author: Cardozo, Ch. J. Crane, J.

text:
    In the Matter of Russell B. Marchant, as Trustee in Bankruptcy of Bear Tractors, Inc., Appellant and Respondent, against Mead-Morrison Manufacturing Company, Respondent and Appellant.

      (Argued October 2, 1929;
    decided December 3, 1929.)

      Kenneth M. Spence, Kenneth E. Walser, Louis S. Weiss and Charles M. Travis for plaintiff, appellant and respondent.
    The agreement was a general agreement to arbitrate, particularly since it provided that “ the matter in dispute shall be settled by arbitration.” The arbitrators, therefore, had power to make the award. (Matter of Berkovitz, 230 N. Y. 261; Itoh & Co., Ltd., v. Boyer Oil Co., Inc., 198 App. Div. 881; The Knonprinzessin Cecilie, 224 U. S. 12; Tudickar v. Guardian Mut. Life Ins. Co., 62 N. Y. 392; Matter of Wenger & Co. v. Propper S. H. Mills, 239 N. Y. 199; Cobb v. Dolphin Mfg. Co., 108 N. Y. 463; Matter of Goldberg Enterprises, Inc., 130 MisC. Rep. 887; 222 App. Div. 729; Matter of Buxton v. Mattery, 245 N. Y. 337; Matter of Smith Fireproof Constr. Co. v. Thompson-Starrett Co., 247 N. Y. 277; Matter of Hines v. Ziegfeld, 222 App. Div. 543; Matter of General Footwear Corp. v. Lawrence Leather Co., 226 App. Div. 777; Matter of Wheat Export Co., 185 App. Div. 723; 227 N. Y. 595; Waite v. Barry, 12 Wend. 377.) The “ condition precedent ” clause was inserted to prevent litigation, not to duplicate it and under such a clause arbitrators have power to make a pecuniary award. (Scott v. Avery, 5 H. L. Cas. 811; Matter of Berkovitz v. Arbib, 230 N. Y. 261; D. & H. Canal Co. v. Pa. Coal Co., 50 N. Y. 250; Seward v. City of Rochester, 109 N. Y. 164; Sweet v. Morrison, 116 N. Y. 19; Nat. Contracting Co. v. Hudson R. W. P. Co., 170 N. Y. 439; 192 N. Y. 209; Meacham v. Jamestown, F. & C. R. R. Co., 211 N. Y. 346; Red Cross

      Line v. Atlantic Fruit Co., 264 U. S. 109.) Since the controversy concerning the power of the arbitrators to award damages was one “ as to the construction ” of the agreement, it was arbitrable, and the parties submitted to the arbitrators for settlement this very controversy. (Matter of Kelley, 240 N. Y. 74; Itoh & Co., Ltd., v. Boyer Oil Co., Inc., 198 App. Div. 881; Matter of Prione v. Schermerhorn, 237 N. Y. 16; Christman v. Moran, 9 Penn. St. 487; Henderson v. Henderson, 247 N. Y. 428; Farmer v. N. L. Assn., 138 N. Y. 265; Reed v. Chilson, 142 N. Y. 152.) The Appellate Division rightly dismissed defendants’ appeal from the order directing the arbitrators to appoint a time and place for hearing proof. (Hooper v. Beecher, 109 N. Y. 609; Wood v. Richardson, 91 Hun, 332; Bloom v. Nat. United Benefit Savings Co., 81 Hun, 120; 152 N. Y. 114; Matter of O’Brien, 145 N. Y. 379; Matter of Hosiery Mfrs. Corp. v. Goldston, 238 N. Y. 22; Raff v. Koster, Bial & Co., 38 App. Div. 336; Bolles v. Scheer, 225 N. Y. 118; Collins v. McWilliams, 185 App. Div. 712; Roslyn Heights Land Co. v. Burrowes, 22 App. Div. 540.) The order appointing a third arbitrator did not deprive defendant of any constitutional right. (Weir v. Barker, 104 App. Div. 112; Kelso v. Kelly, 1 Daly, 419; Castle Creek Water Co. v. City of Aspen, 146 Fed. Rep. 8; State Reserve Bank v. Swift & Co., 32 Fed. Rep. [2d] 590; Matter of Berkovitz v. Arbib, 230 N. Y. 261; Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109; Meacham v. Jamestown, F. & C. R. R. Co., 211 N. Y. 346; Matter of Bullard Co. v. Grace Co., 240 N. Y. 388; Berizzi Co. v. Krausz, 239 N. Y. 315; U. S. Asphalt Co, v. Trinidad Lake Petroleum Co., 222 Fed. Rep. 1006.) Even if the order appointing a third arbitrator was erroneous it was not void, and as it was made in a separate proceeding which is to be further enforced in this proceeding it cannot be attacked collaterally herein. (Matter of Berkovitz v. Arbib, 230 N. Y. 261; Rhode Island v. Massachusetts, 12 Pet. 657; Matter of Hoisery Mfrs. Corp. v. Goldston, 38 N. Y. 22; Fauntleroy v. Lam, 210 U. S. 230;
      Tonnele v. Wetmore, 195 N. Y. 436; Kempe’s Lessee v. Kennedy, 5 Cranch, 173.)

      Edward F. McClennen and Arthur P. French for defendant, respondent and appellant.
    The order directing arbitration did not authorize the arbitrators to decide the amount of the damages for a total breach of the contract. (Matter of General Silk Importing Co., 200 App. Div. 786; 234 N. Y. 513; Matter of Bullard Co. v. Grace Co., Inc., 240 N. Y. 388; Hasbrouck v. N. Y. Central R. R. Co., 202 N. Y. 363; Atwood v. Walker, 179 Mass. 514; The Atlanten, 252 U. S. 313; Dodds v. Hakes, 114 N. Y. 260; Smith Fireproof Const. Co. v. Thompson-Starrett Co., 247 N. Y. 277; Young v. Crescent Development Co., 240 N. Y. 244; Somerset Borough v. Ott, 207 Penn. St. 539; Matter of Collishaw, 211 App. Div. 809; Van Cortlandt v. Underhill, 17 Johns. 405; United States v. Farragut, 22 Wall. 406.) The arbitration statute of New York did not and could not confer jurisdiction on its courts to compel performance in New York or in Massachusetts of an agreement made in Massachusetts to arbitrate in Massachusetts. (Berkovitz v. Arbib, 230 N. Y. 261; Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109; Atlantic Fruit Co. v. Red Cross Line, 5 Fed. Rep. [2d] 218; The Silverbrook, 18 Fed. Rep. [2d] 144; Danielson v. Entre Rios Rys. Co., 22 Fed. Rep. [2d] 326; Matter of Inter-Ocean Food Products, Inc., 206 App. Div. 426; Matter of California Packing Corp., 121 Misc. Rep. 212; Matter of Bullard Co. v. Grace Co., 240 N. Y. 388.) The defendant’s agreement in Massachusetts to arbitrate in Massachusetts before a third arbitrator chosen by two arbitrators did not bind the defendant to arbitrate before an arbitrator not so chosen but appointed by a New York court. (Smith Fireproof Const. Co., Inc., v. Thompson-Starrett Co., 247 N. Y. 277; Matter of Bullard Co. v. Grace Co., Inc., 240 N. Y. 388.)

      Julius Henry Cohen, Kenneth Dayton and Burton A. Zorn for Chamber of Commerce of the State of New York et al., amici curiae.

    The inclusion of the condition precedent clause in the agreement would seem to be direct evidence that the parties had the determination of damages by the arbitrators specifically in mind. (Matter of Goldberg Enterprises, Inc., 130 Misc. Rep. 887; 222 App. Div. 729; Matter of Young v. Crescent Development Co., 240 N. Y. 244; Matter of Wenger & Co. v. Dropper S. H. Mills, 239 N. Y. 199.) The arbitration clause gives the arbitrators the authority to determine whether it authorizes an award of damages. (Matter of Kelley, 240 N. Y. 74; Willesford v. Watson, L. R. 8 Ch. App. Cas. 473; Matter of Bullard Co. v. Grace Co., 240 N. Y. 388.)
   Cardozo, Ch. J.

By contract dated May 25, 1922, Mead-Morrison Manufacturing Company, a Maine corporation, agreed to sell to Bear Tractors, Inc., a New York corporation, 500 tractors to be manufactured according to specifications and to be delivered in installments. There was an arbitration clause in the following form: If for any reason any controversy or difference of opinion shall arise as to the construction of the terms and conditions of this contract, or as to its performance, it is mutually agreed that the matter in dispute shall be settled by arbitration, each party to select an arbitrator, and the two so selected to select a third, and the decision of the majority of such arbitrators given after a full hearing and consideration of the matter in controversy shall be final and binding upon the parties, and a condition precedent to any suit upon or by reason of any such controversy or difference. The cost of such arbitration shall be paid by the party against whom the majority of such arbitrators render such decis'on.” The contract was closed in East Boston, Mass., and there the tractors were to be manufactured and delivery was to be made.

