author: Finch, J. Loughran, J.

text:
    Stella Wechsler et al., as Executors of Sigmund Wechlser, Deceased, Appellants, v. Abraham M. Bowman et al., Formerly Copartners under the Firm Name of Byrne & Bowman, et al., Respondents.

      Argued January 21, 1941;
    decided April 24, 1941.

      Forrest M. Anderson, Donald Marks and Robert McCormack for appellants.

      Louis Salant and Eli S. Wolbarst for Abraham M. Bowman et al., respondents.
   Finch, J.

Ralph Wechsler, a brother of decedent, and the two plaintiffs in this action were named in the will of Sigmund Wechsler as his executors-and trustees.

In 1928 Ralph Wechsler, acting for the executors, carried on negotiations through a broker, John Byrne, of the firm of Byrne & Bowman, seeking to sell to the Port of New York Authority a parcel of real estate which was one of the assets of the estate. Bryne carried on his negotiations with another broker named Edward A. Arnold, who represented the Port of New York Authority. There is a written agreement from the real estate department of the Port Authority to the Chief Executive Officer, dated February 17, 1928, to pay $818,700 for the purchase of this property. This memorandum reads: “ Agreement has been reached for the purchase of property known as 700 West 179th Street * * * at a cost of $818,700 * * *.” The approval of the Advisory Committee was subjoined thereto: In our opinion the Port of New York Authority is fully justified in paying $818,700 for the above described property.”

Ralph Wechsler insisted that the commission which the estate was to pay must be paid back to him, and that Byrne & Bowman must collect their commission from the purchaser. We are not in the dark as tó what then took place, as Byrne, in writing to his partner, Bowman, who was in Florida, calls this matter a funny complication, which I think, however, I have overcome in a satisfactory way. * * * I succeeded in getting the buyer to pay the commission and this has to be split with Edward A. Arnold, who controled the purchaser. I considered the matter very carefully all week as to how to arrange the matter with Wechsler and finally agreed to send a bill to the Estate for the commission and then give back a check for the same amount to Applebaum in Wechsler’s office. In this way we will have no income tax to pay on that part of the deal and do not think that we assume any liability whatever in putting the transaction through in that way.” Thus, according to his own statement, Byrne induced the Port Authority to divert a part of the purchase price they had agreed to pay for the property, to Byrne & Bowman as brokers. It is significant to note that at the bottom of the typewritten agreement of the Port Authority to pay $818,700 as the purchase price for the property, there is written in hand the following notation: “ Approved on basis of $810,000 to be paid owner and Port Authority paying in addition broker’s commission of $8,700.”

There was also, on February 23, 1928, a receipt signed by John Byrne on behalf of Byrne and Bowman, and an agreement running to the defendant Nathan Applebaum, as follows:

“ Feby 23/28
‘M John Byrne hereby agree to pay Nathan Applebaum for his services in assisting me in bringing about the sale of 700 W. 179th (cor. Bway) a full brokers Commission on the purchase price as soon as said Commission is paid to me or my firm by the sellers.
“ JOHN BYRNE
for Byrne & Bowman.”

All the foregoing was arranged previous to the contract of sale being signed February 24, 1928, which provided for a purchase price to the estate of $810,000. Pursuant to the “ arrangement with Wechsler,” John Byrne carried out the collection of the commission from the estate as though it were a bona fide transaction. Byrne and Bowman submitted their bill to the estate and, upon receipt of a check therefrom, signed a receipt therefor. The $8,700 so received was returned to Ralph Wechsler in two checks, one of which was drawn to him directly and the other to Nathan Applebaum. As testified to without dispute by Arnold, the day after payment by these two checks was completed, Byrne explained to Arnold that the commission had to be returned to Ralph Wechsler in two checks because “ Mr. Wechsler did not wish to have a deposit in his account to be of an amount which would identify it as having anything to do with the commission on the sale of this property.”

Following the execution of this contract of sale, and on the next day, February 25th, Byrne wrote to his partner Bowman, who was in Florida, a letter as follows: “ * * * I succeeded in closing the Southwest corner of Broadway & 179th Street, and ran into a funny complication, which I think, however, I have overcome in a satisfactory way. We sold the property at $810,000, all cash above the mortgage. While negotiations were on the way, Ralph Wechsler insisted upon getting a full commission for himself, and of course, the Estate could not pay two commissions, so they put it up to me to get the buyer to pay us full commission and to collect the other one through us from the Estate. I succeeded in' getting the buyer to pay the commission and this has to be split with Edvard A. Arnold, who controlled the purchaser. I considered the matter "very carefully all week as to how to arrange the matter with Wechsler and finally agreed to send a bill to the Estate for the commission and then give back a check for the same amount to Applebaum in Wechsler’s office. In this way we will have no income tax to pay on that part of the deal and do not think that we assume any liability whatever in putting the transaction through in that way. There was no other way to put the deal through as Wechsler insisted on getting his full commission. The buyers understand the situation and agreed that we have done good work in getting the matter through the way we did.

“ I wish you would let me know if you think the arrangement is alright, and if not, I may be able to do it in some other way, and will not take any action until I hear from you. The commission can be collected at any time that we desire to go after it.”

Bowman telegraphed the following reply, dated February 27th: “ Arrangement with Wecksler OK get receipt for services from them

“ AMB ”

Byrne also explained to Arnold that Applebaum was an attorney in Ralph Wechsler’s office. Thereafter Byrne & Bowman, pursuant to the arrangements made before the contract of sale was signed with the estate, collected from the Port of New York Authority an additional $8,700 which was the remainder of the amount of the purchase price of $818,700 as approved by the Port Authority. At the trial the defendants, Byrne and Bowman, submitted as their defense that John Byrne was deceived by the false assurance of Ralph Wechsler that the estate owed him money as attorney, and that the “ folks knew all about the transaction ” of returning to him personally the commission paid by the estate. This defense is based solely on the testimony of John Byrne. In 1934, the other executors who are the plaintiffs in this action discovered for the first time, the acts of Ralph Wechsler and the firm of Byrne and Bowman in this transaction. Ralph Wechsler was thereupon removed as executor and trustee by the Surrogate’s Court, and surcharged for an amount which included among other things this $8,700 paid to him individually. A creditor’s action was then brought to set aside alleged fraudulent transfers by Ralph Wechsler to his wife. This suit was settled by the payment of $12,500 by Lillian Wechsler, the wife of Ralph Wechsler, under a written agreement that no part of this sum was to be applied against the surcharge of $8,700 here involved. Since the date of this agreement, further surcharges for the payment of which the $12,500 was made applicable, have been imposed against Ralph Wechsler.

The plaintiffs seek to recover in this action the $8,700 received by Byrne and Bowman from the estate, and also the sum of $8,700 received from the Port of New York Authority.

The principle of law which the plaintiff urges has been reiterated by this court many times. Any one who knowingly participates with a fiduciary in a breach of trust is liable for the full amount of the damage caused thereby to the cestuis que trust. (Jacobellis v. Prudential Ice & Coal Corp., 244 App. Div. 255; affd., 269 N. Y. 632; Mack v. Latta, 178 N. Y. 525, 532; Anderson v. Daley, 38 App. Div. 505; 159 N. Y. 146.) The explanation which John Byrne made to Arnold of the reason for the return of the commission to Wechsler not in one check but in two, and the testimony of John Byrne himself in the proceeding for the removal of Ralph Wechsler given prior to the trial of this action, wherein John Byrne testified that he was paying the money to Nathan Applebaum as broker, supplemented by the documents, including the letter mentioned above and the answer thereto by Bowman, raises an issue of whether there was not here proven a knowing participation with a fiduciary in a breach of trust.

It is not necessary, however, to rest this case upon that principle. There is no contradiction of the fact that Byrne and Bowman were unfaithful to their duties as brokers for the estate when John Byrne made an arrangement through Arnold with the Port of New York Authority to divert to them a part of the purchase price as a commission in addition to the commission to be collected by them from the estate. The law is well settled that it is the duty of an agent to act honestly towards his principal, and to use his utmost efforts to obtain for his principal the highest price possible for the property. In consequence the principal is entitled to recover from his unfaithful agent any commission paid by the principal and all moneys paid by a purchaser whether as a bribe to the agent of the seller or otherwise, on the theory that the purchaser was willing to pay that much more than the stated purchase price. So it was held in Andrews v. Ramsay & Co. ([1903] 2 K. B. 635, 637), a leading English case, that the seller could recover from the broker both the commission paid by the seller and also a second secret commission paid by the purchaser. The court there said: “It is clear that the purchaser was willing to give £20 more than the price which the plaintiff received and it may well be that he would have given more than that.” Indeed, in the case at bar we have seen that the agreement arrived at by the officials in the Port Authority was to pay as a purchase price the sum of $818,700. Thus we have an act which constituted Byrne and Bowman unfaithful agents. In Lamdin v. Broadway Surface Adv. Corp. (272 N. Y. 133, 138), with respect to the duty of an agent to his principal, the court said: He is prohibited from acting in any manner inconsistent with his agency or trust and is at all times bound to exercise the utmost good faith and loyalty in the performance of his duties. Not only must the employee or agent account to his principal for secret profits but he also forfeits his right to compensation for services rendered by him if he proves disloyal.”'

