text:
    Thomas P. Hall, Respondent, v. Nassau Consumers Ice Company, Appellant.
    (Submitted December 9, 1932;
    decided January 10, 1933.)

      Theodore J. Miller for appellant.
    In the absence of an acceleration clause no action may be brought upon a debenture until the due date. (McCready v. Lindenborn, 172 N. Y. 400; Kelly v. Security Mutual Life Ins. Co., 186 N. Y. 16; Werner v. Werner, 169 App. Div. 9; Burtis v. Thompson, 42 N. Y. 246; Benecke v. Haebler, 38 App. Div. 344; Nichols v. Scranton Steel Co., 137 N. Y. 471; Roehm v. Horst, 178 U. S. 17; Baer v. Durham Duplex Razor Co., 228 App. Div. 350; 254 N. Y. 570; Foxell v. Fletcher, 87 N. Y. 476; Llewellyn Iron Works v. Littlefield, 74 Wash. 86; Hinton v. Jones, 136 N. C. 53; Harshaw v. McKesson, 66 N. C. 266; Weinman v. Blake & Knowles Steam Pump Works, 156 App. Div. 169.)

      John P. Carroll for respondent.
    It is provided in the bonds that in each of the years 1930 to 1939, inclusive, there shall be called for payment by lot under procedure to be determined by the board of directors, the sum of $5,000. The failure to comply with the terms thereof was a material and substantial breach justifying the maintenance of the present action. (Helgar Corp. v. Warner’s Features, 222 N. Y. 449; Fergus v. Chuck, 236 N. Y. 155; Jacob v. Young, 230 N. Y. 244; Central Trust Co. v. Chicago Auditorium Assn., 240 U. S. 581; Wester v. Casin Co., 206 N. Y. 514; Callahan v. K., A. C. & L. C. R. R. Co., 199 N. Y. 268.) The doctrine of anticipatory breach is not applicable. (Baer v. Durham Duplex Razor Co., 228 App. Div. 350; 254 N. Y. 570.)
   Crane, J.

The plaintiff has brought action upon seven debenture gold bonds of the Nassau Consumers Ice Company, Inc., of an authorized issue of $105,000, dated May 1, 1925. These bonds were made payable on May 1, 1940, “ unless sooner called for payment as hereinafter set forth,” with interest at the rate of eight per cent, payable the first days of May and November in each and every year. Each bond contained the following clause: On the 1st day of May, in each of the years 1930 to 1939, inclusive, there shall be called for payment by lot under procedure to be determined by the Board of Directors of the Nassau Consumers Ice Co., Inc., the sum of Five Thousand ($5,000) Dollars. This Bond may be called for redemption at 105 per cent of its face value and accrued interest.”

The defendant has failed to pay any interest on these bonds, and none of them were called for payment in 1930 or in 1931, as required by the above-quoted clause. The defendant corporation, moreover, has been taken over by a successor company, its assets have been distributed and the company was voluntarily dissolved prior to the year 1930. Upon these facts the trial court decided that there had been “ such an anticipatory inability on the part of the defendant to perform as amounts to a breach.” For this conclusion there may be some authority. (See Anson on Contract [Corbin’s American edition], § 385, and following sections; The American Law Institute, Restatement of the Law of Contracts, § 318; Central Trust Co. v. Chicago Auditorium Assn., 240 U. S. 581.)

By the terms of the bond the company agreed to draw by lot and pay bonds in the sum of $5,000 in 1930 and in 1931. For all that we know, the plaintiff’s bonds would have been among the number. This contingency was part of the contract and agreement which he paid for. The defendant failed to make any drawing. It failed to retire $5,000 of the bonds in 1930 and the same amomit in 1931. In this particular it broke its contract and its obligation. This is not the case of a failure to pay an installment due upon a money obligation (McCready v. Lindenborn, 172 N. Y. 400; Kelly v. Security Mutual Life Ins. Co., 186 N. Y. 16; Roehm v. Horst, 178 U. S. 1, 17; Baer v. Durham Duplex Razor Co., 228 App. Div. 350; affd., 254 N. Y. 570; 3 Williston on Contracts, § 1328.) The bond called for a principal payment, a retirement of the bonds, which, in view of the breach, we are justified in assuming included or may have included the plaintiff’s bonds.

The judgment below should be affirmed, with costs.

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

Judgment


source: Caselaw Access Project

author: Pound, Ch. J.

license: Public Domain

text:
    J. Woodward Claris, Respondent, v. J. Ernest Richards et al., Defendants, and Jacob H. Levantine, Appellant.

      (Argued December 13, 1932;
    decided January 10, 1933.)

      Alan Fox and I. Bernard Halpern for appellant.
    It was error for the trial court to base its decision upon a theory directly contrary to the theory upon which the case was tried. (Wright v. Delafield, 25 N. Y. 266; Wells v. Fisher, 237 N. Y. 79; Merry Realty Co. v. Shamokin & Hollis R. E. Co., 230 N. Y. 316; Fox Film Corp. v. Hirschman, 234 N. Y. 55; Vannier v. . Anti-Saloon League, 238 N. Y. 457.) Assuming that plaintiff had the right to shift his theory of recovery, the judgment should be reversed for failure of proof. Plaintiff failed to prove that he retained any property right in the stock and hence was not entitled to recover the proceeds of such stock as against defendant. (Schlesinger v. Cans, 113 N. Y. Supp. 96; Erlanger v. Sprung, .113 N. Y. Supp. 16.)

      H. H. Breland and D. N. Cook for respondent.
    Plaintiff’s unsuccessful attempt to prove fraud did not preclude him from proving any other facts within the pleadings and the judgment resting upon such other facts properly conforms to the pleadings and the proof. (Roberts v. Ely, 113 N. Y. 128; Minchin v. Minchin, 157 Mass. 265; Weil v. Boston Elevated Ry. Co., 218 Mass. 397; Kelly v.
      Insurance Co., 3 Wis. 254.) Since the plaintiff admittedly owned the stock on the day before its sale, the presumption is that such ownership continued down to the time of the sale unless this presumption is overcome by evidence to the contrary. . (Matter of Perry, 129 App. Div. 587; Gaston & Co. v. All Russian Zemsky Union, 221 App. Div. 732; United States v. Massachusetts B. & I. Co., 207 App. Div. 619.) Assuming that the burden rested upon the plaintiff to show that his indorsement and delivery of the stock were not done with intent to pass title, the defendant cannot raise this objection since he objected on the trial to the introduction of evidence offered by the plaintiff to show the intent with which he indorsed and delivered the stock in question. (Walsh v. N. Y. C. R. R. Co., 204 N. Y. 58; Roche v. Nason, 185 N. Y. 128; Fogarty v. Bogart, 43 App. Div. 430; Kramer v. Grant, 60 Mise. Rep. 109.)
   Pound, Ch. J.

The plaintiff in this action was the owner of 800 shares of American Radiator Company stock. He indorsed the stock certificate in blank, delivered it to a branch manager of the Marine Trust Company in Buffalo, who forwarded it to Chase, Reade & Co., a brokerage firm in New York, and subsequently he received from his bank registry mail receipts for the stock, signed by Chase, Reade & Co. Subsequently one Bentley, an officer of Chase, Reade & Co., delivered the certificate to Louis Kaiser & Co., a Stock Exchange firm, which sold the stock for Bentley’s account at Bentley’s direction. The proceeds were forwarded to the defendants comprising the copartnership of Richards & Co. Those defendants paid Bentley $10,000 and at his direction credited the balance to the appellant Levantine. The credit given Levantine was in part payment for a sale of whisky, sold by him to Bentley.

The sum of $14,000, a part of the proceeds of the sale, having been traced into the hands of Richards & Co., this action was started to recover the amount as having been received to and for the use and benefit of the plaintiff. Richards & Co. obtained an order interpleading Levantine and deposited the balance of $14,000 remaining in its hands to the credit of Levantine with the Chamberlain of the city of New York, and the action as against Richards & Co. was discontinued.

Under the plaintiff’s pleading it was proper for plaintiff to attempt to prove fraud or money had and received in any other form. (Roberts v. Ely, 113 N. Y. 128, 131, 132.) At the trial plaintiff attempted to establish fraud. Counsel for the plaintiff stated in one place: " I want to show the fraud of this whole transaction.” Again he said: I desire to prove that it was taken from us by fraud,” and again: “ We are suing to get back the proceeds of the sale of property out of which we were defrauded by a house known as Chase, Reade & Co.”

Fraud implies that plaintiff was induced to part with title through false representations. (Weigel v. Cook, 237 N. Y. 136, 141.) The decision is that title never passed from plaintiff. The plaintiff succeeded in proving that the stock was indorsed, delivered to the bank and received by Chase; Reade & Co., but he was not allowed to show his instructions to the bank, this testimony having been excluded over defendants’ objections. It somewhat nebulously appears that plaintiff entered into a contract with Chase, Reade & Co. for the purchase of certain Pacific Gas Company stock and delivered the Radiator Company stock with other stock for cash in payment for the gas company stock, but the only substantial proof is that plaintiff indorsed and caused his stock to be delivered to Chase, Reade & Co., and that the defendants, for a debt of Bentley’s, obtained credit for $14,000 out of the sale price.

In this state of the evidence, plaintiff, having failed to establish fraud, the court found as a fact that at the time of the sale of the Radiator Company stock by Kaiser & Co., plaintiff was the owner of said stock, and as a further fact, that at the direction of Bentley, Richards & Co. credited the proceeds to the extent of $14,000 to Levantine in payment for rye whisky, theretofore delivered to Bentley by Levantine. It found as conclusions of law that the sale by Kaiser & Co. for the account of Bentley was unauthorized, wrongful and in violation of plaintiff’s rights; that an antecedent debt for whisky sold and delivered is not a valid and legal consideration and that the plaintiff’s right and title to the proceeds is superior to that of the defendant Levantine. The court adjudged to plaintiff the amount on deposit with the Chamberlain.

Plaintiff may recover on this record, if at all, upon a basis of his ownership of the stock at the time of the sale.

This he proceeds to establish by seeking to invoke a presumption of the continuance of ownership. (Wigmore on Evidence [2d ed.], § 2530.) In Richards v. Wells Fargo Express Co. (215 N. Y. 351, 355) stock certificates had, as in this case, been indorsed in blank by the owner and were thereafter found in the possession of another. This court said: “ the inference of ownership which arose from the evidential facts found was an inference of fact, not a conclusion of law, and a finding of fact upon this subject should have been made.” Such a finding of fact has been made in this case in plaintiff’s favor in these words: “At the time of the sale of said 800 shares of American Radiator Stock, as aforesaid [Kaiser & Co. for the account of Bentley], plaintiff was the owner of said stock,” although this finding was based on the presumption of continued ownership only.

