author: Crane, Ch. J. Lehman, J.

text:
    William H. Harrison, Respondent, v. James F. Egan, as Public Administrator of the Estate of George Schultz, Deceased, Appellant.

      (Argued March 12, 1936;
    decided April 14, 1936.)

      Louis Jay Brecher, Maurice Freiman and Edward S. Napolis for appellant.
    Plaintiff failed to prove a cause of action in accordance with his complaint. (Racine v. Morris, 201 N. Y. 240; Melnick v. Kulka, 228 App. Div. 321; McNulty Bros. v. Offerman, 152 App. Div. 181; Leeds v. New York Tel. Co., 79 App. Div. 121; Ginsberg v. Woolworth Co., 185 App. Div. 59.) The plaintiff has failed to trace the trust fund as a matter of law and has failed to prove that the defendant’s intestate had knowledge of the existence of the trust fund or the use thereof by his wife. (Ferris v. Van Vechten, 73 N. Y. 113; Jaffe v. Weld, 155 App. Div. 110; Matter of Cavin v. Gleason, 105 N. Y. 256; Matter of Early, 112 Misc. Rep. 54; Townsend v. Crowner, 125 N. Y. Supp. 329; 145 App. Div. 906; Hamlin v. Stevens, 177 N. Y. 39; Rosseau v. Rouss, 180 N. Y. 116.) The Statute of Limitations barred the plaintiff’s cause of action. (Keys v. Leopold, 241 N. Y. 189; Hart v. Goadby, 72 Misc. Rep. 232; Hopper v. Brown, 34 Misc. Rep. 61; 173 N. Y. 613; Roberts v. Ely, 113 N. Y. 128; Roediger v. Kraft, 169 App. Div. 304; Burdick v. Hicks, 29 App. Div. 205; Cohen v. Diamond, 74 Misc. Rep. 444; Mason v. Henry, 152 N. Y. 529; Glover v. National Bank of Commerce, 156 App. Div. 247; Pitcher v. Sutton, 238 App. Div. 291.)

      John L. McMaster and Jules J. Lubasch for respondent.
    Plaintiff, as beneficiary under a testamentary trust, clearly had a cause of action for the recovery of the trust proceeds fraudulently retained by defendant’s intestate. (Newton v. Porter, 69 N. Y. 133; Whiting v. Hudson Trust Co., 234 N. Y. 394; Lightfoot v. Davis, 198 N. Y. 261; Walsh v. Polley, 177 N. Y. 117; Jaffe v. Weld, 155 App. Div. 110; Fur & Wool Trading Co. v. Fox, Inc., 245 N. Y. 215.) Defendant’s intestate was chargeable in the same manner as an express trustee and could not plead the Statute of Limitations against the cestui que trust. (Soar v. Ashwell, [1893] 2 Q. B. 390; Harrison v. Schultz, 240 App. Div. 13; Finnegan v. McGuffog, 203 N. Y. 342; Lightfoot v. Davis, 198 N. Y. 261; Barnes v. Addy, 9 Ch. 244; Matter of Sharpe, 1 Ch. 154; Elliott v. Landis, 139 S. W. Rep. 356; Case v. Sipes, 217 S. W. Rep. 306.) An action against defendant’s intestate, as executor of a defaulting trustee, was not barred in actual point of time. (Matter of Miller, 257 N. Y. 349; Zebley v. F. L. & T. Co., 139 N. Y. 461; Matter of Barbineau, 27 Misc. Rep. 417; Patterson v. Hewitt, 195 U. S. 309; Putnam v. Lincoln Safe Deposit Co., 191 N. Y. 166; Whiting v. Hudson Trust Co., 234 N. Y. 394; Matter of Duncan, 181 App. Div. 91; Matter of Wood, 70 Misc. Rep. 467; Zeideman v. Molasky, 118 Mo. App. 106; Semmig v. Merrihew, 67 Vt. 38; Newton v. Porter, 69 N. Y. 133; Lightfoot v. Davis, 198 N. Y. 261; Finnegan v. McGuffog, 203 N. Y. 342; Treadwell v. Clark, 190 N. Y. 51.) Plaintiff is entitled to interest on the proceeds recovered, from the date when the trust funds were actually misapplied. (Matter of Eisenlohr, 258 Penn. St. 431; Primeau v. Granfield, 184 Fed. Rep. 480; Bohle v. Hasselbroch, 64 N. J. Eq. 334; Madison Trust Co. v. Carnegie Trust Co., 167 App. Div. 4; Holmes v. Gilman, 138 N. Y. 369; Oliver v. Piatt, 3 How. 333; Bloomquist v. Fearson, 222 N. Y. 375; Putnam v. Lincoln Safe Deposit Co., 191 N. Y. 166; Cook v. Lowry, 95 N. Y. 110.)
   Crane, Ch. J.

This action has been brought by the beneficiary of a trust to recover the principal trust fund diverted by the trustee and devised or bequeathed to George Schultz for whose estate the public administrator is the representative and party defendant in this action. As we are to modify the judgment merely as to the item of interest the facts may be briefly stated.

Daniel B. Harrison, the plaintiff’s father, died April 21, 1887, when the plaintiff was about three years of age. Harrison left a will which in effect left all his property to his wife in trust for his child, this plaintiff. Eliza M. Harrison, the wife, having been duly appointed executrix and trustee, received the sum of $4,173.40 in March of 1894 as the corpus of the trust. Three thousand dollars of this money was invested in property known as 242 East Twenty-third street, New York city, title to which was taken in the name of Mrs. Harrison, who by that time had become Eliza M. Schultz. George Schultz, her husband, named as one of the grantees, subsequently conveyed all his interest to the wife. Eliza Schultz died on the 13th day of January, 1921, leaving a will whereby she bequeathed her entire estate, both real and personal, to her husband, George Schultz, who subsequently qualified as executor on the 14th day of May, 1923.

The estate of Mrs. Schultz, including the said parcel of real property, was of the net value of $34,091.50. Neither Mrs. Schultz nor her husband ever accounted for the trust fund of $3,000 invested in this real property which was subsequently turned into cash and purchase-money mortgage by George Schultz after his wife’s death. George Schultz died intestate on the 5th day of October, 1932, leaving an estate of real and personal property of a net value of $59,352.72. The public administrator, the defendant in this action, now represents this estate.

The trial justice found as a fact that Eliza M. Schultz, formerly Eliza M. Harrison, fraudulently misappropriated this portion of the corpus of said trust consisting of $3,000 which rightfully belonged to the plaintiff; and that the plaintiff, now a man of mature years, at no time had any knowledge or information prior to May of 1933 regarding the trust in his favor created by his father, or of the fraud which had been practiced upon him. The justice also found that, prior to the death of his wife, George Schultz knew that a portion of the trust fund in the sum of $3,000 had been invested in the Twenty-third street property, but that he did not assist the trustee in the fraudulent and dishonest disposition of this fund.

The court was justified in holding that this real property was impressed with a trust in favor of this plaintiff in the sum of $3,000, and that George Schultz took the devise under his wife’s will impressed and incumbered with this trust. The finding made by the judge was quite specific. It reads as follows: “ That the said real property, which was acquired by the said George Schultz, as Executor and sole devisee and legatee of the said Eliza Schultz, at the time of her death, was thereafter fraudulently retained by him with knowledge that it was so impressed with the said trust for the benefit of plaintiff.”

Upon the mere recital of these facts it is apparent that the estate of George Schultz cannot withhold this $3,000 fund from the plaintiff. It never became his property, and he and the estate were never entitled to it. Whether we consider him the successor trustee of an express trust (Soar v. Ashwell, [1893] 2 Q. B. 390), against whom there was no time limit for recovery (Lightfoot v. Davis, 198 N. Y. 261), or as a trustee in invitum, in whose favor the ten-year Statute of Limitations applicable to equitable actions (Civ. Pr. Act, § 53) would apply, is at this time immaterial, as this action was brought within the ten years’ limitation extended by section 21 of the Civil Practice Act on the death of George Schultz, October 5, 1932.

The judgment of the Special Term charged interest on this fund from the 26th day of January, 1905. The Appellate Division modified the judgment in this particular by directing that interest on the $3,000 must rim from the 20th day of September, 1898. The latter date is the time of the conversion or misappropriation by Mrs. Schultz; January 26, 1905, is the day the, plaintiff-beneficiary became twenty-one years of age and entitled to the trust principal. The trust provision in his father’s will reads: “ The said Trustees shall invest and keep invested all of my estate, as aforesaid, in such safe security consisting either of improved real estate or good Bonds secured by first mortgages on good real estate, as in their discretion shall be secure, and they shall pay the income arising from such investments to my said beloved wife, Eliza M. Harrison during the period of her natural life, or until her remarriage after my death. She shall use the same for the support of herself and of any of my children during the minority of the latter. In case of the remarriage of my said wife after my death, then the entire income of my said estate shall be applied and devoted to the support of my children, if any me surviving, during the period of their minority and the principal of my said estate shall be paid to my said children in equal proportions if there be more than one, or the whole thereof when they or it attain the age of twenty-one years.”

The plaintiff should have been paid the $3,000 at his majority but up until that time his mother could use the income for his support. He lived with his mother during his minority and was supported by her. The income on $3,000 would not go very far for this purpose. Under these circumstances we are justified in assuming that the mother spent more than such income upon her boy while he was growing up in the home. The trial justice was quite right, therefore, in starting the interest period with the plaintiff’s majority, January 26, 1905, at which time the mother should have paid over to him the trust fund left by his father.

If George Schultz had received no more than the $3,000, he and his estate would be charged with interest only from the time that he took the money or property and failed to turn it over. However, this action is for much more than to recover for his illegal acts. He received as legatee under his wife’s will over $34,000 net estate, and was also executor of her will. What was her liability for which all of her assets should respond at the time of her death? She had $3,000 in cash which she misappropriated in 1898. The findings are that she never accounted nor paid any money to the plaintiff as she should have done in the execution of the trust. At the time of her death she would have been liable for this $3,000, with interest from 1905 at least. Her estate, represented by George Schultz, her executor husband, would have been liable for this claim.

The whole claim, with interest from 1898, amounts to only $9,799.65 and, with interest from 1905, something less. Her net assets, which passed to George Schultz, both as executor and as legatee, were $34,091.50. How can this amount escape in equity the payment of' the plaintiff’s claim? How can George Schultz’s estate receive and keep money which Eliza M. Schultz could not keep and which she, therefore, could not pass on to others who took with guilty knowledge? This action is brought in equity to reach these assets for the payment of this claim in full.

