author: Lotjghran, J. Finch, J.

text:
    In the Matter of the Liquidation of New York Title and Mortgage Company. William P. Clark et al., Appellants; Lotos H. Pink, Superintendent of Insurance of the State of New York, as Liquidator of New York Title and Mortgage Company, et al., Respondents.

      Argued November 22, 1937;
    decided January 25, 1938.

      William A. Barber and Joseph Diehl Fackenthal for William P. Clark, appellant.
    A claim on the guaranty of a whole mortgage is secured by the mortgaged real estate and it is the value of the real estate which should be deducted from the face amount of the guaranteed mortgage. (Kortright v. Cady, 21 N. Y. 343; Prudence Co. v. 160 West 73d St. Corp., 260 N. Y. 205; McCluskey v. Cromwell, 11 N. Y. 593; Fletcher v. Derrickson, 3 Bosw. 181; Benjamin v. Hillard, 64 U. S. 149; Humphrey v. Hayes, 94 N. Y. 594.) The mortgage moratorium laws (Civ. Prac. Act, §§ 1083-a, 1083-b) apply and require deduction of the value of the real estate. (Klinke v. Samuels, 264 N. Y. 144; Gaimari v. Horch, 249 App. Div. 537; Matter of Scheftel, 294 N. Y. Supp. 387.) It is the real estate which is the security, and it is the value of such real estate which should be deducted from or set off against the face amount of the claim. (Matter of Bond & Mortgage Guarantee Co., 247 App. Div. 911; Central States Life Ins. Co. v. Koplar Co., 85 Fed. Rep. [2d] 181; Matter of Englander Spring Bed Co., 17 Fed. Supp. 15; 86 Fed. Rep. [2d] 998; Downtown Inv. Assn. v. Boston Metropolitan Bldgs., Inc., 81 Fed. Rep. [2d] 314; Matter of Soltmann, 238 Fed. Rep. 241; Matter of McAusland, 235 Fed. Rep. 173; Matter of Reichard & Bro., Inc., 230 Fed. Rep. 525; Matter of Dix, 176 Fed. Rep. 582; Matter of Davis, 174 Fed. Rep. 556.) Even if the security for the mortgage debt could be held to be the mortgage “as a mortgage,” the value of such mortgage is what would be obtained on enforcement thereof, viz., the value of the real estate. (Wheeler v. Newbould, 16 N. Y. 392; Bright-

      son v. Claflin, 225 N. Y. 469; Stern & Co. v. Pizitz, 240 App. Div. 509; Gutman v. Livingston, 173 App. Div. 670; 226 N. Y. 582; Morse v. Kelsey, 78 Misc. Rep. 99; 156 App. Div. 946; Roberts v. Park-Lexington Corp., 131 Misc. Rep. 6; Grossman v. Lindemann, 67 Misc. Rep. 437; Lary v. National Trust Co., 4 N. Y. Weekly Digest, 56; Perillo v. Zunino, 259 N. Y. 21; Industrial & General Trust, Ltd., v. Tod, 180 N. Y. 215; Richmond Mortgage & Loan Corp. v. Wachovia Bank & Trust Co., 57 Sup. Ct. Rep. 338; Murray v. Marshall, 94 N. Y. 611; Spencer v. Spencer, 95 N. Y. 353; Antisdel v. Williamson, 165 N. Y. 372.) In the light of the facts relied on by the appraiser, the value placed by him on the mortgage is palpably erroneous and without any reasonable basis. (Heiman v. Bishop, 272 N. Y. 83; Matter of Frazer, 150 Misc. Rep. 43.) A claim on a participation certificate in a single mortgage should have been completely disallowed. The courts below erred in directing an additional deduction from the value of the security because of the claimant’s fractional interest therein. (Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69; Perillo v. Zunino, 259 N. Y. 21; Industrial & General Trust, Ltd., v. Tod, 180 N. Y. 215; Title Guarantee & Trust Co. v. Mortgage Comm., 273 N. Y. 415; People v. Penniston, 262 Ill. 191.)

      Joseph M. Proskauer, Raphael H. Weissman and J. Alvin Van Bergh for Golden Hill Building Corporation, appellant.
    A mortgage is valued at the amount due thereon if such amount does not exceed the value of the underlying realty, less, where necessary, the probable cost and expense of reducing the realty to ownership and possession. A fractional interest in a mortgage is worth its aliquot part. (Perillo v. Zunino, 259 N. Y. 21; Matter of Kingsland, 118 Misc. Rep. 525; Matter of Concklin, 150 Misc. Rep. 53; Industrial & General Trust, Ltd., v. Tod, 180 N. Y. 215; Sinclair Refining Co. v. Jenkins Petroleum Process Co., 289 U. S. 689; James v. Cowing, 82 N. Y. 449; Colton v. Kennedy, 74 Misc. Rep. 217;
      Crandall v. Leach & Co., 221 App. Div. 263; Henry v. North American Ry. Constr. Co., 158 Fed. Rep. 79; Matter of Mayer, 41 Fed. Rep. [2d] 856; Matter of Morgan, 39 Fed. Rep. [2d] 489; Matter of Englander's Spring Bed Co., 17 Fed. Supp. 15; Central States Life Ins. Co. v. Koplar Co., 85 Fed. Rep. [2d] 181.) Since one who holds a bond and mortgage as collateral security must collect thereon in accordance with their tenor or by foreclosure, and not sacrifice them by a sale, any theoretical “ sales price " is irrelevant in valuing the collateral mortgage. (Wheeler v. Newbould, 16 N. Y. 392; Brightson v. Claflin, 225 N. Y. 469; Morse v. Kelsey, 78 Misc. Rep. 99; Gutman v. Livingston, 173 App. Div. 670; 226 N. Y. 582.) The deductions in the valuations of the security in two of the claims solely because fractional interests in bonds and mortgages were involved should be disallowed. (Matter of New York Title & Mortgage Co., 160 Misc. Rep. 283; Matter of Lawyers Mortgage Co., 154 Misc. Rep. 909; Matter of New York Title & Mortgage Co., 156 Misc. Rep. 808; Matter of People [Westchester Title & Trust Co.], 268 N. Y. 432.)

      Harry Bodwin, Jess H. Bosenberg, Joseph Lapidus and William A. Shea for respondent Louis H. Pink, Superintendent of Insurance, as liquidator of New York Title and Mortgage Company, respondent.
    The valuation of the security of claimants as mortgages and the allowance of the claims upon deduction of such valuation was correct. (Matter of People [Tit. & Mtge. Guar. Co.], 264 N. Y. 69; Prudential Ins. Co. v. Liberdar Holding Corp., 72 Fed. Rep. [2d] 395; Trimm v. Marsh, 54 N. Y. 599; Merritt v. Bartholick, 36 N. Y. 44; Power v. Lester, 23 N. Y. 527; Kortright v. Cady, 21 N. Y. 343; Packer v. Rochester & Syracuse R. R. Co., 17 N. Y. 283; Matter of Bankers Mortgage Co., 83 Fed. Rep. [2d] 50; Royal Life Ins. Co. v. Gross, 76 Fed. Rep. [2d] 219; Prudence Co. v. Central Hanover Bank & Trust Co., 237 App. Div. 595; 261 N. Y. 420.) Section 1083-b of the Civil Practice Act is inapplicable. (Kress v. Central Trust Co., 246 App. Div. 76; 272 N. Y. 629; Matter of Bowes, 164 Misc. Rep. 190; Weisel v. Hagdahl Realty Co., 241 App. Div. 314; City Bank Farmers Trust Co. v. Ardlea Corp., 267 N. Y. 224; Honeyman v. Hanan, 275 N. Y. 382.) The claims were not discharged by the operation of the mortgage moratorium laws. (Easton Furniture Mfg. Co. v. Caminez, 146 App. Div. 436; Silverman v. Rubenstein, 162 N. Y. Supp. 733; Herrington v. Davitt, 220 N. Y. 162; Union Trust Co. v. Willsea, 275 N. Y. 164; Matter of American Paper Co., 255 Fed. Rep. 121; Klinke v. Samuels, 264 N. Y. 144; Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398; Matter of People [Title & Mortgage Guar. Co.], 264 N. Y. 69.) The allowance of a deduction in the value of the security with respect to claims based on mortgage participation certificates due to the fractional character of the mortgage interests held by the claimants was proper. (Matter of Gibert, 176 App. Div. 850; Matter of Loeb, 164 N. Y. Supp. 592; Matter of Turner, 127 Misc. Rep. 205; 221 App. Div. 116.)

      Michael F. Dee, Jesse Freidin, Morris Amchanitzky and Maurice Finkelstein for Mortgage Commission of the State of New York, respondent.
    In evaluating the security of certificate holders some deduction must be made because of the practical difficulties inherent in fractional ownership. (Morse v. Kelsey, 78 Misc. Rep. 99; Matter of Gibert, 176 App. Div. 850; Matter of Turner, 127 Misc. Rep. 205; 221 App. Div. 116; Matter of Loeb, 164 N. Y. Supp. 592; Heiman v. Bishop, 272 N. Y. 83; Matter of Proctor, 41 Misc. Rep. 79; Matter of Curtice, 111 App. Div. 230.)

      Leon Leighton, Sidney Harris and Sidney Kaminsky for Brentmore Estates, Inc., respondent.
    The allowance made to one of the certificate holders by the court at Special Term fairly measures the loss suffered by him and his fellow certificate holders as a result of the company’s failure to perform its guaranty. (Matter of New York Title & Mortgage Co., 157 Misc. Rep. 271; 248 App. Div. 715; 272 N. Y. 556; Heiman v. Bishop, 272 N. Y. 83.) The value of the security referred to in subdivision 5 of section 425 of the Insurance Law fCons. Laws, ch. 28) was properly interpreted by the court at Special Term to reach a result in harmony with the legislative policy not to encourage the wholesale foreclosure of certificated mortgages. (Matter of People [Title & Mtge. Guar. Co.], 264 N. Y. 69.) Defenses based on the moratorium legislation are not available. (Matter of People [Tit. & Mtge. Guar. Co.], 264 N. Y. 69.)

      Abraham J. Halprin, Simon H. Rifkind, Sidney R. Nussenfeld, Sherman S. Rogers, Barnet Kaprow, Joseph L. Maged, Thomas Keogh and Olin Potter Geer for trustees of Series F-l, et al., respondents.
    The security held by claimants consists of mortgages, not real estate, and it is that security which must be evaluated. The court below was correct in approving the valuation of the mortgages as mortgages. (Matter of Empire State Surety Co., 214 N. Y. 553; Van Schaick v. Pennsylvania Exchange Bank, 236 App. Div. 453; Matter of Stupack, 274 N. Y. 198; First Trust & Deposit Co. v. Potter, 155 Misc. Rep. 106.) The proper basis of valuation is the realization value as of July 15,1935. (Van Schaick v. Pennsylvania Exchange Bank, 236 App. Div. 453; Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69; Matter of Stupack, 274 N. Y. 198.) The deduction of fifteen per cent in the case of the claims on certificates was proper. (Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69; Matter of Stupack, 274 N. Y. 198; Kline v. 275 Madison Ave. Corp., 149 Misc. Rep. 747; Matter of Nemerov, 149 Misc. Rep. 797; Matter of Central Hanover Bank & Trust Co., 149 Misc. Rep. 488; 150 Misc. Rep. 351; Tolfree v. New York Title & Mortgage Co., 72 Fed. Rep. [2d] 702; People ex rel. Loeser & Co. v. Goldfogle, 249 N. Y. 284.)

