text:
    In the Matter of Stephen P. O’Reilly et al., Respondents, against Jacob Grumet, as Commissioner of the Fire Department of the City of New York, Appellant.
    Argued February 23, 1955;
    decided April 14, 1955.

      Peter Campbell Brown, Corporation Counsel (Victor J. Eerwitz and Seymour B. Quel of counsel), for appellant.
    I. The fire commissioner’s action in temporarily assigning petitioners to perform the duties of acting battalion chiefs was in strict accordance with the authority vested in him by the charter, the Administrative Code and the rules and regulations of the fire department. Thus, he did not act arbitrarily, capriciously or unreasonably. (Matter of Calfapietra v. Walsh, 183 Misc. 6, 269 App. Div. 734, 294 N. Y. 867; People ex rel. Rogers v. Tinney, 184 App. Div. 748; Acorn Employment Service v. Moss, 261 App. Div. 178; Matter of Apel v. Moss, 256 App. Div. 607; Matter of Friedman v. Valentine, 177 Misc. 437, 266 App. Div. 561; Fawcus Mach. Co. v. United States, 282 U. S. 375; Chicago, R. I. & P. Ry. Co. v. United States, 284 U. S. 80; People ex rel. Clapp v. Listman, 40 Misc. 372, 84 App. Div. 633; Matter of Walsh v. La Guardia, 269 N. Y. 437.) II. Petitioners’ temporary assignments without tenure or salary increases are not appointments or promotions within the meaning of the Civil Service Law. (People ex rel. Campbell v. Partridge, 89 App. Div. 497; Matter of Williams v. Morton, 297 N. Y. 328.) III. The injunctive relief granted in the order appealed from is not properly obtainable in an article 78 proceeding. (Dairy Sealed v. Ten Eyck, 248 App. Div. 352; Matter of Bonacker v. Chuckrow, 166 Misc. 171; Lewis v. Mandeville, 201 Misc. 120;
      J. D. L. Corp. v. Bruckman, 171 Misc. 3; People ex rel. Schwab v. Grant, 126 N. Y. 473; McBride v. City of New York, 56 App. Div. 520.)

      Murray A. Gordon, Daniel Jacobson and Bernard Jacobson for respondents.
    I. The filling of vacancies in the position of battalion chief by means of “ temporary designations ”, which are in effect permanent appointments thereto but without the grade or salary of the position of battalion chief, is in violation of the applicable Civil Service Law and policy and therefore willful, arbitrary and unlawful. (Calfapietra v. Walsh, 183 Misc. 6, 269 App. Div. 734, 294 N. Y. 867; Matter of Hilsenrad v. Miller, 284 N. Y. 445; Matter of Graae v. Ahern, 258 App. Div. 686; Matter of Berger v. Walsh, 266 App. Div. 592, 291 N. Y. 220; McBride v. City of New York, 56 App. Div. 520; Gallagher v. City of New York, 115 App. Div. 662; Matter of Jaffe v. Board of Educ. of City of N. Y., 265 N. Y. 160; Matter of Frankle v. Board of Educ. of City of N. Y., 173 Misc. 1050, 259 App. Div. 1006, 285 N. Y. 541; Matter of Sokolove v. Board of Educ. of City of N. Y., 176 Misc. 1016; Matter of Davis v. Board of Educ. of City of N. Y., 263 App. Div. 369, 288 N. Y. 330; Matter of Jacobson v. Board of Educ. of City of N. Y., 177 Misc. 809, 265 App. Div. 837; Matter of Vanderwoude, 50 N. Y. St. Dept. Rep. 199; Matter of Dillon, 53 N. Y. St. Dept. Rep. 111; Matter of Kearns, 53 N. Y. St. Dept. Rep. 117; Leitner v. Conway, 195 Misc. 621.) II. The relief here sought is appropriate. (Thomson v. Board of Educ. of City of N. Y., 201 N. Y. 457: Hoefling v. Board of Educ. of City of N. Y., 120 App. Div. 545; Dairy Sealed v. Ten Eyck, 248 App. Div. 352; Matter of Wittekind v. Kern, 170 Misc. 939, 256 App. Div. 918, 281 N. Y. 701; Matter of Requa v. White, 170 Misc. 29.)
   Desmond, J.

In this article 78 proceeding the relief prayed for was denied at Special Term but petitioners appealed to the Appellate Division, First Department, which reversed and granted the prayer of the petition. Petitioners are captains in the fire department of the city of New York, suing on their own behalf and on behalf of others similarly situated. Each petitioner, as the result of a competitive civil sendee examination, has a place on the current eligible list for appointment as battalion chief, which is the rank next above captain in the fire department. However, petitioners are not, in this proceeding, seeking to compel their appointments as battalion chiefs, but are asking that an end be put to the admitted practice of the fire commissioner in assigning fire captains for long periods of time to duty as battalion chiefs without appointments as battalion chiefs and, of course, without the salary for that higher grade. Admittedly, this all comes about because the city’s budget director, not a party to this proceeding, has, presumably for reasons of economy, refused to issue the budget certificates necessary to authorize the fire commissioner to appoint eligibles as battalion chiefs, and such appointments cannot be made without such budgetary arrangements (Matter of Ross v. La Guardia, 287 N. Y. 28).

This proceeding was commenced in September, 1953, and up to that time the several petitioners had acted, under this challenged arrangement, as battalion chiefs for periods ranging from 57 days (petitioner Royer), to 343 days in 1952 and 1953 (petitioner Drescher) and 332 days in 1952 and 1953 (petitioner McKenna). Actually, it is conceded that petitioner O’Reilly, who became a fire captain on January 1, 1949, has ever since been serving practically full time in a so-called temporary ” designation as an acting battalion chief. The Appellate Division majority, therefore, was justified in its statement that: “ The designations of petitioners and others similarly situated were frequent and recurrent, and harden to a pattern for permanently filling the positions of battalion chief ”. Indeed, as is undisputed on this record, that “ pattern ” is itself part of a larger one since it appears that it all starts with a refusal of the budget director to authorize an adequate number of appointments to the position of deputy chief, the third highest in the department, with the result that for a considerable period it has become the routine practice of the fire commissioner to assign about 23 battalion chiefs as acting deputy chiefs, about 47 captains (like petitioners) as acting battalion chiefs, and, presumably, a number of lieutenants as acting captains. Facetiously, it might be said that the complete fruition of this plan would make it possible, when there is a vacancy in the position of chief of the fire department, to take care of the matter by appointing one new fireman of the lowest rank and then stepping up one man in each grade along the line. It is conceded that appellant, who was fire commissioner during the periods here in question, was acting in good faith and carried out this elaborate scheme only because the budget director refused to sign certificates. It is easy to see, however, that in other hands this device might be used for various improper purposes.

The Special Term memorandum opinion concluded that, since it was the fire commissioner’s responsibility to furnish fire protection with such personnel as was available, he had power to make the challenged designations, and that, under the circumstances, the exercise of such power could not be said to be arbitrary or capricious. The dissent at the Appellate Division took somewhat the same fine. However, the majority opinion in the latter court, with which we agree, is a most persuasive one. It was conceded on all sides that, under section 3.1.14 of the Regulations for the Uniformed Force of the fire department, the fire commissioner has power to designate members of any rank to perform, temporarily and in emergencies, the duties of the next higher rank, but it is clear that the designations here litigated were not temporary or emergency in character. It appears that the budget director himself has approved a quota of 202 battalion chiefs, that to have 202 on duty at all times requires quite a few more people holding that grade to make up for days off, vacations, sick leaves, etc., and that there are presently only 198 persons holding permanent appointments in the grade so that, as presently set up, there is a continuous need for a large number of these “ temporary ” designations as acting battalion chief. There is a good deal of refined argument in the briefs as to whether there are any “ vacancies ” in the position of battalion chief, the city contending that no such vacancies exist since no such position can be legally filled without the issuance of a budget certificate. We think that argument misses the point. The question is whether the rights of these petitioners are being violated in that, under pain of disciplinary action if they refuse (see Regulations for the Uniformed Force, § 35.3.1), they are being compelled, recurrently and for long periods of time unrelated to any temporary emergency, to perform, without increase in pay and without permanent appointment, the duties of a higher grade for which they have proven their eligibility. It may be that there is no specific statute which, in so many words, invalidates this procedure, but the practice itself is totally inconsistent with, and subversive of, the whole theory of competitive civil service.

The Appellate Division order was, in part, in these terms:

“ Ordered that the continuous and recurrent designation by respondent of petitioners and all others similarly situated to perform the duties of Battalion Chief in the Fire Department of the City of New York, be and the same hereby is adjudged and declared to be unlawful; and it is further

Ordered that the respondent and his successor, and his agents, servants, officers, and/or employees, be and they hereby are directed to refrain from continuing to make, and are restrained, enjoined and prohibited from making such continuous and recurrent designations for extended periods of time of petitioners and all others similarly situated to perform the duties of Battalion Chief in the Fire Department of the City of New York.”

In passing, we remark that we do not see how that could have been made any more specific.

It is unnecessary to call attention to the constitutional (N. Y. Const., art. V, § 6) and statutory (Civil Service Law, § 14) requirements that appointments and promotions in the civil service of the cities of this State shall be made according to merit and fitness ascertained, so far as is practicable, by competitive examinations. Subdivision 1 of section 15 of the Civil Service La,w provides for provisional appointments when there is no eligible list available, but limits the duration of such provisional appointments to six months and/or not more than twenty days after the promulgation of an appropriate eligible list, with the further provision that the six-month period may, with the approval of the State Civil Service Commission, be extended not more than three months and that successive provisional appointments shall not be made to the same position. The same statute permits temporary appointments, when important and urgent, of civil service list eligibles for not more than thirty days, except that temporary appointments in the place of a person absent on leave may be made for not more than a year, or for not more than six months when the position itself will not continue in existence for more than that period, and here, again, it is stipulated that there may not be successive temporary appointments to the same position. The spirit of all that is that, except in special and strictly limited circumstances, temporary appointments are banned by the Civil Service Law. Here, as it seems to us, the New York City authorities have taken it upon themselves to create a new exception whereby, whenever the budget director refuses, arbitrarily or not, to issue appropriate budget certificates, positions in a fixed grade, for which an eligible list is available, are filled routinely, for long periods of time, or forever, by so-called temporary appointments. In Matter of Jaffe v. Board of Educ. of City of N. Y. (265 N. Y. 160), this court dealt with a practice whereby the New York City board of education was regularly employing substitute teachers on a so-called temporary basis without making appointments from eligible lists. Petitioners in that case, it must be noted, were seeking not the limited relief obtained by petitioners here, but were trying to force the board of education to appoint them to permanent jobs. This court, while holding the board’s practice to be illegal, found it impossible to mandate the board of education to appoint those particular petitioners to permanent positions, since the making of a choice from eligible lists is for the board, not the courts. The opinions in the Jaffe case (supra) make it clear that the practice employed in the present case is illegal. We are cited to People ex rel. Lodholz v. Knox (58 App. Div. 541, affd. 167 N. Y. 620) and Matter of Williams v. Morton (297 N. Y. 328). The pertinence of the Lodholz case (supra) is rather remote. However, the quite recent case of Williams (supra), while distinguishable as to its precise facts, is certainly important in that this court, while remitting the case to Special Term for further consistent proceedings, stated (p. 334) that the board of education should be enjoined from assigning the duties of that position to anyone except a person appointed thereto from an eligible list established through a competitive examination conducted pursuant to the Civil Service Law ”.

