author: Lotjghran, J. Crajste, Ch. J.

text:
    New York Steam Corporation, Appellant, v. The City of New York, Respondent.

      (Argued May 23, 1935;
    decided July 11, 1935.)

      Henry L. Stimson, Chauncey B. Garver, Thomas H. Beardsley and Hamilton Hadley for appellant.
    Chapter 815 of the Laws of 1933 is invalid it is a special local law in its effect relating to the property, affairs or government of a specific city, and was not adopted in conformity with the provisions of section 2 of article XII of the New York Constitution. (People ex rel. Mason v. McClave, 99 N. Y. 83; People v. Ahearn, 196 N. Y. 221; Matter of Mayor [Elm St.], 246 N. Y. 72; Adler v. Deegan, 251 N. Y. 467.) The emergency in the city of New York, to meet which the act was enacted, was a fiscal emergency “ relating to the property, affairs or government ” of the city. It was essentially the kind of emergency which section 2 of article XII was designed to reach and protect. (People ex rel. Metropolitan St. Ry. Co. v. Tax Comm., 174 N. Y. 417; People ex rel. Town of Pelham v. Village of Pelham, 215 N. Y. 374; Matter of Zborowski, 68 N. Y. 88; Adler v. Deegan, 251 N. Y. 467; City of New York v. Village of Lawrence, 225 App. Div. 1; 250 N. Y. 429.) The construction of the Home Rule Amendment at the Trial Term disregards the express language of section 2 of article XII, frustrates the essential purpose of the Home Rule Amendment, and is at variance with the way in which the amendment has been construed by the Legislature and the courts. (Browne v. City of New York, 241 N. Y. 96.) The action of the Legislature in delegating its entire power of taxation was an unprecedented abdication of legislative authority and duty, and violated section 1 of article XII of the New York Constitution in that it delegated a power of taxation to the city of New York which was wholly unrestricted in character. (People v. Adirondack B. R. Co., 160 N. Y. 225; People v. Fitch, 148 N. Y. 71; People ex rel. Metropolitan St. Ry. Co. v. Tax Comm., 174 N. Y. 417; People ex rel. Town of Pel-ham v. Village of Pelham, 215 N. Y. 374; Bank of Rome v. Village of Rome, 18 N. Y. 38; Kelly v. Merry, 262 N. Y. 151.) The local law denies to the plaintiff the equal protection of the laws and deprives the plaintiff of its property without due process of law, in violation of section 1 of the Fourteenth Amendment of the Constitution of the United States. (Power Mfg. Co. v. Saunders, 274 U. S. 490; Quaker City Cab Co. v. Pennsylvania, 277 U. S. 389; Southern Ry. Co. v. Greene, 216 Ú. S. 400; Royster Guano Co. v. Virginia, 253 U. S. 412; Liggett Co. v. Lee, 288 U. S. 517; Northwestern Life Ins. Co. v. Wisconsin, 247 U. S. 132.) The local law unlawfully selects plaintiff to bear the burden of a special discriminatory and arbitrary tax when the purpose of the tax bears no special relation to plaintiff or its business. (Charlotte Railroad v. Gibbes, 142 U. S. 386; People ex rel. Jamaica Water Supply Co. v. Tax Comrs., 196 N. Y. 39.)

      Darius A. Marsh and George D. Yeomans for New York Rapid Transit Corporation et ah, amici curice.

    The Legislature has no power under the State Constitution to delegate to cities blanket authority to impose taxes by local city laws. (Matter óf Hermanee, 71 N. Y. 481; Burks v. Bosso, 180 N. Y. 341; Lantry v. Mede, 127 App. Div. 557; 194 N. Y. 544; State Board of Pharmacy v. Gasau, 195 N. Y. 197; Daly v. Haight, 170 App. Div. 469; 224 N. Y. 726; Matter of Holzworth, 166 App. Div. 150; 215 N. Y. 700; Matter of Robinson, 203 N. Y. 380; People ex rel. Bolton v. Albertson, 55 N. Y. 50; People v. Rathbone, 145 N. Y. 434; Newell v. People, 7 N. Y. 9; People ex rel. Griffin v. Mayor, 4 N. Y. 419; People v. Fitch, 148 N. Y. 71; People v. Adirondack Ry. Co., 160 N. Y. 225; People ex rel. Metropolitan St. Ry. v. Tax Comrs.. 174 N. Y. 417; Gautier v. Ditmar, 204 N. Y. 20.)
    respondent.
    The local law was properly adopted under the authority conferred by article XII of the State Constitution. (Adler v. Deegan, 251 N. Y. 467; Cleveland v. City of Watertown, 222 N. Y. 159; Matter of Mayor [Elm St.], 246 N. Y. 72; People ex rel. Outwater v. Greene, 56 N. Y. 466; People v. Richards, 108 N. Y. 137; Matter of Rochester Electric R. R. Co., 123 N. Y. 351; Pulitzer v. City of New York, 48 App. Div. 6; Halsey v. Jewett Dramatic Co., 114 App. Div., 420; City of New York v. Village of Lawrence, 250 N. Y. 429; Browne v. City of New York, 241 N. Y. 96; United States v. New Orleans, 98 U. S. 381; Matter of Braun, 141 Cal. 204; State ex rel. Zielonka v. Carrel, 99 Ohio St. 220; City of St. Louis v. Sternberg, 69 Mo. 289; Pacific Tel. & Tel. Co. v. Seattle, 172 Wash. 649; 291 U. S. 300.) Chapter 815 of the Laws of 1933 does not violate either article III, section 1, or article XII, section 1, of the State Constitution. (Kelly v. Merry, 262 N. Y. 151; Foster v. Kenosha, 12 Wis. 616.) The local law does not deny to the plaintiff the equal protection of the laws, nor does it deprive it of its property without due process of law. (Matter of City of New York v. Prendergast, 202 App. Div. 308.)
   Lotjghran, J.

This appeal is from a judgment in favor of the defendant city of New York in an action to recover taxes exacted from plaintiff by force of chapter 815 of the Laws of 1933 and Local Law No. 19, 1933 (Local Laws, 1933, pp. 127-135). The validity of the statute is challenged under sections 1 and 2 of article XII of the Constitution of the State. The local law is assailed under the Fourteenth Amendment of the Constitution of the United States.

The provisions of the statute, known as the Buckley Act, so far as material, are as follows:

AN ACT to relieve the people of any city of the state having a population of one million inhabitants or more from the hardships and suffering caused by unemployment and the effects thereof on the public health and welfare, by temporarily enabling any such city to adopt and amend local laws imposing in any such city any tax which the legislature has or would have power and authority to impose; to limit the application of such local laws to the period commencing September first, nineteen hundred thirty-three, and ending February twenty-eighth, nineteen hundred thirty-four, and to limit the use of the revenue derived from such taxes to the defrayal of the cost of granting unemployment relief in any such city.
“ Became a law August 29, 1933, with the approval of the Governor. Passed, on message of necessity, three-fifths being present.
“ The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. It is hereby declared that an emergency exists requiring the enactment of the following provisions of law to reheve the people of any city of the state having a population of one million inhabitants or more from the hardships and suffering caused by unemployment and the effects thereof on the public health and welfare and to continue their application until the twenty-eighth day of February, nineteen hundred thirty-four.
§ 2. Notwithstanding any other provision of law to the contrary, any city of the state having a population of one million inhabitants or more, acting through its local legislative body, is hereby authorized and empowered to adopt and amend local laws imposing in any such city any tax which the legislature has or would have power and authority to impose. Such local laws shall be effective only during the period commencing September first, nineteen hundred thirty-three, and ending February twenty-eighth, nineteen hundred thirty-four, or any portion of such period. A tax imposed hereunder shall have application only within the territorial limits of any such city and shall be in addition to any and all other taxes. * * *
“ § 3. A local law adopted pursuant to the provisions of this act shall provide that all revenues collected thereunder shall be paid into a special fund to be established by the chief fiscal officer of any such city and shall be used exclusively for the following purposes: (a) to defray the cost of granting unemployment home and work relief, and (b) to defray the annual cost of the interest on certificates of indebtedness issued in the first instance to obtain funds necessary to provide home and work relief, and to redeem such certificates of indebtedness. * ⅝ * ”

(1) Because this legislation was passed without the concurrent action of two-thirds of each house of the Legislature, plaintiff would have it condemned as a violation of the Home Bule Amendment of the Constitution of the State (Art. XII, § 2). By that section it is provided: The Legislature shall not pass any law relating to the property, affairs or government of cities, which shall be special or local either in its terms or in its effect, but shall act in relation to the property, affairs or government of any city only by general laws which shall in terms and in effect apply alike to all cities except on message from the governor declaring that an emergency exists and the concurrent action of two-thirds of the members of each house of the Legislature.”

The question is whether relief of unemployment so far relates to the property, affairs or government of cities that the act must be held to be special or local in effect. The field of its application is defined as any city of the State having a population of one million inhabitants or more. To that extent it is general both in terms and in effect, but the spirit of the Home Hule article is not satisfied by such a form of words alone. (.Matter of Mayor, etc., of New York [Elm St.], 246 N. Y. 72.) It is only matters of paramount State concern, as discriminated from those of dominant local significance, that .are not subject to the requirements of section 2 of article XII of the Constitution. (Art. XII, § 4; City Home Rule Law [Cons. Laws, ch. 76], § 30; Adler v. Deegan, 251 N. Y. 467; Robertson v. Zimmermann, 268 N. Y. 52.) However hard the problem of classification may be in other situations (McGoldrick on Law and Practice of Municipal Home Rule, pp. 317-351; McBain, 37 Political Science Quarterly, 655), choice of the category in this instance is, we think, free from doubt. It is common knowledge that widespread unemployment has undermined standards of living to a degree which threatens the economic stability of State and nation and affects the welfare of all the American people. (Darweger v. Staats, 267 N. Y. 290.) More than half the population of the State five in the city of New York. Anything that affects the health and the welfare of the city of New York, touches almost directly the welfare of the State as a whole.” (Crane, J., in Adler v. Deegan, supra, pp. 477, 478.) If the moral and physical fibre of its manhood and its womanhood is not a State concern, the question is, what is? ” (Cardozo, Ch. J., id. p. 484.)

