author: Lehman, J. Pound, Ch. J. (dissenting).

text:
    Liberty Mutual Insurance Company, Respondent, v. George Colon & Co., Inc., Appellant.

      (Argued October 20, 1932;
    decided November 22, 1932.)

      Frederick Mellor for appellant.
    The judgment in the case of the administratrix against the defendant herein is not res adjudícala in this action. (Phoenix Ind. Co. v. Staten Island B. T. By. Co., 251 N. Y. 127; 281 TJ. S. 98; Glaser v. Husite, 232 App. Div. 119; 256 N. Y. 686; Haverhill v. International By. Co., 217 App. Div. 521; 244 N. Y. 582; Syczyk v. Szczerbaniewicz, 233 App. Div. 342; First Nat. Bank v. Shuler, 153 N. Y. 163; St. John v. Fowler, 229 N. Y. 270; Village of Port Jervis v. First Nat. Bank, 96 N. Y. 550; Morette v. Bostwick, 127 App. Div. 701; Pinney v. Geraghty, 209 App. Div. 630.) In this action the plaintiff would be required to prove the freedom of the deceased from contributory negligence which prevents the application of the rule of res adjudicada. (Civ. Prac. Act, § 265; Brustein v. New Amsterdam

      Casualty Co., 255 N. Y. 137; Johnson v. Lutz, 253 N. Y. 124; Exchange Mutual Ind. Ins. Co. v. Central Hudson Gas & El. Co., 243 N. Y. 75; People v. Long Island R. R. Co., 194 N. Y. 130; Johnson v. H. R. R. Co., 49 N. Y. 455; McCluskey v. Cromwell, 11 N. Y. 593; O’Tier v. SeZZ, 252 N. Y. 400; Psota v. Long Island R. R. Co., 246 N. Y. 388; £f. Jo/ro v. Fowler, 229 N. Y. 270.)

      Walter G. Evans, James P. Allen, Jr., and John P. Smith for respondent.
    The provision of section 29 of the Workmen’s Compensation Law creating the new cause of action in favor of the employer or carrier who has made payments to the State Treasurer under subdivisions 8 and 9 of section 15 establishes the relationship of indemnitor and indemnitee between the wrongdoer legally responsible for the employee’s death and the innocent employer or carrier making such payments. (Oceanic Steam Navigation Co. v., - Compañía Transatlántica Española, 144 N. Y. 663; Village of Port Jervis v. First Nat. Bank, 96 N. Y. 550; Van Santen v. Standard Oil Co., 81 N. Y. 171; Dunn v. Uvalde, 175 N. Y. 214; Scott v. Curtis, 195 N. Y. 424; Phoenix Indemnity Co. v. Staten Island R. T. Ry. Co., 251 N. Y. 127; 281 U. S. 98; Grand Rapids Lumber Co. v. Blair, 190 Mich. 518; Travelers Ins. Co. v. Post & McCord, 128 Mise. Rep. 626; Travelers Ins. Co. v. Padula, 224 N. Y. 397; Matter of Petrie, 215 N. Y. 335.) The indemnity action being one to recover damages for causing death, the burden is upon the defendant to prove deceased guilty of contributory negligence, and this issue having been determined in the prior action, the same is binding and conclusive upon the defendant. (Travelers Ins. Có. v. Staten Island R. T. Ry. Co., 134 Mise. Rep. 6.)
   Lehman, J.

The Workmen’s Compensation Law (Cons. Laws, ch. 67) imposes upon the employer and insurance carrier an obligation to pay compensation to the dependents of the employee, or where “ there are no persons entitled to compensation ” to pay into a special fund the sum of $1,000. (§ 15, subds. 8 and 9.) In this case there were no persons entitled to compensation ” because the administratrix of the employee brought suit against the defendant for wrongfully causing the death of the decedent, and the dependents recovered in that action a sum larger than the compensation provided in the statute. The plaintiff consequently was compelled to pay the sum of $1,000 into the special fund and that payment operated to give to the employer a cause of action for the amount of such payment against a person not in the same employ whose negligence or wrong caused the death of the employee. (§ 29.)

The cause of action is created for the purpose of placing upon the person whose negligence or wrong caused the death of a workman the obligation to indemnify the employer or carrier who, because of such death, is required to make payment to the State Treasurer. If by denial or defense interposed in the proceedings under the Workmen’s Compensation Law the carrier could have defeated the claim of payment to the State Treasurer; — if the award was invalid — then the carrier is not entitled to indemnification and has no cause of action against a third party. Even where a carrier could not defeat the claim made in the proceedings under the Workmen’s Compensation Law and the award is valid, it can still obtain indemnification from a third party only by establishing that the third party is hable for causing the death of the employee by its negligence or wrong.

No adjudication can be made that a third party is hable upon a cause of action for indemnification without opportunity afforded to the third party to contest the cause of action asserted against it in regard to every element that enters into that cause of action. (Phoenix Indemnity Co. v. Staten Island R. T. Ry. Co., 251 N. Y. 127; affd., 281 U. S. 98, 108.) In that case the Supreme Court of the United States said: “ In creating the cause of action in order to obtain this indemnification, there was no lack of due process of law, as there was none in the means affirmed by the State for enforcing the liability. In the action to enforce it the appellant, could as the state court has held in the present case, avail itself of any defense which it has or ever had. It has a right to establish, if it can, that there could have been no recovery in the negligence action which it settled, and may test the validity of the awards against the insurance carrier by any defense which the carrier could have interposed, as it was not a party to that proceeding and is not bound thereby.’ ”

The third party defendant in that case was not a party to the proceedings, under the Workmen’s Compensation Law, in which an award was made. It had no right to interpose a defense in those proceedings and we held, therefore, that it was not bound by any adjudication in that proceeding and could still “ test the validity of the awards against the insurance carrier by any defense which the carrier could have interposed.” Here .the defendant’s affirmative defense concedes the validity of the award and does not assert that the carrier could have interposed any defense in the proceedings against it. It does not deny that it has paid a judgment recovered against it for negligence in causing the death of the employee, but asserts in its second defense that the death of the employee occurred by reason of his own negligence.” That issue has already been adjudicated against it in an action to - which it was a party. Because the plaintiff was not a party to that action, the defendant claims the right to litigate that issue anew in this action.

Nothing that was said in Phoenix Indemnity Co. v. State Island R. T. Ry. Co. (supra) lends support to that claim. There the action brought in behalf of the dependents of the deceased employee against the third party was settled and there was no adjudication that the third party was hable. All that we said was that the defendant there had “ a right to establish, if it can, that there could have been no recovery in the negligence action which it settled” (p. 138). Here, as we have said, a judgment was recovered in the negligence action, and it cannot now be contended that " there could have been no recovery ” in that action.

Of course if contributory negligence had not been a defense in that action, or even if the burden of proof upon that issue had been different, there might be sound ground for holding that the defendant might again litigate that issue, but we are agreed that in this action, as in the action in which recovery was had, contributory negligence is an affirmative defense upon which the same defendant had the same burden of proof. The usual rule that in an action to enforce an obligation of indemnity, a judgment in a prior action, establishing the liability of 'the person to whom indemnity is due, is not binding upon the indemnitor unless “ vouched in” to the earlier action, has, of course, no application where the indemnitor is the defendant in the original action. Here the only possible ground for holding that the judgment in the negligence action is not binding upon the defendant is that the plaintiff was not a party to that action.

The general rule is that the estoppel of a judgment must be mutual, and since the judgment is binding only upon the parties to the action, no stranger to the action may assert an estoppel by judgment against a party to the action. There are some well-established exceptions to that rule which are difficult to classify. The problem here presented is perhaps novel. The obligation of the defendant does not arise from contract or from any breach of duty owed to the plaintiff. It is imposed by law as a penalty where a breach of duty to an employee causes the death of such employee. The personal representatives of the deceased employee established in the negligence action brought by them the defendant’s liability to them. May the defendant again assert in this action that it was not liable to them?

Where compensation is awarded to an employee or his dependents the employer or carrier has no right of action against a third party except as such rights are based upon subrogation or assignment of the cause of action against such third party. In such case if the injured workman has brought an action against a third party, an adjudication in that action effectively binds the employer and carrier, though not parties to the action. They must pay the compensation provided by the statute in excess of any recovery by the plaintiff in that action, and no cause of action remains against the third party to which" they are entitled by subrogation or assignment. Only where an award is paid to the State Treasurer because of injury causing death, in which there are no persons entitled to compensation ” does such payment operate to give to the employer or carrier a cause of action in addition to the cause of action of the legal representatives of the deceased. If in such case there are no dependents, the employer or carrier must make the payment required by the statute regardless of the outcome of the action brought by the representatives of the deceased. There it may be argued that the employer or carrier has no connection with the plaintiff in the action and is not bound by any adjudication. The argument fails where there are dependents. Then the adjudication does bind the employer and carrier, though not parties to the action. If it results in a judgment in favor of the third party or a recovery against him which affords a dependent less compensation than is provided by the statute, then the employer or carrier remains liable for the excess and the statute does not" create any cause of action in his favor. If it results in a judgment which does provide full compensation to all dependents, then the employer or carrier comes under an obligation to pay $1,000 to the State Treasurer and may resort to a cause of action, against the third person, created by the Legislature in order to provide indemnification for such payment.

The Legislature has made the amount of recovery in an action brought by an injured workman or his dependents against a third party the measure of the employer’s obligation to pay compensation; the recovery in the action against a third person, enuring to the benefit of the dependents of a deceased employee, is made the basis of an obligation imposed by statute upon others who were not parties to the action, and the same statute creates a right of action for indemnity in their favor against the defendant in the original action. The Legislature could hardly have intended that the right of the dependents to recover in the original action should be litigated again in the action brought for indemnity by those obligated to pay as a result of the recovery in the original action. The defendant has had full opportunity to litigate the issue of its responsibility for the death of the workman in the action brought by the representatives of the deceased. It cannot maintain that a judgment against it in that action is not in accordance with due process of law merely because it results in the imposition of a penalty as well as damages since a judgment in its favor would have been a conclusive adjudication that no penalty could be collected. The only questions that remain open in this action relate to the proceedings against the plaintiff for an award.

