author: Crane, J.

text:
    Rockowitz Corset and Brassiere Corporation, Appellant, v. Madame X Company, Inc., et al., Respondents.
    Appeal — trade-marks — appeal to Court of Appeals from order of Appellate Division reversing on the facts and granting new trial — burden on appellant to show that there was no question of fact justifying reversal and that as matter of law it was entitled to judgment — action to enjoin unlawful use of trade-mark — reversal by Appellate Division of judgment for plaintiff on the facts and grant of new trial •— order affirmed where record shows question of fact as to abandonment — evidence from which court might infer intent to abandon.
    1. Where the Appellate Division reverses a judgment on the facts and sends the issues back for a new trial, upon appeal to the Court of Appeals the burden is upon the appellant to show that there was no question of fact justifying a reversal and that as matter of law, on the evidence, it was entitled to judgment
    2. Where, therefore, a review of the evidence received upon trial of an action to enjoin the alleged unlawful use of a trade-mark and for an accounting of profits realized by defendants through such use, hows a question of fact as to the abandonment of the trade-mark by its owner, an order of the Appellate Division reversing a judgment in favor of plaintiff on the .'acts and granting a new tr al must be affirmed by this court.
    3. It cannot be said as matter o’ law that there was no intent to abandon a trade-mark, where for eight years it wa left dormant in the hands of the receiver of a eorporat'on, which had no other assets and no business, and, at the end of that time, was purchased from the receiver and turned over to the plaintiff, a corporat on formed upon discovery of the profitable use of the name by others.

      Rockowitz C. & B. Corp. v. Madame X Co., Inc., 222 App. Div. 359, affirmed.
    (Argued May 11, 1928;
    decided May 29, 1928.)
    Appeal from an order of the Appellate Division of the Supreme Court in the first judicial department, entered January 13, 1928, reversing an interlocutory judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term and granting a new trial.

      Ellis W. Leavenworth, W. Davis Conrad and Tracy Fike for appellant.
    To establish the defense of abandonment it was necessary for the defendants to show not only acts indicating a practical abandonment but an actual intent to abandon. (Singer Mfg. Co. v. June, 163 U. S. 169; Saxlehner v. Eisner, 179 U. S. 19; Baglin v. Cusinier Co., 221 U. S. 580; Hanover Milling Co. v. Metcalf, 240 U. S. 403; Beechnut Packing Co. v. Lorillard Co., 273 U. S. 629.) No reasonable inference of abandonment can be drawn from the facts of record. (Julian v. Hoosier Drill Co., 78 Ind. 408; Burt v. Tucker, 178 Mass. 493; Universal Candy Co. v. Morse Co., 298 Fed. Rep. 847; Madame Irene v. Schweinburg, 177 Official Gazette, 1043; Hannis Distilling Co. v. Torrey Co., 32 App. D. C. 530.)

      Neil P. Cullom, James E. Freehill, Maxwell Slade and David H. Slade for respondents.
    The Appellate Division having reversed upon questions of fact and of law, the judgment and order appealed from should be affirmed. (Alsens v. Degnon, 222 N. Y. 34; Tousey v. Hastings, 194 N. Y. 79; Waddell v. Cabana, 220 N. Y. 18; Mississippi Shipbuilding Corp. v. Lever, 237 N. Y. 1; Forster v. Book-walter, 152 N. Y. 166; Durland v. Durland, 153 N. Y. 67; Reed v. McConnell, 133 N. Y. 425; Rose v. Hawley, 133 N. Y. 315; Jenks v. Thompson, 179 N. Y. 20; Bank of China, etc., v. Morse, 168 N. Y. 458.) The trial court’s findings are wholly unsupported by the evidence and were properly reversed by the Appellate Division. (Farrar v. Churchill, 135 U. S. 609; Matter of Locust Bldg. Co., 299 Fed. Rep. 756; Crook v. Rindskopf, 105 N. Y. 476; Morris v. Talcott, 96 N. Y. 100; Roberts & Co. v. Buckley, 145 N. Y. 215; Constant v. University of Rochester, 133 N. Y. 640; Adams v. Gillig, 199 N. Y. 314; People v. Tuczkewitz, 149 N. Y. 240; Elwood v. Western Union Tel. Co., 45 N. Y. 549; Lewis v. New

      York City, 99 N. Y. Supp. 462; O’Leary v. Auburn, 188 N. Y. Supp. 714.)
   Crane, J.

The complaint in this action alleges that the plaintiff is a domestic corporation engaged in the business of selling at wholesale and retail corsets and abdominal supporters manufactured by its orders. The business was started in 1910 by one Abraham Rockowitz, now known as Abraham Rocke. The plaintiff claims to be his successor by assignments of his trade-mark. “ Madame X was a trade-mark used by Abraham Rocke from 1911 to about 1916, in connection with the sale of merchandise. This trade-mark was registered with the United States Patent Office for both supporters and corsets in August of 1912. The defendants are alleged to have appropriated the trade-mark of the plaintiff and to have used it in connection with the manufacture and sale of similar articles since the year 1924, all to the damage and injury of the plaintiff. The pleading demands relief by way of injunction and an accounting for the profits realized by the defendants through the use of the trade-mark.

The issues raised by the answers were tried at Special Term, which gave judgment in favor of the plaintiff, enjoining the defendants from the use of the name Madame X,” and directing the defendants to account for all the profits derived from the use of such name.

On appeal the findings of fact made by the trial judge were reversed and a new trial ordered. No new findings of fact were made by the Appellate Division, but the order of reversal specified by number the many findings of fact and conclusions of law which were reversed. The reversal was necessarily upon the facts. From the opinion of the Appellate Division it is evident that the Appellate Division disagreed with the trial judge on the facts. It took the view that the evidence did not warrant a finding that the plaintiff owned the trade-mark, but that it did justify the view that whatever rights Abraham Rockowitz had to the trade-mark had been abandoned. However, the court sent the issues back for a new trial and the appellant has given a stipulation for judgment absolute in coming to this court. Its burden, therefore, is to show us that there was no question of fact justifying a reversal, and that as matter of law on the evidence the plaintiff was entitled to judgment.

Abraham Rockowitz did business until 1914 in the name of the Madame X Manufacturing Co.” In September of that year the company was adjudged a bankrupt, and all its property sold at public auction, and the business of course discontinued. The receiver in bankruptcy sold the trade-mark to one Dorfman. Abraham Rockowitz claimed that Dorfman had made this purchase for his benefit and the controversy resulted in litigation. Abraham Rockowitz thereafter did business under the trade name of “ S. O. S. Corset Co.” and got in a law suit over his right to use the name and the trade-mark here in question. The judgment went against him and he was restrained from in any way using the property of the company or the trade-mark. This business went into liquidation and a receiver was appointed in 1916. All its tangible assets were sold at public auction for $226.53. No use was thereafter made of the trade-mark. Apparently the receiver did not sell it nor did Abraham Rockowitz or his brother Joe attempt to use it. Thereafter, in 1922, the defendants manufactured and sold corsets or girdles, using in their advertisements and boxing the trade name Madame X.” There was evidence to support the conclusion that in so doing they, or the Thompson-Barlow Co., Inc., were unaware of the previous user eight years before by Rockowitz. In 1924, and after the defendants had extensively advertised their business and built up a large and substantial trade through the use of this name, Abraham Rockowitz learned of the fact, formed the plaintiff corporation, procured a transfer to it by the receiver of the trade-mark and commenced this litigation. There is evidence from which it may be inferred that the plaintiff corporation was formed for the very purpose of starting this law suit. It had little or no business, employees, machinery or equipment. There is evidence from which it may also be inferred that Rockowitz after two unsuccessful attempts to carry on the corset business had abandoned the use of the trade-mark “ Madame X.” The second company of which a receiver was appointed in 1916 had no good will; it was gone. Nothing was left except the trade-mark which the receiver apparently did not sell, simply because there was no market for it. If he could have sold it, it was his duty to dispose of it, for such were his orders from the court which appointed him. The trade-mark was not used in connection with any business conducted by Rockowitz or his brother Joe Rockowitz from that time until the day of trial. No attempt was made by them to use it. The next we hear of it in their connection is when the plaintiff is formed, and this law suit is brought. No user of the trade-mark has been made by the plaintiff or its organizers.

This brief outline of the case is sufficient, I think, to indicate that there was at least a question of fact to be determined as to the abandonment of the trade-mark by Rockowitz, if he owned it, or by Joe Rockowitz if he were the person entitled to it. There being this question of fact to be determined or inferences which might reasonably be drawn in favor of the defendants from the facts, we can go no further, but must affirm the judgment below.

To constitute an abandonment there must not only be nonuser but an intent to abandon. In Baglin v. Cusenier Co. (221 U. S. 580) the court held: “ But the loss of the right of property in trade-marks upon the ground of abandonment is not to be viewed as a penalty either for nonuser or for the creation and use of new devices. There must be found an intent to abandon, or the property is not lost; and while, of course, as in other cases, intent may be inferred when the facts are shown, yet the facts must be adequate to support the finding.” (See, also, Hanover Star Milling Co. v. Metcalf, 240 U. S. 403; Beech-Nut Packing Co. v. Lorillard Co., 273 U. S. 629; Glen & Hall Mfg. Co. v. Hall, 61 N. Y. 226.) In the Beech-Nut Case (supra) the finding was the reverse of what it is here, that is, that there had been no abandonment of the trade-mark because of nonuser for five years. The Supreme Court, however, dealt with it as a question of fact, as can be gathered from the following quotation:

The mere lapse of time was not such that it could be said to have destroyed the right as matter of law. A trade-mark is not only a symbol of an existing good will, although it commonly is thought of only as that. * * * Therefore the fact that the good will once associated with it has vanished does not end at once the preferential right of the proprietor to try it again iipon goods of the same class with improvements that renew the proprietor’s hopes. * * * Both Courts having found for the defendant, we see no ground upon which it can be said that they were wrong as matter of law.”

The same may be said here. The Appellate Division has held that abandonment was a question of fact and has sent the case back for a new trial. This is the same as saying that there was evidence of an intention to abandon the trade-mark as well as evidence of its nonuser for eight years and more. The appellant is in the position of asking us to find that as matter of law there was no intent to abandon.