The answers of the city to the foregoing are two. The first argument proceeds entirely from the assumption that these are “ temporary ” designations. We think that flies in the face of the conceded facts since it has plainly become routine in the fire department to keep a certain percentage of the battalion chief jobs filled in this manner, as well as a similar number of positions in the captain grade. The city argues next that, since these designations are neither appointments nor promotions, they are not within the precise rules of the Civil Service Law. However that may be, such arrangements are, impliedly at least, forbidden by section 15 of the Civil Service Law (supra) which seems to list all the situations in which jobs in a certain grade may be filled otherwise than from an appropriate list and, certainly, none of the exceptions in section 15 are applicable here or applicable for any such periods as are involved here.

In its last point the city argues in a highly techncial manner that the order appealed from is invalid because it contains an injunction and, according to the city, injunctive relief cannot be obtained in an article 78 proceeding. The several cases cited by the city contain no such sweeping holding but mean only, as we read them, that for certain types of permanent injunctions an action must be brought. Since article 78 proceedings are appropriate to require a public officer to do his duty, they are equally appropriate here.

The order should be affirmed, with costs.

Conway, Ch. J., Dye, Fuld, Froessel and Van Voorhis, JJ., concur; Burke, J., taking no part.

Order affirmed.


source: Caselaw Access Project

author: Burke, J.

license: Public Domain

text:
    Constance Hurley, Appellant, v. Edward R. Tolfree et al., Respondents.
    Argued February 23, 1955;
    decided April 14, 1955.

      Arthur G. Silverman and Milton Pinkus for appellant.
    I. While the mortgage could still redeem, the private sale of this tax title for less than full payment of all tax arrears with interest and penalties violated the controlling statutes and the county supervisors’ duty as trustees. (Wekando, Inc., v. City of Yonkers, 195 Misc. 102; Hossom v. City of Long Beach, 83 Cal. App. 2d 745; Matter of Ueck, 286 N. Y. 1; People ex rel.

      Oakley v. Bleckwenn, 126 N. Y. 310; City of Beacon v. Bernstein Realty Corp., 185 Misc. 262; Connolly v. Jones, 273 App. Div. 904, 299 N. Y. 639; Hurley v. Tolfree, 276 App. Div. 778.) II. The intent of the controlling statutes is to prohibit negotiated sales of county tax titles at a discount particularly when a right of redemption is unexpired. (Lawrence Constr. Corp. v. State of New York, 293 N. Y. 634; McCarthy v. Emma, 304 N. Y. 153; Matter of Mendoza Fur Dyeing Works v. Taylor, 272 N. Y. 275.) III. Apart from the mortgagee’s unexpired redemption, this sale constituted a breach of trust. (Mount Sinai Hosp. v. Hyman, 92 App. Div. 270; Carpenter v. Wise, 92 Misc. 246, 173 App. Div. 998; Matter of Ross v. Wilson, 205 Misc. 295.) IV. Tolfree’s quitclaim to the county did not reduce the tax arrears or abrogate the board’s duty as trustee to collect them in full. (Matter of City of New York [Houghton Ave.], 266 N. Y. 26; McLanahan v. City of Syracuse, 18 Hun 259; Matter of Crystal v. Foster, 148 Misc. 327.) V. This reconveyance was unlawful on the further ground that the mortgagee was the real party in interest thereunder in view of his principal participation in the negotiations with the county, his own beneficial interest in their outcome and his outstanding right of redemption. (Connolly v. Jones, 273 App. Div. 904, 299 N. Y. 639.)

      Morris Rochman, Charles H. Stoll and Aaron L. Rochman for Edward E. Tolfree, respondent.
    I. The trial court’s refusal to find that the mortgagee joined Tolfree and its positive finding that the mortgagee was not the real party in interest in the transaction, with the board of supervisors are findings of fact which, in view of the unanimous affirmance in the Appellate Division, are not reviewable on appeal to the Court of Appeals. It is well established that a case should be disposed of on appeal upon the same theory of action upon which it was tried and decided. (Archer v. City of Mount Vernon, 171 N. Y. 639; Lindlots Realty Corp. v. County of Suffolk, 251 App. Div. 340, 278 N. Y. 45; Randall v. Bailey, 288 N. Y. 280; Central Hanover Bank & Trust Co. v. Eisner, 276 N. Y. 121.) II. The county board of supervisors had the power and authority to proceed, as it did, under section 46 of the Suffolk County Tax Act, reaffirmed by section 154 of the Tax Law. Section 96-b of the Tax Law is implicitly and expressly not required to be invoked in Suffolk County or under the facts of this case. (Robbins v. Abrew, 275 N. Y. 233; Matter of Gould Realty Co. v. Reutershan, 284 N. Y. 540; Lowe v. Sheldon, 276 N. Y. 1; Post v. Cowan, 236 App. Div. 26; Barzler v. Fischer, 272 App. Div. 665; Matter of Kessler v. Johnston, 253 App. Div. 411; Matter of Connolly v. Burns, 272 App. Div. 769; Gillespie v. Board of Supervisors of Broome Co., 178 Misc. 890.)

      Lloyd P. Dodge, County Attorney (Pierson R. Hildreth of counsel), for Milton L. Burns, County Treasurer of the County of Suffolk, and others, respondents.
    The complaint was properly dismissed because the facts show no cause of action against the county officials. (Lowe v. Sheldon, 276 N. Y. 1; Olds v. City of Jamestown, 280 N. Y. 281; Tolfree v. Connolly, 188 Misc. 689, 271 App. Div. 1033; Talcott v. City of Buffalo, 125 N. Y. 280; Ziegler v. Chapin, 126 N. Y. 342.)
   Burke, J.

Plaintiff brought a taxpayer’s action under section 51 of the General Municipal Law in behalf of herself and all other taxpayers of Suffolk County to vacate and cancel an alleged redemption of certain lands of the defendant Tolfree from sales by the county for nonpayment of real estate taxes, on the ground that the defendant was unlawfully permitted to redeem the lands for a fraction of the required statutory amount.

The defendant Tolfree owned lands in Suffolk County subject to a $400,000 mortgage. Suffolk County acquired a lien on these lands for unpaid 1939-1940 taxes. In November of 1940, the county bought in the tax lien at a tax sale and received a tax sale certificate. Notice to redeem was given to Tolfree. The trial court found that the County of Suffolk had not served a notice to redeem upon the holder of the mortgage. On December 15, 1943, the county obtained from the County Treasurer a tax deed for these lands. It is conceded that the defendant Tolfree’s time to redeem had expired. However, it appears from the record that the mortgagee’s time to redeem has not expired. In January, 1944, negotiations were instituted by Tolfree and later joined in by the mortgagee, Matkovie, with the Board of Supervisors of Suffolk County for the purchase of the lands formerly owned by Tolfree. After two proposals were rejected, the Board of Supervisors accepted a third proposal on June 19,1944, whereby Tolfree agreed (1) to make payment of $25,000 in cash, of which $19,459.13 would be paid within ten months if realized from sales, the balance represented by a credit due Tolfree in the sum of $5,540.87, and (2) to execute a quitclaim deed from himself, free of the lien of the mortgage, of a beach area and certain strips of land valued at $28,000 by the Board of Supervisors, which were to he used for park and highway purposes by the county. At the time of the conveyance in 1944, Tolfree still disputed the legality of some of the tax assessments for which the property had been sold.

The trial court dismissed the complaint on the merits holding that the defendant’s time to redeem had expired, and that therefore the conveyance to him was valid. The trial court refused to find, as requested by plaintiff, that defendant Tolfree and mortgagee Matkovic had made offers of purchase to the Board of Supervisors and that the Board of Supervisors had considered the offers, as evidenced by excerpts from the minutes of the proceedings of the Board of Supervisors. The Appellate Division affirmed, finding as a fact, nevertheless, that the offers had been made by the defendant Tolfree and the mortgagee, and that these offers had been considered by the Board of Supervisors, as evidenced by the excerpts from the minutes of the Board of Supervisors.

The appellant contends that the mortgagee was the real party in interest and that the sale to the defendant was a mere subterfuge to allow the mortgagee to redeem below the required statutory amount. In any event, the appellant argues that the Board of Supervisors acted illegally in selling the lands when the mortgagee’s right to redeem had not expired, and that, whether it was a sale or redemption, the conveyance should be vacated, set aside and cancelled as improvident, fraudulent and.illegal as the Board of Supervisors accepted less than the full amoum, of taxes, interest and penalties, and that the defendant, Tolfree, if the land be adjudged to be redeemable, be given a reasonable time to be fixed by the court within which to redeem the lands by paying the difference between the amount heretofore paid and the full amount of taxes required to be paid by the statute for the redemption of the lands or, in the alternative, if it be adjudged that the transaction was in fact an agreement for the resale of lands from the county to the defendant, the fair value of the lands be fixed and determined and that the defendant Tolfree and the members of the Board of Supervisors and the County Treasurer be required to reimburse the county for the difference between the amount actually received for the lands and the true value thereof.

