author: Loughran, Ch. J. Froessel, J.

text:
    Jamalie Shohfi, Respondent, v. Essa Shohfi et al., Appellants.
    Argued May 29, 1951;
    decided January 10, 1952.

      Monroe J. Cahn for appellants.
    I. Ordinarily section 47-a of the Civil Practice Act would be a complete bar to this action, entitling defendants to dismissal of the complaint and judgment on their counterclaim. (Chapin v. Posner, 299 N. Y. 31; Kirschner v. Cohn, 270 App. Div. 126; Ernst v. Schaack, 271 App. Div. 1012, 297 N. Y. 566; Jackson Heights Apt. Corp. v. Staats, 272 App. Div. 780; Rookery Investing Co. v. Audley Constr. Corp., 188 Misc. 693; Eagan v. Engeman, 125 App. Div. 743; Central Hanover Bank & Trust Co. v. Roslyn Estates, Inc., 266 App. Div. 244, 293 N. Y. 680.) II. The prior judgment, according to its explicit terms, did not adjudicate the amount, if any, due or owing on the mortgage but left that question open for subsequent adjudication in a proper action. (Maggi v. Sabatini, 250 N. Y. 296; Percy v. Huyck, 252 N. Y. 168; Sears, Roebuck & Co. v. 9th Ave.-31 St. Corp., 274 N. Y. 388.) III. The prior-judgment conclusively adjudicated that by the 1934 conveyance the wife did not become the owner of the premises but merely the husband’s agent; in consequence, the reconveyance compelled by the prior judgment was not by the wife as owner but as agent returning the record title to the husband who, at all times, had been the actual owner. (Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304; Sielcken-Schwarz v. American Factors, Ltd., 265 N. Y. 239; Hellstern v. Hellstern, 279 N. Y. 327; Pagano v. Arnstein, 292 N. Y. 326.) IV. When construed, as it must be in the light of the provisions of the judgment which compelled its execution, the reconveyance had no effect upon the enforcibility of the mortgage. V. The Statute of Limitations could be avoided only by compliance with section 59 of the Civil Practice Act which requires a written acknowledgment by the party to be charged. That party was the husband and since he made no such acknowledgment, there was no extension. (Bennett v. Bates, 94 N. Y. 354; Purdy v. Coar, 109 N. Y. 448; Matter of Oakes, 248 N. Y. 280; Morrill Realty Corp. v. Rayon Holding Corp., 254 N. Y. 268; Miller-Piehl Co. v. McCormick, 170 Wis. 378.)

      William F. Bleakley, James D. Hopkins and J. Robert Bleakley for respondent.
    I. The acceptance of the deed to the premises subject to the mortgage of $10,000, pursuant to a judgment in an action instituted by defendant Shohfi, constituted an acknowledgment of the mortgage which effectively tolled the Statute of Limitations. (Bennett v. Bates, 94 N. Y. 354; McConihe v. Fales, 107 N. Y. 404; Morrill Realty Corp. v. Rayon Holding Corp., 254 N. Y. 268; Cottle v. County of Erie, 57 App. Div. 443, 173 N. Y. 591; Moore v. Clarke, 40 N. J. Eq. 152; American Investment Co. v. City Sav. Bank, 181 Okla. 511;
      Texas Land & Mtge. Co. v. Cohen, 138 Tex. 464; Crompton v. Jenson, 78 Utah 55; Liebl v. Schaeffer, 134 Wash. 168; Meinhard v. Salmon, 249 N. Y. 458; Barnett v. Daw, 55 App. Div. 202; Union Trust Co. v. Johns, 107 Misc. 12.) II. Appellant Shohfi is estopped by his conduct and by his words from contesting the enforcement of the mortgage on the ground of the Statute of Limitations. (Andrews v. Cosmopolitan Bank, 183 App. Div. 787; Strong v. Smith, 149 Misc. 80; Matter of Rosevele Frocks v. Sommers, 191 Misc. 614; Lightfoot v. Davis, 198 N. Y. 261; Johnson v. Albany & Susquehanna R. R. Co., 54 N. Y. 416; Conklin v. Furman, 48 N. Y. 527; Dodds v. McColgan, 229 App. Div. 273; Zinovoy v. Lieberman, 249 App. Div. 388; Speciale v. Sciascia, 263 App. Div. 901; Safrin v. Friedman, 96 N. Y. S. 2d 627, 277 App. Div. 1138.) III. Equitable principles require that respondent and appellant Shohfi be placed in the same relative position which they occupied prior to the conveyance of the title of the premises by respondent to appellant in 1934. (Hammer v. Michael, 243 N. Y. 445; Grosch v. Kessler, 256 N. Y. 477; Williams v. Fitzhugh, 37 N. Y. 444.)
   Loughran, Ch. J.

The plaintiff Jamalie Shohfi is the wife of the defendant Essa Shohfi. In 1925, she acquired in her own name a parcel of real property which in 1929 she conveyed to the defendant husband who then delivered to her a purchase-money mortgage on that property to secure a bond whereby he undertook to pay to her the sum of $10,000. On or about December 16,1949, this action to foreclose that mortgage was brought by the plaintiff wife against the defendant husband and was referred to Honorable J. Addison Young, Official Referee, for hearing and determination. We quote from his decision the following findings:

“ On February 2nd, 1934 the defendant husband reconveyed the premises to the plaintiff wife. This conveyance expressly provided that the mortgage should not merge.
On about February 20th, 1947 the defendant husband, Essa Shohfi, commenced an action in this Court [the New York Supreme Court] against his wife, the plaintiff herein, demanding judgment that he should be declared the owner of one-half of the real and personal property in his wife’s name.
“ That action was duly tried before Judge Close as Official Referee and resulted in a decision and interlocutory judgment to the effect that the conveyance of February 2nd, 1934 above referred to, was made, ‘ upon the understanding and agreement that she, the wife (Jamalie Shohfi) should manage the same for him (Essa Shohfi);’ and provided that the premises should be reconveyed to the defendant Essa Shohfi, ‘ subject only to the mortgage thereon * * * no adjudication being made as to the amount, if any, due or owing upon said mortgage ’ ’ ’.
“ The mortgage provided that interest thereon should be at the rate of 6% per annum, payable on the 23rd day of July 1929 and semi-annually thereafter, together with installments of principal of $300.00 on each interest date until January 23rd, 1934 when the whole amount of the principal remaining unpaid should be due and payable.
* ‘ It is conceded that no part of the principal of this mortgage has been paid.
“It is likewise conceded that no interest has been paid on the principal of the mortgage since July 23rd, 1933.”
“ Concededly, on January 29th, 1934 default was made in the payment of interest and the moratorium statute no longer forbade the foreclosure of the mortgage, nor suit upon the bond, in consequence of which plaintiff was at all times thereafter free to bring foreclosure. Under these- circumstances, Section 47 (a) [of the Civil Practice Act] operated to limit the period of foreclosure, as though the moratorium statute had never been enacted.”

In keeping with the above findings, Official Referee Young (1) dismissed the complaint of the plaintiff wife upon the ground that enforcement of the bond and mortgage was barred by the Statute of Limitations prescribed by section 47-a of the Civil Practice Act; and (2) granted to the defendant husband a judgment canceling the record of the mortgage. (See Real Property Law, art. 15.)

On an appeal taken by the plaintiff wife to the Appellate Division, the decision of Official Referee Young was reversed on the law alone for a single reason stated as follows (277 App. Div. 390, 393):

“ When a grantor of mortgaged premises conveys real property subject to an existing mortgage, the recital of the mortgage in the deed constitutes an acknowledgment which will remove the bar of the Statute of Limitations as to the grantor. The grantee who accepts title by a deed in which it is expressly stated that it is conveyed subject to a mortgage is bound by the acknowledgment of the grantor. * * ®
“ On July 16, 1948, when plaintiff conveyed title to the premises to the defendant husband subject to the $10,000 mortgage, pursuant to a judgment in an action which he instituted and whose benefits he accepted, this constituted a recognition of the mortgage debt by both parties which tolled the Statute of Limitations and the husband was not thereafter at liberty to contest the existence or validity of the mortgage. (Bennett v. Bates, 94 N. Y. 354, 370.) However, there being no written acknowledgment by the husband of the indebtedness on the bond, the Statute of Limitations remains a defense to him as to that obligation and the plaintiff may not recover a deficiency judgment against him.” In accordance with its views as thus expressed, the Appellate Division made additional findings of fact and new conclusions of law which were merely a necessary basis for a judgment of foreclosure and sale and granted such a judgment to the plaintiff wife.

