author: Conway, Ch. J. Desmond, J.

text:
    In the Matter of Abe Klein, Appellant. Samuel A. Larner, Respondent.
    Argued October 12, 1955;
    decided January 12, 1956.

      Solomon Roshevsky for appellant.
    I. Absent strict statutory compliance, Special Term lacked jurisdiction to issue the subpoena duces tecum and the order directing appellant to be examined as a witness. (Matter of Bernhard v. Lefcourt, 233 App. Div. 609; Matter of Isaacs, 148 App. Div. 157; Matter of Jacobs v. Steinbrink, 242 App. Div. 197; Matter of Mitchel v. Cropsey, 177 App. Div. 663; Matter of Wellhofer, 18 N. J. Super. 197, 10 N. J. 321; Tiene v. Jersey City, 13 N. J. 478; Matter of Richardson, 247 N. Y. 401; Massett Bldg. Co. v. Bennett, 4 N. J. 53; North Bergen v. Gough, 107 N. J. L. 424; Prentis v. Atlantic Coast Line, 211 U. S. 210; Matter of Hecht v. Monaghan, 307 N. Y. 461.) II. A jurisdictional objection, as in the case at bar, is never waived. (Kamp v. Kamp, 59 N. Y. 212; Cameron Estates v. Deering, 308 N. Y. 24; Matter of Doca v. Federal Stevedoring Co., 308 N. Y. 44.)

      Bertram H. Siegeltuch and Walter M. Weisberg for respondent.
    I. The issuance of the original subpoena and of the order directing the appearance of appellant was clearly within the purview of article 30 of the Civil Practice Act. (Matter of Davies, 168 N. Y. 89.) II. The New Jersey proceedings in which the examination is sought are special judicial proceedings within the meaning and intent of section 310. (Massett Bldg. Co. v. Bennett, 4 N. J. 53; Tiene v. Jersey City, 13 N. J. 478; Matter of Wellhofer, 18 N. J. Super. 197, 10 N. J. 321; Matter of Richardson, 247 N. Y. 401; Matter of Tiene, 33 N. J. Super. 429.) III. Every interest of public policy and comity dictates an affirmance of the order below.
   Conway, Ch. J.

The material facts are not in dispute. Appellant, through his company the Hudson City Contracting Company, Inc., contracted to remove garbage from Jersey City, New Jersey. Pursuant to that agreement the company removed garbage from January 1,1953, through February 15,1953, when the contract was adjudged to be null and void by a judgment of the Superior Court of New Jersey (see Scatuorchio v. Jersey City Incinerator Auth., 14 N. J. 72 [1953]).

On January 28, 1953, a petition was filed by forty-nine freeholders of the City of Jersey City requesting an investigation into the financial affairs of that municipality, including alleged corruption in the awarding of the garbage removal contract to the appellant’s company. The Superior Court of New Jersey, pursuant to the statute authorizing that petition (Rev. Stat. of N. J., § 40: 6-1 et seq.), appointed an attorney, the respondent herein, as “ Expert ” to take the testimony concerning the alleged municipal corruption. Since appellant is a resident of the State of New York, respondent made application to and was appointed by the Superior Court of New Jersey “ * * * to appear before such court or courts of the State of New York and there, in accordance with the rules of practice in the courts of the State of New York, to apply for the issuance of subpcenae commanding the appearance of Abe Klein * * * before him and to take the testimony of Abe Klein * * * in matters relevant to the subject inquiry or matters reasonably calculated to lead to the discovery of relevant evidence ”, Accordingly respondent Earner came into New York and in January, 1954, applied to the Supreme Court for a subpoena duces tecum directing the appellant Klein to appear and to bring with him all his books, records and other data ‘1 pertaining to the submission of bids to the City of Jersey City or to the Jersey City Incinerator Authority for garbage contract removal by the Municipal Contracting Company and the Hudson City Contracting Co. * # * The subpoena was issued on January 29,1954, and was personally served upon the appellant. He failed to appear on the date specified. Thereafter, on February 16, 1954, appellant moved in the Supreme Court for an order striking out, vacating and quashing the subpoena. That motion was denied. The Appellate Division affirmed unanimously and we dismissed a motion for leave to appeal. We also dismissed an appeal taken as of right, on the ground that the order did not finally determine the special proceeding (Matter of Klein [Larner], 307 N. Y. 909 [1954]).

Following the denial of appellant’s motion to quash and vacate the subpoena duces tecum, the respondent Earner sought and obtained an order requiring the appellant to show cause why he should not appear to testify and be directed to bring his books and records with him. Compliance with that order was stayed pending an appeal to the Appellate Division from the order denying the motion to quash the subpoena. Thereafter an order was made directing appellant to appear for examination and to bring with him the above-mentioned books and records. From that order Klein appealed to the Appellate Division, which unanimously affirmed' it.

From that affirmance the appellant Klein has appealed by our permission and has brought up for review the prior affirmance of the order denying the motion to vacate and quash the subpoena duces tecum (Civ. Prac. Act, § 580).

The issue involves the interpretation and applicability of section 310 of the Civil Practice Act, which reads as follows: “ In what cases depositions may be tahen. A party to an action, suit or special proceeding, civil or criminal, pending in a court without the state, either in the United States or in a foreign country, may obtain, by the special proceeding prescribed in this article, the testimony of a witness, and, in connection therewith, the production of books and papers, within the state, to be used in the action, suit or special proceeding.”

However much we may desire to assist a sister State, our courts may not go beyond the statutory powers granted by our Legislature. Since this is a matter of procedural law, it is necessary to examine the statutes and decisions of New York — the forum — rather than those of New Jersey (see 3 Beale on Conflict of Laws, p. 1600, § 584.1, pp. 1604-1605; §§ 589.1, 590.1). The applicability of the quoted statute in matters arising before the courts of New Jersey has already been considered in New York. In Matter of Isaacs (148 App. Div. 157 [1911]), a New Jersey master in chancery obtained a subpoena duces tecum requiring the examination in New York of a resident of our State with regard to litigation then pending in New Jersey. It did not appear in the papers on the motion for the subpoena that any issues had yet been raised in the New Jersey controversy. Accordingly, the Appellate Division set aside the service of the subpoena duces tecum, writing that: ‘6 The question we have to deal with now relates to the law and practice of our own State and not to those of New Jersey. Under our rules issue must be joined before a subpoena can be directed in a case like the present, and the evidence sought must be relevant to such issue. That condition was not shown to exist in the present case ” (148 App. Div. 158-159).

Not only is the interpretation and applicability of section 310 governed and determined by examination of the statutes and authorities in our State, but our courts have held that the party seeking a subpoena pursuant to the statute must comply with and fulfill strictly its requirements and conditions. That was succinctly stated by the Appellate Division, together with the reason therefor, in Matter of Bernhard v. Lefcourt (233 App. Div. 609, 610 [1931]) as follows:

6 ‘ In order to protect the citizens of this -State it has been held that the moving papers must show that the application is made in good faith and to promote the ends of justice. The making of the application is not sufficient. It must appear that the purpose is proper, that an action is pending and that issues are involved.
“ The court had no power to issue a subpoena requiring the attendance of a person before a commissioner or other official to testify in an action pending in a foreign State unless there was a compliance with the statutes permitting such examination.” (Cf. Matter of Interocean Mercantile Corp. [Hoops], 204 App. Div. 284, affd. 236 N. Y. 587.)

Appellant argues that the subpoena duces tecum should never have been issued in the present case for the reason that the New Jersey investigation for which his testimony is sought is not an “ action, suit or special proceeding” within the meaning of section 310 of the Civil Practice Act. Before examining the statutes pursuant to which the investigation was commenced, it will be helpful to note the meaning given to the terms used in section 310 by our statutes and decisions.

In New York “ There is only one form of civil action. The distinction between actions at law and suits in equity, and the forms of those actions and suits, have been abolished ” (Civ. Prac. Act, § 8). Our statutes further provide that “ The word ‘ action/ when applied to judicial proceedings, signifies an ordinary prosecution in a court of justice by a party against another party for the enforcement or protection of a right, the redress or prevention of a wrong or the punishment of a public offense ” (Civ. Prac. Act, § 4; emphasis supplied). We define the term ‘6 special proceeding ” as “ Every other prosecution by a party for either of the purposes specified in the last section * * V» (Civ.Prac.Aet, § 5.)

Turning now to the present case, the New Jersey statutes (Rev. Stat. of N. J., § 40:6-1 et seq.) provide that if twenty-five or more qualified freeholders of the political subdivision involved swear to and subscribe to a petition setting forth “ that they have cause to believe that the moneys of such municipality or county are being, or have been, unlawfully or corruptly expended * * '* ”, then [a] judge of the superior court may, in his discretion, make a summary investigation into the affairs of ” such municipality (§ 40:6-1). During any such summary investigation ’ ’, the Judge is given the authority to exercise the subpoena powers of the Superior Court, and to take or order the taking of testimony and evidence “ in similar manner as in civil actions generally ” (§ 40:6-3).

It is noteworthy at the very outset to observe that the New Jersey Legislature deemed it necessary to authorize, specifically and expressly, the issuance of subpoenas and the taking of testimony in similar manner as in civil actions generally ”. Such a provision would be unnecessary if the New Jersey proceeding were a normal and customary judicial proceeding. Indeed, it has been said that the power to compel the attendance of witnesses is an inherent power of a court of justice in adjudging the matters before it (58 Am. Jur., Witnesses, § 9, p. 27, and cases cited). It should be noted in this respect that section 4 of the General Municipal Law of New York, to be discussed later, which authorizes a procedure very similar to the one in New Jersey herein, does not expressly authorize the issuance of such subpoenas or the taking of testimony or impose a liability for perjury. Those powers unquestionably exist and are presumed not to require express authorization in the statute.

In Matter of Hecht v. Monaghan (307 N. Y. 461, 469 [1954]), apropos of the activities of administrative bodies, we quoted with approval the language of the Supreme Court of the United States in Prentis v. Atlantic Coast Line Co. (211 U. S. 210, 226 [1908]) on the method of ascertaining the nature of a proceeding not strictly judicial. That quotation was that ‘ ‘ A judicial inquiry investigates, declares and enforces liabilities as they stand on present or past facts and under laws supposed already to exist. That is its purpose and end ” (emphasis supplied). That is in accord with the Civil Practice Act (§§ 4, 5). The important criteria are (1) the presence of parties, (2) the trial and determination of issues, and (3) a final order or judgment of rights, duties or liabilities.

