author: Andrews, J.

text:
    The Fur & Wool Trading Co., Ltd., Appellant, v. George I. Fox, Inc., Respondent.
    (Submitted March 28, 1927;
    decided May 17, 1927.)
    Equity — stolen goods — accounting — pleading — complaint alleging that defendant had received stolen goods -with knowledge, sold them at a large profit and refused to account for proceeds states a cause of action in equity.
    A complaint which alleges that goods belonging to the plaintiff were taken from its possession by force, that the defendant received them with knowledge of the facts, sold them at a large profit at a price unknown to plaintiff, and has refused to account for the proceeds, and demands that defendant be compelled to disclose what amounts were so received by it, to repay the proceeds of such sale and that plaintiff have general equitable relief, is improperly dismissed on the theory that the only redress is at law. The facts alleged entitle the plaintiff to an accounting and to the general equitable relief for which it prays.

      Fur & Wool Trading Co., Ltd., v. Fox, Inc., 219 App. Div. 398, reversed.
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered February 10, 1927, unanimously affirming a judgment in favor of defendant entered upon an order of Special Term granting a motion by defendant for a dismissal of the amended complaint.

      Maxwell C. Katz and Otto C. Sommerich for appellant.
    Plaintiff is entitled to have defendant, the receiver of stolen property, declared a constructive trustee, and to an accounting for the unknown proceeds of the sale thereof; the mere fact that the common-law courts have applied equitable principles to actions in indebitatus assumpsit does not deprive equity courts of their jurisdiction where the assistance of the equity court makes the remedy more effectual. (Newton v. Porter, 69 N. Y. 133; Lightfoot v. Davis, 198 N. Y. 261; American Sugar Refining Co. v. Fancher, 145 N. Y. 552; Converse v. Sickles, 16 App. Div. 49; 161 N. Y. 666; Robert v. Ely, 113 N. Y. 128; Eyre v. Everitt, 2 Russ. 381; Slim v. Crouche, 1 DeG., F. & J. 518; Hawley v. Cramer, 4 Cow. 717; Sweeny v. Williams, 36 N. J. Eq. 627; Varet v. N. Y. Ins. Co., 7 Paige, 560; Schafuss v. Betts, 94 Misc. Rep. 463; 175 App. Div. 897.) The amount received by the defendant being unknown to the plaintiff, the equity arm of the court will lead to effectual discovery of the net amount received, after deducting all legitimate expenses. (Falk v. Hoffman, 233 N. Y. 199; Schank v. Schuchman, 212 N. Y. 356.)

      J. W. Friedman and I. Gainsburg for respondent.
    Allegations of a mere conversion do not entitle plaintiff to an accounting in equity, and the amended complaint was, therefore, properly dismissed for insufficiency. (Schantz v. Oakman, 163 N. Y. 148; Comstock v. Hier, 73 N. Y. 275; Gilbert Paper Co. v. Prankard, 204 App. Div. 83; Clements v. Cooper Co., 136 N. Y. Supp. 93; U. S. v. Bitter Root Dev. Co., 200 U. S. 451; 1 C. J. 623; 1 Pom. Eq. Juris. [4th ed.] §§ 177, 178; 3 Pom. Eq. Juris. [4th ed.] § 1044.) Defendant never had legal title, according to the allegations of the complaint, and, therefore, cannot be held a trustee. (Beatty v. Guggenheim Exploration Co., 225 N. Y. 380; Doyle v. Murphy, 22 Ill. 502.) Plaintiff fails to allege the existence of a trust res which it would in any event be entitled to trace. For this reason alone the complaint is insufficient. (Matter of Cavin v. Gleason, 105 N. Y. 256; Legniti v. Mechanics & Metals Nat. Bank, 230 N. Y. 415; Jaffe v. Weld, 220 N. Y. 443 ; 208 N. Y. 593; District Nursing Assn. v. Koerner, 91 Misc. Rep. 265; 173 App. Div. 1003.)
   Andrews, J.

The complaint alleges that goods belonging to the plaintiff were taken from its possession by force. The defendant receiving them with knowledge of the facts, sold them at a large profit but. at a price unknown to the plaintiff. It has refused a demand to account for the sums received. The plaintiff, consequently, brings an action in equity to compel the defendant to disclose what amounts were so received by it, to repay the proceeds of such sale, and it asks for general equitable relief. This it has been held may not be done. The only redress is such as the law may give. Therefore, upon motion the complaint has been dismissed.

Some remedy at law there certainly is. The plaintiff might sue for conversion. If successful, it would, as a general rule, recover a personal judgment for the value of the goods at the time and place of the conversion. Or if the goods had remained in the hands of the wrongdoer, an action in replevin would have afforded a complete remedy for their recovery. Or again if they have been sold there is an action for money had and received, resulting in a personal judgment for the proceeds. If the plaintiff has no information as to this sum it may acquire it should it be necessary to enable it to frame a complaint by an examination of the defendant. (Matter of Erie Malleable Iron Co., 90 Hun, 62.) Even though this be so is the plaintiff entitled to still other relief in excess of what a court of law is competent to give? Or is his case one where under historic rules, equity has been wont to assume jurisdiction?

At the outset we should say that the action may not be sustained as a bill of discovery, brought as such a bill was, not as an end in itself but as an aid to an independent proceeding. A complete remedy of this character being otherwise provided, such an action no longer survives. (Civ. Prac. Act. sec. 345.) But in certain cases equity will entertain a suit for an accounting. This is so where such a relation exists between the parties as under established principles entitles the one to demand it of the other. (Schantz v. Oakman, 163 N. Y. 148; Brown v. Corey, 191 Mass. 189.) A trustee in possession of trust funds may in a proper ease be called to account to his cestui que trust (Brinckerhoff v. Bostwick, 105 N. Y. 567), and this rule is enforced as well where the trust is implied as where it is express. (Hawley v. Cramer, 4 Cow. 717.)

Clearly a thief, having sold stolen goods may be treated as a trustee of the proceeds and also of any property into which they have been transformed, so long as either may be identified. Under such circumstances broader relief may be obtained in equity than at law. Where necessary, an accounting may be had. A hen may be declared. A surrender of the trust property may be decreed. (Newton v. Porter, 69 N. Y. 133; American S. R. Co. v. Fancher, 145 N. Y. 552; Hammond v. Pennock, 61 N. Y. 145; Jaffe v. Weld, 220 N. Y. 443.) The added reason that the defendant is insolvent is not essential. Such was not found to be the fact either in Newton v. Porter or in Jaffe v. Weld.

Where, however, the specific proceeds, in their original or in their transformed shape may not be traced, then no hen may be obtained. (Matter of Cavin, 105 N. Y. 256; Matter of Hicks, 170 N. Y. 195.) No identification — no hen. The complaint will not be dismissed, however, if ultimately it is determined that such proceeds are not found in possession of the defendant. Because a trustee has mingled them with his general funds the right to a resort to equity is not ended. The same rule exists as to a trustee ex maleficio. If equity has properly obtained' jurisdiction it may retain it so as to afford proper relief — personal judgment in such a case against the wrongdoer.

At least such jurisdiction is obtained where the trust fund has come into the hands of the trustee, where the cestui que trust is ignorant of its amount and of its subsequent fate, and where the trustee refuses to account. .Such either by express statement or by fair inference is the complaint we consider. We so held in Lightfoot v. Davis (198 N. Y. 261). Bonds are stolen and sold. Years thereafter the estate of the thief was required to account for the proceeds and repay that amount to the true owner from its general assets. The only relief prayed for, we said, was that the administrator may account and pay over the amount of said bonds and the income thereof if it can be traced, and if it cannot be traced ” that the plaintiff have judgment for the sum of $16,000, and we added: “ The method by which equity proceeds in all these cases is to turn the wrongdoer into a trustee. If it may do so for the purpose of subjecting identified funds to the claim of the defrauded party, I do not see why it should not pursue the same method wherever it is necessary to protect the rights of the original owner. In the case of an actual trustee, the cestui que trust may not only reclaim the trust property if he is able to trace it, but failing to trace it, he is entitled to an accounting and personal judgment against the trustee.” '

So we decide that the order dismissing the amended complaint was erroneous. The facts alleged entitle the plaintiff to an accounting and to the general equitable relief for which it prays. To that we confine our decision. The judgment of the Appellate Division and that of the Special Term should be reversed and the motion for judgment dismissing the complaint denied, with costs in all courts.

Cardozo, Ch. J., Pound, Crane, Kellogg and O’Brien, JJ., concur; Lehman, J., dissents.

Judgment accordingly.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    The People of the State of New York, Respondent, v. Katherine Malinowski, Appellant.
    (Argued May 4, 1927;
    decided May 17, 1927.)
    Crimes —■ manslaughter — criminal operation — failure of proof necessary to sustain conviction of defendant.
    Where an indictment charging defendant with manslaughter through performance of a criminal operation upon a woman and the testimony for the People both indicate the existence, at the time of the alleged operation, of peritonitis and a septic condition of the peritoneum and there is no testimony from which the conclusion may be reached that such condition was not caused by an already existing perforation of thd uterus, there is a failure of proof necessary to sustain a conviction of defendant upon the theory that the uterus was perforated by the defendant at the time of the operation, resulting in the septic peritonitis which caused death.

      People v. Malinowski, 219 App. Div. 765, reversed.
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the fourth judicial department, entered February 12, 1927, which affirmed a judgment rendered at a Trial Term for the county of Erie upon a verdict convicting the defendant of the crime of manslaughter in the second degree.

