of a play called The Bat,” which had a successful run. They entered into two contracts with a firm of producers, Wagenhals & Kemper, for the production of the play. One was the production agreement. Under the production agreement it was provided that the authors were to receive as their royalties certain graduated percentages of the play’s gross box office receipts during its production in first class theatres. After that period of availability expired, so that the play would thereupon become available for use in stock, repertoire and motion pictures, the authors were to receive, in lieu of the graduated percentages, one-half of the gross receipts to both, that is, one-fourth to each author, and one-half to the producers, less any playbroker’s commissions. That clause of the agreement, numbered “ fourth,” reads: When the aforesaid dramatic composition becomes available for use in repertoire and stock purposes, as the terms are theatrically understood, the Managers agree to pay to the Co-Authors, and the Co-Authors agree to accept from the Managers, in lieu of the aforesaid royalties, one-half of the sums to be paid for the use of said play to said Managers, less the commission paid to the playbroker who procures such licenses; and the Managers, as producers, shall not be entitled to share in the consideration derived from the use of said dramatic composition for stock and repertoire purposes, unless they will have produced, performed and represented the play in the United States of America and the Dominion of Canada for at least fifty (50) performances, or twenty-five (25) performances in the Borough of Manhattan, City of New York.”

The other contract was the so-called “ joint venture agreement.” The joint venture agreement contained a clause entirely distinguishing the royalties to be paid to the authors under the “ authors ” agreement, from the authors’ interest in the joint venture evidenced by the joint venture agreement. (d) It is agreed between the parties hereto that the royalties to be paid, to the CoAuthors are separate and distinct from their interest in the enterprise, as evidenced by this agreement, and'that the royalties accruing to them shall be paid to them before there be any division of the profits as hereinafter provided.” Under the terms of the joint venture agreement during the production of the said play in first class theatres, the authors were entitled to, and did, receive a share of the net profits of the production. Both royalties and net profits were paid to the authors by the producers from 1920 to 1924. In May, 1924, the play ceased to be produced in first class theatres, and, therefore, according to the provisions of the joint venture contract, the joint venture terminated as of that date. The parties then and there divided whatever surplus remained. The only item remaining was the scenery, which was placed in a storehouse and which was sold in 1926 for $250.

Subsequent to May, 1924, arrangements were made by the producers with the Co-National Play Company, play-brokers, to have the playbrokers procure contracts for the release of the play in stock, for which the brokers were to receive a commission of ten per cent. A play is produced in stock after it has ceased to be produced in theatres of the first class; stock performances are usually given in theatres of the second class for which the top price is about one dollar; stock companies pay a fixed weekly amount for the play, usually running from $100 to $300 per week. It is the duty of the playbrokers to collect and account for all the payments, from which they deduct their ten per cent commission, and remit checks monthly to the parties entitled thereto. Such checks were sent monthly to defendants by the playbrokers, but defendants, instead of accounting to the authors for their share monthly, retained such moneys until the end of the year when they accounted for same.

This action is brought to recover about $12,000, which it is claimed the defendants or their predecessors improperly deducted as expenses from the sums due the plaintiff or its predecessors in interest under the production agreement. As appears, one contract provided that the authors were to receive certain percentages of the gross receipts without deduction of expenses. The second contract provided that the authors for a stated sum acquired a one-half interest in the play, and were to receive one-half of the profits without deduction except for brokers’ commissions.

The defendants or their predecessors kept an office for taking care of the accounts and certain other matters connected with the production in stock. In this office they employed one man and also paid rentals for storing the costumes of the various stock companies. The expenses arising from these activities they deducted from the amounts remitted as the share of the plaintiff or its predecessors after the expiration of the joint venture agreement.

At the end of each year a remittance by defendants to plaintiff or its predecessors was made, accompanied by a statement showing these deductions of expenses. The statements and remittances were received without question until February, 1930, when the plaintiff wrote objecting to the deduction of expenses.

We think that the complaint was improperly dismissed. No meeting of minds on a new contract was claimed. No legal basis is shown under the contract for deduction of items for attorneys’ fees, office supplies, rent and the like. By no construction of the contract is such deduction permissible. (Brainard v. New York Central R. R. Co., 242 N. Y. 125.) No room is found for the application of the doctrine of practical construction when in direct conflict with the clear terms of the contract. The question presented is as to what effect temporary acquiescence by silence in the accounts rendered had upon the rights of the parties. Except for such acquiescence, the rights of the parties are not substantially in dispute.

This is not a case of accord and satisfaction. There is no compromise of a dispute nor extinguishment of a liability uncertain in amount. (Hudson v. Yonkers Fruit Co., 258 N. Y. 168.) Nor is it a ease of estoppel. Estoppel is a conclusive admission, which cannot be denied. A false representation to create an estoppel in pais must be a representation of an existing fact acted on before it is corrected. Inadvertent acquiescence in unauthorized deductions or omissions from an account does not in itself estop the plaintiff from insisting on its due. When the contract is clear in the eye of the law, mutual error does not place the accounting party in the position of having been led to act to its disadvantage. (Brainard v. New York Central R. R. Co., supra, 133, 134.)

Defendants have not been misled to their injury, nor have they been led to part with any substantial right by rendering inaccurate accounts which have been accepted without protest. They had only to read the contract to see what their duty was. They cannot create a right by mere neglect of duty. Silence which is not prejudicial does not estop. They suffer no loss when they pay what they owe.

Account stated, • even when pleaded as a defense or proved on the trial, is not conclusive as a settlement, if mistake or other equitable considerations are shown to impeach it. (Rodkinson v. Haecker, 248 N. Y. 480, 484, 485; Hoover v. Neill, 77 W. Va. 470; 11 A. L. R. 575.)

Cases will be found where silence and acquiescence have been held to preclude the parties from questioning items of debit and credit of an account rendered (Liquidators v. Upton Printing Co., 152 La. 270), but such cases do not preclude recovery according to the plain terms of an unambiguous contract. (Norfolk Hosiery, etc., Co. v. Westheimer, 121 Va. 130.)

The judgments should be reversed and a new trial granted, with costs to the appellant to abide the event.

Crane, Lehman, O’Brien, Hubbs and Crouch, JJ., concur; Kellogg, J., not voting.

Judgments reversed, etc.


author: Crane, J.

text:
    Union Car Advertising Co., Inc., Respondent, v. Barron G. Collier et al., Appellants.

      (Argued December 14, 1933;
    decided February 27, 1934.)