But at the same time all the above findings of fact made by Official Referee Young were expressly affirmed by the Appellate Division. Besides, a final judgment had been entered upon the findings made by Official Referee Close which are set forth in the decision of Official Referee Young and that final judgment has never been questioned except in one particular which has no relevancy to the present case (see 276 App. Div. 869).

Section 47-a of the Civil Practice Act says: “ An action * * * upon a mortgage of real property, or any interest therein, must be commenced within six years after the cause of action has accrued.” This provision went into effect on September 1, 1938.

In short, we have this case: The principal of the mortgage in question became payable on January 23, 1934. No part thereof has ever been paid. The interest that was payable on January 23,11 ''4, was not paid nor was any interest paid thereafter. Moreov ,r, the plaintiff wife in her amended complaint herein expressly waived all interest that became due prior to July 16, 1948. The summons in this action to foreclose the mortgage was not served until on or about December 16, 1949, although no moratorium statute stood in the way of foreclosure after January, 1934. Hence section 47-a of the Civil Practice Act was a bar to this action at its commencement unless indeed (as the Appellate Division ruled) section 47-a was tolled when on July 16, 1948, the plaintiff wife reconveyed to the defendant husband the mortgaged premises “ subject to ” the previously outlawed mortgage thereon.

We find ourselves unable to agree to that ruling of the Appellate Division. The principle that acceptance of a title subject to a mortgage can interrupt or suspend the Statute of Limitations has never been declared by this court to be a hard and fast rule. On the contrary, the principle applies, as we have said, only when “ the circumstances of the purchase amount to an admission of the validity and lien of the outstanding incumbrance ” (Purdy v. Coar, 109 N. Y. 448, 453; Morrill Realty Corp v. Rayon Holding Corp., 254 N. Y. 268, 275). In the present case, there was no purchase of the mortgaged premises by the defendant husband. In fact the premises were reconveyed to him by the plaintiff wife in obedience to a now incontestable final judgment of the New York Supreme Court which declared that his earlier conveyance to her was executed “ upon the understanding and agreement that she should manage the same for him ”. True, the same final judgment declared that her reconveyance to him should be “ subject to ” the mortgage but that judgment also declared that no adjudication was thereby made “as to the amount, if any, due or owing upon said mortgage ”. In that state of the record, the acceptance by the defendant husband of the plaintiff wife’s reconveyance to him of his own property subject to the already outlawed mortgage thereon cannot, in our judgment, be taken to have been an admission by him of the validity and lien of that mortgage within the principle of Purdy v. Coar and Morrill Realty Corp. v. Rayon Holding Corp. (ubi supra).

Whether the Statute of Limitations could have been avoided — as the defendant husband claims — only by a written acknowledgment signed by him in accordance with section 59 of the Civil Practice Act is a question we do not reach.

The dissenting opinion calls upon us to take up the record again. In the prior litigation that was decided by Judge Close, the husband was plaintiff and the wife was defendant. As a witness therein she swore that her husband had reconveyed the mortgaged premises to her because taxes, water rates and other charges against the property were due and unpaid. In respect of that testimony Judge Close made the following findings: “ These were not the facts. <!: “ * Taxes were paid to date, the first mortgage had been reduced and the building was fully occupied. I find * * * that the plaintiff [the husband] conveyed this property to the defendant [the wife] so that she could manage it for him ”. Of course, that finding which has never been disturbed is here binding on us.

Oftentimes a grantee buys land subject to a mortgage and the grantor credits the amount thereof on the purchase price. In that situation, the grantee is estopped to question the validity of the mortgage. But that is not this case. More than that: There is here no finding of any estoppel nor of any fact that would justify such a finding.

The judgment entered upon the order of the Appellate Division should be reversed and the judgment entered upon the decision of Official Referee Young should be affirmed, with costs in this court and in the Appellate Division.

Froessel, J.

(dissenting). This is an action to foreclose a mortgage on real property. The answer pleads the defense of the Statute of Limitations and by way of counterclaim seeks affirmative relief canceling the mortgage sought to be foreclosed. The Official Referee who heard and determined the matter held that the statute operated as a bar. A unanimous Appellate Division reversed, made additional findings, and granted plaintiff judgment. The facts are virtually undisputed.

Defendant Essa Shohfi and plaintiff are husband and wife. They were married in 1911. On December 29,1925, she acquired title to the property in suit in her own name. On January 23, 1929, she conveyed said property to her husband, taking back a bond and purchase-money second mortgage for $10,000. In prior litigation between the parties this was held to be part of “an equitable exchange ”. At the time, the property was also incumbered with a first mortgage of $13,500, reduced by payments to $12,000. The husband paid interest on the purchase-money mortgage to and including July 23, 1933. Instead of paying the principal and the remaining six months’ interest, both of which became due on January 23, 1934, during the depth of the economic depression, he reconveyed the property to his wife, subject to the first mortgage of $12,000 and said purchase-money mortgage of $10,000, the deed providing that the second mortgage was not to merge in the fee. On the basis of those documents, she was a mortgagee in possession.

The wife was undisturbed by the husband in that possession and ownership of both mortgage and fee titles until February 20, 1947, when he instituted an action claiming that he owned a half interest in the fee of said property, and thus acknowledged that she owned the other half. For reasons which do not appear in the record before us, the Official Beferee in said action, on a theory quite different from that pleaded in the husband’s complaint, but which is not reviewable here, and after finding that “ both have been in error in their testimony ”, directed the wife to convey her whole interest to him, “ subject to the purchase money mortgage of $10,000.00 ”, and to account for the income.

An interlocutory judgment was thereupon entered providing that the husband was entitled to have said premises reconveyed subject only to the mortgage ” now sought to be foreclosed, adding the following language which does not appear in the decision: “ no adjudication being made as to the amount, if any, due or owing upon said mortgage ” (emphasis supplied). It further directed the wife to deliver a deed to said premises “ subject to free and clear [sic] of all encumbrances except the said mortgage ”, and to account for “ the rents, issues and profits ”. It should be noted that the wife in the meantime had paid off the first mortgage of $12,000. She thereupon delivered the deed accordingly, “ subject to ” said $10,000 mortgage. On the subsequent accounting, the Official Beferee declined to pass upon the credit sought for interest and amortization on said mortgage upon the ground that no such question was before him, concluding with the significant statement: “ Moreover, the judgment entered herein, which expressly stated that no adjudication was made as to the amount due and owing on this mortgage, directed that the reconveyance be subject to the mortgage and the deed executed pursuant to the judgment stated that it is subject to this mortgage for $10,000.00.” (Emphasis supplied.)

Final judgment was entered accordingly. No appeal was taken by either party from the interlocutory, judgment, and the husband alone appealed unsuccessfully from another branch of the final judgment which is not material here (276 App. Div. 869).

Under these circumstances, we are of the opinion that the unanimous determination of the Appellate Division below was correct in this case. As we read both opinions and both the interlocutory and final judgments of Judge Close in the prior action, the validity,of the mortgage in question was recognized, and only the amount due or owing was left open. It is quite apparent that in respect of this property he intended to restore the parties to their 1934 position, before the husband reconveyed to the wife, so that he would have the fee title and she the mortgage, less any amount paid thereon.

The Statute of Limitations affords no presumption of payment ; it does not destroy the obligation nor render it illegal or otherwise invalid (Hulbert v. Clark, 128 N. Y. 295). Nor does it affect the amount due or owing, which amount is undisputed here and is the only matter left open in the prior litigation. The statute merely bars the remedy in appropriate situations and is not operative if waived, if the debt be acknowledged, or if defendant’s conduct estop him from relying thereon.

In the prior action the husband did not question the validity of this mortgage. The court did not declare it invalid or unenforcible. By accepting the deed, as grantee, subject to the mortgage pursuant to the judgment in his own action, the husband, who had personally made this mortgage, acknowledged the unpaid indebtedness, which is all the wife now seeks. As already noted, his failure to appeal to correct the direction that he take subject to the mortgage, if he felt himself aggrieved, must be deemed consent thereto. Consent or acquiescence is not involuntariness. Nothing turns on the circumstance that he acquired title through a judgment rather than by a direct purchase from an individual seller (Cottle v. County of Erie, 57 App. Div. 443, 448-450, affd. 173 N. Y. 591; Horton v. Davis, 26 N. Y. 495; Central Nat. Bank v. Hazard, 30 F. 484).

