author: Desmond, J.

text:
    Mary L. Hart et al., Appellants, v. Mary Blabey, Respondent.

      Argued November 28, 1941;
    decided January 15, 1942.

      John J. Donohue, Edward N. Scheiberling and John M. Schneider for appellants.
    The action is not barred by the Statute of Limitations. (Burlingham v. Hanrahan, 140 Misc. Rep. 512.) All proper and necessary parties to the action are before the court. (Corpus Juris, ¶ 158; Civ. Prac. Act, § 192.)

      Robert G. Blabey for respondent.
    The action is barred by the statute of limitations and the Appellate Division properly dismissed the complaint. (Guaranty Trust Co.
      v. United States, 304 U. S. 126; Schmidt v. Merchants Despatch Trans. Co., 270 N. Y. 287; Sears v. Hetfield, 216 App. Div. 767; Hanover Fire Ins. Co. v. Morse D. D. & R. Co., 270 N. Y. 86; Leprell v. Kleinschmidt, 112 N. Y. 364; Bartlett v. Judd, 21 N. Y. 200; Perrior v. Peck, 39 App. Div. 390; 167 N. Y. 582; Buttles v. Smith, 281 N. Y. 226; Higgins v. Crouse, 147 N. Y. 411; Oaks v. Howell, 27 How. Pr. 145; Sprague v. Cochran, 70 Hun, 512; 144 N. Y. 111; Exkorn v. Exkorn, 1 App. Div. 124.) There is no proof to support the trial court’s finding that the original grantor and grantee made a mutual mistake. (Bartholomew v. Mercantile Marine Ins. Co., 34 Hun, 263; 107 N. Y. 623; Isaacs v. Schmuck, 245 N. Y. 77; Salomon v. North British & Mercantile Ins. Co., 215 N. Y. 214; Elwood v. Western Union Tel. Co., 45 N. Y. 549; Mead v. Westchester Fire Ins. Co., 64 N. Y. 453; Susquehanna Steamship Co. v. Anderson & Co., 239 N. Y. 285; Matter of Case, 214 N. Y. 199.) The plaintiff Weaver has no cause of action against the defendant. The trial court erred in not dismissing the complaint as to him. (Herse v. Mazza, 100 App. Div. 59.)
   Desmond, J.

This action was brought in 1939 to reform a warranty deed given by plaintiff Mary L. Hart to defendant Mary Blabey, in 1912. Plaintiffs assert that the description in the deed is incomplete, that it does not correctly or sufficiently describe the property intended to be conveyed, and that the defendant is asserting title to more land than the deed was intended to cover. Defendant denies all this, and as a defense pleads that the ten-year statute of limitations has run against plaintiffs. The land lies along the shore of Thompson’s lake in Albany county. Prior to the date of the deed, August 8, 1912, plaintiff Mary L. Hart’s brother, the attorney who later drew the deed, went out to the property with defendant Mary Blabey, the intending purchaser, and pointed out to the latter the part which was to be sold and deeded to Mary Blabey. The attorney located on the ground a fixed starting point in a so-called “ base line ” along the lake shore and then indicated to defendant the location of a line which was to be the southerly line of the latter’s purchase and the dividing line between the land that was to go to her under the deed and the balance that was to be retained by plaintiff Mary L. Hart. This southerly line of the premises to be conveyed was intended, this attorney testified, to be a line running at approximately right angles with this base line on the west shore of Thompson’s lake, back directly west to a private road. This attorney testified that he set stakes in the ground to mark that line. If, in the deed as later written out, this southern boundary line had been described as so pointed out and marked out there would be no dispute here, since the southerly boundary would then be sufficiently located as to termini and direction. But in the deed as actually drawn, the scrivener described the southerly boundary as running from said [starting] point west to the easterly side of a private road.” This description of the southern boundary of the land conveyed to defendant Blabey is obviously incomplete, since, while it definitely locates the eastern end of the southern boundary line, it fails to indicate the exact direction of that line or its length, and furnishes no description, or way of locating, its western terminus, somewhere along the private road. The attorney who pointed out the bounds of the property to defendant Mary Blabey and who later drew the deed, testified that he meant to describe the southern boundary as running “ generally west ” from the fixed point in the base line, at about a right angle to the base line. Defendant did not take the stand and produced no witnesses to deny any of this. Trial Term made findings that the deed was intended to convey a parcel of land bounded on the south by a line drawn at approximately right angles to the base line from the fixed point in the base line, and that the description as found in the deed was the result of a mutual mistake of the parties.

In 1925 plaintiff Mary L. Hart sold to plaintiffs Meineker the.balance of the tract, lying south of the property conveyed to defendant by the 1912 deed, above referred to. In the 1925 deed to the Meinekers, their northern boundary was described in the same way as the faulty description of the Blabey southern boundary in the 1912 deed here sought to be reformed. In 1939 plaintiffs Meineker sold their property to plaintiff Harry A. Weaver. Meanwhile, however, it had become evident, in 1937, that defendant Blabey was claiming land to the south of what would be her southern boundary line as agreed upon in 1912. So, when plaintiffs Meineker conveyed to plaintiff Weaver in 1939, they, in that deed, gave warranties as to the undisputed part only and quitclaimed as to the part over which a dispute had arisen.

Trial Term, on sufficient proof, has found that plaintiff Mary L. Hart and the plaintiffs Meineker, as her grantees, were, from August 8, 1912, to the fall of 1937, “ in exclusive possession and control and used and occupied the property south of the line which the plaintiffs claim was agreed upon as the southern boundary of the plot conveyed to defendant. Also on sufficient proof, Trial Term has found that none of the plaintiffs had knowledge or notice until the fall of 1937 that defendant claimed the gore of land now disputed, and that defendant during all that time recognized that her premises did not extend south of a line drawn at about right angles to the base line on the shore of the lake. Trial Term held that the action was not barred by the statute of limitations, and judgment was entered, reforming the description in the 1912 deed to conform to the intention of the parties to that deed.

The Appellate Division reversed the judgment upon the law and the facts and dismissed the complaint, but did not specify or refer to, by number or otherwise, any particular question or questions of fact upon which the reversal was made. Accordingly, as commanded by the statute (Civ. Prac. Act, § 602) we must consider the reversal to be upon the law, and not upon the facts. There is no conflict in the evidence, and the reversal by the Appellate Division cannot stand unless there were errors of law at the Trial Term.

The case is a proper one for invoking the equitable remedy of reformation. “ Where there is no mistake about the agreement and the only mistake alleged is in the reduction of that agreement to writing, such mistake of the scrivener, or of either party, no matter how it occurred, may be corrected.” (Born v. Schrenkeisen, 110 N. Y. 55, 59.) In such a case equity will conform the written instrument to the parol agreement which it was intended to embody.” (Pitcher v. Hennessey, 48 N. Y. 415, 423.) Here it sufficiently appears that the parties agreed that the southern boundary of the Blabey land was to be a line running approximately at right angles to another line. Since the description in the deed did not conform to that agreement, equity will reform it. It need not be shown that the parties did not realize that inaccurate verbiage was used, nor need the language used be ambiguous. “ Although the parties understood what language was contained in the deed, if they believed the description corresponded with the actual boundaries of the land intended to be conveyed, and were mistaken, the case for a reformation was made out.” (Bush v. Hicks, 60 N. Y. 298, 302.)

The Appellate Division in its opinion held that the action was barred by the ten-year statute of limitations (Civ. Prac. Act, § 53) which, it said, runs from the time of the delivery of the deed, not from the time of discovery of the mistake, citing Exkorn v. Exkorn (1 App. Div. 124). We do not agree with this. Under the facts as found in this case we are of the opinion that the statute began to run not in 1912 when the deed was given, but in 1937, prior to which year, as found by Trial Term, the plaintiffs Hart and Meineker had been in undisputed possession of the gore of land here in litigation, and prior to which year, as similarly found by Trial Term, defendant had never made any claim to ownership of the piece now disputed. Ordinarily, of course, except in fraud cases, the running of the statute does not depend on discovery, but the present case is within a well recognized exception to the general rule. That exception may be stated thus: as to one who is in possession of real property under an instrument of title, the statute never begins to run against his right to reform that instrument until he has notice of a claim adverse to his under the instrument, or until his possession is otherwise disturbed. “ * * * when a party to whom land belongs in equity, is in possession and is afterwards evicted by one claiming a legal title, the statute does not begin to run until such eviction. A bill consequently may be filed at any time within ten years after the eviction.” (Bartlett v. Judd, 21 N. Y. 200, 205.) The owner of real property who is in possession thereof may wait until his possession is invaded or his title is attacked before taking steps to vindicate his right.” (Ford v. Clendenin, 215 N. Y. 10, 17.) This rule is applicable to causes of action for reformation. (Syms v. Mayor, 50 N. Y. Super. Ct. [18 J. & S.] 289, 294; affd., 105 N. Y. 153; DeForest v. Walters, 153 N. Y. 229, 241; Perrior v. Peck, 39 App. Div. 390; affd., 167 N. Y. 582.)

The Exkorn case (supra) and others (Sprague v. Cochran, 70 Hun, 512; revd. on other grounds, 144 N. Y. 104; Hoyt v. Putnam, 39 Hun, 402, 406; Oakes v. Howell, 27 How. Pr. 145, 151) which are cited as holding that the statute begins to run from the delivery of the instrument and not from the discovery of the mistake, are all cases where the aggrieved party did not go into possession under the instrument. Thus they are governed by the general rule and do not come within the exception above described, applicable where there was possession under the faulty instrument. All the plaintiffs here are entitled to the benefit of that more lenient rule as to the running of the statute of limitations. Under the facts as found at Trial Term and by which we are bound, plaintiffs Hart and Meineker were in exclusive possession of the now disputed gore or triangle of land until 1937. Only then did the running of the statute begin. Plaintiff Weaver, who took title later, in 1939, did not go into possession of the disputed piece because defendant Blabey had meanwhile enclosed and occupied it, but plaintiff Weaver, by his deed, took all the rights of the other plaintiffs, even though it was a quitclaim deed only as to the land involved here. All these plaintiffs were proper parties because of their privity of estate. (Cramer v. Benton, 60 Barb. 216, 226; affd., 56 N. Y. 638; Mygatt v. Coe, 147 N. Y. 456, 462; Baird v. Erie R. R. Co., 210 N. Y. 225, 232.)

