author: Desmond, J. Burke, J.

text:
    Mutual Life Insurance Company of New York, AppellantRespondent, v. Tailored Woman, Inc., Respondent-Appellant.
    Argued May 26, 1955;
    decided July 8, 1955.

      George A. Spiegelberg and Robert H. Preiskel for appellant-respondent.
    I. The opinion and order of the Appellate Division insofar as they reverse the trial court were wholly incorrect. Until the fall of 1946, plaintiff had no knowledge that the fifth floor had been altered to permit the operation of the private elevators to that floor. Plaintiff learned for the first time late in 1946 of the purported removal of the fur department to the fifth floor and of defendant’s refusal to pay percentage rent on fur sales after such removal. II. The determination of the trial court is entitled to great weight whenever an issue of credibility is involved. (Roberts v. Fulmer, 301 N. Y. 277; Amend v. Hurley, 293 N. Y. 587; Mason v. Lory Dress Co., 277 App. Div. 660; Brunstein v. Brunstein, 273 App. Div. 847; Wells v. St. Louis, 282 App. Div. 1105; Vatner v. Mackey, 250 App. Div. 383.) III. The Appellate Division erred in reversing the trial court’s conclusions of law. (Cissna Loan Co. v. Baron, 149 Wash. 386.) IV. Because of the complete dependence of the fur department upon the main premises, the fur sales were in fact made “ on, in or from ” the main premises within the meaning of the main lease. Defendant was therefore required to pay as rent a percentage of such sales. (Kirke La Shelle Co. v. Armstrong Co., 263 N. Y. 79; Genet v. President of D. & H. Canal Co., 136 N. Y. 593; Goldberg, 168-05 Corp. v. Levy, 170 Misc. 292, 256 App. Div. 1086; Cissna Loan Co. v. Baron, 149 Wash. 386; Gamble-Skogmo, Inc., v. McNair Realty Co., 98 F. Supp. 440, 193 F. 2d 876; Seggebruch v. Stosor, 309 Ill. App. 385; Dunham & Co. v. 26 East State St. Realty Co., 134 N. J. Eq. 237.) V. If defendant had succeeded in completely severing the fur department from the main premises, it would constitute a breach of the main lease. VI. Even if there were no express prohibition against diversion of sales, it is clear that under the law of this and other jurisdictions a tenant under a percentage lease is under an implied covenant not to divert sales from the demised premises. (Selber Bros. v. Newstadt’s Shoe Stores, 194 La. 654, 203 La. 316; Mayfair Operating v. Bessemer, 150 Fla. 132; Wood v. Duff-Gordon, 222 N. Y. 88; Alexander v. Equitable Life Assur. Soc., 233 N. Y. 300; Kirke La Shelle Co. v. Armstrong Co., 263 N. Y. 79.) VII. Assuming, arguendo, that a diversion per se is not actionable, it is clear that a diversion is actionable when, as here, it was effected by operation of elevators which was contrary to the express terms of the leases and made possible through an unauthorized alteration. VIII. The fifth floor lease did not affect defendant’s obligations under the main lease. The circumstances existing at the time the fifth floor lease was signed clearly show that a physical separation of the fifth floor and the main premises was intended and specifically provided for by the terms of the leases.

      M. James Spitzer, Philip Feldman and Irving Fliegler for respondent-appellant.
    I. Plaintiff did not sustain or prove any damage and is entitled to no recovery. (Woollard v. Schaffer Stores Co., 272 N. Y. 304; C. L. Holding Corp. v. Schutt Court Homes, 307 N. Y. 648.) II. Obligations may not be imposed upon a tenant beyond those specified in the lease of the demised premises. Additional liability should not be imposed through implication. (Black v. General Wiper Supply Co., 305 N. Y. 386; Fogelson v. Rackfay Constr. Co., 300 N. Y. 334; Simon v. Etgen, 213 N. Y. 589; Price v. Spielman Motor Sales Co., 261 App. Div. 626; Genet v. President of D. & H. Canal Co., 136 N. Y. 593; Dickey v. Philadelphia Minit-Man Corp., 377 Pa. 549; Berland Realty Co. v. Hahne & Co., 26 N. J. Super. 477; Stockton Dry Goods Co. v. Girsh, 36 Cal. 2d 677; Cousins Investment Co.
      v. Hastings Clothing Co., 45 Cal. App. 2d 141; Masciotra v. Harlow, 105 Cal. App. 2d 376.) III. The leases are to be construed against the landlord. (Gillet v. Bank of America, 160 N. Y. 549; Moran v. Standard Oil Co., 211 N. Y. 187; 455 Seventh Ave. v. Hussey Realty Corp., 295 N. Y. 166.) IV. The language should be interpreted as plaintiff had reason to believe it would be understood by defendant. V. Leases are to be construed in the light of the surrounding facts at the time of their execution, the circumstances out of which they grew, and the object of the parties. (Smith v. Kerr, 108 N. Y. 31; Halperin v. McCrory Stores Corp., 207 App. Div. 448, 239 N. Y. 547; Columbus Spa v. Star Co., 216 App. Div. 218.) VI. Defendant had the right to operate its private elevators to the fifth floor. In any event, there was a waiver by plaintiff. The so-called non-waiver clause was also waived. (Bovin v. Galitzka, 250 N. Y. 228; Lyon v. Bethlehem Engineering Corp., 253 N. Y. 111; 57th St. Luce Corp. v. General Motors Corp., 182 Misc. 164, 267 App. Div. 978, 293 N. Y. 717; Sol Apfel, Inc., v. Kocher, 272 App. Div. 758; Beatty v. Guggenheim Exploration Co., 225 N. Y. 380.) VII. The fur sales took place on the fifth floor. (Matter of Franks, 154 Misc. 472; Link v. Kallaos, 56 F. Supp. 304.) VIII. The defenses of accord and satisfaction and account stated should have been sustained. (Rodkinson v. Haecker, 248 N. Y. 480; Matter of Bartlett, 272 App. Div. 1068, 298 N. Y. 747; Robinson v. Miller, 210 App. Div. 450; Hudson v. Yonkers Fruit Co., 258 N. Y. 168; Schnell v. Perlmon, 238 N. Y. 362; Fuller v. Kemp, 138 N. Y. 231; Nassoiy v. Tomlinson, 148 N. Y. 326; Milford Spinning & Weaving Corp. v. Manowitz, 203 App. Div. 415; Hettrick Mfg. Co. v. Barish, 120 Misc. 673.) IX. Plaintiff relies on evidence improperly admitted because withheld from its numerous bills of particulars.
   Desmond, J.

The facts of this controversy, and the issues, are set forth and discussed in the Appellate Division opinion. We will limit ourselves to a statement of our views on the principal questions of law.

Since plaintiff is suing for additional percentage rental under the 1939 ten-year lease of the three lower floors of 742 Fifth Avenue, New York City, it must base its claim on the covenants of that lease. Two only of those covenants are pertinent. We take them up in turn. The 4% percentage rental was to be paid on all sales made “ on, in, and from the demised premises ”. After, by separate leases made in 1945, defendant had taken over from plaintiff part of the fifth floor (and the eighth floor, not involved here), defendant made it a practice to pay commissions, on fur sales made on the fifth floor, to salespeople on the lower floor who sent customers to the fifth-floor fur department. We think it not unreasonable to hold, with the Appellate Division, that such sales were, within the lease’s intent, made “ from ” the main store and so subject to percentage rent. Such sales may be considered main store ” sales, as if a clerk in response to a telephone call took merchandise to a customer’s home, and there effected a sale. It would be going too far, though, to hold that all fur sales were made ‘ ‘ from ’ ’ the lower store simply because, as hereinafter more fully explained, the fur department was moved up to the fifth floor after that floor had been1 ‘ integrated ’ ’ with the main store.

By the other language (of the 1939 percentage lease) which we find pertinent, the tenant promised that the store it would conduct in the lower three floors would ‘1 at all times contain a stock of first class merchandise ” and would “ be conducted and maintained in a manner substantially similar to the Tenant’s present store at #729 Fifth Avenue ” (that is, the store across the street from which defendant was moving). That verbiage is to be read with the purpose clause (of that same 1939 lease) which prescribed the sale of all kinds of women’s apparel and accessories. Here, again, we agree with the Appellate Division that no more was intended than an agreement that there should be conducted, on the three lower floors of 742 Fifth Avenue, under the percentage lease, a woman’s clothing shop of the same general character as defendant’s store across the street. If plaintiff had desired further restrictions as to kinds of merchandise, etc., it should have insisted on them. Absent fraud or trickery (and the findings properly say there was none), defendant could carry on its business in the way that suited it so long as it did not deviate from those very broad and general lease specifications.

In 1945, defendant, needing more space, bought out a custom-made dress business which had been conducted in part of the fifth floor by another concern and made with plaintiff a new lease of that space at a flat no-percentage rent. Again, the lease terms went no further as to purpose than to state that the added space was to be used for the sale of female wearing apparel and accessories and for workrooms. The fifth-floor custom-made dress department ivas not successful and ivas soon discontinued. Defendant then made such physical changes in the building that two elevators, which had theretofore served the first three floors from inside the main store, now could be, and were, used to carry passengers inside the store not only to and from the first three floors but to and from the fifth floor, also (and the eighth floor, although that is not important here). The result was that the first, second, third and fifth floors were, as the phrase goes, integrated ” into one store fronting on Fifth Avenue and served by elevators reached through the main store from the Fifth Avenue entrances. Formerly, the fifth floor could be reached by the use of two other elevators only, to which elevators entrance was from the side street lobby on the 57th Street side of the building. Then defendant moved its fur department to the fifth floor, and thereafter paid no percentage rent on fur sales.

Trial Term held that plaintiff did not acquiesce in these changes. The Appellate Division held that it did. The question of fact is a close one but, acquiescence or not, we think the undisputed facts forbade a. recovery here by plaintiff of more than the percentage on certain fur sales, hereinbefore described as made on the fifth floor, but1 ‘ from ’ ’ the lower floors. There is nothing in the main lease to forbid the moving of the fur department and when plaintiff made the second, or fifth floor, lease, it again failed to include any restrictions as to particular kinds of merchandise to be sold in one or the other part of the building. It is clear enough that plaintiff did not contemplate, when it leased the fifth and eighth floors for a flat rental, that the fifth floor would be “ integrated ” with the lower floors into one store but such lack of foresight does not create rights or obligations. True, the second lease said that it would “ not have any effect ” on the earlier lease but the effect of the two leases, read together and enforcing both, was that defendant had the right to sell all kinds of women’s apparel, etc., in any part of the four floors, so long as no other use was made of the premises. As we see it, defendant merely exercised that right when it moved the fur department. As to changing the elevator doors, if that were a violation of any implied covenants (certainly not of an express covenant) redress could be had by injunction or, perhaps, by the landlord putting the elevator doors back as they had been and charging the expense to the tenant. But . such violations (if they were violations) could not result in a liability for additional rent not promised in the lease. Except as t,o the fur sales to customers sent upstairs, there were no additional sales ‘ ‘ on, in or from ’ ’ the premises covered by the percentage lease, even though certain activities with • respect to furs continued to be carried on in the lower store.