It is clear, we think, that the Buckley Act is not obnoxious to the letter of section 2 of article XII of the Constitution. Nor do we apprehend that the act does any violence to the spirit of that section. The city of New York is not thereby commanded to relieve unemployment or to raise taxes to that end. What shall be done in that regard is left to the determination of the local authority. There has been no encroachment upon the conception of the autonomy of the city as a State within a State.

The non-obligatory aspect of the statute persuaded the trial court to sustain it upon a view of section 5 of article XII of the Constitution which we are not prepared to accept. By that section it is provided: “ The Legislature may by general laws confer on cities such further powers of local legislation and administration as it may, from time to time, deem expedient.” At the Trial Term the phrase general laws ” in this section 5 was interpreted in its former sense of an act which, although local in effect, was in terms applicable to localities described as a class. (Matter of Henneberger, 155 N. Y. 420; Matter of Mayor, etc., of New York [Elm St.], supra.) Upon that construction it followed that the Buckley Act was a valid enlargement of the power of local legislation in the city of New York, and the Trial Term so held. The view taken by us renders review of this reasoning unnecessary. We leave open the question whether, in an affair of controlling local concern, legislation under section 5 of article XII of the Constitution must apply alike to all cities, unless enacted in accordance with section 2.

(2) The Legislature for the first time has here conferred upon a municipal corporation authority to enter the field of indirect or excise taxation. (Cf. General City Law [Cons. Laws, ch. 21], § 20 [4]; Tax Law [Cons. Laws, ch. 60], § 3, as amd. by L. 1933, ch. 470, § 1.) Plaintiff accents the consequent reduction of sources of revenue open to the State itself and the resultant harassment of the taxpayer by more complex methods of assessment and less summary remedies for review. (See Report of the State Tax Commission, 1934, Legislative Documents, 1935, No. 11, pp. 6, 7.) All this is held up to our imagination against a background of supposed waste and extravagance in municipal affairs as predicting the ultimate collapse of the State government.

It may be assumed that a novel situation is thus of serious import, for the assumption cannot change the essential nature of the issue under the constitutional provisions invoked upon this branch of the case. That issue is one of legislative power “ to provide for the organization of cities and incorporated villages,” a power limited only by the exhortation that it be exercised to restrict their power of taxation, assessment, borrowing money, contracting debts, and loaning their credit, so as to prevent abuses in assessments and in contracting debt by such municipal corporations.” (Const, art. XII, § 1.) The exhortation is itself a tacit recognition that municipal corporations have the traditional functions to which it is addressed. Those functions are not less extensive than the necessities of government as declared by the Legislature in the exercise of a discretion committed to it by the Constitution.

It is true that there is to be found in the Buckley Act neither limitation in respect of the character or rate of the taxation authorized, nor restriction in respect of persons, business or property within the city of New York to be subjected thereto. The terms of the act, however, do confine its operation in point of time and of specific public use of revenue to be derived. The State has here empowered its agent, the city of New York, during a fixed period, to experiment in taxation for a State purpose which is also so much a matter of local concern that the city authorities undoubtedly have unequaled knowledge and capacity to dispatch it. Broad and unprecedented as is the license so conferred, we are without jurisdiction to circumscribe or modify it. (Bank of Rome v. Village of Rome, 18 N. Y. 38; Bank of Chenango v. Brown, 26 N. Y. 467; Tifft v. City of Buffalo, 82 N. Y. 204; Kelly v. Merry, 262 N. Y. 151, 160; Dillon on Municipal Corporations [Vols. 1 and 4; 5th ed.], §§ 74, 1375, 1376; McBain on The Law and Practice of Municipal Home Rule, p. 52.)

(3) Subject to the restrictions laid down in the Buckley Act, Local Law No. 19 provides:

‘/§ 3. Imposition of excise tax or license fee. Notwithstanding any other provision of law to the contrary, for the privilege of exercising its corporate franchise, or of holding property, or of doing business in the city of New York, during the period commencing September first, nineteen hundred thirty-three and ending February twenty-eighth, nineteen hundred thirty-four, every corporation, company, association, joint stock association, copartnership and/or person, their lessees, trustees or receivers appointed by any court whatsoever, doing business in the city of New York and subject to the supervision of either division of the public, service commission during such period, shall pay to the comptroller of the city of New York for such privilege an excise tax or license fee which shall be equal to one and one-half per centum of its gross monthly income for the period September first, nineteen hundred thirty-three to February twenty-eighth, nineteen hundred thirty-four. Such tax or fee shall accrue and be paid and collected at the end of each month. Such tax or fee shall be imposed for the period beginning September first, nineteen hundred thirty-three and ending February twenty-eighth, nineteen hundred thirty-four, and,shall be in addition to any and all other license fees and/or taxes imposed by any other provision of law and shall be paid at the time and in the maimer hereinafter provided.”

The objections to this law amount, in one form or another, to the claim of unconstitutional discrimination depriving plaintiff of the equal protection of the laws. It is not denied that classification for taxation presupposes a group specially taxed. It is not asserted that the Fourteenth Amendment forbids selection among businesses for subjection to a State excise tax, if determined by some reasonable policy of differentiation, and all in the same class have equality. No objection is advanced to a gross receipts tax as such. Complaint is made that plaintiff also pays a property tax and franchise taxes based in part on income, but protest is not made that the aggregate runs to confiscation. The objections come down to the point that there is no reason for putting businesses like that of plaintiff in a class by themselves for the purposes of revenue for unemployment relief.

In our opinion reasons justifying that separation are apparent. Plaintiff is one of a group — those subject to supervision by the Public Service Commission — that, because of the public service nature of their respective businesses, are accorded a degree of protection against competition and other advantages over the general business community. This common character of the group is, we think, a valid basis of classification for the purposes of this tax. Quaker City Cab Co. v. Pennsylvania U. S. 389) does nob decide the contrary. In that case a similar tax was laid on every transportation company owning or operating in the State any device for the transportation of passengers, but that tax or an equivalent was not imposed on others engaged in competitive public service. The distinction was held to be based only on the corporate character of the taxpayer in violation of the equal protection clause of the Fourteenth Amendment. Again, in that case it was said that the tax was one that could be laid upon receipts belonging to others quite as conveniently as upon those of a corporation. The larger control exerted over public service undertakings simplifies enforcement of a tax upon them, a consideration which the taxing authority here was not bound to ignore in a fiscal crisis.

We conclude that this tax was not imposed through merely arbitrary or accidental classification and that it is not invalid under the Fourteenth Amendment. (See Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 78, 79; Quong v. Kirkendall, 223 U. S. 59; Fort Smith Lumber Co. v. Arkansas, 251 U. S. 532; White River Lumber Co. v. Arkansas, 279 U. S. 692; People ex rel. Farrington v. Mensching, 187 N. Y. 8, 21, 22.)

The judgment should be affirmed, with costs.

Crajste, Ch. J.

(concurring). If chapter 815 of the Laws of 1933 deals with the property, affairs or government of the city of New York, it is unconstitutional, as it was not passed on a message from the Governor declaring that an emergency exists, and, with the concurrent action of two-thirds of the members of each house of the Legislature. Neither is it such a general law as is described in section 2 of article XII of the Constitution: The legislature * * * shall act in relation to the property, affairs or government of any city only by general laws which shall in terms and in effect apply to all cities * * ⅝.” This act is not such a general law as it does not apply to all cities. Not having been passed by a two-thirds vote of the Legislature, and not being a general law which in terms and effect applies to all cities alike, nothing can save it except the conclusion that it does not apply to the property, affairs and government of New York, within the meaning of those words as used in the Home Rule provision.

Section 5 of article XII reads as follows: The legislature may by general laws confer on cities such further powers of local legislation and administration as it may, from time to time, deem expedient.” This is not inconsistent with section 2, for if the general law conferring on cities further power of legislation and administration pertains to the property, affairs and government of a city, it must be not only general in name but general in effect. This court has so held in Matter of Mayor, etc., of New York (Elm St.) (246 N. Y. 72, 76); Robertson v. Zimmerman (268 N. Y. 52).

We are of the opinion that this law comes within the reasoning and ruling of Adler v. Deegan (251 N. Y. 467), and that it pertains to State matters as distinguished from the property, affairs and government of the city of New York. AH recognize that there are many functions performed by a city which are duties resting upon the sovereign State and in which the State Legislature acts for and in behalf of the People of the entire State. We have heretofore recognized that it is difficult many times to distinguish between those matters purely local and those which are State-wide, as there are many interests which overlap. The general health of the State may be affected by the locality, and this is the basis for such decisions as Adler v. Deegan and Robertson v. Zimmerman (supra). The State as well as the nation has been seeking to alleviate the suffering caused by unemployment. Money has been contributed by Congress and by the Legislature for public works and also for the maintenance of homes and families of those who cannot get work. In the State of New York a very large part of the unemployed population is in New York city. It is largely a matter of judgment, whether the taxpayers of New York city contribute to the State as a whole, or look after their own unemployed. As to these latter the nation and State contribute as well as' the city. The .problem for us to decide at this stage is, whether this work of caring for the unemployed and spending- the public funds in their behalf is a State affair or one that is local and pertains solely to the city of New York. We are of the opinion that the trouble is so widespread, not localized, such a matter of State interest, affecting the State and nation as a whole, that it cannot be an affair localized to the city of New York within the meaning of section 2 of article XII of the Constitution.

This act, chapter 815 of the Laws of 1933, is constitutional unless illegal for other reasons.

That the care of the poor and destitute has become a matter of State concern is emphasized by the provisions of the Public Welfare Law (Cons. Laws, ch. 42), which has divided the State into public welfare districts. Article 1, section 2, says: “ (a) A welfare shall mean a division of the state which is a unit for the administration of all public relief, care and support.”

