text:
    Gustavus T. Kirby, Respondent, v. Brown, Wheelock: Harris, Vought & Co., Inc., Appellant.

      (Argued November 5, 1930;
    decided January 6, 1931.)

      Nathan L. Miller and H. Bartow Farr for appellant.
    The course of conduct pursued by defendant, in good faith, was in complete compliance with its instructions and undertaking. (Pickett v. Pearsons, 17 Vt. 470; Mechem Agency, § 1266; 2 C. J. § 374.) It was the duty of the defendant to secure the best price possible for its employer. It could not validly agree to secure the property for a purchaser at the lowest price possible. To be valid the plaintiff’s authority to Yought must be construed to empower him to match the highest bid. That could only be done after the other bids were opened. (Sirkin v. Fourteenth St. Store, 124 App. Div. 384; Schank v. Schuchman, 212 N. Y. 352; Morgan Munition Supply Co. v. Studebaker Co., 226 N. Y. 94; Empire State Ins. Co. v. American Central Ins. Co., 138 N. Y. 446; Duryee v. Lester, 75 N. Y. 442; Jacobs v. Beyer, 141 App. Div. 49.)

      Hugh S. Williamson, Hiram Thomas and Edward A. Craighill, Jr., for respondent.
    There is evidence to support the conclusion that defendant’s breach of its agreement to submit plaintiff’s bid was the cause of plaintiff’s failure to become the purchaser of the school property.
      (Ainsworth v. Backus, 5 Hun, 414; Small v. Houseman, 208 N. Y. 115.) Plaintiff is entitled to recover whether or not defendant’s default was a mere act of omission and resulted merely in withholding a benefit from plaintiff. Defendant’s default was not a mere omission and its result was more than a mere withholding of a benefit. (Moch Co. v. Rensselaer Water Co., 247 N. Y. 160; Glanzer v. Shepard, 233 N. Y. 236; Siegel v. Spear & Co., 234 N. Y. 479; Ainsworth v. Backus, 5 Hun, 414; 1 Williston Contracts, § 138; Boyce v. Greeley Square Hotel Co., 228 N. Y. 106; Rich v. N. Y. C. R. R. Co., 87 N. Y. 382; Byxbie v. Wood, 24 N. Y. 607; Neftel v. Lightstone, 77 N. Y. 96; People v. Wood, 121 N. Y. 522; Goodwin v. Griffis, 88 N. Y. 629; Chaplin v. Hicks, L. R. [1911] 2 K. B. Div. 786.)
   Kellogg, J.

The plaintiff was the owner of the frontage on the east side of Madison avenue, between Fifty-sixth street and Fifty-seventh street; of a frontage on the north side of Fifty-sixth street, extending easterly from Madison 125 feet; of a frontage on the south side of Fifty-seventh street, extending easterly from Madison 75 feet. Miss Chapin’s School for Girls owned a frontage on Fifty-seventh street, extending easterly from the plaintiff’s lot 50 feet. The school property had peculiar value for the plaintiff, since, by its acquisition, he would become the owner of a rectangular block, having a frontage on both Fifty-seventh and Fifty-sixth streets of 125 feet, and a frontage of 200 feet on Madison. When the school property was offered for sale, no written bid was submitted by the plaintiff, and consequently the property was sold to others. The plaintiff’s failure to bid, and the loss of an advantageous purchase, is attributed to the defendant, a real estate broker, and its failure to perform an alleged undertaking made by it to present an offer for the property and purchase it for the plaintiff. Upon the theory that such an agreement was made and broken, damages have been awarded to the plaintiff as compensation for the loss of a prospective increase in value of his adjoining properties.

The trustees of the Chapin School in November, 1925, employed the defendant, Brown, Wheelock: Harris, Vought & Co., Inc., to make a sale of their school property on Fifty-seventh street. Vought, a director of the defendant, informed the plaintiff, Kirby, of the probable sale. As stated by the complaint, Kirby told him that he desired the property and would pay therefor as high a price as any other bidder.” Vought thereafter informed Kirby that the school trustees would not accept an offer for the property without giving plaintiff an opportunity to meet the same.”

George E. Roosevelt, chairman of a committee of the school board, on January 13, 1926, gave written notice to the defendant and others that, on January 18th, 1926, at three p. m., the committee would receive written bids for the property. The Roosevelt letter specifies that the lowest bid must equal $550,000; that the school will retain possession until July 1st, 1928; that the committee “ reserves the right to reject any offer.” The school then occupied not only 32 and 34 East Fifty-seventh street, but two floors in the Ehrich Building, adjoining on the east, and numbered 36 East Fifty-seventh street. The letter points out this fact and states that any arrangements by which the school can continue to occupy the necessary additional space in a convenient manner will be given consideration in fixing upon the offer that will be accepted.”

On being informed by Vought of the contents of the Roosevelt letter, the plaintiff, Kirby, made a draft of a proposed letter to the defendant and handed it to Vought. This letter sets forth the fact that Kirby had been in communication with Ehrich, the lessee of 36 East Fifty-seventh street; that Ehrich had purchased the lease for $30,000; that he would sell it for $55,000 plus $10,000; that if Kirby would pay this sum Ehrich would make no bid for the school property. Kirby then states that he is prepared to make this offer.” He will purchase the leasehold from Ehrich for as little as possible, not less than $55,000; he will enter into a lease with the Chapin School for the two floors until July 1, 1928. The price he will bid is thus stated: “ That from the amount which is to be considered as the purchase price of the Chapin School property there be deducted the amount of the difference between the amount which will have to be paid to Mr. Ehrich (perhaps as much as $65,000) and the $30,000 paid by Mr. Ehrich for such leasehold.” It will be noted that the so-called “ offer ” is indefinite in two particulars. It fails to state the precise sum which Kirby will pay for the school property. It fails to name the rental which the school must pay Kirby for the two floors in the Ehrich Building.

The defendant, through Vought, in consideration of a commission which the said Trustees agreed to pay,” as alleged in the complaint, promised the plaintiff, Kirby, “ to state to the Committee of the Trustees of Miss Chap-in’s School for Girls, at the office of said Roosevelt, before three o’clock on January 18th, 1926, that plaintiff desired to purchase the aforesaid school property on terms more favorable to the school than any other bid received, and to submit to the said committee within the aforesaid time and at the aforesaid place, a bid on behalf of plaintiff for the purchase of the aforesaid school property in form and substance acceptable to said Committee.” The complaint also alleges as follows: “ Relying upon the aforesaid, plaintiff refrained from presenting directly to the committee of the said Trustees any other bid for the purchase of the property.”

The defendant, by Yought, attended the meeting of the committee at three o’clock on January 18th, but, as the complaint alleges, “ neglected to present to the said Committee any bid whatsoever in behalf of plaintiff, or to state that plaintiff desired to purchase the aforesaid school property on terms more favorable to the school than any other bid received.” At the meeting three bids were received and opened by the committee: one for $560,000; one for $561,000; and one for $565,000. Thereafter Vought informed the plaintiff that he would have to pay for the property from $560,000 to $565,000; that the sale would be completed on the following day, January 19th, when the committee would hold a meeting to make decision. On the day following the meeting was held. The committee then refused to receive any bid from Vought for the plaintiff or to permit the plaintiff to make a bid in his own behalf. It thereupon accepted the bid for $560,000.

It will be observed that the allegations of the complaint in relation to the defendant’s agreement with the plaintiff, which we have stated, set up promises by the defendant which, if not inconsistent, are at least diverse in character. The defendant promised (1) to state to the committee prior to the opening of bids that plaintiff desired to purchase the aforesaid school property on terms more favorable to the school than any other bid received; ” and (2) to submit to the said committee within the aforesaid time and at the aforesaid place, a bid on behalf of plaintiff for the purchase of the aforesaid school property in form and substance acceptable to said Committee.”

If it were the fact that the defendant ever agreed to formulate a definite bid and submit it to the committee before the opening, interesting questions, relating to consideration, promissory estoppel, and the validity of an alleged undertaking made by the defendant, an agent of the Chapin School, the seller, to bid in the property for the plaintiff, a prospective buyer, might have arisen. However, the record is devoid of proof that the defendant ever so promised. Therefore, the second allegation, to the effect that the defendant agreed to submit to the said committee ” a definite bid “ in form and substance acceptable to said committee ” may be wholly disregarded.

The plaintiff, in his complaint, says that he informed Vought, in reference to buying the school property, “ that he would pay therefor as high a price as any other bidder; ” that thereafter Vought informed him that no offer would be accepted by the trustees “ without giving the plaintiff an opportunity to meet the same.” In his draft letter to the defendant, containing his “ best and fairest offer ” to purchase, he states that he will pay a sum to be determined by deducting from “ the amount which is to be considered as the purchase price of the Chapin School property ” an appropriate sum for the Ehrich lease, to be ascertained in a way specified. No figure naming a definite sum which plaintiff is willing to pay is given. In handing a copy of the draft letter to Vought, the plaintiff said: “ to meet the situation, I have drawn up here a letter which embodies my ideas of the whole transaction; ” “ this is my proposition; ” “ now, you see Vought, I have tried to meet the entire situation in this letter.” He testifies that he said to Vought, in reference to the Ehrich payments: “Now it seems to me only fair that from whatever I have to pay for the school property, that should be deducted; ” that he said further “ but you are to go there, you are to buy the property for me at the best price you can get it for and deliver to the trustees my terms and conditions relative to the property they must have and have demanded for school purposes.” Vought said: “ Mr. Roosevelt has promised that I may be personally present on Monday afternoon at the time the offers are to be opened; ” “I know what you want and I will buy the property for you for the least possible, under the conditions, set down in your letter.” After the meeting the plaintiff, complaining of Vought, said to the trustees: “ He was to buy the property for as much as any one else would pay for it.” In November there had been a conversation between Roosevelt and Vought which was reported by the latter to the plaintiff to have been that the trustees would give Mr. Vought a right to submit a bid for me, before they closed with anybody else.” Accepting at its face value every line of testimony given on the plaintiff’s behalf, there is not a word of proof that the plaintiff ever named a specific sum which he would pay for the property; that Vought ever agreed to formulate a definite offer for the plaintiff; that he was ever asked thus to formulate a bid; that he ever agreed to present a bid, prior to the meeting, which should name a definite price. The complaint, the letters, and the testimony tell but one story: Kirby, from the beginning, labored under the impression that, in order to get the property, it was unnecessary for him to make a bid naming a specific sum; that it was sufficient if he agreed to meet or better any other bid made. Accordingly he directed Vought personally to attend the meeting of the committee; to tell the committee that he, Kirby, would pay a price ascertainable by deducting from the highest bid made the amount Kirby had been required to offer Ehrich for the lease, less the amount Ehrich had paid therefor. Hence it is, that the theory of the complaint, that the defendant undertook and neglected to formulate and present a definite bid, must be abandoned.