In the view we take of the case, it is unnecessary to engage in interesting but unproductive computations or speculations as to whether or not the new ‘ ‘ integrated ’ ’ store actually produced more percentage rent for plaintiff than if the fur department and the elevators had not been changed. It i§ the fact, though, that plaintiff proved no loss in that respect.

In deciding this case as we do, we are not .moving away from the good old rule that there is in every contract an implied covenant of fair dealing (Kirke La Shelle Co. v. Armstrong Co., 263 N. Y. 79). Defendant, as we see it, was merely exercising its rights. Nor do we reject such authorities as Cissna Loan Co. v. Baron (149 Wash. 386) which penalize unconscionable diversion of business from percentage-lease premises to others. The present case does not fit into that pattern.

The judgment should be affirmed, without costs.

Burke, J.

(dissenting). The defendant is liable for additional percentage rental under the 1939 ten-year lease of the premises 742 Fifth Avenue, New York City, for sales of furs made on the fifth floor, as they were sales made on, in and from the main premises. ■ 1

This appeal involves conflicting constructions of txo leases entered into between the plaintiff and defendant.

The defendant was the lessee under a 1939 lease of three floors with the exclusive use of a Fifth Avenue entrance, an entrance on 57th Street and two passenger elevators. Those premises, known as 742 Fifth Avenue, were leased at a fixed rental, plus 4% of the gross receipts in excess of $1,200,000. “ Gross receipts ’ ’ is defined in the lease as including ‘ ‘ all sales * * * on, in or from the demised premises ”. In the spring of 1945, the proprietor of a retail custom dress business, the tenant of half of the fifth floor at 1 West 57th Street, offered her business, for sale. The defendant purchased the custom dress business and thereafter, under a fixed rental lease commencing June 1, 1945, the defendant rented the same space on the fifth floor in the premises known as 1 West 57th Street, New York City, “ for the sale, display of all types of wearing apparel accessories, worn or carried by women or misses, and as workrooms, and for no other purpose ”. Such lease provided (1) that the space on the fifth floor in 1 West 57th Street was to be serviced by the elevators in the 57th Street lobby at the landlord’s expense “ on business days from 8 a.m. to 6 p.m. except on Saturdays when the hours shall be from 8 a.m. to 1 p.m.”; (2) that no alterations could be' made without the written consent of the landlord; (3) that failure to require strict performance was not to be deemed a waiver,- and (4) that the receipt of the rent with the knowledge of a breach was not to be deemed a waiver. The defendant in a short time altered the fifth floor of 1 West 57th Street, so as to give access through the private elevators of 742 Fifth Avenue.

The plaintiff alleges two causes of action. The first cause of action is based upon the theory that the fur sales were made “ on, in or from ” the main premises. All of the activities of the defendant from the initiation of the alterations to the actual sales were designed to hold out to the public that the fur department was part of the premises 742 Fifth Avenue. The physical layout, the advertising, the window displays, the storage of the furs, and the use of the main store personnel characterized the fur department as an integral part of the main store operations. The second cause of action seeks damages upon the theory that if fur sales were not made ‘ ‘ on, in or from ’ ’ the main premises, nevertheless, the defendant, in removing the fur department from the main premises, violated express and implied covenants of the main lease against diversion of sales. It is implicit in every percentage rental agreement that the tenant has an obligation to conduct its business with regard for the landlord’s interest in the tenant’s gross receipts. A promise may be lacking, and yet the whole writing may be instinct with an obligation,’ imperfectly expressed”. (Wood v. Duff-Gordon, 222 N. Y. 88, 91; Alexander v. Equitable Life Assur. Soc., 233 N. Y. 300, 306). Unless a percentage rental agreement is so interpreted, the percentage requirement would have no meaning.

The question to be resolved is whether under the terms of the leases and the proof adduced at the trial, the plaintiff is entitled to recover on one or both causes of action. Both causes of action are well founded.

There is no doubt that the sales Avere made ‘ ‘ on, in or from ’ ’ the main premises. The evidence shows that the furs were delivered to the basement of the main store, prepared for display there, stored in the basement of the main store, packed and shipped out from the main store premises. The entire fur business was administered and conducted in the Fifth Avenue premises, yet the defendant would have us construe the leases so as to permit it to operate a fur department as part of a main store in a space with an address different from the address set forth in the lease of that space, doing a business with average annual gross receipts of over $600,000, for a fixed rental of $3,800 a year free from the percentage provisions of the main store lease. The leases fail to disclose such an authorization. The 742 Fifth Avenue lease limited the exclusive use of the entrances and elevators to three floors and basement. The 1 West 57th Street lease prohibited alterations without consent, and also prohibited any interference with the premises 742 Fifth Avenue.

We can perceive no distinction between the customer who was sent to the fifth-floor fur department by salespeople on the lower floors, and the customers who responded to the advertisements or displays that proclaimed that the defendant’s fur department was located at 742 Fifth Avenue. All of these customers were patrons of the Fifth Avenue Tailored Woman store, and were attracted to that store by the advertisements and windoAV displays using the Fifth Avenue address. Therefore, it necessarily folloAvs that the terms of the lease of 742 Fifth Avenue must apply to all transactions taking place at that address.

Moreover in every contract there is an implied covenant that neither party shall do anything Avhich shall have the effect of injuring or destroying the right of the other party to receive the fruits of the contract. (Kirke La Shelle Co. v. Armstrong Co., 263 N. Y. 79.) The defendant cannot make a virtue of a violation of the lease. It made alterations without the written consent of the landlord of 1 West 57th Street. It violated the prohibition in paragraph 36 of the 1945 lease that the said lease was not to have any effect on the lease dated June 29, 1939, between the Mutual Life Insurance Co. of New York and the Tailored Woman, Inc. (1) by moving its fur department to the fifth-floor space from a lower floor, and (2) by advertising that the fifth-floor space described in the lease as space in the building known as 1 West 57th Street was located at 742 Fifth Avenue. The consequence of these violations was to bring about the condition wherein the defendant was using a Fifth Avenue address and sales space for the sale of furs at a rental rate of a side-street office salesroom.

Furthermore, under the terms of the 742 Fifth Avenue lease, the defendant agreed to maintain a business substantially similar to that which it had maintained at 729 Fifth Avenue, where the defendant had a fur department. As a result of the removal of the fur department to the fifth floor, the plaintiff was deprived of a substantial portion of the fruits of the contract. By excluding the fur sales from the calculations required by the percentage terms of the lease, the defendant excluded almost 20% of the average gross receipts collected at the premises 742 Fifth Avenue. Such an act constitutes an unreasonable diversion of business from a percentage leased premises to a fixed rental premises.

The intent of the parties as expressed in the two leases was that the fifth-floor space at 1 West 57th Street would be operated independently of the main premises. For example, the landlord by lease restricted the use of the elevators in 1 West 57th Street by providing that they would operate only until 1:00 p.m. on Saturdays and 6:00 p.m. on business days, whereas the elevators in 742 Fifth Avenue were within the absolute control of the defendant and could operate until 6:00 p.m. or later on Saturdays, business days and legal holidays only to the third floor.

The rent fixed for the fifth-floor space reflects the restrictions imposed on doing business in an off-street office salesroom space which is not serviced on Saturday afternoons or on legal holidays. Such restrictions are not incompatible with the use permitted by the 1 West 57th Street lease, i.e., the sale and display of women’s wearing apparel. Such uses are commonly so restricted. In this very case the former tenant on the fifth floor was engaged in the women’s wearing apparel business. The limitation of the use of the elevators to five and one-half days as well as the necessity of sharing the use of the elevators with the other tenants in 1 West 57th Street make it clear that any permitted diversion of business from the main store was intended to be confined to a five and one-half day operation with all the inconvenience of sharing public elevators. Naturally, these conditions in themselves forbid the transfer of a major department from the main store to the off-street office salesroom.

Since the defendant, in order to avoid the restrictions of the 1 West 57th Street lease, elected, in violation of the provisions of the leases, to operate part of the fifth floor as an integral part of the main premises and to make fur sales on, in and from the main premises, it has subjected the gross receipts collected from these operations to the percentage rental terms of the main store lease. Such a conclusion is supported by the evidence, by a common-sense interpretation of the leases, and by the prevailing law in other jurisdictions. (Cissna Loan Co. v. Baron, 149 Wash. 386; Gamble-Skogmo, Inc., v. McNair Realty Co., 98 F. Supp. 440, affd. 193 F. 2d 876; Dunham & Co. v. 26 East State Realty Co., 134 N. J. Eq. 237.)

The judgment of the Appellate Division should be reversed and the judgment of the Trial Term reinstated.

Dye, Fuld, Froessel and Van Voorhis, JJ., concur with Desmond, J.; Burke, J., dissents in an opinion in which Conway, Ch. J., concurs.

Judgment affirmed.


source: Caselaw Access Project

author: Froessel, J. Desmond, J.

license: Public Domain

text:
    Jacob Goodman & Co., Inc., Appellant, v. New York Telephone Company et al., Respondents. (Action No. 1.) Jacob Goodman & Co., Inc., Appellant, v. New York Telephone Company et al., Respondents. (Action No. 2.)
    Argued April 22, 1955;
    decided July 8, 1955.