If George Schultz were still alive, being executor of his -wife’s will, he could be forced to account for every dollar coming into his hands from his wife’s estate and on the accounting he would be charged with this claim of the plaintiff. George Schultz, however, died in 1932, leaving a net estate of $59,352.72. This includes the $34,091.50 received from his wife’s estate, which was net, so that there are no outstanding claims of creditors. The dispute in this case is merely between the plaintiff and George Schultz’s relatives as to who is entitled to the money that came from Eliza M. Schultz, at least to the extent of the $3,000 and interest.

In this state of affairs I can see no reasonable objection to equity taking jurisdiction (Newton v. Porter, 69 N. Y. 133) and compelling the public administrator to pay over to the plaintiff the money concededly due him. There can be no question on the facts as stated and found by the trial judge that this money belongs to the plaintiff and not to the next of kin of George Schultz.

Is there anything in our law, barring the Statute of Limitations, which prevents a court of equity from doing equity and making the public administrator turn over from the funds in his hands money which does not belong to any person he represents, and which is the property of the plaintiff? Relief in equity was also required as the real property — the Twenty-third street property — in which the trust funds were placed, came to George Schultz as devisee and was converted by him into personalty, part mortgage, part cash. It was necessary to trace these funds. The $3,000 plus the interest from 1905 was the amount due the plaintiff when Mrs. Schultz died, against which no statute of limitations had run, as she was the trustee of an express trust. As before stated, the property of Eliza M. Schultz -— her interest in the Twenty-third street property as well as other assets — was more than sufficient to pay this plaintiff the full amount due.

The modification as to interest made by the Appellate Division should be stricken out, and the judgment of the Special Term affirmed, with costs in this court and in the Appellate Division.

Lehman, J.

(dissenting in part). The plaintiff, in 1905, became entitled to the corpus of a trust established for his benefit under the last will and testament of bis father who died in 1887. Eliza M. Schultz, the plaintiff’s mother, was trustee of the fund. She married George Schultz after the death of the plaintiff’s father and she never paid either the principal or income of the trust fund to the plaintiff or accounted to him. She died in 1921, and by her last will and testament she devised and bequeathed her entire estate to her husband, George M. Schultz, and appointed him her sole executor. Letters testamentary were issued to him in 1923. At the time of her death she held title to a parcel of real property which she and her husband had purchased in 1898. The justice at Special Term has found that she misappropriated a portion of the corpus of said trust consisting of $3,000 in cash, which rightfully belonged to plaintiff,” and that the sum so appropriated was illegally used as a part of the total consideration paid by her and her husband, George Schultz, for the conveyance to them of a parcel of real property to which they took title in their joint names.

There can be no doubt that the plaintiff might have demanded from his mother at any time during her lifetime an accounting of her proceedings as trustee under the will of his father and payment to him of the corpus of the trust and the income therefrom. At her death her executor might have been compelled to account in her place (Surr. Ct. Act, § 257), and upon such accounting the plaintiff would have been entitled to receive the corpus of the trust and the income derived therefrom. If it then appeared that the deceased trustee had misappropriated the trust fund the plaintiff might doubtless have recovered from her estate damages for such misappropriation together with interest from the date of the misappropriation.

The plaintiff did not demand such accounting either from the trustee or her executor. The reason is clear; the plaintiff did not discover that under the will of his father a trust fund had been established for his benefit, or that his mother had misappropriated the trust fund, until after her executor, George M. Schultz, died intestate in 1932. We need not, now, consider whether the Statute of Limitations then barred the plaintiff’s cause of action for an accounting of the proceeding of his mother, Eliza M. Schultz, as trustee under the will of his father; for the plaintiff has asserted no such cause of action against her executor. He has brought this action against the estate of the deceased executor and that estate may be held only for personal derelictions of the deceased executor and for the return of property which the administrator has no authority to take charge of or to control. (Surr. Ct. Act, § 266.)

I agree with the opinion of the Chief Judge in so far as it holds that the plaintiff has established a cause of action against the estate of George Schultz for the sum of $3,000 which was wrongfully taken by Eliza Schultz from the trust fund belonging to the plaintiff. So long as the moneys so taken can be traced they remain in equity part of the trust fund. They have been traced into the real property which George Schultz took under the will of the delinquent trustee, with knowledge that these moneys had been wrongfully used in payment of part of the consideration for the conveyance of that property. For the reasons pointed out in the opinion of the Chief Judge, Schultz had no right to withhold this trust fund so received by him from the plaintiff to whom it rightfully belonged and any cause of action against him to compel its restoration survives against his estate. I agree, too, that this cause of action is not barred by the Statute of Limitations. I disagree only as to the date when interest which may be included in the judgment begins to run.

Here, distinction between the present action and an action against a delinquent trustee, or his executor, and the present action becomes important. In an action against the delinquent trustee, or her executor, the plaintiff, as Chief Judge Crane points out, might have compelled an accounting and recovered all sums found due upon the accounting, regardless of whether the delinquent trustee spent those sums for her pleasure or retained them as her property; while in the present action the plaintiff can recover only the amount which, as part of the estate of the delinquent trustee, was wrongfully appropriated by the defendant’s intestate and used as his own. Though the defendant’s intestate received, under the will of the delinquent trustee, all her property, his estate is not hable for the wrongs committed by the testatrix as trustee, but only for the proceeds of such wrongs which can be traced into the property received by plaintiff’s intestate.

The plaintiff succeeded in tracing $3,000 into the real property to which the delinquent trustee took title in her own name and which is now part of the estate of George Schultz. There is neither evidence nor finding that any net income was received from the property or found its way into the estate of Eliza Schultz. The conclusions of law made by the justice at Special Term which constitute the only basis for the equitable relief granted to the plaintiff are that upon the purchase of the real property it “ became impressed with the trust which had been created for the benefit of the plaintiff to the extent of $3,000,” and that upon the death of Eliza Schultz the plaintiff had a right to have a lien impressed upon the said real property in his favor to the extent of the original trust fund, plus accretions thereto.”

What are the accretions to the original trust fund of $3,000? Not the income from the property which was not reinvested in the property nor, certainly, interest upon the fund which the delinquent trustee appropriated. Accretions to the fund can mean only increase in the fund which can be traced into the estate of the delinquent trustee and from there into the possession of the defendants acting as administrators of George Schultz, deceased. That part of the decision and judgment which provides that the plaintiff shall have a lien upon the proceeds of the real property not only for the sum of $3,000, but also for interest thereon from January 26, 1905, is erroneous. Interest against the estate of George Schultz should run only from the time when the benefit to George Schultz from that fund began, i. e., the death of the delinquent trustee in 1921.

It is true that such judgment might award to the plaintiff less than the amount to which he is entitled. Until the death of his mother, Eliza M. Schultz, the plaintiff, at his option, might have held her hable for the amount of his trust fund so misappropriated, together with interest thereon from the date of the misappropriation, or might have claimed the benefit derived from the investment of the trust fund when he traced it into the real property purchased by the delinquent trustee. Though there is no proof that the property in which the plaintiff’s trust fund was invested had increased in value at the time of the death of Eliza M. Schultz in 1921, yet if, in fact, there was such increase, the plaintiff might have claimed from her or her estate that part of the increase which was derived from the original investment. George Schultz took the property from his wife impressed with the same trust. That property was thereafter sold for a profit over the original investment. Again the plaintiff must have the option to demand and receive from George Schultz, or his estate, either the amount of his trust fund with interest thereon at least from the date when George Schultz wrongfully appropriated it to his use, or to claim the benefit of the increase in its value as shown by subsequent sale.

In the decision at Special Term the plaintiff was accordingly granted the option of a judgment for the amount of the original trust misappropriated, together with interest thereon from 1905, or a judgment directing the defendants to account to the plaintiff for the trust fund and income and profits accrued thereon proportionate to the percentage which the said portion of the said trust fund in the sum of $3,000, which was used in the original purchase thereof, bears to the total cash investment of $8,200.” The plaintiff chose the first option and entered judgment accordingly.

That choice was based upon the comparative advantage of an accounting or of a money judgment with interest from 1905. The choice might well be different if the judgment is modified by fixing the date for the commencement of interest much later. The plaintiff should then be given an option of entering a judgment as so modified or a judgment for an accounting of income and proceeds derived by George Schultz, or his estate from the real property proportioned to the percentage which the sum of $3,000, which was used in the original purchase thereof, bears to the total cash investment of $8,200.”

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

Judgment accordingly.


source: Caselaw Access Project

author: Finch, J.

license: Public Domain

text:
    City of Mount Vernon, Respondent, v. The Mount Vernon Trust Company, Appellant.
    (Argued March 11, 1936;
    decided April 14, 1936.)

      Clinton T. Taylor and James D. Hopkins for appellant.
    The pledge by the defendant securing the deposit of the plaintiff is ultra vires as to both parties. (State Bank of Commerce v. Stone, 261 N. Y. 175; Ganse v. Commonwealth Trust Co., 196 N. Y. 134; Foster v. City of Longview, 26 S. W. Rep. [2d] 1059; Texas & Pacific R. R. Co. v. Pottoroff, 291 U. S. 245; City of Marion v. Sneeden, 291 U. S. 262; Lewis v. Fidelity & Deposit Co., 292 U. S. 559; Temple v. McKay, 174 S. E. Rep. 23; Ruden v. City of Platte, 252 N. W. Rep. 32; Eckerson v. United States Dist. Court, 7 Fed. Supp. 201; Commercial Bank & Trust Co. v. Citizens Trust & Guarantee Co., 153 Ky. 566; Tracy v. Talmadge, 14 N. Y. 162.) The city as a depositor in the trust company was and is a general creditor. (Shipman v. Bank of New York, 126 N. Y. 318; General Fire Assur. Co. v. State Bank, 177 App. Div. 745; Matter of Northern Bank of New York, 85 Misc. Rep. 594; 163 App. Div. 974; 212 N. Y. 608.) The plan of reorganization of the defendant is binding upon the plaintiff by virtue of mutual consent or by operation of law, and the deposit must be returned in accordance with the terms of the plan. (Shepherd v. Mount Vernon Trust Co., 269 N. Y. 234; Cox v. Stokes, 156 N. Y. 491; United Water Works v. Omaha Water Co., 164 N. Y. 41; Jacobs v. Fensterstock, 236 N. Y. 39; Clapp v. Guy, 31 App. Div. 535; Hanrahan v. Terminal Station Comm., 206 N. Y. 494; Bowden v. Owen, 103 Misc. Rep. 56; 187 App. Div. 910; 227 N. Y. 612; Treadwell v. Owen, 124 App. Div. 260; Herder v. Clifford, 252 N. Y. 141; Matter of Gilman, 82 App. Div. 186; Ormiston v. Olcott, 84 N. Y. 339; Matter

      of Morse, 247 N. Y. 290; Noble State Bank v. Haskell, 219 U. S. 104; Norman v. Baltimore & O. R. R. Co., 55 Sup. Ct. Rep. 407.)