The litigation over the S. O. S. Corset Co. and the right to the name Madame X ” resulting in the finding that Joe Rockowitz and not Abraham Rockowitz owned the trade-mark; the appointment of a receiver of the corporation to sell the trade-mark; the employment of Joe thereafter as an automobile driver and Abraham by other corset concerns; the fact that no attempt was made to take the trade-mark out of the hands of the receiver until 1924, constituted some evidence from which a court might reasonably infer an intent to abandon. Anyhow, under all the facts in this case we could not hold as matter of law that there was no intent to abandon or relinquish the trade-mark. There was no evidence that either Joe or Abraham Rockowitz attempted to buy the trade-mark from the receiver or force its sale, or raise money for the purpose of purchasing the trade-mark. The right, if any, was left dormant for eight years, and then at the end of that time the trade-mark was purchased from the receiver and turned over to a corporation formed by the Rockowitz brothers after they had discovered the profitable use of the name by others.

“ Mere lapse of time does not per se warrant the conclusion of abandonment. The circumstances of the case, other than mere lapse of time, almost always give complexion to the delay and either excuse or give it a conclusive effect.” (Browne on Trade-Marks, sec. 681.)

Again, it must be remembered that a trade-mark is a species of property to be used in connection with a going business. It has no value in and of itself. In United Drug Co. v. Rectanus Co. (248 U. S. 90, p. 97) the court said: There is no such thing as property in a trade-mark except as a right appurtenant to an established business or trade in connection with which the mark is employed. The law of trade-marks is but a part of the broader law of unfair competition; the right to a particular mark grows out of its use, not its mere adoption; its function is simply to designate the goods as the product of a particular trader and to protect his good-will against the sale of another’s product as his; and it is not the subject of property except in connection with an existing business.”

Registration does not create a trade-mark. It is not essential to its validity. (Pulitzer Pub. Co. v. Houston Printing Co., 4 Fed. Rep. [2d] 924.) And in Hanover Star Milling Co. v. Metcalf (240 U. S. 403) it was said: In short, the trade-mark is treated as merely a protection for the good-will, and not the subject of property except in connection with an existing business.”

This court likewise said in Falk v. American West Indies Trading Co. (180 N. Y. 445, p. 450): “ A trademark is not a piece of property that passes from hand to hand by assignment separate from the business of the owner of the trade-mark or of the article which it may serve to distinguish. Generally, it passes only with the business and good will of which it is an inseparable part.”

The plaintiff’s predecessor had no business in which to use a trade-mark. It hung in the air for eight years.

I have not discussed the relations of the defendants to the plaintiff. The Weil Corset Company was the manufacturer, the Thompson-Barlow Co., Inc., the distributing merchants. These matters become unimportant if I am right in my conclusions that there is some evidence from which an intent to abandon and an abandonment may be inferred.

For these reasons the order below should be affirmed, and judgment absolute ordered against appellant on the stipulation, with costs in all courts.

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

Ordered accordingly.


source: Caselaw Access Project

author: Cardozo, Ch. J.

license: Public Domain

text:
    In the Matter of the Accounting of Francis J. Oakes, Jr., Individually and as Executor of Francis J. Oakes, Deceased, Appellant. Agnes T. Wise et al., Respondents.
    Decedent’s estate — Federal estate tax — gift —: Federal estate tax laid upon transfer of estate as whole including gifts to take effect at death — tax to be computed according to net value of aggregate — shares of stock placed in escrow to be delivered after death of owner to his son when State and National taxes thereon are paid — Federal estate tax properly paid by executor out of residuary estate.
    1. The Federal estate tax is laid upon the transfer of the estate as a whole, and, primarily at least, is a charge upon the residue. Gifts in contemplation of death or to take effect upon death, though made by separate instruments, are for that purpose to be consolidated with those passing under the will, and the tax payable by the executor is to be computed according to the net value of the aggregate.
    2. Where, therefore, an owner of shares of stock delivers them with a writing stating that they are to be held in escrow and on his death delivered to his son “ subject to all state and national taxes thereon being paid ” and upon the same day executes his will, confirming the delivery in escrow, “ upon the conditions stated in the paper,” upon the death of the donor, the Federal estate tax on the transfer of the shares is properly payable by his executor out of the residuary estate. The incidence of the burden of the tax as between the donee of the shares and the 'egatees of the residuary estate is unmistakably fixed by the statute (40 Stat. 1090, 1100, ch. 18, § 408) and has not been modified by the will. The terms of the escrow do not impose a lien nor create a liability, nor does it say by whom the tax is to be paid, and the donee did not assent, by the mere acceptance of the gift to a shifting of the burden.

      Matter of Oakes, 220 App. Div. 758, reversed.
    (Argued April 12, 1928;
    decided May 29, 1928.)
    Appeal, by permission, from an order of the Appellate Division of the Supreme Court in the first judicial department, entered June 2, 1927, unanimously affirming so much of a decree of the New York County Surrogate’s Court as surcharged the account of the executor of Francis J. Oakes, deceased, with the amount of the Federal estate tax on 1,510 shares of the capital stock of the Oakes Manufacturing Company, with interest thereon.

      Archibald R. Watson and John Lehman for appellant.
    The Federal estate tax on the 1,510 shares of stock was a liability of the residuary estate and not of the accountant individually as the recipient of those shares. (Farmers’ L. & T. Co. v. Winthrop, 238 N. Y. 488; Matter of Hamlin, 226 N. Y. 407; Young Men’s Christian Assn. v. Davis, 264 U. S. 47; Wallace v. Wallace, 216 N. Y. 28; Doheny v. Lacy, 168 N. Y. 213; Rosseau v. Bleau, 131 N. Y. 177; Baxter v. Baxter, 92 Misc. Rep. 567; Bartlett v. Bunn, 56 Hun, 508; Martin v. Platt, 51 Hun, 429; Hurlburt v. Hurlburt, 128 N. Y. 420.)

      H. Lewis Brown and Charles S. Day, Jr., for respondents.
    The payment of the Federal estate tax by the beneficiary of the 1,510 shares was clearly required by the trust instrument and the will of the decedent and the action of the surrogate and the Appellate Division in respect -thereto was correct and should be affirmed. (Farmers’ Loan & Trust Co. v. Winthrop, 238 N. Y. 488; Jumel v. Jumel, 7 Paige, 591; Purdy v. Coar, 109 N. Y. 448; A. & S. Elec. R. Co. v. Hoadley, 195 N. Y. Supp. 517; 198 N. Y. Supp. 899; Schwartz v. Cahill, 220 N. Y. 174; Dingeldein v. Third Ave. R. R. Co., 37 N. Y. 575.)
   Cardozo, Ch. J.

Francis J. Oakes, the owner of 1,510 shares of stock of the Oakes Manufacturing Company, made delivery of his certificates to be held in escrow for the benefit of his son. Delivery was accompanied by a writing which described the conditions of the escrow as follows:

I, Francis J. Oakes, hereby deliver irrevocably the certificates of stock of the Oakes Manufacturing Company owned by me for 1,510 shares of the stock of said company, to John D. Kernan and Archibald R. Watson in escrow, to be delivered by them or the survivor of them upon my death to my son Francis J. Oakes, Jr., subject to all state and national taxes thereon being paid, and said Kernan and Watson, or the survivor of them, being fully indemnified and protected against the same.”

If the son died before the father, the certificates were to be held upon other conditions which it is unnecessary to state. The donor retained the right to vote upon the stock, and to enjoy its profits and dividends, during life. A will, executed the same day, confirmed the delivery in escrow upon the conditions stated in the writing, and bequeathed to the son any right, title and interest in and to the stock in said company that I may have and which is not otherwise effectually disposed of.”

Upon the death of Oakes, Sr.,, the executor, Francis J. Oakes, Jr., paid out of his own moneys the tax assessed upon the transfer of the shares under the statutes of New York. He paid out of the residuary estate the tax due upon the transfer of the shares under the revenue act of Congress. The New York transfer tax is laid upon the transfer of the separate interests passing to the donees or legatees, and is payable by them severally in proportion to the value of the gifts. The Federal tax, on the contrary, is laid upon the transfer of the estate as a whole, and, primarily at least, is a charge upon the residue (Matter of Hamlin, 226 N. Y. 407). Gifts in contemplation of death or to take effect upon death, though made by separate instruments, are for that purpose to be consolidated with those passing under the will, and the tax payable by the executor is to be computed according to the net value of the aggregate (Farmers Loan & Trust Co. v. Winthrop, 238 N. Y. 488; Y. M. C. A. v. Davis, 264 U. S. 47). What is taxed is not the interest to which some person succeeds on a death, but the interest which ceased by reason of death ” (Nichols v. Coolidge, 274 U. S. 531, 537).

The question to be determined here is the incidence of the Federal tax as between the donee of the shares, who was also the executor, upon the one hand, and the legatees of the residuary estate, upon the other. There can be no doubt that the executor was justified in discharging the tax out of the residue unless the incidence of the burden has been changed by the conditions of the escrow. The surrogate (disapproving the report of a referee to the contrary) and the Appellate Division found that such a change had been wrought, and that the donee by the acceptance of the gift had assumed by implication the payment of the tax in exoneration of the residue. We hold a different view.

The command of the statute is explicit as to the incidence of the burden. If the tax or any part thereof is paid by, or collected out of that part of the estate passing to or in the possession of, any person other than the executor in his capacity as such, such person shall be entitled to reimbursement out of any part of the estate still undistributed or by a just and equitable contribution by the persons whose interest in the estate of the decedent would have been reduced if the tax had been paid before the distribution, of the estate, * * * it being the purpose and intent of this title that so far as is practicable and unless otherwise directed by the will of the decedent the tax shall be paid out of the estate before its distribution ” (40 Stat. 1096, 1100, c. 18, § 408, Revenue Act of Feb. 24, 1919; Farmers Loan & Trust Co. v. Winthrop, supra, p. 497). The incidence of the burden, thus fixed by the statute in terms so unmistakable, has not been modified by the will. We think the evidence is insufficient to give support to a finding that it has been modified by agreement.

The trustees were directed by the terms of the escrow to make delivery of the gift upon the death of the donor. If this had stood alone, they might have been involved in liability or the claim of liability to some agency of government, State or Federal, as the result of a delivery without deduction of the tax. The absolute command was, therefore, qualified by the condition that delivery might be withheld until the tax had been paid and the trustees relieved of liability therefor. The escrow does not say by whom the tax is to be paid. It does not change the incidence of the burden as determined by the statute. As soon as the tax is paid by any one, whether the donee or another, the condition is fulfilled. Part of the burden was a State tax. For this the donee was liable, and presumably would pay it. So, in fact, he did. Part of the burden was the Federal tax. For this, the executor was hable and presumably would pay it. The terms of the escrow do not impose a hen nor create a- liabihty. Liens and habihties are to be measured by the law.