      Harry J. Halperin, Bernard Buchwald and Edmund B. Hennefeld for appellant.
    I. Both complaints are legally sufficient. II. The Court of Appeals will not now be bound along res judicata lines by anything decided by the Appellate Division in Action No. 1, since the decision of the Appellate Division in that action is presently before the court. (Brick v. Cohn-Hall-Marx Co., 283 N. Y. 99, 283 N. Y. 772; Cohen & Sons v. Lurie Woolen Co., 232 N. Y. 112.) III. The acts of the telephone company in charging and collecting at the 3% rate on subscriber calls to Nassau County and lower Westchester County are clearly illegal. (Matter of Gunther’s Sons v. McGoldrick, 279 N. Y. 148; Matter of United Artists Corp. v. Taylor, 273 N. Y. 334.) IV. In this situation of a claimed illegal charge to consumers, the courts have at least concurrent jurisdiction with the Public Service Commission to determine the question of law as to the legality of the charge being made, and the court below erred in remitting plaintiff for relief first to the Public Service Commission. (Kovarsky v. Brooklyn Union Gas Co., 279 N. Y. 304;
      Chelrob, Inc., v. Barrett, 293 N. Y. 442; Lemoyne Arms v. Central N. Y. Power Corp., 191 Misc. 709; Great Northern Ry. v. Merchants Elevator Co., 259 U. S. 285; Pennsylvania R. R. v. Puritan Coal Co., 237 U. S. 121; Pennsylvania R. R. Co. v. International Coal Co., 230 U. S. 184.) V. The authorities establish he clear right of a consumer to bring a representative action n behalf of himself and all other consumers similarly situated o declare the illegality of such a charge on consumers made by . utility. It was error in any case for the court below to dismiss mder rule 106 since a motion under rule 106 in an action for eclaratory judgment has been always held not to raise the [uestion of the ultimate right of either party to prevail as upon , trial necessitated by the presence of disputed issues of fact a the case. (Kovarsky v. Brooklyn Union Gas Co., 279 N. Y. 304; Brenner v. Title Guar. & Trust Co., 276 N. Y. 230; Rockland v. Power & Light Co. v. City of New York, 289 N. Y. 45.) VI. The curt below erred in dismissing the cause of action for an injuncion. The authorities establish the clear right of a consumer o bring a representative action on behalf of himself and all ither consumers similarly situated to enjoin the threatened coninuance by a utility of illegal charges such as here complained if. (Kovarsky v. Brooklyn Union Gas Co., 279 N. Y. 304; Sloane Estates v. City of New York, 175 Misc. 674, 262 App. Div. 722, 287 N. Y. 818.) VII. In the case at bar, there exists a limited und presently in the possession of the telephone company, which s held by that company in a trust or fiduciary capacity on behalf if the body of consumers from whom the moneys were lawfully aken as the proper cestuis. (Latham v. Father Divine, 299 N. Y. 22; Equity Corp. v. Groves, 294 N. Y. 8; Beatty v. Guggenheim Exploration Co., 225 N. Y. 380; Acker v. Hanioti, 276 App. Div. 78, 276 App. Div. 894; Stephens v. Evans, 190 Misc. 922.) VIII. Plaintiff and the other consumers similarly situated from vhom the moneys were unlawfully taken are entitled in this epresentative action to relief by way of enforcement of their ;rust againsbthe fund on a proper, equitable basis in accordance vith, and apportioned to, the amounts taken from each. (Flanagan v. City of Chicago, 311 Ill. App. 135; Brenner v. Title Guar. & Trust Co., 276 N. Y. 230; Commonwealth v. Scott, 112 Ky. 252; McCann v. City of Louisville, 23 Ky. L. 558; Locke v. City of Detroit, 335 Mich. 29; Peterson v. Donnelley, 33 Cal. App. 2d 133; Washington Gas Light Co. v. Baker, 188 F. 2d 11; Natural Gas Pipeline Co. v. Federal Power Comm., 128 F. 2d 481; Guffanti v. National Sur. Co., 196 N. Y. 452; Pfohl v. Simpson, 74 N. Y. 137.) IX. The right of plaintiff and other consumers similarly situated to share in the trust fund presently in the telephone company’s possession, is in all respects prior and superior to the claim of the City of New York to obtain possession of this fund for itself. (Matter of Kesbec, Inc., v. McGoldrick, 278 N. Y. 293.)

      Frank A. Fritz, Ralph W. Brown, Arthur P. West, Anthony T. Antinozzi, Frank A. Fritz, Jr., Eric B. Nelson and Philip Wagner for New York Telephone Company, respondent.
    I. In Action No. 1 the complaint fails to state an individual or a representative cause of action either for an accounting, declaratory judgment or injunction, and dismissal thereof was proper. (Bouton v. Van Buren, 229 N. Y. 17; Kovarsky v. Brooklyn Union Gas Co., 279 N. Y. 304; Brenner v. Title Guar. & Trust Co., 276 N. Y. 230; Society Milion Athena v. National Bank of Greece, 281 N. Y. 282; Bickford’s v. Federal Reserve Bank of N. Y., 5 F. Supp. 875; Reinman v. Jaffe, 281 App. Div. 833; Adelson v. Sacred Associates Realty Corp., 192 App. Div. 601; Dinkes v. Glen Oaks Vil., 206 Misc. 143; Kahn v. New York Life Ins. Co., 184 Misc. 417; Matter of American Cyanamid & Chem. Corp. v. Joseph, 308 N. Y. 259; Matter of Fifth Ave. Bldg. Co. v. Joseph, 297 N. Y. 278; Matter of Merchants Refrig. Co. v. Taylor, 275 N. Y. 113.) II. The decision and transcript of the hearing held by the commission are proper subjects for judicial notice on a motion such as this. (Pfleuger v. Pfleuger, 304 N. Y. 148; Owen v. Rochester-Penfield Bus Co., 304 N. Y. 457; Sease v. Central Greyhound Lines, 281 App. Div. 192, 306 N. Y. 284.) III. In Action No. 2, since the complaint fails to state an individual or a representative cause of action either for an accounting, declaratory judgment or injunction, the dismissal thereof by the Appellate Division was proper. (Kennerley v. New York Tel. Co., 273 App. Div. 964, 299 N. Y. 623; Terner v. Glickstein & Terner, Inc., 283 N. Y. 299; Kovarsky v. Brooklyn Union Gas Co., 279 N. Y. 304; Cardone v. Consolidated Edison Co. of N. Y., 197 Misc. 188, 276 App. Div. 1068; Matter of Leitner v. New York Tel. Co., 277 N. Y. 180; Murray v. New York Tel. Co., 170 App. Div. 17, 226 N. Y. 590; People ex rel. Public Service Comm. v.
      New York Tel. Co., 262 App. Div. 440, 287 N. Y. 803.) IV. The Appellate Division did not remit Action No. 2 to the Public Service Commission for a determination of the question of the legality of the collection of sales tax. V. The directive by Special Term that “ the status quo of the funds is to be maintained ” was properly reversed. VI. Under the notice of motion herein, it is proper to dismiss the entire complaint, or such causes of action, or parts thereof, as fail to state facts sufficient to constitute a cause of action for an accounting or a declaratory judgment or an injunction. (Andrews v. Lebis, 279 App. Div. 1013; Young v. Taber, 284 App. Div. 829; O’Conner Transp. Co. v. Glens Falls Ins. Co., 204 App. Div. 56; Koppel Ind. Gar & Equipment Co. v. Portalis & Co., 205 App. Div. 144; MacArthur Concrete Pile Corp. v. Kew Queens Corp., 276 App. Div. 1015; Savage v. Mathieson Alkali Works, 174 Misc. 1022, 261 App. Div. 1053.)

      Peter Campbell Brown, Corporation Counsel (Morris L. Heath, Stanley Buchsbaum and Charles M. Fox of counsel), for City of New York, respondent.
    I. Sales tax moneys collected and held by a vendor for transmittal to the city are not subject to an accounting action on behalf of the persons who paid the tax, but must be paid over to the city without prejudice, however, to such remedies at law as the persons paying the tax have against the city. (Matter of American Cyanamid & Chem. Corp. v. Joseph, 308 N. Y. 259; People ex rel. Martin v. Brown, 55 N. Y. 180; Village of Olean v. King, 116 N. Y. 355; Matter of Kesbec, Inc., v. McGoldrick, 278 N. Y. 293; McGoldrick v. Berwind-White Co., 309 U. S. 33; Matter of Gunther’s Sons v. McGoldrick, 279 N. Y. 148; Matter of Atlas Television Co., 273 N. Y. 51; City of New York v. Advance Trading Corp., 202 Misc. 208.) II. The vendor, the purchaser and the city are all fully protected if the vendor is required to pay over to the city all the tax moneys that it collects. (Matter of Kesbec, Inc., v. McGoldrick, 278 N. Y. 293; Matter of Gulf Oil Corp. v. McGoldrick, 282 N. Y. 622; Sloane Estates v. City of New York, 175 Misc. 674, 262 App. Div. 722, 287 N. Y. 818.) III. The funds in the telephone company’s possession simply represent overpayments of taxes by plaintiff and other subscribers. They do not constitute a trust fund held for the benefit of subscribers. Nor is the telephone company a constructive trustee with respect to such funds. (Terner v. Glickstein & Terner, Inc., 283 N. Y. 299; Cohen v. City Co. of N. Y., 283 N. Y. 112; Potter v. Walker, 276 N. Y. 15; Bouton v. Van Buren, 229 N. Y. 17; Empire Square Realty Co. v. Chase Nat. Bank, 181 Misc. 752, 267 App. Div. 817; People ex rel. Martin v. Brown, 55 N. Y. 180; Kovarsky v. Brooklyn Union Gas Co., 279 N. Y. 304.) IV. Equity will not intervene in a case such as this where plaintiff by the slighl effort of tabulating its suburban calls can avoid tax on suet calls, since the right it seeks to protect is a technical and unsubstantial one and it would produce great public hardship if the relief plaintiff seeks were granted. (McCann v. Chasm Power Co., 211 N. Y. 301; O’Reilly v. New York Elevated R. R. Co. 148 N. Y. 347; Gray v. Manhattan Ry. Co., 128 N. Y. 499; Morgan v. City of Binghamton, 102 N. Y. 500; McHenry v. Jewett 90 N. Y. 58; Michaels v. Macan Estates, 278 App. Div. 47; Knoth v. Manhattan Ry. Co., 187 N. Y. 243.) V. Equity will not require an accounting if it is a useless gesture due to the great numbei of persons involved, the prohibitive cost of determining eacl person’s share and the practical impossibility of returning more than a nominal amount to each person entitled to share in the accounting. (Gueutal v. Gueutal, 113 App. Div. 310.)
   Froessel, J.

These two actions challenge the propriety of the billing method in use by the New York Telephone Compan; (hereinafter called the Company) since 1950. At that time following hearings before the Public Service Commission (here inafter called the Commission), the Company extended its Nev York City dial system into Nassau and lower Westchestei counties, and thereafter, in pursuance of its duty to collect th( New York City sales tax, billed plaintiff, and other subscriber; similarly situated, 3% on concededly nontaxable calls dialed t( points outside the city limits as well as on admittedly taxable local city calls, due to the inability of the Company’s equipmen to differentiate between such calls.

In the first action, the Company, under rule 106 of the Rules o: Civil Practice, and the City of New York (hereinafter called the City), under rule 212 of the Rules of Civil Practice, moved te dismiss plaintiff’s complaint. Both motions were granted with out leave to amend, and the Appellate Division affirmed. We al agree that this complaint was properly dismissed.