The New Jersey statute, however, does not provide for any determination of issues, or for any final judgment or order — despite the care with which the subpoena and hearing powers of the New Jersey Judge are set forth. Bather the New Jersey law states only that‘ 1 The judge may, in his discretion, appoint experts to prosecute such investigations, and may cause the results thereof to be published in such manner as he may deem proper” (Bey. Stat. of N. J., § 40:6-2; emphasis supplied). No mention is made of any adjudication of rights or liabilities. 'No mention is made of any course of judicial action which is expected to follow such investigations, as, for example, an indictment which is usually expected to ensue after a Grand Jury investigation. It is not necessary that the Judge conducting the investigation take any action of any kind, for the statute merely says that he ‘ ‘ may cause the results thereof to be published in such manner as he may deem proper ” (§ 40:6-2). In the counterpart New York statute (General Municipal Law, § 4) not only does the above language appear, as it does in the New Jersey law, but in the very next paragraph of our statute it is provided that: ‘‘ The costs incurred in such investigation shall he taxed by the justice, and paid, upon his order, by the officers whose expenditures are investigated, if the facts in such affidavit be substantially proved, and otherwise, by the freeholders making such affidavit. If such justice shall be satisfied that any of the moneys of such town or village are being unlawfully or corruptly expended, or are being appropriated for purposes to which they are not properly applicable, or are improvidently squandered or wasted, he shall forthwith grant an order restraining such unlawful or corrupt expenditure, or such other improper use of such moneys. ’ ’ (Emphasis supplied.) The emphasized portions of that paragraph are not permissive, but mandatory. Thus, in New York, the proceeding is not merely “ to investigate as widely and as thoroughly as possible into the transactions * * * concerned * * * with the ultimate view of determining whether there was any wrongdoing or illegality * * *.” (See Matter of Tiene, 19 N. J. 149 [1955].) In New York both the imposition of costs as well as the injunctive order are mandatory if the facts alleged in the petition be established. In New Jersey, on the other hand, there is no requirement that costs be paid by the petitioners in the event they fail to establish their allegations, or by the officers investigated if the charges be proved. Bather the New Jersey law reads as follows (Rev. Stat. of N. J., § 40:6-2):

“ The judge may, if he deems it advisable, require the applicants to furnish a bond to be filed with the county clerk in such sum as he may deem necessary for the payment of the costs and expenditures of the investigation.
‘ ‘ The cost incurred in the investigation shall be taxed by the judge, and upon his order be paid by the disbursing officers of the county or municipality whose expenditures may have been investigated.” (Emphasis supplied.)

On its face, the New Jersey proceeding fails to meet the requirements of our concept of a judicial “ action ” or “ special proceeding ”, and as we have indicated previously herein (pp. 478-479, supra), it is our definition of terms which is determinative. Under the New Jersey statute there are no parties as such, there is no trial of any issue, there is no adjudication of rights or liabilities, there is no power to issue an injunction.

This conclusion as to the nature of the New Jersey investigation is in harmony with the decisions of the highest court of that State. In the first case of importance on this subject (Massett Bldg. Co. v. Bennett, 4 N. J. 53 [1950]), the plaintiffs sought to restrain the conduct of experts who were making an investigation pursuant to the statutes involved in the instant case. Those plaintiffs argued that these statutes impose upon a judge the performance of nonjudicial duties in violation of article III of the New Jersey Constitution of 1947, which provided for the distribution of powers among the three branches of government. The court, however, pointed out (p. 57) that the doctrine of separation of powers ‘ ‘ has nowhere been construed as creating three mutually exclusive water-tight compartments ”, with the implication that there may be an overlapping of powers and functions among the three branches of government in some cases. The court then proceeded to distinguish between the New Jersey law (Bey. Stat. of N. J., § 40:6-l et seq.) and a similar statute in New York which had been involved in Matter of Richardson (247 N. Y. 401), (i.e., Public Officers Law, § 34, as amd. by L. 1928, ch. 15).

In the Richardson case (supra) we had said (Cardozo, Ch. J.): “We think there has been an attempt by section 34 of the Public Officers Law, both in its original and in its amended form, to charge a justice of the Supreme Court with the mandatory performance of duties non-judicial. He is made the delegate of the Governor in aid of an executive act, the removal of a public officer (Matter of Guden, 171 N. Y. 529). At the word of command he is to give over the work of judging, and set himself to other work, the work of probing and advising. His findings when made will have none of the authority of a judgment. To borrow Bacon’s phrase, they will not1 give the rule or sentence.’ They will not be preliminary or ancillary to any rule or sentence to be pronounced by the judiciary in any of its branches. * * * From the beginnings of our history, the principle has been enforced that there is no inherent power in the Executive or Legislature to charge the judiciary with administrative functions except when reasonably incidental to the fulfillment of judicial duties (People v. Hall, 169 N. Y. 184; Matter of State Indust. Comm., 224N. Y. 13, 16).” (247 N. Y. 410.)

In distinguishing the Richardson case (supra), the New Jersey Supreme Court said (4 N. J. 58-59):

“ There the statute cast a mandatory duty on the justice; here the judge ‘ may ’ act ‘ in his discretion. ’ There the justice acted under an order from the governor directing him to investigate, and he was required to report to the governor; here, if he does see fit to act, he does not report to anyone. He ‘ may cause the results of such investigation to be published in such manner as he may deem proper,’ R.S. 40:6-1. There the proceedings were directed to the definite end of an executive removal of a local officer; here the statute had no such definite goal. The most that may happen at the end of the investigation, as such, is publication of the results. There the judicial action infringed on a specific constitutional prohibition; here it is still to he demonstrated that an investigation into the affairs of local government is not judicial.
“ * * * It cannot he said an investigation into the public affairs of a municipality or a county is not judicial in nature when it may lead to a civil suit for damages, or a proceeding in lieu of a prerogative writ, or a grand jury indictment or any one of a variety of statutory actions. That the statute stops short with a publication of the results thereof does not prevent the action being judicial in character, for it may lead to subsequent judicial action ” (emphasis supplied).

Further on in that opinion, the court took note of the fact that under the Revised Statutes of New Jersey judges are called upon to perform a number of nonjudicial functions, such as making appointments of county park commissioners, morgue keepers, water commissioners, etc., serving “ on boards or commissions in a nonjudicial capacity ’ ’, granting licenses, and what the Chief Justice denominated “ a heterogeneous group of nonjudicial responsibilities ”. (P. 60.) Nowhere in that opinion, however, does the court state that the investigation is judicial in nature; rather the opinion is couched in negative terms. Thus it is said that * * it is still to be demonstrated that an investigation into the affairs of local government is not judicial.” It cannot be said an investigation * * * is not judicial in nature ”, That the statute stops short with a publication * * * does not prevent the action being judicial in nature. ’ ’ That phraseology, coupled with the lengthy discussion of the admittedly nonjudicial duties and functions given to the New Jersey courts and the tendency of the New Jersey Legislature to delegate some of its investigative powers to the courts, seems to point clearly to the nonjudicial nature of the subject investigation.

The next important case was Matter of Wellhofer (10 N. J. 321 [1952]). There the Supreme Court of New Jersey — by a unanimous court — affirmed a decision of the Superior Court of that State. In its Per Curiam opinion, the Supreme Court expressly reserved decision on the question of the power of a judge conducting an investigation under section 40:6-l et seq. of the Revised Statutes of New Jersey to do more than make findings of fact and publish them. The Supreme Court did not, however, reverse the negative conclusion reached by the Superior Court ‘on that issue, and the Supreme Court agreed in all other respects with the Superior Court. In its opinion that latter court had written that “ The proceeding authorized by this statute does not constitute an ‘ action ’ as that word is generally defined ” (18 N. J. Super. 197 [1952]). The definition alluded to is almost identical with that given in section 4 of our Civil Practice Act (see p. 479, supra). The Superior Court then wrote that a proceeding under section 40:6-1 et seq. of the Revised Statutes of New Jersey, “ * * # results in no decision as to guilt or innocence, or as to any right of person or property. The statute merely provides a q^asi-judicial [sic] method of ascertaining and, if the judicial officer should so determine, of publishing the facts of a very particular and vital phase of governmental activity ” (18 N. J. Super. 202).

In Tiene v. Jersey City (13 N. J. 478 [1953]), the Supreme Court of New Jersey considered the very investigation for which Klein’s testimony has been sought. In its opinion the Supreme Court quoted approvingly from Massett Bldg. Co. v. Bennett (4 N. J. 53, supra). The court also said (p. 489): “ The purpose of the statute was discussed in North Bergen v. Gough, 107 N. J. L. 424, 427 (Sup. Ct. 1931): ‘ The Legislature clearly meant this statute to be the channel whereby a minority, having reason to suspect the unlawful or corrupt use of the moneys of the municipality, may present their apprehensions to a justice of the Supreme Court, whereupon that high judicial officer shall make an investigation, and thereupon, if he be satisfied of the propriety of so doing, may at his discretion appoint others, experts, to prosecute the investigation. There was thus set up a quasi judicial method, not of charging an offense or causing trial thereof, but of ascertaining and, if so the judicial officer should determine, of publishing the facts of a very particular and vital phase of governmental activity «= * s > r>

In the most recent opinion of the Supreme Court of New Jersey as to the same investigation (Matter of Tiene, 19 N. J. 149 [1955], supra) it was said: “ * * . in this statutory proceeding the expert is not restricted to any issues formulated by a set of pleadings or set forth in a pretrial order. The very purpose of his appointment is to investigate as widely and as thoroughly as possible into the transactions in which the financial affairs of the City of Jersey City were concerned. It is his duty to pursue his inquiry with the ultimate view of determining whether there was any wrongdoing or illegality in this regard limited only by the general scope of his appointment ’ ’.