The plaintiff’s only reliance must, therefore, be that the defendant promised and neglected “ to state ” to the school committee, “ before three o’clock on January 18th, 1926, that plaintiff desired to purchase the aforesaid school property on terms more favorable to the school than any other bid received.” Assuming that such were the fact, and that the defendant did breach a promise so made, nevertheless the plaintiff could have no recovery. Clearly a statement that plaintiff would offer terms more favorable to the school than any other bid received ” is not a statement of a present bid; it depends for definiteness upon a disclosure of terms contained in other bids yet to be opened; it becomes definite, and, as such, a genuine bid, only when the opening of bids is already a past event. To all intents and purposes, therefore, it is the equivalent of a bid made subsequently to the opening. Now, the plaintiff never was deprived of an opportunity to submit a bid after the opening. The committee had reserved the power to reject any offer; ” it adjourned, after the opening, for twenty-four hours to consider its decision. Meanwhile, Vought reported to the plaintiff that a bid of $565,000 had been submitted, and that the plaintiff would have to pay that sum. Kirby contented himself with saying, Well, that is a whale of a price, but if I have got to pay it, I have got to pay it.” He said that he would immediately attend before the committee, and, in the matter of a down payment, he would be prepared to pay any amount which they may demand.” He did attend within the twenty-four hour interim, but his bid was rejected. The committee said that they regarded it as unfair to accept his bid after the other bids had been opened. They would have considered it as equally unfair to accept a prior offer of terms more favorable to the school than any other bid,” and would have rejected such an offer. Therefore, the plaintiff was not injured by the defendant’s failure to present to the committee, prior to the opening, a statement that the plaintiff would make such a bid. It was the position of the trial judge, in his charge to the jury, that the plaintiff’s case depended upon the making of a promise by the defendant to formulate. or make up a bid of the plaintiff to comply with the terms of the invitation to bid.” It was the position of plaintiff’s counsel on the argument here that a recovery might not be sustained on the theory that the defendant breached its promise to state to the committee prior to the meeting that the plaintiff would offer “ terms more favorable to the school than any other bid.” Such being the only promise which the proof shows was made by the defendant, the recovery cannot be sustained.

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

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

Judgment accordingly.


source: Caselaw Access Project

author: Cardozo, Ch. J.

license: Public Domain

text:
    East End Trust Company of the City of Harrisburg, Pennsylvania, Respondent, v. Anna Otten, Appellant.
    (Submitted November 26, 1930;
    decided January 6, 1931.)

      Raphael H. Weissman and Jacob J. Klansky for appellant.
    Section 223 of the Banking Law, read together with section 1363 of the Civil Practice Act, does not warrant the appointment by the Supreme Court of the State of New York of a foreign trust company as ancillary committee of. real property situated in this State and belonging to a foreign incompetent. (Matter of Provident Life Ins. Co., 171 N. Y. Supp. 431; Matter of Rhoades, 184 App. Div. 658; Matter of Avery, 45 Misc. Rep. 529; Matter of Tiffany, 179 N. Y. 455; Matter of Neally, 26 How. Pr. 402; Seitz Estates, Inc., v. Seitz, 226 App. Div. 373; Chelten Trust Co. v. National Automatic Press Co., 216 App. Div. 380.)

      Emil Kreis for respondent.
    Section 1363 of the Civil Practice Act does not differentiate between individuals and corporate committees, curators or guardians. (Chelten Trust Co. v. National Automatic Press Co., 216 App. Div. 380; Matter of Curtiss, 134 App. Div. 547; 197 N. Y. 583; Matter of Fidelity Trust Co., 27 Misc. Rep. 118; Matter of Bartelme, 34 Misc. Rep. 131; Matter of Rollo, 152 App. Div. 165.)
   Cardozo, Ch. J.

Submission of a controversy upon agreed facts under Civil Practice Act, section 546.

By a decree of the Court of Common Pleas of Dauphin county, Pennsylvania, plaintiff, a trust company incorporated under the laws of that State, was appointed committee of the property of Minnie Smith, an incompetent.

By an order of the Supreme Court of New York, the trust company was appointed ancillary committee of the property of the incompetent located in this State. Simultaneously with its appointment, the committee submitted a petition for leave to sell and convey an undivided interest in real property in Brooklyn. The petition being granted, a contract of sale followed. The defendant, the assignee of the purchaser, refused to accept the title after receiving the report of a title company refusing to insure it. The objection is that the appointment of a foreign trust company as committee of a lunatic is forbidden by the statute.

Civil Practice Act, section 1.363, makes the following provision as to the appointment of an ancillary committee of the estate of an incompetent: Where the person alleged to be incompetent resides without the state, and a committee, curator or guardian of Ms property, by whatever name such officer may be designated, has been duly appointed pursuant to the laws of any other state, territory or country where he resides, the court, in its discretion, may make an order appointing the foreign committee, curator or guardian, the committee of all or of a particular portion of the property of the incompetent person, within the state, on his giving such security for the discharge of his trust as the court thinks proper.”

This section is a re-enactment of Code of Civil Procedure, section 2326, wMch in its substance has been part of the statutory law of the State since 1880 (Laws of 1880, vol. 2, ch. 178, § 2326; Laws of 1898, ch. 294).

Until the adoption of the Code provision, the ruling of the courts had been that a committee would not be appointed by the courts of this State without an independent inquisition into the fact of lunacy, even though lunacy had already been adjudged in the foreign jurisdiction (Matter of Neally, 26 How. Pr. 402; Matter of Payn, 8 How. Pr. 220, 223; Matter of Perkins, 2 Johns. Ch. 124). Doubt was expressed whether the foreign committee would ever be appointed even after a new inqmsition and a new finding of lunacy unless such committee was a resident (Matter of Neally, supra).

The purpose served by the enactment of section 2326 of the Code was thus the avoidance of the requirement that there be a second inquisition and the concession of power to dispense with the requirement of residence. The section had nothing to do, at least in the purpose of its enactment, with the defimtion of the powers of banking corporations.

In tMs state of the law, the Legislature enacted section 223 of the Banking Law (Cons. Laws, ch. 2), which provides as follows: “ No corporation other than a trust company orgamzed under the laws of this state shall have or exercise in this state the power to receive deposits of money, securities or other personal property from any person or corporation in trust, or have or exercise in this state any of the power specified in subdivisions one, four, five, six, seven and eight of section one hundred eighty-five of this article.”

Among the powers thus excluded are those conferred upon domestic trust companies by section 185, subdivision 6, to be appointed and to act under the order or appointment of any court of competent jurisdiction as trustee, guardian, receiver or committee of the estate of a lunatic, idiot, person of unsound mind or habitual drunkard.”

We think the conclusion inescapable that section 223 of the Banking Law establishes an exception to the general power of appointment conferred upon the courts by the successive codes of practice (Matter of Murray Hill Bank, 153 N. Y. 199, 211). The conclusion is in accord with the rule of construction, repeatedly applied, whereby what is special or particular in the later of two statutes supersedes as an exception whatever in the earlier statute is unlimited or general (Matter of Murray Hill Bank, supra). This rule of construction, when applied to the case at hand, gives effect to the presumable object of the law as well as to its letter. The Legislature had no thought, in enacting section 2326 of the Code and the equivalent provision in the present practice act, that what it was doing had any bearing upon the exercise of corporate powers by moneyed corporations. Its primary thought was with natural persons and the consequent removal of incapacities dependent upon residence. This is seen in its use of the pronouns “ he ” and “ his ” in describing the committee. We do not mean to say that the words so employed, if unrestrained by other statutes, would not be extended by construction to cover persons of every kind, artificial as well as natural (Gen. Constr. Law; Cons. Laws, ch. 22, § 22). Even so, construction will not be pressed to extend the scope of a statute beyond the letter of its content when the result will be collision with the prohibition of another statute covering by express provision the field of the extension.

Another provision of section 223 of the Banking Law reinforces this conclusion, if reinforcement be required. A clause of that section is to the effect that a foreign trust company may be appointed executor or trustee under a will, provided trust companies of this State are permitted to act as executors or trustees in the State where such foreign corporation had its domicile, and the foreign corporation shall have executed and filed with the Superintendent of Banks a written instrument appointing the Superintendent its true and lawful attorney upon whom process may be served in any action or proceeding affecting the estate and shall have also filed with the Superintendent a copy of its charter. One finds it hard to believe, with all these limitations upon the appointment of an executor, that the appointment of á foreign committee was to be left without safeguard or restriction.

If section 223 of the Banking Law prohibits the appointment, the question suggests itself whether the appointment is void, with the result that a conveyance by the committee is without legal effect, or erroneous and voidable, with the result that the acts of the committee stand till the appointment is revoked. We state the question merely to exclude it from the scope of our decision, for we are relieved of the necessity of deciding it by the stipulation of the parties. The controversy was submitted to the Appellate Division upon an agreed statement which defines the question to be answered. That question is stated to be whether the provisions of the Banking Law prohibit the appointment of a foreign trust company as ancillary committee. If the question is answered in the negative, the stipulation is that there shall be judgment for the plaintiff; if answered in the affirmative, there is to be judgment for the defendant.

The judgment of the Appellate Division should be reversed, and judgment directed in favor of the defendant in accordance with the stipulation, without costs in the Appellate Division or in this court.

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

Judgment accordingly.


author: Crane, J.

text:
    Syracuse Intercepting Sewer Board, Respondent, v. Fidelity and Deposit Company of Maryland, Appellant.

      (Argued December 1, 1930;
    decided January 6, 1931.)