The second action was commenced on a new and broader complaint designed to remedy the deficiencies of the first complaint. In the present pleading, plaintiff sought by way of relief (1) a judgment pursuant to section 473 of the Civil Practice Act, declaring “ the rights and other legal relations ” of the parties; (2) to restrain the Company from charging 3% on suburban calls, from paying any of the challenged charges to the City, and to restrain the City from requiring payment of said charges; (3) to compel the Company to install new equipment, systems and procedure that will differentiate local from suburban calls; (4) for an accounting from defendants; and (5) for temporary njunctive relief and counsel fees.

Both defendants again moved, this time under rules 106 and L07 of the Buies of Civil Practice, to dismiss plaintiff’s complaint, which motions Special Term denied. The Appellate Division unanimously reversed and dismissed the complaint under rule 106. It did so “ without prejudice to any action or proceeding plaintiff may be advised to institute after the Public Service Commission (on its own motion or on complaint), in the irst instance, has made a determination on the reasonableness, propriety, adequacy and sufficiency of the practices and services lerein involved ”. The Appellate Division, moreover, modified )n the law, a direction of Special Term that, while an injunction pendente lite would be denied ”, the “ status quo of the funds s to be maintained ” pending the determination of the issues n a trial; plaintiff’s motion was thus denied unqualifiedly ”, nstead of “ qualifiedly ”.

We agree with the well-reasoned unanimous opinion of the Ippellate Division. The Company, in extending its dial system vith the approval of the Commission, was nevertheless mandated 3y the sales tax law of the City to collect sales taxes. Becognizng that to a comparatively small extent it was collecting excess iharges in its compliance with the sales tax law, the Company irranged to make appropriate refunds to subscribers upon ipplication. Plaintiff concedes that these moneys were not colected “ as tax ’’but only6 ‘ as an inevitable incident and coneomtant of its actual tax collection ”. There is thus in no event any )asis for an accounting decree here, since the Company, an icknowledged debtor, has at all times been willing to refund to any subscriber-creditor upon simple application therefor the amount he claims to be due.

Nor is there any justiciable controversy here. If, by plaintiff’s demand for declaratory judgment, the court is being asked merely to declare what both defendants admit, namely, that suburban calls are not taxable and that the Company has no right to keep any moneys not properly chargeable, the requisite actual controversy ” is lacking and no declaratory judgment may be had (New York Operators v. State Liq. Auth., 285 N. Y. 272, 276; James v. Alderton Dock Yards, 256 N. Y. 298, 305; 5 Carmody on New York Practice, § 1960; Borchard on Declaratory Judgments [2d ed.], pp. 33-48). The situation is thus quite unlike Kovarsky v. Brooklyn Union Gas Co. (279 N. Y. 304) for there the company claimed it had the right to collect and retain for itself service charges which were expressly prohibited by law, and there were none of the drastic consequences here involved. Furthermore, even if the declaration sought by plaintiff is to the effect that the Company may not utilize the particular system in question to collect 3% on all dialed calls and provide for refunds to subscribers who are thus overcharged, then the court below was entitled to refuse to entertain the application in its discretion under section 473 of the Civil Practice Act, and rule 212 of the Eules of Civil Practice — whether or not motion was made therefor — until after plaintiff first sought relief provided for elsewhere, specifically, before the Commission in a determination of 11 the reasonableness, propriety, adequacy and sufficiency of the practices and services herein involved ’ ’. Where such an 11 adequate remedy is already provided ”, and there is thus no real need for resorting to a declaratory judgment, the court, in its discretion, may decline to accept jurisdiction and deny such relief (Bareham v. City of Rochester, 246 N. Y. 140, 143; James v. Alderton Dock Yards, supra, p. 305).

Plaintiff alleges that the Company could overcome its present inability to differentiate between local and suburban calls by installing new equipment, systems and procedures — a not inconsequential undertaking, and a matter that is'clearly within the jurisdiction of the Commission. The Appellate Division appropriately recognized that the latter body, created "by law even as are the courts, is in a much better position, with its superior expert engineering staff and other facilities, to determine whether or not at the present time the Company may introduce a dial or other system which will differentiate local from suburban calls, and to make appropriate orders with far greater flexibility than the courts.

The injunctive relief sought here is sweeping; it might seriously interfere with the Company’s duty to collect the sales tax concededly due; and the direction that the Company install an entirely new system, with all its consequences, is one that should not be made — at least until the Commission has acted. As to the restraint sought to be imposed upon the Company from paying to the City the amounts collected, this is an issue not presented by the pleadings and is not properly before us.

Under all the circumstances, we are of the opinion that the Appellate Division not only exercised sound judgment, but it had the power to do what it did in the exercise of discretion, both as to declaratory and injunctive relief, with which we have no right to interfere.

The judgments in both actions should be affirmed, without costs.

Desmond, J.

(dissenting). I agree that, as these cases come to us, we may ignore the first complaint, and examine, as to sufficiency, the complaint in Action No. 2, only. I agree, too, that, for several reasons, the cause of action for an accounting, being the sixth count in Complaint No. 2, is inadequate.

However, Complaint No. 2 does include a sufficient cause of action for a declaratory judgment and a sufficient cause of action for an injunction. The basic ground asserted for relief is that defendant telephone company, with the at least passive acquiescence of defendant city, has been carrying on for five years and intends to continue an illegal practice of collecting from the telephone subscribers taxes concededly not owed by the latter. That the company has no present method of distinguishing between taxable and nontaxable messages, explains but does not justify the illegality. The telephone company acts as to these taxes as the city’s collecting agency only and holds as trustee for the city the tax moneys when collected as such (Administrative Code of City of New York, § N41-2.0; Matter of American Cyanamid & Chem. Corp. v. Joseph, 308 N. Y. 259; New York City Comptroller’s Sales Tax Regulations, art. 2). Nevertheless the company has matched and followed its unlawful acts o collecting taxes on nontaxahle telephone calls by an unlawfr assumption of the role of a court or an administrative tribunal i: refunding some of those taxes, at the company’s own will an through procedures formulated by it. The long and short o it is: when this company or anyone else collects money as an for such local taxes, the collector’s only duty or power is to tur the money over to the city. If there are to be refunds, th statute itself provides the procedure (Administrative Cod< § N41-8.0).

Declaratory judgment relief has been denied to plaintiff b the courts below, not in the exercise of discretion (see Rules Cr Prac., rule 212) but on the ground that there is no justiciabl dispute between plaintiff and either defendant. All partie agree that the collection of these New York City local taxes o telephone calls to extra-city points is forbidden by the applicah statute (L. 1934, ch. 873, subd. 1, as last amd. by L. 1952, ch. 232 But from that it does not follow that there is no dispute for tl courts to settle. Defendant telephone company, while admittin invalidity asserts necessity and tells us that there is no oth( way of charging for these calls, in the first instance, and that intends, therefore, to continue its present practices. Thus, justiciable controversy exists not as to whether Manhattai Westchester calls are taxable but as to whether defendant tel phone company may continue to force its subscribers to pay tax( not due and require those subscribers to submit to the company private procedures as to refunds. Whether or not the cour will in the end enter a declaratory judgment, and, if so, whs will be its terms, is not now before us on this motion to dismis the complaint for insufficiency.

Similar reasons require the validation of the injunction com in Complaint No. 2. We are told that resort should first be Ile to the Public Service Commission on the theory that plaintiff grievance is as to the adequacy of the company’s service, equi ment or practices (Public Service Law, § 97, subd. 2). Not s The wrong plaintiff alleges is the illegal collection by the publ utility of taxes not statutorily authorized. Kovarsky v. Brooklyn Union Gas Co. (279 N. Y. 304) established the rule in such situ tians that “ direct application for relief may be made to tl court ”. This is not a mere review of a Public Service Commission determination, since the commission, has never authorized this tax collection procedure. Whether an injunction is in the end to be granted must await a trial, but it will not do to put plaintiff out of court without a trial.

In the view I take, it is unnecessary to decide whether this is an individually-brought or representative-type action.

In Action No. 1, the judgment appealed from should be affirmed, without costs.

In Action No. 2, the judgment appealed from should be modified so as to provide for the dismissal of the sixth cause of action only, without costs.

In Action No. 1: Conwat, Ch. J., Desmond, Dye, Fuld and Van Voorhis, JJ., concur with Froessel, J.; Burke, J., taking no part.

In Action No. 2: Conway, Ch. J., Dye and Van Voorhis, JJ., concur with Froessel, J.; Desmond, J., dissents in an opinion in which Fuld, J., concurs; Burke, J., taking no part.

In Actions Nos. 1 and 2: Judgment affirmed.


author: Conway, Ch. J. Desmond, J.

text:
    In the Matter of the Arbitration between Republique Francaise, Respondent, and Cellosilk Manufacturing Company et al., Appellants.
    Argued April 13, 1955;
    decided July 8, 1955.

      John P. Gorman, Francis X. Nestor and Thomas P. Biordan for appellants appearing specially.
    I. There was no jurisdiction in the New York Supreme Court to entertain the present proceedings or to direct entry of judgment against Cellosilk. (Oklahoma Gas Co. v. Oklahoma, 273 U. S. 257; Title Co. v. Wilcox Bldg. Corp., 302 U. S. 120; Martyne v. American Union Fire Ins. Co., 216 N. Y. 183; Matter of National Sur. Co. [Laughlin], 283 N. Y. 68; Farrington v. Commissioner of Internal Revenue, 30 F. 2d 915; Transit Comm. v. Long Is. R. R. Co., 253 N. Y. 345; Cocalis v. Nazlides, 308 Ill. 152.) II. New York jurisdiction, based solely on New York statute and contract to arbitrate in New York, did not survive dissolution. III. The Supreme Court never acquired jurisdiction to affirm the award and enter judgment, since proper notice of motion was not served. IV. Respondent, in failing to inform the court of the dissolution of Cellosilk, failed to plead a cause of action. (People ex rel. Hearst v. Ramapo Water Co., 51 App. Div. 145.) V. No service by mail at the last known address of Cellosilk, as required by rule 39 of the American Arbitration Association Buies, was made by respondent. (McDonald v. Mabee, 243 U. S. 90; People v. One Chrysler Sedan, 81 Cal. App. 2d 18; De Dood v. Pullman Co., 57 F. 2d 171; Grover & Baker Mach. Co. v. Radcliffe, 137 U. S. 287; State v. Belden, 193 Wis. 145; Hendershot v. Finkel, 74 Ohio App. 106; Hartley v. Vitiello, 113 Conn. 74; Mouldings Div. of Thompson Inds. v. Review Bd., 122 Ind. App. 497.)

