text:
    George H. Rague, as Administrator of the Estate of William J. Rague, Deceased, Appellant, v. Staten Island Coach Company, Inc., Respondent.
    Argued April 29, 1942;
    decided June 4, 1942.

      Ralph Stout and John R. Daly for appellant.
    As a matter of law the plaintiff made out a prima facie case on the issue of defendant’s negligence. (Backus v. Severn, 224 App. Div. 72; Rider v. Syracuse R. T. Ry. Co., 171 N. Y. 139; Sherman v. Millard, 144 Misc. Rep. 748; Kellegher v. Forty-Second Street, M. & St. N. Ave. R. R. Co., 171 N. Y. 309; Thurber v. Harlem B., M. & F. R. R. Co., 60 N. Y. 326; Wardrop v. Santi Moving & Express Co., 233 N. Y. 227; Kettle v. Turl, 162 N. Y. 255; Wasmer v. Delaware, L. & W. R. R. Co., 80 N. Y. 212.)

      Milton Kuren and Henry P. Goldstein for respondent.
    Plaintiff failed to prove that] the defendant was guilty of negligence. (Gloshinsky v. Bergen Milk Transp. Co., 279 N. Y. 54; Lane v. City of Buffalo, 232 App. Div. 334.) Plaintiff was guilty of contributory negligence as a matter of law. (Gloshinsky v. Bergen Milk Transp. Co., 279 N. Y. 54; Lobsenz v. Rubinstein, 258 App. Div. 164; 283 N. Y. 50; Storr v. New York Central R. R. Co., 261 N. Y. 348; Shields v. Van Kelton Amusement Corp., 228 N. Y. 396; Griffin v. State of New York, 250 App. Div. 244; Dolfini v. Erie R. R. Co., 178 N. Y. 1; Rowell v. Hutzler Lumber Co., 228 App. Div. 158; Morris v. Railway Co., 148 N. Y. 182; Eckert v. Long Island R. R. Co., 43 N. Y. 502; Smith v. Erie R. R. Co., 182 App. Div. 528; Miller v. Union Ry. Co., 191 N. Y. 77; Hatch v. Lake Shore & Michigan Southern Ry. Co., 167 App. Div. 958; 219 N. Y. 650; Nelson v. Lake Shore & Michigan Southern Ry. Co., 185 App. Div. 174.)
   Lewis, J.

The decedent named in the title to this action, to whom reference will be made as the plaintiff, suffered personal injuries in an automobile traffic accident which have given rise to the present suit. From statements made by counsel upon the argument we proceed upon the assumption that the cause of the plaintiff’s death, following the trial, was unrelated to the injuries here involved.

On the night of December 3, 1937, the plaintiff was engaged in delivering to newsstands in Port Bichmond, Staten Island, bundles containing the evening edition of a New York • newspaper. In doing so he used a light delivery truck with a driver’s cab. On either side of the cab was a single door hinged on the forward edge and with the door latch on the opposite or rear edge. When the door on the left side of the cab was opened by the driver it was the latch edge toward the rear which swung outward.

At about ten o’clock the plaintiff had stopped his truck parallel to and close against the curb in front of a store on Bichmond Terrace where he had delivered a bundle of papers. Beturning to his truck he had seated himself behind the steering wheel and closed the cab door. At that time the front end of his truck extended about three feet over the rear line of a marked area reserved for a bus stop.” Within that reserved area and a short distance ahead of the plaintiff’s truck was a brown colored bus standing parallel to the curb. It was while those conditions prevailed that the plaintiff observed another bus, concededly owned by the defendant and operated by its agent, come into view from the rear and to the left of his truck. As the bus moved forward its course was gradually turned at an angle to the right toward the curb in front of the plaintiff’s truck. The bus stopped, however, before reaching the curb, when it came into contact with the left front fender of the plaintiff’s truck. The right side of the bus was then close against the left side of the truck. It was while the two vehicles were stationary and in that position that the plaintiff opened the' left door of his cab far enough to permit him to place his left foot on the running board and to project his head upward through the V-shaped opening formed between the top of the opened door and the top of the cab. With his head protruding over the top of the door the plaintiff shouted a warning to the bus driver who was then sounding his horn in an effort to signal the brown colored bus to move ahead. As the defendant offered no evidence the record does not contain proof as to whether the bus driver heard the plaintiff shout. We do know that the night was cold and that the windows of both bus and truck were closed. We also know that the plaintiff’s shout was heard by a witness who, at the time of the accident, stood across the street at a point sixty feet from the bus. In any event the plaintiff’s warning was not heeded and the bus moved slowly forward. As it did so the right side of the bus came into contact with the opened left door of the plaintiff’s cab in such a way that plaintiff’s head was impinged between the top of the door and the top of the cab, thus inflicting personal injuries, the legal responsibility for which is the subject of this action.

In describing the first contact between the two vehicles the plaintiff’s testimony stands undisputed that “ the bus came alongside and just scraped the front fender, and I felt it.” The plaintiff also testified without contradiction that after he had opened the left door of his cab the door did not extend beyond the left side of his truck. There is no evidence that plaintiff moved his truck at any time after the bus passed along its left side. There is testimony, however, by the witness Hickey that after the accident “ the bus had Mr. Hague’s truck jammed up against this sidewalk.” Upon that phase of the proof the plaintiff’s testimony stands uncontradicted that when' the bus started forward after its first contact with plaintiff’s truck — the bus hit the front, in other words, a good smash — the front fender as well as the door and everything else.”

In addition to the evidence mentioned above and as bearing upon the reason why, in circumstances then existing, the plaintiff opened the left door of his cab and thrust out his head to warn the bus driver, counsel for the defendant adduced from the plaintiff on cross-examination the following testimony: Q. And you were afraid that if the driver didn’t do the right thing your truck might get damaged, isn’t that a fact? A. Smashed up. Q. Is that right? A. It might get damaged, yes. Q. And that is why you put yourself out in that position? A. Yes. * * * A. The door was open enough for me to get my foot out and yell in time as I thought to stop what happened.”

We thus find undisputed testimony that after the first impact by the bus against the defendant’s truck and in an effort to prevent further damage to his property, the plaintiff placed himself in the position where later he suffered personal injuries.

After a charge to which no exceptions were taken which are material upon this appeal, a jury found the defendant negligent and the plaintiff free from fault and awarded a verdict to the plaintiff. Thereafter, upon appeal to the Appellate Division, the judgment entered upon the verdict was reversed on the law and the facts and the complaint dismissed on the law.

Upon the evidence to which reference has been made we cannot say as matter of law either that it was plaintiff’s own negligence which caused his injuries or that the defendant’s driver was not lacking in due care in the manner in which he operated the defendant’s bus. It is only where circumstances established by the evidence admit of but a single inference that we may decide as a matter of law what inference shall be drawn. (Camardo v. New York State Railways, 247 N. Y.111, 118.) The evidence of record before us does not present such a situation. The plaintiff had the right, after he felt the first contact between the bus and his truck, to take prudent measures to protect his property from further damage provided he exercised reasonable care for his own safety in doing so. (Wasmer v. D., L. & W. R. R. Co., 80 N. Y. 212, 218.) But it was for the jury to determine whether the act of the plaintiff was a prudent and proper one under conditions then affecting his effort. (Rexter v. Starin, 73 N. Y. 601, 602; Kettle v. Turl, 162 N. Y. 255, 258.) In Wardrop v. Santi Moving & Express Co. (233 N. Y. 227), where, as in the case at hand, the plaintiff was injured in a vain attempt to save his own motor car from damage, the opinion (per Andrews, J.) states the rule which we think is decisive here on the question of the plaintiff’s negligence (p. 229): “ Under these circumstances we cannot say that he was guilty of negligence as a matter of law. That is not always the rule when an effort is made to protect life or property from injury. Each case must depend upon its own peculiar facts. Was the act resulting in the injury reasonable under all the circumstances? Was the end to be gained fairly commensurate with the risks incurred? Undoubtedly more risks may be taken to protect life than to protect property without involving the imputation of negligence, but the rule is that a reasonable effort may be made even in the latter case. We think that whether under all the circumstances what was done by Mr. Wardrop was or was not reasonable is a question of fact for the jury.”

The reasons may be sufficient why the defendant’s bus-driver was not called as a witness to explain his conduct. But upon the present record the question whether the evidence descriptive of the manner in which the bus was operated satisfied the standard of care which the law required of the defendant’s operator, in the circumstances then existing, was also for the triers of the facts. (Kellegher v. Forty-second St., Manhattanville & St. Nicholas Ave. R. R. Co., 171 N. Y. 309, 312.)

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

Lehman, Ch. J., Loughran, Finch, Rippey, Conway and Desmond, JJ., concur.

Judgments reversed, etc. .


source: Caselaw Access Project

author: Finch, J.

license: Public Domain

text:
    The People of the State of New York, Respondent, v. Joseph Massaro, Appellant.

      Submitted April 23, 1942;
    decided June 4, 1942.

      Arthur N. Field and Anthony J. DiGiovanna for appellant.
    There can be no conviction for seduction if the complainant knew or had reason to believe that the defendant was a married man at the time of the commission of the alleged offense. (People v. Alger, 1 Park. Crim. Rep. 333; Hinkel v. State, 157 Ind. 237; People v. Kehoe, 123 Cal. 224; People v. Wright, 18 Cal. App. 171; Callahan v. State, 63 Ind. 198; Wood v. State, 48 Ga. 193.) The trial court erred in refusing to charge as to common law marriages. (Matter of Mahel, 153 Misc. Rep. 228.)

      William O’Dwyer, District Attorney (Edward H. Levine of counsel), for respondent.
    The evidence presented a question of fact and not one of law. (Kenyon v. People, 26 N. Y. 203; Crozier v. People, 1 Park. Crim. Rep. 453; State v. Donovan, 128 Iowa, 44; Boyce v. People, 55 N. Y. 644; People v. Orr, 92 Hun, 199; 149 N. Y. 616; Fearon v. Treanor, 272 N. Y. 268; People v. Kress, 284 N. Y. 452; People v. Kiernan, 3 N. Y. Crim. Rep. 247; 36 Hun, 642; 101 N. Y. 618; People v. Gerdvine, 210 N. Y. 184.)
   Finch, J.

Defendant has been convicted of the crime of seduction under promise of marriage (Penal Law, § 2175) and appeals to this court, alleging certain errors occurring on the trial.