We have repeatedly asserted and held that a grantee may not question the validity of a mortgage to which he specifically takes subject in a deed (Freeman v. Auld, 44 N. Y. 50; Bennett v. Bates, 94 N. Y. 354; McConihe v. Fales, 107 N. Y. 404; Wilson v. Ford, 209 N. Y. 186, 200; Matter of Oakes, 248 N. Y. 280 [see p. 284 for comment on Bennett v. Bates, supra, and Purdy v. Coar, infra]; Purdy v. Coar, 109 N. Y. 448; Cottle v. County of Erie, supra; Morrill Realty Corp. v. Rayon Holding Corp., 254 N. Y. 268, 275 [see pp. 275-276 for comment on Bennett v. Bates and Purdy v. Coar, supra]; Horton v. Davis, supra). Clearly the intention of the wife in making the 1948 transfer to her husband was not to convey the entire interest in the property, but to subject it to the $10,000 mortgage, and any other view would disregard reality. The court so decreed. The husband acquiesced in the judgment and accepted the deed expressly subject to this particular mortgage. No rights of third parties had intervened. Accordingly, the doctrine asserted and applied in the cited cases is clearly applicable here.

Moreover, the principle of estoppel, referred to in the foregoing cases, applies with special force under the facts disclosed by this record, and as found by the trial court and the Appellate Division. As already noted, for thirteen years the husband permitted his wife to remain unmolested in her possession and ownership of both fee and mortgage, and with respect to any accounting. Surely, under these circumstances, and during this period, she could not be expected to go through the idle ceremony of paying interest to herself, or to foreclose a mortgage to obtain a fee title which she already had. In 1947, he acknowledged her ownership, in writing and under oath, to the extent of a one-half interest, did not question this mortgage, and claimed that she was to hold the property ‘ ‘ for the benefit of both ’ ’. As owner or co-owner, as well as mortgagee, she could agree to waive the interest on her own mortgage, as she alleged in her complaint she did, and as defendant expressly admits in his answer. In the light of the husband’s solemn written verified acknowledgment of her co-ownership, and the wife’s election as such co-owner and mortgagee to waive the interest, we have what to all intents and purposes is tantamount to payment of at least one half the interest if not the whole, to the date of said acknowledgment, the verification date of his complaint in the prior action, to wit: February 20, 1947. This action was commenced December 12,1949.

After the institution of the 1947 action, and during the trial thereof, defendant reversed his position; for the first time he claimed full ownership and that plaintiff was merely his managing agent. In the meantime the $12,000 mortgage had been paid off, and, by concealing his real position for all these years, he sought to defeat the second mortgage by the Statute of Limitations. He would thus secure return of the property, free and clear of $22,000 of mortgage incumbrances, subject to which he had conveyed to his wife. To allow this claim to prevail would, to say the least, put a premium upon the husband’s vacillating and dilatory behavior. Surely the wife could not know that she was his managing agent between 1934 and 1947 when the husband himself did not know or assert it until 1947 or 1948, and indeed claimed the contrary as late as 1947. Under these circumstances a clear case of estoppel was made out.

While the precise situation before us does not seem to have been presented to our court before, and we are not unmindful of the fact that the Statute of Limitations is not open to discretionary change by the courts, the prevailing rule throughout the country and followed in our lower courts permits the doctrine of estoppel to be invoked in appropriate cases, by reason of defendant’s conduct, to prevent him from relying on said statute (53 C. J. S., Limitation of Actions, § 25, and cases therein cited; Clarke v. Gilmore, 149 App. Div. 445; Dodds v. McColgan, 229 App. Div. 273; Speciale v. Sciascia, 263 App. Div. 901; Safrin v. Friedman, 96 N. Y. S. 2d 627, affd. 277 App. Div. 1138; see, also, Lightfoot v. Davis, 198 N. Y. 261; Imperator Realty Co. v. Tull, 228 N. Y. 447; Freeman v. Auld, McConihe v. Fales, Wilson v. Ford, Purdy v. Coar, Horton v. Davis, Cottle v. County of Erie, cited supra). And an estoppel in pais, like an estoppel of record, need not be pleaded (Feinberg v. Allen, 208 N. Y. 215).

The principle of equitable estoppel4 prohibits a person, upon principles of honesty and fair and open dealing, from asserting rights, the enforcement of which would, through his omissions or commissions, work fraud and injustice ” (Rothschild v. Title Guar. & Trust Co., 204 N. Y. 458, 464; Selzer v. Baker, 295 N. Y. 145, 149; 3 Pomeroy on Equity Jurisprudence [5th ed.], p. 180, see, also, §§ 816-821, 965; Gorowits v. Blumenstein, 184 Misc. 111. “ The plaintiff [defendant here] seeks the aid of equity and must submit to the condition that he do equity himself ’ ’; Grosch v. Kessler, 256 N. Y. 477, 478).

Finally, even if the findings of fact made below with respect to estoppel were inadequate, as appellant contends, we are nevertheless justified, for the purpose of affirming (but not of reversing) the judgment appealed from, to look to the record to see if there is any evidence to sustain plaintiff’s case (see Helgar Corp. v. Warner’s Features, 222 N. Y. 449, 455; Ogden v. Alexander, 140 N. Y. 356), and we find that there is such evidence.

The judgment of the Appellate Division should be affirmed, with costs.

Lewis, Dye and Fuld, JJ., concur with Loughran, Ch. J.; Froessel, J., dissents in opinion in which Conway and Desmond, JJ., concur.

Judgment accordingly. [See 303 N. Y. 902.]


source: Caselaw Access Project

author: Froessel, J.

license: Public Domain

text:
    The People of the State of New York, Respondent, v. Myron Durling, Appellant.
    Argued October 17, 1951;
    decided January 10, 1952.

      Albert Averbach for appellant.
    Defendant did not have a fair and impartial trial before a fair and impartial Judge and jury. The record in this case abounds with departures and violations of the constitutional safeguards surrounding a defendant accused of a crime. (People v. Herman, 255 App. Div. 314; People v. Buccola, 239 App. Div. 356; People v. Cosmo, 205 N. Y. 91; People v. Spiegel, 149 Misc. 439; People v. Levan, 295 N. Y. 26; People v. Moran, 246 N. Y. 100; People v. Mleczko, 298 N. Y. 153; People v, Samuels, 302 N. Y. 163.)

      Bradford F. Miller, District Attorney, for respondent.
    I. Defendant had a fair and impartial trial. II. The essence of the misconduct claimed by defendant is that several persons overheard “ the discussion of two jurors of their convinced opinion prior to the time you [trial court] submitted it to them ”. This did not constitute a miscarriage of justice. (People v. Spiegel, 149 Misc. 439; People v. Sprague, 217 N. Y. 373; People v. Menken, 36 Hun 90; People v. Johnson, 110 N. Y. 134.)
   Froessel, J.

Defendant was charged with murder in the second degree and found guilty of manslaughter in the first degree. We have examined the numerous errors assigned by defendant’s counsel, and find they are either without merit or without prejudice, save in one respect. After rendition of the verdict, and on the sentence date, but prior to its imposition, defendant moved, under section 465 of the Code of Criminal Procedure, for a new trial on the ground, among others, that defendant’s rights had been prejudiced by reason of the misconduct of jurors, and in that connection asked for the designation of a day certain for a trial of the issues raised thereby.

His attorney stated that he had “ definite, concrete evidence ” that he desired to present by way of sworn testimony, and not by way of affidavits, that certain members of the jury (a) discussed the case before it was submitted to them on several occasions in the presence of the general public, (b) expressed their views as to the guilt or innocence of defendant and as to certain witnesses in public places, and (c) prior to the rendition of the verdict and from the jury room carried on conversations and received communications from prosecution witnesses through the open windows of the jury room in the presence of witnesses, whom counsel desired to swear.

He further stated that he had a letter giving him the data and names with regard to the incident of the jurors discussing their actions with members of the public from the open window while they were deliberating. The trial court at first stated it would not receive “ any statements made by the jurors as to any alleged misconduct ”. When defendant’s counsel stated that he would not submit jurors’ affidavits to impeach their verdict, but rather testimony of witnesses who were present and tallied with the jurors during the progress of the trial, the court denied his motions because it ‘ ‘ believes that this defendant had a fair and impartial trial, and that it was submitted to the jury properly and the jury brought in a proper verdict ” — to which defendant’s attorney duly excepted.