      Martin Conboy, Caruihers Ewing, Basil O’Connor, William F. Snyder and William J. Butler for appellants.
    There is no evidence to support the finding that except for the alleged acts of defendants plaintiff would have obtained a contract from the trustees. (Lewis v. Bloede, 202 Fed. Rep. 7.) Plaintiff’s theory of action as presented to the jury is not recognized in law. (Temperton v. Russell, 1 Q. B. D. 715; Keeble v. Hickeringill, 11 East, 574; Lumley v. Gye, 2 El. & Bl. 216; Allen v. Flood, [1898] A. C. 1; American Law Book Co. v. Thompson Co., 41 Misc. Rep. 396; Morgan v. Andrews, 107 Mich. 33; Debnam v. Simonson, 124 Md. 354; Krigbaum v. Sbarbaro, 23 Cal. App. 427; Skene v. Carayanis, 103 Conn. 708; Ringler v. Ruby, 117 Ore. 455; Lewis v. Bloede, 202 Fed. Rep. 7; Wellington v. Small, 3 Cush. 145.) There is no evidence to establish that the trustees were sufficiently satisfied with plaintiff’s financial condition and responsibility to enter into any arrangement with it whatever. (Lewis v. Bloede, 202 Fed. Rep. 7.)

      Joseph M. Proskauer, Walter D. Yankauer, J. Alvin Van Bergh, Claude B. Cross and Edward 0. Proctor for respondent.
    The jury was justified in finding from the evidence that the defendants’ wrongful interference prevented the plaintiff from obtaining the contract for which it was negotiating. (Taylor v. Guest, 58 N. Y. 262; Ochs v. Woods, 221 N. Y. 335; American Specialty Co. v. Collis Co., 235 Fed. Rep. 929; McMullan v. Hoffman, 174 U. S. 639; Standard Fashion Co. v. Siegel-Cooper Co., 30 App. Div. 564; 157 N. Y. 60; American Law Book Co. v. Thompson Co., 84 N. Y. Supp. 225; Citizens L., H. & P. Co. v. Montgomery L., W. & P. Co., 171 Fed. Rep. 553; Ashley v. Dixon, 48 N. Y. 430; DeJong v. Behrman Co., 148 App. Div. 37; Adams v. Gillig, 199 N. Y. 314; Deyo v. Hudson, 225 N. Y. 602; Pease & Elliman v. Wegeman, 223 App. Div. 682; Hobaica v. Byrne, 216 App. Div. 307.)
   Crane, J.

We have examined this record with a great deal of care to see, if possible, wherein the defendants did the plaintiff injury for which the law gives redress. The eminence and ability of counsel, the size of the verdict and the desire to afford equal opportunity to business competitors have caused us to look for that angle from which we could catch a view of that unfair practice claimed by the plaintiff. We have looked in vain.

The subject-matter of this litigation is the contract or lease for the advertising space in the cars and upon the platforms of the Boston Elevated Railway. Henry Wineburgh and Barron Collier were competitors for the contract which was awarded to Collier. Wineburgh has brought this action to recover damages from Collier and his associates for the unlawful and malicious interference which prevented the award of the contract to him.

By a special act of the Legislature of Massachusetts (Acts of 1918, ch. 159), entitled, “ An Act to provide for the Public Operation of the Boston Elevated Railway Company,” five trustees were appointed by the Governor of the State to manage, control and operate the road. At the time in question (1925) these trustees were Powers, Coffin, Miller, O’Hare and Marshall. Powers, a lawyer, between seventy-five and eighty years of age, had succeeded as chairman a man named Jackson. Coffin was a banker, Miller an attorney who had been Secretary to Governor McCall, O’Hare was chief executive of the labor union, and Marshall was a lawyer,

Henry Wineburgh did business in the name of the Car Advertising Company and the Union Car Advertising Co., Inc. Collier and his associates Elliott and Burnett were awarded the contract under the name of the Eastern Advertising Co., Inc. We shall use the individual and corporate names interchangeably as did the witnesses upon the trial. Wineburgh had had contracts for street car advertising in Washington, Providence, Rhode Island, Baltimore, Ohio, Toronto, Canada and other places, but in 1925 had only one left, and that was a contract with the Pennsylvania railroad for suburban cars around Philadelphia and Pittsburg. Collier had had for the previous ten years the contract for car advertising in the Boston Elevated Railway Company’s cars, which was expiring April 1, 1926. His services had proved satisfactory to the company.

A new contract was about to be awarded and some time in 1924 Wineburgh had gone to Boston to see the chairman of the board to ascertain whether he could bid for the privilege. These contracts gave the full control of the advertising space in all the cars and upon the platforms, together with certain slot machine privileges, to the lessee or grantee, which spaces and privileges were thereafter rented or sublet to customers of the lessee at considerable profit. We may say that this contract or lease in question was of great value from a business standpoint. Jackson assured Wineburgh that he would be given an opportunity to bid for the new contract and that it would be awarded to the highest bidder. As to the latter statement, Jackson had no authority to make it and was not on the board at the time of the negotiations. Later notices and circulars were sent out calling for sealed proposals for advertising, vending and weighing machine privileges to be submitted by noon of Tuesday, September 15, 1925. All of these contained the clause: The right is reserved to reject any and all bids.”

The proposed draft agreement, inclosed or referred to in these notices, and of which the plaintiff had one, and the bid contract which Wineburgh subsequently submitted, provided that the advertising company agrees to furnish to the railway company a bond in the sum of $100,000 or the railway company may increase the deposit or the security, not exceeding the amount of the first annual payment to be made, which in this case was $402,000. The contract was to be for fifteen years, for which the plaintiff, at the time designated, submitted a bid of $7,080,000, the total for the full period. Collier submitted a bid for the Eastern Advertising Company of $5,400,000, so that the plaintiff’s bid was the higher by an excess of $1,680,000.

Wineburgh says that Dana, the general manager, told him before he submitted this bid that the contract would be awarded to the highest bidder and that the clause requiring the deposit or increase of security would not apply to him as they knew of his financial standing. We cannot imagine a man of Mr. Wineburgh’s experience in the advertising business relying upon the representations of a general manager contrary to the express terms of the contract he was about to sign. He must have known that Dana had no power or authority to vary the written contract.

