author: Finch, J.

text:
    Edwin Layer et al., Appellants, v. City of Buffalo, Respondent.
    Argued March 19, 1937;
    decided April 27, 1937.

      Ralph W. Dox and John G. Lesswing for appellants.
    Plaintiffs gave sufficient evidence of negligence to require submission of the case to the jury. (Messersmith v. City of Buffalo, 138 App. Div. 427; Oakes Mfg. Co. v. City of New York, 206 N. Y. 221; Silverberg v. City of New York, 59 Misc. Rep. 492; Capitol Trust Co. v. City of Schenectady, 133 Misc. Rep. 56; Kraus v. Birnbaum, 200 N. Y. 130; Lombardi v. New York State Rys., 224 App. Div. 438; Feiber v. Copeland, 232 App. Div. 504; Hart v. Ruduk, 233 App. Div. 453.)

      Gregory U. Harmon, Corporation Counsel (Bart J. Shanahan of counsel), for respondent.
    The plaintiffs were bound to prove some act of negligence on the part of the municipality. (Jenney v. City of Brooklyn, 120 N. Y. 164; Simon v. City of New York, 82 Misc. Rep. 454; Dunstan v. City of New York, 91 App. Div. 355; Messersmith v. City of Buffalo, 138 App. Div. 427; Capitol Trust Co. v. City of Schenectady, 133 Misc. Rep. 56; Sotel v. City of New York, 81 Misc. Rep. 344; Smith v. Mayor, 66 N. Y. 295; Wiedeman v. Mayor, 84 App. Div. 321; 176 N. Y. 586; Beyer v. New York, 141 App. Div. 679.)
   Finch, J.

These actions, grounded in negligence, were originally brought in the City Court of Buffalo, asking property damages against the defendant municipality, arising by reason of cellars flooded through the breaking of a water main owned and maintained by the city of Buffalo. The plaintiffs were nonsuited at the close of their case, the complaint being dismissed. Upon appeal to the Supreme Court the judgment was reversed and a new trial ordered. Upon further appeal to the Appellate Division, the judgment of the Supreme Court was unanimously reversed, the nonsuit reinstated, and permission granted to appeal to this court. By stipulation, the claims of eight plaintiffs were tried together.

On September 4, 1934, a small truck weighing about three tons, while proceeding along an asphalted street in the city of Buffalo, crashed through the center of the street, thereby causing the immediate breaking of the water main below the surface. Immediately the water gushed forth in great quantity. The cellars of the plaintiffs were flooded to a depth of five feet and two to two and one-half feet of water accumulated in the street.

The plaintiffs allege two specifications of negligence, first, that the city wrongfully maintained the water main in a dangerous and unsafe condition, and secondly, that it did not take such precautions as were necessary properly to protect these plaintiffs from damages that might occur after the breaking of the water main.

The plaintiffs did not rely upon the principle of res ipso loquitur, but offered evidence to prove negligence on the part of the defendant.

Following the leak in the water main, apparently the Water Department immediately responded. A witness on behalf of the plaintiffs testified that the city employees, instead of being directed at once to the manhole into which they might insert the wrench and begin to turn the valves to shut off the water, were looking around trying to find something — looking at different manholes, and picking up one cover after another until they found the proper manhole into which to insert the wrench. Three-quarters of an hour elapsed before they started to turn the valve. They then proceeded very slowly. Before the valve was shut off, three and one-half to four million gallons of water had escaped. ■ This witness further testified that he had seen the previous flood from the same water main, which happened about a year previously, in July, 1933, and that both breaks had occurred in front of the same house. The Water Department admitted that two breaks occurred in the immediate vicinity, but insisted that the second break was 160 feet away from the first. As the complaint has been dismissed at the close of the plaintiffs’ case, the testimony must be taken most favorably to the plaintiffs. Because of the difficulty of obtaining witnesses who knew the plans and conditions affecting the water main, the plaintiffs were forced to call as witnesses the representatives of the Water Department of the city, namely, the Director of Water, an engineer in charge of pipe estimates, and the Deputy Director, all of whom were presumably hostile, since the establishment of negligence would reflect upon their management of the department. One of these witnesses, the engineer, testified that he had studied these leaks and was of the opinion that they arose from the vibrations in the streets, which drove the lead out from the joints, thereby letting the joint leak, and undermine the adjacent pipe. In other words, that the leak had washed away the foundation of earth and clay underneath the pipe, thereby depriving it of support. Thus the Water Department had knowledge of the weakened condition at least of this section of the main by reason of the first leak, and the witness added, “ Q. So that any body in the City could expect a flood at any time? A. I would expect so, yes.” The evidence showed that the main was composed of cast iron pipes, each twelve feet long, thirty-six inches in interior diameter, one and one-half inches thick, which were all united by ball and spigot joints, and lay about three feet below the surface of the street pavement, on a clay or dirt foundation, with wooden blocks at the ends. The pressure was about sixty pounds to the square inch. The moms could not be laid deeper because of an intervening sewer. When the pipes were laid, the street had a cobblestone pavement, which was later replaced by asphalt. For ten years prior to the break, the street had been used for heavy traffic. The water main was laid in 1888. The Director of Water testified that he had recommended to the' municipality that all its water valves be reoiled and repacked. This was supplemented by one of the engineers in the Water Department who testified, “We thought it would be a good idea to go over the valves in the City,” to have them reoiled and repacked. Apparently nothing was done.

The question submitted is whether the testimony is sufficient to make out a prima facie case of negligence so as to compel the city to go forward with its proof.

There is no dispute that where a municipality is acting, as here, in a proprietary capacity, liability attaches for negligence, and the standard of care is the same as that exacted from the proprietor of a private business. (Oakes Mfg. Co. v. City of New York, 206 N. Y. 221.)

When the plaintiffs show that a small truck proceeding upon an asphalted city street, can break through the pavement in the center of the street, thereby causing a six-foot hole in the water main, in the same place where the main had broken only a short time previously, and when the representatives of the city testify that the cause of the breaks is due to vibration from the ordinary use of the street, which is driving lead out of joints, thereby causing seepage and leaks, which wash away the foundation, leaving the pipe without support, sufficient has been shown to cause the city to go forward with its proof and repel the inference of negligence in maintaining this section of the water main. In other words, the plaintiffs show that in this section of the main, at least, the joints are. leaking, thereby washing away the foundations upon which the pipes rest, leaving them constantly exposed to the very happening which occurred in the case at bar. This evidence establishes a prima facie case that the city is maintaining this section of the water main as a trap for vehicles and a constant menace to property owners whose homes border on this street.

The testimony on behalf of the plaintiffs also raises an issue as to whether the men sent to the work were properly equipped in order to enable them to locate at once the manhole through which the wrench should be inserted to turn off the valves, so that the damage from escaping water might be minimized, and whether they were properly supervised so as to work with reasonable speed. There is also some evidence as to the necessity of reoiling and repacking the valves.

The plaintiffs are not in a position to determine with greater precision what caused the second break, whether the first break was properly repaired or whether the situation revealed to the city in repairing the first break was of such nature that it reasonably should have made more extensive repairs or replacements, and whether all joints or only some should have been recalked. We should not demand too much in the way of evidence of negligence from the plaintiffs, who are not in a position to make a thorough investigation and determine what caused the bursting of the water main. All evidence,” said Lord Mansfield in Blatch v. Archer (1 Cowp. 63, 65), “ is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.”

It follows that the judgment of the Appellate Division should be reversed, and the order of the Special Term, granting a new trial, affirmed, with costs to the appellant in all courts.

Crane, Ch. J., O’Brien, Hubbs, Loughran and Rippey, JJ., concur; Lehman, J., dissents.

Judgment accordingly.


source: Caselaw Access Project

author: Crane, Ch. J.

license: Public Domain

text:
    Brooklyn Bus Corporation, Respondent, v. City of New York, Appellant.

      Argued March 22, 1937;
    decided April 27, 1937.

      Paul Windels, Corporation Counsel (Joseph L. Weiner and Arthur A. Segall of counsel), for appellant.
    The tax was not imposed by ordinance of the city or resolution of the Board within section 12 of the contract. (City of New York v. Seely-Taylor Co., 149 App. Div. 98; 208 N. Y. 548; Ebert v. Poston, 266 U. S. 548; Schweinburg v. Altman, 145 App. Div. 377; 207 N. Y. 681.) Local Law No. 10 of 1934 does not impose a tax upon or in respect of the franchise granted or the exercise thereof. (Matter of City of New York v. Prendergast, 202 App. Div. 308; New York Steam Corp. v. City of New York, 268 N. Y. 137.) Franchise contracts, particularly with reference to taxes, are construed strictly in favor of the grantor. (Metropolitan Street Ry. Co. v. Tax Commissioners, 174 N. Y. 417; 199 U. S. 1; Cleveland Electric Ry. Co. v. Cleveland, 204 U. S. 116; Public Service Co. v. Durham, 261 U. S. 149.)

      Clarence J. Shearn, Charles C. Smith and George D. Yeomans for respondent.
    Local Law No. 10 is an ordinance of the city within the meaning of section 12 of the contract. (Rice v. Van Vranken, 132 Misc. Rep. 82; Matter of McAneny v. Board of Estimate, 232 N. Y. 377; Monroe Dairy Assn. v. Webb, 40 App. Div. 49; Armatage v. Fisher, 74 Hun, 167; People v. City of Buffalo, 93 Misc. Rep. 275; 175 App. Div. 218; 220 N. Y. 715; Southern Pacific Co. v. Western Pacific Ry. Co., 144 Fed. Rep. 160; National Bank of Commerce v. Town of Grenada, 44 Fed. Rep. 262; Doehler v. Lansdon, 135 Ore. 687; Kersey v. City of Terre Haute, 161 Ind. 471; Stemmler v. Borough of Madison, 82 N. J. L. 596; Houvouras v. City of Huntington, 90 W. Va. 245; Brown v. Bedell, 263 N. Y. 177.) Local Law No. 10 does impose a tax upon or in respect of the franchise granted or the exercise thereof. (New York Steam Corp. v. City of New York, 268 N. Y. 137.)
   Crane, Ch. J.