Analogies are invoked by the respondents from the law governing conveyances, but they point the other way. The rule is well settled that one who accepts a conveyance “ subject ” to a hen or claim does not assume by such acceptance the obligation to discharge the lien or satisfy the claim (Schwartz v. Cahill, 220 N. Y. 174, 178). He does not even estop himself from asserting that the hen or claim is without vahdity, unless the form of the conveyance is such that submission and recognition are impliedly exacted. Thus, a transfer subject to a described mortgage may preclude a grantee from contesting the existence of the mortgage lien (Bennett v. Bates, 94 N. Y. 354, 371). On the other hand, a transfer subject to “ any and all hens and incumbrances thereon,” without other definition, will leave the privilege of contest open (Purdy v. Coar, 109 N. Y. 448, 453). So here. If taxes, State or National, were specific charges on the gift, the donee acquired a title subordinate thereto. If taxes, State or National, were not specific charges on the gift, but primary charges on the residuary estate, the donee did not assent by the mere acceptance of the gift to a shifting of the burden. Acceptance was submission to all existing liens. It was not a recognition and assumption of non-existing hens.

We have considered the documents themselves without reference to extrinsic evidence. Our reading of them brings us to the conclusion that the incidence of the burden has not been shifted from the estate to the donee. If this conclusion were to be rejected, however, the most that could fairly be said for the respondents is that the meaning is uncertain. In that event, extrinsic evidence may be used to explain the ambiguity. Resort to such evidence confirms our reading of the documents. The clause as to the taxes was inserted in the escrow upon the suggestion of one of the trustees that without it they might become involved in personal liability, and the donor was so informed.

We find nothing in the terms of the will that has a tendency to modify the construction of the deed. The will speaks, it is true, of the delivery of the shares upon the conditions stated in the paper ” signed by the testator. The conditions are not obligations laid on the donee. They are conditions of the escrow imposed on the trustees.

The order of the Appellate Division and the decree of the Surrogate’s Court so far as appealed from should be reversed, and the proceeding remitted to the Surrogate’s Court for the entry of a decree in accordance with this opinion.

Pound, Crane, Lehman and O’Brien, JJ., concur; Andrews and Kellogg, JJ., dissent.

Ordered accordingly.


author: O’Brien, J.

text:
    John Tantillo, an Infant, by Frank Tantillo, His Guardian ad Litem, Respondent, v. Goldstein Brothers Amusement Company, Appellant.
    Negligence — theatres — boy who is returned admission fee to theatre upon his agreeing to take part in act possesses same rights as ordinary patron ■ — • management bound to protect him from dangers inherent in act — not relieved from liability by fact that act was being performed by hired troupe.
    1. A boy who having paid for admission into a theatre is, by order of the manager, returned his admission fee upon his agreeing to go upon the stage and take part in a vaudeville act then n progress, cannot fairly be regarded as possessing rights lesser in degree than those of an ordinary patron. The theatre management is bound to protect him from dangers inherent in the act, and where he is injured in the course of its performance by reason of such a danger it is liable.
    2. Nor is the theatre relieved from liability by the fact that the act was being performed by a hired troupe. If its responsible agent allowed the performance on its stage of an act inherently dangerous and passively consented to participa tion in it by its invitees, it is hable.

      Tantillo v. Goldstein Brothers Amusement Co., 220 App. Div. 745, affirmed.
    (Argued May 3, 1928;
    decided May 29, 1928.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered April 6, 1927, affirming a judgment in favor of plaintiff entered upon a verdict.

      Earle C. Bastow for appellant.
    The trial court erred in submitting the case to the jury upon the theory that the facts brought the case at bar within the exceptions to the general rule that the master is not liable for the acts of an independent contractor. (Kings v. N. Y. C. R. R. Co., 66 N. Y. 182; Berg v. Parsons, 156 N. Y. 109; Herman v. City of Buffalo, 214 N. Y. 316; Deyo v. Kingston Consolidated R. R. Co., 94 App. Div. 578; Engel v. Eureka Club, 137 N. Y. 100; Hyman v. Barrett, 224 N. Y. 436; Paquet v. Pictorial Review Corp., 130 Misc. Rep. 389.) Plaintiff failed to show negligence on the part of the defendant. (Pollett v. Long, 56 N. Y. 200; Ragone v. State of New York, 123 Misc. Rep. 51; 211 App. Div. 573; Paul v. Consolidated Fireworks Co., 212 N. Y. 117; Mane v. Erie R. R. Co., 198 N. Y. 221; Pyne v. Cazenovia Canning Co., 220 N. Y. 126; Hubbell v. City of Yonkers, 104 N. Y. 434; Leeds v. N. Y. Tel. Co., 178 N. Y. 118.)

      Willard R. Pratt for respondent.
    The trial court properly submitted to the jury the question of independent and actionable negligence on the part of the defendant. (Platt v. Erie Co. Agricultural Soc., 149 N. Y. Supp. 520; Bellinger v. Broadhead, 102 N. Y. Supp. 381; Cleveland v. N. J. Steamboat Co., 125 N. Y. Supp. 299; Donnelly v. City of Rochester, 166 N. Y. 315; Roper v. Ulster County Agricultural Soc., 120 N. Y. Supp. 644; Fox v. Buffalo Park, 21 App. Div. 321.)
   O’Brien, J.

This case was tried upon the theory of negligence. In it is involved a principle important to proprietors and operators of theatres to which the general public is invited.

Plaintiff, fourteen years of age, accompanied by two other boys, visited defendant’s theatre at Utica and bought tickets for admission. Before entering the auditorium, they were accosted by a man unidentified either as an employee of the theatre or of the troupe then performing. At his suggestion the three boys returned their tickets, had their money refunded, passed the ticket taker without paying and entered the auditorium with the unknown man. He provided them with seats and later induced them to go upon the stage and to participate in a vaudeville act then in progress. This act was played by a troupe known as George Brown and Company who had been secured by the theatre management through a booking agency and paid by appellant. The act was intended to be amusing. Plaintiff and his two young companions, as well as others among the spectators, were each encircled by a leather belt to which a rope was attached and then they mounted a machine similar to a treadmill. They trotted on the machine and caused it to move like a treadmill. The faster they trotted, the more rapidly it revolved. While so engaged, some one, either a member of the troupe or an employee of the theatre, would jerk the rope, pull the performer from the machine and cause him to fall upon a mat. This operation was supposed to furnish the comedy and to raise a laugh among the spectators. Brown’s part consisted in catching the performer as he was catapulted from the treadmill. While in the act of attempting to catch plaintiff, Brown slipped and, falling, broke plaintiff’s arm. He has recovered judgment which has been affirmed against the theatre. Brown also was made a defendant but was never served and did not appear as a party or as a witness.

We think that plaintiff’s right to the theatre’s protection ought not to be distinguished from that of an ordinary patron. Concededly he did not pay admission, but the circumstances under which payment was waived by the theatre invest him with a status different from that of a guest. The evidence makes clear that he was given free entrance for no purpose other than to promote the interests of the theatre and those of Brown. Both shared in the success added by plaintiff’s presence on the stage and his propulsion, intended to be ludicrous, from the treadmill. If the spectators’ amusement at this treadmill act were heightened by plaintiff’s performance, the theatre’s monetary receipts on occasions when the act was to be repeated might be enhanced. The man who procured admission for plaintiff and, for such a consideration, induced him to perform for the theatre’s benefit is unidentified. From the evidence, no inference can be drawn that he was employed by the theatre rather than by Brown. It was the theatre, however, and not Brown who admitted him. No free admissions .were allowed by the ticket taker except upon orders by the theatre’s manager.

The relation between Brown and the theatre does not distinctly appear. The evidence does not warrant the conclusion that he was an independent contractor. Even if he were proved to be such, the evidence is of a nature to justify submission to the jury of the issue of fact relating to negligence by the theatre. If its responsible agent allowed the performance on its stage of an act which was inherently dangerous and passively consented to participation in it by its invitees, it is liable. While plaintiff was on the stage, the manager of the theatre stood in the rear of the hall and witnessed this act. The jury could find that the act was inherently dangerous, that the operation of the machine in such a manner as violently to propel a human being from it required intense activity and caution by Brown to prevent himself from slipping and falling upon the invitee. Brown’s services in catching the performer after propulsion from the machine seem to have been regarded as necessary. Otherwise he would have allowed the performer to fall without assistance. One of defendant’s witnesses described the act in these words: The idea was at the end of the act, Brown would grab the boy and as he took hold of the boy’s arm, take him clear of the treadmill, and that was the laugh, because the boy would fall and fall on the mattress or pad.” The act must be viewed as the joint product of Brown and the theatre. One could not have produced it without co-operation by the other. The jury could and did find that it was inherently dangerous.

Patrons of theatres are frequently invited upon the stage to be used as foils for the actors. Sleight of hand performers and acrobats avail themselves of the services of spectators as accessory to their tricks and feats. The management is bound to know whether the character of the act is dangerous. Patrons are entitled to protection against acts which by their nature might cause a menace to safety. One who collects a large number of people for gain or profit must be vigilant to protect them. (Arnold v. State, 163 App. Div. 253; Platt v. Erie County Agricultural Society, 164 App. Div. 99.) Plaintiff, having responded to the theatre’s advertisement to witness the performance, having originally paid for his admission and having secured the return of his admission fee for the purpose of participating in an entertainment which was gainful to defendant, and having been admitted to the theatre by order of the manager, cannot fairly be regarded as possessing rights lesser in degree than those of a patron. Defendant was bound to protect its patrons from dangers inherent in George Brown’s act and it was bound likewise to protect plaintiff.

The judgment should be affirmed, with costs.

Cardozo, Ch. J. Crane, Andrews, Lehman and Kellogg, JJ., concur; Pound, J., not sitting.

Judgment affirmed.


author: Per Curiam.

text:
    Luther C. Brown, Respondent, v. Thompson Hill Development Corporation, Appellant.
    Contract — commissions — action for commission for procuring loan • — ■ employer within his rights in refusing proposed loan as not in accordance with terms of contract.
    The conditions of a contract employing a broker to procure a loan are not fulfilled by a proposed contract of loan, where by its terms the borrower, in addition to paying the rate of interest prescribed in the contract of employment, would be obliged to assume payment of taxes, which in law were a liability of the lender, and where both the amortization rate and expense of procuring the loan were larger than prescribed by the contract. The employer was within his rights in refusing to accept the loan and the broker’s cause of action for commissions fails.

      Brown v. Thompson Hill Development Co., 222 App. Div. 727, reversed.
    (Argued May 3, 1928;
    decided May 29, 1928.)

      Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered December 9, 1927, affirming a judgment in favor of plaintiff entered upon a verdict.