      George L. Grobe for appellant.
    It was reversible error for the trial court to remove from the consideration of the jury the question whether or not any instrument or thing other than the curette had been inserted into the private parts of the woman or whether or not the curette caused the puncture. (Broderick v. Brooklyn, Q. C. & S. R. R. Co., 186 App. Div. 546.) The verdict of manslaughter in the second degree was without any evidence to support it "and was unwarranted. (People v. Hoffman, 220 N. Y. Supp. 249.)

      Guy B. Moore, District Attorney (John J. Kane of counsel), for respondent.
    All questions of fact and every scintilla of evidence in the case were left to the consideration of the jury by the trial court. (People v. Maggiore, 189 N. Y. 514; People v. Thompson, 198 N. Y. 396.) The verdict of manslaughter in the second degree was a proper one. (People v. Heineman, 211 N. Y. 475; People v. Van Norman, 231 N. Y. 454; People v. Darragh, 141 App. Div. 408; Fitzgerald v. People, 37 N. Y. 413; People v. Young, 96 App. Div. 33.)
   Per Curiam.

Mrs. Szeluga died on November 6, 1925, of septic peritonitis resulting from a perforation of the uterus by some mechanical means. How long the perforation had preceded the disease which it caused was uncertain. On October 26 the uterus had been penetrated by a curet in the hands of the defendant. Under the conditions existing this might have caused the damage, and if such act caused oí hastened the death of Mrs. Szeluga the defendant was properly convicted of the crime of manslaughter. It may have done so. The difficulty is that the indictment alleges that prior to this last date Mrs. Szeluga was already suffering from pain in her abdomen and uterus, infected uterus and septicemia.” The testimony of the People-also indicates the existence at that time of peritonitis and a septic condition of the peritoneum. If the septic peritonitis present on November 6 was caused by the perforation there is no testimony before us from which the conclusion may be reached that the sepsis and the peritonitis present on October 26 were not also so caused. If they were then the uterus was not perforated by the defendant on that day. There is consequently a failure of the proof necessary to sustain the conviction of the defendant.

The judgment of the-Appellate Division and that of the Trial Term should be reversed and a new trial ordered.

Cardozo, Ch. J., Pound, Crane, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Judgment reversed, etc.


author: Cardozo, Ch. J.

text:
    Anna M. Brick, as Administratrix of the Estate of Thomas V. Brick, Deceased, Respondent, v. Long Island Railroad Company, Appellant.
    (Argued May 9, 1927;
    decided May 31, 1927.)
    Ships and shipping — seamen — negligence — captain of vessel not required to give warning to member of crew before making sudden turn —■ tugboat not unseaworthy in structure or equipment because rail extended around forward part only of upper deck.
    1. Negligence in the navigation of a" steam tugboat may not be predicated upon failure of the captain to give warning to a member of the crew before making a sudden turn, where there was nothing unusual in the movement of the vessel in respect of time or manner and nothing in the known situation to suggest to ordinary prudence the necessity of warning.
    2. The fact that the railing on the upper deck of the tug extended around the forward part only, is no evidence that the boat was unseaworthy in structure or equipment. It appears that such form of construction is so common that it must be recognized as standard, and a boat is not unseaworthy because there are spaces where a seaman may fall.

      Brick v. Long Island R. R. Co., 216 App. Div. 841, reversed.
    Appeal from an order of the Appellate Division of the Supreme Court in the second judicial department, entered May 7, 1926, reversing a judgment in favor of defendant entered upon a dismissal of the complaint by the court at a Trial Term and granting a new trial.

      Thomas J. Brennan and Joseph F. Keany for appellant.
    Plaintiff failed to prove unseaworthiness of the vessel and the nonsuit was properly granted. (Gardner v. Mich. Central R. R., 150 U. S. 349; Kreigh v. Westinghouse, 214 U. S. 249; Wicks v. Cowperthwaite, 203 App. Div. 705; Cordell v. N. Y. C. & H. R. R. R. Co., 75 N. Y. 330; Geer v. N. Y. & P. T. & T. Co., 144 App. Div. 874;
      Baulec v. N. Y. & Harlem R. R. Co., 59 N. Y. 356; Hensen v. Lehigh Valley R. R. Co., 194 N. Y. 205; Jones v. Ryan, 125 App. Div. 282; Searles v. Manhattan R. Co., 101 N. Y. 661; Hanrihan v. Pacific Transport Co., 262 Fed. Rep. 951.) There is no proof that any negligent act of the defendant was the proximate cause of the death of plaintiff’s intestate. (White v. Lehigh Valley R. R. Co., 220 N. Y. 131; Ford v. McAdoo, 231 N. Y. 155; Francey v. Rutland R. R. Co., 222 N. Y. 482; Heck v. Lehigh Valley R. R. Co., 241 N. Y. 210; Maher v. Madison Square Carden Corp., 242 N. Y. 506; Fearick v. Lehigh Valley R. R. Co., 210 App. Div. 742.) Plaintiff’s intestate voluntarily assumed the risk of going out on the upper deck if in fact he did so. (Benzing v. Steinway & Sons, 101 N. Y. 552; Kranz v. Long Island Railroad Co., 122 N. Y. 1; Eastland v. Clarke, 165 N. Y. 420; Southern Pacific Co. v. Berkshire, 254 U. S. 415; Boldt v. Penn. R. R. Co., 245 U. S. 441; Fearick v. Lehigh Valley R. R. Co., 210 App. Div. 742; Heck v. Lehigh Valley R. R. Co., 241 N. Y. 210.)

      Silas B. Axtell and Charles A. Ellis for respondent.
    There was sufficient evidence to make it a question for the jury as to whether the tug was unseaworthy, and defendant negligent, by reason of the absence of a proper and sufficient rail. The evidence clearly showed that the rail was insufficient, in view of the location of the waste supply box. (Standard Oil Co. v. De Vries, 3 Fed. Rep. [2d] 852; Gardner v. Mich. Central R. R., 150 U. S. 349; Grand Trunk R. R. Co. v. Ives, 144 U. S. 408; Kreigh v. Westinghouse, 214 U. S. 249; Robert v. U. S. S. B. E. F. C., 240 N. Y. 474; Nicholson v. Greeley Square Hotel Co., 227 N. Y. 345; Payne v. Troy & Boston R. R. Co., 83 N. Y. 572; Hart v. Hudson River Bridge Co., 80 N. Y. 622; Harris v. Perry, 89 N. Y. 308; The Osceola, 189 U. S. 158; Chelentis v. Luckenbach S. S. Co., 247 U. S. 372; Carlisle Packing Co. v. Sandanger, 259 TJ. S. 255; Lynott v. Great Lakes Trans. Corp., 202 App. Div. 113; 234 N. Y. 626.) There was sufficient evidence to make it a question for the jury whether the master was negligent in navigating the tug around the bug light in such manner as to cause sufficient lurch to throw decedent off-balance and overboard, without any warning to decedent who he knew was on the open upper deck. (Grand Trunk Ry. Co. v. Ives, 144 U. S. 408; Gardner v. Michigan Cent. R. R., 150 U. S. 349; Kreigh v. Westinghouse, 214 U. S. 249; Nicholson v. Greeley Square Hotel Co., 227 N. Y. 345; Robert v. U. S. S. B. E. F. C., 240 N. Y. 474; Hart v. Hudson River Bridge Co., 80 N. Y. 572; Payne v. Troy & Boston R. R. Co., 83 N. Y. 572; Harris v. Perry, 89 N. Y. 308; Standard Oil Co. v. De Vries, 3 Fed. Rep. [2d] 852; Petrone v. Howlett, 237 N. Y. 394; Lynott v. Great Lakes Trans. Corp., 202 App. Div. 113; 234 N. Y. 626; Panama R. R. Co. v. Johnson, 264 U. S. 374; Western Fuel Co. v. Garcia, 257 U. S. 233.) There was sufficient evidence from which it might be fairly and reasonably inferred that the absence of a rail, coupled with the swaying or lurch of the tug as it rounded the buoy,' proximately caused decedent’s fall into the water and death. What was the proximate cause of decedent’s death was, therefore, a question for the jury. (Hart v. Hudson Bridge Co., 80 N. Y. 622; Harris v. Perry, 89 N. Y. 308; Kain v. Smith, 89 N. Y. 375; Milwaukee, etc., Ry. Co. v. Kellogg, 94 U. S. 469; Swistak v. Erie R. R. Co., 208 App. Div. 553; 239 N. Y. 549.) There was no proof upon which the court could rule that,• as matter of law, decedent assumed the risk; and, if a question of assumption of risk was presented, it was a question of fact to be determined by the jury under proper instructions. (Seaboard Air Line v. Horton, 233 U. S. 492; Dowd v. N. Y., etc., Ry. Co., 170 N. Y. 459; The Colusa, 248 Fed. Rep. 21; Lynott v. Great Lakes Trans. Corp., 202 App. Div. 113; 234 N. Y. 626; Dowd v. N. Y., etc., Ry. Co., 170 N. Y. 459; Fitzwater
      v. Warren, 206 N. Y. 355; Pierce v. Atlantic Gulf & Pac. Co., 216 N. Y. 209.)
   Cardozo, Ch. J.

The action is for negligence resulting in death.