The judgment should be affirmed, with costs.

Pound, Ch. J. (dissenting).

The action is brought, under section 29 of the Workman’s Compensation Law to recover $1,000 paid into the State treasury by plaintiff pursuant to subdivisions 8 and 9 of section 15 thereof in a case of injury causing death in which there are no persons claiming compensation. The administratrix of the estate of a deceased employee of a third party has elected, under section 29, to pursue her remedy against defendant.

Section 29 provides: * * * In case of the payment of an award to the state treasurer in accordance with subdivisions eight and nine of section fifteen such payment shall operate to give to the employer or insurance carrier liable for the award a cause of action for the amount of such payment together'with the reasonable funeral expenses and the expense of medical treatment which shall be in addition to any cause of action by the legal representatives of the deceased. * * * ”

The complaint of the insurance carrier against the third party liable for the injury sets up the recovery of a judgment against defendant and that such judgment is res adjudicata and demands judgment accordingly. The answer sets up as one defense that deceased had one dependent on him. The Special Term on a motion for summary judgment refused to strike out the answer. The Appellaté Division reversed and granted the motion to strike out. This defense has no merit as no dependent claimed an award for compensation. (Matter of State Treasurer v. West Side Trucking Co., 233 N. Y. 202, 207.)

It sets up as a further defense, which has also been stricken out, that the death of deceased was due to his own negligence; that the judgment in the death action is not res adjudicata and that defendant may avail itself of any defense which it has or ever had; that it has a right to establish, if it can, any defense which it could have interposed in the death action, as plaintiff was not a party to such action and is not bound by the judgment therein. (Phoenix Indemnity Co. v. Staten Island R. T. Ry. Co., 251 N. Y. 127, 138; affd., 281 U. S. 98.) This defense should not have been stricken out. Bes adjudicata is obviously not controlling. There is no identity of parties or causes of action. This cause of action is purely statutory. Nor is this a case of vouching in for the plaintiff was never called upon to defend the death action. The omission to vouch in the plaintiff in the death action imposes upon the plaintiff in this action the burden of establishing anew all the actionable facts (Village of Port Jervis v. First Nat. Bank, 96 N. Y. 550) which are the same as in the death action out of which this cause of action grows. This action is also an action to recover damages for causing death.” That is the cause of action which must be proved to entitle the plaintiff to recover. . Contributory negligence of the person killed is a defense to be pleaded and proved by the defendant as in the administratrix’s action. (Civ. Prac. Act, § 265.)

The conclusion seems inevitable that plaintiff must establish anew the original cause of action out of' which this statutory action arises subject to the same defenses the defendant had in the action to recover damages for causing death by negligence.

The case differs from one where the indemnitor has by contract agreed to pay the indemnitee any sums that it might be compelled to pay. Here the statute gives the cause of action and we have said with some deliberation in effect that unless the defendant may avail itself of any defense which it has, the statute would be giving a right to take property without due process of law. (Phoenix Indemnity Co. v. Staten Island R. T. Ry. Co., supra.) But it has the burden of proof when it comes to ■ establishing the negligence of the deceased. (Civ. Prac. Act, § 265, supra.)

The fact that in the leading case there was no judgment rendered in the death case because the action was settled does not alter the force of the dictum cited. Here the judgment in the death action has never established the defendant’s habihty in this action as defendant has never had a chance to defend itself against the statutory cause of action.

The judgment of the Appellate Division should be reversed and the order of the Special Term modified by striking out the first defense pleaded and as so modified affirmed, with costs in this court and in the Appellate Division.

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

Judgment affirmed.


source: Caselaw Access Project

author: Lehman, J.

license: Public Domain

text:
    J. H. & S. Theatres, Inc., Respondent, v. John A. Fay, as President of the International Alliance of Theatrical Stage Employees, Local No. 4, et al., Appellants.

      (Argued October 26, 1930;
    decided November 22, 1932.)

      William S. O’Connell for appellants.
    The alleged contract entered into between the plaintiff and the Empire State Theatrical Stage Employees Union, Inc., was no bar to peaceful picketing of the plaintiff’s premises by members of the defendant union. (Stillwell Theatre, Inc., v. Kaplan, 259 N. Y. 405; Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; Nann v. Rai?nist, 255 N. Y. 307; Reardon, Inc., v. Catón, 189 App. Div. 501.)

      Joseph A. Teperson for respondent.
    The defendants lost their rights when they spread false statements which tended to injure the plaintiff’s business. (Exchange Bakery & Restaurant, Inc., v. Rifkin, 245 N. Y. 260; Wilner v. Bless, 243 N. Y. 544.)
   Lehman, J.

The plaintiff has leased and is conducting three theatres at which a member of the defendant union had previously been employed. To do the same work the plaintiff now employs a member of a rival union and has entered into a contract for the term of one year to employ “ only theatrical stage employees who are members in good standing ” of the rival union and supplied by it. The defendant union demands that the plaintiff employ one of its members at each theatre and pay him the union rate of wages. By picketing and other activities the defendant union attempted to induce the public not to patronize the three theatres conducted by the plaintiff until its demands are complied with.

The defendant union is a lawful combination. It may, by lawful means, endeavor to induce the plaintiff to employ its members upon terms and conditions satisfactory to it. Its demand that the plaintiff employ one of its members at each theatre, though at the present time a single employee is performing the same work at all three theatres, may be unreasonable. It is attempting to destroy the plaintiff’s business in order .to induce, or, perhaps we should say, compel the plaintiff to comply with its demand and refuse to go on with the contract made with the rival union.

Demands of workmen may sometimes be fair and sometimes unfair. Combinations give the workmen a power of compulsion which may work harm to their employer, the public and even to themselves. Where the workmen do not combine they may be compelled by force of economic circumstances to accept unfair terms of employment. Such conflicting considerations of economic policy are not primarily the concern of the courts.” (Interborough Rapid Transit Co. v. Lavin, 247 N. Y. 65,74.) It is not within the province of the courts to restrain conduct which is within the allowable area of economic conflict.” (Stillwell Theatre, Inc., v. Kaplan, 259 N. Y. 405, 412.) A combination of workmen formed for the purpose of obtaining employment for its members upon terms and conditions satisfactory to them may use lawful means to achieve its purpose. The courts have not been constituted arbiters of the fairness, justice or wisdom of the terms demanded.

Combinations of workmen, like other combinations, be they weak or strong, must, nevertheless, restrict the exercise of their powers of compulsion within the limits imposed by law. In Exchange Bakery & Restaurant, Inc., v. Rifkin (245 N. Y. 260, 263, 269) we affirmed the right of such combinations to picket for the purpose of achieving their lawful purposes, though injury to others might be incidental to such picketing; but we added the warning: it may not be accompanied, however, by violence, trespass, threats or intimidation express or implied,” and further that where unlawful picketing has been continued; where violence and intimidation have been used and where misstatements as to the employer’s business have been distributed, a broad injunction prohibiting all picketing may be granted. The course of conduct of the- strikers has been such as to indicate the danger of injury to property if any picketing whatever is allowed.”

In Stillwell Theatre, Inc., v. Kaplan (supra, p. 412) we held that the right of the defendant ‘‘ peacefully and truthfully ” to declare to the world that the business practices of the rival union were unjust and that theatres which patronized that union ought not to be patronized by the public, was not lost because the plaintiff had a year’s contract with the rival union. The limitation placed in both cases upon the rights to picket and persuade are integral parts of the definitions of those rights. The courts may not enjoin exercise of those rights because such exercise may cause incidental injury to others. They must, in proper cases, by injunction protect others from injury caused not by exercise of legal rights but by unlawful extension and abuse of such rights.

The defendant union, in this case, picketed the plaintiff’s premises in a peaceful, orderly manner. So far it was within its rights. It did more. Four canvassers employed by it to distribute copies of the Labor World interviewed residents of the neighborhood and endeavored to persuade them not to patronize the plaintiff’s theatres. So long as they confined themselves to honest, truthful persuasion, the plaintiff had no right to complain, but the evidence shows that they misrepresented the situation and attempted by intimidation of prospective customers to destroy the plaintiff’s business. That they certainly had no right to do, and even the defendant does not assert that the courts may not, by injunction, protect the plaintiff from a threatened injury to its business by the continuance or renewal of such acts; if the canvassers acted as agents of the defendant and if future injury is threatened. It does assert that the canvassers were not authorized to do anything but distribute newspapers, and that they were not acting as defendant’s agents in attempting oral persuasion. The justice at Special Term has found otherwise, and the evidence justifies, if, indeed, it does not dictate such finding. In spite of evidence that long before the case came to trial the defendant had ceased to employ these canvassers, the court was not bound to accept belated repentance or belated caution as a sufficient guaranty that the plaintiff’s business would not be injured in similar fashion in the future. It might, in its discretion, grant protection by an injunction broad enough to achieve that purpose.

The injunction which was granted at Special Term is not only broad but vague. It prohibits the defendant, its agents, servants and employees, and/or those in concert with them, during the continuance of the existing contract between the plaintiff and the Empire State Theatrical Stage Employees Union, Inc., from doing any act or acts calculated to induce or cause a breach of such contract * * * and from committing any act or acts which is or are calculated to * *• * cause persons desiring to enter the said theatre to refrain from so doing.” Perhaps these broad prohibitions are intended to be confined to “ picketing and patrolling ” and to the use of “ unlawful means ” in an “ unlawful manner,” for the injunction contains more specific prohibitions embodying such limitations. Such construction is supported by the fact that the justice at Special Term approved some of the defendant’s conclusions of law, including: “ 3. That the picketing as conducted by the members of the defendant union in front of the three theatres involved herein was legal,” and “ 5. That it was legal for the defendant union to employ four young ladies to distribute copies of the New York Labor World in the neighborhood of the plaintiff’s theatres.”