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

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis and Conway, JJ., concur.

•Judgment accordingly.


source: Caselaw Access Project

author: Lewis, J.

license: Public Domain

text:
    In the Matter of Lawyers Title and Guaranty Company. Netacos Corporation, Appellant and Respondent. Louis H. Pink, Superintendent of Insurance of the State of New York, as Liquidator of Lawyers Title and Guaranty Company, Appellant. Reconstruction Finance Corporation, Respondent and Appellant.

      Argued November 27, 1941;
    decided January 15, 1942.

      Irving H. Jurow and Edward F. Keenan for Superintendent of Insurance, as liquidator, appellant.
    The Reconstruction Finance Corporation, as the registered holder and owner of a participating certificate, is entitled to share on an equality and pro rata with the Netacos Corporation, in the mortgage underlying the participation series. (Matter of Title & Mortgage Guaranty Co., 275 N. Y. 347; Pink v. Thomas, 282 N. Y. 10; Matter of Lawyers Mortgage Co. [545 West End Ave.], 157 Misc. Rep. 813; 248 App. Div. 715; 272 N. Y. 554; 275 N. Y. 532; Matter of N. Y. Title & Mortgage Co. [Series FW-1], 157 Misc. Rep. 271; 248 App. Div. 715; 272 N. Y. 556; 275 N. Y. 531; Matter of Lawyers Title & Guaranty Co. [Forshay], 169 Misc. Rep. 266 ; 254 App. Div. 653; 279 N. Y. 571; Matter of People [ Union Guaranty & Mortgage Co.], 285 N. Y. 337; Matter of N. Y. Title & Mortgage Co. [Senes C-2], 253 App. Div. 308; 278 N. Y. 488; Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415; Granger v. Crouch, 86 N. Y. 494; Matter of Lawyers Mortgage Co. [8718 Ridge Blvd.], 284 N. Y. 371; Perillo v. Zunino, 259 N. Y. 21; Matter of Lawyers Title & Guaranty Co. [Chase Nat. Bank], 165 Misc. Rep. 590.)

      Edward J. Ross for Netacos Corporation, appellant and respondent.
    The liquidator is the owner of and has legal title to certificate No. 3. The pledge to the finance corporation is not an assignment within the language of the certificate, and the pledgee interest of the finance corporation therein is subordinate to certificate No. 1. The Appellate Division erred in so far as it affirmed the order of Special Term. (Pink v. Thomas, 282 N. Y. 10; Matter of Lawyers Mortgage Co. [8718 Ridge Blvd.], 284 N. Y. 371; Matter of Lawyers Title & Guaranty Co. [115-25 84th Ave.], 169 Misc. Rep. 266; 254 App. Div. 653; 279 N. Y. 571; Matter of Title & Mortgage Guaranty Co., 275 N. Y. 347; Geist v. Prudence Realization Corp., 122 Fed. Rep. [2d] 503; Griffey v. New York Central Ins. Co., 100 N. Y. 417; Kavanaugh v. Cohoes Power & Light Corp., 114 Misc. Rep. 590; Brown v. Bronson, 93 App. Div. 312; Harding v. Eldridge, 186 Mass. 39; Douglas v. Carpenter, 17 App. Div. 329; Keller v. Halsey, 202 N. Y. 588; Markham v. Jaudon, 41 N. Y. 235; Maas v. Falk, 70 Hun, 598; 146 N. Y. 34; Chelten Trust Co. v. National Automatic Press Co., 216 App. Div. 380.) The company as owner of a subordinate interest could pledge no greater interest than it had. (Pink v. Thomas, 282 N. Y. 10; Fairbanks v. Sargent, 117 N. Y. 320; Lathrop v. Title Ins. & Trust Co., 73 Cal. App. 147.)

      Effingham Evarts and Henry A. Linn for Reconstruction Finance Corporation, respondent and appellant.
    The interest of the finance corporation as the holder of certificate No. 3 is co-ordinate and on a par with that of appellant as the holder of certificate No. 1. (Matter of Lawyers Title & Guarantee Co. [5101-5113 13th Ave.], 156 Misc. Rep. 829; Matter of Lawyers Title & Guaranty Co. [Chase Nat. Bank], 165 Misc. Rep. 590; Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69; Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415; Matter of Title & Mortgage Guaranty Co., 275 N. Y. 347; Granger v. Crouch 86 N. Y. 494; Kelly v. Middlesex Title Guaranty & Trust Co., 115 N. J. Eq. 592; 116 N. J. Eq. 574; Land Title Bank & Trust Co. v. Schenck, 335 Penn. St. 419.)
   Lewis, J.

The Superintendent of Insurance, as liquidator under article XI (now art. XVI) of the Insurance Law (Cons. Laws, ch. 28), took possession of the property of Lawyers Title and Guaranty Company on January 21, 1936, upon an adjudication that the company was insolvent. Prior to the liquidation order the company was the owner and holder of a bond and mortgage in the principal amount of $75,000, the lien of which attached to real property in Long Island City. On February 8, 1927, the company had sold the bond and mortgage to Adele Kneeland, as executrix of the estate of Charles Kneeland, for $75,000, and had guaranteed the payment of the principal and interest on the mortgage debt. Upon its maturity the mortgage debt was not paid, the company’s guaranty was not fulfilled, and the executrix found by an appraisal of the mortgaged property that its value was not sufficient to warrant a mortgage in the principal amount of $75,000. It, was in these circumstances that the company, in an endeavor to readjust the mortgage debt, entered into an agreement whereby the company paid $25,000 on the principal debt and the executrix accepted a guaranteed first mortgage participation certificate for the sum of $50,000. This $50,000 certificate — known in this proceeding as Certificate No. 1 of Mortgage No. “ Q ” 25088 — was sold and assigned by the Kneeland estate on July 12, 1938, to the present appellant, The Netacos Corporation.

Prior to that date, and on December 29, 1932, the company had issued to Chase National Bank a guaranteed participation certificate in the same mortgage in the amount of $25,000, which certificate is known as Certificate No. 2 of Mortgage No. “ Q ” 25088. That certificate, however, is of no importance in the present proceeding in view of the fact that it was reacquired by the company and canceled as of February 1, 1933.

On January 26, 1933, the company negotiated a loan of $1,300,000 from Reconstruction Finance Corporation — hereinafter referred to as R. F. C. As collateral security for the repayment of the loan the company pledged with R. F. C. twenty-nine mortgages and mortgage participation certificates, including a guaranteed participation certificate in the mortgage mentioned above in the amount of $25,000. The certificate last mentioned, known in this proceeding as Certificate No. 3 of Mortgage No. Q ” 25088, was issued in lieu of Certificate No. 2 of the same mortgage. It was registered in the name of Reconstruction Finance Corporation on January 26, 1933, and, except for issuing data not material here, is conceded to be identical in form with Certificate No. 1.

We are thus concerned upon this appeal with only two participation certificates of Mortgage No. Q ” 25088: No. 1, in the amount of $50,000, sold by the company and now owned by the appellant, The Netacos Corporation; and No. 3, in the amount of $25,000, pledged by the company with R. F. C. as one of twenty-nine items which comprised collateral security for a loan of $1,300,000.

When it appeared that the value of the mortgaged property was insufficient to pay on liquidation the face amount of the two certificates, the present proceeding was commenced in which The Netacos Corporation, the present appellant, alleges that its rights represented by Certificate No. 1 are superior in interest to and have priority over rights represented by Certificate No. 3, now pledged by the company with R. F. C. The relief sought is an order adjudging (1) that Certificate No. 1 is entitled to priority over Certificate No. 3; (2) that the interests of the liquidator, as owner of Certificate No. 3, and of R. F. C. as its pledgee, are each subordinate to the interest of The Netacos Corporation in Certificate No. 1; (3) that the liquidator and R. F. C. shall have the right to receive from the liquidation of the property here involved only so much as may remain after paying whatever may be due on principal and interest on Certificate No. 1.

Special Term denied the application of The Netacos Corporation, its ruling being, in effect, that Certificate No. 1 was not entitled to priority over Certificate No. 3. The Appellate Division modified the order of Special Term by providing “ that Certificate No. 1 * * * owned and held by The Netacos Corporation * * * has priority and seniority over and is superior to the ownership by Louis H. Pink, Superintendent of Insurance of the State of New York, as liquidator of Lawyers Title and Guaranty Company, of Certificate No. 3; * * * That the interest in said mortgage of said Superintendent of Insurance, as liquidator, as the owner of said Certificate No. 3, is subordinate and junior to the interest in said mortgage of The Netacos Corporation, as owner and holder of said Certificate No. 1; and * * * That said Superintendent of Insurance, as liquidator, shall have the right to receive out of the proceeds of the income or liquidation of the property here involved, only so much as may remain after paying whatever may be due on principal and interest on said Certificate No. 1.” Otherwise the order of Special Term was affirmed.