Defendant, a man of forty-three at the time of the trial, went through a marriage ceremony with Mildred Massaro in 1921 when she had not yet been divorced from her first husband. The latter procured a divorce from her in 1923. Four years later defendant and Mildred Massaro had their marriage annulled. In 1940, after defendant had run afoul of the criminal law in the case at bar, he and Mildred Massaro seem to have had this decree of annulment vacated. During all this period, however, the couple continued to live together and hold themselves out to the world as man and wife, at least for certain periods of time, and they have a son, sixteen years of age, who bears the name of defendant. There is evidence, therefore, from which a jury could find the existence of a common law marriage.

The complainant, Frances Lombardo, is a woman twenty-four years of age and previously unmarried. Her sister, Mrs. Jennette Massaro, is the sister-in-law of defendant, having been married to defendant’s brother for about sixteen years. Complainant testified that she had known defendant “ a number of years,” had visited him at his home about ten years previously, that she knew defendant and his wife had a son, and had been introduced to his wife. She further testified that at one time when she went to defendant’s home, she saw his baby son in the carriage. At the same time she testified, “ I did not know whether they were living together as man and wife but I knew that they never got along.” She also denied knowing that defendant and Mildred Massaro were in fact married.

At the trial defendant did not dispute the sexual relationship with complainant. His defense was that he never made any promise ' of marriage and that the intercourse was prompted by enticement on the part of complainant. The act of intercourse took place in the apartment of another sister of complainant, Mrs. Peruggi, after Mr. and Mrs. Peruggi had left complainant and defendant alone in the apartment. Upon returning, Mr. and Mrs. Peruggi suggested that defendant and complainant continue to spend the night together in a vacant bed in the apartment, and the latter couple fell in with the suggestion.

The trial court submitted the case to the jury upon the theory that defendant must be acquitted if complainant actually knew that he was a married man. At the same time the trial court refused to charge that the jury might find from the evidence in the case that a common law marriage existed between defendant and Mildred Massaro, and that if such marriage existed it was just as binding as a marriage formally solemnized. The court also refused to charge that there could be no conviction of defendant if, at the time of the intercourse, complainant was in possession of facts concerning his marital life from which she should have known that defendant was married. These two refusals to charge constitute the principal errors urged by defendant on this appeal.

As to the first alleged error, the following charge was requested of the court by defendant: “ I respectfully request Your Honor to charge that common-law marriages were recognized as valid in 1923, and that if subsequent to the divorce obtained by the first husband of Mildred Massaro she and the defendant continued to live together over a period of seventeen years and up to and including the present day, and had one child who bears the name of the defendant, and lived together as husband and wife and held themselves out as such, that the jury may then find a valid common-law marriage existed and the parties were as validly married as if they had solemnized the marriage by a regular marriage ceremony.” Proper exception was taken to the refusal so to charge.

As a general rule there can be no conviction for seduction under promise of marriage if the complaining witness had actual knowledge at the time that defendant was a married man. (People v. Alger, 1 Park. Cr. Rep. 333.) The essence of the crime of seduction is deceit and there can be no deceit when the woman has actual knowledge that the man is legally incapable of carrying out his promise of marriage. Since the attempted marriage to Mildred Massaro in 1921 was bigamous and void, the only basis upon which defendant could claim to be a married man was his living with and holding out Mildred Massaro as his wife after the impediment to a valid marriage had been removed through the divorce procured by Mildred Massaro’s first husband or after the decree of annulment in 1927.

It makes no difference, however, that the evidence tends to show only a common law marriage because such a marriage, if contracted before April 29, 1933, the effective date of chapter 606 of the Laws of 1933, is just as valid as a solemnized marriage. The jury were, therefore, entitled to an instruction that they might find that a common law marriage existed between defendant and the woman with whom he was living and was holding out to the world as his wife. If they found from the evidence that such a common law marriage in fact existed, they were then in a position to go further and find that complainant, having actual knowledge of this marriage and hence knowing that defendant was not in a position to carry out his alleged promise, could not be deceived thereby.

It needs no elaboration to show that such error was material. This refusal to charge with respect to common law marriages destroyed a vital part of the defense offered by defendant and constitutes reversible error.

Another error in the trial occurred by reason of the exclusion of evidence upon cross-examination of Jennette Massaro, that no announcement was made by her that defendant was engaged to marry her sister, the complainant. Counsel for the defendant asked: Q. Did you announce to anybody that the defendant was engaged to marry your sister? ” . This question was excluded. Counsel for defendant further asked of this witness: “ Q. Did anyone speak to you about this defendant being engaged to your sister? ” Proper exceptions were taken to the exclusion of both of these questions.

The trial developed a sharp conflict of testimony concerning the all-important issue in the case, whether defendant had ever promised to marry the complainant. The only corroboration of the alleged promise to marry, as testified to by complainant, came from the two sisters of complainant. It thus became important for defendant to show that the acts not only of complainant but of her sisters were inconsistent with the existence of such a promise of marriage. If it was the fact that neither complainant nor her sisters announced the engagement, such fact would be of great importance in determining the truth of their testimony. It would have been most natural for complainant’s sisters — and for complainant herself — to have announced this engagement and forthcoming marriage. Their failure so to do would have an important bearing on the contention of defendant that no promise of marriage on his part was ever made. In view of the closeness of the disputed question of fact as to whether defendant had ever promised to marry complainant, the error in excluding this testimony was both material and vital.

Since there must be a new trial, it is material to note that the learned trial judge was not in error when he refused to charge that there could be no conviction of defendant if the complainant should have known that defendant was a married man. The court was requested to charge as follows: “ If the jury find that at the time complainant had sexual relationship with him, that she was familiar with the facts or conditions concerning the defendant’s mode of life which should have led her to know or believe that the defendant was married at that time, then the jury must acquit the defendant.”

The theory of defendant was apparently one of constructive notice, namely, that complainant must be held to have had knowledge, whether she did in fact or not, provided she was acquainted with facts and circumstances which would lead a reasonable woman to believe that defendant was married. Such a contention is not tenable. So to hold would deny the protection of the statute to a woman who did not in fact know she was dealing with a married man when the ordinary reasonable woman in the same position would have known the man’s real status. No sound reason exists for refusing the protection of the statute to a foolish virgin merely because a wiser one would have known better. The foregoing, of course, does not mean that a jury should not be instructed that they may find actual knowledge on the part of the woman from the evidence presented, including her familiarity with the background of defendant, his wife and family.

The judgments should be reversed and a new trial ordered.

Lehman, Ch. J., Loughran, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgments reversed, etc.


author: Per Curiam.

text:
    Leon Silverberg et al., Appellants, v. Edwin S. Schweig et al., Respondents.
    Submitted April 22, 1942;
    decided June 4, 1942.

      Arthur Hutter and Joseph A. Jacobson for appellants.
    This is a res ipsa loquitur case. (Goldstein v. Pullman Co., 220 N. Y. 549; Storms v. Lane, 223 App. Div. 79; Katz v. Goldring, 237 App. Div. 824; Puleo v. Bailey, 186 App. Div. 771.) The use of the fire escape for non-emergency purposes is no bar to recovery. (Malcolm v. Thomas, 207 App. Div. 230; 238 N. Y. 577; Vaughan v. Transit

      Development Co., 222 N. Y. 79; Roth v. Mitteldorf, 248 App. Div. 608; Higgins v. New York Florists Supply Co., 275 N. Y. 506; Levine v. Bowery Savings Bank, 283 N. Y. 497; Haefeli v. Woodrich Eng. Co., 255 N. Y. 442; Heffron v. N. Y. C. & H. R. R. R. Co., 223 N. Y. 473.)

      Francis Van Orman and A. T. Antinozzi for respondents.
    This is not a case for res ipsa loquitur. (Slater v. Barnes, 241 N. Y. 284; Galbraith v. Busch, 267 N. Y. 230; Nabson v. Mordall Realty Corp., 257 App. Div. 659.) The defendants’ evidence overcomes any presumption that they were negligent. (Huscher v. N. Y. & Queens El. L. & P. Co., 158 App. Div. 422; Sweeney v. Edison Electric Illuminating Co., 158 App. Div. 449; Plumb v. Richmond Light & R. R. Co., 233 N. Y. 285; Klein v. Fraser, 169 App. Div. 812; Potts v. Pardee, 220 N. Y. 431; St. Andrassy v. Mooney, 262 N. Y. 368.) The infant plaintiff was a mere licensee. (Hudson v. Church of Holy Trinity, 250 N. Y. 513; Collentine v. City of New York, 279 N. Y. 119; Greco v. Levy, 257 App. Div. 209; 282 N. Y. 575; Mendelowitz v. Neisner, 258 N. Y. 181; Ehret v. Village of Scarsdale, 269 N. Y. 198; Morse v. Buffalo Tank Corp., 280 N. Y. 110; McAlpin v. Powell, 70 N. Y. 126; Vega v. Lange, 248 App. Div. 521; Aubrey v. McCarthy, 217 App. Div. 492.)
   Per Curiam.

The infant plaintiff sustained personal injuries allegedly due to a defective drop ladder which formed a part of a fire escape attached to a multiple dwelling owned by the defendant Schweig and managed by the defendant Herman.

Upon the present record we think there was no evidence that the defendants, or either of them, had such exclusive possession, control and oversight of the agency which is alleged to have caused the infant plaintiff’s injury, as to make applicable the rule of res ipsa loquitur. (Foltis, Inc., v. City of New York, 287 N. Y. 108, 114-117; Bressler v. New York Rapid Transit Corp., 270 N. Y. 409, 413; Galbraith v. Busch, 267 N. Y. 230, 235; Slater v. Barnes, 241 N. Y. 284, 287.) There was evidence, however, sufficient to present a question of fact whether, when the infant plaintiff used the drop ladder as a means to reach the fire escape, he did so as an invitee to whom the defendants owed the duty to maintain the ladder in a reasonably safe condition for such use. (Bowers v. City Bank Farmers Trust Co., 282 N. Y. 442, 445.)

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

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgments reversed, etc.


text:
    The People of the State of New York, Respondent, v. George Scalise, Appellant.
    Argued April 27, 1942;
    decided June 4, 1942.

      Martin W. Littleton, Irving Goldberg, Richard H. Brown, John Kadel and David Stein for appellant.
    The proof failed to establish a violation of section 889 of the Penal Law under which all of the forgery counts were framed. (People v. Underhill, 142 N. Y. 38; People v. Anderson, 210 App. Div. 59.)