Article III. “ § 17. Public welfare districts. For the purpose of administration of public relief and care the state shall be divided into county and city public welfare districts as follows:

“ 1. The city of New York * * *
“ § 18. Responsibility for public relief, care and support. A person in need of relief and care which he is unable to provide for himself shall be relieved and cared for by and at the expense of a public welfare district or the state as follows:
⅝ * *
“ 2. Each public welfare district shall be responsible for:
“ (a) The relief, care and support of any person who resides and has a settlement in its territory.”

Article Y defines the powers and duties of city public welfare districts, and that there shall be a city commissioner of public welfare in each city public welfare district who shall administer the public relief and care for which the city public welfare district is responsible.

Article VI, section 41, reads in part: taxes levied for public relief and care in a city, or in a city public welfare district, shall be paid to the city treasurer, and disbursed in accordance with the provisions of law relating to such city for the payment of verified bills and claims.”

Section 46 reads: and appropriations in city public welfare districts. The city commissioner of public welfare shall present to the mayor or other authority provided by law in such city an itemized estimate of the amount of money needed for the ensuing year for the administration of the city public welfare district and for public relief and care. The legislative body of the city public welfare district shall appropriate the amount necessary for such purpose and shall cause taxes to be levied for the amount of such appropriation.”

The care of the poor and destitute has always been a matter of public duty recognized long before this country was settled. The poor we have always had with us as well as homes and institutions for the poor. The town or county buildings and appropriations for these purposes have existed for years. Section 10 of article VIII of the State Constitution, which prohibits a county, city, town or village to give any money in aid of any individual, specifically excepts the provisions for the aid and support of its poor as may be authorized by law.

In so far, therefore, as chapter 815 of the Laws of 1933 authorizes the city to impose a tax to reheve the people of any [such city] from the hardships and suffering caused by unemployment,” it is within the general powers heretofore conferred upon municipalities for the relief of the poor, the constitutionality of which has never been questioned. To keep people from being evicted from their homes, or from suffering from hunger, in other words, to provide them with proper homes and necessary support is simply another means of relieving distress which heretofore, under different circumstances, was sufficiently met by public institutions. The former machinery and methods have proved insufficient and inappropriate for-the present-day crisis.

The State, we see, has considered these matters as well as housing projects, a matter for its care and provision, using the cities, counties and other districts as its agency for this public welfare. The law which is here questioned did not deal solely with the property, affairs and government of a city; it touched State affairs and consequently was properly passed. The Home Rule provision of the Constitution did not apply.

Under the General City Law, section 20, cities are authorized to tax real estate and personal property. Had the Legislature merely given power to the cities to look after the unemployed, without extending by implication the subjects of taxation, there could be little or no complaint as to the legality of such a law. Instead of placing the entire burden upon the real estate of the city or community, the Legislature by this act has given to the city the power to choose other classes of property for taxation. The chief objection to this method is that the Legislature should have chosen and selected the class of property to be taxed without leaving it to the city to make the selection.

We think that, within the limitations and restrictions of the act, considering the powers already given to the city as a public welfare district, the Legislature has not delegated its taxing power so as to abdicate one of its constitutional functions.

It is said, however, that section 1 of article XII, which was in the Constitution of 1846, and is still there, as amended in 1905, has not been complied with. This section reads, It shall be the duty of the Legislature to provide for the organization of cities and incorporated villages, and to restrict their power of taxation, assessment, borrowing money, contracting debts, and loaning their credit, so as to prevent abuses in assessments and in contracting debt by such municipal corporations.”

Whether in any instance the- power of a municipal corporation to tax, to borrow money, to contract debts or loan its credit has been sufficiently restricted, is a question for the discretion of the Legislature, not reviewable in the courts. (Bank of Rome v. Village of Rome, 18 N. Y. 38; Bank of Chenango v. Brown, 26 N. Y. 467; Tifft v. City of Buffalo, 82 N. Y. 204, 209.) This act we are reviewing, nevertheless, does contain certain restrictions. The tax imposed pursuant to a local law is to be effective only during the period between September 1, 1933, and February 28, 1934. The moneys raised are to be kept in a separate fund and used exclusively for relief purposes.

Thus all the objections which have been raised to these taxes, imposed pursuant to the law referred to, have been met and answered, and the judgment below should be affirmed.

Lehman, O’Brien, Crouch and Finch, JJ., concur with Loughran, J.; Crane, Ch. J., concurs in result in separate opinion in which Hubbs, J., concurs.

Judgment affirmed.


source: Caselaw Access Project

author: Ceane, Ch. J.

license: Public Domain

text:
    Corn Exchange Bank Trust Company, Appellant, v. Albert L. Gifford, Respondent.

      (Argued June 3, 1935;
    decided July 11, 1935.)

      Frank C. Laughlin, Spotswood D. Bowers and Stewart Bowers for appellant.
    The contract of guaranty should be given a reasonable interpretation and all the provisions thereof should be given full effect and this can be done only by construing the power to revoke as terminating the continuing nature of the guaranty and preventing the guaranty applying to any new indebtedness, but not to the indebtedness already incurred, including “ renewals ” or “ extensions of time of payment of the then existing indebtedness. (Powers v. Clarke, 127 N. Y. 417; Schmitz v. Langhaar, 88 N. Y, 503; Smith v. Molleson, 148 N. Y. 241; Shultz v. Crane, 6 Hun, 236; 64 N. Y. 659; Gurley v. Frieder, 28 App. Div. 501; Krakauer v. Chapman, 16 App. Div. 115; Fleischman v. Fergueson, 223 N. Y. 235; Browne v. Paterson, 165 N. Y. 460.) When an absolute guaranty of payment extends by its terms to renewals or extensions the renewal or extension of a note guaranteed, even after notice of cancellation of the guaranty, does not discharge the guarantor. (Brown v. Curtiss, 2 N. Y. 225; Bank of United States v. Chemical Bank & Trust Co., 140 Mise. Rep. 394; Merchants’ Nat Bank v. Hall, 83 N. Y. 338; Gelpcke v. Quentell, 74 N. Y. 599; Bonart v. Rabito, 141 La. 970; Neblett v. Cooper Grocery Co., 180 S. W. Rep. 1162; Rodabaugh v. Kauffman, 200 Pac. Rep. 747; Woelfel v. Rtan Grocery Co., 184 S. W. Rep. 803; Valley Nat. Bank y. Cownie, 145 N. W. Rep. 904; Goff v. Janeway & Car-pender, 99 S. W. Rep. 602.)

      Robert B. Watts and Charles Foster Brown for respondent.
    The guaranty having been drafted by plaintiff and presented to defendant for his signature, all doubts and ambiguities therein should be resolved in defendant’s favor. (Gillet v. Bank of America, 160 N. Y. 549; United Water Works Co. v. Omaha Water Co., 164 N. Y. 41; Marshall v. Commercial Trav. Mut. Acc. Assn., 170 N. Y. 434; Industrial & General Trust, Ltd., v. Tod, 180 N. Y. 215; Sanford v. Brown Bros. Co., 208 N. Y. 90; Elwood v. Goldman, 217 N. Y. 585; Dery v. Blate, 239 N. Y. 203; Evelyn Building Corp. v. City of New York, 257 N. Y. 501; Moran v. Standard Oil Co., 211 N. Y. 187.) Neither the surrounding circumstances nor any rule of construction can justify the interpretation of the guaranty as an agreement by defendant to continue liable, after revocation, as guarantor of subsequent renewals of the note outstanding at the time of revocation. (Young v. Leary, 135 N. Y. 569; Ames v. Belden, 17 Barb. 513.) If defendant did not agree for a consideration to continue hable, after revocation of the guaranty, as guarantor of renewals thereafter accepted by plaintiff, he was completely absolved from liability when plaintiff accepted a renewal of the only note outstanding at the time of revocation. ' (National Eagle Bank v. Hunt, 16 R. I. 148; Hard v. Mingle, 206 N. Y. 179; Merchants Nat. Bank v. Hall, 83 N. Y. 338; City Nat. Bank v. Phelps, 86 N. Y. 484; Gay v. Ward, 67 Conn. 147; Bank of United States v. Andron, 277 N. Y. Supp, 594; Smith v. Moliesen, 148 N. Y. 241.)
   Ceane, Ch. J.

On April 11, 1930, Tompkins & Bevers, Inc., borrowed $100,000 from the Eighty-sixth Street Branch of the Corn Exchange Bank Trust Company for the purpose of buying 3,337 shares of Hudson River Yards. On that date the corporation gave the bank its promissory note for that amount with interest payable on October 14, 1930. As collateral security for the payment of the note, the corporation deposited and pledged with the bank the stock and also gave the personal guaranty of the president and treasurer of the company. The note was dated April 11, 1930, and was payable the 14th day of October of the same year.

Shortly before the due date, Mr. Kittredge, the treasurer, told the officers of the bank that the corporation could only pay $15,000 and asked for an extension of the balance. He was informed that the renewal would be granted only if an additional guarantor satisfactory to the bank were seemed. Thereupon Mr. Kittredge obtained the guaranty of his father-in-law, the defendant, Albert L. Gifford, telling him about the facts of the transaction in the following words:

A. I told him that we had borrowed $100,000 from the bank, that we were only able to pay $15,000 at that time, that the Corn Exchange Bank had asked Mr. Sherer to notify me that they could not go ahead and get a new line of $85,000 unless I had a satisfactory guarantor. I had two men in mind that I might get. I went to Mr. Gifford and asked him if he would sign as guarantor and I told him at that time that the note would be $85,000.
“ Q. And he said he would sign it? And he did sign it? A. Yes, sir.”

As we read the guaranty which Mr. Gifford signed, we must remember that it was given to procure a renewal of this $100,000 note which was coming due. The guaranty was in the following words:

For the sum of One Dollar in hand to me paid, by the Corn Exchange Bank Trust Co. of the City of New York, receipt whereof is hereby acknowledged; I do hereby guarantee to said Company to the extent of $100,000 the prompt payment, when due, of each and every claim and demand of the said Corn Exchange Bank Trust Co. against Tompkins & Beyers, Inc. now existing or which may hereafter arise; my liability hereunder shall not extend beyond the said sum $100,000. at any one time, but this guaranty is a continuing guaranty for the said sum and shall remain in force until duly revoked by me by notice in writing to the said company and shall extend to and cover all renewals of any claims or demands guaranteed under this instrument or the extensions of time of payment thereof, and shall not be affected by any surrender or release by said Company of any other security held by it for any claims or demands hereby guaranteed.
Witness my hand at New York, N. Y. this fourteenth day of October, 1930.
“ A. L. GIFFORD.
In presence of:
“ Robert Galbraith.”