      Frank H. Hiscock for appellant.
    Plaintiff was bound to furnish the contractor with a right of way which was necessary for the completion of its contract and whether the contractor was unable to complete its contract by reason of plaintiff’s failure to furnish such right of way was a question of fact for the jury, and the trial court’s refusal to so hold was error. Plaintiff could not declare an abandonment by the contractor when the failure of the latter to proceed was due to some default of the plaintiff and when it failed to furnish necessary access to the creek it could not insist that the contractor should incur liability as a trespasser on the agreement of plaintiff that it would indemnify it against liability damages. (Fulton L., H. & P. Co. v. State of New York., 200 N. Y. 400; Mott v. Mott, 68 N. Y. 246; Van Winkle v. Van Winkle, 184 N. Y. 193; Dolan v. Rodgers, 149 N. Y. 489; Traynor v. Mutaugh, 10 App. Div. 627; 159 N. Y. 545; Porter v. Blair, 83 Fed. Rep. 104; French v. City of Syracuse, 18 Misc. Rep. 278; Mansfield v. N. Y. C. & H. R. R. R. Co., 102 N. Y. 205; Mains v. City of New York, 30 Misc. Rep. 384; Allamon v. Mayor of Albany, 43 Barb. 33; City of New York v. Continental Asphalt Co., 218 N. Y. 685.) The action of plaintiff in rejecting the bid of the lowest bidder for the completion of the work left unfinished by the contractor and in awarding the contract to another bidder, whose bid was higher, was absolutely illegal, and incompetent evidence was received by the court in the attempt to sustain this action. This illegality bars a recovery against the surety. (Dickinson v. City of Poughkeepsie, 75 N. Y. 65; People v. Gleason, 121 N. Y. 631; McDonald v. Mayor, 68 N. Y. 23; Braddy v. Mayor, 20 N. Y. 312; Malloy v. City of New Rochelle, 198 N. Y. 402.)

      Frank P. Malpass, Corporation Counsel (James C. Tormey and A. M. Beach of counsel), for respondent.
    The contractor unreasonably and wrongfully delayed and subsequently abandoned work on its contract, without cause or justification and the plaintiff in formally declaring the contract abandoned acted rightfully and within the provisions of the contract pertaining thereto. (Powers v. City of Yonkers, 114 N. Y. 145; Hogeboom, Inc., v. State of New York, 124 Misc. Rep. 559; O’Donnell v. City of Syracuse, 184 N. Y. 1; Loomis v. Canal Appraisers, 33 N. Y. 461; Danes v. State, 219 N. Y. 67; St. Paul & Pac. R. R. Co. v. Schurmeir, 74 U. S. 272; Fulton Light, Heat & Power Co. v. New York, 200 N. Y. 400; Mack v. State, 122 Misc. Rep. 86; 211 App. Div. 825; Barr & Co. v. New York, 127 Misc. Rep. 75; People v. Karr, 240 N. Y. 348; People v. Rockwood, 126 Misc. Rep. 544; McQuillan on Municipal Corp. [2d ed.] § 2075; Mains v. City of New York, 30 Misc. Rep. 384; 52 App. Div. 343; 166 N. Y. 618.) The plaintiff in rejecting the lowest bid was in the exercise of a discretionary act, judicial in its nature and such act is not, in the absence of fraud, reviewable by the courts. (McQuillan on Municipal Corporations [2d ed.], § 1330; Irving v. Mayor, 131 N. Y. 133; East River Gas Light Co. v. Donnelly, 93 N. Y. 557; Talcott v. City of Buffalo, 125 N. Y. 280; Gilmore v. City of Utica, 131 N. Y. 26; Martens & Co. v. City of Syracuse, 183 App. Div. 622; People ex rel. Belden v. Contracting Board, 27 N. Y. 378; Haecker Co. v. City of Buffalo, 176 N. Y. Supp. 642; Matter of City of New York, 217 N. Y. 45; Campbell v. City of New York, 244 N. Y. 317;
      McCutcheon v. Terminal Station Comm., 217 N. Y. 127, Adams v. Ives, 63 N. Y. 650; Matter of Marsh, 83 N. Y. 431.) The supplemental agreement made in completing the contract which the original contractor had abandoned was authorized and made pursuant to the terms and provisions thereof to which defendant must be deemed to have consented. Moreover, the change provided for therein was a mere change in detail and such change actually lessened the cost of completion and defendant was properly held liable therefor. (Garrison v. Crenshaw Co., 198 App. Div. 1020; United States v. American Surety Co., 200 U. S. 197; Matter of Leeds, 53 N. Y. 400; Fleming v. Village of Suspension Bridge, 92 N. Y. 368; Smith v. Molleson, 148 N. Y. 241; Elmohar Co. v. Peoples Surety Co., 217 N. Y. 289; Newark v. Leary Const. Co., 118 Misc. Rep. 622; Middleton v. Ætna Ind. Co., 121 App. Div. 589; Zimmerman v. Jourgensen, 70 Hun, 222; 144 N. Y. 656; Riviera Realty Co. v. Illinois Surety Co., 165 App. Div. 114; United States v. McMullen, 222 U. S. 460; McKegney v. Illinois Surety Co., 180 App. Div. 507.)
   Crane, J.

The Fidelity and Deposit Company of Maryland gave a $50,000 bond to insure the faithful performance of a contract which the Alto Construction Company made with the Syracuse Intercepting Sewer Board to finish and complete the improvement of Onondaga creek, in the city of Syracuse. By chapter 2 of the Laws of 1798, p. 296, re-enacted by chapter 186 of the Laws of 1801, section 34, and chapter 47 of the Revised Laws of 1813 (Vol. 2, p.'285), Onondaga creek was declared to be a public highway. The Syracuse Intercepting Sewer Board was created by chapter 356 of the Laws of 1907, with power to regulate and improve the channels of Onondaga creek and Harbor brook to an extent necessary for the operation of its sewer systems. The right was given to it of entering upon and using any public street, road or highway for the purpose. of constructing such sewers, the streets to be restored after the improvement had been made. Shortly after its creation, and in 1909, the board entered into a contract, known as contract No. 8, with one Nicholas D. Pound. A later contract was made with the Alto Construction Company on June 18, 1913, known as contract No. 20, to complete the original contract No. 8, which had been unfinished by Pound and others. The work called for by the contract extended for two and one-half miles, a mile of which the Alto Construction Company had constructed up to January 17, 1914, when it closed down work. With the coming of the spring and summer of 1914, the board made repeated demands upon the company to proceed with the work, as its time limit was twenty months from June, 1913. The company, claiming that it could not gain possession of certain rights of way, notified the plaintiff by letter, August 14, 1914, that it ceased work under the contract. On September second the plaintiff passed a resolution, formally declaring the contract abandoned and proceeded to call for bids for the unfinished work. John Young, of Syracuse, bid $167,770; was awarded the contract, and completed the improvement. The excess cost of completing the work over and above the price fixed in the contract with the Alto Construction Company is the amount demanded in this action from the Fidelity Deposit Company of Maryland, which had given the bond for faithful performance by the contractor.

The judgment recovered by the plaintiff is here challenged on two grounds: First, that there was a question of fact as to the justifiable abandonment by the Alto Construction Company; second, that the unfinished work was not relet to the lowest bidder or, at least, this also should have been left to the jury as a question of fact. The trial judge virtually directed a verdict for the plaintiff upon these two points, and left to the jury solely the question of damage. As to this, the amount was also challenged in a particular to be hereafter mentioned.

What is the right of way about which the Alto Construction Company complained? The corporation counsel in reply to the company’s letter of August 14, above mentioned, hastened to assure the Alto Construction Company that the city of Syracuse owned the right of way over which the contract extended, and would defend all actions or proceedings which might be brought against the contractor and would save it harmless. We can find nothing in the record which questions the right of Syracuse or the plaintiff Board to improve or work Onondaga creek for a sewer system. In fact, the evidence shows that the right of way mentioned or referred to by-the contractor consisted of rights or privileges over land adjoining the banks of the creek. We gather that the contractor may have thought that it could use these lands in the progress of the work. There is nothing in the contract to so indicate. That he could approach the creek from the streets and highways is evident, but the necessity for the use of the adjacent land is not explained in the evidence. Two persons owning property to the edge of the creek objected to the contractor cutting some trees and taking dirt for the construction of a dam. Again, the contract is silent as to any such right. Whatever may have been assumed by counsel upon the trial of the case, the record before us fails to explain or refer to any right of way except that in the creek itself, which was the subject of contract. The fact that the persons who objected to the contractor coming onto their property were located half a mile or more above the point to. which the work had progressed, and that for the mile of work finished by the Alto Company, and the mile and a half completed by Young, there was no trouble with adjoining owners, indicates that the difficulties were more imagined than real. The trial court would not have been justified in submitting the right to terminate the contract to the jury.

As to the second point, there were very good reasons expressed at the-time to the board by the engineers why the lowest bid of Merrill-Ruckgaber Co., New York city, should not have been taken. The Board, before rejecting this bid, inquired very carefully about this company, and ascertained that neither as to finances nor equipment was it able to carry out this improvement. In the exercise of this sound judgment, sharpened by experience with other contractors upon this same No. 8 contract, the board was justified in seeking a bidder who could give reasonable assurance of fulfilling his obligations. We do not mean to say that the evidence shows that the MerrillRuckgaber Co. could not have performed the contract; what we do mean, however, is that the evidence shows that the Board acted in good faith and had reason to doubt that company’s ability to perform. Chapter 356 of the Laws of 1907 empowers the plaintiff to let contracts to the lowest responsible bidder.” Information furnished by Bradstreet, Dun and the Maryland Casualty Company was unsatisfactory. The company refused to furnish any financial statement, depending upon borrowed funds to proceed with the work. The Board was charged with the duty of selecting a responsible bidder, and this called for honest judgment and discretion. We think that the Board in this particular performed its duty. Again, no question here to go to the jury.