A claim of ownership of the stock having been thus made it is contended by the respondent that no presumption arises on the other evidential facts that plaintiff intended to transfer title to Chase, Reade & Co. for the reason that the indorsement and delivery of the stock certificate was equally consistent with other possibilities besides that of transfer of title, i. e., that it was for collateral or for sale in the open market; that the burden was, therefore, on the defendants to show the purpose of the transfer and that defendants, in any event, cannot raise the objection that there is no proof of retention of title since they objected on the trial to the introduction of evidence offered by the plaintiff to show the intent with which he indorsed and delivered the stock in question, and as such evidence was excluded on defendants’ objection, they should not be permitted to profit by their objection to the very proof which the plaintiff sought to make. (Walsh v. N. Y. C. & H. R. R. R. Co., 204 N. Y. 58, 65, 66.)

No presumption arising from ownership was relied on at the trial. Plaintiff sought to make out a case by offering evidence showing that he had parted with ownership. Now the court is asked to take a presumption not relied on at the trial and add to it the suppositional evidence which was excluded in order to support a finding of continued ownership and intention to retain ownership. The argument that a case may now be built up in this rococo fashion seems specious. The exclusion of evidence cannot be made to serve a Janus-like purpose.

The conduct of the trial court which tried the case on the theory of fraud and rendered a decision on another theory which was not distinctly and fairly litigated, is at best a departure from the strict rules of pleading and proof. (Wright v. Delafield, 25 N. Y. 266, 270.) In the ordinary administration of justice, the judgment should follow the proofs, although the pleadings may, by mutual consent, be disregarded on the trial. Assuming, however, that by the liberalization of the rules of practice we may say that no error was committed by shifting the theory of recovery after the trial, the only reasonable inference from the offer of the excluded evidence is that plaintiff was seeking to produce evidence to prove fraud and that the evidence, if admitted, would tend to establish an intent to deliver title to the stock. This would shift to defendants the burden of going on with the case on this point. The plaintiff failed to establish any cause of action.

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

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

Judgments reversed, etc.


author: Hubbs, J.

text:
    The People of the State of New York, Respondent, v. Michael Alex, Appellant.
    (Argued November 28, 1932;
    decided January 10, 1933.)

      Joseph Lonardo, Richard J. Barry and David M. Wolff for appellant.
    It was error to exclude the evidence of defendant’s complaint upon arraignment. (People v. Wood, 126 N. Y. 249; People v. Kinney, 202 N. Y. 389.) The excluded testimony was competent. (People v. Randazzio, 194 N. Y. 147; People v. Taranto, 214 N. Y. 199; People v. Nunziato, 233 N, Y. 394; People v. Kinney.
      202 N. Y. 389; State v. Kinder, 10 S. W. Rep. 77; Lefevre v. State, 35 N. E. Rep. 52; Palmer v. State, 36 N. E. Rep. 130; State v. Hill, 65 N. J. L. 626; Bates v. State, 84 So. Rep. 373; Berry v. State, 111 Pac. Rep. 676; Thomas v. State, 32 S. W. Rep. 771; People v. Joyce, 233 N. Y. 61; People v. Strait, 154 N. Y. 165; People v. Gerdvine, 210 N. Y. 184; People v. Ohanian, 245 N. Y. 227.)

      Charles S. Colden, District Attorney (Mordecai Konowitz of counsel), for respondent.
    The evidence relating to the circumstances under which the defendant’s confession was obtained presented a fair triable issue, the issue was fairly tried, and properly submitted to the jury, and the verdict was justified by the evidence. (People v. Wiener, 248 N. Y. 118; People v. Borowsky, 258 N. Y. 371; People v. Doran, 246 N. Y. 41.)
   Hubbs, J.

On June 15th, 1931, at about eleven o’clock at night, the defendant was arrested in New York city and thereafter charged with the crime of murder in the first degree. The next day, June 16th, at about three o’clock in the afternoon, he signed a confession in which he confessed to the commission of the crime. He had neither been arraigned nor given the privilege of consulting counsel before signing the confession.

The next morning after signing the confession, June 17th, he was arraigned in County Court. He was thereafter indicted and brought to trial in County Court. During the trial the Assistant District Attorney offered the written confession in evidence. Counsel for the defendant objected to its receipt in evidence upon the ground that it was not voluntarily made; that it had been extorted from defendant by the police by means of severe beatings and threats which they made of further physical punishment if he refused to confess and repeat the statements in regard to the commission of the crime which they had made to him. The trial court permitted a preliminary examination for the purpose of determining whether the confession should be received in evidence.

The defendant testified in detail in regard to beatings which he claimed the police officers inflicted upon him. He testified in substance that he was told by the police what he must state in a confession, and was warned that if he did not they would continue to beat him; that he made the confession and stated in it what he was told to state by the police because he could not stand the pain inflicted and because of fear of further physical punishment and that the confession was false as he was innocent of the crime charged. He also testified that as a result of the beatings, marks were left upon his body.

He was interrogated by his counsel as to what occurred when he was arraigned in County Court thirty-six hours after his arrest. By proper questions, counsel sought to establish that at that time defendant complained to the County Judge that he had been beaten by the police; that he ripped ” off his coat and shirt in the court room in the presence of the Judge and offered to show the Judge the bruises on his body, and asked the Judge to look at his back. The Assistant District Attorney objected to the questions and the court sustained the objections and refused to permit the defendant to testify in regard to what took place in the presence of the court upon the arraignment.

The defense called as witnesses an Assistant District Attorney and the calendar clerk of the District Attorney’s office, who were present in court when the defendant was arraigned. Substantially the same questions were asked those witnesses, in an effort to establish that the defendant had complained to the court that he had, been beaten by the police and that there were marks upon his body. The trial court sustained objections made by the Assistant District Attorney and refused to permit the witnesses to testify upon that subject.

Thereafter, the confession was received in evidence over the objection and exception of defendant’s counsel.

Defendant’s conviction rests almost entirely upon his confessions. The evidence sought to be elicited from the defendant and the two witnesses was competent and pertinent and should have been received. (People v. Barbato, 254 N. Y. 170, 173.)

The general rule is that the evidence of a witness cannot be corroborated by proof that the witness made the same statement on a prior occasion when not under oath. There are, however, well-established exceptions to the rule. Thus evidence that the injured person made timely complaint of the injury is properly received in a criminal trial where the defendant is charged with rape, robbery or larceny. (People v. O’Sullivan, 104 N. Y. 481; 2 Wigmore on Evidence [2d ed.], § 1142.)

It is under the principle involved in such cases that evidence that the defendant made complaint when arraigned should have been received.

A confession of á defendant cannot be received in evidence against him when made under the influence of fear produced by threats. (Code Crim. Pro. § 395.)

The police officers charged by the defendant with mistreating him testified that he had not been beaten or threatened or induced to make the confession through fear. Their version of what transpired was corroborated by an Assistant District Attorney who took the confession and the stenographer who typed it. The question of fact as to whether the confession was voluntarily made was necessarily submitted to the jury. (People v. White, 176 N. Y. 331, 349; People v. Nunziato, 233 N. Y. 394, 398; People v. Barbato, supra.)

The Trial Judge charged that the jury could consider the written confession only in the event that they found that it was not made under the influence of fear produced by threats. That was a vital issue in the case. When that issue is involved, the question of whether a defendant made complaint of mistreatment at the first opportunity or within a reasonable time is material and relevant. It is of great assistance to the jury in determining whether a defendant’s claim that a confession was induced by-threats and fear is the truth or an afterthought, a concocted story to escape the effect of the confession. If complaint is not timely made, when it is made suspicion is aroused that it is a subterfuge.

Here the defendant attempted to prove that before he had the benefit of counsel and within thirty-six hours after his arrest, at his first appearance before a judicial officer, he complained to the Judge; took off his coat and shirt and exposed his back for the purpose of showing the injuries which he claimed had been inflicted by the police. During all of the time subsequent to his arrest he had been in charge of the police. That was his first opportunity to complain about the treatment which he claimed that he had received.

If the testimony offered had been received, it would have tended to establish that he had made timely complaint and would have had a direct bearing upon the truth of his story.

The refusal by the trial court to receive such testimony was highly prejudicial to the defendant and constitutes reversible error.

The defendant had the legal right to have the evidence sought to be elicited by the questions received and considered by the jury upon the issue as to whether the confession was voluntarily made. The refusal to receive it deprived the defendant of a fair trial.

An error which prevents proper consideration by the jury of the only question relied on by the defendant is substantial, not technical, and we have no right to disregard it, although we may approve of the verdict.” (People v. Gerdvine, 210 N. Y. 184, 187.)

The judgment of conviction should be reversed and a new trial ordered.

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

Judgment of conviction reversed, etc.


author: O’Brien, J.

text:
    In the Matter of Harry G. Fromberg, as Committee of the Estate of Robert Thompson, an Incompetent Person, Respondent. United States Fidelity and Guaranty Company, Appellant.
    (Argued November 2, 1932;
    decided January 10, 1933.)

      William J. McArthur and Sunshine Ulman for appellant.
    A contract cannot be set aside unless the parties lack the capacity to contract. (Civ. Pr. Act, §§ 1384-k, 1549.)

      Harry G. Fromberg and Louis Stark for respondent.
    The Supreme Court has inherent jurisdiction over lunatics and their property and neither the principal nor the surety on the bond may interfere with such jurisdiction. (Civ. Pr. Act, § 1375; Sporsa v. German Sav. Bank, 192 N. Y. 8; Matter of Andrews, 192 N. Y. 514; Matter of Tracy, 1 Paige, 580.)
   O’Brien, J.

In 1922 Harry G. Fromberg, by order of the Supreme Court, was appointed committee of the estate of Robert Thompson, an incompetent, and he filed a bond in the sum of $1,000. In 1924 he was ordered by the same court to file an additional bond for $3,500. In each instance he entered into a separate contract with the United States Fidelity and Trust Company which, under these contracts, issued two separate bonds as surety. The annual premiums payable by the committee on the two separate bonds were $30 and were paid by him. If the committee had filed a single bond for $4,500, the annual premiums payable by him would have amounted only to $22.50. The difference during the course of six years is $45, and the courts below have ordered the surety to refund this sum to the committee.

No theory upon which this order can be sustained is apparent. Conceding the broad jurisdiction possessed by the Supreme Court over the estates of incompetents, it does not extend so far as to authorize it to make a new contract in substitution for one which has been executed by a committee in strict conformity with the statute. The contract between the surety and the individual who performed functions as committee was personal to the individual. He is the one for whose acts the surety assumed liability and he is the one to whom it has the right to look for payment of the premiums. The obligation to discharge the debt incurred for his bonds is his. The fact that he is entitled to recover from the estate, as part of his expenses, a reasonable sum not exceeding one per cent upon the amount of his bond (Civ. Pr. Act, §§ 1384-k, 1549) certainly does not confer power upon any court to disrupt a valid contract. If the committee’s agreements result in an excessive charge, the court in the exercise of its jurisdiction over the estate of an incompetent in respect to the allowance of reasonable expenses to the committee possesses the power in its discretion to withhold from the committee reimbursement for such part of the premiums as it may deem excessive, even though the total amount may be less than one per cent of the amount of the bond. Judicial power relates to the protection of the estate and not to supervision of personal contracts made by an individual who is not a ward of the court and who is individually hable upon them.