      Abraham N. Geller, Bernard A. Saslow and Robert B. Block for Continental Bank & Trust Company of New York, as trustee for Series N-83 and N-108, respondent.

      Ralph W. Crolly for Brooklyn Trust Company, respondent.
    It was proper for the court in valuing a fractional share in a mortgage where the mortgage company had itself, by certificates, divided the mortgage into shares or parts, to allow a reasonable deduction for such fractional interests. (Matter of Gibert, 176 App. Div. 850.) The Legislature intended, by article 9 of the Insurance Law, when providing for claims in the case of guaranteed mortgages and certificates, that the mortgages should be valued as “ mortgages.” (Heiman v. Bishop, 272 N. Y. 83.)

      Martin A. Schenck and Ralph C. Williams, Jr., for Irving Trust Company, as trustee, respondent.

      Maurice J. Dix for certificate holders, amici cwrise.

    The terms of the certificates are totally different from the terms of the mortgage guaranty policies; the obligations of each are separate and distinct and have no relation to each other. (Well v. Manhattan Company, 275 N. Y. 238; Matter of People [Title & Mtge. Guar. Co.], 264 N. Y. 69; Matter of People [Lawyers Title & Guar. Co.], 265 N. Y. 20; Matter of People [New York Title & Mortgage Co.], 265 N. Y. 30; Klinke v. Samuels, 264 N. Y. 144; People v. Metropolitan Surety Co., 205 N. Y. 135; Matter of Empire State Surety Co., 214 N. Y. 553; Prudential Ins. Co. v. Liberdar Holding Corp., 72 Fed. Rep. [2d] 395; Blanding v. Cohen, 101 App. Div. 442; 184 N. Y. 538; Vanderbilt v. Schreyer, 91 N. Y. 392; McMurray v. Noyes, 72 N. Y. 523; Brown v. Curtiss, 2 N. Y. 225; Vetter v. Welz & Zerweck, 143 App. Div. 121; Helios- Upton Co. v. Thomas, 96 App. Div. 401; 184 N. Y. 585; Bernard v. Kaufman, 179 N. Y. Supp. 597; Jacocks v. Dessar, 129 App. Div. 286.)
   Lotjghran, J.

In this proceeding for the liquidation of New York Title and Mortgage Company under article XI of the Insurance Law (Cons. Laws, ch. 28), the Additional Special Term for the county of New York confirmed the allowance by the Superintendent of Insurance, as liquidator, of the claims of four holders of the company’s so-called mortgage guaranties. The Appellate Division affirmed and permitted this appeal by certain stockholders of the company. The issue certified to us for review is whether, upon the record, any of the claims were properly allowed in the sum found by the Superintendent to be the amount of the claimant’s loss.

It is in order first to notice large elements of the case as to which there is no controversy. The stockholders concede that the undertakings of the company were absolute obligations, as distinguished from contingent obligations, and were therefore provable under the statute.” (See Insurance Law, § 425, subd. 3; Matter of People [Bond & Mortgage Guarantee Co.], 267 N. Y. 419.) The respective rights and obligations of the several parties in interest are to be fixed as of July 15, 1935, the date of the entry of the order of liquidation. (Insurance Law, § 404, subd. 2; Matter of Empire State Surety Co., 214 N. Y. 553.) “ The fundamental basis underlying the standard or method for the determination of claims on guaranties is [the words are the liquidator’s] that the creditor-claimant shall receive such allowance as will measure his actual loss.” This loss is to be determined in accordance with the following provision of the statute: “ No claim of any secured claimant shall be allowed at a sum greater than the difference between the value of the security and the amount for which the claim is allowed, unless the claimant shall surrender his security to the superintendent in which event the claim shall be allowed in the full amount for which it is valued.” (Insurance Law, § 425, subd. 5.) Each of the present claimants holds a mortgage or an interest in a mortgage. In no instance has the underlying real estate been acquired by any claimant through foreclosure or otherwise. From this statement of matters upon which the parties are in agreement we pass to the questions upon which our decision is sought.

(1) What is the meaning of the word “ security ” as used in subdivision 5 of section 425 of the statute? The Superintendent and the claimants contend that the security for a claim is the claimant’s mortgage — as a mortgage — and that the value of the mortgage qua mortgage should be deducted from or set off against the face amount of the claim. The stockholders stand upon the position that the mortgaged real estate (and not the mortgage as such) is the security of the claimant and that the value of the real estate should be so set off or deducted. This question of construction has been decided against the stockholders by the courts below. In our opinion that ruling was right and effectuates the aim of the statute.

We quote again the words to be interpreted, stressing this time the phrases which to our minds make clear the idea of the Legislature. No claim of any secured claimant shall be allowed at a sum greater than the difference between the value of the security and the amount for which the claim is allowed, unless the claimant shall surrender his security to the superintendent in which event the claim shall be allowed in the full amount for which it is valued.” These words plainly contemplate that the security ” of which they speak is in any case to be an interest that can be surrendered by a claimant to the Superintendent. Surrender thereof is in so many words made the prime condition of full allowance of a secured claim. A claimant, of course, can surrender only the thing that he has in his possession. So far, then, as the statute in itself is our guide, it must follow that the value to be credited on a claim is the value of the mortgage (or share therein) or is the value of the realty if acquired, accordingly as the one asset or the other is in the possession of the claimant or claimants. Inasmuch as no interest in land is held by any of these claimants there is now no occasion to consider under what circumstances or within what limits realty reduced to a claimant’s possession may be surrendered to the Superintendent.

(2) Next in appropriate sequence is our commentary on arguments addressed to us by the stockholders as reasons why we should not thus take the foregoing provision of the statute as we find it.

They say that there is not, and that there never has been, a mortgage market in this community; that the liquidator cannot value a mortgage qua mortgage without inventing such a market; and that the Legislature could never have intended to set up so fictitious a process for the determination of secured claims against the assets of the company. We suppose it is true that there never has been any market place for mortgages in the sense of a counter over which they could be exchanged for cash or its equivalent at prices publicly quoted currently. But everybody knows (and this record demonstrates the fact) that heretofore in times of good business there was a truly enormous trade in mortgages. Purchasers in that market had to determine whether to buy or not to buy the security and so must have had resort to some general tests of value. Indeed fractional shares in mortgages were in fact bought and sold for a price even in situations where (as in the case of a group series of mortgages) there could have been no definite identification of land that might ultimately be involved in the transaction. (See Matter of Stupack, 274 N. Y. 198.)

It is general knowledge, too, that a landowner as often as not will protect his equity by keeping a mortgage good, even when he believes that the land on forced sale would produce less than the face amount of the lien. Again, the financial responsibility of the obligor on the mortgage bond affects the question of the value of the security.

In short, it will not do to say that the mere value of the underlying land (though a factor of major weight) is the sole index of the worth of a mortgage.

Nor is the contrary proved for the purpose of this case by the fact that sale of a mortgage on July 15, 1935, would have been so much a sacrifice that any sales price now deemed to have been then obtainable must be so theoretical as to be irrelevant to the issue of value. We have held that it is not necessarily impossible to determine the value of mortgaged premises as of the date of a foreclosure sale held when there was no market for real estate such as exists under ordinary conditions. (Heiman v. Bishop, 272 N. Y. 83.) It must be no less a possibility that the value of a mortgage as such can be ascertained as of a time when the ordinary trade in mortgages had stopped.

Arguendo, the stockholders also say that, even if the mortgage is to be valued as a mortgage, nevertheless the valuation as matter of law is determined by deducting from the value of the realty the cost of foreclosing it. For the reasons already stated, we think the ascertainment of the mortgage value is not to be confined to that or any other set form. The process is a factual affair — a a matter of the exercise of reasonable judgment after an intelligent and honest canvass of all factors relevant to the particular security.

(3) We turn now to the procedure whereby the Superintendent here determined the amount of a claimant’s loss. Four claims are disposed of by his report to the Additional Special Term. The first (that of the claimant Ryder) may be taken for the purposes of illustration. The Ryder claim is based upon a guaranty policy which the company issued to the claimant on his purchase of a whole mortgage. Ryder claims for the unpaid mortgage principal of $5,500, with interest accrued to July 15,1935, of $113.44, a total of $5,613.44. The Superintendent appraised the value of the underlying realty as of that date at $8,500 and the then value of the mortgage at $4,700. The loss was fixed at the difference between the sum claimed ($5,613.44) and the appraised value of the mortgage ($4,700) — that is to say, $913.44.

We cannot see why a $5,500 mortgage on property concededly worth $8,500 should itself be valued for no more than $4,700. No suggestion is made by the record in respect of any principle which leads to this result. The only explanation is supplied by the brief for the Superintendent. His counsel there say:

“ The security still held by Byder and other claimants is a species of property not identical with the underlying real estate, but representing a right in real property the value of which is measured by the presence or absence of value in the real estate over and above the face amount of the mortgage. This excess of value constitutes the cushion or margin of safety which gives,^this particular form of security its special character as a form of investment.

The very terms of the statutes fixing the cushion at a value of 50% over the face amount of the mortgage in the case of investments which might be made by insurance companies and other fiduciaries, was a legislative recognition of the necessity of the presence of an adequate cushion as an incident of a good mortgage. It was this requirement, too, that made the mortgages issued by the Company attractive as a form of security to the claimants here involved and others similarly situated who are holders of the Company’s guarantees.

It is submitted that the appraisers for the Superintendent, in fixing the value of the security held by each claimant at an amount less than the value of the underlying real estate, in each case, merely recognized that the inherent nature of the mortgage as security requires the presence of an adequate cushion or margin of safety as a necessary factor in the evaluation of a mortgage.”

This can mean nothing more than that the liquidator has here undertaken to give to the claimant the equivalent of a new mortgage investment with all the safeguards that an investor would insist upon while he was free to risk or not to risk his money. We think that is not the meaning of the so-called guaranty upon which the claim is based. The guaranty was a promise that pay-meat of the mortgage principal would at all events be made within eighteen months after demand therefor subsequently to the due date of the mortgage. The statutory mortgage loan standard obviously is not an admissible measure of any loss consequent upon default on such an undertaking. It is, therefore, quite impossible to sustain the orders entered below.

In stating that conclusion we do not mean to imply that the value of a mortgage must be appraised entirely upon the basis of the more tangible factors like the location of the property, the suitability of any improvement thereon and the rental income. We take it that the appraiser should envisage possible consequences of foreclosure, e, g., whether income would be diminished thereby with the result that new money would be required for carrying charges while the property was held thereafter, and whether additional financing would perhaps be an essential requisite of a resale. In a contingency of that sort, it might be advantageous that some other mortgage be placed and in that aspect appropriate consideration may properly be given by the appraiser to the amount for which a valid trust investment in the property could then probably be made.