The eases thus bear out the conclusion previously reached (supra, p. 482) from an examination of the statutes: an investigation pursuant to section 40:6-l el seq. of the Revised Statutes of New Jersey does not contemplate or involve the formulation and trial of issues, it does not constitute an adversary proceeding, it does not result in a final order or judgment adjudicating the rights and liabilities of parties. It is not, therefore, a judicial action, suit or special proceeding ” within the meaning and intent of section 310 of our Civil Practice Act. Instead this investigation is a proceeding whose very purpose is a broad and all-inclusive inquiry into municipal government looking to the publication of facts as such. Even that final result, however, is not mandatory, but rests in the discretion of the court. Such a proceeding does not fall within the definition of action, suit or special proceeding ” as those terms are used in our statutes. That being so, there was no authority for the issuance of the subpoena duces tecum, or for the subsequent order directing the examination of the appellant.

The order appealed from should be reversed, with costs in all courts, the order directing appellant to appear for examination vacated, and the motion to vacate the subpoena duces tecum should be granted.

Desmond, J.

(dissenting). This simple procedural statute should be liberally construed ” as the Civil Practice Act itself commands (§§ 2, 3). No public policy requires that this law be so straitly limited in its coverage as to deprive it of its useful function of facilitating the taking of testimony in this State for use in judicial proceedings pending elsewhere (see Matter of Roberts, 214 App. Div. 271, 275). It was our own Legislature, not some foreign body, which, so long ago as 1867 (see L. 1867, ch. 68, and, even earlier, Rev. Stat. of N. Y., pt. Ill, ch. VII, tit. Ill, art. IV, and Eldridge v. Chapman, 13 Abb. Prac. 68, n.), provided, without qualification or exception, that a party to an action, suit or special proceeding, civil or criminal, pending in a court without the state, either in the United States or in a foreign country might thus obtain testimony in this State. Such inclusive and sweeping language as “ action, suit, or special proceeding, civil or criminal ’ ’ must have been intended to cover any and every kind of foreign judicial proceeding, whatever its name or special features. Our sole inquiry is, therefore, as to whether the proceedings pending in the Superior Court of New Jersey under chapter 6 of title 40 of the Revised Statutes of New Jersey are judicial. Surely, for that we can take New Jersey’s answer, and that answer is in the affirmative (Massett Bldg. Co. v. Bennett, 4 N. J. 53; Matter of Wellhofer, 10 N. J. 321; Tiene v. Jersey City, 13 N. J. 478; Matter of Tiene, 19 N. J. 149). Confirmation thereof is available from the fact .that our own State has, under section 4 of the General Municipal Law, an investigative procedure, “ unmistakably judicial ” (see Matter of Richardson, 247 N. Y. 401, 412, 413), which is generally similar to the New Jersey procedures we are here examining.

The order should be affirmed, with costs.

Froessel, Yaw Voorhis and Burke, JJ., concur with Cowway, Ch. J.; Desmowd, J., dissents in an opinion in which Fuld, J., concurs; Dye, J., taking no part.

Order reversed, with costs in all courts, and matter remitted to Special Term for further proceedings in accordance with the opinion herein.


source: Caselaw Access Project

author: Froessel, J.

license: Public Domain

text:
    In the Matter of the Accounting of Guaranty Trust Company of New York, as Substituted Trustee of the Will of Elmer E. Smathers, Deceased, Respondent. Harriet B. Myers, Appellant; J. Harvey Turnure, as Special Guardian, et al., Respondents.
    Argued November 15, 1955;
    decided January 12, 1956.

      Richard H. Levet and William B. Levet for appellant.
    I. The burden is upon the trustee to show that it is entitled to extra commissions under the statute. (Mumford v. Murray, 6 Johns. Ch. 1; Matter of Corning, 160 Misc. 434.) II. The plain unambiguous words of the statute and the basic canons of statutory construction preclude the allowance of extra commissions to the trustee. (People v. Ryan, 274 N. Y. 149; People v. Shahun, 251 N. Y. 107; Matter of O’Neil, 91 N. Y. 516; Matter of Chase Nat. Bank v. Guardian Realties, 283 N. Y. 350; People v. Dethloff, 283 N. Y. 309; Cooper-Snell Co. v. State of New York, 230 N. Y. 249; Matter of Manufacturers Trust Co. v. Ralph, 276 App. Div. 118, 300 N. Y. 411.) III. Under the terms of the lease, the ultimate responsibility for management of the realty rests upon the tenant, not the trustee; and the trustee has neither managed nor become entitled to manage the real property. IV. The ease of Matter of Brennan (251 N. Y. 39) is distinguishable from this case, is not applicable to it, nor determinative of the issues of this case. There are substantial and decisive differences between the facts involved in the Brennan estate lease and the facts involved in the Smathers estate lease, and the cases are distinguishable by reason of the different wording of the statutes involved. V. Statements or comments made in the Brennan opinion with respect to the merits of the then effective 1923 statute did not take on the character of a legally effective precedent, but rather were made as obiter dicta and should now be treated as such. (Rolfe v. Hewitt, 227 N. Y. 486; Matter of Broderick v. City of New York, 295 N. Y. 363; Sterling v. Constantin, 287 U. S. 378; O’Donoghue v. United States, 289 U. S. 516; Osaka Shosen Line v. United States, 300 U. S. 98; Crane v. Bennett, 177 N. Y. 106.)

      Walter D. Fletcher, Edivard I. Devlin, Andrew Y. Rogers, Laurence A. Spelman and Gavin Miller for Guaranty Trust Company of New York, respondent.
    I. Respondent trustee had the right and duty to manage the real property in question so that, as a matter of law, it is entitled to the additional commissions given by subdivision 7 of section 285-a of the Surrogate’s Court Act. (Matter of Brennan, 251 N. Y. 39.) II. The lease in the present case, though not paralleling in all respects the provisions of the lease in the Brennan case, nevertheless gives the trustee rights and duties, which clearly bring the present case within the principle enunciated in the Brennan case because they are the rights and duties which, present in the Brennan lease, dictated the result in that case. III. The alterations in the relevant portions of section 285-a of the Surrogate ’s Court Act are purely formal and do not render the Brennan case distinguishable. IV. The decision in Matter of Brennan was not dictum. The decision on the point at issue in the Brennan case was one of two independent grounds on which the decision of this court could have rested. In such a situation neither of the two grounds considered in the decision can be considered dictum. (O’Brien v. Union Central Life Ins. Co., 207 N. Y. 180; Matter of Broderick v. City of New York, 295 N. Y. 363; Matter of Sidenberg, 147 Misc. 742; Matter of Byrnes, 159 Misc. 302.) V. The decision is Matter of Brennan should be upheld as a valid and correct enunciation of law. (Matter of Cole, 235 N. Y. 48; Pouch v. Prudential Ins. Co. of America, 204 N. Y. 281; Matter of Trosk v. Cohen, 262 N. Y. 430; Matter of Scheftel, 275 N. Y. 135; Matter of Popp, 123 App. Div. 2.) VI. There has been no practical construction of subdivision 7 of section 285-a of the Surrogate’s Court Act by the conduct of respondent trustee.

      Burton C. Meighan, Jr., special guardian for Sidney S. Bradfield and others, infants, respondents.
   Froessel, J.

On this appeal, we are asked to decide whether, under subdivision 7 of section 285-a of the Surrogate’s Court Act, a testamentary trustee is entitled to retain, in addition to normal commissions under the preceding subdivisions of said section, extra commissions of 6% on gross rents collected under the 99-year net lease made by the testator, where there was no evidence of any specific acts of management by the trustee.

Elmer Ellsworth Smathers died in 1928, leaving a last will and testament dated December 11,1926, which was duly admitted to probate by the Surrogate’s Court of Westchester County. Thereafter, on December 5, 1930, letters of trusteeship were duly issued to Guaranty Trust Company of New York (hereinafter called Guaranty), as substituted trustee, in which capacity it has continued to serve. Among the assets of the estate were certain premises known as 18 Broadway, New York City, which were then and are now occupied by Standard Oil Company of New York (hereinafter called Standard Oil) under a lease, commencing on March 1, 1920, and continuing until the last day of February, 2019. This lease was negotiated by the testator himself, and provided for a yearly rental of $250,000, payable in quarterly installments of $62,500.

As substituted trustee, Guaranty filed four intermediate accounts covering the period from December 5-, 1930, to April 15, 1948, all of which were settled and allowed by the Surrogate’s Court., The present dispute arose over- items contained in the fifth intermediate account which covers the period from April 15, 1948, to April 15, 1953. This account shows the regular receipt of rents from 18 Broadway at the rate of $62,500 quarterly, making a total collection for this last accounting period of $1,250,000. Pursuant to subdivision 2 of section 285,-a of the Surrogate’s Court Act, the trustee has retained regular commissions on these collections in the amount of approximately $25,000, to which no objection has been made.

For the period, from January 1, 1949, to June 30, 1953,, Guaranty for the first time retained additional commissions in the amount of $7,500 semiannually, making a total of $67,500 ‘ ‘ Total Extra Commissions ’ ’. It is the retention of these extra commissions to which appellant, an income beneficiary, objects. Guaranty claims that, it is entitled to this extra compensation under subdivision 7 of section 285-a of the Surrogate’s Court Act, which provides : “ Where a trustee is- for any reason or cause whatsoever entitled or required to collect the rents of and manage real property, the net amount of rents collected and not the gross amount shall be used in making computation of commissions allowed by subdivision two hereof, and in addition to the commissions hereinbefore provided he shall be allowed and may retain for such services six per centum of the gross rents collected, but there shall be only one such additional commission regardless of the number of trustees.. In the event that there are two or more trustees the additional commission herein provided for must be apportioned among’ them according to the services rendered by them respectively.” (Emphasis supplied.) Appellant contends that under the terms of the lease and will in this case the trustee is neither required, nor entitled, to manage said property, and has not done so, and therefore is not entitled to management commissions under the provisions of subdivision 7.

The lease is a net lease. Standard Oil, the tenant, is by its terms granted exceedingly substantial rig’hts which make it the virtual owner of the property, subject only to certain contingent rights in Guaranty, the successor to the original landlord’s rights. Among the rights and obligations of the tenant are the following: It assumed the performance of all covenants and conditions required to be kept by the landlord, “ the intention of the parties ” being that “ the Landlord shall be relieved of all obligations respecting the premises, and shall relinquish all control over the management of employees and the operation of the premises, and that the Tenant shall, for all purposes, assume the Landlord’s rights, privileges and obligations in reference thereto ” (emphasis supplied); the tenant is to make all repairs and furnish all new fixtures and equipment at its own expense; in case of fire, the tenant waived all rights to an abatement of rent; it agreed to indemnify the landlord against liability for personal injury or property damage arising out of the use, occupation, management or control of said premises there is no restriction against assignment or subleasing; the tenant may make party wall agreements, and may demolish, all existing structures and rebuild without abatement of rent, without the landlord’s consent or approval, and may use the premises for any lawful purpose; it is required to pay, in addition to rent, all taxes, assessments, water rents, utility and other charges, and remove all liens against the premises.