Assuming defendant’s attorney had such evidence and it were found to be true, section 465 of the Code of Criminal Procedure empowered the trial court to grant a new trial. It is true that all the court had before it was the statement of counsel, but, in view of his rather definite charges, which were of a very serious nature, the full investigation of which he stated he had not completed, and the absence of any answer to them, it seems to us that the trial court’s flat refusal to hear such evidence, or at least to give counsel a short adjournment or an opportunity to supply affidavits, amounted to an abuse of discretion (People v. Leonti, 262 N. Y. 256; People v. Gallo, 149 N. Y. 106; McHugh v. Jones, 283 N. Y. 534; Farrer v. State, 2 Ohio St. 54). In the last-cited case, as charged here, after the jury received the court’s instructions, some of its members held communications with their friends and acquaintances in the street through the open windows of their consulting room, and the court said (p. 59): “ no verdict of a jury has or can have its usual and proper force and obligation with the court, if it appear that the jury has exposed its privileges to abuse, or listened from, its sanctuary to unsworn and irresponsible counsels.” (See, also, Eastwood v. People, 3 Parker Cr. Rep. 25, affd. 14 N. Y. 562; Madden v. State, 1 Kan. 340; Sunderland v. United States, 19 F. 2d 202, 212; State v. Muncey, 102 W. Va. 462, 468; Busch, Law and Tactics in Jury Trials [1949], §§ 587, 588.) This is not the case of a refusal to receive evidence of statements of jurors for the purpose of impeaching their verdict (cf. People v. Sprague, 217 N. Y. 373; People v. Sweetland, 298 N. Y. 899).

Following the practice in People v. Shilitano (215 N. Y. 715); People v. Arata (254 N. Y. 565); see, also, People v. Leonti (supra), determination of the appeal should be withheld in order that defendant may promptly renew in the Seneca County Court his motion for a new trial, upon affidavits and notice to the District Attorney, but upon the ground solely of alleged misconduct of jurors, and so that the Seneca County Court may hold a hearing on that phase of the motion and render a decision thereon.

Loughban, Ch. J., Lewis, Conway, Desmond, Dye and Fuld, JJ., concur.


author: Lewis, J.

text:
    B. M. Heede, Inc., Respondent, v. Frederic P. Roberts et al., Copartners Doing Business under the Name of Robert & Company, et al., Appellants.
    Argued October 11, 1951;
    decided January 17, 1952.

      Copal Mintz for appellants.
    I. Reliance on an alleged warranty, is a sine qua non of an action for breach of warranty, irrespective of whether the warranty is express or implied. (Gaylord Mfg. Co. v. Allen, 53 N. Y. 515; Reed v. Randall, 29 N. Y. 358; Studer v. Bleistein, 115 N. Y. 316; Waeber v. Talbot,
      167 N. Y. 48; Hawkins v. Pemberton, 51 N. Y. 198; Heath Dry Gas Co. v. Hurd, 193 N. Y. 255; Henry & Co. v. Talcott, 175 N. Y. 385; American Waste Co. v. St. Mary, 210 App. Div. 383; Miller v. Schloss, 218 N. Y. 400; Chinnery v. Kennosset Realty Co., 286 N. Y. 167; Grombach Productions, Inc., v. Waring, 293 N. Y. 609; Crocker-Wheeler Elec. Co. v. Johns-Pratt Co., 29 App. Div. 300, 164 N. Y. 593.) II. In view of plaintiff’s affirmative testimony that the presence or absence of an emulsifier was of no materiality to it and the contract would have been signed by it if it had specified the presence of an emulsifier, the complaint should have been dismissed on defendants’ motion at the end of plaintiff’s case and surely at the end of the entire case. (Backhous v. Wagner, 234 N. Y. 429; Bank of United States v. Manheim, 264 N. Y. 45; Fealey v. Bull, 163 N. Y. 397; Blum v. Fresh Grown Preserve Corp., 292 N. Y. 241; Matter of Case, 214 N. Y. 199; Laidlaw v. Sage, 158 N. Y. 73.) HI. Reversible error was committed in excluding the testimony of chemical traders as to the meaning of the contract terms. (Atkinson v. Truesdell, 127 N. Y. 230; Smith Co. v. Moscahlades, 193 App. Div. 126; Krstovic v. Van Buren, 235 N. Y. 96.) IV. Plaintiff offered no competent evidence of damages. V. The record presents a fatal variance between pleading and the proof or theory of recovery. (Cohen v. City Co. of N. Y., 283 N. Y. 112.)

      Monroe J. Cahn and Herbert S. Greenberg for respondent.
    I. Since the recovery herein was based upon breach of the implied warranty of description, reliance was not essential to recovery. (Hawkins v. Pemberton, 51 N. Y. 198; Bach v. Levy, 101 N. Y. 511; Henry & Co. v. Talcott, 175 N. Y. 385; Lumbrazo v. Woodruff, 256 N. Y. 92; Carleton v. Lombard, Ayres & Co., 149 N. Y. 137; Hoe v. Sanborn, 21 N. Y. 552; Miller v. Schloss, 218 N. Y. 400; Laskey v. Rubel Corp., 303 N. Y. 69.) II. The proof did not establish that plaintiff’s salesman did not expect that the goods would conform to the description. (Marine Trust Co. of Buffalo v. Willis, 240 App. Div. 176; Kochmann v. Baumeister, 73 App. Div. 309; State Bank v. Brockton Fruit Juice Co., 208 N. Y. 492; Laskey v. Rubel Corp., 303 N. Y. 69; Porter v. Commercial Cas. Ins. Co., 292 N. Y. 176; Hutchison v. Ross, 262 N. Y. 381.) III. No error was committed with respect to the exclusion of evidence regarding the trade understanding of the meaning of the contract. (Lawrence v. Maxwell, 53 N. Y. 19; Gravenhorst v. Zimmerman, 236 N. Y. 22; Matter of Western Union Tel. Co. (ACA), 299 N. Y. 177.) IV. Plaintiff’s damages were fully proved upon undisputed evidence. (Brown & Co. v. Darling & Co., 238 App. Div. 487; Atkins v. Elwell, 45 N. Y. 753; Asbestos Pulp Co. v. Gardner, 39 App. Div. 654; Trankla v. McLean, 18 Misc. 221; Travelers Ins. Co. v. Pomerantz, 246 N. Y. 63.) V. The theory of recovery was authorized by the complaint. (Livingston v. Livingston, 246 N. Y. 234.)
   Lewis, J.

This action, for breach of an implied warranty in a sale by description, arose as a result of the purchase by the plaintiff from the defendants of 80,000 pounds of a chemical known as dibutyl phthalate. In the litigation which followed the plaintiff has thus far successfully maintained that the material delivered under the contract in suit did not meet the commercial standard for dibutyl phthalate whereas, as plaintiff claims, the defendants had warranted that it would meet the test of commercial standards in all respects except for color.

The case is here upon the defendants’ appeal by our leave from a judgment of the Appellate Division unanimously affirming a judgment entered upon a jury’s verdict at Trial Term in favor of the plaintiff.

A brief statement of facts of record will make clear the basis of our conclusion that the defendants’ challenge to an evidentiary ruling affords a valid basis for reversal and a new trial: The chemical known as dibutyl phthalate — a compound of butyl alcohol and phthalic acid — has a variety of industrial uses including its use as a plasticizer in the plastic industry, as a lubricant, and in leather dressing. When it conforms with commercial standards dibutyl phthalate is water-white in color, insoluble in water, and is 98% to 100% pure dibutyl phthalate. Mixed with an emulsifier the resulting chemical occasionally is employed as an insect repellent and when so used the concentration of dibutyl phthalate is below the commercial standard.

The decisive issue at the trial herein was whether the chemical delivered to the plaintiff by the defendants conformed to the following specifications set forth in a written contract prepared by the defendants to govern the transaction:

“ MATERIAL: Dibutyl Phthalate'
SPECIFICATIONS: Ofetest — Pale yellow, as per SAMPLE ”

There was evidence from which a jury could find that the chemical delivered by the defendants did not meet the commercial standard for dibutyl phthalate in all respects except for color; that the chemical delivered consisted of dibutyl phthalate to the extent only of 90% to 94%, the balance being an emulsifier introduced to produce a compound commonly used as an insect repellent. "When that evidence came into the record the inquiry became material whether, as claimed by the plaintiff, the contract called for delivery by the defendants of dibutyl phthalate of commercial standard except for color, or, as claimed by the defendants, the contract requirements were satisfied when defendants delivered the contract quantity of dibutyl phthalate which in quality failed to meet commercial standards not only in respect of color but also in other unspecified respects. That inquiry and the issue thus engendered became the subject of a court ruling. Although the defendants were permitted by expert testimony to prove the trade meaning of the term “ offtest ” and of the phrases “per sample ” and “ offtest, per sample,” as they appear separately in the contract clause, the court on plaintiff’s objection excluded evidence proffered by the defendants that in the chemical trade the entire contract clause “ MATERIAL: Dibutyl Phthalate SPECIFICATIONS: Offtest — Pale yellow, as per sample ” had an accepted trade meaning. Such evidence, if competent, might well have been a factor for consideration in determining the liability of the defendants. We think the proffered evidence was competent.