Bear Tractors, Inc., the buyer, became bankrupt in May, 1924. Two years had then passed since the making of the contract, but of the 500 tractors only part had been received, and these after they were due according to the schedule for deliveries. Seller and buyer each laid the blame upon the other. A controversy having thus arisen as to the performance of the contract, the trustee in bankruptcy made demand that it be settled by arbitration. Each of the parties nominated an arbitrator. The two so selected were unable to agree upon a third. The deadlock, if not broken, would have made the settlement abortive. In this impasse, the trustee moved the court that it designate a third arbitrator in accordance with the statute (Arbitration Law, § 4; Consol. Laws, ch. 72). The seller appeared generally, and opposed the granting of the petition. The chief ground of its resistance was that the arbitration clause should be interpreted as providing for an arbitration in Massachusetts, and nowhere else. The objection was overruled, and the prayer of the petition granted. A third arbitrator was designated by the court to act with the same force and effect as if named in the contract, and the parties were directed to proceed to arbitration before the tribunal thus established. Upon appeal to the Appellate Division, the order was affirmed without opinion (215 App. Div. 759). A motion for leave to appeal to this court was made and denied.

There followed a long contest with twenty-seven hearings, thousands of pages of testimony, and hundreds of exhibits. At its close a majority of the arbitrators filed a report to the effect that the seller had made default in the performance of the contract, and that its default had brought about the bankruptcy of the buyer with a loss of all the capital invested in the enterprise. The capital thus lost, excluding moneys not invested in reliance on the contract, was fixed in the report at $849,006.76. The award was for that amount with the costs of the proceeding.

From the judgment entered on the award there was an appeal to the Appellate Division by the seller, the defendant in the arbitration. The Appellate Division held by a divided court that in respect of a separable provision the award was in excess of the powers of the arbitrators. Buyer and seller, plaintiff and defendant, had been directed to proceed to arbitration in accordance with the contract. The powers of the arbitrators were thus measured by the contract, and did not extend to controversies beyond the terms of the submission. There was power to determine the fact of performance or nonperformance by one party or the other. There was no power to assess the damages resulting to the buyer’s business by reason of the breach. The judgment was, therefore, modified by strildng out the award of damages, and as modified affirmed.

Cross-appeals are now before us. The seller, the defendant in the arbitration, is dissatisfied because the award has been allowed to stand as an adjudication of its fault. The buyer, the plaintiff in the arbitration, is dissatisfied because the damages, if there have been any, must be assessed and recovered through proceedings in the courts.

(1) The appeal by the defendant is a challenge to the order directing arbitration. The challenge must be heeded even now if the order is merely void, an assumption of unlicensed power. The award can be no stronger than the prop on which it rests. The challenge comes too late, however, if power being present, there has been merely error in the use of it (Fauntleroy v. Lum, 210 U. S. 230, 235; Marin v. Augedahl, 247 U. S. 142, 149; Wagner Co. v. Lyndon, 262 U. S. 226, 231). An order for the specific- performance of an agreement to arbitrate a controversy is one that finally determines a special proceeding (Hosiery Manufacturers Corp. v. Goldston, 238 N. Y. 22, 25, 26). The proceeding thus ended is not a part of the arbitration that is thereby set in motion. It is subject to direct review as a separable controversy. Like any other final order, the mandate, unless void, is not assailable collaterally.

Two reasons are advanced by counsel for the seller why the order has collapsed for defect of jurisdiction.

The order, it is said, is void, because the parties to the contract in agreeing to arbitrate their differences had in view an arbitration in Massachusetts, and not performance somewhere else. Whether this was their meaning was, however, a question of construction, to be determined like any other question of construction by the judge receiving the petition. Jurisdiction was not dependent upon his determining it correctly. We must distinguish between the place of performance in respect of manufacture and delivery and the place of performance for the settlement of differences. The contract was to be performed in Massachusetts to the extent that the things to be sold were to be there manufactured and delivered. The conclusion does not follow of necessity that the remedy prescribed for the settlement of differences was to be sought in the same forum. At common law, general contracts of arbitration, though not specifically enf orcible, were not held to be illegal. This is seen from the fact that in case they were broken there might be a recovery of damages (Matter of Berhovitz v. Arbib & Houlberg, Inc., 230 N. Y. 261, 271; Red Cross Line v. Atlantic Fruit Co., 264 U. S. 109, 121). The statute of New York does not bring the contract into being, but adds a new implement, the remedy of specific performance, for its more effectual enforcement. This remedy may lawfully be extended to contracts of manufacture made in Massachusetts and there to be performed, unless it is one of the terms of the arbitration clause, implied if not express, that the arbitration shall proceed n a particular locality. Express restriction there is none in the contract now before us. Whether one is to be implied is a question of intention to be determined in the light of context and occasion. That is what was done. The court in the discharge of its judicial function was called upon to declare the "mplications of the promise. We do not say at this time that the determination was free from error. Enough for present purposes that it is not to be ignored as void.

A second objection, more perplexing, is urged now for the first time. The order, it is said, is void, in so far as it appoints a third arbitrator, not nominated by the other two, but designated by the court. The effect of such an order, we are told, is not merely to give specific performance in New York of a contract to arbitrate made in Massachusetts: the effect is to nullify the contract by exacting a form of arbitration inconsistent with the promise. The parties promised to submit to the decision of two men chosen by themselves and of a third to be chosen by the two. They said nothing in the contract as to the choice of a third if the two could not agree. The statute of New York to the effect that in the event of a lapse for this or other cause a third arbitrator or an umpire may be designated by the court is binding in respect of contracts made in our State or in contemplation of our laws. It is then read into the contract as an implied term of the engagement. To read it into contracts made in other States and without reference to our laws, is something very different. The law of the forum tells us whether the remedy for the breach of an agreement shall be specific performance or damages. The law of the place of contract defines the content of the agreement upon which the remedy shall operate. A State is without power to modify by its statutes the terms, express or implied, of contracts made in other States in contemplation of their laws. The case may be supposed of an agreement made in Boston that a controversy shall be arbitrated by the Chamber of Commerce of that city, with the express provision that in no event shall there be arbitration by any one else. If the law of Massachusetts refuses to permit the appointment of a substitute, the law of New York may not modify by statute the content of the promise, and designate a substitute in the teeth of the agreement. The defendant would have us hold that this is what was done.

We think the argument is fallacious in assuming as a premise that there has been nullification of a contract under the compulsion of a statute rather than enforcement of the contract by discarding the subordinate and preserving the essential.

A helpful analogy may be found in contracts for the sale of land or for the renewal of leases at a price or a rental to be fixed by appraisers appointed by the parties. The method of selection may fail, and yet the court may give effect to the dominant intention through the agency of appraisers chosen by itself and subject to its scrutiny (Mutual Life Ins. Co. v. Stephens, 214 N. Y. 488, 495). Nice distinctions must then be drawn between a method of selection that is an auxiliary incident and one so wrought into the substance, so much a part of an organic whole, as to be accounted of the essence (Castle Creek Water Co. v. City of Aspen, 146 Fed. Rep. 8, 12; Kaufman v. Liggett, 209 Penn. St. 87; Grosvenor v. Flint, 20 R. I. 21; Kelso v. Kelly, 1 Daly, 419; Weir v. Barker, 104 App. Div. 112; State Reserve Bank v. Swift & Co., 32 Fed. Rep. [2d] 590; Dinham v. Bradford, L. R. [5 Ch. App.] 518; Fry on Specific Perf. [6th ed.] §§ 355 to 364). The line of division is often shadowy and doubtful.

Contracts to submit to arbitration must answer to like tests, elusive though they be. There may be a dominant intention to arbitrate at all events, the machinery of selection being merely modal and subordinate. If so, the failure of the means will not involve as a consequence the frustration of the end. Equity will give specific performance of the principal engagement with variations of method appropriate to the facts. “ It is the privilege of a Court in such circumstances and it is its duty to come to the assistance of parties by the removal of the impasse and the extrication of their rights ” (Cameron v. Cuddy, L. R. [1914] App. Cas. 651, 656). On the other hand, the promise to arbitrate may be so wedded to the means that the failure of the one will be the destruction of the other.

We are not required to determine whether there was error in the ruling that the means were in this instance subordinate and incidental rather than indispensable and primary. We are to determine merely this, whether there was a question of intention exacting for its answer the application of the judicial mind, the comparison and appraisal of analogies and precedents. If so, the determination, however erroneous, is proof against attack, unless challenged by direct review (Schuylkill Fuel Corp. v. Nieberg Realty Corp., 250 N. Y. 304, 306). The separating line between nullity and error is not an easy one to draw. If a court were to order arbitration under the mere impulse of a desire to settle a controversy expeditiously and cheaply, reciting, however, in the order that no contract to arbitrate had been made by the contending parties, its determination would be void, for power in such circumstances would be lacking altogether (Vallely v. Northern Fire Ins. Co., 254 U. S. 348, 353; Yamashita v. Hinkle, 260 U. S. 199; United States v. Walker, 109 U. S. 258, 266). On the other hand, if a court were to find the existence of such a promise upon insufficient evidence, or were to enlarge through misconstruction the scope of a submission, an award dependent upon such an order could not be treated as a nullity (Fauntleroy v. Lum, supra). The question like so many others is one of proportion and degree.