      I. Batch Louis for appellant.
    The undisputed evidence in the case establishes that the plaintiff failed to procure a party ready and willing to make the loan upon the terms which were the basis of the plaintiff’s employment; or satisfactory to defendant. (Whalen v. Burkhardt, 221 N. Y. Supp. 352; Maxwell v. Alexander Hamilton Apartments, 215 App. Div. 348; Gallagher v. Dullea, 199 App. Div. 119; Haase v. Schneider, 112 App. Div. 336; Strout Farm Agency v. De Forrest, 192 App. Div. 790; Ansorge v. Kane, 244 N. Y. 395.)

      James Marshall, Robert H. Hibbard and Eugene Untermyer for respondent.
    Plaintiff procured for the defendant at its request a party ready, able and willing to make a loan to the defendant upon the terms set forth by the defendant. It was immaterial whether a binding agreement was entered into between the defendant and the Empire Company. (Holman v. Patton, 227 N. Y. 22; Davidson v. Stocky, 202 N. Y. 423; Tanenbaum v. Boehm, 202 N. Y. 293; Duclos v. Cunningham, 102 N. Y. 678; Phillips v. Kraft, 136 App. Div. 859; Brand v. Nagle, 122 App. Div. 490; Martin v. Weinman, 107 App. Div. 482; Wolfe & Co. v. Chasmore Const. Co., 129 Misc. Rep. 215; Sheridan v. McLaughlin, 172 App. Div. 314; Schrag v. Cohn, 125 Misc. Rep. 258.)
   Per Curiam.

The plaintiff, a broker, sues to recover commissions for services in the procurement of a loan to be secured by a deed of trust covering defendant’s land.

By the contract of employment the loan to be accepted by the defendant was to bear interest at the rate of six and one-half per cent. It was to mature in ten years with amortization at an average rate of four per cent per annum. The expense of procuring it was not to exceed twelve per cent, with one per cent commission for the services of the broker.

Plaintiff submitted to defendant a proposed contract of loan to be underwritten by the Empire Bond and Mortgage Company, the trustee under a deed of trust. Defendant refused to sign it, asserting that it departed in many ways from the terms of the loan prescribed by the contract of employment. This action for commissions followed.

We think the loan procured was not the loan prescribed, and that the defendant was within its rights in refusing to accept it. The loan prescribed by the contract of employment was to bear interest, as we have seen, at the rate of six and a half per cent. The loan procured bore interest at that rate and more. By its terms the borrower was to relieve the bondholders of the payment of the normal Federal income tax, not exceeding four per cent, due upon the bonds, and was to deposit with the trustee a sum sufficient to discharge the liability thus assumed. In addition, the borrower was to pay the personal property tax due from owners of the bonds by virtue of such ownership in Pennsylvania, Connecticut, Maryland, Massachusetts and the District of Columbia. This assumption of a liability which in law was owing by the lender was equivalent to an increase of the interest, since it was compensation for the use of money beyond the rate prescribed. Again, the loan called for by the employment was to be amortized at an average rate of four per cent per annum. The loan procured and tendered was to be amortized at an average rate of six and two-thirds per cent. There were other deviations in connection with the expenses of procurement. After payment of twelve per cent to the trustee and one per cent to the broker, the borrower was to pay for a surety company bond at a cost of $2,400, and was to deposit a sum of money equal to one per cent of the proposed issue as security to the trustee that it would go forward with performance.

The plaintiff did not fulfill the conditions of the contract of employment. The cause of action, therefore, fails.

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

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

Judgments reversed, etc.


text:
    Pine Grove Poultry Farm, Inc., Appellant, v. Newtown By-Products Manufacturing Co., Inc., Respondent.
    Negligence — food — privity — action for breach of statutory duty may be maintained by one suffering property damage thereby — violation of statute prohibiting sale of food containing an injurious substance constitutes negligence as matter of law — sale of poultry feed containing ground wire to dealers — ultimate purchaser may recover from manufacturer damages for death of poultry to which it was fed — public statute need not be pleaded nor called to attention of court or of opposing counsel.
    1. The right to maintain an action for the breach of a statutory duty is not restricted to one suffering an injury to the person. Property rights also come within the protection of a statute imposing a duty for the benefit of the general public.
    2. Violation of a duty imposed by statute to refrain from the sale of food containing deleterious matter constitutes negligence as matter of law and any one having a special interest in the performance of that duty may sue for a breach.
    3. Where, therefore, defendant manufactured and sold to dealers poultry feed falling within the type of food defined by sections 128 and 130 of the Farms and Markets Law (Cons. Laws, eh., 69) prohibiting the- sale of feeding stuffs containing any substance injurious to the health of animals, plaintiff, an ultimate purchaser, may maintain an action for negligence and recover ins damages where the evidence clearly shows that the feed contained ground wire which caused the death of several thousand of his ducks to which it was fed.
    4. A public statute, such as the Farms and Markets Law, need not be pleaded. Neither is there any requirement that during the trial it shall be brought to the attention of the court or of opposing counsel.

      Pine Grove Poultry Farm v. Newtown By-Products Mfg. Co., 222 App. Div. 834, reversed.
    (Argued May 4, 1928;
    decided May 29, 1928.)
    Appeal from a judgment, entered February 11, 1928, upon an order of the Appellate Division of the Supreme Court in the second judicial department, reversing a judgment in favor of plaintiff entered upon a verdict and directing a dismissal of the complaint.

      Harold R. Medina, Edward, Gluck and C. Elmer Spedick for appellant.
    The evidence amply justified the trial court in submitting the case to the jury and justified the jury in finding that the defendant was negligent in the manufacture of the meat scraps by not seeing that the wire was removed therefrom and that such negligence was the sole cause of the death of the plaintiff’s ducks. (MacPherson v. Buick Motor Co., 217 N. Y. 382; Chysky v. Drake Bros. Co., 235 N. Y. 468; Ritchie v. Sheffield Farms Co., Inc., 129 Misc. Rep. 765; Abounader v. Strohmeyer, 243 N. Y. 458.) The defendant’s sale of meat scraps containing wire, a foreign substance, injurious to the health of animals and having no feeding value, violated the statute prohibiting such sale (Farms & Markets Law, §§ 130, 131); and rendered the defendant liable to the plaintiff in this case, whether the statute furnishes a basis for a technical action upon warranty or not. (Abounader v. Strohmeyer, 243 N. Y. 458.)

      Murray G. Jenkins for respondent.
    Where certain claims ° are made and tried out upon one theory, the losing party who does not raise and make an issue of certain facts, circumstances or law consistent with another theory, may not withhold until appeal to the court of last resort that theory and then advance it for the first time in the hope of obtaining a favorable result. (Hull v. Burr, 234 U. S. 712; Oakes v. Oakes, 55 App. Div. 576; 167 N. Y. 625; Nelson v. City of New York, 131 N. Y. 4; Home Ins. Co. v. Western Transportation Co., 51 N. Y. 93; Krauss v. Webber Const. Co., 156 App. Div. 39; Beattys v. Straiton, 142 App. Div. 369; Ehmen v. Gothenburg, 200 Fed. Rep. 564; Spires v. Los Angeles, 150 Cal. 64; Baxter v. Boston R. R. Co., 217 Mass. 312; Jones v. Pulitzer Pub. Co., 240 Mo. 200; Turtle Creek Borough v. Penn. Water Co., 243 Penn. St. 415; Occidental Bldg. Assoc. v. Adams, 96 Neb. 454; Brotherhood of Railway Trainmen v. Dee, 101 Tex. 597.) At common law no action sounding in tort arose against the manufacturer by a third person with whom no contractual relation existed. (MacPherson v. Buick Motor Co., 217 N. Y. 382.) No cause of action exists for breach of warranty, because there was no privity of contract between plaintiff and defendant. (Engel v. Cushman’s Sons, 206 App. Div. 777; Moore v. City of Albany, 98 N. Y. 396; Brooklyn Bank v. Barnaby, 197 N. Y. 210; Winterbottom v. Wright, 10 M. & W. 109; Dulaney v. Joes & Rogers, 100 Minn. 835; Nat. C. O. Co. v. Young, 74 Ark. 144.)
   O’Brien, J.

Plaintiff operates an extensive duck farm on the south shore of Long Island. Defendant manufactures a brand of poultry feed known as meat scrap. It consists of scraps of meat procured from butcher shops, seasoned and ground and sifted through a screen, then packed in bags and sold to retail dealers. From such a dealer plaintiff purchased large quantities and upon it fed its ducks. Several thousand died. This high mortality was traced to the presence in the feed of fine particles of steel wire which had been fastened by butchers to the meat and, still attached to the scraps, was ground with them. The question is presented whether in the absence of privity between the manufacturer and the ultimate purchaser, plaintiff can recover.

Theories based upon common-law rules of negligence need not now be considered. An answer to the question whether the doctrine of common-law negligence founded upon the principles applied in such decisions as Thomas v. Winchester (6 N. Y. 397) and MacPherson v. Buick Motor Company (217 N. Y. 382) shall be further extended to include damage to property rights as distinguished from personal injuries, may prudently be reserved for the future. Before us now is a set of facts which requires disposition according to statutory enactment. The action is based upon negligence. The complaint alleges it. The jury found it. The verdict rests upon evidence, so clear that its truth cannot be and is not assailed, proving that the feed contained ground wire and that the loss of the poultry resulted from that cause. The court, adopting the theory of negligence pleaded by plaintiff, charged the rule relating to reasonable care. In view of the statute he might have correctly charged negligence as matter of law.

The Farms and Markets Law (Cons. Laws, ch. 69) controls this case. Section 130 prohibits the sale of any concentrated commercial feeding stuffs containing any substances injurious to the health of animals, and section 128 defines concentrated commercial feeding stuffs ” as including ground beef ” or fish scraps and “ all other materials of a similar nature.” The meat scraps sold by defendant and fed to plaintiff’s poultry are alleged in the complaint to be “ Red X Brand Meat Scraps.” Throughout the trial reference was usually made to them as such, yet on several occasions, without objection by defendant, they were described as beef ” scraps. The scraps of meat of which the feed was composed were gathered indiscriminately from a thousand shops. A proportion of this meat must have been beef. Even if the proportion of beef to the other meats were low, the material in the finished product, being meat, was of a similar nature to ground beef scrap. The feed falls within the type of food defined by sections 128 and 130. It was proved to be injurious to the health of animals and, therefore, its sale was prohibited. Violation of the duty to refrain from the sale of this feed as imposed by section 130 constitutes negligence as matter of law and any one having a special interest in the performance of that duty may sue for a breach. (Willy v. Mulledy, 78 N. Y. 310; Marino v. Lehmaier, 173 N. Y. 530, 535; Amherg v. Kinley, 214 N. Y. 531.) The right to maintain an action for the breach of a statutory duty is not restricted to one suffering an injury to the person. Property rights also come within the protection of a statute imposing a duty for the benefit of the general public. Such a rule has been applied by us to a violation of the Farms and Markets Law in a case where no privity of contract existed between the party guilty of the violation and the one incurring the damage. No element of ordinary negligence is essential. Violation of the statute becomes actionable default. (Abounader v. Strohmeyer & Arpe Co., 243 N. Y. 458.) A public statute, such as the Farms and Markets Law, need not be pleaded. Neither is there any requirement that during the trial it shall be brought to the attention of the court or opposing counsel. The facts found by the jury upon abundant evidence constitute as matter of law a violation of the statute. The court may have charged more favorably to defendant than the statute contemplates. Defendant cannot complain.