Byrne and Bowman, therefore, are prima facie liable to the estate as representing the beneficiaries for the commission paid them by the estate as brokers for the latter and also the amount received from the Port Authority, for the reason that they were unfaithful in accepting as a part of the purchase price of $818,700 so fixed by the purchaser, an amount equivalent to a second commission from the purchaser.

We are thus brought to a consideration of the defenses set up in the answer of the defendants. Their defense is first, a plea of the Statute of Limitations, since this action was not commenced until eight years after the acts complained of occurred, although within two years from the time that knowledge thereof came to the plaintiffs, and second, a plea of payment, namely, that the payment of $12,500 in settlement of the creditors’ action above referred to included the liability of Ralph Wechsler for this surcharge of $8,700.

Taking up first the plea of the Statute of Limitations, this is sufficient to prevent a recovery of the $8,700 received from the purchaser. This defense of the Statute of Limitations rests entirely upon the will of the Legislature in creating a limitation for the commencement of actions. An action upon a contract obligation, express or implied, must be commenced within six years after the cause of action has accrued. (Civ. Prac. Act, § 48, subd. 1.) While the period of limitation is the same, namely, six years, for an action on contract, express or implied, as for an action to procure a judgment on the ground of fraud, yet in the latter case the cause of action is not deemed to have accrued until the discovery by the plaintiff of the facts constituting the fraud. (Civ. Prac. Act, § 48, subd. 5.) Whether this period of six' years shall rim against an action to recover the money received by these unfaithful agents from the Port Authority depends upon whether the obligation may be said to be upon an implied contract obligation or to procure a judgment on the ground of fraud. A long line of cases in this court denominates the right to recover this $8,700 received from the purchaser as an action on contract and not an action on the ground of fraud. (Carr v. Thompson, 87 N. Y. 160; Wood v. Young, 141 N. Y. 211; Brick v. Cohn-Hall-Marx Co., 276 N. Y. 259; Cohen v. City Company of New York, 283 N. Y. 112.) In Carr v. Thompson (87 N. Y. 160) we pointed out that in the Code of Civil Procedure the pertinent language of the section relating to an action to procure a judgment on the ground of fraud was “ An action to procure a judgment other than for a sum of money on the ground of fraud ” (p. 164). This action of the plaintiffs in seeking to recover the money paid to Byrne and Bowman by the Port of New York Authority is an action to procure a judgment for a sum of money (Code Civ. Proc. § 382), based on a quasi-contractual obligation. There arises therefrom an implied obligation to pay the money to the plaintiff. The Statute of Limitations, therefore, is six years. (Civ. Prac. Act, § 48, subd. 1.)

>_ When we come to the cause of action for the money paid by the estate to Byrne and Bowman, we have a transaction wherein these brokers received the money as a part of a plan in which they were not to keep the money but to pay it to Ralph Wechsler individually. Since Byrne and Bowman breached the duty which they owed to the estate as its agents to obtain the highest possible price for the property sold, they earned no compensation and the estate is entitled to recover by way of damages such amount as they have paid to these unfaithful agents even though as a part of this transaction none of the payment enriched these agents but went through them as a conduit to the executor personally. Under such circumstances, no implied contractual obligation arises since “ the offender acquires no gain to himself * * * ” and his estate is not enriched. (Lord Mansfield in Hambly v. Trott, Cowper, 371, 376.) The estate had the right to recover by way of damages the amount of the money which it had paid them because of the fraud perpetrated by the receipt by the brokers of the second commission paid by the purchaser. This was an action to procure a judgment, not for a sum of money but for damages for fraud growing out of the receipt of the second commission and hence the cause of action did not accrue until the plaintiffs were aware of the facts constituting the fraud. While the six-year Statute of Limitations, therefore, prevents a recovery for the moneys received from the Port of New York Authority, it does not prevent a recovery by the plaintiffs of damages for the amount which it had paid out to these defendants as unfaithful agents. Since these appellants did not discover the facts until 1934, or two years prior to the commencement of this action, the Statute of Limitations is not a bar.

We come then to the second defense alleged, namely, a plea of payment in that the surcharge against Ralph Wechsler was included within the sum paid by the wife of Ralph Wechsler in settlement of the creditors’ action. The written agreements concerning this matter show that at the time the creditors’ action was brought, there were pending claimed surcharges against Ralph Wechsler in the Surrogate’s Court of New York County for amounts far in excess of that received in settlement of the suit. The creditors’ action was brought to set aside conveyances and transfers of property alleged to exceed $1,000,000 in value. On the settlement, the written agreements each provided that the sum received therein was not to be applied or deemed to be applied to the surcharges then outstanding against Ralph Wechsler, including the $8,700 which is here involved. The defendants having alleged payment as an affirmative defense had the burden of proof thereon, and there is nothing in this record which shows that there was included in this settlement the surcharge against Ralph Wechsler of $8,700. Indeed, it may be said that the evidence clearly shows that the parties to the settlement agreement expressly intended that the sum should not be used in payment of this obligation.

It follows that the settlement of the creditors’ action did not affect the liability of the defendants to the estate.

The appellants predicate liability in this action against the defendant Stewart Forshay upon the claim that he was a partner in the firm of Byrne and Bowman at the time that the secret commissions were accepted. This claim and the denial thereof raise a question of fact which must be deemed to have been decided adversely to the appellants by the trial court. (Glanzer v. Shepard, 233 N. Y. 236, 242.) There was also an issue of fact raised as to whether the defendant Nathan Applebaum knowingly aided Wechsler in the breach of trust. For the same reason and on the same authority, this question must also be deemed to have been decided adversely to the plaintiffs. It, therefore, follows that the complaint must be dismissed as to these defendants.

Where the judgment of the lower court is improper as a matter of law, this court has the power to reverse and grant final judgment. (Russ v. Russ, 263 N. Y. 625; Cohen on The Powers of the New York Court of Appeals, at pp. 437-439,)

It follows that the judgments should be reversed and judgment directed against the defendants Byrne and Bowman for the sum of $8,700, with costs in all courts.

Loughran, J.

(dissenting). (1) As I understand the prevailing opinion, the court stops short of deciding that the Wechsler executors established as matter of law their contention that Byrne and Bowman had wrongfully participated with Ralph Wechsler in the breach of his trust as executor. Accordingly I do not take up that issue.

(2) The court postulates the out and out assertion that the agreement arrived at by the officials in the Port Authority was to pay as a purchase price the sum of $818,700.” I cannot agree to this construction of the evidence as matter of law.

The contract for the sale of the property by the Wechsler executors to the Port Authority was made on February 24, 1928. The purchase price stated therein was $810,000. The Port Authority did not commit itself to make the additional payment of $8,700 until March 30, 1928. This commitment was recorded as follows: The Chief Executive Officer reported that in negotiating for the purchase of the property on the southwest corner of Broadway and 179th Street from the Estate of Sigmund Wechsler, the executor had insisted upon the purchaser paying as part of the purchase price the brokers’ commission of $8,700.00 in addition to the purchase price of $810,000; that Byrne & Bowman, the brokers in the matter, had submitted a bill for services of $8,700 which amount was based upon the prevailing rates and which he considered reasonable under the circumstances. He, therefore, asked that his action be approved and that he be authorized to pay the bill rendered. Whereupon, the following resolution was adopted: Resolved, that the action of the Chief Executive Officer in agreeing to pay the brokerage fee as part of the purchase price of the property on the southwest corner of Broadway and 179th Street from the Estate of Sigmund Wechsler, deceased, for the Hudson River Bridge Approach, be ratified and approved and that he be authorized to pay such firm for its services in effecting such purchase price the sum of $8,700.” (The emphasis is mine.)

The foregoing resolution for the payment of $8,700 to Byrne and Bowman, as I read it, did not necessarily mean that the Port Authority would in any event have been willing to pay to the Wechsler estate $8,700 more than the purchase price of $810,000 that had been theretofore fixed by the contract of sale made by the Wechsler executors with the Port Authority on February 24, 1928.

The court makes much of a letter written by Byrne to Bowman one month before the adoption by the Port Authority of the foregoing resolution. The letter (which is quoted at length in the prevailing opinion) was at most an extra-judicial or unsolemn admission — an item of evidence — and was not in itself final or conclusive in any legal sense. (Gangi v. Fradus, 227 N. Y. 452; 4 Wigmore on Evidence [3d ed.], § 1059.)

In that state of the record, I am not prepared to say with Judge Finch that the courts below were wholly without reason for their finding of fact that Byrne and Bowman had not failed in their duty as brokers to obtain for the Wechsler estate the highest price which the Port Authority would have paid for the property.

(3) We are all agreed that the Statute of Limitations had barred recovery by the Wechsler executors of the $8,700 as money had and received by Byrne and Bowman for the use of the Wechsler estate.

The judgment should be affirmed, with costs.

Lehman, Ch. J., Lewis and Desmond, JJ., concur with Finch, J.; Lotjghran, J., dissents in opinion in which Rippey and Conway, JJ., concur.