The plaintiff’s claim from the very beginning seems to have been based upon the assumption or the impression that the Boston Elevated Railway trustees had bound themselves by reason of these statements of Jackson and Dana to award the contract to the highest bidder if he furnished sufficient security. While this position from a legal standpoint has been abandoned it yet forms the framework for the picture which has been given of unfair competition. At the very threshold of this case we must bear in mind that the Boston Elevated Railway was not obliged by law to award this contract or its advertising space to the highest bidder. It could do as it pleased and show all the favoritism of which it was capable. We have instances here in this State, in the charter of the city of New York and in the laws governing the State departments, requiring contracts to be awarded to the lowest bidder when work is to be done or supplies purchased. These laws have reference to public work. We know of no law in Massachusetts that requires the elevated railway to award any contract or make any lease to the most favorable bidder. In fact no such claim is made by the plaintiff in this case, although previous litigation which it had with the railway company would seem to indicate that Wineburgh was under some such impression. The fact is beyond dispute that while bids were called for, the bidders were notified that it was optional with the trustees to reject any or all bids. Wine-burgh submitted his proposition in accordance with this law, if not with his understanding,

Prior to the opening of the bids on October 1st, H. Ware Barnum, the general counsel for the trustees, had advised them that it was very doubtful whether they had the right to award a contract for fifteen years, a period beyond their own term of office. It was then decided before any bids were opened to reduce the term to five years. The bidders were present when Mr. Powers, the chairman, made the announcement in the presence of the trustees and others that the bids would be returned unopened unless by a vote of the bidders they desired to have him do otherwise. Wineburgh remembers that at this meeting the chairman announced that all bids, even if they were opened, were subject to rejection at the will and in the discretion of the trustees. The vote being favorable, the bids were opened, showing the figures as above stated. There were other bids besides the two mentioned, but they are immaterial for the points we are discussing.

The contract was not awarded to the highest bidder and the proposition was considerably changed before it was awarded. Collier’s company, as heretofore stated, received the contract the latter part of December. It is dated December 9, 1925, for a term of five years, and at a sum $101,000 higher than the plaintiff’s bid for the same period. The privileges, however, had been increased so as to give the use of certain vending devices or slot machines upon the seat stanchions or posts in the cars. This made the contract more valuable. Wineburgh says that he knew nothing about this additional privilege and Was not given notice thereof. His letters throw some doubt upon his ignorance, but we shall assume in our statement of the case everything most favorable to his side.

We now come to the claim which the plaintiff has made, that this contract would have been awarded to it but for the unlawful and malicious actions of Collier and his associates Elliott and Burnett. The evidence, we are convinced, shows just the contrary. The trustees, or the majority of them, were dissatisfied with the plaintiff’s bid and were doubtful of Wineburgh’s ability to five up to his contract, and the following statement of facts seems to justify our conclusion. His bid had been submitted in the name of this plaintiff, the Union Car Advertising Co., Inc. It had a capital of $5,000 and no assets. In fact Wineburgh said that the company owed him $30,000 or $40,000. As soon as the plaintiff’s bid had been opened and received a Mr. Pingree was sent to New York to investigate Wineburgh and his company. They found that he had few dealings with the banks and expressed their unwillingness to do business with the corporation in its then condition.

Under date of October 14, 1925, the Union Car Advertising Co., Inc., through Wineburgh, notified Mr. Pingree that the contract, if taken, would have to be in the name of the other corporation, the Car Advertising Company, which would be capitalized for a sufficient amount to operate successfully. In all these letters it was fully understood that Wineburgh himself was taking the contract if he got it, and was merely doing business in the name of these companies. He said he would meet the objections of the trustees by increasing the capital to $250,0.00 and would put up the security demanded of $100,000 or would raise it to $250,000 in gilt-edge bonds. Whatever was his willingness, the fact remains according to his own testimony that he was repeatedly told by the trustees and their agents that he had overbid his hand; that they did not think he could swing the contract; and that he had better submit .another bid or reduce the one he had already put in. To give his exact words, he said, “ They figured that I could not make money and asked me a number of times if I was sure I had not overbid.” To H. Ware Barnum, the counsel for the road, he said, “ Well, I am worth a million dollars, and I offered to show Mr. Pingree — take him down to my safe deposit box and show him gilt-edge securities.” Barnum .said, “Well, Mr. Wineburgh, are you willing to sign a contract with our company personally? ” And Wineburgh said, No; ” then Barnum said, If you are willing to put in all the money that is necessary to run the business, why don’t you sign it yourself? ” Wine-burgh replied, Why of course there is always business chances. I have got my wife to think of and at my .age [he was approaching seventy] I don’t want to hazard all the money that I have accumulated.”

Mr. Wineburgh relates a conversation he had with the trustees who were questioning him about the size of his bid. He [Mr. Powers] then afterwards asked me why I wanted that contract. I guess he referred to my age or something, and I told him that I wanted it to make money, that I had two sons; one of my sons was in the business and he liked it very much and I wanted the business for my sons, as they both wanted to be business men and they both felt they would like to be in the advertising business.”

The trustees desired to see his contracts with the Pennsylvania railroad and he sent them copies. They also knew that he had lost a contract with the Philadelphia Rapid Transit Company in May of 1925. He thinks he told the trustees all about it. Burnett, a witness for the plaintiff, in deposition form, said he understood that the disagreement among the trustees was that some bids were made by irresponsible parties absolutely and that they should be thrown out. Others thought that as long as they were the highest they should get it. This in substance is the relation between Mr. Wineburgh and the trustees and their agents regarding his bid of $7,080,000 — $1,680,000 over the Collier bid. We at least are sure of the fact that the trustees were skeptical of Wineburgh’s ability to swing this contract which was four times as large as the one he had in the suburban roads for the Pennsylvania railroad.

Now we turn to the trustees’ relationship with the Collier concern because, as we have said before, these trustees were under no obligation to give the contract to Wineburgh but could legally give it to the Eastern Advertising Company or Barron Collier if they chose to do so. We must recognize, as does every business man, that people like to do business with those,whom they know personally, especially if they have rendered satisfactory and faithful service. The Collier organization was friendly with the trustees and closely connected with them in many ways. For ten years they had been serving the road in this particular line of activity. We can well imagine that, excepting the price, they would prefer Collier to Wineburgh. The Eastern Advertising Co., Inc., had a capitalization of $100,000, with $300,000 cash in the bank. Behind it stood other large advertising corporations ready to give it .financial support. The Barron Collier companies were the largest in the country, doing at least eighty to eighty-five per cent of the business.