      Lester D. Stickles, Corporation Counsel (Arthur H. Ellis and Herbert R. Goldstein of counsel), for respondent.
    Plaintiff occupies the status of a secured creditor of defendant. (State Bank of Commerce v. Stone, 261 N. Y. 175; Matter of Broderick, 140 Misc. Rep. 861; Matter of Bank of Spencerport, 143 Misc. Rep. 196; Browne v. City of New York, 241 N. Y. 96; Bareham v. City of Rochester, 221 App. Div. 36; 246 N. Y. 140; City of New York v. Village of Lawrence, 250 N. Y. 429; Matter of Mayor of New York [Elm St.], 246 N. Y. 72; Texas & P. R. Co. v. Pottoroff, 291 U. S. 245; Maryland Casualty Co. v. Okmulgee County, 128 Okla. 58.) The status of plaintiff as a secured creditor is not affected even though the deposit of securities by the defendant was ultra vires. (Bissell v. Michigan, So. & No. Ind. R. R. Co., 22 N. Y. 258; Walden Nat. Bank v. Birch, 130 N. Y. 221; National Bank of Xenia v. Stewart, 107 U. S. 676; American Surety Co. v. Philippine Nat. Bank, 245 N. Y. 116; Parish v. Wheeler, 22 N. Y. 494; Bath Gas Light Co. v. Claffy, 151 N. Y. 24; Appleton v. Citizens’ Central Nat. Bank, 190 N. Y. 417; 216 U. S. 196; Holmes & G. M. Co. v. Holmes & W. M. Co., 127 N. Y. 252; Quintal v. Fidelity & Deposit Co., 142 Misc. Rep. 657; 238 App. Div. 820; State Bank of Commerce v. Stone, 261 N. Y. 175.) Plaintiff was entitled to have the percentages of cash payment computed upon its entire balance on deposit, without regard to the security or proceeds thereof. (People v. Remington & Sons, 121 N. Y. 328; McGrath v. Carnegie Trust Co., 221 N. Y. 92; Matter of Andes Co-operative Dairy Co. v. Baldwin, 238 App. Div. 726; 263 N. Y. 578; People v. Granite State Provident Assn., 41 App. Div. 257; 161 N. Y. 492; Matter of Simpson, 36 App. Div. 562; 158 N. Y. 720; Matter of' Kearns, 139 Misc. Rep. 877; Merrill v. National Bank of Jacksonville, 173 U. S. 131; United

      States Fidelity & Guaranty Co. v. Centropolis Bank, 17 Fed. Rep. [2d] 913; Viets v. Union Nat. Bank, 101 N. Y. 563; Broderick v. Aaron [Kornberg], 268 N. Y. 260; Barnes v. Arnold, 23 Misc. Rep. 197; 45 App. Div. 314; 169 N. Y. 611; Priest v. Whitney Loan & Trust Co., 261 N. W. Rep. 375; State v. Childers, 202 Iowa, 1137; People v. Dubia, 289 Ill. 276; State v. Myers, 54 Kan. 206; DeCordova v. Barnum, 130 N. Y. 615; First Nat. Bank of Seattle v. Glidden, 175 App. Div. 563; 225 N. Y. 698; National Bank of Rochester v. Erion-Haines Realty Co., 213 App. Div. 54.) The plan of reorganization did not and could not affect the plaintiff. (Matter of Peck v. Town of Galt, 46 Upper Canada [Q. B.], 211; Matter of Township of Romney, 11 Ont. App. 712; Parr v. Village of Greenbush, 72 N. Y. 463; Moore v. Mayor, 73 N. Y. 238; Van Dolsen v. Bd. of Education, 162 N. Y. 446; McDonald v. Mayor, 68 N. Y. 23; Donovan v. Mayor, 33 N. Y. 291; Brooklyn City R. R. Co. v. Whalen, 111 Misc. Rep. 348; 191 App. Div. 737; 229 N. Y. 570; Belt Line Ry. Co. v. New York, 118 Misc. Rep. 665; Smith v. Smythe, 197 N. Y. 457; Mt. Sinai Hospital v. Hyman, 92 App. Div. 270; O’Brien v. Mayor, 40 App. Div. 331; 160 N. Y. 691; Oswego Falls Corp. v. City of Fulton, 148 Misc. Rep. 170; Matter of New York, L. efe W. R. R. Co., 98 N. Y. 447; Crouse v. McVickar, 207 N. Y. 213; Hong Kong & S. Banking Corp. v. Cooper, 114 N. Y. 388; Hine v. New York Elevated R. R. Co., 149 N. Y. 154; Shepherd v. Mount Vernon Trust Co., 269 N. Y. 234.)
   Finch, J.

This is an appeal by defendant-appellant, pursuant to permission of this court, from a summary judgment in favor of the plaintiff granted at Special Term and unanimously affirmed by the Appellate Division, second department.

The city of Mount Vernon pursuant to local law (Laws of 1931, Local Law No. 1, amending Laws of 1922, ch. 490) duly designated the defendant a depositary, and fixed the sum of $800,000 as the amount of the surety bond to be given by said defendant as security or in lieu thereof the amount of legal securities to be deposited by the defendant with the City Comptroller.

Pursuant to the bank holiday proclamation by the President of the United States, dated March 6, 1933, the defendant was closed. On March 14th the defendant opened on a restricted basis making available to depositors ten per cent of their respective deposits. Prior to this date the city had received from the defendant as security $510,000 in United States Treasury certificates and $290,000 in city of Mount Vernon tax anticipation certificates and had on deposit something over $1,000,000 to the credit of the plaintiff.

Thereafter a plan of reorganization was promulgated pursuant to section 61-a of the Banking Law (Cons. Laws, ch. 2; Laws of 1933, ch. 772), which was submitted to all depositors and stockholders in an effort to rehabilitate the defendant so that it might do business without restriction and return to its depositors more than might ever become available in liquidation proceedings, and certainly make available to them more in the form of immediate cash. This proposed agreement in brief provided that fifty-five per cent of the deposits was to be paid in cash upon the unrestricted opening of the bank and the remaining forty-five per cent paid by certificates of beneficial interest in certain segregated assets to the extent of thirty-three and three-fourths per cent and by capital stock of the defendant to the extent of eleven and one-fourth per cent.

The ordinance of the Common Council, after reciting the closing of defendant, the permission to open on a restricted basis making available to depositors ten per cent and the plan to reorganize and remove all restrictions, authorized the city to execute a depositor’s agreement upon the following conditions: “ That the right of the City * * * to enter into this agreement be subject to the approval of the Appellate Division * * * ” which is to consider whether it was legal for the city to accept stock in the reorganized bank and interest in the fund of segregated assets and whether it was legal for the city to accept, in lieu thereof, the net proceeds of sale of such stock and the interest in such fund, if the sale were held within a reasonable time. Also, whether the method of computing the amount available of the deposit of the city, as made by the Superintendent of Banks, was proper, and whether the defendant was empowered to pledge these securities as collateral to secure the deposit of said city moneys in the Mount Vernon Trust Company. Lastly whether any or all of the funds of the city of Mount Vernon in the Mount Vernon Trust Company are preferred. In other words, these officials were fearful lest their actions might be illegal and desired to shift the entire responsibility to the courts.

Pursuant to such authority, the city duly executed with the defendant a depositor’s agreement authorizing the defendant to invest eleven and one-fourth per cent of the withheld balance in the purchase of capital stock in accordance with the plan of reorganization and pay the balance by a certificate of beneficial interest in certain segregated assets, Provided, however, that whereas the funds on deposit to the credit of * * * the City of Mount Vernon are * * * partly secured by deposit of collateral, this agreement applies to the unsecured portion of such deposit only upon the following conditions; ” and then follow the same conditions as in the ordinance adopted by the Common Council reserving any question of illegality for the courts together with a provision that in case it shall be decided by the Appellate Division that the city of Mount Vernon is not authorized to enter into the aforesaid agreement to accept shares of stock or a certificate of interest in the segregated assets that then the foregoing agreement shall be deemed to be null and void.

Pursuant to the above a submission of controversy was duly submitted to the Appellate Division but was dismissed as stating no controversy.

On June 5, 1934, the trust company reopened without restrictions pursuant to said plan of reorganization. The defendant thereupon received fifty-five per cent in cash applied as expressly provided for in the agreement, namely, to the unsecured portion of the deposit.

This action is now brought for the payment of $103,000 in cash, being the approximate difference between the amount of the original deposit owed to the city less the credit from the sale of the pledged securities, and the payment in cash of ten per cent at the time of the restricted opening and fifty-five per cent at the time of the unrestricted opening.

By stipulation between the parties, dated July 27, 1934, the sale of the pledged securities or the withdrawal of any sums made available by the unrestricted opening of the defendant was not to be construed as a waiver of any rights either of the plaintiff or the defendant and the constitutionality and validity of the statute authorizing the reorganization of the defendant was not to be challenged. (Laws of 1933, ch. 772, known as § 61-a of the Banking Law.)

First, we are brought to a consideration of the effect of the pledge of securities covering the deposit as to either or both the city and the bank. No question remains that this pledge by the defendant securing the deposit was ultra vires as to both parties. (State Bank of Commerce v. Stone, 261 N. Y. 175; Texas & Pacific Ry. Co. v. Pottorff, 291 U. S. 245; City of Marion v. Sneeden, 291 U. S. 262. Cf. Lewis v. Fidelity & Deposit Co., 292 U. S. 559; 32 Columbia Law Review, pp. 1065, 1066.) Before the defendant, however, may repossess itself of the collateral it must first return in full the moneys which it received from the plaintiff under the agreement it now disclaims. (State Bank of Commerce v. Stone, 261 N. Y. 175.) In default of such return, plaintiff was entitled to credit the amount received from the sale of the collateral against the deposit.

We are next brought to a consideration of the effect of the formal execution and acceptance by the city pursuant to a duly enacted ordinance of the agreement signed by nearly all the depositors and repudiated alone by the city, pursuant to which manifold new rights and duties have arisen.

It is a fair inference from the record that the city was anxious to do what it could to bring about the unrestricted opening of the defendant so that more cash would be immediately and perhaps ultimately available to the city in this way than through liquidation.

The city has the implied power to compromise its claim. (McQuillin on the Law of Municipal Corporations [2d ed., 1928], vol. 1, § 384; vol. 6, § 2643; Tiedeman on the Law of Municipal Corporations, § 142.) The amount recoverable by the city in a liquidation proceeding being uncertain, compromise was entirely justified. (Cf. Ormiston v. Olcott, 84 N. Y. 339.)