The judgment of the Appellate Division should be reversed and that of the Trial Term affirmed, with costs in the Appellate Division and in this court.

Cardozo, Ch. J., Crane, Andrews, Lehman and Kellogg, JJ., concur; Pound, J., not sitting.

Judgment accordingly.


text:
    John S. Lane & Son, Inc., Respondent, v. County of Westchester et al., Defendants, Merson Construction Corporation et al., Appellants, and Kalman Steel Co., Inc., Respondent.
    Debtor and creditor — assignment — corporations — Lien Law — assignment by corporation with intent to prefer voidable at instance of later lienors — prohibition not relieved by requirement of Lien Law that assignment of moneys due under building contract must be filed — transfer not validated by fact that assignee might have filed a lien for the debt secured by the assignment — lienors may challenge assignment w thout surrendering their own liens — court may adjust equities of all parties in action to foreclose mechanic’s lien.
    1. An assignment made by a corporation with the intent of giving a preference to one creditor over others is subject to the prohibition of section 15 of the Stock Corporation Law (Cons. Laws, ch. 59) and is vo dable at the instance of later lienors.
    2. Nothing in section 16 of the Lien Law (Cons. Laws, ch. 33) relieves an assignment of moneys due under a building contract from prohibitions applicable to assignments generally. The right to prefer when the assignor is insolvent or when insolvency is imminent is neither increased nor diminished
    3. The fact that the assignee might have filed a 'ien for the debt secured by the assignment, and thus have won a preference by varying the form of the security, does not avail to validate the transfer. What the statute condemns is the voluntary act of the corporation with intent to work a preference. The act is no less wrongful because a creditor acting of his own motion might be able to secure a preference by proceedings in invitum.

    4. An argument that Tenors may not be permitted to challenge an assignment as an unlawful preference without surrendering their own liens, however lawfully obtained, cannot be upheld. The aim of the statute is not absolute equality among creditors but equality among creditors of the same class or order.
    5. The court is empowered, in an action to foreclose a mechanic’s lien, to “ adjust and determine the equities of all the parties to the action.” (Lien Law, § 45; Cons. Laws, ch. 33.)

      Lane & Son v. County of Westchester, 220 App. Div. 773, affirmed.
    (Argued May 4, 1928;
    decided May 29, 1928.)

      Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, ¡entered May 6, 1927, unanimously affirming a judgment entered upon a decision of the court on trial at Special Term in an action to foreclose a mechanic’s lien.

      William A. Hyman and Adolph Bangser for Merson Construction Corporation et al., appellants.
    The assignment at bar, valid under the Lien Law, is not affected by the provisions of the Stock Corporation Law. (Giant Portland Cement Co. v. State, 232 N. Y. 395; Riverside Contracting Co. v. City of New York, 218 N. Y. 611; Bates v. Salt Springs National Bank, 157 N. Y. 322; German Co. v. Diehl, 216 N. Y. 57; Post & McCord v. City of New York, 166 App. Div. 919; Willard Co. v. City of New York, 81 Misc. Rep. 48.)

      Carl Sherman for Peck Coal Corporation, appellant.
    The assignments permitted by section 16 of the Lien Law do not come within the meaning of section 15 of the Stock Corporation Law dealing with illegal transfers. (Post & McCord v. City of New York, 86 Misc. Rep. 300; 166 App. Div. 919.)

      Jeremiah D. Toomey for plaintiff-respondent.
    The assignment from the Merson Construction Corporation to the Peck Coal Corporation was a violation of section 15 of the Stock Corporation Law, and for that reason is invalid and void. (Abrams v. Manhattan Consumers Brewing Co., 142 App. Div. 392; Ferry v. Central N. Y. Bank, 15 How. Pr. 445; Denike v. New York, etc., Lime, etc., 80 N. Y. 599; Harrocks Desk Co. v. Fangel, 71 App. Div. 313; Baker v. Emerson, 4 App. Div. 348; New Britain Nat. Bank v. Cleveland Co., 91 Hun, 477; 158 N. Y. 722; Davis v. Seneca Falls Mfg. Co., 17 Fed. Rep. [2d] 546.)

      W. Randolph Montgomery for defendant-respondent.
    The assignment to the Peck Coal Corporation is void as in violation of the provisions of section 15 of the Stock Corporation Law. (Grandison v. Robertson, 145 C. C. A. 605; Abrams v. Manhattan Consumers Brewing Co., 142 App. Div. 393; Brouwer v. Harbeck, 9 N. Y. 589; Ferry v. Central N. Y. Bank, 15 How. Pr. 445; Denike v. New York, etc., Lime, etc., Co., 80 N. Y. 599; Harrocks Desk Co. v. Fangel, 71 App. Div. 313; Baker v. Emerson, 4 App. Div. 348; Caesar v. Bernard, 156 App. Div. 724; 209 N. Y. 570; Cole v. Millerton Iron Co., 133 N. Y. 164.)
   Per Curiam.

Action for the foreclosure of a mechanic’s lien.

Frank G. Fowler, having contracted with the county of Westchester for the construction of a public improvement, assigned his interest in the contract to the Merson Construction Company. Some months thereafter the latter corporation, being then insolvent, assigned the moneys due or to grow due under its contract to the Peck Coal Corporation, to which it was then indebted for materials and advances in the sum of $46,390.64. Heyel, the president of the Merson Company, was also the general manager of the Peck Company. The evidence is ample that the assignment was made by the assignor corporation with the intent of giving a preference to one creditor over others, and that such was its effect.

We think an assignment so made is subject to the prohibition of Stock Corporation Law (Cons. Laws, ch. 59), section 15, and is voidable at the instance of later lienors. Nothing in section 16 of the Lien Law (Cons. Laws, ch. 33) relieves an assignment of moneys due under a building contract from prohibitions applicable to assignments generally. Section 16, instead of working an enlargement of any right of assignment that would exist without it, is a new restriction on the right; the assignment must be filed in a public office, so that materialmen and laborers, future as well as past, may have notice of its existence. The right to prefer when the assignor is insolvent or when insolvency is imminent, is neither increased nor diminished. If the assignor is a natural person, a preference is lawful, unless bankruptcy supervenes, in which event the validity of the preference is governed by the Federal statute. If the assignor is a corporation, a preference is condemned by section 15 of the Stock Corporation Law irrespective of the nature of the subject-matter affected by the transfer.

The argument is made that the assignee might have filed a lien for the debt secured by the assignment, and thus have won a preference by varying the form of the security. We think this circumstance does not avail to validate the transfer. What the statute condemns is the voluntary act of the corporation with intent to work a preference. The act is no less wrongful because a creditor acting of his own motion might be able to secure a preference by proceedings in indium. In point of fact, this creditor did file a notice of lien, but the notice was defective, and the lien was thus defeated. The statute gives a lien upon compliance with certain conditions. To uphold a prohibited assignment upon some theory of equivalence would amount to the creation of a lien in disregard of the prescribed conditions.

The argument is also made that lienors may not be permitted to challenge an assignment as an unlawful preference without surrendering their own liens, however lawfully obtained. We cannot yield assent. The aim of the statute is not absolute equality, but equality among creditors of the same class or order (cf. Lodi Chemical Co. v. National Lead Co., 41 App. Div. 535, 537, 538). As well might one argue that it would be the duty of an employee of a corporation before attacking an unlawful preference to renounce the advantage of his own preference for wages (People v. Remington & Sons, 121 N. Y. 328).

The court is empowered in this action of foreclosure to adjust and determine the equities of all the parties to the action ” (Lien Law, section 45).

Other objections have been considered and have been found to be untenable.

The j udgment should be affirmed with costs.

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

Judgment affirmed.


text:
    The People of the State of New York, Respondent, v. Samuel Ingber and Louis Siragusa, Appellants,
    Crimes — sentence — discretionary power of court to impose cumulative sentence not affected by section 2190 of Penal Law except as to cases covered thereby — on conviction for crime committed before another, for which defendants had already been convicted and sentenced, court may direct that sentence imposed commence at expiration of first sentence — exercise of common-law power as to form of sentence not precluded by section 22 of Penal Law.
    1. Section 2190 of the Penal Law does not affect the form of sentence in fields uncovered by its mandate. The discretionary power of the court, therefore, to impose a cumulative sentence in other cases remains, undiminished, as it was at common law.
    2. Where, therefore, defendants had been convicted of crime and sentenced to imprisonment, upon their subsequent conviction of another crime committed before the one for which they had been first sentenced, the court had power to make the second sentence cumulative rather than concurrent and direct that it commence at the expiration of the first.
    3. An argument that section 22 of the Penal Law, providing that no act or omission shall be deemed criminal or punishable except as prescribed by that or some other unrepealed statute of the State, excludes the exercise of common-law power cannot be upheld. The effect of that provision is merely to abolish common-law crimes and common-law pun'shments. A grant of power to sentence for a stated term without other limitation is to be read as a like grant of power would be read at common law. (People ex rel. Meininger v. Breuer,
      304 Mo. 381; Ex parte Sargood, 86 Vt. 130, approved; Ex parte Morton, 132 Cal. 346; Matt v of Lamphere, 61 Mich. 105, criticized.)

      People v. Ingber, 222 App. Div. 804, affirmed.
    (Argued May 7, 1928;
    decided May 29, 1928.)
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered January 27, 1928, which affirmed a judgment of the Court of General Sessions in the county of New York, rendered upon a verdict convicting the defendants of the crime of manslaughter in the first degree.

      John Mc Kim Minton, Jr., for appellants.
    The judgment appealed from is illegal. (Ex parte Morton, 132 Cal. 326; Ex parte McGuire, 135 Cal. 339; Matter of Mann, 192 Cal. 393; Ex parte Meyers, 44 Mo. 279; State v. Connell, 49 Mo. 282; Kennedy v. Howard, 74 Ind. 87; Dickerson v. Perkins, 182 Iowa, 871; People ex rel. Tweed v. Liscomb, 60 N. Y. 559; People v. Knapp, 206 N. Y. 373; Haggerty v. People, 53 N. Y. 476.)

