text:
    In the Matter of 320 West 37th Street, Inc., Appellant, against Joseph D. McGoldrick, as Comptroller of the City of New York, Respondent.

      Argued May 24, 1939;
    decided July 11, 1939.

      Morway Picket for appellant.

      William C, Chanler, Corporation Counsel, (Edmund B. Henpefeld, Arthur A, Segall and Sol Charles Levine of counsel), for respondent.
   Hubbs, J.

The appellant is engaged in thé real estate business and is the owner of a loft building rented to small manufacturers. It buys electricity from the Consolidated Edison Company, taking service through a master meter at a rate lower than would be available to its tenants, taking separately. It resells, through separate meters, to its individual tenants at the established rates fixed by the electric company for service furnished to individuals. The electricity thus furnished is billed separately from the rent and the details of management, distribution, meter reading, billing, collecting, etc., is handled for appellant by Consumers Electric Service Company, Inc. The appelant derives a profit from thus reselling the electricity it purchases through the master meter. The apparatus used is located within the premises. No use is made of the city streets. No permit is granted or required from the city or State. It sells electric current to its tenants as an incident of its private real estate business.

For the year prior to making application for a refund, it reported its gross income from the sales of electricity made to its tenants under the provisions of the so-called utility tax laws, being local laws adopted pursuant to chapter 815 of the Laws of 1933. Based upon such returns, it paid a three per cent tax for a portion of the period, and thereafter a one per cent tax. Within one year from the payment of the taxes it made application for a refund, pursuant to the provisions of Local Law No. 30 of 1936 of the city of New York in reference to refunds. The respondent denied the application and this proceeding is to review such determination.

The original utility tax law (Local Law No. 19 of 1933) imposed the tax only upon public utilities subject to the supervision of the Department of Public Service. That did not cover all utilities. Therefore, by Local Law No. 21 (published as No. 22) of 1934 an additional provision was enacted making taxable “ Every person who shall engage in the business of furnishing or selling gas, electric, steam, water, telephone or telegraph service whether or not such person is subject to supervision by the department of public service ” (§ 1, subd. d). By Local Law No. 2 of 1935 the above last-quoted provision was changed to read: every person whether or not such person is subject to such supervision who shall engage in the business of furnishing or selling to other persons gas, electricity, steam, water, refrigeration, telephony and / or telegraphy or . who shall engage in the business of furnishing or selling to other persons gas, electric, steam, water, refrigeration, telephone or telegraph service.” (§, 1, subd. 2.) In the caption of these local laws it is provided that they are local laws “ imposing an excise tax on the gross income of every person doing business * * * subject to supervision of either division of the department of public service, and of any and all other utilities doing business within such city.” The law in force from July 1, 1936, to July 1, 1937. fixed the tax at three per cent and that in force for the subsequent' fiscal year fixed the tax at one per cent. (See Local Law No. 23 of 1937, § 2.) The tax thus imposed and here in question is not a sales tax imposed on the sale of personal property but purports to be a tax on a utility doing business within the city.

The appellant contends that it is not a utility or a person engaged in the business of selling electricity within the intent of that law, and that if the law be construed to include petitioner it is unconstitutional. In support of its contention it relies upon the decision of this court in Matter of Merchants Refrigerating Co. v. Taylor (275 N. Y. 113). There a storage warehouse company maintained refrigerating plants in the basements of its warehouses. In the main its business consisted of storing goods for others in refrigerated compartments, but it sold refrigeration to certain tenants of one of its buildings and from one building it sold refrigeration, through pipes laid under the streets pursuant to a franchise from the city, to customers off its own premises. This court held it not liable under the utility tax law as to its storage business, or as to refrigeration sold to its own tenants, but hable as to refrigeration sold for off-premises consumption pursuant to a franchise permitting the use of the street for its pipes. That case arose after the adoption of the 1935 law, which included in the persons affected by the act those selling refrigeration (Local Law No. 2 of 1935). There, as here, the service to its tenants was not included in the rental charge for the premises, but was separately charged for. The only material differences to be observed are:

First, that in the case cited the refrigerating company was hable to a sales tax, whereas here the appellant is exempt as to its income from rentals through a specific provision to that effect in the business tax law.

Second, in the case cited the refrigerating company produced refrigeration on the premises where here the electricity was purchased rather than produced.

The decision in the Refrigerating Company case was placed upon the ground that it did not appear that the appellant had characteristics differentiating it from business in general and hence that no' reason appeared why the appellant should be subject to the tax while business in general was exempted. Neither the fact that the refrigeration was produced on the premises or that a double tax might result appears to have been considered as a ground for the decision.

The respondent argues that here the appellant has the benefit of a so-called underlying franchise, that is, the franchise held by the Consolidated Edison, upon which it is dependent for the service which it sells, So might have been the refrigerating company dependent upon an electric, gas, water or other franchise to make possible its production of refrigeration. Such argument is without merit.

It is not seriously contended that had the appellant rented its lofts, power and light included, at a specified rental per month, that it would be liable for the tax here in question. It is contended that because it does the same thing except that its charge for rent and electricity are separate items, it thereby engages in the utility business within the meaning of the law in question. The law, read as a whole, is quite evidently intended to apply to those engaged publicly in the business of distributing the named commodities or furnishing the named services. If it is not applicable when a refrigerating company furnishes refrigeration to its tenants for profit, independently of its rental charge for space and other facilities, it clearly is not applicable when a real estate holding company sells electricity to its own tenants on the same basis,

It is urged by the respondent that the tax was voluntarily paid without protest and, therefore, cannot be recovered. Prior to the payment of the tax the Comptroller had issued regulations governing the enforcement of local laws imposing utility taxes and made rulings in respect to the payment of such taxes. Under the terms of such regulations and rulings the appellant was required to pay the tax and in case of failure became subject to penalties for such failure. Section 10 of Local Law No. 21 of 1934 provides; If within one year from the payment of any tax or penalty the payer thereof shall make application for a refund thereof and the comptroller or the court shall determine that such tax or penalty, or any portion thereof, was erroneously or illegally collected, the comptroller shall refund the amount so determined.” Appellant has proceeded thereunder. In the circumstances the general rule of voluntary payment is not applicable. Otherwise there would be no reason for the enactment of the statutory provision for a refund as a tax erroneously paid under protest could be recovered without such statutory provision. (N. Y. Rapid Transit Corp. v. City of New York, 275 N. Y. 258; affd., 303 U. S. 573.)

The order of the Appellate Division should be reversed, the determination of the Comptroller annulled, and a refund directed, with costs to the appellant. (See 281 N. Y. 854.)

Crane,Ch. J. Lehman,Lóttghran, Finch and Rippey, JJ. concur; O'Brien, J., taking no part.

Ordered accordingly.


source: Caselaw Access Project

author: Rippey, J.

license: Public Domain

text:
    In the Matter of the Application Of James P. Mazzone, Appellant, for Payment of an Award Made in a Condemnation Proceeding Instituted by the City of New York. David Hjorth et al., Respondents.

      Argued April 10, 1939;
    decided July 11, 1939.

      Samuel Feuer and Abraham Kantor for appellant.

      Merle I. St. John, Morris T. Hamburg and Edwin C. Hamburg for David Hjorth et al., respondents,

      William C. Chanter, Corporation Counsel (Lewis Orgel and Julius Isaacs of counsel), for City of New York, respondent.
   Rippey, J.

This is a proceeding to determine the ownership of an award made in a street opening condemnation proceeding to unknown owners for Damage Parcel No. 75 taken by the city from Gore Lot No. 69, being twenty-five feet in depth along the northerly fine of Bronxwood avenue. An order to condemn the property in question was filed in the office of the clerk of Bronx county on October 25, 1929. The final decree as to damage and benefit was filed on July 8, 1935, but title to the lands acquired vested in the city of New York on March 2, 1931. Not only did the final decree provide an award, but assessed against it a benefit to the property remaining after the damage parcel was taken. In the instant proceeding an order was made at Special Term confirming the report of an official referee directing that the Comptroller of the city of New York pay to James P. Mazzone the full amount of the award with accrued interest without regard to the assessment levied in the proceeding against the premises of which the damage parcel formed a part and without regard to any other taxes, assessments, water charges or other liens which became a lien against the remaining premises subsequent to June 18, 1925. That order was unanimously reversed by the Appellate Division, which held that the award belonged to a cross-petitioner, Amanda Hjorth, subject to deduction therefrom of the assessment for benefit levied in the proceedings and any other assessment, taxes or other charges that might be liens against the remaining land of which the damage parcel formed a part.

On July 10, 1901, the proper authorities adopted and filed in the proper public office a map of section 32 of the layout of proposed streets for the borough of the Bronx. Among other things, there appeared and was located upon the map a certain Lot G69 on the corner of Fifth street, later Bronxwood avenue, and Corsa lane, later East Two Hundred and Twenty-fifth street, fronting sixty-two and three-tenths feet on Fifth street. The width of Fifth street was indicated to be fifty feet, as then physically existing. The map, however, indicated that it was proposed to widen the street to a width of one hundred feet by taking twenty-five feet off of Lot G69 and twenty-five feet from the lot on the opposite side of the street. In 1910 and 1925 other maps were adopted and filed showing the same existing and proposed layout. On February 25, 1925, Mazzone acquired title to the easterly fifty-five feet of Lot G69 and conveyed title thereto by deed to David Hjorth on June 18, 1925. The grantee paid $6,000 on the purchase price of the property and executed and delivered a purchase-money mortgage for $5,000. The deed to Hjorth, which was recorded on June 25, 1925, conveyed the property in fee simple absolute without restriction or reservation. The following clause, however, was contained in the deed: Excepting, however, that the party of the first part expressly excepts from this conveyance and expressly reserves to himself, his heirs, executors, administrators and assigns any awards o" other remuneration that may be made to said premises by the City of New York or other subdivision thereof for the widening of Bronxwood Avenue. And the party of the first part, the grantor, herein expressly reserves the right to claim such awards or remuneration in his own name and right and to commence any action for the recovery of same in his own name and right.” By subsequent mesne conveyances title to the property (all of Lot G69) finally vested in the Vitabel Realty Corporation, which was the record owner thereof from December 17, 1927, to May 28, 1935. Each conveyance contained the clause which provided that the right to any condemnation award was reserved to Mazzone. On May 28, 1935, the Vitabel Realty Corporation conveyed the premises remaining after the widening of Bronxwood avenue to Amanda Hjorth, wife of the, petitioner’s grantee, together with the right to any award that might be made pursuant to the condemnation. She had joined in a previous conveyance, however, of all of Lot G69 in which it was specifically set forth that Mazzone had the right to any such award. She is now, of course, chargeable with notice of any rights which Mazzone may have to the award by virtue of the various conveyances.