      Frank S. Hogan, District Attorney (Stanley H. Fuld and Richard G. Denser of counsel), for respondent.
    The defendant’s guilt of the crime of grand larceny by embezzlement as charged in the 58th count was established beyond a reasonable doubt. (People v. Shears, 158 App. Div. 577; 209 N. Y. 610; People v. Barnes, 158 App. Div. 712; 210 N. Y. 612; People v. Haupt, 247 N. Y. 369; Dunn v. United States, 284 U. S. 390; People v. Miller, 169 N. Y. 339; People v. Geyer, 196 N. Y. 364.) The defendant’s guilt of the forgeries charged in counts 6, 13, 19 and 45 of the indictment was established beyond a reasonable doubt. (People v. Anderson, 210 App. Div. 59; 239 N. Y. 534; People ex rel. Isaacson v. Fallon, 202 N. Y. 456; People v. Abeel, 182 N. Y. 415; People v. Von Brandenburg, 241 N. Y. 128; People v. Gaimari, 176 N. Y. 84; Hays v. Comm., 211 Ky. 716; Smith v. Farley, 155 App. Div. 813; Koch v. Fox, 71 App. Div. 288; State v. Omodt, 198 Minn. 165.)
   Per Curiam.

There was sufficient proof to justify conviction on the 58th count charging grand larceny by embezzlement. As to the four forgery counts, however, which charge violations of subdivision 1 of the first part of section 889 of the Penal Law, the evidence is insufficient since there is no showing of a falsification of any record by alteration, erasure, obliteration or destruction. (People v. Underhill, 142 N. Y. 38; People v. Anderson, 239 N. Y. 534.) The judgment of the Appellate Division should be modified so as to provide that the judgment of conviction as to the 6th, 13th, 19th and 45th counts of the indictment be reversed and those counts dismissed, otherwise affirmed.

The judgments should be modified in accordance with this opinion and as so modified affirmed.

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgment accordingly.


author: Conway, J. Loughran, J.

text:
    Jane J. Loomis, Appellant, v. Edwin D. Loomis, Respondent.
    Argued January 5, 1942;
    decided June 4, 1942.

      Stanley Faulkner for appellant.
    The Domestic Relations Court is a court of limited jurisdiction possessing specific statutory powers. (Linado v. Linado, 172 Misc. Rep. 782; Kastner v. Kastner, 169 Misc. Rep. 259; Zambrotto v. Jannette, 160 Misc. Rep. 558; Jacobs v. Jacobs, 163 Misc. Rep. 98; Matter of Melis v. Department of Health, 260 App. Div. 772.) To invoke the doctrine of res judicata it must be first determined that the identical issue was passed upon by a court of competent jurisdiction. (Bannon v. Bannon, 270 N. Y. 484; Barrett v. Miner, 119 Misc. Rep. 230; Klee v. Klee, 171 N. Y. Supp. 632.)

      David Schlang for respondent.
    The Domestic Relations Court has the power, as a prerequisite to jurisdiction in support proceedings, to pass upon the marital status of the parties. (Matter of Stilwell, 139 N. Y. 337; People ex rel. Ryan v. Green, 58 N. Y. 295; People ex rel. Burby v. Howland, 155 N. Y. 270; City of New York v. Kaiser, 125 Misc. Rep. 637; Matter of Hertzberg v. Hertzberg, 247 App. Div. 351; 251 App. Div. 273; City of New York v. Cohen, 143 Misc. Rep. 27; 259 N. Y. 645; Erkenbrach v. Erkenbrach, 96 N. Y. 456; Ackerman v. Ackerman, 200 N. Y. 72; Johnson v. Johnson, 206 N. Y. 561; Ramsden v. Ramsden, 91 N. Y. 281.) Findings of the Domestic Relations Court on the marital status of the parties are res judicata. (Kerr v. Kerr, 41 N. Y. 272; Matter of Curry v. Curry, 275 N. Y. 553; Abrams v. Great American Ins. Co., 269 N. Y. 90; People v. Wainright, 237 N. Y. 407; People v. Fleming, 2 N. Y. 484; Betz v. Horr, 276 N. Y. 83; Matter of Buoneto v. Buoneto, 278 N. Y. 284; People ex rel. Glendening v. Glendening, 259 App. Div. 384; 284 N. Y. 598; Greenzang v. Greenzang, 169 Misc. Rep. 516; Everett v. Everett, 180 N. Y. 452; Sears, Roebuck & Co. v. 9 Ave-31 St. Corp., 274 N. Y. 388; Reich v. Cochran, 151 N. Y. 122; Matter of Merritt v. Merritt, 259 App. Div. 242; 285 N. Y. 561; 285 N. Y. 743; People ex rel. Davis v. Sturtevant, 9 N. Y. 263; People ex rel. Kuhn v. P. E. House of Mercy, 133 N. Y. 207.)
   Conway, J.

This is an appeal from an order of the Appellate Division, second department, aifirming an order of Special Term dismissing an amended complaint before answer upon motion made under rule 107 of the Rules of Civil Practice. The amended complaint seeks a declaratory judgment that plaintiff and defendant are husband and wife and that a foreign decree of divorce obtained by defendant is null and void.

Plaintiff and defendant were married in 1909 in the city and State of New York and continued to reside in this State until 1929 when they separated and they have continued to live apart since that time. In 1934 plaintiff applied to the Family Court of the Domestic Relations Court of the City of New York for an order awarding her support by her husband, the defendant here. An award was made and later increased. Thereafter in 1939 the latter order was vacated, after hearings held, upon the ground that the decree of divorce obtained by the defendant in the foreign jurisdiction was a valid one. It is the order entered on that finding which has been held to be an existing final decree of a court of competent jurisdiction rendered on the merits, determining the same cause of action between the parties.” (Rules Civ. Prac., rule 107, subd. 5.)

In so far as applicable here, the Domestic Relations Court was established and such jurisdiction was • conferred upon it by the Legislature as was necessary to enable it to compel the support of a wife by a husband who had abandoned or neglected to support her. (N. Y. State Const. [1925] art. 6, § 18; Domestic Relations Court Act, § 91 [L. 1933, ch. 482, as amd.].)

In the exercise of its limited jurisdiction the court is authorized to hear and determine the cause and, of course, may determine whether the parties are husband and wife. Such determination is incidental to the exercise of any jurisdiction. For that limited purpose there is jurisdiction of the subject matter of the marriage.

A determination by the Family Court that there is an existing marriage, or that one has been terminated, as a preliminary to exercising or declining jurisdiction, is, within its limited summary jurisdiction, binding in that court upon the parties and final until a different determination be there made. (Dorn. Rel. Court Act, § 92, subds. 4 and 16.) It is not binding on the parties in an action in the Supreme Court in which there is directly involved the question whether the same marriage exists or has been terminated. There is no identity of jurisdiction —■ one is preliminary or incidental, the other direct and primary. There is no identity of cause of action — one is for support and that only, the other for an adjudication of marital status.

The orders should be reversed, with costs in all courts, and the motion to dismiss the complaint denied.

Loughran, J.

(concurring). Plaintiff sues as the wife of the defendant for a declaration of the invalidity of a divorce from her which he secured in a foreign jurisdiction. Heretofore she initiated a proceeding in the Family Court of the City of New York to compel her support by him as her husband. After trial thereof, that proceeding was dismissed on a finding that bis foreign divorce is valid in this state. I agree that this former adjudication is not an estoppel in the present action.

The earlier proceeding in the Family Court was in its substantive nature a summary prosecution for a public tort of the defendant (Dom. Rel. Court Act, title III, arts. 3, 4; Code Crim. Proc., part VI, titles VII, VIII. See Duffy v. People, 6 Hill, 75; People v. Schenkel, 258 N. Y. 224. Cf. Matter of Kane v. Necci, 269 N. Y. 13.) The present action is an ordinary civil prosecution brought by this plaintiff individually for the vindication of her status as wife of the defendant. (See Civ. Prac. Act, §§ 4, 6.)

Though the petition in a proceeding in the Family Court may be made in the name of the person asking support and the city of New York is not in every case an indispensable party thereto, yet the Corporation Counsel may always represent the petitioner and shall act as counsel to the court and shall take charge of all legal proceedings on behalf of the court where the court’s action is under review.” (Dom. Rel. Court Act, §§ 59, 112, 138; L. 1933, ch. 482, as amd. L. 1934, ch. 362.) In no fair sense, then, was the summary proceeding in the Family Court a controversy between the parties to the present action.

Nor are the two prosecutions at all equal in respect either of procedure or of the character of evidence necessary to a decision. The present action is to be tried and determined under the Civil Practice Act. (See § 473 thereof and Rules Civ. Prac., rules 210 and 213.) Hearings in the Family Court are conducted in accordance with such rules as may be adopted by the Board of Justices of the Domestic Relations Court. Before making the order the court shall have presented to it by the investigation section the facts discovered in its investigation of the family and may receive from other sources any information that may assist the' court in its determination.” (Dom. Rel. Court Act, §§ 128, 129.)

I think this lack of essential identities dictates that the present issue of res judicata should be ruled against the defendant on the analogy of the principle that a judgment in a criminal case is generally no bar to a subsequent civil action based on the same facts. (2 Freeman on The Law of Judgments [5th ed.], § 914. See Green v. Altenkirch, 176 App. Div. 320, and the cases there cited. Cf. Maybee v. Avery, 18 Johns. 352.)

Lehman, Ch. J., Finch, Rippey, Lewis and Desmond, JJ., concur with Conway, J.; Loughran, J., concurs in result in separate opinion.

Orders reversed, etc.


author: Lehman, Ch. J. Desmond, J.

text:
    Victor S. Everett, Appellant, v. Ellis L. Phillips et al., Respondents, Impleaded with Others.

      Argued October 22,1941;
    decided June 4,1942.