The city of New York contracted with the Brooklyn Bus Corporation on June 4, 1931, about the operation of twenty stage or omnibus routes in the borough of Brooklyn, three of which extend into the borough of Queens. The contract is a formal printed document, executed by the city of New York through James J. Walker, its Mayor, and the Brooklyn Bus Corporation, by W. S. Menden, president. These buses were to be operated in conjunction with the trolley and subway lines for the convenience of persons living beyond the reach of those lines.

Article III, section 8, of the contract fixed the fares to be charged at the rate of five cents, and provided:

Actuated by these mutual understandings and agreements, the Company hereby expressly agrees that if, without the consent of the Board evidenced by resolution the Company shall invoke any of the provisions of the Public Service Law * * * for the purpose of obtaining an increase of fare above that fixed and contained herein, or if, on the authority or claimed authority of any judicial decision heretofore or hereafter made, or otherwise, such Company shall without the consent of the Board evidenced by resolution, increase its rate of fare above that fixed and contained herein, this contract and the franchise, right and consent hereby granted shall immediately cease and determine.”

The Board referred to in this contract is the Board of Estimate and Apportionment of the city.

By section 9 the company shall pay by way of compensation for the franchise an amount equal to five per cent of the gross receipts, which five per cent shall not be less than one -hundred thousand dollars.

Section 12 is the one which governs this case, so I shall quote it in full:

“No payments of compensation made to the City pursuant to the provisions of this Article shall be considered or construed in any manner as in the nature of a tax, but such payments shall be made in addition to any and all taxes of whatsoever kind or description, which now are or at any time may be required to be paid by any law of the State of New York. Provided, however, that any new form of tax or additional charge that may be imposed by any ordinance of the City or resolution of the Board upon or in respect of the franchise hereby granted or the exercise thereof, resulting in an increase in the cost of operation and paid by the Company, shall be deducted from the compensation payable to the City hereunder for the current fiscal year.”

On April 25, 1934, chapter 302 of the Laws of that year took effect. Section 1 thereof reads in part as follows:

“ Notwithstanding any other provision of law to the contrary, any city of the state having a population of one million inhabitants or more acting through its local legislative body, is hereby authorized and empowered until December thirty-first, nineteen hundred thirty-four to adopt and amend local laws imposing in any such city any box and /or taxes which the legislature has or would have power and authority to impose and make provision for the collection thereof by the chief fiscal officer of any such city. The tax or taxes imposed pursuant to such local laws shall be effective only during the period commencing when this act becomes effective and ending December thirty-first, nineteen hundred thirty-four, or any portion of such period. [A tax imposed hereunder shall have application only within the territorial limits of any such city and shall be in addition to any and all other taxes.”

Other parts of this chapter are equally important as bearing upon the question here presented, although not determinative thereof.

“ No such * * * corporation, however, shall be subjected to the imposition of more than one tax by any such city on gross income or gross receipts under the provisions of this act.

§ 2. Revenues resulting from the imposition of taxes authorized by this act shall be paid into the treasury of any such city and credited to the general fund.”

Although this act authorizes the city until December 31, 1934, to impose any tax which the Legislature would have power to impose, yet when it comes to taxing gross income this can only be done once. The second comment on this last quotation is to note that the proceeds of these local taxes are solely for local purposes; the money is not for the State, but for the city; the collections go into the general fund of the city.

With these things in mind, we approach the local law, which became effective June 7, 1934. It was enacted by the Municipal Assembly of the city of New York, and is certified by the City Clerk at the end as having passed both branches of the Municipal Assembly of the city of New York. Section 17 of the Greater New York Charter (L. 1901, ch. 466, as amd.) provides that the legislative power of the city of New York, except as otherwise therein provided, shall be vested in one house, to be known and styled as the Board of Aldermen of the city of New York. For Local Laws the Board of Estimate is added. (City Home Rule Law [Cons. Laws, ch. 76], art. 2, § 10.) Section 2 of this Local Law (Local Law No. 10; Local Laws, 1934, p. 115) reads as follows:

Notwithstanding any other provision of law to the contrary for the privilege of exercising its franchise or franchises, or of holding property, or of doing business in the city of New York, for the balance of the calendar year nineteen hundred thirty-four, every person doing business in the city of New York and subject to the supervision of either division of the department of public service during such period, shall pay to the comptroller of the city of New York an excise tax which shall be equal to one and one-half per centum of its gross income for the period March first, nineteen hundred thirty-four to December thirty-first, nineteen hundred thir by-four. Such tax shall be in addition to any and all other taxes and fees imposed by any other provision of law and shall be paid at the time and in the manner hereinafter provided.”

Under this local law the respondent was taxed upon lbs gross income, and paid the amount under protest. This action has been brought to recover it as an illegal payment and a violation of its franchise contract with the city. The determination of the question presented turns upon the meaning of the contract. Did the parties intend, and does the language justify the city to increase the amount which the bus company is to pay for the franchise to run its buses? The franchise is the municipal consent or authorization for the use of the streets by public conveyances. It is intangible property for which, under the charter, the city may require payment, and which may also be taxed by the State, and now under this local law may be taxed by the city. But what is it that is taxed by the city? It is the franchise, the right to use the street.

The local law recites that it is to raise revenue for the city of New York by imposing an excise tax on each and every corporation doing business within the city, and subject to the supervision of either division of the Department of Public Service. The only business done by the bus company is to exercise the right under its franchise, or permission to use the streets, and to charge a fare for running buses on the streets. It is subject to the supervision of the Department of Public Service. This right or this franchise, however, has already been the subject of a contract between the city and the bus company. The city in this case could have contracted with the respondent that any local tax would be deducted from the amount due under the contract. This in effect is what the parties did contract. For the privilege to operate its buses the contract, as detailed above, requires the company to pay five per cent of its gross receipts, and the bus company agrees not to apply to the public authorities for any increase over a five-cent fare. This is a limitation upon the company. What limitation is there upon the city to prevent it from jumping the contract with a change of administration, for the contract ran for ten years? The contract provided that if the city exacted any more money for this franchise or for the right to do business under the franchise, the amount should be deducted from the contract price to be paid for the privilege. If this were not so what was the use of making any contract with the city? The wording of the contract has enabled the city to draw a distinction between an ordinance and a local law which, in our judgment, vitiates the very purpose of the contract and is contrary not only to the intention of the parties but one which would render the entire contract nugatory. Courts are not inclined to turn, a bilateral contract into one binding upon one party only.

This contract was made in 1931, long before the Legislature had passed a law ■— an emergency law — permitting the city in 1934 to exercise the general power of local taxation. When the parties made this contract in 1931 the city had no power through its Board of Aider-men and Board of Estimate, called its Municipal Assembly, to pass such a local tax law as we are here considering. This local law is known as No. 10. The parties, therefore, were contracting according to the terminology and the powers existing at the time. The contract stated:

Provided, however, that any new form of tax or additional charge that may be imposed by any ordinance of the City or resolution of the Board upon or in respect of the franchise hereby granted or the exercise thereof, resulting in an increase in the cost of operation and paid by the Company, shall be deducted from the compensation payable to the City hereunder for the current fiscal year.”

That the local law provided a new form of tax or additional charge upon or in respect to the franchise hereby granted is beyond dispute. The city claims, however, that this additional draft upon the gross income for exercising the franchise was not imposed by an ordinance of the city or a resolution of the Board of Estimate, but by local law and, therefore, did not come within this exception or provision. However, no mention apparently is made of the fact that even in 1931, when this contract was drawn, no ordinance, as defined now by the city, could have imposed any additional tax or charge on the bus franchise. The Board of Aldermen, given power in certain instances to pass ordinances under the charter, were restricted by section 50 of the charter (as amd. L. 1916, ch. 592), in the following words:

But no ordinance hereafter adopted or power hereafter exercised by the board of aldermen shall limit, apply to or affect any franchise, grant, contract or resolution in the nature of a franchise hereafter made, approved or authorized by the board of estimate and apportionment as in this act provided, or by the board of rapid transit railroad commissioners of the city of New York.”

The use of the word ordinance,” therefore, in this contract in 1931, intended to express more than the ordinary use of the term, as the Board of Aldermen could in no way affect by its own action or by a so-called ordinance the contract made by the Board of Estimate with this bus line. The words ordinance of the city ” and the phrase “ resolution of the board ” were intended to refer to and cover any act by the city authorities increasing for city purposes or for the city treasury the five per cent upon the gross receipts, the compensation for the franchise. Any other interpretation made the contract meaningless and of little or no protection for the bus company.

One form of tax was not exempted. Taxes required to be paid by any law of the State of New York were in addition to payments under the contract. The city could not, and did not attempt to control the taxing power of the State. Any tax which was levied and required to be paid by the State Legislature the company had to pay, irrespective of a city contract. This would seem to be self-evident without such reservation in the contract. In other words, these provisions under section 12, said this to the bus company: “ For your franchise you pay us five per cent on the gross receipts and we will charge you no more for the period of ten years, but as to State taxes imposed by the Legislature, we have no control over these, so they are not included within any terms ©f this contract.” The State Legislature did not impose this tax upon the gross receipts of the bus company nor did it require the city to do it. The city was free to do it or not, as it pleased. The local law was its own concern, and it seeks to turn it into a power virtually to break its contract made in 1931.

The language cannot be twisted to accomplish this purpose, and the judgments of the courts below should be affirmed.