The parties have treated the Appellate Division order as granting to rights represented by Certificate No. 1 priority over only the liquidator’s rights as represented by Certificate No. 3, but not over the rights of R. P. C., as pledgee of Certificate No. 3. In other words, the order is interpreted as providing that The Netacos Corporation and R. F. C. shall share pro rata in Certificates Nos. 1 and 3 and prior to the liquidator. The liquidator, The Netacos Corporation and R. F. C. have each appealed. The liquidator seeks to have the order of Special Term reinstated — which would deny any priority to Certificate No. 1. The appellant, The Netacos Corporation, would have this court rule that Certificate No. 1 is entitled to priority over the rights of both the liquidator and R. F. C. as pledgee, which attach to Certificate No. 3. By its appeal R. F. C. would have the order of the Appellate Division affirmed in so far only as it holds that Certificate No. 1 is on parity with Certificate No. 3 to the extent of its interest, but a modification is sought of so much of the order as attributes to the liquidator ownership of Certificate No. 3, now pledged to R. F. C., and provides for the distribution of the proceeds from a liquidation of the properties involved.

Both Certificate No. 1 (originally sold to the Kneeland estate and later acquired by The Netacos Corporation) and Certificate No. 3 (pledged by the company to R. F. C.) contain a provision assigning to the holder thereof an undivided share in the bond and mortgage No. “ Q ” 25088 “ equal and co-ordinate with all other shares assigned or retained by the Company, the aggregate amount of all such shares, issued and retained, at no one time to exceed the amount then owing on said bond and mortgage.” We read the provision in the light of the explanation given in Pink v. Thomas (282 N. Y. 10, 13): “As we know, these mortgage certificates are sold at different times to different individuals. The words 1 equal and co-ordinate with all other shares assigned or retained by the Company ’ constitute an agreement that the shares in question shall be equal and co-ordinate with those previously sold. That is, that the date of sale of different shares shall not in any event constitute a preference, and the shares retained by the company at the date of the sale of any particular share are retained presumably for subsequent sale, as that was the business of the company. They shall, when sold, be equal and co-ordinate with those in question and all other shares previously sold or those still remaining and retained by the company to be thereafter sold. All shares taken together, that is, all those sold and all those unsold but retained for future sale, shall not exceed the amount at any time owing on the bond and mortgage.” (Emphasis supplied.) (See, also, Matter of Title & Mortgage Guaranty Co., 275 N. Y. 347.)

In the proceeding now before us we believe that, by identical provisions in each certificate, it was intended that the rights represented by Certificate No. 1 should be equal and co-ordinate with all other certificates when sold by the company or retained by it for sale, and not retained for its own use. Accordingly, in our consideration of the problem presented, we proceed upon the assumption that the company intended fulfillment of its guaranty which attached to all certificates sold and guaranteed by it, and that purchasers or their assigns would be paid before the company was paid upon certificates which it retained for its own purposes.

It cannot be doubted, that, under the rule of Pink v. Thomas (supra), if, instead of pledging Certificate No. 3, the company had retained that certificate for itself, Certificate No. 1 would be entitled to priority. Nor can there be doubt that if, instead of pledging Certificate No. 3, the company had sold that certificate to R. F. C., Certificate No. 1 would share in the security pro rata with Certificate No. 3. In the present proceeding, however, Certificate No. 3 was not sold — it was pledged to R. F. C. by the company as collateral to its loan. In that transaction R. F. C., as pledgee, acquired what may be termed a special property in the hypothecated certificate — a “ ‘ possessory right acquired under the bailment.’ ” (McCoy v. American Express Co., 253 N. Y. 477, 482.) But the general property — the legal title to the certificate —• remained in the company as pledgor. (Markham v. Jaudon, 41 N. Y. 235, 240, 241; Keller v. Halsey, 202 N. Y. 588, 597. Cf. Griffey v. New York Central Ins. Co., 100 N. Y. 417, 422; Harding v. Eldridge, 186 Mass. 39, 42.)

It is argued by The Netacos Corporation that because Certificate No. 3 was pledged to R. F. C. and not sold, it is as if it had not left the possession of the company; and that inasmuch as the company still retains the right to pay its collateral loan and thus to redeem its pledge of Certificate No. 3, the rights represented by that certificate are subordinate to those represented by Certificate No. 1. In that contention we believe The Netacos Corporation is correct.

This proceeding and those involving similar problems call for a determination of the intention of the parties and a consideration of the natural equities involved. (Matter of Title & Mortgage Guaranty Co., supra, pp. 354, 355; Pink v. Thomas, supra; Matter of People [ Union Guarantee & Mortgage Co.], 285 N. Y. 337, 344.) The fact that we are dealing with a guaranty by the company bears upon those equities. When the company offered to sell participation certificates in the mortgage here involved, it must have been the intention of the seller and the understanding of the buyer that only purchasers who placed themselves in positions akin to mortgagees would be entitled to the preferential benefits attaching to the guaranteed certificates. The sale of participating interests in mortgages was the business which engaged the company’s efforts. Not only the mortgage security but the company’s guaranty must have been intended as favorable competitive factors in the mortgage market. It is with that assumption in mind that we read the phrase common to Certificates Nos. 1 and 3 whereby the company assigned an undivided share in the bond and mortgage, Equal and co-ordinate with all other shares assigned or retained by the Company.” Thus read, and with proper regard for the ruling in Pink v. Thomas (supra), the quoted phrase refers to shares sold to a purchaser of the certificates, viz., to one who, by reason of the acquisition of the rights represented by the certificate became entitled to participate in the mortgage security and any benefits arising from the guaranty pro rata with the purchasers of other participation certificates in the same mortgage, or their assignees.

We do not befieve that when the company pledged Certificate No. 3 with R. F. C. as collateral to a loan, it granted to R. F. C. as pledgee the same rights as those to which a purchaser of other similar certificates was entitled. The company could pledge no rights in the certificate which it could not exercise itself. R. F. C. was lending money to the company upon the company’s credit. As a part of the transaction R. F. C. took as collateral security for the loan numerous mortgages and participating certificates, including those rights — and no more — which the company might exercise as owner of Certificate No. 3. The company cannot retain the legal title to the certificate — as it does as a pledgor (Markham v. Jaudon, supra, pp. 240, 241) — and enjoy additional rights or advantages solely by reason of the fact that it has pledged the certificate. In the hands of R. F. C. as pledgee, Certificate No. 3 represents no rights which did not attach to it while it was in the hands of the company. To grant to R. F. C. as pledgee of Certificate No. 3 the same rights as those to which the owner of Certificate No. 1 is entitled, would allow the company to do indirectly what it cannot do directly. If, under the rule of Pink v. Thomas {supra), the rights of the company under certificates retained for its own use, are relegated to a position subordinate to rights attaching to certificates which have been sold, the company cannot, by pledging an unsold certificate as collateral to a loan, endow such pledged certificate with the same rights as attach to one which has been the subject of a sale.

The order of the Appellate Division should be modified to provide that Certificate No. 1 of mortgage No. Q 25088 shall be entitled to priority over the interest of both the liquidator and R. F. C. in Certificate No. 3, and as so modified, affirmed, with costs to the appellant, The Netacos Corporation, against the liquidator and Reconstruction Finance Corporation.

Loughran, Finch, Conway and Desmond, JJ., concur; Lehman, Ch. J., and Rippey, J., dissent.

Ordered accordingly.


author: Loughran, J.

text:
    Anna C. Fisher, as Executrix of Sarah A. Connor, Deceased, Respondent, v. Title Guarantee and Trust Company, Appellant.

      Argued December 8, 1941;
    decided January 15, 1942.

      Flynn L. Andrew and John M. Friedman for appellant.
    Defendant, under the provisions of the certificates and the guaranty, had no power or duty to. collect the principal and interest and was expressly restrained from so doing. No conversion ensued by reason of defendant doing what it was required to do under the terms of the guaranty. (Matter of Bond & Mortgage Guarantee Co. [City Bank Farmers Trust Co.], 271 N. Y. 452; Title Guarantee & Trust Co. v. Mortgage Comm., 271 N. Y. 302; Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415; Kline v. 275 Madison Ave. Corp., 149 Misc. Rep. 797; Singer v. Title Guarantee & Trust Co., 160 Misc. Rep. 447; Matter of Kelsey, 186 App. Div. 95.)

      Paul A. Crouch for respondent.
    The assignment to the mortgage company, made as the initial step in a foreclosure in hostility to plaintiff's rights, is a conversion. (Laverty v. Snethen, 68 N. Y. 522; Kittredge v. Grannis, 244 N. Y. 168; Cady v. Bank of Manlius, 285 N. Y. 837; Mendelson v. Boettger, 257 App. Div. 167; 281 N. Y. 747.) Defendant is responsible to plaintiff for the loss of recourse against the guarantee company. (Strebler v. Title Guarantee & Trust Co., 250 App. Div. 846; 277 N. Y. 730; Bush Terminal Co. v. Globe & Rutgers Fire Ins. Co., 182 App. Div. 748; 228 N. Y. 575; International Products Co. v. Erie R. R. Co., 244 N. Y. 331; 275 U. S. 527; Hendry v. Title Guarantee & Trust Co., 165 Misc. Rep. 349; 255 App. Div. 497; 280 N. Y. 740; Perillo v. Zunino, 259 N. Y. 21; Levy Fabrics, Inc., v. Shapiro Bros. Factors Corp., 259 App. Div. 463.) The policy of guaranty conferred no immunity for the consequences of defendant’s own acts. (Cady v. Bank of Manlius, 285 N. Y. 837; Cunningham v. Pressed Steel Car Co., 238 App. Div. 624; 263 N. Y. 671; Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415; Skutt, Inc., v. Goodwin, Ltd., 251 App. Div. 84.)
   Loughran, J.

For convenience, we abbreviate the corporate names appearing in the record. The defendant Title Guarantee and Trust Company will be called the Title Company. Bond and Mortgage Guarantee Company will be called the Guarantee Company. Municipal Mortgage Company will be called the Mortgage Company.