      Jay Leo Rothschild, Joseph Nemerov, I. Vernon Werbin, Louis Rivkin and Israel H. Mandel for appellant.
    The propriety of respondents’ conduct will not be measured by standards of actual and intentional fraud. It is enough if, occupying a dual trustee position, the record of respondents’ performance is such that the reasonable mind is satisfied that they did not act solely in the interests of the beneficiary which now calls them to account. (Southern Pacific Co. v. Bogert, 250 U. S. 483; Hyams v. Calumet & Hecla Mining Co., 221 Fed. Rep. 529; Blaustein v. Pan American Petroleum & Transport Co., 174 Misc. Rep. 601; Kavanaugh v. Kavanaugh Knitting Co., 226 N. Y. 185; Pepper v. Litton, 308 U. S. 295; Geddes v. Anaconda Copper Mining Co., 254 U. S. 590; Isaac v. Marcus, 258 N. Y. 257; Koral v. Savory, Inc., 276 N. Y. 215; Sage v. Culver, 147 N. Y. 241.) While courts will not ordinarily interfere with the management of the internal affairs of a corporation, an exception to this rule necessarily is made where the corporation’s directors have dual obligations and dual relations, which, by their very nature, prevent an unprejudiced exercise of judgment. (United Copper Securities Co. v. Amalgamated Copper Co., 244 U. S. 261; Koral v. Savory, Inc., 276 N. Y. 215; Munson v. S., G. & C. R. R. Co., 103 N. Y. 58; Levy v. Pacific Eastern Corp., 153 Misc. Rep. 488; Billings v. Shaw, 209 N. Y. 265; Wardell v. Union Pacific R. R. Co., 103 U. S. 651; Blaustein v. Pan American Petroleum & Transport Co., 174 Misc. Rep. 601; Farmers’ Loan & Trust Co. v. New York & Northern Ry. Co., 150 N. Y. 410; Delaware & Hudson Co. v. Albany & Susquehanna R. R. Co., 213 U. S. 435; Doctor v. Harrington, 196 U. S. 579; Meinhard v. Salmon, 249 N. Y. 458.) Proof of loss to the Empire Power Corporation was ample. Whether or not there was actual loss need not be established as a condition precedent. (Rose v. Durant, 44 App. Div. 381; Owen v. Blumenthal, 280 N. Y. 96; Farmers’ Loan & Trust Co. v. N. Y. & N. Ry. Co., 150 N. Y. 410; Blaustein v. Pan American Petroleum & Transport Co., 174 Misc. Rep. 601; Sage v. Culver, 147 N. Y. 241; Barnard v. Gantz, 140 N. Y. 249; Fisher v. Bishop, 108 N. Y. 25; Nesbit v. Lockman, 34 N. Y. 167; Meeker v. Winthrop Iron Co., 17 Fed. Rep. 48; Pepper v. Litton, 308 U. S. 295; O’Brien v. Fitzgerald, 6 App. Div. 509; 150 N. Y. 572; Beatty v. Guggenheim Exploration Co., 225 N. Y. 380; Meinhard v. Salmon, 249 N. Y. 458.)

      Stephen Callaghan, Ralph Stout and Thomas A. Gaffney for Ellis L. Phillips et al., respondents.
    The loans made by the power corporation to the lighting company were not ultra vires or in violation of law. (Morse v. Equitable Life Assur. Society, 124 App. Div. 235; Una v. Dodd, 39 N. J. Eq. 173; Hess v. Sloane, 66 App. Div. 522; 173 N. Y. 616; Steinway v. Steinway & Sons, 17 Misc. Rep. 43; Holmes v. Willard, 125 N. Y. 75; Murray v. Smith, 166 App. Div. 528; People ex rel. D. & H. Co. v. Stevens, 197 N. Y. 1; Matter of Staten Island Edison Corp. v. Pub. Serv. Comm., 263 N. Y. 209.) The making of the loans and the refunding thereof were matters within the discretion and judgment of the directors of the power corporation; the evidence herein establishes that the loans and refundings were made in good faith and have been and are of substantial benefit and advantage to the corporation; and the evidence affords no basis for the interlocutory judgment of the Special Term. (Leslie v. Lorillard, 110 N. Y. 519; City Bank Farmers’ Trust Co. v. Hewitt Realty Co., 257 N. Y. 62; Rous v. Carlisle, 261 App. Div. 432; Spiegel v. Beacon Participations, 297 Mass. 398; Gamble v. Queens. County Water Co., 123 N. Y. 91; Burden v. Burden, 159 N. Y. 287; Hine v. Lausterer, 135 Misc. Rep. 397; 232 App. Div. 719; 257 N. Y. 523; Hart v. Ogdensburg & L. C. R. R. Co., 89 Hun, 316; Lewisohn Bros. v. Anaconda Copper Mining Co., 26 Misc. Rep. 613; McNab v. McNab & Harlin Mfg. Co., 62 Hun, 18; 133 N. Y. 687; Cleary v. Higley, 154 Misc. Rep. 158; 246 App. Div. 698; Roberts v. Roberts-Wicks Co., 184 N. Y. 257; Helfman v. American Light & Traction Co., 121 N. J. Eq. 1; Matter of Clark, 257 N. Y. 132.)

      Charles G. Blakeslee, John J. Donohue and Elmer B. Sanford for Long Island Lighting Company, respondent.
   Lehman, Ch. J.

The plaintiff is the owner of 100 shares of the participating stock of Empire Power Corporation. The issued and outstanding capital stock of the corporation consists of 77,000 shares of six per cent cumulative preferred stock with a stated value of $7,133,000; 400,000 shares of participating stock with a stated value of $3,150,000, and 400,000 shares of common stock with a stated value of $1,000,000. The directors of the corporation and members of their families owned all the common stock and large amounts of the preferred stock and the “ participating stock. At the same time they also owned or controlled, directly or indirectly, 1,500,000 shares, constituting a majority of the common stock of Long Island Lighting Company. In 1931 and 1932 the Empire Power Corporation loaned to Long Island Lighting Company large sums of money. Payment of these loans was from time to time extended and the loans are still unpaid. Claiming that these loans and the extension of time of payment were ultra vires and were “ not made to promote any business purpose of Empire Power Corporation, but were made for the sole purpose of promoting the interests of the individual defendants and that of Long Island Lighting Company,” the plaintiff has brought an action in behalf of himself and other minority stockholders in which he has asked that directors of Empire Power Corporation named as individual defendants be compelled to demand payment of the indebtedness by Long Island Lighting Company and that “in the event that the said indebtedness cannot be collected from Long Island Lighting Company, then that the individual defendants shall be directed to pay the same.” At Special Term an interlocutory judgment was granted awarding substantially the relief which the plaintiff asked. The judgment was unanimously reversed by the Appellate Division on the law and the facts and the complaint was dismissed.

To establish his cause of action the plaintiff must show that the individual defendants in causing the Empire Power Corporation to loan the moneys to the Long Island Lighting Company and in failing to demand payment of such loans as they became due, have acted in disregard of the duties they owe Empire Power Corporation and that Empire Power Corporation has suffered, or at least may suffer, some detriment or loss. In a long line of decisions this court has held directors who control corporate action responsible for dereliction of duty where they have used the property of the corporation or managed its affairs to promote their own interests, disregarding the interests of the corporation. Power of control carries with it a trust or duty to exercise that power faithfully to promote the corporate interests, and the courts of this State will insist upon scrupulous performance of that duty. Yet, however high may be the standard of fidelity to duty which the court may exact, errors of judgment by directors do not alone suffice to demonstrate lack of fidelity. That is true even though the errors may be so gross that they may demonstrate' the unfitness of the directors to manage the corporate affairs.

The plaintiff here is asserting a cause of action for wrong done to the corporation of which he is a minority stockholder. In such an action it is immaterial whether the minority stockholder, who asserts it, has a large or a small interest; but in determining whether those who have power to control the corporation have committed a wrong either to the corporation or to its stockholders, the corporate capital structure, the certificate of incorporation, and the corporate constitution or by-laws may be factors of great weight; for, within limits prescribed by law, these define to whom the power of control is entrusted, its scope and the manner in which it must be exercised. Directors are elected by the holders of stock which has voting rights. Here the certificate of incorporation of Empire Power Corporation provides that only the holders of common stock shall have voting rights. According to the testimony of the defendant Phillips, who has been president of the corporation from its formation in 1924 and who with George W. Olmsted, its vice-president until he died in 1940, owned or controlled, either directly or indirectly, all of its common stock, the corporation was “ formed for the purpose of financing and taking care of the various companies in which we were then interested and later became interested further.” They invited the public to subscribe to the capital of the corporation which would be managed by directors in whose election no other stockholders would have any part, and those who might furnish the capital which these directors would manage were not left under any illusion that the directors, when acting for the corporation, would be free from other interests which might prevent an unprejudiced exercise of judgment. The certificate of incorporation contained a provision that “No contract or other transaction between the Corporation and any other corporation shall be affected or invalidated by the fact that any one or more of the directors of this Corporation is or are interested in, or is a director or officer, or are directors or officers of such other corporation, * * * and no contract, act or transaction of this Corporation with any person or persons, firm or corporation, shall be affected or invalidated by the fact that any director or directors of this Corporation is a party, or are parties to or interested in such contract, act or transaction, or in any way connected with such person or persons, firm or association, and each and every person who may become a director of this Corporation is hereby relieved from any liability that might otherwise exist from contracting with the Corporation for the benefit of himself or any firm, association or corporation in which he may be in anywise interested.” It is against this background that the court must consider the claim of the appellant that he has established by the overwhelming weight of testimony that the directors were faithless to their trust.

The complaint of the plaintiff concerns, as we have said, loans made to Long Island Lighting Company. The defendants controlled that corporation. Their stock interest in it was large. According to the balance sheets of the corporation introduced in evidence by the plaintiff, the corporation, in 1931 and also at the time of the trial, had a very large surplus and was earning large profits, but needed money for the development of its business. Corporate balance sheets unfortunately do not always present a correct picture of the corporate finances. The Public Service Commission —■ on appropriate occasions —■ can and does make independent examinations of the balance sheets of utility corporations; a court can ordinarily consider only the evidence produced by the parties and no evidence was produced which would challenge the correctness of the balance sheets or which would enable the court to reconstruct them. We may not assume that the financial condition of the lighting company was not favorable, but the evidence establishes that unless it had succeeded in borrowing money it would have been obliged to discontinue ^payment of dividends, at least temporarily, and to use all its earnings for needed improvements, and that, perhaps, the earnings might have provided insufficient moneys for its needs. The evidence establishes, too, that the defendants expected to derive benefit not only as stockholders but also in other ways from the moneys which, as directors, they caused Long Island Lighting Company to borrow. The question remains whether in seeking benefit for themselves and for the Long Island Lighting Company, which they controlled through stock ownership, they caused Empire Power Corporation, which the defendants also controlled through stock ownership, to make a loan, which might work harm to the Empire Power Corporation.

The Long Island Lighting Company at the end of 1930 owed banks approximately $10,500,000 on short term, unsecured notes. Though, according to the balance sheet of the Long Island Lighting Company, it had assets greatly in excess of its indebtedness, and had a net income of more than $3,000,000 a year, its financial position was not entirely safe or sound. The banks might press for payment of short term obligations at a time when Long Island Lighting Company might find it difficult to borrow elsewhere the money to pay such obligations. Moreover, the needs of the territory served by Long Island Lighting Company required constant extension of its plant. We may assume that prudent and conservative directors would, in such circumstances, have sought to obtain by an issue of bonds the money the corporation might require to refund its short term obligations and for new capital. We need not resort to doubtful inferences to find that the directors in their management of Long Island Lighting Company did not feel themselves restricted to conservative plans and methods. The evidence clearly indicates that.

