text:
    Theodore Lumbrazo, Respondent, v. S. D. Woodruff et al., Appellants.
    (Argued February 16, 1931;
    decided March 24, 1931.)

      Heber E. Griffith and B. J. Woodruff for appellants.
    A disclaimer of liability clause is not against public policy and is lawful and enforcible according to its intent, providing only that such intent be expressed in clear, apt and unmistakable language. (Sanford v. Brown Bros. Co., 208 N. Y. 90; Plimpton v. Brown Bros. Co., 224 N. Y. 724; Landreth v. Wyckoff, 67 App. Div. 145; Bell v. Mills, 68 App. Div. 531; Stroock v. Litchenthal, 224 App. Div. 19; White v. Miller, 71 N. Y. 118; Van Wyck v. Allen, 69 N. Y. 61; Prentice v. Fargo, 53 App. Div. 608; Depew v. Peck Hardware Co., 121 App. Div. 28; Schoelkoff
      v. Coatsworth, 166 N. Y. 77; Possinger v. Thorburn, 34 N. Y. 634; Lichtenstein v. Rabolinsky, 98 App. Div. 516; 184 N. Y. 520.)

      R. R. Calli and R. D. Woolsey for respondent.
    The non-warranty clause was not a part of the contract. (Laudreth v. Wyckoff, 66 App. Div. 145.) The non-warranty clause, if intended as a part of the contract, was superseded and made null and void by an express warranty. (Chadsey v. Guion, 97 N. Y. 332.)
   Crane, J.

The plaintiff is a farmer living in Canastota, N. Y., and the defendants are growers of, and dealers in, seeds in the State of Connecticut.

On May 14, 1926, the defendants sold to the plaintiff 300 bushels of Japanese onion sets at $3.50 per bushel. The sales contract contained a disclaimer of warranty clause reading: We give no warranty, express or implied, as to description, quality, productiveness, or any other matter, of any seeds sent out, and will be in no way responsible for the crop, and the purchaser hereby waives the right of refusal and return of goods which is usually connected with the non-warranty.”

The peculiarity of the Japanese onion sets- is that under favorable conditions they produce a very large crop. The year previous, out of a purchase from the same defendants of one hundred bushels of Japanese onion •sets, the plaintiff had raised twenty-two hundred bushels. While the Japanese onion may be of a somewhat better quality than others, “ its productive ability is the greatest characteristic.” The small bulb onion, or set, about one-half inch in diameter, has no distinguishing features which from inspection will indicate its vitality. From the fact that the planting of these three hundred bushels of sets produced about eighty per cent of seed stalks, and only one thousand bushels of onions, the conclusion has been reached that the sets could not have been Japanese onion sets, but those of an inferior grade or quality. The plaintiff has brought this suit for breach of warranty, in which he has recovered a judgment of $661.58. The Appellate Division, in affirming, has certified that a question of law is involved which should be reviewed by this court. The question is the validity and scope of the disclaimer of warranty clause.

Prior to the Uniform Sales Act, adopted in this State September 1,1911, article 5 of the Personal Property Law (Cons. Laws, ch. 41), a sale by description was supposed to be an inherent part of the contract separate and distinct from any agreement, express or implied, amounting to a warranty. If the goods purchased were not of the ldnd ordered, it was the buyer’s duty to return them within a reasonable time, and no cause of action for damages survived acceptance. In Reed v. Randall (29 N. Y. 358, p. 362) this rule was stated in the following language: “ In cases of executory contracts for the sale and delivery of personal property, the remedy of the vendee to recover damages, on the ground that the article furnished does not correspond with the contract, does not survive the acceptance of the property by the vendee after opportunity to ascertain the defect, unless notice has been given to the vendor, or the vendee offers to return the property. The retention of the property by the vendee is an assent, on his part, that the contract has been performed.”

Where the defendants purchased No. 1 extra foundry pig iron of the Coplay Iron Company, Ltd., make and received iron of a different make and inferior quality, but failed to return or offer to return the delivery after the facts became known, this court said: “ Here there was no collateral warranty or agreement as to the quality of the iron. The representation as to the kind and quality of iron was part of the contract of sale itself, descriptive simply of the article to be delivered in the future; and clearly within the cases cited an acceptance of the property by the defendants, without any offer to return the same at any time, deprives them of.any right to make complaint of its inferior quality.” (Coplay Iron Co. v. Pope, 108 N. Y. 232.)

The words of description or of identification of a kind or class of property purchased have been considered not as warranties, but conditions precedent to any obligation on the part of the vendee, since the existence of the qualities indicated by descriptive words, being part of the description of the things sold, becomes essential to its identity, and the vendee cannot be obliged to receive and pay for a thing different from that for which he contracted. (Carleton v. Lombard, Ayres & Co., 149 N. Y. 137, p. 148; Williston on Sales, vol. 1, §§ 179, 180, 205, 224.)

The distinction between a description amounting to a condition in the contract, or an essential part of the article sold, and a warranty, was quite important. As stated, when description was a condition, no right of recovery survived acceptance, whereas, for breach of warranty the buyer could retain the goods and sue to get his damage. Some confusion in the use of these terms arose, as is evident by the language of the opinion in White v. Miller (71 N. Y. 118, 129). The plaintiffs, who were market gardeners, purchased of the defendants market cabbage seeds of a variety known as Large Bristol Cabbage. The seeds were impure and of different variety, so that the plants raised therefrom were worthless. This court said: “A dealer who sells an article, describing it by the name of an article of commerce, the identity of which is not known to the purchaser, must understand that the latter relies upon the description as a representation by the seller that it is the thing described; and this constitutes a warranty.”

In my judgment, the sounder view, however, was later expressed in the opinion by placing the decision upon the further ground that there always was an implied warranty that the thing sold was free from any latent defect arising from the mode of cultivation or the manner of manufacture, citing Hoe v. Sanborn (21 N. Y. 552). With cabbage seed no inspection could have disclosed its kind or purity so as to permit the purchaser to return the article under the condition precedent rule, relating to sales. The discovery of the kind and nature of the seed could only be disclosed by the crop, but it would then be too late to return or offer to return the seeds. The warranty was, therefore, applied to- an inherent defect which no inspection, would disclose. This distinction runs through such cases as Hawkins v. Pemberton (51 N. Y. 198), and Van Wyck v. Allen (69 N. Y. 61).' No doubt it was difficult at times to distinguish between description and assertions as to quality or condition.

All these .distinctions causing more or less confusion and uncertainty in the law have been swept away by the Uniform Sales Act, and we now have in section 95 of the Personal Property Law the provision that where there is a contract to sell, or a sale of goods by description, there is an implied warranty that the goods shall correspond with the description. This warranty, like the other warranties at common law, survives acceptance. The remedies are alike for all breaches of warranty, even those including what was formerly known in our State and at common law as the description of property, constituting a precedent condition authorizing rejection. The conditions in a contract of sale referred to in section 92 of the Personal Property Law are of a different nature altogether from those we are here discussing.

When, therefore, in the contract of sale made between the plaintiff and the defendants in this case, the word “ warranty ” is used, it has reference to those warranties defined in the Uniform Sales Act, unless it is otherwise expressed or restricted. The parties in the disclaimer of warranty clause exercised a right and privilege expressly reserved to them by section 152 of the Personal Property Law, which reads: “ Where any right, duty or liability would arise under a contract to sell or a sale by implicatian of law, it may be negatived, or varied by express agreement or by the course of dealing between the parties, or by custom, if the custom be such as to bind both parties to the contract or the sale.”

In raising Japanese onion sets the result is not always certain, and the examination of the bulbs will not disclose their inherent vitality. The business is more or less an undertaking to bargain with nature; the elements are not always the same. Therefore, the defendants were unwilling to assume the risk of the implied warranty connected with the sale of Japanese onion sets, as enacted in section 95 of the Personal Property Law, and insisted that if the plaintiff purchased three hundred bushels of these sets, he must take the risk of the crop, provided, of course, that the defendants had resorted to no fraud, unfair dealing or negligence amounting to undue enrichment. This clause was, therefore, made a part of the contract: “We give no warranty, express or implied, as to description, quality, productiveness, or any other matter, of any seeds sent out, and will be in no way responsible for the crop.” The words cover the facts of this case. The" defendants did not warrant that the seeds or sets were Japanese onion sets; neither did they warrant their productiveness. As stated above, the principal quality of Japanese onion sets is their ability to multiply, or their productiveness. There was to be no guarantee of these qualities. The plaintiff’s only damage consisted in the failure to get the crop he expected or as many bushels of onions as the purchase should have produced.

Neither party was obliged to enter into this contract, and there is no public policy which prevents adult persons of sound mind making such agreements as they please, not prohibited by statute, or contrary to natural justice and good morals. This court and other courts have recognized the validity of agreements limiting or excluding implied warranties. (Plimpton v. Brown Bros. Co., 224 N. Y. 724; Kibbe v. Woodruff, 94 Conn. 443; Leonard Seed Col v. Crary Canning Co., 147 Wis. 166; Blizzard Bros. v. Growers’ Canning Co., 152 Ia. 257; Larson v. Inland Seed Co., 143 Wash. 557.)

Much reliance has been placed upon Wallis v. Pratt ([1911] App. Cas. [H. L.] 394, reversing [1910] 2 K. B. 1003), and Howcroft v. Laycock (14 Times L. R. 460). In reading these cases, the distinction between conditions precedent arising out of description and a true warranty, which has been referred to in the beginning of this opinion, must be remembered. The distinction apparently still exists in England; in fact, the English Sale of Goods Act, section 13, uses the word “ condition” in place of the word “ warranty;” contained in our law, which has important consequences. Under that law breach of warranty does not justify rescission of an executed sale, and apparently does not even justify rejection of goods under an executory contract to sell. A “ condition,” on the other hand, not only justifies rejection of goods, but permits an action as in warranty, not formerly existing. (Williston on Sales, vol. 1, § 223-a.) Wallis v. Pratt, therefore, was governed by' these distinctions and determined that the words, “ 'sellers give- no warranty expressed or implied as to growth,' description or any other matters ” relating to common English sainfoin, had no reference to condition or description. By this terminology, as heretofore stated, a sale by description constituted a sale upon condition, and did not constitute a warranty. A recovery could be had as on warranty for breach of a condition.

The judgment of the Appellate Division and that of the Trial Term should be reversed, and the complaint dismissed, with costs in all courts. (See 256 N. Y. 640.)