The Appellate Division agreed with the contention of respondents that the clause above quoted and contained in the conveyance from Mazzone to Hjorth and in the subsequent conveyances was void under the provisions of article I, section 14, of the State Constitution in effect at the time the conveyance was made that all fines, quarter-sales, or other like restraints upon alienation, reserved in any grant of land hereafter to be made shall be void” and that, in any event, the provision constituted a restraint on alienation which was void on the ground that it was repugnant to the estate granted (De Peyster v. Michael, 6 N. Y. 467).

The constitutional provision referred to first appeared in the State Constitution of 1846 and embodied the rule of the common law previously existing. There can be no doubt that the rule of the common law as well as the constitutional provision was intended to and did void covenants in voluntary conveyances of a fee which had the effect of restraining subsequent alienation of the property except where the covenantee had a reversion in the property (Continental Ins. Co. v. N. Y. & H. R.R. Co., 187 N. Y. 225, 237). The restraints indicated apply to voluntary sales only by the act of the. owner or the lessee (4 Kent’s Commentaries, p. 124). The reservation in the deed from Mazzone to Hjorth did not have the effect and was not intended to have the effect of restraining alienation of the property, and this is sufficiently evidenced by the fact that it did not restrain or interfere with various subsequent conveyances. The taking of the landffiy the city in the condemnation proceeding, even though it can be termed a sale (Tiffany Studios v. Seibert, 223 N. Y. 712; Matter of City of New York [Elm Street], 239 N. Y. 220), was not a voluntary sale or conveyance. The right to take private property for public use without the consent of the owner is an inherent and unlimited attribute of sovereignty whose exercise may be governed by the Legislature within constitutional limitatións and by the Legislature within its power delegated to municipalities (People v. Adirondack Ry. Co., 160 N. Y. 225, 237, 238; People ex rel. Burhans v. City of New York, 198 N. Y. 439; Matter of Board of Water Supply of City of New York, 277 N. Y. 452, 455). It is a Compulsory taking of an estate in fee absolute Upon payment of just compensation to the owner (Kahlen v. State of New York, 223 N. Y. 383, 388). The transfer to the city Was a sale in invitum td which neither the constitutional provision nor the rule of the common law voiding covenants restricting alienation applies (4 Kent’s Commentaries, p. 124; Jackson v. Corliss, 7 Johns. 531, 534; Riggs v. Pursell, 66 N. Y. 193, 196; Higgins v. McConnell, 130 N. Y. 482, 487, 488), There can be no escápe from the proposition that the'-'principle laid down in those cases, although they involved different facts, applies to the case of the taking by the city in condemnation proceedings for public Use.

Attention has been called to the fact that the final map adopted in 1901 set out the specific Strip finally taken in the condemnation proceedings. The city proceeded on the basis of that map, The subsequent maps that Were filed constituted amendments not affecting the property in question. While the filing of the map did not interfere With the free use or disposition of the property by its owners up to the time that the condemnation proceeding was actually commenced (cf. Headley v. City of Rochester, 272 N. Y. 197), nevertheless, the map Was notice to all who might be interested in or deal in the property of the probability of future condemnation. That the possibility thereof Was taken into consideration by all parties to all conveyances must have made a material difference in the computation of the purchase price, The bargain and sale transaction between Mázzone and Hjorth reserved to the former substantial rights, Still the reservation did not restrict the full and free Conveyance of the property ñor did the conveyance or reservation deprive Hjorth Or his successors in interest who might at the moment have title of any right to the complete and exclusive possession of the property. Mazzone neither had nor attempted to exercise any control over the disposition of the property by subsequent owners. There was no reservation of any right in the property itself, but the reservation went only to the proceeds of a forced sale if and when that might occur. No authority has been called to my attention by which Mazzone can be deprived of the rights which he reserved to the award, all of which rights were subsequently consistently reserved by subsequent owners for his benefit.

Whatever effect the provisions of section 976 of the Greater New York Charter (Laws 1901, ch. 466, as amd.) might otherwise have had upon the question of the time of the vesting of title in the city, it is conceded here that title to the land condemned vested in the city of New York on March 2, 1931, during the pendency of the proceeding for condemnation and at a time when the Vitabel Realty Corporation was the owner of the property by deed in which it accepted title containing the provision that the amount of the award should belong to Mazzone. Amanda Hjorth did not acquire title to the premises remaining after the twenty-five-foot strip was taken by the city until May 28, 1935. Although the deed to her from the Vitabel Realty Corporation omitted the reservation of the award to Mazzone and purported to transfer the right to the award to her, the grantor had no interest in the award at that time to transfer. That it had no such interest was clearly understood by Amanda Hjorth at the time that she took ,the conveyance, for she had executed a previous conveyance of the same property to another purchaser with clause included expressly reserving to Mazzone the amount of any future award. Based upon the clear intent of the parties, the deed which she executed and in which she made the reservation, although giving no title in and by itself to Mazzone, served as an exception from the thing granted and as definite indication of her knowledge of an adverse claim to the thing excepted (West Point Iron Co. v. Reymert, 45 N. Y. 703). That it was her intent that any future award should not be included in the conveyance has met with no contradiction by her. She stands solely upon the proposition that, regardless of intent, such a reservation was void. She knew, therefore, that at the time the Vitabel Bealty Corporation transfer to her took place the award was reserved by and belonged to Mazzone. She cannot now be heard to assert the contrary.

David Hjorth made a claim here to the award on the ground that he was an owner of a mortgage on the premises at the time the title vested in the city and at the time the award was made. He was the grantee in the deed from Mazzone in which the reservation of the award in the latter first appeared. The mortgage on which he based his claim was not executed until subsequent to that time. He presented no proofs before the official referee to sustain his claim. As matter of law the mortgage must be deemed to have been subject to any rights in Mazzone existing at the time of its execution and delivery.

The city of New York asserts that it is entitled to offset the assessment for benefit on the remaining property against the award under the provisions of section 988 of the Greater New York Charter (amd. L. 1915, ch. 606), which provides that “ if it shall appear by the final decree of the court as to awards or by the report of the commissioners of estimate, as the case may be, or otherwise, that a person entitled to an award also owns property against which an assessment in the same proceeding shall have been entered for collection, the city may, without the assent of the person entitled to the award, set off the assessment against the award.” Attention is called to the fact that the final decree provided that the award should go to unknown owners. We have already shown that Amanda Hjorth had no interest in the award either at the time title vested in the property or at the time of the final decree. The part remaining after the taking was vested in the Vitabel Bealty Corporation, a party to this proceeding, at the time title vested in the city of New York. There was no common ownership in Am.ati.da Hjofith. or in the Vitabel Realty Corporation of the award and of the property not taken during any of the périod subsequent to the making of the order to condemn the property (Cf. Matter of Nunez, 226 N. Y. 246, 251). Malone owned the award and did not own the property against which the assessment had been entered.

The order of the Appellate Division should be reversed and that of the Special Term affirmed, with costs in this court and in the Appellate Division. (See 281 N. Y. 671.)

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

Ordered accordingly. ■


author: Hubbs, J. Lehman, J.

text:
    Busch Jewelry Co., Inc., et al., Respondents, v. United Retail Employees’ Union Local 830, et al., Appellants.

      Argued April 21, 1939;
    decided July 11, 1939.

      Harry Sacher and Samuel M. Sacher for appellants.

      Osmond K. Fraenkel and Nathan Greene for New York City Civil Liberties Committee, amicus curise.

      Walter Chalaire, Bernard Phillips and Sota Mentschikoff for respondents.

      Edwin M. Otterbourg and Frederic P. Houston for New York Board of Trade, Inc., amicus curiae.

   Hubbs, J.

The respondents, hereinafter referred to as the companies, operate twelve retail stores in New York city. The appellants will be referred to as the unions. Labor difficulties arose between the unions and the companies, and an attempt was made to settle such differences by negotiations, but the representatives of the unions would not negotiate while there was a stenographer in the room. They threatened to strike and left the room with the statement, “ I’ll meet you at the barricade.” On May 17, 1938, the unions called a strike against the companies and established picket lines at the companies’ stores. There are no questions of fact involved. The detailed findings of the learned trial court are fully sustained by the evidence and in most instances are undisputed.

From Soon of May 17, 1938, until May -26th pickets in crowds blocked the walks in front of the companies’ stores and prevented prospective customers from entering, not only by crowding the entrances but often by threats and physical violence. Employees who remained at work were intimidated by threats of personal violence and coercion. The pickets in crowds used loud, violent and obscene language and made false and fraudulent statements to induce injury to and destruction of the companies’ property. By violence, force, threats and obscene and abusive language they prevented customers from paying bills which they owed the companies. Not content with picketing the companies’ places of business, they threatened in a violent manner to picket the homes of employees and customers, and thereafter did picket the homes of certain employees and customers. They yelled and shouted and conducted snake dances in front of the companies’ stores, and by their conduct collected large crowds. They called the companies’ employees “ dirty scabs and rats,” and stated to them, “ You will get yours for continuing to work.” An employee was told that he had better come out on strike, that the union will get you.” A lady customer on leaving a store was told that if she didn’t take the merchandise back into the store they would “ get ” her. A lady employee as she was entering a store was" abused and threatened and a striker put his arms arotind her in an effort to keep her from entering the store. The strikers shouted that the companies gave phoney ” receipts and that their jewelry was second hand. Prescriptions for glasses, left by customers, were withdrawn from the store files.