When we come to the question of damage, however, there is an item which needs some examination. The Alto Construction Company and its surety were liable for the excess cost of completing the contract as made. The plaintiff cannot charge to the contractor the excess costs of changes and alterations in that contract. Exhibit 99 is a supplemental agreement made the 12th day of May, 1915, with John Young, the contractor, allowing him to use solid monolithic concrete in place of concrete blocks, where the contract required them, in constructing slope walls and the invert or bed of the creek. Prices were fixed at $10.52 a cubic yard for the concrete laid in place of blocks in the slope walls, and $10.70 per cubic yard for concrete laid in place of blocks in the invert. In other words, the main contract called for concrete blocks; Alto’s bid and contract for these was $8 per cubic yard. Young’s bid and contract was $11, but this latter contract was changed by the supplemental contract. Solid monolithic concrete was substituted. Both Alto and Young had agreed in their main contracts to furnish solid concrete at $10 a cubic yard. It is true that this solid concrete was furnished in place of the more expensive concrete blocks, but when solid concrete was the substitute, it should have been taken at $10 a cubic yard, as called for by the contract of both parties. Anyhow, the Alto Construction Company was never afforded the opportunity of agreeing to do the substituted work for $10 a cubic yard. If the change were to be made, the increased cost of the concrete, by reason of forms of place, should not be charged up to the contractor, when he had no opportunity to bid on it at the same unit figure as before. We appreciate that the Board’s engineer tried to explain the íeason for this increased cost of solid concrete, and also that the concrete was cheaper than the solid blocks, but the fact is that solid concrete work has been done for $10.52 and $10.70 a cubic yard, for which the contractors for that class of material, if not for place, agreed to charge $10. The Alto Company might have been willing to accept the change for this figure. It was more than it had bid for blocks.

Moreover, in examining the contract we find these provisions: The approximate quantities as the basis for the bid was concrete, laid in place, Class A, 4,053 cubic yards, and concrete blocks laid dry, Class B, 8,572 cubic yards.

By article XII of the original contract, the Board expressly reserved the right to increase or diminish the above-mentioned quantities, or any of them, as may be deemed necessary by its chief engineer; and the contractor agreed to make no claim for anticipated profits, or for loss of profits, because of a difference between quantities of the various classes of work actually done or materials actually delivered, and the estimated quantities stated in the information for bidders.

By article XXVI, item 7, For Concrete Laid in Place, Class A, including the furnishing and placing of all materials and all work incidental thereto, the sum of ten dollars per cubic yard; item 8, For Concrete Blocks Laid Dry, Class B, including the furnishing of all materials and all work incidental thereto, the sum of eight dollars per cubic yard.

Class A refers to concrete laid in place according to the drawings for invert and slope walls and “ elsewhere as required.”

Class B refers to concrete blocks laid dry which shall be used for protecting the invert and side slopes as braces of the deepened channel and elsewhere as required. It provides as to the material of which these blocks shall be made and as to their manufacture.

Class A and Class B do not designate particular places for the concrete or the blocks; rather they refer to the class of concrete and the class of blocks to be used when such is required by the plans and specifications. The inference may be fairly drawn that where concrete has been substituted for blocks it is to be paid for under these various provisions at ten dollars per cubic yard.

Under the circumstances of this'case we are of the mind that the increase, $1,753.70 in the one instance, and $2,059.32 in the other, must be deducted from the recovery. This is a total of $3,813.02, interest to be adjusted accordingly.

The judgment should be modified in accordance with this opinion and as modified affirmed, without costs.

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

Judgment accordingly.


author: O’Brien, J.

text:
    The Westchester Electric Railroad Company, Appellant, v. Westchester County Park Commission, Respondent. Westchester Lighting Company, Appellant, v. County of Westchester et al., Respondents.
    (Argued December 1, 1930;
    decided January 6, 1931.)

      Alfred T. Davison and Addison B. Scoville for Westchester Electric Eailroad Company, appellant.
    The plaintiff railroad company is entitled to judgment against the park commission for the reason that the park commission unconditionally promised to pay the actual cost of the work in question. The defendant park commission had the power and authority to make such unconditional promise to pay. (Laws of 1922, ch. 292, §§ 4 and 5.) The provisions of section 5 of the act of the Legislature under which the park commission has acted herein show that the Legislature did not -intend to vest in the park commission any right to subject the railroad company to any expense or damage as a result of the creation of the Hutchinson Eiver parkway. (L. 1922, ch. 292.)

      John A. Garver, P. F. W. Buther and Chauncey B. Garver for Westchester Lighting Company, appellant.
    Chapter 292 of Laws of 1922 expressly provides for the reimbursement by the respondent commission of expenses incurred by public utility corporations in connection with the relocation of their structures, made necessary by the work of said commission. (Matter of Rapid Transit Comrs., 197 N. Y. 81; N. Y. & Queens E. L. & P. Co. v. City of New York, 221 App. Div. 544; Suburban Rapid Transit Co. v. Mayor, 128 N. Y. 510; Coney Island, F. H. & B. R. R. Co. v. Kennedy, 15 App. Div. 588.)

      Francis J. Morgan, Thomas M. Smith, Frank J. Clay-don, Henry R. Barrett and William H. Davidson fox respondents;
    Chapter 292 of Laws of 1922 makes no provision for compensating the appellant railroad company for by-passing and permanently relocating its tracks. (New Orleans Gas Light Co. v. Drainage Comm., 197 U. S. 453; Transit Comm. v. Long Island R. R. Co., 253 N. Y. 345.) The park commission has no authority to reimburse the appellant railroad company for the moneys expended in by-passing and relocating its tracks and any agreement to do so or appropriation of money, therefore, is ultra vires and void. (Miller v. State, 15 Wall. 478; New York State Const. art. 8, § 1; N. Y. C. & H. R. R. R. Co. v. City of New York, 202 N. Y. 212; American Rapid Telegraph Co. v. Hess, 125 N. Y. 641; People ex rel. City of New York v. New York Rys. Co., 217 N. Y. 310; Lord v. Equitable Life Ins. Soc., 194 N. Y. 212.) The park commission has the power and authority to order the change of location, and the expense incidental thereto must be borne by the lighting company as to its gas mains. (Matter of Deering, 93 N. Y. 361; New Orleans Gas Light Co. v. Drainage Comm., 197 U. S. 453; Transit Comm. v. Long Island R. R. Co., 253 N. Y. 345.) Chapter 292 of Laws of 1922 makes no provision for compensating the lighting company for by-passing and permanently relocating its pipes. (New Orleans Gas Light Co. v. Drainage Comm., 197 U. S. 453; Transit Comm. v. Long Island R. R. Co., 253 N. Y. 345.) The park commission has no authority to reimburse the appellant lighting company for the moneys expended in by-passing and relocating its pipes and any agreement to do so or appropriation of money, «therefore, is ultra vires and void. (American Rapid Telegraph Co. v. Hess, 125 N. Y. 641; People ex rel. City of New York v. New York Railways Company, 217 N. Y. 310; Atlantic Coast Line v. Goldsboro, 232 U. S. 548; New Orleans Gas Light Company v. Drainage Commission of New Orleans, 197 U. S. 453; Lord v. Equitable Life Assurance Society, 194 N. Y. 212.)
   O’Brien, J.

The Hutchinson River parkway, which is a park (Matter of County of Westchester [H. R. Parkway], 246 N. Y. 314), was laid out by defendant Commission on both sides of East Lincoln avenue and East Third street in Mount Vernon and Pelham. All incidental proceedings' in connection with the acquisition, improvement" and embellishment of the park are declared to be for a county purpose (Laws of 1922, ch. 292, § 4). For many years, pursuant to franchise rights, plaintiff railroad company has maintained tracks on these streets and plaintiff Hghting company has maintained gas mains. In order that the drive of the parkway might cross otherwise than at grade, the Commission obtained leave from the authorities of the city and of the village to raise the grade of these highways and to construct underpasses. This permission was accompanied by provisos that the Commission would bear the expense of construction, would save the municipaHties harmless from all claims for damages and would pay any damages to abutting land caused by any change of street grade. The streets were elevated and the parkway drive was depressed. This work did not constitute a street improvement by either municipality but consisted entirely of the construction of a park by the county. Both plaintiffs at their own expense by order of the Commission removed their structures from the streets and relocated them at elevations to conform with the new grades. In the case of the Hghting company, the Commission agreed upon reimbursement subject to the mutual understanding that liability should be finally determined by the court. With the ‘’railroad company the Commission stipulated to pay the cost of providing temporary tracks, the cost of materials for fastening the rails and poles to the bridges and the cost of labor in connection with laying the permanent tracks and overhead structures. This stipulation appears to be an absolute promise. The Hghting company expended a sum in excess of $10,000 and the railroad more than $8,000. The Board of Supervisors has appropriated the money to pay for the work performed by the Hghting company. The controversies have been submitted upon agreed facts pursuant to section 546 of the Civil Practice Act.

The power of the Commission to enter into these agreements to reimburse plaintiffs is directly involved. Were the contracts ultra vires? At common law, holders of franchises take the risk of the location of their structures in public highways and are bound to make such changes at their own charge as public convenience or security requires (Matter of Petition of Deering, 93 N. Y. 361; Chace Trucking Co. v. Richmond L. & R. R. Co., 225 N. Y. 435, 437; New Orleans Gas L. Co. v. Drainage Comm., 197 U. S. 453), but this common-law rule is subject to alteration by statute. (Transit Comm. v. Long Island R. R. Co., 253 N. Y. 345.) Public security demands that the driveway of a great park over which millions of motor vehicles proceed at a high rate of speed shall not cross city and village streets at grade. A statute imposing the expense of changes, necessarily incidental to the elevation of such highways, upon the public body directing such changes would not conflict with any constitutional prohibition. The inquiry is, therefore, directed to the existence of such a statute.

The source of authority is found in chapter 292, Laws of 1922, section 5. This part of the act empowers the Commission to agree with the owner of real estate for compensation to be paid for the taking or using and occupying such real estate by virtue of the acquisition of an estate less than a fee. The term “ real estate ” is construed in the act to include all interest therein used for railroad or other public purposes. Provision is made that corporations owning an interest in real property which is used as a public utility shall be allowed perpetual use for such purpose as will afford practical route or location commensurate with and adapted to its needs and that such persons or corporations shall not directly or indirectly be subject to expense, loss or damage by reason of change in such route or location, but such expense, loss or damage shall be borne in like manner as the expenses incurred in carrying out the provisions of this act.” This statute must fairly be held to control the facts as submitted. The Commission temporarily took, used and occupied the land in the highways in which plaintiffs had theretofore acquired an interest. The structures were removed, the railroad tracks were transitorily placed on a different site, the gas mains were by-passed, and later all were returned to locations other than those formerly occupied by them. The locations were to some extent changed and the plain intent of the statute is that, in such an event, the service corporations shall not even indirectly be subject to expense. The whole purport of the act clearly points to the conclusion that the expense of the relocation of structures rendered necessary by this public improvement must be included within the cost of construction. When the Commission agreed with one of the plaintiffs for reimbursement and stipulated with the other for repayment subject to determination by the courts, it did not exceed its official power under the statute. Its acts were wholly authorized.