With this line of approach, the pathway becomes visible. We assume in favor of the defendant that it is possible to phrase an arbitration clause with a method of selection so transparently essential as to leave no room whatever for the process of construction. This might be so, for illustration, if there were a promise to arbitrate through a named person, and no one else (cf. Matter of Inter-Ocean Food Products, Inc., 206 App. Div. 426). Here, on the contrary, promise and intention are not so free from uncertainty that construction is impossible. In the forefront of the clause is the statement of the dominant purpose that controversies of a given order shall be settled by arbitration. What follows may be figured, at least with a show of reason, as incidental and subsidiary. The error, if it be assumed, is not so utterly indefensible, so free from the possibility of genuine contest and debate, as to be equivalent to defect of power. If contracts to arbitrate had been subject to specific performance at common law, no one would be likely to urge that under a contract such as this a decree subordinating a method of choice to a supposed dominant intention could be disregarded as a nullity. The result is no different now that specific performance has its basis in the statute. There is significance in the form of order that was upheld by this court in Matter of Berkovitz v. Arbib & Houlberg, Inc. (supra), and by the Supreme Court of the United States in Red Cross Line v. Atlantic Fruit Co. (supra). Provision was made in each case for the appointment of an umpire to be designated by the court, though the contracts of arbitration made before the adoption of the statute called for an appointment upon the nomination of the arbitrators. True, the point was not urged in those cases any more than it was in this that as to contracts antedating the statute the choice must adhere to the form exacted by the parties. Even so, the orders as entered are pregnant with the assumption that the means might be varied in adaptation to the end. If there was error in the assumption, we think it was not so gross in either case that the decree became a nullity.

We have' considered at such length the validity of the order to proceed to arbitration for the reason that if not binding upon us' now as res judicata, it may not be held binding under the rule of stare decisis. A denial of a motion for leave to' appeal is not equivalent to an affirmance of the order thus withdrawn from review. It1 does not give to the order the value of a precedent. Not infrequently relief is refused in the exercise of discretion, for the test in many cases is the promotion of substantial justice (Const, art. VI, § 7, subd. 5; Civ. Prac. Act, § 588, subd. 5). The ruling, too, is summary. Motions for leave to appeal have the careful consideration of all the judges of the court, yet they lack the authority that attaches to a decision with all the aid of argument. In this very case, there was no suggestion on the motion for leave to appeal that the order to arbitrate, if otherwise proper, might be held to be improper because it departed from the mode of selection established by the contract. There was no hint that any question of constitutional law was involved, and indeed if such a question had been involved and had been seasonably urged, an appeal would have followed as of right. These considerations emphasize the need of holding that a refusal to take jurisdiction of a cause has not the force of an affirmance after jurisdiction has been taken. Appellate Divisions and trial courts are at liberty, if they please, to give to such a refusal some measure of significance, as a token, though indecisive, of the impressions of this court. They are not bound thereby as by an authoritative precedent. This is the rule in the Supreme Court of the United States upon the denial of applications for writs of certiorari (United States v. Carver, 260 U. S. 482, 490; Bankers’ Trust Co. v. Bowers, 23 Fed. Rep. [2d] 941; Dobie on Federal Procedure, p. 863). It is the only safe rule if the doctrine of adherence to precedent is to be kept within reasonable limits.

(2) The appeal by the plaintiff is next to be considered.

Parties to a contract may agree, if they will, that any and all controversies growing out of it in any way shall be submitted to arbitration. If they do, the courts of New York will give effect to their intention. A submission so phrased, or in form substantially equivalent, does not limit the authority of the arbitrators to an adjudicar tion of the breach. It is authority to assess the damages against the party in default (Matter of Gen. Footwear Co. v. Lawrence Leather Co., 252 N. Y. 577).

There is nothing in the law, however, that exacts a submission so sweepingly inclusive. The question is one of intention, to be ascertained by the same tests that are applied to contracts generally. Courts are not at liberty to shirk the process of construction under the empire of a belief that arbitration is beneficent any more than they may shirk it if their belief happens to be the contrary. No one is under a duty to resort to these conventional tribunals, however helpful their processes, except to the extent that he has signified his willingness. Our own favor or disfavor of the cause of arbitration is not to count as a factor in the appraisal of the thought of others.

The clause to be interpreted is instinct with tokens of a purpose to encompass the submission with limitations and conditions. It does not say that any and all controversies growing out of the contract shall be settled by arbitration, though the plaintiff would have us hold that its effect is nothing less. The submission is to be confined to controversies or differences of opinion as to the construction of the terms and conditions ” of the contract, and controversies or differences as to the “ performance ” of the contract. Each of these phrases is to be weighed in association with the other. Dismemberment may be necessary in aid of the process of analysis, but in the end there must be a synthesis that will bring the severed parts together.

The need for such a synthesis is ignored in plaintiff’s argument, or at least thrown into the shadow. What is emphasized is the provision for arbitration of any controversy touching the performance of the contract, as if it stood by itself, without relation to the context. The words, extracted from their setting, are said to include by implication the consequences of non-performance through all the chain of jural causes. But this is to ignore the transforming power of association for phrases as for men. The words “ as to its performance ” do not stand in isolation. If they had been understood to cover everything, there would have been no sense in providing for arbitration as to the meaning or construction of the “ terms and conditions.” The controversies envisaged must have fallen short in some degree of the sum total of the possible. Few words are so plain that the context or the occasion is without capacity to enlarge or narrow their extension ” (Surace v. Danna, 247 N. Y. 18, 21). Color and content will vary with the setting.

We think there was no intention to clothe the arbitrators with power to settle every difference having its genesis in the contract. Their function was more modest. Questions might arise as to the meaning of the contract or the plans and specifications. The arbitrators were to give the answer. Questions might arise as to the per-, formance of covenants and conditions where there was no doubt as to the meaning. Again the arbitrators would answer. If performance had failed in part, there would be questions very often as to the measure of the failure, which would lead to an inquiry as to the diminution in value of the subject-matter of the contract, the worth of what had been done when compared with that omitted. Here again we assume that the arbitrators were expected to estimate the deficiency, and if the price would overpay, to determine the abatement, as upon a claim for recoupment. Reparation to that extent would follow as an incident to the power that had been given them to declare the measure of performance.

They undertook to do much more. They did not limit themselves to fixing the value of what had been done as compared with that omitted according to the practice in recoupment (Mondel v. Steel, 8 M. & W. 858). They charged the dilatory seller with consequential damages of nearly a million dollars on the ground that the effect of the delay was to plunge the buyer into ruin. The rule has long been settled that recoupment in its proper sense does not include a claim for damages purely consequential, but is limited to an allowance for diminution in the value of the subject-matter (Mondel v. Steel, supra, at pp. 870, 872; Williston on Contracts, vol. 3, § 1464). We think this was the extent of the power of the arbitrators under the submission now before us. We do not mean to suggest that under other forms of submission, they would be hampered by distinctions between recoupment and counterclaim (Seibert v. Dunn, 216 N. Y. 237). We go no farther than to hold that the distinction answers in this instance to restrictions that may reasonably be supposed to have been in the minds of the contracting parties, though recoupment ” and counterclaim may have had no place in their vocabulary. The clause is similar in its form to one that is common in building contracts where the architect or engineer is empowered to settle any differences as to the meaning of the contract or as to the performance of its covenants. We think there would be surprise and consternation in the trade if under cover of such a clause an architect or engineer could hold a contractor liable for the bankruptcy of the owner, and assess the damages accordingly. The precedents are apt that no such power is conferred (Somerset Borough v. Ott, 207 Penn. St. 539; Young v. Crescent Dev. Co., 240 N. Y. 244). The case of Hey worth v. Hutchinson (L. It. [2 Q. B.] 447), much relied on by the plaintiff, holds nothing to. the contrary. Wool was guaranteed to be similar to sample, with a provision that if any dispute arose it should be settled by the selling broker. This was held to include a power to fix the abatement from the price, if the wool, the subject of the dispute, was found to be inferior. Nothing in the judgment gives color to the suggestion that consequential damages might have been added for the ruin of the business.

We conclude that the award departs from the submission, and is void to that extent. In thus restricting its scope, there is no attempt to revise the judgment of the arbitrators within the limits of their competence. It is not a question whether the damages awarded proceed from the default so directly and certainly that the plaintiff might have recovered them if he had been suing in the courts. The judgment of the arbitrators within the lines of the submission is not to be impeached for misconception of the law. It is rather "a question whether the damages are of such a nature that arbitrators so commissioned may consider them at all. One has only to compare this clause with sample clauses quoted in the briefs of counsel for the plaintiff to see how far it falls short of many standard forms that were readily available. Typical of such forms is that of the Chamber of Commerce of this State. It calls for arbitration of any dispute arising under, out of, or in connection with or in relation to this contract.” The parties to this controversy had no thought that they were saying the same thing.