(4) Two of the four claimants are holders of participation shares or certificates in mortgages guaranteed by the company. The courts below have adopted the recommendation of the Superintendent that an additional deduction of fifteen per cent in the valuation of the security for these two claims should be made, because of the fractional nature of the interests therein. The Additional Special Term said: The difficulties and expense involved in securing the co-operation of sufficient certificate holders (or co-owners) to enforce a mortgage, through a reorganization proceeding or otherwise, must be taken into account in estimating the value of an undivided interest in a mortgage.” (160 Misc. Rep. 67, 88.) We are of the same opinion.

It is said by the stockholders that the loss resulting from, the necessity for concerted action can be no more than the cost of reorganization plus the fees and administration expenses of the trustees appointed for that purpose. Doubtless this may be true in some cases. We cannot say that it will necessarily be true for all participation claimants. The larger the group the greater must be the difficulty in disposing of the security piece-meal. When the number is relatively large so is the hazard that some will be unable to bear their respective portions of the common load. Quite probably there are other substantial loss factors where group action must be had. In each case such variants can be weighed only by the trained good sense of administrative judgment. The Superintendent tells us that he has no purpose to adopt as a rule of thumb the requirement of a deduction of as much as fifteen per cent for all cases wherein control of the security is divided. Situations may be presented, he admits, where a lesser allowance (or none at all) will be called for by the fractional character of the security. It would not be helpful to set forth the circumstances upon which the size of this additional deduction was here defined. For all that we know fifteen per cent was not too much so far as the two claims in question are concerned.

(5) Lastly, we thinK it appropriate to suggest not only that the Superintendent should disclose in the first instance the fundamentals of the theory of his future action in fixing the losses of claimants, but that fair play requires also that an opportunity should be afforded to test by cross-examination the validity of any appraisal entering into the allowance of a claim.

The orders should be reversed, without costs, the matter remitted to the Additional Special Term for further proceedings in accordance with this opinion and the questions certified answered in the negative. The appeals taken as of right should be dismissed, without costs.

Finch, J.

(concurring). I concur in the decision that there should be a new trial upon which a full and complete hearing with ample opportunity for cross-examination must be accorded to all parties. I also agree that the “ security to be valued under the statute is the mortgage (including the bond which is secured by the mortgage).

This is a liquidation proceeding and to measure the actual loss to the claimant it is necessary to ascertain the true value of the mortgage. The value of the mortgage is what would be realized upon the enforcement of the mortgage in the usual manner and not what might be realized upon the sale of the mortgage as such. The authorities in this State hold that this is the proper basis for valuing such security. (See Wheeler v. Newbould, 16 N. Y. 392; Brightson v. Claflin, 225 N. Y. 469; Perillo v. Zunino, 259 N. Y. 21.) If then the applicable rule of law is that the value of the mortgage is what would be realized upon enforcement thereof, it follows, when the obligor on the bond is hopelessly insolvent, that the value of the mortgage is the value of the realty as if foreclosed less what would be the cost of foreclosure and any loss or expense in so doing. This latter includes all legal and administrative expenses such as receivership maintenance and loss of income. Valuation as if foreclosed does not mean a purchase price which may be realized by a forced sale at the auction block. It means “ the amount which one desiring but not compelled to purchase will pay under ordinary conditions to a seller who desires but is not compelled to sell ” (Heiman v. Bishop, 272 N. Y. 83, 86) and with such ordinary aids towards obtaining such reasonable value as the average holder of a mortgage would employ.

Objection is made that the above method for the valuation of mortgages is not applicable because of the mortgage moratorium laws. (Civ. Prac. Act, §§ 1083-a, 1083-b.) These laws, however, do not purport to' change rights but only to suspend foreclosure during the period of emergency and only where interest and taxes have been paid in full. Such continued payment is the best evidence that the mortgage is worth the face amount and will eventually be paid. But in any event we are valuing the mortgage not because the claimant is required to foreclose but merely to determine the value on the liquidation date. Therefore, the fact that, if interest and taxes are duly paid, the actual foreclosure may be postponed to the end of the emergency and the repeal of the mortgage moratorium laws, does not affect the validity of the method for valuing the mortgage.

Crane, Ch. J., Lehman, O’Brien and Rippey, JJ., concur with Loughran, J.; Finch, J., concurs in separate opinion; Hubbs, J., taking no part.

Ordered accordingly.


source: Caselaw Access Project

author: O'Brien, J. Finch, J.

license: Public Domain

text:
    Edmond J. Dixon, Respondent, v. Fiorello H. LaGuardia, as Mayor of the City of New York, et al., Appellants. Municipal Court Clerks Association of the City of New York, Respondent.

      Argued February 21, 1938;
    decided February 28, 1938.

      William C. Chanler, Corporation Counsel (William S. Gaud, Jr., of counsel), for appellants.
    Each step required to be taken by the Board of Estimate and Apportionment in making a budget must be taken by a resolution which cannot be passed at the same meeting at which it is originally presented unless it receives twelve affirmative votes. (People ex rel. Tyng v. Prendergast, 164 N. Y. Supp. 1042; 178 App. Div. 895; 221 N. Y. 659; Lazinsk v. City of New York, 163 App. Div. 432; People ex rel. Hatch v. Reardon, 184 N. Y. 431; Kirk v. McGuire, 32 Misc. Rep. 596; Wittmer v. City of New York, 50 App. Div. 482; Matter of City of Long Beach v. Public Service Comm., 249 N. Y. 480; Matter of City of Buffalo, 78 N. Y. 362; Matter of South Market Street, 76 Hun, 85; City of Albany v. Goodman, 203 App. Div. 530; Matter of Douglass, 46 N. Y. 42.) No valid budget fixing the salary of petitioner’s position at $4,000 was ever adopted. (Matter of Stickney, 110 App. Div. 294; 185 N. Y. 107; Matter of City of Buffalo, 78 N. Y. 362; People v. Tremaine, 252 N. Y. 27; Matter of City of Buffalo, 78 N. Y. 362.) The Board of Estimate and the Council validly adopted a budget in January, 1938, which fixed the salary of the position held by the petitioner at $3,000 a year. (Matter of Ottinger v. Voorhis, 241 N. Y. 49; Kirk v. McGuire, 32 Misc. Rep. 596; People ex rel. Carter v. Rice, 135 N. Y. 473; Juliand v. Rathbone, 39 N. Y. 369; Looey v. Hughes, 26 N. Y. 514; Matter of City of Buffalo, 78 N. Y. 362.) The salary attached to the position held by the petitioner was on January 3, 1938, validly reduced to $3,000 a year under section 68 of the new charter. (Thoma v. City of New York, 263 N. Y. 402; Buckbee v. Board of Education, 115 App. Div. 366; 187 N. Y. 544; Sauerbrunn v. Board of Education, 150 App. Div. 407; 208 N. Y. 550; Matter of Rudd v, Cropsey, 159 App. Div. 275; Matter of Hurlburt, 88 Misc. Rep. 679; 169 App. Div. 958; Matter of Edkins v. Wotherspoon, 173 App. Div. 330; People ex rel. Kaufman v. Board of Education, 166 App. Div. 58; Matter of Spawn v. Fleming, 208 App. Div. 582.)

      Alfred J. Talley for Edmond J. Dixon, respondent.
    All legal requirements were followed by the Board of Estimate and Apportionment in the preparation, making and adoption of the 1938 budget prior to December 25, 1937. (New York Charter [L. 1901, ch. 466], as amd. by Local Law No. 11, 1933, §§ 226-b, 226-c.) In the process of making the budget the Board of Estimate and Apportionment acted under the provisions of section 226-C and a majority vote was sufficient. (Schieffelin v. Hylan, 236 N. Y. 254; People ex rel. Hatch v. Reardon, 184 N. Y. 431.)

      Gabriel L. Kaplan and Sidney A. Fine for Municipal Court Clerks Association of the City of New York, respondent.
    The Board of Estimate and Apportionment between October 2 and October 29, 1937, made a legal expense budget for the city of New York for the year 1938. (People ex rel. Collins v. Ahearn, 120 App. Div. 95.) The provisions of sections 67 and 68 of the New York City Charter are not pertinent. (People ex rel. Tyng v. Prendergast, 164 N. Y. Supp. 1042; Thoma v. City of New York, 263 N. Y. 402.)
   O'Brien, J.

Petitioner is an assistant clerk of the Municipal Court of the city of New York. His salary had been duly fixed at the rate of $4,000 per annum from and after July 1, 1937. On October 6, 1937, the Board of Estimate and Apportionment adopted, as the tentative budget for the year 1938, the executive budget which had been submitted by the Mayor. That budget showed in detail the items allowed to the Municipal Court. Public hearings were held on October 13 and October 14. At the hearing on October 13 a representative of clerks and deputy and assistant clerks of the Municipal Court requested that salaries be restored to $4,000. On October 19 the Board met in executive session and, on motion of the Comptroller, voted, eleven in the affirmative, to increase the appropriation to the Municipal Court in the sum of $149,890 by restoring the salaries received on July 1, 1937. The next day, October 20, the Deputy and Acting Comptroller moved that the tentative budget as adopted on October 6, 1937, which has since been considered in executive session by the members of the Board of Estimate and Apportionment, be amended and that resolution was adopted by a vote of ten to six. If this resolution of October 20 was originally presented at the meeting of October 20, it failed of passage, for section 226-á, Greater New York Charter fLaws of 1901, ch. 466), as amended by Local Law No. 11 for the year 1933, was then in effect, and provided: “ No resolution or amendment of any resolution shall be passed at the same meeting at which it is originally presented unless twelve votes shall be cast for its adoption.” It was adopted by a majority vote, but failed to obtain the twelve votes required for the adoption of a resolution originally presented. The form of the resolution and the minutes of the meeting of October 20 show that the subject of this resolution had been presented, considered and approved at previous meetings. When the Deputy and Acting Comptroller introduced the resolution of October 20 he stated, “ I move that the amendments made in the tentative budget as approved at the executive sessions, be hereby approved.” The minutes record the following proceedings: “Mayor: The Deputy Comptroller moves that all amendments approved by the Committee of the Whole, and submitted to the Board of Estimate and Apportionment be approved en bloc by one vote. Is a separate vote requested by any member? Pres. Lyons': That means all the changes. Mayor: Allen bloc and one vote. Act. Pres. Halleran: The complete budget. Mayor: All the amendments that you made in committee. Call the roll.” The use of the words “ Committee of the Whole ” and “ committee ” was an unintentional error for the “ Board in Executive Session.” The fact that the presentation, consideration and approval of the amendments made in the tentative budget had originally occurred at an executive session of the board does not affect the validity of the resolution of October 20. Section 226-c of the Greater New York Charter, as amended by Local Law No. 11 of the year 1933, provides that “ the board shall meet in executive session and consider such budget.” At the meetings prior to October 20 the amendments had been originally presented. The purpose of the requirement of twelve votes in favor of a resolution passed at the same meeting at which it is originally presented is to prevent hasty action and to provide for adequate consideration. The amendments effected by the resolution of October 20 having been presented and considered at previous meetings, the object of section 226-a has been accomplished. Neither does the fact that the evidence fails to demonstrate that the action of the Board in executive session was reflected in the rigid form of language containing the precise word “ resolution ” or be it resolved ” constitute a violation of that part of section 226-a which provides: “Except as otherwise specifically provided, every act of the board of estimate and apportionment shall be by resolution.” There is substantial compliance with the statute when a motion is made and carried and entered upon the minutes.