Judgment accordingly.


source: Caselaw Access Project

author: Rippey, J.

license: Public Domain

text:
    In the Matter of 440 East 102nd Street Corporation, Appellant, against Harris H. Murdock et al., Constituting the Board of Standards and Appeals of the City of New York, Respondents.

      Argued March 5, 1941,
    decided April 24, 1941.

      Frederick E. Crane, Leonard Acker and Edgar A. Palmieri for appellant.

      William C. Chanler, Corporation Counsel (James Hall Prothero, Paxton Blair and Jeremiah M. Evarts of counsel), for respondents.
   Rippey, J.

On and prior to March 13, 1935, the petitioner-appellant owned property facing about 218 feet on East One Hundred and Second street in the borough of Manhattan and bounded on the east by the Harlem river. Four buildings were located generally on the outside boundaries of the plot and on the interior, between the buildings, was an open space. The property was used for more than thirty years for stabling horses, at times as many as seventy-five, and for a junk and stable yard. On March 13, 1935, title to the easterly portion of the property, on which two of the buildings and a small portion of the open yard were located, vested in the city of New York by virtue of condemnation proceedings in connection with the proposed construction of the East River drive. Thereupon the buildings on the property condemned were demolished.

After the condemnation proceedings, there remained on the westerly side of the plot a lot facing 105.14 feet on.East One Hundred and Second street, running back 125.91 feet on the westerly line at right angles to East One Hundred and Second street, thence easterly at right angles to the said westerly boundary line to the westerly condemnation line of East River drive and thence along such condemnation line to the southerly lot line of East One Hundred and Second street, comprising some 12,550 square feet of space. The building located on the northeast corner of the plot was in part destroyed by fire in 1938 and what remained was ordered demolished by the city authorities. Still remaining on the northwest corner of the plot was a one-story brick building, 48.7 feet wide and 59.7 feet deep, which had been used continuously from 1900 at least as a stable for more than five horses, and also most of the junk yard and stable storage and accessory space which had been so used for a similar period of time.

Petitioner applied to the Department of Housing and Buildings in May, 1939, for permission to change the use of the premises not theretofore taken by the city in condemnation proceedings to a gasoline service station and such permission was granted on July 18, 1939. Permits for lowering the curb on One Hundred and Second street and for storing gasoline were subsequently issued. The one-story brick building remained on the property unchanged structurally or in any other particular except that a coat of stucco was plastered over the exterior walls. Outside of the building, the surface of the rest of the plot was cemented, six 550-gallon tanks were placed beneath the surface of the ground, six gasoline pumps were installed, and stucco was put on the brick wall on the southerly side of the property. A certificate of occupancy was issued by the city authorities and appellant has been using the property as a gasoline service station since late in 1939.

Prior to December 7,1934, all of the property of appellant was in an unrestricted district. On that date an amendment to the "Amended Building Zone Resolution ” went into effect whereby the portion of the plot to which it still has title was rezoned and placed in a residential district but a strip five feet wide along the westerly lot line was left in the unrestricted district. Since that amendment went into effect, the Amended Building Zone Resolution makes uses of the plot, so far as it was rezoned into a residence district, either for a gasoline service station or for a stable for more than five horses or for a junk and storage yard non-conforming uses'. No application has been made by the owner for a variance. The question presented is whether, without a variance of the Amended Building Zone Resolution, the building and premises west of East River drive and now owned by appellant and included in the residential district may be used under the terms of the resolution for a gasoline service station. It is not open to question that the part of the plot still located in the unrestricted district may be used for a gasoline service station unless its use is restricted or prohibited by some provision of law or regulation not on the record here open for consideration and that the entire plot, embracing both that part located within a residence district and that part located within an unrestricted district, is used as a single unit.

The question of the constitutionality of the Amended Building Zone Resolution as applied to the property of petitioner-appellant is not before us and, consequently, we. do not consider its reasonableness or arbitrary character in such application. Some aspect of the police power furnishes the basis for the imposition of reasonable restrictions by State and municipalities through zoning ordinances and regulations uniformly applicable within a given area affecting the uses to which private property located within that area may be put by its owners but its exercise finds justification only in promotion of public health, public safety, public welfare and good order to the end that public convenience and general prosperity may be attained (Matter of Wulfsohn v. Burden, 241 N. Y. 288; Dowsey v. Village of Kensington, 257 N. Y. 221; Baddour v. City of Long Beach, 279 N. Y. 167; Village of Euclid v. Ambler Realty Co., 272 U. S. 365). Zoning laws which curtail and limit uses of property confer no privilege upon property owners. Even though in case of necessity such laws are properly within the exercise of the police power, the whole and each and every of the parts must be given a strict construction since they are hi derogation of common-law rights (People ex rel. Ortenberg v. Bales, 224 App. Div. 87; affd., 250 N. Y. 598; Matter of Multiplex Garages, Inc., v. Walsh, 241 N. Y. 527; Wood v. Tunnicliff, 74 N. Y. 38, 43; Woollcott v. Schubert, 217 N. Y. 212, 220). The provisions of the resolution may not be extended by implication (Matter of Monument Garage Corp. v. Levy, 266 N. Y. 339). It was a strict legal right of appellant to continue the non-conforming uses existing at the effective date of the amendment to the Amended Building Zone Resolution in 1934 since the property was at that time wholly within an unrestricted district for which no regulations or restrictions were provided (Amended Building Zone Resolution, § 5; Village of Mill Neck v. Nolan, 259 N. Y. 596). Appellant, however, acquired no “ vested rights ” by virtue of the permits and certificate of occupancy upon which it may here rely since applications for the permits and certificate were made and granted later than the effective date of the amendment (Matter of Rosenbush v. Keller, 247 App. Div. 748; affd., 271 N. Y. 282.)

Section 1 of the Amended Building Zone Resolution provides that the word “ building ” shall include the word “ structure.” The city of New York is divided into four classes of districts by section 2 “ for the purpose of regulating and restricting the location of trades and industries and the location of buildings designed for specified uses ” to be known as (1) residence districts, (2) business districts, (3) retail districts, and (4) unrestricted districts. That section further provides that “ no building or premises shall be erected or used for any purpose other than a purpose permitted in the use district in which such building or premises is located.” Section 3 specifies eight uses for which a building may be erected or a building or premises used in a residence district. A gasoline service station is not one of the permitted uses. Subdivision (1) specifies “ dwellings, which shall include dwellings for one or more families and boarding houses and also hotels which have thirty or more sleeping rooms ” and “ the accessory uses customarily incident thereto.” Section 4 (subd. a) prohibits, among other trades, industries or uses, the use of any building or premises and the erection of any building which is arranged, intended or designed to be used in a business district for “(20) Junk, scrap paper or rag storage * * * (36) Stable for more than five horses ” and “ (46) Gasoline service station.” Subdivision (b) prohibits a use which is “ noxious or offensive by reason of the emission of odor, dust, smoke, gas or noise,” except car barns and places of amusement. Petitioner’s use of its building and premises for a gasoline service station has not been prohibited on the ground that it was noxious or offensive for the reasons specified in subdivision (b) nor for any other similar reason and subdivision (c) has no bearing on any question here involved.

Saving provisions as to non-conforming uses and exceptions are contained in sections 6 and 7 respectively but attention need be given only to section 6. Section 6 reads as follows :■

“ 6. Existing Buildings and Premises, (a) Any use existing in any building or premises on July 25, 1916, and not conforming to the regulations of the use district in which it is maintained, may be continued therein. No then existing building designed, arranged, intended or devoted to a use not permitted by this article in the district in which such use is located shall be enlarged, extended, reconstructed or structurally altered unless such use is changed to a use permitted in the district in which such building is located. Such building may, however, be reconstructed or structurally altered to an extent not greater than 50 per cent, of the value of the building, exclusive of foundations, provided that no use in such, building is changed or extended, except as authorized in paragraph b of this section, and provided, further, that no use included in any one of the enumerated subdivisions of paragraph a of section 4 is changed into a use included in any other enumerated subdivision of paragraph a of section 4 or into a use prohibited by paragraph b of section 4, and also provided that no use prohibited by paragraph b of section 4 is changed into another use prohibited by paragraph b of section 4 or into a use included in an enumerated subdivision of paragraph a of section 4.
(b) Any use existing in any building or premises on July 25, 1916, and not conforming to the regulations of the use district in which it is maintained may be changed, and such use may be extended throughout the building, provided that in either case:.
(1) No structural alterations shall be made in the building, except as authorized by paragraph a of this section, and
“ (2) In a residence district no portion of a building devoted to a use included in subdivision 1 of section 3 shall be changed to any use prohibited in a residence district, and
“ (3) In a residence district no building or premises, unless devoted to one of the uses that is by section 4 prohibited in a business district, shall be changed to any of such uses, and
(4) In a residence or business district no building or part thereof and no premises, unless devoted to one of the uses that is by paragraph a or b of section 4 prohibited in a business district, shall be changed to any of such uses.
“ If a use is changed as authorized in this section, the new use may thereafter be changed, subject to the limitations imposed by subdivisions 1, 2, 3, and 4 of this paragraph.”