There remains one other term of the agreement that points the same way. This is the provision to the effect that an award by the arbitrators shall be a condition precedent to a remedy in the courts. Under the rule at common law as established in this State, it was not a bar or defense to a remedy in the courts that the action was maintained in breach of a contract for the settlement of future differences by recourse to arbitration (Pres., etc., D. & H. Canal Co. v. Penn. Coal Co., 50 N. Y. 250; United States Asphalt Ref. Co. v. Trinidad Co., 222 Fed. Rep. 1006). The operation-of this rule might, however, be avoided if .an award as to specific differences was stated in the contract to be a condition precedent to the existence of a cause of action (Pres., etc., D. & H. Canal Co. v. Penn. Coal Co., supra; Meacham v. Jamestown, etc., R. R. Co., 211 N. Y. 346). The condition was ineffective if it extended to all differences, with the result that the grip of the courts would be loosened altogether (Meacham v. Jamestown, etc., R. R. Co., supra; Matter of Berkovitz v. Arbib & Houlberg, Inc., supra, at p. 275). Courts there were indeed, notably the courts of England, that had developed a more liberal doctrine as to the effect of a condition precedent, however broad and unrestricted (Hamlyn & Co. v. Talisker Distillery, L. R [1894] App. Cas. 202; Cohen, Commercial Arbitration and the Law, ch. 16). We are to presume, in the absence of evidence to the contrary, that the rule in Massachusetts at the making of this contract was the common-law rule as established in New York (cf. Miles v. Schmidt, 168 Mass. 339; Lewis v. Brotherhood Acc. Co., 194 Mass. 1, 3, 4). To hold that the contract covered disputes of every kind would be to render it inoperative in the State where it was made. To limit its extension is to give it efficacy and power. The parties will be presumed, if the construction is uncertain, to have had in mind the meaning that would cause their purpose to prevail.

Weighing these considerations in all their cumulative force, we are brought to the conclusion that the Appellate Division did not err in modifying the judgment by striking out the award of damages. It is a very easy thing for contracting parties to provide in a few words for a general arbitration if they are minded so to do. They are not to be trapped by a strained and unnatural construction of words of doubtful import into an abandonment of legal remedies, unwilled and unforeseen.

(3) An appeal from an intermediate order, certified to us by the Appellate Division, has yet to be considered. During the pendency of the arbitration, an order was made by the Supreme Court at Special Term to the effect that some of the witnesses should be examined in New York and some in Massachusetts. The defendant makes the point that there was no power in the court to direct the course of justice in another jurisdiction. The point might be important if the defendant had refused to participate in any examination of the witnesses not conducted in New York. That is not what it chose to do. Apparently the direction to proceed in Massachusetts was made for its convenience. Whether this is so or not, it submitted to the order, examining the witnesses and foregoing an appeal.

What it seeks to do now is to bring up the order for review in connection ■ with the judgment, though the time for such an appeal, if separately taken, has long ago expired.- The practice is not permissible unless the intermediate order is so related to the judgment that it has “necessarily” affected the final result (Civ. Prac. Act, § 580). So intimate a conjunction is lacking in this case. The fact that the testimony of some witnesses was taken in Massachusetts, rather than in New York, did not necessarily affect the outcome of the trial. There is no reason to believe that the award would have been different if the place of hearing had been changed. These considerations led the Appellate Division to hold that the intermediate order was not subject to review. We think it did not err in dismissing the appeal (Bolles v. Scheer, 225 N. Y. 118; Bloom v. National U. B. S. & L. Co., 152 N. Y. 114; Roslyn Heights L. & I. Co. v. Burrowes, 22 App. Div. 540; Raff v. Koster, Bial & Co., 38 App. Div. 336.)

(4) The record brings up a question as to the proper form of judgment. The defendant makes the point that the form adopted by the Appellate Division does not conform to its opinion in that provisions unrelated to the breach, and material, if at all, only as affecting the quantum of the loss, were left untouched in the award, which must, therefore, be modified again. We think the criticism is just. By the twe’fth subdivision of the judgment, it is found that “ the failure of Mead-Morrison Manufacturing Co. to manufacture and deliver tractors according to the terms and conditions of the contract resulted in the bankruptcy of Bear Tractors, Inc., caused a ruination of its enterprise and pecuniary loss.” The declaration of these consequences has no place in the award. In all likelihood the Appellate Division left it there through inadvertence. It should be dropped lest it occasion embarrassment hereafter.

The order of the Appellate Division dismissing the appeal from the intermediate order should be affirmed; and the first question certified answered “ no.” It is unnecessary to answer the other questions.

The judgment of the Appellate Division modifying and as modified affirming the judgment entered on the award should be further modified by striking out the first paragraph of the twelfth subdivision thereof, and as so modified affirmed, without costs to either party.

Crane, J.

(dissenting in part). With part of the opinion in this case I am in accord. Arbitration being the remedy in case of a breach of a contract, that remedy could be enforced in accordance with the Arbitration Law of the State of New York in the same way as other legal remedies would follow the procedure peculiar to this State. Thus a question triable before a jury in Massachusetts might be triable before a court without a jury in New York or vice versa. The parties having contracted to submit their differences to arbitration, each to appoint an arbitrator, and these two an umpire, the courts of New York, having jurisdiction of the parties, could appoint the third arbitrator, in accordance with the Arbitration Law, when the two selected had failed to do so. This was but a piece of machinery, a part of procedure .to arrive at a result contracted for by the parties. I, therefore, concur in so much of the opinion of the chief judge as deals with this point.

The arbitration clause reads as follows: “If for any reason any controversy or difference of opinion shall arise as to the construction of the terms and conditions of this contract, or as to its performance, it is mutually agreed that the matter in dispute shall be settled by arbitration, each party to select an arbitrator, and the two so selected to select a third, and the decision of the majority of such arbitrators given after a full hearing and consideration of the matter in controversy shall be final and binding upon the parties,” etc. These business contracts are not drawn with the precision of deeds or judgments. We must read them with that liberality of meaning which attaches to the laconism of business men. Controversies and differences arising out of the terms and conditions of the contract have reference to the meaning of the contract. This covers everything within its four corners. The performance of the contract does not arise out of its construction or meaning but out of its execution. The difference between the parties to this litigation arose out of the latter, that is, out of the failure to perform. Default was conceded. The dispute was over the damage. The question of loss arising from non-performance, in my judgment, was within the arbitration clause as above quoted, and became one of the matters for arbitration. To this extent I cannot follow the opinion. •

This, however, does not lead me to a reversal of the Appellate Division and an affirmance of the award. Although the evidence is not before us in the record, we have the report of the arbitrators, or the majority of them, from which it appears that they exceeded their authority in disposing of the defendant’s money. The contract called for the manufacture of five hundred tractors according to design represented by drawings and specifications to be furnished. The profits which might have been made in the sale of these tractors would be the ordinary measure of damages. Conceding that the arbitrators were not confined to the rigid rules of law and that they might consider losses consequent upon the expenditure made in preparation for the sale of the tractors, the housing of them or other like liabilities incurred — yet it is beyond all reason to charge up to the failure to get five hundred tractors the loss of the capital of the business. This is entirely too speculative as the capital might have been lost or impaired as well through the delivery of the tractors and the expense of disposing of them, as through failure to get them. For this reason I think the court was justified in setting aside the award.

Entertaining, as I do, however, this view of the case, my conclusion would be that the matter should be sent back for a new hearing before the arbitrators. To submit the question of breach of contract to arbitration, leaving the question of damages to be recovered in an action at law, is to multiply litigation not to lessen it; to complicate our procedure not to simplify it; to burden the business man not to relieve him. Arbitration has been heralded as a ready and speedy relief from the intricacies and delays of the law. We should, if possible, avoid making it another barrier to the settlement of disputes. The answer I know is that the parties have so contracted, to which I reply that to give the word performance ” a narrow interpretation leading to these results is to construe the contract contrary to and not in accordance with the intention of the parties.

With this brief statement of my views I favor modifying the order of the Appellate Division by sending this controversy back for the ascertainment of damages.

Lehman, Kellogg and O’Brien, JJ., concur with Cardozo, Ch. J.; Crane, J., votes in memorandum to remit the controversy for the assessment of damages; Pound and Hubbs, JJ., vote to reverse the judgment so far as appealed from by the plaintiff and to reinstate the award.

Order affirmed and judgment accordingly.


source: Caselaw Access Project

author: Pound, J.

license: Public Domain

text:
    Village of Lynbrook, Appellant, v. George J. Cadoo et al., Respondents, Impleaded with Others.
    (Argued November 20, 1929;
    decided December 3, 1929.)

      Thomas L. Driscoll for appellant.
    If defendants ever had a remedy, they have lost it by delay and procrastination for seven years. (Abell v. Hunter, 211 App. Div. 467; 240 N. Y. 702; People ex rel. Abell v. Clarkson, 223 App. Div. 373; N. Y. C. & H. R. R. R. Co. v. City of Yonkers, 238 N. Y. 165; Gardner v. Christian, 70 Hun, 547.) The failure to publish notice of election for the full statutory time required is unsubstantial and does not render the annexation election void. (Matter of N. Y. & L. I. Bridge Co. v. Smith, 148 N. Y. 547; Ewell v. Doggs, 108 U. S. 148; Olcott v. Robinson, 21 N. Y. 150; Ensign v. Borse, 107 N. Y. 329; Volz v. Sheepshead Bay Bungalow Corp., 249 N. Y. 122; Hulan v. Greenfield Township, 229 Mich. 273; Hood v. City of Wheeling, 85 W. Va. 578; State v. Salt Lake City, 35 Utah, 25; Seymour v. Tacoma, 6 Wash. 427; State v. Doherty, 16 Wash. 382; Wheat v. Smith, 50 Ark. 266.) The alleged failure to give notice by publication has been waived by defendants. (Bechstein v. Schultz, 120 N. Y. 168; Pawlak v. Gruszecki, 124 Misc. Rep. 447; Abell v. Hunter, 217 App. Div. 746; 243 N. Y. 596; State v. Des Moines, 96 Iowa, 521; Strasser v. Fort Wayne, 100 Ind. 443; Morgan v. Railroad Co., 96 U. S. 716; Niven v. Belknap, 2 Johns. 573; Trenton Baking Co. v. Duncan, 86 N. Y. 222; Gregg v. Van Phiel, 1 Wall. 274.)