The plaintiff seeks to justify the exclusion of testimony which would have defined the trade significance of the contract specification clause, read in its entirety, upon the asserted ground that the meaning of the entire .clause was a question for the jury. True it is that the meaning of the entire specification clause was an important factor to be considered by the jury. We do not think it follows, however, that evidence of the meaning ascribed by trade usage to a crucial clause of the contract here in suit should have been excluded. Throughout the taking of testimony and in the court’s charge the contract, with special reference to the specifications clause, was treated as ambiguous. In view of that circumstance and to aid a lay-minded jury to understand what was meant by language employed by the contracting parties — each of whom was engaged in business involving the technical terminology of chemistry — we regard as error the exclusion of evidence explanatory of the contract specifications expressed in a clause which bears an accepted trade interpretation, provided, of course, that evidence did not contradict the terms of the contract. In this instance the introduction of proof of the trade meaning ascribed to the specifications clause would not usurp the function of the jury. Such evidence would serve only to aid the jury in determining what the parties may have meant by the clause upon the interpretation of which a factual decision might rest.

For that conclusion we find support in the rule of Atkinson v. Truesdell (127 N. Y. 230, 234.): “ * * # the rule may be regarded as well settled, that the meaning of characters, marks, letters, figures, words or phrases used in contracts, having purely a local or technical meaning, unintelligible to persons unacquainted with the business, may be given and explained by paroi evidence if the explanation is consistent with the terms of the contract. So, also, paroi evidence may be given as to the uniform, continuous and well settled usage and custom pertaining to the matters embraced in the contract, unless such usage and custom contravene a rule of law, or alter or contradict the expressed or implied terms of a contract, free from ambiguity.” (See, also, Mutual Chemical Co. v. Marden, Orth & Hastings Co., 235 N. Y. 145, 151; Oswego Falls Pulp & Paper Co. v. Stecher Lithographic Co., 215 N. Y. 98, 108; Underwood v. Greenwich Ins. Co., 161 N. Y. 413, 423-425; Newhall v. Appleton, 114 N. Y. 140, 143-144.)

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

Loughran, Ch. J., Conway, Dye and Froessel, JJ., concur with Lewis, J.; Desmond and Fuld, JJ., dissent and vote for affirmance on the ground that the trial court’s ruling, described in the prevailing opinion of this court, was correct, and that, even if erroneous, it could not have influenced the decision by the jury of this issue of fact, already thoroughly tried oui before two juries.

Judgments reversed, etc. [See 303 N. Y. 909.]


author: Conway, J.

text:
    The People of the State of New York, Respondent, v. County Transportation Company, Inc., Appellant.
    Argued November 30, 1951;
    decided January 17, 1952.

      Edward R. Brumley and James Day O’Neill for appellant.
    I. The conditional sale contract herein is not within the provisions of section 62 of the Public Service Law. (People v. New York Central & H. R. R. R. Co., 199 N. Y. 539; Public Service Comm. v. New York & Richmond Gas Co., 244 App. Div. 398; Federal Deposit Ins. Corp. v. Apfelbaum, 268 App. Div. 455; Matter of Staten Is. Edison Corp. v. Public Service Comm., 263 N. Y. 209; Lehigh Valley R. R. Co. Conditional Sale Contract, 233 I. C. C. 359.) II. Congress has occupied the field. (Lehigh Valley R. R. Co. Conditional Sale Contract, 233 I. C. C. 359;
      People v. New York Central R. R. Co., 233 N. Y. 679; Matter of St. Louis Southwestern Ry. Co., 53 F. Supp. 914, 157 F. 2d 337, 330 U. S. 836; Thompson v. McDonald, 95 F. 2d 937, 305 U. S. 263; Lowe v. City Council of Augusta, 45 F. Supp. 143; Missouri Pacific v. Porter, 273 U. S. 341; Wickard v. Filburn, 317 U. S. 111; United States v. Darby, 312 U. S. 100; Labor Board v. Jones & Laughlin, 301 U. S. 1; Hill v. Florida, 325 U. S. 538; Hines v. Davidowitz, 312 U. S. 52; Cloverleaf Co. v. Patterson, 315 U. S. 148; Board of Trade v. Illinois Commerce Comm., 156 F. 2d 33; Grier v. Tri-State Tr. Co., 36 F. Supp. 26, 127 F. 2d 719.) III. The Commerce Clause precludes the exercise by the State of the power claimed in this action. (Willson v. Black Bird Creek Marsh Co., 2 Pet. [U. S.] 245; Cooley v. Board of Wardens of Port of Philadelphia, 12 How. [U. S.] 299; Gibbons v. Ogden, 9 Wheat. [U. S.] 1; Southern Pacific Co. v. Arizona, 325 U. S. 761; Freeman v. Hewit, 329 U. S. 249; Morgan v. Virginia, 328 U. S. 373; Buck v. Kuykendall, 267 U. S. 307; Michigan Comm. v. Duke, 266 U. S. 570; Minnesota Rate Cases, 230 U. S. 352.)

      Lawrence E. Walsh, Counsel to Public Service Commission (Samuel R. Madison and Richard C. Llope of counsel), for respondent.
    I. The obligation here under consideration is an
    evidence of indebtedness within the meaning of section 62 of the Public Service Law. (Matter of Waldstein, 160 Misc. 763; People v. New York Central & H. R. R. R. Co., 138 App. Div. 601, 199 N. Y. 539; City of New York v. New York City Ry. Co., 193 N. Y. 543; U. S. v. Chicago North Shore R. Co., 288 U. S. 1.) II. Congress has not occupied the field and has not asserted jurisdiction over small interstate bus companies. (Hayes Frgt. Lines, Inc., 15 M. C. C. 439.) III. Congress has not asserted jurisdiction over "the conditional sales contracts of any carrier. (Lehigh Valley R. R. Co. Conditional Sale Contract, 233 I. C. C. 359; Louisiana Ry. & Nav. Co. Purchase Contract Application, 67 I. C. C. 808; Southern Pacific Co. v. Arizona, 325 U. S. 761.) IV. In the absence of Congressional action, State regulation may be extended to cover the subject matter of this case. (Cooley v. Board of Wardens of Port of Philadelphia, 12 How. [U. S.] 299; California v. Zook, 336 U. S. 725; Southern Pacific Co. v. Arizona, 325 U. S. 761; People v. New York Central &

      H. R. R. R. Co., 138 App. Div. 601, 199 N. Y. 539.) V. Interstate motor carriers have been held subject to State regulation. (S. C. Hwy. Dept. v. Barnwell Bros., 303 U. S. 177; Eichholz v. Comm., 306 U. S. 268; Southern Pacific Co. v. Arizona, 325 U. S. 761.) VI. Securities of interstate utility companies are subject to State regulation in the absence of Congressional regulation. (Jersey Central Co. v. Power Comm., 319 U. S. 61; People v. New York Central & H. R. R. R. Co., 138 App. Div. 601, 199 N. Y. 539; People v. New York Central R. R. Co., 233 N. Y. 679.)
   Conway, J.

This is an action to recover a penalty under section 63-c of the Public Service Law because of the failure of the defendant to obtain authorization from the Public Service Commission to enter into a conditional sales contract for the purchase of buses. The defendant, a New York corporation, operates a bus line running between New Bochelle, New York, and Stamford, Connecticut, as well as several intrastate routes in New York connecting with this main line. The conditional sales contract into which defendant entered required a down payment before delivery and then provided for sixteen quarterly payments with interest. The total contract called for payment of $159,655.90. The contract was thereafter assigned by the contract vendor to a Pennsylvania trust company.

Subdivision 1 of section 62 of the Public Service Law insofar as material here provides as follows: “ An omnibus corporation organized or existing, or hereafter incorporated, under or by virtue of the laws of the state of New York, may issue stocks, bonds, notes or other evidences of indebtedness payable on demand or at periods of more than twelve months after the date thereof * * * provided and not otherwise that there shall have been secured from the commission an order authorizing such issue # *

Defendant asserts, first, that it was not required to obtaix authorization from the commission to make the purchase of the ten buses because a conditional sales contract is not covered b; the language stocks, bonds, notes or other evidences of indebtedness ”.