Stocks, bonds, notes or other evidences of indebtedness payable at periods of more than twelve months after the date thereof ” could not be issued by Long Island Lighting Company without approval of the Public Service Commission obtained in accordance with section 69 of the Public Service Law (Cons. Laws, ch. 48). The Long Island Lighting Company did in 1932 apply to the Public Service Commission for permission to issue approximately $15,000,000 of refunding bonds. The directors of the Long Island Lighting Company preferred, however, to borrow the moneys under a plan which would not be subject to the restrictions which the Public Service Commission might impose as conditions to its approval. An inference that the directors were influenced by that consideration when they sought to borrow the moneys for Long Island Lighting Company upon notes payable within one year from that date might reasonably be drawn from the evidence in this case. The transaction would not be unlawful for that reason. The Legislature has in the public interest provided that bonds or notes evidencing loans for a longer period than one year may be issued only with the approval of the Commission. The Legislature has not decreed that the public interest requires similar safeguards for issues where the loans became due within the year. The Legislature has drawn the line, and the very meaning of a line in the law is that you intentionally may go as close to it as you can if you do not pass it.” (Superior Oil Co. v. Mississippi, 280 U. S. 390, 395, opinion by Mr. Justice Holmes.) True, the inference might reasonably be drawn that the directors of the Long Island Lighting Company arranged that Empire Power Corporation should loan the money on short term notes with the expectation that Empire Power Corporation, under their control, would continue to renew the loans as they became due, until the time arrived when it would be convenient for Long Island Lighting Company to repay them. The directors regarded these loans as investments ” rather than temporary loans which would be paid at maturity. Nevertheless, the lender could have insisted upon payment of the loans as they became due, and the defendants can be charged with no wrong to the Empire Power Corporation on account of repeated renewals of the loans nor on account of the way in which they were handled, without proof that in these acts the defendants willfully failed to protect the interests of Empire Power Corporation in order to serve better their personal interests and the interests of the Long Island Lighting Company. There may be difference of opinion as to whether these defendants as directors of Empire Power Corporation acted wisely in the handling of the loans. There are many matters disclosed by the record which cast doubt upon the prudence, the wisdom, and the concern for the public interest shown by these directors. We are constrained, however, to agree with the Appellate Division that there is little, if any, evidence to sustain a finding that they have violated their trust or have failed to protect the interests of the Empire Power Corporation according to the dictates of their judgment, be that judgment good or bad.

It is argued, however, that'the transactions in which the defendants acted as directors both of the Empire Power Corporation and the Long Island Lighting Company should be set aside because the dual position of these directors precluded an unprejudiced exercise of judgment. The dual position of the directors making the unprejudiced exercise of judgment by them more difficult, should lead the courts to scrutinize these transactions with care.

(Sage v. Culver, 147 N. Y. 241; Koral v. Savory, Inc., 276 N. Y. 215; Geddes v. Anaconda Copper Mining Co., 254 U. S. 590; United Copper Securities Co. v. Amalgamated Copper Co., 244 U. S. 261.) It does not, however,' alone suffice to render the transactions void, and the provision of the certificate of incorporation of Empire j Power Corporation expressly authorizing the directors to act.even in i matters where they have dual interests, has the effect of exonerating’ the directors, at least in part, “ from adverse inferences which might otherwise be drawn against them.” (Spiegel v. Beacon Participations, Inc., 297 Mass. 398, 417.) We may point out here11 also that if by reason of these loans Empire Power Corporation should sustain a loss, the loss would fall primarily upon these defendants as owners of the entire common stock. The proportion of stock of all classes owned by these defendants in Empire Power Corporation whose moneys they are claimed to have diverted wrong- j fully, is indeed, much greater than the proportion of the stock I, owned by them in Long Island Lighting Company, which received j these moneys. The loans were not excessive in relation to the| capital assets and the income of the borrower as shown in the borrower’s balance sheet. The evidence demonstrates that the defendants acting as the directors of the Long Island Lighting Company borrowed moneys from Empire Power Corporation because in their opinion the loans promoted the interests of the borrower and the stockholders of the borrower; the evidence does not demonstrate \ that the defendants acting as directors of the Empire Power Cor- i poration in loaning its moneys to Long Island Lighting Company j did not decide upon sufficient grounds that the loans would also j promote the interests of the lender and its stockholders. '

The judgment should be affirmed, without costs.

Desmond, J.

(dissenting). At all the times of which we write, the individual defendants controlled both Long Island Lighting Company and Empire Power Corporation. In dealings between those corporations these individual defendants sat on both sides of the table. They caused Empire Power Corporation, from November, 1930, to February, 1933, to loan Long Island Lighting Company $5,330,000 on the latter’s unsecured notes. These notes and various renewals thereof were all made for periods of less than a year. (See Public Service Law, § 69.) Interest has been paid regularly but, up to the beginning of this action, nothing was ever paid on principal. The lighting company needed these moneys — and used them — to pay off, from time to time, notes held by banks which were asking for payment. In 1930, when Empire made its first loan to the lighting company, the latter owed the banks more than $10,000,000 and found it increasingly difficult to persuade the banks to accept renewals of their unsecured notes. The banks had suggested to the individual defendants that the lighting company discontinue paying cash dividends, so that it might accumulate in its treasury funds with which to pay off the bank loans. This the individual defendants, who owned or controlled half of the lighting company’s common stock, were unwilling to do. An application to the Public Service Commission for authority to issue mortgage bonds to raise money to pay off the banks was pending but undetermined. There was only one other convenient source of funds. A lender had to be found who would supply, without security and without question, the cash needed from time to time to satisfy the banks. Such a lender was ready at hand in Empire Power Corporation, completely controlled by these individual defendants themselves.

During 1930 and 1932 these defendants arranged loans aggregating $4,500,000 from the power corporation to the lighting company, most, if not all, of the proceeds going to pay off the bank loans. In March, 1932, when the lighting company owed the power corporation about $4,500,000 and the banks about $8,750,000, an agreement was made between the lighting company and the banks whereby the latter accepted renewals of their notes for six months, and agreed to accept renewals for another six months if necessary, on,condition that the lighting company make certain payments which were intended to come from, and did come from, Empire Power Corporation. It was part of this arrangement that the whole of the lighting company’s debt to Empire Power Corporation should be postdated to that of the banks, postdated rather than subordinated because it was felt that subordination “ would be openly subject to attack on account of the unity of interest between Empire Power and Long Island Lighting.”

A little later Empire’s directors passed a resolution agreeing on behalf of Empire “ to extend and keep extended the time of payment ” of the lighting company’s notes to Empire Power Corporation until the banks should be paid in full. An agreement to the same effect was made by defendant Phillips on behalf of Empire, in 1933, and approved by Empire’s board of directors. Later that same year the Public Service Commission granted permission to the lighting company to sell the issue of bonds above referred to, but sale at the stipulated price was found to be impossible. Again the bank notes had to be renewed, and again Empireh Power Corporation was caused to agree to subordinate its claims'/ to those of the bank. Finally, in 1934, the authorized bond issue; was sold by the lighting company under a contract which provided/ that the indebtedness to Empire Power Corporation would not be paid, discharged or secured by the issuance of any bonds of the fighting company secured by a lien prior to or on a parity with the lien of the bond issue. All of the proceeds of this bond issue went to the banks, none to Empire Power Corporation. In 1936 the fighting company paid off all its unsecured indebtedness, except that owing to Empire Power Corporation. Among the debtors so I paid off were the common directors of the two corporations and j their relatives and corporations controlled by them. Thus Empire $ Power Corporation, starting out with short term loans to the fight- ) ing company, ended up with what amounted to a permanent investment ” of $5,000,000 in the fighting company, in the form of unsecured notes, payment of which, if this suit fails, must await the pleasure of the defendants.

In this suit plaintiffs on behalf of Empire Power Corporation asked the court to compel Long Island Lighting Company to repay the moneys loaned to it by the Empire Corporation, to compel the individual defendants, as directors of Long Island Lighting Company, to pay that indebtedness if the lighting company does not, and to restrain the individual defendants from further extending the time of payment. Special Term found, as stated in its opinion, that the conduct of the individual defendants, in making and renewing these loans, was biased in favor of the fighting company, and ordered judgment for plaintiff. The Appellate Division reversed on the law and the facts and rendered final judgment dismissing the complaint. Contracts between two corporations having common officers are, of course, not void per se (Burden v. Burden, 159 N. Y. 287; Continental Ins. Co. v. N. Y. & H. R. R. Co., 187 N. Y. 225), but are voidable by either corporation, irrespective of the balance of benefits (Globe Woolen Co. v. Utica Gas & Elec. Co., 224 N. Y. 483; Munson v. Syracuse, G. & C. R. R. Co., 103 N. Y. 58), or by a court of equity at the instance of either corporation (or its stockholder), where it appears that such a contract was made in bad faith, fraud, other breach of trust or under circumstances preventing an unprejudiced exercise of judgment.” (Sage v. Culver, 147 N. Y. 241; Farmers L. & T. Co. v. N. Y. & Northern Ry. Co., 150 N. Y. 410; Kavanaugh v. Kavanaugh Knitting Co., 226 N. Y. 185; Geddes v. Anaconda Copper Mining Co., 254 U. S. 590; United Copper Securities Co. v. Amalgamated Copper Co., 244 U. S. 261, 264; Koral v. Savory, Inc., 276 N. Y. 215.) A court will not attempt to pass upon questions of expediency or to control the corporate managers in the faithful exercise of their discretion. (City Bank Farmers Trust Co. v. Hewitt Realty Co., 257 N. Y. 62; United Copper Securities Co. v. Amalgamated Copper Co., supra; Burden v. Burden, supra.) To make a case for the invalidation of such a contract there must be shown circumstances tending to prove that the contract was made in bad faith, fraud or other breach of trust, including a biased exercise of judgment. (Globe Woolen Co. v. Utica Gas & Elec. Co., Sage v. Culver, United Copper Securities Co. v. Amalgamated Copper Co., Koral v. Savory, Inc., supra.) Given such a showing, the burden is then upon those who would maintain the contract to establish its fairness (Sage v. Culver, supra), particularly when they themselves are shown to have exercised the dominating influence in effecting the contract. (Geddes v. Anaconda Copper Mining Co., supra.) Whether the particular contract between these two corporations having the same directors was or was' not made under circumstances amounting to a breach of the directors’ fiduciary duty, is a question of fact.