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

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

Orders reversed, etc.


author: Per Curiam.

text:
    Faith G. Severance, Appellant, v. Harold C. Severance, Respondent.
    (Argued December 8, 1932;
    decided January 10, 1933.)

      Charles H. Tuttle for appellant.
    Section 1159 of the Civil Practice Act has no application to the provision of the final judgment approving the agreement between the parties. That provision was not for ah'mony or support within the meaning of the section; and, in any event, it should not have been stricken from the final judgment. Furthermore, the Appellate Division erred in holding that the provisions for periodical payments and for support and maintenance terminated upon the remarriage of the wife. (Collins v. Collins, 80 N. Y. 1; Wilson v. Hinman, 182 N. Y. 408; Skidmore v. Skidmore, 160 App. Div. 594; Barnes v. King, 129 App. Div. 192; Matter of Junge, 125 Mise. Rep. 707; Johns v. Johns, 44 App. Div. 533; 166 N. Y. 613; Carson v. Murray, 3 Paige, 483; Mann v. Hulbert, 38 Hun, 27.)

      Henry A. Uterhart and Edward D. Brown for respondent.
    The agreement being for the support of the plaintiff, having been incorporated in the decree by the plaintiff, thereby became subject to the mandatory provision of section 1159 of the Civil Practice Act and was properly stricken from the decree. (Schley v. Andrews, 225 N. Y. 110; Mowbray v. Mowbray, 136 App. Div. 513; Skidmore v. Skidmore, 160 App. Div. 594; Wetmore v. Wetmore, 162 N. Y. 503; Altman v. McMillan, 115 App. Div. 234; Wilson v. Hinman, 182 N. Y. 408; Colone v. Colone, 24 N. J. Eq. 440; Pullin v. Pullin, 52 N. J. Eq. 9.)
   Per Curiam.

The provision of the final judgment of divorce directing payments of money for the support of the plaintiff ” (Civ. Pr. Act, § 1159) should be stricken out, the plaintiff having remarried, but without prejudice to the right of the plaintiff to seek relief under the provisions of the contract of December 12,1925. We express no opinion as to her right to support under such contract.

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

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

Ordered accordingly.


author: Hubbs, J. Crane, J. (dissenting).

text:
    Hyman Katz et al., Respondents, v. Harry B. Mendelsohn et al., Defendants, and National Surety Company et al., Appellants.
    (Argued October 20, 1932;
    decided January 10, 1933.)

      Adam K. Strieker for National Surety Company, appellant.
    A surety who pays the principal’s debt becomes subrogated in law to all the rights and remedies of the creditor for the collection of the debt, against any one who is hable therefor. (National Surety Co. v. National City Bank, 184 App. Div. 771; Mathews v. Aikin, 1 N. Y. 595; Townsend v. Whitney, 75 N. Y. 425; Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N. Y. 137; Fidelity & Deposit Co. v. Queens County Trust Co., 226 N. Y. 225; Asseis Realization Co. v. Mercantile Nat. Bank, 167 App. Div. 757; Matter of Oarfunkel, 8 Fed. Rep. [2d] 790; Sobel v. Engels, 188 N. Y. Supp. 436; Niagara County Bank & Trust Co. v. LaPort, 233 App. Div. 501.) Defendant Mendelsohn had the right, notwithstanding the fact that he held the bond of the surety company, to issue execution on his deficiency judgment against the plaintiffs herein. The bond was for his protection and security, not theirs. (Townsend v. Whitney, 75 N. Y. 425.)

      Harry A. Yurdin for Frances Jelinek, appellant.

      Irving Lemov for respondents.
    The equities of plaintiffs are superior to those of the defendants-appellants, and the equitable privilege of subrogation cannot be invoked in behalf of the latter. (Bell v. Greenwood, 229 App. Div. 550; Pittsburgh-Westmoreland Coal Co. v. Kerr, 220 N. Y. 137; Schreyer v. Saunders, 39 App. Div. 8.) Plaintiffs’ obligation on their collateral bond has been discharged through payment by the principal debtor. (.Arnold v. Greene, 160 N. Y. 566; Pease v. Egan, 131 N. Y. 262; Schreyer v. Saunders, 39 App. Div. 8.)
   Hubbs, J.

This action was instituted to require the defendant Frances Jelinek to execute and deliver to the plaintiffs a satisfaction of a deficiency judgment against the plaintiffs and to enjoin and restrain all of the defendants from enforcing that judgment against them.

On September 15th, 1927, the plaintiff Goldie Katz was the owner of an apartment house. On that day she conveyed the same to a corporation known as Sorice Operating Company, Inc., and as security for the payment of a part of the purchase price she received from the corporation and one Antonio Sorice a second mortgage for $20,000 on the premises conveyed. On August 2d, 1928, Goldie Katz sold and assigned that bond and mortgage to Harry B. Mendelsohn and, as collateral thereto, Goldie Katz and her husband, Hyman Katz, plaintiffs in this action, executed and delivered to Mendelsohn a collateral bond in the sum of $20,000. Such collateral bond provided that it was given as collateral ” and as further and additional security.”

Thereafter, on January 15, 1929, Sorice Operating Company, Inc., conveyed the mortgaged premises to the defendant Assunta Sorice by deed. She did not assume the payment of the mortgage then held by Mendelsohn as assignee. Therefore, at that time, Assunta Sorice was the owner of the property subject to the second mortgage, but had not assumed and agreed to pay it.

The defendant Mendelsohn was the owner of the bond and mortgage and held as collateral thereto the bond of the plaintiffs, Hyman and Goldie Katz. On September 15, 1929, he commenced an action to foreclose the mortgage. He made the plaintiffs, Hyman and Goldie Katz, parties defendants and prayed for a personal judgment in case of a deficiency on their collateral bond. In that action Mendelsohn secured the appointment of a receiver. The receiver duly qualified and thereafter the owner of the equity of redemption, Assunta Sorice, who was not liable personally for the mortgage debt, made an application to the Supreme Court for an order vacating the receivership and an order was made in accordance with that application upon the condition that the owner of the equity of redemption, Assunta • Sorice, file a surety bond in the sum of $12,000, conditioned upon the said Assunta Sorice paying any judgment recovered in favor of the plaintiff Mendelsohn against any of the defendants in said action to foreclose the mortgage.

The bond given by Assunta Sorice, as principal, and National Surety Company (appellant herein), as surety, ■unto Harry B. Mendelsohn, plaintiff in the foreclosure action, recites that whereas the order directed that the receivership be vacated upon the defendant Assunta Sorice filing a surety bond in the sum of $12,000 to secure any judgment which may be entered in said action, “ now therefore, the condition of this obligation is such that in the event that a judgment is entered against any of the defendants in said action, then this obligation is to remain in full force and effect, otherwise it is to be considered . void.”

The bond having been filed, the foreclosure action proceeded to judgment and resulted in a deficiency judgment in favor of Mendelsohn and against Antonio Sorice, Sorice Operating Company, Inc., and Goldie Katz and Hyman Katz, the plaintiffs herein, in the sum of $6,969.28. The deficiency judgment as against Hyman Katz and Goldie Katz was granted by virtue of the collateral bond given by them to Mendelsohn. The National Surety Company gave its check to Mendelsohn, the plaintiff in the foreclosure action, in the sum of $6,984.38, the amount of the deficiency judgment plus interest. The check recited that it was in full payment, satisfaction, release and discharge of all of its liabilities under the aforesaid bond as surety and for an assignment of said deficiency judgment together with the interest thereon. Mendelsohn, upon receipt of the check, executed and delivered to the National Surety Company an assignment of said judgment. The surety company assigned the deficiency judgment to the defendant Frances Jelinek, as nominee of the National Surety Company, the proceeds upon collection to be held in trust for the National Surety Company.

Jelinek caused an execution to be issued against Hyman Katz and Goldie Katz which was returned wholly unsatisfied and thereafter an order was made in supplementary proceedings requiring Hyman Katz to appear and be examined concerning his property. Thereupon, Hyman Katz and Goldie Katz brought this action against the National Surety Company, Jelinek, Mendelsohn and Assunta Sorice to require Jelinek to deliver to them a satisfaction of the judgment and to enjoin all of the defendants from proceeding to collect it.

The defendant Sorice was not personally liable to the holder of the mortgage although she was the record owner of the property. _ By giving the surety bond she assumed the payment of the mortgage debt and the National Surety Company became her surety. When her surety paid the amount which she became liable under. the surety bond to pay, it became entitled to subrogation as to any claim against the defendant Sorice only. The only claim which the holder of the mortgage had against the defendant Sorice was upon the surety bond in question. She was not otherwise hable. She assumed the liability to pay the deficiency judgment for the purpose of getting the rents from the mortgaged property and when she paid the deficiency judgment or caused it to be paid by her surety, she was only fulfilling an obligation which she assumed upon a valuable consideration.

The plaintiffs’ agreement was only to indemnify Mendelsohn against loss on the mortgage. Their liability was to cease upon payment of the amount due. That event has occurred. To extend the right of subrogation as against the plaintiffs in this action would be to give to the defendant Sorice a right which she would not have had had she paid the mortgage debt prior to foreclosure and would allow her to charge the plaintiffs herein with an obligation which, for a valuable consideration, she contracted to pay when she executed the surety bond for the purpose of having the receiver discharged so that she could collect the rents.

There is no evidence as to the amount of rent received by Assunta Sorice and there is, therefore, no evidence as to the extent of the consideration received by the defendant Sorice for the execution of the surety bond. We must, therefore, assume that the consideration was ample.

The principle of law governing the determination in this case is clearly stated in Brandt on Suretyship and Guaranty [lsted.], section 227, page 319: “A surety who becomes bound for a debt during the course of legal proceedings against the principal for the collection of the same, is not a cosurety with the original surety for the debt, nor entitled to contribution from him, and if such original surety afterwards has to pay the debt, he is entitled to subrogation to the creditor’s rights against such subsequent surety, and may collect the whole amount that he has paid from such subsequent surety.” (Cf. Hinckley v. Kreitz, 58 N. Y. 583, 590; Barnes v. Mott, 64 N. Y. 397; Wronkow v. Oakley, 133 N. Y. 505; Culliford v. Walser, 158 N. Y. 65; Fidelity & Deposit Co. v. Bowen, 123 Iowa, 356; Southwestern Surety Ins. Co. v. King, 68 Okla. 100.)