Since the plaintiff did not allege in the complaint that the mortgagee was the real party in interest, nor make the mortgagee a party defendant nor clearly raise at the trial the issue that the mortgagee was the real party in interest rather than the defendant Tolfree, we cannot, on this appeal, consider the plaintiff’s contention that the mortgagee was the real party in interest. However, the theory of the plaintiff that the Board of Supervisors acted illegally in selling the lands while the mortgagee’s right to redeem was outstanding, is supported by a proper construction of the appropriate statutes. The interpretation urged by the defendant supervisors and defendant Tolfree that section 46 of the Suffolk County Tax Act (L. 1920, ch. 311, as amd. by L. 1937, ch. 175, § 2) clothes the supervisors with the discretion to fix the sales price of land subject to redemption, is without foundation in that such an interpretation would permit an owner as well as the mortgagee to redeem for less than the statutory amount.

This court in Connolly v. Jones (299 N. Y. 639, affg. 273 App. Div. 904) indicated that the tax law does not authorize disposition of lands taken for taxes by the Board of Supervisors of Suffolk County until the county’s title is perfected by the expiration of the redemption periods. (Tax Law, § 154.) In the cases cited below (Barzler v. Fischer, 272 App. Div. 665, and Matter of Kessler v. Johnston, 253 App. Div. 411), the redeemer paid the full redemption amount. These cases, therefore, are not applicable to the issue in the present case. In this case, the mortgagee held a $400,000 mortgage on the lands. It would be reasonable for the Board of Supervisors to assume that if a notice to redeem had been served on the mortgagee, he would not have allowed this asset to be taken over by the county for failure to pay the redemption amount. Even if it be true, as defendants assert, that part of the back taxes were void, the mortgagee would be more likely to redeem because he could then protect a valuable asset for the reduced amount of the taxes, penalties and interest. Yet the Board of Supervisors failed to serve a notice to redeem-Therefore, there was an outstanding right of redemption in the. mortgagee which prevented the county from, acquiring title in the lands in fee.

- Since the mortgagee had the right of redemption upon payment of the total arrearage, the conveyance herein was in violation of law, and constituted an illegal act on the part of the Board of Supervisors. The defendant supervisors’ defense that the conveyance was legal under chapter 468 of the Laws of 1933 is not available to them in this case, inasmuch as the defendant supervisors contend that the conveyance herein constituted a sale of the lands by the Suffolk County Board of Supervisors to the defendant Tolfree and not a redemption of the lands.

Chapter 468 of the Laws of 1933 is restricted to redemptions of property sold at tax sale permitting the Board of Supervisors to remit in whole or in part any penalties or interest. Under different circumstances, such as a redemption by the mortgagee, the. Board of Supervisors might be able to demonstrate by adequate proof that the consideration received here authorized them to permit a redemption under the authority of chapter 468 of the Laws of 1933. Such is not the case here, and the acts of the Board of Supervisors were consequently illegal. Even though under section 51 of the General Municipal Law, a taxpayer may bring an action to restrain or set aside an illegal or official act that causes waste or injury (Western N. Y. Water Co. v. City of Buffalo, 242 N. Y. 202), nevertheless the burden of proof is upon the taxpayer to adduce proof of waste and injury to public interest. Chief Judge Hiscock said in Western N. Y. Water Co. v. City of Buffalo (supra, pp. 206-207):

“ We shall assume, without deciding, that it is illegal for the city of Buffalo to deliver water to the Gas Corporation within the city with the knowledge and intention that it will and shall be then conducted by said Gas Corporation to its premises outside the city for use thereon. But the fact that the municipality is thus engaged in effect in selling and delivering water to a corporation outside of the city and that this act may be illegal is not in our opinion enough to enable plaintiff to maintain this action. Under the provisions of the Municipal Law the action may be maintained for the purpose of preventing any illegal act or for preventing waste or injury to any property, funds or estate of the municipality. As we have pointed out, there are no findings which support it upon the latter ground and the plaintiff must rely upon the first ground of illegality.

‘‘ Mere illegality is not enough. The very nature and purpose of a taxpayer’s action like the present one presume that there will be more than illegality in order to enable him to intervene. The basic theory of such an action is that the illegal action is in some way injurious to municipal and public interests and that if permitted tó continué it will in some manner result in increased burdens upon and dangers and disadvantages to the municipality and to the interests represented by it and so to those who are taxpayers.”

The only evidence in the record before this court as to the amount of tax arrears and penalties and interest are statements set forth in the proceedings of the Board of Supervisors by various supervisors to the effect that the tax sale liens totaled “ about $54,000 ” and that the total with interest and penalties amounted to “ between $54,000 and $80,000 ”. Clearly no inference is permissible as to the exact amount of tax arrears from these vague statements contained in the board’s minutes of proceedings. The trial court refused to find that the amount of the tax arrears, interest and penalties would be either greater than $25,000, or greater than $80,000 or approximately $110,000. The trial court further expressly refused to find that the payment by the former owner, the defendant Tolfree herein, was substantially less than the amount that would have been required for redemption if the mortgagee could redeem, and the plaintiff herein took no exception to the trial court’s refusal to so find. The Appellate Division affirmed these refusals of the trial court to so find.

It is clear that Suffolk County received $25,000 in cash and credits, ■ obtained lands of undetermined value for its future needs and avoided litigation, as well as effecting restoration of the land to the tax rolls.

There should be no dispute as to what the assessed taxes and arrearages were, for they are a matter of public record. As far as we can determine, no effort was made to introduce in evidence the assessment books required to be kept by law. (Suffolk County Tax Law, § 41, as added by L. 1929, ch. 152.) These books would have established the amount of the assessed taxes, interest arid penalties.

Equally without support by proof are the statements of the Board of Supervisors that part of the assessed taxes were unlawful and thus uncollectible. There is no evidence offered to confirm these statements other than the repetition of the statements themselves which are of no probative value. The alleged valuation of $28,000 for the beach front property and strips of land for the highways and the parks is likewise unsubstantiated except by a casual reference to an appraisal which does not appear in the record.

Without regard, therefore, for the statements offered in defense of the actions of the defendant supervisors herein, we agree, upon the state of this record, with the determination of the trial court and the Appellate Division, that the plaintiff failed to demonstrate upon the trial herein by competent evidence that the actions of the Board of Supervisors, although illegal, constituted waste and were injurious to the public interests of the taxpayers of Suffolk County.

Accordingly the judgment entered upon the order of the Appellate Division should be affirmed, with costs.

Conway, Ch. J., Desmond, Dye, Fuld, Froessel and Van Voorhis, JJ., concur.

Judgment affirmed.


author: Fuld, J. Desmond, J.

text:
    April Productions, Inc., Respondent, v. G. Schirmer, Inc., Appellant.
    Argued January 6, 1955;
    decided April 14, 1955.

      Arthur F. Driscoll, Edward C. Raftery, Paul D. O’Brien and Milton M. Rosenbloom for appellant.
    I. A contract to pay royalties terminates for want of consideration when the license upon which it is based terminates. Any other contract should be clearly and unequivocally stated. (Herzog v. Heyman, 151 N. Y. 587; Bottlers Seal Co. v. Rainey, 225 N. Y. 369; Pomeroy v. New York Hippodrome Corp., 197 App. Div. 114; Marston v. Swett, 82 N. Y. 526; Tams-Witmark Music Lib. v. New Opera Co., 298 N. Y. 163.) II. Copyright renewal is a new grant. If the owner of the new grant is a different individual from the owner of the copyright for the original term, he takes free and clear of any contracts or licenses that attached to the first term and any contracts made by the owner of the first term. (Fitch v. Shubert, 20 F. Supp. 314; Shapiro, Bernstein & Co. v. Bryan, 27 F. Supp. 11; Southern Music Pub. Co. v. Bibo-Lang, Inc., 10 F. Supp. 975; White-Smith Music Pub. Co. v. Goff, 187 F. 247; Silverman v. Sunrise Pictures Corp., 273 F. 909; Fox Film Corp. v. Knowles, 261 U. S. 326.) III. A license granted under a copyright terminates with the expiration of the copyright term. (Ricordi & Co. v. Paramount Pictures, 189 F. 2d 469; Fisher Co. v. Witmark & Sons, 318 U. S. 643; Rossiter v. Vogel, 134 F. 2d 908; Fitch v. Shubert, 20 F. Supp. 314; Scott Paper Co. v. Marcalus Co., 326 U. S. 249.) IV. The trial court was in error in failing to grant defendant’s motion to send the case to the law side of. the court for jury trial, and after trial the court was obligated to dismiss the complaint. (Jackson v. Strong, 222 N. Y. 149; International Photo Recording Machines v. Microstat Corp., 269 App. Div. 485; Nelson v. Schrank, 273 App. Div. 72; Abrams v. Maryland Cas. Co., 270 App. Div. 901.)

      Lionel S. Popkin, William Klein and Adolph Lund for respondent.
    I. Defendant is obligated to make payments under the agreement of September 14,1917, as long as it publishes and sells the music. (Friedman v. Handelman, 300 N. Y. 188; April

      Productions v. Harms, Inc., 165 Misc. 883, 254 App. Div. 728; Tams-Witmark Music Lib. v. New Opera Co., 298 N. Y. 163.) II. Plaintiff was entitled to an accounting, viz., equitable relief. Moreover, the action was properly brought in equity to avoid multiplicity of actions. In any event, defendant did not claim that the action should have been brought at law, for six years after it was started. Defendant asked for reformation of the contract. Concededly, no question of fact was involved. (Pearl v. Seventh Ave. Film Co., 262 N. Y. 605; De Mille Co. v. Casey, 121 Misc. 78; Satterlee v. Kobbe, 173 N. Y. 91; Atlantic Metal Products v. Minskoff, 267 App. Div. 1002; Small v. Kronstat, 175 Misc. 626; Dobschiner v. Levy, 179 Misc. 416.)
   Fuld, J.

This appeal involves the construction of an agreement for the publication of musical compositions on a royalty basis. The agreement is not expressly limited in time, and the question posed for decision is whether the publisher’s obligation to pay the stipulated royalties is for an indefinite and indefinable period — indeed, in perpetuity — or is related to, and measured by, the period for which the grantor controlled and granted the right to publish and sell copies of the work on which royalties Avere to be computed.