      Joab H. Banton, District Attorney (Felix C. Benvenga and William B. Moore of counsel), for respondent.
    The sentence is legal. (Rex v. Wilkes, 4 Burr, 2527; Castro v. Reg., 6 App. Cas. 229; 14 Cox C. C. 546; Blitz v. United States, 153 U. S. 308; Carter v. McClaughry, 183 U. S. 365; Ponzi v. Fessenden, 258 U. S. 254; State v. Mahaney, 73 N. J. L. 53; 74 N. J. L. 849; Williams v. State, 18 Ohio St. 46; Henderson v. James, 52 Ohio St. 242.) Where two or more sentences are imposed at the same time, the terms of imprisonment under them are to run concurrently, unless the fact that they are cumulative and are to run consecutively is clearly and expressly stated in the sentence. (Kirkman v. McClaughry, 152 Fed. Rep. 255; 160 Fed. Rep. 436; Zerbst v. Lyman, 255 Fed. Rep. 609; Ex parte Lamar, 274 Fed. Rep. 160; Fortson v. Elbert County, 117 Ga. 149; Dickerson v. Perkins, 182 Iowa, 871; Matter of Weisman, 93 Kans. 161; Matter of Breton, 93 Me. 39; Ex parte Gafford, 25
      Nev. 109; Ex parte Black, 162 N. C. 457; Ex parte McDonald, 178 Wis. 167.)
   Cardozo, Ch. J.

On March 28, 1927, the defendants were convicted in the County Court of Queens county of the crime of robbery, committed February 25, 1927, and were sentenced to imprisonment for a term of years.

On June 14, 1927, they were convicted in the Court of General Sessions in New York county, upon their plea of guilty, of the crime of manslaughter in the first degree, committed February 6, 1927, and were sentenced to imprisonment for not less than ten nor more than twenty years, this sentence to commence at the expiration of the sentence to State prison pronounced in Queens County Court by Judge Adel on March 28, 1927.”

The question is whether there was power to make the second sentence cumulative rather than concurrent.

By Penal Law (§ 2190), Whore a person is convicted of two or more offenses, before sentence has been pronounced upon him for either offense, the imprisonment, to which he is sentenced upon the second or other subsequent conviction, must commence at the termination of the first or other prior term or terms of imprisonment, to which he is sentenced.”

By the same section, Where a person, under sentence for a felony, afterwards commits any other felony, and is thereof convicted and sentenced to another term of imprisonment, the latter term shall not begin until the expiration of all the terms of imprisonment, to which he is ‘already sentenced.”

Neither of these provisions controls the case at hand — not the first, for sentence had already been imposed for one of the offenses before conviction of the other; not the second, for the felony that is the subject of the later sentence was committed before the felony that is the subject of the earlier one.

We think the discretionary power of the court to impose a cumulative sentence in cases not covered by the mandatory statute remains, undiminished, as it was at common law.

The statute prescribes an automatic rule in certain typical situations that seemed to call for special treatment. Almost invariably a prisoner brought up to be sentenced at the same time for two or more offenses is one who has been tried for the two offenses at the same term of court and before the same judge (People ex rel. Tweed v. Liscomb, 60 N. Y. 559, 575). Even before the statute, the common practice in such cases was to make the terms of imprisonment successive. Sometimes, however, the judge omitted through inadvertence to give that direction in the judgment (cf. People ex rel. Meininger v. Breuer, 304 Mo. 381, at p. 405). The presumption then was that the terms were meant to be concurrent (Kirkman v. McClaughry, 152 Fed. Rep. 255; Zerbst v. Lyman, 255 Fed. Rep. 609; Dickerson v. Perkins, 182 Ia. 871). The aim of the statute, which goes back to the Revised Statutes (2 R. S. 700, § 11), was to make the inadvertence unimportant by prescribing a rule of succession irrespective of the form of judgment. This is made clear by the revisers’ notes, where they say of the section: New in form; generally declared in the sentence; but as it may be omitted, it is deemed useful to provide for it by law.” A like mandatory rule was thought to be desirable where a convict while imprisoned under a sentence for one felony was thereafter guilty of another. These cases have been singled out and subjected to a rule whereby discretion is excluded. The statute is not in any true sense a direction to the judge as to the form or contents of the sentence. It is a direction to the jailer as to the term of the imprisonment. Though the sentence be silent, the statute gives the rule.

We find no token of a purpose to curtail discretionary power in situations left uncovered. Cases have often arisen and must often arise hereafter where a felon about to be sentenced in one court has been sentenced for another felony in the same court or another (Rigor v. State, 101 Md. 465; Dickerson v. Perkins, 182 Ia. 871; Ponsi v. Fessenden, 258 U. S. 254, 264). Authority is overwhelming that at common law there is discretionary power in such circumstances to postpone the execution of the second sentence to the execution of the first (Blitz v. United States, 153 U. S. 308; Ponsi v. Fessenden, 258 U. S. 254, 264, 265; Rigor v. State, 101 Md. 465; Kite v. Comm., 11 Metc. 581; State v. Mahaney, 73 N. J. L. 53; 74 id. 849; Henderson v. James, 52 Ohio St. 242; Russell v. Comm., 7 S. & R. [Pa.] 489). “ Would it not be absurd, to make one imprisonment, a punishment for two offences? Nay the absurdity does not end there, for unless imprisonment for the last offence is to begin where the imprisonment for the first ends, it would be impossible, under our system, to punish the offender, in certain cases, for the last offence, at all (Tilgham, Ch. J., in Russell v. Comm., supra). Take the case, for illustration, where one convicted in a Federal court and sentenced to confinement in a Federal prison, is tried in a State court, with the consent of the Federal government, for an offense against the local law (Ponzi v. Fessenden, supra). In such conditions the common-law rule permits a cumulative sentence (Ponzi v. Fessenden, supra). If the effect of the statute is to require the terms to be concurrent, the second sentence is an idle gesture. Service in a Federal prison will not expiate an offense against the dignity of the State. This is obviously so where the prisons are different. The result will not be varied if by accident the prisons are the same. Nothing short of obvious compulsion will lead us to a reading of the statute whereby the pains and penalties of crimes are shorn of all terrors more poignant than a form of words.

The argument is made that Penal Law section 22 excludes the exercise of common-law power, if it would otherwise exist. “No act or omission begun after the beginning of the day on which this chapter takes effect as a law, shall be deemed criminal or punishable, except as prescribed or authorized by this chapter, or by some statute of this state not repealed by it ” (Penal Law, § 22). The effect of that provision is merely to abolish common-law crimes and common-law punishments. The definition of the crime and the extent of the punishment must be sought for in the statute. This is made clear by Penal Law section 20 which provides: “ This chapter [i. e. the Penal Law] specifies the classes of persons who are deemed capable of crimes, and hable to punishment therefor; defines the nature of the various crimes; and prescribes the kind and measure of punishment to be inflicted for each.” It is one thing to say that the kind and measure of the punishment to be inflicted shah be governed by the statute. It is another, thing to say that there shall be a rejection of common-law tests in determining the form of sentence whereby the mandate of the statute may best be put into effect. If Penal Law section 2190 had never been enacted, the question would remain, When the statute imposes the punishment of imprisonment for each of two crimes, are the terms of imprisonment to be successive or concurrent? The statute answers that question in some situations, and omits to answer it in others. The courts must fill the gap. A grant of power to sentence for a stated term without other limitation is to be read as a like grant of power would be read at common law (cf. People ex rel. Forsyth v. Court of Sessions, 141 N. Y. 288).

Our holding that section 2190, Penal Law, does not affect the form of sentence in fields uncovered by its mandate, has support in carefully considered judgments in other jurisdictions. Such was the ruling of the Supreme Court of Missouri under a statute substantially the same as ours (People ex rel. Meininger v. Breuer, 304 Mo. 381), a ruling the more notable because it disapproved an earlier judgment to the contrary (Ex parte Meyers, 44 Mo. 279). The same conclusion was reached in Vermont under a statute very similar (Ex parte Sargood, 86 Vt. 130). ■ There are indeed contrary decisions by the courts of other States (See, e. g., Ex parte Morton, 132 Cal. 346; Matter of Lamphere, 61 Mich. 105). They involve too narrow a reading of the limits of judicial power.

The defendants were lawfully sentenced, and the judgment should be affirmed.

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

Judgment affirmed.


author: Andrews, J.

text:
    The People of the State of New York, Respondent, v. Abraham Braunstein, Appellant.
    Crimes — constitutional law — section 601 of Education Law providing for continuation schools and requiring attendance of minors between fourteen and eighteen years old, who do not attend full-time day school or who are at work, valid — judgment convicting defendant of violation thereof for failing to cause his son to attend such a school, affirmed.
    Section 601 of the Education Law (Cons. Laws, eh. 16) providing for continuation schools in each city or school district where there are two hundred or more minors between fourteen and eighteen years of age “ who are not'in regular attendance upon full-time day school instruction ”, and requiring attendance at such school, at least four hours a week, of such of them as have not completed a secondary four-year course of instruction, are not attending full-time day school or are at work, is valid, and a judgment convicting defendant of a violation of that statute in having failed to cause his son, who came within the provisions of the statute, to attend such a school must be affirmed. Classification between minors living in districts where such schools must be, and those living in districts where they need not be established, is reasonable, the distinction made by the Legislature between day and night schools is justified, and treated as a labor law rather than as one affecting education solely, it is not discriminatory.
    ' People v. Braunstein, 223 App. Div. 792, affirmed.
    (Argued May 7, 1928;
    decided May 29, 1928.)

      Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered March 30, 1928, which affirmed a judgment of a Magistrate’s Court of the city of New York convicting the defendant of a violation of section 601 of the Education Law.

      Jay Leo Rothschild and Louis Rivkin for appellant.
    The statute violates the Fourteenth Amendment of the Federal Constitution and section 6 of article; 1 of the State Constitution, in that it deprives the defendant and the minor of the equal protection of the laws. (Coppage v. Kansas, 236 U. S. 1; Holden v. Hardy, 169 U. S. 366; Dobbins v. Los Angeles, 195 U. S. 223; Lawton v. Steele, 152 U. S. 133; McLean v. Arkansas, 211 U. S. 539; Pierce v. Society of Sisters of Holy Name, 268 U. S. 510; Meyer v. Nebraska, 262 U. S. 390; Matter of Jacobs, 98 N. Y. 98; Live Stock Assn. v. Crescent City, 1 Abb. [U. S.] 388.) The statute violates section 6 of article 1 of the State Constitution on the ground that it is discriminatory and unequal in its operation, and based upon no justifiable principle of classification. (N. Y. Sanitary Utilization Co. v. Dept. of Health, 61 App. Div. 106; State v. Hann, 61 Kans. 146; State ex rel. Johnson v. Chicago R. R. Co., 195 Mo. 228; People ex rel. Wineburg v. Murphy, 195 N. Y. 126; People ex rel. Duryea v. Wilbur, 198 N. Y. 1; Gulf Colorado & Santa Fe R. R. Co. v. Ellis, 165 U. S. 150; Cotting v. Goddard, 183 U. S. 79; Matter of Pell, 171 N. Y. 48; People ex rel. Farrington v. Mensching, 187 N. Y. 8; Bogni v. Perotti, 224 Mass. 152.)