The Sorice Operating Company, the mortgagor which executed the bond and mortgage, was the principal debtor. The plaintiffs who executed the collateral bond agreement upon the sale and assignment of that bond and mortgage to Mendelsohn occupied the relation of sureties. When the defendant National Surety Company, during the pendency of the foreclosure action to collect the principal debt secured by the bond and mortgage, executed as surety the bond given to secure the discharge of the receiver, it did not become a co-surety with the plaintiffs for the principal debt or entitled to contribution from them.

Assunta Sorice only became personally liable when she voluntarily assumed liability for a valuable consideration as principal on the bond executed by the National Surety Company to secure the discharge of the receiver. The consideration for her liability was entirely separate and apart from the mortgage debt and likewise entirely separate and apart from the consideration for the Katz collateral bond. Her obligation and that of the surety company was a new obligation although it happened to be an obligation to pay the same debt which the Katz bond was given to secure.

The principal for the mortgage debt and on the surety bond are different. On the first, the Sorice Operating Company, Inc., and Antonio Sorice are principals. On the second, Assunta Sorice is principal. Under those facts, the surety of the second principal upon payment cannot be subrogated to the rights of the creditor of the first principal.

The fact that there existed an outstanding collateral obligation on the part of the plaintiffs to pay the debt of the Sorice Operating Company, Inc., does not constitute a consideration for this new independent contract by Assunta Sorice and the National Surety Company to pay it. There is no evidence to the effect that the plaintiffs knew of or requested that the second bond should be executed. The presumption is to the contrary, as the execution and delivery of the second bond and the discharge of the receiver as a result of its execution and delivery deprived the plaintiffs of the valuable right to have the rents applied by the receiver in reduction of the mortgage debt, thereby reducing their liability.

For the same reason, it cannot be successfully urged that the execution and delivery of the second bond was for their benefit.

•Assunta Sorice and the National Surety Company secured the discharge of the receiver by voluntarily executing the second bond. The plaintiffs were injured by their act as it prevented the application of the rents to the reduction of the mortgage debt. No injustice is done to the surety company in being obliged to pay what it agreed to pay, without the right of subrogation against the plaintiffs, who had no relation to the second bond.

It is true that the receiver was appointed for the benefit of the plaintiff in the foreclosure action. Nevertheless, the plaintiffs herein being parties defendants in that action in which a personal judgment was sought against them for any deficiency had an interest in the receivership.

The judgment should be affirmed, with costs.

Crane, J. (dissenting).

On September 15,1927, Goldie Katz was the owner of certain property in the borough and county of Queens, New York city, consisting of a six-story brick apartment house, having a total of fifty-three apartments, and a rental income of about $30,000 per year. She conveyed the premises to the Sorice Operating Company, Inc., taking back a purchase-money mortgage in the sum of $20,000, to secure a bond in like amount. In August of 1928 Goldie Katz desired to sell this mortgage to Harry B. Mendelsohn, who refused to take it without further and additional security. The bond and mortgage were in and of themselves insufficient security in his opinion for $20,000. Thereupon, Goldie Katz and Hyman Katz executed their bond to the said Harry B. Mendelsohn as further and additional security, and transferred and assigned to him the bond and mortgage. Mendelsohn then held a bond and mortgage of the Sorice Operating Company, Inc., for $20,000, and the bond of Hyman Katz and Goldie Katz as additional security. This latter bond, dated the 2d day of August, 1928, recites the bond and mortgage of the Sorice Operating Company, Inc., for $20,000, and states:

Whereas, the said Harry B. Mendelsohn has refused to accept an assignment of said hen and accept said bond and mortgage without further and additional security; and
“ Whereas, as such additional security for the said sum of money, the undersigned, Goldie Katz and Hyman Katz, have agreed to execute a bond collateral to the bond above mentioned,
“Now, Therefore, We, Hyman Katz and Goldie Katz, * * * are held and firmly bound, jointly and severally unto the said Harry B. Mendelsohn in the sum of $20,000.00.”

The condition of the bond is that the Sorice Operating Company, Inc., its successors or assigns, shall pay to Harry B. Mendelsohn the sum of $20,000, according to the terms of the bond and mortgage recited.

In January of 1929 the Sorice Operating Company, Inc., conveyed the mortgaged premises to the defendant Assunta Sorice by deed duly recorded. In September of the same year she, as owner of the equity of redemption, defaulted in the payment of an installment of principal of $10,000 and accrued interest, and the mortgagee, Harry B. Mendelsohn, commenced foreclosure action in the Supreme Court. By the terms of the mortgage the holder was entitled to the appointment of a receiver of the rents and profits in any action to foreclose said mortgage. Thereupon, on the application of Mendelsohn, the court appointed one Otto M. Gabler a receiver of these rents and profits in behalf of and for the benefit of the said mortgagee or holder of the mortgage. To this foreclosure action Hyman and Goldie Katz were parties as well as the mortgagor and its grantee, Assunta Sorice. The collection of rents, pending foreclosure, was an important part of the mortgage security, and the appointment of the receiver for this purpose was pursuant to the terms of the mortgage and for the benefit of the mortgagee therein, Harry B. Mendelsohn. (Ranney v. Peyser, 83 N. Y. 1; Kroehle v. Ravitch, 148 App. Div. 54; Stewart v. Fairchild-Baldwin Co., 91 N. J. Eq. 86.) The bond required of the receiver was $15,000. Shortly after the receiver’s appointment the owner of the equity, Assunta Sorice, applied for his discharge, which meant in effect that she desired, as owner, to collect the rents until her ownership terminated by a sale of the property in foreclosure. Her application was granted upon condition that she give a bond to the mortgagee, Mendelsohn, to secure him for any judgment he might recover in the foreclosure action. The amount of the bond was to be $12,000, or less than the bond required of the receiver for the collection of rents. It is perfectly evident that the application of the owner to supplant the receiver had reference solely to the collection of rents. The receiver was appointed for this purpose, and had given his bond in $15,000. By order of the court he was supplanted, and the owner was restored to her right to collect the rents, upon giving a $12,000 bond to account therefor. She gave the bond of the National Surety Company and no doubt thereafter collected the rents although the amount thereof does not appear in this record. Her bond, furnished by the National Surety Company, recites the appointment of Otto M. Gabler as receiver in the pending foreclosure action, brought by Harry B. Mendelsohn, and continues in this fashion:

“ Whereas, on October 5th, 1929, an order to show cause was granted in said action staying the receiver from collecting any of the rents and profits arising out of the premises mentioned in said complaint, and
“ Whereas, upon the return day of said order, to wit, October 9th, 1929, after due deliberation was had the Court ordered that said order dated September 28th, 1929 should be vacated upon the defendant Assunta Sorice filing a surety company bond in the sum of $12,000.00 to secure any judgment which may be entered in said action,
“Now Therefore, the condition of this obligation is such that in the event that a judgment is entered against any of the defendants in said action, then this obligation is to remain in full force and effect, otherwise it is to be considered void.”

The foreclosure action resulted in a deficiency judgment against the mortgagor Sorice Operating Company, Inc., and Hyman Katz and Goldie Katz on their bond to Mendelsohn, heretofore mentioned. The National Surety Company paid Harry B. Mendelsohn the amount of this deficiency judgment and took an assignment thereof. The draft given in payment, dated July 15, 1930, says that it is in full payment of all liability of the National Surety Company upon its bond, executed in behalf of Assunta Sorice " and for an assignment of the deficiency judgment in the sum of $6,969.28 * * * entered in favor of Harry B. Mendelsohn and against Antonio Sorice, et al.”

The National Surety Company or its assignee, Frances Jelinek, seeking to collect the amount of this deficiency judgment under the doctrine of subrogation, commenced proceedings against Hyman and Goldie Katz, which has resulted in the bringing of this action by the latter against all parties seeking to enjoin the surety company and Jelinek from talcing any further proceedings and for a direction declaring the deficiency judgment satisfied as against them. In considering the respective rights of these parties, certain principles must be borne in mind.

In the first place, the receiver of the rents was appointed for the benefit of Mendelsohn, the plaintiff in the foreclosure action. He was not obliged to apply for a receiver and could permit the owner of the equity to collect the rents up until a judgment in foreclosure. The Katzes would have been liable for the deficiency. Whatever rights as guarantors they might have had for the appointment of a receiver for their benefit in order to reduce their liability as guarantors, were not exercised by them. They were parties to the action, but made no move. The rents collected by the receiver would have reduced the deficiency as they would have been applied upon the mortgage debt. In order to permit the owner to continue to collect the rents instead of the receiver, the National Surety Company gave a bond to Mendelsohn for his benefit agreeing to pay any judgment he might recover. This was not given for the benefit of Katz and was evidently given solely to secure the rents which might be collected or could be collected by the owner instead of the receiver. Mendelsohn having as a primary security the bond and mortgage and also the bond of Hyman and Goldie Katz, could have proceeded to collect his deficiency judgment out of this bond given by the Katzes. No law compelled him to resort to the bond of the National Surety Company in the first instance. Its obligation was secondary. The National Surety Company stepped up and paid Mendelsohn the amount of the judgment and took an assignment. It is subrogated to all his rights, including the. security of the Katz bond.

This does not mean that the National Surety Company can proceed to collect the full amount of the deficiency judgment. All the parties are in equity and, therefore, must do equity. The owner collected rents which would have gone to Mendelsohn to reduce the amount of the mortgage debt. If she had not interfered with the aid of the National Surety Company the deficiency judgment would have been much less. The bond of the National Surety Company in reality was intended to secure these rents, in other words, to make, good to Mendelsohn the rents which he would have collected under the receivership. The owner, Assunta Sorice, being insolvent, the National Surety Company is liable to Mendelsohn and in equity to the two Katzes for the amount of rent collected by Assunta Sorice, or the amount she should have collected in the exercise of ordinary care and prudence. This is what the receiver would have been liable for, and his liability passes on to the surety company by substitution.

Therefore, the National Surety Company has no right to collect from Hyman Katz and Goldie Katz the full amount of the deficiency judgment. From that must be deducted the amount of rents collected or which should have been collected. The record in this case is barren of any evidence on this point. Nowhere does it appear what became of the rents, but when the parties are once in equity, the decree will adjust their rights according to the facts. The plaintiff seeks a judgment restraining the defendants from collecting the full amount of the deficiency judgment and for its satisfaction. The court must determine the amount of the rents collected or which should have been collected less necessary expenses and deduct this from the deficiency judgment, that is, the plaintiff should have a judgment which satisfies the deficiency judgment to this extent and which enjoins the surety company from collecting more. However, if no amount of rents is due from the owner or surety company, then judgment must be given for the defendants, dismissing the complaint. The judgment of the Appellate Division should be reversed and a new trial granted, with costs to abide the event.

Pound, Ch. J., Lehman and O’Brien, JJ., concur with Hubbs, J.; Crane, J., dissents in opinion, in which Kellogg and Crouch, JJ., concur.