Upon receiving this guaranty the note was extended for one month for $85,000, and thereafter from time to time the indebtedness of Tompkins & Inc., was extended or renewed by taking new notes and canceling the old notes, and from time to time payments were made on account, the indebtedness being reduced so that on June 8, 1931, the note, as renewed and extended, had been reduced to $70,000, at which time the defendant revoked his guaranty in the following words:

With reference to the guarantee which I executed and filed with you October 14th, 1930, guaranteeing note of Tompkins & Bevers, Inc., in the amount of One hundred thousand dollars ($100,000), I hereby, under the terms of such guarantee, revoke same.
I take this step reluctantly as I should regret exceedingly to embarass the officers of Tompkins & Bevers, Inc., but my present nervous condition is such that my physician insists on my cancelling all commitments of whatever nature, and that I take a prolonged rest.
I have no lack of confidence in the credit of Tompkins & Inc.; I am aware that they have steadily reduced their loan and I am confident they will continue to do so.”

Thereafter the then indebtedness of Tompkins & Bevers, Inc., to the plaintiff was never increased, but the note was extended from time to time in the same way as previously until June 16, 1933, when it had been reduced to $40,500. The renewals were always conducted in the same way as before revocation.

The sole question presented on this appeal is the construction of the guaranty and whether under its terms the plaintiff could after notice of revocation extend the time of payment without thereby discharging the defendant from all liability.

We take the guaranty as we find it as the surest way of determining the rights of these parties. We think it unambiguous. Mr. Gifford, the defendant, knew that the corporation of which his son-in-law was the treasurer, had borrowed $100,000 from the bank on a note which was coming due. The corporation could pay $15,000 and no more. The note would not be renewed without a guaranty, and he furnished it. As above quoted, he guaranteed the company to the extent of $100,000 the prompt payment of each and every claim and demand when due, which the trust company had against Tompkins & Bevers, Inc. This applied not only to claims then existing but to those which might arise thereafter. The guaranty is to be a continuing guaranty and to cover claims to the extent of $100,000 that might arise thereafter. This looked into the future and anticipated new or additional transactions. Renewals of the present existing indebtedness thereafter would be included in these words. To the extent of $100,000, says Mr. Gifford, I guarantee the payment of every claim now existing or which may hereafter arise.” If the note guaranteed became due and was renewed, it would be a claim either existing or arising after the guaranty. The agreement then goes on to state that the guaranty shall remain in force until duly revoked by me by notice in writing to the said company and shall extend to and cover all renewals of any claims or demands guaranteed under this instrument.” These words are broad enough to cover the renewals of an indebtedness existing at the time of revocation. The words used are all renewals.” The parties could easily have said “ or the extension of time of payment thereof prior to revocation ” if such a meaning were intended. The words prior to revocation ” are not used. The judge at Special Term in his opinion found it very easy to express such an intention for he said the only fair construction that can be placed upon the instrument of guaranty is that the defendant intended thereby to be responsible for the original debt and any extension granted prior to its revocation. The difficulty with this construction is that it is contrary to what the parties did say. The words prior to its revocation ” are not found in the instrument and I know of no authority by which the courts can add them.

It was not necessary to use the phrase “ shall extend to and cover all renewals of any claims ” unless it had reference to renewals after revocation, and the use of the words “ all renewals ” indicates in the absence of any limitation or restriction that they were intended to apply to the renewals or extension of the indebtedness existing at the time of revocation.

With these expressions of our views, the judgment of the Appellate Division and that of Trial Term should be reversed and judgment directed for the plaintiff for the amount due, with interest, and costs in all courts.

Lehman, O’Brien, Crouch, Loughran and Finch, JJ., concur; Hubbs, J., not sitting.

Judgment accordingly.


author: Crane, Ch. J.

text:
    Thomas G. Wylie, Appellant, v. Lucy M. C. Addoms et al., as Executors of Henry C. Copeland, Deceased, Respondents.
    (Argued June 5, 1935;
    decided July 11, 1935.)

      William Roth and George D. Zahm for appellant.
    Section 278 of the Tax Law (Cons. Laws, ch. 60) is inapplicable in an action on a promissory note. (Cooper v. Gossett, 143 Mise. Rep. 165; 237 App. Div. 700; 263 N. Y. 491; Matter of Wylly, 210 Fed. Rep. 954; Bean v. Flint, 138 App°. Div. 846; Crane v. Powell, 139 N. Y. 379; Ambrosius v. Ambrosius, 167 App. Div. 244; People v. Levin, 119 App. Div. 233; People v. Hadden, 3 Den. 220; McManus
      v. Gavin, 77 N. Y. 36; Barron v. People, 1 N. Y. 386; Saxe v. Peck, 139 App. Div. 419.) Section 278 of the Tax Law is penal in its nature and hence is to be strictly construed. (Bose v. N. Y. Tel. Co., 167 App. Div. 691; Johnston v. Auburn & Syracuse Electric R. R. Co., 169 App. Div. 864; Curtis v. Leavitt, 15 N. Y. 9; McCarthy v. International Ry. Co., 126 App. Div. 182.)

      Julian C. Harrison for respondents.
    Section 278 of the Tax Law, when pleaded, prevents a recovery in an action upon contract where the consideration is a stock transfer on which no tax has been paid. {Sheridan v. Tucker, 145 App. Div. 145; Phillips v. Grossman, 76 Mise. Rep. 497; Bean v. Flint, 204 N. Y. 153.) The statute is applicable in actions upon notes as well as in actions upon simple contract, where the facts appear and are pleaded. {Strong v. Sheffield, 144 N. Y. 392; Coral Gables, Inc., v. Mayer, 241 App. Div. 340; Bay Parkway Nat. Bank v. Shalon, 146 Mise. Rep. 431; Hoff ay v. Hershenstein, 232 App. Div. 149; Abrahamson v. Steele, 176 App. Div. 865; Bruyn v. Russell, 52 Hun, 17; 60 Hun, 280; Blanshan v. Russell, 32 App. Div. 103; Lincoln v. French, 105 U. S. 614; Matter of Matthews, 143 App. Div. 562.)
   Crane, Ch. J.

Section 278 of the Tax Law (Cons. Laws, ch. 60) provides as follows: “No transfer of certificates taxable under this article made after June first, nineteen hundred and five, on which a tax is imposed by this article, and which tax is not paid at the time of such transfer shall be made the basis of any action or legal proceedings, nor shall proof thereof be offered or received in evidence in any court in this state.”

This action is brought on a negotiable piomissory note bearing date December 14,1932, for $15,000, and interest, payable one year after date. The note was made by Henry C. Copeland, now deceased. The defendants are the personal representatives of the maker of the said note. The note was given in payment for 3,000 shares of the common capital stock of Sodamat Corporation, which shares were sold by plaintiff to the said Henry C. Copeland. The note was exchanged for the shares of stock. The plaintiff on the trial testified that at the time of the delivery of the stock certificate to Copeland no transfer tax stamps were affixed thereto; and that the plaintiff paid no transfer tax, nor bought any transfer tax stamps which weie affixed to any memorandum of sale. By the amended answer the defendants pleaded the violation of article 12 of the Tax Law. This defense, having been held good by the trial judge, he dismissed the complaint, directing that the plaintiff’s exceptions be heard in the first instance in the Appellate Division before entry of judgment. The Appellate Division, by a divided court, has overruled the plaintiff’s exceptions and given judgment for the defendants, sustaining the trial court’s dismissal of the complaint.

We agree with the Appellate Division in this disposition of the case. This statute must have a reasonable interpretation, having in mind the object in view. Stock transfers are taxed, and the only way to reach or collect the tax is by selling stamps, which must be annexed to the certificates. To be effective there must be a penalty for failure to pay the tax. It is provided in section 278 of the Tax Law. No action or legal proceeding can be brought which is based upon the transfer of any untaxed certificates. An action to collect the price of stocks sold and delivered would thus be barred, provided the certificates were not stamped. Suit on a note given for the sales price in such a transaction is no different than a suit for the price, so far as the interpretation of this section is pertinent. Both the suit for the price and the suit on the note are based upon the transfer of stock; — no transfer, no recovery, either for the price or on the note. We think this is self-evident from the reading of the statute. True it is that there is a difference, a material difference, in the method of proof in the two actions. In the latter the plaintiff merely has to introduce the note which, by section 50 of the Negotiable Instruments Law (Cons. Laws, ch. 38), proves itself. This, however, does not prevent the defendant from proving his alleged defense, that the consideration for the note, or the basis ” for the note, was the transfer of unstamped certificates.

Bean v. Flint (204 N. Y. 153) decided that in order to obtain the benefits of the statute the defendant must plead it. This the defendant failed to do in the Bean case. Cooper v. Gossett (263 N. Y. 491) held that the circumstances were such that the party was estopped from pleading the statute or, rather, that he could waive a statutory defense. Matter of Wylly (210 Fed. Rep. 954), relied upon by the appellant, was a bankruptcy proceeding wherein notes given for the purchase of stock were sought to be proved. Judge Chateield of the District Court held that this tax statute of New York State forbade legal proceedings in State courts, but allowed the claims.

To restate our decision, it is that the plaintiff cannot maintain this action upon the promissory note given to secure the purchase price of stock when the certificate transferred has not been stamped, pursuant to sections 270 and 270-a of the Tax Law, provided, as here, that the defendants allege and prove these facts.

The judgment should be affirmed, with costs.

Lehman, O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur.

Judgment affirmed.


text:
    Joseph M. Purcell, Appellant, New York Central Railroad Company, Respondent.
    (Argued June 10, 1935;
    decided July 11, 1935.)

