text:
    Lenco, Inc., Appellant, v. Harry Hirschfeld, Respondent.
    Landlord and tenant — lease — dispossession of tenant for non-payment of rent and reletting of premises — action to recover balance of deposit to secure performance of lease after deducting rent due, premature — recovery must abide liquidation of loss — liability for deficiency an incident to right to re-enter and relet —■ not cut down by statement as to consequences of abandonment — deposit not liquidated damages but penalty where forfeiture results from unimportant breach of covenant.
    1. An action is prematurely brought to recover so much of a deposit made by a tenant to secure the performance of the covenants of a long term lease as is left after deducting what was due for rent at the time a warrant to dispossess was issued in summary proceedings for non-payment of rent, where it appears that the lease had still more than twenty years to run and the landlord, on resuming possession, , made diligent effort to relet but was unable to do so for two years, when he relet for plaintiff’s account at a lower rental. The recovery of the deposit must abide the liquidation of the loss.
    2. A contention that liability for loss of rental has not survived the issuing of the warrant in summary proceedings, except as to rent already owing at that time, and that the right to relet for the account of the lessee is limited to the case of a voluntary abandonment, cannot be sustained, where, after enumerating many contingencies, including “ summary or dispossess proceedings,” in which the landlord may take and hold possession as if no lease had been made, the lease provides “ in any such ease, the lessor may at its option relet said premises, as agent of the lessee, the lessee remaining liable for loss or damage resulting from such abandonment.” Liability for a deficiency follows as an incident to the right to re-enter and relet and is not cut down by the statement of the consequences that would result from an abandonment.
    3. An argument by defendant that, in any event, the deposit may be retained as liquidated damages must fail. The lease is so drafted that a breach of any covenant, however minute or unimportant, is to bring upon the tenant loss of the entire security. Viewed as an attempt to liquidate the damages, the provision is, therefore, ineffective as amounting to a penalty. (Seidletz v. Auerbach, 230 N. Y. 167, followed.)

      Lenco, Inc., v. Ilirschfeld, 220 App. Div. 761, affirmed.
    (Argued December 15, 1927;
    decided January 10, 1928.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered May 31,1927, unanimously affirming a judgment in favor of defendant entered upon a dismissal of the complaint by the court at a Trial Term.

      E. Crosby Kindleberger for appellant.
    The lease did not extend liability of the tenant beyond the issuance and service of the warrant in the dispossess proceedings and the action was not prematurely brought. (Civ. Prac. Act, § 1434; Mann v. Munch Brewery, 225 N. Y. 189; Kottler v. N. Y. Bargain House, 242 N. Y. 28; Michaels v. Fishel, 169 N. Y. 381; Caesar v. Rubinson, 174 N. Y. 492; Cornwall v. Sanford, 222 N. Y. 248; Swerdlow v. Harrow, 213 App. Div. 521; Terwilliger v. Browning, King & Co., 222 N. Y. 47; Fine v. Fensterman, 124 Misc. Rep. 178; Martin v. Moulton, 200 N. Y. Supp. 213; Fleischer v. Friob, 97 Misc. Rep. 343; 177 App. Div. 921; Stimpson v. Minsker Realty Co., 177 App. Div. 536.) The defendant’s resumption of possession of the hotel and his running of it for two years was equivalent to the acceptance of a surrender of the lease. (Saracena v. Preisler, 180 App. Div. 348; Gray v. Kaufman Dairy & Ice Cream Co., 9 App. Div. 119; Sancourt Realty Corporation v. Dowling, 220 App. Div. 660; Kottler v. New York Bargain House, 242 N. Y. 28.) The clause of the lease under which the security was held by the' defendant must be construed as providing for a penalty and not as liquidated damages. (Brady v. Erlanger, 188 App. Div. 728; 231 N. Y. 562; City of New York v. B. & M. Ferry Co., 238 N. Y. 52; Seidlitz v. Auerbach, 230 N. Y. 167; Caesar v. Rubinson, 174 N. Y. 492; Feinsot v. Burstein, 161 App. Div. 651; 213 N. Y. 703; Stimpson v. Minsker Realty Co., 177 App. Div. 536; 884 West End Avenue Corporation v. Pearlman, 201 App. Div. 12; 234 N. Y. 589.) Upon the complaint and opening statement the plaintiff was clearly entitled to recover not only the deposit, less the unpaid rent, but also the rental of the rooms during its occupancy of the hotel, the prepaid fire insurance, and the value of the permanent improvements to the hotel. (Ford v. Knapp, 102 N. Y. 135; Satterlee v. Koble, 173 N. Y. 91; Lyons National Bank v. Shules, 199 N. Y. 405.)

      Terence J. McManus and Hugo I. Epstein for respondent.
    The deposit which is the subject-matter of this action was given as security for the performance of covenants which, by the express terms of the lease, survived the issuance and execution of the warrant in-summary dispossess proceedings for non-payment of rent. The security so given may be held by the landlord, the defendant, until the term demised as fixed in the lease has expired; and this action, commenced prior thereto, is premature. (Halpern v. Manhattan Ave. Theatre Corp., 173 App. Div. 610; 220 N. Y. 655; Sockloff v. Burstein, 177 App. Div. 471; Henochstein v. Nachman, 218 App. Div. 673; Anzolone v. Paskusz, 96 App. Div. 188; Reshen v. Rosewell Realty Co., 199 N. Y. Supp. 77; Blumberg v. Corday, 160 N. Y. Supp. 613; Michaels v. Fishel, 169 N. Y. 381; McCready v. Lindenborn, 172 N. Y. 400; Markman v. 451-455 Grand St. Corp., 168 N. Y. Supp. 522.) The defendant’s right to retain the deposit until the term demised as fixed in the lease has expired was not terminated by its resumption of possession and operation of the hotel after the defendant was dispossessed therefrom for non-payment of rent. (Halpern v. Manhattan Ave. Theatre Corp., 173 App. Div. 610; 220 N. Y. 655; Sockloff v. Burstein, 177 App. Div. 471; Markman v. 451-455 Grand St. Corp., 168 N. Y. Supp. 522.) The deposit clause of the lease in suit is a valid provision for liquidated damages. In any event, the defendant is entitled to retain the deposit as security until the end of the term demised as fixed in the lease. (Halpern v. Manhattan Theatre Corp., 173 App. Div. 610; 220 N. Y. 655; Stimpson v. Minsker Realty Co., 177 App. Div. 536; Caesar v. Rubinson, 174 N. Y. 492; Dunn v. Morgenthau, 73 App. Div. 147; 175 N. Y. 518.) The complaint and opening statement show no right in the plaintiff to recover the deposit, the rent of the rooms during plaintiff’s occupancy of the hotel, the prepaid fire insurance, and the permanent improvements to the hotel, less only the unpaid rent. (Walton v. Meeks, 41 Hun, 311; 120 N. Y. 79.)
   Cardozo, Ch. J.

This action is brought to recover a deposit made by a tenant to secure the performance of the covenants of a lease. The lease was to continue until December 31, 1944. Long before that date, on June 15,1924, the landlord caused the tenant to be ejected in summary proceedings for non-payment of rent. The building was a hotel, and the landlord, on resuming possessien, continued to run the business until another tenant could be found. After an interval of two years, on June 15,1926, he relet, at a lower rental, for plaintiff’s account. The question is whether the plaintiff may recover so much of the deposit as is left after deducting what was due when the warrant to dispossess was issued.

Two sections of the lease must be quoted and considered before the question can be answered. The first has to do with the effect of a re-entry; the second has relation to the use of the security.

The lease (which covered not only the hotel, but the furnishings and other personal property therein) contains the following provisions as to the effect of a re-entry whether by summary proceedings or otherwise:

“ In the event of non-payment by the lessee of any instalment of rent, or of any taxes, water rates, or assessments or any other payments herein required, in accordance with the provisions of this lease: or if the demised premises be abandoned or vacated by the lessee during the term hereof; the lessor may forthwith terminate this lease, and have the right to re-enter and repossess the said premises by force,' summary or dispossess proceedings, surrender or otherwise, and to dispossess and remove therefrom any and all occupants and their effects, without being liable to any prosecution therefor, and to hold said premises as if this lease had not been made; and in any such case, the lessor may, at its option relet said premises, as agent of the lessee, the lessee remaining liable for loss or damage resulting from such abandonment. The lessee hereby expressly waives, in behalf of itself and all persons claiming under it, all rights of notice to quit or intention to re-enter under the provisions of any statute or of this lease, in case of such abandonment.”