Both parties assumed that the judgment so entered permits peaceful picketing with truthful signs. The plaintiff appealed to the Appellate Division from that part of the judgment or decree which permits the defendants to conduct lawful picketing with truthful signs. The defendant appealed from the other parts of the judgment. The Appellate Division modified the judgment in manner which leaves no doubt as to its meaning. It adjudges now “ that defendants be restrained from in any manner picketing plaintiff’s premises or interfering with its business.” The court has, thus, outlawed all attempts by the defendant to bring any pressure upon the plaintiff to induce it to employ members of the plaintiff union.

The broad injunction of the Appellate Division would be justified if the purpose of the defendant’s interference .with the plaintiff’s business was unlawful. Our decision in Stillwell Theatre, Inc., v. Kaplan (supra), rendered shortly after the decision of the Appellate Division in this case, is direct authority that the defendant’s purpose is not unlawful. The broad injunction can then be sustained only if its end is protection against threatened injury from renewal of abuse of the right of truthful and lawful persuasion.. “An injunction does not issue in such circumstances as punishment for the past. (Iron Molders’ Union v. Allis-Chalmers Co., 166 Fed. Rep. 45, 49; Frankfurter and Greene, The Labor Injunction, p. 116.) Its only legitimate end is protection for the future.” (Nann v. Raimist, 255 N. Y. 307, 315.)

A broad injunction against all picketing has been sustained where there was a finding that picketing had been conducted unlawfully because accompanied with violence or misrepresentation. (Exchange Bakery & Restaurant, Inc., v. Rifkin, supra; Nann v. Raimist, supra; Steinkritz Amusement Corp. v. Kaplan, 257 N. Y. 294.) We have said that the scope of the injunction is something to be determined in the exercise of a wise discretion. This court may not interfere except for manifest abuse.” (Nann v. Raimist, supra.) Here the picketing was orderly and peaceful and not accompanied by misrepresentation. The wrongful acts found by the trial judge were not committed by picketers or at the place where the picketing was being carried on. Nothing in the evidence could lead to an inference that if picketing is continued it will change its character and become unlawful. The injunction must be limited to prohibition of specific unlawful acts except in so far as a broader prohibition has for its legitimate end protection against such acts. Even in those cases where we have sustained a prohibition against all picketing, we have expunged from the judgment other prohibitions which impaired “ the defendant’s indubitable right to win converts over to its fold by recourse to peaceable persuasion, and to induce them by like methods to renounce allegiance to its rival.” (Nann v. Raimist, supra, p. 319; Steinkritz Amusement Corp. v. Kaplan, supra.) To do otherwise would be to use the injunctive power of the court to punish for the past rather than to protect in the future. These considerations require that the judgment of modification of the Appellate Division should be reversed.

The question remains whether the judgment rendered at Special Term is open to similar objections. The plaintiff has been greatly wronged by the statements made by defendant’s canvassers, and by circulars distributed in the neighborhood, and by public meetings at which the speakers reiterated such statements. All of this tended both to mislead and to intimidate the public on whose patronage the plaintiff must rely in its business. It is said that the circulars were distributed and the meeting held by the Women’s Union Label Club and that the defendant was not responsible for such activities. Assuming, without deciding, that the evidence is insufficient to show that the defendant arranged or maintained these activities, it is still true that they arose out of the defendant’s controversy with the plaintiff; they were carried on for the defendant’s benefit and they were calculated to aggravate the injury caused by the wrongful conduct of defendant’s own agents. The court cannot in this action enjoin persons who are not parties defendant and who are not acting as agents of the defendant from acts which may injure the plaintiff. Its injunction against the defendant, acting through agents or allies, should be broad enough to afford protection which is as complete as possible against the wrongs committed or concerted by the defendant. The injunction granted at Special Term is not calculated to effect that purpose. Its prohibitions are too broad and too vague. Either they impair the defendant’s indubitable right to win support by truthful argument and peaceful persuasion, or they fail to define upon what acts the court has placed its ban. We agree with the trial court that the evidence sustains the court’s conclusion that the evidence establishes that the defendant is threatened with injury by false statements and attempts at misrepresentation, made by the defendant’s agents, though the picketing conducted by the defendant was lawful. Against the injury threatened through a renewal of the unlawful acts the plaintiff is entitled to protection by injunction. The injunction should prohibit the defendant from circulating orally or in writing, by personal argument or by public meeting, any statement which falsely represents the attitude of the plaintiff towards union labor or that patrons of the plaintiff’s theatres will be subjected to danger. The injunction should further prohibit all interference with the plaintiff’s business by annoying or intimidating prospective customers or others.

The judgment of the Appellate Division should be reversed, with costs in this court and in the Appellate Division, and the judgment of the Special Term modified in accordance with this opinion, and as so modified affirmed.

Pound, Ch. J., Crane, Kellogg, Hubbs and Crouch, JJ., concur; O’Brien, J., concurs in result solely on the' authority of Stillwell Theatre, Inc., v. Kaplan (259 N. Y. 405).

Judgment accordingly.


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

text:
    Hilda Stapley, Respondent, v. United States Casualty Company, Appellant.

      (Argued October 17, 1932;
    decided November 22, 1932.)

      Thomas G. Rickert for appellant.
    The payments made by the defendant to the plaintiff constituted performance of the condition of the undertaking and discharged the defendant of all liability thereon, (,Shapiro v. Equitable Casualty & Surety Co., 256 N. Y. 341; Winter v. Kinney, 1 N. Y. 365; Toles v. Adee, 84 N. Y. 222.)

      Charles F. Doehler for respondent.
    The present undertaking on appeal having been given to perfect the appeal and to stay execution made the defendant herein liable for the whole judgment and the present undertaking on appeal inured as a common-law agreement and is enf orcible according to its terms. (Haskell v. Fidelity & Casualty Co., 193 N. Y. Supp. 738; 205 App. Div. 858; Rawlin
      v. New Jersey Fidelity & Plate Glass Ins. Co., 221 App. Div. 399.) The filing of and the language of the present undertaking on appeal shows and indicates clearly the defendant’s intention to enlarge its liability under its automobile liability policy. (McElroy v. Mumford, 128 N. Y. 303; Shapiro v. Equitable Casualty & Surety Co., 256 N. Y. 344.) The defendant is liable on the present undertaking for the balance due on the judgment and the payments made upon the automobile liability policy did not discharge the defendant of its liability on the appeal bond. (Haskell v. Fidelity & Casualty Co., 193 N. Y. Supp. 738; 205 App. Div. 858; McÉlroy v. Mumford, 128 N. Y. 303.)
   Lehman, J.

The plaintiff recovered a judgment in the sum of $6,500 against Arthur Aldrich for damages caused by negligence. An appeal was taken from that judgment. The appellant could not stay the execution of the judgment without a written undertaking to the effect that if the judgment * * * appealed from * * * is affirmed, or the appeal is dismissed, he will pay the sum recovered or directed to be paid by the judgment.” (Civ. Pr. Act, § 594.) The undertaking on appeal recites that the plaintiff has agreed to a stay' of execution of said judgment upon the filing of an undertaking in the sum of Five ■ Thousand Dollars,” and provides that the United States Casualty Company does “ undertake that the appellant will pay all costs and damages which may be awarded against the appellant on said appeal, not exceeding Five Hundred Dollars, and does also undertake, in the sum of Five Thousand Dollars, that if the judgment or order so appealed from, or any part thereof, is affirmed, or the appeal is dismissed, the appellant will pay the sum recovered or directed to be paid by the judgment * * * in all not to exceed said sum of Five Thousand Dollars.”

The judgment in plaintiff’s favor against Aldrich has been affirmed. At the time of the accident the United States Casualty Company had issued to Aldrich a policy, insuring him against liability for damages in the amount of $5,000. Under the terms of that policy the plaintiff, upon the return of execution unsatisfied, had the right to maintain an action against the casualty company to recover the amount of the judgment * * * not exceeding the amount of the policy.” The casualty company paid to the plaintiff the amount of the policy, viz., $5,000, together with the costs of the action. The plaintiff then began this action against the casualty company to recover the sum of $1,500, viz., the excess of the amount of the judgment in the negligence action over the amount of the policy.

The defendant maintains that its obligation upon the undertaking on appeal is no wider than its obligation under the policy of insurance which it had previously issued; -that both are limited to $5,000, and that both are completely met when that amount has been paid upon the judgment. Doubtless the defendant’s obligation upon its undertaking is defined solely by the language of the bond. It cannot be extended by the court to afford the plaintiff the protection which she probably ■supposed she was receiving, if the defendant did not agree to give such protection. The problem is whether the defendant’s undertaking is only that $5,000 shall be paid upon the judgment, or whether it undertook that the judgment should be paid but limited its own liability to the sum of $5,000.

The same problem was presented under analogous conditions in Shapiro v. Equitable Casualty & Surety Co. (256 N. Y. 341, 345). There the bond recited that it was conditioned to secure payment of $2,500 upon judg~ ?nents ” and it provided that the surety undertook that the appellant will pay such judgments * * * not exceeding, however, the sum of $2,500 * * * and does also undertake that if the judgments so appealed from * * * are affirmed * * * the appellant will pay the sum recovered * * * up to the amount mentioned herein.” A majority of the court concluded that the undertaking of the surety was only that the appellant will pay "up to ” the sum of $2,500, and that the bond was, as it stated, conditioned to secure the payment of $2,500 on the judgments. When that payment was made by the appellant the condition was met, and no action could be maintained on the bonds.

