author: O’Brien, J.

text:
    Ellis G. Potter, on Behalf of Himself and Others, Appellant and Respondent, and Herman Wangrow, Respondent, v. Elisha Walker et al., Respondents and Appellants, and Paul H. Harwood, Respondent, Impleaded with Others.

      Argued May 25, 1937;
    decided November 23, 1937.

      A. Lincoln Lavine, Howard W. Ameli and Abraham L. Pomerantz for plaintiff Ellis G. Potter, appellant and respondent, and plaintiff Herman Wangrow, intervener, respondent.
    A derivative stockholder’s action against directors, whether for negligence or otherwise, is cognizable solely in equity, and is necessarily governed by the equitable, or ten-year, Statute of Limitations. (Bachus-Brooks Co. v. Northern Pac. Ry. Co., 21 Fed. Rep. [2d] 4; 275 U. S. 562; Brinckerhoff v. Bostwick, 88 N. Y. 32; 99 N. Y. 185; 103 N. Y. 567; Small v. Sullivan, 218 App. Div. 612; 245 N. Y. 343; Mason v. Henry, 152 N. Y. 529; Hanover Fire Ins. Co. v. Morse D. D. & R. Co.,
      270 N. Y. 86; Hardin v. Boyd, 113 U. S. 756; Peters v. Delaplaine, 49 N. Y. 362; Hubbell v. Sibley, 50 N. Y. 468; Ganley v. Troy City Nat. Bank, 98 N. Y. 487; United States v. Whited & Wheless, 246 U. S. 552; Williams v. Flagg Storage Warehouse Co., 128 Misc. Rep. 566; 221 App. Div. 788; United States v. Memphis Cotton Oil Co., 288 U. S. 62; Bookbinder v. Chase Nat. Bank, 244 App. Div. 650.) Even were the corporation the plaintiff in this action it would not have an adequate concurrent remedy at law, and would be barred only by the ten-year statute. (Brinckerhoff v. Bostwick, 105 N. Y. 567; German-American Coffee Co. v. Diehl, 86 Misc. Rep. 57; 167 App. Div. 913; 216 N. Y. 726; Bosworth v. Allen, 168 N. Y. 157.) The ten-year statute applies to actions against directors for an accounting. (Brinckerhoff v. Bostwick, 99 N. Y. 185; Mason v. Henry, 152 N. Y. 529; Goldberg v. Berry, 231 App. Div. 165; City Investing Co. v. Gerken, 121 Misc. Rep. 763; Pollitz v. Wabash B. B. Co., 207 U. Y. 113; Hanna v. People's Nat. Bank, 35 Misc. Rep. 517; Murray v. Smith, 166 App. Div. 528; Continental Securities Co. v. Belmont, 83 Misc. Rep. 340; 168 App. Div. 483 ; 222 N. Y. 673; Venner v. N. Y. C. & H. R. R. R. Co., 177 App. Div. 296; 226 N. Y. 583; Gallin v. National City Bank, 152 Misc. Rep. 679.) As to the profiting directors, even the six-year Statute of Limitations would not bar recovery, because, in an action founded on fraud, the statute does not begin to run until the fraud was or should have been discovered. (Curtis v. Connly, 264 Fed. Rep. 650; 257 U. S. 260; Cooper v. Hill, 94 Fed. Rep. 582; Anderson v. Gailey, 33 Fed. Rep. [2d] 589; Bankin v. Cooper, 149 Fed. Rep. 1010; Adams v. Clarke, 22 Fed. Rep. [2d] 957; Bates v. Preble, 151 U. S. 149; Erickson v. Quinn, 47 N. Y. 410.) Plaintiff has no adequate concurrent remedy at law, and, therefore, the ten-year Statute of Limitations applies. (Falk v. Hoffman, 233 N. Y. 199; Hanover Fire Ins. Co. v. Morse D. D. & R. Co., 270 N. Y. 86; Kane, v. Bloodgood, 7 Johns. Ch. 90; Appleby v. Brown, 24 N. Y. 143; Bundle v. Allison, 34 N. Y. 180; Butler v. Johnson, 111 N. Y. 204; Minion v. Warner, 238 N. Y. 413; Jackson v. Smith, 254 U. S. 586; Sloane v. United Feature Syndicate, Inc., 135 Misc. Rep. 365.)

      Frederick H. Wood, Alfred McCormack, George M. Billings and George G. Tyler for defendants Elisha Walker et al., respondents and appellants.
    The Statute of Limitations which controls a stockholders’ derivative action is the one which would have applied if the corporation had brought the action directly in its own name. (Alexander v. Donohoe, 143 N. Y. 203; Niles v. N. Y. C. & H. R. R. R. Co., 176 N. Y. 119; Pollitz v. Wabash R. R. Co., 207 N. Y. 113; Grant v. Greene Consolidated Copper Co., 169 App. Div. 206 ; 223 N. Y. 655; Boyd v. Mutual Fire Assn. of Eau Claire, 116 Wis. 155; Borst v. Corey, 15 N. Y. 505; Pierson v. McCurdy, 33 Hun, 520; 100 N. Y. 608; Peters v. Delaplaine, 49 N. Y. 362; Butler v. Johnson, 111 N. Y. 204; Wallace v. Lincoln Sav. Bank, 89 Term. 630; Curtis v. Connly, 257 U. S. 260; Winston v. Gordon, 80 S. E. Rep. 756; Mason v. Henry, 152 N. Y. 529; Pietsch v. Milbrath, 101 N. W. Rep. 388; Brinckerhoff v. Bostwick, 99 N. Y. 185; Becker v. Billings, 304 Ill. 190; Kelly v. Dolan, 233 Fed. Rep. 635; Matter of Franklin Brewing Co., 263 Fed. Rep. 512; Link v. McLeod, 194 Penn. St. 566.) An action against directors to recover upon the ground of negligence is within the express wording of the six-year Statute of Limitations. The Appellate Division was consequently right in affirming dismissal of the fourth cause of action against all of the moving defendants. (Peters v. Delaplaine, 49 N. Y. 362; Hun v. Cary, 82 N. Y. 65; O’Brien v. Fitzgerald, 143 N. Y. 377; Dykman v. Keeney, 154 N. Y. 483; Empire Sav. Bank v. Beard, 151 N. Y. 638; Higgins v. Tefft, 4 App. Div. 62.) The first and seventh causes of action in so far as they seek to recover profits alleged to have jbeen derived by the defendant directors at the expense of the corporation, are within the express language of the six-year Statute of Limitations, and the Appellate Division should have affirmed the judgments and orders at Special Term dismissing such causes of action against said defendants. (Miller v. Schloss, 218 N. Y. 400; Lamine v. Dorrell, 2 Ld. Raym. 1216; Kane v. Bloodgood, 7 Johns. Ch. 90; Neilson v. Blight, 1 Johns. Cas. 205; Byxbie v. Wood, 24 N. Y. 607; Middleton v. Twombly, 125 N. Y. 520; Miller v. Wood, 116 N. Y. 351; Terry v. Munger, 121 N. Y. 161; Roberts v. Ely, 113 N. Y. 128; Carr v. Thompson, 87 N. Y. 160; Mills v. Mills, 115 N. Y. 80; Keys v. Leopold, 241 N. Y. 189; Dumbadze v. Lignante, 244 N. Y. 1; Minion v. Warner, 238 N. Y. 413.) The right asserted and the obligation sought to be enforced in the first and seventh causes of action for the recovery of profits are of legal and not of equitable origin. (McClure v. Law, 161 N. Y. 78; Abbott v. Blossom, 66 Barb. 353; Price v. Mulford, 107 N. Y. 303; Caussidiere v. Beers, 2 Keyes, 198; Sayer v. Wynkoop, 248 N. Y. 54; Mason v. Prendergast, 120 N. Y. 536; Felder v. Reeth, 34 Fed. Rep. [2d] 744; Dykman v. Keeney, 154 N. Y. 483; Holmes v. Willard, 125 N. Y. 75; O’Brien v. Fitzgerald, 143 N. Y. 377; Hun v. Cary, 82 N. Y. 65; Wallace v. Lincoln Sav. Bank, 89 Tenn. 630; Pollitz v. Wabash R. R. Co., 207 N. Y. 113.) Where the right asserted and the obligation sought to be enforced are of legal origin, the limitation on actions at law applies even though there may be concurrent jurisdiction at law and in equity. (Hovenden v. Lord Annesley, 2 Sch. & Lef. 607; Kane v. Bloodgood, 7 Johns. Ch. 90; Metropolitan Bank v. St. Louis Dispatch Co., 149 U. S. 436; Baker v. Cummings, 169 U. S. 189; Curtis v. Connly, 257 U. S. 260; Woodmansee v. Schmitz, 232 N. W. Rep. 774; McNair v. Burt, 68 Fed. Rep. [2d] 814; Hughes v. Reed, 46 Fed. Rep. [2d] 435; Rundle v. Allison, 34 N. Y. 180.) Actions to account, based upon legal rights and obligations, and actions to enforce constructive trusts are of legal origin and hence subject to the six-year statute. (Neilson v. Blight, 1 Johns. Cas. 205; Kane v. Bloodgood, 7 Johns. Ch. 90; Murray v. Coster, 20 Johns. 576; Humbert v. Trinity Church, 24 Wend. 587; Pollitz v. Wabash R. R. Co., 207 N. Y. 113, Beatty v. Guggenheim Exploration Co., 225 N. Y. 380; Hughes v. Brown, 13 S. W. Rep. 286; Mason v. Henry, 152 N. Y. 529.) The causes of action alleged are legal, and the legal remedy thereon is adequate. (McClure v. Law, 161 N. Y. 78; Pierson v. McCurdy, 33 Hun, 520; 100 N. Y. 608; Pollitz v. Wash R. R. Co., 207 N. Y. 113; Fur & Wool Trading Co. v. Fox, Inc., 245 N. Y. 215; Comstock v. Hier, 73 N. Y. 269; Hawley v. Cramer, 4 Cow. 717; Manaban v. Gibbons, 19 Johns. 427; Osborn v. Bell, 5 Den. 370; Cory v. Curtis, 44 U. S. 236; Myers v. Hurley Motor Co., 273 U. S. 18.)