The following are the provisions as to the use of the security:

Such security [describing it] “is to be held by the lessor as security for the lessee’s faithful performance of and compliance with, all the terms, covenants and conditions of this lease on his part. If the lessee fails to comply with the terms, covenants and conditions hereof, and this lease is thereby terminated, then and in that event the said money and securities so deposited shall belong to the lessor, as fixed, liquidated and agreed damages; it being agreed that said deposit shall be treated as liquidated damages because the parties hereto cannot ascertain the exact amount of damage that the lessor will sustain in the event of any breach or violation by the lessee of its undertakings herein referred to; it being expressly understood, however, that said security shall not be considered as payment for any rent due or to become due by reason of these presents.”

The plaintiff insists that the liability for loss of rental has not survived the issuing of the warrant in summary proceedings except as to rent already owing at that time. The argument is that the right to relet for the account of the lessee is limited to cases where a vacancy exists as the result of a voluntary abandonment, and does not apply where the lessee is put out against his will. This is a construction too narrow to prevail. The lease enumerates many contingencies, including “ summary or dispossess proceedings,” in which the landlord may hold possession as if no lease had been made, and then adds: “ in any such case, the lessor may at its option relet said premises, as agent of the lessee, the lessee remaining liable for loss or damage resulting from such abandonment.” Liability for a deficiency would follow if the lease had provided for a reletting by the landlord as agent of the tenant, and had stopped at that point. We think it was not cut down by adding a statement of the consequences that would result from an abandonment. This is so whether the word abandonment be taken as confined to a case of a voluntary vacancy or as including any case where the tenant has so acted as to bring upon himself a forfeiture of the term. If confined to a voluntary vacancy, the meaning may be that in addition to liability for the deficiency as fixed by a reletting, there shall remain a liability for damage occasioned to the hotel or its furnishings by the lack of a custodian. If extended to all vacancies, voluntary or involuntary, the result is merely to define the effect of a reletting. Whichever meaning is adopted, the privilege belongs to the landlord “ in any case ” of re-entry to relet as agent for the tenant. Liability for a deficiency follows as an incident.

In thus holding we give the tenant the benefit of an assumption that there is a duty on the landlord to exercise his option with reasonable celerity. In that view unnecessary delay may be evidence of an election to renounce the privilege of reletting and remain the occupant himself (Saracena v. Preisler, 180 App. Div. 348, 353). Even if this be so, there is no duty, while endeavoring to relet, to leave the premises in idleness, thereby destroying the good will, and aggravating the loss. We are to remember that after re-entry for breach of a condition the landlord in reletting is not an agent in a true sense, since the term is at an end (Kottler v. N. Y. Bargain House, Inc., 242 N. Y. 28, 33). He is merely using a prescribed method to ascertain the .damage (Kottler v. N. Y. Bargain House, Inc., supra, at p. 33; Hall v. Gould, 13 N. Y. 127; Moore v. Potter, 155 N. Y. 481, 488). The tenant does not dispute the landlord’s statement that there was diligent effort to relet at the best rent to be obtained. A building so considerable cannot be leased over night. Nothing in the record justifies the conclusion that the option to relet was extinguished or abandoned (Kottler v. N. Y. Bargain House, Inc., supra, at pp. 35, 36).

We conclude that the present action is premature, and that the recovery of the deposit must abide the liquidation of the loss (Halpern v. Man. Ave. Theatre Corp., 173 App. Div. 610; 220 N. Y. 655).

The defendant makes the point that without reference to any loss either through a reletting or through other causes, the deposit may be retained as liquidated damages. We think the point must fail. Viewed as an attempt to liquidate the damages, the provision is one for a penalty within the ruling of this court in Seidlitz v. Auerbach (230 N. Y. 167). The lease is so drafted that a breach of any covenant, however minute or unimportant, is to bring down upon the tenant the loss of the entire security.

A different situation would be here if the deposit had been accepted as the liquidated measure of the loss of future rents (Hackenheimer v. Kurtzmann, 235 N. Y. 57). There is no token of an intention that it should be so accepted or confined. On the contrary, the provision that the deposit shall be retained as liquidated damages is coupled with the statement of an understanding that said security shall not be considered as payment for any rent due or to become due by reason of these presents.” The judgment in this action in favor of the defendant is, therefore, without prejudice to the maintenance of another action for the recovery of the deposit or some part thereof when the time shall arrive for the ascertainment of the loss.

The plaintiff makes claim, aside from the deposit, to $2,000, rents collected by the defendant from guests of the hotel for the use of rooms while the plaintiff was in possession as lessee. The claim is valid so far as it goes, but it is offset by a counterclaim in favor of the defendant for more than $12,000 of rent as to which the plaintiff was in arrears when possession was surrendered.

The judgment should be affirmed with costs.

Pound, Cbane, Andbews, Lehman, Kellogg and • O’Bbien, JJ., concur.

Judgment affirmed, etc.


source: Caselaw Access Project

author: Cardozo, Ch. J.

license: Public Domain

text:
    Genesee Wesleyan Seminary, Respondent, v. United States Fidelity and Guaranty Company, Appellant.
    Principal and surety — bond — banks and banking — trust —■ deposit by treasurer of corporation of corporate funds in his private bank —■ duty to keep fund intact, apart from other moneys and subject to trust — knowledge by corporation of deposit insufficient to show consent that treasurer cease to be fiduciary — action on surety bond — evidence that treasurer mingled corporate funds with those of other depositors and used same for own purposes sufficient to sustain finding of embezzlement.
    1. The treasurer of a corporation who collects its money and, with its knowledge, deposits it with himself as banker is subject to a continuing duty to keep the fund intact, apart from other moneys and subject to a trust. Knowledge by the corporation of the deposits in the bank is insufficient to show consent that its treasurer should cease to be a fiduciary and become a borrower.
    2. In an action, therefore, by the corporation to recover upon a bond whereby the defendant as surety bound itself to make good to plaintiff any loss arising from the fraud or dishonesty of its treasurer amounting to larceny or embezzlement, evidence that he deposited corporate funds in his private bank, where they were mingled with funds of other depositors, and used the entire amount as if it had been his own, until his bankruptcy resulted in a large loss to plaintifi, sustains a finding that his use of the money for himself was fraud and dishonesty amounting to embezzlement within the meaning of the bond.

      Genesee Wesleyan Seminary v. U. S. Fidelity & Guaranty Co., 219 App. Div. 764, affirmed.
    (Argued November 28, 1927;
    decided January 10, 1928.)
    Appeal from, a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered March 17, 1927, modifying and affirming as modified a judgment in favor of plaintiff entered upon the report of a referee.

      George A. Carnahan for appellant.
    As matter of law its treasurer’s acts in depositing plaintiff’s moneys, mingling them with those of other depositors, and using them in the banking business were not acts of fraud or dishonesty, nor did they amount to larceny or embezzlement. (People ex rel. Murphy v. Crane, 80 App. Div. 202; People v. City Bank of Rochester, 96 N. Y. 33; People v. Meadows, 199 N. Y. 1; People v. Barnes, 158 App. Div. 712.)

      Erwin E. Shutt for respondent.
    When plaintiff’s treasurer mingled seminary moneys with his own and with the deposits of others, using and loaning the same in his own name for his own profit, he misappropriated, converted and embezzled them within the meaning of the bond. (People ex rel. Murphy v. Crane, 80 App. Div. 202; People v. City Bank of Rochester, 96 N. Y. 33; People v. Barnes, 158 App. Div. 712; People v. Meadows, 199 N. Y. 1; Britton v. Ferrin, 171 N. Y. 235; Industrial General Trust Co. v. Tod, 170 N. Y. 233; Matthews & Co. v. Employers’ Liability Assur. Corp., 127 App. Div. 195; 195 N. Y. 593; Swisher v. Maryland F. Co., 164 Ill. App. 243; Citizens’ Trust, etc., Co. v. Globe Ins. Co., 229 Fed. Rep. 326.). Plaintiff’s treasurer was guilty of larceny under section 1290 of the Penal Law of this State. (People ex rel. Murphy v. Crane, 80 App. Div. 202; People v. Lammerts, 164 N. Y. 144; People v. Dimick, 107 N. Y. 13; People v. City Bank of Rochester, 96 N. Y. 33; People v. Shears, 158 App. Div. 577; Matthews & Co. v. Employers’ Liability Assur. Corp., 127 App. Div. 195.)
   Cardozo, Ch. J.