Here the individual defendants who. arranged the loans by Empire Power Corporation to Long Island Lighting Company, were completely aware of the latter’s financial difficulties at the times the loans and renewals were made. They and their families owned the majority of the lighting company’s stock; they directed its policies and managed its affairs; some of them were unsecured creditors of the lighting company in substantial amounts. It was to their interest, individually, that the fighting company’s urgent need of funds to pay its unsecured and demanding bank creditors be met. They met it by loaning Empire’s money to Long Island on such terms that Empire’s capital funds were used to pay off Long Island’s bank loans in part, then these loans were made subordinate to the balances owing to the banks and finally remained wholly unpaid when all Long Island’s other creditors of the same class were taken care of by the proceeds of a bond issue. The inference is unescapable that in the making of these loans, and renewals, the welfare of Empire Power Corporation was ignored and that the purpose of defendants was to benefit Long Island Lighting Company, and themselves. It is no answer to all this that Empire’s financial structure may have .resilience enough to absorb the risk or the damage of the loans, or that the individual defendant’s stake in Empire is large and the plaintiff’s small. Plain disclosure of the inequity of the situation and of the unfairness of the risk to the Empire Corporation, makes a strong appeal to the conscience of the court. It is not answered by defendants’ protestations that Empire has a good investment in these loans, that they would surely be paid on a liquidation of the fighting company, that the fighting company’s credit is good, etc., or by the provision in Empire Power Corporation’s charter concerning contracts between that corporation and other corporations with the same officers or directors.

A court of equity in such a case as this does not stand aside and await the outcome of defendants’ conduct. It acts promptly and effectively. It sets the whole transaction aside without wait-! ing, or compelling minority stockholders to wait, to see whether , those who unlawfully put a corporation’s property at risk, may j possibly at some undertermined time, have the skill, or luck, to get ¡I it back intact for the corporation.

The judgment of the Appellate Division should be reversed and that of the Special Term reinstated, with costs.

Loughran, Lewis and Conway, JJ., concur with Lehman, Ch. J.; Desmond, J., dissents in opinion in which Finch and Rippey, JJ., concur.

Judgment affirmed.


author: Lehman, Ch. J.

text:
    Empire Properties Corporation et al., Appellants, v. Manufacturers Trust Company, as Trustee, et al., Respondents.

      Argued April 15, 1942;
    decided June 4, 1942.

      David Miller, Harold W. Newman, Jr., and Richard Kelly for appellants.

      Francis B. Hamlin and Emerson F. Davis for Manufacturers Trust Company, as trustee, respondent.
    The judgment appealed from properly determined that subdivision b of article 5 of section 9 of the indenture does not warrant or justify the use of bonds previously purchased with principal cash derived from sources other than proceeds of sales, and thereupon previously canceled, in arriving at the required 107 per cent to be delivered up in connection with a sale. (Heller v. Pope, 250 N. Y. 132; Graf v. Hope Building Corp., 254 N. Y. 1.)
   Lehman, Ch. J.

Empire Properties Corporation (Delaware) and the defendants entered into a written indenture of trust dated January 1, 1935. A controversy has arisen in regard to the construction of that indenture. The parties have submitted the controversy to the Appellate Division upon an agreed statement of facts, pursuant to sections 546 to 548 of the Civil Practice Act.

The trust indenture contemplated,” it is agreed, that Empire Properties Corporation (Delaware), sometimes referred to in the indenture as the “ Company,” should issue thereunder collateral trust bonds in exchange for an equal aggregate principal amount of certain outstanding bond certificates theretofore issued under eleven certain mortgages, deeds of trust, and indentures of trust, covering eleven apartment house properties in and about the City of New York.” Prior to December 31, 1934, the mortgagor corporations, which had executed the mortgages underlying the above-mentioned bond certificates, had failed to pay substantial amounts "of interest upon said certificates and had also failed to pay the principal of certain of said bond certificates which had theretofore matured. • The trust indenture was executed pursuant to an adjustment plan set forth in a “ Deposit Agreement * * * entered into between the Company, Baltimore National Bank, Depositary, and holders of the bond certificates above referred to.” Holders of more than ninety-eight per cent of all the bond certificates have, pursuant to said plan, transferred the same to the “ Company.” The Metropolitan Casualty Insurance Company of New York had, as surety, assumed certain obligations with respect to payment of principal and interest of the bond certificates. By this transaction release from these obligations was granted to the surety upon specified conditions and the surety has complied with those conditions.

The collateral trust bonds issued under the collateral trust indenture bear fixed interest at the rate of two per centum per annum from January 1, 1935, to January 1, 1940, and three per centum per annum from January 1, 1940, to January 1,1945. The holders of the collateral trust bonds were entitled to receive, also, additional interest ” out of any excess income ” of the trust collateral received by the Company over and above the amount required to pay the fixed interest. The Company was required to use any residue of the excess income remaining after payment of the fixed and the additional income for the redemption or purchase and retirement of collateral trust bonds.

The Company has acquired title to the eleven apartment house properties upon which mortgages underlying the bond certificates had been issued.

In the submission of the controversy the parties have agreed that 16. Said Indenture is a vehicle for a salvaging operation which was designed to secure for the holders of the bond certificates referred to in paragraph 7 of this submission the maximum possible recovery upon such bond certificates.

“ 17. In aid of said purpose, said Indenture provides in Article V, Section 9 thereof:

‘ No single piece of property (i. e., real property — apartment house) constituting or securing any of the Trust Collateral may be sold if the proceeds of sale thereof are less than the principal amount of the outstanding and uncancelled Bond Certificates as at December 31, 1934, secured by such piece of property unless:
“ ‘(a) The Company shall acquire, at a net cost not exceeding the net proceeds of the sale, a principal amount of Bonds equal to one hundred and seven per cent (107%) of the principal amount of outstanding and uncancelled Bond Certificates secured by such property and pledged with the Trustee hereunder, which Bonds shall be delivered to said Trustee and shall be forthwith cancelled; or
‘(b) There shall be delivered to the Trustee hereunder and forthwith cancelled an amount of Bonds equal in principal amount to the difference between the net sale price to the Company and one hundred and seven per cent (107%) of the principal amount of outstanding and uncancelled Bond Certificates secured by such property and pledged with the Trustee; but, until fixed interest and additional interest shall have been paid in full, none of the earning from the properties shall be used by the Company for the purchase of Bonds.
“ ‘(c) However, if the Trustee hereunder shall have so received and cancelled Bonds in excess of one hundred and seven per cent (107%) of the principal amount of outstanding and • uncancelled Bond Certificates pledged with the Trustee secured by all property sold, such excess may be included as part of the Bonds to be delivered up in connection with subsequent sales.’
18. The indenture, Article VI, Section 1 (5), provides ‘ that all principal collections and proceeds of sale received in liquidation of its assets shall be used only for ’ the retirement of bonds by purchase or redemption in the manner therein specified. There is no provision in said section or elsewhere in the indenture stating when such principal collections or proceeds of sale are to be applied to the purchase or redemption of bonds.
“ 19. Although the indenture provides that the proceeds of sales and principal collections must be paid over to the Trustee, it confers upon the Company, so long as it is not in default, the discretion to determine the manner of applying such funds to the purchase of bonds. Article IV, Section 9, provides that bonds may be purchased by the Company: ‘ at any time and from time to time at public or private sale out of any excess income available therefor or out of any cash held as Trust Collateral * * *. Whenever the Company shall direct the application of any cash held as Trust Collateral for the purchase of Bonds at public or private sale, the Trustee shall apply such cash as so directed.’
“ 20. The indenture, Article IV, Section 5, provides for the cancellation of all retired bonds, stating:
‘Any Bonds and coupons appertaining thereto paid or redeemed or purchased under any of the provisions of this Indenture of Trust shall be cancelled and cremated by the Trustee, and the Trustee shall issue its certificate to that effect to the Company and to the Surety; and no' Bonds shall be authenticated or delivered in lieu thereof.’
“ 21. In compliance with the provisions of Article V, Section 9 (a) of the indenture, set forth in paragraph 17 of this submission, the Company heretofore has sold for $1,345,000, six of the underlying properties which constituted security for old bond certificates outstanding in the aggregate principal amount of $2,014,893.75. With the aggregate proceeds of said six sales, the Company acquired its collateral trust bonds in the aggregate principal amount of $2,184,170.05 which bonds were thereupon delivered to the Trustee and forthwith cancelled and cremated.
“ In addition the Company has purchased and retired, with moneys other than proceeds of sales of the aforesaid six properties, which moneys constituted principal collections as defined in the indenture, additional bonds in the aggregate principal amount of $62,907.02; these additional bonds were from time to time as purchased delivered to the Trustee and forthwith cancelled and cremated.”

The Company has “ no means or prospects of obtaining in the future, any assets other than the collateral pledged with the Trustee under said Indenture except $1,000 cash capital.”

“ The five remaining unsold properties owned by the Company constitute the security for old bond certificates outstanding in the aggregate principal amount of $1,072,583.32. These five properties have been appraised in January, 1941, at the aggregate amount of $688,200.

Deducting from the $3,068,877.07 bonds heretofore issued by the Company the $2,184,170.05 bonds retired with the proceeds of sales of the six properties sold and the $62,907.02 bonds retired with other principal collections, there are now outstanding $821,800 bonds.”

The Company desires to sell one or more of the properties that are still unsold. It can do so if the bonds in the principal amount of $62,907.02, which have been purchased with moneys other than proceeds of the sales received from “ principal collections,” may be included as part of the bonds to be delivered up to the trustee in connection with such sale in accordance with the provisions of the collateral trust indenture. The controversy submitted for decision is whether these bonds may be so included.

The parties have stipulated that Unless the Company may require the Trustee to approve the application of said $62,907.02 principal amount of bonds as part of the bonds to be delivered up to the Trustee in connection with the contemplated sale of one of said apartment house properties as aforesaid, the Company may be unable to sell said remaining properties, or any of them, in accordance with the intent and purpose of said Indenture. The Company does not have an option to purchase any of its bonds at a discount such as it had at the times of the six sales heretofore made.” (Italics ours.)