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

Judgments reversed, etc.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    J. E. Carroll Sand Company, Appellant, v. Earl C. Jones, Inc., et al., Defendants; Belmont Lumber Co., Inc., et al., Appellants, and State Bank of Bolivar et al., Respondents.
    (Argued February 13, 1931;
    decided March 24, 1931.)

      William C. Carroll for appellants.
    The finding and judgment of the Appellate Division that the assignment from the contractor to the respondent State Bank of Bolivar was filed within ten days after the date of such assignment in accordance with section 16 of the Lien Law, has no support in fact or in law. (Hackett v. Campbell, 10 App. Div. 523; 159 N. Y. 537; Thurber v. Chambers, 66 N. Y. 42; Williams v. Ingersoll, 89 N. Y. 508; Risley v. Phenix Bank, 11 Hun, 484; 83 N. Y. 318; Hofferberth v. Duckett, 175 App. Div. 480; Edison El. Illuminating Co. v. Frick Co., 221 N. Y. 1; Harvey v. Brewer, 178 N. Y. 5; Glens Falls Portland Cement Co. v.
      Van Wirt Construction Co., 225 App. Div. 159.) The Appellate Division erred in finding and concluding that the respondents Salamanca Trust Company and the First National Bank of Olean were entitled to be paid out of the moneys prior to the liens of plaintiff and defendants which were found to be valid by the trial court. (Paine v. City of New York, 190 App. Div. 681; 231 N. Y. 539.)

      James P. Quigley and Earl C. Vedder for respondents.
    The finding and judgment of the Appellate Division that the assignment from the contractor to the respondent State Bank of Bolivar was filed within ten days after the date of the assignment as required by section 16 of the Lien Law is supported by the evidence and the law. (Hall v. New York, 79 App. Div. 102; Hackett v. Campbell, 10 App. Div. 523; 159 N. Y. 537; Federal Heating Co. v. Buffalo, 99 Misc. Rep. 121; Paine v. New York, 190 App. Div. 681; 231 N. Y. 539; Wood v. Galway, 186 App. Div. 134; Giant Portland Cement Co. v. State, 232 N. Y. 395; Riverside Contg. Co. v. City of N. Y., 218 N. Y. 596; Albany B. S. Co. v. Eastern B. & S. Co., 235 N. Y. 432; Lawrence v. Church, 32 App. Div. 489; 164 N. Y. 115; Griffey v. N. Y. C. Ins. Co., 100 N. Y. 417; Glens Falls Portland Cement Co. v. Van Wirt Constr. Co., 225 App. Div. 159; Shaughnessey v. Lewis, 130 Mass. 355; Orcutt v. Moore, 134 Mass. 48.) The respondents Salamanca Trust Company and the First National Bank of Olean were entitled to share pro rata under the assignment to the State Bank of Bolivar. (Paine v. City of New York, 190 App. Div. 681; 231 N. Y. 539.)
   Per Curiam.

An assignment filed within ten days after the date when it was executed is valid under the provisions of section 16 of the Lien Law (Cons. Laws, ch. 33). The statute does not refer to the date which is inserted in the instrument of assignment but to the actual date when the assignment is made. The assignment to the State Bank of Bolivar was filed within the statutory period. Nothing in the language of the instrument of assignment limited its effect. It was given as collateral security for advances to be made by the assignee and other banting institutions. To that extent and for that purpose, title to all moneys due and to become due passed to the assignee. Instruments thereafter executed by the assignee and delivered to the other banting institutions for the purpose of carrying out the purpose of the assignment and fixing the rights of the parties to the moneys previously assigned, do not constitute new assignments, within the meaning of the statute, which are void unless filed. The judgment should be affirmed, with costs.

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

Judgment affirmed.


text:
    Benjamin E. Cohn et al., Copartners, under the Firm Name of Cohn & Lubow, Respondents, v. Mishkoff Costello Company, Appellant.
    (Argued February 9, 1931;
    decided March 24, 1931.)

      Henry Hofheimer, Milton Mansbach and Louis J. Paley for appellant.
    The cause of action set forth in the complaint cannot be maintained in this State as the court will not take jurisdiction of an action requiring it to interfere in the internal management of a foreign corporation or to control the judgment and discretion of its board of directors. (Sauerbrunn v. Hartford Life Ins. Co., 220 N. Y. 363; People v. Brotherhood P. D. P. A., 218 N. Y. 115; Travis v. Knox, 215 N. Y. 259; Muck v. Hitchcock, 212 N. Y. 283; Southworth v. Morgan, 205 N. Y. 293; Knickerbocker Trust v. Iselin, 185 N. Y. 54; Marshall v. Sherman, 148 N. Y. 9; De Raismes v. U. S. Lithograph, 161 App. Div. 781; Matter of Rappleye, 43 App. Div. 84; Lewisohn v. Anaconda Copper, 26 Misc. Rep. 613; Eberhard v. Northwestern Mutual Life Ins. Co., 210 Fed. Rep. 520; Maguire v. Mortgage Co., 203 Fed. Rep. 858; Chicago Title & Trust Co. v. Newman, 187 Fed. Rep. 573; Sims v. United Wireless Tel. Co., 179 Fed. Rep. 540; Butler v. Standard Milk Flour Co., 146 App. Div. 735.)

      Frank E. Nowve and Philip I. Schick for respondents.
    Interference in the internal affairs of a foreign corporation is not involved in the present suit. (Sauerbrunn v. Hartford Life Ins. Co., 220 N. Y. 363; People v. Brotherhood P. D. P. A., 218 N. Y. 115; Muck v. Hitchcock, 212 N. Y. 283; Southworth v. Morgan, 205 N. Y. 293; Marshal v. Sherman, 148 N. Y. 9; De Raismes v. U. S. Lithograph, 161 App. Div. 84; Matter of Rappleye, 43 App. Div. 84; Travis v. Knox, 215 N. Y. 259; Eberhard v. Northwestern Mutual Life Ins. Co., 210 Fed. Rep. 520; Chicago Title & Trust Co. v. Newman, 187 Fed. Rep. 573; Blythe Co. v. Blythe, 172 U. S. 644; Bach v. Hunt, 193 U. S. 523; Sims v. United Wireless Telegraph, 179 Fed. Rep. 540; Hogue v. American Steel Foundries Co., 247 Penn. St. 62.)
   Per Curiam.

The action is brought by a stockholder against the defendant, a foreign corporation organized under the laws of the State of Indiana, demanding judgment that defendant either redeem shares of its stock at par value with accumulated interest or in the alternative declare a dividend out of its surplus.

The courts of this State will not take jurisdiction, in ordinary cases, to regulate the internal affairs of a corporation which ought to be managed under the laws and by the direction of the courts of the State or country where it is organized. (Travis v. Knox Terpezone Co., 215 N. Y. 259, 264.) While it is not always easy to say when jurisdiction will be taken and when declined, and while contracts between a foreign corporation and its members will usually be enforced in the courts of this State, it seems clear that the jurisdiction now invoked must be declined under the principle stated. Considerations of convenience, of efficiency and of justice point to the courts of Indiana as the appropriate tribunals to regulate the internal affairs of the defendant corporation by determining:

(a) Whether the defendant corporation is under a duty to change its corporate structure by the redemption of its stock in all events in ten years after date at par value and accumulated interest. (Topken, Loring & Schwartz, Inc., v. Schwartz, 249 N. Y. 206.)

(b) Whether the directors of defendant, after demand, have in bad faith refused to declare dividends.

The orders should be reversed and the motion to dismiss the complaint granted, with costs in all courts and ten dollars costs of motion, and the questions certified answered in the negative.

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

Orders reversed, etc.


author: O'Brien, J.

text:
    Cleora Currie, as Administratrix of the Estate of John G. Currie, Deceased, Respondent, v. International Magazine Co., Inc., Appellant.
    (Argued February 19, 1931;
    decided March 24, 1931.)

      Stephen Callaghan and Alfred W. Andrews for appellant.
    The decedent and the operator of the elevator were fellow-servants in the same employment at the time of the accident. (Baldwin v. Abraham, 57 App. Div. 67; 171 N. Y. 677; Zurich G. A. & L. Ins. Co. v. Watson Elevator Co., 253 N. Y. 404; Mollino v. Ogden & Clarkson Corp., 243 N. Y. 450; Breslin v. Sparks, 97 App. Div. 69; Wyllie v. Palmer, 137 N. Y. 248; Higgins v. Western Union Telegraph Co., 156 N. Y. 75; Wolfe v. Mosler Safe Co., 139 App. Div. 848; Quinn v. National Sugar Refining Co., 102 App. Div. 47; Matter of DeNoyer v. Cavanaugh, 221 N. Y. 273; Matter of Schweitzer v. Thompson & Morris Co., 229 N. Y. 97; Jaabeck v. Grane’s Sons Co., 206 App. Div. 574.) The trial court committed reversible error in admitting in evidence rule 14 of the Elevator Rules of the City of New York. (Kennahan v. City of N. Y., 162 App. Div. 364; East v. Brooklyn Heights R. R. Co., 195 N. Y. 409; Sarconi v. 122 W. 26th St. Corp., 241 N. Y. 340; Schumer v. Chaplin, 241 N. Y. 346.)

      Russel S. Coutant, Theodore Kiendl, Edward C. McLean and Coulter D. Young for respondent.
    Decedent and the operator of the elevator were not fellow-servants. (Matter of Brown v. St. Vincent’s Hospital, 222 App. Div. 402; Zurich General Accident Co. v. Watson Elevator Co., 253 N. Y. 404; Wyllie v. Palmer, 137 N. Y. 248; Cannon v. Fargo, 222 N. Y. 321; Matter of Sullivan v. Glens Falls Portland Cement Co., 202 App. Div. 854; 234 N. Y. 552; Bartolomeo v. Bennett Contracting Co., 245 N. Y. 66; Sanford v. Standard Oil Co., 118 N. Y. 571; Johnson v. Netherlands A. S. Navigation Co., 132 N. Y. 576; McNamara v. Leipzig, 227 N. Y. 291; Bloss v. Pure Oil Co., 232 N. Y. Supp. 332.) It was not error to admit rule 14 of the Elevator Rules in evidence. (Sarconi v. 122 West 26th Street Corp., 241 N. Y. 340; Losie v. Royal Indemnity Co., 183 App. Div. 744; Cohalan v. N. Y. Press Co., 212 N. Y. 344; Schumer v. Caplan, 241 N. Y. 346; Depeyster v. Columbian Ins. Co., 2 Caines, 85; Lee v. Vacuum Oil Co., 7 N. Y. Supp. 426; 126 N. Y. 670; Brown v. Bowen, 30 N. Y. 519; Cundill v. Lewis, 245 N. Y. 383; Tochman v. Brown, 1 J. & S. 409; Hawley v. City of Gloversville, 4 App. Div. 343; Beacon Falls Rubber Shoe Co. v. Bums, 79 App. Div. 639; Gill v. Erie R. R. Co., 151 App. Div. 131; Hankowska v. Buffalo Savings Bank, 155 App. Div. 694; Wood v. Wyeth, 106 App. Div. 21; Fitzsimmons v. Isman, 166 App. Div. 262; 219 N. Y. 610; Kopper v. City of Yonkers, 110 App. Div. 747; 188 N. Y. 592.)
   O'Brien, J.