The conclusion follows that the budget adopted prior to December 25, 1937, is valid as the budget for the year 1938.

A point raised by appellants in their brief is, we think, not properly presented by this record. They argue that, assuming that salaries were lawfully fixed in the budget of October, 1937, they were validly reduced on January 3, 1938, under section 68 of the new charter, and that under this section the Board of Estimate, even after the adoption of a budget, possesses the power to reduce salaries paid from the city treasury. This is the language of section 68: The board of estimate may at any time, subject to the provisions of this charter and of the civil service law and except as otherwise provided by statute, create, abolish or modify positions and grades of persons paid from the city treasury.” Assuming such a power to exist, and on this record we express no opinion at present, the resolution adopted by the Board of Estimate on January 3, 1938, was not adopted in pursuance of section 68 of the new charter. The language of this resolution demonstrates that, instead of exercising any such power as may be conferred by that section, the Board attempted, pursuant to section 226 of the Greater New York Charter and section 952 of the New York City Charter (effective January 1, 1938), to adopt, as the proposed budget for 1938, the tentative budget as adopted October 6, 1937. We think, therefore, that the effect of section 68 of the new charter is not before us.

The order should be affirmed, without costs.

Finch, J.

(dissenting). Assuming, as held in the opinion of Judge O’Brien, that the budget adopted prior to December 25, 1937, is a valid budget, I am unable to agree that that disposes of this appeal or disposes of what has been the issue between the parties ever since the 19th day of October, 1937. On that day, at a meeting of the Board of Estimate in executive session, by a majority vote, the salary of petitioner and of many others was raised. This involved a salary increase of over $800,000. The Mayor of the city duly moved to strike out these increases, the motion was lost, and thereafter the various steps necessary in the making of the budget were taken from time to time over the objection of the Mayor, by the same majority vote. This same issue of the increase of these salaries came before a meeting of the Board of Estimate on January 3, 1938. At that meeting the Mayor offered a resolution reducing these salaries to the amount originally fixed in the tentative budget. This resolution was entitled Establishment of Positions and Fixation of Salaries,” and reduced the salary to that in the tentative budget of every person affected by this controversy. It is true that at the same meeting of the Board of Estimate on January 3, 1938, resolutions were likewise passed adopting the tentative budget of October 6, 1937, as the final budget for 1938. Even if it is held that the vote adopting the budget on January 3, 1938, was ineffective for the reason that the budget adopted prior to December 25, 1937, was the budget for the year 1938,1 am still unable to see why the resolution reducing these salaries is not valid if the city of New York has the power under the new charter to reduce at any time a salary paid out of the city treasury.

Let us see whether the city of New York was given such power under the new charter. Under the Greater New York Charter, now called the old charter, the Board of Estimate had the power (with certain exceptions not here material) to fix the salary of every person whose compensation was paid from the city treasury (Greater New York Charter, § 56). This power has been continued in section 67 of the new charter. Whether under the old charter this power to fix salaries could be exercised only in connection with the adoption of a new budget (Cf. Thoma v. City of New York, 263 N. Y. 402; Buckbee v. Board of Education, 115 App. Div. 366; affd., 187 N. Y. 544; Sauerbrunn v. Board of Education, 150 App. Div. 407; affd., 208 N. Y. 550), it is unnecessary for us to consider for the reason that under the new charter power has been given to the city to reduce the salary of any person at any time (with certain exceptions not here material). Such is the express language:

“ Creating, abolishing or modifying positions and grades. § 68. The board of estimate may at any time, subject to the provisions of this charter and of the civil service law and except as otherwise provided by statute, create, abolish or modify positions and grades of persons paid from the city treasury.”

In addition to the power to create and abolish positions, the city is given the power to modify, which necessarily includes change or modification of salaries. Such power to reduce salaries at any time, and unconnected with the making of a budget, was given by the State Legislature to the city in the emergency of the 1929 depression. Section 68 of the new charter merely eliminates the necessity of the city applying to the Legislature for an enabling act. It is reasonable and natural for the city to possess such power to accompany the responsibility to provide the funds necessary to run the city and maintain its financial stability. Not only has the city the power to regulate salaries at any time (provided the total amount of the budget is not exceeded), but it may even transfer appropriations at any time during the fiscal year. (New Charter, § 127.)

The power of the city to act under section 68 of the new charter has been raised at Special Term and in the briefs upon appeal, and should now be considered.

The order appealed from should be reversed and the petition dismissed.

Crane, Ch. J., Lehman, Loughran and Bippet, JJ., concur with O’Brien, J.; Finch, J., dissents in opinion; Hubbs, J., taking no part.

Order affirmed.


author: Crane, Ch. J.

text:
    Vanton Corporation, Respondent, v. New York Rapid Transit Corporation, Appellant.
    Argued January 3, 1938;
    decided March 8, 1938.

      Trabue Carswell and George D. Yeomans for appellant.
    The plaintiff’s motion to strike out the first affirmative defense was properly denied by Special Term, and the Appellate Division erred in modifying the order of Special Term by striking out said affirmative defense. (Story v. N. Y. El. Ry. Co., 90 N. Y. 122; Lahr v. Met. El. Ry. Co., 104 N. Y. 268; New York Nat. Exchange

      Bank v. Met. El. Ry. Co., 108 N. Y. 660; Abendroth v. Man. Ry. Co., 122 N. Y. 1; Kane v. N. Y. El. R. R. Co., 125 N. Y. 164; Wiswall v. Sampson, 14 How. [U. S.] 52; Pennsylvania Steel Co. v. N. F. C. Ry. Co., 161 Fed. Rep. 786; Pine Lake Iron Co. v. Lafayette Car Works, 53 Fed. Rep. 853; Staten Island M. R. R. Co. v. Hinchliffe, 170 N. Y. 473; Weis v. West, 235 App. Div. 766.) The plaintiff’s motion to strike out the fifth affirmative defense was properly denied by Special Term, and the Appellate Division erred in modifying the order of Special Term by striking out said affirmative defense. (White v. Man. Ry. Co., 139 N. Y. 19; Heimburg v. Man. Ry. Co., 162 N. Y. 352; Ward v. Met. El. Ry. Co., 152 N. Y. 43; Conabeer v. N. Y. C. & H. R. R. R. Co., 156 N. Y. 474; Drucker v. Man. Ry. Co., 213 N. Y. 543; Van Cortlandt v. N. Y. C. R. R. Co., 265 N. Y. 249; Klin Co. v. N. Y. R. T. Corp., 271 N. Y. 376; Mackall v. Casilear, 137 U. S. 556; City of N. Y. v. N. Y. C. R. R. Co., 275 N. Y. 287; O’Reilly v. N. Y. El. R. R. Co., 148 N. Y. 347; Murdock v. P. P. & C. I. R. R. Co., 73 N. Y. 579; Williams v. N. Y. C. R. R. Co., 16 N. Y. 111; Herzog v. N. Y. El. R. R. Co., 78 Hun, 486; 151 N. Y. 665.) The plaintiff’s alleged cause of action is barred either by the ten or the fifteen-year Statute of Limitations, and, therefore, it was error to strike out the third and fourth affirmative defenses. (Atlantic Dock Co. v. Leavitt, 54 N. Y. 35; Logan v. United Interests, Inc., 236 N. Y. 194; Rhinelander v. Farmers Loan & Trust Co., 172 N. Y. 519; White v. Man. Ry. Co., 139 N. Y. 19; Heimburg v. Man. Ry. Co., 162 N. Y. 352; Cox v. City of New York, 265 N. Y. 411; Ford v. Clendenin, 215 N. Y. 10; Paige v. Schenectady Ry. Co., 178 N. Y. 102; White v. M. Ry. Co., 139 N. Y. 19; Conabeer v. N. Y. C. & H. R. R. R. Co., 156 N. Y. 474; Klin Co. v. N. Y. R. T. Corp., 271 N. Y. 376.) The plaintiff cannot maintain the action because the court has not jurisdiction of the subject of the action and the amended complaint does not state facts sufficient to constitute a cause of action. (Baxter
      v. McDonnell, 154 N. Y. 432; Matthews v. Matthews, 133 N. Y. 679; Green v. Stewart, 19 App. Div. 201; Gaines v. Miller, 111 U. S. 395; O'Reilly v. N. Y. El. R. R. Co., 148 N. Y. 347; Murdock v. P. P. & C. I. R. R. Co., 73 N. Y. 579; Williams v. N. Y. C. R. R. Co., 16 N. Y. 111; Herzog v. N. Y. El. R. R. Co., 76 Hun, 486; 151 N. Y. 665; Henderson v. N. Y. C. R. R. Co., 78 N. Y. 423; McGean v. Met. E. R. Co., 133 N. Y. 9; Berry v. N. Y. Municipal Ry. Co., 111 Misc. Rep. 432; 196 App. Div. 900; English v. Brennan, 60 N. Y. 609; Whites Bank v. Nichols, 64 N. Y. 65; Trowbridge v. Ehrich, 191 N. Y. 361.) Any cause of action reserved to the maker of the consent set out in the complaint has been barred by the six-year Statute of Limitations, and it was, therefore, error to strike out the second affirmative defense. (Sommer v. N. Y. El. Ry. Co., 60 Hun, 148; Siefke v. Man. El. R. Co., 14 N. Y. Supp. 763.)

      William C. Chanler, Corporation Counsel (Paxton Blair and Oren Clive Herwitz of counsel), for city of New York, amicus curise.

    The proviso in the consent that the right to compensation shall be unaffected requires the application of the fifteen-year statute. Otherwise the consent would effect an unintended augmentation of the landowner’s rights. (White v. Manhattan Railway Co., 139 N. Y. 19; Klin Co. v. N. Y. Rapid Transit Corp., 271 N. Y. 376.)

      Frank R. Rubel and Arthur J. W. Hilly for respondent-
    The affirmative defenses contained in the answer are insufficient in law to constitute defenses to the cause of action alleged in the amended complaint. (Kornder v. Kings County El. Ry. Co., 41 App. Div. 357; Bon v. Kings County El. Ry. Co., 46 App. Div. 626; Kingsland v. Kings County El. Ry. Co., 83 Hun, 151; Pappenheim v. M. E. R. Co., 128 N. Y. 436; Kane v. N. Y. El. R. R. Co., 125 N. Y. 164; Galway v. M. E. R. Co., 128 N. Y. 132; Abendroth v. Manhattan Ry. Co., 122 N. Y. 1; Lahr v. Met. El. Ry. Co., 104 N. Y. 268; Story v. N. Y. El.