In case of nonpayment of rents, taxes, assessments, liens, or in the event of bankruptcy, insolvency, or abandonment of the premises, the landlord may remove the tenant by summary proceedings, re-enter and re-let the premises. There has been no default, actual or threatened.

The only evidence introduced at the hearing was the lease and the will. Guaranty expressly declined to introduce evidence showing any specific acts of management on its part. The Surrogate, though recognizing that the lease in this case was not the same as the lease in Matter of Brennan (251 N. Y. 39), held that the assumption and exercise ” of the “ ultimate responsibility ” for the administration of the demised premises constitutes management within the meaning of the statute ” (emphasis supplied), and dismissed the objections. The Appellate Division, which affirmed the Surrogate but granted leave to appeal to us, also recognized that the lease contained provisions by which the landlord was relieved of all obligations with respect to the management and control of the premises, and by which those obligations were assumed by the tenant ” (emphasis supplied). It nevertheless likewise felt itself bound by the Brennan case (supra). In our opinion, the lower courts erred in assuming that Matter of Brennan was controlling, since we are here concerned with a differently worded statute and a different fact pattern, as we shall presently point out.

At common law, executors and trustees served without compensation (Matter of Schinasi, 277 N. Y. 252, 258; McWhorter v. Benson, 1 Hopk. Ch. 28, 32, 40 [1823]; Green v. Winter, 1 Johns. Ch. 26, 37 [1814]; Bogert on Trusts and Trustees, Yol. 4, pt. 2, p. 354, § 974). In 1817 a statute was enacted enabling the Court of Chancery to make a reasonable allowance for the services of guardians, executors and administrators (McWhorter v. Benson, supra), but it was not until 1866 that an act was passed which expressly provided that trustees were entitled to the same commissions (Matter of Roosevelt, 5 Redf. 601, 607-608 [1882]).

The more recent enactments may be briefly noted. By chapter 649 of the Laws of 1923, section 285 of the Surrogate’s Court Act was amended to provide: “ Commissions of executor, administrator, guardian or testamentary trustee. * * * Where a trustee or executor is, by the terms of the instrument, required to collect the rents and manage real property, he shall be allowed and may retain, five per centum of the rents collected therefrom, in addition to the commissions herein provided.” By chapter 892 of the Laws of 1934, the provision relating to additional commissions was again amended, and it became subdivision 9 of section 285 and provided: 9. Where an executor, administrator, guardian or testamentary trustee is, for any reason or cause whatsoever, entitled or required to collect the rents of and manage the real property, he shall be allowed and may retain five per centum of the rents collected therefrom in addition to the commissions herein provided.” By chapter 694 of the Laws of 1943, the provisions relating to trustees were placed in the new section 285-a, and subdivision 6 of that section was in somewhat similar form (with some exceptions not here material) to present subdivision 7 as enacted in 1948 (L. 1948, ch. 582), quoted above and with which we are now concerned.

This subdivision in its present form has not heretofore been considered by us. In interpreting a statute, it is of course well settled that we must be guided by the rule that where the language is clear and unambiguous, the intent of the framers is to be first sought in the words and language employed and, if the words plainly and clearly express the sense of the framers, there is no reason to resort to other means of interpretation (Matter of Dammam, v. Board of Educ. of City of N. 7., 306 Ñ. Y. 532, 543; Meltser v. Koenigsberg, 302 N. Y. 523, 525; Matter of Rathscheck, 300 N. Y. 346, 350).

Turning, then, to subdivision 7 of section 285-a, it clearly appears that the 6% commission on gross rents collected and here claimed is “in addition to ” the regular commissions on net rents collected ”, as allowed by subdivision 2 (see Matter of Schinasi, supra, pp. 263-264; Matter of Sidenberg, 147 Misc. 742, 750). These additional commissions are obviously meant to be compensation for additional services, to wit, for the management of real property in addition to the collection of rents. The statute plainly indicates that the additional commissions may be retained ‘ ‘ for such services ’ Furthermore, if there is more than one trustee, the additional commissions must be apportioned ‘ ‘ according to the services rendered ’ ’ by them. Thus, if one trustee performs all “ such services ”, he would be entitled to all the additional commissions, and his cotrustees would receive nothing; and so, if no trustee performs any “ such services ”, no additional commissions may be retained. The words manage ” and services ” connote activities, and indicate that the Legislature required some definite action on the part of the trustee in addition to ” the mere passive receipt or collection of rents. Subdivision 2 of section 285-a does not use the word manage ” or “ services ”, but simply provides that A trustee shall * * * be entitled to commissions from the income of the trust ” at designated percentages on the “ income collected ”.

Respondent urges that in the event Standard Oil defaults in the payment of rent, liens or taxes, it may have to re-enter the premises. We do not think that anticipatory action, however remote, without more, can be equivalent to the management required by subdivision 7. The mere collection of rents here does not involve any more action than collection of interest on a bond or mortgage, or dividends on stock, and does not, therefore, constitute management. If the Legislature had intended allowing trustees an additional 6% of the gross rents collected merely for the receipt thereof, without the necessity of engaging-in some form of active management, it would have said so.

Respondent Guaranty relies heavily on Matter of Brennan (251 N. Y. 39, supra). Aside from the fact that when we there held that the Surrogate had no power to modify his own decree that disposed of the appeal, our further discussion with respect to the allowance of additional commissions does not sustain the respondent’s position on this appeal for the following reasons:

(1) The language of the present section 285-a is different from that of former section 285 as it read when the Brennan case (supra) was decided in 1929. The phrases “ for such services ” and “ according to the services rendered by them ”, heretofore adverted to, were added by the 1943 and 1948 amendments. Respondent glosses over this by merely stating that these amendments are of a purely formal nature and have no bearing-on the question here before the court. To the contrary, we think these additions are most significant. It is well settled that in the interpretation of a statute we must assume that the Legislature did not deliberately place a phrase in the statute which was intended to serve no purpose (Matter of Zellner [Brooklyn Trust Co.], 299 N. Y. 243, 247; People v. Dethloff, 283 N. Y. 309, 315), and each word must be read and given a distinct and consistent meaning (New York State Bridge Auth. v. Moore, 299 N. Y. 410, 415-416; Palmer v. Van Santvoord, 153 N. Y. 612, 616). The only reasonable conclusion that can be reached is that the Legislature clearly intended — and so indicated— that the extra compensation for management can be retained only “ for such services ”, i.e., for the active performance of the duties and obligations connected with the real property, and not for just ‘ ‘ general responsibility ’ ’ remotely dependent “ on future contingency ” as respondent contends.

(2) The fact pattern in the Brennan case (supra) is clearly different from that in the case at bar, and what is said in a judicial opinion must be confined by the facts of the case in which it was uttered (Crane v. Bennett, 177 N. Y. 106, 112). It is true that in both leases a number of the standard contingent clauses are similar, as, for example, the tenant was required to pay all taxes and liens; and the landlord reserved the customary right to pay these charges if the tenant defaulted and to treat them as additional rent, for the default of which the landlord reserved the right of re-entry. Both leases also contain the usual provisions for re-entry if the tenant becomes insolvent.

However, there are substantial differences in the remaining essential clauses of the two leases which establish that the Brennan trustee had many duties which it had necessarily to fulfill, as, e.g., the Brennan lease was negotiated by the trustee, a very active duty in itself, whereas the subject lease was negotiated by the testator himself ten years before Guaranty had any interest in this property; the use of the Brennan property was severely restricted to the operation of a theatre and studio, whereas Standard Oil may use the property for any lawful purposes; the landlord could enter upon the Brennan premises and make repairs; the Brennan tenant could not assign the lease without the written consent of the trustee; if the building be totally or partially destroyed, the Brennan tenant was to be discharged, while Standard Oil will still remain liable for the rent; the Brennan tenant had to prepare plans and submit them to the landlord before he could make any alterations, and also had to secure a bond to cover the cost; and, most significant, there is no release clause in the Brennan lease comparable to that in the subject lease, which provides, as hereinbefore more fully noted, that the “ Landlord shall be relieved of all obligations respecting the premises, and shall relinquish all control over the management of employees and the operation of the premises.” (Emphasis supplied.)

Thus, under the Brennan lease, the trustee had continuing rights and duties of management which do not appear in the present lease. Indeed, if ever there were a lease where the landlord had virtually nothing to do but collect rent, this is such a case. As we said in the Brennan case (supra), it is the “ exercise ” of responsibility for “ directing, supervising, overseeing, administering and controlling the property ’ ’ that ‘ ‘ constitutes management within the intent of the statute ” (p. 44). The evidence here is that Guaranty did nothing beyond receiving the rent.

In this case, Guaranty has already retained for the accounting period approximately $25,000 in regular commissions for the collection of rent for these premises which, to all intents and purposes, are owned by the tenant for a period of 99 years. It now seeks an additional $67,500 for performing the same acts, and justifies this by claiming that at some future time it may have to render active service. If we adopt this view, all trustees would automatically be entitled to charge, for the mere collection of rents, an additional 6% based on the gross rents collected, and there would be no case in which a trustee could be denied this additional compensation. That result in the instant case would mean that the trustee would receive additional commissions of close to a million dollars for the remainder of the lease; and for its total commissions on this property it could retain an entire year’s rent ($250,000) out of every 12% years’ income. Upon this record, it seems clear to us that respondent has no proper claim to the additional commissions under the statute.

The order of the Appellate Division appealed from should be reversed, the decree of the Surrogate modified by sustaining the objections of the appellant, disallowing to respondent additional commissions under subdivision 7 of section 285-a of the Surrogate’s Court Act, and the matter remitted to the Surrogate for further proceedings not inconsistent with this opinion, with costs in all courts to the appellant payable out of the estate.