      Arthur TI. Vinett, Irving I. Goldsmith and John A. Slade for appellant.
    The complaint states a good cause of action. (Great Northern By. Co. v. Sunburst Co., 287 TJ. S. 358; Piper v. Hoard, 107 N. Y. 73; People v. Budd, 117 N. Y. 1; Fisher v. N. Y. C. & H. R. R. R. Co., 46 N. Y. 644; Lough v. Outerbridge, 143 N. Y. 271; Murphy v. N. Y. C. R. R. Co., 225 N. Y. 548; Oppenheim v. Kridel, 236 N. Y. 156; Davidson v. Madison Corp., 231 App. Div. 421; 257 N. Y. 120; Goetschius v. Brightman, 245 N. Y. 186; Matter of Lawrence v. Village of Mamaroneck, 263 N. Y. 455; Cleveland v. Town of Lancaster, 239 App. Div. 263; 264 N. Y. 568; Barnet v. N. Y. C. & H. R. R. R. Co., 222 N. Y. 195; Conklin v. Canadian-Colonial Airways, Inc., 266 N. Y. 244; People ex rel. D. & H. Co. v. Stevens, 197 N. Y. 1; People ex rel. N. Y. Edison Co. v. Willcox, 207 N. Y. 86; Matter of Staten Island Edison Corp. v. P. S. Comm., 263 N. Y. 209; Matter of City of New York v. Prendergast, 202 App. Div. 308.) Where the question is one of unreasonable rates, initial determination by the Public Service Commission of such unreasonable ness is a necessary condition precedent to the commencement of an action at law to recover the overcharge. (Texas & Pacific Ry. v. Abilene Oil Co., 204 U. S. 426; Robinson v. B. & O. R. R. Co., 222 U. S. 506; Murphy v. N. Y. C. R. R. Co., 225 N. Y. 548; B. & 0. R. R. Co. v. La'Due, 128 App. Div. 594; Metzger v. New York State Rys., 168 App. Div. 187; Murray v. New York Tel. Co., 170 App. Div. 17; 226 N. Y. 590; City of New York v. New York Edison Co., 196 App. Div. 644; Erie R. R. Co. v. Kieser & Son Co., 216 App. Div. 500; Hunter,

      Inc., y. N. Y., N. H. H. R. R. Co., 97 Mise. Rep. 26; 179 App. Div. 52.) In the absence of a definite statutory procedure for the fixing and enforcement of reparation, the common law action survives. Jurisdiction may not be defeated or taken away by implication. Jurisdiction was not taken from the courts, but preliminary jurisdiction was in the first instance granted to the Public Service Commission to decide solely whether or not the rate was unreasonable. {Murray v. New York Tel. Co., 170 App. Div. 17; 226 N. Y. 590; Metzger v. New York State Bys., 168 App. Div. 187; City of New York v. New York Edison Co., 196 App. Div. 644; Hunter, Inc., v. N. Y., N. H. A H. B. B. Co., 97 Mise. Rep. 26; 179 App. Div. 52; Meeker v. Lehigh Valley R. B. Co., 236 U. S. 412; Oppen-heim v. Kridel, 236 N. Y. 156; New York Life Ins. Co. v. Guttag Corp., 265 N. Y. 292; Louisville A N. R. Co. v, Sloss-Sheffield S. A I. Co., 295 Fed. Rep. 53; Murphy v. N. Y. C. B. R. Co., 225 N. Y. 548; Ives v. Buffalo By. Co., 201 N. Y. 271; Matter of Grandview Dairy, Inc., v. Baldwin, 239 App. Div. 640; Al Baschid v. News Syndicate Co., 265 N. Y. 1.)

      Charles E. Nichols for respondent.
    The common law cause of action for the recovery of unreasonable charges collected by a carrier has been abrogated and supplanted by the provisions of the statute known as the Public Service Law (Cons. Laws, ch. 48). {Murphy v. N. Y. C. R. R. Co., 225 N. Y. 548; People ex rel. City of New York v. Nixon, 229 N. Y. 356; Matter of Dry Dock R. B. Co., 254 N. Y> 305; P. B. B. Co. v. International Coal Co., 230 U, S. 184; Texas A Pacific By. Co. v. Abilene Cotton Oil Co., 204 U. S. 426; Robinson v. B. A 0. R. R. Co., 222 TT. S. 506; Gurney Heater Co. v. N. Y., N. H. A H. B. R. Co., 264 Mass. 427; St. Paul Book A Stationery Co. v. Paul Gas Light Co., 130 Minn. 71; B. A O. R. B. Co. v. Pitcairn Coal Co., 215 IT. S. 481; B. A O. B. R. Co. v. La Due, 128 App. Div. 594; P. R. B. Co. v. Titus, 216 N. Y. 17; Texas A Pacific By. y. Mugg, 202 U. S. 242; N. Y. C.

      <& H. B. B, B. Co, v. Shelmidine, 91 Mise. Rep. 226; Onondaga G. & C. Club v. Bailroad Co., 96 Mise. Rep. 213; N. Y. C. & H. B. B. B, Co. v. Smith, 62 Mise. Rep. 526; People ex rel. New York Steam Co. v. Straus, 186 App. Div. 787; 226 N. Y. 704.) The common law cause of action thus abrogated is not revived by the act of the Public Service Commission in declaring the filed tariff unreasonable and fixing a new rate for the future. (Murphy v. N. Y. C. B. B. Co., 170 App. Div. 788; 225 N. Y. 548; B. & O. B. B. Co. v. La Due, 128 App. Div. 594; P. B. B. Co. v. Titus, 216 N. Y. 17; Texas & Pacific By. v. Mugg, 202 TJ. S. 242; P. B. B. Co. v. International Coal Mining Co., 230 U. S. 184; Loomis v. Lehigh Valley B. B. Co., 208 N. Y. 312; Texas & Pacific By. Co. v. Abilene Cotton Oil Co., 204 U. S. 426; Gurney Heater Co. v. N. Y., N. H. & H. B. B. Co., 264 Mass. 427.)
   Crane, Ch. J.

A brief reference to some of the provisions of the Public Service Law (Cons. Laws, ch. 48) may be necessary to emphasize the point which the appellant makes on this appeal,

All charges made by the common carrier for the transportation of property shall be just and reasonable and not more than allowed by law or by order of the Public Service Commission (§ 26).

Every such carrier shall file with the Commission schedules showing the rates and charges for the transportation of property within the State. The form of every such schedule shall be prescribed by the Commission and shall conform in the case of railroad corporations as nearly as may be to that required by the Interstate Commerce Commission (§ 28).

Upon complaint the Commission may suspend the filed rate until it has an opportunity after a full hearing to determine its reasonableness and it may establish temporary rates in the meantime (§ 29).

No common carrier shall do business until its schedules of rates shall have been filed and published in accordance with the provisions of the law. eonrmon carrier shall charge, demand, collect or receive a greater or less or different compensation for transportation of passengers or property, or for any service in connection therewith, than the rates, fares and charges applicable to such transportation as specified in its schedules filed and in effect at the time; nor shall any such carrier refund or remit in any maimer or by any device any portion of the rates, fares, or charges so specified, nor extend to any shipper or person any privileges or facilities in the transportation of passengers or property except such as are regularly and uniformly extended to all persons and corporations under like circumstances ” (§ 33, subd. 1).

Discriminations are prohibited by section 35.

Upon a complaint that the rates as filed are unjust or unreasonable, the Commission shall determine the just and reasonable rates “to be thereafter observed and in force * * * and shall fix the same by order to be served upon all common carriers, railroad corporations or street railroad corporations by whom such rates, fares and charges are thereafter to be observed ” (§ 49).

The penalties exacted for violation of any of these provisions as well as the crime committed by any agent or officer who participates in the violation are part of the enactment contained in section 56.

The Commission is authorized to establish reasonable rates if those in force and effect are found to be unreasonable. (Laws of 1920, ch. 541; Laws of 1921, ch. 134, §■30.)

The purpose of the Public Service Law (then Public Service Commissions Law), as adopted in 1907 (Ch. 429), and amended thereafter, was to provide uniform rates for all shippers under like circumstances and to forbid discriminations. A uniform reasonable rate was to be the basis for all charges in railroad transportation. “ The means by which these great purposes were to be accomplished was the placing upon all carriers the positive duty to establish schedules of reasonable rates which should have a uniform application to all and which should not be departed from so long as the established schedule remained unaltered in the manner provided by law.” (Texas & Pacific Ry. Co. v. Abilene Cotton Oil Co., 204 U. S. 426, p. 439.)

At common law a carrier who demands payment of an unreasonable sum from a shipper is hable to an action to recover the overcharge. The question arising upon this appeal is whether the Public Service Law has substituted the remedies therein provided for this common law action.

The facts may be briefly stated to be these: The plaintiff is the assignee of the Duffney Brick Company, a domestic corporation, now in receivership; Between the years 1922 and 1930 the company delivered many carloads of brick to the Delaware and Hudson Railroad Company and the Boston and Maine Railroad, at Mechanicville, for shipment to points in and about New York city. Transfer of shipments were made to the defendant at Green Island or Troy, to be forwarded at a freight rate fixed in schedules filed with the Public Service Commission by the defendant and the two originating raihoads. The brick company objected to the rates as excessive, and after September, 1923, made payments under protest, filing a complaint with the Public Service 'Commission on November 20, 1924. On April 7, 1932, the Commission decided that the rate charged was unreasonable, and fixed the price thereafter to be charged as well as regulations for the loading of brick. The Commission had no power under the law nor did it attempt to decide what the reasonable charges should have been for the shipments made by the brick company during past years. It determined in accordance with section 49 what the reasonable rate thereafter should be and this was the full extent and effect of this determination.

In Murphy v. New York Central R. R. Co. (225 N. Y. 548, 557) the Commission made a finding as to the charges theretofore made by the railroad company and adopted a resolution to that the shippers were entitled to recover from the defendant the excess charges which had been paid, upon the ground that the rate was an-unjust and unreasonable exaction. This court held that the Commission had exceeded its power. The determination, at a particular time, that a rate is unreasonable, and the fixing of a reasonable rate are not a determination that the destroyed rate has been unreasonable throughout its existence or for any certain part of its existence or that its excess above the reasonable rate can be measured for any certain time by the difference between the two rates or is the true measure of the damages sustained by the exaction.”