Thomas Brick was employed by the defendant as an engineer on its tugboat, the Patchogue. He entered the pilot house about midnight on April 22, 1923, and asked the captain for some waste to be used in the engine room. He was told that none was there, and went out to seek it elsewhere. A few moments later, the boat rounded a light, listing a little in the turn. Sailors on the starboard side of the lower deck heard something fall from the port side of the deck above, and one of them saw something which he likened to a falling shadow. Almost at the same time a voice was heard in the water calling the captain’s name. The boat was stopped, but the fallen man could not be seen. His dead body was found the next day.

The Patchogue is a tug 90 feet, 5 inches long. Her upper deck, which is also the roof of the tug house, is protected by a railing for a space of thirty-five feet aft. Between the ventilators, and a little in front of them, is a box which was used as a receptacle for waste, oil and lamps. This box is about three feet aft of the railing. It is more than ten feet away from the edge of the deck. The plaintiff’s theory of the accident is that Brick went to the box and fell from the deck as the tug rounded the buoy. On that assumption, fault, it is said, may be ascribed to the defendant both in navigation and in equipment.

(1) We see no evidence of negligence in the navigation of the boat. The plaintiff argues that the captain had reason to believe that Brick was going aft for waste, and should have called out a warning before making a sudden turn. This would indeed have been a most extraordinary precaution. Brick was an experienced seaman. A captain, busy in steering \s course through the shallows of a bay, cannot reasonably be expected to take notice of the location of every member of his crew. There was nothing unusual in the movement of the vessel in respect of time or manner. There was nothing in the known situation to suggest to ordinary prudence the necessity of warning.

(2) We see no evidence that the boat was unseaworthy in structure or equipment. Many tugs have railings around the entire upper deck. Many like the Patchogue have railings around the forward part only. , A more or less haphazard count by plaintiff’s witnesses disclosed a greater number with complete railings than with partial ones, perhaps seventy-five or eighty per cent. Both forms of construction, however, are so common that they must be recognized as standard. We may not say upon the slender evidence within the covers of this record that a fifth of the tugs in the harbor are unseaworthy in build.

Ships roll, and those who go to sea must have sea legs ” (Adams v. Bortz, 279 Fed. Rep. 521). Precautions suitable in aid of passengers may be unexpected and superfluous for members of the crew. What is necessary or usual in the equipment of an ocean liner may be unusual and needless in the equipment of a harbor tug. “ Seaworthiness is a relative term ” (Hanrahan v. Pacific Transport Co., 262 Fed. Rep. 951). There is no evidence how often or for what purpose the crew had occasion to go upon the part of the tug house roof unprotected by a guard. The only purpose suggested is the use of the box of .waste. Indeed, counsel in effect concedes that except for this box the absence of a guard would have little or no relation to the safety of the structure. ■ The box, however, was so located that a man might stand beside it and be all the time within easy reach of the railing to the front. Again we must remind ourselves that seaworthiness is something relative. Equipment should be suitable when viewed in the light of reasonable probabilities, such as the extent of the use to which an unprotected section is to be put, the waters to be traversed, and generally the dangers to be feared. A boat is not unseaworthy because there are spaces here and there where a seaman, if awkward or inattentive, may find it possible to fall (The Santa Clara, 206 Fed. Rep. 179). The mariner on the dizzy mast has this at least in common with his sheltered brother in the harbor, that the work of each is on the waves. One who would shun their perils wholly, should stay upon the land.

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

Pound, Crane, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Ordered accordingly.


author: O’Brien, J.

text:
    The People of the State of New York, Respondent, v. Garhis Ohanian, Appellant.
    Crimes —■ larceny — trial — evidence — credibility of defendant exclusively for jury — court may not say as matter of law that testimony is false — comments of judge during trial and in charge, in effect deciding sole question of fact in case, . reversible error.
    1. No court or judge may say, as matter of law, that evidence of a defendant, on trial for larceny of jewelry intrusted to him for delivery, that he did not remember what he had done with it and that he had suffered from a severe headache and was depressed and absent minded on the day of its disappearance, is false. His credibility is exclusively for the jury and they have the right' to take into consideration the fact that defendant had frequently been intrusted with valuable jewelry and that the request that he deliver it might have impressed him no more than other casual incidents of daily routine and find that in his inefficiency, caused by depression, he really did forget.
    2. Repeated comments, therefore, by the trial judge, both during the trial and in his charge, assuming the falsity of the defense, from which the conclusion is inescapable that the judge made himself the trier of the facts and acted as a self-appointed substitute for the jury, constitute error of law, and where there was only the one question in the case and in language undisguised the judge decided that question, the error is substantial, not technical, and this court may not disregard it.
    (Argued May 5, 1927;
    decided May 31, 1927.)

      People v. Ohanian, 219 App. Div. 709, reversed.
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered January 21, 1927, which affirmed a judgment of the Court of General Sessions of the county of New York, rendered upon a verdict convicting the defendant of the crime of grand larceny in the first degree.

      Vahan H. Kalenderian for appellant.
    Exceptions appearing in the record to the charge, to refusal to charge, to the remarks of the trial judge during the trial and other rulings constitute reversible error. (People v. Marendi, 213 N. Y. 600; People v. Frasco, 187 App. Div. 299; People v. Wansker, 108 Misc. Rep. 84; People v. Wolff, 183 N. Y. 464; People v. Mull, 167 N. Y. 247; People v. Naimark, 154 App. Div. 762; People v. Acardo, 140 App. Div. 929; People v. Milch, 178 App. Div. 875; People v. Esposito, 224 N. Y. 370; People v. Kinney, 202 N. Y. 289; People v. Mayer, 132 App. Div. 646; People v. Becker, 210 N. Y. 274.)

      Joab H. Banton, District Attorney (Archibald Firestone of counsel), for respondent.
    If any errors occurred during the course of the trial or during the judge’s charge, by reason of any remarks made by the trial judge or by his refusal to charge as requested, they were immaterial under section 542 of the Code of Criminal Procedure; and, furthermore, were cured by directions of the court made subsequent to the main charge. (People v. Sprague,
      217 N. Y. 373; People v. Sobieskoda, 235 N. Y. 411; People v. Curtis, 225 N. Y. 519; People v. Bransby, 32 N. Y. 525; People v. Swersky, 216 N. Y. 471; People v. Watson, 216 N. Y. 565; People v. Fielding, 158 N. Y. 543; People v. Manganaro, 218 N. Y. 9; People v. Maestry, 167 App. Div. 266.)
   O’Brien, J.

The indictment charges the larceny of two bracelets valued at $1,700, the property of Friedensohn & Sakolncik. From his conviction as affirmed defendant appeals to this court on errors of law raised by exceptions.

Friedensohn & Sakolncik were jewelers occupying a room on the eleventh floor of No. 71 Nassau street, New York city. Immediately next to their room was a suite of three rooms one of which was occupied by Gilfond & Taylor, jewelers, and another by Harry Janowitz, a jewelry engraver. Defendant was employed by Gilfond & Taylor as a repairer. The entrances to Friedensohn & Sakolncik’s room and to the suite occupied by Gilfond & Taylor and by Janowitz were separated by a distance of six or eight feet. About eleven-thirty o’clock on the morning of June 16, 1925, Friedensohn delivered the bracelets to Janowitz for engraving. He engraved them as directed and about one o’clock in the afternoon of the same day put them and his bill in an envelope, handed them to defendant and asked him to take them next door to Friedensohn’s shop. Defendant took the package, left Janowitz’s room and in a minute or two returned. Nothing was said about the bracelets. About twenty minutes later defendant was sent on another errand, this time outside the building, and shortly returned after performing it. At two o’clock Sakolncikwent to Janowitz to inquire where the bracelets were. In the presence of Sakolncik, Swirsky and Horowitz, defendant was questioned by Janowitz. What had he done with the bracelets? Hadn’t he delivered them? He searched his pockets, lifted Ms hands to Ms head, tore Ms hair and exclaimed: “ I don’t remember what I did with them, O, my God what did I do? ” At the trial he asserted that he did not remember what he had done with the bracelets or where he had put them, whether he had dropped them in the hall or left them on the desk. He demed that he had stolen them or that he had given them to some one m the hall. He claimed to have suffered from a severe headache the Mght before and to have been depressed .and absent minded on the day of the disappearance of the bracelets. At the same time he recalled many incidents of the day and did not pretend to have been afflicted with any form of insamty.

No court or judge may say, as matter of law, that defendant’s evidence is false. It may, perhaps, be true. His credibility was, of course, exclusively for the jury. An acqmttal based upon the existence of a reasonable doubt could not, as matter of law, be deemed utterly unreasonable. The jury had the right to take into consideration the fact that defendant had frequently -been intrusted with valuable jewelry, that Janowitz’s request to deliver the envelope to the shop next door might have impressed defendant no more than many other casual incidents of daily routine and they could have found that in Ms inefficiency caused by depression he was inattentive to Ms work and really did forget. The jury ought to have been left free to ask itself and to answer the question whether tMs simple errand created any deeper impression upon defendant’s memory than the mailing, of a letter or any other petty incident of the day’s work. Answers to these questions are included witMn the function of the jury and .not of the court.