Burnett, associated with Collier and Elliott in the Eastern Advertising Co., Inc., and owning a quarter of the stock, was the brother-in-law of Charles S. Choate, one of the leading lawyers of Boston, and the attorney for the company. Burnett had a great deal of influence in Boston. He went with his brother John to introduce Mr. Collier to Governor Fuller. The reason is not stated, but no doubt it was to influence his friends to have the contract awarded to the Eastern Advertising Co., Inc., or to have it stay where it had been. Burnett knew Powers, the chairman of the board, for over thirty years. His brother was originally a prominent official of the elevated road; in fact, he was secretary for fifteen or twenty years. His dearest friend was Mr. Gaston, who had been president of the elevated. Mr. Choate appeared before the board, to whom he was well known, and discussed the awarding of the contract, referring as matter of argument to the financial ability of Collier satisfactorily to meet his obligations as compared to the uncertainty surrounding Wineburgh’s companies. All these relationships necessarily played an important part and must have had an influence with the board.

Let us assume, even if it is not clear and apparent from the evidence, that political influence was brought to bear, that friends persuaded, and that well-known counsel argued regarding the letting of this contract. There is nothing in all these matters which is unfair competition or foreign to present business competitions. Competitors for a large contract or the purchase or sale of goods are in a struggle and a fight not only for business but sometimes for very existence and all kinds of methods are devised for creating a favorable impression or an advantage. Whatever we may personally think about these selfish, fierce and unfriendly contests for gain and for profit, the law is indifferent. Not until false, fraudulent and malicious methods are used to kill off a competitor does the law take notice.

We now come to that part of this case 'wherein the plaintiff claims the defendants used unfair methods, and it is founded upon a letter dated February 25, 1925, written by Elliott to Edward Dana, the general manager of the railway company. This was seven months before the plaintiff submitted its bid. It begins as follows: Referring to the renewal of the advertising privileges in and upon the cars and stations of the Boston Elevated Railway Company, you are undoubtedly aware of the fact that our company has operated the exclusive advertising privileges with your company for the past thirty-one years. During that time we have made five or six renewals and each time these renewals were made, we always gave your company the highest amount that Was offered by anyone and we are now ready to not only pay you a price over and above any legitimate offer, but will date the new agreement back to January 1, 1925, which will of course give your company an added income between that date and May 1, 1926.” Then follows a discussion of matters not pertinent to the present discussion till we come to the paragraph about which the complaint is made, and that reads as follows: “ For youi own information I wish to inform you there are only two companies of any size who operate street car advertising in the United States. The Eastern Advertising Company (ours) and Barron G. Collier, Inc. These two companies operate 95% of the street car advertising, not only in the United States, but also in Cuba and Mexico, I would exempt the subways in New York City. This company is operated by an old man 74 years • of age who has noticeably incompetent men under him and from what we hear there will soon be a change regarding this lease. The other active competitor or operator has gradually lost every privilege he ever had in the street cars and is now running the advertising privileges in small steam railroad. I think Mr. Mitten of Philadelphia could give you the reasons for this.

“ There has been an erroneous idea that there was an offer that was higher than ours. There never was, and as I have stated before in this letter those interested in this company always gave you the most money that was ever offered.”

The part in italics has reference to the plaintiff or to the man behind the plaintiff, Mr. Wineburgh, and it is said that these statements were false and malicious. The plaintiff must prove them to be such or he has no case.

The first statement is that this competitor has gradually lost every privilege he ever had in the street cars and is now running the advertising privileges in small steam railroad.” In the beginning of his testimony Mr. Wineburgh told of the street car advertising which he had done in various cities and which he had ceased to hold. He also told about losing the contract in May of 1925 with the Philadelphia Rapid Transit Company. He also stated that the only contract he then had was with the Pennsylvania road for suburban service. These statements, therefore, of Elliott, while not exact in every particular, were far from being false. That they were not malicious, that is, done with the sole intent to injure, is evident from the fact that reference is made to Mr. Mitten of Philadelphia, who could give the reasons for Wineburgh being unable to hold on to his contract. There is nothing wrong about this, and as long as a competitor states facts and not falsehoods, he is within his rights as a business rival.

Again it is said that Elliott misrepresented, when he said that the Collier companies operated ninety-five per cent of the street car advertising. This was a little high. It is now said that the percentage should have been eighty or eighty-five per cent. Exaggeration, puffing, boasting appear to be the very breath of salesmanship. We never expect detraction, always over emphasis. Elliott was a little bit too boastful, but he was bragging about his own business, which, if not commendable, is at least not unusual. Surely the trustees were not deceived by these statements after having done business previously with Collier’s companies for so long a time. Counsel upon the argument of this case very frankly stated that no one of these charges of malicious interference was in and of itself sufficient to prove his cause, but he said the accumulation of the little things might lead to the assumption or the conclusion that unfair practices had been resorted to. No amount of zeros can produce aught but zero, and these trifling misstatements, exaggerations, added together with statements of facts comparatively true, cannot make out a cause of action.

Other elements, however, were added to the statements made in this letter. During the course of the negotiations, contrary to the views of Mr. Barnum, the attorney, the trustees proposed that Collier and Wineburgh get together, and they did, so far as meeting at the Democratic Club and the Union League Club in New York city, for the purpose of discussing how they could combine. Who was to blame for failure in the negotiations is now immaterial. The trustees were notified by Wineburgh that negotiations had fallen through. Thereafter, the trustees executed the contract with Collier as heretofore stated, his bid being increased. Before that, however, on November 25, 1925, Elliott, in behalf of the Eastern Advertising Co., Inc., referring to the new bid, read a letter closing with this paragraph: “ This Company agrees and binds itself to hold harmless against any suit growing out of the rejection of any bids of Sept. 15th and award of this contract to us not only the Boston Elevated Railway Company but any and all Trustee of the Boston Elevated Railway Company, this Company in addition binds itself to endeavor to effect a settlement with Mr. Henry Weinburgh to the fullest measure of its ability and to the extent and in the manner described by our Mr. Collier before your Board.”