Sufficient has been said to illustrate the extreme length to which the strikers went and the unlawful and dangerous nature Of their acts. The companies repeatedly appealed to the police for protection from the unlawful acts and were repeatedly informed that the police were helpless to protect them. The unlawful conduct was not that of individuals acting from impulse and excitement but were acts deliberately inspired by the unions and approved by them. The conduct of the strikers was advised in printed bulletins issued by the unions and their illegal acts were expressly approved in bulletins issued after they took place. The record discloses beyond question a deliberately prepared illegal plan, and the trial judge has so found.

The same conduct continued after the commencement of this action for an injunction, during the trial, and in total disregard of the trial justice’s oral instructions. It thus appears that the unions did not act in ignorance of the law but that they acted with full knowledge that their acts were in violation of law and illegal. The trial justice found that the unions had threatened to continue such illegal acts,

In the bulletin of May 18th the union advised the pickets to cast restraint aside, to become louder and more aggressive, and to keep prospective customers from entering the stores, Other bulletins advised the pickets to use language and antics provocative of violence, disorderly conduct and breach of the peace.

Organized labor has the rights of free speech, peaceful picketing and collective bargaining. Those rights are fully protected by law. During peaceful picketing there may occur minor disorders on the part of some of those engaged m picketing, owing to the over-enthusiasm of individuals, for which acts the unions are not responsible and which they generally repudiate. Unions which authorize a strike and picketing are under a legal responsibility to the public not only to avail themselves of their lawful rights in a legal way, but also to endeavor to uphold all laws and to avoid the destruction of property, disorderly conduct, personal assaults, breach of the peace, violence and fraud. When unions not only fail to live up to that responsibility but deliberately, willfully and with full knowledge that their acts are illegal, advise and encourage the commission of acts which are in violation of law and result in disorderly conduct aud breach of the peace, they are no longer entitled to the benefits of special statutes enacted to protect them in the enjoyment of their conceded right of peaceful picketing,

Prior to the enactment of section 876-a of the Civil Practice Act this court had decided that a trial court had jurisdiction to enjoin all picketing where it appeared that a union had failed in its responsibility to the public and it was established that any picketing in the future would result in the same kind of disorderly conduct and unlawful acts. (Nann v. Raimist, 255 N. Y. 307; Steinkritz Amusement Corp. v. Kaplan, 257 N. Y. 294; Wise Shoe Co. v. Lowenthal, 266 N. Y. 264.) Were it not for the provisions of section 876-a of the Civil Practice Act enacted by chapter 477 of the Laws of 1935, it would undoubtedly be the duty of this court to affirm the judgment here in question.

The effect of that statute is to prevent courts from enjoining peaceful picketing. It was never intended to deprive the Supreme Court of jurisdiction to enjoin dangerous, illegal acts which constituted disorderly conduct and breach of the peace. If such was its intent and effect it is to that extent unconstitutional and void as an attempt to abridge the jurisdiction of the Supreme Court, guaranteed by article VI, section 1, of the State Constitution. (DeHart v. Hatch, 3 Hun, 375; People ex rel. Swift v. Luce, 204 N. Y. 478.)

The trial court has made every finding required by section 876-a of the Civil Practice Act. It has found specifically that all the -unlawful acts hereinabove described * * * will be continued unless enjoined by this court;” also that further unlawful acts of the nature hereinabove discussed have been threatened by defendants.”

It is difficult to see how the trial court could have made more specific findings. If a trial court can ever grant an injunction against continuing picketing where the picketing has been carried on with violence and will be in the future, this is such a case.

In the case of Steinkritz Amusement Co. v. Kaplan (supra, p. 296) we said: In the case of Exchange Bakery & Restaurant, Inc., v. Rifkin (245 N. Y. 260) at p. 269) it was said: ‘ Where unlawful picketing has been continued; where violence and intimidation have been used and where misstatements as to the employers’ business have been distributed, a broad injunction prohibiting all picketing may be granted. The course of conduct of the strikers has been such as to indicate the danger of injury to property if any picketing whatever is allowed.’

Where such an injunction has been granted, 1 This court may not interfere except for manifest abuse.’ (Nann v. Raimist, 255 N. Y. 307, at p. 315.) ” To the same effect is the case of Wise Shoe Co. v. Lowenthal (supra).

The late decisions of the United States Supreme Court are apparently in harmony with our decisions. Referring to the National Labor Relations Law (U. S. Code, tit. 29, ch. 7) that court said: There is not a line in the statute to warrant the conclusion that it is any part of the policies of the Act to encourage employees to resort to force and violence in defiance of the law of the land.” (National Labor Relations Board v. Fansteel Metallurgical Corp., 306 U. S. 240, 257.)

The judgment of the Appellate Division should be affirmed, without costs, and the motion to dismiss the appeal denied.

Lehman, J.

(dissenting). Findings sustained by competent evidence and not challenged upon this appeal establish that picketing in this case has been conducted in an unlawful manner and that the illegal and wrongful acts were approved and even incited by the defendant unions, as part of a deliberately prepared plan. I accept the statement of facts contained in the prevailing opinion. I agree, too, with the court’s conclusion that “ the effect of [the] statute is to prevent courts from enjoining peaceful picketing. It was never intended to deprive the Supreme Court of jurisdiction to enjoin dangerous, illegal acts which constituted! disorderly conduct and breach of the peace. If such was its; intent and effect it is to that extent unconstitutional and void as an attempt to abridge the jurisdiction of the Supreme Court.” The difficulty in this case is that in spite of the statute the court has enjoined peaceful picketing and the power of the court to enjoin “ dangerous, illegal gets which constituted disorderly conduct and breach of the peace ” is not even challenged. The appellants ask only that the judgment be so modified that peaceful picketing shall not be prohibited-

By judicial decision the right to picket peacefully in order to achieve a lawful purpose in a labor dispute has been firmly established in this State. We have said that “ picketing ’ connotes no evil. It may not be accompanied, however, by violence, trespass, threats or intipfidation express or implied.” (Exchange Bakery & Restaurant, Inc., v, Rifkin, 245 N. Y. 260, 263.) In the same case we pointed out that where picketing has been accompanied by unlawful acts, an injunction may be granted to protect a complainant’s rights. “ This is no novel assumption of jurisdiction,” we said there. “ Freedom to conduct a business, freedom to engage in labor, each is like a property right, Threatened and unjustified interference with either will be prevented.” (p. 265.) The right to picket peacefully for a lawful end was not created by statute and no statute, I agree, could take away from the Supreme Court its jurisdiction to grant in proper case needed protection against unlawful abuse of the right to picket.

Here unchallenged findings establish that the right to picket has been abused. The abuse indeed is so flagrant that continuance of picketing when so conducted would constitute an intolerable threat not only to the rights of the plaintiff but to the public peace and order. There can be no room for doubt that a court of equity has jurisdiction and_power to protect the plaintiff by injunction against the threatened wrong. The question remains whether in the manner and form of the exercise of that power the court rejected regulations which the Legislature has power to impose. I differ with my associates only upon that narrow question.

The right of the individual to protection against unlawful interference with the conduct of his business through unlawfui acts of others must be reconciled With the collective right of parties to a labof dispute to strike and to picket in peaceful manner. Often there is room for doubt as to the manner in which such rights should be reconciled, and the Legislature in section 876-a of the Civil Practice Act has imposed upon the exercise of the equitable powers of the court to grant injunctions in labor disputes, regulations which in the opinion of the Legislature áre calculated to vindicate rights which at times seem to conflict.

In such disputes injunctions may still be issued, but in manner and form there provided. There is proviso that an injunction is to be confined to prohibition of unlawful acts, and

“ (f.) That no item of relief granted prohibits directly or indirectly any person or persons from doing, whether singly or in concert, any of the following acts: * * *

“ (5) Giving publicity to and obtaining or communicating information regarding the existence of, or the facts involved in, any dispute, whether by advertising, speaking, picketing, patrolling any public street or any place where any person or persons may lawfully be, or by any other method not involving fraud, violence or breach of the peace.”

The intent and effect of the hew statute is clear. It does not sanction acts previously unlawful; it does not ban acts previously lawful. It does not abridge the jurisdiction or power of the court to grant protection against acts which are unlawful but it does provide that in granting such injunction it shall leave the parties to a labor dispute free to do acts which Under the decisions of this court were lawful before the statute and remain lawful after the statute was enacted. The Constitution does not prevent the Legislature from imposing such regulations so long as they leave to the courts jurisdiction and power to grant adequate and appropriate protection against wrong through • injunction confined to prohibition of unlawful acts. (Cf. Goldfinger v. Feintuch, 276 N. Y. 281, 288.)