      Edward W. Scholl for respondent.
    I. Bespondent had the right to institute an arbitration proceeding against Cellosilk in New York in February, 1952. (Matter of Gantt [Hurtado & Cia.], 297 N. Y. 433; Sinnott v. Hanan, 214 N. Y. 454; Schreier v. Kinderhook Knitted Cap Co., 251 App. Div. 16; O’Reilly, Skelly & Fogarty Co. v. Greene, 18 Misc. 423; Trounstine v. Bauer, Pogue & Co., 144 F. 2d 379, 323 U. S. 777; Craftsman Finance & Mtge. Co. v. Brown, 64 F. Supp. 168; Chaplin v. Selznick, 293 N. Y. 529; Matter of Lehrich v. Sixth Ave. Bancorporation, 251 App. Div. 391; Matter of Evens, 183 Misc. 717; Atkins v. Harriman & Co., 69 F. 2d 66; Newmark v. Abeel, 102 F. Supp. 993.) II. The notice of motion sent by respondent to Cellosilk in connection with the confirmation of the arbitration award was properly served. (Matter of Liberty Country Wear [Riordan Fabrics Co.], 197 Misc. 581; Matter of Bradford Woolen Corp. [Freedman], 189 Misc. 242; Tanbro Fabrics Corp. v. Hymen, 341 Ill. App. 396; Ripley Fabrics Corp. v. Hymen, 91 F. Supp. 1007.) III. The proposal made on behalf of Cellosilk and Brown during the pendency of this appeal, that respondent abandon its judgment in exchange for the privilege of instituting a new arbitration proceeding, affords no basis for reversing the order of the Appellate Division.
   Conway, Ch. J.

In October, 1945, the respondent, Bepublique Francaise (hereinafter designated Bepublique), entered into a contract with the Cellosilk Manufacturing Company (hereinafter called Cellosilk) for the purchase of $512,100 worth of a glass substitute, to be delivered F.A.S. Port of New York, in six installments, the last of which was due in March, 1946. Among the General Terms and Conditions ” of the contract there was a provision that the warranty given by the seller “ shall expire not sooner than at the end of one year from the date of receipt by us [Bepublique] of the material ” and a provision that the order “ shall be governed by and construed according to the laws of the State of New York and all questions and controversies arising in connection therewith shall be submitted to arbitration in accordance with the rules of the American Arbitration Association ”.

In March, 1946, Bepublique entered into another contract with Cellosilk for an additional $256,050 worth of the same glass substitute, to be delivered F.A.S. New York City, in two installments, one in March and the other in April, 1946. The General Terms and Conditions ” of this contract, similar to those in the earlier contract, contained provisions that the warranty given by the seller with respect to the goods or material “ shall expire twelve months from the date of receipt by Buyer of such goods and material * * * that the “ agreement shall be governed by and construed according to the laws of the State of New York ” and that the seller and buyer “ agree to submit to arbitration, to be held in the City of New York, all claims or controversies ” arising out of the agreement.

On October 20, 1949, almost three and one-half years after the last scheduled delivery to Bepublique, Cellosilk filed with the Secretary of State of Illinois a statement of intent to dissolve, setting forth therein the names and addresses of its officers and directors as required by the laws of Illinois. (Laws of Illinois, 1933, pp. 308, 347-348, § 77; Smith-Hurd HI. Anno. Stat. [Perm, ed.], ch. 32, § 157.77, p. 386). Thereafter, on April 28,1950, the Secretary of State of Illinois issued a certificate of dissolution, whereupon Cellosilk was dissolved, ceased doing business and closed its office at Barrington, Hlinois — the address given on the contracts with Bepublique.

Bepublique apparently received the goods contracted for and made no attempt to commence arbitration proceedings until on or about February 25, 1952, almost six years after the last scheduled delivery to Bepublique and about two months before the expiration of the two-year period following the date of Cellosilk’s dissolution within which, according to Hlinois law, an action or proceeding might be brought against Cellosilk. (See 1 Ill. Rev. Stat., 1949, ch. 32, § 157.94; Smith-Hurd HI. Anno. Stat. [Perm, ed.], p. 437; see, also, Title Co. v. Wilcox Bldg. Corp., 302 U. S. 120, 124-125, involving an Illinois corporation.) It then mailed a demand for arbitration to Cellosilk at its address at Barrington, Illinois. At the same time it mailed a copy of the demand to the American Arbitration Association (hereinafter designated the Association), setting forth the nature of the dispute and the amount of the award sought. Ho demand for arbitration was sent to the Secretary of State of Illinois. Similarly, no formal demand was ever sent to appellant Brown, who had been an officer and director of Cellosilk as well as its sole stockholder, or to Cellosilk in care of Brown. The next day, February 26th, the Association mailed to Cellosilk a letter addressed in the same manner as the demand sent by Republique, stating that Republique had filed a demand for arbitration, and enclosing the list of names from which the arbitrators were to be appointed. On February 28,1952, this letter was returned to the Association bearing the notation out of business ”. In his affidavit in support of the motion to vacate the order confirming the award and directing the entry of a money judgment against Cellosilk, Brown states that all the proceedings, except those taken in the District Court in Illinois, to be discussed infra, “ were without proper or effectual notice to ” Cellosilk, the Appellate Division found that ‘ ‘ The post office returned the notices [sent] to the corporation ” by Republique and the Association, and Republique itself does not deny or contest the allegations that wo notice of any hind of the attempted arbitration was actually delivered to or served upon Cellosilk.

After learning that Cellosilk was “ out of business ” and that it had not received the notices sent to it, the Association wrote an informal letter, dated March 10, 1952, to appellant Brown, enclosing also a formal notice of hearing, but no demand for arbitration, the process necessary to initiate arbitration. In that letter the Association stated in part :

‘1 On February 28, the post office returned our letter which had been addressed to the Cellosilk Manufacturing Company, with the notation that it was 1 out of business.’ We so notified the attorneys for Republique Francaise, who wrote us, in part, as follows:
‘ ‘ ‘ Regardless of this fact, our client, Republique Francaise, wishes to proceed with the arbitration of the matter set forth in its Demand for Arbitration.’
We were further advised by * * * [the attorneys for Republique] that you were connected with Cellosilk Manufactaring Company in some way. In view of such information, we wish to point out to you Sections 39 and 29 of the enclosed Rules.” (Emphasis supplied.)

Rule 39 of the Rules of the Association, mentioned in the letter to Brown provided: * 39. Serving of Notices — Each party to a Submission or other agreement [Brown, of course, was not a party] which provides for arbitration under these Rules shall he deemed to have consented and shall consent that any papers, notices or process necessary or proper for the initiation or continuation of an arbitration under these rules and for any court action in connection therewith or for the entry of judgment on any award made thereunder may he served upon such party (a) by mail addressed to such party or his attorney at his last known address or (b) by personal service, within or without the state wherein the arbitration is to be held (whether such party be within or without the United States of America); provided that reasonable opportunity to be heard with regard thereto has been granted such party.” (Emphasis supplied.)

Cellosilk did not appear at the above-mentioned hearing, either by representative or by counsel. On the same day as. the hearing — March 24,1952 — the arbitrators made an unanimous award in writing, which was duly acknowledged.

It is manifest from the foregoing that the entire arbitration proceeding was a nullity. No service of process in that proceeding was ever effected on Cellosilk, the Secretary of State of Illinois or Brown, the sole stockholder of Cellosilk. It is true that rule 39 of the Rules of the American Arbitration Association provided that all papers could he served upon any party to an arbitration agreement governed by its rules by mail addressed to such party * * * at his last known address That rule also contained the proviso, however: provided that reasonable opportunity to be heard with regard thereto has been granted such party ”. Knowing prior to the arbitration hearing that the notices sent to Cellosilk by itself and Association had been returned unopened, and having learned or been put upon notice of the dissolution of Cellosilk, it cannot reasonably be said that Republique afforded Cellosilk a ‘ ‘ reasonable opportunity to be heard ” when it promptly directed the arbitration to proceed without further ado. Indeed, it must he held that by so proceeding Repffblique denied Cellosilk a right to which it was entitled by the terms of the same contract which gave New York courts jurisdiction and gave consent to service by mail. The arbitration award having been thus procured in violation of the contract and of due process was null and void.

Thereafter, by a notice of motion dated March 26, 1952, Republique sought an order of the Supreme Court of this State confirming this null and void award and directing the entry of a money judgment thereon. In neither the notice of motion to confirm the award and direct entry of a money judgment thereon nor in the affidavit in support thereof did Republique make any mention to our Supreme Court of the fact that the notice of arbitration had been returned by the Post Office marked out of business Neither did the notice of motion to confirm the award and to direct the entry of a money judgment make mention of the fact that the notice of motion had been mailed to Cellosilk’s address in Barrington from which the former notices had been returned marked ‘ ‘ out of business ”, or of the fact that no notices of any kind had been sent to the Secretary of State of Illinois. The Supreme Court of this State, therefore, received no notice from Republique that there had been no jurisdiction obtained over Cellosilk in the arbitration proceedings or on the motion for confirmation of the award and entry of judgment. Cellosilk neither appeared nor submitted papers in opposition, and the motion to confirm the award was granted on April 14, 1952. Thereafter, on April 22, 1952, six days before the expiration of the Statute of Limitations of Illinois, Republique commenced a civil action in the United States District Court in Illinois (Northern District Eastern Division) against both appellants, Cellosilk and Brown, to recover the amount of the money judgment which had been entered upon the arbitration award.

On April 9, 1953, Cellosilk and Brown appeared specially before the Supreme Court of New York and moved for an order vacating and setting aside the order which confirmed the arbitration award and directed the entry of a money judgment ‘ ‘ upon the grounds that the court had no jurisdiction to make such order or to direct entry of such judgment and that the notices of motion to confirm award and enter judgment and to settle order were not properly served on * * * [Cellosilk] ”. Special Term granted the motion. The Appellate Division unanimously reversed and the present appeal to this court is taken, as of right, from that reversal.

It is settled that an Appellate Division order which reverses an order vacating a final judgment and denies the motion to vacate is not a final order and, so, an appeal therefrom to this court does not lie as of right but only by permission of the Appellate Division (see Cohen and Karger, Powers of the New York Court of Appeals, p. 143 and cases there cited; Civ. Prac. Act, § 589, subd. 1, par. [a]). There is, on the other hand, an equally well-settled exception to this rule. Thus, an order denying a motion to vacate a final judgment is itself regarded as final where the motion to vacate has been made by a person not previously a party to the action or proceeding (see United States Trust Co. of N.Y. v. Bingham, 301 N. Y. 1; Matter of Burdak, 288 N. Y. 606). Where one has been named a party to the action or proceeding but jurisdiction over his person has not been obtained, he is to be regarded osa“ third party ” for the purposes of the finality rule. Here the judgment entered on the arbitration award runs against Cellosilk alone, although Republique has instituted suit in a Federal court in Illinois against Brown, the holder and sole distributee of the assets of Cellosilk, as well as against Cello-silk, seeking to recover the amount of said judgment. If Cellosilk is correct in its contention that the Supreme Court had no jurisdiction over its person, Cellosilk will be regarded as a 1‘ third party” for the purpose of this appeal, taken as of right, a reversal of the Appellate Division determination must follow and the judgment must be vacated. Since we agree that Cellosilk has established its contention we need not further discuss the status of Brown on this appeal or in the action now pending in Illinois in which he is a party.