      George L. Trumbull and Randolph H. Guthrie for defendant Edward R. Tinker, respondent and appellant.
    The Statute of Limitations applicable to the action is the same statute which would be applicable if the corporation were the plaintiff. (Pollitz v. Wabash R. R. Co., 207 N. Y. 113; Alexander v. Donohoe, 143 N. Y. 203; Brinckerhoff v. Bostwick, 99 N. Y. 185; Mason v. Henry, 152 N. Y. 529; Curtis v. Connly, 257 U. S. 260.) The Statute of Limitations applicable to the seventh cause of action against the defendant Tinker is the six-year statute contained in subdivision 1 of section 48 of the Civil Practice Act. (Kane v. Bloodgood, 7 Johns. Ch. 90; Borst v. Corey, 15 N. Y. 505; Keys v. Leopold, 241 N. Y. 189; Hanover Fire Ins. Co. v. Morse Dry Dock & Repair Co., 270 N. Y. 86; Diefenthaler v. Mayor, 111 N. Y. 331; Butler v. Johnson, 111 N. Y. 204; Plet v. Willson, 134 N. Y. 139; Terry v. Munger, 121 N. Y. 161; McClure v. Law, 161 N. Y. 78; Comstock v. Hier, 73 N. Y. 269; Minion v. Warner, 238 N. Y. 413; Mills v. Mills, 115 N. Y. 80; Model Building & Loan Assn. v. Reeves, 236 N. Y. 331; Middleton v. Twombly, 125 N. Y. 520; Carr v. Thompson, 87 N. Y. 160.) The six-year Statute of Limitations has run upon the seventh cause of action as against the defendant Tinker. (Harriss v. Tams, 258 N. Y. 229; Davis v. New York, Lake Erie & Western R. R. Co., 110 N. Y. 646; McConnell v. Williams S. S. Co., 239 App. Div. 393; 265 N. Y. 594; Dietz v. Harris, 221 App. Div. 581; Middleton v. Twombly, 125 N. Y. 520; Mills v. Mills, 115 N. Y. 80; Carr v. Thompson, 87 N. Y. 160; Yeoman v. Townshend, 74 Hun, 625; Smith v. Hamilton, 43 App. Div. 17; Chorrmann v. Bachmann, 119 App. Div. 146; East Lake Lumber Co. v. Van Gorder, 105 Misc. Rep. 704; 188 App. Div. 997.) The first cause of action accrued more than six years prior to the commencement of this action. (McCluskey v. Cromwell, 11 N. Y. 593; Brinckerhoff v. Bostwick, 34 Hun, 352; Gilbert v. Ackerman, 159 N. Y. 118; Wood v. Carpenter, 101 U. S. 135; Cooper v. Hill, 94 Fed. Rep. 582; Hughes v. Reed, 46 Fed. Rep. [2d] 435; Prudential Ins. Co. v. Stone, 270 N. Y. 154; Curtis v. Connly, 257 U. S. 260; Payne v. Ostrus, 50 Fed. Rep. [2d] 1039; McNair v. Burt, 68 Fed. Rep. [2d] 814.) The ten-year statute does not apply ipso facto to every action against directors for an accounting. (Hun v. Cary, 82 N. Y. 65; O’Brien v. Fitzgerald, 143 N. Y. 377; O’Brien v. Fitzgerald, 6 App. Div. 509; 150 N. Y. 572; Dykman v. Keeney, 154 N. Y. 483.)

      David Paine, C. M. Tappen and George Koegler for defendant Paul H. Harwood, respondent.
    The action against Harwood is based upon negligence and seeks to recover damages to the corporation. Actions against directors to recover damage to the corporation are barred by the six-year Statute of Limitations. (Brinckerhoff v. Bostwick, 99 N. Y. 185; Alexander v. Donohoe, 143 N. Y. 203; Pollitz v. Wabash R. R. Co., 207 N. Y. 113; Hun v. Cary, 82 N. Y. 65; O’Brien v. Fitzgerald, 143 N. Y. 377; O’Brien v. Fitzgerald, 6 App. Div. 509; 150 N. Y. 572; Dykman v. Keeney, 154 N. Y. 483; Hanover Fire Ins. Co. v. Morse Dry Dock & Repair Co., 270 N. Y. 86;
      Keys v. Leopold, 241 N. Y. 189.) The Statute of Limitations so far as Harwood is concerned commenced to run on the dates the alleged negligent acts were committed. (Pitcher v. Sutton, 238 App. Div. 291; 264 N. Y. 638; Brinckerhoff v. Bostwick, 34 Hun, 352; 99 N. Y. 185; Gilbert v. Ackerman, 159 N. Y 118; Curtis v. Connly, 257 U. S. 260; Cooper v. Hill, 94 Fed. Rep. 582; Anderson v. Gailey, 33 Fed. Rep. [2d] 589; Hughes v. Reed, 46 Fed. Rep. [2d] 435; McNair v. Burt, 68 Fed. Rep. [2d] 814.) The period of limitations governing the action is the same as though the action had been brought by the corporation. (Alexander v. Donohoe, 143 N. Y. 203; Niles v. N. Y. C. & H. R. R. R. Co., 176 N. Y. 119; Pollitz v. Wabash R. R. Co., 207 N. Y. 113.) The corporation would have had an adequate remedy at law against Harwood. (Dykman v. Keeney, 154 N. Y. 483; Broderick v. Marcus, 146 Misc. Rep. 240; 239 App. Div. 816.)
   O’Brien, J.

Plaintiff, as stockholder of Pan American Petroleum and Transport Company, brought this representative action in June, 1933, against defendants, who are directors of that corporation, for acts committed by them as such during the years 1924 and 1925. The third amended complaint demands judgment that the court, in the exercise of its equitable jurisdiction, decree that defendants be required to account for the profits which they obtained and the losses which the corporation sustained by the acts of these defendants as directors.

The questions of law certified are whether the six-year statute (Civ. Prac. Act, § 48, subd. 3) or the ten-year Statute of Limitations (Civ. Prac. Act, § 53) applies to the first, fourth and seventh causes of action pleaded in the third amended complaint.

Defendants Walker, Armsby, Hayes and Marston moved to dismiss the first, fourth and seventh causes of action as to them. Special Term granted this motion, but the Appellate Division reversed as to the first and seventh and affirmed as to the fourth. Defendant Harwood moved to dismiss the first, fourth and seventh as to him. Special Term granted the motion and the Appellate Division affirmed. Defendant Tinker moved to dismiss the first and seventh as to him. Special Term granted his motion, but the Appellate Division affirmed only as to the first and reversed as to the seventh.

The first cause of action set forth in the third amended complaint alleges that defendants Walker, Armsby, Hayes and Marston, who were then directors of Pan American and who were also officers, directors and stockholders in Blair & Co., Inc., entered into a conspiracy during the year 1924, which conspiracy was consummated in August, 1925, to acquire for themselves and for Blair & Co. a majority of the voting stock of Pan American with money supplied by Pan American; that pursuant to this conspiracy Walker proposed to his codirectors in Pan American that Pan American acquire the stock of British Mexican from British Union; that it did purchase that stock for $11,000,000; that this sum, instead of being paid directly to British Union, was deposited with Blair & Co. to the credit of British Union; that, with the consent of British Union, but without disclosure to the other directors of Pan American, it was used by defendants Walker, Armsby, Hayes and Marston for purchase by them of the majority voting stock in Pan American from B. L. Doheny; that from the transaction Blair & Co., Inc., obtained a profit of $2,505,000 and Pan American suffered a loss of $7,802,743.67. The allegations in support of this cause of action are also to the effect that defendant Tinker, as a director of Pan American, authorized and confirmed the purchase of the stock of British Mexican, but that defendant Harwood dissented. The Appellate Division held, in respect to the first cause of action, that defendants Walker, Armsby, Hayes and Marston are not entitled to plead the six-year Statute of Limitations for the reason that this cause of action is one for an accounting to recover not only losses resulting from their wrongful acts as directors but also profits received by them, and, citing Falk v. Hoffman (233 N. Y. 199) and Hanover Fire Ins. Co. v. Morse Dry Dock & Repair Co. (270 N. Y. 86), that an action at law would not be as complete or effective as the remedy in equity. As to defendant Tinker, he is charged, in the first cause of action, merely with negligence, and the court decided that the six-year statute applies to him in respect to the allegations set forth in the first cause of action. In respect to Harwood, he also was charged merely with negligence, and the Appellate Division held that the six-year statute applies also to him.

The fourth cause of action alleges negligence against the defendant directors for their acts in approving and acquiescing in the payment by Pan American to defendant Stewart of the sum of $150,000, which is averred to be a gift. A remedy at law against Stewart for money had and received would he and no accounting is necessary. The courts below have held that the six-year statute applies in this action for negligence against the directors, none of whom is alleged to have profited by this gift to Stewart.

The seventh cause of action charges defendants Walker, Hayes, Armsby, Marston and Tinker, as members of a “ directors’ syndicate,” with profiting, through a conspiracy at the expense of Pan American, to the extent of $13,200,000 through the purchase of Lago Oil stock by Pan American, and demands an accounting of such profits and losses. The Appellate Division decided that the six-year statute is no defense to this cause of action. The principle is the same as that applied to the first cause of action. This seventh cause of action also charges negligence against the directors and, as in the first cause of action, the courts below have applied the six-year statute as to defendant Harwood. His approval of the resolution occurred in August, 1925, and this action was not commenced until June, 1933.

In respect to those causes of action by which is sought to recover profits received by directors by reason of wrongful acts, an action at law would not afford adequate relief. To the extent that an accounting is necessary, the right and the remedy must necessarily be of an equitable nature. The Appellate Division is, therefore, clearly right in applying the ten-year Statute of Limitations as to such causes of action. (Civ. Prac. Act, § 53; Hanover Fire Ins. Co. v. Morse Dry Dock & Repair Co., 270 N. Y. 86.)

Those causes of action, however, which are based merely upon negligence of two of the directors who are not alleged to have participated in the receipt of any wrongful profits at the expense of the corporation require the application of a different rule. The formal demand for relief in the complaint does not determine the legal or equitable character of the action. These causes of action are essentially and exclusively to recover for an injury to the property of the corporation within the meaning of subdivision 3 of section 48 of the Civil Practice Act as it read prior to its amendment by chapter 558 of the Laws of 1936. If the remedy were invoked directly by the corporation or a receiver, a common-law action for damages would lie. It would be adequate and, consequently, equitable relief would be unnecessary. (O’Brien v. Fitzgerald, 143 N. Y. 377, 380; Dykman v. Keeney, 154 N. Y. 483, 491, 492; Curtis v. Connly, 257 U. S. 260.) Some dicta occur in the earlier reports of this court’s decisions indicating doubt in the minds of the authors of the opinions whether the same rule by which a corporation or its receiver is governed in actions against directors for negligence would apply to a stockholder (O’Brien v. Fitzgerald, supra, pp. 381, 382; Mason v. Henry, 152 N. Y. 529, 535), but no direct adjudication to that effect.