There is in this case a finding that th§ illegal conduct of defendants, their members, agents, servants, employees, and other persons acting in aid of or in conjunction with them, has been so persistent, continuous, wanton and flagrant as to indicate the danger of continued illegal acts by said persons, and the danger of injury to plaintiffs’ property and business if any picketing whatever is allowed.” It is to be noted that the finding is not that any ” picketing allowed in the future will result in the same kind of illegal conduct but only that the illegal conduct has been so persistent, continuous, wanton and flagrant as to indicate the danger of continued illegal acts.” In earlier cases we have said that where there is evidence and finding that a defendant’s course of conduct has been such as to indicate the danger of injury to property if any picketing whatever is allowed,” all picketing may be enjoined. (Exchange Bakery & Restaurant, Inc., v. Rifkin, supra; Nann v. Raimist, 255 N. Y. 307, 315.) In the latter case we said: not improbably a writ could have been framled whereby the desired end would have been attained by prohibitions less complete. We might have preferred such restraints if we. had been exercising the powers of a chancellor. Sitting in this court we deal solely with defect of power or with abuse of discretion so gross as to be equivalent to defect of power.” Except for the statute these cases would give strong support to the judgment we are reviewing, but the Legislature has in effect now said to the courts that prohibition of lawful picketing shall not be granted as an item of relief where the desired end might be obtained by prohibition less complete.

There may, it is true, be cases where “ violence and disturbance have been so great and threatening that peaceful picketing is out of the question.” (Wise Shoe Co. v. Lowenthal, 266 N. Y. 264, 268.) The statutory command is that no injunctive relief shall indirectly prohibit picketing or other method of giving publicity or information not involving fraud, violence or breach of the peace.” That, I agree, cannot prevent a court from prohibiting all picketing where in truth peaceful picketing is out of the question.” Here, I must repeat, there is no finding and perhaps no basis for a finding that an injunction against continuance of the wrongful acts which accompanied the violence would be disobeyed or that peaceful picketing is “ out of the question.” The injunction ignores the statutory provisions which regulate the manner in which the court may exercise its undoubted jurisdiction to protect the plaintiffs’ rights from unlawful interference by the defendants though so far as appears “ the desired end would have been attained by prohibitions less complete.” Though the Legislature may not abridge the jurisdiction of the Supreme Court it can no longer be questioned that it may regulate the manner of its exercise.

For these reasons the judgment should be modified to permit picketing lawfully conducted.

Crane, Ch. J., Loughran, Finch and Rippey, JJ., concur with Hubbs, J.; Lehman, J., dissents in opinion; O’Brien, J., taking no part.

Judgment affirmed, etc.


author: Loughran, J.

text:
    Hartford Accident and Indemnity Company, Plaintiff, v. First National Bank and Trust Company of Hudson, Respondent, and Farmers National Bank, Hudson, Appellant, Impleaded with Another.

      Argued June 2, 1939;
    decided July 11, 1939.

      Warner M. Bouck and Charles B. Sullivan for appellant.

      George C. Inman for respondent..
   Loughran, J.

For convenience, we abbreviate the corporate names appearing in the record: The Savings Bank; First National Bank; Farmers National Bank; the Indemnity Company.

In May, 1935, the Savings Bank drew to the order of Anna Gaddis (a depositor) its draft for $5,000 on First National Bank and debited her savings account in that sum. This draft, indorsed in the name Anna Gaddis, was deposited by one Merlon J. White in his account in Farmers National Bank, and was by that bank indorsed and collected from First National Bank, where the Savings Bank had a deposit to which the payment was charged.

In an action thereafter brought by Anna Gaddis against the Savings Bank, she had judgment for the full amount of her savings account on a finding that the indorsement of her name on the $5,000 draft was a forgery. This judgment has been paid by the Indemnity Company, that company having insured the Savings Bank against such a liability.

The present action was brought by the Indemnity Company (as subrogee of the Savings Bank) against First National Bank for reimbursement of the payment of the Gaddis judgment. First National Bank brought in Farmers National Bank as a party and demanded judgment over against it. The collateral pleadings served in this action by these now defendant banks presented again the issue whether the indorsement of the name Anna Gaddis on the $5,000 draft was a forgery.

The Indemnity Company has a judgment on the pleadings against First National Bank. This judgment has not been challenged and may be passed over.

Special Term denied a motion by First National Bank for summary judgment in its cross-action against Farmers National Bank. First National Bank appealed to the Appellate Division where the order of Special Term was reversed and the motion was granted. Farmers National Bank now appeals to us from the summary judgment directed against it in favor of First National Bank.

The Appellate Division held that the Savings Bank by appropriate notice had offered to Farmers National Bank a full and fair opportunity to defend the Gaddis action and that, though the offer had been declined, the result was that on the issue in the present case in respect of forgery of the indorsement on the $5,000 draft Farmers National Bank was concluded by the judgment antecedently recovered by Anna Gaddis against the Savings Bank. We think this employment of the doctrine of res judicata should not be approved.

A generally accepted statement of the rule in question may be abridged as follows: When a person is responsible over to another, either by operation by law or by express contract * * * and he is duly notified of the pendency of the suit and requested to take upon him the defense of it, he is no longer regarded as a stranger, because he has the right to appear and defend the action, and has the same means and advantages of controverting the claim as if he was the real and nominal party upon the record. In every such case, if due notice is given to such person, the judgment, if obtained without fraud or collusion, * * * will be conclusive against him, whether he has appeared or not.” (Littleton v. Richardson, 34 N. H. 179, 187.) This rule operates only against persons who will be directly responsible over to the person first sued should judgment go against him. (New York Title & Mortgage Co. v. Title Guarantee & Trust Co., 187 App. Div. 537; 1 Freeman on the Law of Judgments [5th ed.], § 448; 24 Am. & Eng. Ency. of Law, p. 741.)

The obligation of the Savings Bank to Anna Gaddis was a simple debt. The only applicable obligation of Farmers National Bank ran to First National Bank and was a warranty of the)genuineness of the indorsement of the name Anna Gaddis on the $5,000 draft. (Neg. Inst. Law [Cons. Laws, ch. 38], §§ 115, 116.) There was no obligation of Farmers National Bank to the Savings Bank in respect of the loss resulting to the Savings Bank in the Gaddis action. In that state of the several relationships of these parties, there was no right of the Savings Bank to impose upon Farmers National Bank a duty to defend the Gaddis action.' The judgment in that action, therefore, is not in this action available to First National Bank to establish as against Farmers National Bank that the indorsement of the name Anna Gaddis on the $5,000 draft was a forgery.

So the case stands in the present aspect of the law. But it is argued for- First National Bank that its judgment against Farmers National Bank is sanctioned by the spirit of the “ rule of reason and practical necessity ” connoted by the phrase res judicata. (See Good Health Dairy Products Corp. v. Emery, 275 N. Y. 14, 18.) This argument can indeed be plausibly stated. We have found it to be unconvincing and indecisive.

A named defendant who would have another (not yet a party) bound by judgment in an action must by proper notice offer to him control of the defense of the litigation. (Municipal Service Real Estate Co. v. D. B. & M. Holding Corp., 257 N. Y. 423, 427.) The essential factors of this process of “ vouching in ” are hard to define. Resort to them has often provoked a new controversy as to the adequacy of notice and opportunity to defend. (See Biasdale v. Babcock, 1 Johns. 517, 518; Castle v. Noyes, 14 N. Y. 329, 332, 335; Andrews v. Gillespie, 47 N. Y. 487, 492; City of Rochester v. Montgomery, 72 N. Y. 65, 67; Oceanic Steam Navigation Co. v. Compania Transatlantica Espanola, 144 N. Y. 663, 666; Prescott v. Le Conte, 83 App. Div. 482, 487; 178 N. Y. 585; Vogemann v. American Dock & Trust Co., 131 App. Div. 216, 219, 220; 198 N. Y. 586.) Vexations inherent in the practice are exhibited once more in the present case. Much may be said for the view of the dissenting opinion below that Farmers National Bank was not sufficiently informed that the creditor-against-debtor action brought by Anna Gaddis against the Savings Bank embraced an unpleaded issue of forgery. But however that may be, we think there is no compelling reason why a procedure so perplexing and inexact should now have operation outside its presently existing limits.

Subdivision 2 of section 193 of the Civil Practice Act provides: Where any party to an action shows that some third person, not then a party to the action, is or will be liable to such party wholly or in part for the claim made against such party in the action, the court, on application of such party, may order such person to be brought in as a party to the action and direct that a supplemental summons and a pleading alleging the claim of such party against such person to be served upon such person and that such person plead thereto, so that the claim of such moving party against such person may be determined in such action, which shall thereupon proceed against such person as a defendant therein to such judgment as may be proper.” The Savings Bank, then, could have sought in the Gaddis action a proper judgment on its claim against First National Bank. In that action, too, First National Bank could in that event have sought a proper judgment on its claim against Farmers National Bank. In that action, again, Farmers' National Bank could then have sought a proper judgment on its claim against Merlon J. White and he in his turn could have sought a proper judgment against any person liable over to him in the premises. (See Municipal Service Real Estate Co. v. D. B. & M. Holding Corp., supra; Clark on Code Pleading, pp. 284r-286. Cf. Fox v. Western New York Motor Lines, Inc., 257 N. Y. 305.) Thus a plain and sure track was open for one complete settlement of the respective claims of all persons involved in the handling of the $5,000 draft. In view of the breadth and certainty of this statutory authority for bringing into a litigation persons answerable over to original parties, we are not disposed to give assent to the dubious extension of the doctrine of res judicata here propounded by First National Bank.

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

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

Judgment accordingly.


author: Crane, Ch. J.

text:
    In the Matter of Gisella Divisich et al., Appellants, against James Marshall et al., Constituting the Board of Education of the City of New York, Respondents.

      Argued July 11, 1939;
    decided July 11, 1939.

      Leonard M. Wallstein, Leonard M. Wallstein, Jr., and Benjamin Menschel for appellants.

      Herman E. Cooper and Charles Barasch for Teachers Union of the City of New York, amicus curise.

      William C. Chanler, Corporation Counsel (Frederick vP. Bryan, Seymour B. Quel and Nicholas Bucci of counsel), for respondents.
   Crane, Ch. J.