In that case we pointed out that the problem would be different if the surety had " undertaken that the principal would pay the judgment but limited its liability to $2,500.” Here, as we have pointed out, the recital in the undertaking is that the plaintiff has “ agreed to a stay of execution of said judgment upon the filing of an undertaking in the sum of Five Thousand Dollars,” not, as in Shapiro v.Equitable Casualty & Surety Co., that the undertaking is conditioned to secure the payment of that sum upon the judgment. From the recital in the bond it is evident that the parties intended that the usual appeal bond required by section 594 of the Civil Practice Act should be filed in order to obtain a stay of execution, except that the liability of the surety might be limited. Again, the contractual parts of the bond, fairly construed, carry out that intent. The surety company undertakes that the appellant will pay all costs and damages awarded against the appellant on the appeal not exceeding $500. That is the statutory undertaking to perfect the appeal. Then " it also undertakes in the sum of $5,000 that “ the appellant will pay the sum recovered,” and the limitation " in all not to exceed the sum of Five Thousand Dollars ” is to be construed merely as a limitation of the amount which the surety company may be called upon to pay under both parts of its undertaking.

Thus here we have a limitation only upon the amount of the defendant’s liability under its bond if the judgment is not paid; while in the earlier case the limitation is upon the amount which the surety undertakes the appellant will pay. In that case the condition was met by the payment of the amount secured; in this case the condition is breached by failure of the appellant to pay the amount recovered. The judgment in this case is in accordance with our decision in the earlier case. The basis of that decision is wanting here, and we pointed out in our earlier decision the distinction which dictates the judgment granted here against the defendant.

The judgment should be affirmed, with costs.

Crane, J. (dissenting).

On the 16th of June, 1930, the plaintiff recovered a judgment in negligence against one Arthur Aldrich in the Supreme Court, Monroe county, N. Y., for the sum of sixty-five hundred dollars. Aldrich was covered by liability insurance in the sum of five thousand dollars, the policy having been issued by the United States Casualty Company. On appeal from the judgment to the Appellate Division, an undertaking was given to stay execution as well as to perfect the appeal. The appeal resulted in an affirmance of the recovery and the insurance company, pursuant to section 109 of the Insurance Law (Cons. Laws, ch. 28), paid the full amount of its indemnity policy, 15,585.32, which included the costs of the action. Aldrich was insolvent and did not pay.

The plaintiff, not satisfied with this substantial payment in behalf of an impecunious defendant, now seeks to recover the balance of the judgment, fifteen hundred dollars, out of the undertaking on appeal upon the theory that the defendant not only insured Aldrich for five thousand dollars but on appeal agreed to pay the whole judgment, or the part remaining unpaid. The undertaking on appeal must, therefore, be read to see if this defendant assumed any such additional burden.

After the recitals we have the obligation: Now, therefore, the United States Casualty Company * * * does hereby * * * undertake that the appellant will pay all costs * * * not exceeding Five Hundred Dollars, and does also undertake, in the sum of Five Thousand Dollars, that if the judgment * * * is affirmed * * * the appellant will pay the sum recovered * * * in all not to exceed said sum of Five Thousand Dollars.”

The appellant is Aldrich, and the costs have been paid. Aldrich, by his agent, has also paid five thousand dollars on the judgment. What more does the bond require? The company undertakes that the appellant will pay the judgment, not to exceed five thousand dollars. This the appellant has done, he has paid the costs and five thousand dollars and all virtue has departed from the instrument; its obligation has been fulfilled.

Some of us were not satisfied with the decision of this court in Shapiro v. Equitable Casualty & Surety Co. (256 N. Y. 341), and the writer was one of the three dissenting judges; but now that the case has become law, we should abide by it and not draw such fine distinctions as to indicate our desire to depart from its authority whenever a little loophole permits an escape. Rules for the guidance of insurance companies in drawing policies or undertakings should be simple andjplain, and when once published in the reports, should not fluctuate with slight changes in punctuation or phraseology.

The appeal undertaking in the Shapiro case read: does hereby undertake that the appellant will pay such judgments * * * not exceeding, however, the sum of Twenty-five Hundred Dollars * * * and * * * if the judgments * * * are affirmed * * * the appellant will pay the sum recovered * * * up to the amount mentioned herein.”

Twenty-five hundred dollars having been paid, that ended the matter, and the bonding company was not held liable for anything more, although the judgment was in a greater amount.

Now in this case we have almost the exact wording. To repeat for comparison: does also undertake * * * that if the judgment * * * is affirmed * * * the appellant will pay the sum recovered * * * in all not to exceed said sum of Five thousand dollars.”

A logomachist might be able to find a distinction between these two bonds, but not the ordinary insurance man. After all is said and done, courts deal with human affairs and not in speculations; their decisions should not be refined beyond the point of practical application; in other words, agreements should be given their plain, ordinary meaning.

The judgment below should be reversed, and the complaint dismissed, with costs.

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

Judgment affirmed.


author: Kellogg, J.

text:
    Arrow Iron Works, Inc., Respondent, v. Harry B. Greene, Doing Business under the Name of H. B. Greene Contracting Co., et al., Defendants; Bank of Yorktown, Appellant; National Surety Company, Appellant and Respondent, and Empire Brick and Supply Corporation et al., Respondents.

      (Argued October 18, 1932;
    decided November 29, 1932.)

      Richard J. Mackey and John Taylor Breen for appellant.
    The assignment, having been made to secure advances by the bank and having been filed in the proper offices prior to the filing of any mechanic’s lien, takes precedence over the liens in the distribution of the fund. (Hall v. City of New York, 79 App. Div. 102; 176 N. Y. 293; Hackett v. Campbell, 10 App. Div. 523; 159 N. Y. 537; Riverside Contracting Co. v. City of New York, 218 N. Y. 596; Edison Electric Illuminating Co. v. Frick Co., 221 N. Y. 1; Anderson v. Hayes Construction Co., 243 N. Y. 140.) The clause in the contract which requires the contractor to furnish satisfactory evidence that there were no outstanding liens or claims for material furnished or labor performed on the work is solely for the benefit of the State and the lienors cannot claim any advantage therefrom. ,.(Riverside Contracting Co. v. City of New York, 218 N. Y. 596; Bates v. Salt Springs Nat. Bank, 157 N. Y. 322; Fortunato v. Patten, 147 N. Y. 277; Willard Co. v. City of New York, 81 Mise. Rep. 48; Contractors Supply Co. v. City of New York, 153 App. Div. 60; Hackett v. Campbell, 10 App. Div. 523.) The default of the contractor does not impair the rights of the assignee since there is an excess over the cost of completion and not a deficit. (.Fraenkel v. Friedman, 199 N. Y. 351; Beardsley v. Cook, 143 N. Y. 143.)

      Michael M. Helfgott for National Surety Company, appellant and respondent.
    The unearned moneys in the contract should have been applied first to the payment to the surety of its cost of completion, with interest. (Lacey v. Maryland Casualty Co., 32 Fed. Rep. [2d] 48; Prairie State Nat. Bank v. United States, 164 U. S. 142; Laski v. State, 212 N. Y. Supp. 675; 246 N. Y. 569; Harley v. Mapes Reeve Const. Co., 33 Mise. Rep. 626; Herman v. Hillman, 203 N. Y: .435 ^Fraenkel v. Friedman,
      199 N. Y. 351.) The plaintiff should have been confined to the deposit of $2,500. The payment of $612.18 as costs and an extra allowance out of the balance in the contract, whether out of retained percentage or the unearned moneys in the contract, was error. (Lien Law, § 21) Berger Mfg. Co. v. City of New York, 206 N. Y. 24; Milliken Brothers v. City of New York, 201 N. Y. 65; Fischer v. Hussey, 11 Mise. Rep. 529; Matter of Dean, 83 Hun, 413; TJpson v. United Engineering & Contracting Co., 72 Mise. Rep. 541.) The assignment to the bank was not filed as required by the Lien Law and is invalid as against the lienors and the surety. (Lien Law, § 16; Carroll Sand Co. v. Jones, Inc., 231 App. Div. 121; 256 N. Y. 99; General Fireproofing Co. v. Keepsdry Construction Co., 225 N. Y. 180; Albany Builders’ Supply Co. v. Eastern Bridge & Structural Co., 235 N. Y. 432; Glens Falls Portland Cement Co. v. Van Wirt Construction Co., 132 Mise. Rep. 95; Italian Mosaic Co. v. City of Niagara Falls, 131 Mise. Rep. 281.) As between the lienors, surety and the assignee bank, the court correctly held that the bank should be paid only after the valid liens and the surety’s cost of completion shall have been paid. (Laski v. State, 212 N. Y. Supp. 675; Harley v. Mapes Reeve Const. Co., 33 Mise. Rep. 626; Lacey v. Maryland Casualty Co., 32 Fed. Rep. [2d] 48; Herman v. Hillman, 203 N. Y. 435; Fraenkel v. Friedmann, 199 N. Y. 351; Prairie State Nat. Bank v. United States, 164 U. S. 142; Southern Surety Co. v. Holden, 14 Fed. Rep. [2d] 411; Ogden- v. Alexander, 140 N. Y. 356; United States v. Rundle, 107 Fed. Rep. 227.) The prior assignment to the surety is effective and valid as against the assignee. bank. (Edison Electric Co. v. Frick, 221 N. Y. 1.)