      R. R. Co., 90 N. Y. 122; Sperb v. Metropolitan El. Ry. Co., 137 N. Y. 155; Hinkley v. State, 234 N. Y. 309; Lewis v. New York & Harlem R. R. Co., 162 N. Y. 202; Felberose Hldg. Corp. v. N. Y. R. T. Co., 244 App. Div. 427.)
   Crane, Ch. J.

The New York Municipal Railway Corporation and its lessee, the New York Consolidated Railroad Company, having procured all necessary consents and the approval of the Public Service Commission, commenced the construction of an elevated railroad in Jamaica avenue, Queens county, and in front of the premises now owned by the plaintiff. The road was completed and in operation by July 3,1918. The owners of the adjoining property at that time were the Stuyvesant Real Estate Company and the Long Island Railroad Company. They gave consents in writing to the erection of the elevated, reserving, however, rights stated thus:

The giving of this consent, however, shall not be construed to affect any right of the undersigned to compensation for damage actually done or resulting by reason of the construction, maintenance and operation of such elevated railway in front of the property of the undersigned, and the right to such compensation shall be left unaffected by this instrument.”

Through reorganization proceedings and final decree in the United States District Court for the Southern District of New York, all the property, franchises and rights of the above railroads were sold and conveyed on June 14, 1923,' to the defendant New York Rapid Transit Corporation.

On May 11, 1923, the plaintiff acquired by conveyance the property here in question on the southerly side of Jamaica avenue which now and since 1923 ” consists of a two-story and cellar brick and steel frame semi-fireproof building. The deed of conveyance included “ Together with all singular ways, passages, easements, rents, issues, profits and appurtenances thereunto belonging.” Past damages or compensation to previous owners apparently did not pass by this deed.

The plaintiff, the present owner, has brought this action perpetually to enjoin and restrain the defendant from maintaining and operating its said elevated railroad, asks that it be removed and that the damage which it has caused be assessed in a large sum. The prayer for relief is that which has been used in all similar cases.

In the brief plaintiff says: “It is frankly admitted by the respondent that it is entitled to no recovery for any of the damages that it has suffered prior to six years before the commencement of the action herein on July 30, 1935.”

The plaintiff has treated this case as one in trespass and as if the defendant were committing a continuing wrong to its property. It has cited as authorities Pappenheim v. Metropolitan El. Ry. Co. (128 N. Y. 436); Kane v. New York El. R. R. Co. (125 N. Y. 164), and other like cases back to Story v. New York El. R. R. Co. (90 N. Y. 122). The entry upon the property in these cases or the taking of the easements was a violation in the beginning of the owners’ rights, and as the user of them was unauthorized, the wrong or trespass continued as to all subsequent owners. Such is not the case here. The defendant’s entry was not unauthorized; the taking and use of the easements of light, air and access were legal as the then owners had given their consent to such taking. Thus the railroad has not committed a wrong, is not a trespasser, and is liable, if at all, according to the reservation in the written consent obtained in April, 1916, above quoted.

We have held in Klin Co. v. New York Rapid Transit Corp. (271 N. Y. 376) that an action to recover for damages to easements of light, air and access appurtenant to the premises of an adjoining owner was barred by the fifteen-year Statute of Limitations where the entry or taking was unlawful. The complaint in that case alleged that the maintenance and operation by the defendant of an elevated railroad structure in Jamaica avenue constituted a continuing trespass and nuisance, and thereby plaintiff’s interest and property in said premises had depreciated in value. Unreasonable indeed would it be to say that no Statute of Limitations applies where the entry or taking has been by and with consent of the owner.

Under such consent with the reservations as above contained, the right to compensation or damages accrues at the time of the entry or the taking. The railroad built the elevated on the written consent of the abutting owner. If easements of any value were taken or if damages were done the railroad was to pay, or, in the exact words of the instrument, “ this consent, however, shall not be construed to affect any right of the undersigned to compensation for damage actually done or resulting by reason of the construction, maintenance and operation of such elevated railway.” The right reserved is that of the undersigned, the then owners, and the damage to be paid is that resulting from the structure in the street and the operation of the trains on it. There was no continuing trespass or wrong as there was no unlawful entry or taking. The railroad took the easements, if any, and was obliged either with or without agreement to pay for them at the time of the taking. The damage accruing to the owner at the time the railroad was operated started the running of the Statute of Limitations. This damage, by the reservation, the company was obliged to pay.

As more than fifteen years have elapsed since the action could have been brought by the abutting owner to recover his damage, we need not consider the arguments made in behalf of the six and ten-year statutes. Argument has been made that the action was at law for damage by the then owner and that the six-year statute applied. (Kingsland v. Kings County El. Ry. Co., 83 Hun, 151.) Also that the usual ten-year statute for equitable actions was appropriate as the resort has been to equity for relief whether or not consents had been given. (Kornder v. Kings County El. Ry. Co., 41 App. Div. 357; Bon v. Kings County El. Ry. Co., 46 App. Div. 626.) In these cases the Statute of Limitations was not raised or considered.

As the above consent reserved all rights to the undersigned,” we think it also carried all appropriate remedies, which included the appeal to equity to assess the damage, as had been repeatedly done in this special class of litigation.

Should we go further and assimilate these reserved rights and remedies to cases where the roads had been built without consent we would still find this action barred by the fifteen-year period, as in the Klin Co. case above.

For the reasons here stated the orders below striking out the defenses of the Statute of Limitations should be reversed, the motion denied, with costs in all courts, and the question certified answered in the negative.

Lehman, O’Brien, Loughran, Finch and Rippey, JJ., concur; Hubbs, J., taking no part.

Ordered accordingly.


author: O’Bbien, J.

text:
    The People of the State of New York ex rel. Sound Realty Company, Respondent, against George P. Nicholson, as Corporation Counsel of the City of New York, Defendant. Paul Windels, as Corporation Counsel of the City of New York, Appellant. The People of the State of New York ex rel. Isaac Lefkowitz, Respondent, against George P. Nicholson, as Corporation Counsel of the City of New York, Defendant. Paul Windels, as Corporation Counsel of the City of New York, Appellant.
    (Appeals Nos. 1, 2 and 3.)
    (Appeal No. 4.)

      Argued November 15, 1937;
    decided March 8, 1938.

      Paul Windels, Corporation Counsel (Paxton Blair, Lewis Or gel and Samuel K. Handel of counsel), for appellant.
    The testimony varying the minutes of the board of trustees of the village of South Mount Vernon ought to have been excluded. (Tumey v. Ohio, 273 U. S. 510; People ex rel. Burr v. Zeyst, 23 N. Y. 140; People ex rel. Regan v. York, 78 App. Div. 432; 174 N. Y. 533; Matter of Carlton Street, 16 Hun, 497; Matter of City of Buffalo, 78 N. Y. 362; Spalding v. City of Lebanon, 156 Ky. 37; Campbell v. Hackensack, 115 N. J. L. 209.) When inadmissible testimony is excluded, there is a total failure to show either an express or an implied dedication and acceptance of the streets in question. (Matter of City of New York [East 177th St.], 239 N. Y. 119; Matter of City of New York [Saratoga Ave.], 226 N. Y. 128; Nichols Copper Co. v. Connolly, 208 App. Div. 667; 240 N. Y. 596; People v. Underhill, 144 N. Y. 316; Stillman v. City of Olean, 228 N. Y. 322; Matter of Wallace Ave., 222 N. Y. 139; People v. Brooklyn & Queens Transit Corp., 273 N. Y. 394; Speir v. Town of New Utrecht, 121 N. Y. 420.)

      Bernard H. Arnold and Jean Nelson Penfield for respondents.
    It was no error to receive in evidence the oral testimony of trustees of the village of South Mount Vernon to identify documents, confirm and supplement the written minutes of the village. (Commonwealth v. Dill, 156 Mass. 266; People ex rel. Minard v. Donovan, 228 App. Div. 596; Fairchild v. Fairchild, 64 N. Y. 471; Clover Crest Stock Farms, Inc., v. N. Y. C. M. F. Ins. Co., 189 App. Div. 548; Reynolds v. Kelly, 1 Daly, 283; Culp v. City of New York, 146 App. Div. 326.) The testimony as to the offer of dedication and acceptance by the village of the streets amply supports the findings of fact and conclusions of law. (Cook v. Harris, 61 N. Y. 448.) No formal resolution adopting the map of the village of South Mount Vernon prepared by the surveyor, Burrowes, was necessary. No such formality was required of village trustees, and the fact of its acceptance was conclusively established by both documentary and paroi evidence. (Stockwell v. Dunckel, 174 App. Div. 481; Cook v. Harris, 61 N. Y. 448; Matter of Hunter, 163 N. Y. 547; 164 N. Y. 365; Mangam v. Village of Sing Sing, 26 App. Div. 464; Driggs v. Phillips, 103 N. Y. 77; People v. Fowler, 139 N. Y. 621; City of Cohoes v. Delaware & Hudson Canal Co., 134 N. Y. 397; Dreggs v. Phillips, 103 N. Y. 77.)
   O’Bbien, J.

Petitioners brought these mandamus proceedings to compel the Corporation Counsel of the city of New York to institute proceedings under chapter 1006 of the Laws of 1895 for the purpose of ascertaining damages due to the discontinuance and closing of Vernon Parkway East, Vernon Parkway North and Osman Place in the borough of the Bronx.

The issue of law is whether the admissible evidence is sufficient to support findings that these ways were ever dedicated and accepted as public streets. They were located on property known as South Vernon Park which was owned by a Mr. Cranford and he regulated, graded and macadamized them. Prior to the annexation of this territory to the old city of New York in 1895, it was included within the village of South Mount Vernon in Westchester county. The name of the village had then been changed to village of Wakefield.

On July 8, 1890, the trustees of the village of South Mount Vernon had adopted a resolution calling for bids “ for the surveying and grading of all the streets and avenues of South Mount Vernon * * * with the exception of the Eingsbridge Road,” and on July 14, 1890, they adopted a resolution awarding to Richard W. Burrowes the contract for such surveying and grading, the work to be done under the personal supervision of the committee on streets and sidewalks. In conformity with this resolution, Burrowes prepared the map of the village, was paid for it by the village and upon it appears these three streets as well as the other streets within the boundaries of the Cranford property. Although there is no formal resolution directing the filing of this map with the village clerk, there is oral evidence that, after the village had paid the surveyor, it was delivered into the possession of the clerk and used by him. This oral evidence does not contradict anything in the official minutes and we think that it was admissible. Upon this map appears the legend, “ Village of South Mount Vernon, R. W. Burrowes C. E. January 1891.” There is documentary evidence that, prior to annexation to the city of New York, the trustees of the village caused additional water hydrants and lights to be installed on several of the streets included within the Cranford property, thus recognizing the streets included within that area and appearing upon the official village map prepared by Burrowes as part of the public street system. Such recognition of those particular streets must be deemed to apply to all the streets in that area which appear upon the village map. All or none were accepted as public streets. After annexation of the village to the city of New York, men employed by the city cleaned Osman Place, Vernon Parkway East and Vernon Parkway North, the three streets involved in this litigation and worked on and repaired many of the streets included within the map of the Cranford property. Prior and subsequent to annexation, Osman Place, Vernon Parkway East and Vernon Parkway North were used by the public for vehicular and pedestrial traffic. In People v. Underhill (144 N. Y. 316) there was no user; in Matter of Wallace Avenue (222 N. Y. 139) the private way never appeared upon an official map; in Johnson v. City of Niagara Falls (230 N. Y. 77) the map was made and filed by the owner and not through the act of the municipal authorities.