The judge’s repeated comments and Ms charge assumed the falsity of the defense. The practical effect of them may be viewed as morally depriving the jury of its freedom of action and as coercing it mto reacMng such a verdict as perhaps it might not otherwise have rendered. The respective duties of the court and the jury are clearly defined. Questions of fact are for the jury, and the court must, if requested, inform the jury that they are the exclusive judges of all questions of fact. (Code Crim. Proc., sections 419, 420.) While verbal compliance was had with these fundamentals, their essence was destroyed. The court took into his own control the disposition of defendant’s credibility. At one stage of the trial he remarked: I do not think the jury is going to be very sympathetic.” On another occasion his comment on defendant’s testimony was, " You cannot slip anything like that here,” and I can readily see the motive of that.” Satirically he assured defendant’s counsel: I am going to ask the jury to believe his story * * *. You said yourself you do not know whether he was telling the truth to you; if you are in doubt about it, what are you going to say to the jury? ” If your contention is quite right, every merchant in this city would be required to have a mental examination made of an employee. In other words whether he was aphasic or whether he was something else, before he could be held for criminal responsibility, that he stole the contents of an entire shop. * * ' * I must say once more that is perhaps the most unique defense that I have ever heard interposed.” In his charge he stated to the jury: “ Subterfuge will not go in this court. Absurd excuses should not govern a jury. I must say that the defense interposed is ' extraordinary.” Can a man come into this court and hoodwink a jury, bamboozle twelve men and say that he does not remember what happened, because he had headaches and other ailments that have been described here? E you feel that you should say ‘ not guilty ’ upon the testimony that has been introduced or 1 not guilty ’ arising out of a reasonable doubt, that is your privilege.” After the close of the charge, the court in passing upon' the numerous exceptions noted by defendant observed that the jury “ can disregard pretty much everything I said, if they see fit.” He did go through the form of instructing them respecting the presumption of innocence and defendant’s right to the benefit of a reasonable doubt arising from the evidence, yet he coupled these instructions with an exhortation not to have justice made ridiculous, held up to public ridicule. He warned against sympathy and advised that reasonable doubt must be cautiously, exercised.

The question whether defendant had a fait trial is primarily, at least, one for the trial court and secondarily, for the Appellate Division. If no error of law is presented by exception the judgment must be affirmed here. The mere intimation by the trial judge of an opinion on the merits of the case does not by itself constitute such an error of law as justifies reversal by this court. (Hurlburt v. Hurlburt, 128 N. Y. 420, 425, 426.) The trial judge is something more than a mere automaton. In the English courts and in our Federal courts, a wide latitude is allowed, yet that latitude is always restricted by the requirement that the jury must be advised in good faith that it and not the judge is the exclusive trier of the facts. (Weare v. U. S., 1 Fed. Rep. [2nd Series] 617; Buchanan v. U. S., 15. Fed. Rep. [2nd Series] 496.) Under our Code of Criminal Procedure (Sections 419 and 420) this duty is specifically enjoined. While the trial judge in the case before us repeated the words of the Code in the literal manner commanded by the statute, plainly his attitude and language throughout the trial could not fail to neutralize their force. The rhetorical question asked by the court: Can a man come into this court and hoodwink the jury and bamboozle the jury? ” answers itself. So too does the judicial entreaty: Don’t have justice held up to public ridicule ” operate as a plea to convict. The members of the jury could not have been notified in plainer words that if they allowed this defendant to escape they would be hoodwinked and bamboozled and would hold justice up to public ridicule. Did they so believe or was an opinion forced upon them by the judge? If left to themselves to appraise defendant’s credibility, how would they have weighed it? Whatever their opinion, dared they brook the satire and ridicule of the judge? We cannot escape the conclusion that the judge made himself the trier of the facts and acted as a self-appointed substitute for the jury. Such conduct is a violation of section 419 of the Code of Criminal Procedure and as such constitutes an error of law. There was only one question in this case and that was whether defendant’s testimony concerning Ms forgetfulness was true or false. In language undisgmsed, the judge decided that question. An error wMch prevents proper consideration by the jury of the only question relied on by the defendant is substantial not techMcal and we have no right to disregard it. (People v. Gerdvine, 210 N. Y. 184, 187.) Indeed, errors committed by trial judges in allowing prosecuting officers to indulge in inflammatory appeals to the prejudice of juries are far less harmful than partisan argument of the judge himself yet they have incurred the condemnation of tins court and have formed the basis for reversals. (People v. Fielding, 158 N. Y. 542; People v. Mull, 167 N. Y. 247; People v. Wolf, 183 N. Y. 464.)

The judgment of the Appellate Division and that of the trial court should be reversed and a new trial ordered.

Cardozo, Ch. J., Pound, Crane, Andrews, Lehman and Kellogg, JJ., concur.

Judgment reversed, etc.


author: Kellogg, J.

text:
    The People of the State of New York, Respondent, v. Hyman M. Epstein, Appellant.
    Crimes — larceny — trial — evidence — charge — charge of grand larceny by appropriation of property in possession of defendant belonging to another — defense that defendant had purchased property and paid for same by several checks — erroneous exclusion of bank statement showing withdrawals from defendant’s account of amounts of checks — erroneous contention that if defendant made unauthorized sale he became trustee of proceeds within meaning of section 1290 of Penal Law — the word “ trustee ” in statute means actually appointed “trustee” not trustee ex maleficio or in invitum — erroneous charge and refusal to charge — when errors may not be disregarded.
    1. Upon trial of an indictment charging defendant with the crime of grand larceny, in that, having in his possession certain property of complainant, he feloniously appropriated the same to his own use, where complainant has testified that she never authorized defendant to sell certain securities and defendant has testified that she sold them to him and he paid for them with five several checks, which he could not produce because they had been' taken from his office after payment and cancellation, it was error for the trial court to refuse to receive in evidence a statement of his account, copied from the books of his bank of deposit, showing withdrawals as stated by defendant in his testimony but not the names of the payees of the several checks, on the ground that the statement was “ a self-serving declaration.” The statement was neither “ self serving ” nor inadmissible' as irrelevant and immaterial, under the only objections taken. If competent, as admitted, it was relevant and material as tending to corroborate defendant’s testimony.
    2. The charge of the indictment was that defendant appropriated to his own use a sum of money received from the sale of stock, but, from testimony of complainant it would seem that defendant’s crime consisted of a wrongful conversion of a certificate of stock by an unauthorized sale thereof, while, on the other hand, defendant’s testimony, if true, showed a lawful sale and that his crime consisted in appropriating the proceeds. A contention that in either case the crime charged was made out, for that if defendant made an unauthorized sale of the certificate he became a trustee of the moneys received, within the meaning of section 1290 of the Penal Law, which provides that a trustee who, with felonious intent, appropriates to his own use trust property in his possession is guilty of larceny, cannot be sustained. The Legislature, in using the word “ trustee ” in the section quoted, meant none other than a person in whom a trust or confidence had voluntarily been imposed and by whom it had voluntarily been accepted. It did not intend thereby a person who might be declared by a court of equity to be a trustee ex maleficio or in invitum. The section should not be so construed that a thief may be found guilty not only of theft of property stolen but also of theft of the proceeds of the same property.
    (Argued May 5, 1927;
    decided May 31, 1927.)
    3. A charge of the trial court, therefore, that if defendant received money on a sale of the stock certificate, he held it as trustee for complainant, to whom it belonged, and a refusal to charge that if defendant stole the securities he must be acquitted, constitute error.
    4. The errors may not be disregarded. The excluded bank statement was an important item of proof in defendant’s favor and the instructions of the trial judge completely eliminated from the case the defense that though defendant may have been guilty of misappropriating a certificate of stock, he was not guilty, as charged, of the crime of stealing the proceeds thereof.

      People v. Epstein, 218 App. Div. 764, reversed.
    Appeal, by permission, from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered November 26, 1926, which affirmed a judgment of the Court of General Sessions of the county of New York, rendered upon a verdict convicting the defendant of the crime of grand larceny in the first degree.

      Otho S. Bowling and Robert H. Elder for appellant.
    The charge was that defendant stole money, whereas the evidence showed that defendant stole (if anything) certificates of stock. This variance was fatal. (People v. Geyer, 196 N. Y. 364; People ex rel. Briggs v. Hanley, 226 N. Y. 453; People v. Dimick, 107 N. Y. 13; People v. Lammerts, 164 N. Y. 137; Silsbury v. McCoon, 3 N. Y. 379; Kittredge v. Grannis, 244 N. Y. 182; Commonwealth
      v. Hays, 14 Gray [80 Mass.], 62; Rolfe v. Gregory, 4 De Gex, J. & S. 576; 3 Pom. Eq. Juris. [3d ed.] § 1044; Murray v. Lyburn, 2 Johns. Ch. 441.)

      Joab H. Banton, District Attorney (William B. Moore cf counsel), for respondent.
    The People's case that the defendant was guilty of larceny as agent, bailee and trustee of a certain sum of money was fully proved by the evidence. There was no variance between the allegations in the indictment and the proof at the trial. (People v. Cruger, 102 N. Y. 510; People v. Geyer, 198 N. Y. 364; People v. McDonald, 43 N. Y. 61; People v. City Bank of Rochester, 96 N. Y. 32; Hammond v. Pennock, 61 N. Y. 145; Densmore v. Searle, 7 App. Div. 45.)
   Kellogg, J.