Defendant owned an apartment house at 471 Park avenue in the borough of Manhattan and retained Huberth & Huberth to manage it. They collected rents, hired, discharged and paid the superintendent, doormen, elevator attendants and all other operatives, purchased supplies, caused repairs to be made, and attended to the wants of tenants. For such services they received as commission a sum equal to three per cent of the gross rentals and remitted the net proceeds to defendant. They performed similar services in respect to a number of buildings, one of which belonged to defendant and the rest to other owners. In their employment was John G. Currie who is described as a supervisor in an executive capacity. His duties consisted in visiting the various properties which Huberth & Huberth managed, obtaining reports from superintendents, ascertaining work to be done, arranging for its performance and recommending the hiring and discharge of persons engaged in the administration of these buildings. Among those whom he recommended for employment was Robert Greig, who worked as a handy man at 471 Park avenue. Greig was ignorant of the ownership of the building and never received orders from any one except Currie and the superintendent. His wages were paid to him in cash by the superintendent.

On one of Currie’s visits to 471 Park avenue, he requested Greig to run a service elevator to the fourteenth story and assist him in the removal of an ice box to the basement. While they were engaged in loading the refrigerator onto the elevator and while it projected several inches from the floor of the hallway into the shaft, they discovered that the floor of the elevator was not flush with the floor of the hallway, but that it stood four or five inches below* it. Greig started the elevator with the purpose of bringing it flush with the hallway, but instead of regulating it so that it would stop at the proper grade, he allowed it to ascend too far. It struck the projecting end of the ice box, overturned it, crushed Currie and inflicted fatal injuries. Issues relating to Greig’s negligence and Currie’s freedom from contributory negligence were resolved in favor of plaintiff. The evidence created questions of fact and the jury was so instructed. Among the other controlling issues in the case are the questions whether Greig was the servant of defendant or of Huberth & Huberth, whether he and Currie were, in any event, fellow-servants, and whether the admission in evidence of a municipal rule based upon an ordinance was error.

Huberth & Huberth cannot be regarded as independent contractors in procuring for the owner the services of Greig. They acted only as agents and managed nineteen or twenty buildings in addition to 471 Park avenue. Their services were directed toward the benefit of the owners. These agents maintained their own office organization of employees, including Currie, which enabled them to administer the affairs of their various principals. When they purchased coal or oil for heating any of the buildings, these, as well as other supplies, became the property of the owners of the buildings. The agents had no interest in them. When they engaged workmen to operate elevators, engines and boilers, to act as superintendents, doormen and porters or to perform other services necessary to the proper management of these "buildings, the persons so engaged likewise became the 'employees of the owners. If this defendant had retained a single individual, instead of a partnership with an extensive organization, to act as its agent in the management of its property, scarcely could any contention be made that such an individual would have become the master and the persons engaged by him in behalf of defendant his servants. Such power of control as Huberth & Huberth exerted over the staff of defendant’s building was derived entirely from the authority with which their principal clothed them as agent, and it was used for the benefit of defendant rather than that of the agents. If Greig were not an employee of defendant, then it had no employees at 471 Park avenue and its policy for "workmen’s compensation insurance covering employees at that address was entirely unnecessary. The fact that by that policy it recognized employees in that building as its own contributes assistance to the solution of a problem in which some degree of doubt might perhaps otherwise be involved. Huberth & Huberth’s functions were similar to, if not identical with those conferred upon real estate agents which were considered in Zurich G. A. & L. Ins. Co. v. Watson Elevator Co. (253 N. Y. 404). All their efforts were expended in behalf of defendant as owner and Greig was the servant of defendant and not of the agents. In Mollino v. Ogden & Clarkson Corp. (243 N. Y. 450) the agents were held liable for injury to á pedestrian caused by the fall of a chimney. Their liability was based upon a specific obligation which they had assumed by contract to make repairs. No issue of master and servant was there involved. Here the elevator was in perfect condition and the question is directed to the identity of the master of him who negligently operated it.

While Greig was beyond doubt in the general employment of defendant, Currie was equally beyond doubt in the general employment of Huberth & Huberth. Neither entered the special employment of the other’s master. Although the purpose of removing the ice box is not disclosed by any evidence, we may assume that its removal formed part of a routine detail connected with the management of the apartment house and was performed at the request of some tenant. It, therefore, constituted work for defendant, and Greig, being in its general employment, was not transferred to the employment of another. When he was engaged in performing defendant’s work he remained defendant’s servant. The ultimate control of his conduct and his retention in defendant’s service rested with defendant (Bartolomeo v. Bennett Contracting Co., 245 N. Y. 66), acting through its agents. Currie’s employment also was permanent. His duties required him to represent his firm in supervising eight or nine buildings. As he proceeded from one to the other he was not transferred in the course of a day’s work to the service of eight or nine different masters. His manual labor in moving the ice box was not part of his duty either to his masters or to their principal. His function was to supervise, he received no compensation for physical work and was a mere volunteer. Defendant could not discharge him or control him. It might complain to his master and if its complaints were to go unheeded, it could terminate its contract of agency with the master. Until he should be discharged by Huberth & Huberth he remained their servant and their power of control is presumed to have continued. (Bartolomeo v. Bennett Contracting Co., supra.)

On the trial, counsel stipulated that the service elevator which was operated by Greig at the time of the accident was designated by the bureau of buildings as a passenger elevator. The evidence proves that it was used for freight and also for the transportation of employees of defendant and of the tenants. That it was a passenger as well as a freight elevator, therefore, must be concluded. Rule 14, adopted by the Board of Standards and Appeals, pursuant to an ordinance, provides that passenger elevators shall be provided with gates and that they shall be closed by the operator before the car is put in motion. Against defendant’s objection and exception this rule ' was admitted in evidence. The elevator, while designated a passenger elevator, was in fact, as the evidence shows, a service elevator. At times it was used exclusively to carry freight, again exclusively to carry employees and sometimes to carry freight and employees together. On the occasion of Currie’s death it was in use for no purpose except the transportation of the ice box. Currie was even less a passenger than the plaintiff in Sarconi v. 122 W. 26th St. Corp. (241 N. Y. 340). The plaintiff in that case was in the act of stepping into the car when the injury occurred, but this plaintiff’s intestate had made no effort to go aboard and remained several feet distant from it. The reason forJEtule 14 lies in the effort to protect passengers and when no passenger was aboard and this service elevator was in use for freight and for nothing except freight, the facts no longer came within the intent and application of the rule. The Sarconi case controls the decision here. From every point of view, the rule seems, on the facts of this case, to be wholly irrelevant. Failure to obey it was not the cause of the accident. The projection of the ice box into the car and its sudden dislocation by the rapid rise of the car to a height too great for safety caused the death of Currie. As long as the refrigerator extended into the car, the gate could not have been closed. As we said in the Sarconi case, the verdict might have been the same even if no error had been committed, for it is amply sustained by the evidence. Again we say, as we then said, that the defendant had a substantial right to have the regulations governing passenger elevators kept out of the case.

The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.

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

Judgments reversed, etc.


author: Kellogg, J.

text:
    Vera Winter, Respondent, v. Carl Winter, Appellant.
    (Argued February 19, 1931;
    decided March 24, 1931.)

      William MacFarlane for appellant.
    Service of the summons in the annulment action was not complete when the proofs were taken and decree granted. (Stokes v. Stokes, 198 N. Y. 301; Davidson v. Ream, 178 App. Div. 362; Morocchini v. Morocchini, 212 App. Div. 21; Kahn v. Kahn, 126 Misc. Rep. 44; Furman v. Futman, 153 N. Y. 309; Mandeville v. Reynolds, 68 N. Y. 529; Kamp v. Kamp, 59 N. Y. 212; Hughes v. Cuming, 165 N. Y. 91; F. & C. Co. v. Marendino, 202 App. Div. 24; Greenfield v. Greenfield, 215 App. Div. 504; McGrath v. Roefs, 119 Misc. Rep. 641; Gruner v. Ruffner, 134 App. Div. 837; Weiser v. Landess, 172 N. Y. Supp. 337; Market Nat. Bank v. Pacific Nat. Bank, 89 N. Y. 397; Matter of Wright, 224 N. Y. 293; Matter of Reed, 218 N. Y. 711; Smith v. Butler, 215 App. Div. 361; City of Albany v. Goodman, 203 App. Div. 530; Bamonte v. Ocean Beach F. I. Co., 222 App. Div. 676; Darrow v. Caulkins, 154 N. Y. 503.) The appellant can set up want of jurisdiction of the court to render the decree of annulment. (Kerr v. Kerr, 41 N. Y. 272; Losey v. Stanley, 147 N. Y. 460; Beardslee v. Dolge, 143 N. Y. 160; O’Donoghue v. Boies, 159 N. Y. 87; Matter of Doey v. Howland Co., 224 N. Y. 30; Smith v. Central Trust Co., 154 N. Y. 333; Risley v. Phenix Bank, 83 N. Y. 318; Goldberg v. Levine, 199 App. Div. 292.)

      H. H. Cohen for respondent.
    The court acquired jurisdiction by the service of the summons. The failure to attach the certificate of authentication to the affidavit of service was, at most, an irregularity, and not a jurisdictional defect. (Sleicher v. Sleicher, 251 N. Y. 366; Volz v. Sheepshead, 249 N. Y. 122; Fawcett v. Vary, 59 N. Y. 597; Lawton v. Kiel, 51 Barb. 30; Rothschild v. Mannesovitch, 29 App. Div. 580; Falikman v. Falikman, 206 App. Div. 7; Von Arx v. Boone, 193 Fed. Rep. 612; Fidelity-Ins. T. & S. Deposit Co. v. Roanoke Iron Co., 81 Fed. Rep. 439; Hibernia Savings & Loan Society v. Matthai, 116 Cal. 424; White v. Crow, 110 U. S. 183; Cunningham v. Spokane Hydr. Min. Co., 20 Wash. 450; National Ins. Co. v.
      Chamber of Commerce, 69 Ill. 22; Burr v. Seymour, 43 Minn. 401; Zahorka v. Geith, 129 Wis. 498; Matter of Newman, 75 Cal. 213.)
   Kellogg, J.