The action is on a bond made by one Alexander M. Holden as principal, and the defendant as surety. ■ By this bond, the surety bound itself to the plaintiff, the obligee, to make good any and all losses sustained by the obligee of moneys, securities, or other personal property in possession of the principal, or for the possession of which he is responsible, by any act of fraud or dishonesty upon his part in the discharge of his duties amounting to larceny or embezzlement.” The question is whether there has been a loss within the meaning of the contract.

Alexander M. Holden, the principal named in the bond, was for many years the treasurer of the plaintiff, Genesee Wesleyan Seminary, a school at Lima, New York. Holden was a private banker at Honeoye Falls, only a few miles away from the Seminary’s home. He did business under the name Bank' of Honeoye Falls, A. M. Holden, Banker.” When money was collected by him as treasurer, he placed it on deposit with himself as banker. This was known to the Seminary. Indeed, the Seminary’s principal made out deposit slips, and left them often at the banking office. So, when money was paid out, the treasurer disbursed it by checks signed by himself as treasurer and drawn on himself as banker. This practice continued during all the years of his service. As far back as 1906, we find a statement in the application for the bond that the Bank of Honeoye Falls is to be the place of deposit. Without greater elaboration, we assume that the treasurer was expected to keep the money where he did.

How he was to keep it there, involves anotffer question. What he did was to mingle it with the money of other depositors, and to use the entire fund indiscriminately as if it were his own. He did not even maintain a cash reserve equal to the fund that he received as a fiduciary. His average cash on hand was from $5,000 to $10,000. In May, 1919, for illustration, it was about $7,000; in May, 1920, about $4,000. The latter sum was only about a fifth of his average deposits during those years for the account of the Seminary alone. There were hundreds of thousands of dollars of deposits from other sources, not to mention other debts. The crash came in May, 1921, though it must have been threatening long before. Holden, then ill in the hospital, instructed his cashier to file a .petition in bankruptcy. He died a few days later. At the date of the bankruptcy there was $23,743.86 on deposit to the plaintiff’s credit. The deposits from all sources were $345,516.38. The cash on hand was only $6,957.98. A large part of the deposits had been loaned to corporations in which Holden was a stockholder and an officer. Most of these loans turned out to be worthless. When he closed the doors of his bank,” he was insolvent beyond redemption.

We think the plaintiff’s deposits should have been kept apart from others and held by the treasurer as a fund subject to a trust. Deposits in a bank or with a banker are classified often as general or special. The presumption is said to be that a deposit is general. The relation then created is that of debtor and creditor as upon any other loan. A special deposit is sometimes said to be equivalent to a bailment. It is not always of that order. Such a deposit may exist where the duty of the depositary is to hold, not the identical bills or coins, but an equivalent sum, to be kept intact, however, for the use of the depositor (Woodhouse v. Crandall, 197 Ill. 104; People v. City Bank of Rochester, 96 N. Y. 32). A bank accepting such a deposit is chargeable with responsibility, civil or criminal, like any other trustee, if it uses for itself what was to be held in trust for some one else. The fund may not be drawn down by loans or other withdrawals below the level of the trust (Woodhouse v. Crandall, supra). There is not even a pretense that Holden complied with that requirement, if requirement it be.

The question remains as to the terms, express or implied, upon which deposits were received. We think the evidence supports the finding that they were received, not as loans, but as a fund burdened with a trust. The Bank of Honeoye Falls was not a corporation. It was not even a partnership. It was Holden under another name. When moneys belonging to the Seminary were paid to Holden, treasurer, they became subject on the instant, as he took them, to a trust imposed by law. No one would doubt this if in the moment of the taking he had spent them for himself, without the form of a credit for the account of his depositor. They were not freed from the trust because he left them in his counting house where he wore the title banker. He was the same person, bearing the same relation to those who had put faith in him. His duties were not changed any more than they would have been if he had collected the money with his right hand and turned it over to his left. The Seminary might consent, if so it pleased, that its treasurer should cease to be a fiduciary, and become a borrower and owner. Something more should be proved to effect that transformation than a deposit of the moneys upon the counter of his bank.” A trust imposed by law is not to be divested at the instant of its creation, and silently, as if by sleight of hand, converted into a loan. The presumption is a strong one that a fiduciary is not to deal for his own profit with the moneys of a trust, expending and even wasting at his own uncensored pleasure. If consent so sweeping is intended, there must be more than the naked fact of a deposit to bespeak the understanding. To say that a treasurer is free to use as his own the funds committed to his care is to say that a bond, securing his fidelity, and kept alive through annual premiums, is in truth an idle form. Business, seriously conducted, becomes a mere vagary.

We cannot find consent to so anomalous a relation. The Seminary knew that the treasurer was a banker. It knew that he had facilities for keeping at his place of business the money subject to the trust and of disbursing it thereafter. The form of a deposit at the so-called bank would thus offer itself at once as a convenient expedient. The evidence does not show that more than this was understood to be the effect of the transaction. At all events, it does not show a different understanding with such clearness and precision as to exact the finding of a loan as an inference of law.' We may assume in favor of the defendant that conflicting inferences are possible. We may even assume that upon a prosecution of Holden for the crime of embezzlement a jury, appreciating the possibility that he had misinterpreted the arrangement, might not unreasonably have absolved him of felonious intent (People v. Meadows, 199 N. Y. 1; People v. Scudder, 177 App. Div. 225, 230; 221 N. Y. 670; Penal Law, § 1306). Such considerations are not decisive of the problem now before us. There is no presumption of law that the treasurer misunderstood his rights and liabilities in dealing with the fund committed to his care. A furtive misuse for his own benefit of moneys placed in his custody for the use of some one else is embezzlement or larceny, or conduct substantially equivalent thereto, at least when the question at issue is one of civil liability (Mitchell Grain Co. v. Maryland Cas. Co., 108 Kan. 379, 382; Van Vechten v. Am. E. F. Ins. Co., 239 N. Y. 303, 305; Lake v. Simmons, 1927 A. C. 487). Here the trier of the facts has found that the transaction was a trust. The plaintiff never knew of or authorized or consented to Holden’s mingling its funds with his own or with other funds in his custody or of his making any use of its said funds except for its own uses and purposes.” The evidence, if not coercive of the finding, is at least sufficient to sustain it. Uncertain implication will not serve to justify a trustee in shaking off his duty as a fiduciary and assuming the absolute dominion appropriate to ownership. If he wishes such dominion, he should ask for it, not covertly and indirectly, but unmistakably and frankly (Wendt v. Fischer, 243 N. Y. 439, 443). Public policy will not suffer us to be satisfied with less.

We conclude that Holden, treasurer, was subject to a continuing duty to keep the fund intact. If this be so, the evidence sustains a finding that his use of it for himself was fraud and dishonesty amounting to embezzlement ” within the meaning of the bond (cf. Mitchell Grain Co. v. Maryland Cas. Co., supra).

The judgment should be affirmed with costs.

Pound, Crane, Andrews, Lehman and O’Brien, JJ., concur; Kellogg, J., not sitting.

Judgment affirmed, etc.


author: Pound, J.

text:
    Lavinia Lally, Respondent, v. Emilie L. Cronen, Individually and as Executrix of Catherine M. Lally, Deceased, Appellant, Impleaded with Others.
    Contract — specific performance — will — decedent’s estate — evidence — action to compel specific performance of contract to make mutual wills — testimony by plaintiff of conversations in presence of testatrix incompetent to establish her acquiescence and consent — plaintiff must establish that minds of parties met on precise terms of agreement — failure to prove mutuality of assent fatal — knowledge of revocation of will by testatrix notice thereof — action must fail where it appears plaintiff had knowledge of revocation in ample time to change her own will before death of testatrix.
    1. In an action to compel specific performance of an alleged contract between plaintiff, defendant individually and testatrix, to make mutual wills, irrevocable without notice to the others, testimony of plaintiff of conversations between herself and defendant in the presence of testatrix are incompetent, under section 347 of the Civil Practice Act, to establish acquiescence and consent of the dead woman from her presence and silence on these occasions.
    2. In such an action plaintiff must furnish proof that the minds of the parties met on the precise terms of the agreement under which the mutual wills were executed. This is not established by proof that testatrix agreed to make a will irrevocable without the consent of plaintiff and defendant, where plaintiff relies on and testified to a mutual agreement to make wills irrevocable without notice to the others. An agreement to make mutual wills revocable only by consent is not the same as an agreement to make mutual wills revocable on notice. The element of mutuality of absent is, therefore, lacking.
    3. In any event, assuming the contract to be as plaintiff testifies, she has not maintained her cause of action. Under such a contract she was entitled to notice of the revocation by testatrix of her will, but, it appearing that plaintiff had knowledge that a new will had been made in ample time for her to change her own or take other action before the death of testatrix, she was not in any way prejudiced by the revocation. Knowledge is the equivalent of notice.