Conway, Ch. J., Desmond, Fuld, Van Voorhis and Burke, JJ., concur; Dye, J., taking no part.

Order reversed, etc.


text:
    Kerstin Swensson, Appellant, v. New York, Albany Despatch Company, Inc., Defendant, and Ward La France Truck Corp., Respondent. Yolanda Trimboli, as Administratrix of the Estate of Anthony J. Trimboli, Deceased, Appellant, v. Ward La France Truck Corp., Respondent.
    Argued October 11, 1955;
    decided January 12, 1956.

      Isadore B. Hurwitz and Solomon Feldman for ICerstin Swensson, appellant.
    I. A prima facie case of negligence and causation was proved. (Didinger v. Pennsylvania R. R. Co., 39 F. 2d 798; Piwowarski v. Cornwell, 273 N. Y. 226; Palsgraf v. Long Is. R. R. Co., 248 N. Y. 339; MacPherson v. Buick Motor Co., 217 N. Y. 382; Van Dorn v. Jackson Auto Sales, 258 App. Div. 745, 283 N. Y. 628; Jones v. Raney Chevrolet Co., 217 N. C. 639; Egan Chevrolet Co. v. Bruner, 102 F. 2d 373; Oliver v. Bereano, 267 App. Div. 747, 293 N. Y. 931; Betzag v. Gulf Oil Corp., 298 N. Y. 358; Noseworthy v. City of New York, 298 N. Y. 76.) II. The declarations of the deceased driver testified to by Miss Swensson, to the effect that the brakes were not functioning, were properly admitted as part of the res gestae. III. The maxim res ipso loquitur is applicable to this -case. Hence, a prima facie case for the jury to pass upon was made out. (Galbraith v. Busch, 267 N. Y. 230.) IV. The trial court' erroneously excluded appellant’s expert witness’ testimony concerning an inspection of the mechanism made five days after the happening of the accident. (McCulloch v. Dobson, 133 N. Y. 114; Mironchik v. Sagadahoc S. S. Corp., 255 N. Y. 81; Peil v. Reinhart, 127 N. Y. 381; Dydkiewicz v. Unterberg Realty Corp., 222 App. Div. 485; Mansfield v. City of New York, 119 App. Div. 199.)

      Bernard Meyerson, Solomon Z. Ferziger and Irving D. Josefsberg for Yolanda Trimboli, appellant.
    I. There is ample testimony to support the verdict rendered in favor of plaintiff administratrix at Trial Term. (Peters v. New York Bd. of Fire Underwriters, 276 App. Div. 846; Garrow v. State of New York, 268 App. Div. 534, 294 N. Y. 741; Trimble v. City of New York, 275 App. Div. 169; Noseworthy v. City of New York, 298 N. Y. 76.) II. The duty of defendant to see that its tractor was equipped with proper brakes was absolute. (Donovan v. Garvas,
      121 Misc. 24; Oliver v. Bereano, 267 App. Div. 747, 293 N. Y. 931; Van Dorn v. Jackson Auto Sales, 283 N. Y. 628; Elfeld v. Burkham Auto Renting Corp., 299 N. Y. 336.) III. Defendant’s counsel took no exception to the charge so they must concede that the charge is the law of the case. (Saulsbury v. Braun, 223 App. Div. 555, 249 N. Y. 618.) IV. The statements of deceased were properly admitted in evidence as part of the res gestae. (People v. Del Vermo, 192 N. Y. 470; Martin v. New York, N. H. & H. R. R. Co., 103 N. Y. 626; People v. Sprague, 217 N. Y. 373.) V. There was sufficient evidence to support the verdict and the Appellate Division erred when it dismissed the complaint. (Piwowarski v. Cornwell, 273 N. Y. 226; Ingersoll v. Liberty Bank of Buffalo, 278 N. Y. 1; White v. Lehigh Valley R. R. Co., 220 N. Y. 131; Sagorsky v. Malyon, 307 N. Y. 584; Stein v. Palisi, 308 N. Y. 293.)

      John V. Downey, Luke A. Burke, Thomas F. Cohalan, Eugene J. Smith and John W. Collopy, Jr., for respondent.
    I. Both plaintiffs failed to prove the allegations of their complaints that the brakes of the tractor were defective. II. The evidence by plaintiff Swensson was hearsay. It was not part of the res gestae and was, therefore, inadmissible. (Ingersoll v. Liberty Bank of Buffalo, 278 N. Y. 1; Handel v. New York R. T. Corp., 252 App. Div. 142, 277 N. Y. 548; Waldele v. New York Central & H. R. R. R. Co., 95 N. Y. 274; Greener v. General Elec. Co., 209 N. Y. 135.) III. The Appellate Division properly dismissed both of plaintiffs’ complaints in the court below. (Higgins v. Mason, 255 N. Y. 104; Meitzler v. Hill, 233 App. Div. 503; Lahr v. Tirrill, 274 N. Y. 112; Malament v. Lidsky, 283 App. Div. 135; Bottalico v. City of New York, 281 App. Div. 339.)
   Froessel, J.

Plaintiffs in these consolidated actions have recovered a judgment against defendant Ward La France Truck Corp., hereinafter called Ward. The Appellate Division by a divided court has reversed the judgment and dismissed the complaints, two of the Justices voting for a new trial. The majority noted that, if they were not dismissing the complaints, they too would have granted a new trial upon the ground that the verdict was contrary to the weight of the credible evidence.

On this appeal, then, we need only consider whether plaintiffs have established a prima facie case under the law as stated by the Trial Judge. Since no exception was taken to the charge, it became the law of the case (Leonard v. Home Owners’ Loan Corp., 297 N. Y. 103, 104; Buckin v. Long Is. R. R. Co., 286 N. Y. 146, 149; Saulsbury v. Braun, 223 App. Div. 555, affd. 249 N. Y. 618). If a prima facie case has been made out, the Appellate Division was without power to dismiss the complaint (Sagorsky v. Malyon, 307 N. Y. 584, 586; Scantlebury v. Lehman, 280 App. Div. 978, affd. 305 N. Y. 713).

Upon this record, the jury was entitled to find the following facts: On the afternoon of October 23, 1952, a Diamond T tractor, Model 660, was delivered by Ward to the defendant New York, Albany Despatch Company, Inc., hereinafter called Albany Despatch, which latter defendant the jury exonerated. The tractor was not new, having been repossessed by Ward earlier that month. At that time it had been driven approximately 18,000 miles. The tractor was lent by Ward to Albany Despatch for demonstration purposes, to be taken on a trial run to Plattsburgh, New York, and return, with a view to its purchase by the latter if it proved satisfactory. Thus the very purpose of this trip was to ascertain if the tractor was in good condition after such a run. It had just been reconditioned by Ward, and, according to its secretary, “ the truck was put in perfect shape ”.

On the same day, Albany Despatch instructed its employee Anthony Trimboli to take the tractor with a loaded trailer attached on an overnight trip to Plattsburgh. Trimboli called plaintiff Kerstin Swensson and asked her if she would like to ride upstate with him for a few hours. She agreed and rode with him all night until the tractor and trailer approached Plattsburgh early the next morning. Miss Swensson stopped at a house where she engaged a room in her own name, and went to sleep, while Trimboli proceeded a little further into Plattsburgh, and someone else drove the tractor and trailer to Saranac Lake and return. They again met and left Plattsburgh between 6:00 p.m. and 7:00 p.m. the same evening, riding in the same tractor which was now attached to a different trailer.

Approximately three hours later, while traveling at about 45 miles per hour, the tractor and trailer proceeded down a slight incline in the road. At this point the road curved slightly to the right. Trimboli attempted to put on the brakes and told Miss Swensson that the air was gone ”, and that the regular brakes did not work either. The tractor and trailer, which according to a disinterested witness were going along in a straight line ”, then went off the road and overturned. As a result, Trimboli died in the crash and Miss Swensson, who was pinned in the tractor for four hours, suffered very serious injuries.

The trial court, in a careful, detailed and comprehensive charge, to which no exceptions were taken, submitted the case to the jury on the theory of the driver’s negligence and on the theory of defective brakes. Then with reference to respondent Ward herein, the court, pursuant to said'respondent’s request, charged the jury that to find the defendant Ward La France liable they must find that it furnished or supplied to New York and Albany Despatch an unsafe vehicle with knowledge that it was unsafe or that by a reasonable inspection it should have known that it was not fit and safe for the purposes for which it was intended.” The test for respondent’s liability, absent plaintiff’s contributory negligence, was stated to be: whether it acted as a person of ordinary prudence would have acted in using due care in the handling of the tractor in question with regard to the inspection made and with regard to its condition when delivered to Albany Despatch. If there was no defect, or if Ward acted prudently despite a defect in the brakes, the jury was told that Ward would not be liable. The jury specifically found for the plaintiffs on the theory that the tractor was defective and thus not properly inspected. In doing so they exonerated the driver of negligence. The jury deliberated almost eleven hours, meanwhile returning to the courtroom twice to ask pertinent intelligent questions that reflected a high sense of duty and understanding.

Thus we must determine whether plaintiffs’ evidence presented facts and circumstances from which respondent’s negligence, and the cause of the accident by that negligence, may be reasonably inferred (Betzag v. Gulf Oil Corp., 298 N. Y. 358, 365), but plaintiffs were not required to offer evidence which positively excluded every other possible cause of the accident (Rosenberg v. Schwartz, 260 N. Y. 162, 166).

Plaintiff Trimboli’s decedent died immediately in the accident, thus leaving Miss Swensson as the only person who could testify as to what occurred. As to the death action, the plaintiff is not held to as high a degree of proof of the cause of action as where an injured plaintiff can himself describe the occurrence (Noseworthy v. City of New York, 298 N. Y. 76). Miss Swensson stated that as the tractor and trailer rounded the top of the hill and proceeded around the slight curve to the right and down the slight incline, it began to gather speed due to its own weight; the load alone weighed 22,000 pounds. The driver, Trimboli, as already noted, told her that “ the air was gone ”, and attempted to stop the tractor with a brake that he was manipulating with his left hand and with the regular foot brakes. He stated that the other brakes did not work either.