Section 6 (subd. a) relates to the continuance of the use to which the premises and the buildings and structures thereon were put by the owner before and at the time of rezoning of the property into a district in which such uses were prohibited. It is specifically provided that the uses to which the premises and buildings thereon were put by the owner on and prior to that date may be continued despite the rezoning and the existence of the property in whole or in part in the residence district. It is next provided that no then existing building on the premises suitably designed, arranged, included or devoted to such uses may “ be enlarged, extended, reconstructed or structurally altered unless such use is changed to a use permitted in the district in which such building is located,” in this case, to a use permitted in a residence district, except, if the pre-existing use is changed or extended as authorized by section 6 (subd. b), “ such building may, however, be reconstructed or structurally altered to an extent not greater than 50 per cent, of the value of the building, exclusive of foundations.” Specifically in the case at bar that means that the owner of the property, when changing the stable for more than five horses and junk yard use to which the property was devoted on and prior to December 7, 1934, to use for a gasoline service station, the then existing building might be reconstructed or structurally altered to an extent not greater than fifty per cent of the value of that building, exclusive of foundations. We have already held that several structures on the same plot, although used for the same purpose, may not be grouped together as one unit for the purpose of effecting a prohibited use of the premises (Matter of Multiplex Garages, Inc., v. Walsh, 241 N. Y. 527). Thus, under section 6 (subd. a) we are to consider only whether, as matter of law, the building on the premises was reconstructed or structurally altered. We would not be required to give even that further consideration except for the limitation provided in section 6 (subd. b, par. 1) on the change of the non-conforming use. The provisos in section 6 (subd. a) of the resolution need no additional consideration here since they are applicable only in the event that there is reconstruction or structural alteration of the building.

Appellant, on this record, does not seek to continue the non-conforming uses of the building for more than five horses or for junk, etc., specified in section 4, subdivision a (par. 20) and (par. 36) as permitted in section 6 (subd. a). Nor was the then existing building “ enlarged, extended, reconstructed or structurally altered.” It has been found in the courts below as a fact upon ample and non-conflicting evidence that nothing was done to the building proper except to cover the outside brick walls with a coat of stucco. Nothing of more consequence was done than would have resulted from a coat of paint. Nothing was done to the structure as such. That was the only building or structure on the premises except the brick wall in the rear and the only treatment it received was a coat of stucco. A building is enlarged, extended, reconstructed or structurally altered ” within the meaning of a zoning resolution only where there is a change or substitution in a substantial particular in the structure of the building itself or in one of its parts or by the addition of another structure to it so that there is an effective conversion of an existing building into a different, structure (Klumpp v. Rhoads, 362 Ill. 412; Paye v. City of Grosse Point, 279 Mich. 254; Commonwealth v. Hayden, 211 Mass. 296; City of Earle v. Shackleford, 177 Ark. 291; Carrithers & Son v. City of Louisville, 250 Ky. 462; Plaza Amusement Co. v. Rothenberg, 159 Miss. 800). By common use and understanding, accord is found in such a definition. Barren land is not a “ building ” or a “ structure ” within the purview of the Amended Building Zone Resolution. Accord is also found in the construction which those having to do with the administration of the resolution throughout its history of more than twenty-four years have uniformly given to section 6 to which the courts must extend great and many times controlling weight (Easton v. Pickersgill, 55 N. Y. 310; City of New York v. N. Y. City Ry. Co., 193 N. Y. 543; Kings Co. L. Co. v. City of New York, 176 App. Div. 175; affd., 221 N. Y. 500; Town of Amherst v. County of Erie, 260 N. Y. 361, 369, 370; Paye v. City of Grosse Point, supra). Doubt, if any, is dissipated as to the meaning of the words and expressions which we have assigned to them by the definition of an “ alteration ” which respondent has formulated in article 2 of its Building Code (Administrative Code of the City of New York, L. 1937, ch. 929, § C26-11.0, p. 504) where it is enacted that “ the term ‘ alteration,’ as applied to a building or structure, shall mean any change or rearrangement in the structural parts or existing facilities of any such building or structure, or any enlargement thereof, whether by extension on any side or by any increase in height, or the moving of such building or structure from one location or position to another ” (Bull v. N. Y. City Ry. Co., 192 N. Y. 361, 372). “We are bound, of course, in interpreting a statute, to construe it in view of other statutes relating to the same subject-matter, in accordance with the sense of its terms and the intention of the framers of the law” (Town of Putnam Valley v. Slutzky, 283 N. Y. 334, 343).

Section 6 (subd. b) authorizes, under specified conditions and limitations, a change by a property owner from a nonconforming use to another non-conforming use both of the building on the_ premises and of the premises themselves. Since (1) “ no structural alterations shall be made in the building, except as authorized by paragraph a of this section,” (2) the building on the premises was not devoted to a dwelling use as specified in subdivision 1 of section 3, (3) the building and premises were devoted to uses prohibited in a business district, and (4) the building wholly and in part and the premises wholly were devoted to a use or uses prohibited in a business district in section 4 (subd. a), by the words expressly used, section 6 (subd. b) specifically authorized a change of use in either or both of the building and premises from a stable for more than five horses and accessories and a junk yard, which existed on July 25, 1916, when it had not been abandoned and was non-conforming to the regulations of the use district in 1939, to a gasoline service station, another non-conforming use in 1939, and the extension thereof throughout the building. Sight must not be lost of the fact that section 6 (subd. b, par. 1) relates to structural changes in the building only whereas section 6 (subd. b, par. 3) and (par. 4) relate to use and changes of uses in either building or premises. There is clear distinction in the resolution between changes made in the building structure and uses made of the building and premises. There is likewise necessarily clear distinction between structural changes to the building and addition of structures to the premises or plot. Structural changes to the existing building proper referred to in section 6 (subd. b, par. 1) are permitted and limited by the provisions of section 6 (subd. a). No prohibitions are found in the resolution of additions of.structures to the premises or plot outside of the existing building necessary to make effective the newly selected non-conforming use.

There could be no abandonment by the owner of the old non-conforming uses through the taking of a part of the premises by the city and the demolition of the buildings thereon or by the injury to and subsequent demolition of another building on account of fire. Neither occurred through the voluntary act of the owner. Further than that, it was found as a fact by the Board of Standards and Appeals that “ the use of the plot as stables and open space for more than five horses and for storage of wagons antedated the adoption of the Zoning Resolution [1916] as well as the change of zone [1934] and was a continuing non-conforming use until after a permit was obtained from the Borough Superintendent for the change of use to a gasoline station.” This finding was made upon ample evidence to sustain it and was approved by Special Term and by the Appellate Division. There was no evidence upon which any contrary finding could be based. Thus the contention of the city that the non-conforming use was abandoned through the demolition of buildings on the premises or by affirmative action of the owner has been effectively determined both as a matter of law and fact against the city.

It was found by the Appellate Division that the transformation of the property into a modern gasoline service station in 1939, the placing of six 550-gallon tanks under the surface of the plot, the erection in the open space on the plot of six gasoline pumps in three separate batteries, the cementing and paving of the open area, the curb cuts and the stuccoing of the outside walls of the building and of the rear brick wall involved structural alterations of the building as well as of the whole premises. We have pointed out that such changes did not constitute structural alterations of the building.

There having been no abandonment of the uses to which the property had been put by the owner and section 6 (subd. b) having authorized the substitution of another nonconforming use without restriction or prohibition except as and to the extent above indicated, the owner could not be denied the right to erect on the premises additional structures designed and necessary for the conduct of the business intended in the new use.

Reliance has been placed by counsel for respondent and by the Board of Standards and Appeals on our decisions in Matter of Kaltenbach v. Board of Standards & Appeals (274 N. Y. 34) and Matter of Fortuna v. Murdock (281 N. Y. 763). The Appellate Division believed the Kalten bach case was in point but correctly pointed out that the Fortuna case was not decisive. Each case depended on its own peculiar facts and neither is controlling on the facts in the case at bar. In the Kaltenbach case a plot which was used and occupied as a whole long prior to 1916 as a monument and stone-cutting establishment was sought to be split up into parts on one of which the pre-existing nonconforming use was to be continued. The owner applied to the Commissioner of Buildings for a permit to change the other part from its former use to a gasoline service station. The permit was granted and a certificate of occupancy was issued. Thereupon the owner applied for a permit to erect an office building and a four-car garage. That application was approved and a certificate of occupancy granted. When the matter reached the Court of Appeals, we stated that “ the issue of law is presented whether the addition of the gasoline service station, the ‘ office building ’ and the four-car garage to these premises constitutes such a change from one non-conforming use to another non-conforming use on the same premises as is authorized by the following provisions of the Building Zone Resolution ” (referring to sections 4 [subd. a] and 6 [subd. b]) (p. 37). It was there held, on the record, that the erection of the garage, pumps tanks and office building constituting a single structural unit — a gasoline station — when on a plot under a single ownership with a non-conforming use continued on a part, was in violation of the terms of the Building Zone Resolution. What actually occurred was the continuance of one nonconforming use on a part of the plot, which was permissible only under section 6 (subd. a), and the addition of another non-conforming use on another part of the same plot under the same. ownership, which was excluded by section 6 (subd. a) and was authorized only under section 6 (subd. b) in the event that it was permissible under section 6 (subd. b, par. 1) and the old non-conforming use on the plot was discontinued. There was no change of one non-conforming use for another within the meaning of section 6 (subd. b) of the resolution. No principle or rule of law was there laid down which has any application in the case at bar. In the Fortuna case it was sought totally to demolish a stable and on the plot construct a building as an accessory to a gasoline station. The only issue raised or determined was whether the owner was entitled to a variance of the Zoning Resolution. In reviewing the order of the Special Term which has sustained the Board of Standards and Appeals in granting the variance, the Appellate Division held: The board of standards and appeals exceeded its jurisdiction when it granted the variance described. There was no proof before the board and none appears in this record justifying the conclusion as to the premises involved that there are either ‘ practical difficulties or unnecessary hardships in the way of carrying out the strict letter of the provisions of’ the Amended Building Zone Resolution (New York Code of Ordinances, Appendix B) as it affected those premises, within the purview of section 21 thereof, as judicially construed ” (257 App. Div. 993, 994), and upon that holding this court affirmed.