In April, 1928, the Title Company issued to the plaintiff’s testatrix (Sarah A. Connor) two written instruments each .of which was in the following form:

“GUARANTEED FIRST MORTGAGE CFvRTIFICATE
* * *
Guaranteed by
“ BOND AND MORTGAGE GUARANTEE COMPANY
Issued by
“ TITLE GUARANTEE AND TRUST COMPANY
* * *
“ Title Guarantee and Trust Company, hereinafter called ‘ the Company ’ has received from
Sarah A. Connor,
“ the sum of $6,000.00 for the purchase of and hereby assigns to the purchaser an undivided share equal to that amount, with interest thereon at the rate of 5% per annum, in the bond of
Louis Alten,
“ for $12,000.00 due March 26th, 1933 and in the first mortgage securing the same covering
1749 Topping Avenue,
“ Interest days April 1st and October 1st.
“ This bond and mortgage, together with the policy of the Bond and Mortgage Guarantee Company guaranteeing to holders of this and similar certificates payments of principal and interest, are held by the [Title] Company as depositary and agent for the holders of such certificates which shall never aggregate more than the amount of principal remaining unpaid on said bond and mortgage, upon the following terms and conditions which are agreed to by the holder of this certificate.

“ 1. The [Title] Company holds and shall continue to hold said bond and mortgage, said policy of Bond and Mortgage Guarantee Company and the other instruments and evidences of title relating thereto. for the benefit of the purchaser and any other persons interested therein.

2. The [Title] Company, on receipt of the interest and principal of said bond and mortgage, as required therein, shall distribute the same among the persons entitled thereto. If payments not so required are made, certificates for the same amount will be called in and paid off.

“3. The [Title] Company shall have full power to take any action it may deem necessary or desirable in order to enforce any of the provisions of said bond and mortgage and to protect the mortgage security.

4. The [Title] Company may for its own corporate account be the holder or pledgee of similar shares in said bond and mortgage.”

Each of these two certificates being for the sum of $6,000, plaintiff’s testatrix, as the holder of both, had the entire beneficial interest in the single $12,000 mortgage therein described. This interest passed to the plaintiff, as executrix, in January, 1932.

The policy of the Guarantee Company which covered the certificates ran not only to the Title Company but also to the holder of the certificates who was described in the policy as The Insured.” The Guarantee Company by this policy guaranteed:

“ First: Payment at the guaranteed rate of interest [5% per annum] * * * from the respective dates from which the insured is entitled, to interest * * * out of every installment of interest * * * within five days after the same has beome due.

“ Second: Payment of the principal and of every installment thereof as soon as collected, but in no event later than eighteen months after it shall have become due and payment thereof shall have been demanded in writing by the insured, with regular payment meantime of interest at the rate guaranteed.”

The policy of the Guarantee Company made also this provision: By the acceptance of this guarantee, this [Guarantee] Company is made irrevocably the agent of the insured until the bonds and mortgages and each of them be paid, with the exclusive right, but at its own expense, to sue for and receive the proceeds of any policies of title insurance or fire insurance covering the mortgaged premises, and to collect the interest as it falls due on the bonds and mortgages hereby guaranteed. Out of the interest so collected this [Guarantee] Company is authorized to retain as its premiums for this guarantee the excess [one-half of one per cent] over the guaranteed rate named above.”

The first question presented in this case is one as to the construction of the provisions of the mortgage certificates quoted above. The Trial Term held that no affirmative duty to collect the mortgage principal or interest was thereby imposed on the Title Company. This was right. In Strebler v. Title Guarantee and Trust Co. (277 N. Y. 730) the second cause of action was that the Guarantee Company had collected the sum due upon such a mortgage certificate owned by Strebler and on October 10, 1930, had deposited that sum in its own bank account with the Title Company. The deposit earned $248 interest before the amount thereof was paid to Strebler by the Guarantee Company on November 22, 1934. It was that item of interest for which Strebler demanded judgment against the Title Company on his second cause of action. Judgment therefor was granted by the courts below on the ground that the Title Company was the agent of Strebler with the duty, as such, to collect the amount of the deposit. In this court, that recovery was annulled for the reason that by its issuance of such a mortgage certificate the Title Company assumed no direct obligation of that kind to the holder thereof. (See Title Guarantee and Trust Co. v. Mortgage Commission, 273 N. Y. 415, 427.) From this definition of the presently pertinent status of the Title Company we go to the factors of the controversy now before us.

The original due date of the mortgage in question was March 26, 1933. It was therein provided, “ that the whole of said principal sum shall become due after default in the payment of any installment of principal or of interest for thirty days.” When an interest installment became due in April, 1932, the mortgagor made default. Consequently the mortgage principal became due May 1, 1932, though interest thereon was paid to the plaintiff by the Guarantee Company to and including October 1, 1932.

On October 25, 1932, the Title Company made an outright assignment of the mortgage to the Mortgage Company (a wholly owned subsidiary of the Title Company) and the Mortgage Company, as such assignee, thereupon commenced a foreclosure action. The complaint in that action contained this allegation: “ The principal sum remaining unpaid on the bond and mortgage is $12,000, and the plaintiff does not elect to deem the principal sum secured by said bond and mortgage to be immediately due and payable.” Judgment of foreclosure and sale was entered in February, 1933. The mortgaged premises were sold on June 1, 1933, to the Mortgage Company “ subject to the continuing lien of the first mortgage in the sum of $12,000 with interest thereon at the rate of 5|% from April 1st, 1932.” The Title Company gave no notice to the plaintiff of any of these events.

In August, 1938, plaintiff brought this action to recover the principal sum of the mortgage with interest thereon from October 25, 1932. At the Trial Term, the defendant Title Company had judgment for reasons stated thus: The defendant has no duty to collect either the principal or interest, and accordingly it may not be held liable for the alleged negligence of Bond & Mortgage Guarantee Company in the prosecution of the foreclosure action instituted by it. Nor has the plaintiff established any act of conversion by the assignment of the mortgage for the purpose of foreclosure. Municipal Mortgage Company, the assignee, was a wholly owned subsidiary of the defendant. Patently the assignment was one of convenience only and not in denial of any right of the plaintiff as no property right passed by virtue of the assignment.” (176 Mise. Rep. 166, 169.)

On appeal by the plaintiff to the Appellate Division, the judgment in favor of the Title Company was reversed ■ and judgment for the plaintiff was directed in the sum of the mortgage principal of $12,000 less the flfound present value of the mortgage certificates ($60) or $11,940, with interest. In respect of the way in which the Title Company had dealt with the mortgage as above set forth, the Appellate Division said: There appears to be no reason for waiving collection, except to aid the Guarantee Company, for the effect of the election was not only to extend the time of the mortgagor to pay the principal of the mortgage, but to postpone plaintiff’s recourse against Guarantee Company. We find that the decision in Strebler v. Title Guarantee and Trust Co. (277 N. Y. 730) requires us to hold that the action taken here by defendant [Title Company] created a liability on its part for conversion, or at least for breach of contract.” (262 App. Div. 293, 296.)

We think the finding by the Appellate Division of a design of the Title Company so to aid the Guarantee Company is in accord with the weight of the evidence. On that basis it followed, as the Appellate Division held, that our affirmance of the recovery had on the first cause of action in the Strebler case (supra) authorized the award to the present plaintiff of her damages; for the wrongful expropriation of the mortgage by the Title Company through its unqualified transfer thereof to the Mortgage Company answered the purpose to deprive this plaintiff of any resort to the Guarantee Company on its policy prior to March 26, 1933, the original due date of the mortgage.

As appellant in this court, the Title Company asserts that this misfeasance on its part was not the cause of plaintiff’s loss. This assertion is sought to be grounded in the provision of the policy of the Guarantee Company whereby that company undertook to make payment of the principal of the mortgage as soon as collected, but in no event later than eighteen months after it shall have become due and payment thereof shall have been demanded in writing by the insured.” The Guarantee Company went into liquidation in August, 1933, less than eighteen months subsequently to the date (May 1, 1932) when the plaintiff was first entitled to treat with the Guarantee Company for payment of the mortgage principal. Hence — so the Title Company says — the loss suffered by the plaintiff would have fallen upon her anyhow.

But the Guarantee Company was solvent at the time the Title Company for reasons of its own disabled the plaintiff in her status as beneficial owner of the guaranteed mortgage. For all the Title Company has shown, the then market value of the deposited security was equal to the sum guaranteed. We see no reason to doubt the admissibility of the measure of damage which the Appellate Division applied. (Strebler v. Title Guarantee and Trust Co., supra.)

The judgment should be affirmed, with costs.

Lehman, Ch. J., Finch, Eippey, Lewis, Conway and Desmond, JJ., concur.

Judgment affirmed.


text:
    Stanley Kosiba, Appellant, v. City of Syracuse et al., Respondents.

      Argued December 3, 1941;
    decided January 15, 1942.