If there be one public policy well-established in this State it is that public education shall be beyond control by municipalities and politics. The Board of Education of the City of New York is not a department of the city government, it is an independent corporate body and may sue and be sued in its corporate name (Education Law [Cons. Laws, ch. 16], §§ 300, 865; Matter of Fleischmann v. Graves, 235 N. Y. 84.) As early as 1921 (Matter of Emerson v. Buck, 230 N. Y. 380) we decided that while the municipality must make appropriations of money to run the schools, the expenditure of that money when once appropriated vested solely in the Educational Board. This was followed and cited in Matter of Fuhrmann v. Graves (235 N. Y. 77, 82) when this court said: The intent of the legislature in enacting the Education Law is clear. It imposes upon the boards of education, as separate corporate bodies representing the state, the responsibility of furnishing an efficient system of public education (People ex rel. Wells & Newton Co. v. Craig, 232 N. Y. 125), and in this respect they are not subject to or controlled by the city authorities. In order to enable such boards to properly discharge the duties thus imposed, they are clothed with authority to act independently of the city authorities. As to when, how and where the amounts placed at their disposal shall be disbursed, each board exercises an independent judgment, uncontrolled by and in no respect interfered with or influenced by the city authorities. The boards cannot incur a liability or an expense chargeable against the funds under their control except for educational purposes, and this only to the extent of the amounts placed at their disposal. (Education Law, § 877, subd. 3, as amended by Laws of 1917, chap. 786.) While such boards are required each year to submit to the city council itemized estimates of the amounts which will be required for educational purposes for the fiscal year (Education Law, as amended by Laws of 1917, chap. 786, § 877, subd. 1) the council may, nevertheless reduce, in its discretion, the total amount thus estimated. (Matter of Emerson v. Buck, supra.)(See, also, Matter of Fleischmann v. Graves, 235 N. Y. 84.)

The city has the machinery for raising the money by taxation and must see that the total appropriations do not exceed the constitutional limitations. The present charter of the city of New York has not changed this policy — no such radical step was even proposed. These cases decided by this court still hold good. Matter of Brennan v. Board of Education (245 N. Y. 8), may be added to the list.

The Board of Education of the City of New York must comply with the formula provided in the charter of that city in making its requests or demands for necessary funds, furnishing by line items or other specified methods, the information' necessary to enable the Board of Estimate to act intelligently, but otherwise it has full control over those funds when appropriated except as controlled by acts of the Legislature — mandatory salary payments. Except as to these it may abolish any position at any time. Here are some of the powers given to the Board by the Education Law: “ To create, abolish, maintain and consolidate such positions, divisions, boards or bureaus as, in its judgment, may be necessary for the proper and efficient administration of its work ” (§ 868, subd. 2.)

For the purpose of obtaining money to meet its expenses, the Board is required to prepare annually an itemized estimate of the sums of money which it deems necessary for educational purposes containing detailed schedules and must show separately the total amount to be derived from local revenues and from State aid. (§ 877, subd. 14).

When an appropriation by the city has been made, The board of education shall administer all moneys appropriated or available for educational purposes in the city, subject to the provisions of law relating to the audit and payment of salaries and other claims by the department of finance (§ 877, subd. 7). Necessarily and by this law expenditures and liabilities chargeable to these funds are limited to the appropriation.

No State aid is granted for kindergarten pupils or teacher units. Salaries payable to the teaching and supervisory staffs are mandatory, with few exceptions, but otherwise the Board has complete discretion in disbursing its money.

This case relates to no mandatory payments. The appeal rests upon the proposition that under the present charter the Board is restricted to the line proposal in its budget estimate as submitted and adopted by the Board of Estimate for the year 1939-1940 and must spend the money if it has it, that is, cannot abolish any teaching position. As it turns out the Board has not sufficient money but, says the appellant, it has no power to reduce its teaching staff to keep within its means. Reliance is placed upon our recent decision in Matter of Rushford v. LaGuardia (280 N. Y. 217), which has nothing to do with the Board of Education or its powers.

Believing that the State would give $57,912,392.76 toward the school funds for New York city, the Board in its budget asked the municipality for $102,374,095.63. The total sum appropriated was $155,243,934.36. The State, however, did not . meet expectations and the Board is about $8,000,000 short. In other words, there is a discrepancy between estimated expenditures and revenues receivable of about that amount. No one suggests that any more money can be obtained, so the only possible thing to do, not as a choice but as an absolute necessity, is to reduce expenses. This the Board proposed to do by abohshing certain positions in the day classes for adults, community recreation centres and kindergartens as such. Certain of the older children in the kindergartens will be taken in other existing classes.

The Special Term granted an order restraining the Board of Education from taking any such action. The Appellate Division reversed and held that the Board had full discretion in the circumstances and acted within its statutory powers. We can find no answer to this conclusion and accordingly affirm its order.

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

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

Order affirmed.


author: Hubbs, J.

text:
    In the Matter of the Application of The People of the State of New York, by George S. Van Schaick, as Superintendent of Insurance of the State of New York for an Order to Take Possession of the Property and Liquidate the Business of Lloyds Insurance Company of America, Respondent. Industrial Commissioner of the State of New York, Appellant.
    Argued May 23, 1939;
    decided July 11, 1939.

      John J. Bennett, Jr., Attorney-General (Paul Balsam and Joseph A. McLaughlin of counsel), for appellant.

      Irvin Waldman and Alfred C. Bennett for respondent.
   Hubbs, J.

An award has been made in three cases against the insurance carrier, Lloyds Insurance Company of America, for the sum of $1,000 in each case. The order, in each case, directed a payment by the carrier of $500 into the special fund and $500 into the vocational rehabilitation fund, as provided in section 15, subdivisions 8 and 9, of the Workmen’s Compensation Law (Cons. Laws, ch. 67). Now that the carrier is in liquidation the question has arisen whether claims for these funds have a preference on the ground that they are claims of the State, and are entitled to the preference given to the sovereign. The Appellate Division, by a divided vote, has held that no preference should be allowed.

Section 15, subdivisions 8 and 9, of the Workmen’s Compensation Law provides that there shall be a special fund to which the employer or his carrier shall contribute $500 in every case where there is an accidental death, but no one who can claim the compensation; and to another fund, the vocational rehabilitation fund, an additional $500 in such cases; and that the funds shall be in the custody of the Commissioner of Taxation and Finance. The funds are provided for additional compensation to those who become permanently disabled totally after having been permanently partially disabled; and for those who can be fitted for remunerative occupations. These are the funds to which the money would go, and for which a preference is sought.

While the law states what use is to be made of the funds, there is no guaranty that these uses alone will be made of the funds. Certain expenses of the Department of Education are paid out of the funds. By chapter 889 of the Laws of 1936 the State used tax money for an appropriation to the Department of Labor for the prevention of silicosis and other dust diseases. By chapter 888 of the Laws of 1936 it took for a silicosis study $250,000 from the special fund. It took another $250,000 from the special fund for carrying out a plan of distribution under section 25-a of the Workmen’s Compensation Law. It is taking from the special fund money to carry out rehabilitation work. Respondent contends that this does not establish that the funds are the general property of the State because the purposes for which the funds were used are the same or similar to those listed in the statute. The statute shows that the recipients of the funds are not the general public or a special group, but rather the individuals described; yet the State took the funds for general purposes. It did not regard the fund as a trust fund for individuals. There is nothing in the statute indicating that it is a trust fund. There is nothing in the statute to prevent the State from taking the funds for general State purposes. H the amount collected for taxes were insufficient to run the government the State could enact a law taking money from these funds for State purposes other than those named.

Further, it cannot be said that the payments provided for are not payments in furtherance of State or governmental functions. The State has an interest in the welfare of its injured employees. (Phenix Indemnity Co. v. Staten Island R. T. Ry. Co., 251 N. Y. 127; affd., 281 U. S. 98.)

It is urged that the case of Matter of General Indemnity Corp. (275 N. Y. 616) controls here. That is not so. There neither the State nor any one else was entitled in all events to the bond. The bond could only be enforced when someone else had failed to pay, and then by the Attorney-General in favor of the injured party. The State did not take that money and hold it itself until the time came when it should be used for some particular purpose. The parties who might become entitled to the fund became so entitled before the Attorney-General could sue for it, and thus he was acting merely as a trustee for them. Here the funds will be held by the State until someone becomes entitled to them. In the meantime the law may be changed abolishing this scheme of payment and rehabilitation and the money may then be used by the State for other purposes. The State, it appears, could also appropriate the fund as its own without accounting to any one. The fund here is quite different from that involved in the General Indemnity case (supra), and here a preference should be allowed.

The order of the Appellate Division should be reversed and that of the Special Term affirmed, without costs.

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

Ordered accordingly.


author: Lehman., J.

text:
    John Gerdes et al., as Trustees of Reynolds Investing Company, Inc., Respondents, v. Clarence K. Reynolds et al., Appellants, Impleaded with Others.

      Submitted May 15, 1939;
    decided July 11, 1939.

      WaTbridge S. Taft, Edward Abbe Nües and G. William Shea for appellants.

      Ethelbert Warfield, Lawrence S. Greenbaum, Theodore S. Jaffin and Harold Kronig for respondents.
   Lehman., J.

Alleging in the complaint that its moneys had been wasted or diverted from corporate purposes by the negligence or other wrongs of its directors, Reynolds Investing Company brought this action against its directors and other persons who, it is said, profited by or participated in the alleged wrongful acts. Eight causes of action are joined in the complaint. Clarence K. Reynolds and William F. Woodward challenge the fourth cause of action on the ground that it fails to allege facts sufficient to constitute a cause of action against them. On the same ground the defendant-appellant Woodward challenges also the seventh cause of action.