In August of 1917, plaintiff’s assignor, Shubert Theatrical Company, produced an English Aversion of a German musical play, entitled “ Wie Einst Im Mai,” in this country. For the American version, which Avas called' May time,” a complete new musical score was composed by Sigmund Romberg, Avith lyrics by Rida Johnson Young. By several instruments, some of which are set out in the record, Shubert acquired from the authors certain rights in the music. Of those, it turned over publication and so-called mechanical rights to G, Schirmer, Inc., under the agreement upon which plaintiff’s claim is predicated. The agreement, in the form of a letter, dated September 14, 1917, from Shubert to Schirmer, recites that you are to publish the music of the play * Maytime ’ — book and lyrics by Rida Johnson Young, and music by Sigmund Romberg,” on the condition, among others, that “ You * * * pay us as royalty for each and every copy sold on the basis of five (5^) cents per copy, and fifty (50%) per cent, of any and all mechanical instruments * * * wherein the music of the numbers as composed by Sigmund Romberg shall be used; also a royalty of five (5^) cents per copy on each complete orchestral selection sold.”

In accord with prevailing custom that the copyright be taken out by the publisher, and in the publisher’s own name, Schirmer copyrighted the compositions and continued to publish and pay the royalties until 1945, when the original twenty-eight-year term of copyright expired. It should be noted here that the 1917 agreement, silent as to the period for which Schirmer was authorized to publish, and for which it was obligated to pay royalties, made no express grant of any right to publish after the expiration of that initial term. (Cf. Fisher Co. v. Witmark & Sons, 318 U. S. 643; Ricordi & Co. v. Paramount Pictures, 189 F. 2d 469, 471; Rossiter v. Vogel, 134 F. 2d 908; Fitch v. Shubert, 20 F. Supp. 314.)

Copyrights for the renewal term were secured by the composer Romberg and the lyricist Rida Johnson Young, or, more precisely— since she had died — her executor. No application for the renewal was made by either Shubert or Schirmer. The latter could not possibly have made such an application. The only persons possessing a right to obtain a renewal under the Copyright Act were the authors, if living, or, if they were dead, their designated statutory successors, unless there was an employment for hire, in which case the employer alone would have had the right to renew (U. S. Code, tit. 17, § 24). As for Shubert, whether or not it could have applied for the copyrights for the renewal term, the simple fact is, it made no attempt to do so. In truth, Shubert disclaimed, even at the trial, any interest or concern in the copyrights or copyright ownership, and has at no time challenged or disputed the copyrights that the authors secured for themselves for the renewal term.

That being so, Schirmer entered into new agreements for the renewal term directly with the authors under which it obtained the essential license to continue to publish the music in return for a royalty of 6 cents a copy. Coincidentally, in 1945, Schirmer ceased paying the 5-cent Shubert royalty, and, two'years later, plaintiff, as assignee, brought this suit for an accounting of royalties.

Although there is no claim that the agreement here involved conferred any right to publish the music after 1945, it is plaintiff’s contention that Schirmer must continue to pay the royalties specified therein as long as it publishes and sells the music. In brief, it is plaintiff’s thesis that the agreement required Schirmer to pay royalties to Shubert without regard to copyright or copyright term.

The trial court sustained plaintiff’s construction and rendered a money judgment for all royalties accrued since 1945. The Appellate Division, two justices dissenting, affirmed. Concluding that the obligation to pay royalties for publication and recording of the works was in no way related to Shubert’s ownership of those rights, that court held that Shubert discharged, for all time, whatever obligations it was under when it gave Schirmer the “ initial opportunity ” of publication in 1917 and that “ what incidental arrangements ” Schirmer was thereafter “ obliged to effect to continue * * * publication ” of the music were “ immaterial ”.

The effect of this decision is that Schirmer must pay, not only royalties of 6 cents a copy to the owners of the renewal copyright for the privilege of publishing the works for the twenty-eight-year period commencing in 1945, but a royalty of 5 cents to plaintiff for the same privilege, even though the right of plaintiff, or its assignor, to control publication of the works expired in 1945. Moreover, even after the copyright finally expires in 1973 — when the whole world will be able to publish without hindrance and royalty free — Schirmer must, if the decision below stands, continue to pay the 5-cent royalty to plaintiff. We cannot agree that such a construction of the contract accords with the intent of the parties.

A careful reading of the contract itself clearly reveals the parties’ intention to require royalty payments only so long as Shubert secured to Schirmer the right to pubhsh the music. The agreement, sparse in statement, simply provides that you [Schirmer] are to publish the music ” and that you are to pay us as royalty [5 cents per copy] for each, and every copy sold.” There is, as already indicated, no express statement of the period for which Schirmer was to publish or for which it was to pay royalties. Yet the authorization to “ publish ” was necessarily confined to the term of the underlying copyrights, for that is all that Shubert had the power to grant. (See, e.g., Fitch v. Shubert, supra, 20 F. Supp. 314, 315-316.) And it follows, we believe it plain, that the duty to pay royalties on copies “ sold ” was intended to be of like duration. The words “ publish ” and “ sold,” appearing in such close juxtaposition, must have been used by the parties as parallel and congruent terms. Consequently, only when the copies “ sold ” were published pursuant to the authority conferred by the agreement, were royalties to be computed upon such sales and paid.

In our view, therefore, there can be no doubt of the parties’ design that payments were to be made solely in proportion to the benefits derived by Schirmer from the exercise of the rights granted by the agreement. In this connection, it is of surpassing significance .that the consideration reserved to Shubert — “as royalty” — was geared exclusively to the publication of the subject works. For, absent specific contractual provision, it is well settled that, where the consideration for an agreement to publish musical compositions is payment of royalties — as opposed to payment of a lump sum or of installments not related to the usufruct of the copyright, i.e., the reproduction of the work — the grantee or licensee must be given the right to use the license in order to be under an obligation to pay the royalty. (See Bottlers Seal Co. v. Rainey, 225 N. Y. 369, 372-373; Herzog v. Heyman, 151 N. Y. 587, 590-591; Marston v. Swett, 82 N. Y. 526, 529; Pomeroy v. New York Hippodrome Corp., 197 App. Div. 114; cf. Tams-Witmark Music Lib. v. New Opera Co., 298 N. Y. 163.) The period for which the grantee enjoys the right to produce under the license must necessarily measure the duration of his obligation to pay the prescribed royalty to the grantor. ‘ ‘ In legal contemplation,” this court wrote in the Bottlers Seal Co. case (supra, 225 N. Y. 369, 373), “ the enjoyment of the undisturbed use of the patent, not the mere execution of the grant, is the consideration for the royalties. The debt is not contracted until the consideration is furnished. (Garrison v. Howe, supra [17 N. Y. 458]; Whitney Arms Co. v. Barlow, 68 N. Y. 34; Gold v. Clyne, 134 N. Y. 262.) If the right to make, use and sell the patent terminates meanwhile; if the licensor does not respect the right; if it had no right to transfer; then the duty to pay royalties ceases; the time for payment never arrives and the debt is not contracted.”

Our reading of the contract in suit — as imposing no obligation to pay royalties after the expiration of the underlying-copyrights— is reinforced by an established rule of construction applied in the analogous field of patent royalty agreements. (See E. R. Squibb & Sons v. Chemical Foundation, 93 F. 2d 475, 477; Tate v. Lewis, 127 F. Supp. 105; Dwight & Lloyd S. Co. v. American Ore Reclamation Co., 44 F. Supp. 396.) There is a presumption that royalties are not to be paid after the expiration of a patent; if the intention is to have them continue longer, the parties should phrase their contract in language from which such intention may fairly be inferred.” (E. R. Squibb & Sons v. Chemical Foundation, supra, 93 F. 2d 475, 477.) In point of fact, an agreement to pay royalties on the manufacture of a patented article “ after the patent expires, whatever the legal device employed,” may be unenforcible as contrary to public policy. (Scott Paper Co. v. Marcalus Co., 326 U. S. 249, 256.) For our purposes, the same rules should apply to royalty agreements involving copyrighted literary property, inasmuch as both forms of property — patent and copyright — may be enjoyed for only a limited period of time under the United States Constitution (art. I, § 8, cl. 8).

It is urged, however, that the cases cited are inappropriate, first, because the contract nowhere uses the term “ copyright ” and, second, because Shubert did not copyright the songs before turning them over to Schirmer for publication. Such an argument ignores the realities of the arrangement made between parties well versed in the intricacies of music publishing.

In the first place, Shubert’s contract with the owner of the original German play, one Hans Bartsch — executed in February of 1917 and from which Shubert’s rights in the play stemmed — spoke in terms of copyright. Not only did it stipulate for the renewal of the contract from season to season “ during the term of copyright of the American version,” but it specified that Bartsch would consent to the introduction of interpolated music in the play on condition that Shubert procured for him an agreement from the publisher — who proved to be Schirmer — providing that Bartsch, upon the contract’s expiration, was to have ‘/he exclusive right to use any such interpolated music in the performance of the play ‘ during the life of the copyright ”. In the light of such language in the underlying agreement between Shubert and Bartsch, the conclusion is unavoidable that Shubert, when but a few months later it made arrangements with Schirmer, was definitely copyright-conscious.

And, in the second place, turning to the contract before us, that between Shubert and Schirmer, it is clear that Schirmer agreed to pay royalties for the privilege of exercising rights existing solely by virtue of section 1 of the Copyright Act, namely, rights to publish and record the works (U. S. Code, tit. 17, § 1, subds. [a], [e]). But for these exclusive rights conferred by the federal statute, Shubert would have had nothing of value to sell or convey. (See Holmes v. Hurst, 174 U. S. 82, 86; Atlas Mfg. Co. v. Street & Smith, 204 F. 398, 402, appeal dismissed 231 U. S. 348, certiorari denied 231 U. S. 755; Krafft v. Cohen, 117 F. 2d 579, 580; American Code Co. v. Bensinger, 282 F. 829, 833.) Indeed, copyright has been described most aptly as ‘‘ the only practical method of uniting publication with profit.” (Silverman v. Sunrise Pictures Corp., 273 F. 909, 910, same case, 290 F. 804, certiorari denied 262 U. S. 758.)