A civil action is commenced by the service of a summons. (Civ. Prac. Act, § 218.) In an action to annul a marriage the defendant may be served by publication. (Id. § 232.) Such service is made when the summons has been published in two newspapers for six successive weeks, and the summons and complaint, together with a notice, have been mailed to the defendant. (Rules Civ. Prac. rule 50.) It is complete on the forty-second day after the day of first publication. (Rule 51.) “ In all cases when publication of the summons is ordered, service of the copy of the summons and complaint and of any accompanying notice required by rules by the delivery thereof to the defendant personally without the State is equivalent to notice by publication and deposit in the post-office.” (Civ. Prac. Act, § 233.) Since publication for six weeks and mailing completes service by publication, commences the action and furnishes jurisdiction, necessarily its equivalent,” viz., personal service without the State, equally well provides jurisdiction. True, rule 51 in part provides: Service without the State in lieu of publication is complete ten days after proof thereof is filed.” However, the convention which formulated the rules was permitted to make only such rules as were “ not inconsistent with the Judiciary Law nor with the Civil Practice Act, adopted by this Legislature.” (Laws of 1920, ch. 902; Laws of 1921, ch. 370.) The full equivalence with publication of personal service without the State having been declared by the Legislature, the convention was powerless to provide that to constitute such equivalence, an additional element, viz., the lapse of a stated period of time after service must be present. The sentence quoted from rule 51 is immediately preceded by this: “ For the purpose of reckoning the time within which the defendant must appear or answer, service by publication is complete on the forty-second day after the day of first publication.” Doubtless it was for the purpose so announced, and that purpose only, that the provision in reference to the completion of personal service without the State was promulgated. Clearly, it could have no greater force, even if, indeed, it be forceful to accomplish that result. Certainly, under section 233 of the Civil Practice Act, personal service without the State when made, ipso facto, commences the action and supplies jurisdiction.

The plaintiff, in the annulment suit instituted by her against a former husband, pursuant to an order of publication, had made service without the State fully eight months prior to the entry of the judgment of annulment. It is true that an affidavit of service, accompanied by an appropriate certificate, as to the authority of the non-resident notary who administered the oath to the affiant, was not filed until the moment when the judgment was entered. Clearly the utmost which might be claimed is that the judgment was prematurely entered; since ten days had not elapsed after the filing of the proper papers, to start running the defendant’s time to answer, as provided in rulé 51. A judgment entered after personal service of a defendant within the State, but prior to the expiration of his time to answer, is an irregular and voidable, but not a void, judgment. (Harper v. Biles, 115 Penn. St. 594; Parker v. Linden, 13 N. Y. Supp. 787; Matter of Newman, 75 Cal. 213; Black on Judgments, vol. 1, § 85; Freeman on Judgments, vol. 3, § 1289.) In Sheffey v. Davis Colliery Co. (219 Fed. Rep. 465, 468) the court, after so stating the rule, said: “We see no reason why the same rule should not apply in cases of service by publication, and the weight of authority is clearly to that effect;”- and that after publication has been completed, “ the power of the court thereupon attaches to exercise its functions in respect to the subject-matter of the suit.” In the case of Matter of Newman (supra) it was said: “ It is the fact of service which gives the court jurisdiction,— not the proof of service,— and the court had authority to receive the amended affidavits of service after judgment and before the roll was made up.” We think that under our procedure a failure to file the required proofs of service until judgment rendered did • not render the judgment void.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


text:
    Samuel Waxman, Respondent, v. Jacob Williamson, Appellant.
    (Argued February 10, 1931;
    decided March 24, 1931.)

      Albert C. Jordan for appellant.
    It is not the object of-Civil Practice rule 113 to deprive any one who has a right to a jury trial of an issue of fact but to require a defendant to show he has an arguable defense. (Curry v. Mackenzie, 239 N. Y. 267; Gravenhorst v. Zimmerman, 236 N. Y. 22; Nyles v. Seeler, 240 N. Y. 650; Weiss v. Goldberger, 209 App. Div. 615; Security Finance v. Stewart, 131 Misc. Rep. 538; Goldstein v. Korf, 203 N. Y. Supp. 119; Karpass v. Baudler, 218 App. Div. 418; Canajoharie Bank v. Diefendorf, 123 N. Y. 191; Kelso v. Ellis, 224 N. Y. 528; Eichinger v. Zimmerlein, 230 App. Div. 708.)

      David Harrison for respondent.
    Summary judgment was properly granted under rule 113. (M’Bee v. Shoemaker, 174 App. Div. 291; Horan v. Mason, 141 App. Div. 89; Hanna v. Mitchel, 202 App. Div. 504; 235 N. Y. 534; Hoof v. Hunter Corp., 193 N. Y. Supp. 91; Dwan v. Massarene, 199 App. Div. 872; McAnsh v. Blauner, 222 App. Div. 381; Davison Coal Co. v. Interstate Coal & Dock Co., 193 N. Y. Supp. 883; Curry v. Mackenzie, 239 N. Y. 267; Gravenhorst v. Zimmerman, 236 N. Y. 22; Nyles v. Seeler, 240 N. Y. 650; Security Finance v. Stewart, 131 Misc. Rep. 538.)
   Kellogg, J.

The complaint alleges that the defendant, on March 25, 1925, made and delivered to Jacob Becker a certain promissory note; that the defendant thereby promised to pay Jacob Becker, on or before one year from date, the sum of $2,000, with interest at eight per cent; that the note was indorsed and transferred to Frank Becker; that the note was duly presented for payment at maturity and payment refused; that the note was thereafter indorsed and transferred by Frank Becker to the plaintiff. The answer denied all the allegations of the complaint, except that it admitted the making and delivery of the note. It also set up, as an affirmative defense, that the note was given to secure a payment in part of the purchase price of a parcel of land purchased by the defendant from the payee; that the purchase was made subject to an existing mortgage of $13,500; that the defendant gave a mortgage to secure the note in suit; that in and by the terms of the mortgage the mortgagee, who was also the payee of the note, stipulated with the defendant that at the maturity of the note the mortgagee would pay off the $13,500 mortgage and take back a new first mortgage for $9,000 due in one or two years from date; that the mortgagee failed to take up the first mortgage at the maturity of the note; that thereupon, as stipulated in the second mortgage, that instrument as well as the note in suit became null and void.

On a motion, made by the plaintiff, to strike out the answer and have summary judgment, as provided in rule 113 of the Rules of Civil Practice, it appeared by affidavit, without dispute, that the note was executed, delivered, indorsed, transferred, presented for payment, and refused payment, all as alleged in the complaint. The original mortgage given by the defendant to secure the payment of the note was exhibited to the court when the motion was presented. No stipulation, such as that set up in the answer, was contained therein. The actual stipulation provided that the mortgagee, at maturity of the mortgage, would accept, in addition to the amount unpaid on the note, the sum of $4,500; that he would thereupon take up the first mortgage for $13,500, and receive from the defendant mortgagor a new mortgage for the sum of $9,000. As the defendant never paid the $4,500, the mortgagee never became obligated to take up the first mortgage. All the allegations of the complaint, as we have heretofore stated them, were established beyond dispute; all of the affirmative matter set up in the answer was conclusively shown to be false.

The complaint, in addition to the matter which we have recited, alleged that the note in suit contained a further promise than to pay $2,000. This promise, admitted by the answer, was that if the defendant failed to pay the note at maturity, and suit for the collection thereof was instituted, the defendant would pay reasonable attorney’s fees for such collection.” The complaint alleged, and the answer denied, that a reasonable sum was twenty per cent of the principal of the note. An affidavit by the plaintiff to the same effect was not met by any affidavit on the part of the defendant. Moreover, on the argument before us, the defendant’s counsel stated that he did not dispute that ten per cent upon the principal, allowed in the judgment for attorney’s services, was a reasonable sum. There can be no doubt that the answer was properly stricken out, and that the plaintiff was entitled to a summary judgment for the principal sum of the note. The only question in doubt is the interesting one whether or not the agreement to pay an uncertain sum for attorney’s fees constituted a debt or liquidated demand,” within rule 113 of the Rules of Civil Practice, so that an allowance therefor, included in the summary judgment, was proper to be made.

It is well known that the early concept of debt was that of a grant and not of a promise (Ames, Lectures on Legal History, p. 150; Plucknett, A Concise History of the Common Law, p. 409); that the action of debt, to procure a return of the res, lay only for the recovery , of-a sum certain, the precise amount granted (Ames, p. 89; Street, Foundations of Legal Liability, vol. 3, p. 135; Young v. Ashburnham, 3 Leon. 161); that the action of indebitatus assumpsit, “a special action on the case-in the nature of debt ” (Street, p. 187), based upon an implied promise to pay a precedent debt, was a novelty introduced to provide a less restricted remedy (Pound and Plucknett, Readings on the History and System of the Common Law [3d ed.], 122; Blackstone, Commentaries, Book III, pp. 154-157); that it was one of the common counts in assumpsit, of which others were quantum meruit and quantum valebat (Chitty, Pleadings [16th ed.], vol. 1, p. 351); that, in the broad sense of the term, indebitatus assumpsit was inclusive of the quantum counts, and that the reasonable value of services performed or goods delivered might be recovered thereunder. (Street, pp. 183, 185.) We know that, as far back as the year 1603, it was held that a tailor who undertook to fashion a garment for an indefinite price might have a special action of debt ” for the recovery of a reasonable sum for his services (The Six Carpenters Case, 4 Coke, part 8, p. 290); that it is stated in 3 Comyn’s Digest: Debt lies, if the sum be not certain, if it may be ascertained: as * * * to pay a tailor quantum meruit for making garments, and finding necessaries for them ” (Digest, Debt, A-8); that the concept of an implied promise, upon which indebitatus assumpsit is based, was deplored by Vaughan, J., as “ a false gloss, thereby to turn actions of debt into actions on the case; for contracts of debt are reciprocal grants.” (Edgecomb v. Dee, Vaughan, 89,101.) Professor Ames has said that it soon became the practice “ to declare in indebitatus assumpsit when no price had been fixed by the parties, the verdict of the jury being treated as equivalent to the determination of the parties at the time of bargain.” (Ames, p. 90.) Chitty stated that it had long been the opinion of the profession that under an indebitatus count in assumpsit or debt the plaintiff may recover, although there be no evidence of a fixed price ” (p. 352). Indebitatus assumpsit became “ the common mode, by which debts of this sort are usually sued for and recovered.” (Pound and Plucknett, p. 122.) In this country it has been held that debt lies for the recovery of a sum not ascertained, i. e., a quantum meruit. (Smith v. First Congregational Meetinghouse, 8 Pick. 178: Norris v. School District, 12 Me. 293; Mahaffey v. Petty, 1 Ga. 261; Thompson v. French, 18 Tenn. 453 ; Mayor v. Butler, 1 Barb. 325, 339.) Our rule 113, as we have seen, provides for summary judgments in an action to recover a debt or liquidated demand.” Irrespective of the nature of the action, whether it be debt, indebitatus assumpsit, or some action otherwise termed, the fact remains that history accords with the common usage of the day, in treating an obligation to pay the reasonable value of services rendered or goods delivered as “ a debt,” an action to recover which is necessarily “ an action to recover a debt.”