      Charles J. Dodd, District Attorney (Henry J. Walsh of counsel), for respondent.
    The enactment of section 601 of the Education Law was a valid exercise by the Legislature of its police power. The statute contravenes neither the Constitution of the United States nor the Constitution of the State. (House v. Mayes, 219 U. S. 270; Barbier v. Connolly, 113 U. S. 27; Lemieux v. Young, 211 U. S. 489; Keller v. United States, 213 U. S. 138; Jacobson v. Massachusetts, 197 U. S. 11; Tanner v. Little, 240 U. S. 369; Ives v. South Buffalo Railway Co., 201 N. Y. 271; Matter of Davies, 168 N. Y. 89; People v. Ewer, 141 N. Y. 129.) The statute is not discriminatory or unequal in its operations. (People ex rel. Armstrong v. Warden, 183 N. Y. 223; People v. Klinck Packing Co., 214 N. Y. 121; People ex rel. Hoelderlin v. Kane, 97 Misc. Rep. 140; 161 App. Div. 956.)
   Andrews, J.

The defendant has been convicted of the violation of section 601 of the Education Law (Cons. Laws, ch. 16) in that his son failed to attend a continuation school in New York city. To the boy the statute works peculiar hardship. He is over 16 years of age, of good character, energetic and ambitious. He successfully graduated from a public school, entered a high school and remained there for six months. Then, because of his father’s financial losses, he was obliged to begin work. He soon decided to become a lawyer and entered the office of Mr. Rothschild, as a messenger. For a time he attended a continuation school, but he was promoted. He became a file clerk and answered the calendar calls in various courts. Meanwhile, to obtain the 72 Regents counts, required before he could begin the study of the law, he attended a night high school and later a night preparatory school. Finally Mr. Rothschild informed him that his absence at the continuation school during office hours was so serious a handicap that he would be obliged to discharge him. Thereupon the boy, to save his position, ceased to attend and this proceeding followed.

The general policy of the State as to the education of minors and the conditions under which they shall be allowed to work, if reasonable and impartial, is not to be lightly interfered with, even to correct what may seem restrictions not needed in individual cases. Statutes, general in their terms, deal and must deal with the needs of the great majority. They do not and cannot take care of all exceptional instances.

This section of the Education Law provides for continuation schools in each city or school district where there are 200 or more minors between 14 and 18 years of age “ who are not in regular attendance upon full-time day school instruction.” There such schools must be established. Elsewhere they may be. These schools are to be held in the day time. Every minor under 18 (now 17) who has not completed a secondary four-year course of instruction and who is not in full-time day attendance ” at school or who is at work, must attend such school at least four hours a week. There is classification .here between minors living in districts where such schools are not and need not be established, and those who do not. Obviously such a classification is reasonable. The Legislature did not wish to burden districts containing few of the minors described with the expense of such schools. The advantage to be gained would be slight in comparison with the cost. Too, in such districts, largely rural, there is less danger that children before their education is completed will be compelled to work.

The chief complaint, however, is that the exception applies only to cases of day time school attendance. Night schools have been created. They are recognized and regulated by the Department. Why then should not a boy who attends them be excused from the continuation school?

There is a reason for the distinction. That children, at work all day, should also be compelled to study at night is an evil in itself. Probably, under present conditions it is an evil that may not be wholly corrected. So far as possible it should be minimized. Day school attendance should be encouraged. Many employers may co-operate in carrying out the policy of the Department. Others might not. They might insist that their employees attend night schools to avoid the interruption, thus making such attendance in effect compulsory. Once we had a law requiring children working in the day time to attend evening school. The experiment was abandoned. It was found that their health was injured out of all proportion to the value of the education they received. The requirement as to girls also involved moral hazard. That should not be done indirectly which was found unwise when done directly. In truth the evening schools are intended primarily for those who have reached maturity. And even four hours a week in a continuation school is not a mere waste of time. They do not confine themselves to vocational training. Optional courses may be taken leading to general education. For these reasons we think the distinction made by the Legislature between day and night schools is justified.

All minors in districts where continuation schools exist are treated alike. And treated as a labor law rather than as one affecting education solely, it is not discriminatory. It separates those who have completed a four-year secondary course from those who have not. It seeks to induce all to do so. If they will not or cannot it makes their right to work subject to the necessity of acquiring some further day-time instruction. The Legislature might forbid all minors under 18 to engage in regular work during the hours of the school day. It might require them to spend those hours in study. It may do less.

The judgment appealed from should be affirmed.

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

Judgment affirmed.


text:
    Miles R. Martin, Jr., Respondent, v. The Gotham National Bank of New York, Appellant, Impleaded with Others.
    Banks and banking — fraud ■— false representations — subordinate officials of bank may do only such things in connection with collection of noté due it as banking practice and business custom recognize — false representations made by them to induce loan to corporation in which they were financially interested — use of part of loan to pay, amongst other debts, a note due to bank —• knowledge of false representations may not be imputed to bank — no presumption that its officials disclosed to it that they were engaged in a fraudulent transaction — bank liable for amount received in payment of note by its agent who had knowledge of the fraud.
    1. Subordinate officials of a bank, empowered to collect notes due it, have the right to do only such things in connection therewith as banking practice and business custom recognize as adequate. They have no implied power to endanger the capital of the bank in an extravagant attempt to collect a small debt.
    2. Where, therefore, an assistant vice-president and a special representative of defendant bank, through false representations, induced plaintiff to make a large loan to a corporation in which they were interested, part of which was used to pay off its debts, amongst which was a comparatively small note due the bank, a finding, in an action to recover the amount loaned, that the bank knew of the false representations, cannot be sustained where it appears that none of its officers or employees, except the two mentioned, knew anything of their plan. They had no right even if they acted honestly to make such representations in behalf of the bank for the purpose of collecting its note and, consequently, their knowledge of the false representations is not the knowledge of the bank.
    3. Nor can additional findings that the two officials were acting for the benefit of the bank and that the whole loan was made in the course of their efforts to help the bank, be sustained, where it appears that they were both financially interested in the corporation to which the loan was made, that its president had informed them that payment of its pressing debts would enable it to complete its contracts and make money and that the bank was but one of several creditors paid out of part of the amount borrowed. Notice to the bank could rest only upon the presumption that the officials in question disclosed to it all of the facts that came to their knowledge and, under the circumstance that they were engaged in a fraudulent transaction by which they planned a primary benefit for themselves, such presumption does not prevail.
    4. The bank is not hable for the acts of its employees acting beyond the scope of their authority and engaged in the commission of a collateral fraud, but it is hable for the amount accepted by it in payment of the corporation note through its special representative. As the bank’s agent, he was empowered to receive it. With knowledge of the fraud he paid it to the bank and his knowledge must be imputed to it.

      Martin v. Gotham National Bank, 220 App. Div. 541, modified.
    (Argued May 8, 1928;
    decided May 29, 1928.)
    Appeal from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered May 26, 1927, affirming a judgment in favor of plaintiff entered upon a decision of the court on trial at Special Term.

      Leonard G. Bisco and Louis S. Posner for appellant.
    The misrepresentations of Banning and Lockwood occurred while pursuing their individual interests for the joint benefit of themselves and the plaintiff; their acts were neither within the scope nor color of their agency for the bank. (De Swarte v. First Nat. Bank, 188 Wis. 455; Shriver v. Fourth Nat. Bank, 121 Kans. 388; Corrigan v. Bobbs-Merrill Co., 228 N. Y. 58; Bienenstok v. Ammidown, 155 N. Y. 47; Taylor v. Commercial Bank, 174 N. Y. 181; Brookhouse v. Union Publishing Company, 73 N. H. 368.) The rule of imputed knowledge has no application where, as here, the agents are engaged in their own independent enterprise. (Corrigan v. Bobbs-Merrill Co., 228 N. Y. 58; Benedict v. Arnoux, 154 N. Y. 715; Bienenstok v. Ammidown, 155 N. Y. 47; Henry v. Allen, 151 N. Y. 1; Mayor v. Tenth Nat. Bank, 111 N. Y. 446; American Nat. Bank v. Miller, 229 U. S. 517; American Surety Co. v. Pauly, 170 U. S. 133; Lilly v. Hamilton Bank, 178 Fed. Rep. 53; Bank of Overton v. Thompson, 118 Fed. Rep. 798; Hilliard v. Lyons, 180 Fed. Rep. 685; Real Estate Trust Co. v. W., A. & Mt. V. Ry. Co., 191 Fed. Rep. 566; Cushman v. Amend, 176 App. Div. 224; Allen v. South Boston R. R. Co., 150 Mass. 200; Brady v. Mt. Morris Bank, 65 App. Div. 212; Bank of LeRoy v. Purdy, 100 App. Div. 64; Fowler v. Watch, 119 App. Div. 542.) The bank’s receipt of payment of the Montville Construction Company note for $2,450 is not in any sense a ratification of the fraud of Banning and Lockwood. (Krumm v. Beach, 96 N. Y. 398; Miller v. Barber, 66 N. Y. 558; Garner v. Mangan, 93 N. Y. 642; Jones v. Jones, 120 N. Y. 589; Fairchild v. McMahon, 139 N. Y. 290; Green v. Des Garets, 210 N. Y. 79; Bloomquist v. Farson, 222 N. Y. 375; Deyo v. Hudson, 225 N. Y. 602; Baldwin v. Burrows, 47 N. Y. 199; Smith v. Tracy, 36 N. Y. 79; Foote v. Cotting, 195 Mass. 55; Shriver v. Fourth Nat. Bank, 121 Kans. 388.) Assuming that the defendant bank was bound by the knowledge of Banning and Lockwood, its liability would not extend beyond the sum actually received by it. (Deyo v. Hudson, 225 N. Y. 602; Baldwin v. Burrows, 47 N. Y. 199; City Nat. Bank v. Nat. Park Bank, 32 Hun, 105; Wendt v. Fischer, 243 N. Y. 439; Carr v. Nat. Bank & Loan Co., 167 N. Y. 375; Credit Alliance Corp. v. Sheridan Theatre Co., Inc., 241 N. Y. 216; United States v. State Nat. Bank of Boston, 96 U. S. 30.)