      Charles J. Buchner for respondents.
    The area including the property of the defendants-respondents was never properly annexed to the village. (Johnson v. Indianapolis, 174 Ind. 691; Blanchard v. Bissell, 11 Ohio St. 96; State v. Several Parcels of Land, 80 Neb. 11; Gardner v. Christian,
      70 Hun, 547; New York Central R. Co. v. Yonkers, 238 N. Y. 165; People ex rel. Abell v. Clarkson, 223 App. Div. 373; Abell v. Clarkson, 237 N. Y. 85.)
   Pound, J.

The question in this case is whether the appellant, the incorporated village of Lynbrook in the county of Nassau, may maintain an action to cancel of record a map or plan of a subdivision of land filed by the respondent George J. Cadoo in the office of the county clerk of Nassau county on September 4, 1926, without the approval of the planning board of the village. The planning board was established and organized prior to the date of such filing, under authority of Laws of 1926, chapter 719, entitled “ An Act to amend the village law, in relation to official maps and planning commissions.” The map as filed bears the legend, Map of Lyndwood Manor belonging to George J. Cadoo situated at Lynbrook, Nassau Co., N. Y.” The streets and lots platted thereon are included in the territory sought to be taken from the adjacent town of Hempstead and annexed to the village, in the year 1921, by proceedings taken under Village Law (Cons. Laws, ch. 64), section 348, and thereafter accepted by all parties affected thereby as valid until this controversy arose. On appeal from a judgment dismissing the complaint the Appellate Division affirmed on the ground that the annexation proceedings of 1921 were void; that, therefore, the Cadoo property laid out on the map so filed was no part of the village of Lynbrook, and not subject to the provisions of the Village Law relative to the- filing of official maps. The regularity of the annexation proceedings is attacked by the respondents on the ground that the notice of the election at which the annexation proposition was submitted to the voters was not given in accordance with the requirements of the Village Law, section 52, which regulates the manner in which notice of village elections to elect officers and vote on propositions shall be given. Respondents contend that the words of the section, “ a vote upon a proposition shall be void unless due notice of the election has been given,” must be taken literally. They are used in connection with the provision: “An annual election * * * shall not be invalid because of a failure to give such notice.” It has been held that the vote on the proposition is of no effect, the same as if no vote had been taken thereon.

Village Law, section 52, provides as follows as to the publication of notices of election: “ * * * The board or such members thereof as are in office also shall, at least ten days before the election, cause notice thereof to be published at least once in the official paper, if such paper is published in the village, and a printed copy thereof conspicuously posted in at least six public places in the village, specifying the time and place or places of holding the election, the hours of opening and closing the polls thereof, the office, if any, and the term to be filled, and setting forth in full all propositions to be voted upon. * * * ” No question is raised as to the proper posting of notices that the annexation proposition would be voted upon. A notice proper in form was published in a newspaper published in the village of Lynbrook nine days before the election and also two days before the election: This is the defective notice of election which is now relied on to invalidate the annexation; i. e., the shortage of one day in the time of the published notice.

Section 89 of the Village Law, defining the general powers of the board of trustees of a village, provides: “ * * * 8. Official paper. May designate a newspaper as the official paper of the village. If but one newspaper is published in the village continuously, it shall be designated as the official paper, if any paper is so designated. * * * If no official paper has been designated, the designation of a newspaper for the publication of a notice, resolution, ordinance or other proceeding of the board shall be deemed a designation thereof as the official paper of the village, for the purpose of such publication. * * * ” The record does not indicate that any paper was ever designated by resolution of the board of trustees as the official paper of the village ” of Lynbrook or that the village board ever designated by resolution any paper for the publication of the notice in question. We shall, however, with the aid of the presumption of the regularity of official acts, conclude that the publication was made by authority of the board; and that the paper was the official paper of the village for the purpose of the publication, and that section 52 of the Village Law has been substantially but not literally complied with. That the court must hold that the vote upon the annexation proposition was void in the sense that it is to be regarded for the purposes of this action as having no legal force or effect, as a nudity, non-existent as a fact for all time, by no means follows. The word void ” is sometimes used in statutes in the sense of voidable,” i. e., capable of being avoided by the party who claims its protection. Even when a statute in so many words declares a transaction void for want of certain forms, the party for whose protection the requirement is made often may waive it, void being held to mean only voidable at the party’s choice.” (United States v. New York & Porto Rico S. S. Co., 239 U. S. 88, 93.) Waiver may in such cases be implied from a course of conduct indicative of a disposition to forego a right which might have been insisted upon. This rule is properly applied in favor of the regularity of proceedings to attach territory to a municipal corporation. Even though the respondents might have defeated the annexation if they had acted with reasonable promptness, they are now in no position to claim the protection of the statute. They have acquiesced in the fact of annexation, paid village taxes, and even filed their map as a map of a subdivision of the village and. not as a part of the surrounding town of Hempstead. Now, when the consequences of defeating the annexation would be so disastrous and far-reaching, they seek to tear apart the village structure so that they may file their map in the office of the county clerk without the approval of the village planning board. They have slept for five years on their right to object to the irregularity of the vote on the proposition to include their land within the village boundaries. If their rule of statutory construction is correct, they might wait for a longer period, until they became dissatisfied with the rate of taxation or with some local assessment, or with the result of a village election, and then assert that they are not and never were bound by the annexation proceedings. Such a conclusion would be fraught with calamity and is contrary to the public interests. It is against the trend of judicial decision elsewhere. (McQuillin Municipal Corporations [2d ed.], § 306, and cases cited.) It has been held that a party may by a course of conduct covering a considerable period preclude himself from raising the question that an annexation statute was void for unconstitutionality. (State of Iowa ex rel. West v. City of Des Moines, 96 Iowa, 521.) Government is a practical affair. Statutory proceedings by town and village boards are often defective in some unsubstantial detail. When every one concerned has had notice and has accepted the result of the vote on a proposition, new situations should not be permitted to revive claims of complete invalidity based on such trifling discrepancies as appear here between the statutory requirement and the notice given by the village board.

In this connection it may not be irrelevant to observe that after this action was brought the Legislature provided (Laws of 1927, ch. 650) that substantial compliance with the provisions of the annexation statute (Village Law, § 348) shall be deemed sufficient and that no action or proceeding shall be taken by any person questioning the validity of such annexation unless taken within one year of the annexation as provided by the section. "While this amendment to the statute has no retroactive effect as applied to pending actions (Gen. Cons. Law, § 94; Cons. Laws, ch. 22), it indicates clearly the intention of the Legislature to close the courts against mildewed assertions of technical non-compliance with the provisions of the statute.

We now pass to the question of the planning provisions of the statute (Laws of 1926, ch. 719) as applicable to the case. Town planning is a new field of legislation, comparable with the recent development of zoning laws and regulations. Its purpose is to preserve through a governmental agency a uniform and harmonious development of the growth of a village- and to prevent the individual owner from laying out streets according to his own sweet will without official approval. As stated in the statute (§ 179-1): “ * * * In approving such plats the planning board shall require that the streets and highways shall be of sufficient width and suitably located to accommodate the prospective traffic and to afford adequate light, air and access of .fire-fighting equipment to buildings, and to be coordinated so as to compose a convenient system; that the land shown on such plats shall be provided with proper sanitary and drainage conditions; and that the parks shall be of reasonable size for neighborhood playgrounds or other recreation uses. In making such determination regarding streets, highways and parks the planning board shall take into consideration the prospective character of the development, whether dense residence, open residence, business or industrial.” We are not called upon to pass upon the details of the statute. One only requires attention. Section 179-e provides that every village may by resolution of its board of trustees establish an official map or plan of the village showing the streets, highways and parks theretofore laid out, adopted and established by law, “ * * * and such map or plan is to be deemed to be final and conclusive with respect to the location and widths of streets and highways and the location of parks shown thereon. Such official map or plan is hereby-declared to be established to conserve and promote the public health, safety and general welfare. The clerk of every village which has established such an official map or plan shall immediately file a certificate of that fact with the clerk or register of the county in which said village is located.”

' Section 179-m reads as follows: “ § 179-m. No plat of a subdivision of land showing a new street or highway shall be filed or recorded in the office of the county clerk or registrar until it has been approved by a planning board which has been empowered to approve such plats, and such approval be indorsed in writing on the plat in such manner as the planning board may designate. After such plat is approved and filed, subject however, to review by court as hereinafter provided, the streets, highways and parks shown on such plat shall be and become a part of the official map or plan of the village. The owner of the land or his agent who files the plat may add as part of the plat a notation if he so desires to the effect that no offer of dedication of such streets, highways or parks or any of them is made to the public.”