The ordinance adopted by the Common Council and the plan executed by the city reveal a complete assent to the plan leaving only the power of the city and its legality to be passed upon by the courts. The ordinance and the agreement amount to complete acquiescence in the plan with the sole reservation that the agreement shall be null and void if it is found to be “ illegal,” not authorized,” or not proper.” If the word proper ” had been used alone it might be argued that the agreement left open the question whether the method of computation provided in the agreement was the method the courts would apply in the absence of an agreement. Read in its context, however, it is obvious that “ proper ” is used as a synonym of legal ” or authorized.” It is used in a clause found between clauses containing these other words and the principle of ejusdem generis applies. This view is confirmed by the fact that the provision of the agreement which sums up the grounds upon which it may be deemed null and void does not use the various synonyms but repeats the word “ authorized.” Moreover, a reading of the ordinance and the agreement as a whole leaves no doubt that the assent of the city to the plan was formal and complete saving only for the courts the question of its legal right and authority to assent thereto. Since no question is to be raised as to constitutional validity and since the city had a right to compromise, the only question remaining is whether the depositors’ agreement applied to the whole of the deposit or only to that portion which remained after crediting the value of the collateral. This question is not difficult to answer. By the very terms of the agreement it expressly “ * * * applies to the unsecured portion of such deposit only * *

We are thus brought to the conclusion that the city was duly authorized by the Common Council and the Board of Estimate and Contract to enter formally into an agreement with the defendant and the other depositors and stockholders which was approved by over eighty per cent of the depositors and over two-thirds of the stockholders. Under this agreement new capital has been raised resulting in the immediate payment in cash of fifty-five per cent to the city and to other depositors. This depositors’ agreement specifically applied only to the unsecured portion of the deposit of the city, subject only to the legal power of the city to enter into such an agreement which was to be determined by the courts. When the Appellate Division because of the lack of an actual controversy declined to pass upon the legality of the plan that question remained open. We now determine that the city had the right to compromise its claim in the way that it did and hence is bound by its assent to the plan.

It follows that the judgments appealed from should be reversed and the motion for summary judgment denied, with costs in all courts.

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

Judgments reversed, etc.


author: O’Brien, J.

text:
    Regina N. Bressler et al., Respondents, v. New York Rapid Transit Corporation, Appellant.
    (Argued March 11, 1936;
    decided April 14, 1936.)

      Harold L. Warner and George D. Yeomans for appellant.
    The plaintiffs cannot repudiate their own evidence as to the cause of the accident. They must succeed on that evidence or not at all. If, as charged by the trial court, no inference of negligence could be drawn from the evidence as to the cracked condition of the glass, the complaint should have been dismissed. To charge the jury that the doctrine of res ipso loquitur applied and allow them to speculate blindly as to the negligence of the defendant, starting off with the premise that the cause of the accident as shown by the plaintiffs themselves was not enough to warrant an inference of negligence, was extreme error. (Whitcher v. Board of Education, 233 App. Div. 184; 236 App. Div. 293.) Assuming that plaintiffs could repudiate their own explanation of the accident, the unexplained breaking of a car window does not raiste a presumption of negligence on the part of the railroad company. The doctrine of res ipso loquitur does not apply. (Gillick v. Delaware, L. & W. R. R. Co., 83 Misc. Rep. 430; McKinney v. N. Y., W. & B. R. R. Co., 179 N. Y. Supp. 535.) The trial court was right in charging that no finding of negligence could be based on the evidence as to the cracked condition of the glass. Without proof of notice of the crack, the defendant is not hable, and the complaint should be dismissed. (Palmer v. Pennsylvania R. R. Co., 111 N. Y. 488; Kelly v. N. Y. & Sea Beach Ry. Co., 109 N. Y. 44; Leyh v. Newburgh Electric R. R. Co., 41 App. Div. 218; 168 N. Y. 667; Schonleben v. Interborough R. T. Co., 160 App. Div. 790; Devine v. Empire State R. R. Corp., 220 App. Div. 466; Strembel v. B. H. R. R. Co., 110 App. Div. 23.)

      Stephen Callaghan and Ralph Stout for respondents.
    The doctrine of res ipso loquitur applies and the trial court properly so charged the jury. (Palmer v. Delaware & Hudson Canal Co., 120 N. Y. 170; Stierle v. Union Ry. Co., 156 N. Y. 70; Sheppard v. Brooklyn Heights R. R. Co., 146 App. Div. 806; Powell v. Hudson Valley R. Co.,
      88 App. Div. 133; Schonleben v. Interborough R. T. Co., 160 App. Div. 790; Rosenbaum v. Union Ry. Co., 169 N. Y. Supp. 456; Orma v. Traction Bus Co., 300 Penn. St. 474; Boice v. Ulster & Delaware R. R. Co., 120 App. Div. 643; Waldman v. Brooklyn Union El. R. Co., 136 App. Div. 376; Scilimbraca v. Central R. R. of N. J., 7 N. J. Misc. Rep. 635; Gilmore v. Brooklyn Heights R. R. Co., 6 App. Div. 117; Weir v. Union Ry. Co., 112 App. Div. 109; Jones v. Brooklyn Heights R. R. Co., 23 App. Div. 141; Och v. M., K. & T. Ry. Co., 130 Mo. 27; Allen v. United Traction Co., 67 App. Div. 363; Vogel v. Union Dime Sav. Bank, 221 App. Div. 881; 247 N. Y. 595; Baum v. N. Y. & Queens Co. R. Co., 124 App. Div. 12.) The fact that the plaintiff offered proof tending to show the existence of some specific defect would not deprive her, as a passenger in the defendant’s car, of the benefit of
    the doctrine of res ipso loquitur, nor would it take away from the defendant the necessity of showing, to the satisfaction of the jury, that the happening of the accident was not due to want of care on its part. (D’Arcy v. Westchester Electric Ry. Co., 82 App. Div. 263; DeRoire v. Lehigh Valley R. R. Co., 205 App. Div. 549; Williams v. N. Y. & Queens County R. R. Co., 97 App. Div. 133; Powell v. Hudson Valley R. Co., 88 App. Div. 133; McDonough v. Boston Elevated Ry. Co., 208 Mass. 436; Rapp v. Butler-Newark Bus Lines, 103 N. J. L. 512; 104 N. J. L. 444; Firszt v. Capitol Park Realty Co., 98 Conn. 627; Stewart v. Barre & Montpelier P. & T. Co., 94 Vt. 398; Partin v. Black Mountain Camp, 248 Ky. 32; Kleinman v. Banner Laundry Co., 150 Minn. 515; Nashville Interurban Ry. Co. v. Gregory, 137 Term. 422; Pearson v. Ehrich, 148 App. Div. 680.)
   O’Brien, J.

Judgment was entered in favor of plaintiff Regina Bressler for personal injuries sustained by her and in favor of her husband, Simon, for loss of services and for expenses. It is based upon negligence by defendant.

Mrs. Bressler was a passenger on one of defendant’s cars and was injured by glass which fell from a window of that car. Testimony introduced by her tended to prove that a short time previous to. her injury she noticed that the glass in the upper sash of the window next to which she was sitting was cracked and that later, when the car gave a sudden jerk, the glass flew from the sash and a particle penetrated her eye. Defendant’s evidence was that a boy near its track threw a stone and broke the window.

At the close of plaintiffs’ case, on the statement of plaintiffs’ counsel that the evidence relating to the cracked condition of the glass was not introduced for the purpose of proving notice but only to show the actual condition, the court denied defendant’s motion to strike out the testimony relating to that subject. At the close of the whole case the court charged, at defendant’s request, that the jury could not find any negligence in the method of operating the train in respect to its jerking or jolting or sudden stopping and that no negligence could be based upon the evidence of a crack in the glass “ standing alone.” However, in the main part of the charge, the court recited to the jury plaintiff’s contention that there was a crack in the window glass and that,. when there was a motion of the car, the glass came out. He called attention also to defendant’s contention that a boy threw a stone through the window, instructed the jury that they must determine which contention was true and charged that the rule res ipso loquitur applied to this case.

No doubt the jury must have failed to appreciate the exact issue which they should determine. In the case remained testimony that the glass was cracked, that, when the car jolted, the glass fell out, but the crack in the glass was not to be considered as constituting notice to defendant nor standing alone ” could it form the basis for a finding of negligence. Neither would the jerking, jolting or sudden stop of the car constitute negligence. On the other hand, there was testimony that a boy hurled a stone through the glass and the jury was instructed to determine the truth of these opposite contentions with an additional instruction that the rule res ipso loquitur applied. Did the jury infer that, while the crack in the glass “ standing alone ” was not negligence and neither was the jolting of the car negligence, the combined evidence of these two factors might constitute negligence and cast the duty upon defendant of going forward with evidence tending, to explain the occurrence?

Some confusion exists in the reported cases whether the rule res ipso loquitur is applicable when a plaintiff produces evidence from which the cause of an accident may be inferred. The reasoning which we think most worthy of adoption is found in Whitcher v. Board of Education (233 App. Div. 184), where, as here, there was evidence by plaintiff tending to prove the cause of the accident but no evidence of defendant’s negligence. Here the proof introduced by plaintiff is that her injury was due to a broken pane of glass, of which defendant was not charged with notice, which fell out because the car gave a sudden jolt which was not negligent. In the absence of evidence by plaintiff tending in some degree to explain the cause of this accident, which in the natural course of events might not be likely to occur without negligence, defendant, having control of this car, would be in the best position to go forward with proof tending to rebut an inference of negligence and to show that the occurrence was without its fault. In such an event, the rule res ipso loquitur would apply. (Volkmar v. Manhattan Ry. Co., 134 N. Y. 418; Hogan v. Manhattan Ry. Co., 149 N. Y. 23; Wolf v. American Tract Soc., 164 N. Y. 30; Qriffen v. Manice, 166 N. Y. 188; Robinson v. Consolidated Gas Co., 194 N. Y. 37; Plumb v. Richmond L. & P. Co., 233 N. Y. 285; Slater v. Barnes, 241 N. Y. 284; Sandler v. Garrison, 249 N. Y. 236.) This is the theory adopted in the second Whitcher case (236 App. Div. 293) and we think that is "correct.

The judgment of the Appellate Division and that of the Trial Term should be reversed and a new trial granted, with costs to abide the event.

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

Judgments reversed, etc.


author: Crane, Ch. J.

text:
    Autocar Sales and Service Co., Inc., Appellant, v. Gertrude Hansen et al., as Administrators with the Will Annexed of the Estate of Chris Hansen, Deceased, Respondents.

      (Argued March 13, 1936;
    decided April 14, 1936.)