Respondent objected to the admission of Trimboli’s statements about the brakes on the ground that they were hearsay and not part of the res gestae. There is no doubt that the statements were hearsay declarations, but they fall within a well-recognized exception to the hearsay rule: that spontaneous declarations which are part of the res gestae are admissible (People v. Curtis, 225 N. Y. 519; People v. Del Vermo, 192 N. Y. 470; Scheir v. Quirin, 77 App. Div. 624, affd. 177 N. Y. 568; Richardson on Evidence [8th ed.], § 263, pp. 241-242; 6 Wigmore on Evidence [3d ed.], §§ 1745-1750).

In People v. Curtis (supra, p. 522), the rule was stated thus: “ The admission in evidence of the declarations of an injured person constitutes an exception to the general rule that excludes hearsay evidence, and is justified when the declarations are so spontaneous or natural as to exclude the idea of fabrication.” And in Coheir v. Quirin (supra), decedent fell into a vat of boiling liquid, then ran in intense pain into a boiler house about 60 or 70 feet away, and spontaneously cried out: <£ Oh, George, I am scalded, the plank slipped off and throwed me in.” No one saw the accident. It was held (pp. 628-629): “In order to make a declaration of this kind competent it seems to be settled that it must bear a close relation to the principal transaction and that it must be a spontaneous exclamation, an outburst of the feelings, and not a mere narration of a past event. ’ ’

This case is almost a classic example of res gestae. Here the decedent made the spontaneous statement in the course of, and within ten seconds of the final happening of, the startling event itself, it related to the circumstances of the event, and was made before he had either time, opportunity or inclination to fabricate. This distinguishes it from the cases cited by respondent, each of which held the statement to be one of a past narrative, and therefore inadmissible; in these same cases, the rule as applied by the trial court here is definitely recognized. As, for example, we said in Greener v. General Elec. Co. (209 N. Y. 135, 138): ‘ ‘ The distinction to be made is in the' character of the declaration; whether it be so spontaneous, or natural, an utterance as to exclude the idea of fabrication; or whether it be in the nature of a narrative of what had occurred.”

It thus appears that the statements made by Trimboli came clearly within the rule, and were therefore properly admitted as part of the res gestae. It may be noted in passing that plaintiff Swensson reported these statements in the hospital emergency room promptly upon her admission, and before having any counsel. It will be recalled that she also testified Trimboli had been lawfully driving 45 miles per hour, and that she observed him trying to use the foot and hand brakes simultaneously with his declaration that they did not work, and that, notwithstanding, the truck gained speed and went off the road.

In addition, plaintiffs introduced unrefuted expert testimony to the effect that although brake linings can be seen through a peephole, this is not good practice for inspecting them. The expert also testified that a brake drum could not be inspected through a peephole, but that it had to be removed, and that the only proper way to inspect brakes is to pull off the wheels and examine their parts. In answer to a hypothetical question, he stated that, under the circumstances of this accident, the tractor and trailer should have stopped within 15 to 20 feet if the brakes were working properly. We should keep in mind here that defendant Ward was a distributor of these tractors, and had reconditioned ” this tractor; it was not the ordinary secondhand car dealer.

Moreover, Louis La Mothe, a mechanic employed by respondent, testified that he inspected the truck involved in October, 1952, and found the brakes working properly. But, while he stated that he looked at the brake linings only through the peepholes, he had previously testified on an examination before trial as follows: ‘1 What inspection did you make of the brake lining?” Answer: “ None.” He also admitted that he did not examine the brake drums. Finally, there is the testimony of the eyewitness to the accident, who stated that the truck was going in a straight line after it reached the top of the hill and was not going from one side of the road to the other, which might be indicative of careless driving.

Of course there was evidence showing that the brakes were operating efficiently prior to the accident, which the Appellate Division outlined “ As against ” the plaintiffs’ evidence. Only a jury is constitutionally endowed with the right to pass on conflicting evidence, as well as the credibility of witnesses (Piwowarski v. Cornwell, 273 N. Y. 226, 229).

Despite the evidence tending to show that the brakes were operating properly before the accident, we certainly cannot say that ££ ‘ by no rational process ’ could the jury have based a finding in favor of plaintiffs on the evidence here presented (Blum v. Fresh Grown Preserve Corp., 292 N. Y. 241, 245-246).” (Stein v. Palisi, 308 N. Y. 293, 296.) Giving plaintiffs the benefit of every favorable inference which can reasonably be drawn from the facts (Sagorsky v. Malyon, 307 N. Y. 584, supra), the jury could have found that the accident was caused by defective brakes, and that respondent, a distributor of tractors, who had allegedly “ reconditioned ” this one and put it in £< perfect shape ”, did not use proper care in inspecting and reconditioning it. There is, in support of these findings, the evidence heretofore outlined.

The mere fact that a piece of machinery functioned properly on prior occasions does not mean that it was in good condition at the time of the accident. It had been on the road for over 18,000 miles. This and the trips to Paramus, New Jersey, Plattsburgh and Saranac Lake could well have weakened an otherwise readily observable defect in the brakes and finally caused this accident. We are therefore of the opinion that plaintiffs made out a prima facie case (Oliver v. Bereano, 267 App. Div. 747, affd. 293 N. Y. 931; see, also, Elfeld v. Burkham Auto Renting Co., 299 N. Y. 336; Van Dorn v. Jackson Auto Sales, 283 N. Y. 628; Jones v. Raney Chevrolet Co., 217 N. C. 693; Egan Chevrolet Co. v. Bruner, 102 F. 2d 373). The Appellate Division therefore had no power to dismiss the complaint, but should have ordered a new trial (Sagorsky v. Malyon, supra).

The judgment appealed from should be modified by providing for a new trial instead of the dismissal of plaintiffs’ complaints, and, as so modified, affirmed, with costs to abide the event.

Conway, Ch. J., Desmond, Ftjld and Btjbke, JJ., concur with Fboessel, J.; Van Voobhis, J., dissents and votes to affirm upon the ground that there is no evidence that the accident was caused by a defective brake drum; Dye, J., taking no part.

Judgment accordingly.


author: Van Voorhis, J.

text:
    Douglas Ripley et al., Respondents, v. Douglas F. Storer et al., Appellants, et al., Defendant.
    Argued October 17, 1955;
    decided January 13, 1956.

      Lawrence E. Bobker and David M. Engelson for Douglas F. Storer, appellant.
    I. The three prior adjudications are final and dispositive of all of the issues in the present action and res judicata of respondents’ claims herein. (Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304; Evergreens v. Nunan, 141 F. 2d 927, 323 U. S. 720; Johnson v. Muelberger, 340 U. S. 581; Partmar Corp. v. Paramount Corp., 347 U. S. 89.) II. Reversible error was committed by the trial court when it refused to admit into evidence the testimony and exhibits in the former adjudications of Justice Eageb and Justice Steuee. (Barber v. Ellingwood, 137 App. Div. 704; Peoples Gas & Elec. Co. v. City of Oswego, 207 App. Div. 134; Emich Motors v. General Motors, 340 U. S. 558; Holland v. Spear & Co., 193 Misc. 524; New York Central R. R. Co. v. Barnet, 192 App. Div. 784.)

      J. Addison Young, II, for Harry E. Colwell, Jr., appellant.
    I. The judgment in the action before Justice Eageb was a bar to the amendment of the certificate of incorporation sought in this action. (Lorillard v. Clyde, 122 N. Y. 41; Reich v. Cochran, 151 N. Y. 122; Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304; Christal v. Petry, 275 App. Div. 550, 301 N. Y. 562; Wygod v. Makewell Hats, 265 App. Div. 286.) II. The trial court was in error in not permitting proof at the trial of the agreements between respondent Ripley and appellant Storer. (Merrihew v. Kingsbury, 150 App. Div. 40; Milliken v. McGarrah, 164 App. Div. 110; Gedney v. Diorio, 190 App. Div. 85; Goldstein v. Schleifer, 209 App. Div. 899; Road Garage Corp. v. Marcus, 229 App. Div. 150; Markowitz v. Markowitz, 119 Misc. 609.) III. The trial court was in error in finding that the proposed amendments to the by-laws do not violate section 27 of the General Corporation Law. (Hoyt v. Thompson’s Executor, 19 N. Y. 207; People ex rel. Manice v. Powell, 201 N. Y. 194; McQuade v. Stoneham, 263 N. Y. 323; Benintendi v. Kenton Hotel, 294 N. Y. 112; Long Park, Inc., v. Trenton-New Brunswick Theatres Co., 297 N. Y. 174.)

      Walter H. Liebman, Charles Nager and Herbert Robinson for respondents.
    I. The prior judgments did not provide that Storer should “ control ” the corporation through a “ fixed ” board. No such issue was ever pleaded, considered, decided or adjudicated in the prior actions. There was no unanimous written, agreement restricting the size of the board. (Smith v. Kirkpatrick, 305 N. Y. 66; Karameros v. Luther, 279 N. Y. 87; Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304; Rudd v. Cornell, 171 N. Y. 114; Fox v. Employers’ Liability Assur. Corp., 239 App. Div. 671; Evergreens v. Nunan, 141 F. 2d 927.) II. The provisions of Justice Eager’s judgment were clear and explicit. There was no claim of ambiguity in the judgment at the trial. (Barber v. Ellingwood, 137 App. Div. 704; People ex rel. McCanliss v. McCanliss, 255 N. Y. 456; Steel Co. of Southern California v. Associated Metals & Minerals Corp., 277 App. Div. 687; Pendleton v. Weed, 17 N. Y. 72.) III. Section 27 of the General Corporation Law does not bar the adoption of the by-law proposals.
   Van Voorhis, J.

This is a bitter controversy mainly between Douglas Ripley, the surviving brother of Robert L. Ripley who originated the pictorial series entitled Believe It Or Not ”, and Douglas F. Storer, who is the president of the corporation and appears to have been the trusted associate and main assistant of Robert L. Ripley in his lifetime. Storer apparently has not succeeded in acquiring or maintaining stock control of the corporation, and Douglas Ripley has — at least through liaison with Herlart, Inc. Nevertheless, while Storer was in a position to accomplish it, he succeeded in entering into a ten-year contract with the corporation, dated June 10, 1949, whereby he was exclusively to represent the corporation in radio, television, motion pictures and theatres and retain for his services 40% of all income received in connection therewith. By an extension of this agreement, Storer’s representation was extended to ‘1 Believe It Or Not” postal cards, toys, puzzles, games and similar items. By a directors’ resolution in 1951, it was provided that for the next year and every year thereafter until terminated by the board of directors, the president (Douglas F. Storer), and first vice-president (Douglas Ripley, brother of Robert), shall each be paid 20% of the gross sums earned by the corporation over and above $100,000 per annum in addition to their regular salary and/or expenses.