      Jacob B. Lindner for plaintiff-respondent.
    The plaintiff’s lien was filed before any valid assignment by the bank, and, therefore, takes precedence over such assignments. (Mechanics’ Lien Law, § 16; General Fireproofing Co. v. Keepsdry Construction Co., 225 N. Y. 180; Glens

      Falls Portland Cement Co. v. Van Wirt Construction Co., 132 Mise. Rep. 95; Albany Builders Supply Co. v. Eastern Bridge & Structural Co., 235 N. Y. 432.) The contractor having made one assignment of the money due it under the contract, had nothing further to assign and any subsequent purported assignment is a nullity. (Edison Electric Co. v. Frick, 221 N. Y. 1; Carroll Sand Co. v. Jones, 256 N. Y. 99.)

      Talbot M. Malcolm for Empire Brick and Supply Corporation, respondent.
    The assignee bank should be paid only after the valid liens and the surety’s cost of completion have been paid. (Laski v. State, 212 N. Y. Supp. 675; 217 App. Div. 420; 246 N. Y. 569; Harley v. Mapes Reeve Const. Co., 33 Mise. Rep. 626; Herman v Hillman, 203 N. Y. 435; Fraenkel v. Friedmann, 199 N. Y. 351;Lacey v. Maryland Casualty Co., 32 Fed. Rep. [2d] 48.)

      Emanuel M. 0straw for J. J. Fisher Company, Inc., respondent.
    The surety’s completion of the contract upon the contractor’s default materially affected the .rights of the respective parties and clearly gave the lienors superior rights over the assignee even had the bank’s assignment been duly filed. (Laski v. State of New York, 126 Mise. Rep. 360; 217 App. Div. 420; 246 N. Y. 569.)

      Arthur H. Printz and Edward C. O. Thomas for LawtonStephens Co., Inc., respondent.
    The lien of defendant is superior to the assignment of the bank. (Laski v. State of New York, 126 Mise. Rep. 360; 217 App. Div. 420; 246 N. Y. 569.)

      Scott Scammell and John Hall Forbes for Richey, B owne & Donald, Inc., respondent.
    Both the retained percentage and the unearned moneys in the contract should be first applied to the payment of the valid claims of lienors with interest prior to the payment to the ■..surety of its cost of completion with interest. (Laski
      v. State of New York, 217 App. Div. 420; 246 N. Y. 569;-Audley Clarke Co. v. Class & Bro., Inc., 187 App. Div. 904; Maneely v. City of New York, 119 App. Div. 376; Harley v. Mapes Reeves Constr. Co., 33 Mise. Eep. 626; Matter of National Surety Co. v. Wallace, 221 App. Div. 506.)

      George G. Lake and Emanuel Goodman for Astride Pardi et al, respondents.
    The assignment of the bank was never properly filed as required by section 16 of the Lien Law. (Carroll Sand Co. v. Jones, Inc., 256 N. Y. 99.) The respondents may avail themselves of the position of the State, that they must be paid before any payments are made to the contractor or the assignee. {Pacific Coast Steel Co. v. Old National Bank, 134 Wash. 457; Mechanics & Traders Nat. Bank v. Winant, 123 N. Y. 265; Riverside Contracting Co. v. City of New York, 218 N. Y. 596.)
   Kellogg, J.

The defendant Harry B.. Greene, on the 12th of April, 1928, entered into a contract with the State of New York, for the erection of certain buildings, at the agreed price of $118,700. On the 14th of May, 1929, Greene, having performed work and supplied material of the agreed value of $107,795.94, abandoned the contract. Greene had then been paid $91,541.55, or approximately eighty-five per cent of the value of the work and materials furnished. This left unpaid, approximately, fifteen per cent of the amount already earned, or $16,254.39, which the State withheld as retained percentages ” to secure the completion of the contract. Greene had also furnished labor and materials, in excess of the contract requirements, of the agreed value of $1,837.04. The contractor, Greene, as principal, and the National Surety Company, as surety, had previously delivered their bond to the State for the faithful performance of the contract. On the default of the contractor the National Surety Company, took over the work and completed the same. At completion, there became payable by the State, for work done prior to abandonment, the sum of $18,091.43, consisting of the item of retained percentages,’ ’ $16,254.39, and the item of extras, $1,837.04. These items, since they were earned by the contractor before abandonment, may be termed “ earned moneys.” There also became due the sum $10,904.06, being the difference between the amount earned by the contractor, prior to abandonment, and the contract price of $118,700. This item may be termed “ unearned moneys,” since it became due, not through the efforts of the contractor, but through those of the surety company, which completed the work. There is thus held for distribution among creditors the sum of $28,995.49.

On the 27th day of April, 1929, the plaintiff filed in the proper offices a notice of lien against the moneys due or to grow due upon the contract, for work and materials furnished. The amount claimed to be due was the sum of $2,285. On May 15, 1929, the contractor applied to the Supreme Court, and procured an order discharging the hen, conditioned upon his depositing with the Comptroller of the State the sum of $2,500. The sum named was deposited and no appeal from the order was taken. The proceeding was had in compliance with section 21 of the Lien Law (Cons. Laws, ch. 33), which provides that a hen against moneys due from a contract made by the State for a pubhc improvement may be discharged by the deposit of money with the State Comptroller. The deposit must be “ such a sum of money as is directed by a justice of the Supreme Court, which shall not be less than the amount claimed by the lienor, with interest thereon for the term of one year from the time of making such deposit, and such additional amount as the justice deems sufficient to cover ah costs and expenses.” The amount so deposited shall remain with the Comptroller “ until the hen is discharged ” as provided in subdivision 3 of the section, or certain other subdivisions named. The subdivision so numbered provides for a discharge by satisfaction of a judgment rendered in an action to enforce the Hen.” Therefore, in order to make the deposit available in satisfaction of its Hen, it was necessary for the plaintiff to institute an action to foreclose the Hen, and for this purpose the present action was instituted. After a trial herein before the Special Term, the court found that the amount then due the plaintiff was $2,195, with interest amounting to $241.45, aggregating $2,436.45, and directed that this amount be paid by the State from the $2,500 deposit. It further adjudged that the plaintiff recover as costs and disbursements the sum of $475.73, together with an extra allowance of $200, or in aU $675.73. The judgment entered provides that after exhausting the balance of the deposit, these costs be satisfied and paid from the “ earned ” and unearned ” moneys due upon the contract. We think that this was error.

Subdivision 4 of section 21 of the Lien Law provides for the discharge of a Hen by the deposit of a sufficient sum of money. In such case the sum deposited is a substitute for the fund to which the Hen attached until the deposit was made. A vaHd Hen on the primary fund must, therefore, be estabhshed to justify payment out of the deposit.” (Milliken Bros., Inc., v. City of New York, 201 N. Y. 65, 74.) In order to effectuate a discharge, the amount ordered deposited must be fixed at a sum, “ which shall not be less than the amount claimed by the Henor,” with interest for one year, and such additional amount as the justice deems sufficient to cover all costs and expenses.” (Lien Law, § 21.) These costs and expenses ” are clearly those of an action to foreclose the Hen, a proceeding through which alone the deposit may become available to the Henor. The purpose of the provision is to free the moneys remaining payable from the claim of the Henor, so that thereafter the State may safely make payments to the contractor or other lienors, as it may be advised. This result would not be achieved if, after the making of the deposit, the lienor might recover from the general fund the costs and disbursements of a foreclosure action which the deposit was not sufficient to satisfy. The reason that the present plaintiff must suffer rests in the fact that the order of discharge provided for an insufficient deposit, and from that order the plaintiff took no appeal. We think that the plaintiff may have no other relief than the payment to it of the sum deposited; that neither the “ earned ” nor “ unearned ” items, due upon the contract, are subject to any claim by the plaintiff.

The National Surety Company, after the abandonment of performance by the contractor, completed the work at a cost to it of $10,617.85. The item of “ unearned moneys,” which became due under the contract through its completion by the surety company, was $10,904.06. Even though interest upon the claim of the surety company may bring that claim to a figure in excess of the item of “ unearned moneys,” the company makes no claim to any portion of the item of “ earned moneys,” including “ retained percentages,” remaining unpaid at the time of the abandonment. Its claim, as stated in its brief, is merely this: “ The unearned moneys ’ in the contract should have been applied first to the payment to the surety of its cost of completion with interest.” It has been held, indeed, that a surety, which completes a contract, is entitled to be reimbursed for the expense thereof, not only from the “ unearned moneys ” of the contract, but from the retained percentages ” as well. (Lacy v. Maryland Casualty Co., 32 Fed. Rep. [2d] 48, 51; Prairie State Bank v. United States, 164 U. S. 227.) In the first of these cases it was said: “ The question arises whether this superior equity of the surety extends to the current estimates payable under the contract or merely to the retained percentage. We think that it extends to both.” Again, it is said: “Upon his performance of this contract, equity subrogates him to all rights of the obligee as against the principal. Now the obligee, upon default of the principal, is without doubt entitled to apply all moneys unpaid towards the performance of the contract, ignoring any assignments by the principal; and it necessarily follows that the surety upon performing the contract, being subrogated to the rights of the obligee, is entitled to the moneys unpaid so far as necessary to reimburse his loss.”

The logic of the quoted statements is not easy of escape. Perhaps it may justly be said that the doctrine of subrogation is purely equitable; that it is not equitable that a surety should have a prior lien upon retained percentages, over and above all lienors and assignees whose labor, material and money created the fund; that, therefore, the surety may have no part in that fund. On the other hand, it is clearly equitable that a surety, which is alone responsible, through its completion of a contract, for the fact that the balance of the contract price accruing after abandonment does become payable, should first be reimbursed for its expenses out of the fund so arising. We hold that the National Surety Company is first entitled, above all other lienors, to the unearned moneys,” and that such moneys, amounting to $10,904.06, should be applied toward the extinguishment of its claim. Whether it would otherwise become entitled to reimbursement from the retained percentages we do not now decide.