Hence, although the present contract does not mention copyrights or, in so many words, grant a license under pre-existing copyrights, it was necessarily made in contemplation of Schirmer’s securing copyrights either in Shubert’s name or in its own name. As both parties well knew, since no property rights in literary or musical works survive an authorized publication without due compliance with copyright formalities (see Holmes v. Hurst, supra, 174 U. S. 82; National Comics Publications v. Fawcett Publications, 191 F. 2d 594, 598; Krafft v. Cohen, supra, 117 F. 2d 579; American Code Co. v. Bensinger, supra, 282 F. 829, 833), Schirmer’s publication of the music without first copyrighting it would have caused it to fall into the public domain, destroying, not only the rights granted to Schirmer, but also those reserved to Shubert. (See American Code Co. v. Bensinger, supra, 282 F. 829, 833; Tams-Witmark Music Lib. v. New Opera Co., supra, 298 N. Y. 163.) Copyrighting by Schirmer was, therefore — contrary to the basic premise of the dissenting opinion (pp. 381-382) — a necessarily implied covenant of the agreement, and the publisher was under a duty to take whatever steps were necessary to safeguard the rights which were the subject of the bargain.

Schirmer did, as we have seen, copyright the compositions and, in line with established trade practice, in its own name. It is to be borne in mind that Schirmer could not legally have done this in the absence of authority, express or implied, from Shubert; no one is entitled to obtain a copyright unless he himself is the author, or is — as Shubert was — the assignee of the author. (See, e.g., Mifflin v. R. H. White Co., 190 U. S. 260; Houghton Mifflin Co. v. Stackpole Sons, 104 F. 2d 306, certiorari denied 308 U. S. 597; Borden v. General Motors Corp., 28 F. Supp. 330, 334.) And, after obtaining the copyrights in this case, Schirmer held them in trust for Shubert to the extent that the latter reserved all rights except publication and mechanical rights, that is, the rights on which royalties were to be paid. (See Bisel v. Ladner, 1 F. 2d 436; Ford v. Blaney Amusement Co., 148 F. 642; Quinn-Brown Pub. Corp. v. Chilton Co., 15 F. Supp. 213, 214.)

It is thus impossible to treat this contract as one which does not involve a grant or license of rights in copyrighted musical compositions, and, accordingly, the rules of construction applicable to such contracts are pertinent here. The agreement may not, therefore, in the absence of express language, not here present, be construed to require payment of royalties after the expiration of the underlying copyrights. (See E. R. Squibb & Sons v. Chemical Foundation, supra, 93 F. 2d 475, 477.)

Any other construction would, moreover, defeat the undoubted intention of the parties. Certainly, these experienced firms could not have contemplated continuation of royalty payments after the rights granted to Schirmer had expired and the exclusive right to publish the music had vested in a third party. To accept plaintiff’s position, we would have to ascribe to the parties an- intent, not only that Schirmer be required to pay multiple royalties during the renewal term — an intention not to be inferred (see Marston v. Swett, supra, 82 N. Y. 526, 533) —but also that Shubert be entitled to exact royalties after the copyrights had actually expired and the works had entered the public domain. In our view, such an interpretation would be indefensible. “ The thought behind the phrase proclaims itself misread when the outcome of the reading is injustice or absurdity.” (Surace v. Danna, 248 N. Y. 18, 21.)

For reasons which must now appear evident, it may not be said —'as it was in the court below — that Shubert was entitled to collect royalties in perpetuity merely because it executed a document in 1917 giving Schirmer the initial privilege of publicaron at that time. Obviously, it was not merely the “ designation ” of Schirmer as publisher, but the grant of a right ,to undisturbed enjoyment of the privileges conveyed, that constituted the consideration for the payment of royalties. (See Bottlers Seal Co. v. Rainey, supra, 225 N. Y. 369.) Nor may it be said that the arrangements that Schirmer was compelled to make with the authors to be permitted to continue publication for the renewal term were merely “ incidental ” and, therefore, “immaterial.” Those agreements were just as basic and necessary in acquiring rights for the post-1945 period as was the agreement with Shubert for the original term. In fact, Shubert conceded, by its acquiescence in the authors’ claim to the right of copyright renewal, that in 1917 it had nothing to give Schirmer beyond the initial twenty-eight-year period. Schirmer had no basis whatever for reliance on the title of its grantor after 1945, inasmuch as the latter disclaimed any interest in control or ownership of the copyrights, and did not even register a claim to the renewal term.

We would add a further word concerning the suggestion that Shubert might have owned these rights for the second term of twenty-eight years, either as employer for hire or otherwise.

The legal effect of assignments from the authors, Bomberg and Young, to Shubert did not, so far as the record before us reveals, give the latter the right to the copyrights for the renewal term upon the expiration of the initial term. The right of renewal afforded the authors of a copyrighted work is in reality a new grant or estate, not arising out of the original copyright (see Silverman v. Sunrise Pictures Corp., supra, 273 F. 909, 911; Fitch v. Shubert, supra, 20 F. Supp. 314, 315), and, absent proof, completely lacking here, that Shubert had obtained from either the composer or the lyric writer any rights beyond the original term, that is the period for which the rights were conveyed. (See Fisher Co. v. Witmark & Sons, supra, 318 U. S. 643; Ricordi & Co. v. Paramount Pictures, supra, 189 F. 2d 469; Rossiter v. Vogel, supra, 134 F. 2d 908.) If there could have been any doubt that the term was so limited in this case, it was laid to rest by Shubert’s action, or, rather, inaction, in 1945. Its conduct was patently inconsistent with any claim that it possessed rights following that first copyright term. If Shubert had any right to renew as employer for hire, it would have had to obtain the renewals in its own name. (See Tobani v. Carl Fischer, Inc., 98 F. 2d 57.) As already appears, Shubert did not, by word or action, even intimate that it had any right in or to the copyrights for such a period.

Nor would plaintiff be helped, or its position improved, by supposing that the present copyright owners, Eomberg and the Young estate, lacked power to secure the copyright renewals, on the ground that the true author was Shubert as employer for hire. Such a hypothesis could lead only to the conclusion that no valid copyrights existed and that the work had fallen into the public domain, deprived of all protection. (See Tobani v. Carl Fischer, Inc., supra, 98 F. 2d 57.) Certainly, no court in a case such as this would or should declare a forfeiture of the rights of those who, as authors, obtained the renewal copyrights. And, beyond that, if such a forfeiture were to be adjudged, with the consequent termination of copyright protection, the result would be, as already demonstrated, that Schirmer’s duty to pay royalties would likewise terminate.

In sum, then, Schirmer’s obligation to pay royalties under the 1917 agreement was measured by the duration of the rights thereby conferred. That obligation, accordingly, came to an end in 1945. To the soft impeachment — that by so holding we are “ construing ” this contract “ to make [it] mean ” what we believe it “ should have said in the first place ” (opinion of Desmond, J., p. 378) — we cannot resist observing, what, perhaps, has been overlooked, that there “is no more likely way to misapprehend the meaning of language — be it in a constitution, a statute, a will or a contract — than to read the words literally, forgetting the object which the document as a whole is meant to secure.” (Central Hanover B. & T. Co. v. Commissioner of Int. Rev., 159 F. 2d 167, 169, per Learned Hand, J.)

The judgment should be reversed and the complaint dismissed, with costs in all courts.

Desmond, J.

(dissenting). Probably every court in the land is tempted, occasionally, to “ construe ” contracts so as to make them mean what the courts think they should have said in the first place. But the old, safe rule is that we judges must ‘ ‘ concern ourselves with what the parties intended, but only to the extent that they evidenced what they intended by what they wrote ” (Raleigh Associates v. Henry, 302 N. Y. 467, 473). The suit we are now deciding is brought to enforce a plain, simple, home-drawn agreement between two highly experienced business concerns. An attempt by us to write new terms into it is unwarranted and gratuitous. “We may not now imply a condition which the parties chose not to insert in their contract ” (Raner v. Goldberg, 244 N. Y. 438, 442; see Rehill v. Rehill, 306 N. Y. 126, 133; Nichols v. Nichols, 306 N. Y. 490, 496).

On August 15,1917, Shubert Theatrical Company, assignor of plaintiff, produced on a New York City stage for the first time an operetta or musical play called “ Maytime ”. Shubert was unquestionably the sole owner of the whole of that production. “ Maytime ” was an adaptation into English, accomplished by translating the book of a German musical play, and interpolating entirely new songs. Shubert had bought, from the German owner, the American and Canadian rights and had procured and paid for the translation of the libretto, and for the writing of the lyrics and music of the new songs. About a month after the Broadway opening of “ Maytime ”, Shubert and this defendant entered into a written contract in the form of a letter from Shubert to this defendant, a large music publishing house, as follows:

“New York City, Sept. 14, 1917.
Gr. Sehirmer, Inc.
New York City.
Attention Mr. Gr. Sehirmer, Secretary
Gentlemen:
Confirming our conversation of recent date it is understood that you are to publish the music of the play ‘ Maytime ’ — book and lyrics by Rida Johnson Young, and music by Sigmund Romberg, under the following conditions:
You are to pay us as royalty for each and every copy sold on the basis of live (5i) cents per copy, and fifty (50%) per cent, of any and all mechanical instruments of whatsoever name or nature, including any inventions that may be made from time to time, wherein the music of the numbers as composed by Sigmund Romberg shall be used; also a royalty of five (5(8) cents per copy on each complete orchestral selection sold. All payments to be made quarterly.
You are also to pay the International Play Bureau an additional two (2(8) cents on each copy of music sold, but you shall make your contract with Mr. Bartsch of the International Play Bureau separately. The contract shall be collateral; that is to say, both contracts are to be treated so that seven (7(8) cents shall be paid for each copy of music sold.
It is also understood that all emoluments of whatsoever name or nature received by you from any person, music hall, cabaret, or theatre wherein the music of Maytime is used, shall inure to our benefit and paid to us, and you shall give no one any consent of whatsoever name or nature to use same without first having our permission in writing.
If this confirms your understanding your signature at the bottom hereof wiM constitute this a valid agreement between us.
You are to pay for all orchestrations made for the numbers which you publish, and deduct same from the accrued royalties.
Very truly yours,
Shubert Theatrical Co. by (sgd.) J. J. Shubert
We hereby accept the above:
G. Schirmer, Inc.
by Gustave Schirmer
Secretary ”

Although that letter contract is dated September 14, 1917, it is conceded that it embodied the terms, and all the terms, of earlier oral arrangements made between the parties before the play opened. The day after the play opened, defendant published and put on sale eight of the songs. At the same time, defendant, in its own name, took out statutory copyrights on those same songs. It is undisputed that there was a custom in the musical world that when a music publisher bargained for and obtained the right to publish music like this, the music publisher was privileged to copyright the music in his own name. But there is not a word in the contract about a copyright and no copyright had been taken out or discussed or arranged for at the time the oral agreement was made. There is no evidence that Shubert promised or intended to have anything to do with a statutory copyright for the songs. There is nothing in the record to justify any claim or conclusion that the rights of the parties under the agreement were to be subject to copyright or copyright laws, or to the existence or continuation or renewal of a statutory copyright. So far as this record shows, the parties meant just what they said in the letter above quoted, that is, that Shubert gave defendant the right to publish the songs and defendant, in return for that present and complete grant, agreed that it would pay to Shubert fixed amounts for every copy thereafter sold. No specific time of duration was expressed in the agreement but none was needed, since defendant would be bound to continue to pay so long as it should continue to publish. Any contention based on the absence of a fixed termination date is rendered academic by the fact that defendant continued, and continues to this day, to publish this music (Cammack v. Slattery & Bro., 241 N. Y. 39, 45).