Judgment affirmed.


author: Crane, J.

text:
    Jeannette Zuckerman, Appellant, v. George F. Parton, Respondent. Joseph Zuckerman, Appellant, v. George F. Parton, Respondent.

      (Argued December 14, 1932;
    decided January 10, 1933.)

      Thomas A. McKennell, Jacob A. Bernstein, Aaron Goody and Junius P. Abramson for appellants.
    Irrespective of the character of the proof by which it was sought to establish the garage owner’s status as that of an independent contractor, the fact that he occupied that relation constituted no ground for the dismissal of the complaints in view of the •inference of defendant’s permission to use the car which the jury would have been at liberty to draw from the evidence. (Jorgensen v. Jaeger, 257 N. Y. 171; O’Tier v. Sell, 226 App. Div. 434; 252 N. Y. 400; Samiof v. Kehn, 131 Mise. Rep. 764; 226 App. Div. 842; Drollinger v. McCurdy, 228 App. Div. 664.) By its terms the statute applies whenever there is either express or implied permission by the owner to use his car, whether in his business or otherwise; and, in the absence of any limitation upon that permission, the owner should be hable. (Fluegel v. Coudert, 244 N. Y. 393; Grant v. Knepper, 245 N. Y. 158; Psota v. Long Island B. R. Co., 246 N. Y. 388; Cohen v. Neustadter, 247 N. Y. 207; Plaumbo v. Ryan, 213 App. Div. 517; Glasgow v. Weldt, 218 App. Div. 749; Roche v. New York Central R. R. Co., 221 App. Div. 497; Leppard v. O’Brien, 225 App. Div. 162; Amann v. Thurston, 133 Mise. Rep. 293; 224 App. Div. 874.)

      Joseph F. Hanley for respondent.
    There is nothing in the evidence that suggests in any way that any permission, either express or implied, was ever given to the garage manager to use the car. (Drollinger v. McCurdy, 228 App. Div. 664.) No permission having been granted to the garage to use the car, the acts of the driver relieved the defendant of any liability. (Fluegel v. Coudert, 244 N. Y. 393.)
   Crane, J.

The plaintiff’s evidence in these cases did not justify a dismissal; there was presented a question of fact which should have been submitted to the jury.

George F. Parton, the defendant, was the owner of a Chevrolet automobile which he was accustomed to leave at the Gramatan Garage in Bronxville before taking the train to New York city, where he was engaged in business. In the evening, on his return, he would pick up the car at the garage and drive home. A few days before the 25th day of October, 1924, he had been informed that his battery needed replacing, and he left it at the garage in the charge of the manager, one Niel G. Larsen. Shortly thereafter, George E. Ryan, Jr., a son of the proprietor, who worked around the garage, took the car and, while operating it, caused injury to the plaintiff. There is evidence in the case from which it might reasonably be inferred that Ryan took the car to Mount Vernon or some other convenient place to get a new battery in accordance with the demands of the owner and the needs of the car. Under these circumstances the question arose whether the car was being operated with the permission, express or implied, of the owner, pursuant to section 59 of the Vehicle and Traffic Law (Cons. Laws, ch. 71, formerly section 282-e of the Highway Law).

The trial judge evidently, judging from the remarks made upon the motions, considered the Gramatan Garage, or the proprietor, George Ryan, Sr., an independent contractor for whose acts the defendant owner would not be responsible. He followed, as was his duty, the ruling in Drollinger v. McCurdy (228 App. Div. 664), where this law was stated by a divided court of the Appellate Division.

Section 59 of the Vehicle and Traffic Law has somewhat restricted the common-law rule regarding non-liability for the negligence of an independent contractor. This oft-repeated section we quote again: Negligence of operator other than owner attributable to owner. Every owner of a motor vehicle or motor cycle operated upon a public highway shall be liable and responsible for death or injuries to person or property resulting from negligence in the operation of such motor vehicle or motor cycle, in the business of such owner or otherwise, by any person legally using or operating the same with the permission, express or implied, of such owner.”

The restriction referred to comes in at this point. The statute refers to the use of the automobile with the permission, express or implied, of the owner. If, therefore, an owner leaves his car in a garage or repair shop to have such work done upon it that a road test is necessary, and he has reason to know or to believe that the car is, or will be, used upon the public highway by the garage contractor in the necessary performance or execution of that work, then in such a case the use of the car is with the implied permission of the owner and he is hable for the negligence of the garage repair shop or its servants. Every class of work or repair done upon a car does not necessarily carry with it this implied permission. Perhaps it is seldom necessary for a garage man to use the owner’s car upon-the street or take it out of the shop for the purpose of making repairs or adjusting the equipment. We must limit this ruling, as we do, to the case where the circumstances or the nature of the work is such as to suggest or indicate to a reasonably prudent person that the car must be, or will be, used to accomplish the work or the repair. Such has been the intimation of this court, although not actually decided, in Jorgensen v. Jaeger (257 N. Y. 171) and O’Tier v. Sell (226 App. Div. 434; revd., 252 N. Y. 400).

Applying this restriction or limitation of the contractor rule to this case, what are the questions of fact which must be decided? The car needed a new battery and the plaintiff left it at the Gramatan Garage for the purpose of having a new one installed. Did the employee of the garage take the car out for the purpose of getting a new battery or merely for his own pleasure and convenience? If the car were taken to Mount Vernon or elsewhere for a new battery was it necessary or reasonable to use the owner’s car for this purpose? Were the circumstances and surroundings such that the owner had reason to anticipate that his car might be used for such a purpose? Without' knowing all the facts and circumstances it is difficult to apply with precision a rule which may be easily stated. The point of it all is that the statute makes the owner liable when the car is used with bis implied permission, and that permission is implied when he leaves his car with a garage or repairman under such circumstances and for such work that he should have contemplated or anticipated that it would be used upon the street or roadway in the performance of that work.

While the evidence in these cases is somewhat meagre, we find it sufficient to justify the submission of them to the jury.

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

Found, Ch. J., O’Beien, Hubbs and Ceouch, JJ., concur; Lehman and Kellogg, JJ., dissent on the ground that the evidence does not justify the inference that the defendant should have contemplated or anticipated that the car would be used upon the street in the performance of the work.

Judgments reversed, etc.


author: Kellogg, J.

text:
    International Publications, Inc., Appellant, v. Prince G. Matchabelli, Respondent.
    (.Argued October 17, 1932;
    decided January 10, 1933.)

      Joseph B. Kaufman for appellant.
    The provisions of the lease create a liability in damage after dispossess for covenant broken. (Hermitage v. Levine, 248 N. Y. 333; Mann v. Munch, 225 N. Y. 189; Michaels v. Fishel, 169 N. Y. 381; Darmstadt v. Knickerbocker, 188 App. Div. 129; Slater v. Von Chorus, 120 App. Div. 16; Hall v. Gould, 12 N. Y. 127; Pickett v. Bartlett, 107 N. Y. 277; Robinson v. Beard, 140 N. Y. 107; May v. Gillis, 169 N. Y. 330; Mecca Realty v. Kellog, 166 App. Div. 74; 221 N. Y. 724; Matter of Buchner, 226 N. Y. 40Ó; Anzalone v. Paskusz, 98 App. Div. 188; Rosenfeld v. Aaron, 248 N. Y. 437; Tepper v. Minsker, 93 Mise. Rep. 36; Johnson v. Oppenheim, 55 N. Y. 280; Simons v. First Nat. Bank, 93 N. Y. 269.)

      Borris M. Komar for respondent.
    Clause 12 in the lease does not confer the right upon the landlord to re-enter and relet premises as tenant’s agent, and hold the tenant liable in damages for the deficiency in rent, if any. (.Fidelity & Deposit Co. v. Commonwealth Trust Co., 65 Mise. Rep. 88; Haywood v. Shreve, 44 N. J. L. 94; Chaude v. Shepard, 122 N. Y. 397; Eten v. Luyster, 60 N. Y. 252; Simon v. First Nat. Bank, 93 U. S. 269; Michaels v. Fishel, 169 N. Y. 381; McCready v. IAndenborn, 172 N. Y. 400; Slater v. Von Chorus, 120 App. Div. 16; Crausman v. Graham Construction Co., 95 Mise. Rep. 608.)
   Kellogg, J.

The complaint, for a first cause of action, alleges that the plaintiff was the owner of premises known as 471 Park avenue, New York city; that he entered into an agreement with the defendant on the 8th day of September, 1924, whereby he leased the premises to the defendant; that the stipulated term of the lease was five years, commencing on the 1st of October, 1924, and ending on the 30th of September, 1929; that the rental agreed upon was $2,700 for the first year and $3,000 a year for the remainder of the term; that the rental was made payable in advance on the first day of every month; that the defendant entered into possession; that the defendant neglected to pay an installment of rent due October 1, 1925; that the plaintiff instituted summary proceedings to eject the defendant from possession; that an order dispossessing the defendant was made; that the defendant vacated the premises and the plaintiff re-entered; that no rent was paid by the defendant during the months of November, 1925, to September, 1926, inclusive; that the plaintiff was unable to sublet the premises during this period; that the loss accruing to the plaintiff through such non-payment was $2,700, with interest to date on unpaid monthly installments. The complaint, for a second cause of action, restates the facts set forth in the first cause and further states that on October 1, 1926, the plaintiff sublet the premises for the balance of the term, October 1, 1926, to October 1, 1929, at an annual rental of $2,700; that the defendant made no further payments; that as a consequence of the defendant’s default the plaintiff’s rentals were diminished by the sum of $900. The complaint demands judgment for $3,650.

There can be no doubt of the general principle that where a tenant removes from premises after a warrant in summary proceedings has been issued, the conventional relationship of landlord and tenant ceases and the landlord may not recover from the tenant, as rent, subsequent installments thereof for which the lease provides. (Cornwell v. Sanford, 222 N. Y. 248; Hoffmann Brewing Co. v. Wuttge, 234 N. Y. 469; Hermitage Co. v. Levine, 248 N. Y. 333; Kottler v. New York Bargain House, 242 N. Y. 28.) The principle finds statutory expression in section 1434 of the Civil Practice Act which states: “ The issuing of a warrant for the removal of a tenant from demised premises cancels the agreement for the use of the premises, if any, under which the person removed held them, and annuls accordingly the relation of landlord and tenant,” it being provided, however, that the landlord may recover rent payable before the warrant was issued, or the reasonable value of the use of the premises prior to such time. “After the tenant had been ejected in summary proceedings, the lease was at an end. What survived was a liability, not for rent, but for damages (Kottler v. N. Y. Bargain House, 242 N. Y. 28).” (Per Cardozo, Ch. J., in Hermitage Co. v. Levine, supra, at p. 336.) These principles, however, do not prevent landlord and tenant from contracting as they please, even in respect to periods subsequent to eviction, after the termination of the relationship of landlord and tenant. (Hermitage Co. v. Levine, supra.)