In Wallace v. Lincoln Sav. Bank (89 Tenn. 630, 648, 649) the opinion was written by a distinguished jurist, Mr. Justice Lurton. That action, as is the one now before us, was instituted by a shareholder in behalf of all other shareholders against directors of the corporation for their breach of trust due to inattention, negligence and mismanagement in that they failed to supervise the management and turned over the entire control of the bank to the unlimited discretion and unaided judgment of the cashier. In the course of his opinion the learned justice wrote: “ This kind of suit is, at last, but the suit of the corporation for its benefit and upon its right of action. If for any reason the corporation is estopped from suing, or its action is barred, the suit by the stockholder or creditor is likewise affected,” and quoted the following excerpt from Morawetz on Private Corporations (§ 271): “ A suit of this character is brought to enforce the corporate or collective rights, and not the individual rights of the shareholders. It may therefore properly be regarded as a suit brought on behalf of the corporation, and the shareholder can enforce only such claims as the corporation itself could enforce. Moreover, the essential character of a cause of action belonging to a corporation remains the same, whether the suit to enforce it be brought by the corporation or by a shareholder. Thus a legal right of action would not be treated as an equitable one, or become governed by the rules applicable to equitable causes of action, as to limitations, etc., because a shareholder has brought suit in equity to enforce it on behalf of the company.” The same principle has been accepted in this State in Holmes v. Camp (180 App. Div. 409, 412). In an action for damage to property the six-year statute applies even in those instances where the alleged remedy may be equitable in form. (Keys v. Leopold, 241 N. Y. 189, 192.)

Plaintiff was granted leave to appeal from the judgment in favor of defendant Tinker on the first cause of action, in favor of defendant Harwood on the first, fourth and seventh causes of action, and the following questions were certified: “ (1) Did the cause of action alleged against defendant Edward R. Tinker in the first cause of action of the third amended complaint herein accrue within the time limited by law for the commencement of an action thereon? (2) Was the motion of defendant Edward R. Tinker for, judgment dismissing the first cause of action in the third amended complaint on the ground that the cause of action therein alleged against him had not accrued within the period permitted by law for the commencement of an action thereon, properly granted at Special Term? (3) Did the causes of action alleged against the defendant Paul H. Harwood in the first, fourth and seventh causes of action of the third amended complaint herein accrue within the time limited by law for the commencement of an action or actions thereon? (4) Was the motion of defendant Paul H. Harwood for judgment dismissing the first, fourth and seventh causes of action in the third amended complaint on the ground that the causes of action therein alleged against him had not accrued within the period permitted by law for the commencement of an action or actions thereon, properly granted at Special Term?” The first question should be answered No,” the second and fourth questions “ Yes.” The third question should be answered “ No.”

Defendants Walker, Armsby, Hayes and Marston were also granted leave to appeal, and the following questions were certified: “ (1) Did the cause of action alleged against the defendants Elisha Walker, George Armsby, Edward F. Hayes and Hunter S. Marston, in the first cause of action in the third amended complaint herein accrue within the time limited by law for the commencement of an action thereon? (2) On the record herein, was the motion of the defendants Elisha Walker, George Armsby, Edward F. Hayes and Hunter S. Marston, for judgment dismissing the first cause of action in the third amended complaint on the ground that the cause of action therein alleged against them had not accrued within the period permitted by law for the commencement of an action thereon, properly granted at Special Term? (3) Did the cause of action alleged against the defendants Elisha Walker, George Armsby, Edward F. Hayes and Hunter S. Marston, in the seventh cause of action of the third amended complaint herein accrue within the time limited by law for the commencement of an action thereon? (4) On the record herein, was the motion of the defendants Elisha Walker, George Armsby, Edward F. Hayes and Hunter S. Marston, for judgment dismissing the seventh cause of action in the third amended complaint on the ground that the cause of action therein alleged against them had not accrued within the period permitted by law for the commencement of an action thereon, properly granted at Special Term? ” The first question should be answered “ Yes,” the second “ No,” the third question “ Yes ” and the fourth question “ No.”

Defendant Tinker was also granted leave to appeal and the following questions certified: “ (1) Did the cause of action alleged against the defendant, Edward R. Tinker, in the Seventh cause of action of the third amended complaint herein accrue within the time limited by law for the commencement of an action thereon? (2) On the record herein, was the motion of the defendant, Edward R. Tinker, for judgment dismissing the Seventh cause of action of the third amended complaint on the ground that the cause of action therein alleged against him had not accrued within the period permitted by law for the commencement of an action thereon, properly granted at Special Term?” The first question should be answered “ Yes ” and the second question “ No.”

The judgments and orders of the Appellate Division should be affirmed, with costs, and the questions certified answered as above stated.

Crane, Ch. J., Lehman, Hubbs, Loughran, Finch and Rippey, JJ., concur.

Ordered accordingly.


source: Caselaw Access Project

license: Public Domain

text:
    George Foxson, Plaintiff, v. Elmus Building Corporation et al., Defendants; August Kneher, Appellant, and J. P. Duffy Company et al., Respondents.
    Argued September 27, 1937;
    decided November 23, 1937.

      Jacob Leiman for appellant.
    The mortgage of the appellant does not contravene section 7 of article 2 of the Lien Law (Cons. Laws, ch. 33). (Rukeyser v. Fountain & Choate, Inc., 185 App. Div. 263; Hudson River Blue Stone Co. v. Huntington, 143 App. Div. 99; American Clay & C. Corp. v. Rochester F. Box Co., 171 N. Y. Supp. 720; Albany Builders Supply Co. v. Standard Building Corp., 264 N. Y. 579; Buffalo Farm Exchange, Inc., v. Heinz, 235 App. Div. 277; Vulcan Rail & Construction Co. v. Westchester County, 250 App. Div. 212; Behrer v. McMillan, 114 App. Div. 450; 191 N. Y. 530.)

      Charles A. Van Patten, Sol Ringel, Jacob Carr, Lowell M. Birred and Harold Mokotoff for respondents.
    The appellant’s mortgage is void in that it violates section 7 of article 2 of the Lien Law. (Horton v. Queens County Machinery Corp., 101 Misc. Rep. 31; 182 App. Div. 932; Kane v. Kinney, 174 N. Y. 69; Crane Co. v. Pneumatic Signal Co., 94 App. Div. 53; Buffalo Farm Exchange, Inc., v. Heinz, 235 App. Div. 277.)
   O’Brien, J.

The application of section 7 of the Lien Law (Cons. Laws, ch. 33; as amd. by Laws of 1932, ch. 627) to the facts herein requires our decision.

In this action to foreclose a first mortgage by plaintiff Foxson against premises owned by defendant Elmus Building Corporation, a surplus remained. The respondents are lienors and the appellant Kneher is the holder of a second mortgage. All the lienors respondent, except Union Tile Supply Corporation, furnished material or performed labor on the mortgaged premises prior to August 19, 1935, and on that date each possessed a claim on account of the improvement of the real property. On July 24, 1935, appellant Kneher and Elmus Building Corporation, the owner of the mortgaged premises, entered into a contract whereby appellant agreed to provide all the materials and perform all the work for the installation of the plumbing and heating. This contract includes a provision in the nature of a conditional sale whereby the parties agree that the entire apparatus shall remain personal property and that title shall remain in appellant Kneher until these chattels shall be fully paid for in cash. Appellant, not content with the security afforded by the agreement of July 24, 1935, obtained a mortgage dated August 19, 1935, and recorded August 20, 1935, as further security. The first item of labor performed and material furnished by appellant was October 1,1935. Although other lienors supplied material and performed labor prior to the execution of the agreement of July 24, 1935, and the mortgage of. August 19, 1935, no notice of lien was filed by any of them earlier than December 21, 1935.

Section 7 of the Lien Law (as amd. by Laws of 1929, ch. 515, § 2, and Laws of 1932, ch.' 627, § 3) provides: “ A conveyance, mortgage, hen or incumbrance made by an owner of real property, for the -purpose of avoiding the provisions of this article, with the knowledge or privity of the person to whom the conveyance is made or in whose favor the mortgage, hen or incumbrance is created, shall be void and of no effect as against a claim on account of the improvement of such real property, existing at the time of the making of the conveyance or the creation of such mortgage, hen or incumbrance.” This part of the statute is not directed exclusively against transactions in which may be involved evil, sinister, fraudulent intent. The finding by the courts below is that this appellant has not been guilty of any of these forms of moral turpitude. The statute was enacted to prevent an avoidance of any of the provisions of article 2 of the Lien Law. Included within this article is section 13 (as amd. by Laws of 1929, ch. 515, § 2), which provides that “ persons shall have no priority on account of the time of filing their respective notices of liens, but all liens shall be on a parity ” (subd. 1), with stated exceptions not here pertinent. If appellant had conformed with the Lien Law and filed a notice of lien for material and labor he would have been on a parity with those lienors who furnished material and performed labor prior to the time of the rendition of his services. By the contract of July 24th he had retained title to the chattels delivered by him to the owner of the building, and the only reasonable inference of fact to be drawn from his act in taking the mortgage of August 19th is that his purpose was to attempt to take precedence over those who already possessed claims and thus to avoid the provisions of the statute.

The order should be affirmed, with costs.

Crane, Ch. J., Lehman, Hubbs, Loughran, Finch and Rippey, JJ., concur.

Order affirmed.


author: Hubbs, J.

text:
    In the Matter of Ralph C. Tobin et al., Constituting the Board of Trustees of the Seventh Regiment Armory Building in the City of New York, Appellants, against Fiorello H. LaGuardia et al., Constituting the Board of Estimate and Apportionment of the City of New York, Respondents.

      Argued September 27, 1937;
    decided November 23, 1937.

      John F. O’Ryan and L. Laurence Liss for appellants.
    The appropriation in controversy is a mandatory appropriation as to the amount of which the Board of Estimate has no discretion. (People ex rel. Conway v. Supervisors, 68 N. Y. 114; Matter of College of City of New York v. Hylan, 205 App. Div. 372; 236 N. Y. 594; Matter of Bryant, 152 N. Y. 412; Matter of McAneny v. Board of Estimate, 232 N. Y. 377; Mangam v. City of Brooklyn, 98 N. Y. 585; People v. Gates, 56 N. Y. 387; People v. Richmond, 5 Misc. Rep. 26; People ex rel. Bahn v. Supervisors, 9 Hun, 440; City of New York v. New York City Ry. Co., 193 N. Y. 543; Matter of Chapman v. City of New York, 168 N. Y. 80; Town of Southampton v. Mecox Bay Oyster Co., 116 N. Y. 1; Smith v. City of Buffalo, 90 Hun, 118.)