This action for a declaratory judgment was precipitated by demands by Douglas Ripley and Herlart, Inc., upon the board of directors to call a special meeting of stockholders to amend the certificate of incorporation to provide that the number of its directors shall be five instead of three, to be elected by the stockholders, and further to amend the by-laws by adding a clause that no contract between the corporation and any other person for longer than one year shall be valid unless ratified by affirmative vote of a majority of the stockholders, and that no director shall be eligible to vote at a meeting of the board of directors for the ratification of any contract from which he derives any financial benefit; and further to amend the by-laws so as to provide that no resolution of the board of directors shall be valid authorizing payment of a bonus to any officer in excess of 5% of the corporation’s net annual income, unless approved by a majority vote of the stockholders — and, further, to provide that “ any such resolution heretofore adopted shall be invalid and unenforceable unless so ratified and approved.”

As it now exists, the certificate of incorporation contains a clause that no such contract shall be affected or invalidated by the fact that a director is a party to such agreement.

Douglas Ripley is endeavoring to impair or cancel Storer’s ten-year agreement, and to terminate the resolution of the board of directors awarding bonuses to Storer and to himself equally. Inasmuch as the directors’ resolution instituting these bonuses provides that they shall be continued to be paid until revoked by another resolution, their payment will continue until a subsequent resolution of the board of directors is adopted. Although Douglas Ripley is able to control the voting of a majority of the stock, Storer has working control of the corporation in view of the circumstance that he and his associate, Harry E. Colwell, Jr., are two of the three directors, the other director being Douglas Ripley. In a previous action (Storer v. Ripley, 1 Misc 2d 235, hereafter described as the Eager action, decided by Mr. Justice Eager, whose judgment was affirmed, 282 App. Div. 950, motion for leave to appeal denied 282 App. Div. 1061, 306 N. Y. 985), Storer obtained a declaratory judgment which upheld the validity of a partly written and partly oral agreement that he and Harry E. Colwell, Jr. (also appellant here) shall be and continue to remain directors as long as Storer and one Millar owned stock. Justice Eager’s judgment also directed Douglas Ripley to vote for the election of Storer and Colwell as such directors in accordance with this agreement. Storer was prompted to bring that action in view of steps taken by Ripley, through his majority stock control, to oust Storer and Colwell as directors.

Thus, at the present time, Storer assumes to be protected by his agency contract through June 10, 1959, and by his bonus which he shares equally with Douglas Ripley which by its terms cannot be cut off as long as he and Colwell elect to continue it through their majority vote upon the board of directors.

A procedure has been devised in an attempt to nullify Storer’s continued working control of the corporation, by increasing the number of directors to five. In that event, although he cannot remove Storer and Colwell as directors, in view of Justice Eager’s judgment, Ripley can fill two new directorates with nominees of his own choosing, and then be able to outvote Storer on the board of directors. He could thus eliminate Storer as president of the corporation, and cancel Storer’s bonus, presumably retaining his own. Storer’s ten-year agreement would not be affected retroactively by the amendment to the by-laws requiring agreements for more than one year to be ratified by the stockholders.

There can be little doubt that the agreement whereby Justice Eager held that Storer and Colwell cannot be removed as directors, contemplated that they were to retain working control. The history of the struggle for control and the interminable litigation between these men since the death of Robert L. Ripley could, in any event, leave little uncertainty that the object of the agreement to keep Storer and Colwell on the board was not mere representation ” of Storer’s and Millar’s interest as stockholders, but was to maintain Storer in practical control of the corporation which Justice Eager found had survived the death of Robert L. Ripley mainly due to his personal services.

Nevertheless, it has been held in this action that the Eager judgment merely continues Storer and Colwell in their positions as directors, but does not preclude increasing the number of directors by an amendment to the certificate of incorporation, pursuant to section 35 of the Stock Corporation Law. Special Term, affirmed by the Appellate Division, held in this action that there was nothing in the agreement on which Justice Eager’s judgment was based preventing an increase in the number of directors. In the course of the opinion at Special Term herein, it was said (1 Misc 2d 281, 289): “If the existing certificate of incorporation contained a provision against increasing the number of directors, the right to increase would not exist (Ripin v. United States Woven Label Co., 205 N. Y. 442); and if there were a written agreement by all the stockholders that the number shall not be increased, the right to increase would not exist (Christal v. Petry, 275 App. Div. 500, affd. 301 N. Y. 562). But as there is no provision in the existing certificate limiting the right to increase, and no unanimous written agreement of all the stockholders limiting the right, it follows that the right to increase is absolute (Christal v. Petry, 275 App. Div. 550, 557, supra).” It may well be in the absence in the.certificate of incorporation of a limitation of the number of directors, that an agreement limiting the number would need to be made by all of the stockholders. However, the Eageb judgment stands as res judicata of whatever issues it decides between these parties. Therefore, if it determined that the contract in force between the parties provided that no increase in the number of directors can be made, it would be too late for Douglas Ripley to question the agreement underlying that decision upon the ground that the holders of a few of the shares did not subscribe to it. Having been held to be a valid and enforcible contract, no party to the former judgment can attack either the contract or the judgment which upheld it, and this is true regardless of whether the former judgment would have been affirmed or reversed if an appeal had been taken from it to this court. Ripley could no more attack a portion of the agreement limiting the number of directors, upon the ground that the contract was not approved by all of the stockholders, than he could, upon the same ground, renew his attack upon the part of it which required Storer and Colwell to be continued as directors.

The rule of res judicata, to be sure, does not apply to a determination of facts immaterial to the issue decided even though such facts have been alleged and controverted in the pleadings (Karameros v. Luther, 279 N. Y. 87). It is, of course, the judgment which is the bar, as stated in Rudd v. Cornell (171 N. Y. 114, 129) and the rule does not prevent the relitigation of a fact litigated and found in the earlier action if it was irrelevant to the issues therein and was not necessary to the final judgment. The classical statement is in Schuylkill Fuel Corp. v. Nieberg Realty Corp. (250 N. Y. 304, 306-307) by Cardozo, Ch. J.: “ A judgment in one action is conclusive in a later one not only as to any matters actually litigated therein, but also as to any that might have been so litigated, when the two causes of action have such a measure of identity that a different judgment in the second would destroy or impair rights or interests established by the first In the case at bar, judgment in favor of plaintiffs-respondents would impair rights that are protected by the earlier judgment. It would invalidate the very contract on which Storer’s and Colwell’s rights depend which are established by the judgment in the former action. The immediate issue in the Eager action was whether Storer and Colwell could be ousted as directors; it was held by the judgment that they could not be ousted due to the existence of a binding agreement which provided, among other things, that they were to continue as directors for so long as Storer or Millar held stock; the judgment in that action depended upon the finding of such an agreement, which formed the sole basis for the judgment; the finding of the existence of that agreement and the determination by the judgment of rights of the parties arising from it extended to holding that the entire agreement had been made and was in force between the parties. Manifestly, in order to constitute a contract, the minds of the parties were found to have met upon all of the factors entering into the contract, and if this contract enforced in the prior action provided that the number of directors was not to be increased, even though no attempt to increase the number was there involved, that portion cannot be ignored and other parts of the agreement severed from it and isolated as though instead of being one contract, it had been a succession of different agreements.

If this agreement found by Justice Eager, and enforced by his judgment, which prevented the majority stockholders from voting Storer and Colwell out of office, provided not merely that they should continue as directors, but that, together with Douglas Ripley, they should be all of the directors of that corporation for the duration of the contract, then this judicial determination that such a contract existed between the parties and is enforcible cannot be relitigated in this action. It was essential to the decision in that action to find the existence of an agreement, for the reason that the adjudication that Storer and Colwell continue as directors was based upon it. Even though preventing an increase in the number of directors was not involved in that action, if any part of the contract which Justice Eager held to be in existence were eliminated, that would invalidate the whole contract (since the contract was entire, and to strike out part of it would nullify the rest) and it would thus undermine the basis on which the Eager judgment was rendered. In the language of Schuylkill Fuel Corp. v. Nieberg Realty Corp. (250 N. Y. 304, 307, supra) to do so would mean 1 ‘ that a different judgment in the second would destroy or impair rights or interests established by the first That the agreement as found by Justice Eager contains a limitation upon the number of directors will be shown presently. What matters at the moment is that if it did contain such an item, the Eager judgment necessarily is res judicata of this issue.

The continuance of Storer and Colwell as members of this board as a matter of contractual right and obligation, as the Eager judgment held, is intimately connected with the limitation of the number of directors to three. The evidence in the Eager action, as is soon to be pointed out in more detail, indicates that the agreement Avas that for so long as Storer or Millar held stock, Storer, Ripley and Colwell would be all of the directors of the corporation. The Eager judgment found that it was in the written part of the agreement that Storer and Ripley must be present to form a quorum at the directors’ meetings. If two formed a quorum, and a quorum had to be a majority, the conclusion would naturally follow that the contracting parties intended that the board should be limited to three members. But there are other and further indications that limitation of the number of directors to three was a portion of the agreement which Justice Eager found to have existed between these parties.

Justice Eager expressly found that the agreement between the parties consisted of three writings set forth as Exhibits “A”, “ B ” and “ C ” annexed to the complaint, and of oral promises. These were not found to be separate agreements, but to comprise one agreement. The judgment in terms declared: ‘ ‘ That there is a valid agreement existing between the plaintiff, Douglas F. Storer, and the defendant, Douglas Ripley, whereby, among other things, they have mutually agreed that the plaintiff, Douglas F. Storer, and Harry E. Colwell, Jr. shall be and continue to be directors of Believe It or Not, Inc., as long as the plaintiff or Donald G-. Millar own stock in Believe It or Not, Inc., and that such agreement is binding upon the defendant, Douglas Ripley.” (Italics supplied.)