Under the law as it existed for this case the full power of the Public Service Commission was exhausted when it determined that the rate on common brick between Mechanicville and New York city points of destination was -unreasonable; and that it should not exceed the eighty per cent basis of rates on common brick, or two-dollar rate per ton; and also found the rates to Brooklyn deliveries unreasonable to the extent that they exceeded $2.70 per ton.

The plaintiff cannot take this figure of the Commission as a basis for his action against the defendant to recover the difference between it and the rate filed and paid. The rate ordered by the Commission applies to the charges thereafter to be made.

We do not understand, however, that the plaintiff relies solely upon the findings of the .Commission to establish the amount of his damage. His claim is that his common law action is preserved to him; that he may still recover the excess over a reasonable rate, which he may establish by proof in his action at law, irrespective of the findings of the Commission. To state the proposition more clearly, it is this: The Public Service Law provides a remedy by complaint to the Commission if charges are excessive. Complaint was made in the latter part of 1924, and a hearing had in 1926. The decision was made on April 7, 1932. In the meantime the brick company had been protesting the rate charged for its shipments. The plaintiff, therefore, takes the position that he may come to court in a common law action and establish by common law proof what a reasonable charge would have been, and thus recover what was paid in excess of such reasonable rate between the time of complaint and the date of the decision. If other similar actions are brought what rate is to govern? That established in the plaintiff’s case upon his evidence will not be binding upon other courts and other parties. We may find, therefore, as the result of litigation, that numerous shippers have recovered excess charges at varying rates,

When the railroad filed its tariff schedules as required by section 28 of the Public Service Law, these were the lawful charges to be paid by the brick company for its shipments of brick. The shipper could not legally pay less, the railroad company could not charge more or less. These were the rates fixed according to the statute modified as therein provided. A subsequent change, although delayed, did not make the prior charges illegal or unreasonable. The statute creating the Public Service Commission and empowering it to supervise rates and charges was intended to cover the whole subject of rates and supersede all common law remedies. As long as the charges enforced are those on file with the Commission, they are the only lawful charges which may be collected. No departure from the filed rates is permitted.

The Legislature has provided a means for the protection of shippers against unreasonable rates. The action at law resulted in different rates for different shippers dependent upon the opinion of juries as to was reasonable. The statute makes the specified rate as fixed uniform and lawful until changed by or with the permission of the Commission.

We, therefore, hold that the remedy provided by our Public Service Law for excessive rate charges is the only relief open to the plaintiff under the circumstances here set forth. (People ex rel. City of New York v. Nixon, 229 N. Y. 356; Matter of Dry Dock, E. B. & B. R. R. Co., 254 N. Y. 305, 312; Gurney Heater Mfg. Co. v. N. Y., N. H. & H. R. R. Co., 264 Mass. 427; St. Paul Book & Stationery Co. v. St. Paul Gas Light Co., 130 Minn. 71.) This question was left open in the Murphy Case. (225 N. Y. 548, 559). We now decide it.

If the plaintiff’s bankrupt suffered any damage it has been due to the delay of the Commission in coming to a decision. Pending the hearing the railroad had no alternative other than to charge the filed rate.

Our act differs in this respect from the Interstate Commerce Act, which permits the Commission to order a refund. (Arizona Grocery Co. v. Atchison, T. & S. F. Ry. Co., 284 U. S. 370; Great Northern Ry. Co. v. Sunburst Oil & Refining Co., 287 U. S. 358.) How far we have gone in this direction by the addition of section 113 (Laws of 1930, ch. 790), and section 114 (Laws of 1934, ch. 287), we do not undertake to say, as these acts are not applicable to this litigation.

The judgment should be affirmed, with costs.

Lehman, O’Brien, Hubbs, Loughran and Finch, JJ., concur; Crouch, J., not sitting.

Judgment affirmed.


text:
    Walter I. Russell, Appellant, v. Anonyme des Etablissements Aeroxon, Defendant, and Friedrich Kaiser, Respondent.

      (Submitted June 5, 1935;
    decided July 11, 1935.)

      William W. Pellet for appellant.
    The Statute of Frauds of the State of New York does not apply to plaintiff’s contract. (Deutsch v. Textile Waste Mfg. Co., 212 App. Div. 681; Wilson v. Lewiston Mill Co., 150 N. Y. 314; Goldstein v. Scott, 76 App. Div. 78; Franklin Sugar Refining Co. v. Lipowicz, 247 N. Y. 465; Union Nat. Bank v. Chapman, 169 N. Y. 538; Fish v. D., L. & W. R. R. Co., 211 N. Y. 374.) The contract is not invalid under the common law of the State of New York. (Crane v. Powell, 139 N. Y. 379.) The written contracts are complete. (Sanders v. Pottlitzer Bros. Fruit Co., 144 N. Y. 209; Deutsch v. Textile Waste Mfg. Co., 212 App. Div. 681.)

      Fritz v. Briesen for respondent.
    The alleged contract purporting to provide for the sale of personal property of the value of more than fifty dollars over a period of five years is void and unenforceable, because the letter is not pleaded as a note or memorandum, and is not a sufficient note or memorandum to satisfy the Statute of Frauds. (Personal Property Law; Cons. Laws, ch. 41, §§ 31, 85; Richardson v, Gregory, 219 App, Div. 211; 245 N. Y. 540; Richardson Press v. Vandergrift, 165 App. Div. 180; Craig v. Wells, 11 N. Y. 315; Brown
      v. N. Y. B. R. Co., 44 N. Y. 79; Franke v. Hewitt, 56 App. Div. 497; Savage v. Weigel, 128 Mise. Rep. 618; Poel y. Brunswick-Balke-Collender Co., 216 N. Y. 310; Schaefer v. Alvarez, 249 N. Y. 117; Ansorge v. Kane, 244 N. Y. 395.) The Statute of Frauds of the State of New York is applicable to the alleged contract. (Dung y. Parker, 52 N. Y. 494; Crane v. Powell, 139 N. Y. 379; Matthews v. Matthews, 154 N. Y. 288; Steinhart, 217 N. Y. 549; Straesser-Arnold Co. v. Franklin Sugar Refining Co., 8 Fed. Rep. [2d] 601; Daniels v. Rogers, 108 App. Div. 338; Duncan v. Wohl, South & Co., 201 App. Div. '737; Dearing v. McKinnon Dash & Hardware Co., 165 N. Y. 78; Taylor Co. v. Fansteel, 234 App. Div. 548; 261 N. Y. 514; Dow v. Way, 64 Barb. 255; Crawford v. Morrell, 8 Johns. 253.) Plaintiff failed to plead the Belgian law. (Beers v. Hotchkiss, 256 N. Y. 41; Cahill Iron Works v. Pemberton, 30 Abb. Pr. [N. C.] 450; Crash-ley v. Press Pub. Co., 179 N. Y. 27; Savage v. O’Neil, 44 N. Y. 298; Smith v. Compañía, 127 Mise. Rep. 508; 220 App. Div. 782; Cuba R. R. Co. v. Crosby, 222 TJ. S. 473; Seamans, v. Barentsen, 180 N. Y. 333.)
   Crane, Ch. J.

The Appellate Division reversing the Special Term has granted the motion of the defendant to dismiss the amended complaint upon the pleadings. An analysis of the complaint is necessary for the consideration of the question presented.

The plaintiff is an individual doing business as the Russell Sales Company. The Societe Anonyme des Etablissements Aeroxon is a foreign corporation organized and existing under the laws of Belgium. Friedrich Kaiser is an individual defendant whose residence or place of business is not stated.

The complaint alleges that on the 24th day of July, 1931, the plaintiff and the defendants entered into an agreement in writing wherein the defendants granted to the plaintiff the sole selling rights for Aeroxon fly catchers for certain, specified States within the United States for the term ending the 31st day of August, 1933, and agreed to sell and ship to the plaintiff said fly catchers as ordered by him at a price to be determined. The plaintiff then states that on or about the 24th day of July, 1931, the defendants entered into an agreement whereby the term of said contract was extended for five years beginning September 1, 1933.” This extension agreement is not alleged to have been in writing. Allegations then follow setting forth an anticipatory breach of this extension agreement to the plaintiff’s damage in the sum of $300,000 for which judgment is asked. The action as it comes to this court relates solely to the individual defendant, Friedrich Kaiser, as the corporate defendant has not been served and has not appeared in the action.

The bill of particulars served by the plaintiff, supplementing his complaint, shows that neither the corporate defendant nor Friedrich Kaiser, as an individual, made any agreement in writing for an extension as alleged and that if Kaiser made such a contract it was oral. As the individual defendant, the only one appearing and answering, has pleaded the Statute of Frauds, the question presented and argued is whether, it appearing that the plaintiff seeks to hold this defendant upon an oral contract not to be performed within a year and for the sale of goods over $50 in value, the plaintiff can recover. That such is the narrow question presented is more fully explained by the following statement of the facts appearing in the bill of particulars, where the previous written contracts are set forth and the nature of the extension given.

The plaintiff had a contract in writing with the Societe Anonyme des Etablissements Aeroxon to take effect on the first day of September, 1925, and to run for one year, ending on the 31st day of August, 1926, apparently made in Brussels. It was signed in its corporate name by its vice-president, Friedrich Kaiser.

On September 6, 1927, Friedrich Kaiser in behalf of the said corporation wrote a letter, stating that the contract would be extended for five years beginning September 1, 1928, which was followed by letter from the corporation, dated the same day, stating:

“ Our present contract from February 20th, 1925, we agree to extend for five years beginning September 1st, 1928. * * *
“ SOC. AN. DES ETABLISSEMENTS AEROXON
“ Le Vice-Présidént,
Friedrich Kaiser.”

This would make the expiration period, September 1, 1933.

On July 24, 1931, the corporation, by its vice-president, wrote a letter to the Russell Sales Company, the plaintiff, stating:

We intend to renew your contract for five years on or about March 15th, 1932, to begin September 1st, 1933. * * *
“ Le Vice-Présidént,
Friedrich Kaiser.
Walter I. Russell,
Max Stenglin.”