      Victor Levine, Albert Averbach and David M. Hayman for appellant.
    The complaint should not have been dismissed as against the city since section 50-c of the General Municipal Law (Cons. Laws, ch. 24) is expressly made applicable only to actions under sections 50-b and 50-c, and the action against the city was properly brought under section 50-a of the General Municipal Law and section 244 of the Second Class Cities Law (Cons. Laws, ch. 53). (Matter of Evans v. Berry, 262 N. Y. 61; Ottmann v. Village of Rockville Centre, 273 N. Y. 205; Rothman v. City of New York, 261 N. Y. 596; Miller v. Town of Irondequoit, 243 App. Div. 240; Schwartz v. City of New York, 25 N. Y. Supp. [2d] 964; Berger v. City of New York, 260 App. Div. 402.) The service on the police officer of a summons with the notice of intention to sue was a compliance with section 50-c of the General Municipal Law. (Brehm v. City of New York, 104 N. Y. 186; Burns v. Lopez, 256 N. Y. 123; Mahar v. Harrington Park Villa Sites, 204 N. Y. 231; Neuchatel Asphalte Co. v. Mayor, 155 N. Y. 373; Merz v. City of Brooklyn, 33 N. Y. St. Repr. 577; 128 N. Y. 617.) Even if it be held that the plaintiff has not complied with section 50-c the complaint should not be dismissed as against the city, but only as against the individual defendant. (McIntosh v. Ensign, 28 N. Y. 169; Stedeker v. Bernard, 102 N. Y. 327; Alaska Banking & Safe Deposit Co. v. Van Wyck, 146 App. Div. 5; Shultz v. United States F. & G. Co., 134 App. Div. 260; Lawton v. Partridge, 111 App. Div. 8; Civ. Prac. Act, § 192.)
    P. Sidney Hand for respondents.
    The plaintiff is subject to the limitations contained in sections 50-b and /or 50-c of the General Municipal Law and the action of the Appellate Division in reversing the judgment and dismissing the complaint was correct. (Derlicka v. Leo, 281 N. Y. 266; Winter v. City of Niagara Falls, 190 N. Y. 198; Babcock v. McCaffrey, 165 Misc. Rep. 103; Reining v. City of Buffalo, 102 N. Y. 308; Circle Cab Corp. v. Rizzuto, 162 Misc. Rep. 547.) The service of the summons at the same time with the alleged notice of claim and intention to sue on the police officer, one of the defendants in the action, was not a compliance with section 50-c of the General Municipal Law. (Threat v. City of New York, 159 Misc. Rep. 868; New York Times Co. v. Sun Printing & Pub. Assn., 204 Fed. Rep. 586; Matter of Keep, 241 App. Div. 556; 266 N. Y. 583; Casey v. City of New York, 217 N. Y. 192; Hill v. Board of Supervisors, 119 N. Y. 344; Levbard v. Travelers Ins. Co., 257 App. Div. 852; Hirschback v. Ketchum, 5 App. Div. 324; Grosso v. Holbrook, Cabot & Daly Constr. Co., 102 App. Div. 49.)
   Loughran, J.

On December 6, 1938, plaintiff while crossing Erie Boulevard West in the city of Syracuse was struck by an automobile owned by the city and operated by one of its police officers — Luebberman — who then and there was acting in the discharge of his duties and within the scope of his employment. Judgment for damages so suffered by the plaintiff was entered in his favor on the verdict of a jury against the city and Luebberman. The Appellate Division reversed this judgment and dismissed the complaint upon questions which the plaintiff now brings to this court for review.

At the time here in issue article 4 of the General Municipal Law (Cons. Laws, ch. 24) made these provisions:

§ 50-b. Municipal liability for negligent operation of vehicles. Every city, town and village, notwithstanding any inconsistent provisions of law, general, special or local or any limitation contained in the provision of any city charter, shall be liable and shall assume the liability for the negligence of a person duly appointed by the governing board or body of the municipality, or by any board, body, commission or other officer thereof, in the operation of a municipally owned vehicle upon the public streets and highways of the municipality in the discharge of a statutory duty imposed upon such person or municipality, provided the appointee at the time of the accident or injury was acting in the discharge of his duties and within the scope of his employment. Every such appointee shall, for the purpose of this section, be deemed an employee of the municipality, notwithstanding the vehicle was being operated in the discharge of a public duty for the benefit of. all citizens of the community and the municipality derived no special benefit in its corporate capacity.

“ § ■ 50-c. Municipal liability for negligent operation of certain vehicles in the performance of duty by policemen and firemen. Every city, town and village, notwithstanding any inconsistent provision of law, general, special or local or the limitation contained in the provisions of any city charter, shall be liable for, and shall assume the liability to the extent that it shall save harmless any duly appointed policeman or fireman of the municipality for, the negligence of such appointee in the operation of a vehicle upon the public streets or highways of the municipality in the discharge of a statutory duty imposed upon such appointee or municipality, provided the appointee at the time of the accident, injury or damages complained of, was acting in the performance of his duties and within the scope of his employment. * * * No action or special proceeding instituted pursuant to the provisions of section fifty-b or fifty-c of this chapter, shall be prosecuted or maintained against the municipality and appointee, unless it shall appear by and as an allegation in the complaint or the moving papers that at least thirty days have elapsed since the demand, claim or claims upon which such action or special proceeding is founded were presented to the comptroller, or corresponding officer, of said municipality and the appointee for adjustment, and that adjustment or payment thereof has been neglected or refused for thirty days after such presentment; * * * ”

Plaintiff failed to present to the defendant Luebberman any claim or demand in the manner thus prescribed. This omission was held by the Appellate Division to be fatal to the maintenance of the action against either defendant. For that reason the complaint was dismissed upon the merits.

Municipal corporations,” said the Appellate Division, never consented to accept liability for the negligence of their agents, officers, employees or appointees committed while in the discharge of purely governmental functions until the enactment of section 50-c of the General Municipal Law and that section gives no cause of action against the municipality itself for such torts.” (260 App. Div. 557, 558.) This pronouncement, as we apprehend, was an inadvertence. Section 50-c was not the first instance of withdrawal from municipal corporations of their governmental immunity from liability for the torts of their employees. Section 50-c came into being in 1936. (L. 1936, ch. 323.) In 1929 the Legislature added to the Highway Law (Cons. Laws, ch. 25, as section 282-g) these provisions:

“ Municipal liability for negligent operation of vehicles. Every city, town and village shall be liable for the negligence of a person duly appointed by the governing board or body of the municipality, or by any board, body, commission or other officer thereof, to operate a municipally owned vehicle upon the public streets and highways of the municipality in the discharge of a statutory duty imposed upon the municipality, provided the appointee at the time of the accident or injury was acting in the discharge of Ms duties and within the scope of his employment. Every such appointee shall, for the purpose of this section, be deemed an employee of the municipality, notwithstanding the vehicle was being operated in the discharge of a public duty for the benefit of all citizens of the community and the municipality derived no special benefit in its corporate capacity.” (L. 1929, ch. 466.)

When section 50-c was enacted as part of article 4 of the General Municipal Law in 1936, the foregoing text of section 282-g of the Highway Law was re-enacted as section 50-a of the same article. Nobody denies that under section 50-a this action in its present shape would have been maintainable against the city as sole defendant. (See Garrett v. City of Schenectady, 268 N. Y. 219.) Though Luebberman and the city were joint wrongdoers, each of them was severally as well as jointly hable for the whole of the plaintiff’s damages and the city moreover was bound to indemnify Luebberman in respect thereof. Section 192 of the Civil Practice Act provides: “No action or special proceeding shall be defeated by the nonjoinder or misjoinder of parties. New parties may be added or substituted and parties misjoined may be dropped by order of the court at any stage of the cause as justice may require.” Long before this provision was adopted the law had been that, “ The mere joinder of too many persons as defendants, when there is no misjoinder of subjects, is not a ground of demurrer by any one of them against whom the complaint sets forth a good cause of suit.” (New York & New Haven R. R. Co. v. Schuyler, 17 N. Y. 592, 603, 604.) The actual controversy, therefore, comes round to whether the content of this record requires us to say that the plaintiff cannot now drop Luebberman, for whose joinder as a codefendant there was no good reason to begin with.

At the close of the case, the trial judge reserved decision on the motions of the defendants for a dismissal of the complaint on the ground of plaintiff’s non-compliance with section 50-c. The issue as to the liability of the defendant city was then left by the judge to the jury in this way: “ Now, just a word as to the City of Syracuse. Under the General Municipal Law of this State, liability is imposed upon a municipality, such as the City of Syracuse, for the negligent operation of an automobile engaged in the city service, such as this was in this case. If you should find that Mr. Luebberman was negligent in the manner in which he operated the car in question on the night in question, and was responsible for the damages by reason of that negligent operation, then you would likewise say that the city was negligent and your verdict would be against both the city and Mr. Luebberman.” So far as the liability of the defendant city was concerned, this part of the charge of the trial judge was a correct definition of the consequence of the foregoing provisions of section 50-a. Neither in his complaint nor in the notice of claim which he served upon the defendant city did the plaintiff make mention of section 50-c, while the facts stated in both the complaint and the notice entitled him to invoke section 50-a.

When decision was reserved on the defendants’ motions, counsel on all sides consented that the trial judge should dispose of the case after the jury .comes in with their verdict, with the same force and effect as if the jury were present and carrying out the direction of the court.” So — for all that now appears — effect may yet be given to the valid verdict against the defendant city, upon appropriate application to the Trial Term.

Plaintiff has not made the point that the defendant Luebberman on his part was not entitled to more than a dismissal of the complaint as on a nonsuit. (Cf. McCammon v. Kaiser, 218 N. Y. 46.)

As to the defendant city of Syracuse, the judgment should be reversed and the action against that defendant remitted to the Trial Term for further proceedings in accordance with this opinion, with costs in all courts to the appellant to abide the event. As to the defendant Hyacinth J. Luebberman, the judgment should be affirmed, without costs. (See Cohen, Powers of the New York Court of Appeals, § 171.)

Lehman, Ch. J., Finch, Rippey, Lewis, Conway and Desmond, JJ., concur.

Judgment accordingly.

       Laws of 1940, chapter 687, amended sections 50-a and 50-b by substituting for the phrase “ upon the public streets and highways of the municipality ” the broader phrase_,“ within the state.”


author: Rippey, J.

text:
    Nasaba Corporation, Appellant, v. Harfred Realty Corporation et al., Respondents.
    Argued November 17, 1941;
    decided January 15, 1942.

      Herman A. Benjamin for appellant.
    Plaintiff’s cause of action accrued in June of 1940. (Pitcher v. Sutton, 238 App. Div. 291; Buttles v. Smith, 281 N. Y. 226; McKenzie v. Wappler Electric Co., 215 App. Div. 336; Hadlock v. Eric, 23 Fed. Supp. 692; Schmidt v. Merchants Despatch Trans. Co., 270 N. Y. 287; Tierney v. Ruppert, 150 App. Div. 863; Schreyer v. Scott, 134 U. S. 405; Decker v. Decker, 108 N. Y. 128.) The action is not one to recover upon a liability -created by statute. (Civ. Prac. Act, § 48 [2]; O’Brien v. East River Bridge Co., 161 N. Y. 539.) If the complaint be deemed founded on article 10 of the Debtor and Creditor Law (Cons. Laws, ch. 12) it is not barred by the statute of limitations. (Hadlock v. Eric, 23 Fed. Supp. 692; O’Brien v. Fitzgerald, 143 N. Y. 377; Bell v. Merrifield, 109 N. Y. 202; Stark v. Howe Sound Co., 148 Misc. Rep. 686; Roulston v. Warner, 134 Misc. Rep. 459.)