      Paul Windels, Corporation Counsel (James Hall Prothero and Paxton Blair of counsel), for respondents.
    Only clear warrant of law can operate to divorce control of the public purse from the constituted appropriating body. (People ex rel. Rand v. Craig, 231 N. Y. 216; People v. Karr, 240 N. Y. 348; Munro v. State, 223 N. Y. 208; Peterson v. Martino, 210 N. Y. 412; Heckmann v. Pinkney, 81 N. Y. 211.)
   Hubbs, J.

The Seventh Regiment (107th Infantry) of the National Guard since 1879 has occupied as an armory a building which stands on ground leased by the city of New York to the petitioners, who are the field officers of the regiment and comprise the board of trustees of the building with corporate powers conferred by legislative grant. The building was in the main constructed by the regiment with funds donated. When the building was nearly completed, a special act (Laws of 1879, ch. 57) authorized the issuance of bonds for $150,000 upon security of the building and lease, and directed the Board of Estimate and Apportionment, in lieu of rental, to appropriate and pay over to the trustees of the building $15,000 annually to be used by them in paying the interest and principal of the bonds. The bonds having been paid, the Legislature, by chapter 518 of the Laws of 1893, reduced the amount to be appropriated to an amount not exceeding eight thousand dollars, as an equivalent, and in lieu of the rental for an armory for said regiment, as may be required by the trustees of the * * * building, which sums so appropriated shall be paid to the said trustees * * * and applied by them to the preservation, maintenance and improvement oj the * * * building * * *.” (§ 2.)

The act of 1893 required the trustees to report to the Board of Estimate and Apportionment such sum or sums “ as they may require for the payment of the charges and expenses of repairing, altering, maintaining and improving said building and the several parts and appurtenances thereof ” and to report the expenditures to the Comptroller annually, giving “ the specific purposes for which such moneys have been expended * * *.” The same act further provided “ the said armory shall be subject to the provisions of the military code.” The Military Code was adopted at the same session, being chapter 559 of the Laws of 1893.

Likewise section 230 of the City Charter (Laws of 1897, ch. 378) requires the Board of Estimate and Apportionment to appropriate a sum not exceeding $8,000 annually to be paid to the said trustees “ to be applied to the preservation, maintenance and improvement of said armory building, as provided in chapter five hundred and eighteen of the laws of eighteen hundred and ninety-three.”

Appropriations of $8,000 annually were requested and paid to and including the year 1934. In 1935 a like appropriation was requested but not made. Thereupon this mandamus proceeding was instituted. Subsequent to commencement of the proceeding $1,000 was appropriated.

The defense, briefly stated, is that $30,530.81 had been appropriated under the Military Law (Cons. Laws, ch. 36) to the Armory Board for the regiment. Of that sum it appears $27,387.81 was for personal service and $3,143 for other than personal service, and of which last item only $140 was for repairs and replacements. It is urged that the Military Law has superseded the laws above referred to and quoted; that appropriation of the further sum requested would amount to a duplication of payments; that some of the items were not for lawful expenditures under the Military Law, and' if the Military Law be not held to repeal the older statutes, the extra $1,000 subsequently appropriated satisfied the requirements of chapter 518 of the Laws of 1893 and section 230 of the Charter.

At the trial, for the purpose of avoiding expense and simplifying the question to be passed upon, the petitioners stipulated that the court .might find that the aforesaid appropriations [$30,530.81 to the Armory Board and $1,000 to the petitioners] made for the year 1935 were adequate for the care, preservation, maintenance and improvement of the said armory building for said year.”

With such stipulation in the record the petitioners moved for a directed verdict on the ground that the facts so stipulated were irrelevant, that petitioners were entitled to mandamus by virtue of the fact that the charter provision has not been superseded by the Military Law, and that the charter provision leaves no discretion in the Board of Estimate and Apportionment as to the amount to be appropriated.

Petitioners moved for a peremptory order. The Special Term denied the motion but granted an alternative order. On appeal, the Appellate Division affirmed. Respondents then filed a return. The question of adequacy of the $1,000 appropriation made pursuant to section 230 of the Greater New York Charter was tried as an issue of fact, and on that trial the stipulation above referred to was made. The determination was against the petitioners. Petitioners moved under rule 112 of the Rules of Civil Practice to dismiss the return on the ground that it was insufficient in law upon the face thereof. That motion was likewise denied by the Special Term and affirmed by a divided court. No opinions were written in the Appellate Division. The court at Special Term on the first motion denied the motion for a peremptory writ on the ground that, the city having appropriated $30,530.81 for the preservation and maintenance of the 107th Infantry Armory under the Military Law and an additional $1,000 pursuant to the provisions of section 230 of the Greater New York Charter, it did not clearly appear that the entire sum of $8,000 authorized to be appropriated in lieu of rental was required for the preservation, maintenance and improvement of the armory building.”

The stated conclusion of the Special Term upon dismissal of the petition for a mandamus order after trial of the issue of fact and direction of a verdict for respondents was that it could not ignore the previous determination of the court in allowing an alternative mandamus and hold that the court was free to reconsider the order denying a peremptory mandamus and granting an alternative one.

We have reached the conclusion that section 230 of the charter has not been repealed by implication by the enactment of the Military Law, which makes general provision for the maintenance of the National Guard and for the rental and maintenance of its quarters. The stipulation applied only to the year 1935 and is not determinative of the issue as to whether the Charter section has been repealed by implication or as to whether the Board of Estimate and Apportionment is vested with power to determine the amount required for preservation, maintenance and improvement of the building in question or whether that power remains vested in the board of trustees of the building.

The Legislature, in 1879, in providing for the $15,000 rental, provided that the Seventh Regiment new armory when completed and occupied be subject to the provisions of the Military Code relating to armories, and provided also in the 1893 act, which specified a sum not exceeding $8,000 in lieu of rental, nothing herein contained shall affect, modify or qualify the authority of the commanding officer of the regiment for which said armory has been provided; and the said armory shall be subject to the provisions of the military code relating to armories and to the rules and regulations prescribed by the proper military authorities for other regimental armories in the city of New York.’’

The fact remains that the Board of Estimate and Apportionment is authorized by the 1893 act and by section 230 of the Charter is directed to include in its final estimate a sum not exceeding $8,000 as an equivalent and in lieu of rental, to be paid to the trustees to be applied to the preservation, maintenance and improvement of the building in question and the amount to be appropriated therefor, within the limit specified, is by the 1893 act left to the determination of the trustees of the building. The statute subjects the building to the general provisions of the Military Law, it recognizes the ownership by the regiment of the particular building and specifies a rental, with the administration of that rental left to the trustees of the building. The Military Law recognizes that some buildings are owned by the city and that some are rented. It provides for the maintenance by the Armory Board of city owned buildings and for the payment of rental as to other buildings. The very fact that the Military Law provides for the rental of buildings not owned by the city would seem to refute any argument that there was a legislative intent to nullify the statute fixing the rental on this building or to take from the trustees of the building the right given them by the earlier act to specify the amounts they may require for its preservation, maintenance and improvement. The argument that there may be duplication of appropriations for repairs and improvements is hardly sound unless there be imputed to the Board of Estimate and Apportionment and to the Armory Board a failure to perform their duties under the Military Law. If the board of trustees of the building expend sums out of the amount appropriated in lieu of rental for the preservation, maintenance and improvement of the building, the money which that board expends will not have to be appropriated under the Military Law. The board of trustees of the building may determine to make repairs and improvements and expend sums for maintenance which the Armory Board might not expend. That is a right given to the board of trustees of the building under the 1893 act and the City Charter and that right has not been taken from them either directly or by implication.

The board of trustees is required as a preliminary to the making of the appropriation by the Board of Estimate and Apportionment to report the sum or sums “ they may require for the payment of the charges and expenses of repairing, altering, maintaining and improving said building and the several parts and appurtenances thereof.”

In doing that for the year in question, they included insurance on certain personal property, including pictures, tapestries, etc., which respondents say are items of personal property owned by the regiment, and certain additional telephone service. These two items total $788.75 and $286 respectively. It is contended that these are not items properly payable out of rental. That is a question to be determinated in the first instance by the Board of Estimate and Apportionment but affords no reason for rejecting the amount requested by the trustees of the building in its entirety or limiting the amount appropriated to $1,000.

Under the provisions of the statute, the board of trustees of the building is entitled to an appropriation of not exceeding $8,000 a year, to be applied to the “ preservation, maintenance and improvement ” of the building in question and the several parts and appurtenances thereof. Within the limit specified, the board of trustees of the building is clothed with discretionary powers as to the amount to be requisitioned for the purpose. If additional amounts are necessary to be expended for the same purposes, such additional expenditures are within the discretion of the Armory Board and the Board of Estimate and Apportionment. The Board of Estimate and Apportionment is vested with the power to refuse such amounts as petitioners may report as necessary unless it appears on the face of their request for such amounts that the sum is needed for the purposes specified in the statute, i. e., for payment of the charges and expenses of repairing, altering, maintaining and improving said building and the several parts and appurtenances thereof.”

The Board of Estimate and Apportionment is not vested with the power to refuse such amounts as petitioners may report as necessary up to $8,000 unless it appears on the face of their request for such amounts that items have been included not wdthin the authority granted to the board of trustees by statute. This proceeding relates back to the requisition of requirements for the year 1935, made before the Board of Estimate and Apportionment had appropriated $1,000 plus additionál sums under the Military Law. Even though the petitioners have stipulated that the appropriations subsequently made were sufficient, they have not stipulated that the sums would not have been necessary but for the subsequent appropriations; they have not stipulated that an appropriation made to the Armory Board is in satisfaction of the obligation on the part of the Board of Estimate and Apportionment to appropriate to the board of trustees the amount required for the maintenance, alteration, repair and improvement of the building for the year in question.

It was clearly the purpose of the Legislature to recognize that the building in question is owned by the regiment and to leave in its board of trustees the power to maintain it and require the Board of Estimate and Apportionment to appropriate $8,000 each year for that purpose.