The orders should be affirmed, with costs.

Grane, Ch. J., Lehman, Hubbs, Loughban, Finch and Rippey, JJ., concur.

Orders affirmed.


author: Loughran, J. O’Brien, J.

text:
    In the Matter of the Will of James O. Trybom, Deceased. Dorothy M. Hannigan, Appellant; Henrietta J. Trybom, as Executrix of James O. Trybom, Deceased, Respondent.
    Argued January 3, 1938;
    decided March 8, 1938.

      Charles Lamb and Benjamin Zwick for appellant.
    The gift to appellant under the will was absolute. (Thornhill v. Hall, 2 Cl. & P. 22; Bligh [N. S.] 88; Tillman v. Ogren, 227 N. Y. 495; Banzer v. Banzer, 156 N. Y. 429; Clarke v. Leupp, 88 N. Y. 228; Lamb v. Eames, 10 Eq. Cas. 267;
      Matter of Barney, 207 App. Div. 25; 239 N. Y. 584; Matter of Arrowsmith, 162 App. Div. 623; 213 N. Y. 704; Matter of Hayes, 263 N. Y. 219; Salter v. Drowne, 205 N. Y. 204; Robinson v. Martin, 200 N. Y. 159; Wright v. Wright, 118 N. Y. Supp. 994; 140 App. Div. 634; Wood v. Duff-Gordon, 222 N. Y. 88.) The phrase, “ in consideration of services to be rendered in the probate of this my Last Will and Testament,” is equivocal and ambiguous and rendered the entire concluding clause indefinite and uncertain. (Wells v. Wood, 4 L. T. [N. S.] 768; Pershall v. Elliott, 249 N. Y. 183; Crain v. Wright, 114 N. Y. 307; Martin v. Martin, 131 Mass. 547; McCarty v. Fish, 87 Mich. 48; Matter of Raab, 42 App. Div. 141; Livingston v. Ward, 247 N. Y. 97; Matter of Barney, 207 App. Div. 25; 239 N. Y. 584; Cunningham v. Parker, 146 N. Y. 29; Matter of Arrowsmith, 162 App. Div. 623; 213 N. Y. 704; Freer v. Glen Springs Sanitarium Co., 131 App. Div. 352; 198 N. Y. 575.) The bequest cannot be nullified by the refusal of the executrix to avail herself of appellant’s assistance. (Matter of Horton, 217 N. Y. 363; Matter of Cornell, 149 Misc. Rep. 553; Matter of Smith, 154 Misc. Rep. 53; Matter of Lasak, 131 N. Y. 624; Dodd v. Anderson, 197 N. Y. 466; Foster & Tyler v. Foster, 7 Paige, 48; Scofield v. St. John, 65 How. 292; Livingston v. Gordon, 84 N. Y. 136; Hogan v. Curtin, 88 N. Y. 162; Oliver v. Wells, 254 N. Y. 451.)

      David C. Broderick and Solomon Silverstein for respondent.
    A testator cannot legally bind his executor to employ an attorney of testator’s own choosing. (Matter of Caldwell, 188 N. Y. 115; Hughes v. Hiscox, 105 Misc. Rep. 521; 110 Misc. Rep. 141.) The bequest to the beneficiary was in consideration of services to be performed which according to the acts of the executrix and pursuant to law cannot be performed. (Matter of Caldwell, 188 N. Y. 115; Matter of Wallach, 164 App. Div. 600; 215 N. Y. 622; Oliver v. Wells, 254 N. Y. 451; Matter of Phelps, 133 Misc. Rep. 450; Hughes v. Hiscox,
      110 Misc. Rep. 141; Matter of Shea, 106 Misc. Rep. 222; Matter of Thompson, 304 Penn St. 349; Robinson v. Wheelwright, 43 Eng. Reprint, 1342.)
   Loughran, J.

This is a proceeding for the construction of a will.

The testator, James O. Trybom, died in March, 1936, survived by bis wife and two minor children. He was a member of the bar. The appellant Dorothy M. Hannigan is an attorney at law who was associated with him in his practice.

His will, dated January 2, 1936, makes but two dis-positive provisions. By one he gives his residuary estate to his wife, who is named executrix. The other provision is the subject of this proceeding. It reads as follows: I do hereby give, devise and bequeath to my associate, Dorothy M. Hannigan, all of my office furniture, and all of my interest in the library at my office at 51 Chambers Street, New York City, that being a one-half interest and a one-half interest in all the pending legal matters in consideration of the services to be rendered in the probate of this my last Will and Testament.”

At the suggestion of the Surrogate, Miss Hannigan made a written offer to serve as attorney for the estate. This tender was refused by the executrix. A decree followed declaring that the conditional bequest was void. The consideration fails,” said the Surrogate, and, consequently, the gift falls with it.” The Appellate Division affirmed. We think this result missed the intention of the testator.

He did not try to say that the executrix was at all events to have Miss Hannigan as attorney for the estate. It cannot reasonably be supposed that services to be rendered in the probate ” of this simple will was in his mind an object of first importance. There is no gift over of the conditional bequest. The primary idea behind it appears to us to have been the expectation of the testator that his law practice could be wound up without changing hands. Half the return was to be a reward to his office associate. The other half would fall into his residuary estate.

Taking that to have been the testamentary purpose, it does not matter whether the incidental condition annexed to the bequest to Miss Hannigan was in form precedent or subsequent. Performance on her part was tendered and refused. We can find no satisfactory basis for a presumption that this situation was intended by the testator to spell a forfeiture of the gift. (See Livingston v. Gordon, 84 N. Y. 136; Cunningham v. Parker, 146 N. Y. 29; 18 Am. & Eng. Ency. of Law, p. 734; 2 Page on The Law of Wills, § 1133.)

The order of the Appellate Division and the decree of the Surrogate’s Court should be reversed, with costs to the appellant payable out of the estate, and the matter remitted to the Surrogate’s Court for further proceedings in accordance with this opinion.

O’Brien, J.

(dissenting). I agree with the Surrogate and the unanimous Appellate Division.

This testator was an attorney, especially experienced in the law relating to decedents’ estates. His will, simple and concise, is notably free from verbiage. B his purpose was to make an absolute gift to appellant, without proviso or condition, this will demonstrates that he possessed the skill to express it by the omission of all unnecessary words. When he made the gift “in consideration of the services to be rendered in the probate of this my last Will and Testament,” he employed no ambiguous phrase. He must have meant what he said. The language indicates in the clearest terms his expectation that appellant would render services and that, as compensation for such services, she should receive the bequest. Here is an instance where the language of the will must be deemed “ to support an inference that the estate was intended to depend upon performance of the condition.” (Cunningham v. Parker, 146 N. Y. 29, 33.) The inference must be drawn that this testator expected his estate to. receive a quid pro quo and that in consideration of this gift, his estate would be otherwise free from expenses in the probation of his will. He definitely-specified the consideration. His intent must be inferred from his accurate language and the courts below were, in my opinion, entirely justified in refusing to stray beyond the terms of the will or to indulge in speculation regarding some possible purpose (at variance with the testator’s expression of intent. When appellant, unfortunately for her, was not allowed by the executrix to render services in the probate of the will, the consideration' failed and so did the conditional gift.

Crane, Ch. J., Lehman, Finch and Rippey, JJ., concur with Loughran, J.; O’Brien, J., dissents in opinion; Hubbs, J., taking no part.

Ordered accordingly.


author: Loughran, J.

text:
    Central New York Coach Lines, Inc., Appellant, v. Syracuse Herald Company, Respondent.

      Argued January 4, 1938;
    decided March 8, 1938.

      Charles E. Spencer for appellant.
    The former action was prosecuted solely for the purpose of recovering damages for the benefit of the surviving next of kin of the deceased under section 130 of the Decedent Estate Law (Cons. Laws, ch. 13) under letters of administration issued for that purpose and expressly limited and restricted to the prosecution of an action or actions authorized by special provisión of law. (Martin v. Dry Dock E. Bway. & B. R. R. Co., 92 N. Y. 70.) In the prosecution of the action under section 130 of the Decedent Estate Law under limited letters, the plaintiff was not representing the estate of the deceased and was not chargeable with the debts or liabilities of said estate. The court could not properly adjudicate upon the purported counterclaim as no party representing the estate of the deceased was before the court. (Hamilton v. Erie R. R. Co., 219 N. Y. 343; Cohen v. L. I. R. R. Co., 154 App. Div. 603; Kwiatkowski v. Lowry, Inc., 248 App. Div. 459; Matter of Meekin v. Brooklyn Heights R. R. Co., 164 N. Y. 145; Kirwin v. Malone, 45 App. Div. 93.) The judgment entered in the former action does not purport to adjudicate as to, the counterclaim and, therefore, cannot constitute a bar to this action. (MacAffer v. Boston & Maine R. R. Co., 242 App. Div. 136; Denike v. Denike, 44 App. Div. 621; 167 N. Y. 585; Lorillard v. Clyde, 99 N. Y. 196; Webb v. Buckelew, 82 N. Y. 555; DeForest v. Andrews, 27 Misc. Rep. 145; Masten v. Olcott, 101 N. Y. 152.)

      William F. Fitzpatrick for respondent.
    The judgment in the former action is res adjudicóla and is a bar to the present action. (Bigelow v. Dominion Copper Co., 225 U. S. 111; Wolf v. Kenyon, 242 App. Div. 116; U. S. Fire Ins. Co. v. Adirondack P. & L. Corp., 206 App. Div. 584; Haverill v. International Ry. Co., 217 App. Div. 521; 244 N. Y. 592; Pangburn v. Buick Motor Co., 211 N. Y. 228; Byrne v. Hasher, 249 App. Div. 651; 275 N. Y. 474; Good Health Dairy Products Corp. v. Emery, 275 N. Y. 14.) Plaintiff herein has had its day in court and has had one full, fair trial upon all the issues raised in its present action. (Anderson v. Illinois Surety Co., 157 App. Div. 691; Hatch v. Attrill, 118 N. Y. 383.) The conduct of the plaintiff herein in the former action was such as to estop the bringing of the present action. (Houghton v. Thomas, 220 App. Div. 415; 248 N. Y. 523; Matthews v. Truax, Carsley & Co., 265 N. Y. 8.) The letters of administration issued on the estate of the deceased were general letters of administration except as to the action for the wrongful death. (Matter of Malloy, 1 Dem. 421; Kirwin v. Malone, 45 App. Div. 93; Matter of Atterbury, 222 N. Y. 355; Matter of Ehret, 158 Misc. Rep. 308; 247 App. Div. 456.)
   Loughran, J.

For convenience we abbreviate the names of the parties. The Coach Corporation is plaintiff. The Herald Company is defendant.

While driving an automobile for the Herald Company, Arthur Grady lost his life when the vehicle collided with a motor bus of the Coach Corporation. Administration of his estate was granted to William H. Grady by letters “ limited to the prosecution of such action or actions as you, the said administrator, may be entitled to prosecute by special provision of law.”