      Israel Hoffman and Louis I. Hochstein for respondents*
    If the complaint is founded on section 15 of the Stock Corporation Law (Cons. Laws, ch. 59) or section 60 of the General Corporation Law (Cons. Laws, ch. 23) then the actions are barred by the six-year statute of limitations computed from the date that executions on plaintiff’s judgments were returned unsatisfied. (Shepard Co. v. Taylor Publishing Co., 234 N. Y. 465.) If the complaint is founded on article 10 of the Debtor and Creditor Law (Cons. Laws, ch. 12) then the actions are barred by the ten-year statute of limitations provided for in section 53 of the Civil Practice Act, computed from the date the transactions complained of were effected. (Buttles v. Smith, 281 N. Y. 226; Hadlock v. Eric, 23 Fed. Supp. 692; American Surety Co. v. Conner, 251 N. Y. 1.) A mere allegation in the complaint that the acts charged were committed with intent to hinder, delay and defraud plaintiff of its claim where proof of fraud is not essential to recovery upon the cause of action founded on statutory liability or on constructive fraud, does not convert the cause of action into one to procure a judgment on the ground of fraud so as to bring the case within the provisions of section 48 (5) of the Civil Practice Act, and thus avoid the bar of the statute of limitations. (Brick v. Cohn-Hall-Marx Co., 276 N. Y. 259; Hearn 45th St. Corp. v. Jano, 283 N. Y. 139; Murtha v. Curley, 90 N. Y. 372; Ochs v. Wood, 221 N. Y. 335.)
   Rippey, J.

Before answer and without denial by affidavit of essential allegations of the complaint upon proof of which, uncontested, plaintiff may recover, defendants moved at Special Term, upon the authority of rule 107 of the Rules of Civil Practice, to dismiss the complaint on the ground that “ the causes of action set forth in the complaint did not accrue within the time limited by law for the commencement of the said actions.” There was nothing in the moving papers to indicate upon what statute of limitations defendants relied as a bar to the prosecution of the action. The motion was denied at Special Term.

Upon appeal to the Appellate Division from the order denying the motion, the order was reversed and the motion to dismiss the complaint granted upon a holding that on whatever theory the complaint might be sought to be sustained the causes of action arose more than ten years prior to the commencement of this action.

Two causes of action were set up in the complaint. It is alleged that the plaintiff duly recovered and docketed judgments on January 3, 1931, in the office of the clerk of the county of New York for $3,303.22 against the defendant Harfred Realty Corporation and for $5,482.68 against the defendant 4510 Broadway Corporation upon which executions were duly issued on January 6, 1931, and thereafter returned wholly unsatisfied and that such judgments remain wholly. unpaid and unsatisfied. Those judgments arose upon obligations of the judgment debtors for loans made prior to August 1, 1928, by the National Safety Bank & Trust Company of New York and duly assigned and transferred to the plaintiff on October 25, 1930. Prior to the docketing of the aforesaid judgments the judgment debtors were the owners of real estate in the city of New York which the defendant Isidore Wolff, who was an officer and director and the dominant stockholder of and controlled the debtor corporations, Coronet Properties, Inc., W. S. R., Inc., Verplanck Realty Corporation, and Montan Realty Corporation and the sole stockholder and owner of the last two named corporations, caused to be transferred and the proceeds of the sale thereof so manipulated and disposed of by the said corporations to himself and his wife, the defendant Annie Wolff, that the debtor corporations were rendered wholly insolvent and without property from which the judgments might be collected. The defendant corporations refused to pay their debts and obligations when due. It is alleged that those properties and proceeds of their sale in truth belonged to the debtor corporations, were not exempt from liability for their debts and would have been subject to the lien of executions. It is further alleged “ that the said transactions * * * were for unfair, insufficient and inadequate considerations, with intent to and as part of a concerted plan and conspiracy to hinder, delay and defraud plaintiff creditor of its said claims ” and that the plaintiff did not discover or ascertain the facts as to such transactions until about June, 1940, when the same were revealed by reason of a certain action had in this court entitled Sidney Ziskind etc. v. Fred Budinger et al.” The plaintiff sues to recover damages only for the fraud of the defendants as a result of which it was unable to collect its claims and the resulting judgments.

This action was commenced December 17, 1940. As above stated, the fraud which furnishes its basis occurred in 1929. Executions on the judgments were returned unsatisfied January 6, 1931. The fraud was not discovered by plaintiff until June, 1940. If it appears from the face of the complaint that the causes of action alleged owe their existence exclusively to statutory provisions (Debtor & Creditor Law, art. 10 [Cons. Laws, ch. 12]; Stock Corporation Law, § 15 [Cons. Laws, ch. 59], or General Corporation Law, § 60, subd. 5 [Cons. Laws, ch. 23]) or to constructive fraud as distinguished from actual fraud, applicable statutes of limitation of time within which the action must be commenced bar prosecution (Buttles v. Smith, 281 N. Y. 226; Hearn 45 St. Corp. v. Jano, 283 N. Y. 139). But if “ the gravamen of the cause of action is the right of the plaintiff to recover judgment compensating him for injury sustained as a result of fraud * * * the period of limitation would be six years after the discovery of the fraud (Civ. Prac. Act, § 48, subd. 5). It is well settled that section 48, subdivision 5, applies only to cases of actual fraud, express or implied ” (Hearn 45 St. Corp. v. Jano, supra, p. 141). The allegations contained in the complaint, which here with all reasonable inferences to be drawn therefrom must be deemed to be true, quite clearly show that the action is not to set aside or to declare the conveyances of the debtors’ properties fraudulent nor to procure application of the real properties conveyed to the payment of the judgments, nor is equitable relief of any kind sought. Plaintiff does not seek to follow the funds and property of the debtor corporations into the hands of any of the defendants. Thus if an analysis of the complaint establishes that, causes of action for actual fraud are alleged, it was error to dismiss the complaint.

Actual fraud, as distinguished from constructive fraud, involves the element of deceit practiced upon the party defrauded (Studer v. Bleistein, 115 N. Y. 316, 324). Quoting Story on Equity Jurisprudence, section 186 (14th ed. § 267), Bouvier (Law Dictionary, p. 1304) says: “Actual or positive fraud includes cases of the intentional and successful employment of any cunning, deception, or artifice, used to circumvent, cheat, or deceive another.” The fraud which is the gravamen of the actions does not lie alone in the execution and delivery of the written documents which are matters of public record. Rather, it lies, as alleged or clearly to be implied, in the deliberately secret, deceitful, undisclosed and fraudulent manipulation and transfer without consideration of the proceeds from the sale of the properties of the judgment debtors to an officer of the several corporations and to his wife with intent and dishonest and fraudulent purpose and design to make it thereby impossible for plaintiff to recover its judgments out of the debtors’ properties and with the effect that such recovery became impossible. An intent and design is alleged or clearly and necessarily inferable from the complaint to misrepresent or conceal a material fact, to produce a false impression in order to mislead the plaintiff or to cheat it and therein lies the deceit which is the material constituent of actual fraud (Willink v. Vanderveer, 1 Barb. 599; Forker v. Brown, 10 Misc. Rep. 161, 162, 163). It is not claimed that affirmative 1 and false representations were made with intent to cheat and defraud plaintiff upon reliance on which plaintiff was injured. The defendants are charged with fraudulent acts which they kept secret and concealed from plaintiff to its detriment and loss with intent that plaintiff should be misled. Concealment with intent to defraud of facts which one is duty-bound in honesty to disclose is of the same legal effect and significance as affirmative misrepresentations of fact (Forker v. Brown, supra). That plaintiff was misled to its loss through the deliberate concealment of material facts is alleged in the complaint. Common law causes of action at law for damages for actual fraud, as distinguished from constructive fraud, appear to be sufficiently set up in the complaint and the only recovery plaintiff seeks is compensation for the injuries sustained because of that frauc

The statute of limitations is an affirmative defense an must be pleaded (Matter of Weil v. Rothschild, 251 App. Div. 639, 641; Locke v. Pembroke, 280 N. Y. 430, 434). It may be that when all the facts and circumstances are dis-. closed the causes of action for actual fraud may not be sustained or the evidence may be insufficient to sustain the claim of the plaintiff that the circumstances of the fraud were not known to it more than six years prior to the date of commencement of the action. Perhaps the facts and circumstances as finally established may indicate other defenses but as to those we are not here to speculate. We take the complaint as we find it and if it does not indicate upon its face that the prosecution of the causes of action is barred by some statute of limitations, it must, at this point, be sustained. At least, where the complaint may be so construed as to state causes of action the prosecution of which is not barred by any statute of limitations, speculation as to what other cause of action may be sufficiently alleged to warrant recovery thereunder which may be barred by some statute of limitations should not be indulged in the absence of facts appearing upon the trial after the defenses upon which defendants rely have been presented by proper pleading and proof (Schenck v. State Line Telephone Co., 238 N. Y. 308; Clark v. Kirby, 243 N. Y. 295).

The judgment of the Appellate Division should be reversed and the order of the Special Term affirmed,1 with costs in this court and in the Appellate Division.

Lehman, Ch. J., Loughran, Finch, Lewis, Conway and Desmond, JJ., concur.