Cellosilk was a foreign corporation — an artificial entity whose existence and powers depended upon the laws of the State of its incorporation. The general rule at common law where a corporation has been dissolved — whether it be by voluntary action, court decree, or expiration of its chartered life — is that all of its obligations cease and all actions against it abate. Thus, in Title Co. v. Wilcox Bldg. Corp. (302 U. S. 120, supra), a case involving a dissolved Illinois corporation, the Supreme Court wrote at pages 124-125: The decisions of this court are all to the effect that a private corporation in this country can exist only under the express law of the state or sovereignty by which it was created. Its dissolution puts an end to its existence, the result of which may be likened to the death of a natural person. There must be some statutory authority for the prolongation of its life, even for litigation purposes. [Citing cases] ”. Except as modified by specific statutes, the Supreme Court went on to state (302 U. S. 125), the law of Illinois follows the above-quoted general rule. There is such a survival statute in Illinois (1 Ill. Rev. Stat., 1949, ch. 32, § 157.94; Smith-Hurd 111. Anno. Stat. [Perm, ed], p. 437). Before seeking an order of the Supreme Court of this State confirming the award and directing the entry of a money judgment against Cellosilk, Republique was* under a duty to determine the exact legal status of Cellosilk and what, if any, actions or proceedings could be brought against it. It was incumbent upon Republique to make certain that the Supreme Court of New York had jurisdiction to enter the order confirming the award and directing the entry of the money judgment so that Cellosilk be not deprived of due process. Therefore, when the notices of demand for arbitration and the other correspondence were returned, Republique was under an obligation to determine the meaning of the notation out of business ”. That inquiry must have disclosed the prior dissolution of Cellosilk, and the fact that it no longer was possible for Republique to send notices to that corporation by mailing them to its former office at Barrington. Despite this knowledge that no notice of any kind was being effected, Republique chose that same method of service for the notice of motion for an order confirming the arbitration award and directing entry of a money judgment thereon. The rule of the Arbitration Association which prescribed the manner for the service of the demand for arbitration also, by its terms, regulated the service of notices for any court action in connection with the arbitration. That rule, therefore, permitted the notice of motion to confirm the award and to direct entry of a money judgment to be mailed to the last known address of the party provided that a reasonable opportunity was given such party to be heard in opposition. If the notices of demand for arbitration and subsequent correspondence had not been' returned unopened and marked “ out of business ”, then it would not have been unreasonable for Republique to conclude that service of the notice to confirm the award and to direct the entry of a money judgment had been effected on Cellosilk. That, however, was not the case, for the notices, sent by mail to the last post-office address of Cellosilk by Republique and the Association were, as the Appellate Division found, returned unopened and marked 11 out of business ”.

The method of service by which parties have agreed to be bound must be complied with according to the exact terms thereof in order that the requirements of due process be satisfied (De Dood v. Pullman Co., 57 F. 2d 171; Grover & Baker Mach. Co. v. Radcliffe, 137 U. S. 287). It has been said that where a plaintiff has been given alternative methods for the service of process and notices upon his adversary, ‘ ‘ the complainant is under a constitutional duty to select that alternative that is reasonably calculated to notify the adverse party. Stated negatively, the complainant may not select an alternative that he knows (or should know) will not notify the other party when he also knows (or should know) that one of the other alternatives, if selected, would notify the adverse party.” (People v. One 1941 Chrysler 6 Touring Sedan, 81 Cal. App. 2d 18, 34; see, also, Mouldings Div. of Thompson Inds. v. Review Bd., 122 Ind. App. 497). In the present case, Republique knew from its examination of the Illinois law that the Secretary of State of Illinois was the irrevocable, statutory agent for the service of process and notices in those instances where the same could not be served upon this corporation at Barrington. Service upon him would have been service upon the corporation within the two-year period expiring on April 28, 1952, within which an action or proceeding could be brought against Cellosilk and Brown following the dissolution of Cellosilk on April 28,1950, provided that a £ remedy [was] available to or against such corporation, its directors, or shareholders, for any right or claim existing, or any liability incurred, prior to such dissolution ”. (That proviso we do not reach here.) Although experience had shown Republique that it was impossible to serve Cellosilk in Barrington, nevertheless, the notice of motion to confirm the award and to enter a money judgment thereon was sent to that address, and not to the Secretary of State of Illinois. That was not a bona fide compliance with the rule for service of process and notices for any court action” by which the parties had agreed to be bound (rule 39 of the Rules of the Association, supra). It was, rather, a method of service which Republique knew from the past would not give notice to its adversary and would not give its adversary a reasonable opportunity to be heard in opposition. What the Supreme Court has said with regard to constructive service statutes is applicable with equal force here: ‘ ‘ No doubt there may be some extension of the means of acquiring jurisdiction beyond service or appearance, but * * * great caution should be used not to let fiction deny the fair play that can be secured only by a pretty close adhesion to fact ”. (McDonald v. Mabee, 243 U. S. 90, 91.) It is only by closing our eyes to the facts and background of this case that we might possibly consider that mailing the notices of motion to confirm the award and to enter judgment to Cello-silk at Barrington, Illinois, would give the Supreme Court of New York jurisdiction over Cellosilk. The realities of the case dictate a contrary conclusion, and since the Supreme Court did not acquire the necessary in personam jurisdiction over Cellosilk, Cellosilk is to be regarded as a “ third party” for the purposes of the finality rule and, as a matter of law, the order confirming the award and the judgment entered upon that order must be vacated.

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

Desmond, J.

(dissenting). Republique Francaise is entitled to its award since it met every requirement of contract and law for a valid arbitration. Particularly is this so since appellant Brown who now asserts that he at the time of the arbitration was and now is, the sole and actual owner of, and/or liquidator of, Cellosilk Manufacturing Company then in dissolution received but deliberately ignored full and timely notice of the arbitration hearing.

The contracts between Republique and Cellosilk, described in detail in Chief Judge Conway's opinion, called for deliveries of the merchandise at the Port of New York. Both agreements recited that they were to he governed by and construed according to the laws of the State of New York In each agreement the parties covenanted to submit to arbitration all claims or controversies in accordance with the procedures of the American Arbitration Association. The later contract specified that any arbitration should be held in New York City and the courts below properly held that to cover both agreements. By the rules of the American Arbitration Association, incorporated into both contracts by reference, each party was deemed to have consented that all demands for, and notices of, arbitration and of court action for judgment or an award might be served by mail addressed to the other party “ at his last known address ”. The address of Cellosilk in both agreements was given as Barrington, Illinois there is no claim that Cellosilk ever had any other address, or that, until the first arbitration notices were sent by, and returned to, Republique, the latter knew that Cellosilk was out of business and no longer to be found in Barrington, Illinois. Despite its agreements that arbitration notices should be sent to its last known address, neither Cellosilk, which had meanwhile taken voluntary dissolution proceedings, nor anyone on its behalf, ever notified Republique, or American Arbitration Association, of any other or different address. Appellants’ position comes to this: that, having sold and been paid for merchandise under such contracts, Cellosilk could unilaterally destroy all Republique’s rights to arbitration simply by dissolving, discontinuing business and turning over its assets to its sole stockholder.

The argument that there was jurisdictional insufficiency in the service of notices by mail on Cellosilk is readily answered. Service by Republique of its demand for arbitration was made in exact conformity with the association’s rules. Appellants concede, as they must, that Barrington, Illinois, was Cello-silk’s last address. That fact could not be altered by Cello-silk’s act of self-immolation. Much is made of the return to Republique of that notice, with the stamped legend ‘‘ out of business ”. But what was Republique then supposed to do? Abandon its claim? It did what the association’s rule 29 permitted it to do. It proceeded to arbitration despite ‘ ‘ the absence of any party, who, after due notice, fails to he present ”. But Republique did see to it that the association sent to appellant Brown, who says he is and then was the sole party in interest as to the dissolved or dissolving Cellosilk, a letter giving Brown fourteen days’ notice of the time and place of the arbitration hearing. Brown ignored the letter, and the arbitration proceeded to an award. Wherein was there any lack of reasonable opportunity to be heard ”?

As to the service of notice of motion to confirm the award in Supreme Court, New York County, it does not seem to be disputed that, this service, too (by mail to Cellosilk at Barrington, Illinois), complied exactly with the requirements of American Arbitration Association rule 29 (supra) as well as with section 1461 of the New York Civil Practice Act. The majority opinion in this court says that Republique had an obligation to investigate Cellosilk’s status or location and to notify the Supreme Court as to its discoveries. We do not know of any such obligation.

The only obstacle found by Special Term (but denied by the Appellate Division) to confirmation of the award was the prior dissolution in Illinois of Cellosilk, an Illinois corporation. But Illinois, like New York, has a survival statute (111. Rev. Stat., 1953, ch. 32, § 157.94) by virtue of which corporate dissolution in Illinois does ‘ ‘ not take away or impair any remedy available to or against such corporation ”, if action or proceeding is commenced within two years after the date of such dissolution ”. The confirmation of Republique’s award was within two years after Cellosilk’s dissolution. The Illinois statute does not require that such proceedings ” after dissolution be had in Illinois in order to be valid, and there was every reason here why this arbitration (which the parties had agreed should be held, and was held, in New York) should be the subject of confirmation proceedings in New York (see Matter of Gantt [Hurtado & Cia.], 297 N. Y. 433). Thus, there was a continuing remedy available ” to Republique in New York, and that remedy was in no way cut down or destroyed by the survival statute of Illinois, the State of Cello silk’s incorporation.

While we of the dissent are strongly of the opinion that the Appellate Division was correct, we must point also to a jurisdictional objection to entertaining this appeal. The arbitration award was made against Cellosilk alone. The Appellate Division order sought to be appealed from denied a motion to vacate the previous confirmation of that award. Nothing is better settled as to our jurisdiction than that such an order, being nonfinal, is not appealable to this court without the Appellate Division’s permission, which was not obtained here. That rule does not apply where the vacatur is sought by one not a party to the action or proceeding in which was made the determination sought to be vacated. But Cellosilk was a party to the confirmation proceedings and its status as a party therein is not altered or destroyed by its present contention that service on it was invalid. So the appeal of Cellosilk should be dismissed (Civ. Prac. Act, § 589, subd. 1, par. [a]).