Lehman, O’Brien, Hubb-s, Loughran, Finch and Rippey, JJ., concur.

Judgment affirmed.


author: Rippey, J.

text:
    The People of the State of New York, Respondent, v. Joseph Ryan, Appellant.
    Submitted March 24, 1937;
    decided April 27, 1937.

      Jerome A. Peck and Irving E. Toohill for appellant.
    The facts stated in the indictment do not constitute a crime. (Cons. Laws, ch. 3-B, §§ 2, 116.)

      Walter A. Ferris, District Attorney {William F. Horan and Thomas D. Scoble, Jr., of counsel), for respondent.
    The statute (Cons. Laws, ch. 3-B, § 102, subd. 1 [d]) in express terms positively prohibits any person from transporting wines and liquors from without the State into this State even though such liquors may be for his own personal use. The County Court erred in misapplying the rule of ejusdem generis for the purpose of spelling out a legislative intention directly contrary to the plain words of the Legislature itself. (Manning v. Keenan, 73 N. Y. 45; People ex rel. Bingham v. State Water Supply Comm., 153 App. Div. 587; People v. Crossman, 241 N.Y. 138; Ossmann v. Crowley, 101 App. Div. 597; Gallagher v. Dolan, 27 Misc. Rep. 122; Gooch v. United States, 80 L. Ed. 418; People v. Kaye, 212 N. Y. 407.)

      John J. Bennett, Jr., Attorney-General {John C. Crary, Henry Epstein, JohnF. X. Me Gohey and Colin McLennan of counsel) for State of New York.

      Benjamin I. Tunick for Westchester Package Stores, Inc., amicus curice.

   Rippey, J.

Defendant was indicted for carrying liquor and wine into the State of New York in violation of section 102, subdivision 1 (d), of the Alcoholic Beverage Control Law (Cons. Laws, ch. 3-B) which reads as follows:

“No common carrier or other person shall bring or carry into the state any liquors and/or wines, unless the same shall be consigned to a person duly licensed hereunder to traffic in liquors and/or wines, as the case may be.”

Motion was made by defendant for an inspection of the minutes of the grand jury. The record before this court contains those minutes and the affidavits and moving papers upon which the County Court of Westchester county dismissed the indictment. Defendant waived immunity and testified before the grand jury. It appears from the record that defendant needed a particular manufacture of wine for medicinal purposes which he did not find available within the State of New York. He had found the desired wine at one of the A. & P. stores in Danbury, Connecticut. Another such store was located upon the Post road in the town of Greenwich, in the State of Connecticut, a short distance from the New York State line. On December 14, 1935, defendant procured in this store eleven bottles of wine and one bottle of hard liquor, placed it in his car and then proceeded across the State line into the State of New York. Employees of the Westchester Retail Liquor Dealers Association had spied on and trailed Ryan to and from Greenwich. Alter he had crossed the State line and proceeded some distance into the State of New York, they forced him over to the side of the road, held him up and produced a Port Chester police officer who arrested him for violation of the statute above quoted. It appears affirmatively that the liquor was not intended for sale or distribution. It was owned by Ryan and was solely for his personal use. Its possession was not subject to tax within the State of New York. The Appellate Division unanimously reversed the order of the County Court dismissing the indictment and reinstated it. The appeal reaches us by permission of a justice of the Appellate Division.

Defendant asserts that the facts stated in the indictment do not constitute a crime within the meaning of section 102, subdivision 1 (d), of the Alcoholic Beverage Control Law, that if the Legislature made it a crime to transport liquor across State lines, to that extent the act is unconstitutional in that it violates the commerce clause of the Federal Constitution, being an attempt to regulate commerce among the several States, and that the court does not have jurisdiction to try the indictment.

In the interpretation of statutes, the spirit and purpose of the act and the objects to be accomplished must be considered. The legislative intent is the great and controlling principle. Literal meanings of words are not to be adhered to or suffered to “ defeat the general purpose and manifest policy intended to be promoted;” all parts of the act must be read and construed together for the purpose of determining the legislative intent, and if the statute is ambiguous and two constructions can be given, the one must be adopted which will not cause objectionable results or cause inconvenience, hardship, injustice or mischief or lead to absurdity. (Smith v. People, 47 N. Y. 330; People ex rel. Wood v. Lacombe, 99 N. Y. 43, 49; Matter of Livingston, 121 N. Y. 94; Surace v. Danna, 248 N. Y. 18, 21; City Bank Farmers’ Trust Co. v. N. Y. C. R. R. Co., 253 N. Y. 49, 55; Matter of Meyer, 209 N. Y. 386.)

The express policy of the State and the purpose of the chapter, as stated in section 2 of the Alcoholic Beverage Control Law (Laws of 1934, ch. 478, in effect July 1, 1934), is “to regulate and control the manufacture, sale and distribution within the state of alcoholic beverages for the purpose of fostering and promoting temperance in their consumption and respect for and obedience to law.” It is there declared that “ such policy will best be carried out by empowering the liquor authority of the state to determine whether public convenience and advantage will be promoted by the issuance of licenses to traffic in alcoholic beverages, the increase or decrease in the number thereof and the location of the premises licensed thereby.” It is added that “ it shall be against the public policy of the state to permit the selling or serving of alcoholic beverages for consumption in such premises as were commonly known and referred to as saloons,” etc. The definite, fixed and expressed purpose of the Legislature was to regulate and control the manufacture, sale and distribution of alcoholic beverages. No purpose or intent is found to control their personal use, except that sale for consumption on premises not under license was prohibited. Control of the manufacture, sale and distribution was desirable also for tax purposes. The Tax Law (Cons. Laws, ch. 60) requires distributors to keep account of purchases, sales and distribution of liquors for tax purposes. But the law provides that nothing in this section contained shall be construed to require the keeping of a record of the purchase or disposition of alcoholic beverages by a consumer thereof, except by a person who uses the same for commercial purposes, or of the sale of alcoholic beverages at retail.” (Tax Law, § 426.) There is nothing in the law to indicate that the Legislature had in mind any intent to interfere with the private right of individuals to consume or transport within the State alcoholic beverages lawfully obtained. The State maintains no prohibition of consumption of alcoholic beverages by private individuals in their own homes. By the provision of the act (§ 116), an individual may transport within the State liquor owned by him as long as the purpose of transportation is not for distribution or sale. To hold with respondent here would require such an interpretation of the section of the act under which the indictment is brought as to deny to the defendant the right to transport which is expressly granted by section 116. The crime here, if crime there be, is the transportation of liquor owned by defendant and for his private use across the boundary line between Connecticut and New York State.

Having in mind the policy of the State and the purposes of the act, what construction is to be given to the statute under which the indictment is found? The words used in the applicable statute prohibit a common carrier or other person ” from bringing liquor into the State. Applying the doctrine of ejusdem generis to the expression “ No common carrier or other person,” which is contained in subdivision 1 (d), quoted above, the words “No common carrier or other person ” should be construed to mean “No common carrier or other person engaged in a similar occupation,” that is, no other person engaged in commercial transportation of goods owned by or consigned to others. That rule of construction is in harmony with the obvious purposes of the Legislature. Giving consideration to the practical effects of a construction which would make it a crime for a person to bring intoxicating liquor into the State for his own personal use and to the fact that as a regulatory measure its usefulness may be doubtful and would not be within the declared policy of the State and would be contrary to the meaning of other provisions of the act, this particular section of the statute should be construed as being intended to apply only to commercial importation. Such being the construction given to subdivision 1 (d), the reference to personal use in the next subdivision of the act must mean that the “ common carrier or other person ” is prohibited from bringing or carrying into the State liquors and wines, whether they are to be used personally by the consignee or sold by him. It does not refer to personal use by one who is not a “ common carrier or other person engaged in a similar occupation ” who brings such liquor or wine into the State for his own private consumption.

Criminal statutes must be strictly construed. Under the facts in this case, defendant committed no act within the prohibition of the statute. That conclusion being reached, no constitutional question remains for our consideration.

The order of the Appellate Division should be reversed and that of the County Court affirmed.

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

Ordered accordingly.


text:
    John E. Wood, Appellant, v. City of New York, Respondent.
    Argued March 24, 1937;
    decided April 27, 1937.

      Thomas P. Mackey, Thomas J. Kavanagh and Maurice Breen for appellant.
    The power of a Municipal Civil Service Commission to make rules for the classification of employees does not authorize or sanction the classification of mechanics with reference to the character of duties to be performed in any such manner as to deprive them of their rights under the prevailing rate of wage provisions of the Labor Law (Cons. Laws, ch. 31). (Story v. Craig, 231 N. Y. 33; McAvoy v. City of New York, 52 App. Div. 485; 166 N. Y. 588; Ryan v. City of New York, 177 N. Y. 271; McCaffrey v. State, 259 N. Y. 159; Devitt v. Schottin, 248 App. Div. 298; Lent v. City of New York, 150 Misc. Rep. 291; 242 App. Div. 764.) Sections 14 and 16 of the Civil Service Law (Cons. Laws, ch. 7) do not preclude a recovery by plaintiff. (People ex rel. Birmingham v. Grout, 45 Misc. Rep. 47.) The Comptroller having found the prevailing rate of wages in the occupation of plaintiff to be $13.20 per day effective February 1, 1929, and defendant having paid that rate to June 30, 1929, such rate- continued to be his prevailing rate. (Ryan v. City of New York, 177 N. Y. 271; McCann v. City of New York, 52 App. Div. 358; 166 N. Y. 587; McMahon v. Mayor, 22 App. Div. 113; Carder Realty Corp. v. Perkins, 237 App. Div. 152; 261 N. Y. 634; Walsh v. City of Albany, 32 App. Div. 128.) Although appellant was appointed to the position of electrical inspector he was legally assigned to, and required to do, work similar to that of electrician and acquired a civil service status as such by qualifying in the electrician-power house examination, as well as in the examination for inspector of light and power. (People ex rel. Peters v. Adam, 56 Misc. Rep. 29; 122 App. Div. 898; 190 N. Y. 567; People ex rel. Webb v. Milliken, 66 Misc. Rep. 192.)