The payment of the item of “ unearned moneys ” to the National Surety Company will leave for distribution among other claimants - none other than the item of earned moneys,” consisting of the “ retained percentages ” and the sum due for extras,” amounting in the aggregate to $18,091.43. For this sum there are two sets of claimants, (1) the defendant Bank of Yorktown, claiming -under a written assignment from the contractor of all moneys due or to grow due under the contract, and (2) the eight defendant lienors whose claims have been allowed. The instrument of assignment, under which the Bank of Yorktown now claims, was executed by the contractor, Harry B. Greene, and delivered to the bank on May 16, 1929. At this time Greene was indebted to the Yorktown Bank for a balance of moneys previously advanced to him in the sum of $33,296.71, and this was the sum repayment of which the assignment was designed to secure. Concededly, this assignment was- filed in the appropriate offices, as provided by the Lien Law, on the 17th day of May, 1929. Concededly, it was after this date that the eight defendant lienors, having claims now totaling more than $18,500, filed their claims. It will be seen that either the claim of the Yorktown Bank on the one hand, or the aggregate claims of the lienors on the other, will exhaust the fund of $18,091.43 remaining payable. Notwithstanding the fact that the assignment to the bank was first filed, it has been held that the defendant lienors, whose notices of hen were subsequently filed, are entitled to priority and must receive the contract moneys remaining unpaid.

The preponderance of authority, to the effect that an assignee of the moneys due or to become due under a contract for a public improvement, has priority over all lienors whose liens are subsequently filed, is.overwhelming. (Lauer v. Dunn, 115 N. Y. 405; McCorkle v. Herrman, 117 N. Y. 297; Stevens v. Ogden, 130 N. Y. 182; Beardsley v. Cook, 143 N. Y. 143; Bates v. Salt Springs Nat. Bank, 157 N. Y. 322; Hackett v. Campbell, 10 App. Div. 523; 159 N. Y. 537; Hall v. City of New York, 79 App. Div. 102; 176 N. Y. 293; Riverside Contracting Co. v. City of New York, 218 N. Y.. 596; Anderson v. Hayes Construction Co., 243 N. Y. 140.)

The enactment of the provisions of section 16 of the Lien Law, which first appeared in section 15-a of the Lien Law of 1897, when amended and added to by chapter 692 of the Laws of 1907, did not alter the rule as-thus firmly established. (Riverside Contracting Co. v. City of New York, supra; Edison Electric Illuminating Co. v. Frick Co., 221 N. Y. 1; Anderson v. Hayes Construction Co., supra.) These provisions, so far as applicable, were merely to the effect that no assignment should be valid unless filed in certain offices named within ten days after the date of such assignment,” and should not be enforceable except from the date of filing. “ The only effect of the statute on the assignment was to limit its operation by certain provisions concerning its filing.” (Per Hiscock, J., in Riverside Contracting Co. v. City of New York, supra, at p. 612.)

Excepting the provisions concerning filing, the law remains as stated by Andrews, J., in McCorkle v. Herrman (supra, at p. 305): “ The assignee, under such an assignment, according to the general current of authorities, would take precedence over lienors' under liens subsequently filed;” as stated’ by Gray, J.,. in Bates v. Salt Springs Nat. Bank (supra, at p. 327): “ In the absence of anything to the contrary in the contract and before any notice is filed, the contractor may assign to his creditor, in payment of his debt, the whole, or any portion, of the moneys due, or to become due, under the contract and the assignee acquires a preference over a subsequent lienor.” The law now existing, without the exception, is thus stated by Cardozo, J., in Anderson v. Hayes Construction Co. (supra, at p. 147), “ By section 16 of the act as construed in our decisions, the assignment takes precedence of liens subsequently filed.”

• ‘ The respondents cité Laski v. State of New York (126 Misc. Rep. 360; 217 App. Div. 420; 246 N. Y. 569, for the proposition that in such cases as this the order of payment should be to (1) the lienor, (2) the surety, and (3) the assignee. Undoubtedly that was the order adopted in that case. In giving our approval to the decision by an-affirmance -without opinion, we certainly did not intend, in the face of overwhelming authority to the contrary, to countenance the proposition that the stated order was the order of priority generally to be observed. Nor did we intend to adopt the reasoning of the Special Term, that a lienor must have priority over an assignee, though the lien is filed subsequently to the filing of the assignment, because the assignee may take no more than the assignor-contractor, and the latter may, where filed liens are outstanding, take nothing except the excess over the liens. The argument fails to recognize that lienors and assignees have claims of a nature, if not identical, at least quite similar.

In Anderson v. Hayes Construction Co. (supra, at p. 150), Judge Cabdozo pointed out that, in such a case as this, it was fallacious to regard a lienor, under a mechanic’s hen filed, as possessing a hen “ on a specific res in the possession of the State; ” that there was no specific fund identified and earmarked; ” that there was merely a cause of action against the State, held by the contractor; that the lien ” of materialmen or laborers might more fitly be characterized “as a right of -subrogation to the contractor’s cause of action.” He concludes with this significant statement: “ The hen attaches to the debt, and the henors to the extent of their interests are statutory assignees.” The position of the henors, therefore, is no better than that of an assignee, since they are themselves assignees. That they have no greater right is thus stated by Judge Gray in Bates v. Salt Springs Nat. Bank (supra, at p. 328): The principle to be extracted from the cases is that a henor obtains no greater right to the moneys payable by the owner, than the contractor has and if the latter has assigned to a creditor, pro tanto, the assignee gains a preference over subsequent hens.” In the hght of these opinions the reasoning in the Laski case produces this fallacy: Assignees and henors may not recover when their assignor, the contractor, may not; the assignor may not recover because of assignments and liens filed; therefore, the assignees and lienors may not. The argument proves too much, for, if sound, then the debtor state or owner, admitting the debt, may be relieved from its payment to any person.

In the Laski case these facts were considered: On November 4, 1922, the contractor for a public improvement assigned to a development corporation all the moneys due or to become due under the contract. After April 9, 1924, Laski, the plaintiff, filed a lien for materials and labor furnished. On that date the contractor refused to proceed with performance, and the surety took over the work, subsequently completing the same. Completion was had at an expense of $3,100.34. This was in excess of $2,582.31, the sum then becoming due from the State, which included $1,130.25 of earned moneys,” or “ retained percentages ” earned when the surety undertook to perform. If the doctrine of subrogation were applied strictly and the surety company were entitled to succeed to the rights of the State, in all their fullness, then it was entitled to the earned moneys,” as well as the unearned moneys ” which became due through its completion. However, there was outstanding a lien for $860.31, in favor of the plaintiff, Laski. Materials and labor, of the value stated in the lien, had been supplied by Laski, and had in part created the fund of earned moneys ” or retained percentages.” It was equitable that to this extent the surety should give way to the lienor. In the case of the assignee, there was no such equity, since there was no proof that any part of the moneys, for which the assignment was given, had been employed to furnish labor or materials for the performance of the contract. These may have been the considerations which induced our affirmance of the decision; certainly it was not the proposition that generally subsequent lienors should have priority over assignees.

The defendant lienors do not make the point that generally subsequent lienors have priority over assignments previously filed, or that the general principle is other than we have stated it. Their points are (1) that, by reason of the peculiar terms of this contract, the assignee was not entitled to priority, and (2) that this assignee, the Yorktown Bank, did not file its assignment “ within ten days after the date of such assignment,” and so, under section 16 of the Lien Law, the assignment, as to them, was invalid.

In substantiation of their first point the lienors cite that clause of the contract which is to the effect that the last payment on this contract shall not be made * * * until the party of the second part has furnished satisfactory evidence that there are no outstanding liens or claims for materials furnished or labor performed on the said work.” From this, they deduce the conclusion that, since in this instance no such proof was ever furnished, the contractor could have no recovery, and, therefore, the assignee could not. This is the same argument, already considered, which again must fail, since it proves too much. If, for lack of proof that no liens existed, the assignee must fail, then, likewise, must the claims of lienors, who are in effect mere assignees, in which case the State would be relieved from all further payments upon a conceded debt. Moreover, it is well established that such a provision inures only to the benefit of the State and is not available to lienors. (Fortunato v. Patten, 147 N. Y. 277; Hackett v. Campbell, supra; Riverside Contracting Co. v. City of New York, supra.)

To establish their second point, that the assignment to the Yorktown Bank was not filed in the appropriate offices within ten days after the date of such assignment,” and was, therefore, invalid, the lienors assert that the assignment executed on May 16, which was duly filed on May 17, 1929, in truth was an ineffective instrument, since several similar assignments previously made, which had not been filed in the various offices as the statute requires, had conveyed to the Yorktown Bank all the rights of the contractor-assignor. We do not think the argument deserves serious consideration. After all, an instrument of conveyance, such as an assignment, is merely the written evidence of a transfer previously agreed upon orally, and there is no reason why successive instruments may not be employed as such evidence. As well might it be claimed that a deed, given to take the place of a lost and unrecorded deed, conveyed nothing and could not be recorded, as to claim that this instrument of assignment was void because it transferred nothing. The language of the statute relates not to the original assignment, oral or written, which may have been given, but to the particular instrument offered for filing, when it is said that the instrument must be filed within ten days after the date, of such assignment.” This particular instrument of assignment was filed not only within ten days of the date given therein, but within such period after the actual execution of the instrument.

The judgments should be modified in accordance with this opinion, and, as so modified, affirmed, with costs in all courts to appellants payable out of the retained percentages. (See 260 N. Y. 698.)

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

Judgment accordingly.


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

text:
    Isadore B. Geller et al., Copartners under the Firm Name of I. B. Geller & Co., Plaintiffs, v. Flamount Realty Corporation et al., Appellants, Impleaded with Others. Ernest W. Bradbury, as Receiver, Respondent.

      (Argued October 3,1932;
    decided November 29,1932.)