The administrator sued the Coach Corporation to recover damages for"Arthur Grady’s death. A counterclaim interposed by the Coach Corporation demanded affirmative judgment for damages to its bus alleged to have been caused by negligence of Arthur Grady on the occasion of the collision in which he was killed. A reply traversed the allegations of the counterclaim. The final judgment entered in that action recites that the issues were tried before the court and a jury and that the jury duly rendered its verdict of no cause of action in favor of the defendant.” It was thereby Adjudged that the defendant have judgment of no cause of action upon the issues herein and that defendant recover of the plaintiff the sum of $97.07 costs as taxed and that the defendant have execution therefor.” This determination is therein stated to have been made upon the motion of the then defendant Coach Corporation.

The ^present action by the Coach Corporation against the Herald Company (the employer of the decedent Arthur Grady) is based upon the facts that were pleaded by the Coach Corporation as its counterclaim in the death action prosecuted against it by Arthur Grady’s administrator. Whether the determination of that action is here res judicata is the question now to be decided.

The limited letters issued to Arthur Grady’s administrator restricted his authority to the prosecution of the statutory action to recover damages for a wrongful act, neglect or default by which the decedent’s death was caused. (Surrogate’s Court Act, § 122.) It was this statutory action that was brought against the Coach Corporation. Though pro forma the administrator was the necessary party plaintiff, the cause of action was not a general asset of Arthur Grady’s estate. Had there been a recovery, the proceeds would have been a special fund subject only to a trust for the sole benefit of the statutory distributees. (Davis v. N. Y. C. & H. R. R. R. Co., 233 N. Y. 242, 246.)

This phase of the record was clearly interpreted at the Special Term. In the careful opinion there written, the court said: ‘1 The defendant herein [the Herald Company] and the administrator of Arthur Grady limited solely to the prosecution of an action pursuant to section 130 of the Decedent Estate Law are not in privity.” Accordingly the Special Term judge held that the judgment in the action against the Coach Corporation for Arthur Grady’s death does not preclude the liability of the Herald Company to the Coach Corporation in the present action. The Appellate Division reversed.

The result reached by the Special Term is in keeping with the main doctrine that estoppels must be mutual. (Stone v. State, 138 N. Y. 124; Downey v. Seib, 185 N. Y. 427.) More than that: The action for Arthur Grady’s death having been brought by his administrator for the sole benefit of the statutory beneficiaries, no claim of the Coach Corporation against the general estate of the decedent tended to diminish or defeat the plaintiff’s recovery.” The counterclaim there attempted to be set up by the Coach Corporation was thus invalid in itself. (Cf. Civ. Prac. Act, § 266, as since recast by Laws of 1936, ch. 324.) Hence the judgment in that action should be taken to have determined only that the plaintiff-administrator failed to establish his own case. (See Beebe v. Bull, 12 Wend. 504; Masten v. Olcott, 101 N. Y. 152, 160.)

The judgment of the Appellate Division should be reversed and the order of the Special Term affirmed, with costs to the appellant Central New York Coach Lines, Inc., in this court and in the Appellate Division.

Crane, Ch. J., Lehman, O’Brien, Finch and Rippey, JJ., concur; Hubbs, J., taking no part.

Judgment accordingly.


text:
    The People of the State of New York ex rel. Slaughter W. Huff et al., as Receivers of the Property of New York and Queens County Railway Company, Respondents, against Mark Graves et al., Constituting the State Tax Commission, Appellants.

      Argued January 4, 1938;
    decided March 8, 1938.

      John J. Bennett, Jr., Attorney-General (Edward J. Grogan, Jr., Henry Epstein and Timothy F. Cohan of counsel), for appellants.
    The provisions of section 45-a of the Tax Law (Cons. Laws, ch. 60) with respect to the service of complaints upon the State Tax Commission are mandatory and not directory. (People ex rel. Soeurbee, Inc., v. Purdy, 179 App. Div. 748; People ex rel. Chambers v. Wells, 110 App. Div. 336; People ex rel. Horton v. Ferguson, 120 App. Div. 563; People ex rel. Mutual Union Tel. Co. v. Commissioners of Taxes, 99 N. Y. 254; People ex rel. Wessell, Nickel & G. v. Craig, 236 N. Y. 100; People ex rel. Erie R. R. Co. v. State Tax Comm., 128 Misc. Rep. 142; People ex rel. N. Y. C. R. R. Co. v. Graves, 159 Misc. Rep. 458.)

      Addison B. Scoville and Alfred T. Davison for respondents.
    The complaint of the relators objecting to the valuation was served upon the State Tax Commission in due time. (Matter of Cathedral of Incarnation, 91 App. Div. 543; Rose v. Elliott, 218 App. Div. 287.) The facts that a substantial compliance with a statutory requirement will serve the purpose of the statute and that no one will be prejudiced by the failure strictly to comply with such statutory requirement are material factors in determining that the requirement is directory and not mandatory. (People ex rel. Lyon Co. v. McDonough, 173 N. Y. 181; People v. Karr, 240 N. Y. 348.)
   Crane, Ch. J.

The relators instituted- a certiorari proceeding for the purpose of reviewing the special franchise assessment of the New York & Queens County Railway Company in the borough of Queens for the year 1936. The relators are the receivers of the property of the New York & Queens County Railway Company, which is subject to the lien of the mortgage originally made by the Steinway Railway Company of Long Island City, and they maintain and operate a street surface railroad covered by such mortgage.

The State Tax Commission, on or about October 21, 1935, sent a notice to the relators of a tentative special franchise valuation and tentative rate of classification against the street railroad so operated in the borough of Queens, city of New York, which notice stated that the State Tax Commission would meet at its office in the city of Albany on the 26th day of November, 1935, to hear and determine any complaint concerning such valuation and rate of classification; and stating that, in case of objection, a written protest must be verified and filed at least fifteen days before the date of hearing, as provided in section 45-a of the Tax Law (Cons. Laws, ch. 60).

This provision of the Tax Law, so far as applicable, reads as follows:

" E any person, copartnership, association or corporation whose special franchise is assessed or if any city, town or village in which a special franchise is subject to assessment proposes to complain at the hearing concerning the full valuation or rate of equalization as fixed in such statement, such person, copartnership, corporation or association or such city, town or village shall cause a written complaint specifying its objections, to be served on the tax commission at least fifteen days before the day fixed for the hearing. Service may be either in person or by mail. Section twenty-seven of this chapter applies so far as practicable to a hearing by the tax commission under this section.”

On November 12, 1935, fourteen days before said hearing, the relators mailed to the State Tax Commission their verified complaint against this assessment, which written complaint was received on November 13th, so that it was physically in possession of the State Tax Commission for thirteen days before the date fixed and specified according to statute. Thereafter the Commission finally fixed and determined the assessment of such special franchise at the sum of $294,800, the amount of its original tentative assessment, whereupon the relators applied for and obtained an order for a writ of certiorari, which was dismissed by the Special Term on the ground that the objections had not been served within the time required by the above section. The Appellate Division took another view and reversed this order of the Special Term, holding that the length of time referred to in section 45-a was merely directory, and, as no harm had been done through delay in presenting the complaint, the error or omission might be overlooked. In other words, the court held that, as the taxpayer was entitled to a hearing on his assessment, it might determine what was a reasonable opportunity within which to present his complaint. The court, in its opinion, summarized its views in these words:

“ The provisions of the statute relative to grievance day and the making and hearing of complaints are procedural designed to effectuate the fundamental right of the taxpayer to a hearing, and the length of notice to be given by the complaining taxpayer is a matter of convenience rather than of substance. Hence, in the line of authorities cited it seems clear that the provision in question is directory only and that the relators substantially complied with the statutory requirements.” (249 App. Div. 362, 365).

Our reading of the cases leads to a different conclusion than that just quoted. What may be considered at times by the court as “ directory” for official acts may not be so considered when applied to individuals, even though section 45-a also applies to municipal corporations. Public policy often requires that minor omissions and failures by officials shall not make void all their proceedings; otherwise government in some special feature might come to a standstill or result in confusion. This liberality of construction is not necessary when the duty to act rests upon the individual, as his omission and failure will apply only to himself and not bring confusion or damage to a whole community. We find in most of the cases cited (People v. Karr, 240 N. Y. 348; People ex rel. Lyon Co. v. McDonough, 173 N. Y. 181: Matter of Douglass, 46 N. Y. 42; Hardmann v. Bowen, 39 N. Y. 196, and Dutchess County Mut. Ins. Co. v. Van Wagonen, 132 N. Y. 398) that the omissions were those of officials.

Thus, in People v. Karr (supra), this court said:

And the fine between mandatory and directory statutes cannot be drawn with precision. General principles there may be. Perhaps as well as anywhere they are stated in Maxwell on the Interpretation of Statutes at page 649. * * * Where the prese iptions of the statute relate to the performance of a public duty; and to invalidate acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those intrusted with the duty, without promoting the essential aims of the Legislature, such prescriptions seem to be generally understood as mere instructions for the guidance and government of those on whom the duty is imposed, or, in other words, as directory only. The neglect of them may be penal, indeed, but it does not affect the validity of the act done in disregard of them ” (p. 351).

In the Lyon case we said of our authorities:

“ They do, however, sustain the proposition that, where a statute or ordinance requires the performance by public officers of a certain specified act, or that it shall be performed in a certain specified manner, they must at least substantially • comply with these requirements to render their acts valid. But such a statute or ordinance is not required to be literally performed in unessential particulars, where there has been a substantial compliance which answers the purpose or intent of the statutory requirements. If the statute is substantially complied with and its actual purpose secured, especially where it has been acted upon and a proper contract in pursuance of it has been entered into, such as the statute requires, an unimportant variance in the proposed bid does not render the contract invalid (p. 190).

In the Dutchess County Mut. Ins. Co. v. Van Wagonen case failure to state the place of business of an assignor for the benefit of creditors was held not to be fatal, although required by the statute; as the object of the law evidently was to identify the assignor and prevent his being confounded with others bearing the same name. The court said the identification of the assignor in this case could be determined by his signature to the assignment and the acknowledgment thereof before an officer specified in the statute. Consequently, the requirement of the statute was not mandatory, but directory, in this case, for the reason that the legislative intent was to be the guide in all such cases.

Perhaps it will be well to refer to other cases in order to ascertain to what extent the courts have gone in requiring strict compliance with statutes. In People ex rel. Lefever v. Board of Supervisors (34 N. Y. 268, p. 272) it was said: “ Statutes are held to be directory or declaratory, according to the existence or the want of certain indications of legislative intent.” Here, again, the case applied to public officers, for the opinion stated: “ The misconduct or mistake of a public officer, in a matter of mere form, should not prevent the attainment of right and justice ” (p. 274).