      Lally v. Cronen, 220 App. Div. 253, reversed.
    (Argued November 30, 1927;
    decided January 10, 1928.)

      Appeal, by permission, from a judgment of the Appelfate Division of the Supreme Court in the second judicial department, entered April 8, 1927, unanimously affirming a judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term.

      Charles H. Kelby, Morris L. Golieb and Charles W. Stapleton for appellant.
    To establish an agreement for mutual wills and to defeat the right to revoke a will, there must be full and satisfactory proof of the agreement, which cannot be supplied by presumption. Such an agreement is not shown by the fact that persons make similar wills with cross-provisions in favor of the survivor or survivors; (Edson v. Parsons, 155 N. Y. 555; Rastetter v. Hoenninger, 214 N. Y. 66; Wallace v. Wallace, 216 N. Y. 28; Hermann v. Ludwig, 186 App. Div. 287; 229 N. Y. 544.) Notice of revocation was given. (Stone v. Hoskins, L. R. 1905, Prob. 194; Alexander on Wills, § 86; Canada v. Ihmsen, 43 A. L. R. 1010.) The plaintiff was disqualified as a witness in her own behalf under section 347 of the Civil Practice Act. (Talbot v. Laubheim, 188 N. Y. 421; Albany Savings Bank v. McCarty, 149 N. Y. 71; Franklin v. Kidd, 219 N. Y. 409; Ralley v. O’Connor, 71 App. Div. 328; 173 N. Y. 621; Brady v. Donohue, 139 N. Y. Supp. 851; Hurley v. Macey, 94 App. Div. 9; Lerch v. Brasher, 104 N. Y. 157; Griswold v. Hart, 205 N. Y. 384; Kings County Trust Co. v. Hyams, 242 N. Y. 405; Matter of Kelly, 238 N. Y. 71; Nay v. Curley, 113 N. Y. 575; Clift v. Moses, 112 N. Y. 426.)

      Max L. Schallek for respondent.
    An agreement based upon a valuable consideration to execute mutual wills is enforcible in equity if revoked without notice, and the death of the party breaking the contract is not such notice. (Stewart v. Todd, 190 Iowa, 283; Brown v. Webster, 90 Neb. 591; Corcoran v. Kennedy, 177 App. Div. 63; Hermann v. Ludwig, 186 App. Div. 287; 229 N. Y. 544.) The rulings upon evidence by the court were proper and no error can be predicated.thereon. (Kissinger v. Quirin, 206 App. Div. 126; Matter of Eno, 196 App. Div. 131; Greer v. Greer, 58 Hun, 651; Hamlin v. Stevens, 59 App. Div. 522; Pinney v. Orth, 88 N. Y. 447; Cowan v. Davenport, 30 App. Div. 130.)
   Pound, J.

The action is in equity. Plaintiff is a half-sister of the defendant Cronen and a stepdaughter of the latter’s mother, Catharine M. Lally, deceased. She is a member of the New York bar and was in active practice for some years before and after the year 1901. The complaint alleges a contract made between the plaintiff, the defendant Cronen and Catharine M. Lally, deceased, whereby “ it was mutually agreed that all property belonging to any or either of them should pass upon the death of any or either of them to the survivors and that they would execute mutual wills, and not revoke the same during their lifetime without notice to the others.” It further alleges the execution of such wills by the three parties to the agreement and that Catharine M. Lally, with the knowledge and consent of defendant Cronen, made a new will in breach of the agreement in favor of defendant Cronen without notice to plaintiff and in violation of her rights. Judgment by way of specific performance is demanded for one-half of the property of the deceased Mrs. Lally, now in the hands of the defendant individually or as executrix of her mother’s will.

On April 18, 1901, the parties made identical wills. Each left her property to the other two. In 1908 new wills were made, to the same effect. In 1913 Mrs. Cronen and Mrs. Lally made their wills leaving plaintiff out. Mrs. Lally left all her property to Mrs. Cronen. Plaintiff was not notified of the change but subsequently learned of it. On March 28, 1922, she obtained Mrs. Lally’s signature to a new will which again provided for her and Mrs. Cronen equally. Mrs. Lally was, however, incompetent to make a will and after her death, on January 8, 1923, probate was refused the later will and the Cronen will was admitted to probate. Plaintiff thereupon brought this action.

Although plaintiff claims to have rendered valuable professional services to her stepmother and half-sister and that such services, as well as mutual love and affection, were the consideration for their contract to make mutual wills in her favor, her claim is, not that the wills were irrevocable, but that they were irrevocable without notice to the others.

The contract to make mutual wills and the consideration therefor are established as to Mrs. Cronen by plaintiff’s evidence of conversations between plaintiff and her-half-sister. Some of these conversations were in the presence of the testatrix Mrs. Lally, some perhaps, were not. They were evidence against Mrs. Cronen in either event but they were evidence against Mrs. Lally in neither event, either because she was absent or because incompetent under section 347 of the Civil Practice Act, as evidence of personal transactions of plaintiff with a deceased person against whose estate she is asserting a claim. (Matter of Kelly, 238 N. Y. 71.) It is sought to establish acquiescence and consent of the dead woman from her presence and silence on these occasions. The evidence has no other purpose.

As against the sister, the evidence is of an agreement based on a consideration to make a mutual will that neither could change without notice to the other. The competent evidence against the mother, Mrs. Lally, consists of her admissions. They are testified to by two witnesses. Abner Stupel was a clerk in plaintiff’s law office. In June, 1901, he was fifteen years old. He says that he then had a talk with Mrs. Lally about the legal services that plaintiff was rendering for herself and the others and the absence of plaintiff from her office and business in connection therewith. She said: “ You know Pinky [Mrs. Cronen], Vinie [plaintiff] and myself made wills, mutual wills, and we can’t change those wills without the consent of the others, and whatever she loses by reason of being in California (on the business of the family) she and Pinky will make up when I die, of whatever money I leave.”

Tillie C. Cook heard a conversation in August, 1901, between her father and Mrs. Lally in San Francisco. The subject was the legal services rendered by plaintiff for her benefit. The fact of a will was mentioned. The witness testified that Mrs. Lally said: Vinie (plaintiff] will not put in a bill for compensation, because we talked it over before we came out here and there was a will, drawn at that time before we left New York.” Witness’ father suggested that a will could be changed. Mrs. Lally replied Why no. We can’t break our wills. These wills are mutual wills and we can’t break them without consulting and advising with the other one too.”

Giving to the evidence of these two witnesses their fullest probative force, it establishes an agreement on the part of Mrs. Lally to make a will irrevocable without the consent of plaintiff and Mrs. Cronen. Plaintiff relies on a mutual agreement to make wills irrevocable without notice to the others.

The question is whether the agreement to make mutual wills has been competently established. No doubt a sufficient consideration has been shown for ' such an agreement and mutual wills were made in reliance upon some kind of an agreement between the parties. Plaintiff must, however, furnish proof that the minds of the parties met on the precise terms of the agreement under which the mutual wills were executed.

“ As a will an instrument is revocable at pleasure, but as a contract, if supported by an adequate consideration, it is enforcible in equity.” (Rastetter v. Hoenninger, 214 N. Y. 66, 71.) The evidence required to show a contract by one deceased, to dispose of his property in a certain manner after his death, must be clear and convincing, or it will not be regarded as sufficient.” (Wallace v. Wallace, 216 N. Y. 28, 39.) The agreement depended upon for the award of the relief demanded must be clearly and definitely established by full and satisfactory proof. “ To attribute to a will the quality of irrevocability demands the most indisputable evidence of the agreement, which is relied upon to change its ambulatory nature, and that presumptions will not, and should not, take the place of proof.” (Edson v. Parsons, 155 N. Y. 555, 568.)