The indictment, in two counts, charged the defendant with the commission of the crime of grand larceny in the first degree. The first count charged that the defendant, on the 4th day of .April, 1924, did steal, take and carry away from one Ray Dona Kuba the sum of $2,731 in lawful money. The second count charged that the defendant, having in his possession the property of Ray Dona Kuba, described in the first count, as agent, bailee and trustee thereof, did feloniously appropriate the same to his own use. On the trial, the judge presiding withdrew from the consideration of the jury the charge contained in the first count. The jury found the defendant guilty of the crime of grand larceny as charged in the second count. The judgment of conviction was affirmed, and from the judgment of affirmance the defendant appeals.

Witnesses for the prosecution gave testimony of which , the following is a brief summary: The complainant, Ray Dona Kuba, for ten years prior to the year 1918, had been the mistress of one Moses Sahlein. She left him in the year 1918 and Sahlein then promised that he would take care of her for the rest of her life. In August of the year 1923 Ray Kuba met Sahlein and urged him to give her the money he had promised. In pursuance of the request, on August 17, 1923, Sahlein gave Ray Kuba certain securities, among which were 400 shares of the common stock of the Texas and Pacific Railway Company, and a $5,000 bond of the Missouri, Kansas and Texas railroad. Sahlein died within a few weeks. Ray Kuba consulted with her brother, Dubie Kuba, concerning the disposal of the securities given her. He, in turn, consulted with his business associate, the defendant, Hyman M. Epstein. The two visited a broker for the purpose of procuring the securities to be sold. The broker, when told that the securities came from the possession of Sahlein, then deceased, declined to handle the securities, on the ground that he might get into trouble with Sahlein’s estate. Early in October, 1923, Ray Kuba, Dubie Kuba and Epstein met in the Commodore Hotel in New York. Ray Kuba had with her the securities given her. Epstein reported that the securities could not be sold. He suggested interviewing the attorney for the Sahlein estate, and stated that he thought he could get $100,000 for the securities. That sum was about five times their market value. Epstein said that he must have the securities to introduce himself to the attorney. Ray Kuba thereupon turned over to him the securities, and Epstein said that he would place them in a vault for safekeeping. Epstein saw Mr. Flaherty, the attorney for the Sahlein estate. He tried to get from him an authorization of the estate for the sale of the securities, but was not successful. Epstein reported back to Ray Kuba that Flaherty would write Mrs. Stern, a sister of Moses Sahlein, to whom all his property had been left. He told her that some other woman, who had had relations with Sahlein, had obtained $1,000,000 from the estate. About the time Epstein went to see Flaherty Ray Kuba gave him a written statement setting forth her history and other interesting items. She stated therein that Moses Sahlein left an estate of about $15,000,000 and specified various parcels of New York real estate which he owned. The statement contained the following: “Attorney Flagherty is bluffing as M. S. only lunched with him once or twice a year; ” “ I think Flagherty cannot be bluffed or made to do as Mrs. Rose Stern (M. S. only sister). If Mrs. Stern is seen and told the story (omitting my name Ross) she will consent as she would not like to have the N. Y. and Frisco papers get the story of M. S. life which involves affairs with among others the following ” (naming them); “ Tell Mrs. Stern you have enough leads for the newspapers to make a big story of it; ” “ M. S. Cousin Grace Sahlein and her daughter-in-law, Mrs. Grace Steinau, would make a big hit of notoriety and Mrs. Stern knows all about it. Letters from the younger Grace whom M. S. tempted with big money and then thru aside would be made public. The above would involve the Sahlein old maids and the papers can get the entire life, and signed statement of many.” On October 17, 1923, Epstein procured the 400 shares of Texas and Pacific stock to be transferred to his name on the books of the corporation. The certificates had been originally issued to Shafer Bros., brokers, and were indorsed in blank by them. Before procuring their transfer to himself Epstein filled in the blank assignments on the back thereof with his name as assignee. On the same day as the transfer, October 17th, Epstein turned in the old certificates and procured new certificates to be issued to himself. On the 14th of January, 1924, Epstein delivered one of the certificates .to a broker for sale. It was sold and the proceeds were credited to his account with the broker. On February 4th, 1924, he delivered the remaining three certificates to the broker for sale. One was sold on the same day and one on March 7th. The proceeds were placed to his account and checks were drawn by the broker payable to Epstein, which he cashed. On April 4th, 1924, the fourth certificate was sold for $2,731. This is the certificate for converting the proceeds of which Epstein was charged with grand larceny. The broker drew a check for $2,800, payable to Epstein, on the same day, and the check was returned subsequently to the broker as paid. It then bore the indorsement of Epstein. Meanwhile, Ray Kuba kept importuning Epstein for a settlement with the Sahlein estate, and Epstein kept putting her off. Finally, in May, 1925, Ray Kuba and her sister met Epstein in his apartment, Ray Kuba told him she could not wait any longer; that she was going to Max Steuer, a well-known lawyer, with her case. She demanded her securities. Epstein asked for another week. He said she could raise money on the Chemical Bank stock, one of the securities given her by Sahlein, and he turned over to her the stock certificate therefor. The blank assignment on the back thereof had been filled in with the name of Epstein as assignee. In October, 1925, Ray Kuba, with her attorney, went to Epstein’s apartment and demanded her securities. He said: “ I haven’t got them; I have given you the money.” Ray Kuba never received the proceeds of the 400 shares of Texas and Pacific stock, nor the $5,000 Missouri, Kansas and Texas bond, which Epstein had caused to be sold for him on April 15th, 1924.

Ray Kuba testified that she never authorized the defendant Epstein to sell her securities. The following is her testimony upon this point: “ Q. Now, I understand you to say, and did you not say, that you gave no authority whatever at any time to this defendant to sell the certificates? A. Yes. Q. Is that correct? A. Yes. Q. You never told him to do it? A. Never. Q. Never asked him to do it? A. No. Q. He never told you he was going to sell those things? A. No.» Q. You didn’t want him to? A. No. Q. And when he did it, he did it contrary to your wishes and orders, is that right? A. Yes.” The burden of her testimony and of her statement is that she employed Epstein, not to sell her securities to buyers generally, but to extort large sums therefor from the estate of Moses Sahlein, upon threats otherwise to expose his past life through the public prints.

The defendant, Hyman M. Epstein, called as a witness, bold a story which partly confirmed the testimony of the prosecution’s witnesses, but which in important particulars differed from the testimony of Ray Kuba. He stated that he was employed generally to sell the securities for Ray Kuba. He denied that there was a plan made to extort more money than the securities were worth from the Sahlein estate. He said that Ray Kuba complained often that he had not sold the securities; that she importuned him to get money for them; that he told her the difficulties standing in the way of sales unless the Sahlein estate authorized them; that finally, in the latter part of September, 1923, he offered to buy the 400 shares of Texas and Pacific and the $5,000 bond of Missouri, Kansas and Texas for two-thirds their market value. He said that the market value of these particular securities amounted to $9,800; that he offered to give her $6,500 for them; that she said she. would take $6,550; that the. bargain for their sale at that price was then made. He said that he gave her a check for $900 at the time; that he gave her a check for $500 within two or three days; that within a week he gave her a check for $1,100; that in November he gave her a check for $2,150; that -in the same month he made his final payment by giving her a check for $1,900. The complainant, Ray Kuba, denied that she ever sold the 400 shares of Texas and Pacific stock or the Missouri, Kansas and Texas bond to the defendant Epstein.

The defendant, Ebstein, did not offer in evidence the checks, stated to have been given by him to Ray Kuba, which, if given and thereafter cashed, must have been returned to him. He testified that the canceled checks had. been taken from the office which he had occupied with Dubie Kuba, and that he was unable to produce them. In lieu thereof he offered for identification a statement of his account copied from the books of his bank of deposit. The district attorney stated: I won’t object to their competency, but as to their relevancy and materiality, I will object to them, because I don’t know what his defense is, as I haven’t heard any opening.” The court said: “He is placing himself on record that he raises no objection as to whether they were correctly copied from the main sheet, or whether the transcript is true.” The district attorney then stated: “ That is right.” Later the statement was offered in evidence. Again, the district attorney said: “ I do not object to their competency or the fact that they were not proven by the bank.” The court refused to receive the offered proof, declaring the statement to be "a self-serving declaration.” We are at a loss to know wherein the statement was “ self-serving ” or inadmissible under the objections taken. If competent, as it was admitted to be, it certainly was relevant and material. The statement showed that the defendant Epstein on September 25th, 1923, checked out of his account $900, on October 26th, $1,100, on November 9th, $2,150, and on November 23d, $1,900. These withdrawals were made precisely as stated by Epstein in his testimony, and although the statement did not disclose the names of the payees of the several checks, nevertheless, it tended to corroborate the testimony so given. The court was clearly in error in excluding the statement.