The judgment in each case should be reversed and judgment directed for plaintiff, without costs.

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

Judgments reversed, etc.


author: Hubbs, J.

text:
    Thomas J. McCormick, Respondent, v. The Potomac Insurance Company of the District of Columbia, Appellant.

      (Argued December 1, 1930;
    decided January 6, 1931.)
    P. C. Dugan for appellant.
    The plaintiff failed to use. all care and diligence in maintaining the efficiency of the locking device in locking the automobile when leaving the same unattended. (Kean v. National Surety Co., 241 N. Y. 252; Sattler v. Hallock, 160 N. Y. 297; Doerr v. National Fire Ins. Co., 315 Mo. 266; Billet v. Pennsylvania Fire Ins. Co., 101 N. J. L. 546; Allgood v. Hartford Fire Ins. Co., 186 N. C. 114; Forstmann v. Joray Holding Co., 244 N. Y. 22.)

      Walter L. Collins for respondent.
    At the time plaintiff’s car was stolen he was exercising the due and reasonable degree of diligence that the terms of the policy imposed upon him. (Garcia S. & Co. v. Taggart Coal Co., 27 Ga. App. 204; De Hart v. Haun, 126 Ind. 378; Allgood v. Hartford Fire Ins. Co., 186 N. C. 414; Grabbs v. Farmers’ Mut. F. S. Assn., 125 N. C. 399; Bray v. Virginia F. & Ins. Co., 139 N. C. 393; Ocean Acc. & Guarantee Corp. v. Piedmont R. & El. Co., 179 N. C. 406; Underwood v. State L. Ins. Co., 185 N. C. 540; Asbury v. Charlotte Electric R. & Power Co., 125 N. C. 568; Drum v. Miller, 135 N. C. 208; Bushey & Sons v. American Ins. Co., 237 N. Y. 24.)
   Hubbs, J.

This is an action on an insurance policy to recover from the defendant insurance company the damage caused plaintiff because of the theft of his automobile.

The policy contained a clause which reads: In consideration of a reduction in premium, it is warranted by the insured that the automobile insured under this policy will be continuously equipped with a locking device known as Peerless (approved by the Underwriters’ Laboratories of the National Board of Fire Underwriters and bearing their label).

“ The insured undertakes during the currency of this policy to use all diligence and care in maintaining the efficiency of said locking device in locking the automobile when leaving same unattended.”

The defense interposed is that the plaintiff breached the promissory warranty contained in the clause quoted.

The facts surrounding the theft of the plaintiff’s automobile briefly stated are as follows: The plaintiff at about seven o’clock p. m. upon his return from a ride in his automobile, stopped it at the curb on a city street in front of his residence. He left it unlocked with the motor running and the door toward the sidewalk open. He walked to the front door of his residence, thirty feet from the curb, opened the door and walked fifty feet to the rear of the house to get his overcoat. Upon his return to the front door he discovered that his automobile was gone. During the interval a thief had driven it away. It was dark at the time and the street lights were lighted. There was one about fifty feet from the automobile. A neighbor of the plaintiff was walking on his porch about thirty feet from the automobile and there were people on the street.

The learned referee to whom the action was referred found that the plaintiff failed to comply with the clause of the policy in question and dismissed the complaint upon the merits. The Appellate Division by a divided court reversed the findings of the referee, made new findings and directed judgment for the plaintiff for the stipulated amount of damages.

Concededly a proper locking device ” was attached to the automobile and it was in proper order and condition. The presence, however, of such a device upon an automobile is not of the slightest advantage and offers no inducement to an insurance company to grant a reduction in the premium for an insurance policy. The inducement to the insurance company to grant a reduction in the premium is the promise of the insured to make use of the “ locking device ” when leaving the automobile unattended.

The plaintiff agreed to use all diligence and care * * * in locking the automobile when leaving same unattended.” We agree with the Appellate Division that those words mean that an insured shall exercise due diligence and care — the diligence and care which one of ordinary prudence would exercise under the circumstances.

We do not construe the clause as meaning that the insured shall never leave the car unlocked. Such a construction would be unreasonable and not justified by the language used. If a sudden emergency arises, such as an accident, a driver may be justified in leaving an automobile temporarily without locking. So if a driver steps out of a car to purchase something and the car is within his view. Many illustrations of similar situations might be given. In most cases a question of fact will be presented, the determination of which will depend upon all the circumstances of the case.

In the case at bar the referee treated the question as one of fact and found that the plaintiff failed to use all diligence and care ” when he left the automobile unlocked after dark on a city street with the motor running and the door adjacent to the sidewalk open so that all that a thief would have to do in order to take the automobile would be to release the brake, throw in the clutch and drive away. The finding of the referee was justified by the evidence. The plaintiff failed to carry out the agreement which he made and cannot, therefore, under the terms of the policy, require the defendant to make good his loss. The plaintiff’s agreement was based upon a valid consideration — a reduction in the premium on the policy. (Billet v. Pennsylvania Fire Ins. Co., 101 N. J. L. 546; Pisciotte v. Indemnity Co., 164 La. 260; Ward v. Alliance Ins. Co., 55 Ont. L. R. 451.)

We find nothing in the opinion in the case of Allgood v. Hartford Fire Ins. Co. (186 N. C. 415) in conflict with the views which we have expressed. The plaintiff in that case went into his house and left his automobile unlocked. It was stolen and an action was brought to recover upon a policy containing a clause similar to the one in the policy in question. The trial court granted a nonsuit. The Supreme Court held that under the facts in that case a question of fact was presented.

In Doerr v. National Fire Ins. Co. (315 Mo. 266) the court held as a matter of law that the plaintiff who had left his car at night unlocked in his garage from which it was stolen could not recover from the defendant insurance company as a clause in the policy provided: “ The insured would not leave the automobile without locking the device.” In that case the agreement was absolute. Under the policy in question the agreement was to use diligence and care.

The judgment of the' Appellate Division should be reversed and judgment entered upon the report of the referee affirmed, with costs in the Appellate Division and in this court.

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

Judgment accordingly.


text:
    Fred Nann, as President of Local Union No. 3 of the Amalgamated Food Workers, Respondent, v. Lasar Raimist, as Treasurer of Local No. 500 of the Bakery and Confectionery Workers’ International Union of America, Appellant.

      (Argued December 2, 1930;
    decided January 6, 1931.)

      Charles H. Kelly, Hyman Bushel and Samuel Gottlieb for appellant.
    The placards and circulars employed and distributed by the defendant were neither misleading nor unfair. (Public Bakeries v. Stern, 127 Misc. Rep. 229.) The proof fails to establish that defendant is engaged in an unlawful conspiracy to annihilate plaintiff’s organization. Nor are the defendant’s activities malicious as matter of law merely because they are directed against another alleged trade union. The facts here fall far short of justifying the drastic relief granted to the plaintiff. Injunctions in labor disputes should not issue except in extreme cases. (Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; Interborough Rapid Transit Co. v. Lavin, 247 N. Y. 65; People v. Phillips, 245 N. Y. 401; Mills v. U. S. Printing Co., 99 App. Div. 605; National Protective Assn. v. Cumming, 170 N. Y. 315; People v.
      Kostka, 4 N. Y. Crim. Rep. 429; Park & Sons Co. v. National Druggists’ Assn., 175 N. Y. 1; Quinn v. Leathem, [1901] App. Cas. 495; Iron Molders Union v. Allis-Chalmers Co., 166 Fed. Rep. 45; Herzog v. Klein, 131 Misc. Rep. 816.) It was beyond the power of the court to grant an injunction decree so unlimited in scope and so disproportionate to the facts. (Reed v. Whiteman, 238 N. Y. 545; Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; Wilner v. Bless, 243 N. Y. 544; Interborough Rapid Transit Co. v. Lavin, 247 N. Y. 65.)

      Bruce R. Duncan and Charles W. Froessel for respondent.
    The law will protect against violence, threats or intimidation, express or implied, trespass, causing crowds to collect, impeding free access to places of business, injurious false statements, oral or written, even though done with a lawful object in view. (Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; Interborough R. T. Co. v. Lavin, 247 N. Y. 65.) Where unlawful picketing has been continued; where violence and intimidation have been used and where misstatements as to the employer’s business have been distributed, a broad injunction prohibiting all picketing may be granted. (Exchange Bakery & Restraurant, Inc., v. Rifkin, 245 N. Y. 260; Wilner v. Bless, 243 N. Y. 544; Reed v. Whiteman, 238 N. Y. 545; Picadilly Laundry Service, Inc., v. Broader, 252 N. Y. 539; Interborough Rapid Transit Co. v. Lavin, 247 N. Y. 65.) Even if the picketing in this case had been peaceful, orderly''and without threats or false statements, it was wrongful and illegal and should be enjoined. (Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; Beardsley v. Kilmer, 236 N. Y. 80; Peekskill Theatre, Inc., v. Advanced Theatrical Co., 206 App. Div. 138.)
   Cardozo, Ch. J.

The controversy is one between rival labor unions competing for supremacy.

The trade represented by the two unions is that of bakers and confectioners. The plaintiff association is a local union of the Amalgamated Food Workers; the defendant association, which is affiliated with the American Federation of Labor, is a. local union of the Bakery and Confectionery Workers’ International Union of America. Each union is accustomed to make contracts with employers in the trade whereby the employers so contracting agree to employ the members of the chosen union to the exclusion of all others. The contracts are not for a fixed period, but' are terminable at will. They prescribe the conditions of service for the workers, and in particular the wages. The schedule of wages fixed by the Amalgamated is considerably lower than that fixed by the International. The International, however, has established what is described as the “ substitute system ” for the benefit of its members. According to this system, known also as the “ stagger system,” a member employed by the week must give up part of his time to a member out of a job, when the supply of union labor is in excess of the demand. The result is to shorten the week for some members, but to make it impossible for others to be idle altogether. The substitution is one to which a proprietor contracting with the union is required to submit. The Amalgamated, on the other hand, has refused to apply this system to the shops subject to its control. Its members, if employed at all, work more days in the week, but at a lower wage by the day. Their weekly earnings are sometimes higher and sometimes lower than the earnings of their rivals.