      Paul Windels, Corporation Counsel (Arthur Bainbridge Hoff, Paxton Blair and Nicholas Bucci of counsel), for respondent.
    Since the plaintiff was appointed an electrical inspector, he could not legally be employed to do the work of an electrician and cannot gain any right to additional salary from such illegal work. (Farrell v. City of Buffalo, 118 App. Div. 597; Doyle v. City of New York, 148 Misc. Rep. 503; Manning v. City of New York, 150 Misc. Rep. 292; McCunney v. City of New York, 40 App. Div. 482; New York City Employees’ Retirement System v. Eliot, 267 N. Y. 193; Lord & Burnham Co. v. City of New York, 251 N. Y. 198.) Since plaintiff did not prove any prevailing rate of wage for electrical inspectors, judgment for defendant was proper. (Dunphy v. State, 264 N. Y. 429; McCaffrey v. State, 259 N. Y. 159; Falco v. N. Y., N. H. & H. R. R. Co., 161 App. Div. 735; People ex rel. Lemon v. Supreme Court, 245 N. Y. 24; Matter of Ihrig v. Williams, 181 App. Div. 865; 223 N. Y. 670.) Section 220 of the Labor Law does not apply to positions in the competitive class of the civil service. (McAvoy v. City of New York, 52 App. Div. 485; 166 N. Y. 588; Austin v. City of New York, 258 N. Y. 113; People ex rel. Sweeney v. Sturgis, 78 App. Div. 460; 175 N. Y. 470; McNulty v. City of New York, 238 N. Y. 29.)
   Crane, Ch. J.

On January 23, 1928, the appellant was appointed to the position of electrical inspector of light and power, grade 3, in the Fire Department of the city of New York. His yearly salary was $2,160, which he claims was at the daily rate of $7.78 for the number of days he worked during the year. Insisting that the prevailing rate for electricians was $13.20 per day, Wood has sued the city to recover the difference between $7.78 and $13.20 a day for the days he worked in the Fire Department from June 30, 1929, to June 30, 1934, the period covered by the action. From January 1, 1933, to June 30, 1934, the salary was $2,025, a slight change due no doubt to the uniform reductions in salaries during the financial depression.

Section 220 of the Labor Law (Cons. Laws, ch. 31) enacts that eight hours shall constitute a legal day’s work for all classes of employees in this State except those engaged in farm and domestic services. Subdivision 3 requires:

“ The Wages to be paid for a legal day’s work, as hereinbefore defined, to laborers, workmen or mechanics upon such public works, shall be not less than the prevailing rate of wages as hereinafter defined.”

Although the section apparently refers only to contracts and contractors with the State it has been held to apply to the laborers, workmen and mechanics in the employ of the State. (McAvoy v. City of New York, 52 App. Div. 485; affd., 166 N. Y. 588.)

As the point has not been directly raised and passed upon, most of the cases being those of the laboring class, no particular notice has been taken of the difference between non-competitive and competitive positions. (Austin v. City of New York, 258 N. Y. 113; McCaffrey v. State, 259 N. Y. 159; McNulty v. City of New York, 238 N. Y. 29, 32.) That this section of the Labor Law has reasonable limitations dependent upon the circumstances was stated in the McNulty case, wherein it was held inapplicable to a wireman in the fire alarm telegraph bureau who was to respond to a call for service when necessary. He was a mechanic in the labor, not the competitive class. “ He was required,” said this court, to do ‘ wiring ’ in connection with the repair and maintenance of the fire alarm system in charge of the fire alarm telegraph bureau of the fire department, including the fire alarm boxes in the engine houses of the fire department and in schools and public hospitals. * * * The plaintiff is a member of the fire department and, even though not a member of the uniformed force, he is subject to call at all hours, and according to his own testimony he is on duty at any time within the twenty-four hours when necessary.” That section 220 does not apply to the uniformed men of the Eire Department, see People ex rel. Sweeney v. Sturgis (78 App. Div. 460).

Wood was appointed to his position as inspector of light and power, grade 3, after passing the civil service examination required by the Municipal Civil Service Commission. The duties of inspector were described by the Commission as follows: “ To inspect lighting, wiring, electrical apparatus, appliances, fixtures and motors in public buildings; to inspect all electrical installations and connections for conformity with the electrical code.” The requirements were:

“ Candidates must present evidence of having had at least three years experience as journeyman electricians, installing motors, transformers and switchboards.” Salary: Grade 3, $2,160 to but not including $2,760 annually.

Electricians generally, journeymen electricians,” doing all classes and kinds of electrical work as directed, receive as a prevailing rate of wage $13.20 per day. For the 278 days which the plaintiff worked in a year this would make his salary for the year $3,669, far above the limit of his grade 3, which was $2,760. He claims the larger amount under the plea that the Civil Service Law (Cons. Laws, ch. 7) must not stand in the way of the Labor Law. Both statutes, however, find their authority in the Constitution and must be harmonized. (N. Y. Const. art. V, § 6, civil service; and art. XII, § 1, regulation of wages and hours of labor.) Under these provisions of the Constitution employment in the civil service must be by competitive examination as far as practicable. Should the Legislature fail to enact laws to carry out this requirement, this court intimated in Chittenden v. Wurster (152 N. Y. 345) that the constitutional provision would be enforced by the courts. The labor provision of the Constitution, however, is merely permissive. “ And the Legislature may regulate and fix the wages or salaries, the hours of work or labor,” etc. This does not permit the Legislature to pass a labor law conflicting with the constitutional provision requiring competitive examination for civil service. There is force in the argument that section 220 of the Labor Law was not intended to apply to competitive positions. If the appellant’s theory were correct the State and City Civil Service Commissions would be unable to classify any positions coming under a generic name like electricians, carpenters, iron workers, engineers, and the like. The fact that the competitive class of the civil service has been graded according to the particular work required, and the salary paid, maximum and minimum, without challenge ever since the Civil Service Law was enacted indicates that the prevailing rate law was never thought to be an invasion, a disruption of all civil service regulations. No classification could be made or executed which varied each year and with each locality.

The Municipal Civil Service Commission had graded inspectors, as above stated. Wood passed his examination and was appointed inspector. Another grade or class was called electrician (power house), men of five years’ experience, who took a different examination and who were expected to do all the manual work. The duties were these: “ Include the installation, repairs or replacement of switchboards, fixtures, motors, dynamos, fans and all types of electrical appliances as well as wiring conduits and lamps.”

Although Wood had subsequently passed the examination for electrician (power house) he had never been appointed to such position. He seeks, however, the prevailing rate of such work because as inspector he' also at times did electricians’ work. The Civil Service Law cannot be evaded by mere change of employment or work. (Farrell v. City of Buffalo, 118 App. Div. 597.) Section 14 of that law would then have little or no effect. Section 14 reads: “No person shall be appointed or employed under any title not appropriate to the duties to be performed, and no person shall be transferred to, or assigned to perform the duties of, any position subject to competitive examination, unless he shall have previously passed an open competitive examination equivalent to that required for such position, or unless he shall have served with fidelity for at least three years in a similar position.” Section 16 of the Civil Service Law prohibits promotions or transfers without examination for the position.

As stated above, Wood was never appointed to the position of an electrician (power house).

The civil service provisions of the Constitution and of the law were intended as a protection for the public and all the employees in the civil service as well as security for the individual employee.

John L. Flagg, president of the Watson Flagg Engineering Company, electrical contractors, testified as a witness for the plaintiff. He explained the position of inspector.

“ We always make our own test on completion, and when we are sure we have the installation right then we call for the City inspection, and then the City has its own inspectors come and make tests along with our men, and they pass on the work finally.”

The chief of the Bureau of Fire Alarm Telegraph, New York, testified that the bureau maintains the department fire alarm system and that Wood’s duty was to inspect the installation and make tests to show that the installation was properly functioning. In addition he did a certain amount of manual work necessary to show the C. W. A. employees how to do the work required, and when necessary he did the manual work of connecting the cables to the fire alarm system.

Q. All the men in your bureau are subject to call at any time of the day, isn’t that so? * * * A. Yes, that is understood, that everybody in the Telegraph Bureau is on call at any hour. * * * It is as intricate an electrical system as you will find anywhere in the City of New York. We have all types of equipment, signal and power equipment, radio equipment. We have equipment of every electrical nature except possibly the medical X-ray.”

Prof. Frank E. Canavaciol and other witnesses make it quite clear that an inspector’s work is quite distinct and different from an all-round electrical worker.

The plaintiff was appointed electrical inspector of light and power, grade 3, for which he received a salary of $2,160 per annum with continued pay during vacation; he is a member of the New York City Employees’ Retirement System. He has not been appointed to the class or grade of electrician (power house). There has been no attempt to show that the grading of the Civil Service Commission is improper, unfair or a subterfuge. He has received the pay fitting his grade and cannot be taken out of it by reason of the rate of wages prevailing for electricians generally not applicable to inspectors.”

The Comptroller of the city having paid to the plaintiff some time in 1929 the prevailing rate of $13.20 does not justify continuing the mistake. Lent v. City of New York (150 Misc. Rep. 291; affd., 242 App. Div. 764) has not been followed by the same Appellate Division in this case. Doyle v. City of New York (148 Misc. Rep. 503, App. Term, 2d Dept.) is in point, and in result meets with our approval.

The judgment should be affirmed, with costs.