The lease between these parties, which is annexed to the complaint and made a part thereof, contains this clause: “Any entry or re-entry by the landlord, whether had or taken under what are known generally as summary proceedings, or otherwise, and in any manner, shall not be deemed to have absolved or discharged the tenant from any liability hereunder.” Freed from all technicalities, with which the law governing leasehold interests is attended, the clear intention thus expressed by the parties was this: Even if the tenant shall be evicted; even if for his monthly rental he will receive no monthly use; even if the relationship of landlord and tenant shall have terminated; these facts, nevertheless, “ shall not be deemed to have absolved or discharged the tenant from any liability hereunder.” What was the “ liability hereunder ” when the lease was signed? None else than to pay the landlord during a period of five years the sum of $2,700 for the first year and the sum of $3,000 for each of the remaining four years. These sums the tenant agrees that he will pay regardless of whether the tenancy, through summary proceedings taken, has or has not ceased to exist. Whether the moneys to be paid subsequently to eviction should be termed “ rents ” or not is immaterial. It is enough, for the purposes of this case, since all installments payable are past due, that he has agreed to pay them, and has defaulted upon his promise.

In Mann v. Munch Brewery (225 N. Y. 189, 194) there was considered a clause reading as follows: “ If the tenant is dispossessed by the issuance of service of any warrant or final order in summary proceedings, or if he abandon the premises, he shall nevertheless continue liable for the payment of the rent and the performance of all ot the other conditions herein contained.” It was held that the ouster of the tenant through summary proceedings did not absolve the tenant from making subsequent payments. No distinction may be perceived between the phrase “ shall nevertheless continue liable ” contained in the lease considered in that case, and the words used in the lease now considered, providing that the eviction “ shall not be deemed to have absolved or discharged the tenant from any liability hereunder.” “ The parties may, however, as they did in this case, agree to the contrary and render the lessee liable to the end of the term although out of possession,” said Judge Crane in the case cited (p. 194). No doubt, a damage clause can be drawn in such a way as to make a tenant responsible for monthly deficits after the re-entry of his landlord,” said Chief Judge Cardozo in Hermitage Co. v. Levine (supra, at p. 337). We think the clause was so drawn in this case that the lessee is hable for the loss in rentals suffered by the landlord.

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

Pound, Ch. J., Crane, O’Brien, Hubbs and Crouch, JJ., concur; Lehman, J., dissents.

Judgment accordingly.


text:
    Samuel A. Telsey, Respondent, v. Calvin-Morris Corporation et al., Defendants, and Hoegger, Inc., Appellant.
    (Argued October 11, 1932;
    decided January 10, 1933.)

      Morris Gottlieb and Nathaniel Fishman for appellant.
    Plaintiff’s mortgage does not contain a proper trust fund covenant as required by section- 13 of the Lien Law (Lien Law, §§ 10, 36.)

      Gerson C. Young and Leon G. Telsey for respondent.
    Plaintiff’s mortgage complied in all respects with section 13 of the Lien Law as it was when the mortgage was placed. (Lien Law, § 36.) Defendant-appellant, having itself failed to comply with the provisions of the Lien Law, has no standing to invoke their protection in attack upon the validity of the mortgage in suit. (Sexauer & Lemke v. Burke & Sons Co., 228 N. Y. 341; Weaver Hardware Co. v. Solomowitz, 98 Mise. Rep. 413; Grippin v. Weed, 22 App. Div. 593; DeKlyn v. Simpson, 34 App. Div. 436; Packard v. Sugarman, 31 Mise. Rep. 623; Pennsylvania Steel Co. v. Title Guarantee & Trust Co., 50 Mise. Rep. 51; 120 App. Div. 879; 193 N. Y. 37.)
   Kellogg, J.

The defendant Calvin-Morris Corporation was the owner of premises on the northeast corner of Madison avenue and Seventy-sixth street upon which it had erected or was in the course of erecting a building known as the Carlyle Hotel. It was, also, the owner of premises on the southeast corner of Madison avenue and Seventy-seventh street upon which it had erected or was in the course of erecting a large apartment house. On the 6th day of November, 1930, it executed and delivered to the plaintiff its bond for $200,000; on the same day, to secure the bond, it executed and delivered to the plaintiff a mortgage covering the two parcels above mentioned. The mortgage was subject to two prior mortgages, securing, in the aggregate, the sum of approximately $4,300,000. On the very day when the bond and mortgage were delivered, the plaintiff advanced to the defendant Calvin-Morris the sum of $170,000; on the 14th of November he advanced the balance of $30,000. The mortgage was not recorded until the 2nd day of Decernber, 1930. At this time the premises were ■unincumbered by any hen whatsoever, except the two prior mortgages mentioned. Thereafter, on January 13, 1931, the appellant, Hoegger, Inc., filed a notice of mechanic’s hen stating the amount claimed due to it for materials furnished to be $10,261.69.

Although the plaintiff’s mortgage was recorded prior to the filing of appellant’s notice of hen, the appellant claims that it has priority, since the mortgage, as to it was invalid. This claim is grounded upon the provisions of subdivisions 2, 3 and 5 of section 13 of the Lien Law (Cons. Laws, ch. 33). Subdivision 2 provides: Every mortgage recorded subsequent to the commencement of the improvement and before the expiration of four months after the completion thereof shah, to the extent of advances made before the filing of a notice of hen, have priority over hens thereafter filed if it contains the covenant required by subdivision three hereof.” The covenant provided for in subdivision 3 is “a covenant by the mortgagor that he will receive the advances secured thereby as a trust fund to be apphed first for the purpose of paying the cost of improvement, and that he will apply the same first to the payment of the cost of improvement before using any part of the total of the same for any other purpose.” Subdivision 5 provides: No instrument of conveyance recorded subsequent to the commencement of the improvement, and before the expiration of four months after the completion thereof, shall be valid as against hens filed during the said period, unless the instrument contains a covenant ” identical with the covenant set forth in subdivision 3. The mortgage did in fact contain a covenant that “ if this mortgage is recorded subsequent to the commencement of any improvements, repairs or alterations to or upon the mortgaged premises and before the expiration of four months after the completion thereof ” the mortgagor will receive the advances as a trust fund, and apply them first to pay the cost of improvement before using any part thereof for any other purpose. It may be questionable whether this conditional convenant is the substantial equivalent of the absolute covenant required by the statute. This question it is unnecessary now to decide for reasons which will be given.

The covenant is a requisite only of those mortgages which are recorded during a period between the commencement of the improvement and a date not more remote than four months after its completion. The question here is, Was this mortgage recorded before the expiration of four months after the completion ” of the improvement.

There is no evidence in the case, given by the owner, the contractor, the architect or any other person, as to the date of completion of either building, constituting an integral part of the improvement made, unless certain equipment furnished by Hoegger, Inc., the appellant, who claims a lien, may be regarded as “ materials furnished ” for the permanent improvement ” of real property (Lien Law, § 2), in which case there might be proof of completion of the improvement ” within the four-month period. No testimony was given to indicate whether the articles in this equipment were ever attached in any wise to either of the buildings; none to show that they ever became an integral part of either structure. They are described in the notice of Hen not otherwise than as foUows: The materials furnished were bathroom accessories and closet poles.” Closet poles, as one ordinarily conceives them, are merely furniture, not fixtures, and as such not an improvement ” to real estate. Bathroom accessories ” bring to mind towels, soap, bath mats, soap dishes, and the Hke, which are clearly furniture. “ A notice of Hen must be sufficient in essentials in and of itself.” (Per Pound, J., in Pascual v. Greenleaf Park Land Co., 245 N. Y. 294, 298.) It might perhaps be reasoned that a notice of Hen is not sufficient which does not on its face disclose that the putative lienor has supplied materials or labor for the improvement of real estate.” However, it is unnecessary here to decide the question. The only external proof offered consists of two contracts between the builder and the lienor, which were offered in evidence, but not printed in the record on appeal. These contracts are not referred to in the notice of lien and cannot well be identified as describing the materials furnished for which the notice of lien was filed. One contract calls for the supply of a great quantity of items falling into several classes, designated as crystal shelf,” “ crystal soapholder,” “ crystal towel bar,” “ paper holder,” bag hook,” or by some similar name. Clearly many of these may have been furniture or loose equipment. The other contract provides for the supply of sets of rods ” consisting of “ 20 gauge crodon plated tubing.” What these may be, no one can learn from the document, and no one has told from the witness chair. Even if these articles were supplied to the buildings in the months of August, September, October or November, 1930, it does not appear that they in any wise became an integral part of either structure for the equipment of which they were furnished, so as to affect the question whether or not the mortgage, which was recorded on December 2, 1930, was so recorded within four months after the completion of “ the improvement.” It does not appear, therefore, that the mortgage in question was within the class to which section 13 refers; nor does it appear that the equipment comprised articles for which the appellant might have a lien upon real estate, to which, under the statute, the plaintiff’s mortgage, if recorded within four months from completion, must have given way.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


text:
    In the Matter of the Claim of Robert Kolodick against General Electric Company, Respondent. State Industrial Board, Appellant.
    (Argued November 29, 1932;
    decided January 10, 1933.)

      John J. Bennett, Jr., Attorney-General (Joseph A. McLaughlin and Boy Wiedersmn of counsel), for appellant.
    The award and decision of June 28, 1930, does not as a matter of fact constitute or involve a reclassification of disabilities in violation of any provision of the Workmen’s Compensation Law. (Vincent v. Allerton House Co., 230 App. Div. 583; Schaefer v. Buffalo Steel Car Co., 250 N. Y. 507.)

      Charles Ward Broum and Richmond D. Moot for respondent.
    The opinion of a member of the Industrial Board is not a decision determining classification under the Workmen’s Compensation Law. (Lorchitsky v. Gotham Folding Box Co., 230 N. Y. 8; Clark v. Voorhees, 231 N. Y. 14; Vincent v. Allerton House Co., 256 N. Y. 522.) The decision and award of June 28, 1930, is void, for it was made pursuant to a reclassification of claimant’s disability, said reclassification having been made more than three years from the date of accident. (Schaefer v. Buffalo Steel Car Co., 250 N. Y. 507; Vincent v. Allerton House Co., 256 N. Y. 522; Lorchitsky v. Gotham Folding Box Co., 230 N. Y. 8; Clark v. Voorhees, 231 N. Y. 14; Marsh v. Elba Bank & Trust Co., 205 Ala. 425; Schleier v. Bonella, 77 Col. 603; Marshall & Spencer Co. v. People’s Bank, 88 Fla. 190; Watkins v. Dunbar, 318 111. 174; QuinnSheperdson Co. v. U. S. Fidelity & Guaranty Co., 149 Minn. 261.)
   Kellogg, J.