We are said to have borrowed our rule 113 from the Supreme Court Rules of the English courts. (Wile v. Nassau S. & R. Works, Ltd., 205 App. Div. 657; Norwich Pharmacal Co. v. Barrett, 205 App. Div. 749.) The case of Lagos v. Grunwaldt (L. R. [1910] 1 K. B. 41), an action to recover the reasonable value of attorney’s fees, therefore, possesses singular interest upon this issue. In that case, Cozens-Hardy, M. R., discussing the propriety of a summary judgment permitted by Order XIV of the Rules of the Supreme Court, said: Under Order XIV the first thing that has to be done is to have the writ specially indorsed under Order III, r. 6, and all that is required by Order III, r. 6, is that the plaintiff should be seeking to recover for a debt or liquidated demand of money. I think this is within the meaning of that rule. It is a liquidated demand for money, 1469£, or something which could have been claimed under the old indebitatus count.” Farwell, L. J., said: It is a claim on contract for quantum meruit. In my opinion that is within the rule.” After referring to a statement in Bullen and Leake [2d ed.], page 28, to the effect that the quantum meruit and quantum valebat counts had been superseded by the general application of the indebitatus counts, the Lord Justice continued: In my opinion that is the true view; everything that could be sued for under those counts comes within the description of debt or liquidated demand.” .

We think that, in so far as this is an action to recover the reasonable value of an attorney’s services, it is an action to recover a debt;” that as the value of the services are conceded to be the amount allowed, the summary judgment was proper.

The judgment should be affirmed, with costs. (See 256 N. Y. 587.)

Cardozo, Ch. J., Pound, Crane, Lehman, O’Brien and Hubbs, JJ., concur.

Judgment affirmed.


author: Lehman, J.

text:
    Clinton Burns, Respondent, v. Felix Lopez, Appellant.

      (Argued February 17, 1931;
    decided March 24, 1931.)

      James S. Darcy for appellant.
    The Special Term erred in disregarding the denials as well as the first affirmative defense of payment in the answer and directing judgment without a trial. (Levon v. American Safety Table Co., 222 App. Div. 110; Delaware Trust Co. v. Calm, 195 N. Y. 231; Cowles v. Rochester, 179 N. Y. 87; Clemmons v. Gordon, 37 Misc. Rep. 835; Smathers v. Standard Oil Co., 199 App. Div. 368; 233 N. Y. 617; Ewanski v. Solvay Process Co., 238 N. Y. Supp. 508; Boissevain v. Boissevain, 252 N. Y. 178; Hurwitz v. Hurwitz, 216 App. Div. 362; Maxherman Co. v. Alper, 210 App. Div. 389; Moore v. Bonbright & Co., 202 App. Div. 281; Wappler v. Woodbury Co., 246 N. Y. 152; Curry v. Mackenzie, 239 N. Y. 267.) The Special Term erred in striking out the affirmative defense and counterclaim contained in the answer and summarily granting judgment to the plaintiff. (Levon v. American Safety Table Co., 222 App. Div. 110; McCrea v. Hopper, 35 App. Div. 572; 165 N. Y. 633; National Bank v. Erion-Haines R. Co., 213 App. Div. 54; Siebert v. Dunn, 216 N. Y. 237; Quaid v. Ratkowsky, 183 App. Div. 428; 224 N. Y. 624; Curry v. Mackenzie, 239 N. Y. 267.) A court of equity may prevent an insolvent from profiting by his insolvency at the expense of a bona fide creditor. (Scott v. Armstrong, 146 U. S. 499; O’Connor v. Brandt, 12 App. Div. 596; Clute v. Warner, 8 App. Div. 40; DeCamp v. Thomson, 159 N. Y. 444; Dunlop v. James, 174 N. Y. 411; Pittsburg-West. Coal Co. v. Kerr, 220 N. Y. 137; Hopkins v. Lane, 87 N. Y. 501; Clark v. Kirby, 243 N. Y. 295.)

      Harold L. Allen for respondent.
    The so-called counterclaim and defense was properly stricken out. (National Gum Co. v. MacCormack, 124 App. Div. 269; Acer v. Hotchkiss, 97 N. Y. 395; Susquehanna S. S. Co. v. Anderson, 239 N. Y. 290; Walker v. American Central Ins. Co., 143 N. Y. 167; Hopkins v. Lane, 87 N. Y. 501.) The defense of payment is insufficient in law. (Buyer v. Doscher, 139 App. Div. 324; Smith v. Brooklyn Sav. Bank, 101 N. Y. 58.) No equitable setoff was pleaded by defendant or available to him under the facts. (Duncan v. Lyon, 3 Johns. 351; Beecher v. Vogt Mfg. Co., 227 N. Y. 468; Dunn v. Uvalde Asphalt Paving Co., 175 N. Y. 214; Spafford v. Rowan, 124 N. Y. 108; Cummings v. Morris, 25 N. Y. 625; DeCamp v. Thomson, 159 N. Y. 444; Scott v. Armstrong, 146 U. S. 499; Silberstein v. Begun, 232 N. Y. 319; Sawyer v. Hoag, 17 Wall. 610; Middleton v. Pollock, L. R. [20 Eq.] 29; Weston v. Barker, 12 Johns. 276; Matter of Schultz, 132 Fed. Rep. 573.) The action was not prematurely brought. (Lowe v. Harwood, 131 Mass. 113; Canada v. Wick, 100 N. Y. 127; Nichols v. Scranton Steel Co., 137 N. Y. 471; Swift v. Davis, 118 Misc. Rep. 205.)
   Lehman, J.

The action was commenced by service of a summons and complaint upon the defendant on November 25, 1929. The complaint alleges that on or about March 29th, 1929, the defendant borrowed from the plaintiff the sum of $10,000, which he promised to repay upon demand, and that “ thereafter and before this action, and on or about the 22nd day of November, 1929, the plaintiff duly demanded payment of the sum from the defendant, but no part of the said sum has been paid.” The answer denies the allegations of the complaint, except that it admits that the defendant borrowed from the plaintiff the sum of $10,000, but on the express agreement on the part of the plaintiff that the said sum was not to be demanded by the plaintiff nor to be repaid by the defendant until after January 1st, 1930.” The answer also alleges as a “ further defense and counterclaim ” that the defendant is a partner having a three per cent, interest in profits and losses of the firm of Jenks, Gwynne & Co. which acted as brokers for the plaintiff in the purchase and sale on margin of securities on the New York Stock Exchange; that the plaintiff is insolvent and is indebted to the said firm in the sum of $428,000. That the defendant with the consent of his partners in said firm duly paid to the plaintiff the said sum of $10,000 and interest from March 29th, 1929, by withdrawing from his capital in said firm the said sum of $10,000 and causing said firm of Jenks, Gwynne & Co. to credit to the plaintiffs said indebtedness to said firm the sum of $10,000 and interest thereon from March 29th, 1929.”

The plaintiff has challenged the sufficiency of the answer by motion to strike out the defense and counterclaim pursuant to the provisions of rule 109 of the Rules of Civil Practice and by motion for judgment on the pleadings pursuant to rule 112. Assuming, as we must, that the allegations of the answer are true, it appears that on November 25th a loan of $10,000, made by the plaintiff to the defendant, was unpaid, but that payment was not due and might not be demanded until more than a month thereafter. On the other hand, the plaintiff at the time the action was brought was presently indebted in a much greater sum to a firm of which the defendant was a member. The defendant’s share of the indebtedness due to his firm is greater than the amount borrowed by him from the plaintiff. The plaintiff is insolvent and cannot pay his indebtedness to the firm. He seeks a judgment against the defendant, regardless of his own indebtedness to the firm of which the defendant is a member. The defendant seeks to apply the amount he owes to the plaintiff upon the plaintiff’s indebtedness to the firm. In framing the answer, the pleader may have been uncertain as to the theory upon which the plaintiff’s claim may be defeated. The question we must decide is whether upon any theory the allegations of the answer are sufficient.

Undoubtedly the answer is sufficient, at least to raise an issue as to whether the action is premature. True, at the time the motion for judgment was made, the loan was due, or if payable on demand, a demand might have been made. For that reason the contention that the action was prematurely brought has been brushed aside, except that the judgment provides that “ interest on the said sum of $10,000 shall be computed only from January 1st, 1930.” The plaintiff cannot bring an action to recover money loaned until the loan is due. If for purposes of his own he brings an action prematurely he is not entitled in that action to judgment when the debt does thereafter fall due. (Delaware Trust Co. v. Calm, 195 N. Y. 231.) That is admitted on this appeal even by the plaintiff, but he seeks to sustain the judgment on the theory that the affirmative allegations in the answer show that the defendant committed an anticipatory breach by attempting to apply the amount of the loan upon the indebtedness due to the firm.

The complaint is not based upon any anticipatory breach. The allegations, upon which the claim of the anticipatory breach is based, are contained in the separate defense or counterclaim which has been stricken out. They cannot create a cause of action which is not alleged nor qualify the denials of the allegations of the complaint. For that reason it would serve no purpose to analyse them or to point out their insufficiency, even if they had been pleaded in the complaint. The motion for judgment on the pleadings, under rule 112, should, therefore, have been denied.

The question whether the defense or counterclaim should have been stricken out presents a more difficult question. Undoubtedly the defendant could not pay his indebtedness to the plaintiff by voluntary application of the amount of his indebtedness upon an indebtedness due from the plaintiff to a firm of which the defendant was a member. Therefore, the facts alleged are insufficient to constitute the defense of payment. If the defense or counterclaim is sufficient for any purpose it must be as an equitable set-off.