Judgment accordingly.


text:
    In the Matter of Agnes O’Connell, Appellant and Respondent, against Paul J. Kern et al., as Commissioners of the Municipal Civil Service Commission of the City of New York, et al., Respondents and Appellants.
    Argued November 24, 1941;
    decided January 15, 1942.

      Irving H. Saypol and Leo Roller for petitioner, appellant and respondent.
    This proceeding is not barred by the provisions of section 1286 of the Civil Practice Act. (Matter of Walsh v. LaGuardia, 269 N. Y. 437.) Petitioner has not been guilty, of laches. (Matter of Cornehl v. Kern, 260 App. Div. 35.) Petitioner is entitled to back pay. (Cons. Laws, ch. 7, § 23; Matter of Wolfson v. Cruise, 172 Misc. Rep. 577; 258 App. Div. 790; 282 N. Y. 701.)

      William C. Chanter, Corporation Counsel (Paxton Blair and Charles F. Murphy of counsel), for Municipal Civil Service Commission et al., respondents and appellants.
    The transfer of an employee of the Register’s office to perform the same work as was done by petitioner as a clerk in the City Clerk’s office, and the latter’s acquiescence in the transfer, constituted a determination adverse to petitioner by the Civil Service Commission and by the City Clerk, and started running the statute of limitations set forth in section 1286 of the Civil Practice Act. (Matter

      of Woods v. Finegan, 246 App. Div. 271; People ex rel. Davison v. Williams, 213 N. Y. 130; Schmidt v. Merchants Dispatch Transportation Co., 270 N. Y. 287; Wakulaw v. State Bank, 214 App. Div. 673; Matter of DeLack v. Greene, 170 Misc. Rep. 309; Matter of Hall v. Leonard, 260 App. Div. 591; 285 N. Y. 719; Matter of Insley v. Shanahan, 173 Misc. Rep. 33; Matter of Weinstock v. Hammond, 270 N. Y. 64; Legg v. Brandt, 261 App. Div. 319; People ex rel. Young v. Collis, 6 App. Div. 467; People ex rel. Connolly v. Board of Education, 114 App. Div. 1; 187 N. Y. 535; People ex rel. Reith v. Polk, 138 App. Div. 497.) The Dowd proceeding was not a class suit so as to toll the statute as to the present petitioner, since he was merely purporting to assert a right personal to him, under section 31-b of the Civil Service Law (Cons. Laws. ch. 7). (Brinckerhoff v. Bostwick, 99 N. Y. 185; Bouton v. Van Buren, 229 N. Y. 17; Kovarsky v. Brooklyn Union Gas Co., 279 N. Y. 304; Matter of Conway v. Carey, 283 N. Y. 122.) The petitioner was rightly denied her back pay. (Matter of Barmonde v. Kaplan, 266 N. Y. 214.)
   Rippey, J.

On June 30, 1939, petitioner, along with others including the defendant Dowd, was, through no delinquency or misconduct on her part, suspended without pay from the competitive civil service position she then held as clerk, grade 3, in the Marriage License Bureau in the office of the City Clerk of the City of New York, and her name was thereupon, with those of the others then similarly suspended with her, entered upon a preferred list for the position last held by her or any other position having the same or similar requirements for entrance as provided in section 31 of the Civil Service Law (Cons. Laws, ch. 7). It then became the duty of Municipal Civil Service Commission to certify from such list the names of persons for reinstatement, in the order of their original appointment, before making certification from any other list, for such position or similar position and no other name could be certified from any other list until such preferred list had been exhausted (Civil Service Law, § 31). Only questions of law are involved in this proceeding. The facts essential to a determination are not in dispute.

Petitioner received her original appointment on April 20, 1931, and defendant Dowd was originally appointed on March 10, 1932. When the preferred list was established, four persons were ahead of her on the list. Of those, two were reinstated by order of the courts as of March 15, 1940 (Matter of Wolf son v. Cruise, 282 N. Y. 701). The other two were retired on pension on July 1, 1939, under the provisions of section B3-35.0 of the Administrative Code (L. 1937, ch. 929) and had not thereafter re-erttered the city service up to the time this proceeding was commenced.

On July 16, 1939, one Gladys B. Eddy, who was holding the classified civil service position of typewriter copyist in the Register’s office of Kings county, was transferred to the Brooklyn Marriage License Bureau of the City Clerk’s office and assigned to duties formerly performed by petitioner and by defendant Dowd without legal authority in view of the then existing preferred list for reinstatement and the provisions of the Civil Service Law. In November, 1939, Dowd instituted proceedings for reinstatement. As a result, by consent, he was reinstated to his former position on December 15, 1939, without the knowledge or consent of the petitioner and in violation of her priority rights to the appointment.

The defense is not that the petitioner was not entitled to priority in reinstatement at the time that Dowd was reinstated as against Dowd. Rather, it is based on the contentions that (1) her right to- reinstatement accrued at the time Miss Eddy was transferred to the Marriage License Bureau of Brooklyn and consequently she is barred from prosecuting this proceeding by the four months’ limitation prescribed by article 78, section 1286, of the Civil Practice Act, and (2) she was guilty of gross and inexcusable laches. This proceeding was commenced on April 11, 1940. She demanded reinstatement and it was refused subsequent to December 15, 1939. She first learned of Dowd’s reinstatement in January, 1940. She had no knowledge of or information concerning the transfer of Miss Eddy, nor did the transfer itself or anything else that occurred charge her with knowledge. No claim is made to the contrary. She was not a party to the Dowd proceeding nor did she have any knowledge of or information concerning it at any time. She neither consented to nor acquiecsed in the Eddy transfer nor waived her rights to priority of reinstatement because of that transfer or the reinstatement of Dowd. There is nothing to indicate that Miss Eddy was classified as a clerk, grade 3, nor was she on the preferred list. At most, petitioner was required only to watch the list for violation of her priority rights to reinstatement, in the absence of proof of notice and knowledge, or of facts charging her with knowledge, of an opening for reinstatement to her former position. She was eligible to reinstatement at the time Dowd was taken back.

The Appellate Division has correctly held that her right to prosecute this proceeding accrued when Dowd was reinstated and she had made her demand for reinstatement and it had been refused. In the circumstances here, petitioner had the right by mandamus to compel her reinstatement since it appears that another person was employed in the position to which she was entitled (Civil Service Law, § 31-b [see now § 31-a]). She was ahead of Dowd on the preferred fist. She had a clear legal right to compel the appointing power to reinstate her (Civil Service Law, §§ 31, 31-b; see Matter of Wolfson v. Cruise, supra). Where the relief sought is “to compel performance of a duty specifically enjoined by law ” the proceeding must be instituted “ within four months * * * after the respondent’s refusal, upon the demand of the petitioner or the person whom he represents, to perform his duty ” (Civ. Prac. Act, § 1286). Under the express terms of the statute the proceeding was instituted within the four months prescribed. Under all the circumstances of the case, petitioner cannot be charged with laches so as to bar recovery. This is particularly so since she commenced the proceeding within the time prescribed by law.

The Appellate Division omitted to provide for payment of the salary to which petitioner would have been entitled had she been reinstated to the vacancy as the law required. She has received no other compensation for services since her suspension. She is entitled to salary from December 15, 1939, at the rate of $2,250 per year, that being the salary she was receiving at the time she was suspended from her position (Civil Service Law, § 31-c [see now § 31-b]).

The order of the Appellate Division should be modified in accordance with this opinion and, as so modified, affirmed, with costs to the petitioner.

Lehman, Ch. J., Loughran, Pinch, Lewis, Conway and Desmond, JJ., concur.

Ordered accordingly.


text:
    Hovsep Pushman, Appellant, v. New York Graphic Society, Inc., et al., Respondents.
    Argued December 9, 1941;
    decided January 15, 1942.

      J. Francis Hayden and Leo T. Kissam for appellant.
    The plaintiff’s original property right in his painting as a physical object, and his artistic property or common-law copyright therein were separate. and distinct. A conveyance of the physical property did not imply a transfer of the artistic property or common-law copyright. (Werckmeister v. American Lithographic Co., 142 Fed. Rep. 827; Press Pub. Co. v. Monroe, 73 Fed. Rep. 196; Jewelers’ Mercantile Agency v. Jewelers’ Weekly Publishing Co., 155 N. Y. 241; Oertel v. Wood, 40 How. Pr. 10; Harper & Bros. v. Donohue &, Co., 144 Fed. Rep. 491; Parton v. Prang, 18 Fed. Cas. 1273; Drone on Copyright [1879], p. 106; Werckmeister v. Springer Lithographing Co., 63 Fed. Rep. 808; Dielman v. White, 102 Fed. Rep. 892; Yardley v. Houghton Mifflin Co., 25 Fed. Supp. 361; 108 Fed. Rep. [2d] 28; Stephens v. Cady, 14 How. 528; Woolsey v. Judd, 11 How. Pr. 49.) The painting is not in the public domain. (Werckmeister v. Pierce & Bushnell Mfg. Co., 63 Fed. Rep. 445; Bobbs-Merrill Co. v. Straus, 147 Fed. Rep. 15; Werckmeister v. American Lithographic Co., 134 Fed. Rep. 321; American Tobacco Co. v. Werckmeister, 146 Fed. Rep. 375; 207 U. S. 284; Patterson v. Century Productions, Inc., 19 Fed. Supp. 30; 93 Fed. Rep. [2d] 489; Daly v. Walrath, 40 App. Div. 220; Jewelers’ Mercantile Agency v. Jewelers’ Weekly Pub. Co., 155 N. Y. 241; Palmer v. DeWitt, 47 N. Y. 532; Dielman v. White, 102 Fed. Rep. 892; Yardley v. Houghton Mifflin Co., 25 Fed. Supp. 361; 108 Fed. Rep. [2d] 28.)

      George M. Simon and Robert J. Burton for American Artists Professional League, Inc., et al., amici curiæ.