We point out that under the terms of the trust indenture proceeds of sales and principal collections must be paid over to the trustee and must be used for the purchase of bonds at public or private sale. Though the Company, it is agreed, has discretion to determine “ the manner of applying such funds to the purchase of bonds ” it has no discretionary power to direct the use of the funds for any other purpose. It is not disputed that if the bonds purchased with the proceeds of principal collections had been delivered to the trustee at the time of the sale of any property owned by the Company and had been “ forthwith ” canceled, the amount of the bonds so. received and canceled might be “ included as part of the Bonds to be delivered up in connection with subsequent sales.” Because the Company did not see fit to postpone the use of the proceeds of principal collections for the purposes to which such proceeds must, under the trust indenture, be applied, we are told that the canceled bonds may not be so included.

The parties agree that the purpose of the trust indenture was to facilitate the sale of the properties held by the Company so that bondholders might eventually receive as much cash as possible. The parties in article V, section 9, of the trust indenture formulated the conditions under which such sales might be made. The parties have agreed that under the construction which the trustee has placed upon the indenture the Company may be unable to sell said remaining properties, or any of them, in accordance with the intent and purpose of said Indenture.”

A written contract will be read as a whole, and every part will be interpreted with reference to the whole; and if possible it will be so interpreted as to give effect to its general purpose.” (3 Willis-ton on The Law of Contracts, § 618.) Standing alone, the part of the indenture which formulated the condition upon which sales may be made seems ambiguous. Literal construction might sustain the contentions of the trustee. We think that such construction is not justified here. The meaning of a writing may be distorted where undue force is given to single words or phrases. We read the writing as a whole. We seek to give to each clause its intended purpose in the promotion of the primary and dominant purpose of the contract. (State v. Comer, 176 Wash. 257; Marx v. American Malting Co., 169 Fed. Rep. 582.)

We have said, “ The intention of the parties must be sought for in the language used. To understand the language we may put ourselves in their place and discern if possible the objects they had in view and the motives which dictated their choice of words. A wider meaning may thereby be disclosed.” (Halsted v. Globe Indemnity Co., 258 N. Y. 176, 180.) The object which the parties had in view is, in this case, clear, and so are the motives which dictated their choice of words. The construction which has been placed upon the words the parties have chosen might defeat the object of the parties. The parties have chosen words which leave room for construction. Even literal construction would leave the meaning of the words open to doubt. The courts should then choose that construction which will carry out the plain purpose and object of the indenture.

The judgment of the Appellate Division should be reversed and judgment directed sustaining the contention of the plaintiffs, without costs.

Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgment accordingly.


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    Charles S. Scholen, as Limited Administrator with the Will Annexed of Frederick B. Aebly, Deceased, Appellant, v. Guaranty Trust Company of New York, Respondent.

      Argued April 20, 1942;
    decided June 4, 1942.

      I. Maurice Wormser and Edward A. Scott, Jr., for appellant.
    By knowingly accepting, in pursuit of its calling, the sole and exclusive custody of the will and the appointment as executor, defendant was under a duty to deliver the will into the Surrogate’s Court within a reasonable time after testator’s death. (Sawyer v. Old Lowell Nat. Bank, 230 Mass. 342; Rich v. New York C. & H. R. R. R. Co., 87 N. Y. 382; Glanzer v. Shepard, 233 N. Y. 236; Lyons Bank v. Ocean Nat. Bank, 60 N. Y. 278; Hyland v. Paul, 33 Barb. 241.) Defendant was not entitled to notice of testator’s death as a condition precedent to the performance of its obligation to deliver the will into the Surrogate’s Court. (Vyse v. Wakefield, 6 M. & W. 442; Matter of Millbourne Mills Co., 165 Fed. Rep. 109; Drew v. Goodhue, 74 Vt. 436; Traver v. Snyder, 34 Misc. Rep. 406; 35 Misc. Rep. 261; Beach v. Crain, 2 N. Y. 86; Hoes v. Nagele, 28 App. Div. 374; Lorillard v. Clyde, 142 N. Y. 456; Villard v. Villard, 219 N. Y. 482; Siegel v. Spear & Co., 234 N. Y. 479.) Defendant was under a duty to exercise a reasonable degree of care, skill and diligence in an effort to ascertain when testator died, so that it would know when to deliver the will into the Surrogate’s Court. (Bunnell v. Stern, 122 N. Y. 539; Woodruff v. Painter, 150 Penn. St. 91; Newhall v. Paige, 10 Gray [Mass.], 366; Glanzer v. Shepard, 233 N. Y. 236; Zaepfel v. Parnass, 140 Misc. Rep. 539; Emerald & Phœnix Brewing Co. v. Leonard, 22 Misc. Rep. 120; Ouderkirk v. Central Nat. Bank, 119 N. Y. 263; Siegel v. Spear & Co., 234 N. Y. 479; Marks v. Nambil Realty Co., 245 N. Y. 256; Moch Co. v. Rensselaer Water Co., 247 N. Y. 160; Wilson v. Wyckoff, Church & Partridge, 133 App. Div. 92; 200 N. Y. 561; Whalen v. N. Y. Elec. Co., 63 App. Div. 615; Spann v. Erie Boatmen’s Transportation Co., 15 Misc. Rep. 701; 157 N. Y. 694.)

      Theodore Kiendl, Otis T. Bradley and Andrew Y. Rogers for respondent.
    The first cause of action is insufficient, for no duty to ascertain the fact of the testator’s death can reasonably be implied from the facts alleged. (Myers v. Exchange National Bank, 96 Wash. 244; Snyder v. Security-First Nat. Bank, 88 Pac. Rep. [2d] 760; Britton v. Elk Valley Bank, 54 N. D. 858; Sawyer v. Old Lowell Nat. Bank, 230 Mass. 342; O’Gara v. Eisenlohr, 38 N. Y. 296; Matter of Shupack, 158 Misc. Rep. 873; Brodie v. Cardiff Corp., [1919] A. C. 337.) The first cause of action is insufficient for the added reason that no duty to ascertain the fact of the testator’s death is owed to the plaintiff or those on whose behalf he purports to sue. (Seaver v. Ransom, 224 N. Y. 233; Glanzer v. Shepard, 233 N. Y. 236; Buckley v. Gray, 110 Cal. 339.) The second cause of action is insufficient. (Avalon Constr. Corp. v. Kirch Holding Co., 256 N. Y. 137; Bishop v. Hendrick, 82 Hun, 323; 146 N. Y. 398; Marvin v. Prentice, 94 N. Y. 295.)
   Lehman, Ch. J.

The defendant made a motion pursuant to rule 106, subdivision 5, of the Rules of Civil Practice, for an order dismissing the complaint on the ground that the complaint does not state facts sufficient to constitute a cause of action. Upon that motion the court may, of course, consider only the sufficiency of the allegations contained in the complaint. In this opinion we treat the allegations of the complaint as established facts.

The plaintiff seeks damages alleged to have been caused - to legatees named in the last will and testament of Frederick B. Aebly by the failure of the defendant, Guaranty Trust Company, to offer for probate, or at least to disclose that it was in possession of, the last will and testament of the decedent within a reasonable time after the death of the decedent or after it had notice of such death or after the death should have been known to the defendant “ by the exercise of reasonable care and prudence.” The decedent, in September, 1927, executed a will in which the defendant trust company was designated the sole executor and trustee. The decedent delivered the written instrument to the defendant, placing it in the custody of the defendant for safe-keeping.” The defendant accepted the custody of the instrument and retained possession of it until September, 1937, “ with full knowledge that it was, or purported to be, the Last Will and Testament of the said Frederick B. Aebly, and that it was designated therein as executor and trustee thereof, and, with such knowledge, the defendant did accept such designation.”

It is alleged in the complaint “ that by reason of the premises, and particularly, by reason of the trust and confidence inherent in the trust, duties and powers conferred upon, entrusted, committed, and transferred to it by the said Frederick B. Aebly, and which it took and accepted, as aforesaid, it was the duty of the defendant to make periodical checkups and annual investigations to ascertain whether the maker thereof was dead or alive; to safely and securely keep the said instrument, and present, or cause the same to be presented for probate, upon the death of the maker thereof; upon the death of said Frederick B. Aebly, to enter at once upon the prompt discharge of its duties as executor; to offer the will for probate; to obtain Letters Testamentary; after probate, to protect the property and carry out the terms of the will; within a reasonable time after the maker’s death to notify the heirs, legatees and next of kin thereof, and make known to them the existence of a will, and to protect the legatees and beneficiaries named in said will.”

The decedent died on March 30, 1933. On April 6, 1933, letters of administration on the ground of intestacy were granted by the Surrogate’s Court of Richmond county to the Public Administrator. In August, 1937, the defendant found the will which had been placed in its custody ten years before. The assets of the estate had then been distributed by the Public Administrator. There is no allegation in the complaint that, before that time, the death of the testator was known to the defendant, but there is an allegation that his death “ was known to the defendant * * * or by the exercise of reasonable care and prudence, should have been known to the defendant.”

The gravamen of the complaint is that the defendant owed to the testator a duty to make periodical check-ups and safely and securely to keep the will and present, or cause the same to be presented for probate ” upon the death of the maker thereof, and owed to him, also, the incidental duty to seek, by means available to it, information whether the maker is living or dead. There is no allegation in the complaint that the defendant expressly agreed to make such check-ups or to present the will for probate upon the death of the maker thereof, or to exercise any care to obtain knowledge whether or not the maker of the will was dead. The plaintiff maintains, however, that a duty arises from the relationship created by the delivery of the will to the defendant for safe-keeping and by the acceptance of the bailment by the defendant for its own profit.

Unquestionably duty may grow out of a contract even though it is not assumed by a party to the contract. “ Given the contract and the relation, the duty is imposed by law.” (Glanzer v. Shepard, 233 N. Y. 236, 239.) In this case, however, neither reason nor authority supports the plaintiff’s contention that an implication of voluntary agreement by the trust company to produce the will for probate, even though it may not have received actual notice of the testator’s death, arises from acceptance of the bailment or that from the relations created by such bailment a duty arises to exercise care to discover such death. The defendant, according to the complaint, received the will “for safe-keeping.” It accepted the custody thereof. It was bound to return the instrument to its maker upon demand and perhaps after the death of the testator and upon notice of such death, it was bound to produce the will so that it might be probated. The complaint does not show that the defendant voluntarily assumed any greater obligation and, at least in the first cause of action, the complaint alleges no facts which would permit the inference that from the bailment a broader duty arises which the law imposes, even though not voluntarily assumed by the parties. For that reason we agree with the courts below that the facts alleged in the first cause of action are insufficient to show any dereliction of duty by the defendant.