      Joseph L. Zoetsl and Ernest Rolph for appellants.
    An order adjudging defendants-appellants guilty of contempt may be appealed from where the object is to rid themselves of the alleged contempt. (Peters v. Berkeley. 219 N. Y. Supp. 709; Brinkley v. Brinkley, 47 N. Y. 40.) Not more than one fine may be imposed jointly, on a number of joint offenders. (Socialistic Co-operative Pub. Assn. v. Kuhn, 164 N. Y. 473.) The fine imposed for the alleged contempt exceeds the statutory limit of $250. (Judiciary Law, § 773; Socialistic Co-operative Pub. Assn. v. Kuhn, 164 N. Y. 473; Moffa v. Herman, 116 N. Y. 131; Snow v. Shreffler, 148 App. Div. 422; Stewart v. Smith, 186 App. Div. 755.)

      Abraham N. Geller, Bernard A. Saslow and Aaron Green-gold for respondent.
    The order adjudging appellants in contempt is an intermediate and not a final order. The Court of Appeals is without jurisdiction to entertain this appeal therefrom by reason of the Appellate Division’s refusal to allow an appeal upon certified questions. (McKeown v. Officer, 127 N. Y. 687; Schieffelin v. Hylan, 229 N. Y. 633; Turner v. Woolworth, 221 N. Y. 425; Matter of Steinman v. Conlon, 208 N. Y. 198; Jewelers’ Mer. Agency v. Rothschild, 155 N. Y. 255; Ray v. N. Y. Bay ExtensionR. R. Co., 155 N. Y. 102; Handy. Órtschreib Building Corp., 254 N. Y. 15; Thayer y. McManus, 251 N. Y. 591; Novick v. Duckor, 236 N. Y. 644; Matter of Empire State Surety Co., 214 N. Y. 659; Clark y. Clark, 195 N. Y. 612; Matter of Simonson, 164 N. Y. 571; Douglass y. Halstead, 161 N. Y. 621; Robinson y. Robinson, 123 Mise. Rep. 80; People v. Moran, 235 App. Div. 317.) Clearly as to the appellant corporation, the order is intermediate. (Klasko Finance Corp. y. Belleaire Hotel Corp., 257 N. Y. 1; People v. American Loan & Trust Co., 150 N. Y. 117.) The right of the receiver to the possession of the security is not in issue on this motion to have defendants-appellants adjudged in contempt. The receivership order is not subject to collateral attack or review herein. (Ketchum v. Edwards, 153 N. Y. 534; Lawson v. Tyler, 98 App. Div. 10; People ex rel. Day v. Bergen, 53 N. Y. 404; Matter of Cornblum, 133 Mise. Rep. 357; King v. Barnes, 51 Hun, 550, 113 N. Y. 656; Matter of Landau, 230 App. Div. 308; 255 1ST. Y. 567; Bornemann v. Bischoff, 6 App. Div. 524; Matter of Murray’s Estate, 6 App. Div. 376; Slackman v. Kaufman, 160 N. Y. Supp. 786; 162 N. Y. Supp. 1144.) The presumption of jurisdiction and regularity is conclusive here by reason of appellants’ failure to produce evidence to the contrary. {Hunt v. Hunt, 72 N. Y. 217; Mills v. Frank, 137 Mise. Rep. 407; King v. Barnes, 51 Hun, 550; 113 1ST. Y. 656; Steinhardt v. Baker, 163 N. Y. 410; Matter of Marcellus, 165 N. Y. 70; Matter of Whitman, 225 N. Y. 1; Smith v. Central Trust Co.,
      154 N. Y. 333; Wood v. Morehouse, 45 N. Y. 368; Culp v. City of New York, 146 App. Div. 326; Epstein v. Steinfeld, 206 Fed. Rep. 568; Oriel v. Russell, 278 U. S. 358; U. S. v. Chemical Foundation, 272 IT. S. 1.) The amount of the fine imposed upon defendants-appellants was proper. (Matter of International Milling Co., 259 N. Y. 77.)
   Hubbs, J.

This is an action against Flamount Realty Corporation and others to foreclose a real property mortgage. During the pendency of the action, a receiver of the property was appointed by an order of the Supreme Court. The order as resettled directed: “ That the defendant, Flamount Realty Corporation, and/or the officers thereof, forthwith deliver and turn over to the receiver any and all sums deposited by tenants as security under leases on the mortgaged premises herein.”

Appellants Charles W. Gerstenberg and Ernest Rolph were president and treasurer respectively of the defendant-appellant Flamount Realty Corporation. Certified copies of the receivership order were duly personally served upon the appellants. They refused to comply with the terms of the order. Thereafter an order to show cause entitled in the action was granted in which the appellants were directed to show cause why they should not be punished for contempt of court for failing to obey the receivership order to turn over to the receiver the securities deposited by tenants. Upon the return of the order to show cause, they appeared by attorney in opposition to the motion, but did not file any affidavits in opposition.

Thereupon, the order appealed from was granted, adjudging the appellants in contempt and imposing a fine upon each of $250.

The defendant corporation was a party defendant in the action. The motion in the action to punish it for contempt resulted in an order made in the action, and not a final order in a special proceeding appealable to this court. (Klasko Finance Corp. v. Belleaire Hotel Corp., 257 N. Y. 1.)

The appeal by it must be dismissed, with costs. The order adjudging the individuals who were not parties to the action in contempt is a final order in a special proceeding and appealable to this court. (Rosenberg v. Rosenberg, 259 N. Y. 338.)

The individual appellants contend that the order adjudging them in contempt was improperly granted, as they could not be in contempt for failure to obey the order appointing the receiver, as notice of the application for that order was not served upon them and the order itself was void as the court had no power to require them to turn over securities deposited by tenants. This appeal does not bring up for review the order appointing the receiver. The papers and proceedings upon which that order was based are not contained in the record. We have no- way of determining whether the court, in granting the order appointing the receiver, acted without jurisdiction. The order was granted in an action pending in the Supreme Court, a court of general jurisdiction, and is presumptively valid and regular. In fact, the appellants, upon the motion for the order appealed from, failed to file any papers questioning the validity or regularity of that order.

In the absence of evidence to the contrary the presumption of jurisdiction and of regularity is conclusive and cannot be attacked collaterally.

It is urged that the record does not disclose any proof that the securities were in the possession and control of the individual officers of the corporation who are appellants. That is true because the papers upon which the receivership order was based and which order directed them to turn over the securities are not before us. For all we know, the affidavits used upon the motion for the receivership order may have disclosed that the individual appellants were personally in possession and control of such securities.

In the absence of any contention to the contrary, we must presume that the court, when it granted the receivership order, had before it affidavits alleging facts which justified it in including in the order the provision which directed the individual appellant officers of the corporation to turn over to the receiver the securities in question.

If the individual appellants had the securities in their possession as officers of the corporation and refused to turn them over, they were assisting the corporation defendant in violating the order and are liable for civil contempt. (Fletcher, Cyclopedia Corporations, vol. 5, p. 5569, and cases cited.)

If appellants did not desire to obey the order, they should have moved to vacate or modify it. (Civ. Prac. Act, §§ 897, 898.) They could not legally determine for themselves that it was void and refuse to obey it. Having done so, they cannot now urge facts or arguments which might have led to a modification of the order if presented to the court for that purpose. The order, so far as we are able to determine from the record before us, was not void and it cannot be reviewed upon this appeal in order to relieve appellants from punishment for disobeying it. (Koehler v. Farmers & Drovers Nat. Bank, 6 N. Y. Supp. 470; affd., 117 N. Y. 661; Daly v. Amberg, 126 N. Y. 490, 495; People ex rel. Day v. Bergen, 53 N. Y. 404; Ketchum v. Edwards, 153 N. Y. 534; Lawson v. Tyler, 98 App. Div. 10.)

As the contempt with which the individuals are charged is a civil contempt and no proof of damage was offered, the court was without jurisdiction to impose a fine of over $250 against them, jointly and severally. (Judiciary Law [Cons. Laws, ch. 30], § 773; Socialistic Co-op. Pub. Assn. v. Kuhn, 164 N. Y. 473.)

The orders should be modified by reducing the fine imposed to $250 against the corporation and individuals, jointly and severally, and as so modified affirmed, without costs. The appeal of the corporate defendant should be dismissed, with costs.

Lehman, J. (dissenting).

An interlocutory order made in the action directs that “ the defendant, Flamount Realty Corporation, and ¡or the officers thereof,” forthwith deliver and turn over to the receiver any and all sums deposited by tenants as security under the leases. Failure to make such delivery has resulted in an order holding not only the corporation but its president and treasurer in contempt.

I agree that the regularity of the original order may not be reviewed upon this appeal from the contempt order. Presumptively it was regular and binding, at least, upon any person named therein who was a party to the action. The corporation was a party to the action and named in the order. The officers of the corporation were not parties to the action or to the proceedings which resulted in the order to deliver and turn over to the receiver security deposited under leases. They are not even named in the order as individuals, though included in the general class described as officers of the corporation. No specific officer is directed to act. All that the order, fairly construed, requires is that the corporation shall act and, since the corporation can act only through its agents and officers, that its appropriate officers shall act in its behalf. Upon a motion to punish an individual for contempt of an order made in a proceeding to which the individual was not a party, two questions are presented: Was the order binding upon the individual? Did he disobey the order? .

“No court can make a decree which will bind anyone but a party; a court of equity is as much so limited as a court of law; it cannot lawfully enjoin the world at large, no matter how broadly it words its decree. If it assumes to do so, the decree is pro tanto hrutum fulmen, and the persons enjoined are free to "ignore it. It is not vested with sovereign powers to declare conduct unlawful; its jurisdiction is limited to those over whom it gets personal service, and who therefore can have their day in court. Thus, the only occasion when a person not a party may be punished, is when he has helped to bring about, not merely what the decree has forbidden, because it may have gone too far, but what it has power to forbid, an act of a party. This means that the respondent must either abet the defendant, or must be legally identified with him.” (Alemite Mfg. Corp. v. Staff, 42 Fed. Rep. [2d] 832, opinion by Learned Hand, J.)