      George H. Barber for appellant.
    When the defendants served their answer on August 31, 1934, section 79 of the Personal Property Law (Cons. Laws, ch. 41), as amended by chapter 728 of the Laws of 1934, was in effect, and all subsequent proceedings herein were governed by said section as amended. (Laird v. Carton, 196 N. Y. 169; Sackheim v. Pigueron, 215 N. Y. 62; Ives v. South Buffalo Ry. Co., 201 N. Y. 271; Eagle Picher Lead Co. v. Mansfield Paint Co., Inc., 201 App. Div. 223; Christiano v.
      Christiano, 204 App. Div. 47; Nicholson v. City of New York, 85 Misc. Rep. 563.) The plaintiff did not retake the burned truck, under the provisions of the Personal Property Law or under the contract of conditional sale. (Brucker v. Carroll, 86 Misc. Rep. 414; Scribner v. Levy, 23 N. Y. St. Repr. 351; Barber v. Gray, 4 Misc. Rep. 193.)

      John H. Broderick and George H. Rothlauf for respondents.
    The amendment to section 79 of the Personal Property Law by chapter 728 of the Laws of 1934, which became effective subsequent to the commencement of this action, is not applicable. (People ex rel. City of New York v. Nixon, 229 N. Y. 356; Edwards v. Kearzey, 96 U. S. 595; Northern Pacific Ry. Co. v. Wall, 241 U. S. 87; Montgomery Acceptance Co. v. Coons, 263 N. Y. 561; Addiss v. Selig, 264 N. Y. 274; Feiber Realty Corp. v. Abel, 265 N. Y. 94; Walker v. Walker, 155 N. Y. 77; Jacobus v. Colgate, 217 N. Y. 235; Hollenbach v. Born, 238 N. Y. 34; United States v. Heth, 3 Cranch, 399; Orinoco Realty Co. v. Bandler, 233 N. Y. 24; Dalziel v. Rosenfeld, 265 N. Y. 76; United States Mortgage & Trust Co. v. Ruggles, 258 N. Y. 32; Isola v. Weber, 147 N. Y. 329; O’Reilly v. Utah, N. & C. Stage Co., 87 Hun, 406; Ralph v. Cronk, 266 N. Y. 428; Matter of Messinger, 29 Fed. Rep. [2d] 158.) The plaintiff retook possession of the four trucks and was required under the provisions of section 79 of the Personal Property Law to sell them within thirty days after the retaking. Its failure to do so entitled the defendants to recover judgment against the plaintiff as directed by the trial court. (Montgomery Acceptance Corp. v. Coon, 263 N. Y. 561; Grossman v. Weiss, 129 Misc. Rep. 234.)
   Crane, Ch. J.

The plaintiff is a New Jersey corporation transacting business within the State of New York. On the 30th day of November, 1931, one Chris Hansen, now deceased, executed a written conditional sales contract with the plaintiff wherein and whereby he purchased four auto car trucks bearing serial numbers 716-6844, 716-6845, 716-6846 and 716-6847 for the sum of $26,217.04. The ordered trucks were delivered to Hansen, who died on November 11, 1932. Gertrude Hansen and the Manufacturers National Bank of Troy were appointed administrators of the will annexed, now the defendants herein. There was a balance due on the purchase price of these trucks of $1,973.43, so that $24,243.61 had been paid prior to the commencement of this action which was brought to recover the possession of three of the trucks.

The complaint was served on June 12, 1934, and the answer of the defendants on August 31, 1934. This answer set forth that as more than fifty per cent of the purchase price had been paid, and the trucks were not sold within thirty days after possession was regained, the defendants were entitled to at least one-fourth of the amount of the payments, pursuant to section 80-e of the Personal Property Law (Cons. Laws, ch. 41). To this counterclaim no reply was served. As stated, this action was brought to recover possession of three of the cars numbered respectively 716-6844, 716-6845 and 716-6847. The fourth truck was not replevined. It had been destroyed by fire and the plaintiff in this action made no claim to it nor was its possession delivered to the plaintiff by reason of the conditional bill of sale or any rights thereunder.

The case came on for trial. The defendants did not ask for judgment upon their counterclaim on the pleadings, that is, because of the failure to serve a reply. An agreed statement of facts was submitted to the court and it was stipulated that the judge should decide the case not only on the pleadings but also on these agreed facts. The stipulation reads: “ It is further stipulated that this case is submitted to this Trial Term of the Supreme Court, Hon. Ellis J. Staley presiding, for decision upon the pleadings and the foregoing stipulations, and the parties stipulate that judgment may be entered upon the decision of the court herein in the same manner as if this cause were tried before the Court and a jury, pursuant to the provisions of Section 440-a of the Civil Practice Act.”

The failure, therefore, to serve a reply to the counterclaim is of no importance. The agreed statement of facts contains the following: On September 30, 1933, pursuant to a requisition of replevin the sheriff of Albany county seized trucks numbers 716-6844, and 716-6845, and thereafter, and at the expiration of three days from the seizure, delivered them to the plaintiff, which retained possession thereof. On the 5th day of October, 1933, the sheriff of Clinton County, N. Y., pursuant to a requisition of replevin, seized truck number 716-6847, and on the 9th day of October, 1933, delivered it to the plaintiff, which retained it.” It is further stipulated and the plaintiff admits that it did not within thirty days alter it had repossessed the trucks sell them pursuant to the provisions of section 79 of the Personal Property Law as it existed before the amendment of 1934.

This section required the seller, after a taking of property, to sell the same at public auction not more than thirty days after the retaking, provided at least fifty per cent of the purchase price had been paid. The plaintiff admits that it failed to comply with this law and is, therefore, subject to the penalty provided in section 80-e of the Personal Property Law. This section reads as follows:

“ Recovery of Part Payments. If the seller fails to comply with the provisions of sections * * * seventy-nine * * * after retaking the goods, the buyer may recover from the seller his actual damages, if any, and in no event less than one-fourth of the sum of all payments which have been made under the contract, with interest.”

Under this law the defendants on their counterclaim were entitled to one-fourth of the payments made upon the three cars or trucks retaken by the plaintiff unless the amendment to section 79 of the Personal Property Law, effective May 19, 1934, applies. The amendment is chapter 728 of the Laws of 1934 modifying the provision regarding a sale at public auction within thirty days. The amendment reads: Provided, however, that when the seller retakes possession of the goods by legal process, and an answer is interposed the seller may hold such retaken goods for a period not to exceed thirty days after the entry of a judgment by a court of competent jurisdiction entitling the seller to possession of such goods before holding such resale.”

The dates become important. The possession of the three trucks was retaken under the conditional bill of sale through seizure in replevin in September and October, 1933. Under the law in force at that time the defendants had certain property rights which were vested in them. They became entitled to not less than one-fourth of the money paid for these trucks -unless the plaintiff sold the same within thirty days at public auction. The time expired in November of 1933, and at that time there was not less than $4,545.68 due the defendants by contract and by law which became a part of the contract. This debt due from the plaintiff to the defendants was a property right, a cause of action , which could not be taken from the defendants by subsequent legislation. The amendment to section 79 taking effect May 19, 1934, has no retroactive effect so as to deprive these defendants of the money due or the right to collect it.

Moreover, chapter 728 of the Laws of 1934 gives no indication on its face that it was the intention of the Legislature to make it retroactive. As á general rule of construction legislation speaks for the future and is not retroactive except in matters which pertain merely to procedure. The appellant, plaintiff, has argued that this legislation pertains merely to procedure, but as to this we do not agree. Such cases as Sackheim v. Pigueron (215 N. Y. 62), relating to the burden of proof in an action brought to recover damages for death through negligence; or Laird v. Carton (196 N. Y. 169), with reference to the issuance of garnishee executions, are not in point. The first relates solely to procedure and the second enlarges rights rather than takes them away.

That statutes which take away or deprive one of vested rights in property should not receive a construction making them retroactive see Addiss v. Selig (264 N. Y. 274); Feiber Realty Corp. v. Abel (265 N. Y. 94); Hollenbach v. Born (238 N. Y. 34, 38); Jacobus v. Colgate (217 N. Y. 235), and Orinoco Realty Co. v. Bandler (233 N. Y. 24, 28).

We have thus far dealt with the three trucks to recover which this action has been brought. As to the fourth truck the facts are entirely different, and we think a different conclusion should be reached than that found by the trial court. The facts stipulated are these: “ That on the 5th day of September, 1933, truck 716-6846 was damaged by fire, and that on the 6th day of September, 1933, a fire adjuster by the name of Gable, representing the Fire Insurance Company that insured said truck for the benefit of the plaintiff and defendant Hansen, as administratrix, ordered the said truck to be removed from the scene of the fire to the place of business of the plaintiff in the city of Albany; that the delivery of said truck to the plaintiff was made without any knowledge on the part of either defendant, and that the defendant Hansen, as administratrix, was informed of said delivery to the plaintiff the same day by Mr. Soden, an insurance agent in the city of Cohoes, representing the insurer, and that the plaintiff has retained possession of said truck ever since that date, and that the plaintiff has never offered to return it to either defendant, and that neither defendant has ever demanded its return.”

This action was not brought to recover nor to replevin this fourth truck; the plaintiff did not take possession of it under its conditional contract of sale or through the sheriff; it took no steps or action to repossess the truck through any of its agencies; the truck was in the possession of the defendants when it was destroyed or damaged by fire; the insurance adjuster took the remains of the truck from the defendants and left it with the plaintiff, for what purpose we do not know.

The plaintiff has never refused to return the truck nor have the defendants ever demanded its return. There is nothing whatever in the evidence or the agreed statement of facts to show that the plaintiff took this truck or repossessed itself of this truck under its conditional bill of sale or any rights pertaining thereto, nor does it appear that the insurance agent acted for the plaintiff and not for his own insurance company. We do not think, therefore, that the plaintiff should be charged with the duty of reselling this truck within thirty days or with the return of one-fourth of the purchase price paid upon it. The statutes above referred to have no application to such circumstances or possession. This results in a modification of the judgment to the following extent:

It is conceded that all the trucks were of equal value, and we must, therefore, assume that the $24,243.61 was paid ratably on all four. Therefore, $6,060.90 was paid on number four truck, and $18,182.71 on the other three. The defendants are entitled to one-fourth of this latter amount, or $4,545.68, with interest.

The judgments of the Appellate Division and of the Trial Term should be modified in accordance with this opinion, and as so modified affirmed, with costs to the appellant in this court.

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

Judgment accordingly.


text:
    Joseph H. Lambert, Respondent, v. Mae Lambert, Appellant.
    (Argued March 13, 1936;
    decided April 14, 1936.)