Brown’s appeal, too, should be dismissed for lack of jurisdiction. In the eyes of the law he, individually, is not a party aggrieved. The arbitration award did not run against Brown. In moving to vacate it, he could be heard as a liquidator or stockholder or representative, only, of Cellosilk. A stockholder has, as such, no standing to vacate a judgment against his corporation. Thus, since Cellosilk has no right to appeal here, neither has Brown.

The order should be affirmed, with costs, or the appeal dismissed, with costs.

Froessel, Van Voorhis and Burke, JJ., concur with Conway, Ch. J.; Desmond, J., dissents in an opinion in which Dye and Fuld, JJ., concur.

Order reversed, etc.


author: Fuld, J. Desmond, J.

text:
    Dessi Williams, Appellant, v. Mervin K. Alexander, Respondent.
    Argued June 7, 1955;
    decided October 13, 1955.

      Bernard Meyerson, Albert Martin Cohen and Louis I. Rothenberg for appellant.
    The trial court erred in allowing the history of the accident that was in the hospital record to be marked in evidence in spite of counsel’s objection that the history was entirely hearsay. (People v. Kohlmeyer, 284 N. Y. 366; Meiselman v. Crown Heights Hosp., 285 N. Y. 389; Wolf v. Kaufmann, 227 App. Div. 281; Del Re v. City of New York, 180 Misc. 525; Roberto v. Nielson, 262 App. Div. 1035, 288 N. Y. 581; Constantinides v. Manhattan Tr. Co., 264 App. Div. 147; Matter of Bourne, 181 Misc. 238, 267 App. Div. 876, 293 N. Y. 785; Johnson v. Lutz, 253 N. Y. 124; Matter of Fischer, 154 Misc. 74, 243 App. Div. 685; Dougherty v. City of New York, 267 App. Div. 828, 295 N. Y. 786; Doyle v. City of New York, 281 App. Div. 821.)

      John D. Kelly and Joseph F. O’Brien for respondent.
    The hospital records were properly admitted. (People v. Kohlmeyer, 284 N. Y. 366; Johnson v. Lutz, 253 N. Y. 124; Geroeami v. Fancy Fruit & Produce Corp., 249 App. Div. 221; Dougherty v. City of New York, 267 App. Div. 828, 295 N. Y. 786; Del Re v.
      City of New York, 180 Misc. 525; Matter of Bourne, 181 Misc. 238, 267 App. Div. 876; Roberto v. Nielson, 262 App. Div. 1035; Erickson v. Commercial Cas. Ins. Co., 265 App. Div. 327; Cerniglia v. City of New York, 182 Misc. 441.)
   Fuld, J.

Dessi Williams was struck by defendant’s automobile as he was crossing a street in Brooklyn, with the traffic light in his favor. His right leg fractured, he was taken to Kings County Hospital for treatment. At the trial, the testimony of the parties as to the manner in which the accident occurred was sharply discrepant. According to plaintiff, defendant’s automobile approached the intersection, at which he was crossing, without diminishing speed and ran into him. Defendant, on the other hand, insisting that he had brought his car to a complete stop at the light, maintained that another vehicle had struck it from the rear and propelled it forward and upon plaintiff.

In the early stages of the trial, plaintiff introduced so much of the Kings County Hospital record as bore upon his injuries and their treatment. Counsel for defendant thereupon offered the balance of the record and it was received in evidence over plaintiff’s objection. Specifically challenged by plaintiff as inadmissible hearsay was an entry to the effect that he had stated to a physician at the hospital that he was crossing the street and an automobile ran into another automobile that was at a standstill, causing this car (standstill) to run into him ”. Plaintiff denied making any such statement, and the doctor who recorded it was not called as a witness.

Upon this appeal — following a verdict in defendant’s favor and an affirmance by a divided Appellate Division — we are called upon to decide whether the statement attributed to plaintiff, relating the manner in which the accident occurred, was properly admitted in evidence as a memorandum or record made in the regular course of * * * business ”. (Civ. Prac. Act, § 374-a.) While there are many out-of-state decisions on the point, we have never had occasion to consider it; neither in Roberto v. Nielson (288 N. Y. 581), nor in Dougherty v. City of New York (295 N. Y. 786) —upon which reliance is placed to sustain the trial judge’s ruling — nor in any other case was it necessary for this court to pass upon the question now posed.

Section 374-a of the Civil Practice Act permits the introduction in evidence of “ Any writing or record * * * made as a memorandum or record of any act, transaction, occurrence or event,” despite its hearsay character, if the trial judge shall find that it was made in the regular course of any business, and that it was the regular course of such business to make such memorandum or record at the time of such act, transaction, occurrence or event, or within a reasonable time thereafter.” The term “ business ” is broadly defined as including “ business, profession, occupation and calling of every kind ”, and among the records within the section’s ambit are those that a hospital keeps in diagnosing and treating the ills of its patients. (See Meiselman v. Crown Heights Hosp., 285 N. Y. 389; People v. Kohlmeyer, 284 N. Y. 366.)

The statute, similar to those in effect in most jurisdictions, is designed to harmonize the rules of evidence with modern business practice and give “ evidential credit ” to the memoranda or other writings upon which reliance is placed in the systematic conduct of business undertakings. (See Johnson v. Lutz, 253 N. Y. 124, 127.) It rests upon the probability of trustworthiness which inheres in such records, by virtue of the fact, first, that they are the “ routine reflections of the day to day operations of a business ” (Palmer v. Hoffman, 318 U. S. 109, 114) and, second, that it is the entrant’s own obligation, and to his interest, to have them truthful and accurate, made and kept as they are with the knowledge, indeed, for the purpose, that they will be relied upon in the conduct of the enterprise. (See Johnson v. Lutz, supra, 253 N. Y. 124, 128; Weis v. Weis, 147 Ohio St. 416, 425; see, also, 5 Wigmore on Evidence [3d ed., 1940], § 1522, p. 369; McCormick on Evidence [1954], § 281, pp. 596-597.) It is this element of trustworthiness, serving in place of the safeguards ordinarily afforded by confrontation and cross-examination, which justifies admission of the writing or record without the necessity of calling all the persons who may have had a hand in preparing it. And it was to assure such accuracy and reliability that the legislature made explicit the condition that the memorandum may be received in evidence — and this is the heart of the provision — only if it was ‘ ‘ made in the regular course of [the] business, and * * # it was the regular course of such business to make such memorandum ”.

As the statute makes plain, and we do no more than paraphrase it, entries in a hospital record may not qualify for admission in evidence unless made in the regular course of the “ business ” of the hospital, and for the purpose of assisting it in carrying on that “ business.” The business of a hospital, it is self-evident, is to diagnose and treat its patients’ ailments. Consequently, the only memoranda that may be regarded as within the section’s compass are those reflecting acts, occurrences or events that relate to diagnosis, prognosis or treatment or are otherwise “ helpful to an understanding of the medical or surgical aspects of * * * [the particular patient’s] hospitalization.” (E.g., Green v. City of Cleveland, 150 Ohio St. 441, 443-444; Commonwealth v. Harris, 351 Pa. 325, 330-331; see, also, Borucki v. MacKenzie Bros. Co., 125 Conn. 92, 102-103; McCormick, op. cit., § 290, p. 611.)

It follows from this that a memorandum made in a hospital record of acts or occurrences leading to the patient’s hospitalization— such as a narration of the accident causing the injury — not germane to diagnosis or treatment, is not admissible under section 374-a, and so it has been almost universally held under the identical or similar statutes of other jurisdictions. (See, e.g., Scott v. Gibbons Co., 192 Md. 319, 330; Sadjak v. Parker-Wolverine Co., 281 Mich. 84, 87-88; Valenti v. Mayer, 301 Mich. 551, 557; Green v. City of Cleveland, supra, 150 Ohio St. 441, 443-444; Weis v. Weis, supra, 147 Ohio St. 416, 425; Commonwealth v. Harris, supra, 351 Pa. 325, 330-331; see, also, Borucki v. MacKenzie Bros. Co., supra, 125 Conn. 92, 102-103; Watts v. Delaware Coach Co., 44 Del. 283; Brown v. St. Paul City Ry. Co., 241 Minn. 15, 23-27; Richardson on Evidence [8th ed., 1955], § 233, pp. 209-210, 211-212; McCormick, op. cit.,- § 290, p. 611; Medina, Current Developments in Pleading, Practice, and Procedure in the New York Courts, 30 Corn. L. Q. 449, 454-458.) In the words of the Ohio court in Green v. City of Cleveland (supra, 150 Ohio St. 441, 444), typical of those found in the other cases, “ it was the business of the hospital to diagnose plaintiff’s condition and to treat her for her ailments, not to record a statement describing the cause of the accident in which plaintiff’s injuries were sustained.”

In some instances, perhaps, the patient’s explanation as to how he was hurt may be helpful to an understanding of the medical aspects of his case; it might, for instance, assist the doctors if they were to know that the injured man had been struck by an automobile. (See Scott v. Gibbons Co., supra, 192 Md. 319, 330; cf. Roberto v. Nielson, supra, 288 N. Y. 581; Watts v. Delaware Coach Co., supra, 44 Del. 283.) . However, whether the patient was hit by car A or car B, by car A under its own power or propelled forward by car B, or whether the injuries were caused by the negligence of the defendant or of another, cannot possibly bear on diagnosis or aid in determining treatment. That being so, entries of this sort, purporting to give particulars of the accident, which serve no medical purpose, may not be regarded as having been made in the regular course of the hospital’s business. (See Scott v. Gibbons Co., supra, 192 Md. 319, 330.) Indeed, in discussing the matter, Wigmore observed that the essential “ Guarantee of Trustworthiness ” rests upon the fact that the physicians and nurses * * * themselves rely upon the record ” and that the record is designed to be relied upon in affairs of life and death.” (6 Wigmore, op. cit., § 1707, p. 36; see Loper v. Morrison, 23 Cal. 2d 600, 608.) Such reasoning, however, will not support the use,.or justify the receipt, of a statement detailing the circumstances of the accident where they are immaterial to, and were never intended to be relied upon in, the treatment of the patient. There is no need in that case for the physician to exercise care in obtaining and recording the information or to question the version, whatever it might be, that is given to In'm. The particulars may be a natural subject of the doctor’s curiosity, but neither the inquiry nor the response properly belongs in a record designed to reflect the regular course of the hospital’s business. (See, e.g., Commonwealth v. Harris, supra, 351 Pa. 325, 331.)

In conclusion, then, that portion of the hospital record containing the statement assertedly made by plaintiff as to the manner in which the accident happened was erroneously admitted, and, since we cannot say that it did not influence the jury in arriving at its verdict for defendant, there must be a new trial.

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

Desmond, J.

(dissenting). I see no error here, and no reason for retrying this simple question of fact.