This was done on the advice of counsel. Wineburgh had threatened suit against the Boston Elevated Railway Company and the trustees. They were anxious to have Collier settle this difficulty or pay any damage Wineburgh might be entitled to, if any. Collier kept his word. After he was awarded the contract he tried to settle with Wineburgh and offered various propositions to no effect. Wineburgh preferred apparently to seek his damages at law, and thereupon commenced an action in the Federal courts of Boston against the Boston Elevated Railway Company for damages for breach of contract. The case was tried and the complaint dismissed in an opinion by Judge Bingham of the United States Circuit Court of Appeals, First Circuit, affirming the District Court. As stated at the beginning of this opinion, Wineburgh appears all through these litigations to have been moved with the idea that because his bid was the highest the Boston Elevated Railway trustees were under some obligation to award him the contract; that their preference for Collier was a breach of good faith for which the law would award damage. Further, the plaintiff says that ■ Collier’s people told the trustees that the plaintiff could not carry out the contract as he would have to get his advertising clients from Collier. This spoke for the future and was a mere matter of opinion regarding each other’s business. We find the plaintiff falling into the same fine of cheap talk through its president. Wineburgh told the trustees that it was a disgrace the way Collier had been handling their advertising business.

One other element in the case needs mention. When at one of their conferences Wineburgh asked Collier, “ How many people did you have to bribe to get this contract? ” he says that Collier threw up his hands and said, My God, Henry, don’t ask me.” There is no evidence beyond this remark that anybody was bribed and the judge so instructed the jury or at least told them that there was no evidence that anybody in authority to award the contract had been bribed. Whatever this may add in the way of guess or surmise it contributes nothing to the evidence in the case bearing upon the derogatory or false statements made about the plaintiff.

To entitle the plaintiff to recover in an action like this •it must prove that it would have procured and received •the contract but for the wrongful and illegal interference of the defendants. That the defendants interfered there -is no question. Of course they did. They were competitors and they interfered successfully to themselves. They fought the plaintiff at every point, no doubt bringing much influence to bear in their favor. The interference of a competitor creates no cause of action. The thing the law looks for and seeks to redress when found, is fraud, deceit, false charges made against the competitor. In analyzing 'this testimony, not fully and completely, but in its salient and material points, we are of the opinion •that the plaintiff has failed to prove that these trustees of the Boston Elevated Railway Company would have awarded -it the contract. As we have said, the evidence indicates that the -trustees were not satisfied with the standing and ability of Wineburgh or his companies, in whose name he was doing business, to fulfill and carry out the contract.

The judge charged the jury as follows: “ The basis of the plaintiff’s claim is that the defendants maliciously and for the purpose of preventing the plaintiff from obtaining •the contract which it otherwise had a reasonable expectation of obtaining so interfered with the plaintiff’s •endeavors to secure the contract as to amount to unfair •competition.” Later he used the expression, from entering with him into a contract which it is reasonably certain would have been made but for such interference.” If these words mean anything less than would have received,” we think they go too far. A cause of action exists where an executed contract is broken by a third person's unlawful interference. (Lamb v. Cheney & Son, 227 N. Y. 418.) A cause of action has also been recognized where a party would have received a contract but for the malicious, fraudulent and deceitful acts of a third party, such, for instance, as materially lying about him. (Morgan v. Andrews, 107 Mich. 33; Debnam v. Simonson, 124 Md. 354; Skene v. Carayanis, 103 Conn. 708; Lewis v. Bloede, 202 Fed. Rep. 7; Nims on Unfair Competition and Trade-Marks [3d ed.], § 176; May v. Wood, 172 Mass. 11, p. 14.) There must be some certainty that the plaintiff would have gotten the contract but for the fraud. This cannot be left to surmise or speculation. The courts rightfully extended the arm of the law to reach one who deliberately interfered with an executed contract (Lumley v. Gye, 2 E. & B. 216), since which time they have gone a step further and mulcted in damages him who does the same thing to one who would have received such a contract but for the illegal interference. (See above cases.) The courts will be a little slow in permitting juries to speculate upon what a competitor had reason to expect or might reasonably suppose would happen. The expressions reasonable expectation ” or reasonably certain ” may not be as precise as “ would have received,” and we think the latter words are preferable. While not finding reversible error in this part of the charge to the jury, yet we call attention to this phraseology in order that there may be no misunderstanding in the future.

There may be one or two other elements in the evidence which have been omitted, but I am sure that we have touched upon the main features. As we said in the beginning, so at the close — from no point of view can we see wherein the plaintiff has made out a cause of action.

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

Pound, Ch. J., Lehman, O’Brien, Hubbs and Crouch, JJ., concur; Kellogg, J., not voting.

Judgments reversed, etc.


text:
    Jacob Thoma, Respondent, v. The City of New York, Appellant.
    (Argued January 17, 1934;
    decided February 27, 1934.)

      Arthur J. W. Hilly, Corporation Counsel (J. Joseph Lilly and Henry J. Shields of counsel), for appellant.
    The head of a department has the power to reduce the salary of a subordinate within the limitations of the salary grades. (Matter of Rudd v. Cropsey, 159 App. Div. 275; Walters v. City of New York, 190 N. Y. 375; People ex rel. Stokes v. Tully, 108 App. Div. 345; Matter of Hurlbut, 88 Misc. Rep. 679; 169 App. Div. 958; Matter of Hurlbut v. Connolly, 92 Misc. Rep. 288; Buckbee v. Board of Education, 115 App. Div. 366; 187 N. Y. 544; People ex rel. Tyng v. Prendergast, 164 N. Y. Supp. 1042; 178 App. Div. 895; 221 N. Y. 659; Matter of Sullivan v. McAneny, 145 App. Div. 413; Matter of Barton v. Brannan, 141 App. Div. 295; Koso v. Green, 260 N. Y. 491.)

      Louis E. Felix and J. M. Cohen for respondent.
    The Borough President had no power to reduce the plaintiff’s salary. That power is confided in others under section 56 of the Greater New York Charter (Laws 1901, ch. 466). (People ex rel. Stokes v. Tully, 108 App. Div. 345; People ex rel. Lodholz v. Knox, 58 App. Div. 541: Powell v. City of New York, 65 App. Div. 421; O’Malley v. Board of Education, 160 App. Div. 261; Sauerbrunn v. Board of Education, 150 App. Div. 407; Lazinsk v. City of New York, 163 App. Div. 423; People ex rel. Tyng v. Prendergast, 164 N. Y. Supp. 1042; 178 App. Div. 895; Matter of Colihan v. Miller, 72 Misc. Rep. 140.)
   Crane, J.

On the 1st day of August, 1920, the plaintiff was appointed as assistant engineer, grade D, in the bureau of sewers, borough of Queens, pursuant to the civil service rules and regulations, and given a salary of $3,008. The Municipal Civil Service Commission of the city of New York had classified in the competitive class the position of assistant engineer, under the heading,

“ III. The Engineering Service.

Grade 4. Assistant Engineer.