It is urged that the phrase ‘ ‘ other evidences of indebtedness ’ ’ is applicable only to securities, issued to the general public, or to a negotiable instrument. It may not be disputed that a conditional sales contract is an evidence of indebtedness, but defendant urges a construction which would make the subdivision applicable only to papers or instruments such as, or similar to, stocks or bonds or notes. The legislative history of the statute points to a different legislative intent and supports a contrary construction. Section 62 was enacted by section 2 of chapter 531 of the Laws of 1931 and was taken almost verbatim from section 55 which up to that time had applied to all common carriers including omnibus corporations. The relevant language of section 55 had remained without change since its enactment in 1907 (L. 1907, ch. 429). It then read and still reads except for the change of the word “ evidence ” to “ evidences ”: u A common carrier, railroad corporation or street railroad corporation organized * * * under ® * * the laws of the state of New York, may issue stocks, bonds, notes or other evidence of indebtedness payable at periods of more than twelve months after the date thereof « o * provided and not otherwise that there shall have been secured from the commission an order authorizing such issue ®

Since section 62 followed the wording of section 55 the legislative background of the latter section will be helpful in indicating the proper construction. When first introduced the bill, which subsequently became section 55, read in part as follows: 11 * ° * stocks, bonds, evidence of indebtedness or other form of security issue ” (Sen. Pr. No. 682, p. 50, 3907). Had section 55 been enacted in that form it may very well be that a proper construction would have excluded a conditional sales contract from the coverage of the statute. However, the bill was amended so that it covered instead: u * * * stocks, bonds, notes or other evidence of indebtedness ” (Sen. Pr. No. 1738, p. 52, 1907). Thus the elimination of the word securities indicated that it was not the legislative intent to limit the coverage of the statute to obligations customarily issued to the general public. The addition, notes ”, which are not commonly issued for public distribution indicated a similar lack of restrictive intent. Moreover the prohibition of the statute has to do with the issuance of certificates or obligations and not with their marketable character.

Protection of the public would appear to have been the paramount design of section 55. We quote three sentences from an address made by Governor Hughes in advocating passage of the first legislation on the subject: “ It is not simply or primarily the question of protection to the investor. The paramount demand is that through the improper issue of securities there shall not be provided a motive for crippling the public service or a basis for demanding extortionate returns. The power of the State should be exercised to compel respect for the public interest.” (Addresses and Papers of Charles Evans Hughes, p. 112 [Putnam’s Sons, 1908 ed.].) The case of People v. New York Central & H. R. R. R. Co. (138 App. Div. 601, affd. on opinion below 199 N. Y. 539), relied on by defendant in support of its construction, is in no sense a holding that the exclusive purpose of section 55 was to control the flotation of negotiable or quasi-negotiable securities by utility corporations and the subsequent practice of the Public Service Commission clearly shows that the commission did not so construe the holding of that case. The fictitious lease set up in the agreement there considered may not have- been other evidence of indebtedness ” within the meaning of the statute, as pointed out by the court, but the trust certificates were clearly securities intended to be sold to the general public and so also envisioned by the terms of the lease and the statute.

From a commercial and economic standpoint the conditional sales contract and its assignment by a contract vendor realizes the same result as though (1) defendant issued a note to the seller and the seller discounted it at the assignee bank, or (2) defendant borrowed the money from the bank, giving its note in exchange, and used the proceeds to pay the seller. Clearly section 62 is to be broadly construed so as to achieve the purposes intended by its enactment, i.e., the prevention of useless and unnecessary or improper expenditures as a means of protecting the public generally.

It is next argued by defendant that Congress through legislation (the Interstate Commerce Act) has occupied the field so as to exclude applicable State legislation. We think it quite clear that on the contrary Congress has purposely excluded from the field of its legislative competency (a) small interstate omnibus companies such as defendant and (b) conditional sales agreements of all omnibus companies whether large or small.

Congress first enacted legislation controlling the issuance of securities of motor carriers engaged in interstate commerce in 1935 when it enacted the Motor Carrier Act (U. S. Code, tit. 49, § 301 et seq.). That act incorporated by reference the provisions enacted for railroads in 1920 (U. S. Code, tit. 49, § 20a). Section 62 of our Public Service Law was enacted in 1931, four years before the passage of the Motor Carrier Act. Thus our State had exercised jurisdiction over the issuance of certain instruments before Congress took action. Congress has not superseded New York State action since. Section 314 of title 49 of the United States Code extends regulation only to motor carriers which have issued securities of a par value in excess of $500,000. According to the agreed statement of facts, the par value of defendant’s outstanding securities, plus the face value of the conditional sales contract in question, have never exceeded $500,000. Congress has specifically omitted from the coverage of the act small interstate motor carrier companies like defendant. Section 314 provides: “ Common or contract carriers by motor vehicle, corporations organized for the purpose of engaging in transportation as such carriers, and corporations authorized by order of the Commission to acquire control of any such carrier, or of two or more such carriers, shall be subject to the provisions of paragraphs 2-11, of section 20a of this title (including penalties applicable in cases of violations thereof): Provided, however, That said provisions shall not apply to such carriers or corporations where the par value of the securities to be issued, together with the par value of the securities then outstanding, does not exceed $500,000, nor to the issuance of notes of a maturity of two years or less and aggregating not more than $100,000, which notes aggregating such amount including all outstanding obligations maturing in two years or less may be issued without reference to the percentage which said amounts bear to the total amount of outstanding securities. In the case of securities having no par value, the par value for the purpose of this section shall be the fair market value as of the date of their issue.”

Congress, thus, has manifested no intent to regulate small interstate omnibus companies such as defendant. At a hearing before the Senate Committee considering this legislation, Joseph B. Eastman, Federal Coordinator of Transportation, under whose direction the proposed act was drawn said: * " * we do not undertake to regulate the issue of securities here until the operator acquires sizable proportions.” (Hearings before Senate Committee on Interstate Commerce, 74th Cong., 1st Sess., p. 81 [1935].)

Moreover, it would appear that Congress has not chosen to exercise jurisdiction over conditional sales contracts of any carrier whatever its size on the theory that only securities sold to the public should be regulated. Section 314 (supra) speaks of the par value or fair market value of “ securities ” issued as determining whether Federal regulation applies. The Interstate Commerce Commission has held that the language of section 20a, incorporated by reference in section 314, does not give jurisdiction over conditional sales contracts because they are not securities ” within the meaning of subdivision (2) of section 20a. (Lehigh Valley R. R. Co. Conditional Sale Contract, 233 I. C. C. 359.) That subdivision provides: It shall be unlawful for any carrier to issue any share of capital stock or any bond or other evidence of interest in or indebtedness of the carrier (hereinafter in this section collectively termed ' securities !) ” without an order by the commission authorizing such issue. (Emphasis supplied.) The instruments are collectively defined as “ securities ” and the issue to be tried, as the decision of the commission indicates, was whether “ a conditional-sale contract covering the acquisition of railroad equipment * * * constitutes an issue of a security within the purview of section 20a(2) of the act.” (233 I. C. C. 359, 360, supra.) The scheme of the Federal statute apparently separates promotional obligations such as stocks and bonds from instruments for credit purchases such as notes and conditional sales agreements. In section 62 of our Public Service Law no such differentiation is made among “ stocks ”, notes ”, bonds ” and evidences of indebtedness ”,

Despite the fact that there is no conflict between the State and Federal statutes, the defendant argues that there is a conflict in policy; that although Congress has enacted no regulatory legislation covering the contract in question there is a policy expressed in the Federal legislation quoted above which indicates a Congressional intent to pre-empt the field of financial affairs of interstate carriers, and, accordingly, the State may not be permitted to fill in the gaps in the existing legislation. The doctrine of occupation of the field is customarily brought to our attention only after the National Government has chosen to act in connection with subject matter which the State also seeks to regulate. It was early said that State legislation is invalidated only if the Federal and State regulation cannot either practically or logically exist together. (Sinnot v. Davenport, 22 How. [U. S.] 227, 243.) Even more important is the doctrine, enunciated in a long line of cases, that “ the intention of Congress to exclude States from exerting their police power must be clearly manifested ”. (Napier v. Atlantic Coast Line, 272 U. S. 605, 611, and cases there cited; Allen-Bradley Local v. Board, 315 U. S. 740, 749, and cases cited.) Here we have in section 62 of the Public Service Law an exercise of police power affecting a bu's line, a public utility, rendering a public service in the community. The basic applicable canon of statutory construction governing all the variations of exercisable police power was well stated as follows in Maurer v. Hamilton (309 U. S. 598, 614): As a matter of statutory construction Congressional intention to displace local laws in the exercise of the commerce power is not, in general, to be inferred unless clearly indicated by those considerations which are persuasive of the statutory purpose. This is especially the case when public safety and health are concerned.” (See to the same general effect, Ill. Cent. R. R. Co. v. Public Utilities Comm., 245 U. S. 493, 510; Southern Pacific Co. v. Arizona, 325 U. S. 761, 766.) It is important for the health, comfort, convenience and safety of residents of the State who must use the buses of defendant that there be no interruption in their operation due to repossession of them by a distant creditor by reason of the waste or financial incompetence of the defendant.