The fourth cause of action charges that the defendants named therein constituted a majority of the board of directors of the corporation from its incorporation until December 31, 1937, and that during that time the property and effects of the corporation were wasted and squandered because the defendants as directors utterly failed or neglected to perform their official duties. There are general allegations that the defendants caused plaintiff to purchase large blocks of securities in other corporations in which said defendants, or some of them, were financially interested, or were interested as directors or officers, and permitted the money, property and effects of plaintiff to be wasted, and they negligently suffered and permitted the money of plaintiff to be loaned without adequate security by means whereof said moneys were lost to plaintiff.” Otherwise there is no attempt to set forth any specific wrongful act or default which may have caused damage to the corporation.

A complaint must state facts. General allegations of wrongdoing based upon undisclosed facts do not state a cause of action. (Knowles v. City of New York, 176 N. Y. 430; Meisel v. Central Trust Co., 223 N. Y. 589, affg. 179 App. Div. 795.) The same general rules of pleading and proof which are applied in other actions must be applied in actions brought by a corporation against its directors for official misconduct. (Kavanaugh v. Commonwealth Trust Co., 181 N. Y. 121.) A complaint may state facts sufficient to constitute a cause of action though the statement may lack definiteness and precision. An aggrieved party may, in such case, move for a bill of particulars or for an order to serve an amended pleading which will remove indefiniteness, uncertainty or obscurity (Rules of Civil Practice, rule 102), but a pleading which, fairly construed, fails to allege any facts which constitute a wrong but only general conclusions, is entirely insufficient and may be dismissed on that ground.

The business for which the Reynolds Investing Company was formed “ involves,” it is alleged, “ the purchase and sale from time to time of securities of other corporations.” A director of such a corporation who causes it to buy stock in a corporation in which he or other directors are financially interested, or interested as director or officer, does not act wrongfully if the purchase is made solely for the benefit of the corporation, and the director has not dealt with himself as an individual, or in the character of trustee, director or officer of another corporation.” (Cf. Sage v. Culver, 147 N. Y. 241, 247.) Mere possibility that the director might, directly or indirectly, make a personal profit from his official act might constitute reason for scrutiny of the transaction but does not itself render the act wrongful. The complaint here contains no express statement that either of the defendants-appellants made or expected to make any profit, directly or indirectly, or that his individual interests were or could be served by any purchase for which he voted; nor can any such allegation be read into the complaint by fair implication. Indeed, the complaint does not even state that either of the appellants was interested in any corporation whose securities were purchased, but contains only a statement in the disjunctive that they or some of the directors were interested. That is, it is clear, no allegation of any wrongful act, and outside of that allegation only the barest general charges without disclosure of any facts are contained in the fourth cause of action.

We are told that complaints containing similar allegations have been sustained in earlier cases in this court. (Sage v. Culver, 147 N. Y. 241; Brinckerhoff v. Bostwick, 88 N. Y. 52, and Walsh v. Van Ameringen-Haebler, Inc., 257 N. Y. 478.) Nothing said or decided in any of those cases supports the ruling here. In the last cited case the complaint was sustained only because it alleged that the defendants voted themselves excessive salaries. Proof and finding of such payment would, of course, dictate the conclusion that the directors must restore to the corporation the moneys which they had no right to take from its treasury. In Brinckerhoff v. Bostwick the opinion contains a general statement of the nature of "the general charges contained in the complaint as a basis for its discussion of the question of whether the court had jurisdiction of the cause of action alleged and whether the action was brought by the proper plaintiffs against the proper defendants. An examination of the record on appeal shows that these general charges set forth in the opinion were supported by allegations of fact which were so clearly sufficient to constitute a cause of action that the defendants did not even argue otherwise in this court, and the court contented itself by saying that “ we entertain no doubt of the sufficiency of the allegations of the complaint.” (p. 61.) So, too, in Sage v. Culver (supra, p. 247) the plaintiff pleaded facts which, if proven, would conclusively show that the defendants as officers and directors have made use of relations of trust and confidence in order to secure or promote some selfish interest ” and would thus establish the right of the corporation to compel the unfaithful directors to restore funds to the corporate treasury which they depleted. Proof that the defendants in the case we are now considering had caused the corporation to purchase the securities as alleged would be entirely consistent with complete innocence of any wrong on their part and would not establish any cause of action against the defendants.

The defendant Woodward challenges the sufficiency of the seventh cause of action, because it fails to allege that at the time he received moneys of the corporation without consideration he was a director of the corporation. That allegation is contained in other causes of action in the complaint, but is not incorporated by express reference in the seventh cause of action. Even without that allegation we find the cause of action sufficiently set forth. Proof that money was paid and received as alleged would, we think, conclusively establish a wrong for which the defendant would be answerable though not a director. Orders of Appellate Division and of Special Term modified to the extent that the motion to dismiss the fourth cause of action is granted, and otherwise affirmed, without costs.

The orders should be modified in accordance with this opinion and as so modified affirmed, without costs. The first and second questions certified are answered in the negative and the third question in the affirmative.

Crane, Ch. J., Herbs, Loughran and Rippey, JJ., concur; Finch, J., concurs in result; O’Brien, J., taking no part.

Ordered accordingly.


text:
    H. V. Noyes, as Commissioner of Agriculture and Markets of the State of New York, Appellant, v. Erie & Wyoming Farmers Co-operative Corporation, Respondent. Same, Appellant, v. Arthur E. Landed, Doing Business as Williamsville Dairy, Respondent. Same, Appellant, v. Sterling Amherst Farms Dairy, Inc., Respondent. Same, Appellant, v. Trevett Co-operative Association, Inc., Respondent.

      Argued May 25, 1939;
    decided July 11, 1939.

      John J. Bennett, Jr., Attorney-General (Henry Epstein of counsel), Milo R. Kniffen, Robert G. Bldbey and David 0. Chambers for appellant.

      Worthy B. Paul for Erie & Wyoming Farmers Co-operative Corporation, respondent.

      Henry S. Manley for Arthur E. Landel et al., respondents.

      Robert I. Millonzi for Trevett Co-operative Association, Inc., respondent.
   Rippey, J.

Four actions were brought by the Commissioner of Agriculture and Markets of the State of New York to enforce his Official Order No. 127, announced and promulgated by the Commissioner on September 19, 1938, which had for its purpose the regulation of the handling, the fixing of prices and the distribution of the proceeds of the sale of milk produced and sold in the Niagara Frontier Marketing Area as defined in the order and to enjoin the defendants from in any manner violating the provisions thereof. No answer was interposed in either case. At Special Term plaintiff moved in each case for a temporary injunction and the motions were denied. By stipulation of the parties, the record upon the proceedings for a temporary injunction is not before us. In each case defendant’s cross motion to dismiss the complaint on the ground that it failed to state facts sufficient to constitute a cause of action and was insufficient in law was granted on the grounds that sections 258-k and 258-m of article 21 of the Agriculture and Markets Law (Cons. Laws, ch. 69), added by amendment to the article relating to milk control by chapter 383 of the Laws of 1937, in effect May 19,1937, which purported to give the Commissioner authority to make the order, constituted invalid delegation of legislative power in violation of article III, section 1, of the Constitution of the State of New York and that the act and the order issued thereon deprived the defendants of their property without due process of law in violation of article I, section 6, of the State Constitution. Appeals by plaintiff were taken direct to this court (N. Y. Const, art. VI, § 7, subd. 3; Civ. Prac. Act, § 588, subd. 3).

In section 258-k of the act the dairy industry is declared to be “a paramount agricultural industry of this state and the normal processes of producing and marketing milk have become an enterprise of vast economic impoitance to the state and of vital interest to the consuming public which ought to be safeguarded and protected in the public interest.” Consequently the Legislature has declared that it is the policy of this state to promote, foster and encourage the intelligent and orderly marketing of milk through producer owned and controlled co-operative associations.” Finding “ that unfair, unjust and destructive demoralizing trade practices have been and are likely to be carried on in the production, sale, processing and distribution of milk and that it is a matter of public interest and for the public welfare for the state to promote the orderly exchange of commodities and in cooperation with the federal government, in its regulation of interstate commerce, to take such steps as are necessary and advisable to protect the dairy industry and insure an adequate supply of milk for the inhabitants of this state,” it thereupon provided for the creation and operation of producers’ and distributors’ bargaining agencies for the various defined production areas of the State (§ 258-1) and for co-operative price-fixing and marketing agreements for milk within such areas (§ 258-m). The purpose of the legislation was, as defined, to stabilize a steady supply of clean and wholesome fluid milk according to definite classifications as to quality during lean as well as flush periods. Details of the legislative plan to carry through its purpose is no necessary part of the declaration of policy. To further effectuate the purpose, it is enacted that provision may be made “ for an equalization of prices to all producers of the production area of the market affected so that each producer or co-operative association shall receive the same base price for all milk delivered subject to reasonable differentials for quality and location and for services.” The standards upon which such equalization of prices is to be fixed are definitely laid down in the act and pools are authorized and provided for according to specified standards to make effective to each producer in the area equality of prices with all others on the indicated basis (§ 258-m, subd. 6).

That the legislation is within the scope of the police power of the State, that the means and standards provided to carry out the legislative purpose are within the scope of the power and properly delegable to au administrative agency and that the plan for equalization of prices is not confiscatory is settled beyond further controversy (People v. Perretta, 253 N. Y. 305; People v. Beakes Dairy Co., 222 N. Y. 416; People v. Nebbia, 262 N. Y. 259; same case sub nom. Nebbia v. New York, 291 U. S. 502; Townsend v. Yoemans, 301 U. S. 441, 450; United States v. Rock Royal Co-operative, Inc.; Noyes v. Same; Dairymen’s League Co-operative Association, Inc., v. Same; Metropolitan Co-operative Milk Producers Bargaining Agency, Inc., v. Same, 307 U. S. 533, decided June 5, 1939). There is no invalid delegation of legislative power merely because the act on its face authorizes the Commissioner to fix and equalize prices, since the Legislature has provided the manner in which the Commissioner must act and the matters which he must consider as the basis for his order and that he must make findings as a preliminary to the issuance thereof (People v. Beakes Dairy Co., supra; Highland Farms Dairy, Inc., v. Agnew, 300 U. S. 608). Hearings upon notice must be had preliminary to the making of findings (§ 258-m) and his order is subject to judicial review (Civ. Prac. Act, art 78; Matter of Elite Dairy Products, Inc., v. Ten Eyck, 271 N. Y. 488).