The positions in the Engineering Service are graded according to the amount of the annual compensation or its equivalent, attaching to each, as follows:

“ Grade A — $1,200. annually,

Grade B — 1,560. annually,

“ Grade C — 2,160. annually,

Grade D — 2,760. annually, or over.”

As stated, the plaintiff came within grade D, receiving a salary over and above $2,760.

The head of the department, clothed with the power of appointment, had also the power of removal, except as limited by the Civil Service Law (Cons. Laws, ch. 7) and the charter (Laws of 1901, ch. 466), section 1543. In appointment he was obliged to select from the competitive class as listed by the Civil Service Service Commission. In removal, he was limited, if the plaintiff were a volunteer fireman, to giving notice and a hearing before action taken. (Civil Service Law, § 22.) The plaintiff was not removed from office; he was not demoted by being placed in a lower grade; nor was he advanced without examination into a higher grade. (Civil Service Law, § 16.) The question arising in this case is whether the head of the department could lower his salary within the grade. The power exists unless it be limited by some other statute than the Civil Service Law and Regulations. The plaintiff finds this limitation in section 56 of the Greater New York Charter, which reads: “ The power is vested in, and it shall be the duty of the Board of Aldermen, upon' the recommendation of the Board of Estimate and Apportionment, to fix the salary of every officer dr person whose compensation is paid out of the city treasury, irrespective of the amount fixed by this or any other act, other than day laborers, teachers, examiners and members of the supervising staff of the department of education, * *

The purpose of this provision and section 226 is to restrict the appropriations and expenditures of the various departments of the city government. The adoption of the budget by the Board of Aldermen after submission by the Board of Estimate is the usual method of proceeding under section 56. The budget is made up for the year and the appropriations, as demanded, are set off in itemized form. The Board of Aldermen fixes the compensation in this way for every person to be paid out of the city treasury. The Board of Aldermen, however, does not say, nor has it power of saying, who shall fill the positions, or that the salary fixed for a position shall be paid to any named individual. The salary goes to the place or to the office; but the head of the department fills the place by his appointment. Beyond this restriction there is nothing in the law which prevents the head of the department from placing his employees within a certain grade as he sees fit.

,Thus, within grade D, for the year 1924, the appropriations made were for three assistant engineers at $3,008 each, an assistant engineer at $2,808, an assistant engineer at $2,760, and the budget for 1925 as adopted by the Board of Aldermen gave two assistant engineers at $3,008 each, one at $2,808, and one at $2,796 and three at $2,772. As all these positions were within grade D, the appointing power, if he found the man whom he had put in the $3,008 position unsatisfactory, could at will change him and put him in the position which paid $2,772. This was not a removal from an office nor a change of grade within the Civil Service Law. (People ex rel. Tyng v. Prendergast, 164 N. Y. Supp. 1042; affd., 178 App. Div. 895; 221 N. Y. 659.) It was a discretion and an authority given to the appointing power which had not been taken away either by the charter or the Civil Service Law. We always start with the absolute power of appointment and of removal unless some statute or Constitution directs otherwise.

The facts of this case are that the plaintiff on August 1, 1920, was employed as assistant engineer in the office of the President of the borough of Queens at $3,008 per annum. He had a leave of absence without pay for nearly a year. He came back, and from January 1, 1924, to April 30, 1924, he was paid at his old rate. He was then notified by the Borough President that his salary was reduced to $2,760 per annum to take effect May 1, 1924, and he was paid at that rate until November 30, 1925. The difference in pay between the two rates for this period amounts to $389.24, to collect which this action was brought. As stated above, both the $3,008 and the $2,760 rates per annum for assistant engineer were within grade D as classified by the municipal civil service. The plaintiff is wrong in thinking that because he was at first employed at $3,008 per year his compensation could not be reduced within the grade or that he held an office for which the salary had been fixed by the Board of Aldermen so that he, the individual named Jacob Thoma, became entitled to it as a salary fixed by statute, and that any reduction was in the nature of a removal or at least illegal.

Within the grade as classified by the civil service, the Borough President could shift the plaintiff from the $3,008 position to the lowest classified position within grade D, paid at $2,760 per annum. (See Matter of Hurlbut, 88 Misc. Rep. 679; affd., 169 App. Div. 958; Walters v. City of New York, 190 N. Y. 375; People ex rel. Stokes v. Tully, 108 App. Div. 345; People ex rel. Tyng v. Prendergast, 164 N. Y. Supp. 1042; affd., 178 App. Div. 895; 221 N. Y. 659; Ernst v. Bd. of Education, [Blanchard, J.] N. Y. L. J. May 16, 1912; Wintersteen v. City of New York, 220 N. Y. 57.)

In our view of the action taken by the Borough President it simply amounted to a change from the position paying $3,008 to one paying $2,760. The Borough President in the notification to the plaintiff and to the municipal civil service called it a reduction of salary. All this happened in April of 1924. The plaintiff commenced this action almost three years later, in February of 1927, letting interest run on his claimed amount. He took no proceeding to compel the Borough President to restore him to the 13,008 place nor to compel the certification of his payroll at this figure.

Section 20 of the Civil Service Law provides: It shall be unlawful for the comptroller * * * to draw, sign or issue, or authorize the drawing, signing or issuing of any warrant on the treasurer or other disbursing officer * * * for the payment of * * * any salary or compensation to any officer, clerk or other person in the classified service * * * unless an estimate, payroll or account for such salary or compensation, containing the names of the persons to be paid, shall bear the certificate * * * of the municipal civil service commission of such city, that the persons named in such estimate, payroll or account have been appointed or employed or promoted in pursuance of law and of the rules made in pursuance of law. Any officer, clerk or other person entitled to be certified by said commission, * * * to the comptroller * * * as having been appointed or employed in pursuance of law and of the rules made in pursuance of law and refused such certificate, may maintain a proceeding by mandamus to compel such commission * * * to issue such certificate.”

While an action may be maintained under certain circumstances to recover a salary fixed by law or by contract (Wintersteen v. City of New York, supra; Walters v. City of New York, 190 N. Y. 375, at pp. 381, 382), yet where the incumbent has been removed .from his position either by change of grade or removal from office his remedy is at least in the first instance by mandamus for his restoration, wherein, if successful, suit for compensation becomes unnecessary. Mandamus requires acting without delay — an alert attention to an asserted claim.. Whether the plaintiff in this instance pursued the wrong remedy is unnecessary for us to decide. From his own standpoint he claims an office with a fixed salary by law, for serving in which he was paid less. We, however, consider the action of the Borough President as a change from the $3,,008 to the $2,760 position, all within the same grading. If this had been an illegal or unlawful removal or demoting of the plaintiff, his remedy was by mandamus. Neither remedy, however, is of any -use to him, as the Borough President acted within his authority, as we have stated.1

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

Pound, Ch. J., Lehman, O’Brien, Hunns and Crouch, JJ., concur; Kellogg, J., not voting.