An agreement to make mutual wills revocable only by consent is not the same as an agreement to make mutual .wills revocable on notice. Mrs. Lally may have been willing to make a will on consideration that the wills of plaintiff and Mrs. Cronen should not be revoked without her consent. She may have been willing or unwilling to make a will in their favor when they reserved the power to revoke their wills in her favor upon notice. We take the intention of Mrs. Lally from the language she used. Mutual assent is essential to the formation of a contract. It is not established that Mrs. Lally assented to an agreement to make mutual wills revocable on notice. The result is that element of mutuality of assent is lacldng. One contract is proved as to her; another as to Mrs. Cronen.

The plaintiff was, as we have indicated, disqualified as a witness in her own behalf against the executrix of her mother’s will under section 347 of the Civil Practice Act. Leaving such evidence out of the case, the unsubstantial evidence of ancient admissions of the mother to third parties alone remains. Such evidence establishes, not an agreement of Mrs. Lally with her daughter and stepdaughter to make mutual wills revocable on notice, but an agreement for a consideration to make irrevocable wills. Irrevocable wills, when regarded as contracts, are not revocable on notice, except as the parties so stipulate. Although it would have been much to plaintiff’s advantage to establish a mutual agreement to make irrevocable wills, she has made no attempt to show that such was her own agreement. Her own will was, according to her narrative, revocable on notice. She reserved to herself this important privilege. She must, in order to succeed, establish that the minds of the parties met and this she has failed to do. As a member of the bar, it should have occurred to her not to hazard her rights on the chances of death and uncertain memory but to preserve them in writing. (Tousey v. Hastings, 194 N. Y. 79.)

'Further considerations tend to defeat plaintiff’s cause of action.- Assuming the contract to be as she testifies, the rule is established in this State that where either party to such, a contract commits a breach thereof by subsequently executing without notice another will, devising and bequeathing his estate contrary to its terms and dies, the survivor, if any benefit has accrued to the deceased party by reason of the agreement, is upon proof of a continued performance in good faith upon her part, entitled to a specific performance of the contract. (Hermann v. Ludwig, 186 App. Div. 287, 306; affd., 229 N. Y. 544.) This right rests in the fiving as well as in the representatives of the dead. Some cases and authorities hold that equity will enforce the contract only against those who have had the benefit of it and taken property under a contractual will. If the one who dies first has revoked his will, the survivor is not injured for he has the like power of revocation ” says Alexander on Wills (§ 86). But plaintiff was injured by the breach of the agreement, if breach there was, because she gave up a claim for compensation for legal services on the strength of her mother’s agreement and forbore to assert her rights. She was, therefore, entitled to notice of revocation of her mother’s mutual will.

Knowledge, we take it, is the equivalent of notice. Plaintiff had knowledge that her mother had made a new will in ample time for her to change her own will or to take such other'action as she might decide to take before her mother’s death. She was not in any way prejudiced or injured by the revocation. The revocable will had been revoked and she had knowledge of the fact. Continued performance of her contract on her part was no longer in reliance on the promise of her mother. She took the risk when she made her contract and we are unable to perceive any reason why a court of equity now should come to her relief.

The judgment of the Appellate Division and that of the Trial Term should be reversed and the complaint dismissed, with costs in all courts.

Cardozo, Ch. J., Crane, Andrews, Lehman, Kellogg ' and O’Brien, JJ., concur:

Judgment reversed, etc.


author: Lehman, J.

text:
    Interborough Rapid Transit Company, Respondent, v. Edward P. Lavin, Individually and as President of the Consolidated Railroad Workers’ Union of Greater New York, et al., Appellants.
    Injunction — labor unions — contract — basis of permissible action by courts in labor disputes — right of members of labor union to persuade workers to leave employment — agreement by members of brotherhood of workers of a public service corporation not to join another labor union while so employed not a contract between corporation and employees — understanding that all employees must join brotherhood and abide by its rules to retain employment — members of other unions may not be enjoined from attempting to induce employees to join their unions — injunction prohibiting same too broad.
    1. The basis of permissible action by courts in labor disputes is the probability of threatened and unjustified interference with rights of the plaintiff and that basis must be shown even where the public has an interest in the outcome. (Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260, followed.)
    2. Wrong may not be imputed to members of a labor union if they seek to further their own lawful interests and purposes by argument and persuasion intended to induce workers to quit their employment or to join a union or association of other workers and through such union make collective demand for other terms of employment. Wrong begins, if at all, if they use unlawful means to carry out their purpose or perhaps if they attempt to induce the workers to conceal facts where concealment constitutes in effect deception, or to do other acts which contravene express or implied obligations to their employer upon which the employer has legal and equitable right to insist.
    3. Upon a motion for an injunction pendente lite prohibiting defendants from inducing employees of plaintiff, a public service corporation, from leaving its employ, a claim that its workmen have agreed collectively that they will not join or become identified in any manner with an association with which defendants are identified and that defendants may not lawfully induce plaintiff’s workmen to break this contract, is not justified by the facts that the plaintiff’s employees had organized a brotherhood, the constitution of which provides that each newly employed person “ shall upon appointment and as a condition of employment agree to join the Brotherhood ” and take an obligation to remain a member thereof during the time of employment and not become identified in any manner with any other labor organization. The clearly expressed contractual obligation is between the brotherhood and each of its members and is not in terms or effect a contract between the plaintiff and the brotherhood or its members.
    4. Where, therefore, the record does not show that the plaintiff exacted any express promise from any worker at the time he entered its employ to join the brotherhood and no other combination of labor, though it was understood that all workers must join the brotherhood and abide by the constitution to remain in plaintiff’s employ, and were prohibited from joining the union with which defendants are identified, that union may, despite the prohibition, attempt to recruit its membership from plaintiff’s employees, and may not be accused of malicious interference when it urges the employees to make their choice in its favor, even though the choice involves termination of their present employment and disruption of plaintiff’s business. The injunction as issued, therefore, in so far as it prohibited the defendants from inducing the plaintiff’s employees by lawful means to join their union, was beyond the power of the court.

      Interborough Rapid Transit Co. v. .Lavin, 220 App. Div. 830, reversed.
    (Argued November 21, 1927;
    decided January 10, 1928.)
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the first judicial department, entered July 15, 1927, which affirmed an order of Special Term granting a motion for an injunction pendente lite.

      Joseph Force Crater, Robert F. Wagner and Simon H. Rifkind for appellants.
    In the absence of a valid contract of employment for a definite period not yet expired, equity will not enjoin a labor union from using peaceable means to induce workmen to cease working for plaintiff. (Nat. Protective Assn. v. Cumming, 170 N. Y. 313; Foster v. Retail Clerks’ Protective Assn., 39 Misc. Rep. 48; Vail-Ballou Press, Inc., v. Casey, 125 Misc. Rep. 589; Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; Posner v. Jackson, 223 N. Y. 325; Lamb v. Cheney & Son, 227 N. Y. 418; Mills v. U. S. Printing Co., 99 App. Div. 605; Bossert v. Dhuy, 221 N. Y. 342; Reed Co. v. Whiteman, 238 N. Y. 545.) Plaintiff has failed to establish any contractual relation between it and its employees giving rise to any property rights with which defendants are interfering. (McCabe v. Goodfellow, 133 N. Y. 89; Hale v. Hirsch, 205 App. Div. 308; Robinson v. Dahm, 94 Misc. Rep. 729; Haebler v. N. Y. Produce Exch., 149 N. Y. 415; Bellon v. Hatch, 109 N. Y. 593; Burns v. Manhattan, etc., Soc., 102 App. Div. 467; Sheldon v. George, 132 N. Y. 470; Howland v. Lounds, 51 N. Y. 604; Fitch v. Snedaker, 38 N. Y. 248.) Plaintiff is not a party to the agreement between the employee and the brotherhood, nor is plaintiff the third person beneficiary of that agreement. (Fosmire v. National, 229 N. Y. 44; Nat. Bank v. Grand Lodge, 98 U. S. 123; Simson v. Brown, 68 N. Y. 355; Wheat v. Rice, 97 N. Y. 296; Embler v. Hartford Steam Boiler Ins. Co., 158 N. Y. 431; Garnsey v. Rogers, 47 N. Y. 233; Pardee v. Treat, 82 N. Y. 385; Lockwood v. Smith, 81 Misc. Rep. 334; Leary v. N. Y. C. R. R. Co., 212 App. Div. 689.) In any event the injunction as granted is unduly broad in scope and requires modification. (Hitchman Coal & Coke Co. v. Mitchell, 245 U. S. 229; Bossert v. Dhuy, 221 N. Y. 342; Kissam
      v. U. S. Printing Co., 199 N. Y. 76; Jacobs v. Cohen, 183 N. Y. 207; Mills v. U. S. Printing Co., 99 App. Div. 605; Sun Printing Association v. Delaney, 48 App. Div. 623.) The injunction should have been denied because of -the lack of clear and convincing proof of the right thereto. (Gambrill Mfg. Co. v. Am. Foreign Bank Corp., 194 App. Div. 425; Maloney v. Kalzenstein, 135 App. Div. 224; Grimm v. Krahmer, 112 App. Div. 489; Cohen v. United Garment Workers, 35 Misc. Rep. 748; Russell & Sons v. S. & G. L. Local Union, 57 Misc. Rep. 96; Reynolds v. Everett, 144 N. Y. 189; Butterick Pub. Co. v. Typographical Union, 50 Misc. Rep. 1.)