When the originalpíatutory copyright term expired in 1945, the music was still being sold by defendant, but defendant refused to make any more payments to Shubert (or plaintiff). Instead, when payment was demanded of it, defendant called plaintiff’s attention to the fact that, shortly before the expiration in 1945 of the ¡original twenty-eight-year copyright term, Sigmund Bombergl, who had written the music for the new songs while a paid employee of Shubert, and the estate of Mrs. Bida Johnson Young, who had written the lyrics under some sort of employment with Shubert, had taken it upon themselves to renew the copyrights originally taken out by defendant. Bomberg and the Young estate^had accomplished these copyright renewals without notice to, or knowledge or consent by, Shubert or plaintiff. Such a unilateral act by a third party could not, under any theory we have ever heard of, put an end to the obligations of defendant under the contract here in suit. We emphasize, again, that Shubert and/or plaintiff had nothing whatever to do with the taking out of the original copyright or the purported renewals. Shubert, by the 1917 letter, had made a present transfer of a part of his unquestioned rights in the play, and, in consideration for that transfer, defendant agreed that whenever it should publish any of the songs, it would pay Shubert a fixed sum per copy. Since those renewals, or purported renewals, of the copyrights had no effect in this situation except possibly to suggest to defendant a line of defense, we will not discuss their validity (see Tobani v. Carl Fischer, Inc., 98 F. 2d 57; Shapiro, Bernstein & Co. v. Bryan, 27 F. Supp. 11; U. S. Code, tit. 17, § 24).

Defendant resists payment on this sole ground: it insists that there must, be read into the letter contract of 1917 (supra) an implied term that defendant’s obligation to pay was to continue only until the end, in 1945, of the original copyright' term of twenty-eight years. A short answer would seem to suffice. Since there is nothing illegal or even unfair about a publisher agreeing to pay fees to the owner of a work so long as the publisher shall continue to publish the work, and since there is not a word in this record to the effect that anybody said or suggested or had in mind that defendant’s obligations would cease in 1945, we would be rewriting the contract to put in anything like that. However, defendant calls to its aid an elaborate argument from copyright law. Defendant, to excuse itself from further performance of its promise, attempts to apply an inapplicable line of decisions, all to the general effect that, when the holder of a copyright or a patent issues a license thereunder, the obligation of the licensee to pay royalties ends when the copyright or patent for any reason ends (Tams-Witmark Music Lib. v. New Opera Co., 298 N. Y. 163; Ricordi & Co. v. Paramount Pictures, 189 F. 2d 469). But Shubert did not issue a license under a copyright. He had not copyrighted the songs, had no intention of copyrighting them, and, as he testified without dispute, was not in any way concerned with the copyrights or renewals. Shubert’s bargain with defendant was that defendant could publish the music for a price. Defendant’s copyrighting of the music was, apparently, pursuant to a custom of the trade, although not by any express permission, but, in any event, it was defendant’s own act for its own benefit. Shubert never agreed to take out a copyright or to protect, continue or renew the copyright, and defendant never asked Shubert to do any of those things. The whole course of conduct showed that Schirmer got what it bargained for, that is, the right to produce the music, and that Shubert had no remaining obligation. What defendant really wants us to hold is that, when the owner of an uncopyrighted work sells to another the right to publish it, the obligation of the grantee, if he himself afterwards takes out a copyright, is measured, as to duration, by the copyright term. That would be equivalent to saying that if defendant had taken on an obligation unlimited in time, he could, by his own act, cut down his own obligation by taking out a copyright.

The practical explanation of this situation is that, when this show opened in 1917, no one knew or had any reason to believe that its songs would become minor classics and still be sold in 1945 and 1950. This was “ show business ”, and the parties were practical showmen and publishers, dealing with the probabilities as of then. What they meant, like what they said, relates to 1917 and cannot be changed by the fortunate circumstance that the Maytime ” music is still being sung, or the unfortunate (for defendant) fact that defendant is subject to two separate demands for royalties.

Defendant, as a minor point, argues that there was error in the denial of its motion to transfer the cause from the ‘ Special Term calendar ” to the " Contract Trial Calendar ”. In other words, defendant says that the cause should have been tried as one at law rather than as one in equity. The complaint demanded various forms of purely equitable relief, although no such relief was pressed for or granted at the trial, the judgment being a simple one for money damages only. However, we find it unnecessary to decide whether defendant would have been entitled, under other circumstances, to have this money demand tried " at law ”. The suit had been on the equity trial calendar for about six years when defendant first moved to transfer it therefrom. At no time, so far as this record shows, did defendant demand a jury trial. We think that no error was committed in denying the transfer motion (see Civ. Prac. Act, § 8).

The judgment should be affirmed, with costs.

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

Judgment reversed, etc.

      . Under the United States Code, in 1945 as well as in 1917 and today, the original term of copyright is twenty-eight years. An additional term of twenty-eight years may be obtained by application made by the author, if then living, or by his widow, widower or children; if there be none, then by the author’s executor or, if he died intestate, by his next of kin. And, the statute continued, in the case of a work copyrighted “ by an employer for whom such work is made for hire, the proprietor of such copyright ” is entitled to the renewal (U. S. Code, tit. 17, § 23, renumbered § 24 in 1947).


author: Van Yoorhis, J. Desmond, J.

text:
    In the Matter of Semple School for Girls, Appellant, against William E. Boyland et al., Constituting the Tax Commission of the City of New York, Respondents. [351 Riverside Drive, Borough of Manhattan.]
    Argued January 12, 1955;
    decided April 14, 1955.

      Francis Finkelhor and Edward W. Simms for appellant.
    L The court’s ruling that petitioner’s testimony as to the value of the school building cannot be given any weight because it failed to show that its real estate expert was qualified to express an opinion about its value is erroneous. (People ex rel. Semple Realty Corp. v. Mills, 277 App. Div. 751; Sparkill Realty Corp. v. State of New York, 254 App. Div. 78, 279 N. Y. 656; Heiman v. Bishop, 272 N. Y. 83; People ex rel. Amalgamated Properties
      v. Sutton, 274 N. Y. 309; Matter of New York Tit. & Mtge. Co., 277 N. Y. 66; Matter of Board of Water Supply of City of N. Y., 277 N. Y. 452; National Cellulose Corp. v. State of New York, 292 N. Y. 438; Matter of City of New York [Blackwell’s Is. Bridge], 198 N. Y. 84; McGraw v. Mayor & City Council of City of Baltimore, 131 Md. 430.) II. The facts that petitioner’s predecessor lost money, that its board of trustees consisted of her family and the attorney for the corporation, and that she was the sole stockholder of the selling corporation, do not prima facie establish that petitioner was organized as a pretense or guise for it or her to make a profit. (People ex rel. Doctors Hosp. v. Sexton, 267 App. Div. 736, 295 N. Y. 553; People ex rel. Manlius School v. Adams, 143 Misc. 459, 232 App. Div. 869, 257 N. Y. 549; Borough of Princeton v. State Bd. of Taxes & Assessments, 96 N. J. L. 334; Matter of Mary Immaculate School [Bd. of Assessors, Town of Ossining], 188 App. Div. 5; Bush Term. Co. v. City of New York, 282 N. Y. 306.) III. Petitioner was organized and is being conducted in good faith as an educational institution. (Association for Benefit of Colored Orphans v. Mayor of City of N. Y., 104 N. Y. 581; Saint Barbara’s R. C. Church v. City of New York, 243 App. Div. 371; Matter of Syracuse Univ., 214 App. Div. 375; Croton Community Nursery School v. Coulter, 283 App. Div. 716.)

      Morris Handel for respondents.
    I. The trial court’s finding of fact, unanimously affirmed by the Appellate Division, that petitioner’s valuation witness lacked the qualifications of an expert resulting in petitioner’s failure to prove an essential part of its ease, is supported by legally sufficient evidence. Consequently, no question reviewable by this court is presented. (Slocovich v. Orient Mut. Ins. Co., 108 N. Y. 56; Jenks v. Thompson, 179 N. Y. 20.) II. Tax exemption is properly denied where the applicant fails to prove by a preponderance of the credible evidence that its officers are not entitled to receive any pecuniary profit from its operations, particularly where the financial setup indicates absence of good faith and violation of other provisions of the exemption statute. (People ex rel. Rye Country Day School v. Schmidt, 266 N. Y. 196; Lawrence-Smith School v. City of New York, 166 Misc. 856, 255 App. Div. 762, 280 N. Y. 805; People ex rel. Semple Realty Corp. v. Mills, 277 App. Div. 751; People ex rel. Manhattan Sq. Beresford v. Sexton, 284 N. Y. 145; People ex rel. Manlius School v. Adams, 143 Misc. 459, 232 App. Div. 869, 257 N. Y. 549; Borough of Princeton v. State Bd. of Taxes & Assessments, 96 N. J. L. 334; Kimberley School v. Town of Montclair, 137 N. J. L. 402; Town of Montclair v. State Bd. of Equalization of Taxes, 86 N. J. L. 497, 88 N. J. L. 374.)
   Van Yoorhis, J.