In view of what has been said, appellant was not required to apply for an exception under section 7 of the resolution or a variance of the zoning regulations under section 21 in order to obtain the right to use the premises as a gasoline service station.

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.

Loughran, Finch, Lewis and Conwat, JJ., concur; Lehman, Ch. J., and Desmond, J., dissent.

Ordered accordingly.


author: Desmond, J.

text:
    Gayton Delisa, an Infant, by Michael Delisa, His Guardian ad Litem, et al., Appellants, v. Arthur F. Schmidt, Inc., Defendant, and Warren Norge Company, Inc., Respondent.

      Argued March 11, 1941;
    decided April 24, 1941.

      Frank L. Tyson and I. Sidney Worthman for appellants.

      Edward M. Fuller and Daniel Mungall for respondent.
   Desmond, J.

The action is for damages for personal injuries suffered by the infant plaintiff when a refrigerating coil and tank unit, containing sulphur dioxide, exploded. The unit had been purchased by the plaintiff parent as junk from the ■ defendant Arthur F. Schmidt, Inc. It was one of three Frigidaire ” units that had been removed from the Hotel Henri at Lynbrook, N. Y., by defendant Arthur F. Schmidt, Inc., to make way for the installation of a new Norge refrigerating unit. Defendant Warren Norge Co., Inc., was the distributor from whom Schmidt, Inc., had purchased the new Norge unit. Two of defendant Norge’s employees, a commercial installation supervisor and a service man, together with two employees of the Schmidt Company, had removed the old Frigidaire units and installed the new Norge unit. The employees of the defendant Norge knew at the time that sulphur dioxide was used in the Frigidaire units as a cooling substance or refrigerant and that sulphur dioxide, when confined and exposed to heat, would explode, and that the gas so released would imperil human life. Before removing the units they made sure that this refrigerant was pumped back into the tank of each unit. They did not remove this sulphur dioxide after the units were dismantled but allowed it to remain sealed in the tanks. Defendant Schmidt had the units removed to a fenced yard where the unit, which after-wards exploded injuring the infant plaintiff, remained for over a year until sold to the infant’s father as junk.

By its answer the defendant Norge Admits that prior to December 22, 1936, to wit, on December 21, 1935, its agents, servants and/or employees assisted the agents, servants and/or employees of another in dismantling certain portions of a certain refrigerating outfit in the Henri Hotel.” An officer of Schmidt, Inc., testified that during part of the dismantling operation he was at the hotel and saw one of defendant Norge’s employees remove one of the Frigidaire units, that he gave no orders to the employees of defendant Norge, that the employees of Schmidt, Inc., were not in charge of the dismantling operation, that he did not hear either of the employees of the defendant Norge give any orders, that he did not ask Mr. Wallace, the service manager of Warren Norge corporation, for help in installing the new Norge refrigerator, that he requested Warren Norge Company, Inc., to install the refrigerator, and that he had had a conversation with Mr. Wallace with reference to the dismantling of the old Frigidaire plant in the Henri Hotel. The trial judge refused to permit the witness to relate the conversation on the ground that there was no evidence that Mr. Wallace, the service manager of defendant Norge, had authority to bind his company with regard to the dismantling of an old plant which was not a Norge plant.” Mr. Wallace was the supervisor of the employees of the defendant Norge sent to the Henri Hotel, and he sent them there in connection with the assisting of dismantling of the refrigerating unit.” The defendant Norge paid its employees for their work in removing the old unit and installing the new one.

The trial court after consultation with counsel for plaintiff and for the defendant Norge, dismissed the complaint as against the defendant Norge, and declared a mistrial as against the defendant Schmidt. At this stage of the proceeding plaintiff had yet to introduce any proof of the manner in which the accident happened, the damage to plaintiffs, and the infant plaintiff’s freedom from negligence. The case has been treated by counsel for the respective parties and the courts below as if such proof had been introduced. Further, it was stipulated that the record be deemed to be amended to show “ that this infant plaintiff sustained injuries when the chemical exploded and came in contact with him.” The Appellate Division unanimously affirmed the dismissal of the complaint as against the defendant Norge. This court granted leave to appeal.

We are of the opinion that the record presents a question of fact as to whether the two men sent by the defendant Norge to help install the new refrigerator in the Henri Hotel remained in the employ of the defendant Norge while assisting in the dismantling of the Frigidaire units. Plaintiff’s evidence and the inferences reasonably to be drawn therefrom established a prima facie case of negligence on the part of the defendant Norge, if it be found that the men sent to the hotel to help the defendant Schmidt install the new machine remained in the employ of the defendant Norge.

While the defendant Norge urges otherwise, the evidence admits of a finding that the two men continued in their general employment while installing the new machine. They were sent to install it at the request of the defendant Schmidt. They were under the control of the service manager of the defendant Norge. They were paid by the defendant Norge. The work they did, at least to the extent of installing the new Norge refrigerator, was indirectly but substantially beneficial to the defendant Norge, as it aided in the sale of the machine and promoted good will with the customer and with the retailer Schmidt. From the authority to install the new machine may be inferred the authority to do all acts necessarily connected therewith or that would in a reasonable manner expedite the work assigned. (Casey v. Davis & Furber Machine Co., 209 N. Y. 24.) The dismantling of the old units could be found as fact to be merely incidental to the installing of the new refrigerating equipment, as installation of the new refrigerator first required removal of the old one. The fact that the employees of the defendant Norge assumed the work of removing the old units without order or request from the defendant Schmidt is some evidence that they were simply performing their duties to their general employer. Moreover, the record is barren of proof that the general employer surrendered control of its employees, and it must be presumed that [its] control continued.” (Irwin v. Klein, 271 N. Y. 477, 485.) It was error, therefore, for the trial court to hold as matter of law that the two men sent to the Henri Hotel by the defendant Norge were not in its employ when they undertook to dismantle the old equipment in order to install the new. (Wawrzonek v. Central Hudson G. & E. Corp., 276 N. Y. 412.)

One of the essentials to be considered in determining the question whether the general employment of one doing work primarily beneficial to another continues, is the agreement or understanding between the general employer and the person primarily benefited. (Braxton v. Mendelson, 233 N. Y. 122.) The general employer, particularly if the general employer is a corporation, may be bound by its agent, whom it intrusts with the responsibility of assigning the work to be done by other employees, to an agreement whereby its employees perform work for another. The scope of the agent’s authority to make such an agreement may be a question of law. More often, however, it is a question of fact. Where the service manager of the defendant Norge was shown to have authority to bind his principal to the extent of permitting its employees to install a new machine, a question of fact was presented as to whether the scope of his authority did not also include the right to make an agreement that the employees under his control shall remove an old machine before installing a new one. The court erred in not permitting the witness Schmidt to relate the agreement with Mr. Wallace, the service manager of the defendant Norge.

Here the instrument which caused the injury to the infant plaintiff was inherently dangerous (Pettis v. N. Y. State Elec. & Gas Corp., 275 N. Y. 507), to the knowledge of the employees of the defendant Norge. They left it in such condition that it could and did become a source of injury to the unsuspecting. Their negligence in so doing is attributable to their employer, whoever he may have been at the time. Should the jury find that the defendant Norge was their employer, then upon the plaintiff’s proof the defendant Norge would be liable.

It follows, therefore, that it was error to dismiss the complaint as against the defendant Norge at the end of plaintiffs’ case.

The judgment so far as appealed from should be reversed and a new trial granted, with costs in all courts to abide the event.

Lehman, Ch. J., Lotjghran, Finch, Rippey, Lewis and Conway, JJ., concur.

Judgment accordingly.


author: Desmond, J. Rippey, J.

text:
    Mae O’Hanlon, as Administratrix of the Estate of James J. O’Hanlon, Deceased, Appellant, v. Thomas E. Murray, as Receiver of Interborough Rapid Transit Company, Respondent.
    Argued February 28, 1941;
    decided April 24, 1941.