    An artist has a common law copyright in all of his works which is perpetual unless rights of reproduction in a work are expressly granted by the artist. (Wheaton v. Peters, 8 Pet. 591; Caliga v. Inter Ocean Newspaper Co., 215 U. S. 182; Tribune Co. v. Associated Press, 116 Fed. Rep. 126; Stephens v. Cady, 14 How. 529; Werckmeister v. American Lithograph Co., 134 Fed. Rep. 321; Bartlett v. Crittenden, 2 Fed. Cas. 967; Bobbs-Merrill Co. v. Straus, 210 U. S. 339; Parton v. Prang, 18 Fed. Cas. 1273.) The transfer of the physical manuscript or other unpublished work does not of itself pass the common law copyright therein. (Stephens v. Cady, 14 How. 529; O’Neill v. General Film Co., 171 App. Div. 854; Yardley v. Houghton Mifflin Co., 108 Fed. Rep. [2d] 28; National Cloak & Suit Co. v. Kaufman, 189 Fed. Rep. 215; Tobani v. Fischer, 98 Fed. Rep. [2d] 57; Moore v. Ford Motor Co., 28 Fed. Rep. [2d] 529; Bartlett v. Crittenden, 2 Fed. Cas. No. 967; Baker v. Libbie, 97 N. E. Rep. 109; Jewelers’ Merc. Agency v. Jewelers’ Weekly Pub. Co., 155 N. Y. 241.) The trial court erred in holding that the sale of the plaintiff’s work to the university constituted an abandonment and a publication. (Werckmeister v. American Lithographic Co., 134 Fed. Rep. 321; Baker v. Libbie, 97 N. E. Rep. 109; Universal Film Mfg. Co. v. Copperman, 212 Fed. Rep. 301; Coliga v. Inter Ocean Newspaper Co., 215 U. S. 182; Tribune Co. v. Associated Press, 116 Fed. Rep. 126; Jewelers’ Merc. Agency v. Jewelers’ Weekly Pub. Co., 155 N. Y. 241.)

      James G. Holland and Ernest E. Wheeler for respondents.
    The sale by an artist of one of his paintings without express reservations vests in the purchaser all rights of ownership, including the right to copy or reproduce and to sell the reproductions. (Parton v. Prang, 18 Fed. Cas. 1273; Werckmeister v. Pierce & Bushnell Mfg. Co., 63 Fed. Rep. 445; Dielman v. White, 102 Fed. Rep. 822; Gerlach-Barklow Co. v. Morris & Bendien, 23 Fed. Rep. [2d] 159.) Grand Central Galleries could and did sell the reproduction rights. (Groat v. Gile, 51 N. Y. 431; Higgins v. Moore, 34 N. Y. 417.) The painting is in the public domain. (Dielman v. White, 102 Fed. Rep. 822; American Tobacco Co. v. Werckmeister, 207 U. S. 284.)
   Desmond, J.

Plaintiff, who is an artist, brought this suit in 1940 for an injunction to enjoin the defendants from making reproductions of a painting executed by plaintiff and which he had/sold outright to the University of Illinois in 1930, for $3,600. This painting was not copyrighted under the copyright laws of the United States.. Special Term denied the injunction and dismissed the complaint on the merits, ¿writing an opinion and decision in which it is said that the only question in the case is as to whether an artist after giving an absolute and unconditional bill of sale of his painting, still retains such a common law copyright in it as to be able to prevent commercial reproduction., Appellate Division, First Department, one of the justices dissenting, affirmed without opinion.

Plaintiff, Pushman, has an international reputation as an artist, for his execution of still life subjects in color. He has been painting for fifty years; his original works command substantial prices and many of them are held by museums and collectors. In 1930 he completed "the painting, entitled “ When Autumn is Here,” which is the subject of this action. He turned the painting over for sale to Grand Central Art Galleries which seems to be a mutual organization of artists for sale of their works, as agent for them. All the evidence is that the plaintiff did not state that he was seeking to reserve reproduction rights in his painting and that he made no such reservation at any time up to and including the sale to the University. There is evidence here of a general practice of this gallery whereby whenever it sold a painting to a purchaser who was in the reproduction business, which of course would not include the University, the Gallery negotiated a separate written agreement between the artist and the purchaser covering reproduction rights. Pushman never expressly authorized the Gallery to sell the rights to reproduce this painting, nor did he forbid it. Shortly after this painting was sent to the Gallery for sale, the manager of the Gallery took it and a number of others to the University of Illinois where he exhibited them publicly for sale. The University chose seven of these paintings, including the one by plaintiff here in suit. The University would not pay plaintiff’s asking price of $5,000 and so the Gallery sold it to the University for $3,600. All this took place in 1930. The painting remained at the University until 1940 when the University sold to the defendant, New York Graphic Society, Inc., the right to make reproductions. The trial proofs had been made by defendants and the reproductions were about to be put on the market when plaintiff learned of the project and brought this suit.

Both parties bear down hard off the leading case of Parton v. Prang (18 Fed. Cases, No. 10784). That suit, very similar to this, was decided on the pleadings. The artist plaintiff Parton, whoj^was seeking, like plaintiff here, to enjoin the reproduction of one of his paintingsby a defendant who had bought the painting from a dealer, lost the suit. True, it was argued in that case that the artist had lost his rights to object because of certain negotiations with the defendant, but the court, leaving that question undecided, held positively that “ if the sale was an absolute and unconditional one, and the article was absolutely and unconditionally delivered to the purchaser, the whole property in the manuscript or picture passes to the purchaser, including the right of publication, unless the same is protected by copyright, in which case the rule is different ” (18 Fed. Cases at page 1278). In Parton v. Prang there was cited Turner v. Robinson (10 Irish Chancery Rep. 121, 143), which case is considered authoritative and wherein it is said: it would be a waste of time to add more than that the copyright is incident to the ownership, and passes at the Common Law with a transfer of the work of art.” In Weil on Copyright Law, at page 116, the author cites the Prang case for the proposition that prima facie a transfer of a work of art “ will be deemed to be intended to carry the common law copyright with it unless a contrary intention be manifested.” (in Drone on The Law of Property in Intellectual Productions, it is said at page 106 that the unconditional sale of a painting is a transfer of the entire property in it.” In Dam v. Kirk La Shelle Co. (175 Fed. Rep. 902, 904), in this circuit (not in point on the facts) it is said that a sale or assignment without reservation would seem necessarily to carry all the rights incidental to ownership.”

The most recent case called to our attention is Yardley v. Houghton Mifflin Co. (108 Fed. Rep. [2d] 28, Second Circuit; certiorari denied, 309 U. S. 686). That case concerns a painting copyrighted by the artist. In building a public school in New York city, the contractor was obligated to furnish a mural painting for the wall of one of the rooms. The artist was selected by the city but paid by the contractor. Nothing was said in the contract as to who was to own the copyright but when the painting was actually installed it had already been copyrighted by the artist.; The court held that in the absence of any reservation, the copyright passed to the city and that the city owned and could sell the right to reproduce. I do not believe that this case is distinguishable because that painting was commissioned by the purchaser, or because the purchaser was a municipal corporation.

We are, of course, concerned here with the so-called common law copyright, not statutory copyright. This common law copyright is sometimes called the right of first publication. There is no question but that it is a different and independent right from the usual right of ownership of an article of personal property^ (Stephens v. Cady, 14 How. [U. S.] 528, 530). The Stephens case quotes Lord Mansfield as saying it is “ a property in notion, and has no corporeal tangible substance.” There is no doubt that in New York State the separate common law copyright or control of the right to reproduce belongs to the artist or author until disposed of by him and will be protected by the courts (Oertel v. Wood, 40 How. Prac. 10; Howitt v. Street & Smith Publications, Inc., 276 N. Y. 345, 350). Such is the holding of the case of Werckmeister v. Springer Lithographing Co. (63 Fed. Rep. 808), which says (at p. 811) that the painting itself may be transferred without a transfer of the common law rights of publishing or restricting publication, and that the ownership of the painting itself does not necessarily carry with it the common law copyright. ¡ The same thing is held in Caliga v. Inter Ocean Newspaper Co. (157 Fed. Rep. 186, 188; affd., 215 U. S. 182). Palmer v. DeWitt (47 N. Y. 532) is not direct authority either way on the case before us.

We are not helped here by the cases which say that an artist’s separate common law copyright does not necessarily pass with the sale of the painting. The question is whether it did pass with the sale of this painting. We think it follows from the authorities above cited that it did so pass and that an artist must, if he wishes to retain or protect the reproduction right, make some reservation of that right when he sells the painting. The Parton case above cited has always been considered as so holding. There are seemingly contrary expressions in some cases, such as the dictum in Stephens v. Cady (14 How. [U. S.] at p. 531), that the right to reproduce will not pass with the manuscript unless included by express words in the transfer.” Appellant cites also other authorities which say that the sale of a work of art does not carry with it the right of reproduction “ unless such was the evident .intent of the parties.” But this begs the question. What was the intent of the parties? The whole tenor of the Prang case, as we read it, is that an ordinary, straight out bill of sale shows an intention to convey the artist’s whole property in his picture. Here there is no substantial proof of a contrary intent.

We are not entering into a separate discussion as to whether by this sale and the public exhibition the artist is to be held to have “ published ” the work so that his common law right is lost. • Special Term so held (see Keene v. Kimball, 16 Gray [Mass.], 545; Baker v. Taylor, Fed. Case No. 782). Nor need we examine into the equities, as did Special Term. Our conclusion is that under the cases and the texts, this unconditional sale carried with it the transfer of the common law copyright and right to reproduce. Plaintiff took no steps to withhold or control that right. The Courts cannot read words of limitation into a transfer which the parties do not choose to usej’ (Dam, v. Kirk La Shelle Co., 175 Fed. Rep. 902, 904).

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

Lehman, Ch. J., Loughran, Finch, Rippey, Lewis and Conway, JJ., concur.

Judgment affirmed.