It does not appear that the village of Lynbrook has adopted a city map since the enactment of the statute and filed a certificate of that fact with the County Clerk of Nassau county, and it is contended that the statute is, therefore, inapplicable. By the title of the statute it appears that the legislation deals with official maps as well as with city planning. The Cadoo map, which has not been approved by the planning board of the village, has been filed in the office of the County Clerk of Nassau county. The Legislature has power to declare what maps or plans or plats may be regarded as official maps and filed as such in a public office. It has declared that this Cadoo plat shall not be filed. Inaction on the part of the village in adopting a city planning map should not result in defeating the purpose of the law with regard to filing non-official maps.

The appellant is entitled to a judgment to the effect that the County Clerk shall remove from and cancel of record the map No. 613 filed by respondent Cadoo. To that extent plaintiff may have judgment. Other questions may be disposed of as they arise.

The judgment of the Appellate Division and that of the Special Term should be reversed, and judgment directed for the plaintiff in accordance with this opinion, with costs in all courts.

Crane, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur; Cardozo, Ch. J., not sitting.

Judgments reversed, etc.


author: Crane, J. Harris J.

text:
    In the Matter of the Application of Harris J. Klein, Appellant, for Admission to the Bar. Committee on Character and Fitness for the First Judicial Department, Respondent.
    (Argued November 18, 1929;
    decided December 3, 1929.)

      Jay Leo Rothschild and Louis Rivkin for appellant.
    A “ vacation,” as used in rule 6 of the old rules of the Court of Appeals, is a stated interval in a round of duties or employment, or the intermission of the course of studies required during clerkship, or a freedom or relief from duty. It may or may not constitute a period of irresponsibility, of idleness, of recreation. Its character is determined by the fact that it is a suspension of regular activity, and not by any requirement that it should constitute stagnation of all effort. (American Historical Society v. Glenn, 248 N. Y. 445.)

      William D. Guthrie, Sol M. Stroock, Bernard S. Deutsch, Charles J. Hardy, Harold E. Lippincott, Charles W. Pierson and Cornelius W. Wiclcersham, for Committee on Character and Fitness, respondent.
    The question decided by the Committee on Character and Fitness and the Appellate Division was one of fact. (Matter of Beggs, 67 N. Y. 120; Matter of Flannery, 212 N. Y. 610; Matter of Robinson, 209 N. Y. 354.)
   Crane, J. Harris J.

Klein moved the Appellate Division of the first department for an order directing the Committee on Character and Fitness to certify him as fit for admission to the bar or directing that the applicant be admitted to the bar. Notice of the motion was given to the committee which appeared by counsel in opposition to the motion. The motion was denied.

Appeal is brought to this court as the action of the Character Committee was based upon a construction of our rules for the admission of attorneys and counselors at law. From the record on appeal, which includes the testimony and proceedings before the Character Committee, the only matter ruled on was the question of Klein’s clerkship and his compliance with rule 3 and rule 6 as in force and effect prior to July 1st, 1929. No other question was presented to the Appellate Division and none other has been presented to this court.

Under rule 3 applicants of the first class, or those who are not graduates of a college or university, must serve a clerkship for a period of at least one year continuously either before examination by the State Board of Law Examiners or after such examination and prior to admission to the bar. Rule 6 provides: “In computing the period of clerkship a vacation actually taken not exceeding two months in each year shall be allowed as a part of such year.” The words “ vacation actually taken ” require the applicant to serve a full calendar year of a clerkship including ten months of actual service and two months of a vacation. The vacation must be actually taken in the sense that two months cannot be lopped off as for a vacation and the applicant admitted to the bar at the end of ten months. He must serve the full calendar year including the vacation. The rule, however, gives no indication as to how the vacation shall be spent or what the applicant may or must do during his leave of absence. If he actually takes a two months' vacation during his year’s clerkship in a lawyer’s office, he may use his time in the same way anybody else does who takes a holiday. This court did not intend to dictate or restrict the activities of the student. A vacation is an intermission of a stated employment or a period of leisure or rest. But minds differ very widely as to what constitutes leisure or rest. We are now taught that leisure is free activity not idleness, and that rest may be a change from one employment to another. Some men take a vacation to play golf, others to write a book as did John Stuart Mill. The tastes of all men differ as to the value and nature of a vacation or as to the method of spending leisure days. Where there is choice there is variety, where there is necessity there is no choice. Many of our students in colleges spend their vacations in working at some employment which will give them funds sufficient to pay their college fees. They work their way through college. If this is no detriment to the scholarship necessary for a scholastic or scientific degree why should it disqualify the student seeking admission to the bar who is serving his clerkship in a law office to learn practice and the ethics of his profession?

Our rules, therefore, place no limitation upon the freedom of the law clerk during the period of his vacation. Harris J. Klein, the applicant, spent his two months’ vacation, or part of that time, working as a bookkeeper and cashier in a summer hotel in Sullivan county. Working at such employment during the vacation allowed by our rules was not a violation thereof and the Character Committee was not justified in refusing to certify for this reason that the required period of clerkship had been served.

We are merely passing upon the construction of our rule. Whether the vacation exceeded the period allowed or whether the applicant has told the truth about the matter or whether he is qualified in any other particular which might affect his character, we do not attempt to say. This is for the Appellate Division to determine. The applicant must, of course, comply with all other rules and regulations which include satisfying the Appellate Division that he is a fit person to be admitted. These matters still rest with that court.

Attention at this time may be called to the change made in these rules by rule 5, subdivisions 7 and 8, of the present rules of the Court of Appeals for the admission of attorneys and counselors at law, taking effect July 1st, 1929.

The order should be reversed, without costs, and the matter remitted to the Appellate Division for such further action as may be proper in the light of the construction now placed upon our rules.

Pound, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur; Cardozo, Ch. J., not sitting.

Order reversed, etc.


author: O’Bbien, J.

text:
    Mollie Reife, Appellant, v. Caroline A. Osmers, Respondent.
    (Argued October 24, 1929;
    decided December 3, 1929.)

      Milton Pinkus and Thomas J. Cuff for appellant.
    The defendant was unable to convey the property contracted to be conveyed because title to a substantial portion thereof had vested in the city of New York by eminent domain between the date of the contract and the law day and the plaintiff was justified in rejecting title.

      (Brownell v. Board of Education, 239 N. Y. 369; Van Etten v. City of New York, 226 N. Y. 483.)

      Carsten H. Ludder for respondent.
    The vendor is able to give the vendee all she contracted to. (Clarke v. L. I. Realty Co., 126 App. Div. 282; Sewell v. Underhill, 197 N. Y. 168; Paine v. Meller, 6 Ves. Jr. 349.)
   O’Bbien, J.

Defendant owned real property in Queens' county fronting sixty feet on Jamaica avenue and extending back one hundred feet. Plaintiff contracted to buy it. Between the dates of the contract and of the closing of title, a strip three and a quarter feet deep running along Jamaica avenue vested in the city of New York in a condemnation proceeding to widen that street. On the. closing day .plaintiff rejected title because part had vested in the city. This action is brought to recover the amount of the deposit and expenses and to declare such charges a hen on the land. On defendant’s motion for a dismissal on the pleadings, the complaint was dismissed and final judgment entered for defendant.

The contract provides: “ This sale covers all right, title and interest of the seller of, in and to any land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining said premises, to the center line thereof, and ah right, title and interest of seller in and to any award made or to be made in lieu thereof; and the seller will execute and deliver to the purchaser, on closing of title, or thereafter, on demand, all proper instruments for the conveyance of such title and the assignment and collection of any such award.” This provision, referring to the seller’s title in land lying in the bed of any street opened or proposed,” might have application to the proposed widening of the then existing Jamaica avenue and to a transfer by the vendor to the vendee of all right to an award for the taking. Perhaps, however, the parties had reference to some other transaction, such as the proposed opening of another street. On this point the pleadings are not clear. In the absence of contract, the award would be payable to the one holding title when it passed to the city (Matter of Van Etten v. City of New York, 226 N. Y. 483, 489) and that one is defendant. No doubt, however, the vendee under an executory contract of purchase and sale has an equitable interest in the award. (Clarke v. Long Island Realty Co., 126 App. Div. 282.) Reading the complaint and the contract alone, the facts are that a strip three feet deep is taken from land one hundred feet deep, amounting to what may be fairly regarded as an unsubstantial deduction, and that, in equity, plaintiff will be entitled to the award. Even if defendant could keep the award, plaintiff, on taking title, could insist upon a corresponding deduction from the contract price.

There are two ways of looking at this case. The first is the way Mr. Justice Gaynor regarded similar facts when he wrote his dissenting opinion in Clarke v. Long Island Realty Co. (supra). It is logical. If this present case were not so closely related in principle to others decided before and since the Clarke case, the reasoning of that dissenting opinion might be accepted as sound law. As an original proposition, it would not be easy to answer. When a vendor contracts to convey a parcel described by metes and bounds and is unable to perform, the case would seem to be clear and the vendee apparently ought not to be put to an enforcement of his rights as an. equitable owner of that part of the land which the vendor, through the fault of no one, becomes unable to convey.