      Jeremiah A. O’Leary for appellant.

      William C. Chanler, Corporation Counsel (Edward J. McGratty, Jr., and Paxton Blair of counsel), for respondent.
   Desmond, J.

Plaintiff’s intestate was killed when he stepped from the platform in defendant’s subway station in the city of New York onto the tracks and was struck by a train. The subway station was so arranged that passengers had to pay their fares before entering upon the platform bordering the tracks. The surface of the platform was four feet above the tracks. A witness for the plaintiff testified that as he stood on the platform waiting for a train he noticed the intestate lying on the tracks, and, giving warning, ran to the rescue. He said that in the presence of two station agents he lifted the man from the tracks to the platform and onto a bench which was eight feet away from the edge of the platform, that the man did not appear to be conscious and sat in a slumped position on the bench, in which condition the station agents left him and returned to their duties. The witness testified further that he went to the station agent’s booth, some distance from the bench, and told the agent to call a police officer as the man “ would fall off the platform again,” to which the agent replied, “ What can I do? I am all alone. I can’t do a thing,” and that a special officer had been called. Later, as this witness stood near the station agent’s booth reading his newspaper, he heard the rumble of an approaching train and looking up, saw the man get up from the bench and walk off the platform onto the tracks. The witness ran along the platform toward the oncoming train, shouting and waving his paper, but “ The train was too close and the motorman couldn’t stop.” Plaintiff’s intestate was crushed to death as he tried to get back upon the platform. This evidence, together with the inferences reasonably to be drawn therefrom, was sufficient to take the case to the jury upon the question whether defendant’s agent, when the intestate was first removed from the tracks, exercised such care, precaution and aid as were due to an ordinary passenger and “ any special care and attention beyond that given to the ordinary passenger which reasonable prudence and care demanded for bis exemption from injury.” (Fagan v. Atlantic Coast Line R. R. Co., 220 N. Y. 301, 307.)

However, the trial court also submitted to the jury the question of the method of the operation of the train. The record contains no evidence that would justify a jury in finding that the train was being operated in a negligent manner, or that the motorman could have stopped the train sooner than he actually did. The only witness for plaintiff who saw the accident repudiated on cross-examination his direct testimony in this respect. All the credible testimony places the train inside the station at the time plaintiff’s intestate stepped off the platform and at a point so close to him as to make the result inevitable.

The judgments should be reversed and a new trial granted, with costs to abide the event.

Rippey, J.

(concurring in part). I concur with Judge Desmond in so far as he finds that a question of fact was presented as to whether the agent of the defendant, when the deceased was first removed from the track, exercised such care and caution as was required under the circumstances.

It is asserted that there was insufficient evidence to take the case to the jury on the question of the negligent operation of the train or that, if there was negligence, it was not the proximate cause of the áccident. With that conclusion I cannot agree. The question here is not as to the weight to be accorded to the evidence of witnesses nor are we permitted to pass upon the question of credibility and there was some evidence indicating that the motorman had ample opportunity of observing the situation in which the deceased was placed when he went off the platform in front of the oncoming train to enable him, if he acted with reasonable promptness, to stop the train before the accident occurred. Reasonable care demanded that he observe and act upon the signals given him by a passenger on the platform of the position of the deceased. The train was operated a distance of at least 145 feet beyond the point where the defendant’s motorman might have observed the position of the deceased, the tracks and surroundings were well lighted and the motorman made no effort to stop his train and failed to apply his brakes until after he had struck the deceased. The approach to the station was around a curve. Under the rules, since that circumstance was present, the motorman was prohibited from operating in excess of nine miles per hour. Yet there was evidence that the train could be normally stopped in an emergency when operating at twenty-five miles per hour within a distance of eighty feet. Without pursuing the matter further it is sufficient to say that upon this record there was evidence to go to the jury upon the question as to whether the train was operated with such care and caution under the existing circumstances as ordinary prudence required and whether the lack thereof, if any, was the proximate cause of the accident.

Consequently, I believe that the judgment should be reversed and the verdict reinstated, with costs. However, a majority of the court do not agree with me on the sufficiency of the evidence to warrant submission to the jury of the question of the negligence of the motorman and, in those circumstances, it becomes necessary for me to concur in the granting of a new trial and leave it to the plaintiff to supply, if possible and if she is so advised, such deficiency of proof as may exist in the present record in that respect.

Finch, J., concurs with Desmond, J.; Rippey, J., concurs in part in separate memorandum in which Conway, J., concurs; Lehman, Ch. J., Loughran and Lewis, JJ., dissent.

Judgments reversed, etc.


author: Loughran, J.

text:
    In the Matter of the Appointment of Commissioners to Determine the Compensation of Owners of Real Property for Damages Caused by the Closing of Garden Place and Vernon Parkway in the Borough of the Bronx in the City of New York. City of New York, Appellant; Sound Realty Company, Respondent.
    Argued January 8, 1941;
    decided April 24, 1941.

      William C. Chanler, Corporation Counsel (Lewis Orgel, Julius Isaacs and Samuel K. Handel of counsel), for appellant.

      Harry Lesser for Wakefield Taxpayers and Civic League, Inc., et al., amici curiæ.

      Bernard H. Arnold for respondent.
   Loughran, J.

This proceeding was instituted in 1927 under chapter 1006 of the Laws of 1895 (the so-called Street Closing Act) to determine the compensation to be made for the damages caused to abutting owners by the closing in 1909 of Vernon parkway, a street in the borough of the Bronx, city of New York.

By a report made in 1936, the Commissioners of Estimate and Assessment made among others an award of $1,425 principal and $2,336.71 interest to Sound Realty Company as the owner of premises designated in the proceeding as Damage Parcel No. 2. Special Term returned this report to the Commissioners with a direction that they should determine what offset against any allowance of interest should be made for the value of the use of Vernon parkway which the respective owners of the damage parcels had enjoyed subsequently to the legal closing of the street. Under date of September 13,1938, the Commissioners made a final report which found that in every instance the value of such use had been equal to the interest allowance that had been awarded to the owner by the Commissioners in their earlier report. The award for Damage Parcel No. 2 was accordingly reduced to $1,425, although Sound Realty Company on January 19, 1911, had conveyed Damage Parcel No. 2 to Alfred C. Bachman, as assignee of the rights of Clarence J. Davies under a contract made on July 12, 1910, between Mr. Davies and Sound Realty Company for the sale by the company and the purchase by Mr. Davies of premises which included Damage Parcel No. 2.

When the final report of the Commissioners was presented to Special Term for confirmation, the city of New York challenged the right of Sound Realty Company to the award for Damage Parcel No. 2 on these grounds: (1) That Sound Realty Company had assigned the award to Clarence J. Davies by the contract of July 12, 1910; (2) that by this contract Sound Realty Company undertook to pay assessments for benefit which thereafter were levied on Damage Parcel No. 2 in this proceeding; and (3) that the deed which Sound Realty Company delivered to Alfred C. Bachman on January 19, 1911, conveyed Damage Parcel No. 2 with easements of frontage on the closed street for which Bachman had paid full value. Despite these objections, Special Term confirmed the final report of the Commissioners, but directed that the award for Damage Parcel No. 2 be paid over to and held by the City Treasurer until the title to said award or the respective interests and estates of all parties therein shall be finally determined in appropriate proceedings.”

From so much of this order as denied to Sound Realty Company any allowance of interest and from the direction therein for the impounding of the award for Damage Parcel No. 2, Sound Realty Company appealed to the Appellate Division. In that court, the order of Special Term —■ in so far as it was appealed from — was reversed and direction was made that the final report to the Commissioners should be returned to them “ with instructions to add to the award to Sound Realty Co. in the sum of $1,425 as damages for Damage Parcel No. 2, interest from January 19, 1911 to the date of their report and to revise their assessments accordingly * * *.” The case has now come to us on an appeal taken by the city of New York by permission of the Appellate Division.

The order of reversal made by the Appellate Division is admittedly an intermediate order. Where an appeal from such a non-final determination is allowed, specific questions of law must be certified by the Appellate Division for review by this court. (Civ. Prac. Act, § 588, subd. 4.) The Appellate Division has here certified to us two questions as follows: (1) Did the Special Term properly direct that the award for Damage Parcel No. 2 in the sum of $1,425 made by the Commissioners of Estimate and Assessment to Sound Realty Co. be held by the City Treasurer pending objections to Sound Realty Co.’s right to the award?” (2) Was Sound Realty Co. entitled to interest on said award as a matter of law from January 19, 1911? ” (January 19, 1911, was the date of the above-mentioned deed made by Sound Realty Company to Alfred C. Bachman.) It will be noticed that the first of these questions concerns the principal of the award for Damage Parcel No. 2, while the claim of Sound Realty Company to an allowance of interest on such principal is the subject of the second question.