The order of the Appellate Division and of the Special Term denying a peremptory order of mandamus requiring the Board of Estimate and Apportionment to appropriate the sum of $8,000 for the purposes specified should be reversed, with costs, and the motion therefor by petitioners granted, the sum to be appropriated to be $8,000, less the sum of $1,000 heretofore appropriated, and less either or both of items amounting to $788.75 for insurance on pictures, tapestries, etc., and $286 for additional telephone service alleged to have been included in petitioners’ estimate as submitted to the Board of Estimate and Apportionment for the year in question in the event such item or items shall be determined by the Board of Estimate and Apportionment not within the purposes for which appropriation is authorized by statute.

The orders of the Appellate Division and those of the Special Term should be reversed and the motion for a peremptory order of mandamus granted, with costs in all courts.

Crane, Ch. J., Lehman, O’Brien, Lottghran, Finch and Rippey, JJ., concur.

Ordered accordingly.


author: Lehman, J.

text:
    In the Matter of Yacht Club Catering, Inc., Respondent, against Henry E. Bruckman et al., Constituting the State Liquor Authority of the State of New York, Appellants.
    Argued September 27, 1937;
    decided November 23, 1937.

      The following questions were certified:

      “ 1. Under Section 121 of the Alcoholic Beverage Control Law (Chapter 478 of the Laws of 1934), has the Supreme Court the power to stay the operation of Section 130 of the said law for any period in excess of thirty (30) days following the cancellation or revocation of a license or permit issued pursuant to the said law?
    “ 2. Where an application for an order of certiorari to review the actions of the liquor authority as provided in Section 121 of the Alcoholic Beverage Control Law (Chapter 478 of the Laws of 1934), and for a stay of operation for thirty days of Section 130 of said law, has been brought on by order to show cause, and said order to show cause contains a stay of operation of said Section 130 pending the determination of said application, has the Supreme Court the power, upon granting such application, to grant a stay of operation of said Section 130 for thirty days following the granting of such application for an order of certiorari? ”

      Monroe I. Katcher, II, and William II. Ticho for appellants.
    In a proceeding brought pursuant to section 121 of the Alcoholic Beverage Control Law (Cons. Laws, ch. 3-B) the Supreme Court has no power to stay the operation of section 130 of said law beyond an aggregate period of thirty days following the cancellation or revocation of a license. (Crowley v. Christensen, 137 U. S. 86; Metropolitan Board of Excise v. Barrie, 34 N. Y. 657; Bertholf v. O’Reilly, 74 N. Y. 509; Matter of Yates v. Mulrooney, 245 App. Div. 146; People ex rel. Crane v. Hahlo, 228 N. Y. 309; Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261; People ex rel. Durham R. Corp. La Fetra, 230 N. Y. 429; Masters v. Eclectic L. Ins. Co., 215 App. Div. 424; State Board of Equalization v. Young’s Market Co., 299 U. S. 59; Mugler v. Kansas, 123 U. S. 623; Delamater v. So. Dakota, 205 U. S. 93; Foster v. Kansas, 112 U. S. 201; License Cases, 5 How. 504; Beer Co. v. Mass., 97 U. S. 25; Matter of Bergemann, 249 App. Div. 737; Matter of Yates v. Mulrooney, 157 Misc. Rep. 116; Matter of De Pue, 185 N. Y. 60; People ex rel. Grant v. Warner, 51 Hun, 53; 125 N. Y. 746; Kroner v. Reilly, 49 App. Div. 41; Matter of Hilliard, 25 App. Div. 222.)
    No appearance for respondent.
   Lehman, J.

In February, 1937, the State Liquor Authority revoked the license of Yacht Club Catering, Inc. Such revocation is subject to review by the supreme court in the manner provided in article seventy-eight of the civil practice act or by any other appropriate remedy provided that no stay shall be granted pending the determination of the matter except on notice to the liquor authority and for a period not exceeding thirty days.” (Alcoholic Beverage Control Law, § 121; Cons. Laws, ch. 3-B.) Yacht Club Catering, Inc., initiated certiorari proceedings to review the revocation of its license “ in the manner provided in article seventy-eight of the civil practice act,” and on March 19th it secured an order to show cause why an order of certiorari should not be granted and why an order should not be made “ staying all of the proceedings in connection with this matter on the part of the State Liquor Authority for a period of thirty days.” The order to show cause was made returnable in three days, on March 22d, and contained a stay pending the hearing and determination of the motion for an order of certiorari and for a stay of thirty days. The motion was not determined until April 20th, more than thirty days after the signing and service of the order to show cause.

The order of. April 20th granting the motion for an order of certiorari provides that “ pending the determination of the certiorari proceeding herein and for a period of thirty (30) days from the entry of this order, the State Liquor Authority and the Police Department of the City of New York are hereby stayed from enforcing the cancellation order of the State Liquor Authority.” An appeal was taken from that part of the order of certiorari which grants a stay for a period of thirty days from the entry of the order. The Appellate Division has affirmed the order so far as appealed from and has granted leave to appeal to this court upon certified questions.

When the Legislature, in section 121 of the Alcoholic Beverage Control Law, provided that certain specified “ actions by the liquor authority shall be subject to review by the supreme court,” it at the same time restricted the power, which the court might otherwise have possessed, to grant a stay pending the determination of the review. The right of the Legislature to impose such a restriction is clear and is not challenged in this proceeding. Except for that restriction, the Supreme Court, under section 1295 of article 78 of the Civil Practice Act, would have power to direct that the execution of the determination of the Liquor Authority be stayed “ pending the certiorari and until the further direction of the court.” The Legislature has commanded that no stay shall be granted except for a period not exceeding thirty days, and the court must mould its decree in conformity with the statute. That is not disputed, but it is said that no stay has been granted for a period exceeding thirty days. In a formal sense that may be true; no stay has been granted by any order which in terms extends beyond thirty days, but by successive orders all proceedings have been stayed- for over sixty days from the date of the order to show cause why the application for an order of certiorari should not be granted.

Argument is made that section 121 of the Alcoholic Beverage Control Law, like section 1295 of the Civil Practice Act, refers only to a stay of proceeding pending the determination of an order of certiorari or other order for review, and does not apply to an order to show cause why such an order should not he granted. The language of section 121 does not permit such construction. The issuance of an order of certiorari is only a step in the proceedings to obtain a review. The proceedings are initiated by the order to show cause or other notice that an application for an order of certiorari will be made. The limitation upon the power to grant a stay applies at every stage of proceedings for review from the inception of such proceedings. That is clear from the language of the statute as weir as from the nature of the problem which the statute was intended to solve.

The Legislature has provided that certain kinds of business shall be lawful only when licensed by the Liquor Authority. Subject to rules embodied in the statute or otherwise fixed by law, the Liquor Authority, and the Liquor Authority alone, must determine when it should give, withhold or revoke its sanction. To insure, however, that the Liquor Authority acts lawfully and to protect the rights of the individual, the determination of the Liquor Authority is subject to review by the court. Irreparable damage to the individual might result if, pending the determination of the court upon such review, an erroneous or arbitrary order of the Liquor Authority were enforced. On the other hand, respect for the law is weakened to the public detriment whenever the State is delayed, even by legal process, in stopping any act which is in fact unlawful and which has been declared unlawful by the public authority vested with power to determine its legality. Except in connection with the review of “ actions by the liquor authority,” the court which may review a determination of a public body in a certiorari proceeding has unrestricted power to weigh these opposing considerations and, in the exercise of a proper discretion, may protect the interests of an aggrieved individual by grant of a stay pending the court’s review. (Civ. Prac. Act, § 1295.) In case of the review of a determination of the Liquor Authority the Legislature has, however, determined to place bounds upon the court’s discretion. A stay may be granted, but only for a period of thirty days. Postponement of the enforcement of the order, which might result in continuance of an unlawful business, may not, under any circumstances, extend further than that period. The Legislature supplemented the limitation by a provision in the same section intended to hasten the review: Proceedings to review any action enumerated herein shall be entitled to a preference.” The Legislature may have supposed that if an aggrieved person moved promptly a decision upon the review might be obtained within thirty days from the time when a stay is granted. The period may be too short. It is certainly too short where, as in this case, the petitioner for an order of certiorari must wait thirty days before the court decides whether an order of certiorari shall issue. Injustice to the individual may in such case result. Nevertheless, the Legislature has decided to impose that limitation, and the courts may not disregard it or give to the statute a construction which would thwart the legislative intent. The Legislature fixed a definite period beyond which the enforcement of the determination of the Liquor Authority may not be stayed. When it imposed that limitation it did not intend that the limitation might be evaded by successive stays. If undeserved hardship may be caused in cases where no decision in the proceedings for review is rendered within that period, doubtless courts which recognize that they cannot relieve from such injustice will endeavor to avoid it by prompt decision.

The orders should be reversed, without costs, and the second question certified answered in the negative. The other question is not answered.

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

Ordered accordingly.


author: Finch, J.

text:
    In the Matter of the Claim of Annie Finnegan against Annie E. Biehn et al., Respondents. State Industrial Board, Appellant. In the Matter of the Claim of Annie Finnegan et al. against Annie E. Biehn et al., Respondents. State Industrial Board, Appellant.
    Argued September 28, 1937;
    decided November 23, 1937.

      John J. Bennett, Jr., Attorney-General (Roy Wiedersum of counsel), for appellant.
    The injuries to the decedents and resultant death arose out of and in the course of their employment. (Matter of Ziolkowski v. American Radiator Co., 247 N. Y. 513; Malandrino v. Southern

      N. Y. Power & R. Co., 190 App. Div. 780; Hannan v. Consolidated Telegraph & Electrical Subway Co., 227 App. Div. 679.)

      F. A. W. Ireland for respondents.
    There was no testimony to support the finding of the State Industrial Board that the injuries sustained by the employees arose out of and in the course of their employment. (Matter of Pisko v. Mintz, 262 N. Y. 176.)
   Finch, J.

Joseph and Catherine Burns, husband and wife, were employed as janitors of a tenement house, which contained no central heating system. They received as compensation a small monthly wage and the use of an apartment in the building. Both died as the result of burns suffered in a fire which occurred on January 1, 1935, when an oil heater, which they were using to keep their apartment warm, was accidentally overturned. At the time of the fire all the tenants had vacated the building, and the decedents were remaining on the premises in order to watch the building and to perform general duties of supervision until the building was closed and padlocked in preparation for demolition.

The Industrial Board granted awards, but the Appellate Division, two justices dissenting, has reversed and dismissed the claims on the ground that there was no evidence to support-the finding 'that the accident arose out of the employment.