The indictment did not charge the defendant Epstein with larceny in causing the certificate of stock for 100 shares of Texas and Pacific Railway stock to be sold for his account on April 4th, 1924. The charge was that he appropriated to his own use the sum of $2,731 received from the sale. Ray Kuba testified positively that she gave no authority to Epstein to sell the stock for her. Her testimony, coupled with her written statement, tended strongly to establish that the securities owned by her w;ere turned over to Epstein for the sole purpose of extorting from the estate of Moses Sahlein a sum far greater than their value. On the other hand, the defendant Epstein testified that he was expressly authorized to make a sale of the securities. If Ray Kuba told the truth it would seem to follow that Epstein’s crime consisted in a wrongful conversion to his own use of the certificate of stock by a sale thereof on April 4th, 1924. On the,other hand, if Epstein told the truth, the sale was lawfully made and his crime consisted in appropriating the proceeds of the sale as charged in the indictment. The district attorney urges that in either case the crime charged was made out. Section 1290 of the Penal Law provides that a person is guilty of larceny who, with felonious intent, “ Having in his possession, custody, or control, as a bailee, servant, attorney, agent, clerk, trustee, or officer of any person, association, or corporation, or as a public officer, or as a person authorized by agreement, or by competent authority, to hold or take such posséssion, custody, or control, any money, property, evidence of debt or contract, article of value of any nature, or thing in action or possession, appropriates the same to his own use, or that of any other person other than the true owner or person entitled to the benefit thereof.” The district attorney argues that, even if the defendant Epstein made an unauthorized sale of the certificate, he became a trustee of the moneys received therefrom, within the meaning of the section, and was properly chargeable with a larceny thereof in appropriating the same to his own use. We do not agree with the contention. If Epstein made an unauthorized sale the legal title to the moneys received therefrom passed to him. (Silsbury v. McCoon, 3 N. Y. 379; Matter of Cavin v. Gleason, 105 N. Y. 254, 261; Vogt Mfg. & Coach Lace Co. v. Ettinger, 88 Hun, 83.) It is true that a court of equity, if resorted to, might have impressed a trust upon the moneys received, and might have declared him a trustee thereof for .the benefit of the true owner. (Newton v. Porter, 69 N. Y. 133; Matter of Cavin v. Gleason, 105 N. Y. 254, 260; Holmes v. Gilman, 138 N. Y. 369, 376; Amer. Sugar Ref. Co. v. Fanchor, 145 N. Y. 552, 556; Falk v. Hoffman, 233 N. Y. 199.) However, the interposition of a court of equity, or at least the application of equitable principles, would have been necessary, in order that Bay Kuba might have had a recovery of the moneys. We think that the Legislature, in using the word “trustee” in the section quoted, meant none other than a person in whom a trust or confidence had voluntarily been imposed and by whom it had voluntarily been accepted; that it did not intend thereby a person who might be declared by a court of equity to be a trustee ex maleficio or a trustee in invitum. The section declares that a “ bailee ” who appropriates ” property in his possession “ to his own use, or that of any other person other than the true owner ” is guilty of larceny. Under that provision the defendant Epstein, if he sold securities belonging to Bay Kuba without authority and with felonious intent was guilty of a felony. If he appropriated to his own use the proceeds of the sale, then, under the district attorney’s construction of the section, he was, as a “ trustee ” guilty of a second felony. We do not think that the section should receive such a construction that a thief who steals property might be found guilty not only of that theft, but also of the theft of stealing the proceeds of the property thus already stolen.

The court charged the jury in reference to the securities delivered by Kay Kuba to the defendant Epstein as follows: They belonged to her, and if he got the money for them, that money belonged to her, and if he got $2,800 on that date, after having exchanged a certificate, the value of which was $2,731, that sum of money which he then got was hers, and it would be hers by reason of the fact that he held it only by being a trustee. He could not destroy the relationship of bailee, agent, or trustee of that sum by converting the securities into its cash capital, or cash equivalent; that cash capital or cash equivalent was hers, and it could not be said to be the stealing of a piece of paper only and allow the man who stole the piece of paper, although he gets the money to say ' You can’t accuse me of stealing the money — all you can accuse me of is stealing the piece of paper.’ ” The charge, as thus made, was duly excepted to. Defendant’s counsel requested the court to charge as follows: I request your honor to charge the jury that if the defendant stole the Texas and Pacific securities on October 17th, 1923, he must be acquitted.” The court said: “ I refuse to charge other than what I have charged on that subject.” In the view which we take of the case and have hitherto expressed, the charge and refusal to charge constituted error.

We do not feel that we may disregard the errors referred to. There was a fair question of fact as to whether or not the securities in question were purchased by the defendant from Ray Kuba and were his own property when he sold them. Upon that issue the bank statement which was excluded by the court was an important item of proof in the defendant’s favor. There was a fair question of fact as to whether or not the defendant was authorized by Ray Kuba to sell the securities in question. The evidence that he was not so authorized was not greatly overbalanced, if at all, by evidence to the contrary. Consequently, it was a fair question qf fact whether the defendant was guilty or not of the crime as charged. The instructions of the trial judge upon this question completely eliminated from the case a defense which the defendant had a right to urge, namely, that, although he may have been guilty of misappropriating a certificate of stock, he was not guilty, as charged, of the crime of stealing the proceeds of the certificate. Various other minor errors are complained of and were committed by the trial judge, but it is unnecessary to refer to them. We think that the errors which we have detailed were such as to require a new trial.

The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial ordered.

Cardozo, Ch. J., Pound, Crane, Andrews, Lehman and O'Brien, JJ., concur.

Judgment reversed, etc.


author: Pound, J.

text:
    James D. McCauley, Appellant, v. Georgia Railroad Bank, Respondent.
    Banks and banking — principal and agent — negligence — duty of bank as agent in receiving, holding and releasing collateral for loan by its principal that of due care — whether agent has exercised care a question of fact.— insufficiency of evidence to warrant finding of negligence.
    1. The duty of a bank, acting as agent for another, under the general directions of a third, in receiving, holding and releasing collateral for a loan made by its principal is that of due care under the circumstances. If it has knowledge of sufficient facts as to the worthlessness of the collateral and the failing circumstances of the borrower to put it on its guard, it is bound, before accepting such collateral, to communicate its knowledge to its principal so far as the same may be material for the principal to know for the protection or preservation of its interests. Whether or not the agent has exercised such care is usually a question of fact.
    2. In an action by the assignee of such a principal against the agent bank to recover money lost through the agent’s acceptance of worthless warehouse receipts as collateral for a loan made through the directing bank, evidence that a few days prior thereto defendant had information that a warehouse audit showed more outstanding certificates than merchandise, and that shortly before, the borrower’s president had been guilty of some irregularity in the issuance of warehouse receipts, is insufficient to warrant a recovery by plaintiff on the ground of negligence, where an immediate examination was made by the bank, its officers going to the warehouse and demanding a count, from which they were informed that there was more merchandise than outstanding receipts, and other audits showed the same thing, business with the borrower going on in the meantime in the usual way. The securities were regular on their face. Prior to defendant’s employment large sums of money had been loaned on similar certificates by its principal through the, directing bank and the latter had authorized the loans in suit and directed defendant to receive the notes and collateral. Under such circumstances the defendant bank had no greater responsibility than it exercised. It was not bound to give notice of its suspicions before investigating and after investigation it seemed unnecessary.
    (Argued April 1, 1927;
    decided May 31, 1927.)

      McCauley v. Georgia Railroad Bank, 218 App. Div. 841, affirmed.
    Appeal from a judgment of the Appellate Division of the Supreme Court in the second judicial department, entered December 21, 1926, affirming a judgment in favor of defendant entered upon a dismissal of the complaint by the court at a Trial Term.

      Vermont Hatch and Aron Steuer for appellant.
    The defendant was an agent for the Shawmut Bank and it is immaterial whether it is called an agent, simply or a sub-agent without discretion. As agent or as sub-agent without discretion, it was bound by law to report to the Shawmut Bank or the Bank of Charleston whatever came to its attention which might influence the making of 'loans dr advances to Barrett & Co. upon collateral offered. (First Nat. Bank v. Hayes, 59 N. E. Rep. 893; Hegenmeyer v. Marks, 32 N. W. Rep. 785; Heinemann v. Heard, 50 N. Y. 27; Edmonstone v. Hartshorn, 19 N. Y. 9; Clinton Nat. Bank v. Nat. Park Bank of New York, 37 App. Div. 601.)

      Hamilton M. Dawes and Morris U. Ely for respondent.
   Pound, J.

The plaintiff brings this action, as assignee of the National Shawmut Bank, a National bank having its place of business in Boston, Mass. The defendant is a State bank of the State of Georgia having its place of business in Augusta, Ga. The action is to recover damages for the negligence of defendant as agent for the Shawmut Bank in advancing money to Barrett & Co., Inc., a cotton factoring concern in Georgia, on the security of warehouse receipts for cotton. The right of the plaintiff assignee to maintain the action in the State of New York was upheld on a motion to vacate an attachment levied herein. (McCauley v. Georgia Railroad Bank, 239 N. Y. 514.)

The complaint sets forth two causes of action on each of two transactions, one a loan of July 7, 1923, of $77,000 and one a loan of July 9, 1923, of $55,000. It is alleged in substance in regard to the first transaction that the Shawmut Bank agreed to loan to the Barrett Company up to $250,000 on demand loans secured by bills of lading or warehouse receipts for cotton through the Bank of Charleston of Charleston, South Carolina, and the defendant undertook to represent the Shawmut Bank and the Bank of Charleston in making loans to and receiving from and holding collateral of Barrett & Co.; that Frank H. Barrett, president of Barrett & Co., was a director of defendant and defendant was largely interested in financing Barrett & Co.; that Bank of Charleston for account of Shawmut Bank requested defendant to receive from Barrett & Co. its demand obligations for $77,000 together with warehouse receipts of Allied Compress Company for 700 bales of cotton; that Barrett & Co. delivered to defendant a demand paper for the amount of the loan and warehouse receipts purporting to cover the cotton; that defendant advised Bank of Charleston to that effect and the latter bank then paid Barrett & Co. the proceeds of the $77,000 loan and was reimbursed from funds of the Shawmut Bank; that on July 7, 1923, defendant knew or had notice that the warehouse receipts of Allied Compress Company were of doubtful value and were being issued irregularly and also that Barrett & Co. were in financial difficulties; that it carelessly and negligently received the warehouse receipts as collateral for the loan of $77,000; that with proper care and investigation it would have learned that the receipts were fraudulently-issued, not against cotton actually in the warehouse or in transit thereto; that Shawmut Bank and Bank of Charleston were ignorant of these facts and of the means of ascertaining them; that Barrett & Co. became bankrupt shortly after July 16, 1923, and the receipts were discovered to be almost worthless to plaintiff’s damage $77,000.