The Supreme Court has had no difficulty in permitting'a State to fill in a gap in existing Federal legislation. Thus in the case of Kelly v. Washington (302 U. S. 1) the respondents operated a fleet of motor tugs engaged in interstate commerce. The Federal Motor Boat Act required certain lights, whistles, life preservers and fire extinguishment equipment but did not provide for an inspection of the hull and machinery of the boat. The court held that regulations embodied in the State statute could be applied in connection with the inspection of the hull and machinery. So also similarity of State and Federal legislation does not necessarily lead to the striking down of the former. In California v. Zook (336 U. S. 725) a State statute prohibited the sale or arrangement of transportation over the public highway of the State if the transporting carrier had no permit from the Interstate Commerce Commission. The State statute was virtually identical with the Federal statute but was held valid even though heavier penalties for violations were provided for in the State law and even though there was a possibility of double punishment. In Allen-Bradley Local v. Board (315 U. S. 740, supra) the complete system of Federal regulation of labor relations promulgated in the National Labor Relations Act was held not to bar State police action directed against mass picketing and other strike disorders. In Parker v. Brown (317 U. S. 341) the Supreme Court upheld a California plan for pooling and elimination of competition in the raisin industry to support prices despite the fact that the Secretary of Agriculture was authorized to establish a similar plan but had not done so. Of like nature were N. W. Bell Tel. Co. v. Ry. Comm. (297 U. S. 471); Welch Co. v. New Hampshire (306 U. S. 79), and Maurer v. Hamilton (309 U. S. 598, supra).

We had a similar problem before us in Matter of Davega-City Radio v. State Labor Relations Bd. (281 N. Y. 13) which was a proceeding to set aside orders of the State Labor Relations Board made by it in a proceeding charging the petitioner with violations of the State Labor Relations Act on the ground that the National Labor Relations Act precluded State regulation of the same subject matter. There was no saving clause in the National act. Both the National and State acts were virtually identical in aims and provisions. We reached the conclusion that the State board could enforce the State act until such time as it might be ousted by the exercise by the National board of its jurisdiction under the National act.

That brings us to the final point urged upon us by the defendant that since it operates in interstate commerce it would constitute an unconstitutional encroachment upon the power granted Congress over interstate commerce to require defendant to obtain authorization of the Public Service Commission to execute the conditional sales contract here involved.

The Commerce Clause of the Constitution which gives the National Government power to regulate interstate commerce does not exclude all power of regulation by the States. Amendment X of the United States Constitution provides: “ The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” This constitutional principle has been expressed in the following language by the Supreme Court in Halter v. Nebraska (205 U. S. 34, 40-41): “ Another vital principle is that, except as restrained by its own fundamental law, or by the Supreme Law of the Land, a State possesses all legislative power consistent with a republican form of government; therefore each State, when not thus restrained and so far as this court is concerned, may, by legislation, provide not only for the health, morals and safety of its people, but for the common good, as involved in the well-being, peace, happiness and prosperity of the people.” In the absence of conflicting legislation by Congress it has been recognized from an early date that the States may make laws governing matters of local concern which to some degree affect or even regulate interstate commerce. (Willson v. Black Bird Creek Marsh Co., 2 Pet. [U. S.] 245; Cooley v. Board of Wardens of Port of Philadelphia, 12 How. [U. S.] 299.) Of course, in a field where national uniformity is demanded, a State will often not be permitted to legislate even though there is no Federal statute covering the subject matter. (Gibbons v. Ogden, 9 Wheat. [U. S.] 1; Brown v. Maryland, 12 Wheat. [U. S.] 419; Di Santo v. Pennsylvania, 273 U. S. 34.) The problem is one of balancing State interests against national interests. The State statute will invariably be upheld, in the absence of a requirement of national uniformity or of existing Congressional legislation covering the subject matter, unless the application of the State statute obstructs interstate commerce. (Southern Pacific Co. v. Arizona, 325 U. S. 761, supra.) On the other hand measures reasonably calculated to increase the safety of railway travel without obstructing interstate transportation have been upheld. (N. Y., N. H. & H. Railroad v. New York, 165 U. S. 628; Atlantic Coast Line v. Georgia, 234 U. S. 280; Missouri Pacific R. Co. v. Norwood, 283 U. S. 249; Terminal Assn. v. Trainmen, 318 U. S. 1, 8.) State highways are, of course, subject to regulation by the States in the public interest. (Eichholz v. Comm., 306 U. S. 268; S. C. Hwy. Dept. v. Barnwell Bros., 303 U. S. 177; Bradley v. Pub. Util. Comm., 289 U. S. 92; Sproles v. Binford, 286 U. S. 374.)

Here the State statute requiring authorization of the Public Service Commission before an omnibus corporation may enter into a conditional sales contract was in the interest of the public. Such a regulation helps to ensure the general financial responsibility of a public utility operating under a franchise granted by this State. A bus line which is financially sound is less likely to have interruptions of service and the public will be protected against the possibility of sudden deprivation of bus service. The public need for efficient and uninterrupted transportation is thus served by our State statute. It is not drastic or discriminatory but is a reasonable exercise by the State of its police power to protect customers and creditors of a small bus company from the danger of high rates or loss of service resulting from uncontrolled financing.

Before Congress gave the Interstate Commerce Commission power to regulate the securities of railroads, such regulation was exercised by State commissions. We sustained such regulation by the Public Service Commission in People v. New York Central & H. R. R. R. Co. (138 App. Div. 601, affd. 199 N. Y. 539, supra). Only after the Interstate Commerce Act was amended by the Transportation Act of 1920, did this court hold that a railway corporation organized under the laws of this State might issue securities and assume obligations without securing the authorization of the Public Service Commission. (People v. New York Central R. R. Co., 233 N. Y. 679.) Clearly, securities of interstate carriers may be regulated either by the State or by the Federal Government. As long as the Federal Government does not choose to regulate the execution of conditional sales contracts, there is no reason why our Public Service Commission should not continue such regulation through the provisions of section 62 of our Public Service Law.

The judgment of the Appellate Division should be affirmed, without costs.

Loughran, Ch. J., Lewis, Desmond, Dye, Fuld and Froessel, JJ., concur.

Judgment affirmed.


author: Per Curiam.

text:
    The People of the State of New York, Appellant, v. William J. McCormick, Respondent.
    Argued December 5, 1951;
    decided January 17, 1952.

      Frank S. Hogan, District Attorney (Richard G. Denzer and Chester E. Kleinberg of counsel), for appellant.
    The cross-examination of defendant was proper. (People v. Sorge, 301 N. Y. 198; People v. Jones, 297 N. Y. 459; People v. Webster, 139 N. Y. 73; People v. Rosenthal, 289 N. Y. 482; People v. Perry, 277 N. Y. 460; People v. De Garmo, 179 N. Y. 130.)

      Elliott E. Vose, Florence M. Kelley and Martin Erdmann for respondent.
    I. The cross-examination was wholly collateral to the issues. II. It was error to permit the District Attorney to contradict defendant’s denials of collateral crimes by reading a purported confession which defendant denied making. (Potter v. Browne, 197 N. Y. 288; People v. Brown, 265 App. Div. 153, 290 N. Y. 830; People v. Malkin, 250 N. Y. 185.)
   Per Curiam.

While the rule is clear that cross-examination upon collateral matters may not be fobbed off by a negative response (see People v. Sorge, 301 N. Y. 198), that rule does not sanction either the calling of other witnesses or * * * the production of extrinsic evidence ” to refute the witness’ answer on such collateral items (p. 201). In the case before us, confronting defendant with a written statement, purportedly made by him, and reading from it considerable inculpatory material tending to refute his earlier denials, not only rendered such denials futile but amounted to the production of extrinsic evidence within the meaning of the rule here involved. In short, the ■ cross-examination complained of exceeded all permissible limits.

The order should be affirmed.

Loughran, Ch. J., Lewis, Conway, Desmond, Dye, Fuld and Froessel, JJ., concur.

Order affirmed.


text:
    In the Matter of 23 West Street Corporation, Appellant and Respondent. Gibbs & Cox, Inc., Respondent and Appellant.
    Argued November 26, 1951;
    decided January 17, 1952.