      James L. Quackenbush, Louis S. Carpenter and Albert J. Kenyon for respondent.
    The order appealed from should be affirmed and the question certified answered in the affirmative, if the order granting the injunction pendente lite was deemed necessary or warranted either in the exercise of judicial discretion as a means of preserving the status quo, or in order to safeguard the public interest. (Young v. R. & K. Gas Light Co., 129 N. Y. 57; City of Rochester v. Bell Telephone Co., 52 App. Div. 6; Third Ave. Ry. Co. v. Shea, 109 Misc. Rep. 18; Sultan v. Starr Co., Inc., 106 Misc. Rep. 43; People v. Federated Radio Corp., 216 App. Div. 250; 244 N. Y. 33; Gottlieb v. Matchin, 117 Misc. Rep. 128; Dailey v. City of New York, 170 App. Div. 267; 218 N. Y. 665; Knoth v. Manhattan Ry. Co., 109 App. Div. 802; 187 N. Y. 243; Health Dept. of the City of New York v. Purdon, 99 N. Y. 237; Blake v. Greenwood Cemetery, 14 Blatch. 341.) The defendants were and are seeking and threatening to destroy the Brotherhood of Interborough Rapid Transit Company Employees, the established method of collective bargaining between plaintiff and its employees, the good will, loyalty and efficiency of plaintiff’s employees, and to induce the entire body of plaintiff’s employees to break their contracts of employment and to strike by concerted action, thereby causing serious, continuous and irreparable injury to the plaintiff; and they are also threatening to interrupt, suspend and irretrievably impair the public service which plaintiff is rendering daily to millions of the inhabitants of the city of New York, thereby endangering the public interest and the rights, property and interests of the city of New York. (Hitchman Coal & Coke Co. v. Mitchell, 245 U. S. 229; Bittner v. W. Va.-Pittsburgh Coal Co., 15 Fed. Rep. [2d] 652; Kinlock Telephone Co. v. Local Union, 275 Fed. Rep. 241; Montgomery v. Pacific Electric Ry. Co., 293 Fed. Rep. 680; Eagle Glass Mfg. Co. v. Rowe, 245 U. S. 275; American Foundries v. Tri-City Central Council, 257 U. S. 184; Reed Co. v. Whiteman, 238 N. Y. 545; 3d Ave. Ry. Co. v. Shea, 109 Misc. Rep. 18; Auburn Draying Co. v. Wardell, 227 N. Y. 1; Posner v. Jackson, 223 N. Y. 325; Flaccus v. Smith, 199 Penn. St. 138; Grassi Contracting Co. v. Bennett, 174 App. Div. 244; Schlesinger v. Quinto, 201 App. Div. 487; Altman v. Schlesinger, 204 App. Div. 513; United Shoe Machinery Co. v. Fitzgerald, 237 Mass. 537.) The plaintiff’s right to injunctive relief against interference with its contracts of employment cannot be denied upon the ground that the contractual obligations are not fixed by agreements having a definite or limited time to run. (Reed Co. v. Whiteman, 238 N. Y. 545.) The contracts of employment between the plaintiff and its employees do not involve consideration of the doctrine of Lawrence v. Fox; the plaintiff is a principal party to its contracts and does not claim any rights as a third party beneficiary thereunder; but, in any event, the plaintiff is entitled to the full benefits of the contracts in question. (Hitchman Coal & Coke Co. v. Mitchell, 245 U. S. 229; First Nat. Bank of Sing Sing v. Chalmers, 144 N. Y. 432; Hamilton v. Hamilton, 127 App. Div. 871; Watkins v. Reynolds, 123 N. Y. 211; Gifford v. Corrigan, 117 N. Y. 257; Knowles v. Erwin, 43 Hun, 150; 128 N. Y. 633; Seaver v. Ransom,
      224 N. Y. 238; Brantly on Contracts [2d ed.], 253; Formire v. Nat. Surety Co., 229 N. Y. 48.)
   Lehman, J.

The plaintiff is a public service corporation. It operates a system of rapid transit railroads in the city of New York consisting of approximately one hundred and thirty-eight miles of elevated railroad and two hundred and forty-four miles of subway railroad. It is said that it transports over three million passengers daily on approximately nine thousand trains. It is evident that the general public of the city of New York is interested in the safe, efficient and unbroken operation of this great instrument for the transportation of passengers.

In 1916 there was a general strike of the employees operating the subway and elevated lines of the plaintiff. After the strike was ended a voluntary unincorporated association was formed under the name of the Brotherhood of Interborough Rapid Transit Company Employees.” Substantially the whole body of employees of the plaintiff joined the brotherhood. The members of the brotherhood adopted a constitution which was submitted to and approved by the board of directors of the plaintiff at a meeting held on August 30th, 1916. Thereafter the brotherhood prepared a new constitution which was submitted to and approved by the board of directors of the plaintiff at a meeting held on April 6th, 1920. That constitution is now in full force and effect. By its terms the constitution may be amended by a two-thirds vote of the members of the general committee at a regular meeting, provided that certain preliminary formalities have been complied with.

The constitution provides (section 9): The General Committee shall be vested with the power at all times to promote the welfare of the members of the Brotherhood and of the Company by amicable adjustment of all questions as to wages and working conditions that may arise from time to time. Section 10: The decision of the General Committee in all controversies between the Brotherhood and the Company shall be final.”

On June 30th the secretary of the brotherhood sent to Mr. Frank Hedley, the plaintiff’s president and general manager, a letter: “lam instructed by the general committee to confirm in writing, the understanding arrived at at the conference held at our office, Wednesday, June 30th, at which conference it was agreed by the committee on behalf of our members, to allow wages and working conditions to remain ‘As Is ’ for one year beginning July 1st, 1926.” Mr. Hedley acknowledged this communication in a letter dated the same day stating: “ I am in receipt of your letter of June 30th, 1926, confirming by direction of the General Committee, the understanding reached at a conference held at this office on Wednesday, June 30th, 1926, to the effect that wages and working conditions would remain as then existing for one year, beginning July 1st, 1926. This will confirm such understanding on the part of the management of the Company.”

At that time the defendants Lavin, Bark, Phelan and Walsh were employees of the plaintiff and members of the general committee of the brotherhood. Under the constitution of the brotherhood the employees of the plaintiff company were grouped according to the nature of their work and the place the work was performed. Each group constituted a local of the brotherhood. On July 1st, 1926, at the instigation of the defendants Lavin, Bark and Phelan, a meeting of the members of Local No. 7 of the transportation department, consisting of motormen and switchmen employed in the subway division of plaintiff’s railroad system, was held. By a vote of 579 against 7 the members rejected a proposal that the wages and working conditions of the plaintiff’s employees should remain unchanged. The defendants Lavin, Bark and Phelan made speeches at that meeting urging that those present should withdraw from the brotherhood and should form a new organization called by these defendants the Consolidated Railroad Workers Union of Greater New York. On the following day the defendants Lavin, Bark and Phelan, purporting to represent the men present at the meeting, delivered'to Hedley, plaintiff’s president and general manager, a written communication containing a demand for recognition of the Consolidated Railroad Workers of Greater New York and fot a wage increase to one dollar per hour for motormen and seventy-five cents per hour for switchmen. It concluded with the words: “ In the event that the above is not agreed to by you representing the I. R. T. Company by six (6) p. m. Saturday July 3d, 1926, these men will cease work at 12.01 a. m. on Tuesday, July 6th, Í926.” On July 6th a strike on plaintiff’s railroad lines, induced by Lavin, Bark and Phelan began and lasted till July 30th, 1926, causing a large financial loss to the plaintiff. The four individual defendants were leaders in the strike. After the strike was ended they were not employed by the defendant. By various means they have urged and are urging employees of the plaintiff corporation to become members of the Amalgamated Association of Street and Electric Railway Employees of America. They are trying to induce these employees to believe that they will be able to secure better pay and conditions of employment through demands made on their behalf by the Amalgamated Association than under the present system of bargaining by the brotherhood.