In that case the injunction order was entered against a defendant, “ his agents, employees, associates and confederates,” yet the court reversed an order adjudging in contempt one who had been in the employ of the defendant and who, with notice of the injunction, violated its prohibitions, but acting independently and not as an agent of the defendant. Strictly * * *, the addition of such words as the plaintiff here relies on, adds nothing to the decree. Without them any one is liable who knowingly does what the court has properly enjoined; with them nobody is liable who does not.”

The same limitation upon the power of the court to enjoin persons not parties to an action has been generally recognized. Disobedience by a person not a party to the action of an order enjoining a party, its “ agents ” or “ officers ” or servants,” may be punished as a criminal contempt, but only where the offender acted as agent or servant of the defendants or in combination or collusion with them or in assertion of their rights or claims.” (Rigas v. Livingston, 178 N. Y. 20, 24; People ex rel. Stearns v. Marr, 181 N. Y. 463.) (See, also, Seaward v. Paterson, [1897] 1 Ch. 545.)

Here such distinctions have been entirely disregarded and the result seems to me quite anomalous. The corporation and its officers have been charged with a civil contempt and have been fined $250 each, though there has been only one act of disobedience by the corporation and its officers, and we are agreed that but one fine should have been imposed on them jointly and severally. The defendant corporation as a party to the action is bound to obey the mandate of the court issued in the action. Its failure to act through its officers and agents is a disobedience of the mandate of the court and a contempt. So, too, would be refusal to act by an officer or agent authorized, and under a duty, to act for its principal. (Matter of Lennon, 166 U. S. 548.) Mere failure to act by an officer not a party to the action would not. The power derived from the principal and the duty must coincide. Here there may be proof that the corporation received deposits from tenants; in the proceeding in which the appellants are parties there is no proof of what became of these deposits or that they are now subject to the control of either or both of the officers who have been adjudged in contempt. Yet the order directs the commitment of both the officers until the order is obeyed by somebody.

It is sought to justify all this upon the ground that the order, directed to the corporation and/or its officers, is not subject to collateral attack, by any person charged with disobedience. So far as the order adjudicates that the conduct of the corporation which was a party to the action is unlawful and enjoins continuance of such conduct, the order is conclusive when the corporation is charged with its violation or its officers are charged with knowingly assisting the corporation in violating the injunction. So this court has held in cases cited in the opinion of Hubbs, J. The reason underlying these decisions is that the court had jurisdiction over the person of the defendant and its mandate to a defendant is presumptively valid and no person may knowingly assist another to violate a mandate of the court. The problem is different where a person not a party to the action is charged with violation of an injunction order directed to such person. If by such order the unlawfulness of his conduct has been determined, and, if he has not been a party and has had no day in court, he is condemned without hearing.” (Alemite Mfg. Corp. v. Staff, supra, at p. 833.) As was said in that case, “ This is far from being a formal distinction; it goes deep into the powers of a court of equity. * * * It is by ignoring such procedural limitations that the injunction of a court of equity may by slow steps be made to realize the worst fears of those who are jealous of its prerogative.”

Thus, if we construe the injunction order as a direction to the corporation acting through its officers, it is not subject to collateral attack, but the order punishing the corporate officers for contempt should be reversed because there is no proof that either of these officers was in possession of the deposits and had both the power and the duty to pay it over. If we treat the injunction order as a direction to the officers, eo nomine, though not parties to the action, then it is void as to them, for they have not had their day in court to contest a claim that they were under any duty towards the receiver to make such payment. In either event, they cannot be held in contempt without a hearing upon the basic question of whether their conduct is unlawful.

The order should be reversed upon the appeal of the officers, and the appeal of the corporation dismissed.

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

Ordered accordingly.


author: Per Curiam.

text:
    The Mayaguez Drug Company, Inc., Appellant, v. The Globe and Rutgers Fire Insurance Company of New York, Respondent.
    (Argued October 24, 1932;
    decided November 29, 1932.)

      B. F. Norris for appellant.
    The plaintiff as a matter of law is entitled to interest. (Civ. Pr. Act, § 480.) The plaintiff followed the proper procedure to raise the question hereby presented. (Wirt v. Reid, 138 App. Div. 760; Spielter v. North German Lloyd S. S. Go., 232 App. Div. 104; Fox Co. v. Wohl, 255 N. Y. 268; Duerr v. Consolidated Gas Co., 104 App. Div. 465.)

      Robert P. Schur, Robert J. Fox and Hugo Wintner for respondent.
    The affidavit of the juror was incompetent to impeach the verdict and it is evasive and disingenuous. (,Stromblad v. Hanover Fire Ins. Co., 121 Mise. Rep. 322; Miller v. Gerard, 200 App. Div. 870.) If there were any ambiguity about the verdict its interpretation would depend upon the construction given by the tribunal which rendered the decision. (Klausner v. Queens Fur Dressing Co., 130 Mise. Rep. 579; 223 App. Div. 829.)
   Per Curiam.

Defendant issued policies of insurance against damage by fire to plaintiff’s property. A fire occurred and damage resulted. The complaint demands the sum of $70,200 with interest thereon from the date of the fire. The sealed verdict as reported in open court was for the amount of $55,000. Plaintiff moved to amend the clerk’s minutes by adding interest. This motion was denied and the order of denial was affirmed by a divided court. From the final judgment plaintiff appeals to this court. Since the judgment is final and was rendered by a divided Appellate Division, it is appealable as of right.

During the trial, counsel for plaintiff mentioned the calculation of interest and the justice stated that it could later be calculated. The matter never was presented to the jury. It was instructed to consider only the question whether plaintiff is entitled to $70,200 or any portion thereof, or whether defendant should have a verdict. The subject of interest received no treatment in the charge. On the motion to amend the verdict one of the jurors executed an affidavit in which he stated that the question whether interest should be included in the verdict was discussed by the jury and that they unanimously reached the conclusion that they had nothing to do with interest which in their opinion was a matter for the judge. This juror added that the verdict for $55,000 represented the jury’s opinion respecting the value of the property alone and did not include interest. The affidavit was not received for the purpose of upsetting a verdict. No one presented any contrary version by affidavit. As matter of law, interest must be added to the amount recovered. (Civ. Prac. Act, § 480.) In view of the uncontradicted statements in the juror’s affidavit to the effect that interest was not added, the ambiguous proceeding at the trial when the verdict was rendered cannot be deemed to raise an issue of fact. The foreman’s answer to the justice clearly resulted from a misunderstanding.

The motion to dismiss the appeal should be denied and the judgment of the Appellate Division and that of the Trial Term should be modified by directing the addition of interest to the sum of $55,000 and as so modified affirmed, with costs to appellants in all courts. (See 260 N. Y. 567, 681.)

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

Judgment accordingly.


text:
    Sterling Motor Truck Co. of N. Y., Inc., Appellant, v. Bella Schuchman, Respondent.
    (Argued October 11, 1932;
    decided November 29, 1932.)

      Herbert G. McLear for appellant.
    The court committed reversible error in refusing to admit plaintiff’s evidence to establish the value of the used car traded in, and in awarding defendant $225 therefor, without any evidence as to its value. The court having found that defendant had rescinded the contract for the purchase of the new truck, there was no basis to hold that defendant should recover $225 as the agreed allowance for the car traded in. (.Sorenson v. Keesey Hosiery Co., 244 N. Y. 73; Marr v. Tumulty, 228 App. Div. 559.)

      M. Walter Solomon for respondent.
    The trial court properly limited the parties to proof of the agreed value of the car traded in. (Koon v. Greenman, 7 Wend. 122; Kelvinator-Syracuse, Inc., v. Evans, 258 N. Y. 629.)
   Per Curiam.

The defendant purchased a motor truck chassis. She agreed to pay the sum of $2,375 in cash and in notes to be secured by a chattel mortgage. The contract provides, one 2-cylinder Autocar with body to be traded in on this contract.” She delivered the cash, notes and chattel mortgage and also the “ 2-cylinder Autocar.” In this action to foreclose the chattel mortgage the defendant pleaded a breach of warranty and a rescission of the contract as a defense and counterclaim. After a trial of the issues, judgment was entered dismissing; the complaint and awarding to the defendant the sum of $1,240, with interest.

The justice at Special Term found that the Autocar which the defendant traded in was of the agreed, accepted and reasonable value of $225. That amount is included in the defendant’s recovery. The only evidence to sustain that finding is that the amount which the defendant agreed to pay in cash and notes was $225 less than the list price of the automobile she bought.

Even if we assume that in determining the price which the defendant should pay for the chassis she bought, the parties agreed that the Autocar should be delivered and accepted at a valuation of $225, when the contract of sale is rescinded for breach of contract the agreement for ■ the delivery and acceptance of the Autocar at the agreed valuation fails with the other terms of the rescinded contract. Then the defendant was entitled to the return of the Autocar. Since the plaintiff was unable to return the automobile, the defendant was entitled to its actual value, not the value agreed upon as part of the contract which has been rescinded. At most the agreed valuation constitutes an admission of actual value subject to explanation or contradiction and to be given such weight, only, as the circumstances justify. Evidence of actual value was offered by the plaintiff and excluded on the ground that the agreed value was conclusive. That ruling constitutes reversible error and requires reversal of the finding of the value of the Autocar. In other respects the judgment is supported by the evidence, and no reversible errors affect its validity.

The judgment of the Appellate Division and that of the Special Term should be reversed and a new trial granted, with costs to appellant in all courts, unless respondent stipulates to reduce the recovery by the sum of $225, in which event the judgment as thus modified should be affirmed, without costs. (See 260 N. Y. 698.)

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

Judgment accordingly.