The direction that the award for Damage Parcel No. 2 be impounded pending determination of its ownership was made by Special Term in supposed accordance with section 11 of the Street Closing Act. It is thereby provided: “ Except when any sum or sums of money shall in said report be made to ‘ unknown owners,’ the supreme court shall, upon the application of such city or of any person entitled to or claiming to be interested in the lands, tenements or hereditaments for which said awards have been made, or any part thereof, either direct the same to be retained by the said chief financial officer or comptroller, or to be paid into the supreme court until the title thereto or the respective interests and estates of all parties therein shall be determined by said court and upon such application the said court may take the proofs and testimony of the claimant or claimants or parties interested in the lands for which said awards have been made or refer the matter to a referee for such purpose.” (Vol. 2, Part 2, Laws of 1895, ch. 1006, p. 2049.)

Sound Realty Company attacks the order of Special Term on the grounds (1) that the foregoing section 11 authorizes a separate proceeding for determination of the right to an award only where (as is not the case here) conflicting claims to the award are made by several parties; and (2) that it is only when an award is made to an “ unknown owner ” (as is not the case here) that payment thereof may be withheld. (Cf. Administrative Code of the City of New York, L. 1937, ch. 929, §§ E15-27.0, E15-28.0; Matter of City of New York [Old Kingsbridge Road], 229 N. Y. 30; Matter of Sea Beach Ry. Co., 148 N. Y. Supp. 1080; 121 App. Div. 907; 196 N. Y. 533.) This issue as to the scope of the power conferred upon the court by section 11 of the Street Closing Act is an issue of law. The order of Special Term necessarily decided that issue against Sound Realty Company. The Appellate Division in its opinion said: “ Sound Realty Company is the only claimant in this proceeding. Its grantee and his successors in title have filed no claims for any damage due to the closing of Vernon Parkway.” (258 App. Div. 490, 492.) These words perhaps suggest that the Appellate Division may have ruled that section 11 of the Street Closing Act was here inapplicable. But matters yet to be noticed quite plainly indicate the contrary.

Special Term ruled that the award for Damage Parcel No. 2 had been assigned by Sound Realty Company to Clarence J. Davies by their contract of July 12, 1910. The Appellate Division read this contract differently. This contract (said that court) “ specifically mentions awards for land taken for street purposes and does not assign any awards for street closing” (p. 493). (The emphasis is ours,) While the construction of writings is, to be sure, matter of law in the sense that it is an affair for a judge, still the particulars of the process of ascertaining the disclosed intention of a writer are for the most part items of fact. Such an inquiry may nevertheless be a question of law in the sense of the phrase “ questions of law ” as that phrase is used in the constitutional limitations upon the jurisdiction of this court. (See Mitchell, Inc., v. Dannemann Hosiery Mills, 258 N. Y. 22.) It may be, then, that the issue as to whether the award for Damage Parcel No. 2 was assigned to Clarence J. Davies by the contract made between him and Sound Realty Company on July 12,1910, is a question of law which (if all else is in order) can now be reached by us consistently with the form of the questions certified. (See Matter of New York Title & Mortgage Co., 277 N. Y. 66.)

Special Term in its opinion said that “ Sound Realty Company in conveying the property in question conveyed the same as property having frontage and easements on the street, and hence the beneficial use of such grantee may be used to offset any award based upon the loss of such easements.” The Appellate Division in its opinion said that Sound Realty Company after it parted with title * * * no longer had occasion to use the street and consequently its right to interest immediately accrued” (p. 494). The Corporation Counsel in his brief says: “ It sounds plausible to say that the respondent [Sound Realty Company] should not be charged for its grantees’ use. But the respondent sold that use * * * and has had the use of the full purchase price ever since. Respondent, therefore, sustained no damage * * *. The claim is * * * grossly unjust, since the allowance of such interest would only go to swell the assessments which respondent’s grantees must pay. * * * The respondent is guilty of laches, if nothing more. In law, in equity and on the facts its claim for interest should be denied and the second question answered in the negative.”

It is now evident, we think, that neither of the questions certified admits of any proper answer. This court can never decide an issue of fact or a matter of discretion when, as in this case, the order of the Appellate Division is an intermediate order. Hence a certified question must distinctly present a proposition of law which in itself is decisive of some part of the controversy involved in the appeal. (Grannan v. Westchester Racing Assn., 153 N. Y. 449, 458. See Cohen on the Powers of the Court of Appeals, § 78 et seq.) We cannot be sure that either of the questions here certified is of that character.

None of the three objections made by the city of New York to the claim of Sound Realty Company to the award for Damage Parcel No. 2 had a basis in any right of the city itself. By those objections, the city undertook to subject the award to an unclaimed equitable interest of parties who had succeeded Sound Realty Company in the ownership of Damage Parcel No. 2. It may be, then, that the Appellate Division held that section 11 of the Street Closing Act left to the court discretionary power to refuse to impound the award at the behest of the city and in the absence of the real parties in interest. (See Administrative Code of the City of New York, tit. E, passim.) Consequently we are persuaded not to answer the first question certified.

Under the second question certified, counsel find room for argument of the above-stated combination of issues as to the position of Sound Realty Company, “ in law, in equity and on the facts.” This question, so interpreted, does not allow of an unqualified answer.

• The appeal should be dismissed, without costs.

Lehman, Ch. J., Finch, Rifpey, Lewis, Conway and Desmond, JJ., concur.

Appeal dismissed.


author: Per Curiam.

text:
    Jno. Dunlop’s Sons, Inc., Appellant, v. Jean A. D. Spurr, as Executrix of John D. Dunlop, Deceased, et al., Respondents.
    Argued February 27, 1941;
    decided April 24, 1941.

      Emil Weitzner and Eugene M. Parter for appellant.

      Horace S. Manges, Gabriel Kaslow and James H. Mathias for respondents.
   Per Curiam.

Potter v. Walker (276 N. Y. 15) did not decide that the ten-year Statute of Limitations (Civ. Prac. Act, § 53) is necessarily applicable to all cases in which corporate directors have profited in any degree through a breach of their fiduciary duties. In such a case an action for an accounting may be brought only for the recovery of gains received by the directors beyond the amount of losses caused to the corporation by their wrong. Where, as in the present case, the gains received by the directors do not exceed the correlated losses suffered by the corporation, no accounting is necessary and the Statute of Limitations which controls the remedy at law is to be applied. (See Goldstein v. Tri-Continental Corp., 282 N. Y. 21.)

The judgment should be affirmed, with costs.

Lehman, Ch. J., Loughban, Pinch, Lewis and Desmond, JJ.; concur; Rippey and Conway, JJ., concur in result.

Judgment affirmed.


author: Finch, J.

text:
    In the Matter of The People of the State of New York, by George S. Van Schaick, as Superintendent of Insurance of the State of New York, for an Order to Take Possession of the Property and Rehabilitate the Union Guarantee and Mortgage Company. United Equities, Inc., Appellant; New York Trust Company et al., Respondents.

      Argued March 14, 1941;
    decided April 24, 1941.

      Milton B. Ignatius, Lauson H. Stone and Joseph S. Catalano for appellant.

      Adrian D. Stevenson for New York Trust Company, respondent.
   Finch, J.

This is a proceeding for liquidation of the Union Guarantee and Mortgage' Company which had guaranteed certificates of participation in a mortgage on 165 Bennett avenue, Manhattan, city of New York. The question presented by this appeal concerns the respective rights arising between the assignee of the interest of the guaranteeing corporation and the owners of the certificates of participation where the owners have consented to a reduced rate of interest in the mortgage as extended, and where the only interest of the guaranteeing company was a certificate issued by the Superintendent of Insurance to the guaranteeing mortgage company evidencing the alleged share of the interest in the mortgage as the difference between the face of the mortgage less the interest represented by the outstanding certificates. No certificates representing this alleged interest of the guaranteeing mortgage company in the mortgage have ever been issued to that company in place of the certificates which had been repurchased by the guaranteeing mortgage company, or representing the interest which had never been sold by the company.

The necessary facts, stated briefly, are as follows: The guarantor, Union Guarantee and Mortgage Company, deposited on May 7, 1929, with the Chase National Bank as depositary, a mortgage in the principal amount of $232,500 under a deposit agreement dated November 15, 1927. Certificates registered with the depositary were sold to the public for the full amount of the mortgage less $4,550 representing the unsold share. On November 21, 1928, prior to the sale of any of the certificates to the public, the depositary agreement dated November 15, 1927, was allegedly amended by the guarantor. No reference to this amendatory depositary agreement was included in the certificates. Instead each certificate, when issued, was registered with the depositary and purported to assign: “, * * * an undivided share o,r interest to the extent of said principal sum in the bond and mortgage described on the back of this certificate,' and the Company hereby certifies that it has deposited said bond and mortgage together with insurance and title policies and other instruments and evidences of title relating thereto with The Chase National Bank of the City of New York (hereinafter called the Depositary) under the terms of an agreement made between the Company and the Depositary dated November 15, 1927, pursuant to which this certificate is issued and to all provisions of which the holder hereof, by acceptance of this certificate, shall be bound.” (Italics interpolated.) Subsequently the guarantor repurchased certificates which had been sold to the public, amounting to $46,150. Upon the reacquisition of the certificates the company made numerous perforations through the signatures of the officers of the company and of the officers of the depositary, and made notations in the certificate record books and the records of the company to the effect that the reacquired certificates were canceled. No new certificates were ever issued to the guarantor, either for the certificates reacquired from the public to the amount of $46,150, or for the $4,550 which represented the unsold share. All reacquisitions of certificates were effected prior to maturity and it is not alleged that they were made to meet or anticipate the maturity of the mortgage or any portion thereof.