The substance of this portion of the ‘ ‘ valid agreement ’ ’ was found chiefly upon the basis of oral testimony. Concerning this, the Eager decision stated (1 Misc 2d 235, 241-242, supra):

“ Finally, when Millar was induced to indorse the note for the plaintiff and Ripley to finance the purchase of the 60 shares of stock, the parties and Millar and Colwell met at plaintiff’s home and the plaintiff claims that it was then orally agreed that Colwell, nominated by Millar, should be a director, and that plaintiff and Colwell should continue as directors as long as the plaintiff or Millar owned stock in the corporation. The plaintiff, Millar and Colwell gave testimony in support of such an agreement. Reasonable inferences from all the evidence give support to the finding of such an agreement. The court was impressed with the testimony of plaintiff, Colwell and Millar and with their appearance and demeanor upon the stand. The court believes and finds that it was the understanding and agreement between plaintiff and Ripley that the plaintiff and Colwell should continue as directors as long as the plaintiff or Millar owned stock in the corporation. The court rejects the testimony of Ripley and his wife that there was no such agreement.
“ Notwithstanding the agreement found was by paroi, it was valid and enforcible. (See Wygod v. Makewell Hats, 265 App. Div. 286, and Kronenberg v. Sullivan Co. Steam Laundry Co., 91 N. Y. S. 2d 144, affd. 277 App. Div. 916.) Such an agreement is valid notwithstanding all of the stockholders are not parties thereto. (Lockley v. Robie, 301 N. Y. 371.) ”

Whether such an agreement had to be made by all of the stockholders is not in issue before us now. Under the doctrine of res judicata, a former adjudication is binding upon the parties concerning questions necessarily decided, whether of fact or of law. Justice Eager specifically mentioned the portions of the agreement which he found, that “ among other things ” (to quote his language) provided that Storer and Colwell were to continue on the board. When the testimony is examined upon this subject, it is discovered that the very sentences in which it was stated that Storer and Colwell should be kept on as directors are interwoven with their mutual promises that the directorate should remain at three members for the same period of time. In the conversations forming this part of the agreement, they were talking about control of the company. Justice Eager recognizes this in the portion of his decision in which he said (1 Misc 2d 235, 240, supra): “ The defendants Ripley and Herlart, Inc., have been allied in the defense of the action at bar, and their attorneys concede that they seek to wrest control of the affairs of the corporation from plaintiff.” (Italics supplied.) Maintenance of control in Storer presupposes no increase in the number of board members.

What is the substance of this agreement, as found by Justice Eager? The testimony of Storer, Millar and Colwell, which Justice Eager credited in support of such an agreement, relates to an occasion on February 11,1951, at Storer’s home. Storer testified that It had been previously decided between Mr. Ripley and myself and confirmed by me and by Ripley, at that time, that we would be directors, too, so there would be three directors; Col-well, Storer, Ripley; and we would remain directors as long as we held stock. ’ ’ Millar testified concerning this conversation, at which Ripley and Storer were present, that Storer said that he and Ripley were buying sixty shares of stock as a joint venture; that he, Millar, was to have six shares, and that as long as I had an interest in them, the directors were going to be Ripley, Storer and Colwell ” (emphasis supplied). Millar further testified: ‘ ‘ Also, it was clearly understood that Storer was going to operate Believe It Or Not because otherwise I wouldn’t have given him anything.” The interest in the corporation to which this witness refers was his indorsement of commercial paper and his status as stockholder. Colwell testified that the substance of this conversation was as follows: ‘ ‘ Q. Have you told us all that was said about who were to be the directors? A. Yes, sir; simply that we three were to be the directors, and that’s all there was to that, and everybody agreed on that.” (Italics supplied.) This is the testimony on which Justice Eager found that Storer and Colwell were to be continued as directors; and this very language which says that these three men were to be directors says that they are to be all of the directors. The agreement found by Justice Eager necessarily included the latter as well as the former, for it is included in the same conversation which his decision says that he credited and which forms the basis for his judgment. He found this agreement as a fact in the former action. He stated that he rejected the conflicting testimony of Ripley and his wife. We are not passing upon any question of fact; we are merely deciding a question of law arising from the existence of the agreement which he found as a fact; the undisputed evidence before us is that Justice Eager rejected the testimony of Ripley and his wife, and found that the testimony of plaintiff (Storer), Millar and Colwell expressed the agreement on the basis of which his judgment was rendered. The analysis which has been made shows that the conversation which forms this part of the contract immediately concerned both the continuance of these three men as directors and the limitation of the number of directors to three. The same sentences express both thoughts, and the ideas coalesce. Storer and Colwell were to control the operation of the company for the duration of the agreement. The minds of the parties met upon both of these points, and if they did not meet on both, they met on neither. If you remove the part about the number of directors continuing to be three, it would destroy the whole contract on which these parties agreed. That would destroy the basis for Justice Eager’s decision.

It is familiar law that where a contract has been adjudged to be valid and enforcible, it is thereby rendered binding between the same parties as res judicata, even though the subsequent proceedings are on a different cause of action arising out of the same agreement (50 C. J. S., Judgments, § 712, pp. 168-173). At page 173, it is written: “ Another statement of the rule is that any right, fact or matter in issue, and directly adjudicated on, or necessarily involved in, the determination of an action before a competent court in which a judgment or decree is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and privies whether or not the claim or demand, purpose, or subject matter of the two suits is the same. ’ ’ This rule has been applied to successive actions arising from different aspects of the same contract in numerous cases (Larme Estates v. Omnichrome Corp., 250 App. Div. 538, affd. 275 N. Y. 426; Becker v. New Penn Development Corp., 271 App. Div. 280, affd. 297 N. Y. 497; President & Directors of Manhattan Co. v. Parker, 258 App. Div. 737; Goldberg v. Eastern Brewing Co., 136 App. Div. 692). In the latter case, quotation is made from Secor v. Sturgis (16 N. Y. 548, 558) as follows: “ The true distinction between demands or rights of action which are single and entire, and those which are several and distinct is, that the former immediately arise out of one and the same act or contract, and the. latter out of different acts or contracts. Perhaps as simple and safe a test as the subject admits of, by which to determine whether a case belongs to one class or the other, is by inquiring whether it rests upon one or several acts or agreements.” This principle was applied in the Goldberg case (supra) to the doctrine of res judicata. Here both causes of action manifestly arise out of the same contract, which is not severable insofar as this issue is concerned.

The pleadings, decision and judgment in the Eager trial were admitted in the record on this appeal. The testimony was offered in evidence but excluded and marked for identification. The established rule is that record evidence which is clearly identified may be considered on appeal under such circumstances. “ This has frequently been decided in respect to records of judgments, exemplification of bankrupt discharge, certificates of naturalization, etc. * * '* Evidence of this character is received by the appellate court for the reason that, being in its nature incontrovertible, it would be idle to send the case back for a new trial for the sole purpose of admitting it.” (Dunham v. Townshend, 118 N. Y. 281, 286; People v. Flack, 216 N. Y. 123, 129; Matter of City of New York [Newport Ave.], 218 N. Y. 274, 279; Matter of Cooper, 93 N. Y. 507; Rossbach v. Rosenblum, 260 App. Div. 206; Cohen and Karger, Powers of the New York Court of Appeals, § 168.) We may therefore consider the evidence in the Eager record, even though it was excluded, if it be material to the issue as it.clearly is. In Black on Judgments (Yol. 2, § 624, p. 950), the author states concerning res judicata: “ It is now fully settled upon the authorities that extrinsic evidence, when not inconsistent with the record and not impugning its verity, is admissible for the purpose of identifying the points litigated and decided in a former action between the same parties, when the judgment therein is set up as a bar or estoppel in the case on trial.” (Citing Carleton v. Lombard Ayres & Co., 149 N. Y. 137.)

Evidence received upon a former trial is admissible where it is necessary in order to clarify what was decided by the judgment in cases where the rule res judicata is invoked (Barber v. Ellingwood, 137 App. Div. 704, 708; 2 Freeman on Judgments [5th ed.], § 771; Peoples Gas & Elec. Co. v. City of Oswego, 207 App. Div. 134, 139; New York Central R. R. Co. v. Barnet, 192 App. Div. 784, 786-787). Under these authorities, the testimony in the trial before Justice Eager, which has just been analyzed, should have been admitted. It demonstrates that the same contract precludes increasing the number of directors which was held to require the continuance of Storer and Colwell as directors in the prior action.

For these reasons, the judgment in Storer v. Bipley (1 Misc 2d 235, affd. 282 App. Div. 950, motion for leave to appeal denied 306 N. Y. 985, supra) is conclusive and requires that the judgment appealed from should be reversed and the amended complaint dismissed insofar as it asks for an adjudication that plaintiffs-respondents may insist upon calling a special meeting of stockholders to increase the number of directors to five, and amend the by-laws accordingly.

The judgment of Special Term as affirmed by the judgment appealed from should be modified in the following respects:

Paragraph 1 (cl. [a]) is eliminated;

Paragraph 3 is eliminated insofar as it refers to clause (a) of paragraph 1;

Paragraph 4 is unchanged except as otherwise provided in the modifications of paragraph 7;

Paragraph 5 is unchanged except as otherwise provided in the modifications of paragraph 7;

Paragraph 6 is unchanged except as otherwise provided in the modifications of paragraph 7;

So much of paragraph 7 is eliminated as dismisses the defenses of res judicata based upon the judgment rendered by Mr. Justice Eager ; and it is further amended so as to provide that no amendment to the by-laws permitted by the judgment to be entered upon the remittitur herein shall impair any existing contractual right under any contract heretofore made between Believe It Or Not, Inc., and either appellant, nor shall it render him ineligible to participate in making or voting for the ratification of any contract of a type described in paragraph 1 (cl. [b], subd. [2]) of this judgment between said corporation and parties other than its directors from which either appellant may derive commissions or other benefits under now existing contracts; nor shall any such amendment to the by-laws operate retroactively so as to impair any resolution of the board of directors heretofore adopted;

Paragraph 8 is eliminated.

As so modified, the judgment should be affirmed, with costs of this action in all courts to the appellants against the plaintiffs-respondents.

Conway, Ch. J., Desmond, Fuld, Froessel and Burke, JJ., concur; Dye, J., taking no part.

Judgment modified and matter remitted to Special Term for further proceedings in accordance with the opinion herein and, as so modified, affirmed, with costs in all courts to appellants against plaintiffs-respondents.