      Isaac H. Levy, George Gordon Battle and Ludlow S. Fowler for respondent.
    Banning and Lockwood having acted within the actual and apparent scope of their authority, the bank is liable for their fraud. (Fifth Ave. Bank v. 42nd St. &.G. St. F. R. R. Co., 137 N. Y. 231; East River Nat. Bank v. Gove, 57 N. Y. 597; Fishkill Savings Inst. v. Nat. Bank, 80 N. Y. 162; Nowack v. Met. St. Ry. Co., 166 N. Y. 433; Jarvis v. Manhattan Beach Co., 148 N. Y. 652.) The bank’s receipt of the benefits of the transaction coupled with its willful refusal to make restitution operated as a ratification of its agent’s fraud. (Bennett v. Judson, 21 N. Y. 238; Rocky River Devel. Co. v. German American Brewing Co., 193 App. Div. 197; Fairchild v. McMahon, 139 N. Y. 290; Bloomquist v. Farson, 222 N. Y. 375; Krumm v. Beach, 96 N. Y. 398; Bacon v. Union Mut. Life Ins. Co., 43 N. Y. 288; Wakeman v. Dalley, 51 N. Y. 34; Garner v. Mangam, 93 N. Y. 643; Abraham v. American Ex. Nat. Bank, 191 App. Div. 594; Carr v. Nat. Bank & Loan Co., 167 N. Y. 375; Chisholm v. Eisenhuth, 63 App. Div. 135; Fitzhugh v. Sackett, 50 N. Y. 699.) There is no warrant for limiting the liability of the bank to the sum actually received by it. (McCord v. W. U. Tel. Co., 39 Minn. 181; Lloyd v. Grace, Smith & Co., 1912 App. Cas. 716; Booth v. Farmers’ & Mechanics’ Nat. Bank, 50 N. Y. 396; Farmers’ & Mechanics’ Bank v. Butchers’ & Drovers’ Bank, 16 N. Y. 125.)
   O’Brien, J.

In April, 1923, the Montville Construction Company owed the Gotham National Bank $2,450 on a note. The collateral security was worthless and the note was overdue and had been protested. Charles H. Banning held a position as an assistant vice-president of the bank and Henry E. Lockwood was employed as a special representative. Each was empowered to collect notes payable to the bank. Individually and personally each held a financial interest in the Montville Construction Company and had induced several persons to loan money to it. In fact, the $2,450 had been loaned by .the bank upon Banning’s recommendation. April 7,1923, the construction company agreed to elect Lockwood vice-president and treasurer, to issue to him forty shares of its preferred stock and to pay him a percentage of its profits. Banning, by an arrangement made the same day with Lockwood, acquired a half interest in such moneys as might be received by Lockwood.

During the first week in April, plaintiff, at the suggestion of a common friend, called upon Banning, stated that he was seeking investment for his funds and requested Banning’s advice. The relations between Banning and plaintiff were purely personal and arose from their acquaintance with that common friend. The bank was not concerned. Banning referred plaintiff to Lockwood and on April 10th he and plaintiff first met. Banning and Lockwood recommended the Montville Construction Company as a safe investment and on April 13 a contract was executed by plaintiff, Banning, Lockwood and the construction company. Lockwood as vice-president of the construction company executed it in behalf of that corporation. This agreement after reciting the existence of Banning’s and Lockwood’s interest in the construction company and the desire of the parties to finance that company and profitably to manage its business, provides for a loan of $15,000 by plaintiff to the Montville Construction Company in return for a ninety-day note for that amount made by the corporation, indorsed by its president and secured by a chattel mortgage. On the same day a second agreement was executed by plaintiff, Banning and Lockwood. This second contract recites the former one of that date and the fact of the absence of the president and his consequent inability to indorse the note, and provides for the immediate advance to the corporation by plaintiff of $10,047.50 in return for a note for that amount executed by Banning and Lockwood and payable April 20th. This note was to be surrendered and canceled by plaintiff upon delivery to him of the note for $15,000, as provided for in the earlier agreement of the same day and upon delivery of such a note plaintiff was to advance the balance of the $15,000. The agreement explicitly states that $7,000 of the $10,047.50 was to be used immediately for the liquidation of the corporation’s debts which were then due and payable. Plaintiff loaned the $10,047.50 to the construction company by giving it to Lockwood, who was its treasurer, and Banning and Lockwood gave their note to him for that amount. In plaintiff’s presence Lockwood paid off $7,000 in obligations of the Montville Company. Among such obligations was the $2,450 note held by the Gotham Bank. Plaintiff later paid the balance of the $15,000 to Lockwood who deposited it in another bank to the credit of the Mont-ville Company and the $15,000 note provided for in the agreement of April 13 was indorsed by the president of that company and delivered to plaintiff. The note for $10,047.50 executed by Banning and Lockwood was returned to them by plaintiff.

The court has found that all of the $15,000 was expended in payment of the Montville Company’s debts except $5,681.31 which was returned to plaintiff. Judgment for $9,318.69 was directed against Banning, Lockwood, the construction company, its president and the Gotham National Bank. The bank appeals.

The finding by the courts below is that plaintiff was induced to make the $15,000 loan to the construction company by reason of Banning’s and Lockwood’s fraudulent representations concerning that company’s financial resources and that the bank knew that the representations were false. Additional findings are to the effect that Banning and Lockwood were acting for the benefit of the bank in an effort to collect $2,450, that they made the fraudulent representations in order that the construction company might obtain money out of which to pay its note to the bank and that the whole advance of $15,000 was made by plaintiff upon the strength of the false representations made by Banning and Lockwood in the course of their efforts to help the bank.

As matter of law, the finding concerning the bank’s knowledge must be rejected. The bank could possess no knowledge of the transaction except such as it might acquire through agents acting within the scope of their authority. None of its officers or employees, except Banning and Lockwood, ever heard of the elaborate plan by which plaintiff was parted from his money. The issue is narrowed, therefore, to an inquiry whether these two employees possessed implied authority to engage in the complicated process of becoming stockholders and officers in a corporation and procuring a loan of $15,000 to that corporation in order that it might become able to pay a debt of $2,450 to the bank. They were empowered to collect notes payable to the bank. Their authority to perform that duty must, however, be limited to a power such as is usual and ordinary among minor bank officials and employees. (Taylor v. Commercial Bank, 174 N. Y. 181, 185.) They would not have represented the bank, if, using their personal funds, they had embarked in a joint venture in real estate or stock speculation with the bank’s debtor to the end that the debtor could reap profits and discharge bis obligation to the bank. They could not travel to some remote corner of the earth to inspect property worth huge sums and to take possession of it in behalf of the bank in exchange for the discharge of a paltry debt due the bank. They had the right to do only such things as banking practice and business custom recognize as adequate. They could interview the debtor, notify him' of the passage of time by which bis debt had grown overdue, consult attorneys, receive payment, surrender or cancel the note after payment, give receipts and go through the usual routine of collection. The exertion of the collector must bear some fair relation to the sums collected. The proportion between the effort and the result must be reasonable. Execution of unusual and extraordinary designs is not commensurate with small achievement. Subordinate employees have no implied power to endanger the capital and surplus of their principal in an extravagant attempt to collect a small debt. Banning and Lockwood transgressed every boundary by which their authority was confined. The bank is not answerable for their representations to plaintiff. They had no right, even if they had acted honestly, to make such representations in behalf of the bank for the achievement of such a result. Their knowledge of the false representations by which plaintiff was induced to loan $15,000 to the construction company is not the bank’s knowledge.

' The additional findings that Banning and Lockwood were acting for the benefit of the bank and that the whole $15,000 loan was made in the course of their efforts to help the bank results from a false emphasis and a wrong perspective. These individuals who were financially interested in the construction company wished to finance it and profitably to manage its business. These facts are recited in the preamble to the first agreement of April 13, with plaintiff. The first step essential to that end was to pay the construction company’s debts. The second agreement of April 13 provides for the payment of approximately $7,000 for the immediate liquidation of certain outstanding obligations. The court has found that from this sum the construction company paid $2,038 to Progressive Clay Company, $2,450 to the Gotham National Bank, $418 for payroll, $483.60 for employers’ liability insurance, $1,500 to George F. Merritt and $536 to a firm of attorneys. To say that Banning and Lockwood were acting for the benefit of the bank is, in a sense, true. Equally true would be a finding that they were acting for the benefit of the other creditors whose debts were paid from the $7,000 fund. If accurate perspective be observed we see these two men primarily working for and promoting the benefit of the construction company in which they were financially interested. Only incidentally were they endeavoring to assist the bank. Incidental help to the bank and the other creditors was thought vital to the rehabilitation and prosperity of the construction company. The court found that Banning and Lockwood had been informed by its president that the payment of $7,000 of pressing debts would enable it to complete its contracts and make money. They were personally engaged in a fraudulent transaction by which they planned a primary benefit for themselves. The presumption that under such circumstances they disclosed to the bank all the facts that came to their knowledge no longer prevails. Notice to the bank could rest only upon such a presumption. (Henry v. Allen, 151 N. Y. 1; Brooklyn Distilling Company v. Standard Distilling & Distributing Company, 193 N. Y. 551; Bienenstok v. Ammidown, 155 N. Y. 47, 60.)

The bank is not liable for the acts of its employees acting beyond the scope of their authority and engaged in the commission of a collateral fraud. (Deyo v. Hudson, 225 N. Y. 602.) Its standing in this respect is the same as that of the other creditors who were paid from the fruits of this dishonest scheme. If, however, any creditor accepted payment of his debt with knowledge that the money used to pay it had been fraudulently obtained from plaintiff, he must answer to the extent of that amount. Upon this principle, the bank is liable for the $2,450 accepted by it through its duly accredited agent who had knowledge of the fraud. Lockwood, as treasurer of the Montville Construction Company, paid to himself, as special representative of the Gotham National Bank, the amount due on the note. As the bank’s agent, he was empowered to receive it. With knowledge of the fraud he paid it to the bank. His knowledge, while acting within the scope of his employment, must be imputed to the bank.

The judgment of the Appellate Division and that of the Special Term should be modified by reducing the plaintiff’s recovery to the sum of $2,450 with interest thereon from April 13, 1923, and costs at Special Term, and as so modified affirmed, without costs of appeal either in the Appellate Division or in this court.

Cardozo, Ch. J., Pound, Crane, Andrews and Kellogg, JJ., concur; Lehman, J., not sitting.

Judgment accordingly.