No immediate legislative investigation was necessary preliminary to the enactment. A wealth of investigation preceded it over a period of years showing its need. The distribution of milk had been regulated under certain forms of control long before 1933 (see above cases, the Agricultural Law of 1909 [L. 1909, oh. 9] and McKinney's historical references to article 21 of the Agriculture and Markets Law). But a known state of facts warranting legislative action is presumed and where the regulation is made by an administrative agency to whom the Legislature has legally delegated the power to act, a similar presumption of the existence of facts justifying its specific exercise ” obtains (Pacific States Box Basket Co. v. White, 296 U. S. 176, 186). No facts have been presented here in any attempt to overcome those presumptions. No point is raised as to invalidity for conflict with Federal power.

The requirement of “ due process is satisfied. “ The guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the object sought to be attained.” (Nebbia v. New York, 291 U. S. 502, 525.) Neither the act nor the order promulgated under it is arbitrary, capricious or unreasonable under the facts set up in the complaints. The means adopted by the Legislature relate directly and appropriately to the object sought to be obtained. It would necessarily depend upon the facts and circumstances in each particular case at bar after the issues were duly presented and the facts then at issue developed whether the enforcement of the order would work a discrimination as to them (Ætna Ins. Co. v. Hyde, 275 U. S. 440; Townsend v. Yeomans, supra). Defendants have failed to set up in any moving papers in these actions any facts or details or specifications of the respects in which the statute is claimed to be discriminatory or by virtue of which the rights of the defendants were adversely infringed.

Where the power of the Legislature to enact a statute is conceded or established beyond successful attack, further consideration of the constitutionality of the act will not be indulged on the application of any litigant Unless he shows by proper pleading that he comes within the scope of the act and that special features thereof or of the order or regulation issued thereunder would cause him injury (Pacific States Box & Basket Co. v. White, supra). Whether the Commissioner complied with the requirements of the provisions of the statute antecedent to the issuance of the order cannot be questioned, since, upon the record here presented, the allegations of fact contained in the complaint in each case are well pleaded and must be taken as true and plaintiff has alleged full compliance with all of the applicable provisions of the act.

Two of the defendants have moved to dismiss the appeals in their cases on various grounds which need not here be enumerated. None of the grounds urged presents a case for the granting of the motion.

In each action the judgment appealed from should be reversed and the motion to dismiss the complaint denied, with costs in all courts. The motion to dismiss the appeals should be denied, with ten dollars costs.

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

Judgment accordingly.


author: Finch, J.

text:
    The People of the State of New York, Respondent, v. Horton Motor Lines, Inc., Appellant.

      Argued May 26, 1939;
    decided July 11, 1939.

      Robert C. McCreedy for appellant.

      William C. Chanler, Corporation Counsel {Paxton Blair and Alan M. Stroock of counsel), for respondent.
   Finch, J.

This is an appeal by leave of a judge of this court from a judgment of the Appellate Part of the Court of Special Sessions of New York City, affirming a judgment convicting the appellant of violating sections 140-142 of chapter 14 of the New York City Code of Ordinances, commonly known as the Public Cart Ordinance. Section 140 provides:

“ Definitions. Every vehicle, of whatever construction drawn by animals or propelled by any motor power, which is kept for hire or used to carry merchandise, household or office furniture or other bulky articles within the city, for pay, shall be deemed to be a public cart, and the owner thereof shall be deemed to be a public cartman.”

Section 141 divides all public carts into two classes, motor driven and horse drawn. Section 142 requires payment of the fee hereinafter provided.” Section 143 provides that for horse drawn carts the fee is two dollars and for motor driven carts five dollars. (See now Administrative Code of City of New York, L. 1937, ch. 929, §§ B32-92.0-B32-95.0.)

Defendant, a North Carolina corporation, is an interstate motor carrier and is licensed to engage in that activity by the Interstate Commerce Commission, pursuant to the Motor Carrier Act (U. S. Code, tit. 49, §§ 302 et seq.). In the course of its operations it employs two kinds of motor trucks, the tractor-trailer type, which is used for long hauls between fixed termini, and smaller trucks to ply between defendant’s terminal in New York city and the customer’s door, to pick up or deliver the freight. The large trucks travel over regular routes in contrast to the smaller vehicles, which are for “ irregular routes.” Where a shipment is sufficiently large to require an entire “ regular route ” truck, that vehicle will pick up or deliver a load without extra charge if the customer is within New York City Zone 1. The smaller trucks are used to call for the smaller loads at customers’ doors and to concentrate them at defendant’s New York city terminal, or to distribute to the consignees upon delivery to the terminal by the regular route trucks. If the customer desires he may himself deliver or call for the shipment at the terminal. Whether there is an additional charge for the pickup or delivery service is determined by the origin or destination of the shipment in the following manner:

For the purpose of shipment between the Middle Atlantic States and New York city, the city is divided into three zones. Zone 1 consists of parts of the boroughs of Manhattan, Brooklyn and Queens; Zone 2, of the remainder of Manhattan and all of the Bronx and Richmond; and Zone 3, the remainder of Brooklyn and of Queens. Shipments between the Middle Atlantic States and Zone 1 are picked up or delivered without additional charge. But where the shipment is between the Middle Atlantic States and Zones 2 or 3, there is an additional charge. If the origin or destination of the shipment is the southern area (e. g., Georgia, the Carolinas, etc.), then there is an additional pickup or delivery charge based upon the weight and the borough in New York city to or from which the shipment is made, except that where the load exceeds 15,000 pounds there is generally no additional charge.

The smaller trucks are also employed between defendant’s terminal and other carriers to transfer freight passing through New York city. In regard to this kind of shipment there is a single through rate- based upon the points of origin and destination, but no portion of the tariff can be definitely allocated to the transfer service.

Defendant was convicted on the testimony of an inspector of the New York City License Department that he had examined an irregular route ” truck of defendant, which was at defendant’s terminal loaded with merchandise shipped from Lexington, N. C., and was to deliver- the articles to a steamship pier for transshipment to Attleboro, Massachusetts.

The question in this case is whether the Public Cart Ordinance may be applied to defendant’s irregular route ” trucks operating in New York city. There is testimony that these trucks are sometimes used to carry merchandise from the New York city terminal to points outside of the state, but that this is done to such an extent as to be considered an established use of the smaller trucks rather than an occasional diversion, is not shown. In any event, such use is not shown to be connected with the particular truck upon which defendant’s conviction was based.

Appellant contends that (1) it is not within the scope of section 140, because (a) its vehicles are not “ kept for hire,” (b) they are not used to carry merchandise * * * within the city * * and (c) they are not used to carry merchandise * * * for pay;” (2) in any event the ordinance cannot apply to defendant’s vehicles because they are engaged solely in interstate commerce.

(1) Whether defendant’s trucks are within the scope of the Public Cart Ordinance. It is settled that the Public Cart Ordinance applies only to common carriers. (People v. Bridge Auto Renting Corp., 272 N. Y. 637; People v. Heckman Trucking Co., 277 N. Y. 480.) It is clear that defendant is a common rather than a private contract carrier. (Stevenson & Co. v. Hartman, 231 N. Y. 378, 381; Anderson v. Fidelity & Casualty Co., 228 N. Y. 475.)

However, defendant is not engaged in a business covered by the ordinance. The ordinance applies to a common carrier who engages in the general business of carrying goods „ generally for all who desire his services. (Stevenson & Co. v. Hartman, supra.) This is shown by section 6 of chapter 14 of the Code of Ordinances, which requires that “ a licensee shall at all times render any public services Within scope of his license when called upon, 'unless actually unable so to do.” A public cartman, to whom the ordinance applies, holds himself out as rendering a service which is different from that offered by defendant. The former undertakes to carry goods anywhere within the city whenever any one will engage him to do so. Defendant does not undertake to carry goods within the city for any one who so desires, but only for those who contract to ship goods in interstate commerce.

This ordinance does not attempt to cover a contract between shipper and carrier where State lines are to be crossed. (Adams Express Co. v. City of New York, 232 U. S. 14.)

Defendant, therefore, is not within the scope of the ordinance.

(2) But even if the ordinance were intended to apply to defendant’s smaller trucks, which are used solely in connection with interstate transportation, the ordinance could not constitutionally apply to defendant. It is clear that the smaller trucks are instrumentalities of interstate commerce. “ The train, although moving from one point to another in the State of Washington, was hauling merchandise from points outside of the State destined to points within the State and from points within the State to points in British Columbia, as well as in carrying merchandise which had originated outside of the State and was in transit through the State to a foreign destination. This transportation was interstate commerce, and the train was an interstate train * * *.” (Northern Pacific Ry. Co. v. Washington, 222 U. S. 370, 375.) Similarly, carriage by defendant’s smaller trucks is interstate commerce and the trucks are interstate trucks.

The facts presented here are distinguishable from the facts in State of New York ex rel. Penn. R. R. Co. v. Knight (192 U. S. 21), so heavily relied upon by respondent. In that case the taxicab service at the railroad’s New York city terminal was available to persons not traveling in interstate commerce, and was available by contract separate from that with the railroad for the interstate carriage. Defendant's smaller trucks are not available to any but those shipping in interstate commerce and are available only pursuant to a single contract for interstate commerce.