The plaintiff has brought this action to secure an injunction which would in effect prohibit the defendants from inducing the plaintiff’s employees by lawful or unlawful means from leaving the plaintiff’s employ. The complaint also asks damages for past acts. Upon motion by the plaintiff an injunction in broadest terms has been granted pendente lite. Leave to appeal has been granted by the Appellate Division and the question certified: Do the facts pleaded and the facts stated in the moving papers, and the public interest, justify, in the exercise of judicial discretion, an injunction pendente lite as prayed for or any part thereof? ”

Some of the “ facts pleaded and the facts stated in the moving papers ” are denied by defendants. Upon a motion for an injunction pendente lite, a substantial denial of a material allegation in the moving papers may become a decisive factor in the exercise of judicial discretion. In view, however, of the form of the question certified, we shall disregard all denials, at least until we have determined whether the allegations contained in the moving papers are in law sufficient to sustain the injunction.

Where there is proof of threatened wrong which the courts have power to enjoin, there may be room for the exercise of a sound judicial discretion in the determination of whether that power should be exercised. If the moving papers show that the defendants have done and are threatening to do acts which constitute a wrongful interference with, and disturbance of the relations existing between the plaintiff and its employees, doubtless the public interest in the safe, efficient and uninterrupted operation of the plaintiff’s railway system might be a consideration of some weight in determining whether an injunction should issue. In the recent case of Exchange Bakery & Restaurant, Inc., v. Rifkin (245 N. Y. 260), we have pointed out that the basis of permissible action by the court in labor disputes, as in other situations, is the probability of threatened and unjustified interference with rights of the plaintiff. That basis must be shown even where the public has an interest in the outcome.

The relations of the plaintiff and its employees are based on consent. Each has freedom of contract. The plaintiff has not entered into any contracts with the individual workers which binds the plaintiff to employ them for any definite period. The employees are not bound to continue in the plaintiff’s employ longer than they desire. Employment is terminable at the will of either party at a moment’s notice. We speak now only of those relations which according to the allegations of the moving papers existed at the time the injunction was granted. We do not pass upon the effect of new arrangements which, the plaintiff’s brief suggests, have been made since that time. Possibly they might present other questions than those which may be raised upon the present record.

The operation of the plaintiff’s railway requires a great organization. The affidavits show that it employs about fourteen thousand men. Some of these employees require peculiar skill and training. If they leave the plaintiff’s employ it may be difficult for the plaintiff to replace them. If the workers leave simultaneously in large numbers, doubtless this difficulty in finding others to fill their places would interfere, at least for a time, with the operation of plaintiff’s railways and cause the plaintiff great loss.

The plaintiff may doubtless determine for itself the conditions of employment upon its railways which will in its opinion best assure its own interests and the interests of the public, provided it can induce sufficient workers to accept these conditions. It may refuse to employ workers who will not accept a condition or make an agreement that they will not join a particular union or combination of workers while in the plaintiff’s employ. Doubtless such a condition, if imposed and accepted, lessens the power of the workmen to compel an employer to meet demands of the workers. The workmen may refuse to accept employment based on such conditions or on any other conditions which the employer chooses to impose. Demands of workmen may sometimes be fair and sometimes unfair. Combinations give the workmen a power of compulsion which may work harm to their employer, the public and even to themselves. Where the workmen do not combine they may be compelled by force of economic circumstances to accept unfair terms of employment. Such conflicting considerations of economic policy are not primarily the concern of the courts. Freedom of contract gives to workers and employers the right to fix by individual or collective bargaining the terms of employment acceptable to both. Unless the workers have by agreement, freely made, given up such rights, they may without breach of contract leave an employment at any time separately or in combination, and may demand new terms of employment which in turn must be fixed by bargain.

In this case -the plaintiff claims that its workmen have agreed collectively that they will not join or become identified in any manner with the Amalgamated Association of Street and Electric Railway Employees of America or with any other association of railway or other employees, and that the defendants may not lawfully induce the workmen to break this contract. The assertion in the moving papers that such a contract has been made constitutes only a conclusion. The facts shown must be examined to determine whether the conclusion is justified.

The constitution of the brotherhood provides that employees of the company, except officials and persons having power of discipline, shall be eligible to become members of the brotherhood, and that Beginning February 1st, 1920, each newly employed person who is eligible for membership in the Brotherhood shall upon appointment and as a condition of employment, agree to join the Brotherhood and to accept its obligations. Such persons, however, shall only be eligible to become members of the Brotherhood after having worked thirty days.” In another section, provision is made that all applicants for membership in the brotherhood shall take the obligation” as appearing in Appendix A “to the constitution.” That obligation reads as follows: “ In conformity with the policy adopted by the Brotherhood and consented to by the Company, and as a condition of employment, I expressly agree that I will remain a member of the Brotherhood during the time I am employed by the Company and am eligible to membership therein; that I am not, and will not become identified in any manner with the Amalgamated Association of Street and Electric Railway Employees of America, or with any other association of street railway or other employees, with the exception of this Brotherhood, and the Voluntary Relief Department of the Company while a member of the Brotherhood or in the employ of the Company, and that a violation of this agreement or the interference with any member of the Brotherhood in the discharge of his duties or disturbing him in any manner for the purpose of breaking up or interfering with the Brotherhood shall of itself constitute cause for dismissal from the employ of the Company.”

Here we have a clearly expressed contractual obligation between the brotherhood and each of its members. True, that contractual obligation may be terminated by any member by withdrawal from the plaintiff’s employ, with consequent separation of the company brotherhood. That circumstance does not, however, detract from its binding force, as long as membership in the brotherhood continues. We are here not concerned with the rights of the brotherhood, but with rights asserted by the employer. Question still remains whether the workers have assumed similar obligation to the plaintiff.

That question is not free from doubt. The constitution of the brotherhood was submitted to the approval of the directors of the plaintiff corporation before it became effective. That circumstance suggests that it was intended that the terms of the constitution should become a binding contract between the plaintiff and the brotherhood and its members. Some of the provisions of the constitution too give apparent force to the suggestion. On the other hand, the provision of the constitution that it may be amended by a two-thirds vote of the general committee of the brotherhood, and the absence of provision that changes so made must be approved by the plaintiff, tends to negative any conclusion that the constitution was intended as a contract with plaintiff, and there are other provisions of the constitution which it is difficult to believe that the company intended should be binding upon it.

Undoubtedly the primary purpose of the constitution was to create a form of combination of workmen which would be acceptable to the plaintiff and with which it would be willing to deal in arranging wages and terms of employment. The constitution must be submitted to plaintiff’s approval so that the plaintiff should be able to determine whether it would accept the combination so formed. The plaintiff’s officers perhaps had their own views as to the nature of the combination which would effect the best results. These views may be reflected in the constitution of the brotherhood. So long as the members of the brotherhood abided by its terms and joined no outside union or combination, the plaintiff might rest secure that collective demands of its workers would be formulated by them alone and that in collective bargaining the workers would be represented by members of the general committee of the brotherhood who were themselves in the plaintiff’s pay and employ. Perhaps the plaintiff preferred that the brotherhood should have real or apparent independence rather than be bound to it by contract or other ties than mutual advantage. The constitution of the brotherhood is not in terms or effect a contract between the plaintiff and the brotherhood or its members, but a factor recognized by both sides in the relations of the employer and employed.