Death or injuries resulting from fire have been held to arise out of and in the course of the employment when the employee is on twenty-four hour duty, even though the employee was asleep or not actively engaged in his work at the time of the fire. (Matter of Giliotti v. Hoffman Catering Co., 246 N. Y. 279.) The employee is required to remain on the premises, and injuries connected with the place he is bound to occupy are compensable. Not all injuries which occur on the premises, however, arise out of the employment. Injuries due to the acts of the employee disassociated from his employment are not compensable. “ The difficulty lies in drawing the line between that which is a risk growing out of the employment and that which is solely personal to the employee.” (Matter of Pisko v. Mintz, 262 N. Y. 176, 179.)

The duties of the decedents required their presence on the premises which contained no heating system on the day of the fire in January. Necessarily, in mid-winter, they had to provide some method of keeping warm. The conditions of the employment created the necessity for using the oil stove. Heating was a necessary concomitant of the employment in order that the decedents might perform their duties. It did not involve a purely personal act which might have been performed by the decedents wherever they lived. (Matter of Zilokowski v. American Radiator Co., 247 N. Y. 513.) The injuries in the case at bar were caused by a risk growing out of the employment and were not the result of a personal act of the employee disassociated from the place of employment.

Our conclusion does not conflict with the cases of Matter of Pisko v. Mints (supra), which involved the death of a janitor as the result of a fire caused by his own cigarette, and Matter of Commissioner of Taxation & Finance v. Pure (241 App. Div. 644; affd., 264 N. Y. 678), where the decedent was asphyxiated by gas while brewing tea, since in both cases the injury was the result of and was caused by an act of the employee which was purely personal and disassociated from his. employment.

The order of the Appellate Division should be reversed, and the awards of the Industrial Board reinstated, with costs in this court and in the Appellate Division.

Crane, Ch. J., Lehman, O'Brien, Hubbs, Loughran and Rippey, JJ., concur.

Orders reversed, etc.


author: Hubbs, J. Rippey, J.

text:
    Hermine Gerschon et al., Infants, by Fanny Spiro, Their Guardian ad Litem, Plaintiffs, v. Travelers Insurance Company, Defendant. Alvin Gerschon, Respondent; A. A. Berle, Jr., as Chamberlain of the City of New York, et al., Appellants.

      Argued September 28, 1937;
    decided November 23, 1937.

      Paul Windels, Corporation Counsel (William S. Gaud, Jr., Paxton Blair and Bernard Newman of counsel), for A. A. Berle, Jr., as Chamberlain of the city of New York, appellant.
    The petitioner’s moneys were properly invested under section 44-c of the State Finance Law (Cons. Laws, ch. 56). (County of Tompkins v. Ingersoll, 81 App. Div. 344; 177 N. Y. 543; Barone v. Ætna Life Ins. Co., 260 N. Y. 410; Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261; Matter of Stillwell, 139 N. Y. 337; People ex rel. Ryan v. Green, 58 N. Y. 295.)

      Copal Mintz and Hyman Korn for Charles A. Buckley, appellant.

      Murray D. Welch for Hartford Accident and Indemnity Company et al., amici curiæ.

    The investment of the petitioner’s funds by the Chamberlain was authorized by the court order of November 29, 1926. (Chesterman v. Eyland, 81 N. Y. 398; Matter of Schmidt v. Chamberlain, 266 N. Y. 225; Matter of Doheny, 157 Misc. Rep. 735; County of Tompkins v. Ingersoll, 81 App. Div. 344.)

      Nelson David Spiro for respondent.
    The original order of deposit was a specific direction of a court having jurisdiction of the subject-matter. The Chamberlain, therefore, had no power or authority to withdraw the funds from the petitioner’s account and invest them without further order of the court. (Mills v. Bluestein, 275 N. Y. 317.) Section 44-c of the State Finance Law is unconstitutional in that it is an attempt by the Legislature to encroach upon and abridge the existing judicial powers and functions of the Supreme Court granted by the Constitution over the property and property rights of infants as wards of the court, and lodge such powers and functions in a ministerial officer who is a mere custodian of moneys deposited with him by court order, and permitting him to invest such moneys without hearing or notice to the parties interested. (People ex rel. Mayor v. Nichols, 79 N. Y. 582; Matter of Steinway, 159 N. Y. 250; Wilcox v. Wilcox, 14 N. Y. 575; Matter of Berkovitz v. Arbib & Houlberg, 230 N. Y. 261; Civ. Prac. Act, § 64.)
   Hubbs, J.

Alvin Gerschon, the respondent herein, upon coming of age, made a motion based upon a petition for an order directing the Chamberlain of the City of New York to pay to him $1,000, the balance of moneys deposited in his office on December 14, 1926, pursuant to a court order entered upon the settlement of an action instituted in his behalf while an infant. The order, pursuant to which the money was deposited, provided that it be deposited with the Chamberlain of the City of New York for the benefit of the infant and said sum be. withdrawn only upon order of the court.” ' The order did not contain any direction as to how the money should be handled by the Chamberlain as it might have under section 136 of the Civil Practice Act.

The Chamberlain submitted an answering affidavit setting forth that in September, 1929, the sum of $1,000 out of the petitioner’s money was invested by the then Chamberlain in an undivided share of a bond and mortgage, which investment was made under authority claimed to be vested in the Chamberlain by section 44-c of the State Finance Law (Cons. Laws, ch. 56). He also furnished, in accordance with rule 32 of the Rules of Civil Practice, a certificate which contained the following statement: Invested — S1000-B of M mtg. Of this investment $1000 is not available for payment at this time.”

It appeared on the hearing at Special Term that if the balance of moneys deposited to the credit of the petitioner had remained on deposit, the present value thereof at bank interest would have been in the net amount of $936.06, which amount the petitioner agreed to accept. The Special Term directed the Chamberlain to pay to respondent that sum, with interest. The order was affirmed by the Appellate Division on the ground that the investment was illegal. Leave was granted to appeal to this court on the following certified question: “Is the petitioner entitled to receive from the present Chamberlain in cash the sum of $936.06, together with interest? ”

It appeared from the affidavits submitted on the motion that the former Chamberlain had purchased a mortgage for $70,000 and had assigned to this infant an interest in that mortgage; that the mortgage was subsequently reduced by payments to $50,000, and that it was foreclosed and title to the property was taken by the Chamberlain. The claimed authority for the investment by the Chamberlain of the moneys deposited for the benefit of the petitioner is section 44-c of the State Finance Law, which provides: “ All moneys so paid into court may be invested by the several county treasurers and in the city of New York by the chamberlain, without a specific direction of the court having ■ jurisdiction, in securities that are legal investments for trustees, when the said county treasurers or chamberlain deem it for the best interests of the funds to make such investments.”

It is the contention of the respondent that the decision of this court in Matter of Schmidt v. Chamberlain (266 N. Y. 225) is conclusive and establishes that the investment made by the Chamberlain of the infant’s funds was illegal, and it is upon that decision that the Appellate Division has relied. The order there under consideration provided: “ and that the said special guardian pay the balance remaining in his hands to the Chamberlain of the City of New York * * * to be held by said Chamberlain of the City of New York until the further order of this court.”

In interpreting that order we construed the word “ held ” as indicating that the court intended that the money be held readily available for distribution in the manner to be determined by the court.

The order here involved does not contain the word held ” or equivalent direction as to the disposition of the moneys.

In Mills v. Bluestein (275 N. Y. 317) we had under consideration an order very similar in language to that here involved in so far as it provides for a deposit of the funds. That order required the defendant in the action to deposit the sum of $1,000 with the City Chamberlain of the City of New York to the credit of the infant plaintiff William Mills there to remain on deposit until said infant shall have attained the age of 21 years, or until the further order of the court in the premises.”

That order further provided: and said City Chamberlain is hereby further authorized and directed to invest the said money so deposited with him to 'the credit of said infant plaintiff, in a guaranteed mortgage or guaranteed mortgage certificate or other similar securities, the net income therefor to be held for the account and benefit of said infant plaintiff.”

In that case the order contained a specific direction for the investment of the money in a security of the class in which it was actually made and this court held that the Chamberlain could not be compelled to pay in cash the money deposited.

The two cases cited are clearly distinguishable from the case at bar on the ground that in the first there was a specific direction to hold and an absence of authorization to invest, and in the other there was specific authority for the investment and absence of a direction to hold. Neither case can be construed as answering the question as to whether, where there is an order for deposit subject only to the further order of the court with neither a specific direction to hold nor a specific authorization for an investment, the mere fact that the deposit is subject to the further order of the court places such a restriction upon the Chamberlain that he may not act under the authority granted by section 44-c of the State Finance Law. A decision to the effect that the Chamberlain is not permitted to invest court funds deposited with him in cases where the order of deposit fails to recite either that the funds so deposited are to be held or tobe invested, would nullify section 44-c of the State Finance Law. That section was enacted to provide for cases where there is no specific direction in the order to invest or not to invest funds deposited by order of the court. To hold that where, as in the instant case, no specific direction is given in the order che statute affords no protection to the Chamberlain who acts in reliance thereon would thwart the clearly stated purpose of the Legislature in enacting section 44-c. We may go far to sustain the power of the court to retain control of funds deposited by its order, where in the order specific direction is expressed as to how the fund is to be handled. That was the effect of our decision in Matter of Schmidt v. Chamberlain {supra), but an application of the rule laid down in that case to the facts in this case would be unwarranted because of the difference in the wording of the orders.

The Legislature by section 44-c of the State Finance Law has placed a discretion in the Chamberlain in cases where the court in the order directing the deposit of funds does not make a direction as to their disposition and we may not by judicial construction create a distinction where none exists from the fair import of the words of the statute and take from the Chamberlain the discretion so conferred upon him. The words “ until the further order of the court,” contained in the order in the case of Matter of Schmidt v. Chamberlain (supra) and in Mills v. Bluestein (supra), standing alone, do not constitute a specific direction within the meaning of section 44-c of the State Finance Law, that the funds shall not be invested. Neither do the words to “be withdrawn,” when coupled with the words “ only upon order of the court,” constitute a specific direction to the Chamberlain to hold the funds and not to invest them in securities authorized by statute. There is no more a withdrawal of sums deposited when invested by the Chamberlain than there is when moneys paid over to the Chamberlain are deposited in a bank. The moneys or that which represent the moneys in either case remain under the jurisdiction and control of the Chamberlain. The word withdrawn ” refers to a removal of the moneys, or that which represents the moneys, from the custody and control of the Chamberlain.