But looking at this case in another way, regard must be paid to that line of precedents which follow the rule in Paine v. Metier (6 Ves., Jr., 349). They can be distinguished for the purpose of the present action only at the risk of creating chaos. Since the decision in Paine v. Meller it has not been doubted in England that the purchaser is not excused from fulfilling his promise to purchase by an accidental injury to the property. It is not surprising that the English law has had a marked effect upon the decisions in the United States. A maj ority of the American courts which have dealt with the subject have, either in dicta or decisions, indicated their assent to Lord Eldon’s view though not always without qualification. But there is, nevertheless, a strong dissent.” (Williston on Contracts, § 928.) In Clinton v. Hope Ins. Co. (45 N. Y. 454, 465) Judge Andrews respected the doctrine of Paine v. Meller when he said: “The general rule is, that the vendee in a contract for the sale of land, is entitled to any benefits or improvements happening to the land after the date of the contract, and must bear any losses by fire or otherwise, which occur without the fault of the vendor.” The facts there, however, were peculiar. The vendee was not treated as an equitable owner because, under the contract of sale, he went into possession as tenant and paid rent during the interval between the execution of the contract and its necessary approval by the court due to the fact that infants were interested. The rule of Paine v. Meller was enforced in Sewall v. Underhill (197 N. Y. 168), where a vendee was in possession when a building upon the land was destroyed by fire. He brought his action to recover damages upon the theory that there had been a breach of the agreement in the failure of the vendor to convey the house. This court held that it was too late to dispute the rule in Paine v. Meller. Judge Gray wrote: “I am unable to find that the authority of the English rule has been shaken in this State, that a loss by fire, or other accident, not due to the fault of the vendor, must fall upon the vendee, when the title is satisfactory and the contract is, therefore, capable of being specifically performed by the vendor. (See Pomeroy’s Eq. Jur. Vol. 6, § 859.)” That doctrine was not weakened in Brownell v. Board of Education (239 N. Y. 369, 374). There the parties by the terms of their contract took themselves out of the rule. Decisions in this State holding to the general rule that, in the absence of contract, the vendee of land upon which buildings insured by the vendor are destroyed by fire intermediate the contract of purchase and the vesting of title is not entitled to insurance moneys are all based upon the recognized theory that the vendee must bear the loss. Such a rule is harsher than the one applied in this case where merely the title as to part of the land was divested. The one who loses his beneficial ownership in a building uninsured by him has no redress. Here, the vendee has complete remedy as the equitable owner of the award. No substantial distinction in principle is. apparent between the destruction of a building by fire and a partial divestment of title by act of the sovereign. In neither case is the vendor at fault and so the vendee must bear the burden. Appellant seeks to limit the authority of Sewall v. Underhill to cases wherein the vendee has gone into possession. No valid distinction seems to exist. Either the rule in Paine v. Metier should be accepted in its entirety as it was accepted in Sewall v. Underhill or it should be rejected. To draw fine distinctions would lead only to confusion.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


text:
    Mary P. Hyland, an Infant, by John R. Hyland, Her Guardian ad Litem, Respondent, v. Mortimer Cobb et al., Appellants.
    (Argued October 8, 1929;
    decided December 3, 1929.)

      Wilberforce Sully, Jr., and Henry Needham Flynt for appellants.
    The complaint should be dismissed for failure of respondent to prove a cause of action. (Muller v. McKesson, 73 N. Y. 195;Lynch v. McNally, 73 N. Y. 347; Smith v. Donohue ; 49 N. J. 548; People v. Donnelly, 232 N. Y. 423; People v. Underhill, 144 N. Y. 316; City of Oswego v. Collins, 38 Hun, 171; Madison Products Co. v. Coler, 242 N. Y. 467; Fluker v. Ziegele Brewing Co., 201 N. Y. 40; Knupfle v. Knickerbocker Ice Co., 84 N. Y. 488; Boronkay v. Robinson & Carpenter, 247 N. Y. 365; Schumer v. Caplin, 241 N. Y. 346.)

      Frederick J. Flynn and Henry Alan Johnston for respondent.
    Proof of viciousness and scienter are not necessary in order to recover damages from the owner of an animal where a statute or muzzling ordinance has been violated or other negligence of the owner can be shown. (Molloy v. Starin, 191 N. Y. 21; Muller v. McKesson, 73 N.. Y. 195; Dickson v. McCoy, 39 N. Y. 400; Farber v. Roginsky, 123 App. Div. 38; Koffler v. Am. Ry. Express Co., 126 Misc. Rep. 838; Mills v. Bunke, 59 App. Div. 39; Van Leuven v. Lyke, 1 N. Y. 515; Keenan v. Gutta Percha Co., 46 Hun, 544; Earle v. Van Alstine, 8 Barb. 630.) The muzzling ordinance applies to Gramercy Park. (People ex rel. Knoblauch v. Warden of City Prison, 89 Misc. Rep. 243; 216 N. Y. 154.)
   O’Bbien, J.

Plaintiff, a very young infant playing in the care of her nurse within the inclosure at Gramercy Park, New York city, was bitten by an unmuzzled dog owned by defendants and held in leash by one of them. No evidence of defendants’ knowledge of previous acts by the animal inconsistent with a gentle disposition was produced. Plaintiff’s judgment rests upon the theory that, in the absence of scienter, negligence was properly imputed to defendants by reason of an assumed violation of an ordinance which prohibits the presence of an unmuzzled dog in a public park or place. ■ Conceding that negligence by an owner, even without knowledge concerning a domestic animal’s evil propensity, may create liability (Dickson v. McCoy, 39 N. Y. 400; Buchanan v. Stout, 139 App. Div. 204), the mere failure to muzzle a dog cannot be held in itself to constitute negligence. Violation of an ordinance is, however, evidence of negligence (Knupfle v. Knickerbocker Ice Co., 84 N. Y. 488; Fluker. v. Ziegele Brewing Co., 201 N. Y. 40; Schumer v. Caplin, 241 N. Y. .346), and, consequently, the question for consideration relates to the application of the ordinance to the inclosed area known as Gramercy Park.

The ordinance urged as controlling is the Sanitary Code of the city of New York (Ch. 20, art. 2, § 17) which provides: “ Unmuzzled dogs; not permitted in any public place. No unmuzzled dog shall be permitted at any time, to be on any public highway or in any public park or place in the city of New York.” The term public place ” is defined by the ordinance (Ch. 20, art. 1, § 1) as follows: “ Subdivision 23. Public place. Every street (as hereinafter defined), park, pier, dock and wharf * * * waters within the jurisdiction of the City of New York; every public yard, ground and area; every space open to the public between a building and the street, between buildings and between streets; all places of public assemblage, including every place of public worship, amusement, entertainment, or instruction, and every place where an appreciable number of persons gather for any purpose whatever, and every public room or space connected with, and every means of entrance to or exit from, any of the said places; all places and premises where goods, wares, and merchandise are sold or offered for sale, including all public rooms or places therewith connected; every railroad car, and every other public vehicle; every railroad depot, station, and platform, and every public room or space connected therewith, and every stairway and other means of entrance thereto or exit therefrom; every ferry boat and ferry-house, and every public room or space connected with, and every means of entrance to or exit from, such ferry-house.”

Gramercy Park is not a public park. This conclusion must follow from the nature of the trust created by Samuel B. Buggies in two deeds executed in the years 1831 and 1833. He was then vested with title to a tract of land which includes the forty-two lots now known as Gramercy Park. In the deed of 1831 he recited his purpose, with a view to enhance the value of his property, to devote and appropriate these lots to the formation and establishment of an ornamental “ private square or park ” for the benefit and enjoyment of the owners and occupants of the sixty-six surrounding lots of land then belonging to him. These forty-two lots he conveyed to trustees with directions to cause this private park to be inclosed by an iron fence and to allow the owners of the surrounding sixty-six lots, their families and tenants and the families of their tenants to have free ingress and egress. The deed also provided for the maintenance of the park by them and their successors and the imposition upon the surrounding lots of charges necessary for such maintenance. This deed of 1831 restricted the use and enjoyment of the park to one family only for each of the surrounding lots, but the deed of 1833, reciting doubt in relation to the validity of such a restriction, omitted this hmitation and granted the rights and privileges for such use and enjoyment not only to the owners but also to all tenants as an easement appurtenant to the land. For nearly a century Gramercy Park or Square has been administered by trustees in conformity with the terms of this trust. It is and has been during all these years under private control. Plaintiff’s parents were tenants of a building situated on one of the sixty-six lots surrounding the park and were allowed the use of a key to unlock the gate and gain admission. Defendants occupied part of a building located on another of these lots and enjoyed the same privilege. The public is excluded. In every sense the park is strictly private.

Nor from any point of view can Gramercy Park be regarded as a public place within the purview of the Sanitary Code. That code is a penal ordinance. Violation of its provisions constitutes a misdemeanor. Extreme liberality in its interpretation must be .avoided. Nine times the word public ” occurs in the definition included within that ordinance. All the places to which the definition makes specific reference are those to which the public either is invited or may gain entrance as matter of right. Not one of them is a place from which the public is excluded, unless, as urged by respondent, the following clause may be so considered: all places of public assemblage, including every place of public worship, amusement, entertainment or instruction, and every place where an appreciable number of persons gather for any purpose whatever, and every public room or space connected with, and every means of entrance or exit from any of said places.” A fair reading of this part of the code compels the conclusion that its framers intended to comprehend only places of public assemblage and that such places are deemed to include locations or sites where certain designated functions are performed, as well as any other undesignated spot rightfully used by the public as a gathering place for any purpose. not specifically described. Unless this meaning be inferred from the language of the ordinance many places concededly private would need to be included. An appreciable number of persons frequently gather for a variety of purposes in a dwelling house, a club, or a garden attached to either building. If respondent’s argument is sound, all such secluded structures and their grounds would constitute a public place, and a person there performing an act forbidden only in public places would be guilty of a misdemeanor. The definition of a public place necessarily excludes all places of a private character. Gramercy Park is as private in its nature as any other garden controlled in common by abutting householders. The public, as such, has no right to enter, and this part of the ordinance has no application.