And Thomson v. Harris (88 Hun, 478, p. 481): The general rule is that statutory prescriptions in regard to the time, form and mode of proceeding by public functionaries are generally directory, as they are not of the essence of the thing to be done, but are given simply with a view to secure system, uniformity and dispatch in the conduct of public business.’ ”

In Wuesthoff v. Germania Life Ins. Co. (107 N. Y. 580, 589) the public officer feature was again emphasized, but the court gave this word of caution: “ The exercise by courts of a power to disregard a particular provision of a statute on the ground that it is directory merely, is a delicate one and should be applied with great caution. The intention of the Legislature is the cardinal consideration in the construction of statutes, and whether a particular provision is mandatory or directory is to be determined from the language used and the purpose in view.”

In 2 Sutherland on Statutory Construction ([2d ed.], pp. 1114 et seq.) we find it stated: “ Where the provision is in affirmative words, * * *, and it relates to the time or manner of doing the acts which constitute the chief purpose of the law, or those incidental or subsidiary thereto, by an official person, the provision has been usually treated as directory.”

From these authorities we find the rule to be that the intention of the Legislature, if it can be gathered from the contents of the act and the purposes in view, must be the guiding principle, and that where the omission or failure to perform a minor detail of a duty has been that of an official, the intention has been found to be that such duty was directory, not mandatory. As stated before, the public policy, for the convenience and necessity of government, has much to do in the finding of this intention.

Section 45-a of the Tax Law places upon the person or corporation assessed a duty to complain within the time stated. The relators here were notified that they must file their complaint not less than fifteen days before the time fixed for hearing, which was the 26th day of November, 1935. They failed to comply with the act. They were not public officials; they were not obliged to complain; no duty rested upon them to pay any attention to the notice of the Tax Commission. It was a matter of discretion. However, if they chose to act they were obliged to do it within a certain time. We can find no distinction between such cases and other acts of the Legislature requiring notices of claims to be presented to city officials within a certain time, or notices of intention to sue, which must be served upon corporation counsels under various city charter provisions, or other statutes of limitations within which actions must be brought or special proceedings started. Here is a time limitation, and the only excuse offered for not complying with it is that no one has been harmed. What particular harm failure to give notice could do to anybody, except the objector, is difficult to see. Once permit the courts to determine the materiality of omissions, or failure to comply with such a statute, and the time element has no application at all, for the fifteen days gives way completely to the rule of reasonable time, with all its uncertainty.

For the reasons here stated the order of the Appellate Division should be reversed and that of the Special Term affirmed, with costs in this court and in the Appellate Division, and the question certified answered in the affirmative.

Lehman, O’Bbien, Loughean, Finch and Rippey, JJ., concur; Hubbs, J., taking no part.

Ordered accordingly.


author: Finch, J. Loughban, J.

text:
    John S. Gellert, Respondent, v. Fairman R. Dick et al., Copartners, Trading as Dick and Merle-Smith, Appellants.
    Argued January 5, 1938; decided
    March 8, 1938.

      Harold S. Glendening and Fred J. Knauer for appellants.
    There is no consideration for the defendants’ alleged agreement as the only consideration alleged is past consideration. (Williston on Contracts, § 142; Pershall v. Elliott, 249 N. Y. 183; Fulton v. Varney, 117 App. Div. 572; Axelrad v. 77 Park Avenue Corp., 225 App. Div. 557; Fine v. Nehring Bros., Inc., 172 N. Y. Supp. 689; Christensen v. Petterson, 239 App. Div. 735; Perkins v. Smith, 83 App. Div. 630; Myers v. Dean, 11 Misc. Rep. 368; Warner & Co. v. Brua, 33 Ohio App. 84; Field v. Hamm, 150 N. E. Rep. 3; Dilweg v. Milwaukee Machine Tool Co., 182 N. W. Rep. 726; Shields v. Sterrat, 71 Atl. Rep. 1129; Sharp v. Hoopes, 64 Atl. Rep. 989; Cronin v. American Securities Co., 50 So. Rep. 915; Wulff v. Lindsay, 8 Ariz. 168; 196 U. S. 642.) There is no consideration for the defendants’ alleged agreement as the only consideration alleged is not a good and valuable consideration. (Walleston v. Fahnestock, 116 N. Y. Supp. 743; Soule v. Bon Ami Co., 201 App. Div. 794; 235 N. Y. 609; Costa v. Schetz, 175 N. Y. Supp. 476.)

      Seth V. Elting and Irving Mariash for respondent.
    The complaint alleges both a present consideration and performance. (Parsons v. Robinson, 27 J. & S. 546; 133 N. Y. 537; McLaughlin v. Barnard, 2 E. D. Smith, 372; White v. Drew, 56 How. Pr. 53; Drake v. Bell, 26 Misc. Rep. 237; 46 App. Div. 275; Miller v. Fischer, 142 App. Div. 172; Motley Green & Co. v. Elmenhorst, 142 App. Div. 830.) The consideration alleged is a good and valuable consideration. (Parsons v. Robinson, 27 J. & S. 546; 133 N. Y. 537; McLaughlin v. Barnard, 2 E. D. Smith, 372; White v. Drew, 56 How. Pr. 53.)
   Finch, J.

The validity of this complaint depends on whether the plaintiff has pleaded a valid consideration. The complaint alleges a special agreement between the parties and the existence of a custom and usage to the same effect, which was known to both parties and in contemplation of which they had the dealings involved. The position of the defendants is that only a past consideration was pleaded and that custom and usage can have no effect in overruling the doctrine that past consideration is inadequate in the absence of a prior request.

A reading of the complaint establishes that present' and not past consideration is alleged, and that, therefore, a valid and binding agreement is set forth. Paragraphs III and IV of the complaint allege performance by the plaintiff in that he discovered that certain bonds were available for sale and conveyed this information to the defendants. Paragraph V then states:

“ V. That it was agreed between the plaintiff and the defendants at the time of the conveying of said information * * * that in the event that said defendants * * * determined to purchase the said bonds * * * they would pay to the plaintiff a reasonable commission by reason and in consideration of the finding of the said bonds by plaintiff, and the conveying of the said information respecting said bonds by him to said defendants, said commission to be paid at the time of the purchase of the said bonds.”

The important words above are that the promise was made “ * * * at the time of the conveying of said information * * * and in consideration of * * * the conveying of the said information respecting said bonds by him to said defendants * * *.” This allegation, that performance and promise were contemporaneous, alleges present consideration. The allegation is not that the information was conveyed first and the agreement made subsequently. The bonds, it is true, had been found before this agreement was entered into, but this allegation may be treated as surplusage. The vital consideration was the conveying of the information as to their whereabouts. It is sufficient to make out a cause of action that a valid, present consideration, the giving of the information concerning the whereabouts of the bonds, is alleged.

We are only dealing with the allegations of the pleadings and not with what the proof may show at the trial.

The order should be affirmed, with costs, and the question certified answered in the affirmative.

Loughban, J.

(dissenting). The case is here upon this certified question: Does the complaint herein state facts sufficient to constitute a cause of action?

After describing the parties as brokers of securities with offices in the borough of Manhattan, city of New York, and as members of the New York Stock Exchange, the pleading alleges:

III. That on and prior to the 24th day of April, 1935, the plaintiff had found and acquired knowledge of the fact that certain New York City bonds bearing Four (4%) per cent interest, due in 1977, to the extent of Five Million ($5,000,000) Dollars face value, and certain New York City bonds bearing Four and one-quarter (4)4%) per cent interest, due in 1977, to the extent of One Million ($1,000,000) Dollars face value, or part thereof, were available for sale by the owner thereof at a reasonable price, and had been informed by the agents of the owner of said bonds that, in the event that a purchaser of said bonds or part thereof at a reasonable price were found, the owner of said bonds was prepared to sell the same or part thereof.

“ IV. That thereafter, and on or about the 25th day of April, 1935, the plaintiff informed the defendants of the availability of said bonds for purchase by them for their own account or for the account of otherflpersons at a reaonable price.

“ V. That it was agreed between the plaintiff and the defendants at the time of the conveying of said information to the defendants by the plaintiff, that in the event that said defendants themselves or together with others, for their own account and /or for the account of other persons, determined to purchase the said bonds or any part thereof at a reasonable price, they would pay to the plaintiff a reasonable commission by reason and in consideration of the finding of the said bonds by plaintiff, and the conveying of the said information respecting said bonds by him to said defendants, said commission to be paid at the time of the purchase of the said bonds.”

VII. Upon information and belief, that thereafter, and in and about the month of May, 1935, the said defendants, together with others, for their own account and/or for the account of other persons, purchased the said bonds from the owners thereof at a reasonable price.”

It is then alleged that such a reasonable commission was one-quarter of one per cent of the face amount of the bonds referred to and that payment thereof had been demanded and refused.

Plaintiff’s assertion that these allegations state a cause of action stretches back for support to the remark of the court in Parsons v. Robinson (27 J. & S. 546, 548; 133 N. Y. 537) that a past consideration, beneficial to the defendant, to which he afterwards assents, is sufficient to support an action.” This observation, however, was unnecessary to the decision of that case. The issue there was not one of pleading. It was proved by the suing party that his services had been requested, and the subsequent express promise could have been taken by the jury as an admission fixing the value which the other party by his antecedent request had actually though impliedly undertaken to pay. In that state of the record in the Parsons case, the fact of the recovery there is no precedent for the case in hand.

Here the question is whether the complaint is sufficient on its face. Neither in terms nor by necessary inference does the pleading allege the ultimate fact of a request by the defendants for the services of the plaintiff. (See Jacobs v. Monaton Realty Investment Corp., 212 N. Y. 48.) All that is really pleaded is a promise made in consideration of benefits theretofore rendered without a request by the promisors, express or implied. Such a promise is invalid. (Pershall v. Elliott, 249 N. Y. 183, 188; Lee v. Woodward, 259 N. Y. 149.)

The sixth paragraph of the complaint was omitted above. Its text is as follows:

“ VI. That at all the times hereinabove mentioned, a custom and usage existed among the brokers of stocks, bonds and other securities, in the Borough of Manhattan, City of New York, and among the members of the New York Stock Exchange, which was then known to the plaintiff and to the defendants, and in contemplation of which the plaintiff and the defendants had the dealings above mentioned, to the effect that a broker finding bonds and conveying the information above mentioned with respect thereto to another broker was entitled to a reasonable commission therefor, in cases where such other broker thereafter purchased the said bonds or any part thereof himself or together with others, for his own account and /or for the account of other persons.”

In respect of this allegation I need observe only that people are not at liberty so to establish for themselves what engagements shall be legal obligations. Though usage is often resorted to for explanation of commercial instruments, it never is, nor ought to be, received to contradict a settled rule of commercial law.” (Kent, Ch. J., in Frith v. Barker, 2 Johns. 327, 334, 335. See Corn Exchange Bank v. Nassau Bank, 91 N. Y. 74; 3 Williston on the Law of Contracts [Rev. ed.], § 655; American Law Institute, Restatement of Law of Contracts, § 249.)

The order should be reversed and the motion to dismiss the complaint granted, with costs in all courts. The question, certified should be answered in the negative.

Crane, Ch. J., O’Brien and Rippey, JJ., concur with Finch, J.; Loughran, J., dissents in opinion in which Lehman, J., concurs; Hubbs, J., taking no part.

Order affirmed, etc.