At least three situations may arise when court funds are turned over to the Chamberlain by order of a court. If the court anticipates that some of the funds may be needed from time to time and it does not desire to have them invested by the Chamberlain, the order should provide that the money shall be held by the Chamberlain and not invested. It will then be the duty of the Chamberlain to deposit the money in a duly approved depositary. If, however, the court believes that the money will remain in charge of the Chamberlain for a considerable period, and that a higher rate of interest should be secured than paid by authorized depositories, the order should provide that the money be invested by the Chamberlain. If the court does not desire to give specific directions in the order, the money will be received by the Chamberlain subject to his discretion as to whether it shall be invested or kept on deposit in an approved depositary.

The respondent contends that section 44-c of the State Finance Law, as amended in 1928 (L. 1928, ch. 837), is unconstitutional in that it is an attempt by the Legislature to encroach upon and abridge the existing judicial powers and functions of the Supreme Court granted by the Constitution over the property and rights of infants as wards of the court and lodge such powers and functions in a ministerial officer who is a mere custodian of moneys deposited with him by court order. The statute is operative only where the court fails to direct a disposition of the funds. However, the court is not required to direct. Section 136 of the Civil Practice Act reads in part: Each court may direct that money paid into that court * * * may * * * be * * * invested * *

The statute operates only in the event the court fails to direct how the money shall be handled. The statute does not deprive it of any jurisdiction which it formerly possessed. It may act if it deems it advisable. It is only in case of its failure to act that discretion is vested in the Chamberlain.

The orders should be reversed as to appellant, Berle, Jr., as Chamberlain, etc., with costs in all courts, the motion denied, with ten dollars costs, and the question certified answered in the negative. The appeal by Charles A. Buckley should be dismissed, without costs.

Rippey, J.

(dissenting). On November 29, 1926, an order was made in the above-entitled action permitting and authorizing the guardian ad litem to make a settlement and compromise of the cause of action for the sum of $5,000. The order directed payment therefrom to the attorneys for the plaintiff of the sum of $1,250 plus disbursements and it was further ordered, that the balance be deposited with the Chamberlain of the City of New York for the benefit of the infant and said sum be withdrawn only upon order of the Court.” Accordingly there was deposited with the Chamberlain of the City of New York for the benefit of Alvin Gerschon the sum of $1,785 which represented one-half of the net balance of the money received from the settlement. Subsequently three orders were made herein by the court dated September 21, 1931, September 23, 1932, and December 3, 1936, authorizing withdrawals from such funds so deposited plus accrued interest in the aggregate of $1,347.32, leaving a balance as of the time of the commencement of this proceeding in the hands of the Chamberlain of $936.06. Alvin Gerschon, having arrived at maturity, filed a petition in which he requests that such balance together with accrued interest be paid over to him. On February 18, 1937, an order was made at Special Term directing payment. The Appellate Division has affirmed.

It appears that on September 19,1929, the Chamberlain, without order of the court, withdrew $1,000 of such sum so deposited and, again without order of the court, invested the same in an undivided share of a bond in the face amount of $70,000 made by the New York Electrical Trade School, secured by a mortgage in the sum of $70,000, thereafter reduced to $50,000, covering premises at 39 West Seventeenth street, Manhattan, New York city, and that this mortgage was foreclosed and the City Chamberlain acquired title to the premises on December 17, 1934. The Chamberlain asserts that he has no cash in his hands but he has that investment which represents an undivided interest in real property. He admits that the balance, if it had been on deposit in bank at regular interest, would have amounted, after deducting his commissions, to the sum of $936.06 as claimed by the petitioner.

It has been the common understanding that an order made in the form in which this order of deposit was made required the depository to retain the deposit in cash unless the court ordered it withdrawn or invested. That the Chamberlain so understood and construed the meaning of the order is irrefutably indicated by the fact that it was all so retained for the period from November 29,1926, to September 19, 1929, and $1,347.32 of the fund was retained for a further period until withdrawn and paid over for the use of the infant by the aforesaid orders. The obvious purpose of the order being made in the form indicated was to retain the fund in such shape that it might be at any time withdrawn in cash for the benefit of the infant as and when the court deemed it proper. In Matter of Schmidt v. Chamberlain (266 N. Y. 225) this court held that an order of deposit of funds with the Chamberlain to be held by said Chamberlain of the City of New York until the further order of this court herein ” required the Chamberlain to hold the funds available for distribution at any moment that distribution might be deemed advisable by the court. Under such an order the Chamberlain was not authorized to make any investment of the fund but was prohibited from doing so. Attempt is now made to draw a distinction, affecting substantial rights of the parties involved, between the order in the case at bar and the order made in the Schmidt case. In the latter case the order provided that the sum be deposited with the Chamberlain to the credit of the infant “to be held by said Chamberlain of the City of New York until the further order of this court herein.” In the case at bar the order provides that the moneys be deposited with the Chamberlain for the benefit of the infant and that “ said sum be withdrawn only upon order of the Court.” In the one case, it is said, the words used mean that the Chamberlain must keep the cash on hand or deposit, while, in the other, he need not do so. The one constitutes a “ direction; ” the other does not. To my mind the meanings are identical. One is a direction; the other a prohibition. “ To hold ” is. “ not to withdraw.” So the dictionary teaches us. The form of order in the instant case is in the usual and general form prepared to require retention of the moneys in cash or on deposit. As above indicated, that meaning was attributed to it by the Chamberlain, and I see no occasion to now make the order read something entirely to the contrary. Whether the court was “ not required to direct ” as to whether the funds should be held or invested is beside the point. The court did direct that the mm on deposit should not be withdrawn without further order of the court, and the Chamberlain violated the direction.

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

Crane, Ch. J., Lehman, O’Brien, Loughran and Finch, JJ., concur with Hubbs, J.; Rippey, J., dissents in opinion.

Orders reversed, etc.


author: Crane, Ch. J.

text:
    Northeastern Real Estate Securities Corporation, Appellant, v. Edgar B. Goldstein, Respondent.
    Argued September 29, 1937;
    decided November 23, 1937.

      David Hoar for appellant.
    The pendency of the bankruptcy proceeding does not oust the State court of its power to hear and determine a case of which it has general jurisdiction. (Connell v. Walker, 291 U. S. 1; Hill v. Harding, 107 U. S. 631; Boynton v. Ball, 121 U. S. 457; Hahlo v. Cole, 112 App. Div. 636; Matter of Newman, 17 Fed. Rep. [2d] 584; Matter of Basch, 97 Fed. Rep. 761; Simpson v. Tootle, 42 Okla. 265; Friedman v. Zweifler, 74 Misc. Rep. 448; Matter of Rosenstein, 276 Fed. Rep. 704; Roth v. Pechin, 260 Penn. St. 450.)

      Alexander L. Strouse and Edwin P. Gordon for respondent.
    The jurisdiction of the Federal court was exclusive at the time when the plaintiff sought to institute the action in the State court. (Matter of Basch, 97 Fed. Rep. 761; Acme Harvester Co. v. Beekman Lamber Co., 222 U. S. 300; Matter of Southern Pharmaceutical Co., 286 Fed. Rep. 148; United States Fid. Co. v. Bray, 225 U. S. 205; Matter of New York, New Haven & Hartford R. R. Co., 17 Fed. Supp. 489; Isaacs v. Hobbs Tie & T. Co., 282 U. S. 734; Straton v. New, 283 U. S. 318; Matter of Heim Milk Product Co., 183 Fed. Rep. 787; Jacobus v. Colgate, 217 N. Y. 235; Oswego & Syracuse R. R. Co. v. State, 226 N. Y. 351.)
   Crane, Ch. J.

The sole question presented for determination is whether the Supreme Court of this State has jurisdiction of an action brought upon a bond for $20,000, when the action was instituted subsequent to the filing of a petition in bankruptcy and an adjudication of bankruptcy.

On July 17, 1936, the defendant filed a voluntary petition in bankruptcy and was adjudicated a bankrupt. In his schedules he listed the plaintiff as a creditor on a bond for $20,000, executed on October 30, 1930, by the terms of which the obligor had agreed to pay the sum of $750 on January 30, 1931, and a like amount quarter-annually thereafter. On August 17, 1936, defendant applied for his discharge, but objections were filed by this plaintiff on October 13th. The objections were referred to a referee and no determination has as yet been made.

The summons and complaint in this action were served on October 8,1936. On October 24th an order was issued by the bankruptcy court staying and restraining the plaintiff and his attorney from prosecuting this action. Thereafter, on October 27th, the bankrupt served a notice of motion for an order dismissing the action on the ground that the court had not jurisdiction of the subject of the action. The court at Special Term ordered that the complaint be dismissed for lack of jurisdiction. The Appellate Division affirmed, without opinion.

The respondent draws a distinction between suits commenced prior to the adjudication in bankruptcy and suits instituted while bankruptcy proceedings are pending. As to the latter suits, he says the jurisdiction of the bankruptcy court is exclusive, and a State court acquires no jurisdiction of an action based upon a claim that is dischargeable in bankruptcy.

Section 11 (subd. a) of the Bankruptcy Act (U. S. Code, tit. 11, § 29) provides: “ A suit which is founded upon a claim from which a discharge would be a release, and which is pending against a person at the time of the filing of a petition against him, shall be stayed until after an adjudication or the dismissal of the petition; if such person is adjudged a bankrupt, such action may be further stayed until twelve months after the date of such adjudication, or, if within that time such person applies for a discharge, then until the question of such discharge is determined.”

In Connell v. Walker (291 U. S. 1) an action was brought against Connell to set aside, as in fraud of creditors, a conveyance of land located in North Dakota. The action was brought in the State court of North Dakota. Suit was begun by the attachment of the land, and while it was pending Connell set up by way of amended answer that within four months after the attachment he had filed a voluntary petition in bankruptcy which had resulted in an adjudication of bankruptcy. The court found that the conveyance was in fraud of creditors and directed that the land be sold and the proceeds applied to the satisfaction of the debt. The relief was restricted to a sale of the land by a provision that it should not be deemed to establish personal liability of any of the defendants. The petitioners in the United States Supreme Court argued that the attachment upon which the judgment was founded was a nullity because procured when the bankrupt was insolvent and within four months prior to the filing of the petition, and in any event the State court should have stayed the action until the termination of the bankruptcy proceedings. The court, in passing upon the latter point, said: Bankruptcy proceedings do not, merely by virtue of their maintenance, terminate an action already pending in a non-bankruptcy court, to which the bankrupt is a party. Pickens v. Roy, 187 U. S. 177; Jones v. Springer, 226 U. S. 148; Straton v. New, supra [283 U. S. 318]. * * * We find it unnecessary to decide whether section 11 (a), 11 U. S. C. A. section 29 (a), authorizing a stay of certain suits pending against a bankrupt, lays down a rule for non-bankruptcy as well as bankruptcy courts, or whether it is applicable to suits like the present one or whether the bankrupt may invoke its provisions. For, if applicable here, the authority given by that section to stay pending suits after adjudication, which has taken place here, is not mandatory, but permissive, to be exercised in the sound discretion of the court ” (p. 5).