It has frequently been held that a defendant may not at law set off a claim, even though liquidated, which is owing by the plaintiff to a copartnership of which the defendant is a member. Equity, following the law, usually requires that the debts which are to be set off against each other shall be due from and to the parties in the same right. It does not allow a set-off of debts accruing in different rights,— as of a joint debt against a separate debt.” (Halsbury, Laws of England, vol. 13, p. 163.) “ There is no doubt that courts of equity did eventually extend the doctrine of set-off, and claims in the nature of set-off, beyond the law, but they only did so where peculiar equities intervened between the parties. The cases in which a set-off was allowed on special grounds are so very various as to admit of no comprehensive enumeration.” (3 Story, Equity Jurisprudence [3d Eng. ed.], § 1437a.) The question in this case is whether “ peculiar equities intervened ” which require relaxation of the rule.

In equity the right to a set off does not depend upon the statute, but upon the equities existing in each particular case, and the fact of the insolvency of one of the parties, so that no satisfaction can be obtained by a direct proceeding against the defendant for recovery of the debt, frequently gives rise to the right of set off aside from any other fact.” (Rothschild v. Mack, 115 N. Y. 1.) There, it is true, the obstacle at law was that the indebtedness which was set off was not presently due, and there were facts aside from insolvency which created peculiar equities which could not be disregarded. The rule there stated nevertheless covers the question presented in this case.

Here if the allegations of the answer be true, the insolvency of the plaintiff will prevent the defendant and his partners from enforcing payment of the amount owing to them jointly by the plaintiff. The defendant’s share of what is owing to the partners is larger than the amount he owes to the plaintiff. At least where the partners consent to the application of the indebtedness from defendant to the plaintiff upon the indebtedness due to them by the plaintiff, equity should permit the set off of a portion of the joint debt against the individual debt. (See Chamberlain v. Stewart, 6 Dana [Ky.], 32; Brewer v. Norcross, 17 N. J. Eq. 219; Collins v. Campbell, 97 Me. 23; Spofford v. Rowan, 124 N. Y. 108.) Where the partners consent to such application analogy to an equitable assignment by the firm to the defendant of part of the firm claim against the plaintiff is close if not, indeed, complete. (See Edelman v. Scholl, 65 Penn. Sup. Ct. 357.)

We have not in this opinion sought to determine whether, the enactment of section 271 of the Civil Practice Act may have broadened the scope of a set-off which may be pleaded. No such question has been argued or considered. Nor have we considered whether the other members of the firm should be made parties to this action. Until an objection is made, no such question is before the court.

The judgment of the Appellate Division and that of the Special Term should be reversed and the motion denied, with, costs in all courts.

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

Judgments reversed, etc.


text:
    Sol Greenfarb, Appellant, v. R. S. K. Realty Corporation, Respondent.
    (Argued February 11, 1931;
    decided March 31, 1931.)

      Harris Jay Griston and Alexander Bicks for appellant.
    The provisions as to the maintenance of the private sewers, contained in the agreements, constitute a covenant running with the land, and, therefore, an additional incumbrance, and a defect in the title. (Morehouse v. Woodruff, 218 N. Y. 494; Denman v. Prince, 40 Barb. 213; Nye v. Hoyle, 120 N. Y. 195; Gould v. Partridge, 52 App. Div. 870; Witherbee v. Meyer, 84 Hun, 146.) The provisions for the maintenance and repair of the private rights of way and sewers, in so far as they constituted a money charge or lien on the land, were neither restrictions nor easements, but constituted an additional incumbrance on the title, justifying title rejection. (Israelsky v. Levine, 215 App. Div. 94; Trustees of Columbia College v. Lynch, 70 N. Y. 440; Nellis v. Munson, 108 N. Y. 453; Bull v. Burton, 227 N. Y. 101; Hendricks v. Stark, 37 N. Y. 106; O’Neil v. Van Tassel, 137 N. Y. 297; Maupai v. Jackson, 139 App. Div. 524; Hart v. Lyon, 90 N. Y. 663; Mott v. Oppenheimer, 135 N. Y. 312; Crawford v. Krollpfeiffer, 195 N. Y. 185; Corn v. Bass, 43 App. Div. 53.)

      Edward S. Greenbaum, Morris L. Ernst, Alexander Lindey and Abraham J. Herrick for respondent.
    The plaintiff contracted to purchase subject to restrictions and easements of record, and the agreement as to maintenance and repair comes within that category. (Rider v. Smith, 3 Term Rep. 766; Pomfret v. Ricroft, 1 Saund. 321; Laurence v. Jenkins, L. R. 8 Q. B. 274; Bronson v. Coffin, 108 Mass. 175; Castner v. Riegel, 54 N. J. L. 498; Adams v. Van Alstyne, 25 N. Y. 232; Morehouse v. Woodruff, 218 N. Y. 494; Levy v. Schnurmacher, 255 N. Y. 83;
      Bull v. Burton, 227 N. Y. 101; O’Neil v. Van Tassel, 137 N. Y. 297; Maupai v. Jackson, 139 App. Div. 524; Hart v. Lyon, 90 N. Y. 663; Mott v. Oppenheimer, 135 N. Y. 312; Cole v. Hughes, 54 N. Y. 444; Scott v. McMillan, 76 N. Y. 141; Crawford v. Krollpfeiffer, 195 N. Y. 185; Corn v. Bass, 43 App. Div. 53.) The covenant to repair was a benefit to, not an incumbrance on the property. (Bull v. Burton, 227 N. Y. 101; Levy v. Schnurmacher Constr. Corp., 255 N. Y. 83; Lawrence Park v. Crichton, 218 App. Div. 374.)
   Kellogg, J.

The plaintiff entered into a contract in writing with the defendant, whereby the former agreed to purchase and the latter agreed to sell certain premises, “ free from all encumbrances ” except as stated in the contract. The contract specified certain mortgages and restrictive agreements to which the transfer was expressly made subject. It further provided that the transfer was to be “ subject to restrictions and easements of record.” On the law day the plaintiff refused to take title on the ground that the premises had been subjected to covenants, constituting incumbrances not specified in the contract, which were neither restrictions ” nor easements.” This action was subsequently instituted by the plaintiff to recover the down payment made.

The Edgemere Ocean Front Improvement Company, Inc., the defendant’s predecessor in title, had been the owner of a rectangular tract of land, about one thousand feet long and two hundred feet wide, reaching from Bay avenue on the north to Ocean promenade on the south. The northern six hundred feet had been designated parcel B; the southern four hundred feet parcel A. The Edge-mere Company sold all of parcel A to Kaplan and Miller. Contemporaneously, seller and buyer entered into written covenants, expressed to be binding upon their successors and assigns, and to constitute “ covenants running with the land.” The seller, the Edgemere Company, having retained title to parcel B, covenanted to lay out through the center of that parcel a roadway, thirty feet wide, from the north line of parcel A, on the south, to Bay avenue on the north, and to maintain the road at its own cost and expense. It also covenanted to lay a sewer through the entire length of parcel B, giving to the owners of A the privilege of connecting therewith, each of the parties “ agreeing to maintain in proper repair the sewer laid across the land owned by each respectively.” Kaplan and Miller, the purchasers, on their side covenanted to lay out a private road, thirty feet wide, continuing the road on parcel B from the south line thereof through the center of parcel A to Ocean promenade, and thereafter to maintain the road. The contract contained this clause, “ the rights of way to be laid out as aforesaid to be and forever remain for the common use of the parties hereto, their successors and assigns, the tenants" and occupants of parcels A and B.” Thereafter the private road was laid out through parcels A and B, and termed Marvin street. Subsequently, the Edgemere Company conveyed to the defendant that lot of land in parcel B which the defendant contracted to sell to the plaintiff. The lot is bounded on the east by Marvin street, easements of passage in which are appurtenant to the lot. Do the covenants, entered into by the Edgemere Company and Kaplan and Miller, run with the land, to subject the lot in parcel B, which the plaintiff contracted to buy, to charges for the maintenance of the roadway and sewer pipe so far as they traverse the length of parcel B? If so, are the burdens imposed by the covenant either “ restrictions ” or “ easements?”

It has been held that the burdens and benefits of covenants to maintain fences on boundary lines between railroad rights of way and lands adjoining run with the land. (Blain v. Taylor, 19 Abb. Pr 228; Moxley v. N. J. & N. Y. R. R. Co., 21 N. Y. Supp. 347; 143 N. Y. 649; Satterly v. Erie R. R. Co., 113 App. Div. 462; Corwin v. N. Y. & Erie R. R. Co., 13 N. Y. 42.) The same is true of covenants between farmers to maintain line fences (Dey v. Prentice, 90 Hun, 27; Countryman v. Deck, 13 Abb. N. C. 110); of covenants by a railroad to maintain overhead crossings over its right of way for the benefit of adjoining owners who granted the easements in part (Aikin v. Albany, etc., R. R. Co., 26 Barb. 289; Post v. West Shore R. R. Co., 123 N. Y. 580); of covenants between adjoining owners binding them to share equally the expense of repairing or rebuilding a party wall (Mott v. Oppenheimer, 135 N. Y. 312; O’Neil v. Van Tassel, 137 N. Y. 297). In Holmes v. Buckley (1 Eq. Cas. Abr. 27) it was held that the successors in title of one who had granted a watercourse across his premises to another, and had covenanted from time to time to cleanse the same, must cleanse it at the behest of those who succeeded to title in the watercourse. This ' court, in Miller v. Clary (210 N. Y. 127,132), after stating the English rule to be that an affirmative or positive covenant does not run with the land, noted the exceptions to be covenants to repair fences on boundary lines; to repair private ways, and covenants in leases.” In a recent case this court considered the question whether covenants to maintain a private right of way ran with the land to bind abutting owners not parties to the covenant. (Levy v. Schnurmacher Constr. Corp., 255 N. Y. 83, 86.) Although the covenant was held not to be binding upon the particular litigant, the court said, “ such a covenant is a recognized exception to the general rule that covenants running with the land do not bind to the performance of affirmative acts.”