Lehman, O’Brien, Hobbs, Loughran, Finch and Rippey, JJ., concur.

Judgment affirmed.


author: O’Brien, J.

text:
    International Harvester Company of America, Inc., Respondent, v. James P. Whelan et al., Respondents, and Bethlehem Steel Corporation et al., Appellants.

      Argued March 22, 1937;
    decided April 27, 1937.

      Joseph Day Lee for Bethlehem Steel Corporation, appellant.
    The court below erred in holding that the steel corporation did not have a priority right in the special fund set aside when its lien was discharged. (Bethlehem Fabricators, Inc., v. Wills, Taylor & Mafera Corp., 272 N. Y. 170.) The assignments of the liens under which plaintiff claims were also invalid. (Rollin v. Cross, 45 N. Y. 766; Ogden v. Alexander, 140 N. Y. 356; Tisdale Lumber Co. v. Read Realty Co., 154 App. Div. 270; Moelle v. Sherwood, 148 U. S. 21; Hess v. Hodges, 78 So. Rep. 85; Drury v. Foster, 2 Wall. 24.)

      George M. Simon for Keystone Portland Cement Company, appellant.
    The court below erred in holding that the cement company did not have a priority right in the special fund set aside when its lien was discharged. (Bethlehem Fabricators, Inc., v. Wills, Taylor & Mafera Corp., 272 N. Y. 170.)

      Alfred D. Dennison for plaintiff, respondent.
    The appellants, steel corporation and cement company, have no priority in distribution of the moneys retained under court orders. (Ansonia Brass & Copper Co. v. New Lamp Chimney Co., 53 N. Y. 123; People ex rel. Mason v. McClave, 99 N. Y. 83; People v. Long Island R. R. Co., 194 N. Y. 130; Arrow Iron Works, Inc., v. Greene, 260 N. Y. 330; Lackawanna Steel Constr. Co. v. Longacre E. & A. Co., 151 Misc. Rep. 17; Alberene Stone Co. v. Board of Education, 153 Misc. Rep. 812,) The savings made by the State upon reletting the contract are properly a part of the fund distributable. (Van Clief v. Van Vechten, 130 N. Y. 571; Ogden v. Alexander, 140 N. Y. 356; Ringle v. Wallis Iron Works, 149 N. Y. 439; Weeks v. O’Brien, 141 N. Y. 199; Campbell v. Coon, 149 N. Y. 556; Bader v. City of New York, 51 Misc. Rep. 358.)

      Nelson R. Pirnie for Official Purchase Corporation et al., respondents.
    The trial court properly found that the sum for distribution in the hands of the State is $48,770.09, this amount being the fund in the hands of the State as the balance of moneys. applicable to the public improvement. (Arrow Iron Works, Inc., v. Greene, 260 N. Y. 330; Scarsdale Nat. Bank & Trust Co. v. U. S. Fidelity & Guaranty Co., 264 N. Y. 159; Van Clief v. Van Vechten, 130 N. Y. 571; Campbell v. Coon, 149 N. Y. 556; Bader v. City of New York, 51 Misc. Rep. 358.) The mere retention of certain of the contract moneys pursuant to court order does not give any lienor a priority, as such moneys are still moneys of the contractor to be distributed pro rata under the provisions of the Lien Law (Cons. Laws, ch. 33). (Alberene Stone Co. v. Board of Education, 135 Misc. Rep. 812; 244 App. Div. 711.)

      John J. Bennett, Jr., Attorney-General {Isaac I.' Marks and Henry Epstein of counsel), for The People of the State of New York, respondent.
    The difference between the original contract and the result of the reletting of the contract is a direct result of the unit prices bid by the completing contractor and should be deducted from the general fund. (Herrmann v. Hillman, 203 N. Y. 435; Peets Motors v. State, 147 Misc. Rep. 218.)
   O’Brien, J.

August 18, 1931, defendant Whelan entered into a contract with the State for the construction and reconstruction of certain highways in Fulton county. Early, in August, 1932, Kalman Steel Corporation (predecessor of defendant Bethlehem Steel Corporation), defendant Keystone Portland Cement Company and three others filed liens against moneys due under the contract, and on August 16, 1932, by order of court pursuant to section 21, subdivision 6, of the Lien Law (Cons. Laws, ch. 33), the Comptroller was authorized to deduct from the amount due the contractor the sum of $4,200, which includes the amount of those five liens filed earlier in that month, and. to retain it until the liens should be discharged as otherwise prescribed in section 21. In October, 1932, the State canceled Whelan’s contract for the reason that he had failed to make proper progress and during the same month the work was relet to Harp & Conway Construction Company which completed it. The price for the work under the original contract was $202,313.63. To the original contractor the State paid $94,514.04 and to Harp & Conway Construction Company, for cost of completion, $57,706.76. The State also paid $1,332.74 fpr. keeping the road passable for traffic after Whelan’s default. There remained unpaid, therefore, from the contract price the sum of $48,770.09. When the State relet. the contract to Harp & Conway Construction Company, the contractor bid lower prices than the State had agreed to pay Whelan and as a result the sum of $4,953.63 was saved to the.State.

The Central Bridge Trucking Corporation performed work for Whelan and in September, 1932, it filed notice of lien for the sum of $9,997.19 and assigned its lien to plaintiff. Other liens for the respective sums of $170.45, $700 and $1,445.60 were assigned to plaintiff and it brought this action to foreclose these liens amounting to $12,313.24 against the moneys owing to defendant Whelan.

The first question is whether Bethlehem Steel Corporation, as successor to Kalman Steel Corporation, and Keystone Portland Cement Company have exclusive rights to the fund of $4,200 which was deducted and retained by the Comptroller from the amount due to Whelan pursuant to the court order of August 16, 1932, entered in accordance with the provisions of section 21, subdivision 6, of the Lien Law. The same issue of law was presented and decided by this court in Bethlehem Fabricators, Inc., v. Wills, Taylor & Mafera Corp. (272 N. Y. 170). Our decision therein requires the application of the same rule here and an answer that these two parties have such an exclusive right. No other lienor may participate in this special fund set apart under section 21, subdivision 6. The special fund of $4,200 should, therefore, be deducted from the general fund.

The second question is whether the sum of $4,953.63, which was saved to the State on reletting the contract to Harp & Conway Construction Company, should also be deducted from the general fund. By the judgment of the Appellate Division that sum was deducted. We agree. This action is to foreclose liens against moneys due to Whelan from the State. The $4,953.63 is no part of the moneys due to Whelan or to the succeeding contractor or applicable to this public improvement. The cost was reduced on reletting from $202,313.63 to $197,359.95. Neither the original contractor nor his substitute has any interest in the amount saved on the reletting and lienors’ rights must necessarily depend upon the contractors’ interest in the fund.

In respect to the validity of certain assignments or Kens and the sufficiency of notices of liens, we agree with the referee and the Appellate Division.

The judgment of the Appellate Division should be modified in accordance with this opinion, and as so modified affirmed, without costs.

Crane, Ch. J., Lehman, Hubbs, Loughran, Finch and Rippey, JJ., concur.

Judgment accordingly.


author: Rippey, J. O’Brien, J. Lehman, Hubbs and Loughran,- JJ.,

text:
    Louis H. Pink, Superintendent of Insurance of the State of New York, as Rehabilitator of Bond and Mortgage Guarantee Company, Appellant, v. Title Guarantee and Trust Company, Respondent.

      Argued January 12, 1937;
    decided April 27, 1937.

      Charles E. Hughes, Jr., John F. Caskey, Curtiss E. Frank and John B. McCullough for appellant.
    The 'pleadings show on their face that the defendant is sued for breach of fiduciary obligation and as a constructive trustee, while its setoffs are individual claims. (Munson v. S., G. & C. R. R. Co., 103 N. Y. 58; Globe Woolen Co. v. Utica G. & El. Co., 224 N. Y. 483; Wendt v. Fischer, 243 N. Y. 439; Meinhard v. Salmon, 249 N. Y. 458; Hamm v. Christian Herald Corp., 236 App. Div. 639; Mathieson Alkali Works v. Arnold Hoffman & Co., 31 Fed. Rep. [2d] 1; Miller v. Schloss, 218 N. Y. 400; Fur & Wool Trading Co. v. Fox, Inc., 245 N. Y. 215; Falk v. Hoffman, 233 N. Y. 199; Sayer v. Wynkoop, 248 N. Y. 54; Clifford Banking Co. v. Donovan Com. Co., 195 Mo. 262; Levy, v. Drew, 4 Cal. [2d] 456; Palmer v. Doull, Miller Co., 233 Fed. Rep. 309; Morris v. Windsor Trust Co., 213 N. Y. 27.) Claims belonging to defendant in its individual capacity may not be set off in a suit against it in a fiduciary capacity; and allowance of the setoffs here would also be- inequitable. (Fry v. Evans, 8 Wend. 530; Patterson v. Patterson, 59 N. Y. 574; Frank v. Mercantile Nat. Bank, 182 N. Y. 264; Britton v. Ferrin, 171 N. Y. 235; New York Title & Mortgage Co. v. Irving Trust Co., 241 App. Div. 246; 268 N. Y. 547; Coffin v. McLean, 80 N. Y. 560; Burns v. Lopez, 256 N. Y. 123; Morris v. Windsor Trust Co., 213 N. Y. 27; Irving Trust Co. v. Gunder, 234 App. Div. 252; Goldstein v. Goldsmith, 235 App. Div. 744; Allaire v. Silberberg, 210 App. Div. 109; Dakin v. Bayly, 290 U. S. 143; Western Tie & Timber Co. v. Brown, 196 U. S. 502; Cook County Nat. Bank v. United States, 107 U. S. 445; Libby v. Hopkins, 104 U. S. 303; Bank of United States v. Braveman, 259 N. Y. 65.) Plaintiff’s action is not an action on contract within the meaning of section 266 of the Civil Practice Act as it read prior to September 1, 1936. (E. T. C. Corp. v. Title Guar. & Trust Co., 271 N. Y. 124; Voehl v. Title Guarantee & Trust Co., 266 N. Y. 662; Munson v. S., G. & C. R. R. Co., 103 N. Y. 58; Village of Charlotte v. Keon, 207 N. Y. 346; Kittredge v. Grannis, 244 N. Y. 182; Poland Export Corp. v. Marcus, 204 App. Div. 302; Ebling v. Nekarda, 148 App. Div. 193; 210 N. Y. 566; People v. Wood, 121 N. Y. 522; Atkinson v. Fox, 242 App. Div. 707; Morris v. Windsor Trust Co., 213 N. Y. 27; Britton v. Ferrin, 171 N. Y. 235; Fishkill Sav. Inst. v. National Bank, 80 N. Y. 162.)