The second transaction involving the loan of $55,000 is set forth in substantially the same way except that the defendant advanced $35,000 to Barrett & Co. and the Bank of Charleston $20,000 and took as security therefor warehouse receipts for 500 bales of cotton. Of the $55,000 so adyanced $23,000 was for the account of the Shawmut Bank and Bank of Charleston was reimbursed for that amount by Shawmut Bank, to plaintiff’s damage $23,000.

The answer admits the payments to Barrett & Co., but puts in issue the other allegations of the complaint. It also pleads payment and that the loans in question were made by the Bank of Charleston on its own account and not for Shawmut Bank.

At the close of plaintiff’s evidence it appeared without question that defendant had accepted the collateral mentioned in the complaint; that Barrett & Co. went into bankruptcy soon thereafter and that there was then almost an entire shortage of the cotton represented by the warehouse receipts. The court, however, granted a motion to dismiss the complaint on the following grounds:

(1) That there was no proof to show that the defendant actually knew of the failing condition of Barrett & Co., or the questionableness of Allied Compress receipts and that there was a failure of proof of any facts or circumstances which would put the defendant upon notice.

(2) That as matter of law defendant did all that could be exacted of it as reasonable diligence.

(3) That the defendant was a subagent without discretion who has complied with all of its instructions.

(4) That no damages or basis for damages had been proven in the case.

(5) That there was no proof in the case that the cotton called for by the receipts received by the defendant on the 7th and 9th of July was not actually in the warehouse at the time the receipts were taken by the defendant.

(6) That as to the July 9th loan, there was no proof that the defendant had ever had knowledge that it belonged to the Shawmut Bank in part.

(7) That as to the $77,000 of July 7th, there was no proof that the defendant was notified on July 7th that thé loan belonged to the Shawmut Bank.

Although the court did not specify which of these reasons prevailed, it is unnecessary to consider all of them as we arrive at the conclusion that on the question of negligence the plaintiff would not be entitled to recover after giving him the benefit of the most favorable view that a jury would be warranted in taking of the evidence.

The rule of law applicable to the facts may be definitely stated. If defendant acted as agent for the Shawmut Bank in these transactions, although it acted under the general directions of the Charleston Bank in receiving, holding and releasing Barrett & Co. collateral, its duty was that of due care under the circumstances. The directions of the Charleston Bank were as follows: “ In all instances we will furnish you with the full particulars as to how the note is to be signed, the time it is to run, the form of the obligation to be executed as well as the collateral security to be pledged.” These instructions are of the most general character. The Charleston Bank dictated merely the form of the note and the character of the collateral. It did not leave defendant entirely without discretion or obligate it to receive collateral proper in form but known to it to be worthless in fact. Its duty as such agent is clearly defined. If it had knowledge of sufficient facts as to the worthlessness of the warehouse receipts and the failing circumstances of Barrett & Co. to put it on its guard, it was bound, in the exercise of “.a high degree of fidelity and diligence in the performance of its duties as such agent,” before accepting such collateral to communicate its knowledge to its principal so far as the same might be material for the principal to know for the protection or preservation of its interests. The orders of the principal in such a case are subject always to the implied condition that they are not to be executed if the agent has knowledge or notice of dangers which would affect the action of the principal and save him from loss if he had notice thereof. If it had notice that the securities were or might be worthless, it should have promptly communicated the facts to the Shawmut Bank through the Bank of Charleston before accepting the securities. (Bown Brothers, Inc., v. Merchants Bank, 243 N. Y. 366.) Whether or not the agent has exercised such care is usually a question of fact but the omission thereof either through inattention, incapacity or intent to defraud is a breach of duty. (Heinemann v. Heard, 50 N. Y. 27.) The question then is whether or not it is a reasonable inference from the facts that defendant knew, or in the exercise of due care' would have ascertained that the Allied Compress receipts were not, when it accepted them, backed by cotton.

A brief and summary history of the parties and the substance of their dealings is as follows: Barrett & Co. was a cotton factor and buyer. Its business was the largest in Augusta. It claimed to be the largest cotton house in the world. , Its credit standing was testified to by John Phinizy, vice-president of the defendant, as good up to July 14th, 1923. It handled 100,000 to 200,000 bales of cotton a year. Frank H. Barrett was its president and managing director and he was considered as a successful man of business. He was a director of the defendant bank. The Allied Compress Company was a Georgia corporation and Barrett was its president. It had no warehouse of its own but leased a building or compartmerits from Atlantic States Warehouse Company, a Georgia corporation of which John Phinizy, defendant’s vice-president, was president and Hugh H. Saxon, vice-president and cashier of defendant bank, was secretary and treasurer. Atlantic States Warehouse Company had a large plant consisting of thirty acres located three miles from the city of Augusta. It also leased compartments to Independent Warehouse Company, a third cotton warehouse. Its superintendent, O’Keefe, was also the general manager of Allied Compress Company.

Bank of Charleston was Barrett & Co.’s financial agent in the south and gave it a large line of credit, placing its paper with other banks. It had placed millions of dollars of Barrett & Co. loans in this way. Bollinger, vice-president of National Shawmut Bank, in September, 1922, made an arrangement with Pringle, president of the Bank of Charleston, whereby Shawmut Bank agreed to extend Barrett & Co. a fine of credit to handle its spot or transit business to the extent of $250,000 in the form of a demand note secured by cotton collateral, to be handled through Bank of Charleston. A loan agreement was entered into September 13, 1922, between Shawmut Bank and Barrett & Co. Various loans on this account were made and payments were made thereon, the last payment being $100,000 on July 6, 1923. On that date Barrett & Co. owed Shawmut Bank $32,000 after receiving such credit.

Defendant’s relation to the transaction grew out of a conversation in October, 1922, between Small, representing the Charleston Bank, and Saxon, representing the defendant. Defendant undertook to look after the Barrett collateral in the manner in which Citizens and Southern Bank had looked after it. Thereafter it made separate reports on collateral handed by it to the Charleston Bank under the heading for account National Shawmut Bank.”

On July 7, 1923, Barrett & Co. borrowed $77,000 through the Bank of Charleston for which it delivered to defendant its demand note and Allied Compress Company receipts purporting to cover 700 bales of cotton. These were taken by- defendant under directions from the Charleston Bank and Barrett & Co. received credit therefor. The receipts were regular in form and the bales were identified by a schedule of marks and weights of the cotton called for. The same is true in substance of the loan of $55,000 on July 9.

What was the duty of defendant in connection with the warehouse receipts of Barrett & Co.?

In May, 1923, defendant’s president, Jacob Phinizy, wrote to Frank H. Barrett demanding his resignation as president of Allied Compress Company, as a condition of the continuance of defendant’s loaning to Barrett & Co. on Allied receipts, saying in substance that the relationship existing between Barrett and the Allied and Barrett & Co. was too intimate and that the bank examiner would criticize him for holding Allied Compress receipts. From this it might be inferable that the objection was that the warehouse receipts might be regarded as Barrett’s own collateral, Barrett being a director of the bank. But Barrett did not resign. The close alliance between the defendant and Barrett thus appears, but knowledge or even suspicion of misconduct does not appear. Barrett was also warned by Phinizy on July 5 that he had been told that Barrett was issuing receipts for cotton which was not actually in the confines of the Allied Company and that the bank could not submit to this under any circumstances. This was quite proper but it again was not a charge of more than irregularity and Barrett promised not to do it again.

On July 2, 1923, defendant held as collateral Allied Compress Company receipts for 5,676 bales, issued to Barrett & Co., and to others. On July 2, Cashin & Campbell made a count of the cotton at the Allied Compress Company warehouse for that company. Their report showed that on July 2 there were only 1,623 bales of cotton and only 1,262 held for account of Barrett & Co. On July 3 the report was brought to the bank. Saxon looked it over and said the "bank had more receipts than that. He immediately went to Woodall, the secretary and treasurer of the Allied Compress Company, and they went to Barrett. Barrett said that the cotton was there in either the Atlantic or the Independent compartments. These were all in one building. The bank officials went out to the place at once and demanded of Gercke, the auditor, that he immediately count the cotton. O’Keefe was manager for both the Allied and the Atlantic Company. This the Charleston Bank knew, as Pringle, its president, was a director of the Atlantic Company. Gercke reported that the cotton was there for all the certificates outstanding, and this was made known to the officers of the Georgia bank. Besides that, there was an Alexander & Taylor audit, made as of the 3d of July, and this showed outstanding 1,546 receipts; cotton on hand, 1,551 bales. An audit was also made by a Federal Reserve bank which had made loans, and which was not shown to have resulted in a deficiency of cotton. Wood-all’s testimony regarding his conversation with Barrett was as follows: He remarked that if both the Allied and Atlantic States were checked at the same, time, you would find the two would balance with the receipts of both companies outstanding.” This had happened in previous years, so on this occasion Saxon told Barrett that such a method of doing business must not happen again and Barrett gave orders to discontinue it. Woodall says: “I was advised by Mr. O’Keefe in one of two instances, or probably several instances, that he had issued receipts for cotton, Allied Compress Company’s receipts for cotton, that was still in the Atlantic States Warehouse.”