Judgments reversed, etc.


text:
    In the Matter of the Probate of the Will of Margaret A. McCulloch, Deceased. Robert S. Dornon, Appellant; Florence E. Boone et al., Respondents.

      (Argued January 8, 1934;
    decided February 27, 1934.)

      Henry A. TJterhart and Alfred M. Schaffer for appellant.
    It was reversible error to permit a beneficiary under the first two wills to testify, over objection and exception, as to various alleged conversations with the deceased, in the attempt to sustain the contention of undue influence as to the will offered for probate herein. (Civ. Pr. Act, § 347; Matter of Smith, 95 N. Y. 516; Matter of Jeffrey, 129 App. Div. 791; Pringle v. Burroughs, 100 App. Div. 366; 185 N. Y. 375; Lesster v. Lesster, 178 App. Div. 438; Surr. Ct. Act, § 278; Matter of Rogers, 127 Misc. Rep. 428; Croker v. N. Y. Trust Co., 245 N. Y. 17; Hartig v. Hartig, 147 App. Div. 6.) It was reversible error to permit a party contestant and statutory next of kin to testify, over objection and exception, as to personal transactions with the deceased. (Civ. Pr. Act, § 347; Matter of Smith, 95 N. Y. 516; Surr. Ct. Act, § 314, subd. 10; Matter of Gant, 142 Misc. Rep. 446; Matter of Jeffrey, 129 App. Div. 791.) The waiver of the seal of confidence by requesting an attorney to witness a will is annulled if the testator through a different attorney makes another will revoking the first will before such confidential communications are disclosed. It was, therefore, reversible error to allow the attorneys to testify as to confidential communications on the trial of a proceeding to prove a later will drawn by a different attorney. (Civ. Pr. Act, §§ 353, 354; Mead v. Cavanagh, 161 App. Div. 177; Matter of Coleman, 111 N. Y. 220; Matter of McGowan, 134 Misc. Rep. 409.)

      Joseph T. Cashman for Florence E. Boone et ab, respondents.
    The affirmance by the Appellate Division should not be disturbed because a beneficiary -under the first two wills, but not under an intervening will, was permitted to testify as to conversations with the deceased to sustain the contention of undue influence. (Matter of Hennessey, 157 App. Div. 136.) The affirmance by the Appellate Division should not be disturbed because a party contestant was permitted to testify as to personal transactions with the deceased. (Franklin v. Kidd, 219 N. Y. 409; Talbot v. Laubheim, 188 N. Y. 421; Matter of Hennessey, 157 App. Div. 136; Griggs v. Renault Selling Branch, Inc., 179 App. Div. 845.) The decision of the Appellate Division should not be disturbed because former attorneys for the testatrix were allowed to testify as to communications with the deceased. (Matter of Coleman, 111 N. Y. 220; Matter of Coughlin, 171 App. Div. 662; Matter of Ford, 135 Misc. Rep. 630; Matter of Pedaro,
      138 Misc. Rep. 410; Baumann v. Steingester, 213 N. Y. 238.)

      Howard W. Ameli and Albert D. Smith for Lottie Williams et al., respondents.
    The admission of testimony of a beneficiary under former wills and a party contestant was not prejudicial error as they are not interested in the event within the prohibition of section 347 of the Civil Practice Act. (Lesster v. Lesster, 178 App. Div. 438; Talbot v. Laubheim, 188 N. Y. 421; Matter of Hennessey, 157 App. Div. 136; Griggs v. Renault Selling Branch, Inc., 179 App. Div. 845.) The testimony of the attorneys was properly admitted. (Matter of Coleman, 111 N. Y. 220; Matter of Coughlin, 171 App. Div. 662; Matter of Ford, 135 Misc. Rep. 630; Baumann v. Steingester, 213 N. Y. 238.)

      Joseph Gazzam for May L. Gazzam, respondent.
    The testimony of a beneficiary under prior wills and a party contestant was introduced in a contest, the favorable result of which might create the possibility of other litigations, in the outcome of which said witnesses would be interested. This possibility was' not sufficient to bar the criticised testimony. (Franklin v. Kidd, 219 N. Y. 413; Lesster v. Lesster, 178 App. Div. 438; Talbot v. Laubheim, 188 N. Y. 421.)

      Salvatore M. Parisi, as special guardian, respondent.
   Crane, J.

Rulings on the admission of evidence require the reversal of this decree. The will of Margaret A. McCulloch was denied probate because the jury found undue influence had been used to procure its execution.

Mrs. McCulloch, a widow with no heirs or next of kin of her own, died in Brooklyn, New York city, at the age of about seventy-two on April 12, 1932. Her family physician for two years was Dr. Hamilton, at whose house she was living when she passed away. The testatrix had made four wills and her sanity and ability to make a last disposition of her property was not questioned. The will of April 28, 1930, gave $500 to Dr. Hamilton and left $25,000 to Florence E. Boone, a housekeeper nurse, the income on $15,000 for life to Lottie Williams, a maid, and the residue to the Masonic Hall and Asylum Fund. The will of May 14, 1930, contained the $500 bequest to Dr. Hamilton, increased the Boone bequest to $30,000, made Lottie Williams’ legacy $15,000, and provided for the Masonic Hall and one May L. Gazzam. On January 12, 1931, another change was made. This time Dr. Hamilton got nothing and Florence E. Boone and a Clarence C. Bythrow got all. The last will, the one offered for probate, turned to her physician, Dr. Hamilton, leaving him the entire estate.

Up to February 3, 1931, Mrs. McCulloch had been living in her own apartment in Vanderbilt avenue, Brooklyn, N. Y., keeping house with the aid of Florence Boone, a nurse and housekeeper. Clarence C. Bythrow came to live with them. He was a new acquaintance, met for the first time in the summer of 1930 in the White Mountains. Lottie Williams had been a maid in the house of Mrs. McCulloch for many years during the lifetime of Mr. McCulloch. With this date, February 3, 1931, commenced new arrangements. The testatrix on that day was taken to the St. John’s Hospital, Brooklyn, for treatment of her ailment, diabetes. She closed her home and notified Florence Boone and Bythrow that they must leave; she did not desire to see them again. From the hospital the testatrix went to live with her physician who fitted up the fourth floor of his house for her comfort. Here she received her friends without let or hindrance and came and went at will. Errands at her bank were attended to personally.