      Richard S. Holmes, W. H. L. Edwards and Eugene Z. Du Bose for respondent.
    The complaint states a cause of. action on contract within the meaning of former section 266 of the Civil Practice Act. (Long Beach Trust Co. v. Warshaw, 264 N. Y. 331; Bien v. Freund, 26 App. Div. 202; Starr Cash Car Co. v. Reinhart, 2 Misc. Rep. 116; Roth v. Palmer, 27 Barb. 652; Andrews v. Artisans’ Bank, 26 N. Y. 298; Wood v. Mayor, 73 N. Y. 556; Coit v. Stewart, 50 N. Y. 17; Lange v. Schile, 117 App. Div, 233; City Nat. Bank v. Nat. Park Bank, 32 Hun, 105; Carroll v. Sharp, 67 Misc. Rep. 254; Pecke v. Hydraulic Constr. Co., 21 Misc. Rep. 712; 23 App. Div. 393; Conyngham v. Shiel, 20 Misc. Rep. 590; Wickham v. Weil, 17 N. Y. Supp. 518; Adams v. Schwartz, 137 App. Div. 230.) Defendant’s setoffs are asserted in the same right in which it is sued. (Richard v. Credit Suisse, 242 N. Y. 346; Degraw v. Elmore, 50 N. Y. 1; Palmer v. Doull Miller Co., 233 Fed. Rep. 309; Beatty v. Guggenheim Exploration Co., 225 N. Y. 380; Moore v. Crawford, 130 U. S. 122; Salina Canyon Coal Co. v. Klemm, 290 Pac. Rep. 161; Libby v. Hopkins, 104 U. S. 303; Morris V. Windsor Trust Co., 213 N. Y. 17; Topas v. Grant, Inc., 18 Fed. Rep. [2d] 724; Valley Butter Co. v. Minnesota Co-Op. Creameries’ Assn., Inc., 300 Penn. St. 102; Cook County Nat. Bank v. United States, 107 U. S. 445.) Under section 262 of the Civil Practice Act the setoffs are properly pleaded. (Comton v. Preston, 51 L. J., Ch. Div. [N. S.] 680; Gray v. Webb, 51 L. J., Ch. Div. [N. S.] 815; Bank of Montreal v. Cruikshank, 1 W. W. R. 381; Beddall v. Maitland, 17 Ch. Div. 174.) Plaintiff’s motion was properly denied. (Gordon v. Van Cott, 38 App. Div. 564; E. Forty-sixth St. R. Corp. v. Gutschneider, Inc., 103 Misc. Rep. 491; Shotland v. Mulligan, 60 Misc. Rep. 58; State v. Superior Court, 113 Wash. 439; Goodman v. Rutchik, Inc., 171 N. Y. Supp. 152.)
   Rippey, J.

The Bond and Mortgage Guarantee Company is a domestic corporation organized under chapter 538 of the Laws of 1885. Its activities came under the supervision of the Superintendent of Insurance. On August 2, 1933, the Superintendent of Insurance took possession of its affairs under an order of rehabilitation made pursuant to the provision of article 11 of the Insurance Law (Cons. Laws, ch. 28) upon the grounds, among others, and upon the findings of the court, that it was insolvent and in such condition that its further transaction of business would be hazardous to its policyholders, to its creditors and to the public, after a stipulation to that effect had been made by a majority of its directors and their consent to rehabilitation had been secured. It then had 48,462 holders of mortgage guaranties outstanding aggregating $722,246,552.80. The Superintendent thereupon became a statutory receiver. (Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69, 80.) To insure equitable treatment for its creditors and to avoid preferences, the order of rehabilitation transferred to the Superintendent of Insurance possession of and title to all of the insolvent’s property.

The Superintendent of Insurance, as rehabilitator of the Bond and Mortgage Guarantee Company, brought this action to recover from defendant the sum of $1,010,541.67, alleged to have been wrongfully procured from the insolvent on June 10, 1932, in exchange for worthless mortgages then owned by defendant or, at least, mortgages which had been in default for years and were of questionable value. A series of transactions are set up in the complaint extending from prior to 1920 to June 10, 1932, by which that result' was accomplished. These transactions are alleged to have been wrongful,, fraudulent and illegal and conceived and carried through by officers and directors common to both corporations with a design to bring about the unjust enrichment of defendant at the expense of the Bond and Mortgage Guarantee Company. Plaintiff asserts that he disaffirmed the transactions upon discovery of the fraud and tendered to defendant the property received from it in exchange for the money for which suit is brought to recover.

Defendant has set up in its amended answer five separate defenses and offsets. None of them arose out of the transaction set out in the complaint and none are in any way connected with the subject-matter of the action. The third offset arises upon a promissory note executed by the insolvent and delivered to defendant under date of March 13, 1933, for $2,250,000, upon which $1,948,506.44 and accrued interest is alleged to be due; the fourth, fifth, sixth arid seventh offsets arise on guaranties made by the insolvent to the defendant for payment of loans made by defendant to third parties. Plaintiff moved, urider rules 109 and 110 of the Rules of Civil Practice, to dismiss these defenses and offsets. The motion was denied. The Appellate Division, affirming the order of the Special Term, certified to us the question: “ Was plaintiff’s motion to dismiss the third, fourth, fifth, sixth and seventh defenses and setoffs properly denied? ”

The order of rehabilitation enjoined all persons (including this defendant) from interfering with the assets of the insolvent or from obtaining a preference or from bringing any action or other proceeding at law or in equity against the insolvent or its assets or against the Superintendent of Insurance. Obviously, defendant could not proceed to collect its claims by a direct action against or by way of counterclaim in any action brought by the Superintendent. Its position is that it nevertheless may offset its claims, arising on contract, against any recovery that plaintiff may have in this action, under former section 266 of the Civil Practice Act, inasmuch as the complaint, as it claims, is “ on contract.” In New York Title & Mortgage Co. v. Irving Trust Co. (268 N. Y. 547, 709), where the complaint contained causes of action on contract to recover moneys deposited by the insolvent with the Irving Trust Company prior to August 4, 1933, on Which date the Superintendent of Insurance was appointed rehabilitator of that plaintiff and took possession of its affairs and assets, it was held that defendant might plead offsets arising on contract which had matured prior to that date under section 420 of the Insurance Law. The provisions of article 11 of the Insurance Law, so far as applicable, apply exclusively to the rehabilitation, liquidatian, conservation and dissolution of delinquent insurers, anything “ in the laws of the state to the contrary notwithstanding,” and the word assets,” as used in the article, “ includes all deposits and funds of a special or trust nature.” (§ 400).

We must look solely to the allegations of the complaint to determine the character of the action and it is the substance of the cause of action contained in those allegations, not the form of action, that determines the right of setoff. (Village of Charlotte v. Keon, 207 N. Y. 346.) The nature of the action or the remedy available does not depend upon any standardized legal nomenclature. To say that the action is on contract ” does not make it so. There is no allegation in the complaint that indicates that defendant promised or intended to return the money. In the absence of such an agreement or intention, it is the obligation of defendant which plaintiff asserts and which the law creates to return the money which it procured “ under such circumstances that in equity and good conscience [it] ought not to retain it, and which ex aequo et bona belongs to another. Duty, and not a promise or agreement or intention of the person sought .to be charged, defines it.” (Miller v. Schloss, 218 N. Y. 400, 407.) As said by this court in that case, that duty rests “ upon the equitable principle that a person shall not be allowed to enrich himself unjustly at' the expense of another.” Independent of any statute, form of action or legal nomenclature, the obligation to do justice rests upon all persons, natural or artificial, and the law will compel restitution from a person who obtains money or property from another fraudulently, unjustly, or without authority. (Marsh v. Fulton County, 10 Wall. [U. S.] 676, 684; Salt Lake City v. Hollister, 118 U. S. 256, 263; Louisiana v. Wood, 102 U. S. 294; Ward v. Love County, 253 U. S. 17, 24.) It is for the purpose of. compelling restitution that this action is brought. (Wendt v. Fischer, 243 N. Y. 439, 444.)