There was introduced into section 15 of the Workmen’s Compensation Law (Cons. Laws, ch. 67), by chapter 557 of the Laws of 1927, a new subdivision entitled “ 6-a,” which read as follows: “The board may, within one year from the date of the accident, upon its own motion, or on application of any party in interest, reclassify a disability upon proof that there has been a change in condition, or that the previous classification was erroneous and not in the interest of justice.” The section was amended by chapter 292 of the Laws of 1931 in the particular only that the words within three years ” were substituted for the words “ within one year.” Prior to the passage of the act of 1927 it had uniformly been held that the Industrial Board was vested with plenary power to rescind awards previously made; to reclassify disabilities; to make, in place of rescinded awards, new awards conformable with the proof; and this whether or not any change of condition had been shown. (Matter of Kriegbaum v. Buffalo Wire Works Co., Inc., 182 App. Div. 448 ; 224 N. Y. 621; Matter of Cohen v. Ashford Plumbing Co., 203 App. Div. 261; 235 N. Y. 576.) The restriction that no such review shall affect such award as regards any moneys already paid ” (§22) need not now be considered. It thus appears that the adoption of subdivision 6-a had the effect, not of enlarging, but of greatly limiting the powers of the Board in respect to the rescission or modification of prior awards. Indeed, the new subdivision has force merely as it prohibits, by implication, the reclassification of a disability after the lapse of three years from the date of the accident, and not otherwise. The statute introducing the subdivision 6-a took effect on July 1, 1927.

Prior to April 19, 1927, the claimant had been the beneficiary of many awards which classified his disability as temporary total. On that date, Richard J. Cullen, a member of the Industrial Board, made a finding that the claimant’s condition .was “ one of permanent partial disability for which compensation should be awarded under the provisions of section 15, subdivision 3-u [now v] of the Workmen’s Compensation Law,” and promulgated an award accordingly. On April 25, 1927, notices were sent out informing the parties that on April 19, 1927, the previous awards for temporary total disabilities were rescinded, and a new award had been made on the basis of the reduced earning capacity of claimant. The carrier argues that the finding made by Cullen was merely a part of an interdepartmental communication, and not an award. Obviously this is not so, for Cullen states, I hold that his [claimant’s] condition is one of permanent partial disability,” and says “ award is hereby made.” That, in so deciding, he was well within his authority is seen by a reading of section 27 of the Labor Law (Cons.. Laws, ch. 31), which provides that any hearing authorized to be conducted by the Industrial Board may be heard by any individual member thereof, and the order, decision or determination of such member shall be deemed the order, decision or determination of the board from the date of filing thereof in the department.” Moreover, the order of the Appellate Division, to which the carrier appealed, states the appeal of the carrier to have been “ from the award and decision of the Industrial Board of the State of New York made and entered herein on the 25th day of April, 1927,” that being the very date which the notice of award, following the decision by Cullen, bears upon its face. It seems clear that the reclassification was made before the subdivision 6-a, forbidding a reclassification in such a case, took effect.

True it is that the Appellate Division reversed the award so made by Cullen. However, its reversal was not placed upon the ground that the reclassification made thereby was erroneous, but resulted from the fact that no " finding had been made fixing the wage-earning capacity of claimant. The case was remitted for further consideration by the Industrial Board, which subsequently, on March 20, 1928, took further evidence, determined the diminished earning capacity of claimant, and made an award on the basis of reduced earning capacity under subdivision 3-u (now v). This award was affirmed by the Appellate Division (226 App. Div. 711) and by this court (252 N. Y. 522). It is immaterial that, upon the appeal, the point was not made that on March 20, 1928, it was too late for the Industrial Board to have reclassified the disability. The fact remains that, even though the prior reclassification by Cullen on April 19, 1927, had been eliminated by the subsequent reversal, nevertheless, the classification made by the Board on March 20, 1928, was final and conclusive, as established by the subsequent affirmances. This classification finally gave the claimant’s injuries the character of a permanent partial disability. When the Board subsequently made the award, from which the present appeal lies, it followed the classification already made in the prior award. It could not do otherwise. Therefore, the award did not involve a reclassification.

The order of the Appellate Division should be reversed and the award of the State Industrial Board affirmed, with costs in the Appellate Division and in this court to the State Industrial Board.

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

Ordered accordingly. ■


text:
    In the Matter of Margaret M. Byrnes, Respondent. City Bank Farmers Trust Company et al., as Executors of and Trustees under the Will of Harwood Byrnes, Deceased, et al., Appellants.

      (Argued December 13, 1932;
    decided January 10, 1933.)

      C. Alexander Gapron, Charles Angulo and Benjamin Nassau for City Bank Farmers- Trust Company et al., appellants.
    Section 18 of the Decedent Estate Law does not give to a widow the right to reject the testamentary provisions made for her benefit in her husband’s will. Her right of election is limited to the difference between her intestate share and the aggregate of the testamentary provisions for her benefit. (Hilder v. Dexter, [1902] A. C. 476; Matter of Smalhnan, 141 Mise. Rep. 796; Stengel v. Edwards, 98 Atl. Rep. 424; Baugham’s Estate, 172 N. C. 170; Matter of Plum, 37 Mise. Rep. 466; Matter of Terry, 218 N. Y. 218; Matter of Allen, 111 Mise. Rep. 93; 202 App. Div. 810; 236 N. Y. 503; Matter of Waddell, 129 Mise. Rep. 495; Rich v. Tiffany, 2 App. Div. 25.) A trust for life, but subject to a condition against remarriage, is a valid trust for life within the meaning of section 18 of the Decedent Estate Law. (Scott v. Tyler,
      2 Brown Ch. 431; Robinson v. Martin, 200 N. Y. 159; Irwin v. Irwin, 179 App. Div. 871; Beardslee v. Beardslee, 5 Barb. 324; Durfee v. Pomeroy, 154 N. Y. 583; Miller v. Gilbert, 144 N. Y. 68; Dana v. Murray, 122 N. Y. 604; Matter of Plum, 37 Mise. Rep. 466; Matter of Smallman, 141 Mise. Rep. 796.)

      William J. O’Shea, Jr., John H. Johnson and Edward D. Burns for Ronald M. Byrnes et al., appellants.
    The recognition that the legislative purpose was to furnish protection and continuing support for a widow enforces the conclusion that a testator who provides adequately for the support of his widow until her death or remarriage fully complies with the legislative intent. For upon remarrying the widow obtains that protection and the additional means for support which marriage is usually presumed to bring. (Robinson v. Martin, 200 N. Y. 159; Skidmore v. Skidmore, 160 App. Div. 594; Irwin v. Irwin, 179 App. Div. 871; Scott v. Tyler, 2 Brown Ch. 431; David’s New York Law of Wills, § 892; 2 Pomeroy Eq. Jur. [4th ed.] § 933; Jarman on Wills [7th ed.], p. 1496.) The residuary trust is a trust for the petitioner’s benefit for life, and satisfies the requirements of subdivision 1 (e) of section 18. (People v. Wainwright, 237 N. Y. 407; Perkins v. Smith, 116 N. Y. 441; Standard Oil Co. v. United States, 221 U. S. 1; Kepner v. United States, 195 U. S. 100; Matter of Schriever, 221 N. Y. 268; Durfee v. Pomeroy, 154 N. Y. 583; Miller v. Gilbert, 144 N. Y. 68; Dana v. Murray, 122 N. Y. 604; Weiss v. Mt. Vernon, 157 App. Div. 383; 215 N. Y. 657; Place v. Burlingame, 75 Hun, 432; 149 N. Y. 617; Giles v. Little, 104 U. S. 291; Coke on Lyttleton, 42-a; Matter of Plum, -37 Mise. Rep. 466; Matter of Smallman, 141 Mise. Rep. 796; People ex rel. Lyon v. McDonough, 76 App. Div. 257.) If the residuary trust does not comply with subdivision 1 (e), then subdivision 1 (f) clearly applies. (People ex rel. Killeen v. Angle, 109 N. Y. 564; People ex rel. Balcom v. Mosher, 163 N. Y. 32; Pennsylvania R. R. Co, v. Inter

      national Coal Co., 230 U. S. 184; United States v. Alexander, 79 IT. S. 177.)

      Charles E. Hughes, Jr., and Ernest L. Wilkinson for respondent.
    A trust to apply income only until remarriage is not a trust for life within the meaning of section 18. (Legislative Document [1930], No. 69; Matter of Greenberg, 141 Mise. Rep. 875; Matter of Simcone, 141 Mise. Rep. 737; Matter of Hamlin, 226 N. Y. 407; Archer v. Equitable Life Asswr. Society, 218 N. Y. 18; City Bank Farmers’ Trust Co. v. N. Y. C. R. R. Co., 253 N. Y. 49; American Historical Society v. Glenn, 248 N. Y. 445; Flynn v. McDermott, 183 N. Y. 62; Camardella v. Schwartz, 126 App. Div. 334; Youngs v. Goodman, 240 N. Y. 470.) The trust in question is not within subdivision (f) of paragraph 1 of section 18 of the Decedent Estate Law. (Ada?ns v. New York, Ontario & Western Ry. Co., 220 N. Y. 579; Bailey v. Colmnbian Rope Co., 184 App. Div. 718; Matter of Wagner v. Wilson & Co., 251 N. Y. 67.)
   Kellogg, J.

Harwood Byrnes, dying on March 7, 1931, left a last will dated January 30, 1931, whereby he disposed of a gross estate of approximately $350,000. He bequeathed to charities the sum of $40,000. To his widow he gave outright automobiles, jewelry, furniture and the like, the value of which is conceded to have been less than $2,500. He devised and bequeathed the remainder of his property to trustees in trust “ to collect and receive the income therefrom and to apply the net amount of such income to the use of my said wife, Margaret M. Byrnes, during her life, or until her remarriage.” As the testator left no children or parents him surviving, but did leave a brother, the intestate share of the widow would have been $10,000 and one-half of the balance of his property. (Decedent Estate Law; Cons. Laws, ch. 13, § 83, subd. 4.) This proceeding was instituted by the widow under new section 145-a of Surrogate’s Court Act to obtain a determination of the validity of her election “ to take an intestate share against the provisions ” of the will, as such an election is provided for by new section 18 of the Decedent Estate Law. That section was added to such law by chapter 229 of the Laws of 1929 and applies in the instance of this will.

The section begins as follows: “ § 18. Election by surviving spouse against or in absence of testamentary provision. 1. Where a testator dies after August thirty-first, nineteen hundred and thirty, and leaves a will thereafter executed and leaves surviving a husband or wife, a personal right of election is given to the surviving spouse to take his or her share of the estate as in intestacy, subject to the limitations, conditions and exceptions contained in this section.” It is provided in paragraph

(a) that the surviving spouse, in the exercise of election, shall in no event be entitled to take more than one-half of the testator’s net estate, and that the words “ intestate share,” as used in the section, shall not be construed to mean more than such one-half. The absolute right of the surviving spouse to take her intestate share, as thus provided for, is limited by paragraphs (b), (c), (d), (e), (f), (g). Briefly, these paragraphs make provision as below stated.