      Vincent J. Loughlin for appellant.
    Mere form should never be substituted for substance, nor technicalities for merit. (Matter of Tricomi, 203 App. Div. 207; Pitcairn v. Pitcairn, 119 Misc. Rep. 37; Gall v. Gall, 114 N. Y. 109.) The court acquires jurisdiction by the service of the summons and not by its proof of service. (Winter v. Winter, 229 App. Div. 750; 256 N. Y. 113; Mishkind v. Sidorsky, 189 N. Y. 402; Loring v. Binney, 38 Hun, 152; 101 N. Y. 623; Valz v. Sheepshead Bay Bungalow Corp., 249 N. Y. 122.) The authority of the court to act in a dissolution proceeding is found solely in the provisions of section 7-a of the Domestic Relations Law (Cons. Laws, ch. 14). (Matter of Tricomi, 203 App. Div. 207; People ex rel. Wogan v. Rafferty, 208 N. Y. 451; Fink v. Wallach, 109 App. Div. 718.) Irregularities in the proceedings were cured by the nunc pro tune order. (Valz v. Sheepshead Bay Bungalow Corp., 249 N. Y. 122; Code Civ. Proc. §§ 721, 722; Civ. Prac. Act, § 109.)

      Emil Rubenstein for respondent.
    Appellant’s failure to file the petition and order of publication in the dissolution proceeding in the County Clerk’s office on or before the first day of publication, was fatal, and the court never acquired jurisdiction. (Whiton v. Morning Journal Assn., 50 N. Y. Supp. 899; Fink v. Wallach, 96 N. Y. Supp. 544; Wilson & Co. v. Banque Francaise Due Mexique, 208 N. Y. Supp. 213.) Section 7-a of the Domestic Relations Law provides that proof of publication of notice and object must be filed before the court may make a decree. Such proof was never filed in the County Clerk’s office. (Townsend v. Townsend, 100 N. Y. Supp. 464; Wilson & Co. v. Banque Francaise Due Mexique, 208 N. Y. Supp. 213.) The dissolution proceedings, being purely statutory, required strict compliance with every provision of the statute. (Glinski v. Glinski, 225 N. Y. Supp. 505.) The dissolution proceedings having been jurisdictionally defective, the nunc pro tune order must be deemed a nullity. (Barleycorn v. Woolley, 179 N. Y. Supp. 518; Fink v. Wallach, 96 N. Y. Supp. 544; Wilson & Co. v. Banque Francaise Due Mexique, 208 N. Y. Supp. 213; Valz v. Sheepshead Bay Bungalow Corp., 249 N. Y. 122.)
   Finch, J.

This is an action brought by the plaintiff husband to annul his marriage to the defendant on the ground that at the time of his marriage to her she was the lawful wife of another.

These parties were married on September 10, 1925. After living together for approximately a year and a half the defendant obtained a legal separation with an award of alimony which was paid until the plaintiff obtained judgment of annulment.

The defendant had been previously married to one Alonzo Rogers. That marriage took place in 1897. In 1909 Rogers abandoned the defendant and the last she saw or heard of him was in 1913. Diligent search and inquiry for him proved futile. In 1925 after the defendant had become acquainted with the plaintiff she instituted a proceeding to obtain a divorce from Rogers pursuant to the so-called Enoch Arden Law ” (Dom. Rel. Law [Cons. Laws, ch. 14], § 7-a), and when the plaintiff asked her to marry him she explained the situation to him. The order of dissolution of the marriage was signed on September 10, 1925, and on that very day the plaintiff married the defendant.

He now seeks to have the marriage annulled on the ground that the order obtained by the defendant dissolving her marriage with her former husband was invalid because of lack of jurisdiction by the court granting the order.

The record shows that pursuant to section 7-a of the Domestic Relations Law a petition was drawn by the attorney for the defendant and duly signed and verified by her. Upon that the order of publication was signed by a justice of the Supreme Court on the 13th day of May, 1925. Pursuant to that order the summons was duly published in two Buffalo newspapers for the prescribed period. Before the hearing was held the attorney for the defendant submitted the papers in the matter to the clerk of the court who “ O. K’ed them.” The hearing was then held before a justice of the Supreme Court, who signed the order dissolving the marriage, which order was entered in the minutes of the County Clerk. Later it was discovered that the papers in the dissolution proceeding were not filed in the office of the County Clerk. Thereupon a nunc pro tune order again purporting to dissolve the marriage was obtained and filed in the County Clerk’s office in August of 1928, but even this order was not indexed. The plaintiff maintains that the dissolution proceedings were jurisdictionally defective because the petition and order of publication were not filed in the County Clerk’s office on or before the first day of publication and were never filed and that proof of publication was never filed. At Special Term the complaint in this annulment proceeding was dismissed. The Appellate Division, however, reversed and granted a judgment of annulment.

Were there defects in the Enoch Arden proceedings which were jurisdictional and destroyed the validity of the judgment entered therein? Section 7-a of the Domestic Relations Law provides for dissolution of marriage on the ground of absence for five years where the absent party is believed to be dead and after diligent search no evidence is found to show that he is still alive. At the time of the dissolution proceedings involved this section provided: “ * * * the court shall thereupon by order require notice of the presentation and object of such petition to be published in the same manner as required for the publication of a summons in an action in the supreme court where service of such summons is made by publication.”

The manner of service by publication is not found in the Civil Practice Act, section 232 of that act merely providing the cases in which service by publication may be employed. This is found in Rules of Civil Practice, rules 50-52. Rule 50 prescribes the manner of service by publication. Rule 51 gives the time in which the publication must be made and the method of reckoning the time of completion of service. Rule 52 provides that “ * * * the summons, complaint and order and the papers on which the order was made must be filed with the clerk on or before the day of the first publication * * *,” and contains a notice which must be annexed to and published with the summons.

Admittedly there has not been strict compliance with the provisions of rule 52. The papers were not filed with the County Clerk prior to the publication of the petition. Does this failure to comply with the details of procedure outlined in the rule make it necessary to hold that the dissolution of the marriage was invalid and that the subsequent marriage which continued over a period of five years, during more than a year and a half of which the parties were living together as man and wife, was a nullity?

Rules of Civil Practice are not statutory enactments. They are rules formulated and adopted by the justices of the Appellate Division. Such rules, when validly made, have the force and effect of statutes. (Matter of Moore, 108 N. Y. 280; Sachs v. Blum, 241 App. Div. 384.) But a rule inconsistent with a statute is inoperative. (Gormerly v. McGlynn, 84 N. Y. 284; French v. Powers, 80 N. Y. 146; Broome County Farmers’ F. R. Assn. v. N. Y. State Elec. & Gas Corp., 239 App. Div. 304.)

The contention that the only rule of practice applicable to proceedings pursuant to section 7-a of the Domestic Relations Law is rule 50 carries much weight. Section 7-a merely provided that the publication should be made in “ the same manner as required for the publication of a summons.” Rule 50 provides the manner of publication. Rule 51 is at least in part inapplicable since it fixes the time when the service shall be complete and is in conflict with a similar time provision contained in section 7-a. The pertinent part of rule 52 does not deal with the manner of service or of publication but rather with the filing and the time of such filing. Thus it might be held that rule 52 does not apply to proceedings under the Enoch Arden Law. It is unnecessary, however, to go this far.

Even if we should assume that rule 52 is applicable in addition to rule 50, the Special Term had a right to waive strict compliance with its terms in this dissolution proceeding. Jurisdiction is obtained by service and the failure of proof of service does not render the service void or the jurisdiction defective. (Winter v. Winter, 256 N. Y. 113.) In view of the general requirement of section 7-a that the manner of service of publication be followed it cannot be held that the filing of the papers prior to the publication is an essential of service and that the failure to file renders the service defective. The courts have held already that in Enoch Arden proceedings it is not necessary to comply with rule 52 in so far as it requires that the notice contained in the rule must be annexed to the notice of publication. (Matter of Tricomi, 203 App. Div. 207.) Even under our present system where the judicial department is not free and responsible to itself alone but must conform to an inflexible procedure prescribed by the Legislature, still the courts are permitted to disregard mistakes, defects and irregularities in process, pleadings, and other proceedings “ not being against the right and justice of the matter.” (Civ. Prac. Act, § 109; Valz v. Sheepshead Bay Bungalow Corp., 249 N. Y. 122, 123.) In accordance with this section the courts feel free, where no injustice is done, to overlook rules of evidence and rules dealing with such details of practice as have been committed to them. Such defects may be disregarded or cured either before or after judgment where no substantial right of any party is thereby prejudiced. Who could be prejudiced in the case at bar? Alonzo Rogers, the first husband, has not made an appearance. In fact, the only proof that we have that he is still alive is the deposition by his brother that he has communicated with him through the mails. Nor can the plaintiff complain. He knew of the entire situation before he married the defendant. He cannot now claim that because of the failure to file the papers he was not put on notice of the existence of an earlier marriage. To enforce strict compliance with this rule of practice would work injustice rather than promote that justice which is the object of the' rules. Since jurisdiction has been obtained and nobody is prejudiced the courts may waive strict compliance. (Broome County Farmers’ F. R. Assn. v. N. Y. State Elec. & Gas Corp., supra.)

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

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

Judgment accordingly.


author: Hubbs, J.

text:
    Joseph Wolff, Appellant, v. Mortgage Commission of the State of New York et al., Respondents.

      (Argued January 30, 1936;
    decided April 14, 1936.)

      Robert F. Dart, Oliver K. King, Saul Katz and Joseph A. Vassallo for appellant.
    The constitutionality of the statute (L. 1935, ch. 19) is to be tested by what may be done under it, not by what has been done. (Stuart v. Palmer, 74 N. Y. 183; Colon v. Lisk, 153 N. Y. 188; People ex rel. Balcom v. Mosher, 163 N. Y. 32; People ex rel. Alpha P. C. Co. v. Knapp, 230 N. Y. 48; Matter of Richardson, 247 N. Y. 401; Coe v. Armour Fertilizer Works, 237 U. S. 413.) The Fourteenth Amendment to the Constitution of the United States is violated by the Mortgage Commission Law, in so far as section 7 thereof provides for the exercise of the powers conferred by subdivisions 3 and 4 of section 5. (Pennoyer v. Neff, 95 U. S. 714; Chicago, M. & St. Paul Ry. Co. v. Minnesota, 134 U. S. 418; Londoner v. Denver, 210 U. S. 373; Southern R. Co. v. Virginia, 290 U. S. 190; Stuart v. Palmer, 74 N. Y. 183; Hess v. Pawloski, 274 U. S. 352; Davidson v. New Orleans, 96 U. S. 97; People v. Nebbia, 262 N. Y. 259; Home Savings & Loan Assn. v. Blaisdell, 290 U. S. 398; Worthen Co. v. Thomas, 292 U. S. 426;
      Worthen Co. v. Kavanaugh, 295 U. S. 56; Louisville Joint Stock Land Bank v. Radford, 295 U. S. 555; Matter of People [Title & Mtge. Guar. Co.], 264 N. Y. 69.) The statute infringes upon the equitable jurisdiction of the Supreme Court in violation of section 1 of article 6 of the Constitution of the State of New York. (Matter of Empire City Bank, 18 N. Y. 199; N. Y. Life Ins. & Trust Co. v. Conkling, 159 App. Div. 337; Matter of International Milling Co. [Broderick], 259 N. Y. 77; Matter of Cashmere State Bank, 169 Wash. 258.)