This last will of February 19, 1931, was drawn up by reputable lawyers who received their instructions from the maker personally, without interference or suggestion from the proposed legatee. Unnecessary for the purpose of this opinion to state the evidence as we move on to the points of law requiring attention.

When the will was offered for probate objections were filed by Lottie Williams, a legatee in a previous will, one removed, i. e., the second will above listed. She was called as a witness and permitted to testify on material matters. Not so Florence Boone, who was excluded as a witness because she was a legatee under the third will, the one before that on probate. (Pringle v. Burroughs, 100 App. Div. 366; affd., 185 N. Y. 375.) Should the last will be rejected, Florence Boone would benefit, as she was given a considerable amount in the third will, which could then be probated as a last will. While more remote and yet not without possible claim to success, Lottie Williams was in the same position. Yet her interest was so contingent and remote that it does not come within the excluded class. (See Laka v. Krystek, 261 N. Y. 126; Franklin v. Kidd, 219 N. Y. 409; Talbot v. Laubheim, 188 N. Y. 421; cf. Lesster v. Lesster, 178 App. Div. 438.)

In setting aside this will, Lottie Williams would not benefit directly or even indirectly. She would not benefit at all. Another will intervened in which she was not mentioned. Should this will also be set aside or refused probate, then it is true, she might realize her hopes and become a legatee, but this interest, while possibly affecting the credibility of her testimony, would be too remote and contingent to disqualify her as a witness under section 347 of the Civil Practice Act. The interest to disqualify must be a present, certain and vested interest and not an interest uncertain, remote or contingent. (Hobart v. Hobart, 62 N. Y. 80, 84; Nearpass v. Gilman, 104 N. Y. 506, 509; Eisenlord v. Glum, 126 N. Y. 552, 558; Albany County Sav. Bank v. McCarty, 149 N. Y. 71, 84; Laka v. Krystek, supra.) Some of the decisions have criticized or narrowed this disqualifying rule and Professor Wigmore in his prolific work on Evidence (Vol. 1 [2d ed.], pp. 1004-1007) has severely condemned it. (See Yale Law Journal, vol. XXX, 593, p. 605, Comments on Will Contests in New York,” by Henry W. Taft.) ’ We still, and I may say with some reason, adhere to it but recognize that it should not be extended. Thus, this court in Eisenlord v. Clum (supra) said, “ All legislation on the subject has been in favor of greater liberality in the rules relating to the competency of witnesses.” (See, also, comments in Funk v. United States, 290 U. S. 371.) In Matter of Smith (95 N. Y. 516) the last two wills were treated as one in effect and so cannot be considered as authoritively passing on this point.

On another point, however, Lottie Williams was a disqualified witness. She was made a party to the probate proceedings and as stated filed written objections asking for affirmative relief. Had she been defeated she could have been charged with costs. (Surr. Ct. Act, § 276.) As it was she won and has been awarded costs by the decree. Thus she became a party disqualified under section 347 of the Civil Practice Act. (Croker v. N. Y. Trust Co., 245 N. Y. 17.)

The same objection applies to the testimony of Frank H. McCulloch, a party contestant and a recipient of costs. His evidence should have been excluded for this reason. However, as next of kin, made such by the Decedent Estate Law (Cons. Laws, ch. 13), section 83, subdivision 15, he was not otherwise disqualified. He was a statutory next of kin, no blood relation of Mrs. McCulloch, being the brother of her deceased husband. Although in the absence of all blood relatives he would take her property, yet with four wills extant in which he was not mentioned, his interest was too remote and contingent to bar him out as a witness. His relationship by marriage may weaken his testimony but should not silence him.

Section 314, subdivision 10, of the Surrogate’s Court Act, which defines “ persons interested ” as including any person entitled absolutely or contingently to share in the estate, applies to the provisions of the act, referring as it does to practice. A blood relative may be contingently interested in an intestacy if all who take as heirs or next of kin should die, yet this is not the kind of contingency referred to. A husband, in the contingency that his wife does not sell or give away her property, will be entitled to one-half of it (Decedent Estate Law, §§ 18, 83), yet he is not disqualified as a witness. This section has no reference to section 347 of the Civil Practice Act relating to parties interested in the event.

We now come to the testimony of attorneys Clark and Gilroy, subscribing witnesses to prior wills. Clark, a lawyer, was a witness to the first will and Gilroy to the third. On the ground that the privilege, so called, of section 353 of the Civil Practice Act had been forever waived when making a lawyer a witness to a will, these attorneys were permitted to testify to transactions with Mrs. McCulloch on the probate proceedings of the fourth will. This we think was misconstruing section 354 of the Civil Practice Act. An attorney cannot disclose a communication made to him by a client in the course of bis professional employment. (Civ. Prac. Act, § 353.) An exception is contained in the next section in these words: “ But nothing herein contained shall be construed to disqualify an attorney in the probate of a will heretofore executed or offered for probate or hereafter to be executed or offered for probate from becoming a witness, as to its preparation and execution in case such attorney is one of the subscribing witnesses thereto.” This exception applies to the will on probate. As to this will the lawyer — a subscribing witness — is free to speak; as to all others he cannot testify. The reason is this. Under certain beliefs a person consults a lawyer about his will. It is drawn and the lawyer becomes a witness to it. Here is a waiver of the client’s privilege to compel his lawyer to keep secrets. The lawyer may testify on the probate proceedings as to all that was said to him about the matter. But later the client may discover that his beliefs were ill-founded, and not only desires to change his will but prevent the lawyer disclosing his mistaken views. Can he do this? He may by drawing a new will with new witnesses; this revives the privilege. We must remember the right to secrecy belongs to the client, not the lawyer. (Mead v. Cavanagh, 161 App. Div. 177.)

The testimony of these two lawyers should have been rejected.

The decree and the order of affirmance should be reversed and the proceeding remitted to the Surrogate for a new hearing, with costs in all courts to each party who has appeared and filed a brief, payable out of the estate.

O’Brien, Hubb& and Crouch, JJ., concur; Pound, Ch. J., and Lehman, J., concur in result; Kellogg, J., not voting.

Ordered accordingly.