(b) Where the intestate share is over $2,500, and the testator has given in trust an amount equal to or greater than the intestate share, with income thereof payable to the surviving spouse for life,” the surviving spouse may elect to take the sum of $2,500, absolutely, and this sum shall be deducted from the principal of the trust, the will to be effective in all other respects,

(c) Where the intestate share is less than $2,500, the surviving spouse may take his or her share absolutely, in lieu of all provisions of the will, (d) Where the will contains an absolute gift to the surviving spouse, equal to or in excess of $2,500, and also creates a trust “ for his or her benefit for life,” of a principal sum, which, together with the outright gift, will equal or exceed the intestate share, no right of election may be exercised, (e) Where the will gives outright to the surviving spouse a sum less than $2,500, and also gives in trust “ for his or her benefit for life ” a sum greater than the excess of the sum of the intestate share over the absolute gift, the spouse may take the sum of $2,500, inclusive of the gift, and there shall be deducted from the principal of the trust the difference between the sum of the absolute gift and $2,500. (f) Where the aggregate of the provisions under the will for the surviving spouse, “ including the principal of a trust, or a legacy or devise, or any other form of testamentary provision,” is less than the intestate share, the surviving spouse may elect to take the difference between such aggregate and the intestate share, the will to be otherwise effective, (g) The provisions of this section with regard to the creation of a trust, with income payable for life to the surviving spouse, shall likewise apply to a legal life estate or to an annuity for life or any other form of income for life created by the will for the benefit of the surviving spouse. In the computation of the value of the provisions under the will the capital value of the fund or other property producing the income shall be taken and not the value of the life estate.”

In making these provisions it was the evident purpose of the Legislature that a surviving spouse should retain the right to claim his or her full intestate share, in spite of any will, unless the instrument should provide substantial equivalents. A testamentary gift of an equal sum with the intestate share, or a gift in trust of such a sum for the use of the surviving spouse for life, or a combination of such gifts providing in the aggregate at least such a sum, should constitute an equivalent of the intestate share. The expression of that simple principle is somewhat complicated by the solicitude of the Legislature that the surviving spouse should in any event receive the sum of $2,500 absolutely, provided the intestate share equals that sum. So it is provided that, in various contingencies, certain procedure should be followed, whereby the surviving spouse should receive $2,500 outright, whether by election against the will, or under the will itself, or by virtue of the two taken together, and that to compensate for the disturbance of the testamentary provisions, the amount received through election should be credited upon the principal of the trust fund which might be set up. The question involved here is whether or not a testamentary gift in trust for the life of a surviving spouse, or until she remarries, is in fact a trust for life within the meaning of section 18. If so, the gift in question would fall within the terms of paragraph (e) of section 18, and the right of election would be lost to the surviving spouse. If not, the right of election might be exerted by her. The courts below have held that the spouse is entitled to avail herself of an election.

Undoubtedly, at common law, an estate during widowhood is classed as an estate for life, determinable by remarriage. (Matter of Schriever, 221 N. Y. 268; Durfee v. Pomeroy, 154 N. Y. 583; Giles v. Little, 104 U. S. 291.) So, also, is an estate granted “to a man and woman during coverture, or so long as a man shall live in a certain house, or shall pay a certain sum, or until £100 be paid out of the income of the estate, even though the income of the estate be £10 by the year; or so long as the grantee shall maintain salt works on the land.” (1 Washburn on Beal Property [6th ed.], p. 103; 1 Coke upon Lyttleton, p. 717, 42 A.) Likewise, is an estate granted to a man “ until he be promoted to a benefice.” (Blackstone, book II, ch. VIII, 121.) It will be readily seen that if the common-law classification were held controlling and a trust estate during widowhood were regarded as a sufficient equivalent, under section 18, of an intestate share, a testator would equally well have the power to defeat an election on the part of lfis surviving spouse by making bequests in trust for her life, subject to determination if conditions virtually incapable of performance were not fulfilled. We think that the Legislature had no thought to deprive a surviving spouse of an election, where a will made gifts in trust for life for the use of the spouse, which, while technically life estates, could not reasonably be regarded as substantial equivalents for .the intestate share.

In submitting to the Legislature for adoption the new section 18 of the Decedent Estate Law, the Commission, previously appointed to make recommendations in respect to the rights of inheritance of a surviving spouse (Laws 1927, ch. 519), had this to say: It does not seem to the Commission to be desirable that the right to take the intestate share should be given to the surviving spouse in every estate, regardless of its amount. But while immediate necessities should be provided for, there should be some limitation by way of permitting the income only upon the balance of the intestate share to be paid over during the life of the surviving spouse. Therefore, in the larger estates the Commission proposes to preserve to the testator a right to create a trust, with income payable to the wife, upon a principal equal to or greater than her intestate share.” (Leg. Doc. [1930] No. 69, p. 87.)

In adopting the new section 18, as received from the hands of the Commission, the Legislature announced its intention to be to increase the share of a surviving spouse in the estate of a deceased spouse, either in a case of intestacy or by an election against the terms of the will of the deceased spouse thus enlarging property rights of such surviving spouse,” and stated that such provisions shall be liberally construed to carry out such intention.” (Laws 1929, ch. 229, § 20.)

Turning to the wording of section 18 we find that in paragraphs (b), (d) and (e) the technical phrase “ Life Estate ” or Estate for Life ” is nowhere used. In these paragraphs the provisions for the substitution of a trust in place of the intestate share, deal with trusts which are described as trusts “ with income thereof payable to the surviving spouse for Ufe ” or trusts for his or her benefit for life.” Paragraph (c) makes no provision for a trust. Paragraph (g) deals with a trust described as one with income payable for life to the surviving spouse.” Paragraph (f) deals with a case where the aggregate provisions under a will do not equal the intestate share. In our case, even assuming that a trust during widowhood is a sufficient trust for life under section 18, the aggregate provisions exceed the intestate share, so that paragraph (f) is not applicable. However, it is said that the paragraph supplies interpretive information wherewith to construe the nature of trust gifts, referred to in the other paragraphs, which were intended by the Legislature to constitute equivalents. This because it describes the aggregate of testamentary provisions which may be less than the intestate share to include “ the principal of a trust, or a legacy or devise, or any other form of testamentary provision.” The answer is that paragraph (g), immediately following, restricts the meaning of the phrase the principal of a trust ” by making reference to all previous trust provisions contained in the section, as provisions with regard to the creation of a trust, with income payable for life to the surviving spouse.”

We think that when the Legislature referred to trusts which should be regarded' as the equivalents of the intestate share of the surviving spouse, as trusts for his or her benefit for life,” or as trusts “ with income thereof payable to the surviving spouse for life,” it intended thereby to use these words, not in a technical sense, but in the sense with which common usage would ordinarily invest them. If it had meant equitable estates for life, determinable by any condition which the testator might impose, it would have been easy for it so to have stated. We conceive its intent to have been that the equivalent substitute of the intestate share in the form of a trust should be none other than a trust for the benefit of the surviving spouse throughout life. Not otherwise may the statutory injunction that the provisions, to increase the share of a surviving spouse ” shall “ be liberally construed,” be obeyed.

The order should be affirmed, with costs payable out of the estate.

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

Order affirmed, etc.


text:
    Julia S. Greenhall, Respondent, v. Louis Rothschild et al., Appellants.
    (Argued December 12, 1932;
    decided January 10, 1933.)

      David L. Podell, Louis B. Davidson, John A. Sherman and Sol Deutsch for appellants.
    The Supreme Court had no jurisdiction to pass upon the validity of the will of January 12th or of April 12th, which were matters purely cognizable in the Surrogate’s Court. (Anderson v. Anderson, 112 N. Y. 104; Matter of Erlanger, 242 N. Y. Supp. 257; Matter of Work, 137 N. Y. Supp. 97; Booth v. Kitchen, 7 Hun, 255; O’Brien v. Bonfield, 220 111. 219; Meluish v. Milton, 3 Ch. 27; Webb v. Claverden, 2 Atk. 424; Ryves
      v. Wellington, 9 Beav. 579; Thompson v. Nichols, 254 Fed. Rep. 973; Matter of Broderick, 88 U. S. 503.) Plaintiff’s failure to join as parties to this action the sisters and other next of kin of the decedent renders any decree of the court with reference to the wills and transfers herein contrary to law and constitutes reversible error. (Riggs v. Cragg, 89 N. Y. 470; Osterhoudt v. Board, 98 N. Y. 239; Bouton v. Van Bureh, 229 N. Y. 17; Delcambre v. Delcambre, 210 N. Y. 460; Hobart College v. Fitzhugh, 27 N. Y. 130; Brown v. Brown, 190 N. Y. Supp. 373; Early v. Nash, 139 App. Div. 736; Rosenbaum v. Beuthner, 12 N. Y. Supp. 597; Gugél v. Hiscox, 216 N. Y. 145; Mahr v. N. U. F. Ins. Co., 127 N. Y. 452; Simon v. Cibralter, 179 App. Div. 273; First Nat. Bank v. Shuler, 153 N. Y. 163; Me Knight v. Bank of New York, 254 N. Y. 417.)

      Samuel Silbiger for respondent.
    The lower court had power to make the judgment and decree appealed from herein. (Voorhees v. Voorhees, 39 N. Y. 463; LeBrantz v. Conklin, 39 Mise. Rep. 715 ; Rogers v. New York Land Co., 134 1ST. Y. 197; Chatfield v. Simonson, 92 N. Y. 199; Patcher v. Scobell Chemical Co., 129 Mise. Rep. 612; Village of Bollivar v. Bollivar Water Co., 62 App. Div. 484; Lawrence v. Grant, 140 App. Div. 629; Redpath v. Redpath, 75 App. Div. 95; Ackerman v. Hartwick, 123 Mise. Rep. 937; Butler v. New York Bargain House, 242 N. Y. 28.)
   Per Curiam.

In view of the fact that the necessary parties for the probate of a will are not before the court, the decree should be modified by striking out of the first adjudicating clause of the decree the following words, “ was duly executed by Betty Hirsch and published, and declared by her to be her last will and testament and was not revoked by Betty Hirsch,” and by striking out the word probated ” in the third line from the end of that paragraph and inserting in place thereof the words “ Proceedings taken therein for its probate.” Also by inserting in the second adjudicating clause after the word “ void ” in the second line from the end thereof, the words as to the defendants ” and in the eighth adjudicating paragraph after the word void ” in the last line, inserting the words as to them,” and as so modified the judgment should be affirmed, with costs to the respondent.

The judgment should be modified in accordance with this opinion and as so modified affirmed, with costs to respondent.

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

Judgment accordingly.