      Lawrence S. Greenbaum, Benjamin J. Rabin, Theodore S. Jaffin and Benjamin Kaplan for Mortgage Commission of the State of New York, respondent.
    The power of the Commission to borrow money and execute a mortgage on the property held by the Commission in trust for the certificate holders of the issue, for the purpose of making necessary repairs in and about the property, and for the payment of taxes and insurance, does not violate appellant’s constitutional rights. (Matter of People [Westchester Title & Trust Co.], 268 N. Y. 432; Matter of People [Title & Mortgage Guarantee Co.], 264 N. Y. 69; Matter of People [New York Title & Mortgage Co.], 264 N. Y. 475; United States Trust Co. v. Roche, 116 N. Y. 120; Rogers v. Rogers, 111 N. Y. 228; Matter of Windsor Trust Co., 142 App. Div. 772; New York Life Ins. & Trust Co. v. Conkling, 159 App. Div. 337; Raht v. Attrill, 106 N. Y. 423; Cowdrey v. Galveston, H. & H. R. R. Co., 93 U. S. 352; Miltenberger v. Logansport Ry. Co., 106 U. S. 286; Thompson v. Phenix Ins. Co., 136 U. S. 287.) The statute provides sufficient procedural safeguards. (Matter of People [Westchester Title & Trust Co.], 268 N. Y. 432; Matter of Casualty Co. of America, 244 N. Y. 443; Walsh v. State, 248 N. Y. 408; Matter of Second Russian Ins. Co., 219 App. Div. 46; 244 N. Y. 606; Lafayette Trust Co. v. Beggs, 213 N. Y. 280; People v. Knickerbocker Life Ins. Co., 199 App. Div. 503; 233 N. Y. 604; Reed v. Squire Co., 217 App. Div. 494; Matter of People [Title & Mortgage

      Guar. Co.], 264 N. Y. 69; Isaac v. Marcus, 258 N. Y. 257; Matter of Union Bank of Brooklyn, 176 App. Div. 477; Matter of Broderick, 235 App. Div. 281; Matter of Horowitz, 235 App. Div. 248; Matter of People [National Surety Co.], 239 App. Div. 490; 264 N. Y. 473.)
   Hubbs, J.

The sole question involved on this appeal is the constitutionality of section 5, subdivision 3 (a) and (c), and section 5, subdivision 4, of the Mortgage Commission Act (Laws of 1935, ch. 19, as amd. Laws of 1935, ch. 290). The section provides that the Commission may borrow money to pay taxes and the expenses of a mortgage foreclosure and pledge the securities of the trust therefor.

The Lawyers Westchester Title and Mortgage Company, a guaranty company under the Insurance Law (Cons. Laws, ch. 28), issued to plaintiff two participation certificates secured by a mortgage, now amounting to $140,000 of principal, on Green Meadow Country Club, Inc. The mortgage was on deposit with Lawyers Trust Company as depositary. The mortgage company is in liquidation under article XI of the Insurance Law, rehabilitation having failed. The Mortgage Commission has taken over the documents. The certificates and mortgage are in default. Taxes are in arrears to the extent of $48,421.65. There is danger of foreclosure of a tax lien for $25,000. The mortgage provides that the mortgagee may pay taxes in arrears. The Mortgage Commission notified the certificate holders that it proposed to borrow $75,500 upon an assignment of the mortgage for the purpose of paying back taxes and for a reserve to pay taxes during the ensuing year, to pay foreclosure expenses and to pay interest on the loan pending efforts to sell the mortgaged property. The appraised value of the property is $195,500.

The complaint seeks an injunction against the consummation of the loan on the ground that its consummation would violate plaintiff's constitutional rights by depriving him of his property without due process of law, taking it without just compensation and impairing the obligation of his contract; also that the statute which purports to authorize the loan is contrary to the constitutional provision which preserves the inherent jurisdiction of the Supreme Court. The complaint was dismissed upon motion by the Special Term.

Concededly, the sections of the statute in question authorize the borrowing of money to pay taxes and the expenses of a foreclosure. The question is, are those provisions of the statute valid under the Constitution?

The background of the situation here involved has been stated by Judge Lehman in detail in his opinion in the case of Matter of People (Title & Mtge. Guarantee Co. of Buffalo) (264 N. Y. 69), and in the factual provisions of the statute here involved. It would serve no useful purpose to restate such facts here.

In the Buffalo case we. sustained the validity of the Schackno Law (Laws of 1933, ch. 745) upon the broad ground that it was enacted within the reserved power of the State; that it created a new remedy which was necessary to protect the rights of a vast number of certificate holders to prevent the demoralization of the real estate market, the wiping out of the equities of certificate holders and the general disrupting of the financial structure. We held that the means adopted to accomplish that purpose were reasonable and appropriate.”

The decision in that case is authority for and justifies the decision made by the Special Term in this case. The underlying principle is the same, i. e., that the strict contract right of the individual is subject to the right of the State under its reserved power to enact laws to preserve the State itself or to avert an impending danger which threatens the general welfare of the State. (Shepherd v. Mount Vernon Trust Co., 269 N. Y. 234, 243; Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398.)

Assumption of control by the Mortgage Commission creates a relationship similar to or in fact that created under a statutory receivership. As a statutory receiver, it, of necessity, must preserve the property intrusted to its care for the benefit of all certificate holders. One small certificate holder for some selfish interest should not be allowed to defeat the underlying purpose of the receivership and by accomplishing his purpose jeopardize or destroy the equities of all other certificate holders. To preserve the property, it is necessary that taxes should be paid. In fact, the mortgage provides that the mortgagee may pay taxes in arrears. Such payment does not depreciate the equity of any certificate holder, but protects the interest of all.

The same is true in regard to the payment of expenses of foreclosure and the payment of the cost of insurance. The administrative details must necessarily be left to the judgment of the receiver which has decided that it is for the interest of all certificate holders that the taxes should be paid, the property insured, and a fund provided to pay the expenses of foreclosure. We can see no valid constitutional objection to such determination.

Appellant stresses the point that a receiver has no power to borrow funds on a trust security for the purpose of acquiring money to pay taxes not yet due, at least without the approval of the court. It may be conceded that a trustee of an expressed trust, which did not by its terms give such authority, would be without such power. If a trust instrument in terms gave such authority it would be perfectly valid and the trustee in the exercise of a sound discretion would be justified in exercising the power granted. In the absence of authority granted in a trust instrument, if a trustee desired to borrow money upon a trust security for a purpose which he deemed advisable for the protection of the trust estate, it would be necessary for the trustee to apply to the court upon notice for. permission to exercise such power. (Real Prop. Law [Cons. Laws, ch. 50], § 105; Laws of 1909, ch. 52; Bogert on Law of Trusts, p. 310; Rogers v. Rogers, 111 N. Y. 228; United States Trust Co. v. Roche, 116 N. Y. 120.)

i Doubtless the same principle would apply to the Mortgage Commission as successor trustee in the absence of authority to the contrary conferred by statutes. Section 5 of chapter 19 of the Laws of 1935 provides: “ The commission shall have the following limited powers, with reference to mortgages, mortgage investments and real estate under its jurisdiction. * * *

“ 3. To borrow funds for any of the following purposes: (a) to pay taxes, assessments or water rates and. penalties thereon, fire, rent, liability, workmen’s compensation and /or other appropriate insurance, and to buy or redeem tax liens and transfers thereof. * * *

(c) to pay foreclosure costs and expenses.”

It is apparent that the statute confers upon the Commission expressed authority to pay past due taxes and to pay the expenses of foreclosures. Does the statute authorize the Commission to borrow money to pay taxes not yet due but which it knows will become due within a year and also to borrow funds to pay the expenses of a foreclosure before the expenses are actually incurred?

The Mortgage Commission is a statutory trustee. Its-authority is derived from the statute creating it and defining its powers. Undoubtedly, the Legislature could legally grant it power to borrow money to pay past due taxes and thereby preserve the trust fund, without infringing upon the constitutional power of the Supreme Court. In granting it other powers it would not limit the power of the Supreme Court unless the powers so granted were unreasonable.

In the first instance, the question of the reasonableness of the powers granted is for the Legislature to determine. We are unable to say as a matter of law the grant of .the limited powers here involved was unreasonable. True it is that the statute does not say in so many words that the Commission shall have power to borrow money to pay the expense of a foreclosure not yet incurred or to pay taxes during the year not yet due. It does say, however, that it shall have power to borrow funds to pay taxes and expenses of foreclosure. That taxes will be assessed is absolutely certain. When they are imposed they become a hen ahead of a mortgage and interest and penalties may be incurred. Was the Commission compelled to wait until that happened before it took steps to procure funds with which to pay the taxes that it knew would be imposed? If so, additional expenses would necessarily have been incurred which would have lessened the value of the outstanding certificates. The Commission was obliged to secure a loan to pay the past due taxes. Why compel it to make a second loan to pay taxes shortly to become due? To give the statute the construction sought by the appellant would be unreasonable.

The same reason applies to the borrowing of funds to pay the expense of a foreclosure. We are passing only upon the exact questions presented on this appeal. The Commission has only such power and authority as is conferred upon it by the statute. It must confine its actions within the power granted. If it exceeds those powers it is subject to control by the courts the same as any other trustee which exceeds or attempts to exceed its powers. No doubt a bank from which the Commission sought a loan would be exceedingly careful to ascertain before making a loan that the Commission was acting within its statutory authority. Otherwise, the security might be of questionable value.

The judgment should be affirmed, with costs.

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

Judgment affirmed.


text:
    In the Matter of the Mortgage Commission of the State of New York, Respondent, Relative to Mortgate on 1175 Evergreen Avenue in the City of New York. William Lauro et al., Appellants.

      (Argued January 30, 1936;
    decided April 14, 1936.)