For some years the two unions worked in harmony, each acting within its own sphere of influence, and not encroaching on the other. Gradually, however, the Amalgamated began to draw away employers who had given allegiance to the International. There was attraction in the lower wages and in escape from the inconvenience and perhaps the loss of efficiency occasioned at times by the employment of substitutes. Trouble soon developed.

The International, menaced by defections, made demand on the Amalgamated that it merge or surrender. A blunt refusal followed. Upon this the International threatened to drive the Amalgamated out of existence. It would go from shop to shop, would make the methods of its rival manifest to the world, and in the words of a witness wipe it off the map.” The campaign had its beginnings in August, 1927. In that month the Winthrop Baking Company, allied with the Amalgamated, opened a new shop. Members of the International spoke from wagons at the street corner, and others bearing signs paraded up and down the street. They denomiced the Amalgamated as a fake ” union, a union made up of “ scabs,” asserted that theirs was the only regular or genuine union, and told passers-by that a strike was going on and that by encouraging their rival they would -be giving aid and comfort to the bosses. This happened on August 30 and again the following day. The Winthrop Company sued for an injunction, and obtained an order restraining interference with its business, but the order was narrower in scope than the one demanded. The International was restrained from marching up and down in front of the bakery with false or misleading signs, and from making false and misleading statements, but it was not restrained from picketing. The bakery, dissatisfied with the scope of the restraint, appealed to the Appellate Division, and there on December 7, 1927, the order was affirmed.

Picketing, if there had been any in the meantime, had been peaceful and without disorder. A change came about toward the end of 1927 and the beginning of 1928. The evidence as to what happened is conflicting. In view of the findings of the trial court we state the version of the testimony adverse to the defendant.

, On January 3, 1928, there was disorder at the Winthrop bakery. Two men walked up and down the street telling every customer that “ the place was on strike,” and not to patronize it till the strike was over. Ten other men, members of the union, were hanging about the street corners. When the day’s work was over, an employee of the bakery, coming out of the shop, was set upon and beaten.

On January 4 the pickets were on hand again. Once more the customers were notified that a strike was in progress, and most of them walked by and did their shopping elsewhere. About noon some one was heard to telephone the International headquarters to send as many men as possible. In response to this message three taxicabs drew up. A fight ensued between the occupants and men from the Amalgamated who were already on the scene.. One of the workers at the bakery was set upon and beaten. The police were notified, and thereafter, till the commencement of this action, an officer was posted at the scene of trouble.

Disorder occurred also at another bakery about the same time. On December 28, 1927, Scheffer & Edelstein opened a new shop. They had formerly been members of the International, but had gone over to the Amalgamated. Pickets informed the customers that the shop was not a union one, and that, a strike was going on. Some one told a picket that he had no right to do such things, and that he must go away from the bakery. At this there was a fight, the picket striking the first blow. Only a few days before, the proprietors of the bakery had refused to give up their alliance with the plaintiff union or cancel their existing contract. A few days later, terrified by the interference with their business, they signed a contract with the defendant. ¡

On January 12, 1928, the Amalgamated began the present action to enjoin the International from destroying; its existence by violent or illegal acts, the suit previously brought by the Winthrop bakery being discontinued soon thereafter. The court at Special Term granted an injunction in the form stated below, and the Appellate Division unanimously affirmed.

The plaintiff, if threatened in its business life by the violence of the defendant or by other wrongful acts, may have the aid of the court to preserve itself from disruption through recourse to these unlawful means. The remedy is not lost because the controversy is one between the members of rival unions, and not, as happens of tener, between unions and employers (Tracey v. Osborne, 226 Mass. 25; Goyette v. Watson Co., 245 Mass. 577). On the other hand, the legality of the defendant’s conduct is not affected by the fact that no strike is in progress in any of the plaintiff’s shops (Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260.) If the defendant believes in good faith that the policy pursued by the plaintiff and by the shops united with the plaintiff is hostile to the interests of organized labor, and is likely, if not suppressed, to lower the standards of living for workers in the trade, it has the privilege by the pressure of notoriety and persuasion to bring its own policy to triumph (Exchange Bakery & Restaurant, Inc., v. Rifkin, supra; Bossert v. Dhuy, 221 N. Y. 342).

Upon the facts exhibited in this record the defendant went beyond the bounds of lawful conduct in conducting its campaign for the suppression of its rival. These acts were of such a nature as to justify some of the restraints imposed by the courts below, though they are insufficient to give support to others. The defendant does not complain of the injunction against acts of violence or intimidation or against causing crowds to gather or loiteiing in groups. Those provisions of the judgment may stand as they were written. What the defendant' complains of is the injunction against picketing, against false and misleading signs and statements, and against peaceable persuasion.

“ Where unlawful picketing has been continued; where violence and intimidation have been used and where misstatements as to the employers’ business have been distributed, a broad injunction prohibiting all picketing may be granted ” (Exchange Bakery & Restaurant, Inc., v. Rifkin, supra, at p. 269). The course of conduct of the strikers ” is then “ such as to indicate the danger of injury to property if any picketing whatever is allowed ” (Ibid).

Before this action was begun, the defendant had already been restrained in the suit by the Winthrop bakery from acts of violence or disorder, from picketing with false and misleading signs and from other false and misleading statements. These prohibitions it had violated, or so the trier of the facts has found. It had set upon and beaten innocent workmen. It had falsely asserted that a strike was in progress. By such falsehoods it had driven customers to other bakeries, had forced unwilling proprietors to succumb to its demands, and in so doing had threatened the prosperity and indeed the very existence of its rival.

Whether the trial court in view of this record of defiance, would give the defendant still another chance to picket peacefully and in order, was something to be determined in the exercise of a wise discretion. This court may not interfere except for manifest abuse. It becomes a question for the judgment of the Chancellor who has heard the witnesses, familiarized himself with the locus in quo and observed the tendencies to disturbance and conflict ” (American Steel Foundries v. Tri-City C. T. Council, 257 U. S. 184, 207). One chance the defendant had already been given. It had defied the mandate and abused the privilege. How many more chances was it to have before the court could intervene? An injunction does not issue in such circumstances as punishment for the past (Iron Molders Union v. Allis-Chalmers Co., 166 Fed. Rep. 45, 49; Frankfurter & Greene, The Labor Injunction, p. 116) Its only legitimate end is protection for the future. Not improbably a writ could have been framed whereby the desired end would have been attained by prohibitions less complete. We might have preferred such restraints if we had been exercising the powers of a chancellor. Sitting in this court we deal solely with defect of power or with abuse of discretion so gross as to be equivalent to defect of power. The injunction in this aspect is not to be sustained upon any theory that picketing per se is to be condemned as an illegal act. This court is committed to a contrary doctrine (Exchange Bakery & Restaurant, Inc., v. Rifkin, supra). The injunction is sustained upon the theory that the defendant having been permitted to picket subject to conditions, violated those conditions, and in contempt of the existing mandate picketed with violence and with falsehood, spreading terror with a strong hand and a multitude of people. In the judgment of the trial court, “ the [defendant’s] course of conduct * * * has been such as to indicate the danger of injury to property if any picketing whatever is allowed ” (Exchange Bakery & Restaurant, Inc., v. Rifkin, supra). We cannot say that a basis for that belief is lacking altogether.

The injunction as written is not limited to the shops that had been the scenes of violence and intimidation, but extends to any others connected with the plaintiff’s union. The defendant had threatened to go from one shop to another. A saving clause is necessary, however, to avoid misapprehension. The decree, perpetual in its operation, is broad enough to prohibit picketing for all time at any bakery or shop in alliance with the plaintiff, no matter what the grievance or the occasion of the controversy. This is too far-reaching. At some time in the future, a controversy unrelated to the dispute between the plaintiff and the defendant may arise between the defendant and a bakery or shop now protected by the judgment. The evidence is that 370 shops or bakeries are within the terms of the injunction. The restraint is to be interpreted as limited to acts done by the defendant in furtherance of its plan to exterminate the plaintiff union or in the course of the controversy that is the subject of the pending action.

The injunction as to false and misleading statements should be limited to one prohibiting the false announcement of a strike (Wilner v. Bless, 243 N. Y. 544).

With picketing restrained, the plaintiff is in little need of protection by an injunction against words. The remedy when so applied is an exceptional one at best, and is to be reserved for those cases where the exigency is clear (Wilner v. Bless, supra; Beck v. Railway Teamsters’ Protective Union, 118 Mich. 497). Equity does not intervene to restrain the publication of words on a mere showing of their falsity (Marlin Fire Arms Co. v. Shields, 171 N. Y. 384). It intervenes in those cases where restraint becomes essential to the preservation of a business or of other property interests threatened with impairment by illegal combinations or by other tortious acts, the publication of the words being merely an instrument and incident (Beck v. Railway Teamsters’ Protective Union, supra; Gompers v. Bucks Stove & Range Co., 221 U. S. 418, 431; Steinert & Sons Co. v. Tagen, 207 Mass. 394, 397; Hotel & R. R. News Co. v. Clark, 243 Mass. 317, 323; Allen Mfg. Co. v. Smith, 224 App. Div. 187, 191; Pound, Equitable Relief against Defamation, etc., 29 Harv. L. R. 640, 666; Pound, Chafee’s Cases on Equitable Relief against Defamation [2d ed.], 1930, collating the authorities).

In the case at hand most of the statements imputed to the defendant were well within its rights. This is true, for example, of the circulars and handbills. They amount to nothing more than praise of its own achievements, and criticism of the methods of its rival, with an appeal to the public for sympathy and preference. Warning is given that the International is the only union that is on the look-out that its members should work ■under union conditions, which means like human beings and not like mules.” Warning is given that this Amalgamated organization, which calls itself a union,’ is such a union that it is willing to ruin our conditions which were gained with your support.” For those reasons and others the appeal is made to consumers to buy only with this union label,” a phrase followed by a reproduction of the label in use by the defendant. There is argument and entreaty, over-colored and hectic, involving perhaps at times the deduction from meagre facts of debatable conclusions. There is no such malevolent distortion as to justify repression. Courts have enough to do in restraining physical disorder without busying themselves with logomachies in which the embattled words are the expression of the opinion of the writer or the speaker. If there is redress for such a wrong, unassociated with wrongful acts, the remedy is not in equity.