This appeal concerns exemption from taxation of real property under subdivision 6 of section 4 of the Tax Law, upon the ground that it is used exclusively for educational purposes.

During fifty-two years prior to October, 1950, Rosa Gunter Semple owned and conducted a girls’ private secondary school in the city of New York. In 1930 she moved the school to a large stone mansion at 351 Riverside Drive, which is the subject of this proceeding, that had been purchased for the purpose for $200,000 by Semple Realty Corporation. That corporation was wholly owned by Mrs. Semple. In 1950, appellant, the Semple School For Girls, was incorporated as a nonprofit, nonstock educational institution to which a provisional charter was granted by the Board of Regents. There was then outstanding against this real property a first mortgage of $39,204, in addition to which Semple Realty Corp. owed to Mrs. Semple $157,051.36. It then transferred 351 Riverside Drive to appellant subject to the mortgage. In consideration of this transfer, appellant gave its unsecured fifteen-year bond for $111,746, which was assigned to Mrs. Semple to apply upon the indebtedness to her of Semple Realty Corp. She received another unsecured bond of $16,784.50, also due in 1965, in payment for the furnishings and other personal property transferred to the school. Neither of .these bonds contained acceleration clauses, nor was annual interest payable upon them unless the school operated at a profit, and not even in that event unless its trustees should decide that the profit was not needed for the purposes of the school. It thus appears that these obligations could not be enforced until 1965, whether interest upon them was paid or not, and that meanwhile interest was payable if, and only if, the trustees voted to pay it out of annual profits earned in the operation of the school.

The Appellate Division has affirmed the order of Special Term denying exemption from taxation. Under the facts of this case, we think that this determination was correct.

In order to qualify for exemption, it is necessary for appellant to establish that this real property is “ used exclusively ” for educational purposes, which cannot be true “ if any officer, member or employee ” of the school “ shall receive or may be lawfully entitled to receive any pecuniary profit from the operations thereof, except reasonable compensation for services in effecting ” such purposes, or “if the organization thereof for any such avowed purposes be a guise or pretense for directly or indirectly making any other pecuniary profit for such corporation or association, or for any of its members or employees, or if it be not in good faith organized or conducted exclusively ” for educational purposes (Tax Law, § 4, subd. 6).

Appellant is organized exclusively for educational purposes, and the real property at 351 Riverside Drive is used exclusively for carrying out such purposes except insofar as Rosa Semple “ may be lawfully entitled to receive any pecuniary profit from the operation The circumstance that the venture is being operated at a loss does not signify that she is not lawfully entitled to receive pecuniary profit that may be earned. Exemption from the general property tax is not conditioned upon whether an enterprise is profitable. It depends upon whether one would reasonably expect that if a profit were made it would inure to the benefit, among other aspects, of any “ officer, member or employee ” of the educational corporation. Mrs. Semple is the president and chairman of the board of trustees of this school.

Special Term considered that whether Mrs. Semple may be entitled to receive pecuniary profit from the operation of the school depends upon whether the real property is worth less than the consideration appellant paid for it, and held that appellant had not proved that the property was worth as much as the purchase price. In a memorandum decision, the Appellate Division stated that “ Aside from the finding of Special Term with respect to the value of the property, the petitioner has not made a showing to satisfy the requirements of the statute.’ ’

We base our decision upon all of the particular facts and circumstances of the case.

It is hardly necessary to state that appellant is not to be deprived of exemption for the reason that it is a private school. It is likewise true that exemption may not be denied for the reason that the pupils pay for the education which they receive (People ex rel. Doctors Hosp. v. Sexton, 267 App. Div. 736, affd. 295 N. Y. 553). Provided only that it meets the educational standards required by the Board of Regents, which is conceded, any appraisal by the Tax Commission of its usefulness to the City of New York would be irrelevant. The decision depends entirely upon whether the burden has been sustained of proving that any profit from the school would not redound to the benefit of Mrs. Semple. The date as of which exemption is to be determined is, of course, the tax status date (Matter of Mary Immaculate School, 188 App. Div. 5). Nevertheless, whether Mrs. Semple held a proprietary interest in the school at that time is affected, under the facts of this case, by whether it was then reasonable to believe that its indebtedness to her would be satisfied from its capital assets irrespective of the success of its operations. If, under the guise of a bondholder, she was really the owner of a proprietary interest in the school, exemption should be disallowed.

As has been stated, Mrs. Semple held bonds of the school in the amounts of $111,746 and $16,784.50. A memorandum submitted to the Board of Regents states that the school had personal assets approximating the latter amount, although it is not evidence of value. Appellant attempted to prove that this real property, which was the only other asset of -the school, was worth $167,933.44 and that, after deducting $39,204, being the unpaid balance secured by the outstanding mortgage, a net value of $128,729.44 remains, which would be $16,983.44 in excess of the $111,746 bond held by Mrs. Semple, that had been given by the school to purchase this real property. The trial court held, however, that the only expert witness called by appellant was not qualified to testify concerning construction costs or depreciation. This witness was a real estate broker but not a builder or an architect. He would have been competent to have testified to market value based on sales or economic return from similar properties, but was not asked to do so. His appraisal of the building was based entirely upon reproduction cost less depreciation, sometimes known as ‘ ‘ sound value ’ ’. Such a method of building valuation has been held to be appropriate in case of specialties ”, that is to say, structures designed for unique purposes (People ex rel. New York Stock Exch. Bldg. Co. v. Cantor, 221 App. Div. 193, affd. 248 N. Y. 533; People ex rel. Hotel Astor v. Sexton, 159 Misc. 280, affd. 256 App. Div. 912, motion for leave to appeal denied 280 N. Y. 853; People ex rel. Hotel Paramount Corp. v. Chambers, 298 N. Y. 372, 375). These decisions hold that, even in such instances, the full structural value of the building (less depreciation) may only be added to the value of the land where the structural improvements are suitable to the site. The present building is not a specialty; it is a large stone mansion on Riverside Drive, obsolete for its intended use as a single-family residence, but utilized for a school. Except in the case of specialties, reproduction cost less depreciation is accepted only as establishing maximum value (People ex rel. Manhattan Sq. Beresford v. Sexton, 284 N. Y. 145). In the instant proceeding, regardless of the correct measure of value, the witness who testified upon this point was not qualified to testify to reproduction cost or depreciation. His opinion was correctly held to lack probative force upon this aspect. He could have testified concerning sales ” value or economic ” value of land and building, but appellant chose not to elicit his views in those respects concerning the building. Consequently the record is barren of evidence of the value of this real property as a whole, except that the total assessed valuation was $145,000. That might be regarded as some evidence of value (Heiman v. Bishop, 272 N. Y. 83), although for this purpose we cannot separate the land and building values comprising the assessment (Tax Law, § 21, subd. 3; People ex rel. MacKay v. McGregor, 271 App. Div. 798).

Under different circumstances, the deficiency of $5,950, being the total assessed valuation less the outstanding mortgage and Mrs. Semple’s bond, might not be significant. This educational corporation, however, never had an endowment; its grantor, Semple Realty Corp., made no donation, nor has any other person made any contribution to appellant; Semple Realty Corp. was evidently insolvent and even though Mrs. Semple voluntarily accepted a bond which was $45,305.36 less than the indebtedness to her from Semple Realty Corp., nevertheless appellant obligated itself for more than the record shows the real estate to have been worth. The entire purchase price was paid by the issuance of a bond for $111,746. If this had been an ordinary business transaction, Mrs. Semple’s bond would at least have been likely to have been secured by a purchase-money mortgage. Not only did this bond represent merely the debenture obligation of this educational corporation, as did also the $16,784.50 bond given to buy the personal property, but also, as has been previously noted, neither of these bonds could be enforced until 1965, and meanwhile neither bond carried interest, except as interest might be declared annually by resolution of the board of trustees (of which Mrs. Semple was chairman), and only then if it were payable out of annually earned profits of the corporation. Both bonds contain clauses providing that interest shall be payable only if the net earnings of the school for any twelve-month fiscal period shall exceed expenses, and only if the trustees ‘ ‘ in their uncontrolled discretion shall determine that the funds necessary to pay such interest are not needed for the purposes of the school. Mrs. Semple expressly waived the payment of interest unless it were earned, and even if earned unless the board of trustees declared it to be payable. There is no acceleration clause maturing either bond in event of nonpayment of interest; these bonds represent no fixed liability of the corporation payable before the expiration of fifteen years, nor do they operate as liens upon any real or personal property.

No adverse criticism is made of Mrs. Semple or of anyone for having cast the transaction in this form. The question is whether the pattern which it took results in tax exemption.

Although this was in form a nonprofit, nonstock educational corporation, the practical effect was to place Mrs. Semple in the position of the holder of an equity interest in the enterprise. Her situation was analogous to that of a stockholder, having the right to receive dividends payable out of earnings if and when declared by a board of directors. Parenthetically, it may be observed that the saving in real property taxes if 351 Riverside Drive were held to be exempt would be approximately equivalent to the amount needed to enable the school trustees to declare and pay a return of 5% upon the obligations of the school held by Mrs. Semple.

We pass only upon the question as it is presented by the present record on appeal. This decision is not inconsistent with tax exemption for the school if Mrs. Semple were to cancel the bonds of appellant which she holds, or if she were to reduce appellant’s legal liability to her so substantially that it would be reasonable to believe that any bonds which she might hold could be collected when due with interest out of assets of appellant corporation, irrespective of fluctuations in the current earnings of the school. No decision is rendered now concerning the legal effect of any future changes in arrangements which may be made, but the existing pattern of ownership of the enterprise in its various ramifications creates a present obstacle to exemption under subdivision 6 of section 4 of the Tax Law.

These conclusions are in accord with the law as heretofore established in this State (Lawrence-Smith School v. City of New York, 166 Misc. 856, affd. 255 App. Div. 762, affd. 280 N. Y. 805 [People ex rel. Manlius School v. Adams, 143 Misc. 459, affd. 232 App. Div. 869, affd. 257 N. Y. 549, is distinguished in the case cited, per Shientag, J., 166 Misc. 860]; People ex rel. Rye Country Day School v. Schmidt, 266 N. Y. 196).

The order appealed from should be affirmed, with costs.