      Henry N. Rapaport, Irving S. Rapaport, Robert S. Garson and Edith Margolish for appellants.
    The Mortgage Commission Act (L. 1935, ch. 19) provides a drastic remedy. Silence will not be taken to mean assent unless the peculiar relationship between the parties is such that that result reasonably follows. (Poel v. Brunswick-Balke-Collender Co., 216 N. Y. 310; Drucker v. Oppenheimer, 165 N. Y. Supp. 284; Beach v. United States, 226 U. S. 243; Klinke v. Samuels, 264 N. Y. 144; Chastleton v. Sinclair, 264 U. S. 543; Meyer v. Nebraska, 262 U. S. 390; Home Building & Loan Assn. v. Blaisdell, 290 U. S. 398; Doty v. Love, 295 U. S. 64; Worthen Co. v. Thomas, 292 U. S. 426; Worthen v. Kavanaugh, 295 U. S. 56; Nebbia v. New York, 291 U. S. 502; Edwards v. Kearzey, 96 U. S. 595.) The act is void as discriminatory. (Winter v. Barrett, 352 Ill. 441; Smith v. Cahoon, 283 U. S. 553; Gilfillan v. Union Canal Co., 109 U. S. 401.) The notice provided for in the Mortgage Commission Act is so unreasonably short that it may and undoubtedly already has deprived certificate holders of their day in court in violation of the Fourteenth Amendment of the Constitution of the United States. (Roller v. Holly, 176 U. S. 398; Shusherba v. Ames, 255 N. Y. 490; Security Bank of California, 263 U. S. 282; Matter of Empire City Bank, 18 N. Y. 199; Matter of Societa v. Broderick, 260 N. Y. 260; McGahey v. Virginia, 135 U. S. 662; Lamb v. Powder River Live Stock Co., 132 Fed. Rep. 434; Berry v. Randsall, 4 Ky. 292; DeMoss v. Newton, 31 Ind. 219.) The Mortgage Commission Act denies all opportunity to dissent from modifications of the plan made by the court, clearly a taking of property without due process of law. (Civ. Prac. Act, § 479; Clapp v. McCabe, 155 N. Y. 525; Coastal Equipment Co. v. Herrick, 243 App. Div. 97; Schiller v. Weinstein, 45 Misc. Rep. 591.)

      Lawrence S. Greenbaum, Benjaimin J. Rabin, Theodore S. Jaffin, Benjamin Kaplan and Callman Gottesman for respondent.
    The Mortgage Commission Act, in so far as it permits a plan of reorganization to become binding upon all certificate holders of an issue, if it is approved as fair by the Supreme Court after notice and hearing, and is adopted by two-thirds in amount of the certificate holders, does not impair the obligation of contracts or deprive appellants of property without due process of law. (Matter of People [Title & Mortgage Guar. Co.], 264 N. Y. 69; Doty v. Love, 295 U. S. 64; Matter of People [New York Title & Mortgage Co.], 264 N. Y. 475; Matter of People [Westchester Title & Trust Co.], 268 N. Y. 432; Shepherd v. Mt. Vernon Trust Co., 269 N. Y. 234; Continental Illinois Nat. B. & T. Co. v. Chicago, R. I. & Pac. Ry. Co., 294 U. S. 648; Matter of Central Funding Corp., 75 Fed. Rep. [2d] 256; Campbell v. Alleghany Corp., 75 Fed. Rep. [2d] 947; McConville v. Ft. Pierce Bank & T. Co., 101 Fla. 727; Priest v. Whitney Loan & Trust Co., 261 N. W. Rep. 374.) The procedural requirements of the act in so far as they provide that written dissent to a plan must be filed and that failure to dissent constitutes assent, are solely remedial in nature. Accordingly, they violate no constitutional safeguards. (Home Building &

      Loan Assn. v. Blaisdell, 290 U. S. 398; Sturges v. Crowninshield, 4 Wheat. 122; Green v. Biddle, 8 Wheat. 1; Planters’ Bank v. Sharp, 6 How. 301; Walker v. Whitehead, 16 Wall. 314; Penniman’s Case, 103 U. S. 714; Bronson v. Kinzie, 1 How. 311; Waggoner v. Flack, 188 U. S. 595; Bernheimer v. Converse, 206 U. S. 516; Gibbes v. Zimmerman, 290 U. S. 326; Oshkosh Water Works Co. v. Oshkosh, 187 U. S. 439; Hardware D. Mut. F. Ins. Co., v. Glidden Co., 284 U. S. 151; Wilson v. Standefer, 184 U. S. 399; Terry v. Anderson, 95 U. S. 628; Gilfillan v. Union Canal Co., 109 U. S. 401; Hiatt v. Peddy, 73 Fed. Rep. [2d] 235; Vance v. Vance, 108 U. S. 514; Canadian Northern R. R. Co. v. Eggen, 252 U. S. 553; Conley v. Barton, 260 U. S. 677.) The procedure for bringing interested parties before the court is constitutionally sufficient. (Matter of People [Title & Mortgage Guar. Co.], 264 N. Y. 69; Matter of Empire City Bank, 18 N. Y. 199; Missouri ex rel. Hurwitz v. North, 271 U. S. 40; Ballard v. Hunter, 204 U. S. 241; Happy v. Mosher, 48 N. Y. 313; City of Buffalo v. Hawks, 226 App. Div. 480; Doty v. Love, 295 U. S. 64; Primos Chemical Co. v. Fulton Steel Corp., 254 Fed. Rep. 454; 266 Fed. Rep. 937; Seaboard Nat. Bank v. Rogers Milk Products Co., 21 Fed. Rep. [2d] 414; Security Sav. Bank v. California, 263 U. S. 282; Pennoyer v. Neff, 95 U. S. 714; Freeman v. Alderson, 119 U. S. 185; Matter of Sodeta v. Broderick, 260 N. Y. 260.)
   Hubbs, J.

Bond and Mortgage Guarantee Company; an insurance corporation, held a mortgage for $100,000 on premises known as 1175 Evergreen avenue, Bronx county, New York city. It issued fifty-four certificates of participation therein, aggregating $98,000. Appellants are owners of some of those certificates. Since August 2, 1933, the company has been in “ rehabilitation under article XI of the Insurance Law (Cons. Laws, ch. 28).

The respondent Mortgage Commission came into control as trustee under the Mortgage Commission Act (Laws of 1935, ch. 19). It is conceded that the mortgage issue in question is in need of reorganization and that reorganization is feasible. After informal negotiations, the Commission promulgated a plan for reorganization. The statutory procedure preliminary to presenting the plan for approval to the Supreme Court was duly taken by the Commission. After a hearing, the plan, with some modifications, was approved by the court. One certificate holder, owning a $1,000 certificate, filed a written dissent from the plan. No other written dissents were filed.

Appellants appeared at the hearing by counsel and objected orally to the plan on the grounds that the Mortgage Commission Act is unconstitutional in providing that two-thirds of the certificate holders in an issue may bind the remaining one-third to a plan of reorganization held to be fair and equitable by the Supreme Court; that the act is unconstitutional in so far as it provides that certificate holders who do not actively dissent from the plan, but remain silent, are deemed to have assented thereto; also, that the court had not acquired jurisdiction because the notice given pursuant to the act is not constitutionally sufficient. The objections were overruled. This appeal is from the order overruling the objections and approving the plan.

Thirty days prior to the hearing the Commission mailed to each of the parties in interest by registered mail a notice of the proceeding and a summary of the proposed plan and notice that the proposed plan would be presented to a Special Term of the Supreme Court for approval on November 4, 1935, more than thirty days after the mailing of the notice, at which time holders of mortgage investments would be heard. The notice stated that the plan would not become effective unless it was approved as fair and equitable by the court,

Or if written dissent therefrom, duly executed and acknowledged, shall be filed with the Clerk of this court prior to the return date mentioned herein or prior to such other date as may be fixed by the court by the holders in the aggregate of more than thirty-three and one-third per centum (33%%) of the face amount of mortgage investments affected by such proposal or plan.

“All holders of mortgage investments who have not dissented from the proposal or plan in the manner above provided shall be conclusively deemed to have assented thereto.”

A summary of the proposal or plan containing a digest of the conditions of the mortgage and the plan as promulgated was annexed to the notice. A copy of the plan was filed with the Commission and the clerk of the court and published in a newspaper. All requirements contained in the statute were complied with.

The fairness or feasibility of the plan in general is not questioned. The responsibility of the Bond and Mortgage Guarantee Company is not affected by the plan as approved by the court. It is too late successfully to urge in this court that the provision of the act is unconstitutional which permits a plan of reorganization to become operative and binding upon all certificate holders of a particular issue when approved as fair and equitable by the Supreme Court after notice and hearing and approved by two-thirds in amount of the certificate holders. (Matter of People [Title & Mtge. Guarantee Co.], 264 N. Y. 69; Matter of People [N. Y. Title & Mtge. Co.], 264 N. Y. 475; app. dismissed, 293 U. S. 188; Matter of People [Westchester Title & Trust Co.], 268 N. Y. 432; Shepherd v. Mount Vernon Trust Co., 269 N. Y. 234.)

The general contention of appellant that the procedure bringing interested parties into court is unconstitutional because personal notice is not required is without basis. There are many proceedings in which a court acquires jurisdiction without actual personal service. Here notice is required to be mailed by registered mail. The proposed plan must be filed with the Commission and the clerk of the court and published. Such notice is resonable under the cases. (Cf. United States Trust Co. v. United States F. Ins. Co., 18 N. Y. 199; Matter of Societa, etc., Di Savoia v. Broderick, 260 N. Y. 260; Matter of People [Title & Mtge. Guarantee Co.], supra.)

The principal contention of the appellants is that the “ procedural requirements ” under section 7 of the act (L. 1935, ch. 19) provide that assent to the plan need not be expressed affirmatively but that dissent from the proposed plan must be filed in writing and that those who fail to so dissent shall be conclusively deemed to have assented.”

Under the Schackno Act (Laws of 1933, ch. 745), which we have held to be constitutional sixty-six and two-thirds per cent must indicate their assent affirmatively. Appellants assert that the provisions of section 7 to the effect that affirmative assent to the plan need not be expressed but that dissent must be expressed in writing, and that failure to so dissent shall be deemed to constitute assent, make the Mortgage Commission Act unconstitutional because their vested rights are thereby impaired. If the Schackno Act is constitutional, then the change complained of is a change of procedure only, a. change from affirmative assent to assent by silence, clearly within the power of the Legislature to enact, as a reasonable procedure, to further a perfectly valid purpose.

There is no constitutional right of property involved in a form of remedy provided, at least if the substituted remedy is not unreasonable. (Gibbes v. Zimmerman, 290 U. S. 326, 332.)

Here a reasonable substantial remedy remains to the certificate holder. At least that question could be so decided by the Legislature as a part of the new remedy given to the certificate holders. (Cf. Lansing Drop Forge Co. v. American State Sav. Bank, [Mich.] 262 N. W. Rep. 756; Gilfillan v. Union Canal Co., 109 U. S. 401.)

Such statutory provision is not new under our law. Many instances might be cited where rights of property holders are cut off by their failure to take affirmative action. Here we have an unprecedented condition where many certificate holders having a joint interest are in danger of having their interests wiped out with no one in a position to take effective action to protect them. The State, in view of the situation, acts to protect their interest by creating a new remedy, not to deprive them of their interest but to protect the interest of all, including the general public. To hold that the act of the State is unconstitutional because the procedure adopted by the Legislature varies from that adopted in the Schackno Act would be unreasonable.

The order should be affirmed, with costs.

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

Order affirmed.