      Leonard P. Moore and Harry F. X. Hammer for appellant and respondent.
    I. The Appellate Division, in modifying the amount of respondent tenant’s proportionate share of the basic gross return, used an erroneous mathematical formula which deprived the landlord of rental from 11,120 square feet of office space occupied by said tenant. II. Maintenance and operation items aggregating $20,110.24 were improperly disallowed. (Matter of Barry Equity Corp. [Marcia Hat Co.], 276 App. Div. 685; Matter of Court Square Bldg. v. City of New York, 298 N. Y. 380; Matter of Hecht Broadway Corp. [Ashenfarb], 298 N. Y. 769; Matter of Relmar Operating Corp. [Roffer], 297 N. Y. 609.) III. Landlord is entitled to all costs of maintaining and operating its property. IV. The courts below properly rejected the testimony of tenant’s expert and accepted that of landlord’s expert as to differentials in rental value per square foot of the various floors. (Amend v. Hurley, 293 N. Y. 587; Drivas v. Lekas, 292 N. Y. 204; Harrington v. Harrington, 290 N. Y. 126.)

      Walter Gordon Merritt, H. George Carroll and Thomas P. Dwyer for respondent and appellant.
    I. In apportioning the statutory rent load among all the office tenants, respondent tenant has been erroneously charged with operation costs incurred exclusively for the other tenants. (Matter of Lamon [City of New York], 276 App. Div. 1090, 301 N. Y. 624; Matter of 290 Park Ave. [Fergus Motors], 275 App. Div. 565; Matter of Cranford Coal & Land Co. [Red Ball Van Lines], 278 App. Div. 579; Matter of Fifth Madison Corp. [New York Tel. Co.], 297 N. Y. 155.) II. It was error to reject the testimony of tenant’s expert and to accept the testimony of landlord’s expert as to the differentials in rental value per square foot of the various floors.
   Per Curiam.

In this alternative proceeding under subdivision 2 of section 4 of chapter 314 of the Laws of 1945, as amended by chapter 326 of the Laws of 1950 and chapter 430 of the Laws of 1951, the total rent of $281,675 found by the Official Referee to be the reasonable rent for the tenant, but reduced to $279,190 because the emergency rent may not be increased by more than 15%, should be reinstated but reduced by $21,423.18 to $260,251.82. The tenant should be charged only for the cost of cleaning its premises by the specially engaged cleaning company. There is no proof in the record that some or all of tenant’s premises could be cleaned by the staff of the landlord without increase of cost to it by the hiring of additional help.

The actual occupancy of the tenant was 138,125 square feet. The reduction of square-foot area of whole-floor occupancy by the tenant by the assumption of the existence of hypothetical corridors and hallways upon those floors by an. expert called by the landlord was solely for the purpose of enabling him to offer his opinion that there was a differential in value in office space between that above and that below but including the fifteenth floor. That difference the expert testified was 30 cents and was between the respective values of $3.30 and $3.60 per square foot. His schedule so hypothetically reducing the square-foot occupancy of tenant by 10,880 square feet was received, and thus the existence of corridors and hallways assumed, for that purpose alone. Both the Official Referee and the Appellate Division found an occupancy of 138,125 square feet which included the total square footage of the whole floors occupied by tenant. Neither the Official Referee nor the Appellate Division adopted the valuation per square foot as testified to by the opinion witness mentioned. The Official Referee disregarded the testimony as to the differential in value of office space between the upper and lower floors. The weight of the evidence supports the findings of the Official Referee. Accepting the Official Referee’s valuation and thus disregarding any differential in value but reducing the cost of cleaning chargeable to the tenant, the cost per square foot to it will be $1.88 per square "foot.

The items of landlord’s expense found by the Official Referee and not reversed or modified by the Appellate Division are not before us.

The order of the Appellate Division should be reversed, and the order of the Official Referee modified by reducing the cost of cleaning chargeable to tenant by $21,423.18, and in all other respects affirmed, without costs.

Loughran, Ch. J., Lewis, Conway, Desmond, Dye, Fuld and Froessel, JJ., concur.

Ordered accordingly.


text:
    In the Matter of Lynch’s Builders Restaurant, Inc., Respondent, against John F. O’Connell et al., Constituting the State Liquor Authority, Appellants.
    Argued December 6, 1951;
    decided January 24, 1952.

      Alvin McKinley Sylvester and Charles W. Chattaway for appellants.
    I. Upon the evidence the board was justified in concluding that on at least two different occasions petitioner either knew or through the exercise of reasonable diligence could have known that homosexuals were committing disorderly acts upon the licensed premises. The question of credibility of witnesses was for the board alone and its determination is supported by substantial evidence. (Schindler v. Royal Ins. Co., 258 N. Y. 310; Matter of Cohen v. Board of Regents, 274 App. Div. 952, 299 N. Y. 582; Matter of Bender v. Board of Regents, 262 App. Div. 627; Matter of Kaufmann, 245 N. Y. 423; Matter of Garvey v. O’Connell, 271 App. Div. 766; Matter of Miller v. Kling, 291 N. Y. 65; Matter of Avon Bar & Grill v. O’Connell, 301 N. Y. 150; Matter of Humphrey v. State Ins. Fund, 298 N. Y. 327.) II. The court below, in holding that petitioner was excused and justified, as a matter of law, in refusing to take steps to prevent its premises from becoming disorderly, has usurped the exclusive province of the board to judge the facts, and, since the facts in mitigation were not raised or proved by petitioner, but rather affirmatively denied by it, the court has created a rule of law which would nullify completely any effective sanctions against licensees who suffered or permitted their premises to become disorderly. The court further erred in creating a new criteria of proof relating to the statutory phrase “ suffer or permit ”. (Matter of Clement [Ruehl Certificate], 144 App. Div. 156; Grannan v. Westchester Racing Assn., 153 N. Y. 449; Madden v. Queens Co. Jockey Club, 296 N. Y. 249; Matter of Fortino v. State Liq. Authority, 273 N. Y. 31; Matter of Yates v. Mulrooney, 245 App. Div. 146; Bertholf v. O’Reilly, 74 N. Y. 509; Matter of Kormann’s Hofbrau v. O’Connell, 275 App. Div. 930, 300 N. Y. 521; Matter of Conomon v. State Liq. Authority, 254 App. Div. 650, 278 N. Y. 591; Purity Extract Co. v. Lynch, 226 U. S. 192.)

      Melvin L. Krulewitch and Barnet V. Kaufman for respondent.
    I. The charge did not allege sufficient grounds to constitute a violation of law nor did the evidence support such charge. (People v. Grogan, 260 N. Y. 138; People v. Patrick, 175 Misc. 997; People ex rel. Prudhomme v. Superintendent of N. Y. S. Reformatory for Women, 21 N. Y. S. 2d 563; People v. Lo Vecchio, 185 Misc. 197; Matter of Toyos v. Bruckman, 266 App. Div. 28, 291 N. Y. 745.) II. There was a failure of competent proof. (Matter of Arnold Reuben, Inc., v. State Liq.

      Authority, 268 App. Div. 981, 294 N. Y. 730; Matter of Stevensville Lake Holding Corp. v. O’Connell, 269 App. Div. 804; Matter of Konopka v. Bruckman, 290 N. Y. 777; Matter of President on Swan Lake, Inc., v. O’Connell, 269 App. Div. 805; People v. Rankin, 92 Misc. 62; Matter of Abrams v. Bruckman, 263 App. Div. 593; Matter of 54 Cafe & Restaurant v. O’Connell, 274 App. Div. 428, 298 N. Y. 883.)
   Per Curiam.

In a proceeding brought under article 78 of the Civil Practice Act to review a determination of an administrative agency, it is sufficient that the record contain “ substantial evidence ” to support it. (See, e.g., Matter of Humphrey v. State Ins. Fund, 298 N. Y. 327, 331-332; Matter of Miller v. Kling, 291 N. Y. 65, 69.) In the case before us, ample proof was adduced before the State Liquor Authority — and it was not rendered less effective or less probative because the criminal charge based upon some of it had been dismissed in a magistrate’s court (see Matter of Cohen v. Board of Regents, 299 N. Y. 582, affg. 274 App. Div. 952; Schindler v. Royal Ins. Co., 258 N. Y. 310, 312-313; Matter of Garvey v. O’Connell, 271 App. Div. 766) —to warrant the Authority (1) in finding that the licensee actually knew or should have known, had reasonable diligence been exercised, that homosexual activities were being carried on in its premises, and (2) in concluding that such licensee had suffered or permitted the premises to become “ disorderly ” in violation of subdivision 6 of section 106 of the Alcoholic Beverage Control Law. (See Matter of Avon Bar & Grill v. O’Connell, 301 N. Y. 150, 153.)

The order of the Appellate Division should be reversed and the determination of the State Liquor Authority confirmed, with costs in this court and in the Appellate Division.

Loughran, Ch. J., Lewis, Conway, Desmond, Dye, Fuld and Froessel, JJ., concur.

Order reversed, etc.