No easement imposes upon the owner of a servient tenement other than a passive duty; an obligation to maintain a wall, a fence or a private road is not an easement. (Goddard, The Law of Easements, p. 24; Jones on Easements, § 822; Gale on Easements, p. 426; Brill v. Brill, 108 N. Y. 511.) An obligation imposed upon a servient owner “ to do something for the benefit of the dominant tenement is not an easement, or, in other words, there can be no easement rendering it compulsory for the servient owner to do something.” (Goddard, p. 23.) I never heard of a servitude which had an obligation to repair.” (Per Lopes, J., in Stockport Highway Board v. Grant, 46 Law Times Rep. 388.) The grantor [of a way] is not bound to keep it in repair, if it be foundrous.” (Comyn, Digest, Chimin, D-6; Pomfret v. Ricroft, 1 Saund. 320, 322.) Apart from express contract the owner of a servient tenement is not bound to execute any repairs to insure its enjoyment. (Gale, supra, p. 426.) “ But special circumstances may impose upon him the duty to repair.” (Halsbury, Laws of Eng., vol. 11, p. 237.) “ Apt words ” may bind him. (Levy v. Schnurmacher Constr. Corp., supra.)

That a covenant to repair a right of way, which runs with the land, is not strictly an easement clearly appears from the foregoing authorities. Nevertheless, that such a covenant relates to and concerns an easement is no less clear. Indeed, in such a situation as we have in this instance, the covenant may seem so incidental and requisite to the easement that a purchaser warned by his contract of the latter might be deemed to have been fully advised of the former. We have here a private park one thousand feet long by two hundred feet wide; a roadway laid out lengthwise through its center; a subdivision of the park into small lots to which there would be no access except by the private road; a reference to a recorded grant of an easement, presumably giving legal status to a right of way, of which the laid out roadway was an outward and visible sign. Aware of these matters, a prospective purchaser might well reflect that, when all the lots were sold, none but lot owners would remain to repair and maintain the roadway; that lot owners must necessarily provide for its upkeep; that the burden of making repairs could not be more equitably distributed than through a requirement that each lot owner should maintain that part of the roadway which marked the frontage of his particular lot. Is it not, then, a reasonable interpretation of the phrase subject to restrictions and easements of record,” contained in the contract of sale to the plaintiff, that the conveyance agreed upon was subordinated not only to easements of record, but to such covenants in aid of easements and incidental thereto as the records might disclose? Under the circumstances known to the plaintiff did not the phrase convey this meaning to his mind? We think that these questions must be answered in the affirmative, and that the plaintiff contracted to take subject to the incumbrances of such covenants. In Blanck v. Sadlier (153 N. Y. 551, 555, 558) there will be found a decision upon an analogous state of facts which reasonably justifies the holding now to be made. There a purchaser of real estate contracted to buy “ subject to a mortgage of $16,000, to be at five per cent, three years to run.” The purchaser sought rescission because the records, subsequently examined, disclosed that the mortgage, to which the purchase was subject, contained a provision for its payment in gold coin of the United States of America of the present standard of weight and fineness.” It was held that rescission might not be had although the purchaser had not been made aware of the particular provision as to payment; that special clauses such as this were quite frequently found in mortgages; that the particular clause was an incident connected with an incumbrance on the property ” which might well have been apprehended; that it did not appear that the purchaser would not have bought had he known of the provision; that the value of the property was not seriously affected thereby. The same thing may be said here, that the purchaser, agreeing to buy subject to an easement, contracted to take subject to an incident ” of that incumbrance, viz., a covenant to repair, the imposition of which was obviously called for by the physical situation of the properties.

The judgment should be affirmed, with costs. (See 256 N. Y. 678.)

Cardozo, Ch. J., Pound, Crane, Lehman, O’Brien and Hubbs, JJ., concur.

Judgment affirmed.


text:
    Avalon Construction Corporation, Appellant, v. Kirch Holding Co., Inc., Respondent, Impleaded with Others.

      (Argued February 16, 1931;
    decided March 31, 1931.)

      Joseph J. Schwartz and Herman Schwartz for appellant.
    Plaintiff’s failure to advance the money did not constitute a breach of the contract, and the court erred in denying the motion to dismiss the counterclaim. (Noble v. Higgins, 214 App. Div. 135; Mawhinney v. Millbrook Woolen Mills, 231 N. Y. 290; Travelers Ins. Co. v. Pomerantz, 246 N. Y. 63; Rosenthal Paper Co. v. National Folding Box Co., 226 N. Y. 313; Giventer v. Antonofsky, 209 App. Div. 679; Shepman Mortgage & Realty Corp. v. Sussman, 147 App. Div. 25.) Defendant-respondent was not entitled to recover damages, because the agreement for the loan specifically provided for other consequences of appellant’s failure to make the loan. (Read v. Fox, 119 App. Div. 366; Mechanics Bank v. City of New York, 164 App. Div. 128.) The damages awarded exceed the amount actually sustained. The court erred in admitting evidence upon, and adopting improper measures of, damages. (B. E. & C. R. R. Co. v. N. Y., L. E. & W. R. R. Co., 123 N. Y. 316; Hoch v. Braxmar, 109 App. Div. 209; Mawhinney v. Millbrook Woolen Mills, 231 N. Y. 290; Travelers Ins. Co. v. Pomerantz, 246 N. Y. 63; Taggart v. Western Union Telegraph Co., 198 App. Div. 366; Chapman v. Fargo, 223 N. Y. 32; Reilly v. Connors, 65 App. Div. 470; Malex Realty Co. v. Hageman, 121 Misc. Rep. 676; Cuyler Realty Co. v. Teneo Co., 196 App. Div. 440; 233 N. Y. 647.)

      Arthur Morris for respondent.
    The agreement of the plaintiff to advance the $20,000 being part of another transaction and an inducing cause to the defendant to purchase the premises, the defendant is entitled to recover general damages for breach of contract. (Miller v. H. J. & M.I. Realty Corp., 188 N. Y. Supp. 446; Bohemian v. Northern, 120 N. Y. Supp. 134; Hoch v. Braxmar, 109 App. Div. 209; Tolchinsy v. Schiff, 47 Misc. Rep. 371; Griffin v. Calver, 16 N. Y. 489; Industrial v. Tod, 180 N. Y. 215; Wallingsford v. Kaiser, 191 N. Y. 392; Carleton v. Lombard, 19 App. Div. 297; 162 N. Y. 628; Meyer v. Kinney, 137 App. Div. 541; Ehrenworth v. Stuhmer, 229 N. Y. 210; Palmer v. Osband, 108 Misc. Rep. 313.)
   Kellogg, J.

Pursuant to the terms of a written contract, the plaintiff, on April 26th, 1928, conveyed certain premises to the defendant. The conveyance was expressly made subject to a first mortgage lien of $103,400, and a second mortgage lien of $23,750. The defendant conveyed and transferred to the plaintiff other premises and securities, in part consideration for the conveyance to it, so that, at valuations agreed upon, there remained unpaid upon the purchase price the sum of $7,048. It was agreed that the payment of this sum should be secured by a third mortgage upon the premises conveyed. Accordingly, a bond was executed and delivered by the defendant to the plaintiff, conditioned upon the payment by the former to the latter, not of $7,048, but of $27,048. This is explained by the mortgage securing the bond, which, in compliance with the contract of sale, contained a provision, whereby it was agreed that on April 11th, 1929, after the second mortgage became due, and the defendant had reduced the same by paying $3,750, the plaintiff would pay off the balance of $20,000, and cancel the mortgage. The purchase-money mortgage, given to secure a bond of $27,048, would then secure the payment to the plaintiff, not only of the balance of the purchase price but of the loan made to take up the second mortgage. Interest to become payable was to be reckoned on $7,048 until April 11th, 1929. Fifteen hundred dollars was to be paid upon the principal on that date. Thereafter, the $20,000 having been advanced, interest was to be reckoned on $25,548, the new principal thus to be created. This principal was to be paid off, at the rate of $1,500 quarter-annually, until April 11th, 1934, arrived, when the balance should become payable. The transaction thus agreed upon, if carried out, would have secured to the defendant the privilege of paying off $20,000 in installments during a period of six years rather than the whole sum within a year.

On the 11th of April, 1929, the defendant had reduced the second mortgage to the principal sum of $20,000 as agreed. Nevertheless, the plaintiff neglected and refused to advance that sum to take up the mortgage and cancel it. Foreclosure of that mortgage was then begun and the defendant was compelled to borrow money at various banking houses, on short term credits. With money so obtained, it paid off the second mortgage. Default having been made upon the plaintiff’s mortgage, this suit was begun to foreclose it and recover the sum of $5,548, at which sum the principal then stood. The defendant counterclaimed for damages accruing through the breach of the plaintiff’s promise to advance the sum of $20,000. In support of its reply thereto the plaintiff reasoned that the obligation to make the payment never matured, owing to the fact that the defendant had not reduced the first mortgage by paying installments of principal thereon of $2,200, falling due during the year 1928. It was a sufficient answer thereto that neither the mortgage nor the contract contained a term conditioning the plaintiff’s obligation to advance $20,000 upon a prior payment by the defendant of installments due on the first mortgage, and the trial court properly so found. The trial court proceeded to find further that the defendant’s damage through the plaintiff’s breach was $10,587.50; that after deducting from this sum with interest added the amount due on the plaintiff’s mortgage for principal and interest, there was a balance due the defendant of $5,321.12. Accordingly, it decreed a cancellation of the plaintiff’s mortgage and granted judgment for the defendant in the last-named amount.

When money is loaned, or goods sold on credit, and the debt is not paid when due, obviously the delay occasions the creditor nothing more than a temporary loss of the use of his money. For this loss, the law compensates the creditor with an award of no greater or other sum than legal interest. (Sedgwick on Damages, vol. 2, § 622-b; Williston on Contracts, vol. 3, § 1410.) Logically, a prospective borrower, whose contract for a loan has been breached, should stand in no better case. His money loss is likewise nothing else than the loss of its use for a limited period. However, the interest charge which would measure that loss merely cancels the interest charge which would measure the loss of the lender, had the loan been made, so that, if a balance be struck, no loss is found. Consequently, reason compels, and all authority supports the conclusion that a breach of contract to make a loan, standing by itself, involves no legal damage. (Williston on Contracts, vol. 3, § 1411; Sedgwick on Damages, vol. 2, § 622; Mayne on Damages, p. 175; Sutherland on Damages, vol. 1, § 76; Western Wagon & Property Co. v. West, L. R. [1892] 1 Ch. 271; South African Territories, Ltd., v. Wallington, L. R. [1897] 1 Q. B. 692; Manchester & Oldham Bank v. Cook & Co., 49 L. T. 674; Prehn v. Royal Bank of Liverpool, 21 Law Times, 830; Gooden v. Moses Bros., 99 Ala. 230; Turpie v. Lowe, 114 Ind. 37; Bixby-Theirson Lumber Co. v. Evans, 167 Ala. 431; New York Life Ins. Co. v. Pope, 139 Ky. 567; Thorp v. Bradley, 75 Iowa, 50.) Upon breach of a contract to loan money, if no special damage is shown, the recovery is only nominal. For though by the contract the plaintiff would receive the amount of the loan, it would be saddled with an obligation of exactly equal amount, so that the profit of the contract would be nothing.” (Sedgwick on Damages, supra. § 622.) Breach of a contract to lend money for whatever period at the current rate of interest, or at whatever rate of interest for no definite time, involves no legal damage, unless consequential damages are recoverable.” (Williston on Contracts, supra, § 1411.) The utmost liability of a person who breaches his contract to loan money, in the absence of notice of special circumstances, is for the increased interest the-other person was obliged to pay.” (Sutherland on Damages, supra.) As will be seen from these quotations, the law is kinder to a borrower than to a lender. The latter, for the loss of use of his money, through a delayed payment by his debtor, must content himself with interest. The prospective borrower, however, may recover the special damage which an inability to obtain the money, under the peculiar circumstance of his case, has actually caused him. (South African Territories, Ltd., v. Wallington, supra; Western Wagon & Property Co. v. West, supra. See, also, other cases cited.) In the first of the two cases last named, Lopes, L. J., said: “ The borrower may go into the market the next day after breach, and get the money without incurring any loss, or he may not be able to get it without suffering a loss, in which case the measure of the damages is the loss he suffers ” (p. 695).