Plaintiff, for his own convenience, chose to prove his injuries and the hospital treatment he received therefor, by putting a hospital record in evidence and without calling as a witness the physician who made the entries. In so doing, he of course vouched for the accuracy and regularity of that record. Defendant made no objection hut in his turn offered in evidence so much of the same hospital record as showed a statement to the hospital physician by plaintiff that the accident had occurred in a manner quite different from that testified to at the trial by plaintiff. Plaintiff objected to any such “history” going into evidence. His alleged ground of objection was stated in the one word: “hearsay”. That of course was meaningless in- this context. An undoubted exception to the “ hearsay ” rule makes admissible extrajudicial declarations against interest (Reed v. McCord, 160 N. Y. 330, 341). Plaintiff’s declaration to the hospital physician as to the way the accident happened was directly probative evidence of a main fact in issue (Gangi v. Fradus, 227 N. Y. 452). It is, of course, conceivable (hut unlikely) that by plaintiff’s use of the word “hearsay” he referred to the failure of defendant to call as a witness the physician who had written up the notes. But plaintiff himself had put into evidence the (helpful to him) parts of that identical paper without calling the physician. Surely, plaintiff could not then demand that the other party prove the authenticity of the very record plaintiff had himself presented to the court. Since plaintiff had been allowed to prove by the record alone the diagnosis and treatment of his injuries, it would be absurd to forbid defendant using the same record, written in the same handwriting by the same physician at the same time, to prove an equally relevant, competent and material fact, that is, that plaintiff had stated to the physician that his injuries were caused in the manner asserted by defendant.

It follows from the above that section 374-a of the Civil Practice Act, our statutory rule as to admissibility of records made in the regular course of a business, has little or nothing to do with this case. What we have here is an admission against interest, proved not by the oral testimony of the person to whom it was made but by an authentic document already vouched for to the court by the opposing party himself.

But let us suppose that this is a section 374-a case. Hospital records concededly are included within the records to which section 374-a of the Civil Practice Act is applicable ” (People v. Kohlmeyer, 284 N. Y. 366, 369, 370). The physician who made the entries need not be called as a witness (Meiselman v. Crown Heights Hosp., 285 N. Y. 389, 396, 397). True, as Judge Fuld points out, this court has not yet directly decided whether the section 374-a makes admissible that part of a hospital record which gives the history of the injury. But why should this court not adopt a practical and useful construction, rather than a narrow and unnecessarily restrictive one? And the statute itself seems to furnish the answer: “ Any writing or record, whether in the form of an entry in a book or otherwise, made as a memorandum or record of any act, transaction, occurrence or event, shall be admissible in evidence in proof of said act, transaction, occurrence or event, if the trial court shall find that it was made in the regular course of any business, and that it was the regular course of such business to make such memorandum or record at the time of such act, transaction, occurrence or event, or within a reasonable time thereafter.” There is no reason why the “ history ” part of a hospital record, obtained not from unidentified persons but from the patient himself, should not be used in evidence against the patient. Of course, the writing must have been made in the regular course of the hospital’s business and it must have been the regular course of the business of the hospital to make such entries. But in this case plaintiff did not object because of any failure to prove those requirements (see Meiselman v. Crown Heights Hosp., 285 N. Y. 389, 397, supra). Indeed, he could not, after himself bringing the record to court, reasonably urge that it was not the regularly made record of this hospital. And he knew, as we all do, that an examining physician, especially in a hospital receiving department, always inquires as to the cause of a trauma. Certainly, in the absence of any suspicious circumstance, it is not up to the courts to decide just how thoroughly a qualified physician may delve into the cause or occasion of the injuries he is diagnosing and treating. Anyhow, all this is by the statute’s own words committed to the trial judge’s discretion. It is he who is charged with passing on the question of whether the entry was regularly made. Here, no one suggested that it was not so made or called for proof that it was. The trial justice, therefore, had no reason for excluding it, particularly since there was no suggestion that the physician or the hospital had any interest in the case or any possible reason for falsifying these records.

This was a routine trial of a simple issue of fact. Plaintiff said the accident happened one way, defendant said that it happened another way. A hospital book brought to court by plaintiff showed that he himself had described the occurrence in the way that defendant described it. Plaintiff denied that he had made such a statement at the hospital. The jury settled that dispute. It is most unfortunate, especially in these days of congested calendars, that such a case must now be retried.

The judgment shbuld be affirmed, with costs.

Conway, Ch. J., Fboessel and Van Voobhis, JJ., concur with Fuld, J.; Desmond, J., dissents in an opinion in which Dye and Bubke, JJ., concur.

Judgments reversed, etc.

      . Although the doctor who made the entry would have been competent to testify to plaintiff’s alleged admission against interest, the entry itself was, nevertheless, excludable as hearsay, unless within the compass of section 374-a of the Civil Practice Act (see, e.g., Green v. City of Cleveland, 150 Ohio St. 441, 444-445; Richardson on Evidence [8th ed., 1955], § 233, p. 211); and the issue was sufficiently raised by the objection predicated on the hearsay rule.


author: Desmond, J.

text:
    The People of the State of New York, Respondent, v. Alvin E. Lain, Appellant.
    Argued October 6, 1955;
    decided November 17, 1955.

      Vincent L. Rosato for appellant.
    I. The court below erred in refusing to grant a hearing upon the allegations raised by the petition and the records of the court. (Johnson v. Zerbst, 304 U. S. 458; People v. McLaughlin, 291 N. Y. 480; Matter of Bojinoff v. People, 299 N. Y. 145; Rice v. Olson, 324 U. S. 786; Hawk v. Olson, 326 U. S. 271; Matter of Hogan v. Supreme Court of State of N. Y., 295 N. Y. 92; People v. Richetti, 302 N. Y. 290; Matter of Lyons v. Goldstein, 290 N. Y. 19; People v. Guariglia, 303 N. Y. 338; People v. Langan, 303 N. Y. 474.) II. Even if the court should find that appellant was represented by counsel at the time of sentencing, the record nevertheless conclusively shows that he did not have the aid of counsel nor was he advised of his rights at every stage of the proceedings. (Glasser v. United States, 315 U. S. 60; People v. Steinmetz, 240 N. Y. 411.)

      Frank S. Hogan, District Attorney (Harold Roland Shapiro of counsel), for respondent.
    The records of the Court of General Sessions conclusively established defendant’s representation by counsel and thus completely refuted his allegations that he was not advised of or given counsel at any stage of the proceedings and that the court records were barren of proof that at any time was he represented by counsel. (Gayes v. New York, 332 U. S. 145; Canizio v. New York, 327 U. S. 82; Walker v. Johnston, 312 U. S. 275; People v. Guariglia, 303 N. Y. 338; People v. Richetti, 302 N. Y. 290; People v. Langan, 303 N. Y. 474.)
   Desmond, J.

Defendant petitioned for coram nobis relief to set aside his 1934 conviction for robbery on a guilty plea. His allegation was that he had not been represented by counsel, or advised of his right to counsel, at any stage of those 1934 criminal proceedings. His petition included a request for a hearing as to the truth of those allegations but such a hearing was denied him. The Court of General Sessions instead examined the original 1934 file, including the indictment and the indorsements thereon and the stenographic minutes of sentence, and, finding therein what the court thought to be a clear showing that defendant was represented by counsel in 1934, held that no hearing was necessary as to defendant’s contrary allegation. The coram nobis motion was therefore denied.

It is settled that in coram nobis a petitioner swearing to allegations such as those of this petition is entitled to a trial thereof in open court unless his claims are ‘1 conclusively refuted by unquestionable documentary proof ”. (People v. Richetti, 302 N. Y. 290, 296; see People v. Guariglia, 303 N. Y. 338, 342; People v. Langan, 303 N. Y. 474, 477; United States v. Hayman, 342 U. S. 205, 222.) There was in the present proceeding no such conclusive refutation by unquestionable documents. The file handed to the coram nobis court contained two documents of importance. One was a photostatic copy of the 1934 indictment and the indorsements thereon, that indictment running against this defendant (Lain) and two other men, Soimes and Jasper. It was returned on September 26, 1934, and on its back there is a notation that on September 27,1934, Lain pleaded guilty to robbery in the third degree while armed, and that his co-defendant Soimes on that date pleaded guilty to robbery in the third degree. There is nothing in the record to say that Lain was represented by a lawyer or informed of his right to counsel at the time his plea was entered. Under date of September 29, 1934, on the back of this same indictment is a statement that a named attorney filed a notice of appearance for both Lain and Soimes. The next writing on the back of the indictment says that on October 9, 1934, Lain was sentenced to State prison for ten years for robbery, plus an additional sentence, because of his having been armed, of not less than five nor more than ten years.

The other writing which was before General Sessions, when it denied the coram nobis petition without trial, was the stenographer’s minutes of the sentencing of Lain and Soimes. Therein under the heading “ appearances ” is a statement that an attorney (not the same one who filed the notice of appearance) was present “ for the defendants ”. When, according to the minutes, the sentencing judge asked Lain whether he had been previously convicted of a felony, he answered “ Yes ” and this attorney, too, made the same answer as to Lain. Later, this attorney addressed the court in behalf of leniency for Soimes, but said nothing for Lain. Thus, the only documents available indicate that one lawyer, two days after the guilty plea, filed a notice of appearance for Lain but was not heard of again in the record. Another lawyer, in court on the day of sentence, was thought, by the stenographer at least, to be representing Lain but did no more for him than to repeat to the court an answer Lain made as to his prior conviction. If there is an adequate explanation for these discrepancies, it does not appear on this record. People v. Guariglia (303 N. Y. 338, 342, supra) is a directly applicable holding that such scant entries on the official records do not conclusively disprove a sworn allegation that defendant never was told of his right to counsel, never consciously waived it, never authorized counsel to act for him and never knew that the right existed.

Since we are holding that this defendant should have had a trial of his allegations, the question is not before us as to whether adequate representation by an attorney, if such there was, at the time of sentence would be held to have satisfied defendant’s rights if it should turn out also that at the earlier date of arraignment and plea he had no counsel and was not told of his right to counsel (see Code Crim. Pro., §§ 188, 308; Canizio v. New York, 327 U. S. 82, 85-87; Gayes v. New York, 332 U. S. 145, 148-149; cf. People v. Guariglia, supra).

Defendant’s right to a trial of his allegations was not destroyed by the inept allegation in his home-drawn petition that his claims could be conclusively established by the court records. Of course, those records did not prove that he was denied counsel, any more than they proved the opposite of that. But defendant’s overstatements of what the documents proved did not automatically deprive him of a trial of his principal contention.

The orders should be reversed and the case remitted to the Court of General Sessions of the County of New York for hearing in accordance with the opinion herein.

Conway, Ch. J., Fuld, Fboessel, Van Voobhis and Bubke, JJ., concur; Dye, J., taking no part.

Orders reversed, etc.