In our opinion, however, additional facts alleged in the second cause of action are sufficient to permit the trier of the facts to find the assumption of a duty by the defendant to exercise care to discover within a reasonable time the death of plaintiff’s testator. There it is stated that the defendant represented, among other things:

That in connection with its said custody department, it had a highly organized central control division which devotes much, if not all of its time, to checking obituary notices, news items in daily newspapers, law journals, Surrogate’s Court records, records of the Health Department of the City of New York, and other sources of information, for information concerning the death of the maker of any will in its custody, and that such division was well equipped with facilities for obtaining such information.
That as custodian of wills, it periodically reviews each will in its custody, and that at least once every year, an investigation or inquiry is made to ascertain whether the maker of any will in its custody is alive or dead.
That after the testator’s death, it would offer the will for probate, notify heirs, legatees and next of kin, and make known the existence of a will, and that after probate, it would execute the provisions of the will, and would protect the legatees named in the will, with a clear and definite understanding of its duties and responsibilities.”

It may be that plaintiff upon the trial will be unable to show that such representations were made. If it does produce such proof a question of fact would arise whether the defendant failed in any duty arising from the contract of bailment made upon such representations and the relation created by such contract.

We do not pass upon the question whether damages resulted from such dereliction if it occurred. The order of the Appellate Division and the Special Term should be modified by providing that the motion to dismiss the second cause of action is denied, and as so modified affirmed, without costs.

Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgment accordingly.


text:
    Jack L. Stulsaft, Appellant, v. Mercer Tube and Manufacturing Company, Respondent.

      Argued April 15, 1942;
    decided June 4, 1942.

      Harry B. Sale and Solomon C. Stember for appellant.
    There was no need, under the Statute of Frauds, for the term of compensation to appear in the written memorandum, inasmuch as the agreement merely carried forward an existing employment embracing an established term of compensation. The mere continuation of the employment ipso facto carried forward by implication the previously established term of compensation since the memorandum did not expressly or by necessary implication exclude that term. (Marks v. Cowdin, 226 N. Y. 138; Adams v. Fitzpatrick, 125 N. Y. 124; Berth v. Knapp Co., 215 App. Div. 693; Spiegel v. Lowenstein, 162 App. Div. 443; Cohen & Sons v. Lurie Woolen Co., 232 N. Y. 112; Imperator Realty Co. v. Tull, 228 N. Y. 447.) There was no need, under the statute, to evidence in the written memorandum the term of compensation, since it was concededly the established rate fixed by the usage and custom in the trade in the particular kind of sales representation involved, and was, therefore, implied in the contract. (Walls v. Bailey, 49 N. Y. 464; Cassin v. Stillman-Delehanty Ferris Co., 185 App. Div. 63; Newhall v. Appleton, 114 N. Y. 140; Ragette v. Maxwell Co., 188 App. Div. 715; Morgan v. Mason, 4 E. D. Smith, 636; Mesibov, Glinert & Levy v. Cohen Bros. Mfg. Co., 245 N. Y. 305; Curry v. Mackenzie, 239 N. Y. 267.) In any event, the letters, together with the checks, remittance memorandums and invoices, constitute a sufficient memorandum in writing to satisfy the requirements of the Statute of Frauds. (Marks v. Cowdin, 226 N. Y. 138; Young v. Leary, 135 N. Y. 569; Wright v. Weeks, 25 N. Y. 153; Lipschitz v. Grace & Co., 104 Misc. Rep. 55; 188 App. Div. 912; Petrie v. Hamilton College, 158 N. Y. 458; Mills Power Co. v. Mohawk Hydro-Electric Co., 155 App. Div. 869; 215 N. Y. 666; Vandevoort v. Dewey, 42 Hun, 68; Cohen & Sons v. Lurie Woolen Co., 232 N. Y. 112.)

      H. Preston Coursen for respondent.
    The alleged agreement is void under the Statute of Frauds. (Drake v. Seaman, 97 N. Y. 230; Mentz v. Newwitter, 122 N. Y. 491; Ward v. Hasbrouck, 169 N. Y. 407; Poel v. Brunswick-Balke-Collender Co., 216 N. Y. 310; Standard Oil Co. v. Koch, 260 N. Y. 150; Carter Macy Co. v. Matthews, 220 App. Div. 679; 247 N. Y. 532; Bell Clothes Shops, Inc., v. Kamber, 204 App. Div. 1; 236 N. Y. 569; Sophie v. Ford, 230 App. Div. 568; Taylor Co. v. Fansteel Products Co., 234 App. Div. 548; 261 N. Y. 514; Pratt Co. v. Roseman, 259 App. Div. 534; Webster v. Condon, 248 Mass. 269.)
   Lehman, Ch. J.

The plaintiff’s employment as selling agent of the defendant has been terminated. He has brought an action to recover damages resulting from his discharge. In his complaint the plaintiff alleges: “ That the defendant agreed to pay to the plaintiff for his services, an amount equal to two and one-half per centum (2J%) of the gross sales in the territories allotted to the plaintiff, payable monthly, and the plaintiff agreed with the defendant so to work for said time and for said compensation.”

The defendant pleaded as a defense the Statute of Frauds. In response to the defendant’s demand, the plaintiff served a bill of particulars setting forth the written contract ” of employment upon which he relies. It is in the form of a letter addressed to the plaintiff and signed by the president of the defendant corporation. In that letter the writer states among other things: I promised you that when I took the company out of receivership, I will have you represent the Mercer Tube through Florida and New England. I thought it about time I sent you a letter in writing to that effect * * * You can now consider yourself the exclusive sales agent for Florida and New England territories, for the next ten years, when 1947 comes around we will talk some more, maybe long before that you will find it more profitable to sell pipe only. I know you can make some real money out of selling pipe. You have been some real help to the company since I became associated with it, and I certainly appreciate it.” The defendant moved for summary judgment on the ground that the action has no merit and that the statute of frauds is a complete defense to the complaint.” The motion was granted.

The sole serious question presented upon this appeal is whether the alleged agreement is void under the Statute of Frauds. The letter constitutes a memorandum of an agreement to employ the plaintiff as exclusive sales agent in Florida and New England for a period of ten years. It does not in express terms state the compensation which the plaintiff is to receive or define the conditions of the promised employment. To satisfy the Statute of Frauds, the writing must contain all the material terms of the agreement. An incomplete writing may not be supplemented by testimony of oral promises omitted from the writing. The courts below have held that only by such testimony could the allegation of the complaint be sustained that the defendant agreed to pay to the plaintiff for his services, an amount equal to two and one-half per centum (2|%) of the gross sales in the territories allotted to the plaintiff, payable monthly.” The plaintiff contends that the promise to employ the defendant as exclusive sales agent ” when read in the light of the relations of the plaintiff and the defendant and the other circumstances recognized by both when the promise was made, includes by necessary implication, by inevitable construction,” a promise to pay compensation as alleged in the complaint. If that is true, then the writing is sufficient. (Marks v. Cowdin, 226 N. Y. 138, 143.)

The test formulated in that case is simple, but like other simple tests may at times be difficult to apply. A written memorandum of a contract of employment not to be performed within one year is sufficient to satisfy the Statute of Frauds (Pers. Prop. Law, § 31; Cons. Laws, ch. 41), if the written words completely formulate the terms of the promised employment or if the written words describe the promised employment complete in every term and condition by reference to existing, external facts. We do not violate the statute when we fit the description to the facts.”. Parol evidence may be required to identify the existing facts to which the written description refers. “ We exclude the writing that refers us to spoken words of promise. We admit the one that bids us ascertain a place or a relation by comparison of the description with some ‘ manifest, external and continuing fact.’ ” (p. 144.)

We apply this test to the allegations of fact contained in the pleadings and affidavits in this case. These allegations establish, for the purposes of this appeal, that the plaintiff’s promised employment as exclusive sales agent continued an existing employment in the same position and for the same commission or compensation; that this commission “ was then, and since has remained the customary, usual, and standard rate of compensation for this kind of sales representation in that particular line of plumbing supplies; ” and that all the salesmen of the defendant corporation received compensation in this amount.” Parties often reach a complete agreement upon all the terms of a contract though not all the terms have been discussed. The relations of the parties, the customs of the trade, or other facts and circumstances known to the parties, may give rise to a necessary inference that when agreement has been reached upon the terms which have been the subject of discussion, a common understanding and agreement has been reached in regard also to terms which were in the minds of all the parties, though not discussed. A complete agreement so made is not void under the Statute of Frauds, though the writing which is intended to satisfy the statute sets forth only the promises upon which there has been discussion and express agreement, provided the writing itself when read with reference to the relations of the parties and the surrounding circumstances known to both, sufficiently identifies also the other terms and conditions where agreement was tacit. Thus, in Marks v. Cowdin (supra), the court held that a writing was sufficient which stated that an existing employment was continued though it did not set forth the terms and conditions of that employment. That would be true also if the writing set forth an agreement of employment upon the usual and customary terms.” In either of such cases parol testimony to fit the description to existing facts would be admissible. A custom cannot create a contract where there has been no agreement by the parties and none is implied by law; nor can it give validity to a contract which the law declares void. (Webster v. Condon, 248 Mass. 269.) Nonetheless, the parties may contract with reference to a custom known to both, and then proof of the custom may explain and make definite a writing otherwise vague and of doubtful meaning.

Here the writing does not expressly state that the plaintiff’s existing employment is continued upon the same terms or upon customary terms. It is, however, fairly open to the construction that the words “ you can now consider yourself the exclusive sales agent for Florida and New England territories, for the next ten years ” was intended as a description of an agreement complete in all its terms, leaving nothing open for future discussion or agreement even though there may have been no previous oral discussion or express agreement upon such terms. Parol evidence of the relations of the parties and of custom might not only support such construction of the writing, but might identify the terms and conditions which would fit the description of exclusive sales agent ” of the defendant corporation. To give heed to these things is not to ignore the rule that the writing must contain all the material terms of the agreement. It is to explain the memorandum without changing or enlarging it.” (Marks v. Cowdin, supra, p. 145.) The construction and sufficiency in law of the memorandum must in this case await trial at which proof of the existing relations of the parties and other circumstances known to both parties may clarify the meaning of the letter and identify the-terms of the employment.

The judgments should be reversed, with costs in all courts to the appellant and the motion for summary judgment denied, with ten dollars costs.

Loughran, Finch, Rippey, Lewis, Conway and Desmond, JJ ., concur.

Judgments reversed, etc.