This decision involved an action pending when the petition in bankruptcy was filed; so also the cases of Hill v. Harding (107 U. S. 631); Boynton v. Ball (121 U. S. 457) and Hahlo v. Cole (112 App. Div. 636).

Where the action subsequently commenced in the State court is a possessory action, or relates to specific property of the bankrupt, it cannot be maintained. (White v, Schloerb, 178 U. S. 542; Murphy v. John Hofman Co., 211 U. S. 562.)

“ Where the property in dispute is in the actual possession of the court of bankruptcy there comes into play another principle, not peculiar to courts of bankruptcy but applicable to all courts, Federal or State. Where a court of competent jurisdiction has taken property into its possession, through its officers, the property is thereby withdrawn from the jurisdiction of all other courts.” (Murphy v. John Hofman Co., supra, p. 568.) This also applies where the property is in the constructive possession of the bankruptcy court. (Matter of Friedlaender, 233 Fed. Rep. 250.)

The action at bar is not a possessory action and does not relate to any particular property of the bankrupt. It is an action to establish the personal liability of the bankrupt. The bankruptcy court has not restrained the commencement of any action by the plaintiff, but has restrained the prosecution of the action.

Subdivision 15 of section 2 of the Bankruptcy Act (U. S. Code, tit. 11, § 11, subd. 15) empowers the court of bankruptcy to “ make such orders, issue such process, and enter such judgments in addition to those specifically provided for as may be necessary for the enforcement of the provisions of this title.” It was held in the case of Matter of Basch (97 Fed. Rep. 761) that section 11, in connection with section 2, subdivision 15, necessarily includes suits on provable debts commenced after the petition was filed and while bankruptcy proceedings are pending, and such suits could be stayed by the court.

In the case of Matter of Havens (272 Fed. Rep. 975) Judge Hough, writing for the Second Circuit Court of Appeals, said: Under the Constitution bankruptcy is wholly a creature of statute, and under the present act of 1898 no authority can be found for staying suits by or against bankrupts, except section 11. This is true, notwithstanding that upon other and more general principles of law the bankruptcy court may stay suits, even in state courts, which interfere with the administration of the estate in charge of such bankruptcy court ” (p. 976).

We said, in American Woolen Co. v. Samuelsohn (226 N. Y. 61): The Bankruptcy Act of 1898, unlike that of 1867, does not contain a provision restraining a creditor from pursuing his claim against a bankrupt debtor until the question of his discharge has been determined. The commencement of the bankruptcy proceeding does not, therefore, stop or toll the running of the Statute of Limitations ” (p. 69).

Where an action is commenced after adjudication which affects property actually or constructively in the possession of the trustee, the bankruptcy court has exclusive jurisdiction and a State court is without jurisdiction. But where the action is commenced against the bankrupt personally and does not affect his property, nor interfere with the property in the custody of the bankruptcy court, the State court is not ousted of jurisdiction, although" the action may be stayed by the bankruptcy court pending the discharge of the bankrupt, as was done in this case.

The judgments should be reversed, with costs in all courts, and the motion to dismiss the complaint denied, with ten dollars costs.

Lehman, O’Brien, Hubbs, Loughran, Finch and Rippey, JJ., concur.

Judgments reversed, etc.


text:
    In the Matter of Daniel H. Sandford, Respondent, against James E. Finegan et al., Constituting the Municipal Civil Service Commission of the City of New York, et al., Appellants.
    Argued September 29, 1937;
    decided November 23, 1937.

      Paul Windels, Corporation Counsel (Edmund L’ Palmieri, Paxton Blair and Seymour B. Quel of counsel) for appellants.
    Since the petitioner’s position had been validly placed in the competitive class prior to his purported reappointment he cannot claim a fixed tenure of office. (Matter of Friedman v. Finegan, 268 N. Y. 93; Matter of Gluck v. Rice, 265 N. Y. 132; Matter of O’ Keefe v. Clarke, 238 App. Div. 175; Matter of Welling v. Kaplan, 242 App. Div. 605; Matter of Sherman v. Higgins, 272 N. Y. 286; Hurley v. Board of Education, 270 N. Y. 275; Ciaccia v. Board of Education, 271 N. Y. 336; Matter of Carow v. Board of Education, 272 N. Y. 341; Matter of Mylod v. Graves, 274 N. Y. 381; Matter of Rooney v. Rice, 274 N. Y. 347.)

      John J. Bennett, Jr., Attorney-General (Henry Epstein of counsel), for State of New York.

      Gabriel L. Kaplan and Sidney A. Fine for respondent.
    The Civil Service Law (Cons. Laws, ch. 7) does not prohibit an exempt incumbent from continuing to perform the duties of his position once that position has been reclassified into the competitive class. (Matter of Fornara v. Schroeder, 261 N. Y. 363; Matter of Sugden v. Partridge, 174 N. Y. 87.) Expiration of petitioner’s original term did not create a vacancy in his position which compelled the district justices to fill that position by appointment from a competitive eligible list. (People ex rel. McCullough v. Wilson, 80 App. Div. 640; 176 N. Y. 574; People ex rel. Wilson v. Knox, 45 App. Div. 537.) The petitioner was in office on May 28,1937, the effective date of chapter 716 of Laws of 1937, and he is now entitled to continue in his position until he dies, resigns or is removed. (People ex rel. Distler v. McGuire, 68 Misc. Rep. 516; Berry v. Cain, 246 App. Div. 536; Matter of Fornara v. Schroeder, 261 N. Y. 363; Ciaccia v. Board of Education, 271 N. Y. 336.)
   Finch, J.

The defendants appeal, with the permission of this court, from an order of the Appellate Division unanimously afHrming an order of the Supreme Court granting a peremptory order of mandamus.

The petitioner was appointed an assistant clerk of the Municipal Court of the City of New York, borough of Manhattan, in 1918, to fill an unexpired term ending December 31, 1919. Thereafter he received several successive appointments for six-year terms, pursuant to the Greater New York Charter (§ 1373; Laws of 1901, ch. 466, as amended by Laws of 1923, ch. 145, and Laws of 1929, ch. 235). On June 28, 1932, petitioner was appointed a deputy clerk of the Municipal Court to fill an unexpired term ending January 28, 1936. When the petitioner received his appointment as assistant clerk and deputy clerk the positions were in the exempt class of the civil service. The Municipal Civil Service Commission on August 9,1934, transferred these positions to the competitive class. The validity of this resolution has been sustained by this court. (Matter of Friedman v. Finegan, 268 N. Y. 93.) At the expiration of the term of petitioner running to January 28, 1936, the justices of the Municipal Court for this district appointed the petitioner as deputy clerk for the ensuing six-year term. No issue arises in the case at bar between a competitive and a qualifying examination, since the petitioner has refused to take either.

The issue presented is whether the petitioner is legally in office although there has been a reclassification of the position and a subsequent expiration of petitioner’s previous term of office. In this connection it should be noted that the Legislature passed an act which took effect May 28, 1937 (Laws of 1937, ch. 716), and sought to confer tenure of office during good behavior upon all employees of the Municipal Court of the City of New York. Thus we have in the case at bar an office originally in the exempt class and the term of the incumbent expiring after the office was placed in the competitive class. E the term had not come to an end there would be no doubt that the position could be placed in the competitive class without the necessity of taking any examination. So, too, if the tenure, of the office had been indefinite he would be continued in the position without taking an examination after the position had been placed in the competitive class. (Matter of Fornara v. Schroeder, 261 N. Y. 363.) This view of the law has been followed by the Attorney-General and the civil service authorities for the past thirty years. On the other hand, if in the case at bar the incumbent had died or resigned after the office had been changed from the exempt class to that of the competitive class, the new appointee would have to be taken from the eligible list. In the case at bar, however, we have the facts faffing in between the examples given. We have the case of an office with a fixed tenure changed from the exempt to the competitive class, and thereafter the incumbent being reappointed for a fixed term and refusing to take any examination.

In the first place we note that the continuance of the petitioner in office does not violate the provisions of the Constitution. The constitutional provision requires that appointments and promotions in the civil service * * * shall be made according to merit and fitness to be ascertained, so far as practicable, by examinations which, so far as practicable, shall be competitive.” (N. Y. Const, art. 5, § 6.) What happened to this incumbent was at the least a holding over in an office the term of which had expired. He was neither appointed nor promoted to this office, and hence the prohibition of the Constitution does not apply. While the petitioner remained in office his term was in effect extended. Nor can there be any doubt that the incumbent was legally in office on May 28, 1937, when the act of the Legislature took effect. Where a person is in office for a fixed term, and the term expires and no appointment is made, and the incumbent continues in office and draws his pay, as in the case at bar, the Public Officers Law (Cons. Laws, ch. 47) provides that he shall hold over and continue to discharge the duties of his office until his successor is chosen and qualifies. (Public Officers Law, § 5.) Since the language of the Constitution does not prohibit the retention in office of the petitioner, the claim of the defendants-appellants, that the act of the Legislature was unconstitutional, cannot be sustained. The petitioner was legally in office, and the act of the Legislature was duly applicable to him.

The cases relied upon by the appellants are not in point. In Hurley v. Board of Education (270 N. Y. 275); Ciaccia v. Board of Education (271 N. Y. 336), and Matter of Carow v. Board of Education (272 N. Y. 341) we were not dealing with persons who held offices with permanent tenure or a fixed term, but with persons who were on an eligible list and had not been appointed prior to its expiration. In Matter of Rooney v. Rice (274 N. Y. 347) the positions were classified as competitive and yet thereafter persons who had never previously been in the office, except as temporary employees, were appointed without regard to the eligible list.

The petitioner being legally in office when the act of the Legislature took effect, it becomes unnecessary to consider the effect and applicability of sections 14 and 16 of the Civil Service Law (Cons. Laws, ch. 7).

The order should be affirmed, with costs.

O’Brien, Hubbs, Lotjghran and Rippey, JJ., concur; Crane, Ch. J., and Lehman, J., concur in result.

Order affirmed.