O’Keefe is the man who issued all the certificates. They were not issued by Barrett nor by the Allied Compress Company when the cotton was in the warehouse.

John Phinizy, vice-president of the defendant, says regarding this circumstance: “After further talk with Mr. Saxon he reported that , he had been around to see Mr. Woodall, and also Mr. Frank Barrett, and talked with both of them, and my recollection is that there was some statement made that a part of the cotton, which was covered by receipts of Allied Compress Company, was in the compartment or compartments of the Atlantic States, and then that afternoon Mr. Saxon and I drove out there, and asked, got Mr. Gercke, and told Mr. Gercke to make an audit count of all three of those. Understand there was an Independent Warehouse Company doing business out there at that time, which had subrented some of those compartments out there, and we wanted a count made, so that if there were any mixed receipts, or any receipts, that cotton could not be identified upon in the individual compartments, it would develop on the entire check being made. We wanted an entire check made.”

Mr. Gercke made his report in writing, dated July 7, in which he shows that there were more bales of cotton in the entire building than certificates issued, and tabulates the Allied Compress Company’s holdings and certificates in the same way. Acting on this information, the bank made the loans of July 7 and 9. The defendant was interested in this matter for itself as well as for others. It held demand, unsecured claims, amounting to nearly $80,000, If it had had any substantial feeling of wrongdoing it could have refused further credit and prevented the loss to itself which subsequently occurred. It also held as security for its own loans certificates for 550 bales of cotton on which it received nothing.

To summarize: The defendant bank was employed to carry out the instructions as given above from the Charleston Bank, Barrett’s financial backer and agent. It advanced money at the direction of the Charleston Bank on certain securities, regular on their face. Over $234,000 of Shawmut Bank’s money had been loaned on these certificates before the defendant bank was employed. On July 2, an audit showed that there were more outstanding certificates than cotton. An immediate examination was made by the bank, the officers going to the place where the cotton was, and demanding an immediate count. They could not be expected to count it themselves. They got a written report and were informed that there was more cotton than outstanding receipts. Other audits showed the same thing. During this time business was going on with Barrett in the usual way; he reduced the Shawmut Bank loan by a $100,000 payment on July 6; he made deposits of over $400,000 on July 2 and 3. ■ The defendant bank had loaned him $150,000, of which $80,000 in round numbers was unsecured. It held certificates for 550 bales of cotton as security. It was personally and deeply interested in the financial soundness of Barrett & Co. Business was going on as usual. The smash came later.

What should it have done that it failed to do in relation to the loans by the Charleston Bank on July 7 and 9? It was in duty bound to itself and others to make investigation when information was received that certificates were being overissued, and this it did. The sufficiency thereof is to be determined by the facts then known to it or discoverable with proper earé. Viewed in this light it acted with prudence and care under the circumstances. Viewed in the light of the subsequent failure of the seemingly responsible customer it is plain that it might have done more to protect itself and its principals from loss. It was guilty of no negligence in failing to notify the Charleston Bank of its suspicions before it made its investigation and after it made its investigation it had no occasion to notify it. The Charleston Bank had directed the loan and the defendant bank had no greater responsibility than it exercised. It may have been credulous but it would naturally lend a ready ear to the explanations of its good customer verified by a disinterested audit. That would not amount to negligence if reasonable men under the circumstances would do the same. The bank officials were not detectives on the track of crime, carelessly neglecting clues.

On the whole it appears that plaintiff failed to produce or offer to produce sufficient competent proof to shift the burden of going on with the case to the defendant or to call upon the triers of fact to draw such inferences as the evidence justified.

The judgment should be affirmed, with costs.

Cardozo, Ch. J., Crane, Andrews, Lehman, Kellogg and O’Brien,' JJ., concur.

Judgment affirmed, etc.


author: Casdozo, Ch. J.

text:
    Wolf Marks, Respondent, v. Nambil Realty Co., Inc., Appellant.
    (Argued May 9, 1927;
    decided May 31, 1927.)
    Landlord and tenant — negligence — landlord liable for negligence in making voluntary repairs.
    A landlord, though a volunteer in making repairs to leased premises, is liable, none the less, to his tenant, for negligence in making them. (Marston v. Frisbie, 168 App. Div. 666; Wynne v. Haight, 27 App. Div. 7, disapproved.)

      Marks v. Nambil Realty Co., 218 App. Div. 763, affirmed.
    Appeal from a judgment of the Appellate Division of the Supreme Court in the first judicial department, entered December 8, 1926, affirming a judgment in favor of plaintiff entered upon a verdict.

      Walter G. Evans and Alfred W. Andrews for appellant.
    Plaintiff did not prove any fact showing that the landlord defendant in making this stairway more solid by placing a piece of board under the right-hand stringer of the stairway made the condition more dangerous, or that the placing of this board under the right-hand stringer had any causal connection with the breaking of the tread, and the complaint should have been dismissed. (Schick v. Fleischauer, 26 App. Div. 210; Kane v. Williams, 140 App. Div. 857; Kusher v. Ginsberg, 99 App. Div. 417; 188 N. Y. 630; Elfante v. Pizitz, 182 App. Div. 819; 230 N. Y. 567; Silverman v. Isaac, 183 App. Div. 542; Hollman v. Kayell Realty Co., 120 Misc. Rep. 546; Wynn v. Haight, 27 App. Div. 2; Marsten v. Frisbie, 168 App. Div. 666.)

      Charles Marks and William Dike Reed for respondent.
    Sufficient proof was presented by plaintiff to warrant the submission of the case to the jury. (2 McAdam on Landlord & Tenant, 1331, 1613; Race v. Krum, 222 N. Y. 410.)
   Casdozo, Ch. J.

Plaintiff was the tenant of the ground floor and cellar of a building in the city of New York. A flight of stairs leading to the cellar fell out of repair. The iron stringer supporting the lowest step was planted in concrete which had become broken and hollow. The defendant, the landlord, was notified of the defect and promised to correct it. The promise was gratuitous, for the stairs were not for the common use of all the occupants of the building, but were wholly within the premises demised. There was thus no duty to repair, since the building was not subject to the Tenement House Law (Cons. Laws, ch. 61), but was leased for business uses (Altz v. Leiberson, 233 N. Y. 16). The landlord, however, did repair, and made a bungling job of it. The broken concrete was not reset, but the fragments were cleared away, and a piece of wood, ill-secured, was inserted between the stringer and the ground. The plaintiff expressed misgivings as to the safety of the prop, but was assured by the landlord’s agent that it would last forever.” The event belied the prophecy. Step and prop collapsed under the burden of the plaintiff’s weight. He was thrown to the ground, and suffered injuries for which he sues.

The landlord, though a volunteer in making the repairs, is liable, none the less, for negligence in making them. It is ancient learning that one who assumes to act, even though gratuitously, may thereby become subject to the duty of acting carefully, if he acts at all ” (Glanzer v. Shepard, 233 N. Y. 236, 239). The distinction in such cases is the old one between nonfeasance and misfeasance (Thorne v. Deas, 4 Johns. 84, 96; Siegel v. Spear & Co., 234 N. Y. 479, 483; Bohlen, Studies in the Law of Torts, p. 80). A landlord in these circumstances is not charged with liability on the basis of the non-performance of a voluntary promise. He is charged with liability because having chosen to perform he has thereby become subject to a duty in respect of the manner of performance. The cases are many in which liability has been enforced upon that footing for the protection of a tenant (Gregor v. Cady, 82 Me. 131; Gill v. Middleton, 105 Mass. 477; Buldra v. Henin, 212 Mass. 275; Miller v. Fisher, 111 Md. 91; Charney v. Cohen, 94 N. J. L. 381, 383; Mann v. Fuller, 63 Kan. 664).

We recall these familiar principles because they seem to have been overlooked in cases in the Appellate Division relied on by the defendant here (Marston v. Frisbie, 168 App. Div. 666; Wynne v. Haight, 27 App. Div. 7). There is a suggestion, if not a ruling, in these cases, that to make the landlord hable, the negligent repairs must have aggravated the defect, so that what was dangerous before became more dangerous than ever. We cannot yield assent to this restriction of the field of duty. The tenant does not have to prove that by the negligent making of the repairs what was wrong has been made worse. His case is made out when it appears that by reason of such negligence what was wrong is still wrong, though prudence would have made it right.

We do not read the charge of the learned justice at Trial Term as laying down any rules at war with those announced in this opinion, He told the jury in effect that the defendant was not liable if the step collapsed through some defect unrelated to the prop, and hence not within the scope of the promise to repair. If the charge were to be read, however, as restricting liability within the narrow limits of the rule in Maratón v. Frisbie (supra), a verdict thus limited would have a basis in the evidence. The plaintiff came down the stairs, his arms hampered by a burden. The inference is permissible that the presence of the prop cloaked the defect, dulled the call to vigilance, and so aggravated the danger.

The judgment should be affirmed with costs.

Pound, Crane, Andrews, Lehman, Kellogg and O’Brien, JJ., concur.

Judgment affirmed, etc.