On August 2, 1933, the guarantor company was taken over for rehabilitation by the Superintendent of Insurance. In the proceedings instituted for the purpose of reorganizing the rights of the holders of certificates under the provisions of the Shackno Act (L. 1933, ch. 745), the New York Trust Company was appointed trustee of this mortgage by order dated November 6, 1935, and with the approval of the court the trustee entered into an agreement with the mortgagor whereby all unpaid sums due on the mortgage were compromised and the mortgage was extended at a reduced rate of interest. There has been no subsequent default on the mortgage under this extended mortgage. The trustee has collected the interest at the reduced rate and paid over to every certificate holder his full share of the interest, but has retained in its possession the interest applicable to the share totalling $50,700 now owned by United Equities, Inc. On June 15, 1937, the liquidation of the Union Guarantee and Mortgage Company was ordered. Appellant United Equities, Inc., was organized and acquired all assets of the Union Guarantee and Mortgage Company, the realized proceeds of which are to be used for paying the claims of creditors as established in the proceedings for the liquidation of the guarantor. Among these assets so transferred was the single certificate issued by the Superintendent of Insurance as rehabilitator for $50,700 to evidence the interest of the company in this mortgage. In May, 1938, the New York Trust Company, as trustee of the mortgage, asked instructions of the Special Term, praying for an order determining that the share of the guarantor, now owned by appellant United Equities, Inc., was subordinate to that of the certificate holders, and that the court determine the right of the guarantor to receive the interest on the $50,700. Special Term, after a reargument, held the share of United Equities, Inc., subordinate to that of the certificate holders, and further decreed that the certificate holders should receive interest at the original guaranteed rate of five and one-half per cent instead of the reduced rate of four and one-half per cent until full payment of principal and guaranteed interest had been received by them. The Appellate Division unanimously affirmed. This appeal is by leave granted by this court.

The principles of law applicable to the assignment of a prior interest in a mortgage are found in the decisions of this court. In the event of no debtor-creditor relationship, the shares are on a parity. In Title Guaranty & Trust Co. v. Mortgage Commission (273 N. Y. 415, 428) we said: “ We believe that in this State the courts are committed to the proposition that in the absence of an agreement or proven intent to the contrary, the existence of a trust relationship or proof of some equitable reason why priority should exist in favor of an assignee, the assignor of part of the mortgaged indebtedness who has not assumed a liability as guarantor is entitled to share pro rata with his assignee in the proceeds of insufficient security.”

Where, however, “ * * * a debtor-creditor relationship exists between an assignor of part of a mortgage and the assignee thereof, the assignee's claims must be satisfied before the assignor’s.” (Matter of New York Title and Mortgage Co. [Weil], 253 App. Div. 308; affd., 278 N. Y. 488.)

This rule was followed in the case of Pink v. Thomas (282 N. Y. 10). In order to avoid this rule an assignor of a part of a bond and mortgage or other assignable chose in action, may, by the terms of the assignment, fix the right and interests of the assignor and assignee. Thus the rights of the certificate holders to preference may rest not only upon the presumption of intent derived from the guaranty of the assignor, but also may be determined from the actual intent shown by the provisions of the agreement between the assignor and assignee. (Matter of Title & Mortgage Guaranty Co. [Pink], 275 N. Y. 347.) In the case at bar, the relevant portions of the agreement from which the intention of the parties may be derived consist of the language in the certificate, that the guaranty company “ * * * shall likewise have the right to retain, out of the proceeds of collection of said bond and mortgage, so much as may remain after paying whatever may be due to the assured of principal and interest on this or other certificates,” and of the language in paragraph seventh of the depositary agreement of November 15, 1927, which provides: “ Seventh: The depositary and the company may, for their own corporate accounts, be the holders or pledgees of a participation certificate or certificates, and, to the extent of such certificates, share in the same manner as other certificate holders.” It is clear from the language used in the above-quoted portion of the certificates that such portion is sufficient evidence of an actual intent on the part of the contracting parties to grant priority to the certificate holders. On the other hand, it is urged by the appellant that the provisions of paragraph seventh of the depositary agreement offset this intent and provide for a parity between the assignor and the assignee in the security. We said in the case of Pink v. Thomas (supra, p. 12) that “ it should take very clear and unambiguous language in the certificates to overcome that rule and substitute a holding that in spite of its guarantee of payment it should be permitted to share in the available assets even though the certificates which it had guaranteed should be paid remained unpaid.”

Assuming for the purposes of argument, but not deciding, that the above provision contained in paragraph seventh provides for parity between the certificate holders and any share of the company, it is to be noted that the company upon the reacquisition of the certificates, made numerous perforations through the signatures of the officers of the company and of the officers of the depositary, and made notations in the certificate record books and the records of the company to the effect that the reacquired certificates were canceled. It is apparent, therefore, that the reacquired certificates were canceled and nullified. It is equally clear that no certificate ever existed with respect to the unsold portion of the issue in the sum of $4,550. Since the guarantor has not issued or caused to be issued certificates to itself for either the amount of $4,550 representing the unsold portion of the issue or the amount of $46,150 which was reacquired from the purchasers, the company at the time of the institution of this action had no certificates in its possession which complied with the provisions of paragraph seventh which stipulate that the “ company may * * * be the holders or pledgees of a participation certificate or certificates, * * Upon this identical set of facts we have held that the failure to issue such certificates subordinates the equity of the company in the security to the claims of the certificate holders. (Matter of New York Title & Mortgage Co. [Series FW-1], 157 Misc. Rep. 271; affd., 248 App. Div. 715; affd., 272 N. Y. 556.) That decision is controlling in this case.

Thus in the case at bar where the parties have by express terms of the contract limited the right of the company to share on a parity with the certificate holders to a situation where the company "has duly issued certificates to itself, the court must give effect to this limitation. It is not an answer to this construction that as a practical matter it makes no difference whether or not such certificates have in fact been issued. It may well have been the intention of the guaranteeing company to obtain advantages by the reduction in the amount of the certificates outstanding "under this mortgage. Obviously, the holders of the certificates could by an inspection of the records at the depositary have ascertained that there was only outstanding under this mortgage an amount of certificates substantially less by $50,700 than could have been issued. If the company had duly issued certificates to itself such certificates would have to be registered in the records at the depositary and this information would become available to those who might care to ascertain the facts and set their course in dealing in this security thereby.

The appellant urges that the failure to issue certificates for the amount of the $50,700 interest in the security which the company owned was cured by the provision in the amendatory depositary agreement which was dated November 21, 1928. This contention is without merit since the certificates received by the certificate holders referred only to the original agreement dated November 15, 1927, and did not contain reference to the amendatory agreement even though such amendatory agreement was made and known to the officers of the company before any of the certificates were sold to the public. Inasmuch as this amendatory, agreement purported to enlarge the rights of the company and since it was not incorporated into the certificates or brought to the notice of the certificate holders it is in no way binding upon them.

The order of Special Term to the trustee to pay interest to the certificate holders at the guaranteed rate was error. Such direction presumes that the contractual obligation upon the guaranty continues even in the face of an express consent by the certificate holders to an extension of the mortgage at a reduced rate of interest. On the contrary, unless the claimant shall reserve his right or surrender his security to the Superintendent in order to prove his loss, he elects to accept the reduced rate of inteiest and releases the guarantor from his liability upon the guaranteed rate of interest. By consenting to the extension of the mortgage at the reduced rate of interest, the certificate holders accepted such extension in lieu of their claim against the guarantor for the guaranteed interest. In the absence of any reservation from such action of any right to enforce their original contract of guaranty against the guarantor, such action is clearly a waiver of the guaranty as to the guaranteed rate of interest. Such fact distinguishes this case from the case of Ticonic Nat. Bank v. Sprague (303 U. S. 406).

It follows that the orders appealed from should be modified in so far as it directed the trustee to pay interest to the certificate holders at the guaranteed rate of interest. It is affirmed, however, in so far as it adjudged the interest of $50,700 of the company to be subordinate to the interest of the certificate holders.

The orders should be modified in accordance with this opinion and as so modified affirmed, without costs.

Lehman, Ch. J., Rippey, Lewis and Conway, JJ., concur; Loughran and Desmond, JJ., dissent in part in the following memorandum: We do not agree that certificate holders, by consenting to a reorganization plan which included an extension of the term of the mortgage and a reduction in the interest rate, waived their claims against the Guarantee Company on its guaranty, for the difference between the interest, as guaranteed, and the interest, as reduced. There is no waiver of the guarantor’s liability unless the reorganization plan specifically so provides (Schackno Act, Laws of 1933, ch. 745, § 7). The order should be affirmed.

Orders modified in accordance with prevailing opinion.