This is all the written correspondence or alleged contract relating to a continuance or extension of the sales agreement upon which the plaintiff has brought this action. At once, we note that if there be any written contract it was made solely by the corporate defendant and not by Friedrich Kaiser. He never himself individually; he signed solely for the corporation as vice-president and in the name of the corporation. The plaintiff has no written contract, therefore, with Friedrich Kaiser, and it is with this defendant we are solely interested on this appeal.

This letter dated July 24, 1931, is Exhibit E,” annexed to the bill of particulars. As to it the plaintiff says:

Second. The agreement referred to in the 5th paragraph. of the amended complaint was partly oral and partly in writing. A copy of the written portion is hereto attached and marked Exhibit E.’ The oral part of the agreement was entered into on or about the 24th day of July, 1931, by Frederick Kaiser individually and as Vice-President of the Societe Anonyme des Etab-lissements Aeroxon. The substance of the oral part of the agreement was that the plaintiff and the defendants agreed to extend the contract then in existence between them for five (5) years from the 1st day of September, 1933, under all the terms and conditions contained in the contract then in existence between them.”

This Exhibit “ E ” and the alleged oral contract constitute the agreement sued upon as alleged in the complaint, for in paragraph fifth we read:

“ Fifth. That thereafter and on or about the 24th day of July, 1931, plaintiff and defendants entered into an agreement wherein and whereby the term of said contract was extended for five years beginning September 1st, 1933.”

It is for the anticipatory breach of this extension contract that the action is brought as the plaintiff further alleges in the complaint that the breach occurred when the defendants refused to sell any more fly catchers after August 31, 1933.

With this explanation of the complaint, as supplemented by the bill of particulars, we understand the justification for the statement above made that if the letter of July 24, 1931, be an extension in writing, which is very doubtful, it is the contract of the corporation and not that of Friedrich Kaiser, individually, and that the plaintiff seeks to maintain this action against Kaiser on an alleged oral contract. To state the question again, it is whether such an action can be maintained when it thus appears that the oral contract was not to be performed within one year or was for the sale of goods more than $50 in value.

Nowhere in this complaint or the bill of particulars is it stated where this oral contract with Kaiser was made. Was it in New York or in Belgium? We may possibly infer that it was made in Belgium. It is equally possible to assume that Kaiser was in this country and that the oral contract was made with him here. Whatever we may imagine or presume, the fact is that the complaint merely alleges in substance that the plaintiff made an oral contract on or about the 24th day of July, 1931, with Friedrich Kaiser to sell fly catchers to the plaintiff for a period of five years from the 1st day of September, 1933. To this complaint the defendant has answered, setting up the Statute of Frauds,

The Personal Property Law .(Cons. Laws, ch. 41), section 31, reads:

“ Agreements required to be in writing. Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking:
1. By its terms is not to be performed within one year from the making thereof * * * ”

And section 85 reads as follows:

Statute of Frauds. 1. A contract to sell or a sale of any goods or choses in action of the value of fifty dollars or upwards shall not be enforceable by action unless the buyer shall accept part of the goods or choses in action so contracted to be sold or sold, and actually receive the same, or give something in earnest to bind the contract, or in part payment, or unless some note or memorandum in writing of the contract or sale be signed by the party to be charged or his agent in that behalf.”

We think this defense was good and that this statute of our State applies to this oral contract as alleged by the plaintiff.

We might stop here in disposing of this case as from the allegations or lack of allegations in the complaint we may assume that the contract was made in New York. Were we justified, however, in presuming that the oral contract was made by the plaintiff with the individual defendant in Belgium, then we think the plaintiff should have gone further and alleged that such oral contract was at least enforceable in Belgium. There has been much diversity of opinion in the books as to whether our courts would enforce a foreign oral contract violative of the Statute of Frauds even if good in the country where made. '(1 Williston on the Law of Contracts, § 527, pp. 1016, 1017; 1 Williston on Sales [2d ed.], § 71-a, p. 117; Anson on the Law of Contract [5th Am. ed. Corbin], pp. 109-112; 47 Harvard Law Review, 315, 320; Goodrich on Conflict of Laws, § 88, p. 173.) In the American Law Institute’s Restatement of the Law of the Conflict of Laws (Ch. 12, § 602) we have the law stated in this language:

“ If the law of the forum forbids action unless certain forms have been employed, no action can be maintained on a foreign cause of action without satisfying such requirements of form. * *
Comment:
a. Statute of frauds. If the statute of frauds of the forum requires a written agreement as a condition of bringing action on a contract of a certain sort, no action can be maintained on a foreign oral agreement even if it complies with the law of the place of contracting. If the statute of frauds of the forum affects only the admissibility of certain evidence, the action may be maintained and the plaintiff may recover if he can establish his case by other admissible evidence.”

Under the heading “ Oral Evidence,” section 598, the American Law Institute in this volume on Conflict of Laws has found this to be the existing law:

Subject to the rule stated in § 599, the law of the forum determines whether a certain fact can be proved by oral evidence.”

Most of the authorities arrive at their conclusion as to the law applicable, i. e., lex loci or lex fori, by first determining whether the statute is substantive or procedural and evidentiary. If it is substantive then the law of the place of contracting applies, and though the forum has its own Statute of Frauds, the latter would not be applicable. If it is procedural or evidentiary then the law of the forum applies though the contract was valid and enforceable where made. (See Prof. Lorenzen, 32 Yale Law Journal, 311, 338; 14 Cornell Law Quarterly, 102; 83 University of Penn. Law Rev. p. 584; 3 Beale on Conflict of Laws, p. 1618.) This author states: “ If a provision of the statute goes to the form only, the statute of the forum should apply to all cases, even to cases where the contracts are valid where made. If the statute goes to the substance, the contract should be valid or void according to the law of the place of making; if valid it will be enforced if the statute of the forum does not forbid it; if void where made, it cannot be enforced anywhere.”

2 Wharton on Conflict of Laws ([3d ed.] § 690-f, p. 1454) says: “It is apparent, from what has already been said, that the decisions upon the question whether a contract is governed, in respect to matters covered by the statute of frauds, by the law of the forum or by the substantive law of the contract, are in irreconcilable conflict.” We refused to decide the question in Reilly v. Steinhart (217 N. Y. 549).

In this case before us we recognize the conflict simply for the purpose of saying that the complaint is insufficient whichever view we take of it, It appearing that the contract was oral and there being no allegation where it was made, the law of New York applies, and under our Statute of Frauds cannot be enforced. That a motion to dismiss under such circumstances is proper where the defendant has pleaded the Statute of see Seamans v. Barentsen (180 N. Y. 333), wherein we held: it appears upon the face of the complaint that a- contract sued upon is void under the Statute of Frauds, the objection need not be taken by demurrer, but is sufficiently raised by an answer expressly pleading the statute and by a motion for judgment on the pleadings at the opening of the trial.”

On the other hand, if we assume that the contract was made in Belgium then the plaintiff should have gone further and pleaded that an oral contract was enforceable by the laws of Belgium. The plaintiff had to plead a good cause of action, an action enforceable here in our forum. This contract alleged in the complaint, if made if New Yoik, was void and unenforceable if the Statute of Frauds be raised or pleaded. This the plaintiff knew. Therefore, if he sought to bring his cause of action within the substantive rule as being good according to lex loci, then he should have pleaded this fact. In the absence of such pleading it will be presumed that the law of the State of New York applies.

In 2 Wharton on Conflict of Laws ([3d ed.] § 781-f) the rule is stated that if for any reason a person desires to avail himself of the foreign law, and is unwilling to abide by the common law or the law of the forum, he must plead the foreign law.

When a contract would be void under the laws of this State, but is valid in the State where made, the plaintiff must allege where it was made and that it was there valid. (Thatcher v. Morris, 11 N. Y. 437.) To the same effect Riendeau v. Vieu (50 N. Y. St. Repr. 309; 66 Hun, 633); Turnow v. Hochstadter (7 Hun, 80). In Harmon v. Peats Co. (243 N. Y. 473) the defendant had failed to plead the Statute of Frauds, which of course is essential to raise this objection to the pleading.

We, therefore, conclude that the motion of the defendant for judgment on the pleadings was properly granted. The judgment should be affirmed, with costs.

O’Brien, Hubbs, Crouch, Loughran and Finch, JJ., concur; Lehman, J., concurs in result.

Judgment affirmed.


author: O’Brien, J.

text:
    In the Matter of the Application of The City of New York Relative to Acquiring Title to Real Property Required for Opening Cropsey Avenue in the Borough of Brooklyn. Anna Semken, Appellant; Frederick Semken, Respondent.

      (Argued May 20, 1935;
    decided July 11, 1935.)

      John J. Kirby and James H. Gilvarry for appellant.
    In proceedings to condemn real propeity by eminent domain, the inchoate right of dower of the wife of the owner of the fee in said real property must be recognized and protected in the proceedings as against her husband and her interest in the award will be preserved to her. (Byrnes v. Owen, 243 N. Y. 211; Matter of Trustees of New York & Brooklyn Bridge, 75 Hun, 558; 143 N. Y. 640; 89 Hun, 219; Clifford v. Kampfe, 147 N. Y. 383; Simar v. Canaday, 53 N. Y. 298; Utter v. Richmond, 112 N. Y. 610; Wheeler v. Kirtland, 27 N. J. Eq. 534; Matter of Central Park Extension, 16 Abb. Pr. 56; Mutual Life Ins. Co. v. Shipman, 119 N. Y. 324; Mac Kenna v. Fidelity Trust Co., 184 N. Y. 411; Emigrant Industrial Bank v. Regan, 41 App. Div. 423; Merchants Bank v. Thomson, 55 N. Y. 7; Oarlick v. Strong, 3 Paige, 440; Menelky v. Melen, 198 App. Div. 66; Matter of Eno, 196 App. Div. 131.) The amount directed by the Special Term to be invested to protect appellant’s inchoate right of dower is the proper amount required, and any less amount would be inadequate. (Mott v. Palmer, 1 N. Y. 564; Stokes v. Stokest 119 Mise. Rep. 168; 206 App. Div. 743; Richardson v. Harms, 11 Mise. Rep. 254; Hamm v. Butler, 112 So. Rep. 141; Smith v. Stanley, 37 Me. 11.)