The case of Duckworth v. Ewart (2 Hurlstone & Colt-man, English Exch. Rep. 129) possesses features of interest upon this issue. Rutledge was the owner of lands, subject to a building society mortgage for £4,300, and to a second mortgage of £350 owned by the defendant. He conveyed the same to the plaintiff in fee, subject to the building society mortgage, with power to mortgage the same for £5,000, pay off the building society mortgage, reimburse himself for advances made, pay up the defendant’s mortgage and turn over the surplus to Rutledge. The defendant covenanted that he would execute all assurances necessary for the plaintiff to execute his trust. The plaintiff expended £1,100 upon the property; procured an agreement from the building society to accept £4,100 upon its mortgage; and obtained the promise of a loan of £5,000 to be secured by a mortgage on the premises. The defendant refused to execute a writing consenting to the new mortgage. As a result the loan was refused; the building society foreclosed; and the property was sold for £4,510, a sum just sufficient to pay its mortgage. The court, in an opinion by Beam-well, B., said: Each claim is based on the same fallacy. What was the loss at the moment of the breach of contract? Let us see what difference it at once caused in the plaintiff’s position. Had the contract been fulfilled he would have had an estate subject to a mortgage of 5,000£, and in debt to him 200£, in all 5,200£, with other liabilities. By the breach of contract, he had an estate subject to a mortgage of 4,100£ and-in debt to him 1,100£, in all 5,200£, and subject to the same further liability. His position therefore was the same, less the expense of the abortive mortgage.” In our case, if the plaintiff had advanced the money, the defendant would have owned the identical property, subject to a first mortgage for $103,400, and a second mortgage for $25,548. Instead, because of the breach, he owns the property subject to the same first mortgage of $103,400, a second mortgage of $5,548, and owes the banks $20,000. His position is the same except for actual expenses paid. Nor has be lost his property by foreclosure as in Duckworth v. Ewart (supra). There Baron Beamwell put this case and made this comment: The present case seems to me the same as though I were to say, ' I will always give you twenty shillings for a sovereign/ and the prornissee sends me one by a child: I break my promise, the child returns with the sovereign, shows it to other children, and it is stolen or lost. Should I be liable? Certainly not.” So here the defendant has the same property; he owes in connection therewith the same indebtedness; therefore, instead of having twenty shillings he has a sovereign; nor has the sovereign been lost as in the case put by Baron Beamwell.

The court, as one base for its conclusion that the defendant had suffered a loss of $10,587.50, through the plaintiff’s breach of promise to make the loan, found that the defendant’s real estate had sustained, in consequence thereof, a shrinkage in value of $10,000. The property now has mortgages against it of $108,948. Had the loan been made, the mortgages against it would have stood at $128,948. That it would be more valuable under the latter condition than it is under the former; that the intrinsic value of any real estate is affected by the presence or absence of mortgages; these propositions are so unthinkable that reasons to refute them require no expression. As an alternative base for the same conclusion of loss, the court found that expenses totalling more than $10,000 had been incurred, or must be, to make the defendant whole.

One element of the alternative base was an item of $6,642.48, the estimated cost of obtaining a loan of $25,548, to take up the plaintiff’s third mortgage, the $20,000 loan obtained by the defendant at the banks, and to place a second mortgage upon the premises for the total amount. The expense was estimated on the basis of a twenty-five per cent bonus for obtaining the loan and a one per cent charge for brokerage. The assumption that there can be a uniform market price for the procurement of a second mortgage is an obvious fallacy. The bonus necessary to be paid, even to unscrupulous usurers, would doubtless vary in every instance, depending upon the intrinsic value of the property, the extent of prior hens, and the urgency of the borrower’s needs. This was recognized even by the witnesses for the defendant. More than that, the defendant has never been required to make the payment. Nor is there any likelihood that it will be forced to make it through resort to usurers to obtain a loan. Already banks have loaned it the necessary $20,000 without other charge than interest; have renewed the obligations; and, so far as the evidence shows, will renew them indefinitely. If the situation changes and it becomes reasonably necessary for the defendant to raise money through the instrumentality of a further bond and mortgage, we are not prepared to say that a necessary payment made to obtain such a loan will not be recoverable herein.

Another item, reckoned in the bill of expense occasioned the defendant, is an item of $3,000 for legal services. This item chiefly consists of charges made or to be made by the defendant’s present attorney for services in conducting this litigation. The legal charges which the plaintiff must pay to the defendant in this action, if any, will be comprehended in the defendant’s bill of costs. There is no basis for including them in the damages which the defendant may recover. Other items appearing in the expense account may or may not be recoverable. Upon a new trial the defendant’s recovery should be confined to expenses naturally and necessarily resulting from the plaintiff’s breach of its promise.

The judgment of the Appellate Division and that of the Special Term should be reversed and a new trial granted, with costs to abide the event.

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

Judgments reversed, etc.


author: Pound, J.

text:
    In the Matter of the Claim of Peter Anderson, Respondent, against Babcock & Wilcox Co. et al., Appellants. Carl Pierleoni et al., Respondents. The State Industrial Board et al., Respondents.
    (Argued March 24, 1931;
    decided April 7, 1931.)

      William B. Davis and E. C. Sherwood for appellants.
    The disability was the result of the accident of December 3, 1926, and there was no other accident. (Matter of Phillips v. Holmes Express Co., 190 App. Div. 336; 229 N. Y. 527; Blackley v. Niagara Roofing Co., 225 App. Div. 432; Herald v. Cohen & Simansky, 186 App. Div. 933.)

      Walter L. Glenney for Carl Pierleoni et al., Respondents.
    The finding that the second accident was the proximate cause of the later disability is supported by the evidence. (Matter of State Treasurer v. U. S. T. Co., 233 N. Y. 202; Matter of Carroll v. Knickerbocker Ice Co., 218 N. Y. 435; Blackley v. Niagara Roofing Co., 225 App. Div. 432; Phillips v. Holmes Express Co., 190 App. Div. 336; Herald v. Cohen & Simansky, 186 App. Div. 933.)

      John J. Bennett, Jr., Attorney-General {E. C. Aiken of counsel), for State Industrial Board, respondent.
   Pound, J.

On December 3, 1926, claimant, while in the employ of Carl Pierleoni, fell from a scaffold, striking his left hip on the ground. The attending physician reported contusion of left hip and left ankle. An X-ray report dated January 31, 1927, showed: Fracture of the ischium bone right near its junction with the pubic bone of the left side — fragments are in good position and there is callus present.”

On March 4, 1927, a second X-ray report showed: Fragments are in good position and there is a small amount of callus present at the site of fracture. There is also good union.”

Claimant was attended by Dr. Schultz, who testified at a hearing held May 17, 1927, that he thought that the claimant was able to work about the middle of March, and he further testified: It seems to me that the condition of the pelvis has healed, because the last X-ray taken showed plenty of callus.”

After April, 1927, the claimant did light work in a restaurant, and for seven weeks prior to August 8, 1927, he had been working for Babcock & Wilcox Co., as a laborer, doing regular laboring work. On August 8, 1927, he and four or five other men were lifting a piece of timber weighing about 1,000 pounds, when he felt a crack in his left hip and stopped work immediately and reported the accident to his foreman. His description of the accident was: “ I was lifting some heavy timber, loading on a truck, and I felt a crack in the left hip, a bad crack, so I had to stop at once and went to the doctor.”

The attending physician, Dr. Schultz, testified that merely by lifting one cannot break a bone, not even separate a bone that has been fractured, if it was properly healed. He expressed the belief that the disability after the second fracture or separation was the result of the original fracture, which might have separated at any time, even as a result of taking a quick step.

The question is thus presented of one accident or two. The award has been against the second employer, Babcock & Wilcox Co., and its insurance carrier alone. They contend that the evidence points conclusively to a finding that the second injury was the direct result of the earlier disability; that there was no other accident than the first, and that the award should be against the first employer, Pierleoni, and his insurance carrier.

In Matter of Phillips v. Holmes Express Co. (190 App. Div. 336; affd., 229 N. Y. 527) claimant had sustained a fracture of his arm. About four months thereafter as the result of attempting to crank an automobile the fracture parted. The court held that there was no evidence of an accident on the later date and that the first insurer should bear the entire liability. Here it would seem that the evidence points conclusively to two accidents; that the bones merely parted does not appear. The healing and union were partial as was apparent from the evidence as to the crack felt in the hip at the same place where the fracture had been. The attending physician was misled. Union was there but not a good union. The lifting of the heavy timber produced an accidental result, an unexpected happening, i. e., a new break of the partially united bones. Obviously that result would not have happened had it not been for the first injury but it was immediately due to strain caused by heavy lifting. The case was that of a man, not in good sound condition, taken as he was by the employer and insurer.

On the evidence the present disability exists by reason of the two accidents and the compensation should be equally apportioned between the two insurers. Unjust it is that the second insurer should bear the entire liability when the second accident was related in large measure to the first. No less unjust it is that the first insurer should bear the entire liability if it appears that without the second accident an earlier recovery might have been had. In no event does the evidence sustain an award against the second insurer alone.

The order should be reversed, without costs, and the case remitted to the Industrial Board for further consideration and for additional findings as to the cause of the present injury, and the liability therefor.

Cardozo, Ch. J., Crane, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur.

Ordered accordingly.