It is too well settled to require the citation of authority that directors of a corporation hold a fiduciary relation to it. The facts underlying the transfer by the Bond and Mortgage Guarantee Company to defendant on June 10, 1932, constituted a fraud by which defendant cannot profit. Defendant, who perpetrated the fraud, will be treated as a trustee ex maleficio. The law constructs a trust in favor of the one on whom the fraud was practiced. (Chesterfield v. Janssen, 2 Ves. Sen. 124, 155; Gale v. Gale, 19 Barb. 249, 251; Wendt v. Fischer, supra; Munson v. Syracuse, G. & C. R. R. Co., 103 N. Y. 58; Meinhard v. Salmon, 249 N. Y. 458; 3 Story on Equity Jurisprudence [14th ed., 1918] § 1590; 1 Perry on The Law of Trusts and Trustees [7th ed., 1929], § 166; 3 Bogert on The Law of Trusts and Trustees [1935], § 471.) The trust which the law erects is not based on promise, intention or actual fraud. The test of the trust is the fiduciary relation and the breach of the duty of honesty and fair dealing imposed by the fact of common directorate and officers. Jurisdiction, either at law or in equity, is founded not upon any true contract, express or implied, but upon the fraud and imposition practiced and upon the unjust enrichment of defendant under cover of confidential and fiduciary relations through the common directorate. (Ryan v. Dox, 34 N. Y. 307; Wheeler v. Reynolds, 66 N. Y. 227; Sinclair v. Purdy, 235 N. Y. 245, 253; Foreman v. Foreman, 251 N. Y. 237, 240.)

Having the common directorate and the result having been accomplished by acts ultra vires and otherwise illegal and fraudulent, whether executory or executed, the transaction, although not absolutely void, might have been avoided by the Bond and Mortgage Guarantee Company without inquiry by the court as to whether the transaction was beneficial to it or not (Burden v. Burden, 159 N. Y. 287, 307; Globe Woolen Co. v. Utica G. & E. Co., 224 N. Y. 483; Wendt v. Fisher, supra; Steinbeck v. Bon Homme Mining Co., 152 Fed. Rep. 333; Corsicana Nat. Bank v. Johnson, 251 U. S. 68) or by the stockholders within a reasonable time after the discovery of the fraud (Corsicana Nat. Bank v. Johnson, supra). There is no assertion that either the corporation or its stockholders took any action to disaffirm. There is nothing in the complaint from which ratification of the transaction by the board of directors or stockholders of the Bond and Mortgage Guarantee Company or its acquiescence in the transaction can be found. To the time insolvency was declared and the rehabilitator appointed, nothing took place to interfere with the rehabilitator taking such action thereafter as he might be advised. Upon discovery of the fraud he disaffirmed the transaction and offered to return the property received by the Bond and Mortgage Guarantee Company in exchange for its cash, as he had the right and as it was his duty to do. (1 Tardy’s Smith on The Law and Procedure of Receivers, § 34; Porter v. Williams, 9 N. Y. 142, 150.) Then and then only did the obligation on the part of defendant to act arise. There had previously been no debt, no duty on defendant to act, no obligation to perform.

Section 420 of the Insurance Law (which is included within the provisions of article 11), so far as material, provides that “ in all cases of mutual debts or mutual credits between the insurer and another person, such credits and debts shall be set off and the balance only shall be allowed or paid.” These offsets are not permissible under the provisions of the Insurance Law. At the time of insolvency there was no debt ■— no mutuality of debts and credits. (Patterson v. Patterson, 59 N. Y. 574.) From the face of the offsets it appears that the defendant was not in a position to assert or claim payment of or bring any action upon any of the matters set out therein. (Fera v. Wickham, 135 N. Y. 223.) Upon insolvency of the Bond and Mortgage Guarantee Company and the appointment of the receiver, a new principle came into operation, the rights of general creditors intervened, and “ equity requires that the assets of the insolvent party be equally distributed among such general creditors;” while this is an action at law, the courts of law and equity follow the same general doctrines on the subject of setoff ” in this jurisdiction. (Cf. Bank of United States v. Braveman, 259 N. Y. 65, 70.) Prosecution of this action with the allowance of the offsets in question would-result in the plaintiff being required to turn over to the defendant all of the property it received on June 10, 1932, whatever its value may be, and in addition the defendant would receive payment in full of its claims to the extent that recovery may be had by plaintiff on account of the cash delivered to the defendant at that time. Thus, the allowance of the offsets would create a preference. Defendant must take its chances to pro rate with other creditors in the administration of the assets of the insolvent.

Furthermore, it is clear that the claims of the parties are not held in the same right. (Morris v. Windsor Trust Co., 213 N. Y. 27; Topas v. Grant, Inc., 18 Fed. Rep. [2d] 724; certiorari denied, 274 U. S. 754; Putman v. Handy, 251 Mass. 196.)

In view of the foregoing, it-becomes unnecessary to consider the question as to whether certain of the offsets should be stricken out under rule 110 of the Rules of Civil Practice on the ground that they had been pleaded by defendant as setoffs in a prior action now pending between the same parties.

The order of the Appellate Division and that of the Special Term should be reversed and the motion grantéd, with costs in all courts, and the question certified answered in the negative.

O’Brien, J.

(dissenting). Only a question of pleading is involved.

Defendant corporation was not a fiduciary in this transaction. The transfer of the bonds and mortgages to plaintiff was effected by officers common to both corporations. The Bond and Mortgage Guarantee Company participated in the exchange no less than the Title Guarantee and Trust Company. Although defendant received the benefit of the exchange, such tort as may

have been committed was not committed by defendant to any extent greater than by the corporation represented by plaintiff.

The pleadings show plainly that, even if a tort was committed by defendant, plaintiff elected to waive it and to sue for money had and received. This is an action on an implied contract against defendant in its individual capacity and not as trustee. (Andrews v. Artisans’ Bank, 26 N. Y. 298, 301; Wood v. Mayor, 73 N. Y. 556, 559; Rothschild v. Mack, 115 N. Y. 1; Vail v. Reynolds, 118 N. Y. 297; Kittredge v. Grannis, 244 N. Y. 182, 189.) As such, the debts owing by each corporation are mutual debts within the meaning of section 266 of the Civil Practice Act, as it existed at the date of the pleading, and of section 420, subdivision 1, of the Insurance Law. This rule has recently been applied in New York Title & Mortgage Co. v. Irving Trust Co (268 N. Y. 547, 709) Section 420, subdivision 1, of the Insurance Law is included within article 11, entitled Rehabilitation, Liquidation, Conservation and Dissolution of Delinquent Insurers,” and provides: “ In all cases of mutual debts or mutual credits between the insurer and another person, such credits and debts shall be seo off and the balance only shall be allowed or paid.” It has special reference to the liquidation, rehabilitation and dissolution of insolvent insurers and, if the decision in Bank of United States v. Braveman (259 N. Y. 65), in which no reference is made to any similar provision in the Banking Law (Cons. Laws, ch. 2), is to be deemed applicable' to an insolvent insurer, then section 420 of the Insurance Law will entirely fail of its apparent purpose and New York Title & Mortgage Co. v. Irving Trust Co. (supra) will be overruled.

Lehman, Hubbs and Loughran,- JJ.,

concur with Rippey, J.; O’Brien, J., dissents in opinion, in which Pinch, J., concurs; Crane, Ch. J., taking no part

Orders reversed, etc. (See 274 N. Y. 610.)


author:
      Per Curiam.
     Crane, Ch. J.

text:
    Fergus Reid, Jr., Respondent, v. City of New York, Appellant.
    Argued March 24, 1937;
    decided April 27, 1937.

      Paul Windels, Corporation Counsel (William S. Gaud, Jr., Paxton Blair and Arthur Bruan of counsel), for appellant.
    The plaintiff’s predecessors did not acquire title to the property in suit by a deed from the town of Gravesend. (Woolley v. Stewart, 222 N. Y. 347; Fitzpatrick v. Dorland, 27 Hun, 291.) The plaintiff has failed to prove title to the property by adverse possession. (Belotti v. Bickhardt, 228 N. Y. 296; Rathbunville Union Cenetery Assn. v. Betson, 208 N. Y. 364; Kneller v. Lang, 137 N. Y. 589; St. Vincent Female Orphan Asylum v. City of Troy, 76 N. Y. 108; Tiffany v. Town of Oyster Bay, 234 N. Y. 15; Slingerland v. International Contracting Co., 43 App. Div. 215; 169 N. Y. 60; Dickens v. City of New York, 175 App. Div. 568; Hinkley v. State, 234 N. Y. 309; Fulton Light, Heat & Power Co. v. State, 200 N. Y. 400; Burbank v. Fay, 65 N. Y. 57; Roe v. Strong, 107 N. Y. 350; De Lancey v. Piepgras, 138 N. Y. 26.) Title to the property involved could not, as a matter of law, have been acquired by adverse possession in the period from 1906 to the present. (Burbank v. Fay, 65 N. Y. 66; Hinkley v. State, 234 N. Y. 309; Slingerland v. International Contracting Co., 169 N. Y. 60; Knickerbocker Ice Co. v. Shultz, 116 N. Y. 382; People v. Baldwin, 197 App. Div. 285; 233 N. Y. 672; People v. Shipley, 229 App. Div. 21.) The defendant is the fee owner of the property in suit. (People v. City of New York, 234 App. Div. 771; 259 N. Y. 579; City of New York v. Atlantic Yacht Club, 209 App. Div. 642; 240 N. Y. 630; Harway Improvement Co. v. Partridge, 203 App. Div. 174; 236 N. Y. 563; Nevins v. Friedauer, 198 App. Div. 250; Somerville v. City of New York, 78 Misc. Rep. 203; 89 Misc. Rep. 188.)

      William E. Friedman and W. N. Selisberg for respondent.
    Plaintiff acquired title to the property by grant from the town of Gravesend. The mere absence of a deed does not affect plaintiff’s title. (McKee v. McKee, 267 N. Y. 96; Sewell v. Underhill, 197 N. Y. 168; Ford v. Clendenin, 215 N. Y. 10; People v. Tompkins-Kiel Marble Co., 269 N. Y. 77.) The adverse possession by plaintiff and his predecessors for over forty years under a color of title establishes plaintiff’s right to be adjudged the owner in fee simple absolute. (Harway Improvement Co. v. Partridge, 203 App. Div. 174; 236 N. Y. 563; Barnes v. Light, 116 N. Y. 34; La Frombois v. Jackson, 8 Cow. 589; Schaubler v. Schulz, 137 Fed. Rep. 389; Hannibal & St. Joseph R. R. Co. v. Clark, 68 Mo. 371; Sands v. Hughes, 53 N. Y. 287; Ledoux v. Samuels, 116 App. Div. 726; Sherman v. Kane, 86 N. Y. 57; People v. Vanderbilt, 26 N. Y. 287; Matter of City of New York [Parker Hospital], 217 N. Y. 1; Timpson v. Mayor, 5 App. Div. 424; Knapp v. City of New York, 140 App. Div. 289; Fulton Light, Heat & Power Co. v. State, 62 Misc. Rep. 189.)
   Per Curiam.