      Frank W. Holmes for respondent.
    When the city condemned a portion of respondent’s land for public use, it extinguished his wife’s inchoate dower right in that portion. (Matter of the City of Rochester v. Holden, 224 N. Y. 386; People v. Mayor, 32 Barb. 102; People v. Adirondack Ry. Co., 160 N. Y. 225; Woodward-Brown R. Co. v. City of New York, 235 N. Y. 278; Spears v. Mayor, 87 N. Y. 359; Ferry v. Spokane, P. & R. Ry. Co., 258 U. S. 314; Randall v. Kreiger, 23 Wall. 137; Hammond v. Pennock, 61 N. Y. 145; Witthaus Schack, 105 N. Y. 332; Bennett v. Bennett, 318 Ill. 193; N. Y. C. & H. R. R. R. Co. v. Cottle, 187 App. Div. 131; Matter of Seventh Ave., 59 App. Div. 175; Van Loan v. City of New York, 105 App. Div. 572; King v. City of New York, 102 N. Y. 171; Matter of Trinity Ave., 116 App. Div. 252; Wendel v. Benninger, 132 App. Div. 785.) Appellant’s inchoate dower right does not in any event entitle her to have the benefit of the award for the improvements. (Melenky v. Méllen, 233 N. Y. 19; Phelps v. Phelps, 143 N. Y. 197; Westcott v. Campbell, 11 R. I. 378; Thompson v. Morrow, 5 Serg. & R. 289; Powell v. Monson & B. Mfg. Co., 3 Mason, 347; Rumsey v. Sullivan, 166 App. Div. 246; Sidway v. Sidway, 52 Hun, 222; Emrich v. Emrich, 129 App. Div. 557; Blesch v. Wood, 344 Ill. 153; Sanders v. McMillan, 98 Ala. 144; Allen v. McCoy, 8 Ohio, 14; McClanahan v. Porter, 10 Mo. 746.)
   O’Brien, J.

The respondent and appellant are husband and wife. Frederick Semken was the owner of real estate acquired by the city of New York in a condemnation proceeding. His wife Anna had an inchoate right of dower in this realty. For six damage parcels, including the land and improvements, the sum of $53,258 was awarded to Frederick. With interest to November 19, 1934, this amounts to $68,432.54. The Comptroller paid Frederick $50,762.24 and deposited $17,670.30 with the City Chamberlin to Frederick’s credit. The husband petitioned for an order directing the Chamberlain to pay this balance to him and the wife opposed his motion and asked for an order directing that the Chamberlain retain and invest the $17,670.30 during the lifetime of the husband and that her inchoate right of dower in the property condemned and in the proceeds be recognized and protected. Her theory is that this sum represents her inchoate right of dower in the award for the realty condemned. The Special Term denied the husband’s motion and directed the Chamberlain to invest this sum and to pay the income to the husband during his life and thereafter to his wife, if she survives, during her life. The Appellate Division reversed that order and granted the husband’s motion.

The damages awarded take the place of the land and the fund thus created becomes a substitute for the real property taken. (Utter v. Richmond, 112 N. Y. 610, 613.) Although an inchoate right of dower does not amount to an estate or title or interest in the land but constitutes a contingent claim as an institution of the law (Witthaus v. Schack, 105 N. Y. 332, 336), nevertheless the has an interest which attaches to the land as soon as there is a concurrence of dower and seizin and this valuable, subsisting, separate and distinct interest is entitled to protection. (Clifford v. Kampfe, 147 N. Y. 383, 385, 386.) In recent years this court has again pronounced the right of dower to be among the most highly and widely cherished property rights resulting from marriage and has held that the protective attitude of the courts extends to this right even when it is. no more than inchoate. (Byrnes v. Owen, 243 N. Y. 211, 216.)

As between the holder of an inchoate right of dower and the sovereign or its delegate exercising the power of eminent domain, the wife is divested of her interest when payment is made to the owner of the fee (Moore v. Mayor, etc., of New York, 8 N. Y. 110), but, except as to the sovereign or its delegate, her right will be preserved. (Simar v. Canaday, 53 N. Y. 298, 304; Mackenna v. Fidelity Trust Co., 184 N. Y. 411, 415; Matter of Trustees of New York & Brooklyn Bridge, 75 Hun, 558; Wheeler, Green & Whitney v. Kirtland, 27 N. J. Eq. 534.) Doubtless, as between the public and the wife, an owner of real estate may also dedicate it for a public use but, except as to the government, the wife’s subsisting interest is preserved from destruction until such a time as she releases it by joining in a deed or it is forfeited by her own adultery or is abolished by statute.

While the order at Special Term in its main features conforms with the general principle of the law relating to inchoate right of dower, as between husband and wife, the amount on deposit, $17,670.30, as calculated by the Comptroller, includes one-third of the award, less the liens, and also one-third of the accrued interest on the award.

The order of the Appellate Division should be reversed, with costs in the Appellate Division and in this court, and the proceeding remitted to the Special Term for modification of its order by ascertaining the value of appellant’s dower right by excluding participation by her in the interest on the award.

Crane, Ch. J., Hubbs, Crouch, Loughran and Finch, JJ., concur; Lehman, J., dissents.

Ordered accordingly.


author: Htjbbs, J.

text:
    In the Matter of the Claim of Harry Seiderman, Respondent, against Herman Perla, Inc., and Globe Indemnity Company, Appellant. State Industrial Board, Respondent.
    (Argued May 21, 1935;
    decided July 11, 1935.)

      F. A. W. Ireland for appellant.

      John J. Bennett, Jr., Attorney-General (Hector A. Robichon of counsel), for State Industrial Board, respondent.
    The appellant was properly held on the risk. (.Dobroski v. Supreme Window Cleaning Co., 213 App. Div. 838; Manchuk v. Eiseriberg, 215 App. Div. 850; Benna v. Maio, 241 App. Div. 641.) The extension of the period of coverage was properly extended by the Industrial Board to include the time of the accident. (Liverpool & London & Globe Ins. Co. v. Kearney, 180 U. S. 132; Gillet v. Bank of America, 160 N. Y. 549; Paul v. Travelers’ Ins. Co., 112 N. Y. 472; Evelyn Building Corp. v. City of N. Y., 257 N. Y. 501.) The attempted cancellation of the insurance contract on one day’s notice was ineffectual. (Hicks v. British America Assur. Co., 162 N. Y. 284; Lipman v. Niagara Fire Ins. Co., 121 N. Y. 454; Matter of Arner v. Manhattan Spring & Couch Co., 264 N. Y. 101; Matter of Teufel v. Lido Club, 228 App. Div. 870; Matter of Aioss v. Sardo, 249 N. Y. 270; Bamberger v. Wolf e-Smith Co., 205 App. Div. 739.)
   Htjbbs, J.

On January 14,1933, at eleven-thirty a. m., an insurance broker, acting for the employer, Herman Perla, Inc., submitted to the Trupin Agency, Inc., agent for the Globe Indemnity Company, appellant, an application for a workmen’s compensation policy. The agency, at that time, indorsed upon the application its acceptance and issued a binder as agent of the Globe Indemnity Company for a period of fifteen days, which by its terms would expire upon January 29th, at eleven-thirty a. m.

The effect of the transaction was to insure the employer from the date of the binder until eleven-thirty a. m. on January 29th, unless the risk was legally canceled by the Globe Indemnity Company prior to that time. A binder, or binding slip, as it is sometimes called, constitutes a written memorandum of the important terms of a contract of insurance which gives temporary protection to the insured pending the investigation of the risk by the insurance company or until a formal policy is issued. binder was signed by the agent of the Globe Indemnity Company and delivered to the broker, the contract of insurance was closed and the binder became in effect the same as a regular insurance policy including by inference all the terms of a regular policy. The application stated that it was submitted to the Globe Indemnity ” and the acceptance was signed by the agent of that company. On January 28th, 1938, the Trupin Agency wrote to the broker who submitted the application for the policy the following letter:

January 28, 1933.
“ Max E. Weiss,
“ 60 John Street,
New York City
Re: Compensation & Liability Herman Perla Inc.
Dear Sir: Kindly be advised that we have been unable to place the above captioned risks on account of class of business and hazardous machines used.
We are, therefore, forced to close our files on same and would kindly thank you to return above binders to our office within five days for cancellation as same will be void by then.
We regret our inability to be of service to you in this particular business.
Very truly yours,
“ TRUPIN AGENCY

Thereafter, and after the binder had expired according to its terns on Feburary 2d, the claimant was injured in the course of his employment. The Industrial Board has found that the letter quoted constituted an extension of the binder for five days from the date of the letter and that it was in force and covered the risk at the date of claimant’s injury.

We are unable to find any justification for such finding. The binder according to its terms expired before .claimant’s injury. If the letter had not been written, the risk would not have been covered by the binder, as it had expired.

The letter clearly advised the broker that the agency had been unable to place the risk and stated the reasons why it had been unable to do so. That statement was notice to the broker and the employer that the agency was without authority to grant further insurance and, therefore, was prohibited from extending the term of the binder. The sentence “ We are, therefore, forced to close our files on same,” could have had no other meaning.

The request to return the binder within five days, in view of the prior statements in the letter, could not by any possibility have had the effect of extending the terms of the binder.

This is not a case of attempted cancellation of a policy or binder before it expired according to its terms, by the service of notice upon a broker. The only question involved in this case is whether the insurance company’s agent legally extended the term of the binder.

The award against the Globe Indemnity Company, appellant, should be reversed and the claim against it dismissed, with costs against the Industrial Board.

The order of the Appellate Division and the award of the State Industrial Board should be modified in accordance with this opinion and as so modified affirmed, with costs in this court and in the Appellate Division to Globe Indemnity Company against the State Industrial Board.

Crane, Ch. J., Lehman, O’Brien, Crouch, Loughran and Finch, JJ., concur.

Ordered accordingly.