The piaintiff might ban from its employ all who would not abandon, as a condition of employment, their privilege of joining any union or combination of workmen. It preferred to employ men who would become members of a company brotherhood whose constitution had been approved by it. The record does not show that the plaintiff exacted any express promise from any worker at the time he entered its employ to join the brotherhood and no other combination of labor while in its employ. Undoubtedly it was understood that all workers must join the brotherhood and abide by its constitution if they remained in plaintiff’s employ. The distinction is a close one between such an understanding and an actual contract. In this case such distinction has, perhaps, no practical effect. All knew that failure to abide by the understanding must result in discharge and that, as long as the employment continued, the brotherhood was the only association which might voice the collective demands of the employees. <*,**?#J-'k-mi

The organization of a working force of 14,000 men to operate the plaintiff’s great railway system is a considerable accomplishment. It constitutes a significant factor in the value of the plaintiff’s going business. The plaintiff’s employees may have the right to leave that organization singly or in combination, yet interference with that Organization by an officious outsider, merely, for the purpose of injuring the plaintiff, or inducement maliciously held out to the employees to leave the organization might constitute a wrong which the courts would have power to remedy. (Beardsley v. Kilmer, 236 N. Y. 80.) The defendants do not contend otherwise. They maintain that in the present case they are endeavoring to accomplish a lawful purpose by lawful means, and that they are not acting maliciously. ......

• The individual defendants are former employees of the plaintiff whose employment has been terminated because they instigated a concerted demand for change of conditions of employment. A combination of employees for such purpose is not unlawful, and even after an employee has left or been discharged he may continue efforts to effect such a combination, for the purpose of regaining employment upon conditions satisfactory to him. The defendants now, apparently, are working in behalf of the Amalgamated Association of Street and Electric Railway Employees of America. Though the plaintiff’s employees are prohibited by the plaintiff from joining that association or union, the union may, despite the prohibition, attempt to recruit its membership from-those employees, at least where the prohibition is not' part of a contract of employment for a definite term. It may be as interested in the wages of those not members, or in the conditions under which they work as in its own members because of the influence of one upon the other.” (Exchange Bakery & Restaurant, Inc., v. Rifkin, supra.) Collective bargaining by an association limited to employees of one company; prohibition by an employer against joining other labor associations may weaken or indeed threaten the existence of a general labor union. The union may argue the greater effectiveness of its own methods, the validity of its own principles. Where employees have freedom of choice, a labor union may not be accused of malicious interference when it urges the employees' to make that choice in its favor, even though that choice may involve termination of present employment and consequent disruption of a business organization. This court has not yet been called upon to decide whether employees may lawfully be urged to make a choice in breach of a definite contract. We do not decide that now. At least so far as the injunction prohibits the defendants from inducing the plaintiff’s employees to leave their positions and to terminate their employment, it is not justified upon this record.

The defendants have, however, gone farther. They have urged the plaintiff’s employees to join the Amalgamated Association secretly, and to conceal their new affiliations from their employer while remaining in its employ. It may be that such action on their part goes beyond the limits of permissible interference by an outsider in the relations between employer and employee. The plaintiff has made its choice to employ none who are members of other labor associations than the brotherhood. The defendants have the right to induce the plaintiff’s employees to join the Amalgamated Association though that may involve termination of their employment. They are under no obligation to the plaintiff to inform it that some of the plaintiff’s employees are joining the union, so that the plaintiff may exercise its choice of retaining or discharging the new members. They are not under any obligation even to urge or compel their new members to give their employer such information. The defendants are acting for themselves or the Amalgamated Association, and in taking lawful action to advance the interests of the members of that union they are under no affirmative duty of protecting the privileges or even rights of the plaintiff.

A more doubtful question is whether the defendants may not be under a duty to refrain from urging the plaintiff’s, employees to conceal from their employer that they are acting contrary to their employer’s expressed wish, if not command. Employment by the plaintiff is based upon the understanding that its employees are members of the brotherhood and abide by its rules. Membership in that association is not merely an inducement to employment; it constitutes an important factor in the relationship of employer and employed. The advice by the defendants to the employees to conceal their membership in the Amalgamated Association can have but one purpose: to induce the plaintiff through such concealment to continue an employment it would otherwise terminate. Exercise by the plaintiff of the privilege of freedom to discharge is to be nullified by concealment of the fact that the employees are acting contrary to the understanding upon which they were originally employed, though if such fact were known it would result in discharge by the plaintiff. Continuation of employment induced by such concealment is calculated to result in undermining the company brotherhood and in the substitution for it of another association of workers with power to compel the plaintiff to accept its demands. Even though we should assmnb, without deciding, that the plaintiff’s employees are themselves not under a contractual or other legal obligation to court discharge by information to the plaintiff that they are joining the Amalgamated Association, the question would still remain whether the defendants are justified in urging the employees to conceal facts which, if disclosed, would lead inevitably to their discharge. That question has not been argued on this appeal. We do not answer it now. Many factors must enter into its solution. Not all appear in this record. We merely state the question to point out that we are in no wise determining it.

Though we have decided that the defendants may not be enjoined from inducement by lawful means to leave the service of the plaintiff or to join an organization of employees other than the brotherhood or to make demands upon the plaintiff for increased wages, yet even such purposes may not be effected by unlawful means. In labor disputes, as in all other disputes, the courts may and should restrain acts which are themselves unlawful, regardless of the purpose of the acts. The defendants may not without the permission of the plaintiff enter upon the plaintiff’s property or place any signs thereon for the purpose of inducing even lawful action on the part of the employees. That would constitute a trespass. The defendants may not achieve their purpose through malicious falsehood and deceit. They may not use force or intimidation. They may not injure or deface the plaintiff’s property. The injunction includes prohibition of all such acts, and to that extent it is justified if the record shows that such acts are threatened. We shall not extend this opinion by analysis of the record upon that point. There is some evidence of threatened trespass; perhaps there is also some evidence, even though slight, of other threatened wrongs. Though the court at Special Term would have been justified" in issuing an injunction against any threatened use of unlawful means even to achieve a lawful end, and though we leave open the question of whether the defendants may be enjoined from inducing the plaintiff’s employees to conceal from the plaintiff that they had joined the Amalgamated Association, the injunction as issued, in its broad scope, was beyond the power of the court. Under these circumstances the orders should be reversed and the motion remitted to the Special Term in order that it may exercise its discretion as to whether an injunction of more limited scope should issue, upon the facts contained in' this record.

Both parties have upon this appeal cited decisions, most of them from other jurisdictions, which they urge support certain of their contentions. Some of the opinions in these cases are' of great weight because of the strength of the reasoning and the authority of the tribunals. The law that should be applied in this jurisdiction to the circumstances disclosed by the record has been established by repeated decisions of this court. Difficulty, if any, lies in the application of. established rules of law to particular facts. Attempt by analysis to reconcile or distinguish decisions where other courts have passed upon a state of facts in which analogy is more or less complete would be futile. It might even tend to confusion or deduction of rules which are rigid or arbitrary. In this State the courts may interpose their mandates between contesting parties only where there is attempt to effectuate an unlawful purpose, or to effectuate a lawful purpose by unlawful means. The privilege of freedom of contract may not be destroyed by force or fraud. Against the threatened use of such means the courts must éxercise their full powers unflinchingly. Business and property rights in their broadest sense should be immune from malicious interference. They rest upon established principles of law; they* are subject to attack within limits fixed by law. The plaintiff in the exercise of its lawful rights and to accomplish a lawful purpose has built up a great organization of workers who are willing to remain at work as long as the conditions of their work are satisfactory to them. No outsider may maliciously destroy the plaintiff’s freedom of choice of the men it will employ and of the conditions of employment. No outsider may maliciously destroy the workers’ freedom of choice whether they will accept and continue the employment offered to them. Wrong may not be imputed to the defendants if they seek to further their own lawful interests and purposes by argument and persuasion intended to induce the plaintiff’s workers to quit their employment or to join a union or association of other workers and through such union make collective demand for other terms of employment. Wrong begins, if at all, if the defendants use unlawful means to carry out their purpose or perhaps if they attempt to induce the plaintiff’s workers to conceal facts where concealment constitutes in effect deception, or to do other acts which contravene express or implied obligations to their employer upon which the employer has legal and equitable right to ipsist.

The question certified should be answered to the effect that an injunction for some part of the relief prayed for is justified by the record and the order of the Appellate Division and that of Special Term should be reversed, without costs to either party, and the motion remitted to Special Term to proceed in accordance with this opinion.

Cardozo, Ch. J., Pound, Crane, Andrews, Kellogg and O’Brien, JJ., concur.

Ordered accordingly.