The ordinance in question is one which attempts to license the occupation of public cartmen. Section 1 (ch. 14) provides that no person may engage in any of the activities required to be licensed under that chapter without first, obtaining a license. Section 144 prescribes the rates to be charged by public cartmen. It is clear that whatever may be the limits of a State’s power to tax property or activities related to interstate commerce, the State may not require a license as a condition precedent to the pursuing of activities in interstate commerce. (Western Union Tel. Co. v. Massachusetts, 125 U. S. 530; Sprout v. City of South Bend, 277 U. S. 163.) The ordinance in question is not a tax measure, but is a comprehensive scheme to license the calling of public cartmen. Even if the ordinance were designed solely as a revenue measure, it is doubtful whether it could apply to defendant's smaller trucks. (Cooney v. Mountain States Tel. & Tel. Co., 294 U. S. 384.)

The ordinance in the case at bar is not one of the types of taxation or police regulation by the states or municipalities which are permitted under principles well defined. It is not in the nature of a property tax (Old Dominion S. S. Co. v. Virginia, 198 U. S. 299); nor is it regulation which involves a proper exercise of the police power (Sprout v. City of South Bend, supra, at 169); nor is it a regulation of an intrastate activity, which may be separable from interstate commerce. (Coverdale v. Arkansas-Louisiana Pipeline Co., 303 U. S. 604.)

The case at bar is distinguishable from Coverdale v. Arkansas-Louisiana Pipeline Co., (supra), where the court upheld a tax upon the use of a compressor to increase the pressure of natural gas to a point necessary to transmit the gas through interstate pipelines. The court said: “ Privileges closely connected with the commerce may be regarded as distinct for purposes of taxation. So, local privilege taxes on storage in transit, compressing or dealing in cotton, already moving in its interstate journey from plantation to mill, are validated as imposed upon operations in connection with a commodity withdrawn from the transportation movement ” (at p. 610). The ordinance in the case at bar does not levy a tax upon an intrastate activity closely related to interstate commerce, but attempts to tax an integral portion of interstate commerce itself.

It is not necessary to decide whether the operation of the ordinance with regard to the defendant is limited not only by the commerce clause, but also by the enactment of conflicting Federal regulation governing the said field. (Motor Carrier Act, U. S. Code, tit. 49, § 302.)

Since the ordinance was neither drawn to apply to defendant’s smaller trucks, nor may it constitutionally subject defendant’s smaller trucks to its provisions, the judgments should be reversed and the information dismissed.

Crane, Ch. J., Lehman, Htjbbs, Loughran and Rippey, JJ., concur; O’Brien, J., taking no part.

Judgments reversed, etc


text:
    In the Matter of the Petition of Julia W. Porges, Respondent. Almerindo Portfolio, as Treasurer of the City of New York, Appellant.

      Argued May 31, 1939;
    decided July 11, 1939.

      William C. Chanter, Corporation Counsel (Bernard Newman and Seymour B. Quel of counsel), for appellant.

      Harold M. Bosenzweig and Merle I. St. John for respondent.
   Hubbs, J.

Pursuant to an order of the Supreme Court in a partition action, the sum of $5,857.56 Was deposited on March 6, 1902, in the office of the Chamberlain of the City of Hew York to be held by him until the death of Adolphus Monell Sayre.” Sayre having died, the petitioner filed a notice of motion in the partition action for an order directing the then Chamberlain to turn over to her-in cash her proportionate share, one-third, of the money originally credited to the account, with interest.

The Chamberlain interposed an affidavit in opposition to the motion, stating that he had on hand to the credit of the account

$2,453.79 Cash.

15,600.00 Guaranteed mortgage certificate in Series F-l.

2,700.00 Share in guaranteed bond and mortgage on 163 West Twenty-third street, Hew York city.

The affidavit stated that a predecessor Chamberlain had so invested a part of the funds pursuant to section - 44-c of the State Finance Law (Cons. Laws, ch. 56); that the securities could not be liquidated at face value, and recited a tender of the cash with an assignment of the securities held. Subsequent to the motion the office of City Chamberlain Was abolished, its functions transferred to the City Treasurer, and the City Treasurer has been substituted as a party herein.

The Special Term originally held that the order of deposit did not direct a retention of the moneys deposited, that the Chamberlain had power under section 44-c to invest the funds, that the investments made were not illegal per $e, and that he could not be held liable if the investments were made in good faith on the representations of the title compañíes. The court ordered a reference to determine whether the investments made were legal; if not whether the Chamberlain is exonerated because they were made in good faith on representations by the title companies; whether petitioner is one to share in the fund; and, if so, the extent of such participation.

Both parties appealed from the order of reference. The Appellate Division modified by eliminating all issues except as to the right of petitioner to participate and the extent of participation. Two justices dissented (255 App. Div. 757).

The referee found petitioner entitled to participate to the extent of one-third of the fund. Thereupon the Special Term ordered payment to the petitioner of $6,100 in cash, that being one-third of the sum representing the total of the investments — one-third of the cash having been paid over pursuant to stipulation that payment should be without prejudice to the rights of the parties. Upon appeal the Appellate Division affirmed, two justices dissenting, and certified to this court two questions:

“ 1. Were the investments of the funds received by the Chamberlain’s office under the order of the court of May 21, 1901, authorized?

2. Is the petitioner, Julia W. Forges, entitled to an order in the present proceeding directing that there be paid to her in cash the sum of $6,100 together with the accrued interest, and less fees?”

To answer the first question would be to anticipate an issue not now before us if a negative answer to the second question is required. Whether the petitioner is entitled to have turned over to her in cash the portion of the funds invested by the former Chamberlain depends upon whether liability may be imposed on the Chamberlain in office when this motion was made, or the City Treasurer who has succeeded to his office, for an investment of funds made by a former Chamberlain, It is undisputed that no investment was made by the Chamberlain in office when the motion was made. All that he received was the cash referred to in his affidavit, plus the securities tendered.

No direct answer has been given by this court to the question here involved. The Appellate Division in the first department, in Gerschon v. Travelers Ins. Co. (251 App. Div. 281), held squarely that even though a predecessor Chamberlain had invested funds deposited under an order providing for their withdrawal only upon the order of the court, the sum due was properly ordered paid over in full by the Chamberlain then in office upon a motion in the original action. Such decision was rendered by a divided court, the two justices there dissenting being the two justices who have dissented upon the appeals in the present case. However, that decision by the Appellate Division has not been given the stamp of approval by this court, since the case came here on a certified question: “ Is the petitioner * * * entitled to receive from the present Chamberlain in cash the sum of $936.06, together with accrued interest? ” and this court reversed upon the ground that it appeared that the investment made was authorized under the facts there presented. The procedural question was not discussed. (276 N. Y. 53.)

The second department, in Pfeffer v. Lehmann (255 App. Div. 220), reached the conclusion that the City Chamberlain receives such a deposit as trustee and that a subsequent Chamberlain can be held responsible only to the extent of money or property actually received by him.

Prior to 1908 it was "a rule of the common law that no recovery could be had against a city for the loss of money deposited with a City Chamberlain. (Gray v. Board of Supervisors, 93 N. Y. 603.) The remedy was by action against the defaulting Chamberlain and the sureties on his official bond. (County of Erie v. Diehl, 129 App. Div. 735; affd., 196 N. Y. 501.)

In 1908, by chapter 186 of the Laws of that year, it was enacted: “ The city of New York and outside thereof, each county of the state shall be responsible for all funds or moneys deposited with the chamberlain and treasurer thereof respectively by virtue of a judgment, decree or order of any court of record in this state, and an action to recover any loss to or of stich fund may be brought against the city or county respectively by any part aggrieved or by the comptroller of the state of New York in a court of competent jurisdiction.”

The act imposes no liability upon the city enforcible except in an action in which the city is a party. In the present action the city is not a party. The Chamberlain (now city treasurer), to the extent that he has money or property belonging to the fund is clearly subject to the order of the court. If he has dissipated the fund, he may be required to make good or be liable for contempt for disobedience of an order requiring him to pay over, Beyond that the individual Chamberlain cannot be held liable. Clearly he has no individual responsibility beyond the money and property which have come into his hands. By assuming the office he does not assume liability for the defaults or misfeasance of a predecessor. His official liability is no greater than his individual liability. By an order directed against him, either in his individual or in his official capacity, the city may not be made liable under a statute which gives a cause of action against it. By its prior decisions this court has adhered to the rule that an order against the Chamberlain will be sustained in those cases where the investment was illegal or improper and made by him. (Matter of Schmidt v. Chamberlain, 266 N. Y. 225.) But not where the investment Was held to be proper, whether made by him or by a predecessor. (Mills v. Bluestein, 275 N. Y. 317; Gerschon v. Travelers Ins. Co., 276 N. Y. 53.) In none of those cases was the liability of the city considered or determined, In each case the motion was directed against the Chamberlain and in the case where he was directed to pay this court did not concern itself with the source from which payment was to be made — it did not direct payment out of city funds. This court has not held that a Chamberlain must pay out of city funds the amount of an illegal investment where a motion was made in the original action, and it has not determined,that a Chamberlain is liable for an amount illegally invested by a predecessor. The question is open as to whether, assuming the illegahty of an investment made by a prior Chamberlain, a direction to a Chamberlain in office to turn over moneys never received by him is proper, and the answer to that question is obvious, namely that such an order is improper and must be reversed. At common law the city would not be liable. Its liability is purely statutory and to enforce liability the statutory procedure must be followed. Very likely it would be advantageous to have all questions involved determined in a proceeding in the action in which the money was deposited by making the city a party to such a proceeding. However, that is a question for the Legislature.

Such being our decision upon the one question, it would be futile to discuss here the legality of the investment-made. That is a matter to be determined when the question of petitioner’s loss, if any, has been legally presented for determination against the City, the prior Chamberlain and the sureties on his official bond.

The orders appealed from should be reversed, with costs and the proceeding dismissed. The second question should be answered in the negative and an answer to the first question refused on the ground that it involves a matter not pertinent to the present appeal.

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

Ordered accordingly.