Other statements, not in the circulars and handbills, but testified to by witnesses, are closer to the border line. This is true of declarations that the plaintiff is a “ scab ” and not a regular union, and that any one dealing with its bakeries will not be buying union bread. Even these statements, however, are in essence expressions of opinion, dependent, in the main, upon an appraisal of methods and motives, and gaining much of their significance from context and occasion. Standing by themselves, the statements may be unduly broad. Heard or read in the light of the context or in the setting of the occasion, they may wear another aspect. They are then seen to be opinions merely. The opinion may be erroneous, but it does not follow that the defendant will be required to withdraw it under penalty of contempt. Indeed, there is a near approach to the ludicrous when a member of one union debating an industrial dispute with a member of another, is restrained by the solemn mandate of an injunction from stating his belief that the rival union is a “ scab.” An injunction might draw a distinction between one context and another, yet the dividing line is one that it would be hard to make manifest by words. Perhaps an attempt to draw it would be necessary if picketing were to continue. With picketing out, the danger, if any, is too slight, the zone of demarcation too nebulous, to turn the attempt into a duty. Equity does not act for every shadowy or unsubstantial wrong.

A genuine controversy exists between two competing groups as to the effectiveness and sincerity of the methods of one of them. By concession the form of a union has been adopted by each of the two bodies. Whether the spirit also is there, the spirit, that is to say, for which unions are created, is a question not susceptible of answer without heed being given to many imponderable elements. The plaintiff does not prevail by showing that the defendant’s criticism is wrong, though even this it fails to do. What is wrong must be so clearly wrong that only “ disinterested malevolence ” (American Bank & Trust Co. v. Federal Reserve Bank, 256 U. S. 350, 358), or something close akin thereto, can have supplied the motive power (Steinert & Sons Co. v. Tagen, supra). If less than this appears, a court of equity will stand aside.

The other prohibitions are an impairment of the defendant’s indubitable right to win converts over to its fold by recourse to peaceable persuasion, and to induce them by like methods to renounce allegiance to its rival. Recent decisions of this court have established that fundamental right too emphatically and forcefully to make further vindication needful (Exchange Bakery & Restaurant, Inc., v. Rifkin, supra; Interborough R. T. Co. v. Lavin, 247 N. Y. 65). All these provisions must be expunged from the decree.

. The judgment of the Appellate Division and that of the Special Term should be modified in accordance with this opinion, and as modified affirmed, without costs.

If the parties are unable to agree upon the form of the judgment, the form may be settled upon an application to the court.

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

Judgment accordingly.

       “ Ordered, adjudged and decreed that the defendant, Lasar Raimist, as Treasurer of Local No. 500 of the Bakery and Confectionery Workers’ International Union of America, an unincorporated association, consisting of seven or more persons, his agents, servants, associates, confederates and all persons combining and conspiring with him or them or any of them, be and they hereby are perpetually enjoined and restrained and prohibited from interfering with the conduct of the business of any store, bakery or shop having a contract with the plaintiff union and/or where any members of plaintiff union are employed; from threatening or intimidating, directly or indirectly, by placard or sign or other writing or by word of mouth or by force or otherwise, any member of the plaintiff union, and/or any employer of any member or members of plaintiff union or any person or persons having a contract with plaintiff union, and from picketing or marching or loitering in front of the premises of any employer of any member of the plaintiff union or of any person having a contract with the plaintiff union, or in the vicinity of such premises, or gathering or causing any crowd to collect there, from asserting or representing orally or in writing that plaintiff union is a ' scab ’ union or is not a regular union, and/or asserting or representing that any bakery or shop having a contract with plaintiff union or employing any member thereof is a ‘ scab ’ shop, and/or that the label of the defendant union is the only union label and/or that the label of the plaintiff union is not a union label, or is a scab label, or that the bread or other food baked in any shop or bakery having a contract with the plaintiff union or employing any member of plaintiff union is not union bread or food; and/or from persuading or inducing any employer of labor having a contract with the plaintiff and/or employing any member of the plaintiff, to breach or terminate such contract or to discharge or terminate the employment of any member of plaintiff union, and/or from persuading or inducing any member of plaintiff union to leave his employ or withdraw or resign from such union, and/or from interfering in any manner above set forth or in any other manner, or by any other means, with the business, custom or trade of any employer having a contract with the plaintiff or employing any member of the plaintiff, or making any false statements respecting any such employer or the plaintiff union or any members thereof, or the products of any such shop or employer or doing any other illegal act in reference thereto.”


author: Per Curiam.

text:
    In the Matter of the Elimination of Grade Crossings of the New York Central Railroad Company, Appellant. The Public Service Commission of the State of New York, Appellant; St. Lawrence County, Respondent.
    (Argued December 2, 1930;
    decided January 6, 1931.)

      Francis E. Cullen for New York Central Railroad Company, appellant.
    The Appellate Division erred in reversing the order of the Public Service Commission on the law. There was no question of law presented to that court. There was no abuse of discretion, caprice nor arbitrariness, on the part of the Commission, and, therefore, its decision should not have been disturbed. The Appellate Division, under the guise of judicial power, has usurped a mere administrative function of the Commission. (People ex rel. New York & Queens Gas Co. v. McCall, 219 N. Y. 84; 245 U. S. 345; State v. Great Northern Ry. Co., 153 N. W. Rep. 247; Matter of N. Y. C. R. R. Co. 177 App. Div. 444; 222 N. Y. 541.)

      Harry M.. Chamberlain, Sherman C. Ward and Charles G. Blakeslee for Public Service Commission, appellant.
    The courts will not substitute their judgment of what is reasonable in a given case for that of the Public Service Commission, but will consider only whether the action complained of was capricious or arbitrary and for that reason unlawful. (People ex rel. New York & Queens Gas Co. v. McCall, 219 N. Y. 84; Brooklyn Heights R. R. Co. v. Straus, 245 Fed. Rep. 132; City of Rochester v. Rochester Gas & Elec. Corp., 233 N. Y. 39; People ex rel. Pavilion Natural Gas Co. v. Public Service Comm., 178 App. Div. 937; People ex rel. Woodhaven Gas Light Co. v. Public Service Comm., 203 App. Div. 369.)

      George H. Bowers for respondent.
   Per Curiam.

If the order appealed from were a final order, remitting the proceedings to the Public Service Commission merely for the mechanistic process of putting in force the decision of the Appellate Division in favor of the elimination of the grade crossing in question by an underpass rather than an overpass, it would be reviewable by this court as matter of right. (People ex rel. New York & Queens Gas Co. v. McCall, 219 N. Y. 84, 90.) That it is not such an order is evident by the reference in the opinion below to Matter of Railroad Crossings (226 App. Div. 255, 258) where the matter was remitted for a rehearing “ whereat all parties may have full opportunity to present such evidence as they may be advised.” Such an order is not final and is not appealable to this court without leave of the Appellate Division on certified questions. (People ex rel. New York & Queens Gas Co. v. McCall, supra.)

The Commission is not, however, so bound by the decision below that it may not, after the rehearing directed by the court, continue to exercise its judgment and discretion as between the alternative plans of making the improvement. The court may not substitute its judgment for that of the Commission as to the wisdom or policy of the order complained of or analyze or balance the evidence which was before the Commission for the purpose of determining whether it preponderates for or against the conclusion arrived at on a question of engineering plans, but may determine only whether after a fair hearing the action of the Commission is arbitrary or capricious. (People ex rel. New York & Queens Gas Co. v. McCall, supra; affd., 245 U. S. 345.)

We are not to be understood as giving countenance to the views expressed by the Appellate Division as to the application of its powers of review in this case.

The appeal should be dismissed.

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

Appeal dismissed.


text:
    The People of the State of New York ex rel. Florence C. Kight, Respondent, v. Thomas M. Lynch et al., Constituting the State Tax Commission, Appellants.
    (Argued December 2, 1930;
    decided January 6, 1931.)

      Hamilton Ward, Attorney-General (Henry S. Manley of counsel), for appellants.
    Annuities and similar periodic payments should not be exempt from personal income taxation. (Merchants L. & T. Co. v. Smietanka, 255 U. S. 509; Irwin v. Gavit, 268 U. S. 161; Jones v. Commrs. of Inland Revenue, [1920] 1 K. B. 711.) Relator’s acceptance of the testamentary provision in lieu of dower is an election rather than a purchase. (Irwin v. Gavit, 268 U. S. 161.)

      Richard E. Enright for respondent.
    The Tax Commission in denying relator’s claim for refund was in error. (New York Trust Co. v. Eisner, 256 U. S. 345; Allen v. Brandeis, 29 Fed. Rep. [2d] 363; United States v. Bolster, 26 Fed. Rep. [2d] 760; Warner v. Walsh, 15 Fed. Rep. [2d] 367.) Relator electing to take under the will in lieu of dower, acquired the legal status of a purchaser for value. (Isenthart v. Brown, 1 Edw. Ch. 413; Hathaway v. Hathaway, 37 Hun, 266; Flynn v. McDermott, 183 N. Y. 62.)
   Crane, J.

Alonzo B. Eight died in August, 1923, léaving a last will and testament, wherein he devised and bequeathed to executors his property in trust, both real and personal, to collect the income therefrom and pay it over as follows:

1. To my "wife, Florence C. Eight, % of the net income from such property for and during her natural life dating from the date of my death and paid to her as often as may be convenient from and after the date of my death, and at least as often, as possible, as once in each three months.”

“ Paragraph 6. The provisions in this Will in favor of my wife are in lieu of dower and all other claims against my Estate.”

The widow elected to take under the will, which constituted a waiver of her dower right, provided by law. Thereafter for the years of 1926 and 1927, she included in her income tax return for those years the income received from the trustees under this provision of her husband’s will. She later made application for a refund, claiming the tax on this income was erroneously paid and illegally collected. The Tax Commission denied her application. The Appellate Division, upon certiorari, reversed this determination and held that the income was exempt from tax.