Desmond, J.

(dissenting). This real property, owned by a nonstock, nonprofit educational corporation and used exclusively for secondary school educational purposes, is entitled to tax exemption. The applicable statutory law, expressing an old and basic (see L. 1823, ch. 262; L. 1893, ch. 498; N. Y. Const., art. XVI, § 1) public policy of this State is part of subdivision 6 of section 4 of the Tax Law, which exempts from taxation The real property of a corporation or association organized exclusively for * * * educational * * * purposes * * * and used exclusively for carrying out thereupon * * * such purposes ” but further provides that “ no such corporation or association shall be entitled to any such éxemption if any officer, member or employee thereof shall receive or may be lawfully entitled to receive any pecuniary profit from the operations thereof, except reasonable compensation for services in effecting one or more of such purposes, or as proper beneficiaries of its strictly charitable purposes; or if the organization thereof for any such avowed purposes be a guise or pretense for directly or indirectly making any other pecuniary profit for such corporation or association, or for any of its members or employees, or if it be not in good faith organized or conducted exclusively for one or more of such purposes ’

In what respect does this parcel fail to meet those tests for exemption? Appellant was unquestionably “ organized exclusively for educational purposes ”, as conclusively shown by its charter granted by the State Board of Regents in October, 1950. No one doubts that its real property was “ used exclusively ” for educational purposes and had been so used by petitioner and its predecessor since 1930. (The school itself, conducted by Mrs. Semple individually till turned over by her to petitioner in 1950, had been in existence since 1898.) Any lawful denial of exemption would, therefore, have to be based on proof and finding of one or more of these factual situations described in the second sentence above quoted from the statute: first, that an officer, member or employee of the corporation receives or is lawfully entitled to receive pecuniary profit from its operations ; second, that the corporation is a mere guise or pretense for profit-making by it or its officer, member or employee; or, third, that the corporation is not in good faith organized for educational purposes.

The situation last above described, that is, of a corporation not in good faith organized for educational purposes, can be ruled out here without further discussion, since this petitioner corporation had no activity other than that of conducting an old, established private school for girls. Similarly, as to the second kind of situation above listed, that is, organization of a corporation for avowed educational purposes but actually as a guise or pretense for profit-making, there is no proof, permissible inference or finding in this case that anyone was disguising or pretending anything, or that the purpose, intent or possibility was to operate for individual profit. The undisputed proof is that this school had been running at a loss for years, before and after incorporation, and that it had been kept alive by loans and advances from Mrs. Semple, its founder and principal. Not only were there in fact no profits, but, under the Regents nonstock charter granted petitioner in 1950, any profits from operation could not lawfully be paid to any individual but, as Special Term pointed out, would have to be used for educational purposes. This case, therefore, readily distinguishes itself from the only two decisions of this court ratifying a refusal of such an exemption on “ profit ” grounds. The first of those decisions is People ex rel. Rye Country Day School v. Schmidt (266 N. Y. 196) where the land owner, although an educational corporation, had been specifically authorized to issue corporate stock and, on dissolution, to divide its assets among its stockholders. The other such decision is Lawrence-Smith School v. City of New York (166 Misc. 856, affd. 255 App. Div. 762, affd. 280 N. Y. 805). The Lawrence-Smith School, when previously owned by a business corporation, had mortgaged its realty for its full value and had become insolvent and indebted to its head master and an instructor for substantial sums. A new educational corporation was formed to take over the school property by assuming the mortgage and by agreeing to pay also, out of net earnings, not only the amounts owing to its two individual creditors but also to pay $10,000 to the former owners for “ good will ”. The courts, in Lawrence-Smith (supra), held that the actual purpose of the new arrangement was the making of profits, and the use thereof to pay up the debts (and to pay for the “ good will ”) of the former, and insolvent, profit-motive corporation. There is nothing remotely like that in the present record.

Special Term, in dismissing this petition, held that it did not appear from the record ‘ ‘ that no pecuniary profit will be made by the corporation or by its officers and employees ”, thus apparently relating the case to the first of the above-listed situations which make an educational corporation’s real property taxable. The decision against petitioner would be sound, we assume, if it appeared affirmatively that corporate profits would, in fact and in law, be available to individuals, or, negatively, if petitioner had failed to show nonavailability. Looked at from either direction, this record conclusively proves petitioner’s right to exemption. While Special Term held in effect that the facts showed that Mrs. Semple “ receives or may be lawfully entitled to receive pecuniary profit from the operation ” of the school, the court’s opinion makes it plain that what it was discussing was not “ pecuniary profit from the operation ” at all, but an entirely suppositious, hypothetical profit to the vendor on the sale of the property occupied by the school, by another corporation controlled by Mrs. Semple, all as described below.

Plainly, the statute, when it referred to pecuniary profit from the operations ” of a school, meant just that, and intended to refuse exemption to those educational corporations only, where the insiders received or were lawfully entitled to receive corporate operating profits. But this petitioner’s method of organization is such that, in the unlikely event that there be future profits, no individual will be entitled to take them. It has always been held (see Matter of Mary Immaculate School, 188 App. Div. 5, 7; People ex rel. Manlius School v. Adams, 143 Misc. 459, 466, affd. 232 App. Div. 869, affd. 257 N. Y. 549) that the right to exemption must be determined upon the facts as they exist at the time of making the assessment in question. Using that test here, it would be absurd to say that Mrs. Semple or anyone else was, in 1952 when these assessments were made, receiving or entitled to receive any operating profits from the school.

The profits ” referred to by the court below were, assuming that they existed at all, not operating profits but a supposed profit to the vendor on the sale of the realty, in 1950, by Semple Realty Corp., wholly owned by Mrs. Semple, to petitioner, the newly chartered educational corporation. The sale price was $150,950, paid as follows: $39,204 by means of the assumption by petitioner of a mortgage held by an outsider, and $111,746 by means of the giving by petitioner to the old corporation of an unsecured bond in that amount (later assigned by the old corporation to Mrs. Semple) with 5% annual interest payable in the discretion of petitioner’s trustees if funds should be available therefor, the interest to be waived or forgiven if not paid within twelve months from its due date. This transaction, so held Special Term, resulted in a “ profit ” to Mrs. Semple, apparently because the court thought, although it did not expressly so find, that the real property was at that time worth less than $150,950. We reject the idea that any such theoretical difference could conceivably be the ‘ ‘ profit ’ ’ referred to in the statute. As was pointed out in the Manlius School decision (see 143 Misc. 459, 466, supra), the case in this respect is the same whether the property be sold for cash or bonds. If petitioner corporation here had borrowed $111,746 from an outsider and had paid it in cash to Mrs. Semple or her old corporation, would anyone assert, in the following year, that the realty as owned by the new nonprofit educational corporation was taxable because someone was receiving or entitled to receive a “ profit from the operations ”? In actual fact, this record does not even show that there was a profit in the sense of a capital gain. Here are the figures:

Paid by Mrs. Semple for the property in 1930. .$200,000.00

Paid by petitioner in 1950.................... 150,950.00

Appraisal by petitioner’s expert before 1950 sale 167,933.34

Assessed value in 1950....................... 145,000.00

Petitioner’s expert who made the appraisal at $167,933.34 testified, at the trial, to the same value (his appraisal went into evidence without objection) and, as the Special Term itself pointed out, no one was called by the city to refute this and it “ thus stands uncontradicted ”. The court pointed out that future operating profits, if any, could not benefit Mrs. Semple, since they could not be used ‘ ‘ for * * * anything other than the reasonable expenses for maintaining the school and the purchase price of the property ”. In other words, the court itself found and held that there could not be any “ profit ” in the sense in which the statute uses that word, but then denied exemption on a mistaken definition of the word “ profit ”. We find it unnecessary, therefore, to analyze the figures listed above to show that they do not establish even the kind of capital gain which the court apparently had in mind. Nor is it necessary to analyze the qualifications of petitioner’s expert witness above referred to, particularly since the record shows no objection by the city to the receipt in evidence of his uncontradicted appraisal.

The decision about to be made by this court is strikingly inconsistent with that made, on similar facts, in the Manlius School case (257 N. Y. 549, supra). But it is even more important to point out that this decision is a departure from New York’s ancient, liberal tax exemption policies for educational institutions. That policy is as old as the 1823 statute cited in the first paragraph of this opinion, and its application is as recent in this court as People ex rel. Doctors Hosp. v. Sexton (295 N. Y. 553) and People ex rel. Clarkson Memorial Coll. v. Haggett (300 N. Y. 595). The People of the State approved it in 1938 when they adopted section 1 of article XYI of the State Constitution. In 1897 this court had written: “Indeed the state has no policy against institutions of charity or learning. Throughout its history it has shown a deep interest in promoting such objects and in encouraging its citizens to help them. Aid to education has always been a prominent feature in its legislation ” (Amherst Coll. v. Ritch, 151 N. Y. 282, 334-335). Court decisions abound with statements of the reasons underlying such tax exemptions (see, for instance, Matter of Huntington, 168 N. Y. 399, 407). One of the best such expressions is this from Justice Imrie’s opinion at Special Term (191 Misc. 621, 624) in the Clarkson case (supra): “ Education is declared to be a function of the State. The State may, and does, provide many of the educational processes. It also may, and does, delegate its function in that respect to private corporations under suitable regulations. In such instances, real property of the delegatee, used for the purposes of its charter, is, in fact, devoted to a public purpose and thereby becomes quasi-public in nature. Nontaxation of public buildings and properties is not an act of grace but is a basic principle of our law; it is the rule and not the exception. Thus, school and college properties may be said to receive their rights of tax exemption, not as acts of grace from the sovereign, nor as personal exceptions to the rule that all real property bear its share of the cost of government, but both upon the principle of nontaxation of public places and as a quid pro quo for the assumption of a portion of the function of the State. Such a situation calls for a reasonable construction of the exemptive statute, ' so as to give full effect to the policy declared ’. (Yale University v. Town of New Haven, 71 Conn. 316, 333; People ex rel. Trustees of Mt. Pleasant Academy v. Mezger [98 App. Div. 237, affd. 181 N. Y. 511], supra; St. Barbara’s R. C. Church v. City of New York, 243 App. Div. 371.) ”

The order should be reversed and the prayer of the petition granted, with costs in all courts.

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

Order affirmed.