The judgment of the Appellate Division and that of the Trial Term should be reversed and the complaint dismissed, with costs in all courts.

Cardozo, Ch. J., Lehman and Kellogg, JJ., concur; Pound, J., votes for a new trial on the question of viciousness and scienter; Crane and Hubbs, JJ., dissent and vote for affirmance.

Judgments reversed, etc.


author: Crane, J.

text:
    Michael Seltzer, Respondent, v. Indemnity Insurance Company of North America, Appellant. Ruth Seltzer, an Infant, by Michael Seltzer, Her Guardian ad Litem, Respondent, v. Indemnity Insurance Company of North America, Appellant. Rose Gilbert, Respondent, v. Indemnity Insurance Company of North America, Appellant.

      (Submitted November 22, 1929;
    decided December 3, 1929.)

      James I. Cuff, Harold V. Angevine and Grattan B. Shults for appellant.
    The trial court erred in directing verdicts in favor of the plaintiffs and against the defendant. (Higgins v. Eagleton, 155 N. Y. 466; Citizens’ State Bank v. Cowles, 180 N. Y. 346.) There was collusion and failure to co-operate on the part of the insured. (Clark v. Traver, 205 App. Div. 206; 237 N. Y. 544; Sheehan v. Coffey, 205 App. Div. 388; Joyce v. Brockett, 205 App. Div. 770; Brassil v. Maryland Casualty Co., 210 N. Y. 235; Mullen v. U. S. Casualty Co., 225 App. Div. 719; People v. Doody, 172 N. Y. 165; Gerka v. Fidelity & Casualty Co., 251 N. Y. 51; Weatherwax v. Royal Indemnity Co., 250 N. Y. 281; Coleman v. New Amsterdam Casualty Co., 247 N. Y. 271; Rosenberg v. Ocean Accident & Guarantee Corp., Ltd., 251 N. Y. 563.) Whether defendant waived its defenses under the policy, was at best a question of fact for the jury. (Gerka v. Fidelity & Casualty Co., 251 N. Y. 51; Mullen v. U. S. Casualty Co., 225 App. Div. 719; Hermance v. Globe Indemnity Co., 221 App. Div. 394; Gordon v. Mass. Bonding & Ins. Co., 229 N. Y. 424; Mason-Henry Press v. Ætna Life Ins. Co., 211 N. Y. 489; Weiss v. N. J. Fidelity & Plate Glass Ins. Co., 131 Misc. Rep. 836; Solomon v. Preferred Accident Ins. Co., 132 Misc. Rep. 134.)

      Jacob C. Brand and Harry H. Bernstein for respondents.
    There was no material issue of fact to be submitted to the jury, hence there was no error in directing verdicts for the plaintiffs. (Tolmie v. Fidelity & Casualty Co., 95 App. Div. 352.) There was no evidence of failure to co-operate. (Boyarsky v. New Amsterdam Casualty Co., 219 App. Div. 784; Howard v. Reid, 225 App. Div. 399; Coleman v. New Amsterdam Casualty Co., 247 N. Y. 271; Rushing v. Commercial Casualty Ins. Co., 225 App. Div. 49; 251 N. Y. 302.) The defendant waived all defenses by proceeding to trial in the primary actions. (Miller v. Union Indemnity Co., 209 App. Div. 455; Farrell v. Merchants’ Mul. Auto L. Ins. Co., 203 App. Div. 118; Sachs v. Maryland Cas. Co., 170 App. Div. 494; Glens Falls Co. v. Travelers Ins. Co., 162 N. Y. 399; Utterback-Gleason Co. v. Standard Accident Ins. Co., 193 App. Div. 646; 233 N. Y. 549; Gerka v. Fidelity & Casualty Co., 251 N. Y. 51.)
   Crane, J.

Jacob Wasserman, residing in Brooklyn, Kings county, owned an automobile and was insured by the Indemnity Insurance Company of North America against personal liability for negligence. On the 24th day of July, 1923, he was driving on the State road near High view, Sullivan county, New York, when his automobile turned over and three people were injured, Michael Seltzer, Ruth Seltzer and Rose Gilbert. These people were close personal friends of Wasserman. Michael Seltzer had been in the real estate business with Wasserman for some years. Although the real estate transactions were carried on through a corporation, Wasserman and Seltzer acted toward each other as if they were partners. Ruth Seltzer was the daughter of Michael Seltzer. Rose Gilbert was the daughter of another partner of Wasserman’s and worked for the Thirteenth Avenue Building Corporation, through which the partners or associates did business.

These three people sued Wasserman and retained for this purpose the law firm of Barnett & Mintz, who were Jacob Wasserman’s personal attorneys and legal advisers. The actions came on for trial resulting in judgments; one for Michael Seltzer for $987; one in favor of Ruth Seltzer for $987, and one in favor of Rose Gilbert for $1,427.

Jacob Wasserman was insolvent, whereupon these actions were brought against the insurance company pursuant to section 109 of the Insurance Law (Cons. Laws, ch. 28) of the State of New York, which provides that the insolvency of the person insured shall not release the insurance carrier from the payment of damages sustained and that an action may be maintained by the injured person against the insurance company under the terms of the policy for the amount of the judgment which has been recovered. The policies of the defendant, in compliance with this law, contained the same provision. The company is hable according to the terms of the policy. The policy contained the following: the assured shall at all times render to the company all co-operation and assistance in his power and whenever requested shall 'aid in securing information as evidence and the attendance of witnesses and in prosecuting appeals.” If Jacob Wasserman failed to comply with this condition of the policy he could not recover for any liability which he had met by payment, neither could the persons recovering the judgments, in case of his insolvency and non-payment. They stand in his shoes and can only recover under the policy and this section of the Insurance Law when the assured has complied with this condition of the policy. (Coleman v. New Amsterdam Casualty Co., 247 N. Y. 271.)

The insurance company defended on the trial, pressed upon the attention- of the court that Jacob Wasserman had not only failed to co-operate and assist the defendant in resisting these claims but had gone so far as to wrongfully aid and assist a recovery by the plaintiffs. The court, however, took the question from the jury and directed a verdict in favor of the plaintiffs for the amount of the judgments above stated. In this we think he was in error. The evidence should be submitted to the jury to determine whether Jacob Wasserman failed to comply with the above-quoted condition in the policy.

After the commencement of the actions by his friends and associates, through his own attorneys, he made an affidavit for the insurance company which was the reason for its defending the claims. The negligence charged against Wasserman was fast driving. In this affidavit he swore that he did not driye faster than twenty-five miles an hour and that no one in the car complained to him about driving too fast or asked him to drive slower; no remarks were made to him whatever about driving. This was important evidence bearing upon both the question of negligence and of contributory negligence of the plaintiffs. (Clark v. Traver, 205 App. Div. 206; affd., 237 N. Y. 544.)

As the time of the trial drew near, Jacob Wasserman suddenly lost his memory. He could not recollect how fast he was driving and he could not recollect whether the people in the car had warned him or not. The investigator preparing the case for the company interviewed him in the court room during the trial preparatory to calling him in as a witness. His statement then was that he could not remember. The defendant did not call him on the trial of the negligence cases because of this failing memory. Who can tell whether Jacob Wasserman was telling the truth when he made the affidavit or when he said at the time of the trial that he could not remember. A failing memory may be a false excuse as well as a true one. A witness has been sent to jail for perjury who falsely testified to loss of memory. (People v. Doody, 172 N. Y. 165.) The testimony of Wasserman, if given according to his affidavit, was at least material on the trial of the negligence cases. It might have helped the defendant and the insurance company and again it might not have been of any avail. This, however, is not the point. The insurance company was entitled to the defendant’s assistance and to a truthful statement of the cause of the accident. Wasserman never claimed that he made a false affidavit but simply stated that he could not remember about the accident in these particulars.

We think it was a question for the jury whether Wasserman had actually forgotten or whether he was feigning, falsifying and willfully trying to help the plaintiffs to recover against him and thus reach a recovery against the insurance company. To be plain, it is a question for the jury to say whether Wasserman was deliberately aiding the plaintiffs to get money out of the insurance company by making believe that he had forgotten his statements for the insurance company or the facts that might help it and thus faffing to render all co-operation and assistance in his power in the defense of the actions.

There was no waiver as matter of law. At the time the insurance company undertook the defense it had Wasserman’s affidavit; not until the time of the trial approached did Wasserman claim that he had forgotten about the speed of the car or whether the occupants of the car spoke to him or not.

For the reasons here stated, in each action the judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.

Pound, Lehman, Kellogg, O’Brien and Hubbs, JJ., concur; Cardozo, Ch. J., not sitting.

Judgments reversed, etc.