In this action is involved the title to a parcel of land formerly under water in Gravesend Bay designated as Allotment No. 8. The courts below have decided plaintiff’s title to be valid by adverse possession since the year 1891.

In the year 1891 title to the upland contiguous to this parcel of land under water was concededly in the heirs of Albert Voorhies. At that time the town of Gravesend concededly owned this land under water and, pursuant to chapter 458 of the Laws of 1883, it was vested with power to alienate it. The procedure required by that statute provided for a receipt by the Trustees of a written proposition to purchase, a meeting of the electors of the town to. pass upon the proposition, acceptance by the Trustees, consent of the Supervisor, execution of a deed by the Trustees with the approval of the Supervisor, delivery of the deed to the County Treasurer and delivery of the deed by the County Treasurer to the purchaser. Tull compliance was had with all the requirements of the statute except that no deed was ever delivered or even executed. The reason for the failure to execute and deliver a deed to the heirs of Alberti Voorhies was due to the fact that the attorney for the town of Gravesend in 1891 expressed the opinion that the, estate of Albert Voorhies was not a legal entity and could not take a grant from the town and he instructed his associate to refrain from drawing a deed until the identity of the Voorhies heirs should be discovered. Deeds to allotments other than Allotment No. 8 were executed to other grantees.-

One of the Trustees of the town undertook to discover the Voorhies heirs but he never reported to the attorney for the town. That is the reason why no deed was ever executed by the Trustees for Allotment No. 8.

Immediately after the proposition by the Voorheis heirs to purchase Allotment No. 8 for ten dollars had been unanimously approved by the electors November 20,1891, and that sum paid, the Voorhies heirs took over the allotment and used the land under water as their property for fishing, boating and swimming and their successors in title to the upland used it for the same purpose until 1906 when they made application to the Department of Docks of the city of New York for permission to fill in and bulkhead about 1,000 feet of the land under water in Allotment No. 8 and to erect two piers. In July, 1906, such a permit was issued by the city. The chief engineer of the Dock Department reported that the land under water was private property. Part of this land under water was filled in, was bulkheaded and two piers were erected. The owners of the upland manufactured brick from the sand of Gravesend Bay and pumped it from Allotment No. 8 in pipes laid along the bed of Allotment No. 8. This property has been assessed against plaintiff and his predecessors since 1894 and prior thereto.

The occupation and possession of Allotment No. 8 by plaintiff and his predecessors in title for more than forty years has been actual, open, notorious, exclusive, continuous and under claim of right founded upon the grant from the town of Gravesend and the deeds from plaintiff’s predecessors asserting ownership and hostile and adverse to any claim of title by defendant or any other person. Defendant had notice of such occupation and possession but never asserted any claim of title before the institution of this suit.

The recognition by the city’s predecessors, the town of Gravesend and the city of Brooklyn, of their lack of title by assessing this land to plaintiff’s predecessors prior to the year 1894 and since that date, the acceptance by the Trustees of the proposition by the estate of Albert Voorhies to purchase Allotment No. 8 and the action by the electors in accepting the proposition, and payment for a deed which was never executed, coupled with the use by plaintiff’s predecessors furnish color of right to plaintiff even in the absence of a deed. If a deed had been executed and delivered in compliance with the statute, the question of title by adverse possession would not be in the case.

Not once between 1891 and 1935 did the town of Graves-end, the city of Brooklyn or the city of New York ever assert any right to this land under water. The trustees of the town accepted the proposal to purchase, the electors ratified the act of the Trustees, the proposing purchasers paid for a deed which they never received, the taxing authorities assessed the property against private owners. Since 1906 plaintiff’s predecessors have expended large sums in improvements and actually excavated the sands for making brick, the city in 1928 condemned part of the property for street purposes and made an award to unknown owners and in nearly every way acknowledged as far as it was able that it possessed no title.

The judgment should be affirmed, with costs.

Lehman, O’Brien, Htjbbs, Loughran, Finch and Rippey, JJ., concur; Crane, Ch. J., concurs in separate memorandum.

Crane, Ch. J.

(concurring). I agree with the statements of the per curiam opinion, but desire to add that the law considers that as done which ought to have been done and the city cannot now claim title as against this party.

Judgment affirmed.


author: Per Curiam.

text:
    In the Matter of Frederick J. Mix, an Attorney, Appellant. Daniel J. O’Mara, District Attorney, Respondent.
    Argued March 25, 1937;
    decided April 27, 1937.

      Paul Folger, Charles S. Wilcox and William Johns for appellant.
    The Appellate Division erred in finding that the relationship of attorney and client existed between the complainant and appellant. (Shultz v. Hoagland, 85 N. Y. 464; Lopez v. Campbell, 163 N. Y. 340; People v. Galbo, 218 N. Y. 283.) The Appellate Division erred,in finding that the money collected from the maker of the note belonged to Stockwell, and that appellant, in failing to turn it over to Stockwell, rendered himself .amenable to discipline. (Matter of Bailey v. Rutherford, 242 N. Y. 220.) The appellant has been found guilty and disciplined in the Thomas matter for an offense not charged or proved. (Matter of Eldridge, 82 N. Y. 161; Matter of Metcalfe, 247 App. Div. 178.)

      Daniel J. O’Mara, District Attorney {Stephen K. Pollard of counsel), respondent.
    The Appellate Division was not in error in finding that the relationship of attorney and client existed between Stockwell and the appellant. (Matter of Young, 188 App. Div. 538.) The court did not err in finding appellant guilty of professional misconduct in the Thomas matter. (Matter of Horovitz, 228 App. Div. 484; Matter of Kohler, 240 App. Div. 501.)
   Per Curiam.

After an examination of the evidence we find that the charge regarding the Stockwell loan is not sustained by the evidence. It appears that Stockwell treated Mix as a debtor from whom money was due on his note. Mix was not acting as attorney, and the relationship was that of debtor and creditor: He, there- ■ fore, should not be charged with unprofessional conduct as an attorney. The findings of the Appellate Division in this respect should be reversed and the charge dismissed.

As to the other charge, however, the retention of money paid by Joseph Thomas to satisfy a judgment, we cannot say that there is no evidence to sustain the findings of the Appellate Division. We remit the matter to the Appellate Division to determine whether disciplinary action should follow from that charge.

The order should be reversed and the matter remitted to the Appellate Division in accordance with this opinion.

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

Order reversed, etc.


text:
    Empire State Ice Company, Inc., Respondent, v. Rochester and Lake Ontario Water Service Corporation, Appellant.
    Argued March 19, 1937;
    decided April 27, 1937.

      Clarence P. Moser and Lathrop D. Marsland for appellant.
    The plaintiff was a trespasser upon the defendant’s easement. The only duty which the defendant owed was to refrain from inflicting wanton or willful injury or from knowingly creating a hidden danger. The defendant did not fail in that duty. (Mendelowitz v. Neisner, 258 N. Y. 181; Fox v. Warner-Quinlan Asphalt Co., 204 N. Y. 240; Sterger v. Van Sicklen, 132 N. Y. 499; Cusick v. Adams, 115 N. Y. 55; Greenwood Lake & Port Jervis R. R. Co. v. N. Y. & Greenwood Lake R. R. Co., 134 N. Y. 435; Nellis v. Munson, 108 N. Y. 453; O’ Neill v. O’Hare, 254 N. Y. 186.) There was no evidence from which the jury could find that the defendant was negligent. (Lebright v. Gentzlinger, 232 App. Div. 274; Magid v. City of New York, 234 App. Div. 38; 259 N. Y. 618; Cunningham v. Dady, 191 N. Y. 152; Murray v. Great Atlantic & Pacific Tea Co., 236 App. Div. 477.)

      Charles S. Wilcox for respondent. The relationship was not that of owner and licensee.
    Appellant’s conduct went beyond mere passive negligence. (Ferrari v. N. Y. Central R. R. Co., 224 App. Div. 182; 250 N. Y. 527; Buell v. Utica G. & E. Corp., 259 N. Y. 443; Fritcher v. Anthony, 20 Hun, 495; Wittleder v. Citizens’ El. Ill. Co., 50 App. Div. 478; Skzypek v. Long Island R. R., 245 App. Div. 309; Ehret v. Village of Scarsdale, 269 N. Y. 198; Beck v. Carter, 68 N. Y. 283; Constantino v. Watson Contracting Co., 219 N. Y. 443.) The defendant was negligent in laying the pipe and in failing to inspect it. (Silverberg v. City of New York, 59 Misc. Rep. 492; Armbruster v. Auburn Gas Light Co., 18 App. Div. 447; 162 N. Y. 655; Haas v. City of New York, 107 Misc. Rep. 427; 190 App. Div. 939; Halligan v. Fitzpatrick, 243 App. Div. 252.)
   Per Curiam.

We find in the record no evidence of negligence, even though the duty of the defendant is not to be measured as if the relationship between the parties were that of owner and licensee.

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

Crane, Ch. J., Lehman, O’Brien, Loughran and Finch, JJ., concur; Hubbs and Rippey, JJ.; dissent.

Judgments reversed, etc.