The Tax Law (Cons. Laws, ch. 60), section 365, provides that the tax on incomes shall apply to estates and trusts “ which tax shall be levied, collected and paid annually upon and with respect to the income of estates or of any kind of property held in trust, including: “ * * * d. Income which is to be distributed to the beneficiaries periodically, whether or not at regular intervals, * * This tax shall not be paid by the fiduciary, but there shall be included in computing the net income of each beneficiary his distributive share, whether distributed or not, of the net income of the estate or trust for the taxable year. (§ 365, subd. 4.) Certain items are exempt from taxation, and are enumerated in section 359 (subd. 2); they include:

a. The proceeds of life insurance policies and contracts paid upon the death of the insured to individual beneficiaries or to the estate of the insured.

“ b. The amount received by the insured as a return of premium or premiums paid by him under fife insurance, endowment or annuity contracts, either during the term or at the maturity of the term mentioned in the contract or upon surrender of the contract.

“ c. The value of property acquired by gift, bequest, devise or descent (but the income from such property shall be included in gross income).”

These exemptions of our State Income Tax Law are identical with the provisions of the Federal Revenue Act, or Income Tax Law (Revenue Act 1916, § 4; Revenue Act 1918, § 213 [b],. 1,2,3, which, for convenience, will be found in United States Statutes at Large, vol. 39, part 1, p. 758, and United States Statutes at Large, vol. 40, part 1, p. 1065). The United States Circuit Courts have held this class of income exempt under the Federal Revenue Act, treating the widow’s election as the purchase with her dower of an annuity, non-taxable, until the income therefrom shall equal the amount or value of the principal payment, namely, the dower interest. (Warner v. Walsh, 15 Fed. Rep. [2d] 367 [2d Circuit]; United States v. Bolster, 26 Fed. Rep. [2d] 760 [1st Circuit]; Allen v. Brandeis, 29 Fed. Rep. [2d] 363 [8th Circuit]; Internal Revenue Cumulative Bulletin, VIII-2, p. 141, I. T. 2480.) The Appellate Division followed these decisions, stating that practical reason suggests that there should not be contradictory rules relating to the same income. We also share this feeling, but are disinclined to adopt this conclusion for the State of New York in the absence of' any final construction of the statute by the United States Supreme Court. There may be a side of this question not presented to, or considered by these Circuit Courts, which we shall state and which leads us under our dower statutes to a different ruling.

A widow shall be endowed oí the third part of all lands whereof her husband was seized of an estate of inheritance at any time during the marriage. (Real Prop. Law; Cons. Laws, ch. 50, art. 6, § 190.) Article 14 of the Real Property Law provides the procedure for admeasuring dower. If practicable, a distinct parcel constituting the one-third part of the real property of the deceased husband is to be admeasured and laid off by permanent monuments, of which the widow is to be possessed during her natural life, subject to the payment of all taxes, assessments and other charges accruing thereupon, after she takes possession. If it be not practicable to admeasure and lay off a distinct parcel of the property, then the widow shall have one-third of the rental value of the real property paid to her annually during her natural life. (Real Prop. Law, §§ 472, 476.) However, the widow may desire to take a gross sum instead of rents, and section 480 gives her this privilege. She may consent in writing to accept a gross sum in full satisfaction and discharge of her dower right in the real property, and upon filing this consent, the value of her life interest is thereupon to be ascertained and paid to her.

Assuming that Mrs. Kight, in this case, had elected to take her dower instead of under the will, what would be her position and right as well as obligation under the Income Tax Law? If she took a specific piece of real property, which was laid off and admeasured to her, the rents or income from this property would be income, not payments as part of her principal, and would have to be included in the tax return as taxable income. The same ruling would apply if Mrs. Kight received one-third of the rental value of the real property annually and for life. These rents would not change their nature from income to principal simply because they were paid to a widow as dower. So, likewise, if she elected to take a gross sum, as the value of her dower life interest, the income from the investment of this money would still be income taxable under the law. In a word, the income which a widow receives on her dower interest, whichever way she takes it, is income taxable under the law, and not a capital payment in any sense.

What does the widow do, therefore, when she elects to take an income provision from a trust under the will of her late husband? She gives up one taxable income for another income, be it more or less. By what process of reasoning does her election of the substitute income reheve her from the duty to pay a tax or turn the selected income into a capital payment or a purchased annuity? As a fact, and not as a fiction, the income from one-third of the deceased’s real estate, constituting dower, is the same income in nature, perhaps also in amount, as the income from one-third of that estate held in trust for her. This being 'so, we do not see any reason for exempting from taxation one income and not the other. The Tax Law creates no such exemption.

Neither is it accurate to say that the widow, in giving up her dower, purchases an income or an annuity from the estate. She purchases nothing; she makes an election allowed by law. (Real Prop. Law, § 200.) The estate does not sell, neither does she buy. The statement in Flynn v. McDermott (183 N. Y. 62), that a bequest in lieu of dower, and the acceptance of same, amounts to a matter of contract and purchase,” means in its application that as dower precedes legacies so should her election. The paragraph is not relevant here. When she makes her election she knows, or is presumed to know, that the income which she considers taking under the will is taxable. She does not have to take it; she may reject it; but in considering her election, she is presumed to know that by section 365 of the Tax Law a tax is paid annually on income from any kind of property held in trust, and is to be paid by the beneficiary.

Another consideration moves us. The inchoate right of dower, as heretofore existing, has been abolished, with certain exceptions, and the widow is given, in the absence of á will, one-half or one-third of the estate outright. A will cannot deprive her of this portion which the law provides for her, but in case of a will, she now has numerous elections. (Laws of 1929, ch. 229, amending the Decedent Estate Law, the Surrogate’s Court Act, the Real Property Law, the Civil Practice Act, and the Personal Property Law, generally, in relation to decedents’ estates, taking effect September 1, 1930.) Surely, every election made by a widow under this law would not metamorphose income into principal.

That the income from this trust estate is not exempt as a gift or bequest, see Irwin v. Gavit (268 U. S. 161), which strongly indicates that income remains income, under the Federal Income Tax Act, until it clearly appears to be a return of a capital payment, or the payment of a bequest in installments. The same thought follows in Jones v. Commrs. of Inland Revenue ([1920] 1 K. B. p. 711).

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

Cabdozo, Ch. J., Pound, Lehman, Kellogg, O’Bbien and Hubbs, JJ., concur.

Ordered accordingly.


text:
    Rensselaer County Agricultural and Horticultural Society, Respondent, v. Edward C. Weatherwax et al., Appellants, Impleaded with Another.
    (Argued December 2, 1930;
    decided January 6, 1931.)

      Alex. T. Selkirk and John P. Weatherwax for appellants.
    Plaintiff has no power of eminent domain. (Sharp v. Spier, 4 Hill, 76: Hooe v. United States, 218 U. S. 322; Matter of Water Commrs., 96 N. Y. 351; Schneider v. City

      of Rochester, 160 N. Y. 165; Litchfield v. Bond, 186 N. Y. 66; Bell Telephone Co. v. Parker, 187 N. Y. 299; Board of Education v. O’Rourke, 191 App. Div. 317; People v. Fisher, 189 App. Div. 148; 233 N. Y. 663; Erie R. R. Co. v. Steward, 170 N. Y. 172; Matter of Niagara Falls & Whirlpool R. Co., 108 N. Y. 376; Matter of Split Rock Cable-Road Co., 128 N. Y. 408; Matter of Mayor of New York, 135 N. Y. 253.)

      H. P. Humphrey for respondent.
    The plaintiff as an agricultural society, receiving moneys from the State for premiums paid for improving the breed of cattle, 'is entitled to acquire real property needed for its corporate purposes by condemnation. (Cons. Laws, ch. 35, § 201.)
   Per Curiam.

By section 201 of Membership Corporations Law (Cons. Laws ch. 35), respondent was entitled to condemn real property needed for its corporate purposes. The question is whether it has been deprived of that right by section 206 of the Membership Corporations Law because it has capital stock. For all that appears the shares of stock were issued to raise money for corporate purposes only and do not entitle the owners to share in the corporate profits. The distinction between the two classes of capital stock mentioned in section 208 seems plain. Any agricultural or horticultural corporation may have capital stock. Such capital stock is of two kinds: First, the corporation may issue shares of capital stock to raise money for corporate purposes. Secondly, the corporation may go further and issue capital stock entitling its shareholders to dividends from the profits of the corporation. It is only when the second class of stock is issued that the corporation becomes subject to the stock corporation law ” and not to the provisions of the Membership Corporations, Law.

“ Capital stock ” means the amount of capital contributed by the members for corporate purposes. Certificates of stock, as the term is used in the act, may be deemed to be mere certificates of membership (Membership Corporations Law, § 40) when issued by corporations not organized for pecuniary profit. Ownership of capital stock does not of itself entitle the shareholders to dividends. Mere membership in a membership corporation implies equality, i. e., one vote for each member (Membership Corporations Law, § 41), but shareholders vote in accordance with the number of shares held by them. Therefore it would be proper to have shares of stock in a membership corporation which did not entitle the holder to dividends. If, however, the corporation becomes a true stock corporation, it may properly be made subject to the stock corporation law ” and taken out of the provisions of the Membership Corporations Law.

If the society, having had the right to condemn real property and having alleged that right in its petition, has lost the right by issuing capital stock entitling its shareholders to dividends,” the allegation of the petition is traversable and the answer permits proof of the fact. In the absence of proof to the contrary the right to condemn remains. (Laws of 1926, ch. 722, § 4; Matter of Brooklyn, W. & N. Ry. Co., 72 N. Y. 245.) Such is the situation before us.

The question certified should be answered in the affirmative and .the order affirmed, with costs.

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

Order affirmed, etc.

       § 206. Capital stock. An agricultural or horticultural corporation may have capital stock, not less than five thousand dollars, divided into shares of not less than ten dollars each, and may issue such shares at not less than the par value thereof to raise money for. its corporate purposes, if provision therefor be made in its certificate of incorporation or in a certificate filed pursuant to section thirty. An agricultural or horticultural corporation, which has issued or shall hereafter issue capital stock, entitling its shareholders to dividends from the profits of the corporation, shall be subject to the stock corporation law and not to the provisions of this chapter.